Bill Cara’s Blog for July 27, 2010 [See post-close report]

now i get it. That is interesting:

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

never underestimate the gullibility of the american public... maybe we did get the ' low ' back at $ 2.80 - $ 3.00, but still, the profits were very good... live to trade another day ! (* ps.) > dd at ' sdth ' and see what ya' think.. growth rate is strong, chemical equal to ' seed ' ( albeit, larger float ) chart is flexing for move... best of trades to you, baz.

A bit more on the Stifel Nicolaus Upgrade of COST.

"Its main Sam's Club competition is undergoing internal turmoil."

This is reflective of my experience so far this century as a small business owner.

APA - price target raised at BofA/Merrill to $145 from $138 on new assets acquired from BP. Reiterate Buy rating.

UTX - estimate boosted at BofA/Merrill. UTX 2010 EPS estimate jumped to $4.85 from $4.79 on improved operating leverage and performance. Reiterate Buy rating.

I pay zero attention to this figure. To me its completely tied to the performance of the stock market. In June the market was down pretty sharply.

but I believe ' frpt ' will be bought within 1 year. ( could be The Carlise Group ).. Wars never end. They just change places.

Does anyone think there is any truth to the rumor that SLW may consider paying a dividend as mentioned in this past weekend's Barron's article? I would think such a revelation would be fairly major and certainly not priced in. SLW announces earnings in early August. I am taking a close look at the AUG $18 calls today...

All comments appreciated as always.

TOF,

If it is due to stock indices performance, it must be by people who believe the media/political spin. At least around my circle of friends only a few are still die hard B&H investors and even they have no real confidence in the economy anymore.

I see consumer confidence no more or less relevant than other often presented data. ALL, in my opinion, are skewed, juggled or flat out lies. Couple with that there are no firm rules anymore.

These data are mostly (I think) used between traders who are playing a game with the Fed, and foreign central banks. The rest of us are in bonds, gold or both.

Also of note that XLU seems to be acting as a safe have play right now - solidly green while the indices cool off. Suggests to me that traders would prefer to be defensive in the higher yielding utilities rather than the piddly yields on treasuries being offered right now.

BP to claim $10B TAX CREDIT. If this is allowed, I want a refund of all FIT I've paid in my lifetime.

http://www.marketwatch.com/story/bp-taking-10-bill...

Decent move down in gold today (-21) breaking support and dragging gold miners down even further along with it: gold off -1.8% while Goldcorp is down -5.3%.

The persistent selling has abated at this point, so perhaps -22 will be more or less where we end up. One interesting factoid: the "first notice day" of the front month COMEX gold contract is tomorrow. Rumor is hammering the contract down prior to expiration encourages those who are holding for delivery to bail out instead. True or not, I have no idea. Today isn't the biggest down day I've seen, but the selling sure has been persistent, and there's no real cause I can see that would have caused the move. Then again if I were really good at this, I'd be filthy stinking rich by now, wouldn't I?

Then again, it might have all been a game to get some gold miners a little bit cheaper. Who can say? The miners sure did sell off hard.

One other factoid: bonds have not had a good day, even though the overall market is down. I wonder what that's all about?

FD: short GG puts, wrote more today, moments ago

George, I would say if you are going to take a negative view on IWM, keep a close eye on the 50 day and 100 day EMA's as well. 50 day EMA (currently 64.30) fell below the 100 EMA (64.86) around July 1st but the 50 day EMA has turned back positive on this recent rally. That should cause a decent bit of congestion above that death cross. If the 50 day EMA is able to turn back above the the day 100 EMA, we could see some major support move in around 65.

I'm wary of getting bearish right away - this move off the bottom has undoubtedly worked as a huge bear trap. Considering that the death cross has been almost certain for a number of weeks, a lot of overeager bears who gauged it as a sign of imminent demise are feeling the heat right now. My feeling is that investors are hugely under-allocated to equities based on bearish rhetoric spewed over talking head TV during June/early-July. Unfortunately the crowd fails to acknowledge they are wrong until the counter-move is well under way(61 to 66 on IWM in 4 days).

I guess what I am really saying here is that I wouldn't put any chips on us seeing 63 on IWM before we see 69.

Believe me, Billy, I want you to be right!

I'm not so bearish as I'm leery and stockpiling cash on my small company's balance sheet. Fortunately, I don't owe anything on any of my equipment.

...to the bearish side.

Building short positions along the way.
http://bit.ly/drNITj

Couple comments to yesterday's discussion about parallels... I can see clearly some of the similarities Ross notices. Politicians and apparatchiks concerned exclusively about their careers and expediency of the moment - check. Slogans replacing thinking - check. Upper echelon's ignorance, arrogance and hubris - check. Blindness while moving closer and closer to the abyss - check. Deterioration of the very fabric of society - check. Worst and the most scary for me personally analogies are 1)increasing disdain for the law, bending it to the need of the moment and 2)culture of entitlement.

At the same time, it would be a mistake to identify both societies fully without noticing glaring differences. There are plenty, and of one of the most important - having some recourse when abuse becomes intolerable. I know, it looks to many that there is none or it's insufficient (and in many regards it is), but we are talking comparisons here... and comparison sake:

- city of Bell, CA exploded in protests and changed situation in a matter of days. In good old USSR a few activists expressing anger about city rulers abusing power would have disappeared before their voice reached their neighbors, let alone country.
- Cheryl Sherrod was heard by the whole country; unfair accusations and firing were made public and she got her say and according reaction. In good old USSR she would be lucky to be simply fired; there was no way to make her story heard as all media were state owned and censored as any of complainers about censorship in USA wouldn't believe; finally, had she tried to raise her voice she would have disappeared just as effectively.
- oil spill in GoM became public knowledge in a matter of hours. Do you know what happened in USSR after Chernobyl explosion? Cover up continuing for weeks, nothing but vague rumors, people in Kiev encouraged to go out on the May parade instead of taping their windows shut - all the while upper class was quietly evacuating families...

Etc etc. There are horrifying similarities but there are also huge differences.

Vad,

We are fortunate to have you to give a bit of perspective on such an important topic. I for one tend to think of how much better it once seemed to be and have no real idea of how bad it could get.

I do have scary imaginings from my reading and a couple of stories from people who've been to hell and survived.

1.) A friend who was in a Chinese prison camp during the Korean War.

2.) A book binder I met in the 1960s who survived Auschwitz.

We aren't even close yet, but I saw the massive job losses through globalization coming beginning in the mid 1980s and it happened much faster than I even imagined.

A vivid imagination is a two-edged sword.

.
Grym,

Don't you think globalization is really a euphemism for the systematic destruction of the American middle class starting in about 1980. The jobs that have been lost to globalization are almost all middle class jobs. The American public has been much more tolerant of globalization than they should be because they have been falsely led to believe that it is just an unemployment matter that can be remedied by retraining. 30 years and billions of dollars of retraining have done little. Globalization has destroyed not only middle class American jobs for many, but also the middle class life style and dreams that those jobs produced. Its been 30 years since the process started. At some point the American public may understand it has been betrayed. However, by then there may not be a large enough number of people to claim the right to middle class status and the government will presume that it can tailor all of its social programs to serve only the needy, e.g., social security and medicare will become needs based programs. John Boehner said he favors this approach based on his argument that Social Security is broke, which is a false argument because the Social Security trust fund has a balance of $2.5 trillion. I think the destruction of the middle class of Seniors has always been part of the scheme to destroy the US middle class. Its probably the main issue that separates todays democrat and republican parties.

As to the difference between the US and USSR, I doubt that there will be a difference without US middle class rights. The poor are downtrodden everywhere.

lessmore,

Coincidentally, I sent this to a friend (far more liberal in his thinking than I) this morning when he sent me an email from a Catholic publication about redistributing the wealth.
------

Dick,

I'm quite sure that people who have long been advocates of "redistributing the wealth" had a far different outcome in mind.

What we got was a massive shift from the middle class savings and earnings to the wealthiest and "most special" class.

In the US we began redistribution under the guise of creating jobs and a better life in under developed countries beginning with Mexico and the advent of NAFTA. Being a natural skeptic I never believed this would occur and saw it as a corporate/legislative joint venture to grab large amounts of money for the top tier of society. It had already started among my clients when Elco began out sourcing all standard fasteners in the mid 1980s.

Now millions of people in totally unrelated jobs** have begun to feel the affects of Globalization. Yet, even now, most media reports see it as being only related to the biggest part of the scam — the housing fraud.

Typically, those who caused it all not only lost nothing, they got limitless use of taxpayer dollars, bonuses, mergers and acquisitions of other companies and were put in charge of creating even more centers of power and control over the rest of us. I think it is ironic that I, a life-long conservative, find myself agreeing with a statement by Karl Marx.
------------

“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it.” — Karl Marx
----------------

I just hope enough people get pissed off enough to make real change I can believe in and support.

There is little chance of such happening, in my opinion, and I think we may see many Democrats voted out to be replaced by equally crooked or inept Republicans this November. Then Obama will place the blame for the little or no improvement in most people's situations back on them. There will be massive tax increases, more government stimulus and resulting unemployment. So far no one has been punished and I don't expect they ever will be. It is simply too pervasive at all levels of government.

One California city manager has resigned , but he will get a $600,000 annual pension for life!

Bring back the guillotine! I volunteer to sharpen it.
----------
**Note: Dick's son just lost his job of 25 years at a local bank when they went bankrupt and were bought by Harris Bank.

"I think the destruction of the middle class of Seniors has always been part of the scheme to destroy the US middle class. Its probably the main issue that separates todays democrat and republican parties."

I frankly don't think either party gives a damn about what is happening to the middle class since none of them remembers what it is like to actually work for a living or worry about making enough to get by.

What Twigg calls a wedge is actually a symmetrical inverted triangle. And that's not even correct according to Schabacker's "Technical Analysis and Stock Market Profits" (forerunner to Edwards/Magee). It is actually an Inverted Triangle with a Descending Hypotenuse. Resistance for the SP500 is about where it closed today with a very wide range below 1000. And if/when 1000 is breached, it'd measure to 850

http://www.youtube.com/watch?v=eq0EWNuR1H8&feature...

Somewhere over the rainbow
Way up high,
There's a land that I heard of
Once in a lullaby.
Somewhere over the rainbow
Skies are blue,
And the dreams that you dare to dream
Really do come true.

Someday I'll wish upon a star
And wake up where the clouds are far
Behind me.
Where troubles melt like lemon drops
Away above the chimney tops
That's where you'll find me.

Somewhere over the rainbow
Bluebirds fly.
Birds fly over the rainbow.
Why then, oh why can't I?

It's not about someday, or somewhere. It's our moment-to-moment decisions and actions that allow us to make our way (one step at a time) to a destination often referred to as Somewhere.

And somehow, in the many buys and sells we transact over a lifetime, we make our way Over the Rainbow. That's exactly how each of us manages to 'fly.'

Loan... how are you ? Been looking at Fannie repo's... good prices, but as Always, there's a catch. Regardless if one pays full cash or gets a loan, you must sign a statement that the house being purchased will be: 1) Your primary residence. 2) You cannot sell it or rent it for a period of One Year from the closing....

My feeling is, America peaked as a world power back in 1970-72, along with the domestic production of energy, the closing of the gold window, the Arab oil embargo, and the beginnings of requiring both people in the family to enter the workforce in order to maintain a rising standard of living. Back then we could have guns, butter, and put a man on the moon all at the same time. People saved 8%, houses were for living in, nobody bought imported cars (my gosh why would you?), mostly dads worked and moms stayed home, and America was the biggest creditor nation in the world.

In 1970, we produced 9.5 mbpd and imported 1.5 mbpd. By 1980, production had dropped to 8.5 mbpd, and imports had risen to 6.5 mbpd. Today, we import 10 mbpd, and produce 5 mbpd.

http://en.wikipedia.org/wiki/File:US_Oil_Productio...

Energy cost = "cost of getting something else to do your work for you" = standard of living

1970: the year america peaked as a sovereign power.

When did the middle class peak? Six years later, in 1976. That's when the bottom 99% of America held 80% of the wealth. Now that is down to 65% (2007 data) - and that figure is probably much lower today with the housing crash.

DaveF,

You are right on in my experience.

But TA doesn't agree with your feeling :)) specially with the Death Cross already crossed in several world markets indexes. Don't tell me we should switch to trading with our emotions now and scrab TA altogether. I used to do that in the past and got killed, never again. Good luck to you anyway.

FD, I made good money trading RAS back in April but sold my position when TA told me to do so and thank God I did. I would think it would have gone up more this time around after they released their earnings had they announced a big dividend as many investors were hoping for but that didn't happen so stock sold off from its high post earning news even on a good 3 bullish trading days.

All of the people that I respect as both fundamentalists and as the readers of entrails suggest that the counter trend decline is over...Period.

It suggests to me that this cyclical Bull rally in a secular Bear will continue for some months. The markets are severly overbought. Time your purchases around SP 1080/1090 and hold on for a ride to at least 1220. Actually 1350 SP may be in the cards but I'll be long gone by then.

"As I was going up a stair
I met a man who wasn't there.
He wasn't there again today.
I wish, I wish he'd stay away."

TOF, I remember way back when (summer 09) you talked about the golden cross, and how you used it to signal buying decisions regardless of the negative mood of the market. You were right then. Why now that we've had the reverse - the death cross - do you not use that same mechanism to simply stand aside and wait for that golden cross to reappear?

Vad,

I am on the same page with you. Sometimes I dart in and read too quickly so it's easy to be reactive and while the world around me is a series of good people making hard choices (even folks with good credit scores have home values and stock portfolios in decline). 2003 home values are back. The less than a decade I have been in the mortgage business has seen such a race up and swift decline that many cannot accept their losses. They feel betrayed by a system they supported so many years. Yes, it is frightening when you witness what passes for leadership.

S&P +1.40 / +0.13%
Level 1,112.30
Fair Value 1,110.40
Difference 1.90
Nasdaq +4.00 / +0.21%
Level 1,890.50
Fair Value 1,887.11
Difference 3.39
Dow +11.00 / +0.10%
Level 10,505.00

rinse cycle worked well on US markets yesterday. Mixed trading in Euroland. Banks up but Auto's not so hot.

Loannetter pointed out the skewing of home pricing recently. Here is a graph from Mish's article today.

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

New Home Sales and Bear Market Math

One can't help but laugh at headlines touting a huge 23.% jump in new home sales given that the "jump" was to the second worst month in history, dating back to 1963.

Dave Rosenberg puts the headline jump into perspective in Housing Data Are Not Supportive.

http://globaleconomicanalysis.blogspot.com/