Bill Cara’s Blog for Sept 16, 2010 [See post-close report]

ALOHA!!

I have been reading the US FED FOMC Meeting Minutes for many years. The one and most important insight that keeps percolating to the surface is that the US FED, with all its grandiosity and with all its super policy intellect, especially during the Greenspan years, are completely incapable of predicting or guaranteeing anything except that the member banks will always be one step ahead of the herd.

I want to link to the charts the US FED uses in their FOMC Meeting Minutes so that you can see what they use as "indicators" of future market moves in currencies and banking. I especially likes DINO KOS, because he had all the charts and I think he out performed even the governors with all their unlimited staff.

Now these charts are from 2004 so it is very cool to read and see these charts as hindsight so that we can understand more what the US FED is thinking now that we know they completely failed to prevent the banking crisis of 2007/2008.

There are some notable charts ...

FOMC CHART LINK: http://www.federalreserve.gov/monetarypolicy/files...

#1-BANK ASSETS IN MBS
In 2004 10% of bank assets were in MBS, up from a low of 7% in 2001. Anyone looking at that chart could clearly see that banks were in an MBS bull trend, even by Dec 2004.

#2-FRBNY CUSTODY HOLDINGS
Even the US FED member banks were trading in US Treasuries in favor of GSE, so more MBS and more GSE.

#3-DIRECT CURRENCY SHIPMENTS ABROAD
If you read the DINO KOS Meeting Minutes then you see that this chart is useless because they all eventually agree that there is no way to accurately measure how much hard USD currency is taken out of the USA every year. When I was in construction my Mexican employees sent money out of every pay check to relatives in Mexico. When we talk about currency in circulation this issue raises a big question mark. Even the US FED admits they cannot provide an accurate count and these are the guys that supply the data everybody in the World base their investment and trading strategies on. Also notice the breakdown after 2000, maybe a combo Tech Crash and YTK, but even after a bounce in 2001 it goes negative again in 2003 and 2004, in the boom and bubble years. Why is that? I think it was due to the SubPrime, which was mainly focused on minorities and even my Mexican employees who had always rented ended up in houses back then, so that means less money to send to relatives in Mexico. In essence foreign savings were sacrificed for the HOUSING BUBBLE via SubPrime. That chart tells me that the HOUSING BUBBLE where Goldman Sachs and JP Morgan profited handsomely was also financed on the backs of foreign relatives. I mean even if you put ZERO DOWN you still need furniture and appliances to fill your new house. So the SubPrime reached very deep even into Mexico, its people and its banks. The reverse of Ross Perots "giant sucking noise".

#4-DOLLAR-YUAN EXCHANGE VALUE IMPLIED BY THE NDF MARKET
Anyone here know what the "NDF MARKET" is? Maybe you better find out because DINO KOS and the US FED use it gauge the value of the USD compared to other global currencies.

#5-YEAR-TO-DATE RETURNS BY ASSET CLASSES
Once again between the US FED and the US TREASURY I can hardly tell which is the bigger fraud. They both consider DEBT as an "asset". I guess it is if you derive your power from enslaving the masses. You will notice GOLD is not on that chart but every other DEBT BASED "asset" is ...

#6-CURRENT US AND EURO AREA THREE MONTH DEPOSIT RATES AND RATES IMPLIED BY TRADED FORWARD RATE AGREEMENTS-Holy cow ... that was the longest "chart title" I ever saw! Leave it to DINO KOS! Where in the hell do you get data on TRADED FORWARD RATE AGREEMENTS? Dino? Anyone here even know that "rates" could be traded forward? Obviously this is all about LIBOR, but even with this level of complexity the entire banking and credit system froze up! Dino talks about data and charts and their "predictive" abilities in the Meeting Minutes and even I was not convinced.

#7-Is not a chart at all but this is what it says STRICTLY CONFIDENTIAL FR CLASS I FOMC. That must have been the chart entitled LETS SUCKER THESE STUPID IDIOTS TO THE MAX!!

There are more charts than what I listed so go look and draw your own conclusions. It is amazing to see and read what the elite of the elites are doing even if it is six years ago.

The YEN intervention, as it has been stated that the BOJ last intervened in a massive manner back in 2004, made me visit the FOMC Meeting Minutes of 2004 to seek some insight. I did read some currency intervention topics but not much about the YEN as the EURO seemed to be more the focus. Still it is quite amazing to see all these currencies in a race to devalue lower than the other guy in an effort to have an export advantage. In a round-about way they are saying that they need to destroy their currency in order to have a "perceived" better economy. Its laughable and such a tragedy in the same breath. This would be the complete opposite of the gold standard and points out in an obvious way what happens to the World when all currency is based on DEBT! When all currency is based on DEBT there is a race to the bottom of "value", as in store of value, but when currency is based on ASSETS, like gold or silver, there is a race to the top, whereby the masses benefit most not the banks. The fact remains that banks benefit most from debt and it is in their best interest to enslave the masses in as much debt as they possibly can. Its enticing to leverage $300,000 with a 3.75% rate, its the AMERICAN DREAM! To lock in a 3.75% rate is called a "victory" of sorts now days but its still 30 year debt slavery in the end. I guess its just viewed as a little less "slave" compared to a 5% slave. The banks sure have conned us good! A multi-generational con job ... They own us without ever having to put up a dime of their own money! The power of OPM ... pronounced "opium". Rothschild was a genius!

My gold short is down 0.08 in pre market. Will decide by EOD whether to close out or not. Right now I will lose my pizza and gas money from the DZZ trade the other day.

I wonder if this could be the gold boat anytime soon?

http://www.youtube.com/watch?v=8lYTIYvKTNg

Still holding oil short [DTO] up 1+ in PM since the close yesterday:-)

2nd: Is OAKBX a place where you park your cash so to speak when not trading? Why there versus your trading account?
Bev: short 2nd: long [Mmmmmm... I getting nervous now :-) ]

Q2 current account deficit up 12.9% from Q1 8:30a
U.S. Q2 current account deficit $123.3 bln 8:30a
Wholesale prices climb 0.4% in August 8:30a
Core rate of producer prices up 0.1% in August 8:30a
Weekly jobless claims fall 3,000 to 450,000 8:30a
4-week claims average down 13,500 to 464,750 8:30a
Continuing claims drop 84,000 to 4.49 million

Bev- I usually park in cash, and move into OAKBX when 'cautiously bullish.' My last move into OAKBX lasted 1-2 days.

bottom of consensus range. little changed from previous week.

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

Headline News:
FedEx Earnings More than Double, Plans 1,700 Layoffs
emphasis on the latter words.

See full article from DailyFinance: http://www.dailyfinance.com/story/company-news/fed...

Mr Cara... That is correct I had entered a small short position the day before you made that post. Needless to say when I saw it, it sent chills through me. I don't find much confidence in being on the opposite side of you in a trade. I closed the trade out a day or so later when the indicator I watch showed a nice positive divergence in GLD on the 1 & 5 min chart [resulted in that big move the next day]. So I was able to close it out for a small profit [pizza $$$].

The reason I entered a small short yesterday is I am still seeing distribution in gold on the longer time frames. I believe the first correction downward in gold to be fast and sharp and would like to capitalize on it. The position I hold for now is small with a tight mental stop. It is just every where you look from TV ads, to internet ads, to blogs, etc, it is gold ..gold ..gold..you can't go wrong. Time will tell. Right now I am only down .05 in PM.

This is a chart by a trader name springheel_jack who I monitor a lot for his TA. Thought some here might find it interesting if not useful.

http://tinyurl.com/2bhnudu

Just as I expected...it was a bear trap (assuming it continues below the 50DMA)

Once again, thanks Bill. Silver Wheaton has been spectacular. Others not too shabby either.

Here's what I call the BCara Super Seven of precious metals. There is another blue chip group of seven that Bill has identified, but these were the gems.

Entered on 2/23/10, as a "buy-and-hold-as-insurance-against-everything-and-everyone". I believe this is only the beginning. Don't let KGC performance sway you. And of course, UXG has a 'little' CEO premium, which is warranted.

Sym Buy CP Gain/Loss
UXG 2.62 5.17 97.33%
NGD 4.26 6.02 41.31
AEM 55.54 67.22 21.03
AUY 10.11 10.54 4.25
GG 36.45 42.76 17.31
KGC 17.75 17.58 <0.96>
SLW 14.75 24.82 68.27

This could all turn around in an instant, of course. Especially now that Mr. Greenspan says "buy gold". On the other hand, Mr. Soros says "sell gold". Hmmm...make up your own mind and do what you think is right. Base it on prices, not prediction. Best of luck.

p.s. speaking of predictions, if the silver gurus are right and we only have about 9 years of production at a reasonable finding/mining cost, then strap yourself in.

On the perf chart for the last 50 days from July 7th thru yesterday, GDXJ is up 27.01% and GLD is up 5.27%. This positive difference of almost 25% is more than unusual. GLD will need to keep moving up to sustain the GDXJ move.
It is akin to a growth stock that needs ever increasing earnings per share to maintain it's high pe ratio. Not saying that it can't happen but it seems a little bit risky to me.

http://stockcharts.com/charts/performance/perf.htm...

Not as sophisticated an analogy on my part when I sold; it felt like I was taking on too much risk and risking too much profit...did not want to be greedy in this case...worked for me at that time.

Edit:

Feelings are not the best indicator unless it is your back that hurts for somatic intelligence...just joking of course.

Philly Fed -0.7 (prev -7.7)

Ain't buying the selloff holding...Long BGU at $49.75avg and STT at $48.42.

A negative Philly Fed is getting bought? I don't think this market wants to go down. Not yet, anyway.

Last weeks unemployment claims were revised up 2000 to 453,000.

This weeks number sees two states (NE & VA) estimating claims due to "technical problems".

Percentage of Americans in poverty rises to 14.3% in 2009, Census Bureau says.

Thanks for posting that, gforce. That was pretty much my impression.

Every dip is being bought. This is telling and I do the same. Lets look what the leaders are doing like AAPL, no dips whatsoever.

George - while POG is a factor in the prices for junior companies, another huge factor has been the increased financing available for the large gold miners to acquire smaller counterparts. The assets of many of the junior companies can become exponentially more valuable when they can access financing to expedite the amount of time it will take to exploit the assets.

The money is there right now for large caps to borrow to finance acquisitions and mergers. Don't forget, these highly levered junior companies also got smashed to oblivion during the crash (before GDXJ even started trading) - so the extreme leverage works both ways.

OPEX forces in action?

$VIX is flat to slight increase but TLT decisively down. Which is telling the true direction? I don't know.

ditto, i've had enough of this, although I still think it will break out sometime this month for a trade.

maybe 1127.36 or 1116.06

Yom Kippur tomorrow - not expecting a strong move in either direction until next week

Yom Kippur starts at Sundown tomorrow night. Jewish businesses are open tomorrow.

http://www.bloomberg.com/news/2010-09-16/bank-seiz...

-------

Expect a huge market rally off this news.

This was posted second hand at my brokerage
..............
Canaccord Genuity's Morning Coffee: For Those Not on Goldfinger's Email Distribution List
10:21 am ET 09/16/2010 - StreetInsider

Canaccord Genuity's Morning Coffee by Dave Rovelli

A monumental sign from one of the largest gold companies that gold prices are poised to increase further. With gold pushing $1,270 an ounce, AngloGold Ashanti (NYSE: AU) announced plans to sell about $850 million of stock, in addition to convertible debt, and use the net proceeds to buyout its remaining gold hedges. The negative marked-to-market value of the company's hedge book was around $2.41 billion as at June 30, 2010. Gold watchers say this is the end of an era, as AU was the last of the gold majors with a significant hedge book. AngloGold's strategy has the support of New York-based Paulson & Co., the company's largest shareholder with 12.1% of its shares outstanding as per the latest filings, and Cape Town-based Allan Gray Limited, whose clients are the company's second-largest shareholder with a 9.5% shareholding. Eliminating its gold hedge book is an important catalyst to shift investor focus to the company's robust leverage to gold. AngloGold had an average mining cash cost of US$617/oz in Q2.

I'm still banging my head against the wall for not loading up on long bonds during the Carter years.

Bull in that regard you remember the Bo Derek bonds the 10's of 10. lol

At first glance in the spring of 1980, the 10% Treasuries looked attractive. Traders dubbed them "Bo Dereks," after the lubricious actress whose body starred in the previous year's hit comedy film 10.

OIl is getting crushed today ... DTO is up 2.68

Average mining cash cost of US$617/oz!! What happened to the miner's talk of a few years ago when they were thrilled with the price of gold at $600/oz, because their costs of mining were around $300/oz. Their costs of mining have doubled in a few years?!?

My disgust at what I suspect are cavalier attitudes to production costs, (which I'm inclined to think may also include ridiculous pay and bonus packages - whoo-hoo, party time), are enough to leave me with a twinge of remorse in my investment decisions. At the end of the day, of course, I can't resist the opportunity to make money regardless of their management.

michael3442
I always use the finviz link. Like the 5 min futures page

http://finviz.com/futures_charts.ashx?t=ALL&p=m5

For those who missed it on CNBC this morning, here's the brief video.

http://bit.ly/a0TnNK

BTW, Jim Rickards was also on earlier in the day and also called for $5,000 gold. Here's the video for that interview. Fast forward to the 4:08 mark for his discussion on gold.

http://bit.ly/bcLicz

Bev, those charts are great; that site has tremendous depth. Do you know if those futures charts are time delayed or if the small time stamp on each chart is accurate? The non-index stock charts are delayed. Here's another of their great charts: http://finviz.com/futures_performance.ashx
M

michael3442 I always assumed they were in real time. I will do some checking and if I find they are not [which will be a surprise to me] I will get back to you.

davefairtex

Yes I agree, Vad is correct. Also for the most part he only day trades [flat at the end of day] if I am not mistaken. But what I do is start my shorts or longs when there is a divergence on the 1 min with confirmation at least on the 5 min chart. When you see divergences on all the longer time frames then to me that signals a possible bigger move is in the making. As with the gold trade the longer time frames have been for some time showing what I think is a serious distribution [big divergences]. But on the 1 min and sometime 5 min charts the indicator has either track price or flipped back and forth [especially on the 1 min] between pos /neg divergences. But the longer time frames have remained negative. My thoughts are when and if they do correct gold downwards it will take place over night and the initial drop could be fast and deep. I am willing to be red to a certain extent so I can be on the train when it leaves. Right now the charts I see show it could be sooner than later.

Again I am not afraid of being earlier especially with my friend's leading indicator. So many times the big move comes over night and at the opening bell you missed the train. Two weeks ago when oil was selling off badly the indicator was showing accumulation [positive divergence]. I start shorting the oil short DTO [which is like going long oil] and began building a position. I saw red for about a day or so but held because the indicator kept showing a positive divergence. Well, when oil did reverse it did so over night. At the opening bell I found myself in the 1st class section of the train so to speak with a nice 2+ pt jump. To me I feel the risk is worth being earlier and being in the red to a certain extent. I know for some traders it is not acceptable but so far for me it has paid off. Just my 2 cents in a bag of pennies.

bev,

my preferred time frame has no role in this. General trading principles are the same.

Reaffirm Buy and $6.50 target.

Growth Drivers:
Growth Drivers include: improving macro-economic backdrop, Capital markets activity levels, declining credit costs, consumer and corporate loan demand, and international expansion.

• Asian Expansion Ramping Up – China a Major Focus. In a series of recently published interviews with senior management of C’s Asian operations, we see the company’s expansion plans in Asia (previously undisclosed) coming into focus. And clearly, the pace of investment is ramping up, with the expectation of material increases in retail bank branches and personnel, as well as significant increases in Asian-focused trading desks within its Institutional Clients Group. Although it is not surprising that China is a major focus, the scale of C’s expansion efforts are. In fact, C expects to triple its workforce in China over three years from 4,500 employees to 12,000 – which would make China C’s third largest market by staff (after the US and Mexico).
• Retail Banking – Adding the Maximum Branches. With 29 branches, C is the third largest foreign retail bank in mainland China, behind HSBC’s 102 and Standard Chartered’s 59. Chinese regulators cap branch opening at no more than two per month, and C plans on opening the maximum branches allowed for the foreseeable future – i.e. adding 10 more by the end of this year (including August). On top of investments in the mainland, C is growing its presence in Hong Kong (adding nearly 10 branches this year) and Taiwan, as well as recentlystarting retail banking in Vietnam.
• Institutional – Doubling Asian-Focused Trading Desks. C management is “optimistic” that it can find a local partner in China for securities underwriting – an issue that has taken on more importance recently with China’s announcement a month ago that it plans to begin opening up debt underwriting to foreign banks. Elsewhere, C expects to double its Asian-focused trading desks from 13 currently. Much of these desks will be concentrated in areas where trade with Asia is growing rapidly, including Latin America and Africa. The focus will be on serving Asian corporate customers in these markets via FX, derivatives, treasury, lending, and advisory services.
• LT Revenue & Earnings Impact Not Immaterial. With C’s Asian operations generating a 1.7% ROA in 1H10 and pre-tax margins near 45% (vs. North America’s 1.0% and 25%), we believe the ROI potential on these investments is high. And while the impact is a few years down the road, the revenue and earnings impact is not immaterial. We would note that in 1H10, the average revenue per employee in Asia was $290,000. Assuming similar productivity, adding 7,500+ employees would equate to $2.2bn in revenue. At a 45% pre-tax margin, that translates into nearly $1bn in pre-tax income – or 3.2% additive to normalized earnings.
• Reinforces Above Average Organic Growth Opportunities. As we highlighted late last year when we upgraded the stock, we believe C’s exposure to faster growth emerging markets (45% of Citicorp’s revenues) is a significant differentiating factor vis-à-vis its more domestic oriented rivals. We saw this play out in 2Q10, where growth in Latin America and Asia offset declines in North America. As C continues to shrink Citi Holdings and the credit environment further improves, we believe investors will increasingly take notice – and pay for – this growth potential.
• Remains a Top Pick. On top of C’s above average organic growth potential, we see substantial excess capital build up over the next 3-5 years from balance sheet shrinkage (25% of total assets) and DTA utilization. Moreover, at 0.87x 4Q10E TBV of $4.42 and 5.0x-5.5x our normalized EPS range of $0.70-$0.75, we believe the stock is materially oversold.

BH,

I remember thinking at the time someone should have banged his head against the wall. Last time I heard him speak I thought someone must have banged his head against something. Who said age brings wisdom?

W.r.t. trading with the trend, I assume you mean a longer time frame than daily. What time frame exactly? A week, a month? 3 months?

Thanks in advance.

invariate... my time frames are mins / hours if I see a divergence build on the 1 min and not on the 5min or greater ... And possible days when the divergences are on the longer time frames. Like this oil short I entered Tuesday around noon because the divergence still showed up on the 1 min and was supported by the longer time frames. It has been 2.5 days and I am still holding DTO. The indicator now is just tracking price. Once I see a positive divergence start to build or a sudden quick reversal in price [due to news etc] I will close out what I have left. In this market right now I do not hold anything for weeks or months as of now.

Looking to sell any spike in the morning.

the rest ' No ' .....

Thanks Bev. My question was more directed at Vad. Folks talk about being on the right side of the trend, but that means defining the time frame. For the most part, I'm not a very successful trader, and I find myself on the wrong side most of the time. Just wondering what time frame the better guys use.

Mark

jet8400 This past weekend I posted a chart on the $VIX, that showed there was a positive divergence [accumulation]. I saw a post by an options trader last Friday that said there is a big open interest call of 45 on the VIX for October. So something is going on. Tomorrow is going to be something else with it being OPEX and the triple witching hour. But I found the Mondays after OPEX Fridays are usually bearish. This could turn into a winner for you depending on the pain you can with stand if it goes red on you. If there is some truth to the VIX open interest calls being so high next month then this could really turn into a good trade. Again just my $0.02.

One day gain of 17%. That'll do it for me. Keeping the INTC shares.

There is a rule of thumb out there that says if you have a green close on the VIX and a green close on the SPX then the next day it will close red.

George,
Here's my take (not an insider expert view):
1) Last week's storage number had an implied increase of 103 Bcf;
2) The median estimate was for about 90 Bcf build;
3) This triggered a reflexive down move in price. (I sometimes trade these on futures contracts, the best this year capturing a 12 cent move in NG in an 11 second trade);
4) Many stops were taken out and I suspect many longs dumped their positions;
5) The price traded near the day lows for almost two hours, then the traders moved it back up to the top of the rising trend channel (see attached one month chart with hourly candles);
6) Henry Hub prices climbed .03 today to $4.09.

^VIX was actually down...................

http://finance.yahoo.com/q?s=%5Evix

VOLATILITY S&P 500(Chicago Options: ^VIX)
Index Value: 21.95
Trade Time: 4:03PM EDT
Change: -0.15 (0.68%)
Prev Close: 22.10
Open: 22.65
Day's Range: 21.95 - 22.83
52wk Range: 15.23 - 48.20

[cough ...cough] I mean Bill. :-)

I know a while back you made a post about how you were taken back by the singing of the 10yr old from Pittsburgh name Jackie Evancho. In cased you missed it last night this was her final performance.

[Jackie Evancho ~ America's Got Talent The Finals 2010]

http://www.youtube.com/watch?v=yCUl5_Y_jG0&feature...

and this is...

The Winner is Revealed

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

Thanks all for feedback and info. Sitting tight with reload of CNQ.TO at average $34.29, over past few days, and exactly where it closed today.

never stops to amaze me. Earnings releases are the cheap last minute sales literature, printed to fill the last passengers on the cruise ship before departure south.

I think i found a long term buy. but its not a buy right now.

http://bit.ly/acMB7w

http://www.caasauto.com/caas/

I believe the 1st time i posted this chart was early spring when it was in the $20s.

Edit: It may be a bull flag and never go as low as i'd like. but thats the risk i take for waiting.

A lot of posters today jumped all over George Soros comments about a possible gold bubble, but no one ever challenges Rob McEwens comments. I googled "Rob McEwen $5000 gold" and its certainly not a new call - there have been articles on a monthly basis for the last couple of years where he has been calling for this. I found one dated May 15, 2007 calling for $5000 gold by the end of (drumroll here) ... 2010. I'm not saying I don't respect Rob McEwen, but he is foremost a promoter and salesman. If I could have one share of UXG for every $5000 gold prediction, I'd have a nice little nest egg now.

What about the Monday after?

And Ms. Crow wants us to use one sheet of toilet paper as I believe she flies around in her Gulfstream.

http://women.timesonline.co.uk/tol/life_and_style/...

Don't worry be happy.

http://www.youtube.com/watch?v=u-rJ-6hBfSo

Wow you threw me off 2nd_ave in your response to your own post from earlier. Seems like some twist from 24 going on. Tense time but the Market will have the final say.

SLW, EGO, GSS & NEM in distribution mode.

SLV in distribution
,
Putting in an order to open a position tomorrow.

ZSL Sept/Oct max pain is 27

10 day ATR is .96

RSI 7 day is 12.62. Getting close to a capitulation trade (sub 10).

Close was 24.85. Close minus 10 day ATR is 23.89. Roughly 3:1 reward:risk.

Can't be around all day or I'd be watching the hourly MACD for a divergence to open the position.

See what happens.

FD:long DZZ. DZZ in Triple RSI accumulation mode.

Re: Free Association writing can lead to mistakes
Submitted by gforce (275 comments) on Wed, 09/15/2010 - 09:26 #69197 (in reply to #69192)

Les,

"I don't know if this was in reference to the question I asked. Buying $ and selling Yen is an uphill battle for the BOJ. I am guessing that a) it is ultimately a futile gesture (the Swiss SNB lost big this year buying Euro &selling Franc) and b) while risk is eschewed more Yen gets repatriated and continues to strengthen, regardless of short term efforts at weakening it."

gforce,

That is how the story goes; without assuming the US has a vested interest at the end of the day, no pun intended, in seeing the yen weaken. I say this because having Japans economy strengthen when the timing is right through a weaker Yen would help shape world economy perceptions or the perceptions of it as sound, I guess via the carry trade. Convoluted and possibly too early, but does the possibility exist?

New(16th):

As a counter balance and longer term picture some feel it is over for Japan:

http://financialsense.com/contributors/james-quinn...

I stink at posting links, so I won't bother, but all your RBY holders should take a gander at the announcement at 7:20PM EST this evening - he's liquidating his SIZEABLE RBY position.

While this will certainly put pressure on the stock over the next few weeks while the position is unwound, I am quite confident that this will clear the flight decks for a fast track merger w/ GG.

I will be a buyer of RBY over the next few days. There's just no way that doesn't get gobbled up w/ its holding in Red Lake and outstanding drill results.

Someone really needs to write a book about Rob McEwen. He is remarkable. If there were more folks like him, we wouldn't have had the banking crisis.

Is it possible that the reverse scenario is in play? The banks, having successfully shaken out unsuspecting ex-owners of shares in the financial/energy/semiconductor sectors, have accumulated positions at the expense of traders seeking the safety of cash.

I agree. While we are at the August top levels nominally looking at SPY and trying to break the resistance (but much higher considering leaders like EEM, QQQQ or AAPL), the sentiments are only half as high. Furthermore, the $tick closed low today, hinting another jump up tomorrow. Too bad I had to close my daytrade highly leveraged calls before the close (risk management) for modest return as they would be highly profitable tomorrow.

I also expect a blowout in gold soon as daily news mention gold price these days. We may be getting closer to gold top time-wise but lots of room yet IMHO.

Now, even if equities roll down tomorrow (unlikely), we have a higher low and a higher high already.

ALOHA!!

I have been in and out of gold and silver and mining stocks since 1978. I sold out in 1979 and I held two 100 ounce JM silver bars from then until 2001 when I re-entered the gold market after the TECH CRASH. When the TECH BUBBLE was running I was in that buying up IPOs and flipping them through my Morgan Stanley broker. At the height of that bubble I literally asked my broker to give me a printout of any company trading on the NASDAQ whose name or profile had the word "fiber" in it. The end came for me when my broker told me one day that I could no longer flip IPOs, meaning I could not sell out the same day of the IPO, which is what I was doing. One of my last TECH trades was put options on Enron when Jeffrey Skilling announced he was leaving. By gone days for me ... During that whole DOTCOM/TECH BUBBLE the only dissenting voice was Warren Buffet and he wasn't even that loud about it all. Pretty much everyone in the bubble told old "Gramps" Warren to go change his Huggies and down another can of Ensure!!!

Well ... since 2001 I have heard it all and every year since then some FIAT KING has been yelling about the GOLD BUBBLE, even when the POG was $400. Even one of the most notorious naysayers, Mr Greenspan, labeled gold the "barbarous relic", since it paid no interest. But Alan ... only debt pays interest and that only works until it doesn't. On Sept. 15th this was Greenspan's latest comment on gold at a meeting of the Council On Foreign Relations, “Fiat money has no place to go but gold ...” Someone needs a fresh pair of Huggies ...

Enter the naysayers of the week ... Of course there was George Soros and then this lady who is the Fidelity portfolio manager somewhere in Australia, probably the paper shuffling capital over in Sydney.

Ms Howitt points out that the only reason investors are drawn to the metal is because there is a low and steady growth rate in its supply, ensuring investors its rate cannot be manipulated and it cannot be debased by excess supply.

See ... its a "metal" ... its not even close to "money" ...

Hummmmm ... I wonder if she even knows that she just defined what real money is suppose to be when it actually provides a long term "store of value". Ahh-h-h-h-!!! " ... cannot be debased by excess supply."

However, despite the positive outlook, Ms Howitt says that gold is one of the few assets left in the world whose value can only be imputed.

"For almost every other asset in the world, the asset's value is derived from the cash flow it generates, for example the coupon of a bond, the dividend of a stock or the imputed rental yield of a house."

"Gold will never generate cash flows, so for purist investors it has no value. From this point of view, gold itself is in a bubble driven by investor fear, implying that the price of gold will collapse when investors realise the world is not ending," Ms Howitt noted in a statement.

First off gold did generate cash flow for central bankers when they leased it to bullion banks ... Meager returns, but then what isn't at the US Treasury?

Well, yes, Ms Howitt, the World will not end unless there is a meteor that hits it or unless we nuke ourselves back to the Stone Age, but that does not mean our monetary system cannot end. In fact the USA has defaulted many times in the past on its monetary obligations. Just ask the French ... Lets face it ... if the USD was absolutely worthless tomorrow the Sun would still rise in the East and set in the West. Is the "bubble" really "fear" based or is it a case of seeking the least exposure to insolvent sovereign monetary counterparties pedaling "political paper" we now call money. Do you have to be fearful to take prudent action to protect your wealth? Were we all driven by "fear" when we bought the TECH BUBBLE? Just exactly what is motivating those who have run screaming into the BOND BUBBLE? Is it "greed"? Yet Ms Howitt would only label those buying gold as "fearful". At some point we run out of monetary choices, which is exactly what Greenspan was saying at the Council On Foreign Relations on Wednesday. According to George Soros if China did not prop up the Euro at 1.20 then the Euro would have collapsed. If US Taxpayers did not prop up all the US Banks where would the USD be today? But for how long can taxpayers and China keep propping up the ever expanding LIABILITY BUBBLE?

Things like bonds that generate so called "cash flow" are based in debt by both the USD medium of exchange and the "asset", the bond, itself. A bond is nothing more than DEBT creating more DEBT paying interest with yet more DEBT, all with a AAA rating. HA!! Just ask Bill Gross over at PIMPCO! Besides the bond yields don't even yield a sustainable income stream. You're not even treading water ... You still need to work at McDonald's just for the healthcare benefits! Dividends paid in USD are also based in debt. Rents from a house paid in USD are also debt based and in many cases the actual "asset" itself, the house, is probably indebted. Therein lies the problem when every "asset" is indebted or throws off cash whose value is imputed in debt. If you look around you then you will see we are drowning not only in our own personal debt, but the debt of our elected government and our unelected central bank.

So maybe it is not the "fear" we "fear" but the damn incessant debt that leaves us all no other choice ... People like Ms Howitt want you to throw all your accumulated wealth into the most crowded trade that the human race has ever witnessed ... What is more crowded than DEBT? It's the BUBBLE OF ALL BUBBLES! Its one gigantic liability that masquerades as an asset. Ms. Howitt, uh, Tim Geithner says, "You're hired!"

S&P +7.50 / +0.67%
Level 1,130.10
Fair Value 1,119.59
Difference 10.51
Nasdaq +16.25 / +0.83%
Level 1,966.00
Fair Value 1,945.64
Difference 20.36
Dow +46.00 / +0.44%
Level 10,596.00

China's flat, but India, Japan and Hong Kong seeing some gains. Australia, while gaining ground today looks cautious in the bigger picture, which is illuminating given the bullish picture being sold by employment numbers etc. The Ozzie $ is now at 52 week highs. Another currency testing resistance.

S&P +8.70 / +0.77%
Level 1,131.30
Fair Value 1,119.59
Difference 11.71
Nasdaq +18.50 / +0.95%
Level 1,968.25
Fair Value 1,945.64
Difference 22.61
Dow +70.00 / +0.66%
Level 10,620.00

looks like someone's trying. That's what Europe's done - gapped up, autos and French banks alike. $ heading for a test of 80 support me thinks. significant loss in CHF and gain in $Aus. EUR/USD 1.31 and $gold so close to $1300. Risk is back.

http://pragcap.com/small-investor-bullish-sentimen...

Perhaps what the market's been waiting for...

Les, Traders Narative presents the same picture with a different calc. It also covers 2007 and might be of additional value.
http://www.tradersnarrative.com/