Bill Cara’s Blog for Aug 12, 2010 [See post-close report]

I like this comment:

"Patrick Honohan, governor of Ireland’s central bank and a member of the ECB’s council, dismissed the bond jitters as yet another spasm by jumpy and emotional markets."

hehe get used to it pal. Seems rescuing Allied Irish is gonna cost a bit more than previously thought.

http://www.telegraph.co.uk/finance/economics/79400...

I wonderful product from Apple. I got mine this January. Also with a wireless keyboard and mouse. You'll love it!

Good morning.

AAPL - Apple initiated with an Outperform at Wells Fargo.

BRCM - Broadcom downgraded to Market Perform from Outperform at BMO Capital.

CSCO - Cisco downgraded at BMO Capital to Market Perform from Outperform with a $23 target. After Cisco provided reduced guidance for its October quarter, BMO Capital is worried that macro uncertainty will weigh on the company's revenues and stock over the next few quarters.

CSCO - Downgraded to Perform @ Oppenheimer following the company's Q4 results citing concerns with management commentary and a soft Q1 sales outlook.

CSCO - PT Lowered from $30 to $27 @ Stifel Nicolaus. Buy

GOOG - Google initiated with an Outperform at Wells Fargo.

IBM - IBM coverage resumed with an Outperform at Wells Fargo.

INTC - Intel downgraded to Market Perform from Outperform at BMO Capital.

MSFT - Microsoft initiated with a Market Perform at Wells Fargo.

QCOM - MKM Partners Initiates with a Sell. MKM believes investors are overly optimistic about the growth of the 3G market and Qualcomm's smartphone ASPs. The firm set a Sell rating on the stock with a $30 price target.

TXN - Texas Instruments downgraded to Market Perform from Outperform at BMO Capital.

Bill, if you have some tech-heads available to help you...

I've been running Linux 64-bit (Ubuntu) and Windows XP (32-bit) simultaneously on the one PC, using Sun's Virtualbox. Ubuntu is the host Operating System, WinXP runs as a guest OS in a virtual machine.

Works beautifully. Windows and Linux applications all available, running together .. Virtualbox is brilliant. I love it.

And you can run Apple guest OS's as well.

Something to consider.

Wow, this does make one realize how much the Post Close report by Patrick and the Morning Call by Bill are appreciated.

export prices M/M -.02%
import prices M/M .02

Y/Y for the two significantly higher, reflecting stronger deflationary forces of last year I guess (?).

CPI report tomorrow should be interesting.

http://fidweek.econoday.com/byshoweventfull.asp?fi...

I don't need the sound on with CNBC to realize when they are in full court press — Gotta start the equity pumps! — Turn on the bubbling cheerleaders! Show a little more cleavage!

A simple head count of the "experts" (I think 8 is the max so far.) covering the serious issue of the day/week/month tells me they have been told to get out the optimism squad.

"We're long term buyers." = We have a bunch of losers and expect the market to tank.

"We're averaging in on solid companies." = The ones other fund managers own, so we won't look any worse than the average idiots.

Linda McMahon, former chief executive officer of World Wrestling Entertainment Inc., won the Republican U.S. Senate nomination in Connecticut, trouncing opponent Peter Schiff.

Perhaps more and more political candidates will now come from the ranks of American Idol performers, as well. Thank God that Justin Bieber isn't old enough to run for office.

Yes, that's what the link says on the home page of MarketWatch. Maybe we'll see a short-term reversal in the Treasury market today.

Hedge funds pile into Treasury bond market
http://bit.ly/cxITKO

Worse-than-expected.

Factory output dropped 0.1 per cent, against forecasts of a 0.6 per cent jump, in line with the trend over the previous three months. But the bad news was tempered by an upward revision of the May figure, from 0.9 per cent to 1.1 per cent growth, according to seasonally-adjusted data from the European Commission.

Uh-oh, Germany & France leading the way down.

Germany (-0.5 per cent) and France (-1.6 per cent) accounted for the bulk of the shortfall, though Greece, Spain and Portugal also saw retrenchment in industrial production.

http://bit.ly/cVpXnm

Bill,

If and when I develop a market/chart based app, you'll be the first to know. Of the ones which exist, I have FT Mobile (subcribers only), Bloomberg and FX360 currently installed. IIRC, the FT app does have some basic charting tools.

http://www.zerohedge.com/article/john-taylor-expla...

That is this article-----------John Taylor Explains Why The "Global Frown" Will Turn Europe Upside Down

Haven't been in for a while, and this could be a decent entry. Picking away at a few big names: HPQ, CSCO, MU, HIG, JPM for a bounce.

"Alright, let me give you my take on Wednesday’s action. The media will spin it as “pure panic”, but this is just another day for Wall Street crooks to make a killing. After the Fed’s announcement, they brought the market up, a classic head fake before they cut risk across the board on Wednesday.
Don’t be fooled. This market is so corrupt, so manipulated, that it’s no wonder the big banks and their elite hedge fund clients are the only ones that can navigate through it properly, making a killing in the process. Multi-million dollar computers performing high-frequency trading (HFT) provide the illusion of an “imminent catastrophe”.

Total rubbish. I really wonder which institutional investor was dumb enough to sell stocks after the Fed’s announcement. I bet you elite hedge funds and big banks’ prop desks are loading up on risk assets, using this as another opportunity to make enormous profits.

All this gloom & doom is way overdone. I don’t know if the bounce will happen this week or next week, but it will bounce back and global equity markets will rally sharply. In fact, all risk assets will bounce back because asset classes are highly correlated.

Cheap money may not benefit consumers and businesses in the near term, but it means more cheap financing for Wall Street’s financial elite to continue borrowing at zero and investing in risk assets all around the world. They’ll continue trading, not lending.

Read more: http://advisoranalyst.com/glablog/2010/08/12/did-t...

From Les last night: Yes the uptick in Foreclosures is worrying. To put in in perspective: Sellers in the 50 largest cities in the USA slashed their collective house prices by $3.1 billion dollars for the month of August alone.

Meanwhile, the concept of seller assitance to buyers is viewed dimly by our leaders. Urge your Congress bods to vote YES for House Bill H.R. 600 the seller funded down payment assisted legislation. These are NOT government handouts like the Tax Credit. Sellers would fund the down payment to get more people into foreclosed homes. Get things moving. What a concept? http://www.congress.org

With 20% of mortgages underwater now -- more homes will be hitting the market eventually even though lenders are delaying foreclosures to keep the homes maintained and windows lit.

Bill -

Windows still sux. Sorry to hear about your loss of work;

Here's a must-read blog-post by a Goldman Sachs graduate. I hope it's some consolation:

http://adgrok.com/why-founding-a-three-person-star...

1) Orderly selling. Do permabulls feel better?

2) "Bull markets won't let you in, bear markets won't let you out." - Richard Russell

3) Even Chuck Norris is afraid to buy this market.

Time to reload on longs?

Senator Bingaman-NM just introduced a bill to create a new IRA of which the first $5k would be invested in a new Treasury R bond. No employer contributions allowed. Companies having 10 employees or more would be mandated
to set up the accounts. Penalty for failure to comply. They would be offered a small credit to offset administrative costs. The largest employer in the US would be exempt... government workers!

There had been rumors that a forced IRA/Treasury bond savings plan was coming..... well here are the beginnings
of it. This is just the opening salvo to force investment in US Treasury debt.

http://tinyurl.com/375sub6

Seems like a pretty impressive chart. Might be quite daring to try to buck it. Where are the chinks in the armor etc. cause I don't see any?
http://tinyurl.com/29ex68j
One added caveat - does depend on one's time frame. Chart is daily and looks completely different on hourly or five minute!

Looking at Econoday's site G, looks like yields fell under 4% for the first time since the panicky days of early 2009. Investors are looking for surety (cough cough) and taking less for it in long-term paper. Unfortunately I'm not sure I understand the full implications of the treasury market auctions.

http://fidweek.econoday.com/byshoweventfull.asp?fi...

yet their aug 4th release debunks what he says. They made 15c a share vs a yr ago's 3c a share. A 500% increase and a stock worth 30% less than a year ago witha 30% higher gold price.

Whats a guy to think.

Hi 2nd - Quite doable today with Citigroup putting up the best numbers for that product. No cost for your deal is only be available to those with bigger loan amounts. For lower loan amounts (~<$250,000) you shouldn't walk away from 4.5% no cost in this cycle. In the depth of the downturn in early 2008 the best I found for my own mortgage was 4.5% with costs. Happy Trading

A phrase from antiquity, almost lost in TARP, TALF, Maiden Lane I, II,... Now Mr. David Broder wrote "...this is simply the opening wedge in what will probably be the overriding issue of 2011-12 -- the struggle to discipline the federal budget." It's disorienting! Where will all the federal handouts come from? It's almost as if the strategy of ever increasing deficit spending might at last, entertain the wispy ethereal thoughts of scope reduction. Why, just yesterday billions more were openly allocated to give away to the poor underwater homeowners, while those who saved, cut back and acted prudently would fund this through their tax debt, just the way our elected change agents have so wisely voted whenever increasing debt is the offered choice. (I am sorry for the parochial sarcasm.) With virtually everything in government being bloated almost beyond comprehension. I couldn't help myself.

"In his announcement Monday, Gates said he wants to shutter the entire U.S. Joint Forces Command, an interservice innovation with about 2,800 military and civilian employees and 3,300 contractors, as a down payment on a long-term strategy to cut Pentagon and intelligence contracting 10 percent a year over the next three years. "

http://tinyurl.com/254zr3v

So 2nd, did you actually get a zero closing cost loan. IE..you rolled over 250 thousand that was 4.8% (or whatever) to 250K at 4.375% with no additional cost? What was the out of pocket cost to do so? I have a 15 year fixed at 4.8% with about 13 years left to pay. I'd roll into another lower rate refi if one could truly do so with no "closing costs".

Is this your typical crowding out or more? Consider also the record amount of junk floated lately...what is that saying?

http://www.bloomberg.com/news/2010-08-11/junk-bond...

Hedge funds are getting in on the act:

http://www.marketwatch.com/story/hedge-funds-pile-...

Hedge fund definition:
http://en.wikipedia.org/wiki/Hedge_fund

Selling nor buying the few sessions is not spectacular. If there are people on the sidelines or equity holder waiting, then they still are not flooding the market.

Staying out for a few sessions but here are some charts bookmarked on my iphone.

http://bit.ly/aEOCkz
http://bit.ly/d0FN0l
http://bit.ly/9E54wq
http://bit.ly/bfcehj

And there are gaps everywhere.

Pz- There was no cost whatsoever. It's a non-conforming loan- however, we have a LTV of about 0.3, the broker (who owns the company) is an acquaintance I've known for twenty years, and on weeks like this he watches the ticks in rates almost as closely as we watch the ticks in asset prices.

looks like a falling wedge with a breakout very close? Seems like a lot of capitulation volume?

I have used this trust company for self directed accounts. Also, anyone who can (qualifications vary) should look into an HSA (health saving account) for tax purposes.

http://www.mtrustcompany.com/

I disagree with the analysis on that second chart. THere was a massive volume spike last week on K.TO, and not very much in the way of price movement, and that happened at the tail end of a big downward movement. This didn't show up as clearly on KGC (the US listing of the stock). That says to me that a whole bunch of selling was absorbed by someone right there at that level, after a year-long downtrend. I'm not suggesting buying KGC for your grandchildren's retirement plan, or making any comment about KGC management or this particular acquisition, but there might be a nice trade in there once whomever is accumulating here at this level starts running the stock up.

The volume spike tells me this may be a capitulation low - perhaps anyone remaining who wanted to sell just did so last week in disgust after a year of dreadful underperformance.

No position, but now thinking about it Thanks doc. :)

A confirmation is required within 1-36 days. A severe downturn is a result of the confirmation. To learn about it:
http://ewtrendsandcharts.blogspot.com

ALOHA!!

PMI GOLD(PMV:TSXV)
Some here know that I have been a long term shareholder in this company and I have mentioned them here before in the past, but rarely give updates any more. The reason for that is that I believe this is not a company to own for the faint of heart, as it is risky and has run into problems in the past, though a lot of those problems are behind them now(no debt). Still the cost of those untimely problems can be seen in the dilution and share price. Really like a lot of juniors they were hit hard when the global financial meltdown occurred right in the midst of raising funds to go to production as well as some Board issues thrown in to spice things up a bit. Lots of set backs, but the CEO and the larger more long term shareholders stood by the company, me included.

At any rate we all know the gold is there, its just the execution now. That seems to be coming together, especially when you see drill results like the latest ones. Still even though the drill results were excellent and in many cases way better than other higher priced Canadian explorers there is still long term hang over. Now if Rob McEwen was CEO of this company this dilemma would not have occurred and in fact the share price would probably be $10CDN a share instead of $0.19CDN. What I am trying to say is this multi-deposit company is undervalued relative to its drill results and major past-producing properties on one of the most prolific gold belts in the World.

Here is a bit of the drill results from their Tuesday news release ...
Tue Aug 10, 2010
153 Metres of 2.37 g/t Gold at PMI Gold's Obotan Gold Project, Ghana
* Long high grade gold intersections at Nkran, including:
o 153.40 metres @ 2.37 g/t Au - including 46.00 metres @ 5.23 g/t Au
o 124.24 metres @ 2.25 g/t Au - including 35.32 metres @ 4.10 g/t Au
* Results confirm potential for significant new gold resource at Nkran
* Results received from 43 of 65 drill holes, with balance expected mid September
* NI 43-101 resource estimate, now under preparation by Hellman and Schofield in anticipation of proposed ASX listing and IPO, is expected imminently
* Additional drilling will commence once all the current results have been compiled

August 10, 2010 - Vancouver BC - PMI Gold Corporation (TSX.V:PMV) - the Company is pleased to announce the results from the first 43 of 65 diamond drill holes recently completed at our Obotan Gold Project in Ghana. The program consisted of a total of 10,877 metres, with 6,315 metres in 35 resource definition drill holes and 4,562 metres in 30 quality control (QC) drill holes. The results of this definition and QC program have been added to the historical Obotan database of 2,930 drill holes totalling some 202,250 metres. A maiden NI 43-101 resource estimate for Obotan is currently under preparation. Drilling was completed at Nkran (holes labeled below with 'NKC' and 'NKR'), Adubiaso ('ADP'), Asuadai/Edubia ('ASP') and Abore ('ABP').

Douglas R. MacQuarrie, President and CEO commented: "We have achieved the objective of this drill program which was to confirm, and to commence expanding, the historical Obotan drill data base. The excellent grades, widths and continuity of the gold mineralization intersected in drilling at Nkran clearly indicate the potential of this zone for renewed mining activities -- by either a pit push back or underground bulk mining techniques. In addition, significant near surface gold mineralization was noted at Adubiaso, Asuadai and Abore. Additional drilling will commence once all of the current results have been compiled." (more)
LINK: http://tinyurl.com/248symp

There you have it ... More to come ...

So, is it worth it to buy these shares now?

Well, if you look at the share price movement on Tuesday when these drill results came out you would wonder, since the shares were up some 40% on big volume of 2.6mil shares traded, but that was in the morning. By closing bell the shares were actually at a 0% gain as they sold off throughout the day. I know the shares face headwinds since a number of people have held these shares a long time and sell when the liquidity offers. But I called the CEO, Doug MacQuarrie and asked about the share price action that day. He informed me that a large Swiss Fund was forced to sell due to 10% regulations, whereby they could not hold more than 10% market cap of any mining company so when the share price exploded up 40% in the morning they were forced to sell. He told me he even got a phone call from the Fund after the sell to explain the circumstances. Yet the top shareholders, including Macquarie Bank Group did not sell. I sold none myself and I own 1.9 million shares. Caution on the liquidity, but then I have noticed liquidity has been improving and I suspect the shares will have more play as funding and production becomes more evident.

What's left is a scoping study and more exploration but most important is finding funding to build a gold mine. The elusive funding ... Well, if Rob McEwen were CEO it would not be an issue, but it is. According to Doug he is negotiating funding tomorrow with a group from China in Vancouver. China has made a lot of investments in Ghana, some $5BIL worth in 2009 alone. Time will tell on that one ...

I understand that the new 43-101 coming soon will move the resource from close to 1 million AU ounces at Kubi to at least 1.5 million, could be 2 million with added Obotan ounces. Progress is good there and the widths and grades are there as well.

Then there is an IPO planned for the ASX in late September or early October. That would bring in the required funding, but also dilute the company further, which is not desired. If funding can be secured prior to the IPO then the IPO shares will be restricted to a much lesser amount. Still it is important to gain access to the ASX since a number of the largest share holders reside there(Macquarie Bank Group)and the Aussies seem to like Ghana plays, companies like Perseus and Adamus have done well there. Hartley's will be the lead and promote the ASX IPO ...

So the gold is there and I believe a mine will be, so that leaves the share price playing catch up, in my opinion. Once again time will tell and there are no absolute guarantees, yet I'M ALL IN! Consider the risk though. I have been doing this a long time now so I tend to have the capital from prior successes to compensate losses. Of course it is best not to have losses or at the very least limit them, yes ... Be careful for sure! Still I try never to overlook opportunities when they are presented. Hey, what do I know about "risk" I live by an active volcano?

I will just say ... "Worth a look!" ... Maybe even a "chihuahua position"!

Great work. Yes these are amazing times. 4.25 - 4.375% for 30 year fixed terms are everywhere you look...for solid credit and values that is.

Thank you for this Kaimu. I haven't forgotten SLR.ASX bottoming out at .17A$ and certainly appreciate the risk/reward scenario outlined here and noted in your other investments. I'd appreciate your updated commentary on this and other propositions as they appear interesting to you.

Pillzilla,

A 'no cost refinance' means the broker or banker is being paid by the lender from their margin. For example, if I could get you 4.25% for 1 point and escrow fees to close (about 3% on average) OR I would absorb the costs for an additional .X% to the rate for good credit (no costs). YSP or SP are the yield spread or service premiums paid to brokers and bankers they can use to pay your costs...technically built into the rate. All loans have margins or costs. Par = no margin or cost. Nobody works for free. At least not intentionally.

ALOHA!!

Okay Les ...

Actually I will be in 2nd's neck of the woods later this year attending a TECH DEMO DAY in Silicone Valley. Looking at some new start-ups, thinking of tech now again after so many years of monetary related moves. Not that monetary issues have been resolved ... far from it, but like junior mining, tech start-ups are high risk but then pay-offs are tremendous. More risk ... more reward. Anyway its a contact in my tech network from my Cisco Systems days in the contracting biz! I guess California is running out of venture capital! In the midst of the tech boom I would have never been given this invite. Time to get my foot in the door.

I will report on that if anything turns up, but then its all very small private companies, however there are times when a public one gets in the loop. Thinking "small and private" rather than "large and public", at least there is no stock market risk on the private side. Just gotta have the right app ...

Hummmm ... Cisco Systems taking a beating -9.95% ... "unusually uncertain" indeed!

I am also in negotiations right now to buy another orchid farm where the owner wants out due to economic conditions. It will be a great fit as it will give us big exposure to intra-state accounts, whereas it fills the gaps in our mainland based and internet retail and wholesale accounts. My Bahamas connection fell through so you win some ... you lose some!

The key is to keep debt attrition at bay so you can stay in the game longer. Holding debt just kills your long term viability and severely reduces your ability to capitalize on opportunities in a down economy, especially if you are in business. Of course it helps to have revenues, unlike the US Treasury!!! The main reason I can now have these opportunities in Hawaii is mainly because I did the opposite of the crowd. The crowd was loading up on debt and expanding like there was no tomorrow! I dumped debt and got very lean! Now there isn't a tomorrow for many businesses in America.

Too many people bought the American Dream hook, line and sinker ... Tough times ... the toughest I've ever seen my entire life!

http://ronsen.blogspot.com/2010/08/canaries-in-coa...

Chart elegance. LOL.

I can't say if they were lower, but I do remember that in 1961 my father-in-law had a 20 yr loan at 3.25%. He had bought the house in the mid 1950s and assumed an existing mortgage. (USA, IL)

My wife and I were building our first house with a 6.25% 20-yr at the time.