Bill Cara’s Blog for May 24, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning, Geoff here.

On a day when the US Dollar rallied to new highs and gold get pounded on the open, look what happened to the miners!

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GDX has formed a daily swing low, broke above its downtrend line on high volume and is in accumulation mode. This is what happens when sentiment is horrible and most traders have thrown in the towel.

The miners have started to outperform gold, which is a chart that I have shown you before as one that needs to improve – and it has.

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And here you can see that this ratio is at low levels which means that when it turns higher, the miners will begin to outperform the metal itself.

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As the talking heads were wringing their hands over the EU, Greece and whatever other negative news that they found, the S&P 500 was able to find support, hold its swing low and form a very nice daily bar. We got stopped out of a few stocks that we recently bought when the stocks broke below their support levels. However, the stocks that didn’t drop to that point were in the energy sector which is a positive and we are positive on these stocks should oil have bottomed. Once the gold trade has improved, I will spend much more time on the general market and Cara 100 stocks.

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Still looks good to me!

Have a great trading day!

Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 1,937.93 6:44AM EDT Up 32.63 (1.71%) Components, Chart, More
^BFX BEL-20 2,097.70 6:35AM EDT Up 20.70 (1.00%) Components, Chart, More
^FCHI CAC 40 3,044.90 6:59AM EDT Up 41.63 (1.39%) Components, Chart, More
^GDAXI DAX 6,332.20 6:44AM EDT Up 46.45 (0.74%) Components, Chart, More
^AEX AEX General Chart, More
^OSEAX OSE All Share 444.20 6:44AM EDT Up 3.34 (0.76%) Components, Chart, More
^OMXSPI Stockholm General 308.94 6:23AM EDT Up 2.64 (0.86%) Components, Chart, More
^SSMI Swiss Market 5,852.61 6:24AM EDT Up 34.70 (0.60%) Components, Chart, More
^FTSE FTSE 100 5,339.89 6:44AM EDT Up 73.48 (1.40%) Components, Chart, More
FPXAA.PR PX Index 879.70 6:59AM EDT Up 1.60 (0.18%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,260.35 6:59AM EDT Down 3.29 (0.26%) Chart, More
GD.AT Athex Composite Share Price Index 518.99 6:24AM EDT Down 7.40 (1.41%) Chart, More

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.

Vad’s Catch of the Day

Kaimu’s Sound Money

Stephen Wellman


With fractional reserve banking we get fractional reserve everything. We get more risky loans than deposits at banks. We get more politicians than we need. We also get way more PUBLIC DEBT at the US Treasury than we can pay back as a Nation without going broke! Below you see the US Treasury paid nearly $29BIL USD interest on the debt last Tuesday, May 15th …

Here you see on that same Tuesday, May 15th, how much the “net debt” went up even after we paid the minimum due. It went up $39.12BIL in one day …

Look at that YTD total $926BIL USD!!! Don’t forget the US Treasury “rounds in millions” …
(Detail, rounded in millions, may not add to totals)

Okay, they say “may not add to totals”! No doubt!

On May 21st the PUBLIC DEBT looked like this …

Only $721BIL USD left before the November Presidential Elections. Let’s hope Congress can control themselves and that no banks anywhere in the world are at risk! To put that $15.673TRIL PUBLIC DEBT into perspective Congress would have to totally stop spending 100% and use every dime of net tax revenues for the next ten years to pay that debt off. In other words America and life as we now know it as self-appointed “global consumers” would have to cease and desist! The free ride is about as free as the markets we call “capitalism”! If the world is operating under true capitalism then why do central banks exist and why is there only one “reserve currency”? Where is the competition and free choice when it comes to money and the extinguishment of debt?


The number one problem facing US small business for this year is “growing government regulation” according to the NFIB, National Federation of Independent Business. The number one problem for the $2TRIL sized FDI INDEX, Foreign Direct Investment, is … ta-dum … “growing government regulation”. In other words government intervention into business and markets is killing off what’s left of any sort of recovery. Note that even “consumer demand” (aka: revenues) comes in second to the problem of government regulation according to the FDI INDEX report for 2012. The following charts speak to the C WORD.

I pay attention to the AT Kearney FDI INDEX. Such tools are useful in getting a more global contrast to mainstream media and government and central bank propaganda.


Note that even with the OWS movement media hype North America lags both Europe and Asia in “demands for accountability”.

Here is one of the FDI INDEX charts about DEBT!


Please note that US respondents of “very likely” and “somewhat likely” make up 66% of the survey. I would guess the 23% in the “very unlikely” category derive some or all of their revenues from US government contracts.

That same total for the non-US respondents is 64%, so they are almost equal on their views of further US government debt expansion. Moody’s and S&P and Fitch take note!! Since money is debt and the US Congress thrives on debt and in fact would lose their political power without debt as the basis of their budgets I would say it is a fair assumption to say Congress will increase debt burdens not lighten them in the future. They cannot PRICE FIX without debt since tax revenues have faltered.

And how has the effects of increasing debt and increasing government regulation affected the outlook of business for the future?


You can see that TARP and the other bank sponsored bailouts that have caused a severe increase in debt and bloated toxic balance sheets at the US Treasury and the US FED has translated to an unhealthy outlook for future economic recovery. It’s always a “catch-22” with Keynesian economics, the idea you can spend your way to prosperity using massive debt issues amounts to nothing more than “crony capitalism”.

Okay … so how did your country rank in the FDI INDEX?


Two of the most improved and consistent countries in the TOP TEN have been Brazil and Australia. No surprise since these two countries are resource rich and supply producer countries like China and India(Chindia) with much needed raw material for manufacturing. It seems the USA and the UK has suffered some setbacks compared to 2007. Now Singapore had an amazing recovery compared to 2010 in their ranking going from 24 in 2010 to 7! A radical change occurred, probably something to do with government and market regulations easing.

Of the EU countries France has not done well and no surprise that Germany is tops in Europe. Look at Poland falling from 6 in 2010 to 23. No surprise that debt issues are involved in the European countries.

Speaking of “surprises”, a huge surprise to me is where Canada ranks, dropping from 9 in 2010 to 20 in 2012. That is a big drop! STELCO have an influence? Cost of Vancouver housing? Hard to believe Canada is below Russia and Turkey. What’s up?

Direct from BHP, one of the largest mining companies in the world …

The chairman of the world’s largest miner, BHP Billiton’s Jac Nasser, has warned of increasing global volatility and uncertainty while ditching plans to invest $80 billion on growth projects over the next five years.

As global sharemarkets reeled yesterday, Mr Nasser said the world had fundamentally changed since the global financial crisis, adding that the 2008 event was not a short-term glitch but a “structural shift”.

In other words BHP sees no growth prospects worthy of investment as global governments mire their citizens in more and more “debt”. Why would any company invest long term in a world of sovereign fiscal chaos? We can see BHP sits at the top echelon of global employers and here is where the future global employees sit from the spotlight on Quebec, Canada …

The student strikes in Quebec, which began in February and have lasted for three months, involving roughly 175,000 students in the mostly French-speaking Canadian province, have been subjected to a massive provincial and national media propaganda campaign to demonize and dismiss the students and their struggle. The following is a list of ten points that everyone should know about the student movement in Quebec to help place their struggle in its proper global context.

1) The issue is debt, not tuition

The NUMBER ONE reason Canadian students are protesting is DEBT! They go on to define that …

1) The issue is debt, not tuition: In dismissing the students, who are striking against a 75% increase in the cost of tuition over the next five years, the most common argument used is in pointing out that Quebec students pay the lowest tuition in North America, and therefore, they should not be complaining. Even with the 75% increase, they will still be paying substantially lower than most other provinces. Quebec students pay on average $2,500 per year in tuition, while the rest of Canada’s students pay on average $5,000 per year. With the tuition increase of $1,625 spread out over five years, the total tuition cost for Quebec students would be roughly $4,000. The premise here is that since the rest of Canada has it worse, Quebec students should shut up, sit down, and accept “reality.” THIS IS FALSE. In playing the “numbers game,” commentators and their parroting public repeat the tuition costs but fail to add in the numbers which represent the core issue: DEBT. So, Quebec students pay half the average national tuition. True. But they also graduate with half the average national student debt. With the average tuition at $5,000/year, the average student debt for an undergraduate in Canada is $27,000, while the average debt for an undergraduate in Quebec is $13,000. With interest rates expected to increase, in the midst of a hopeless job situation for Canadian youth, Canada’s youth face a future of debt that “is bankrupting a generation of students.” The notion, therefore, that Quebec students should not struggle against a bankrupt future is a bankrupted argument.

This sounds very familiar to US students …

Total student debt now stands at about $20 billion in Canada ($15 billion from Federal Government loans programs, and the rest from provincial and commercial bank loans). In Quebec, the average student debt is $15,000, whereas Nova Scotia and Newfoundland have an average student debt of $35,000, British Columbia at nearly $30,000 and Ontario at nearly $27,000. Roughly 70% of new jobs in Canada require a post-secondary education. Half of students in their 20s live at home with their parents, including 73 per cent of those aged 20 to 24 and nearly a third of 25- to 29-year-olds. On average, a four-year degree for a student living at home in Canada costs $55,000, and those costs are expected to increase in coming years at a rate faster than inflation. It has been estimated that in 18 years, a four-year degree for Canadian students will cost $102,000. Defaults on government student loans are at roughly 14%. The Chairman of the Canadian Federation of Students warned in June of 2011 that, “We are on the verge of bankrupting a generation before they even enter the workplace.” This immense student debt affects every decision made in the lives of young graduates. With few jobs, enormous housing costs, the cutting of future benefits and social security, students are entering an economy which holds very little for them in opportunities. Women, minorities, and other marginalized groups are in an even more disadvantaged position. Canadian students are increasingly moving back home and relying more and more upon their parents for support.

They also include their American counterparts in the “debt issue” …

In the United States, the situation is even worse. In March of 2012, the Federal Reserve reported that 27 percent of student borrowers whose loans have gone into repayment are now delinquent on their debt.” Student debt in the United States has reached $1 trillion, “passing total credit card debt along the way.” It has become a threat to the entire existence of the middle class in America. Bankruptcy lawyers in the US are “seeing the telltale signs of a student loan debt bubble.” A recent survey from the National Association of Consumer Bankruptcy Attorneys (NACBA) indicated, “more than 80 percent of bankruptcy lawyers have seen a substantial increase in the number of clients seeking relief from student loans in recent years.” The head of the NACBA stated, “This could very well be the next debt bomb for the U.S. economy.” In 1993, 45% of students who earn a bachelor’s degree had to go into debt; today, it is 94%. The average student debt in the United States in 2011 was $23,300, with 10% owning more than $54,000 and 3% owing more than $100,000. President Obama has addressed the situation by simply providing more loans to students. A recent survey of graduates revealed that 40% of them “had delayed making a major purchase, like a home or car, because of college debt, while slightly more than a quarter had put off continuing their education or had moved in with relatives to save money,” and 50% of those surveyed had full-time jobs.

In conclusion the Quebec students state …

It would appear that whether in the United States, Canada, or even beyond, the decisions made by schools, banks, and the government, are geared toward increasing the financial burden on students and families, and increasing profits for themselves. The effect will be to plunge the student and youth population into poverty over the coming years.

Really these students are only beginning to grasp the severity of future “debt issues” as more and more of their employee payroll taxes go to servicing more and more “public debt”. What a gleeful place America would be if we only had $1TRIL of US PUBLIC DEBT instead of nearly $16TRIL! What have we gained from the exponential growth of debt in America? What have we gained from a monetary system based on debt and backed by debt?

Okay, I want to expand on the issues of government regulation and the accompanying dilemma of “uncertainty” in terms of cause and effect on business bottom lines. These issues are all forcing the C WORD into the forefront! My friend John B. Taylor over at Stanford Economics One is exactly in tune with these growing government interventionists and their expanding regulations. If you have ever wondered how many staffers and government employees are working on creating new and innovative ways to regulate your life then here is your answer …


I find it appalling that excluding TSA employees there are practically a quarter of a million government employees engaged in interventionist policies and that is just the “federal” government. What would that number look like if we included all the state, county and city governments? Those Fed employees are working 8-10 hours a day at least five days a week, being paid a handsome salary with benefits in order to do exactly what? Can their efforts even be described as “productive”? Do we even know what they are doing on a daily basis?

Here is what we do know. This recovery has stalled out and failed and the vast majority of Americans feel less secure about their future now than they did back in 2001 when there were some 70,000 less government interventionist “regulation creators” employed. These are the Federal employees responsible for PRICE FIXING 101, DEBT-O-RAMA and CURRENCY IMPLOSION!

Next John Taylor shows us this chart …


Now is it any wonder that businesses cannot make any long term plans. How can anyone plan for the future when they have no idea what sort of tax implications they will face from one year to the next? As the above chart points out clearly from 2007 on we have “Congress Gone Wild”, not only in the bank bailout sector but every basic American right from taxation down to TSA pat downs and Google spinet is under attack! For the math geniuses here is the formula …

C = R² + D∞

C = Crisis
R= Regulation
D = Debt

That’s right “debt to infinity”! How much tax revenues can be raised under such conditions of complete economic policy lunacy? If voters had half a clue then they would vote for candidates who espoused the complete opposite economic and monetary policy with a super healthy dose of less government. Can anyone here say, after looking at those two charts above, that we are better off now than we were in 2001 when we had 70,000 less government regulators and 125 less tax provisions to worry about?

Here is the link to John Taylor’s blog, Economics One …


Below is Table 1 which shows in nominal dollars spending for Federal Regulatory agencies since 1960. Please note how Obama and Congress have slashed budgets for regulation of Workplace, Environment and Energy for 2012. It seems Consumer Safety and Health as well as Homeland Security is the big winners in the “social” sector of regulation. Meanwhile in the General Business sector Obama and Congress wants to bump up regulation by 34.5% in 2012. Is that good for business? And hey, I thought those “conservatives” ran Congress? With regulatory policy like that you can look for more unemployment and underemployment …


You want historical staffing numbers? Take a look at Table 3 below. It is astounding! These are not $8 an hour employees with no benefits or retirement. These are the cream of the crop of the employed Americans in our society today. These are the only Americans in the only sector that will enjoy job security until they die or until America defaults, whichever comes first!

Please notice there has never been a “negative number” at the line items entitled “Annualized Percentage Change” since 1960. What can we infer from that statistic in terms of future job openings? How long before 51% of the active voters work for government, whether Fed, State, County or City? Maybe a Constitutional Amendment that states if you work for the government you cannot vote in the same government elections. In other words if you are a Federal worker you cannot vote for President or Congress. Please do not shoot the messenger …


Next we have a history lesson going back to the 1970s. If you are too young to remember or too old to remember that was when “inflation” was a dirty word and we had OPEC cutting off our oil supply. You had to get in long lines at the gas station and you could only get gasoline on certain days depending on whether your license plate ended in an odd or even number. America was on gasoline rations for the first time since WW2. We were also seeing that the Vietnam War was no longer politically viable for the two party political monopoly.


Here we have a 227 page 1975 published report from the Trilateral Commission that I think is even more relevant today than it was in 1973 when this report was being researched and compiled. We may not have the Vietnam War riots, but we do have more Vietnam Wars and we do have social unrest and a crisis in government. No need to label what it is, because it isn’t really a democracy as we saw when TARP was enacted, but it most definitely is a CRISIS IN CONFIDENCE. The C WORD is here to stay …


I would like to refer to the research and surveys done with regards to JAPAN and its citizens. Obviously there are huge societal differences between Japan and the USA, but set that aside and just look at the HUMAN ACTION factor. Human Action just means human nature that humans tend to be egocentric and will always do what they believe is best for them in order to survive. It is a basic human survival instinct. Every animal on the planet has its own survival at the top of its list of “Things To Do”! Animals and humans act differently when in packs or mobs, which is what democracy is “mob rule”.

Table 1 suggest politicians, especially perceived “gurus” can handle our own personal issues better than we can. You can see in 1953 Japan was still under the influence of WW2, but look how much “confidence” in even a “competent politician” has eroded since then. The vast majority of Japanese believe they think ordinary citizens can manage better than “competent politicians”. I guess we must wonder what the exact definition of a “competent politician” is …


Table 2 below reflects common HUMAN ACTION, or basic human nature as we are more concerned about “prices” than participation or free speech. Clearly “Order and Prices” are the two most sought after values in Japanese society in 1975. I doubt that has changed any.


Table 4 is just out and out “survival mode”. The older you get and less able to work you want higher pay, shorter work hours along with more welfare. Self-improvement and a suitable job is low priority for the 65+ guys.


Now we switch to the retirees in America and what we see is growing poverty levels in the population that is 65+. These people contributed to their retirement using 1970 monetary values but are forced to retire and live in 2012 monetary values, where money buys decided less now than it did in the 1970s. This is the theft of government largess at the expense of the people, but nearly all of us voted for it by voting either Republican or Democrat. Take a look at the chart below, entitled Figure 1. This is from a study on retirement status by the EBRI, Employment Benefit Research institute. It shows that the oldest Americans, the 85+ sector, are suffering the most in poverty. How can anyone possibly plan 60 years ahead of time for retiring when they have to compete with the largess of governments and high risk banks and corporations who routinely raid the US Treasury directly or indirectly, who are the main benefactors of most tax dollars and the increasing debt being issued. There are only so much Wal-Mart greeter jobs available, but if you are a US Senator then you can work until you’re 100! My two Hawaii Senators are both over 85 years old now so they have another 15 year to go. It seems the chart below reveals that the optimum age group of 65-74 has the least worries about poverty. One would wonder why the 50-64 age group is doing so poorly, since they seem to have the best employment options of the other three age groups. This does not reflect the same aging demographics we saw in the 1975 Trilateral Commission with regards to Japan. Could it be Americans have been conned into believing we are entitled to be the anointed global consumers and not the global savers? Or are we Americans just too unskilled at the “carry trade” strategy? No matter the Japanese government since 1975 has provided its people enough debt to choke all the Sumo wrestlers in Japan and Hawaii.


In case you wondering who the member of the Trilateral Commission in North America were here is the list …


That list looks like the “Who’s Who” of the bankrupt political and banking monopoly …

Please note the bank execs and the banks that no longer exist, like Lehman Bros and Wachovia. How many of those 1975 members would have thought Lehman Bros would become instinct? Others like Bank of America would be instinct as well if not for “crony capitalism”. Mostly this list is the who’s who of politicians, lawyers and academia, the “non-producers” of society. The US FED mandate failed in its execution and we are now closer to global financial meltdown than we have ever been, certainly closer than we were in 1975 when this report was published.

As the former Citigroup chief executive Charles Prince famously put it, “As long as the music is playing, you’ve got to get up and dance.” Or, as John Maynard Keynes once wrote, “a sound banker is one who, when he is ruined, is ruined in a conventional and orthodox way.” Notice Keynes said “when” not “if” …


For those who need charts to see trends here are two. Can you tell me which twelve year trend you would rather have been on?


These charts illustrate the C WORD … They show you that massive and unlimited “liabilities” have no future!

“The public debt embodies claims of people who have in the past entrusted funds to the government against all those who are daily producing new wealth. It burdens the producing strata for the benefit of another part of the people.” – Ludwig Von Mises, Socialism, 1958

“Any change is resisted because bureaucrats have a vested interest in the chaos in which they exist.” – Richard M. Nixon

“If the people cannot trust their government to do the job for which it exists – to protect them and to promote their common welfare – all else is lost.” – Barrack Obama

“The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital… the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.” – John F. Kennedy

“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.” – Alan Greenspan

“The Washington Bullets are changing their name. They don’t want their team to be associated with crime. From now on, they’ll just be known as the Bullets.” – Jay Leno

“The man who views the world at 50 the same as he did at 20 has wasted 30 years of his life.” – Muhammad Ali

Deron’s ETF Daily


Jake’s Take

Harp’s Roadmap


Harp is a professional trader who manages his own 8-figure account. He is long gold and gold stocks.

The coming roadmap for GOLD

Ever since Gold slipped from 1900 ($/once) in August 2011, further compounded by the resurging Euro crisis, Gold has attracted a multitude of sentiments towards its next fate.

Following is my prediction of the next roadmap for Gold based on my analysis

• First milestone movement:
Gold will bounce back to 1660 ($/ounce)
• Second milestone movement:
Gold will break 1900 ($/ounce) and reach 2100 ($/ounce)
• Third milestone movement:
Gold will hit 2600 to 2700 ($/ounce)
• Fourth milestone movement:
Gold will reach 3040 ($/ounce)


The views and opinions expressed by me are solely my own; Cara Community members should not treat any opinion expressed by me as a specific inducement to make a particular investment or follow a particular strategy. No warranty or guarantee of any kind, expressed or implied is given regarding the outcome analyzed by “Harp”.

Cara on the Metalminers

Cara on the International Markets

CTA Trading Desk Mid-Day Report

CTA Trading Desk Post-Close Report

  1. 8:30 AM ET Durable Goods Orders 8:30 AM ET Jobless... [#109385]
    By: davefairtex (5215 comments) Go to top ↑
    • 8:30 AM ET Durable Goods Orders
    • 8:30 AM ET Jobless Claims
    • 9:45 AM ET Bloomberg Consumer Comfort Index
    • 10:30 AM ET EIA Natural Gas Report
    • 11:00 AM ET Kansas City Fed Manufacturing Index
    • 1:00 PM ET 7-Yr Note Auction
    • 4:30 PM ET Fed Balance Sheet
    • 4:30 PM ET Money Supply
  2. 7 in Accumulation Zone 12 in Buy alert 2 in Sell... [#109386]
    By: davefairtex (5215 comments) Go to top ↑
    • 7 in Accumulation Zone
    • 12 in Buy alert
    • 2 in Sell alert

    Accumulation Zone (25%): Monthly 11, Weekly 33, Daily 31
    Distribution Zone (3%): Monthly 7, Weekly 1, Daily 1

  3. Good morning. 08:30 Jobless Claims (370K) Full gubmint... [#109387]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    08:30 Jobless Claims (370K) Full gubmint malarky here:
    08:30 Durable Goods (0.2%)


    There are NO Cara 100 Ratings Changes to report at this time.


    Outside the Cara 100 Universe:

    AGPPY – Anglo Platinum upgraded to Neutral from Underweight at HSBC.

    IVN – Ivanhoe Mines upgraded to Outperform from Market Perform at BMO Capital primarily based on valuation. In addition, the firm believes that Rio Tinto (RIO) is continuing to support Ivanhoe’s Oyu Tolgoi mine, which the firm views as one of the world’s best mine development projects. Target $13.50.


    “Politicians are always interested in people. Not that this is always a virtue. Fleas are interested in dogs.” ~ P.J. O’Rourke

  4. from the always interesting Paul... [#109388]
    By: Bull Hunter (3552 comments) Go to top ↑

    from the always interesting Paul Farrell:

  5. ALOHA!! Next SOUND MONEY we look at flow of funds and the... [#109389]
    By: kaimu (3289 comments) Go to top ↑


    Next SOUND MONEY we look at flow of funds and the all important Foreign Direct Investment(FDI). This helps you see which countries foreign investors are sending their capital to. Not in all cases, but it seems large sums of money moving into certain sectors in certain countries have done extensive due diligence beyond the norm.

    Here is one such country I cover from the MINING NEWS …

    AUSTRALIA continues to attract investment in resource projects, with a new report finding committed capital expenditure in the sector is at a record $A260.8 billion.


    And a lot of that investment capital is headed for Western Australia …

  6. ... [#109390]
    By: Jack Senett (438 comments) Go to top ↑


  7. CHA - China Telecom upgraded to Outperform from Neutral at... [#109392]
    By: Bull Hunter (3552 comments) Go to top ↑

    CHA – China Telecom upgraded to Outperform from Neutral at Macquarie.


    Outside the Cara 100 Universe:

    NEM – numbers were lowered at Jefferies. Shares are now seen reaching $46. Estimates were also lowered on skepticism over growth projects, Jefferies said. Hold rating.

  8. "In November 2010, even the British Bankers' Association, a... [#109393]
    By: jragusa (121 comments) Go to top ↑

    “In November 2010, even the British Bankers’ Association, a lobbying group, explicitly noted the scale of the CIO’s [that's JPM's chief investment office in London] activities in a warning on the fragility of the UK mortgage market: ‘The JPM CIO has taken more than 45% of the total amount of UK residential mortgage backed securities that has been placed with investors since the market re-opened in October 2009′.”

    Based on this and other reports, it’s not clear that the recent losses at JP Morgan were simply the result of a speculative trade gone bad. Rather, my impression is that the problems at JPM may be the result of using highly leveraged, illiquid derivative transactions as a “cross-hedge,” intended to reduce the risk of default in a whole portfolio of complex positions including (but not limited to) European mortgage debt, but with the long and short portions of the position behaving unexpectedly in relation to each other. I’d be much more interested in how large JPM’s mark-to-market losses are on the European mortgage-backed bonds than how much loss they’ve sustained on the hedge. Maybe the right question isn’t why they lost money on the hedging transaction, but why they apparently have a boatload of questionable assets so massive that they need to use whale-sized leverage to hedge the default risk in the first place.


    • "I'd be much more interested in how large JPM's... [#109396]
      By: Corner Stone (369 comments) Go to top ↑

      “I’d be much more interested in how large JPM’s mark-to-market losses are on the European mortgage-backed bonds than how much loss they’ve sustained on the hedge. Maybe the right question isn’t why they lost money on the hedging transaction, but why they apparently have a boatload of questionable assets so massive that they need to use whale-sized leverage to hedge the default risk in the first place.”

      That’s a good comment, IMO, but I usually like to try and understand what the underlying trade was really about. That’s why I’m uncomfortable with use of the word “hedge”, as the company characterizes this position. To me, it seems this position was really a doubling down on a previously held long position.
      And that makes me want to ask other questions, in an effort to determine if JPM is merely a potentially good candidate for shorting. Or depending on the answer, whether I need to pull the hole in over the top of me and lock the zipper shut when it all goes south on us.

  9. HSBC MANUFACTURING PMI China for May Actual: 48.7Cons.:... [#109394]
    By: Les (7233 comments) Go to top ↑

    Actual: 48.7Cons.: Previous: 49.3

    Actual: 1.7%Cons.: 1.7%Previous: 1.5%

    Actual: 52.2Cons.: 52.0Previous: 52.2

    Actual: 45.0Cons.: 47.0Previous: 46.2

    Actual: 45.0Cons.: 46.0Previous: 45.9

    Actual: 46.5Cons.: 46.9Previous: 46.9

    IFO – BUSINESS CLIMATE Germany for May
    Actual: 106.9Cons.: 109.4Previous: 109.9

    IFO – CURRENT ASSESSMENT Germany for May
    Actual: 113.3Cons.: 117.4Previous: 117.5

    IFO – EXPECTATIONS Germany for May
    Actual: 100.9Cons.: 102.0Previous: 102.7

    Actual: -0.3%Cons.: -0.2%Previous: -0.3%

    Actual: -0.1%Cons.: 0.0%Previous: 0.5%

    TOTAL BUSINESS INVESTMENT (YOY) UK for Q1 [capital expenditure - Les]
    Actual: 14.2%Cons.: 9.2%Previous: 1.6%

    Actual: 32.4Cons.: 32.0Previous: 31.9K

  10. Intermediate bottom or a cycle low. We shall see. European... [#109391]
    By: Les (7233 comments) Go to top ↑

    Intermediate bottom or a cycle low. We shall see.

    European economic activity is contracting. Dunno if this is helping the technical picture. See Non US Economic data for further details.

  11. Great piece from Reason Magazine about the fear of Jazz... [#109395]
    By: Jeff B (715 comments) Go to top ↑

    Great piece from Reason Magazine about the fear of Jazz music in the 20′s that seems oddly familiar to the fear of rock in the 50′s, heavy metal in the 70′s, rap in the 90′s and fear of Facebook today.

    At their core these fears posses the same characteristics: a music or influence favoured particularly by young people that gets blamed for actions that young people have been engaging in for time eternal.

    Each generation is met with a crisis of declining morals, and concern about children growing up too fast while under the spell of “sexulaized” media. One would think that by now we catch the patterns and get smart. We don’t, instead we elect to repeat the patterns the guide far too much of our daily lives.

    Like culture, our trading can be dominated by toxic or unhealthy patterns that in retrospect seem absurd but fail to serve as lessons for better trading habits. The process of becoming a trader is very much a long and storied one, littered with a laundry list of faulty assumptions and failed sages.

    It is not surprising that our views on trading may appear absurd 1, 2 or even 5 years later. It is even less surprising that we fail to find any real parallel to such bad tactics.

    Lather, rinse, repeat. What is our next big fear? What is the next device, sound or pattern we think we can see that will corrupt the morals of our youth, our system and our society? What is the next big thing that will poison our trading mindset?

    Most folks say they got into trading from an interest in finance or money. I took a different route: I liked history, and eventually after many failed years of trading grew to view the process as a history of actions and thoughts that formed a series of patterns.

    Being a historian of our thoughts, our actions and patching together these patterns helps make a smarter trader… if you choose to accept that our inclinations to repeat patterns is what makes us human, as if our ability to learn from them.

    Have a good session gang, it’s getting messy out there.


  12. 10:24 (IT) Italy PM Monti: Eurobonds will become a reality... [#109397]
    By: Vadym Graifer (4341 comments) Go to top ↑

    10:24 (IT) Italy PM Monti: Eurobonds will become a reality very soon

    Sanity becomes such a rarity…

    Edit: (DE) Germany CDU (part of coalition Govt) member reiterates Eurobonds are not up for discussion

  13. Opened a short position with puts this AM. This stock has... [#109398]
    By: ea32da32 (2362 comments) Go to top ↑

    Opened a short position with puts this AM. This stock has to take out 216.25 on 100k+ volume or it’s going to fill that gap down to 196.

    Question for chartist – on March 27 it posted a high of 209.85 and yesterday a low of 211.18 I’m wondering if this can count as a gap close?


    • $216.25 is my stop. so far buyers are met with... [#109399]
      By: ea32da32 (2362 comments) Go to top ↑

      $216.25 is my stop. so far buyers are met with sellers.
      $213.60, $212, 211.20, 209.86, 206.85, 196…

      Good signs for the SPX
      .TNX 10 year headed up, TLT down
      .XOI oil headed up
      .DXY dollar headed down

      Keith McCullough just posted a one liner – GrowthSlowing, he got it wrong on FB but in general has it very right. I will play everything from the short side until those .TNX, .XOI & .DXY make longer term reversals.


      • Moving my stop down to $215.25 to protect profit. I can... [#109402]
        By: ea32da32 (2362 comments) Go to top ↑

        Moving my stop down to $215.25 to protect profit.

        I can hear the sucking sound from the market makers with their 401k buds sucking in some extra $$$


        • It's like they have an endless supply of OTHER PEOPLES... [#109405]
          By: ea32da32 (2362 comments) Go to top ↑

          It’s like they have an endless supply of OTHER PEOPLES MONEY defending this 214 area on AMZN – market look to be struggling, dollar breaking above this mnornings high – I’m watching a few, AAPL can’t take out day low – their holding AMZN up too. About ready to move my stop down again…

          If we break 214 I’ll do a rain dance;-)

    • Earl, gap would be closed at 196, close of 04/26 (pre-gap... [#109406]
      By: Vadym Graifer (4341 comments) Go to top ↑


      gap would be closed at 196, close of 04/26 (pre-gap day)

      • Thank you Vad, I thought so but I wanted to make sure ... [#109409]
        By: ea32da32 (2362 comments) Go to top ↑

        Thank you Vad,
        I thought so but I wanted to make sure – that May27 number bothered me. I just booked my $215 profit on the 5 puts. They are defending this 214.10 and I’m not going to hang here all day – will wait for another set up. now 98% cash. Fells good not to have the old concerns… Have to take my puppy to the vet.
        thank you very much.


        • I could not stand it - when my alert went off and I watched... [#109410]
          By: ea32da32 (2362 comments) Go to top ↑

          I could not stand it – when my alert went off and I watched them take it up to $214.70 I had to buy some October 190 puts; Stop loss set – will hold over the weekend most likely.


          • Although your time frame on the AMZN puts are short-term in... [#109422]
            By: BillySundance (1355 comments) Go to top ↑

            Although your time frame on the AMZN puts are short-term in nature, in the long run I would have to say that I think AMZN is a great company that is poised to continue growing earnings at amazing rates for many years to come. Earnings don’t look that great because they have been continually taking their money and reinvesting it to further expand and crush or purchase competition and technology (where worthy).

            My take is that if they wanted to they could stop plowing money back into the business right now and start ringing up major earnings increases right now. Instead they are making strategic moves that will pay off in the longer run. Bezos knows his business. I think the high P/E is very, very deceiving.

          • Hi Billy, I believe you - I have a $200 stop loss on this... [#109498]
            By: ea32da32 (2362 comments) Go to top ↑

            Hi Billy, I believe you – I have a $200 stop loss on this trade, provided it does not open $4 to the upside. That gap is pulling, we shall see…
            Thank You,
            I hope everyone is having a great weekend.

  14. Going strong since put up on 21st, chart looking ripe as it... [#109400]
    By: London (235 comments) Go to top ↑

    Going strong since put up on 21st, chart looking ripe as it gets over 9MA.


    “A U.S growth retailer with no European exposure”.

    05/21/2012 – 12:39

  15. like this in my years of trading... ROSG.. May 15> $... [#109401]
    By: baz22 (2875 comments) Go to top ↑

    like this in my years of trading… ROSG.. May 15> $ 1.62… Todays high was $ 23.00 +….. albeit, there was the 1 for 30 split, but, …. damn…

    • Buz... I'll do you one better, and in the same sector:... [#109404]
      By: Vadym Graifer (4341 comments) Go to top ↑

      Buz… I’ll do you one better, and in the same sector: ENMD, 1999 (formally dot-com era but not a dot-com stock). Closed around $10, published cancer-cure news overnight, indicated $45-60 pre-market, opened at $80, quickly dropped to $40, fizzled out within a few days.

      Nothing new under the moon… :), make a correction for 10:1 reverse split

  16. geoff your morning report is always well stated and... [#109403]
    By: skyler (67 comments) Go to top ↑

    geoff your morning report is always well stated and interesting. thankyou for your insight and analysis.

  17. today, hit $ 2.47, tipped $ 2.52, jumped all over $ 2.32... [#109408]
    By: baz22 (2875 comments) Go to top ↑

    today, hit $ 2.47, tipped $ 2.52, jumped all over $ 2.32.. ‘ gnom ‘

  18. ... and looks unfavorable for EU: (GR) Most recent poll in... [#109411]
    By: Vadym Graifer (4341 comments) Go to top ↑

    … and looks unfavorable for EU:

    (GR) Most recent poll in Greece sees anti-bailout Syriza party in the lead at 30% (polling record high) vs 26% for New Democracy and 15% for PASOK ahead of June elections – financial press

    - Support for Democratic Left is at 7%, Independent Greeks 7%, KKE at 5%, and Golden Dawn at 4.5%.
    - Polls also indicate that 85% of respondents say Greece should remain in the euro zone.

    **NOTE: On May 18th, opinion polls indicated the New Democracy party ahead of Syriza for the first time since the May 6th elections, with ND getting just over 23%, Syriza 21% and Pasok slightly above 13%.
    **On May 22nd, Syriza Party Leader Tsipras said that austerity program has failed and needs to be stopped. Greece euro exit not necessary if austerity stopped.

  19. ... [#109412]
    By: Bill Cara (4105 comments) Go to top ↑
    • Bill , you run a truly brilliant web site here and I'm... [#109427]
      By: Ventilation Blues (164 comments) Go to top ↑

      Bill , you run a truly brilliant web site here and I’m really looking forward to the new contribution. Collectively on this web site you have created something really important as well as a new form of education and enlightenment on many things even beyond trading. It may sometimes seem frustrating but what is happening here is truly unique and hugely appreciated. Thanks.

    • Coming roadmap for S&P 500 Ever since the S&P... [#109428]
      By: Ilya (572 comments) Go to top ↑

      Coming roadmap for S&P 500

      Ever since the S&P slipped from 1561 in 2007, further compounded by the resurging Euro crisis, the S&P 500 has attracted a multitude of sentiments towards its next fate.

      Following is my prediction of the next roadmap for the S&P 500 based on my analysis:

      . First milestone movement:
      S&P will bounce back to 1425
      . Second milestone movement:
      S&P will break 1561 and reach 1725
      . Third milestone movement:
      S&P will hit 2122 to 2218
      . Fourth milestone movement:
      S&P will reach 2497.30


      If it doesn’t happen, it’s not my fault. One can never discount the possibility of a Klingon market intervention.

      Still, I believe in an S&P backed currency system whereby every dollar is backed, on a fractional basis, by the total real and intellectual property of the S&P 500.

      • Ilya: Still, I believe in an S&P backed currency system... [#109430]
        By: Les (7233 comments) Go to top ↑

        Ilya: Still, I believe in an S&P backed currency system whereby every dollar is backed, on a fractional basis, by the total real and intellectual property of the S&P 500.

        The problem with your posts Ilya is that I can’t tell through the printed word whether you’re taking the piss out of others. Try smiley faces…

        But I think Jamie Dimon has you cold on the “real” property (forget intellectual) that is represented by the S&P with his proposal to take 30% of copper immediately available for delivery out of the system for his latest ETF venture, or so his detractors claim:

        Is it me or does there appear to be a huge scramble underway by the NY mafia to gather up as much “real” stuff as possible and warehouse it for their own benefit? Or does it serve as a hedge to their “intellectual” and fraudulent paper shenanigans?

      • Ilya, FD: I have asked Ilya to join the contributor team... [#109436]
        By: Bill Cara (4105 comments) Go to top ↑


        FD: I have asked Ilya to join the contributor team, but I don’t think I ever got a reply, at least not one that I liked, and I usually remember the ones I like. :)

        I may not have time to read everybody here, but if I see “Ilya” on board, I stop, look and listen.

  20. (DE) Germany CDU (part of coalition Govt) member... [#109413]
    By: Corner Stone (369 comments) Go to top ↑

    (DE) Germany CDU (part of coalition Govt) member reiterates Eurobonds are not up for discussion

    Isn’t it pretty close that EUbonds must happen? It’s either that or, IMO, Greece exits the EU and lots of fun run on effects happen. Including Portugal, then Spain also needing sovereign bailouts, or exiting.
    To my opinion, either Eurobonds happen and the EU experiment lives for a year or two more, or no Eurobonds and we can roll up the euro and toss it in the trash can.

    • Agreed, but politicians have that nasty habit of waiting... [#109414]
      By: tgifbipo (190 comments) Go to top ↑

      Agreed, but politicians have that nasty habit of waiting until the brink of destruction before they act, and act they will, patience is required on our part.

  21. Harp's roadmap for gold sounds spot on... I only wish we... [#109415]
    By: MoKat (531 comments) Go to top ↑

    Harp’s roadmap for gold sounds spot on… I only wish we could know the timing, but in retrospect, I guess that would take away all the suspense, excitement and fear. Those that are able to maintain and or grow their precious metal positions and walk the full length of the golden road should be rewarded at road’s end, with their savings intact. In the end the Dow and gold should achieve a 1:1 ratio… whether that’s at $3000 or $7500 or $12,000.

    Below is a link to an article about the conditions which should fuel the gold market to much higher levels. The author makes a case that the collapse of the ponzi UST bond market has begun, which will be followed by the end of dollar supremacy and a final push in the gold price. The JPM situation is the tip of the iceberg. JPM has over $50 Trillion in interest rate swaps and losses could end up in the several hundred billion dollar range. Now it is evident why Jamie supposedly threatened Corzine with a pair of cement overshoes. He was desperate for the cash.

    ” When the USTBond tower topples, it will lead to the great release upward in the Gold price. A grand Gold bull market is near. As the safety and security of the USTreasury Bond market is unmasked (an asset bubble), enduring a devastating wreck, the global funds will flock into Gold. The timing will be simultaneous with the rejection of the USDollar in trade settlement, and the end of the famed Petro-Dollar. The Gold cartel cannot stop the price rise, because they will have no physical gold.”

    For those interested….here’s a link to the full article.

  22. If Walmart stock breaks out north of $70, it could be a... [#109417]
    By: NYUGrad (4750 comments) Go to top ↑

    If Walmart stock breaks out north of $70, it could be a nice positive ride up.

  23. Year end info for JPM is shown on page... [#109418]
    By: George (619 comments) Go to top ↑

    Year end info for JPM is shown on page 9.

  24. Other than from Zerohedge, can anyone verify the report... [#109419]
    By: Bill Cara (4105 comments) Go to top ↑

    Other than from Zerohedge, can anyone verify the report that CME has decreased crude and gold margins by 13% and 10% respectively.

  25. Long started yesterday at 13:30 added today around the same... [#109425]
    By: Tower Dog (90 comments) Go to top ↑

    Long started yesterday at 13:30 added today around the same time. My old Dad told me about AUQ reading from the right side of the chart it’s off to a good start. Hope this holds, long weekend coming Fri 3 days of terror for the price of one. Thinking of adding if it’s down cashing-in if it’s up.
    Good Luck

  26. Hi All - Anyone holding this one? The company said it has... [#109426]
    By: Luggie (639 comments) Go to top ↑

    Hi All – Anyone holding this one? The company said it has intersected 231 metres grading 2.4 grams per tonne of gold and 0.44% copper at its Las Tres Palmas project. Not a bad ore hole, but caution out there. Happy Trading

    To the north of existing work in the past: see circular feature -

  27. about exposure of US and other banks to Greece: (GR... [#109429]
    By: Vadym Graifer (4341 comments) Go to top ↑

    about exposure of US and other banks to Greece:

    (GR) Certain Wall Street banks have already made preparations for a Greek exit from the EU – Focus

    - US banks and politicians have been preparing for a Greek exit for about 2 years.
    - Comments on how US banks have sought to reduce or hedge their exposures in Greece.
    - Japan’s Nomura has been conducting simulations related to a Greek exit for months.
    - According to data from the BIS, the direct exposure of US banks to Greece is estimated at about $4B.