Good morning.

Here are your Cara 100 Ratings Changes:

Downgrade:

TM - to Underweight @ HSBC

New Coverage:

INFY - Outperform @ William Bair

Price Target Lowered:

AMAT - from $23 to $18 @ Argus
AMAT - from $19 to $12 @ Kaufman Bros.
INTC - from $22 to $19 @ Friedman Billings

-------------------------------------------------

Today's Market Music from the inimitable, Ry Cooder:

http://tinyurl.com/69b8e3

Bill,

Thank you very much for the gracious invitation to Nassau in April.
Hope I can make it.

[Bill Cara note:

I hope many of you can make it. We will have lots planned. BTW, in time you will see the relationship I have set up with Bank of Bahamas International (BOBI), who will be helping me make a super event of those ten days. BOBI, which is 50% owned by the government, which in turn is the country's biggest employer, will sponsor many events. As to hotels, transportation, wines/spirits, etc, I can get significant discounts that the public could not get, and in some cases will be covering the costs of excursions. If you bring young families, I can arrange the most appropriate accommodations in housekeeping villas, as well as have the kitchen stocked and part-time babysitters, cooks, etc, ready to serve as needed. We all need the best possible vacation, which I intend to make possible. You will be exposed to The Bahamas as few people see it. We will also have some of our top traders and researchers, and local bankers, available for seminars, as well as CEOs of some international public companies to meet, which will make this event potentially a tax write-off. I'll put as much into this April Week as I do for the blog. I'll also have autographed copies of the books as gifts. So, yes, I hope you can make it. If you haven't already contacted me, and want to make plans, please do so at ctab409 [at] billcara.com. I will post a special blog page in a couple weeks, after we have a chance to make some additional arrangements.]

The answer to today's market music question:

"Get Rhythm, When You Get the Blues"...a Johnny Cash number nicely performed by Ry Cooder.

The dollar seems to be hitting alot of resistance between 86 and 87. I would say that if it can't get above 87 soon we'll see everything reverse as traders start selling the dollar.

If this proves true in the next couple of weeks then this could be the last takedown in commodities before they start another huge run.

I know the other side of the argument is for more dollar strength because of deflation but it seems like soon the FED will be holding most of the bad paper that it replaced with printed money. Since the whole world is doing the same thing, once Central banks have all the bad debt replaced with new currency couldn't they just quietly mark it down to zero little by little and shrink their balance sheet over a six month or a one year time-frame. That has to be their final plan because nothing else makes sense.

Rob.

Comparison of sentiment indexes as measured by Hulbert and Investors Intelligence:

http://tinyurl.com/5wh8ky

Thanks for sharing Willain's EV work with us, Bill. I noted that he is very negative on the solars. With good reason, it seems. Yesterday, Chinese solar company JA Solar (JASO) dropped 32% from its gap open.

In a single day. 32%. These kind of moves are commonplace now.

A negative report from an obscure "boutique" analyst helped facilitate the drop. But there's no doubt that this is not a sector for short-term bulls.

JASO reports earnings after the close today. Caveat emptor.

[Bill Cara note:

Pascal Willain as well as the other quant/technical analysts that work with me are people who just study prices. The data speaks. I use a variety of analysts, including fundamental analysts and traders who work the orders, in order to get different perspectives. At the end of the day, I have to make up my own mind. The pro traders then work the orders. In this morning's squawk box call, we were talking about the need to hit singles and doubles and not try for home runs; it's called Billy Ball. :-)]

lately there is no relation between what future is
and opening of DOW

November 11th, 2008,
take a moment gang:

In Flander's Fields

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flander's fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, tho poppies grow
In Flander's fields.

Lieut. -Col. John McCrae

[Bill Cara note:

Hopefully, at 11:11am ET today, we are watching the ceremonies and paying our respects.]

The market morphs, changes it's character, to a degree sufficient to fool most of the people most of the time.

Or, as has been the case with me, some of the people all of the time.

Thanks 2nd. That's the same point Caraistas have been discussing for the last few weeks. Are we reading Hulbert, or is Hulbert reading us?:>)

Wow, getting philosophical before the market even opens.

What happened to las vegas sands?

interesting to compare flanders fields with the marine corps song: two sides of the same coin.

Repeating what somebody said:

Don't ask man whether he likes war. You might as well ask whether he likes stone.... he was made for it... war predates man and was there, waiting for him, when he arrived.

Have to look up the exact quote.

LVS- construction being halted in Macau to conserve cash...

Bit of a spread on bid/ask for LVS...

0.01 14.48

Somebody's a bit optimistic...

GM @ $3.02 this morning. GE $18.01.

Where's the Fedge Fund?

Holiday today for Banks, Fed, and Federal Offices. Hmmmm, no PPT today?

Bill,

1974? I was there also and your picture is familiar — no one wanting to buy equities, but going for the high rates on bonds.

What concerns me is what if no one wants to buy our bonds today? Now, far more than 1974 we are sinking in debt — the average individual, cities, states and national — all at record highs.

We have no decent jobs, fewer benefits and a tremendous erosion of retirement account balances. (Tough to get hired at 70 or 80, especially when all the 40 and 50 year-olds are looking for a second part time job.)

We may eventually get back to manufacturing something to sell, but so far no one is attempting to plan for a long term solution, just handouts — to banks, insurance, autos(?) and citizens.

China's stimulus is money which will not go to our debt purchase. We have a huge new short end debt which will need a long term buyer.

Running the tape backwards — as each country, state, city and person cuts back the picture becomes more like the 1930s.

[Bill Cara note:

Why buy bonds when inflation is higher than the present yield, and there is an expectation that sooner or later the yields will rise and the prices fall? At the short-end, the needs of govts are crowding out the market and sapping the capital that should be going into equities.]

shark_attack
LVS has price new stock offering at $5

ok what happened in SIL?

it is halted right now

Cara 100 Update:

GOOG - price target cut at Goldman to $475 from $520 based on lower Q4 expectations. Expect paid-search revenue to react rapidly to macroeconomic deterioration and expect declining order values. Maintained Buy rating.

NEW YORK (MarketWatch) Las Vegas Sands Corp. (LVS:las vegas sands corp com
News, chart, profile, more
Last: 6.66-1.34-16.75%

9:30am 11/11/2008

Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:

LVS 6.66, -1.34, -16.7%) on Tuesday announced the pricing of its public offering of 181,818,182 shares of common stock, 5,196,300 shares of its 10% Series A Cumulative Perpetual Preferred Stock and warrants to purchase about 86,605,173 shares of common stock at an exercise price of $6.00 a share. The common stock has a public offering price of $5.50 per share. Units consisting of one share of Series A preferred stock and one warrant to purchase 16.6667 shares of common stock will be purchased at a public offering price of $100 per unit. The shares of Series A preferred stock and warrants are immediately separable and will be issued separately. The Series A preferred stock will be redeemable on or after Nov. 15, 2011, at the company's option in whole or in part at a price of $110 per share plus any accrued and unpaid dividends

LVS

WSJ Heard on the Street (may need subscription)

“The last thing Las Vegas Sands needs right now is a reason to worry about one of its biggest bets.

That's exactly what it faces from Macau. The three casinos it operates in the city account for about 69% of its revenue so far this year.

While Macau has served Sands and rivals like Wynn Resorts well in the past, the winning streak might be coming to an end. Poor infrastructure and travel restrictions are to blame.”

http://tinyurl.com/6mfugq

Until market make all expert feel fool. And take their patient out
Make them desperate and them stat to have ulcer it is not going to stop going down

Pascal Willain's 8 shorts, flagged by Bill this AM are all down sharply. 100% accurate. Thanks!

Am I crazy or is TM still an unbelievable short opportunity at this price? EPS estimates for 09 should be around $3. This is trading at over 20 times those earnings in an industry that is not going to be good for years.

While you're listening to Ry and Johnnie, and watching your shorts pile up the gains read this beauty Op-ed from Minyanville: Imagine what Obama's priorities could be if he was thinking of a future that would build something for his two lovely daughters and their generation.

http://tinyurl.com/6aphst

Who does this sound like?

Risk-Free in Name Only

By Howard Simons
RealMoney.com Contributor
11/11/2008 10:00 AM EST

One of the sillier promises made during the recent presidential campaign was to review the federal budget line by line. What a Zen experience that would be. It recalls two similar efforts -- Jimmy Carter's zero-based budgeting and Ronald Reagan's war against "waste, fraud and abuse," as if those were line items in the budget.

Speaking of abuse, let's turn our attention to what governments around the world have been doing to their sovereign credit ratings since the mid-July backstopping of Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take) by the U.S. government. This is in addition to a much longer history of governments trying to meet their spending desires and those of key constituencies by debauching their own currencies. The sad history in the U.S. includes the 1933 suspension of the dollar's convertibility into gold, the closure of the gold window in 1968 and the move to floating exchange rates with the 1971 Smithsonian Agreement.

Those pieces of green paper in your pocket are nothing more than Treasury debt, a weak link to reality given the almost unbelievable expansion of government credit obligations since July. And we are not alone in official abuse of credit; as we shall see below, the full faith and credit of Uncle Sam ranks high on the world scale. But the last time there was such an explosion of global liquidity -- the 1969-1970 episode corresponding to the creation of Special Drawing Rights at the International Monetary Fund -- we had a decade of runaway global inflation soon thereafter.

Sovereign Credit Risk

TCK down %18.
insane.

Thank you Bill for your very generous and exciting invitation to the Bahamas. I am continually impressed with your willingness to share and teach this community.

I hope to meet many of you in April!

[Bill Cara note:

I hope that anybody who decides to come, allows me to make the local hotel and car arrangements because I can get by far the best discounts and make the best choices for your needs. I want everybody to leave here thinking that Bahamas is a special place, and that you got a great taste of it.]

RE Bonds. Just heard an analyst tout Lehmans High Yield Commercial Index paying about 18%. He said it is a home run up until fiveteen percent default rates. That would give a twelve percent yield.

Grym - asked why HE can't convert to being a bank.

How long until ads on cable offering such conversion to joe sixpak, "we'll take your credit card interest rate from 27% to 1%; we'll convert you into a commercial bank!"

calvino.

never believe he pundits...

I wouldn't want to be the guy who "predicts" default rates... We don't have an idea how big or small they will be...

got stopped out of TCK at 8.90 this morning...this is insane.

NRT

Speaking of yields, don’t know if anyone picked up on NRT Oil & Gas Royalty mentioned three times in during October while in the 20s. (Hit a 19 handle (royalty yield 20%) for @ 3 days in early Oct).

Trading today @ 32, royalty yield now @ 13%, ex-dividend tomorrow. Will retain in some accounts for others relying upon fixed income, but may take the 40-50% profit for one of them. Not a lot of volume as previously mentioned. DOYDD.

GOOG just fiddling with 300

Yahoo finance Key Stats shows TCK having 1.05 Billion of cash on hand and $1.29 Billion of debt. It also shows they have a book value of $17.01 and pay $.98 per year in dividends.

I would say they have to be getting slaughtered like this because of fear that they will not be able to pay that debt back without selling assets.

Buying Long-term calls may be a good idea here if that book value is accurate and the dividend seems safe.

Rob.

Well, so much for holding October's lows. Looks like I was a couple days early on buying GM.

fugly.

wave - why buy GM when you can sell it?

GG Nov 17.5 puts looking like interesting sells...I know Bill has been selling the 20's but I don't know if I have the stones

Found some interesting quotes from Thomas Jefferson re: the military. Of note is the distinction between an organized military and a militia. I think I see our problem.....

"The Greeks by their laws, and the Romans by the spirit of their people, took care to put into the hands of their rulers no such engine of oppression as a standing army. Their system was to make every man a soldier, and oblige him to repair to the standard of his country whenever that was reared. This made them invincible; and the same remedy will make us so."

"We must train and classify the whole of our male citizens, and make military instruction a regular part of collegiate education."

Assuming dividends will remain under pressure for the time being, there's a higher probability large dividend payers will have to cut back.

When the market recovers and interest rates increase (in order to control inflation), dividends are likely to rise across the board.

The question is, in terms of divs, will those equities now on the low end of the scale outperform those on the high end? There certainly will be increased competition.

nemo - "Dewie Cheatem & Howe" - What a hilarious coincidence!

new 52 wk low for C, BAC closeby...

Seamus
I did look at NRT (32.30))when you mention few week ago
did not buy it because of very low volume.
I figure they might cut divident when it was around 20

currencies.... not good.

Precedent.

"SAO PAULO, Nov 11 (Reuters) - The Sao Paulo state government said on Tuesday that it would extend a 4 billion reais ($1.8 billion) credit line to the automotive industry to help it ride out the current financial crisis, which is putting the brakes on Brazil's economy."

Just a matter of time... GM's been given up for dead on the basis of one analyst's 0 rating.

http://tinyurl.com/57t2y7

65 year lows... guess I like collecting cheap Generals.

GE $17.66.

why don't auto worker contribute to GM bailout with taking cut in their benefit any pay
before we put taxpayer money into it

Craig,

That has been both the Swedish amd the Swiss policy for 100 years.

Meanwhile I am going into deep defense mode here in the market. No margin debt. No ammo left either, but a few quality, deep underwater positions that will come right after these liquidation sales.

vinod,
Are you still holding on to BGU. I bought too and am down.
What is your game plan ?

we are asking guy who makes 12/HR to pay taxes so we can bailout guy who makes 70/HR. this is crazy
let GM and F go bankrupt

sandy
no I got stop out and lost 220
I will always use a stop on this high flyer

NRT never heard of it, but the nat gas and oil trusts have not been doing well, and are giving back their gains off the Oct 10 lows.

vinod. let gm and f go bankrupt and the 12 an hour you are making is gon to turn into 5. Thank the unions every day for your 12.

Damm, everything I buy goes down
Buy 2000 Shares of TCK
Details Filled at $7.6478
Buy 1000 Shares of SLW
Details Filled at $3.40

Just noticed a big bid for MDR shares - 115,000 shares @ 8.80. There is a gap that is trying to close on this stock @ 8.47 that goes back to 8/29/05.

turning off the stink bids... smells too bad here.

calvino
I am not against union. I am for Union
As long as taxpayer is not financing their pay
Look what happen to communist country
Now china is openly communist country while we are not openly capitalist country.
People has to sue FED to find out what they are taking as collateral from bank

vinod

NRT not for everyone. I call it a "widows and orphans" stock. It is illiquid. Thrown out with the bathwater last month. IMO.

Think company consists of a couple of employees in New Jersey who send out royalty checks every three months. That's it. They are not the producers, drillers or explorers. Fields located in Germany. Key is it's a royalty. Aware of company since late 80's.

I do not have in my personal accounts.

GG Buying day

Disc: Fully loaded, should be re-loading.

vinod, when that happens it means you're out of sync with market. Not that my advice is worth anything, but I've been trading much smaller positions and using much tighter stops.

I'm watching the short term charts (5, 15 min) for signs of a bottom. Nothing so far. It help me resist the impulse to force a trade that just isn't there.

number2son
right now I am using large position and getting out making 10 cent to 50 cent and do not keep overnight.
and using very tigtht stop

Chuck Butler's Everbank's Daily Pfennig referred to CNBC site listing recent layoffs.

Not pretty

http://www.cnbc.com/id/27645929

R2K held its low from earlier in the morning while S&P and DJIA just made new lows.

Very surprisingly, JPM's star trader suddenly recommends gold...

JP Morgan’s star resources manager, Ian Henderson, believes the current global economic slowdown can in fact speed up infrastructure spending. He also says the resource super-cycle isn’t over because emerging world growth remains on course, if somewhat tamed.

‘The fact of the matter is that markets have been downgrading resources stocks,' he says. ‘It takes stocks back to the couple of years ago and to a degree it provides an opportunity for the future. The long-term story remains in tact in terms of expansion of the emerging world and the expansion of commodities.’

‘The resources sector is cheap as it’s ever been. Relative valuations of the oil and gas stocks, metals and mining stocks relative to the MSCI World does illustrate what downward re-rating has occurred in the sector. Overall, the sector is cheap as ever to the market.’

Henderson highlights gold as one area that has suffered by recent sell offs and currency fluctuations. However, he notes that gold is unlikely to lose its tag as the safe haven and is an attractive proposition at current valuations.

‘If you compare the value of the gold sector to the gold price, they’ve never been so cheap as they are today and that I find to be a foundation of the forced selling rather than the fundamentals of the companies and that to me is paradoxical. Given the fall in price, I’m pretty optimistic that gold isn’t a bad place to be. The demand for gold ETF funds has been strong.’

http://tinyurl.com/5g2hfs

Seamus
I do keep track of stock mention here by you and other member.and I go through them every weekend to see what happen

Dollar at 86.90 now. We may see today whether 87 is still resistance.

Rob.

I am still liking the long term fundamentals for retail auto parts stores. With a consumer credit tapped and loan standards rising, the long term fundamentals look great here. Auto parts retail looks like the next best thing to investing in pawn shops (which I can't find any exposure to).

Anyone else eyeing stocks like GPC (Napa Auto parts 4.2% divy), AZO, AAP, ORLY?

LOL! Speaking of Seamus mentions and low volume, CHSCP just now got a tick for 160 shares today....after almost two hours of trading.

Down 1.17% in this market and paying that div. like clockwork. Many thanks!

86.98 now

Rob.

Some of traders are saying this is once in a life time to buy BOND. Some are available at 30 to 40 cent a dollar.
And will give 30 to 40% yield.
I wish I know what this bond is. I do not understand the bond market.
And they are not going to hold my hand and walk me through

seems to me that when a lot of folks wonder whether the roof is caving in, that having gold bars (or their equivalent) seems pretty wise...

Bad news. Now we're at 87.14

Commodities watch out below!!!

Rob.

Bill,
re: My post of 9:38 and your note —
I realize rates are low and inflation is higher...
----------
[Bill Cara note:
Why buy bonds when inflation is higher than the present yield, and there is an expectation that sooner or later the yields will rise and the prices fall? At the short-end, the needs of govts are crowding out the market and sapping the capital that should be going into equities.]
----------
My question is what if other countries needs (ie: China's) lead to refusing to buy our bonds. What if their own needs are more important to them and sapping the capital we need to have going into our Treasuries?

Pawn shops & payday loans...
AEA
CSH
EZPW
WRLD
FCFS
DLLR

IWC might be a better holding.

These guys make Chinese lenders look like prime + 1%.

"Payday lender Cash America is being forced to close down 43 shops in Ohio because voters passed a cap on short-term loans at 28%. "

http://tinyurl.com/6qwj3t

Can't make money at 28%??

looking for DB and MOS to test mid//high 20s range again...

yeah...just sold some GG Nov 17.5 puts...fiat currency should be toast...

Guys, you may want to keep an eye on stem cell stocks. Particularly, STEM and GERN show nice relative strength vs. the rest of the market. Reason for the interest is kind of self-explanatory in light of new administration policies.

Press Conference this afternoon.....

Feds move to steamline help process for homeowners
-11:39 am ET

http://tinyurl.com/6otvru

"The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, scheduled a press conference for 2 p.m. EST. Scheduled to attend were officials from the Treasury Department, Wells Fargo & Co., the Department of Housing and Urban Development and Hope Now, an alliance of mortgage companies organized by the Bush administration last year.

An industry official who worked on the plan said the new approach will allow lenders to modify more delinquent loans by establishing broad criteria to speed up the process. The official spoke on condition of anonymity because details had not been announced.
"

Wave, imagine the default rate, it's gotta eat into that 28%. This is one grade above broken knee cap loans in tough times.

Smells like another foul smelling,levered hedge fund is in the ditch.......TCK at $8.61 on 13.9 million?

am i crazy or does it feel like STT is getting bought out by GS?

Post those fixed income suggestions as I realize some here may be looking for it and not involved with day or very short term trading in this market. Some others may want to place some money for a time off to the side and wish to earn more than 2-3% MM rate. As always doydd.

CHSCP, real glad it works for you Craig. That one I do have in my personal account.

Vinod—I watch your comments and companies also. “We’re all students of the game.”

FWIW, I’m watching CAT here (day or very short term) as it appears to hold up well today around the 37 level, give or take 0.50. Traded in an out from late last week with a 38 handle and took the 2 points at a 40 handle early yesterday morning (discussed on skype).

blue bluff--when GG had a 14-15 handle in Oct., I sold Jan 12.50 puts (mentioned on skype back in Oct) . . hard to believe now. Good luck with your 17.50s!

Vinod,
We are not asking the guy making $12/HR to bail out the $70/HR guys.
Far worse — the vast majority said, "NO!" to the bailouts and many are already losing their $12/HR jobs while bonuses are thought to be OK for the wealthiest!
---------
...everything going down:
It sure seems that way to me at times.
I believe it was Will Rogers who said, "Only buy stocks that go up. If they don't go up, don't buy them." :-)
Sorry. Maybe a short moratorium?

For those interested.....YHOO's Jerry Yang short zd.net interview on the MSFT/YHOO dance.
Scroll to the bottom of the page

http://blogs.zdnet.com/BTL/?p=10767

Thanks for the music link, now I'm paying more attention to which music clip is playing that any trading. Cant watch movement with my eyes closed remembering!

Seamus, Re: NRT. You said the key is that they're royalties. Does this have any tax implications for the stock?

thanks Seamus...if they do get put to me I'll probably write covered calls on them...one good thing about this market is that option premiums are the highest I've seen

Bill, or anyone who would like to weigh in:

I have been accumulating shares of some very beaten down ETF's(uyg,ure,uwm), and have a very low average now.

I have a cash position for emergency situations of approx. 30k(which I will not touch), As I am able, I have been dollar cost averaging into these etf's.

My time horizon is five or so years.

Appreciate any thoughts on my approach here.

Dab

Dab- 5 years? I would just go about my business and wait for the headlines to tell me when it's time to think about selling...

writersblock

Mentioned royaly as they own the land, lease it.

Yes, royalties are treated different than dividends. You have another form to complete.

I am not an accountant. Suggest you visit (if U.S. citizen) IRS site or call company, check annual statemnt, etc.

RGLD (no position) is another royalty. Perhaps someone here may own and can comment on tax implications.

MBT high was 0ver 100
Cara 100 Company. I brought at 60. Went to as low as 20
I sold it at 40 last week. And took 20 dollar cut.
Now it is back to 30. Buy and hold does not work in this market right now
It is traders market. I might buy it back when it is around 20

Seamus, thanks.

TCK.B...... New low...........$ 8.67 cdn

MORE PAULSON THIEVERY!!!
http://www.truthout.org/111008A

bsi7
I mention last week when it was over 87 that I may buy under 70.
Well, it is at 67 and what I am hearing is GS try to merge with STT/C/and other but no luck
Expect it to hit around 50

SECRET $140 BILLION DOLLAR TAX GIFT FOR BANKS!!!
http://www.truthout.org/111008A

stop out of my TCK/SLW and lot big
no mre trading now for a while

S

At 52 week low $2.50

Can someone give me a reason why the Columbia Free Trade agreement is so darned important to the Bush admin?

$ index has been in a very balanced symmetrical triangle for two weeks. It broke out last night pulled back then took off from $86.2 this morning.
It was nearing the point of the triangle so was coiling up pretty tight. Could be a real or false breakout. The volume doesn't seem high enough and open interest has been flat in the December and March contracts since the triangle formed. it is currently quite oversold in the hourly RSI.
If it does drop from here to find some more buyers and maybe retest the lower trend line.
Could also be morphing into an ascending traingle wih the top horizontal line at $88.5.
No position but watching it for a tell on upcoming energy and PM trades.

Craig:

It would be a counterbalance to CHavez's influence-in theory

I'm more cynical I guess. I was thinking something like Cerberus wanting to move Chrysler.

sv
Have a look at writing Dec 9 puts on TCK-at worst you own it at ~7.50. Not my favorite because they bought a lot at market top, but extremely oversold.

Craig - CFTA - Perhaps the strategy puts pressure on Chavez in some way?

FXP/EWV - Congrats holders! Taking profit?

^VIX could be a good short when it goes above 70

Bought a few STT Nov $40 calls at $3.90 based purely on speculation of a buyout from GS or some other entity.

and by the way, i don't like buying based on potential buyouts...

teamenfuego-where are you hearing the STT-GS rumors?

Reminds me of the LEH buyout...

S Long at 2.55 (on a tight leash)

Tck is down on massive volume 17million shares, thoughts?

(OT) going back to the early 60s- one of Tony Dow's sculptures will be exhibited at the Louvre...

http://tinyurl.com/6cg9og

that is tck.b.to
17 million today average vol 4.8 million

the US side tck
4.62 million today average 4.5 million

Huge dump on canadian side

navid
The herd is heading for the door. TCK downgraded by Scotia (after the stock craters) and no explanation on the volume front.

[Bill Cara note:

Teck (TCK) and Goldman Sacks (GS) are getting hammered because of forced selling in the big institutional accounts I believe. The question is, are they fundamentally broken or do they represent great value here? I tend to believe they do, but there are so many drivers to this market action that holding positions overnight is a risky proposition unless you have a measure of protection via options.]

heard it on CNBC and have read it online. Plus, the price action clearly states that someone is interested in STT. and STT is far less risky to a buyer than a consumer bank because they have commercial deposits not subject to things like falling unemployment and home prices.

Chicken - STT is much more stable and a very risk averse company in comparison to LEH. I'd argue that they are one of the few companies that has steered through this downturn pretty much intact.

GM tumblin' down. Next big leg down in the markets will come like a lightning bolt when GM declares bankruptcy. Bush and Obama bickered about it in the Oval Office yesterday and it appears Bush won't help. Good for him. Dinosaurs should be dead. I won't hold anything overnight until I know GM's fate.

http://tinyurl.com/5u6nmt

"It's a far cry from the gloom and doom of just 4 years ago. Sometimes it's hard to remember that only a short time ago people were counting America out. They were claiming that we were a nation in decline, that our best days were behind us. Inflation was running in double digits, robbing working people and the elderly of the value of their savings. Economic stagnation was throwing more and more people out of work and destroying any chance for the poor to better their lot.

The auto industry, like the rest of the country, was on the edge of catastrophe. In 1980 alone, the Big Three [Chrysler Corp., Ford Motor Corp., and General Motors Corp.] lost $4 billion. And then came the recession, the culmination of years of too much taxing, spending, and regulating by those who claimed they could spend your earnings better than you could.

Well, we've been determined to chart a new beginning for America. And I know that it hasn't been easy. That recession was deeper and longer than predicted. But these problems had been building up for 20 years.

We were determined to find a real economic cure, not just resort, as they had so often in the past, to another political quick fix. There've been eight recessions since World War II, and seven of those were treated with quick fixes. There's no compassion in snake oil cures. We weathered that storm together, and now the Sun is shining on a strong economy and on an American automobile industry that is moving forward again."

- Ronald Regan, July 5, 1984.

Stopped out of S @ 2.46

That wasn't very long.

Fitch downgrades GMAC to 'CC' from 'B+'

http://tinyurl.com/5avsho

"About $72 billion of unsecured debt is affected by the action"

Las Vegas Sands not seeking shareholder OK for offering

"Las Vegas Sands said that "after a careful review of the facts, the members of the audit committee of the company's board of directors have determined that any delay caused by securing shareholder approval prior to the issuance of these shares of common stock in connection with the conversion of the convertible senior notes would seriously jeopardize the ability to complete the offerings as well as the financial viability of the company."

http://tinyurl.com/5t4roq

If Obama wants to rescue GM, and GM has enough cash to make it into next year, then what makes us believe GM will soon file?

As long as people want better lives for themselves and their families, the economy will move fwd.

every govt is ready to aid in stopping this mess. what will happen when they all get the signal to go back into equities?

the lack of volume is painful to watch. but i am calm because i believe this crash of 2008 will go down in history as a great buying opportunity.

Or i guess i can be wrong and the markets goes to zero. this lack of volume is just painful.

vinod - Here's something for you:

http://biz.yahoo.com/ts/081110/10447034.html?.v=1

check PFF/HYG look at yield. HYG is Corporate bond ETF.

Mackinaw posted these last night.

re:GS

bsi7
I mention last week when it was over 87 that I may buy under 70.
Well, it is at 67 and what I am hearing is GS try to merge with STT/C/and other but no luck
Expect it to hit around 50

Posted by: vinod at November 11, 2008 12:22 PM [link]

well I bought yesterday and I'll put a sell stop under the low of past 2 days. Right now GS is showing a spinning top - meaning indecision. We'll see if it can stage a reversal.

My position is small. Max pain is 95.

re:mergers

I bought it because it was in the Triple RSI accumulation mode and frequent reference to its bad performance on CNBC.

[Bill Cara note:

I am starting to get a sick feeling in my stomach for what is happening at Vancouver-based Teck Corp. I don't have the time to investigate, but I hope some of you do. There may be a link here to Brookfield, the company that torpedoed Stelco. Their mining guy Derek Pannell is on the Teck Board. Brookfield likes to use debt and trojan horses to take control of quality assets. Who is selling massive blocks in Teck shares in Canada, and why isn't Teck buying those shares? Is Brookfield and others pushing the squeeze on those shares in order to buy at the bottom? Now I see that Teck has agreed to convert $2 mil debt it holds in a tiny Vancouver company (Hudson Resources HUD.V) in exchange for almost 15% of the stock. Why now at the bottom of the market, when they could have made a direct cash investment in HUD and kept the debt? Something is going down here, other than just the price of Teck. I wish I had the time to look closer.]

vinod - Try this article instead:

http://tinyurl.com/6ldzbe

Clear for takeoff!

jeez they couldn't get someone that could talk better to announce this than that guy? (see CNBC)

the housing solution - on bubble vision - fannie/freddie - another garbage solution.

principle must be written down in order to fix this mess... extending term or deferring the payments is not going to solve this...

GS range today... $66.68 to $73.88?

Apparently liking mortgage relief plan?

"Citigroup Inc. says it will offer to modify terms on up to $20 billion in mortgages."

S in @2.50 out at 2.66...lucky. Thank you Seamus.

Also been in and out of GS several times for some decent lunch money.

UYG near it's low @7.12 (low is 7) and out 7.52

Hoping the GG buy from today's low will stick, but we never know.

"Macao will not allow casinos in the world's largest gambling market to go bust, according to the territory's chief executive.

"If necessary, the government will take over," Edmund Ho said on Tuesday. "We will not allow any casinos to shut down."

http://tinyurl.com/55rxb3

LVS down 36%... takers?

I've changed my tactics. Used to be Ma and Pa would panic in the first 30 - 60 minutes and I'd put a buy stop above the HOD and get long. Now selling continues well into the later part of the day. I am now waiting till 3PM to put in my orders with buy stop limit orders above the 3PM price. It may not be the best entry but it avoids buying at what appears to be a good entry price in the AM and then getting blasted out of the position, assuming RSI signals and others are in place for a buy.

JMO.

Bill said: "there are so many drivers to this market action that holding positions overnight is a risky proposition unless you have a measure of protection via options."

Hey! Stop talking so Bullish! (Kidding, of course)

[Bill Cara note:

I am still bullish. I believe the market is working though a cycle bottom. There is extreme volatility though, which traders need to sell. You do that via short puts at very attractive prices. Yes, the stock may be put to you, but these are essentially at you initially thought were stink bid prices. If you average the price of stock you acquire at times like this versus the prices you get by doing just the opposite at cycle tops, ie, writing calls on your positions that represent essentially stink offers, and you average the prices some people pay you then, you will be a winner. There are many things happening in the market today that I don't understand. Transparency is not the greatest. But volatility happens at major trend reversal points when Bull and Bear fighting reaches extremes, and you need to use the options market to sell that volatility and use time decay plus imprudent trading by others to your advantage.]

What was the number on that curtain?

re:LVS

wave,

my caution is that if LVS slipes below 5, the big boys may be restricted from buying it.

bsi87, I've noticed the same thing. The only trade that seems to work now is to sell into those little rallies at the open.

Of course, now that I've noticed this you can expect the pattern will no longer obtain. ;)

TCK

Wrote TCK Feb 7.50 puts for $2.05. Cannot believe I can get into TCK at a 5.45 basis!

Max

Buy the open! Sell the.... Rally!

Craig, way to go! I had to step away from the screen for awhile and got hit with a stop for small loss. Don't know what will happen in this market if you leave the arena for any length of time. So goes life!

CP

true, true, true...

Chickie,

The trade in dotcom bust was to buy the close and sell the open...

Just came back from my morning routine, saw SWC take a huge beating, saw the market moving up, saw that $USD has reached its recent highs (so that a move down from these levels would signify a double top), and decided to buy 1000 shares of SWC at $2.68.

re:GS

Plus I thought Hammering Hank needs a place to hang his hat when he leaves Treasury so they gotta keep the lights on for him at GS. LOL

re:SHLD

getting interested again. No position.

GG - it's hard for this cowboy to buy GG or any gold stock when the US dollar index is challenging the October highs!

GG for a trade here Jock. In at the intraday low and out at 21.90.

I really want it back in the 13's...

Teck Falls Most in 20 Years on Concern Coal Prices May Drop

By Rob Delaney

Nov. 11 (Bloomberg) -- Teck Cominco Ltd., which last month gained control of the world's second-largest exporter of coking coal, fell the most in 20 years in Toronto on speculation that prices for the steelmaking ingredient will decline.

Teck slid C$2.26, or 21 percent, to C$8.69 at 1:07 p.m. in Toronto Stock Exchange trading. A close at that price would be the biggest drop since September 1988. The stock has plunged 74 percent since July 31, the day Teck said it agreed to buy Fording Canadian Coal Trust to boost sales of the fuel.

``There have been a lot of rumors just in the past 24 hours about steel companies trying to renegotiate, and just about every other commodity is off today,'' Salman Partners analyst Haytham Hodaly said in a telephone interview. ``It doesn't mean that buyers will renegotiate with Teck; it's just not good for coal prices in general.''

On Oct. 30, Vancouver-based Teck completed the cash and stock acquisition of Fording Canadian for about C$10.4 billion ($8.64 billion) amid the worst financial crisis since the Great Depression.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

Last Updated: November 11, 2008 13:14 EST

Craig - why Colombia free trade is important to Bush!

Pres. Uribe of Colombia is Washington's boy in S. America. Since Clinton, US has (quietly) funded billions into "Plan Colombia" = crunch the left wing guerillas (right wing para-militaries are OK) and try to stomp out drug gangs who pay left wing guerillas for protection (para-militaries protect other drug gangs, but you don't hear much about that).

Also, Colombia is a counter to growing Venezuelan, Ecuadorian, Bolivian influence and possibly someday Peruvian rejection of US doctrine. (Former socialist Pres. Garcia of Peru toes the US line, but is now less popular than Bush is in the US.)

Argentina is chaotic, and plays footie with Chavez. Paraguay just elected a leftist, former priest, as President. And Chile, while the best economy in S. America, has a socialist president, which no doubt bothers the Bushies (even after their own conversion to socialism!lol).

Brazil, which has half the GDP of S. America has a socialist President, whose economic policies have been what Wall St. wants. US tends to take Brazil for granted.

Remember the Colombian raid into Ecuadorian territory? US advisors in Colombia and at the US airbase at Manta, Ecuador surely had a lot to do with that.

So, S. America is also a contested region for the US, and Colombia is the US' lead partner on the continent.

What a bad timing (intraday) for my SWC purchase! I *knew* that buying *anything* after the market has already staged a parabollic recovery is a bad idea, because parabollic moves up always retreat, at least a little. Hopefully, this time I'll make it a rule: NEVER buy anything in the late stages of a parabollic move. Long-term, however, the price of $2.68 for SWC is not bad at all, so I'll probably stick with the purchase.

chickenpookie -
GM losses accelerating as its 49% share of GMAC defaults ramp up and eat remaining cash. Vehicle sales stopped. UAW Viagra coverage still in place. Quarterly losses show the alarming trend.

AP reported monday that GM may allow GMAC and Delphi to file. George W. wants them to fail with two long months to go.

buy 100 gm @ 2.98

Last time I was in NY I walked from 108th St. to Battery Park a couple times over the weekend. Incredible city to see, especially on foot.

One of the things I regret was not being able to get into the Intrepid.

Today it hosted a "Press Gaggle" from the White House.

Now that we have a lame-duck gubm't in the US, passing the buck could be the norm?

"Q Dana, what is the President's position on this aid for the auto industry, beyond any linkage or anything, but just -- and beyond the loans that were approved by Congress earlier this year? Is he open to more help for the auto industry right now?

MS. PERINO: What we've said is that Congress created a loan program for the auto industry. When they were discussing the TARP program, Troubled Asset Relief Program, as we read it, we don't see anything in there that would give us the authority to help individual industries, but we are willing to listen to Congress as to how they might choose or not choose to provide additional authorities so that we can accelerate those loans to viable companies, as laid out in the statute.

We haven't seen that yet. We understand that they're going through a very difficult time. There's been business decisions they've made over the years that have led to this situation, but we have gone as far as we can with the authority Congress has given us in order to help industries. We rushed through those regulations to write the rules so that they could apply for those loans. If they believe that that's not enough for them, they need to continue to work with Democrats, and then we'll see what they can come forward with. "

http://tinyurl.com/644psg

"Q A couple weeks ago at the briefing, you mentioned GMAC and the finance arms of the automakers potentially applying for TARP and access. Is that now just -- you guys gave gone through that?

MS. PERINO: I would refer you to the Treasury Department for more, as they've tried to look at -- they've exhausted all possibilities to try to find out how they could help them, but I believe that because it's not the parent company, how the legislation is written in the original intent of Congress, which we are trying to follow and follow quickly, that's not included. "

http://failblog.org/

Kinross has been trading almost flat while Goldcorp is down around 7%.

(I hold both)

US$ index at 87.665 - nearing Oct. high of 87.88

There's no way any commodity can rise while this is going on, IMO. (Back in July, US$ index was at 72.5!)

maybe they've figured out that cheaper commodities prices are "better" for the world's economies at large and they've gimmicked a way to make the $USD stronger - this would work in europe's favor as well, no? (making euro exports cheaper in the U.S. and U.S. imports more expensive in europe).

Dr.S - Got it, there's at least 1M jobs on the line with the Domino effect... Warning, Will Robinson!

hecla dropped another 18% today and is now available at the lofty price of $1.33...

Teck Responds to Market Rumours
Tuesday November 11, 3:48 pm ET

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 11, 2008) - Teck Cominco Limited (TSX: TCK.A and TCK.B, NYSE: TCK) today responded to rumours that it is in the process of undertaking an equity offering. Teck is not currently contemplating issuing equity securities. Teck is developing a comprehensive plan to reduce the bridge debt incurred on the acquisition of the assets of Fording Canadian Coal Trust, focused initially on paying down a substantial portion of the bridge debt through the next two quarters using strong cash flows in which Teck has confidence based on the fixed price nature of Teck's coal sales, previously announced copper hedging transactions and expected cash tax refunds. Teck is concurrently taking steps to contain operating costs, to reduce sustaining capital spending, to reduce development capital spending and to defer projects, and is evaluating a number of potential asset sale alternatives. Teck intends to access the debt capital markets to refinance the balance of the bridge debt as these other initiatives progress and as market conditions permit.

pookster, i bought NVLS at $12.70 today...will probably regret it in 2 weeks when its at $8 or so...

S&P closed below 900.

Nibbled some BAC (yes, I know...)at the new 52 wk low.
GS was a blast today.

Seamus, did you mention CAT? I got 100 shares.
Also in and out of SBUX for the last few days except last night was safely out. This was one of those buy the open, pay for lattes for months trades. 9.50 to over 10 in a day isn't bad.

It's a traders market. I wish we could get something less volatile, but it is what it is.

Anyone want to guesstimate what the price of a barrel of oil will be by Dec 31st?

Last 4 weeks, 1 month libor rate (london interbank rate) down from 4.55 to 1.55.

Today, TED spread (between 3 mo. eurodollar and 3 mo. T-Bill rates) down 14% to 1.75.

That's progress ... means credit internationally is cheaper.

I guess I need some handholding. Thinking the worst was over, and thinking everyone was too negative, I got fully invested in September, just in time for the selloff. Now I am down like everyone else and am queasy everyday wondering what to do. Will it pay to hunker down and hold these blue chip stocks for 2-5 years? Or just admit to myself that I made a major mistake and sell out. The sad thing is that I had good gains over the last few years, sold out last winter, then got back in this September, and have lost nearly all those gains in one month. I am not a trader, but an intermediate to long term. I enjoy the dialog on this site, and the wisdom from Bill and 2nd avenue comments. Was I early, or just plain wrong? Thanks.

Craig, yes that was me. Focus was elsewhere at the time of breakout so when I saw it beyond 37.50, I didn't chase with the usual 1K share nibble.

It will offer more future opportunity in this roller coaster. BTW, just as info in case things unlikely calm down, it has a @ 4.4% dividend.

grosbank - if your gains from "last winter" are taxable this year you MIGHT sell - otherwise, you'll be taxed on the lost gains. That's insult to injury

goldbug58 - NVLS - A contrarian move?

You must've gotten a buy signal, or know something I don't... Good catch though, you're positive by 0.30 as of now...

Jock

credit may be cheaper but of course it will be if the FED is the first/last/only lender of resort.

Banks don't trust each other still.... They will never trust each other until transparency is priority.

Now, over night deposits from banks to the FED are paid interest in surplus holdings. That interest is paid for by the tax payers who are paying the interest on treasury bills/bonds/notes in the first place.

pay interest on interest? --- liquidity trap...

Seamus, yep, that's why I checked the chart, the div., and took a little position I could add to if push comes to shove.
I think the Chinese infrastructure capital infusion and longterm infrastructure maintenance in the U.S. will be beneficial.

I might have missed the chance had you not said something. Thanks again!

I'm not particularly interested in non-div payers these days. I'd love to have a whole portfolio of steady preferreds like Cenex though.

Jock at November 11, 2008 3:42

There have been some substantial rallies of gold and the shares during usd bull legs in the past.The common denominator in those rallies were that $usb was falling during those periods as I have observed.

No, I know nothing. Just like NVLS and think they are #1 in the semi-equipment industry - remember once when their earnings took a hit (like last qtr) and they actually dipped negative in the following qtr - only to rip from single-digits to high 50s over the following year and a half. well, that's history, but I see it as a long-term hold even if it drops from here - will buy more.

norm - GS called $250 oil some months ago, I'm convinced it will be much lower (sub-$50?), and left questioning their sanity/motives (as if).

Norm - TED and LIBOR are London-based rates, where there's a different lender of last resort.

Good point, though, about whether lower rates necessarily mean more lending taking place.

Still, Donald Coxe maintains lowered TED spread has been the key indicator of easing crises re Iran in '78, Continental Illinois in '84, crash of '87, Asia in '97 and Russia/LCTM in '98.

groosbank- we'll know the answer to your question only when looking back...it is, however, the quintessential question in life- my response would be how you handle the uncertainty will ultimately be more important (to you) than where the market ends up...

Craig,

they should TAKE the remaining 350 bil of the TARP, set it aside for municipals, states and companies.

Have states and Municipals submit plans for infrastructure, issue them the money from the 350 billion. If a company wins the bid for the work and needs a loan, have the access the money (loan) from TARP. (mind us all it has to be a transparent competitive process, even foreign companies can bid but have to hire USA workers, lowest best bidder wins). Once the municipalities, states (get their grants) and companies (get their loans) get their money, IT has to be deposited in a BANK. Hence the banks will be recapitalized to some extent. They can use the fractional system to create more money if they choose or they can hoard the cash but at least this process that still gets money to the banks, CREATES JOBS and gives our kids something to drive or play on decades later....

Jock,

your right and so it Cox but isnt' the ted spread suppose to be 20 basis points or so above fed funds target?

Fed funds rate isn't even close to target as of right now anyways.

IMO Cox (heard his call yesterday) is totally discounting the unwinding that is taking place. The longer institutions take to write off debt, never mind i'll shut up now.

I'm with you on this Norm.
I would have done something similar with the first $350 instead of a one shot dump to the banks. Why not help homeowners at risk? The cash ends up with the banks in the end, we get closer to marked to market, the banks could defer/adjust loan terms/lease/whathaveyou, we kill more birds with the same taxpayer funded stone. Combine with tax free savings/IRA's, etc. and some good sized tax benefits for first time homeowners and we could get this turkey flying again.

But...you know it would be good for savers and average work-a-day guys like you and I, so you know the chances....

On KGC being flat

My charts show the low of the day hit near the 200 Week MA and the close is about the 50 Day MA (both MAs are very close). There is a lot of resistance holding KGC up for the present. Here's hoping for a fall of the $ and rally in gold!!

yeah chances are zero to zilch.

i wish there would be some whistle-blower to take these clowns down.

Either way in the end we will be a better nation, we will start to save more (it will be PAINFUL) but 10 years from now we will be better for it. It will humble us all... As i have been.

NVLS has a strong product line, maybe some great patents from their Varian-TFS acquisition back a number of years. I would expect to see that in their PVD(Sputtering) line. Initial question with NVLS: If they aren't strong in PVD, then where?

Varian-TFS was a huge pioneer in the world of batch coating(only one of many accomplishments), helping Detroit realize their desire to triple-chrome plate the roads with humongous bumpers and a large number of elaborate accoutrements without polluting the entire northern hemisphere.

Basically, you can thank PVD technology for our new 100" LCD televisions, With a small Stanford grant, the Varian brothers developed WWII radar, night-vision, canned-food safety, MRI, (attach exhaustive list here).

CAT on the daily, is that a cup and handle forming?

Yes Craig, I agree. Like to see it swing trade like the old days. ;)

norm--good idea. Whether they have set any aside for the cities, the municipalities are going to ask for it regardless. Posted a NPR radio report over the weekend on financial crisis impact on a municipality (Phil) and Wisconsin schools. Shows how this thing reaches everywhere. Munis next?

imo - munis will be fine. Taxing authority of the issuer. (not to say that some will have a issue or two).

10 years from now I would be worried about long term munis.

the whole world needs to unwind, for now.

That Wisconsin school story is HORRIBLE! I about punched my monitor after reading it, which i threw my remote after the press conf today in regards to fre and fnm.

Norm - Yvrapx published here, Coxe's criteria for knowing when "mama bear had finished her mauling" of us:

1. A TED Spread reading of less than 150 on a sustained basis.
2. A VIX reading of less than 30 on a sustained basis.
3. A pullback in the Dollar Index (DXY) to 80 or less.
4. A pullback in the yen to below par.
5. A contained rally in gold (not a leap to $1,200 or some such number).
6. A BKX reading above 50—and preferably above 60.

We're close only on TED (1.75) and BKX (51.39). (BKX is the regional bank index).

I agree, most munis will be fine, but not all. Historically, muni default rate is very low (something like 0.0086% or so). I remember Orange County, CA but I don't think I had any munis in those days.

However, I've previously posted examples like Jeff Cnty, AL that was talked into derivatives by HB&B and is now facing some financial angst.

Also, in lieu of reading the NPR report, listen to the audio on the City of brotherly love. I certainly think they'll make it as total exposure was minimal when you consider the whole picture. However, it just shows those land mines out there.

groosbank - impossible to really answer. It all depends on your situation which generally can't be described accurately in a couple sentences. In addition nobody really knows the answer. It's all about management of risk as Bill points out. By no means am I a professional, but I have traded for years. One thing I have learned is that at any point in time it's a matter of whether you like your current position (it does not matter what you paid or when, if you were starting from scratch is your current position where you want to be). I'm not suggesting you do this, but sometimes wiping the slate clean is the best way to address your holdings in this fashion. Anyway, in my opinion risk management is where you should put your effort. You can't get caught up in the "only if" game when you see prices blastoff or implode. Just stick to your game and manage risk.

Posted by Jock: "Last 4 weeks, 1 month libor rate (london interbank rate) down from 4.55 to 1.55. Today, TED spread (between 3 mo. eurodollar and 3 mo. T-Bill rates) down 14% to 1.75."

We are getting very close to the 1.5% TED spread, the level at which Don Coxe said the crisis will have past. So why is $USD moving up, if the crisis is dissipating???

groosbank, as an answer to your question, I strongly suggest you read John Hussman's latest e-letter: http://www.hussmanfunds.com/wmc/wmc081110.htm, where he shows that the stock valuations are now cheapest since WWII except for the 1970's. Bill Cara recently wrote about the 70's, explaining that because of the high inflation and interest rates, no one wanted to invest in stocks. Now the interest rates are low, so we should not expect a return to the 1970s. So this is the best entry point into stocks you can have in the past 60 years (with low interest rates), and you should expect at least 10% annual gain for the next 20 years, as Hussman explains.

[Bill Cara note:

The study of markets is like geology. You show resource data to ten different geologists and you'll get many different hypotheses. Same with the market, which makes it so interesting because we don't need a Master's degree in Geology to speak the language.

http://en.wikipedia.org/wiki/Hypothesis

Does anybody remember 1969, with the high-tech "Nifty 50", the "Junior Industrials" and the Grateful Dead at Woodstock? Well, all those dreams were brought back to earth with high interest rates in the 1970's. Speculation was taken out of the market. PE's plunged. None of that speculation is the case today. Today, whether it's pro traders, mom & pop or high rollers, spec equities can't find a bid, but interest rates are not high so PE's can stay high. I truly believe that if interest rates today were the same levels as the mid-1970's, the DJIA would be down at the 4,000 to 5,000 level. Traders are frightened of risk. Even the high yield debt of some corporations isn't sniffed at because traders are asking questions about solvency. The same corporations might have solid cash flow and easily meet their debt service, but the question now is will they have a banker standing when all this is over. Will they be a survivor -- not because of their situation possibly, but due to our concern about banks and their mega-trillion dollar problem with credit default swaps. With all these rescue packages being thrown around, traders know that commodity prices ultimately will have to zoom, and interest rates will have to rise, and that will kill prices of equities, so they stay on the sidelines, waiting for that situation to be resolved. Today is a different market entirely than 1974. People should recognize it, and stop drawing ridiculous comparisons. I haven't read Hussman, but from what you say, it sounds reasonable. I believe financially sound corporations today represent good value at these PE's.]

David - I think TED spread and US$ index have different dynamics. US$ and Yen seem to rise (against almost all other currencies) when hedge funds must unwind the carry trade and remit cash to US.

Also, Coxe maintains that many foreign banks held US denominated assets, and shorted the US$ simultaneously as a hedge. When the US$ started to run, due to hedgies, these investors had to cover their US$ shorts whatever the cost.

TED is a measure of cost of borrowing offshore in (uninsured) US$ vrs. US$ borrowing of T-bills inside the US.

2nd,
I appreciate the kind response of you and others. In reading your reply, it struck me as rather profound, which I am still trying to interpret. Do you mean that by not joining the panic selling, and learning to live with the uncertainty will ultimately be a more rational human response? I am inclined to think that way, but I do not want to be in a state of denial either.

thanks

Posted by Jock: "TED is a measure of cost of borrowing offshore in (uninsured) US$ vrs. US$ borrowing of T-bills inside the US."

So TED spread is a kind of an indicator for the "need" for liquid US$ rather then T-bills. As TED falls, so should US$. If US$ does not fall with the TED spread, then we may have a trading opportunity (e.g., go short US$ or go long commodities).

groosbank, here is a quote from Hussman's most recent e-letter that echos what 2nd_ave said: "Investors often have little success in actually buying low and selling high, because to buy low is to buy into fear and uncertainty, and to sell high is to sell into enthusiasm and confidence. Investors pay an enormous price for constant comfort."

norm - Did I say ~$1T? Wrong, sorry, I meant ~$1B. Anyway, the right way to approach might be to locate device manufacturer's capital equipment budgets (if available), and equipment vender's book2bill forecasts, etc.

Here's a possible starting point:

http://www.semiconductor.net/

Thanks David,
Those are encouraging words, similar to Warren Buffett's recent comments. I take them to heart, but it is a constant battle fighting the spirit of gloom. Lord, give me strength.

Goldbug58 - my previous post was for you, not specifically norm...

seamus,

orange county - they bk'd but didn't default on their munis (if my history is correct).

Jock - can't disagree with your post... here is my two Cents (cuz the dollar is looking good for the short/intermediate term.

next 2-5 years - debt unwind/deleverage (what ever "de" they want to call it). USD won't crash in that time period - emerging markets will not lead up, the dog has t get up before the tail can. I would handi cap a G-20 currency before a USD crash.

Emerging economies (yesterday's news, i.e. news flash to 2000 investors the TECH bubble is gone) day is gone, PEAK credit build those stories and now we must get back to more sustained debt levels. The debt monster has build for the past 25 years ad they added jet fuel to that fire since 2004. This build up everything until that unwinds, don't expect much from them.

We are still in a commodity bull market but that is probably going to pause until we find out what bonds, companies, nations and currencies are going to implode from the debt going bust.

Old 'historics' can't seem to grasp that there is no one left to borrower. There are eligible borrowers out there but they don't need to or want to take on debt.

Cox is smarter than me without question, in fact 98% of the population is smarter than me, however as kaimu keeps stating it is the money and there is to much of it on the globe.

once the dust settles, population growth will cause/create more demand for commodities again but until then there are going to be a bunch of disappointed people on this globe, and I am not thinking stock investors. More like hunger, water, ect.

China has been building 5-7 Manhattans a year for the past what 5 years? If you think the REITs here in the USA are going to struggle. Wrong, that is going to be painful. The largest migration known on the face of the earn - rual chinese to urban chinese will begin to unwind and reverse as it has already started. Factories that require USA consumption are closing by the droves. More pain to come as he haven't hit our bottom of our recession. Don't believe the pundits.

optimism is a good thing, but you need to real first. Lets be real, get a vision of 2, 5, 10, 20 years and then be optimistic.

AMAT reports tomorrow (In case there's an interest):

Applied Materials Inc. (AMAT: Is expected to report fiscal fourth-quarter earnings of 14 cents a share, according to analysts surveyed by FactSet Research.

[Bill Cara note:

Seth Glickenhaus, who is almost 100 years old, a true icon on Wall Street, is being interviewed on Bloomberg TV. This is classic. Can somebody please post the youtube or Bloomberg video? I want this video to be taught for the next two generations or more in secondary schools and universities. BTW, he's just started the interview. You can catch it on Bloomberg!]

Groosbank,
Someone suggested selling your stocks to relieve yourself of a tax obligation. If that is the case and the obligation is significant then it may make sense to do so but talk to your accountant first. You can always buy back the day your new tax year starts. The way things are going they may be cheaper!

If these are "real" blue chip stocks and there is no tax obligation then you should consider going with your inner voice, what is it saying to you (rhetorical)? Often times that inner voice is right. If you are waking up in the night and worried about your position then your inner voice is suggesting you get out. I wish I had listened to mine a few months ago.

Some commentators suggest the market is near bottom and others see anything up to a 30% drop from current levels. Who knows at present, not me. There is always a compromise strategy you can employ, i.e. sell a portion now and another portion if the market drops another x% and so on, a reverse on averaging up this is averaging down.

Bon chance!

I know how you feel, groosbank -- I feel the same way, since my portfolio has also collapsed in October. But this kind of gloomy feeling gives me hope that I am on the right side of the trade now. :)

[Bill Cara note:

The humor on the trading floors goes like this: "How's it going?" Reply: "Sadly, I've become an investor." What this boils down to is that you bought risk, and didn't sell it. I continue to tell you; the job #1 of a trader is to sell risk. Job #2 is to seek rewards. This is not rocket science.]

Placing a sell limit order at $3.50 for the 1000 shares of SWC I purchased today at $2.68. Notice that Palladium & Palladium are much higher now than where they were when $USD first reached the current level a few weeks ago, which I think is a good sign.

That was Platinum & Palladium, in my previous post...

If you think that the potential upside now (in absolute terms) in your favorite underwater stock is now bigger than the downside (which I think is the case for all my stocks), then in order to take tax losses you can BUY some more shares of this stock now dirt cheap and sell them at the end of December (using the IRS first-in, first-out rule, the cost basis for the shares you will sell in December will be equal to the level at which you FIRST bought the stock).

Seth Glickenhaus was a guest on Consuelo Mack's wealthtrack a couple of weeks ago. You may view it at www.wealthtrack.com under previous shows.

[Bill Cara note:

He was also on Bloomberg a few weeks ago and I referred to the interview then as well. The man was working on Wall Street in the 1930's. He has seen it all. He also has incredible judgment.]

AGM http://tinyurl.com/6okys4 reported its third quarter results yesterday http://tinyurl.com/6l5wmt

I wonder if its heading back down to around $3 and plans a third 200%-400% week-long rally?

Yields 9% also.

http://ca.youtube.com/watch?v=-bLaoYxtYe0&feature=user

Seth Glickenhaus Video

Bill,
There has been reference to an event in the Bahama's in April but I can't find the original post. Can you please provide a reference to the post? Cheers

Bloomberg is reporting tonight:

GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs at least $11 billion to pay its monthly bills. (That's $16.8B shy by end of Jan. when Obama and the new Congress are in place)

``We still have the slimmest of majorities in the Senate,'' Reid said in a statement. ``This will only get done if President Bush and Senate Republicans work with us in a bipartisan fashion, and I am confident they will do what is right for the economy.'' (Default on payroll come Jan 1)

Even with ultra low P/Es, bottom will fall out as unemployment hits double digits. Low interest rates won't help consumers living in Davey's Locker and Wall St barons holding ALL the bailout cash. There will be a run on $100,000 shower curtains in Manhattan though.

Waiting for the GM 'solution'

Did a comparative chart of 4 industrials - 2 that Bill has talked about (BA,CAT) plus MMM and ITW. The latter is not in the DJIA.

Over the longer course of the decline, BA is the worse with CAT not far behind but both over 50%. MMM fares best with "only" a 30% downer. ITW is in between.

Shorter term, like 5-6 wks ... the time of real trouble ... CAT falls the most and 3M is + with BA/ITW tied in the downside middle.

One more and a short time comparison at 6 days: Three are down a bit but BA has fallen out of bed with an 18% decline. Volatility now!

My conclusion, as a value investor who wants to buy a good company at these low prices (and an occasional trader): Zip, until I do a screen.

Ran one for bottom fishing (Yahoo) but included my favorite parameter price to cash flow, with other stringent parameters:

ITW looks best right now per price, cash flow, debt and profit ratios.

CAT has a huge debt to equity ratio and not too good return on assets.

MMM is a fine company but may be overpriced relative to others in my screen.

BA has a great return on equity but is low on ROA. High debt hampers but cash flow per share is outstanding. Choose your poison.

I am into bettering my fundamental position going into next year by trading into the best stocks and tax loss selling (even though I am not an upper bracket person since retired). Therefore, perhaps goodbye CAT and hello ITW.

Ultimate downer disclosure: I am far from a millionaire or successful trader but would like to be one for my grand kid's sake.

grossbank- sorry for the unclear response; as soon as i posted it i thought about following up with more helpful comments (and then it was time to go home)...

(a) we've been more or less riding the same train since September (I was at my YTD high and up almost 35% as of the 9/26 close)...at the time I was less than 50% invested...I scaled in over the following week to what amounts to equally weighted positions in gold, China+India, financials, energy, and technology)...it took less than 5 trading days to turn my YTD gains into significant losses instead, so I know EXACTLY how you feel...

(b) you've heard my mountain climbing analogy already, so I won't repeat it...I'll just add this: in the event of an avalanche that totally wipes us all out, then the higher your elevation, the further you fall...however, I fail to see how going to cash will necessarily save you in that event-> the world would be in turmoil, and you have a suitcase holding $1m in cash? worse, you have a statement from your (now non-existent) bank that says you have $1m in cash? worse still, that statement is backed by a (also non-existent) FDIC?

(c) not once in my trading career has it ever been 'easy money'...we work for the gains, and sometimes the 'work' involves watching and waiting, either for an entry point, or for an exit point...

(d) in general, I go with the odds, which means buying on weakness/selling on strength...obviously, one can be early, and this time we were pretty damned early...I'm still planning to sell on strength (and it really doesn't need to be above my basis), but I just haven't seen it yet...

(e) i don't, of course, know anything about you...i admit to being more of a 'gambler' than most investors, but i have a fairly secure financial foundation (in terms of health [both personal and that of the industry i work in], years remaining in the work force [i could retire in 10 years, but i like my job, and could easily work another 20 years], earnings power, and family/social network)...if i didn't, i would be less inclined to 'play' the odds...

(f) if i were sitting across from you right now, i'd be telling you that my gut feeling is that you should hold onto your positions and give them a few months to play out...a few weeks is really not enough time for me to concede anything...

that's my take right now...GL, and feel free to ask for further clarification anytime...

Mac - Wow, that's quite a fall there for AGM, I suppose their results weren't quite up to expectation.

David & Bill,

David: Thanks for the link —I read Hussman each Monday AM and have for several years. I have no way to ask his opinion on a specific scenario. If you know of a way to email him I'd appreciate it.

I remember the Nifty 50 (My Polaroid camera is only worth about $35 on ebay, but I remember when the stock was about that.) I know interest was high then and seemed it would rise still higher.

I know stock prices are down, but low is relative and in itself does not mean they'll go back up. (Hussman said for years they were overpriced.) I know that many conditions today are not like the 1970s.

I understand expectations are for increasing interest rates. I realize Bernanke is attempting to inflate our problems away and promised to do so several years before he became Fed chairman. The most recent increases had little effect at the long end (about 4.5% I think). Makes those I bought a few years ago near 7% look good, but I sold them at about 3.5%.

I also know there are many other things today which are less favorable to both the U.S. economy and I assume to the prospects for the financial markets. Massive debt — individual and national. The poor employment opportunities.

It is the UNexpected which I am asking about.

What will happen if NOBODY either wants to buy, or is in an economic condition to buy U.S. debt. What if what is now seen as a credit crunch is in fact global-wide insolvency? It happened with the banks, why not whole nations?

Just as individuals are now cutting back to purchasing only necessities — what if this carries through to cities, states and ultimately nations?

Am I not getting a direct answer because it is unknowable or because it is too bad to even contemplate? I'm just looking for a discussion and some other people's views on the issue.

To me it seems like it would be one massive deflationary spiral. If so, what are the best defensive measures?

...adding to (c) above, i meant to say "it can involve seemingly endless periods of watching and waiting"...it's certainly not easy; the waiting can be grueling, but that's exactly what it takes to eliminate the last of the sellers...

groosbank,

I can empathize with you. From last November to this July I had more in market gains than I ever made in any two years of working. Now I'm down about 11% overall — most is not tax deductible.

Overconfidence and a nice smug feeling is a sure path to new found humility. I have the rules change by the SEC to thank for a tough lesson.

I'm usually a medium to longer term stock and bond holder. Life is not all or nothing, however, so I would suggest evaluating each purchase and selling to gather ammo for better days to buy. The tax considerations mentioned may be a major help in deciding what to dump.

Things are too unsettled for me right now. I've gone to half cash.

2nd,
Thanks for the detailed response. As for my situation, I am a 50 year old farmer. I considered the stock market my other business. Until recently, I thought I knew what I was doing. $ 2,700,000 portfolio on Sept 1.
$ 2,090,000 on Nov. 11. Only other assets are small farm. I have been fully invested for years, rightly or wrongly. Sold out last December, went to cash. Thought I was being too negative, got back in whole hog in August and September. I knew the risks and thought I was mentally prepared for them, but I have such an impending sense of doom after reading Harry Dent and Nouriel Roubini. On the other hand is Warren Buffett saying now is the time to buy, not sell. Stumbled upon this site and took up the dialog. Found Bill Cara to be right on, but I never considered myself a trader. I try to pattern myself after a couple at my church, who live off their dividends, instead of trading. They bought Pfizer 27 years ago and their cost basis is $ 2.00 per share, which is less than the current annual dividend if I am not mistaken. I have seen Buffett ridiculed on this site, but he is the richest man in the world, or close to it. My ongoing torment, is that I probably was set for life until I got back in the market, and now I have compromised that, or have I? I am probably being irrational. I appreciate your insightful comments. I have been reading them for weeks.

CP says: "Wow, that's quite a fall there for AGM, I suppose their results weren't quite up to expectation."

Actually, a move of $0.94 for this stock is pretty hohum, recently. It's 14-day ATR is $1.49. This puppy moved up from $2.85 to $8.40 from Oct.29 to Nov.4, a +295% move.

Made a similar move from $2.50 to $10.99 from Sept 29 to Oct 3 (+440%).

I guess the plan is buy it if it's under $3 on Nov. 28? :P

I just looked at the price chart of SWC going back to Jan 1995 (choose max interval on Yahoo finance) -- what a fun chart! Today SWC matched THE lowest level it has ever been since Jan 1995, which was achieved during a spike down (on the 13-year chart) in its stock price during the recession of 2003. As 2nd_ave would say, at least I bought it today near THE bottom. :)

Seth Glickenhaus for TREASURY SECRETARY! - He's a ntaional treasure.

David - I think TED spread measures not demand for US$. It's the overseas dollars (per Coxe the largest source of capital in the world) and the rate overseas holders demand for lending money uninsured in London vrs the US$ T-bill rate.

Those "eurodollars" include petro-dollars and oligarch-dollars and chino-dollars too. It's a measure of their appetite for risk vis-a-vis the
"riskless rate" for US treasury notes.

Maybe not so riskless now, esp. over the longer term. Check this 30 min. video by David Walker, former US currency comptroller, IOUSA about the US long-term fiscal craziness of $53T and counting:

http://www.youtube.com/watch?v=O_TjBNjc9Bo

groosbank- unless you're farming in Manhattan or SF, i think at age 50 you're doing quite well...(and sorry to have misspelled your handle the second time around, the subconscious is wonderful thing, must have slipped off into thinking about the condition of the banking sector)..

"[a] wonderful thing"

Genworth

Debt downgraded today and also lost its ability to
borrow from the Fed. Closing price $1.29 down from 52wk hi of $28.

Market Cap $537 million
Revenue $10 Billion
Debt $8.7 Billion
Assets $70 Billion
PE 1.04

They have $1.1 Billion in debt maturing
2nd qtr 2009

Bankruptcy or good for a rebound or takeover ?

Anyone have an opinion on Genworth? Maybe WBuffet will come and pick at the carcass.

David- there is no way, of course, you'll still be holding your current positions when the XAU returns to 200, but those are the kinds of thoughts that can take the edge off a bad day...;)

Thanks for your 8:09pm post, Jock! It has finally clarified for me what the TED spread is.

As I understand it now, the eurodollars are being lent to the banks, and so the TED spread is mostly a measure of risk of some bank going down, as Don Coxe has mentioned as well. At the same time, looking from the borrower point of view, if the banks are not willing to borrow $USD at a high rate (the TED spread is going down), then they must be seing some other "better" alternatives than holding $USD. Therefore, the holders of $USD might use those alternative directly, which *should* put a downward pressure on the $USD.

Grym, I've wondered the same thing. Haven't heard that scenario addressed anywhere.

On a different topic, but another one that I haven't heard addressed anywhere: Pardon me if I'm naieve here (I'm a fairly new student to this world), but in these days of unprecedented government action, why can't we mandate across the board mortgage rates of say, 4%? It would allow struggling homeowners a chance while also giving real and sensible stimulus to homeowners who are not at risk of default.

Why is such an action not possible? Tearing up the contracts and resetting them seems far simpler and more direct than all these other schemes they're throwing at it.

"It is the UNexpected which I am asking about.

What will happen if NOBODY either wants to buy, or is in an economic condition to buy U.S. debt. What if what is now seen as a credit crunch is in fact global-wide insolvency? It happened with the banks, why not whole nations?

Just as individuals are now cutting back to purchasing only necessities — what if this carries through to cities, states and ultimately nations?

Am I not getting a direct answer because it is unknowable or because it is too bad to even contemplate? I'm just looking for a discussion and some other people's views on the issue."

Grym- anything can happen, but the problem I have with your scenario is that, historically, optimism always triumphs...people are optimistic by nature, and as we all know by now, human nature never changes...

if i talk to my older kids, or even to my 6-year-old, i will get a completely different take on the world, which is, after all, made up of people just like them and like us...

there is NO way we REMAIN mired in a global recession for an extended period of time...people just won't allow it to happen...there are people planning right now for new businesses, (first, second, third, fourth) weddings (LOL), a new President with a new administration, college, parties, first (or new) careers...there are people excited about the after-life...

sometimes art depicts life better than any other medium...go catch any movie playing, and you will (usually) leave with a new perspective on things...not only do films portray the same basic (but never boring) stories over and over again, they also (to me) make clear how easy it is to change one's emotional state...two months ago, no one saw the massive bear coming; in another few months, we could all be talking about the totally unexpected bull...i would never bet against the unending cycle of the markets, which is the same as saying i wound never bet against the certainty that sentiment always reverses...

'wouLd'

what a great video:

http://www.youtube.com/watch?v=O_TjBNjc9Bo

..another to say it is we have very short attention spans...the seeds for the next bull market in china have been planted, and the new owners of china stocks have been buying them from weary sellers for weeks...the same has been happening in the metals sector, the financial sector, and the technology sector...people are going to get rich buying into today's negativity; some will be readers of this blog...

another WAY to say it...

I never ridiculed Buffett. I called into question the attempted application of his investment strategies by ma and pa. In addition, and we don't yet know the answer to this one yet, I sometimes wonder if Buffett MAY have enjoyed the "best of all markets" in which to do his thing, back when he was certainly doing it effectively. Who is the best trader? He's the one who buys and sells at the right times, right?

You know, there's a lot of hot air being dispensed regularly on this subject, and the truth is, there's really only 2 basic behaviors or actions that we can engage in as traders, and we are all traders, even if for you a trade lasts 30 years. We can, on the one hand, push a button called "Buy". Later, we push another button marked "Sell". Sometimes it's backwards, the sell then the buy, but that's basically it. We're essentially a bunch of apes whose sole task in life (I don't farm, myself, sounds like fun and glad to hear of your success, but this is my only source of income) is to push 2 buttons. All the rest is just good organic fertilizer and conversation, some of it quite good:)

And you know...grinding sacred cows into cheeseburger is too much fun to resist. But of course I respect the guy, his success is awesome but not terribly unusual for the sharper old-timers some of whom I know who recognized that what they were buying was not stock in some corporation but rather the future, of this great place called America. What's changed is not the virtue of equity participation nor the health of corporate profits...but instead the nature and the past, and therefore the future of this place and time. What it will become nobody knows. But I do know that what used to work great long ago tends not to work after a point. Or else we'd still all be hoarding new unopened baseball cards counting on profits that in the future would be like those of the past, not taking into account the fallacy of composition, or what happens to the effectiveness of a behavior when EVERYONE does it (think Johnny 401-K and the Great Retirement Scam, yet to be fully played out.)

shark- actually, i would say the best trader is the one who successfully reaches his goals (no more, no less) with the least effort (ie, spends as much or as little time as he wishes at it), while simultaneously also maintaining a perfect balance with all other facets of life...

we don't need to trade like Buffett to be 'great' traders...Buffett likes what he does, and he does it well...i doubt he stresses much beyond an overcooked steak on a typical day at work...i think you're beginning to find your own style, and you seem to be getting better at it; a lot happens between pushing those two buttons, my man...;}

Nov. 12 (Bloomberg) -- The rout in global markets may continue while bonds will be a ``terrible'' investment as economic problems may persist until 2010, investor Jim Rogers said.

``Stocks in the West are still expensive on any historic valuation method,'' while ``bonds are going to be a terrible place to be for the next 10, 20 years,'' Rogers, chairman of Singapore-based Rogers Holdings, said at a conference in Seoul today. Equities in the West will be ``in a trading range for years to come,'' he said.

``I have started going back into the markets; that does not means it's the bottom,'' Rogers said. His purchases since mid- October include commodities and equities in China and Taiwan, as well as ``a Korea stock,'' he said, without giving deails.

``We may be hitting `a' bottom,'' Rogers said. ``I don't know if it's `the' bottom.''

Even Buffett doesnt buy and hold all his stocks. Didnt he offload his entire PTR stake last year at the top?

shark- you also have the ability to see the forest for the trees, maybe even a little beyond the forest...in a general sense, all investors are in fact placing their faith (or not) in their hopes for the future...

groosbank,

Also just found this site in the last month. Your story sounds a lot like the stunt I pulled this year. After the horrible string of losing trades or investments I've had the past couple months, I no longer have any confidence to buy things and hold them through anything but the smallest of shake outs. I'm about 2/3 long, now and if I have to, I just turn off the screens and walk away to avoid selling at the exact lows. I've got just enough cash that I can sleep at least 3 or 4 hours a night, LOL.

Oh well, at least you have a farm to fall back on.

If you go to cash, you could try trading on a simulator till you have confidence again. If I get to where I HAVE to exit again, I'll probably do that.

vinod- Rogers, Buffett, Cara...no one plays ball the same way; we each end up finding a player who fits our own strengths and perspectives...i would use the mentor that appeals to you, and the rest should follow...

(..i recall practicing Kareem's sky hook a long time before realizing it just wasn't my shot...LOL)

Foz,

Your idea was actually mentioned on Kudlow tonight by one of his guests (at 3%). The whole panel was scratching their heads saying 'why didn't I think of that'. So I guess you should be on TV!

vinod- but i know we're closing in on that +1500 day...;)

shiva- exactly...he knows when to buy, and when to sell, all within his own investing framework...note that he only likes certain kinds of companies, and doesn't do as well when he strays outside his usual 'turf' (eg, his sense of timing worked less well trying to short the nasdaq in 1999)...

Seadog:
Bill's party in the Bahamas...the original post was as at the end of the last WIR - nov9.

Can anyone think of a reason why stocks will go up... all of the bad news has been priced in (valuation)? improved retail numbers? improved housing numbers? improved employment?

I'm thinking that sellers are having their way on low volume and it has been working because there is simply no reason to buy.

Without a positive catalyst or, worse, with continuing unforeseen negatives (such as the auto industry - yes I have to call this unforeseen as it was no where on the Treasury's radar with respect to Tarp) there will be no year end rally and we are likely to go lower.

If this is not going to be a 1960 to 1980 type market, i guess we will all have chances to correct our mistakes unless we had bought at the exact very top or shorted at the exact bottom.

Mackinaw - I'll keep an eye on AGM, you may be onto something with that. ;D

Brown-Cal- is it possible stocks (collectively) move up or down not on good or bad news, but on positive or negative sentiment? and changes in sentiment are notoriously difficult to predict...

groosbank,

It’s late; you’ve probably gone to bed now. But just in case, here are some thoughts you might find useful. In my own development as a trader (which is a little over a year now), I’ve found the most critical factor is to understand how my fears bias my decisions and hold me prisoner. Whenever I’m uncertain, I ask myself: What am I most afraid of? In the past, when I’ve been underwater, the usual answer was that I was afraid to sell and cut my losses because I was afraid a huge rally would occur immediately afterwards. How painful to find I had sold at the bottom.

Crucially for me, selling and being wrong is much more painful than doing nothing and watching the stock drop day by day. So my fear biased me to do nothing when that was the complete wrong thing to do. Take a moment and think about it: you may discover that you can’t sell because you find more psychological pain in the idea of a subsequent big rally than you do in a big drop. This bias in our fears causes a bias in our decision making. So the most important thing is to clear your fears so you can think straight. This is critical and I’m still in awe of the power of this idea: I found that when I’m not afraid, I actually make reasonably good decisions, and have increased my portfolio 40% in the last month. This is after a year of decimating it (down 50%) through fear-biased decision making.

One question that cuts through the fear: If you were in cash, what, if anything, would you buy now. The answer you give will be your true heart, not biased by fears or hopes, and as 2nd_ave says, if you listen to yourself, you’ll find the right answer right there inside. If you decide to sell, you may find you sold at the bottom. So be it. You took steps to protect yourself and you can sleep at night, but you might miss the start of the next bull. And if you do decide to hang on, consider a line in the sand; for example, the 2002 lows. If we drop below that support, I think it would be a clear sign that the current volatile range we’re in is not, in fact, a bottom, but instead is a consolidation of a continuing and quite serious down-trend.

Brown-Cal

Just finished watching the Seth Gickenhaus part 1 and 2 interviews from the link above and i believe the dates were from oct.13. He seemed to think at that time that we had hit the bottom and things were going to rise but he also states that he believes that there is only enough room for 1 North American automaker to survive and the products will be small cars with lower profit margins. I guess this all means that there will be more job losses and more defaults on loans and mortgages, like we need more bad paper, but i guess that this all means that there will be more fear and selling and i guess i have to agree with you and am in your camp. I recommend watching the clips, its truly amazing to see a man of his age with all of his faculties intact expressing his opinions using his vast expierience. God i hate having to work these long 12 hour days and missing the market action and of course the daily dialogue in this blog.

2nd
To be honest, I am losing interest in day/swing trading right now.
Also I think I was not strong enough to stay focus while I was down in market.
I know it was only six week that market is really is down and I should give it 3 to 3 month before I make a decision
But daily look at total balance was too much pain and I got rid of all of sock. I might have given up expected future gain. But pain was not worth it.
Learn a lot about market and now when I read some expert article or opinion or view
I will treat it as just one out of thousand views. And will believe that my own view is no worse or better than any others

"Can anyone think of a reason why stocks will go up?"

Yes, I can think of a few:

1) They've been going down for a year now.
2) Lots of cash is sitting on the sidelines earning a negative, real rate of return.
3) While the market makers (e.g. HB&B, Central Banks, and, increasingly, Governments - think TARP) can make money in most market conditions, ultimately their true wealth/power is tied in with upward trending markets for many reasons.

Interesting reading from Bloomberg

http://tinyurl.com/6n9tks

"Obama's Bailout Bunch Brings Us More of the Same: Jonathan Weil"

i sincerely hope we get better than we had. this is starting to depress me.

Brown-Cal: Are you serious? A big part of me was hoping someone would say, "Foz, here's why we can't do that..."

How could it be that a solution so obvious, so clearly based in the simplest of common sense, is missed by so many Big Minds? Seriously, if this is a workable solution, how could it not have been addressed, and wouldn't it suggest a grand manipulation?

So please, someone out there say "Foz, here's why that wouldn't work..." I think I'll feel better.

Foz it can't work because ...

uncertainty, be it in stock prices or mortgages rates, is the life-blood of capitalism. If you want flat collective predictablity, you get communism and we know how that ends up.

FarAwayEyes- wonderful example of analyzing your own behavior, deciding on a (different) course of action, and turning your portfolio around...(or as Vad would say, however far you find yourself down the wrong road, does it not make sense to stop, make a U turn, and get back on track-> of course, if I want to get to San Jose, I will take the longer/less crowded/more scenic Junipero Serra freeway...you won't find me on the Bayshore fwy unless I'm in a hurry)...

vinod- LOL, are you saying you're tired of making money? you strike me as the ultimate trader, my friend...

[Bill Cara note:

Here is the ultimate trader (thanks Monroe)--

http://ca.youtube.com/watch?v=-bLaoYxtYe0&feature=user PART I (Oct 13, 2008)

http://www.youtube.com/watch?v=RiJktbCWdIg&NR=1 PART II

Hopefully somebody will post the interview Seth Glickenhaus did this evening on the same show. This is terrific stuff. I'll take 15 minutes of this man versus all the stuff I've been watching all month from the so-called gurus and economists that Bloomberg has been interviewing. This is media that teachers ought to be showing their students.]

Mackinaw: Thanks for replying.

But: What's more Big Government/Socialist/CallitWhatchaLike:

Setting a flat mortgage rate across the board to keep struggling folks in their homes while providing stimulus to the rest, or throwing trillions of dollars around, wresting taxpayer money away into the pockets of banks that failed to conduct business soundly?

Grym - "My question is what if other countries needs (ie: China's) lead to refusing to buy our bonds. What if their own needs are more important to them and sapping the capital we need to have going into our Treasuries?"

This is why Bill doesn't recommend holding bonds. The face value is high and the rates are low because capital is parking in a safe place. All the cars will be leaving the parking lot once the show is over, the value will fall and the rates will increase.

The TOG is sell bonds and buy gold. If you don't want to be a tin-foil hat (I certainly wouldn't blame you), then sit in cash until the storm has blown over. After all, those bonds aren't gaining you anything until the value falls and then where will you be? Wait in cash until the exodus, then buy back into bonds at lower prices and higher rates.

I hope this makes sense.

Ooooh, Seth Glickenhaus likes Diana Shipping (DSX)! Too bad I got stopped out, today, marking the shortest-duration trade of my life. While I certainly respect the incredible store of knowledge this guy must have regarding markets (oldest stockbroker in the world?), isn't he just an Emeritus member of the HB&B crowd who has been feeding off Ma&Pa's Feer/Hope/Greed for decades?

(I'm in for a whooping now, I bet :( )

The era that defined Wall Street is finally, officially over. MICHAEL LEWIS-author of LIAR'S POKER

AS BILL CARA SAYS--A GREAT STUFF

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

The era that defined Wall Street is finally, officially over. MICHAEL LEWIS-author of LIAR'S POKER

AS BILL CARA SAYS--A GREAT STUFF

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

http://ca.youtube.com/watch?v=-bLaoYxtYe0&feature=user

Seth Glickenhaus Video

Posted by: JB [TypeKey Profile Page] at November 11, 2008 7:09 PM [link]

Preemptive apology: I don't know Seth Glickenhaus at all. I'm sure his longetivity in his job is a direct function of his genuine honesty and hard and sucessful work on behalf of his clients.

Mackinaw - Then where does that place us? If Bill likes him then there's got to be something to it.

Being suspicious should be your first instinct, there's no reason to apologize for that!

2nd goes positive.....

There is a real biological reason for positive bias. In behavior it is called positive reinforcement, where organisms repeat behaviors seeking repeated reward. For predators it includes things like hunting successful spots repeatedly in hopes of a repeat catch. Some intelligent species will run through a series of known behaviors seeking reward if they don't know which one will result in reward (or is wanted by a trainer).

This is so powerful that teaching and training using positive reinforcement is 60% faster than negative reinforcement. IOW, praising your kids for doing the right thing works 60% better (faster) than punishing them for doing the wrong thing. This is true of all organisms that can experience a positive reinforcement (food, pleasure, praise, sex,etc.) or negative reinforcement. Yes, this is also true of criminal behaviors.

Think about how powerful this is for traders. How many want to repeat successful trades over again (hoping for that reward) and sometimes get caught? (Finding bottoms?) How about that feeling when the market rallys and you get overwhelmed by the positive?
There is a positve bias, but in our business it can be dangerous. Reward is not guaranteed in trading, but we can learn, albeit slower, from negative reinforcement too. So learning profitable rewarding habits is going to be a bit easier than stopping negative behaviors.

Punishment can work (change unwanted behavior) if it is perfectly timed, is short lived (doesn't generate resistance), and works much better if it is followed with the opportunity to perform a wanted behavior that is rewarded.
Once we know this it can be used to our advantage in all aspects of life.

TBar- so Glickenhaus thinks the '08 crash is worse than the '29 crash...does that change your perspective?

the other take-away for me would be, if 80 is the new 70, then glickenhaus at 94 means i've got another 40-50 years in the work force, man...;)

vinod,

"Learn a lot about market and now when I read some expert article or opinion or view
I will treat it as just one out of thousand views. And will believe that my own view is no worse or better than any others"

amen! Much as Buffett is my hero, if I hear another story about how Buffett can time the market or bought this or recommends that...sheesh. The market revolves around mindless rumors and stock promotion. It is all about selling a dream or inventing a nightmare...

Anybody calling bottoms, tops, $2000 gold or $25 oil, question authority as Kaimu would say. Google " calls bottom" or "$2000 gold" and you will see what I mean.

This is from somebody who knows way more about capital markets than many of us...

"Typically, in very weak markets, most people do not buy stocks. And in over-hyped markets, they do not sell, in spite of the overwhelming evidence to the contrary.

But if you do paint the bottom", for the reasons I suggest, and within a list of up to 100 well-managed large cap companies I provide you, then, maybe two to three years from that point the Moms & Pops among my readers will probably conclude you never again have to rely on the help" of a salesperson to tell you what you need to buy, and when you need to buy it.

In all likelihood, you will have figured it out for yourself, and, consequently, you'll be able to teach your children this acquired skill.

And what a wonderful legacy that would be. It's one my Dad passed on to me. "

http://tinyurl.com/6mjssc

Hard to believe it has only been six weeks since the falling knife... and 3 years since that post!

With the advent of CDS protection and the focus on driving companies into the ground for takeovers (Stelco? Teck?) or just a better return on investment (short selling, CDS, derivatives), it may make sense to stay away from many of the indebted blue chips too... which leaves Bill's survivor's list to pick through.

Maybe it makes sense to sit out until the new year? Who knows... with this volume everyone else seems to think so. I can see why Bill is bullish... no volume will cause some crazy arbitrage & value investing opportunities. Most of us probably don't have the time or knowledge to take advantage of them and will just get run over picking up nickels in front of the bulldozer.

Mr. Glickenhaus seems to think this episode is much worse than the Great Depression... since there's a lot more vested interests in the stock market, more ties to the government, pensions, and a lot more ties to the real world of main street... and information is moving around realtime.

He called the bottom in Oct. It looks like he was wrong? He's been doing this longer than anyone on the planet... could he be wrong? Of course!

Interesting times... and there's no reason to play the game if you're not having fun. Cash is doing better than the index right now... but it's only been six weeks as you said and things will get better eventually... which probably means a cycle out of cash, if the wheels are still on the cycle.

It's all about diworsification...

Cos Participating In US Govt's Commercial Paper Program

November 11, 2008: 12:45 PM EST

http://tinyurl.com/68k6ud

Speaking of cycles...

Company: Harley-Davidson Inc. (HOG)
Participation: Financial services unit accessed the facility Oct. 27, didn't provide details on amount used Notes: The company said traditional commercial paper sources remain available to the financing unit. "It's an additional source of diversification," a spokesman said in a phone interview. The company expects to continue using the facility.

Some dangerous precedents set last month... capital markets compete with the Fedge Fund now.

wavesmash- so far he's right (assuming the interview was conducted 10/13)...

Posted by 2nd_ave: "i would never bet against the unending cycle of the markets, which is the same as saying i wound never bet against the certainty that sentiment always reverses..."

John Hussman (I seem to be quoting him a lot today, but his most recent e-letter has been a treasure trove!) wrote in bold letters: "The strongest determinant of market fluctuations is change in the valuation multiples that investors apply to normalized earnings, not major shifts in the long-term earnings power of U.S. corporations." So the stocks are down today not because the smart traders really expect a big long-term decrease in US corporate earnings, but because panic and uncertainty compells them to use NOW a low multiple for the P/E ratios. This psychological tendency always reverses. So we don't even need to wait for a noticeable recovery in the US economy -- all we need is for the mood pendulum to swing back, and many stocks will double. "The pendulum always swings back," as you said many times before.

craig- are you saying the masochistic trader who derives pleasure from his losses would be the one most likely to be caught long when the market rallies 1500 points...

Foz, It *may* not work but it's happening.
The deal today is 3% mort rates and payments not over 38% of income. This is for FNM/FRE loans if I'm not mistaken. This doesn't address any additional principal that might be temporarily held aside to make the "loan" affordable. That has to get paid back when the home is sold....which may be a big problem down the road.

mbernold,

thanks for the read.

Red all across Asia so far tonight. Ok, this is it - we're going down to test Oct 28 lows. I'm bulking up on some 2X inverse ETFs. Could be a potential short-term 12% gain.

Disclosure: Sadly, I'm probably the best contrarian indicator in the world. :P

Man, masochism is going to throw a wrench in a trader's game, no? Pain = reward is not your normal positive for most of us, although lately I wonder. With a few drinks and the right partner it could probably be fun, but surely I digress. I suppose a masochist getting caught long a rallying 1500 pt market would be the equivalent of my getting caught long in the last 30 days or so....hmmmmm.

Posted by 2nd_ave: "David- there is no way, of course, you'll still be holding your current positions when the XAU returns to 200, but those are the kinds of thoughts that can take the edge off a bad day...;)"

2nd_ave, I see that you are not planning to hold your PM positions until XAU 200 either, as you mentioned that you want to sell them on strength. Apparently, you are hoping to make an even bigger return on your money by catching the mid-term fluctuations of XAU on the way to 200, is that right?

David- if all i ever do is buy on negativity and sell into exuberance, i expect to at least outperform the average mutual fund...

Craig, I see now what you and Mackinaw are referring to:

http://www.cnbc.com/id/27662494

But this isn't what I meant. This has too many strings and doesn't have the look of something that will be effective. What's preventing the government from taking a page from Thoreau: Simplify, simplify.

4% across the board, perhaps with some higher income limits, to provide emergency aid as well as stimulus to the middle class?

re: Seth Glickenhaus

Bill, you would like this...

Two days after the 87 crash he told Barrons "A new bull market has begun". He said the same thing about Oct 10th.

this is the wealthtrack show

http://www.brightcove.tv/channel.jsp?channel=263843164

I don't believe china will stop buying out bonds, because their currency is tied to ours... it will take years of monetary policy there for them to diversify their currency (it will happen eventually) not in the immediate time frame though.

Also one problem, their economy was made to support the g7, last time I check the g7 has less demand for their crap.

China like other nations will line up to continually buy our bonds for the near term especially since we elected B rolling stone Obama as pres...

Herd a comment on cash on sidelines... two points, #1 why would they leap into equities (unless for a trade) no one knows how bad things could get, #2 cash on the sidelines isn't the best indicator for money comes into stocks.

You sell a stock, you get sideline money, sideline money goes into the market (buys your stock), (your money is now on the sideline) hence not the best indicator.

Emotion and sediment drive up prices and market not sideline money. For the most part.

Look on the bright side, even though Wall St.'s been canceled, Sesame St. is still on!!!

Posted by Mackinaw: "Red all across Asia so far tonight. Ok, this is it - we're going down to test Oct 28 lows. I'm bulking up on some 2X inverse ETFs. Could be a potential short-term 12% gain."

The S&P 500 futures are up 0.9% now. We may be going up tomorrow...

2nd,

Guess it depends on which statistic used to call a bottom...

Q's are below Oct 10...

Spy missed breaching Oct 10 close by a dime today. Probably in the same trading range. Will see what tomorrow brings us.

GM...well...
GE...ummm...

DOG still has 5.9% to go before it hits Oct highs. Today had a bit higher than normal volume and a range of $2.76... give us another couple of really bad days to get to those levels.

I'm not gonna call a bottom... why jinx it... :)

Maybe time to get some $5 LVS tomorrow or $100 preferred?

"Billionaire Sheldon Adelson has doubled down on his half-billion dollar bet this fall on Las Vegas Sands Corp. in a plan intended to keep the casino company from defaulting on its debt and falling into bankruptcy."

http://tinyurl.com/57c44j

I used to play blackjack once a week (for charity of course!). Never recall winning much or losing much... cash advancing retail credit cards to play. It's hard to believe it only cost $2 to cash advance $100! And only 3% interest a month...

Now I just go less frequently and lose more. People got really mad at me when I split tens, but I always seemed to win those hands.

"The company's current situation is a remarkable setback for Adelson, once considered the third richest man in America by Forbes magazine with an estimated worth of $28 billion as recently as September 2007, much of which was tied up in shares.

Since hitting $145.57 on Oct. 2, 2007, Las Vegas Sands shares have lost 96 percent of their value."

wow. That's gotta be a bottom.

"Remember, if you are going to learn anything from this article you should try to forget it before you start playing because A THINKING BLACKJACK PLAYER IS A LOSING BLACKJACK PLAYER. I mean, if you're winning, what the hell do you need to think for?"

The Lucky Ned Incredi-system Guide to Winning Blackjack. lol.

http://tinyurl.com/5f4be2

Should have learned roulette.

Candidates' Emphasis on Wall St., Main St. Leaves Sesame Street Overlooked

http://tinyurl.com/6flk3z

Posted by David: "The S&P 500 futures are up 0.9% now. We may be going up tomorrow..."

All the better, I planned stink bids on BGZ and TZA anyway. It's not a day trade - I work. A test of the Oct 28 lows should take a few days to reach, no?

Fascinating reading some of the old posts here. (and lack of comments!)

Bill has got to be one of the most prolific bloggers out there. I don't know too many people that consistently deliver so much information every single day.

"Trade deficit widens, gold strengthens, Thurs., Nov. 10, 2005, 8:42 AM
I changed my outlook for gold bullion early this morning. I am now even more bullish.

· Long term " very bullish (US$600)
· Intermediate term - bullish (550)
· Short term " bullish (500)
· Current price: 469.00 Dec-05 futures (8:35 AM ET)"

http://tinyurl.com/6c8u2p

Would love to get my hands on some of that $469 gold.

WFMI was another one talked about quite a bit in those days. Tomorrow's a ground floor opportunity? closed $9.62 today.

"What's up with all these restatements?, Thurs., Nov. 10, 2005, 9:11 AM
If you happen to be a skeptic, and want to have the biggest laugh of the day, just google: restating financial results. Three simple words will lead you to a shocking revelation that our capital markets are out of control.

I just took a swipe at Washington, FNM and Wall Street because of the fact that Fannie Mae cannot even produce a set of financial summaries anybody can trust. I didn't even mention that the principals themselves think there are mistakes into 11-digits. That just happens to be a number greater than $10 billion.

I didn't mention it because nobody knows whether its $10 billion or some multiple of that. But in Washington where eyebrows don't get lifted unless the numbers are into trillions (thousands of billions), nobody seems worried.

They ought to be."

http://tinyurl.com/5ra9xx

I learn from the best. lol.

The Oracle of Nassau. Should be a great party next year...

Can anyone explain to me the strength in the Korean markets lately? Wasn't Korean Industry one of the first of the Asian Markets to get bamboozled into signing on to exhorbidant annual commodity contracts back before July?

Re: Glickenhaus
Enjoyed the interview immensely, he is an extremely wry and wise 94. His caveat around mistakes is brilliant he figures 7 of 10 times he is spot on the remaining 3 out to lunch. I put my money on his call, experience does mean something and as as independent he doesn't appear to have an axe to grind nor vested interest. A true gentleman, thanks Bill and others for the links.

Glad to see things haven't changed much... Crazy Eddie's CFO is still digging.

"Overstock.com's New Disclosures Show Company Financial Reports Were a 'Joke'"

http://tinyurl.com/65mxwz

Chrysler to Merge With Daimler-Benz in $40-Billion Deal
By Donald W. Nauss
May 07, 1998 in print edition A-1

“There are tremendous synergies in this deal,” said Seth Glickenhaus, whose New York money management firm Glickenhaus & Co. is a major Chrysler shareholder.

http://tinyurl.com/55kvd9

Enjoyed watching his interview too. Wonder if this is one of the 3 mistakes? Or just some PR quote that he let get attributed to him.

Here's one of his spot on calls... if you bought it when he called it in 2006 you'd be one happy dry ship owner... if you avoided the choppy seas earlier this year.

http://tinyurl.com/5hqrzm

Dorchester's Seth Glickenhaus Picks Four Stocks for a Weak Economy

http://tinyurl.com/5gwfsj

Not so much F, GM, TM, DCX...

Wave,

that link is dated 2006. just an fyi.

Dump GM from the DOW?

http://tinyurl.com/6qthkh

yup... interesting to see how the picks turned out for the buy and holders...

I still say we wouldn't be where we are today if the SEC hadn't killed market confidence with random rules changes. Now these bailouts sprinkle just enough money to keep bankrupt companies afloat, burning through cash by paying interest on their debt. This wasn't a solution, they needed to go through Bankruptcy (can't say this for AIG as it's a special situation).

I think GM will need to go through bankruptcy re-organization to release their heavy debt. I'll be disappointed if I find Obama wanted another bailout.

Seth Glickenhaus - "The market is so bad because the news media has been doing such a superb job of pointing out what's happening." Oct 13 08

re: GM bailout

With all the CDS's around, I think they are afraid to let anything big trip a default wire for fear whoever wrote it will go under as well...

But you are correct, with lead weights like the pensions, union contracts, lack of efficient/affordable/profitable/desirable cars, a credit crunch, and a recession, all at once, they will be "swimming wit da fishes" no matter how much cash they get anointed with.

They could expedite the bankruptcy, first assemble a comprehensive package together, sail the deal through, and then introduce a new GM to the media. Quick and painless.

2nd - I'm considering a jump over to BGU once the turnaround comes.

A pdf on Candlestick pattern.

http://tinyurl.com/5jdplw

Bill, wondering whether we can have a 'stock' threead for learning about technical analysis in your new blogging platform ?

CP, the Ch 11 option with the Big 3 would trigger default clauses on CDS's, which would certainly cost hundreds of billions to companies like AIG who were writing the CDS paper.

I've never seen any accounting of who wrote what against them defaulting, but I think its a safe bet that the CDS's easily exceed double the debt on the big 3

re: Seth

On Wealthtrack commented on POT, but had the company name wrong, and recommended Navios who don't appear to actually be doing any shipping, LOL. I didn't understand that one. His other picks, EGLE and EPD appear to check out ok.

For a 94 yr old guy he seemed to have a good handle on panics being opportunity, but was getting fuzzy on individual pics. LOL, I hope I'm still that sharp at 94.

2nd_ave at November 11

Consider this, the Sept low in gold was 739.80 when the usd hit 80.39

Today with the usd 7 cents higher gold has been in a core range from 720 to 770 for 3 weeks. If someone suggested that the usd would rise 7 cents and gold would not fall they might get some funny looks but that is what has happened and it is hard to grasp because this has been such a slaughter.

The miners on the other hand only bottomed(150 for hui) at the Oct usd high 87.88 but are 47 pts higher with the usd at 87,14 (new closing high)today.

So the relative strength to usd rallies has gotten much stronger but it is difficult to feel. I sure feel lousy....

The bond,dollar gold relationship has been working,$usb hit it's highs 3 days after the 739.80 low in gold and have had 3 lower highs since. Yesterdays high(a doji)candlestick shows indecision possible. If this is another lower high a possible 5 month hs top and the relationship continues? Something I will watch.

Crash what crash? ...g..oh the pain.

Market "on track"...

http://tinyurl.com/6nwelj

Foz and others,
One reason against mandating a 4% freeze on mortgage rates is that it would negate contract law. It would destroy what is left of the securitization system and act as a precedent elsewhere. Would you buy a security paying you 8% if the government could one day decide that your return will be 4%, or 2% if that doesn't work out, or even 0% for five years? If the rules can change arbitrarily (like Calvinball) despite a contract then the US will not longer be a safe place to conduct business.

Foz,

My first concern came from an article by Frank Veneroso:

http://tiny.cc/OpcBJ

Although I have been concerned about this possibility ever since reading it, I have only recently read articles along this same track. Not much about what to do though.

1. Brad Tottle, Raymond James,"...those countries who have historically been large purchasers of our debt are facing problems of their own. If the big foreign central banks have to take a more defensive posture at home, it means lower reserves to invest abroad." (11-3-08)

2. Bill Fleckenstein, Contrarian Chronicals "I can't see why foreigners would fund a couple of trillion dollars in spending in our currency, given our recent behavior." (11-3-08)

3. James Jubak, MSNBC, "Global Economy Depends on China" (11-4-08) The article points out China's domestic economic needs call for most of its investment for the immediate future.

It seems to me a lack of foreign "propping up" would be deflationary in the US. I suspect a strengthening of the dollar and an increase in saving would follow. In this case it may "trickle up" from individuals (of necessity) to government spending. Lower income, job losses and drop in net worth, mean fewer tax dollars for congress to play with.

In such as scenario I think Treasuries may be the safest.

I've also been reading "Hard Times," by Studs Terkel (1970). It is a collection of first hand recollections of the Great Depression.

The parallels are frightening. The causes of our present situation are obvious and maddening. The recent attempts to fix it are repetitious. (In the 1930s they bailed out the banks, insurance and the railroads — today the banks, insurance and perhaps autos.)

2nd_ave,

Ah, youth! With kids as young as 6, you may not have had your illusions dimmed as yet. That's OK, especially in front of your children.

After forty years as a self-employed, one person business — I can say for sure it is best to sometimes temper your optimism — not everyone who presents a good face is to be trusted. As Reagan said, "Trust, but verify." to this I would make a slight revision — "Verify, then trust." (to a point)

Some will be sincere, but wrong. Others will flat out take advantage of you. You need to watch for both.

As for blanket optimism, it works just fine until the day it doesn't. Check out Taleb's, "Black Swan" the 1000 days.
A turkey thinks life is wonderfully care-free. He's fed and cared for... then comes Thanksgiving Day!

My life-long Christian Scientist is now in radiation treatment for cancer. Up until now, no need for doctors.

CP,

I understand the present status of bonds.

I own bullion (more than I have ever held before).

I realize the expectation for increased rates and falling value and know this is what Bernanke is desperatelytrying to do.

BUT...

Why would anyone want to buy our debt?
China owns a bunch and we are trying our best to devalue what they bought. Would you go back to a store which treated their customers like that?

What if no one CAN buy our bonds regardless of the rate?
The global situation appears to be similar everywhere we look — huge needs domestically, slowing sales of everything, citizens demanding attention. Everyone has budgetary limits — from individuals up to the most consumer dependent nation — us.

I'm not talking about this afternoon, but trying to be prepared for next year, the year following, whatever.

Today will probably the last time I bring up the issue here.

Thanks, Kiron. I understand there are contracts involved, and your reference to Calvinball reaches me with a smile. But I'd have to think that some of these companies holding to rights to More% would realize that they will limit defaults and potentially make more $ by leveling it and spreading relief around, at least for those holding 'troubled assets'. Maybe not, but maybe so? At the very least, it makes more sense to me than the TARP.