Bill Cara’s Blog for Aug 20, 2010 [See post-close report]

The trend has changed, and the sell-off may have begun in earnest. Naturally, we're becoming bullish. Those 52-week lows attract buyers like moths to a flame.

Time to remind ourselves:

(a) The indexes are likely to trend lower. Bottoms aren't usually accompanied by bullish sentiment.

(b) Keep counter-trend positions small. Avoid the temptation to hit one out of the park. Sellers will entice you with the promise of outsized gains- those aren't the pitches to swing at. A related emotional curve ball would be (c).

(c) During the initial phase(s) of a sell-off, losses in (the average long) portfolio are typically small (they may not seem 'small' at the time)- it's human nature to want to buy into the first leg down in hopes of 'making it back.' That's almost always a mistake- one ends up instead a trapped bull watching losses mount.

The goal is capital preservation.

Interesting article from yesterday's Toronto Star on Jim Miekka on the "coming" market crash:
http://www.thestar.com/business/markets/article/84...
Don't know what to think but I will still stick with the Cara 100 and refreshing daily blogs. Great lessons learned each day!

Thanks , 2nd_ave , You can't say it too many times . " THE GOAL IS CAPITAL PRESERVATION !!! "

GlaxoSmithKline and Human Genome Sciences Benlysta (belimumab) has been awarded priority review status in the USA as a potential treatment for systemic lupus erythematosus. The target date for approval is 9 December 2010, six months after the biologic drug was filed.

The dossier includes the results of two pivotal Phase 3 clinical trials involving 1,684 patients with SLE. Benlysta is the first in a new class of drugs called BLyS-specific inhibitors to have completed Phase 3 trials with positive results, say the firms.

Indeed, the so-called BLISS-52 and BLISS-76 studies showed that the intravenous drug reduced disease activity when combined with current standard of care in patients with SLE and may make patients less vulnerable to flare-ups.

GSK submitted a Marketing Authorisation Application for belimumab to the European Medicines Agency (EMA) on 4 June 2010. In the USA, a priority review designation is granted to drugs that, if approved, offer major advances in treatment or provide a treatment where no adequate therapy exists. No new drug has been approved by regulatory authorities in more than 50 years.

SLE or lupus, is a chronic autoimmune disease of the connective tissue that can affect any part of the body, resulting in inflammation and tissue damage. It is estimated that 1.5 million people in the USA, and five million worldwide, suffer from various forms of lupus, including SLE.

Analysts have forecast Benlysta could reap in excess of $1 billion for its co-owners; GSK and HGS will share equally in both the late-stage development costs and profits.

Axel Weber, Bundesbank president, has put himself on a possible collision course with other European Central Bank policymakers by arguing publicly in favour of extending emergency help for eurozone banks until at least next year.

The comments by the head of Germany’s central bank were unusually forthright and suggested he was trying to assert his authority ahead of a decision next year on a successor to Jean-Claude Trichet, ECB president.

Speaking on Bloomberg television, Mr Weber said it would be “wise” to continue to meet in full banks’ demands for weekly, monthly and three-monthly loans until after the year-end, which was “usually surrounded by some uncertainty regarding the liquidity situation”. Discussion on the ECB’s “exit strategy” would be “focused on the first quarter”, although Mr Weber also said “we need to re-embark on a normalisation procedure”.

MORE HERE:
http://bit.ly/ag9MJ0

ALOHA!!

What I see missing in nearly 98% of economic data is what the US Treasury has been doing since the BUBBLE YEARS. Lets look ...

Now 2006 was one of those BUBBLE YEARS, where construction was booming and a janitor could get into a $400,000 house just by lying. To emphasize just how many Americans were employed, the official unemployment rate was at 4.6% for 2006.

Here is the US Treasury data concerning the most important economic data for 2006. All data is YTD for August 18th.

FY 2006
UNEMPLOYMENT BENEFITS - $27.8BIL
DEFENSE VENDORS - $256.5BIL
MEDICARE - $334.5BIL
SOCIAL SECURITY - $386.3BIL

FY 2010
UNEMPLOYMENT BENEFITS - $140.1BIL
DEFENSE VENDORS - $346BIL
MEDICARE - $457.1BIL
SOCIAL SECURITY - $514.1BIL

Total US Dollar spending increase on these line items since FY 2006 is $452.2BIL, so far for FY 2010, which will probably be closer to half a trillion increase by the end of FY 2010. Total percent increase in US Treasury spending on these line items is as follows.

UNEMPLOYMENT BENEFITS - 500%
DEFENSE VENDORS - 135%
MEDICARE - 137%
SOCIAL SECURITY - 133%

Now here is net tax revenues YTD for each fiscal year.

FY 2006 - $1.55TRIL
FY 2010 - $1.34TRIL

Big spending increases since the FY 2006 BUBBLE YEAR yet a 13% loss in net tax revenues. Those facts should point to increased US Treasury debt issues and they do. Look ...

Here is total US Debt issues, both marketable and non-marketable per fiscal year.

FY 2006 - $32.3TRIL
FY 2010 - $56.8TRIL

Here is total marketable debt(US Treasury; safe haven) per fiscal year.

FY 2006 - $3.9TRIL
FY 2010 - $7.2TRIL

US marketable debt issues have nearly doubled since FY 2006. What a difference four years makes. My question is where will all this debt and spending be in another four years time? Well, lets just say the historical trend is UP! Its been UP since 1836! Guess what other trend follows this US Treasury monetary one?

While many CNBC pundits are chasing the various economic indexes and economic stocks du jour I focused on the long term monetary trend that the US Treasury has clearly laid out for all investors and traders, really since the TECH CRASH, since 2001. This has been one of the least crowded trades over the past four years. Mainly gold and gold juniors. Gold juniors offer the most risk/reward leverage. While pundits on CNBC have extolled the gains in GOOG or INTC or WMT, happy with annual gains of 8%-10% at best, just gold alone has provided a steady 20%-30% annual gain, while some of the annual gains on the junior golds I have been in and out of were yielding 100%-600% annual gains. Some over a two to three year period produced 1200% to 3500% gains, which even leaves the five year gain in AAPL of 450% in the dust. It has paid very well to "follow the real money", over the past ten years! Where will the "real money trend" be in the next ten years? Well if the US Treasury is any guide then I would say UP.

What I have done is filter out practically 98% of the "noise" from the internet, TV and friends and relatives. I am in no position to chase day trading every hour of every day nor do I have time to research the gigantic volume of data that Bill does and others like Rosenburg and even Warren Buffet. In the end it all boils down to money and what it is worth.

If you need proof of concept then here it is ...
LINK: http://tinyurl.com/29phwop

Out of STEALTH DATA comes STEALTH TRADES ...

SNDK - SanDisk downgraded to Neutral from Positive at Avian following checks that indicate 2H10 could experience lower than expected embedding loading, slower margin growth, and weaker NAND pricing.

Per Grym's post on Kyle Bass, he (Kyle Bass) is looking for a downward revision of Quarter 2 to 1%.

That's one pitch I'm passing up right now, even though I'm interested in eventually establishing a position.

long @ 66.52. Just renting some for now.

Do your own homework.

RIMM - downgraded at Morgan Stanley from Overweight to Underweight. $47 price target. Company could lose market share at a faster pace.

The 3x inverse ETFs remind me of the warnings painted on the backs of trucks in the seventies. If you forego the patience required for a straight-up short in order to try racking up big gains with a high-risk trade 'passing on the right,' it's not the 'Passing Side-' it's 'Suicide.'

If you'd entered TZA @ 38.4x on the last spike down and weren't fast enough to exit @ 38.6x, you would probably have been shaken out @ 38.0x (on a meager 17 point bounce in the DJIA).

We got the housing numbers for the U.S. earlier this week and we saw single-family starts crater for the third month in a row — by 4.2% in August to a 432,000 unit annual rate. Only six other times in the past 50 years have starts been this low.

For the real GDP count, this is obviously awful news for the current quarter, and it seems like this, alongside a variety of other influences (weaker growth in consumer spending, state and local government cutbacks, a more moderate profile to the double-digit trend in capital spending, the end of the mini-inventory cycle), will lead to a modest economic contraction this quarter, which will still come as a surprise to a consensus still expecting near-2% growth.

Thanks for the info. I decided to try short term trade in-the-money FAZ put this AM with very tight stop. Notice that FAS chart seems better today than TZA. I'm still holding CSCO as it weathers the markets well. I shed NTAP as it weakened after the jump up.
My latest TLT shorts are barely holding over my stops.
Good luck!

Edit: As soon as I wrote this, SP500 dropped, but I'm seeing lower highs on TLT today, that divergence should be bullish.

I like your thinking, although it could fall a bit further to "really" shake out the fence-sitters. July 6 shows open gap at 33.19. Intraday breach of 602 on the Russell 2000 would set off a lot of alarms & could send traders the wrong way, thus the chance that gap gets filled.

That would be a fine opportunity, imo.

I'm watching & waiting with much interest/take care

Whatever moves the market. If the consensus is wrong we're more likely to see 880. At which point, I know what I'll be doing.

TLT has not been tracking the equity market since a little after market open, side-tracking and now falling as the S&P has been dropping. Perhaps bonds are fatigued after their long run up?

Remember Matt Simmons, who was extremely vocal about the mis-information being presented by BP and government,saying there was a large underwater plume of oil which Woods Hole researchers recently confirmed. One third of the Corexit was applied underwater. The underwater plume is not visable to the eye and is detectable only by spectrometer and was at least 22 miles in length at 3-4000 ft in depth. It could be larger as Woods Hole researchers had to pull off due to a tropical storm. Many are suspicious of Matt's sudden death. There are many scientists especially in the biology field who presented information contrary to official government statements who have died mysteriously over the past few years. Matt should probably be added to the list.

I watched a bit of a Congressional hearing chaired by Ed Markey, who was questioning NOAA, EPA and FDA scientists regarding the spill and
they continue to downplay any negative effects of the oil/dispersant mix
floating around in the Gulf. They stated they were testing by putting sea creatures in a tank with Corexit for 24hrs and then examining for contamination in addition to the sniff testing on seafood being pulled out of the Gulf by Louisiana fisherman. If you view the official Nalco data sheet for Corexit, it states that little testing on toxicity was done on the product. FDA admitted they were just developing a methodology to test for this contamination.

Government lies and or distortion continue, whether it be on war,th economy,or any other activity in which they are engaged in. Sad truth in 2010.

I wonder, can he see Russia from his back door?, he just seems so, so, SARAH.

Bonds slightly lower, dollar up, gold down today, where is the top for the dollar?

Round and round it goes.
PIMCO's smooth talking McCulley gives the "saintly" argument for fiscal stimulus. (QE2).
http://advisoranalyst.com/glablog/2010/08/19/when-...

I never hear much discussion about where this money could go to create jobs. Who's got a plan?

David Stockman made a lot of sense to me as he knocked the PIMCO saintliness senseless yesterday.
http://www.minyanville.com/businessmarkets/article...

Triple top, turning down, PE of 39:

http://tinyurl.com/3y66vqt

Long read, interesting theory, but theory with a mix of emperical nonetheless:

http://www.hussmanfunds.com/rsi/zerobound.htm

dave- Thanks for posting the observation. Taking a starter position in TBT @ 31.78 based on that + the fact it's been in the AZ for several days (from the RSI link).

Nice move.

ALOHA!!

At least someone is making money in the US real estate market ...

LINK: http://www.youtube.com/watch?v=ssl5yb7FewA

Any mortgage people here getting as good a deal as these Goldman Sachs guys?

In the end its just more DEBT ...

As you say, kaimu, everything works until it doesn't and when the music stops, the Goldman Sachs crowd will be in the same shoes as Louis XVI.

Let's also not forget how we all own the Red Roof Inn chain as presented by Rep. Grayson in this classic summation on the House floor.

http://www.youtube.com/watch?v=pE3oiKuU8UI

As Jackie Gleason used to say, "How sweet it is!"

Many many times I have heard Rep. Grayson and many others talk about the Fed making money out of thin air. More accurately it is done with a key stroke by which the Fed deposits money in the many bank accounts it has or controls where ever they are and in whatever name.

I accept these assertions as true.

When the Treasury issues bonds to fund the government's numerous functions its done mostly with a key stroke in which 80% or 90% of the amount to be issued is deposited by the Fed in the accounts of the banks which are the primary non-competitive bidders (at .25% interest) and the Treasury gets the deposits as proceeds of the bond sales and pays a higher interest rate. It appears that the primary purpose of the bond sale is to enrich the banks via the carry trade not to fund the government as the Fed could if permitted directly deposit this money in Treasury's accounts and eliminate the middle man.

It also appears that the Fed sets the interest rates in long and short term treasuries since those non-competitive bidders have to accept what the Fed wants them to. It appears that the often made statement that the Fed controls only rates on the money it lends to the banks is a fable. So effective is the Fed's control over Treasury interest rates that rates have dropped even though China and others are diversifying away from Treasuries.

Perhaps it would be most productive to try to understand the system that the Fed has created. It does not appear to be productive to predict and anticipate that the Fed's money printing will doom the USA. I see no indication at all of the adverse effects predicted and anticipated by such money printing even though warnings of such adverse effects have been made since at least the administration of Franklin D. Roosevelt.

On the other hand, the Fed does need to submit to audit and control so that it will not be free to unjustly enrich wall street.

Considering the trouble you've had with Microsoft lately, I thought you might need this.

ALOHA!!

As I posted on Tuesday, 8/17, the US Treasury created $78BIL in Notes and Bonds, long term debt. I predicted that by Thursday, 8/19, that the US Treasury would create their usual $120BIL+ in short term Regular Series debt, which would be a $200BIL debt issue on one week. Well here it is on Thursday sure enough the US Treasury created short term debt issues of $121.4BIL. That makes debt issues of close to $200BIL within three working days. To be more exact it was $199.422BIL in debt in three days. So where did all that go to?

Well $122.3BIL was deposited into the US Treasury's Federal Reserve Account on Thursday whereby $127.4BIL was withdrawn in outlays, mostly marketable debt redemptions. But there was a $2.5BIL outlay thrown to the good people over at HUD along with all the other usual suspects!

How much revenues came into the US Treasury from net taxes? Only $1.25BIL to cover withdrawals of $127.4BIL. REVENUE DEFICITS defined.

I just got back from the Kalapana Cafe for an early dinner with my wife. We rode our scooters up there. Nothing like riding and feeling the cool tradewinds of Hawaii caressing your face. Next door at Uncle Robert's there was a band. I remember this guy used to play songs at the Cafe.
LINK: http://www.youtube.com/watch?v=M_x5GixoH9A&feature...

Kalapana Village Cafe ...
LINK: http://www.flickr.com/photos/17144603@N02/2433698862/

Jussan island ting bruddah ...

All work and no play ...

Dear Dr,
As a greedy and misguided bourgeoisie, I represent those remarks! Today is the best of all possible worlds to paraphrase Summerset's Mom. Castles are on the discount block for 30, 40, 50% under replacement cost and financed at a titch over 4% for 30 years! What's not to love?

Has anyone ever thought about self insuring their potential medical costs? Until my medicare card arrived (unsolicited I might add) neither moi nor my family had insurance dating from 1982. We have become so so very socialistic that the thought of a potential debilitating event scares us into buying into 'insurance.' Insurance is a good thing if properly priced. It can be a stupid 'investment' if people become rabbit scared by the Madison Avenue hyperbolists.

Dear Dr., put your $2,200 a month in a bank and even with modest interest you will have $150,000 in 5 years. Forget the staycation, if you need a new hip, fly the family to Thailand and get 70% off from a surgeon educated at Johns Hopkins! Eventually your 'vitals' will be read by a Doc in Delhi.

Anything medicine can do to get around the American tort system will be done in spades. The banksters have already 'offshored' much of industrial America. Healthcare is right behind.

Enjoy the Thai beaches.

Many could translate this move to pump the market up next week. Stay tuned..

http://finance.yahoo.com/news/Japan-considering-ne...

ALOHA!!

All that said Dave your debate rests on the fact that America, especially those Middle Class "households" have suffered a huge deflationary crash due to debt deflation. Yet on your same link for FLOW OF FUNDS is TABLE B.100.e BALANCE SHEET OF HOUSEHOLDS. One would imagine in a debt deflationary environment like you say that said "net worth" of HOUSEHOLDS would be declining, yet the opposite is shown.

Line #1 - ASSETS, have all now risen to pre-crash year 2008.
Line #6 - EQUITY SHARES, on the rise, not declining.
Line #9-15 - INSURANCES, AND PENSIONS, ETC all rising in value.
Line #17 - LIABILITIES, are all declining.
Line #18 - NET WORTH, rising above pre-crash years now higher than 2004.

How can HOUSEHOLD NET WORTH rise in a deflation? This is the most expensive Great Depression 2 ever!

Ross,

Absolutely!

As one who was essentially self-insured for a family of four for forty year I can say we paid full price while the insurance giants get a big discount.

However, I did negotiate a 10% discount for cash. Which benefited my major medical insurer — not me.

I had one major claim of which I paid $12,500 on a $14,000 surgery and my premium jumped 457% in the next two years.

When you consider the premiums even though lowered by my high deductible — I would have been much farther ahead paying no premiums and negotiating each bill.

Insurance is one of the most pervasive and perpetual scams ever. While billed as "sharing the risk" their ability to funnel individuals into risk related categories gives them a huge advantage. It's just like betting against the house.

Kaimu! The very fellow I hoped would read the Fed report. I know how you like numbers, but I think you missed some stuff.

"Line #1 - ASSETS, have all now risen to pre-crash year 2008"

If you think back, you will remember that the crash year happened towards the end of 2008. This column you are quoting as "pre-crash" is EOY 2008. In other words the 2008 column is post-crash, not pre-crash. Look at the 2007 (EOY) column to see pre-crash numbers: Example: ASSETS:
* 2007 - $78T
* 2008 - $65T
* Now - $67T

We've had modest deflation in mortgage loan creation - and we'd have a LOT more if all these way-past-broke GSE's weren't still loaning money like crazy. The deflation would be Great Depression level for certain; it wouldn't be -3%, it would be -85%. The GSEs MUST keep loan generation going as a requirement if we are to avoid a deflationary disaster. (Not a recommendation, an observation)

See how this data explains the actions of the power players in DC? GSE ops have to continue if we are to have any hope of returning to business as usual - regardless of expense to the taxpayer. Even with it, deflation is still occurring.

"Line #17 - LIABILITIES, are all declining."

Liabilities have gone down - from $14.3T down to $13.9T. That's people saving, or going bankrupt, or defaulting on their loans followed by a repossession. (Lets ignore the banker's strategic non-defaults for now). But note that assets are down by $11T, far more than liabilities have dropped. That's an impact of deflation: debt goes down a little, while assets go down a LOT, because there is less money floating around to bid for the same number of assets.

Of course, that's not deflation itself, it's just deflation's footprint. I make this distinction because we're discussing the impact of Fed policy and money printing on the economy. As such, I suggest we not confuse the tracks with the beast making them. Price changes can happen for many reasons - like oil rising because of a weaker dollar, for instance, or shortages in the market - fewer products & the same # of dollars. You probably shouldn't blame "fed policy" for higher wheat prices when the harvest is bad, but you CAN blame the policy when we have enough, and loan generation is high, money is created and prices rise.

When more money gets created, that should be visible as rising prices - assuming the number of things to buy remains the same. If there is real underlying growth, then more money is offset by more products, which means no prices actually rise. That's why I suggest we look at how much money is created in a sector to see who is to blame.

Minus Fed money printing, all money in the system is created by debt - people borrowing money from banks. Less money (less debt) = deflationary pressure. Its as simple as that. Prices can still go up in an overall deflation due to shortages - much like some stocks go up in a bear market. Add in Fed money printing, and things get even more dislocated, because the area the Fed intervenes in will be distorted by the new money injected.

Look at the rise in bank credit during the bubble years, from 10-15% per year. Throw a bunch of money at a sector, and "surprise surprise" prices go up. Can the Fed slow down loan generation? Of course they can. Did they see this happening? Guaranteed, they did. Its the headline section of their report.

I wonder if we looked at the rise in total credit over the years since 1981, how much of that credit growth would be visible in the shadowstats price level increases? Its a tough comparison because supply/demand for various things confuses the matter; the oil price crash during the mid 80s would distort, as would the price spike of 2007.

Last point: this thing seems to have rough predictive value, as well as explanatory value in showing why policymakers take apparently absurd actions. Why not make use of it?

"Afghans have failed to move their corruption from the Rod Blagojevich model, which we all deplore, to the Barack Obama model, which we all admire."

The 72-Hour ExpertEverything you always wanted to know about Afghanistan .  .  .
BY P. J. O'Rourke

davefairtex -

"Well I can't tell you about medical costs, but the Volt's price has more to do with physics than inflation. Energy density of batteries is far less than that of gasoline ... Not cheap. Also not "inflation", just a really expensive technology."

It is indeed inflation when Treasury creates dollars to bail out GM and then the White House (GM's Chairman is Obama, yes?) touts this expensive 'green' tech which is COAL based at its core (50% of electric generation in the U.S.) to push a politically expedient 'green' agenda and now a product that will be D.O.A.

I've seen latest variable turbo tech chip on a prototype diesel producing over 100 mpg. developed by some engineering pals of mine here outside of Detroit. Europe has been running on efficient 2.0L turbo diesels (50+ mpg) for decades. Why doesn't the U.S. just start there and learn to CONSERVE ENERGY? It just takes gasoline to spike to $5+/gal. to get motivated.

At $42,000, the Volt is the epitomy of INFLATION when you consider how it was funded. UAW and GM run themselves into the ground only to have Treasury create infinite funds to save those jobs that went from unsupportable $27/hr to $13/hr with today's new hires and now payback this expanded debt (money supply) with an overpriced green boondoggle of a car? I call that inflationary madness.

The inflation/deflation debate is tiresome, no? I am focused on the lack of velocity of money (banks won't lend/corporation won't hire) and the coming currency event as defined by Sinclair and Armstrong.

I'll leave you with this:

"Banks and corporations are holding on to their cash because nobody knows what the hell is going on and government has lost all credibility. If you have to count your fingers after shaking hands with Uncle Sam, it's just not worth doing business here." - Martin Armstrong in his latest essay linked below.

http://tinyurl.com/2cjcoxy

Cheers.

Middle class is f'd, no two ways about it

Dave,

"Inflation is "a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency."

"The Treasury CANNOT create money, so when you say "it is indeed inflation when Treasury creates dollars" - you're perpetuating a misunderstanding about how money works in our system."

I remember reading that there was wild inflation following the Black Plague in Europe. The quantity of money remained static, but in some places the population was cut in half, thus there was twice the money per person.

Since there is no audit of the Fed we really have no way of knowing our current situation.

We do know much is "off budget" and can assume our debt is worse than admitted.

There is no actual need to "start up the presses" anymore mouse clicks do it very nicely and instantly shuffles it to anywhere in the world.

How to get individuals, businesses and banks to activate it is an open question, IMO. Japan is still my poster boy. Last I heard their debt is more than double their GDP and growing. Ours was at 53% (not counting the "off budget")and also growing at an outrageous rate these last couple years.

Timely reminder from Armstrong thanks Doc. Interested by his latest paper - world share market outlook - and the importance of June 2011 for the possible beginning of a new run in market prices.

Perhaps coincidence, but this period of time would coincide with Bill's thoughts on the next bull market (approx., recalling a 12-18 month time frame in Bill's recent comments) and would be running against the grain of popular consensus as double dip into 2011 has belatedly become the topic du jour of bubble heads.

Les,
With respect to the current time period I found one of Martin Armstrong's observations, which I have paraphrased to enhance my own understanding, to be interesting. That observation is that sometimes a pattern emerges in which prices close down hard at the close. This reflects trader bailout because either a generalized or particularized lack of confidence has infected a significant number of traders which leads to their reluctance to hold positions overnight. When such a pattern emerges on a daily basis it has a tendency to move to larger time periods as the feeling of lack of confidence will tend to infect a larger number of people. As larger numbers of people are infected by the lack of confidence bug the impacts on the makets are more severe causing multi-day or mult-week declines, or crashes.

Since this month there have been several days in which markets have closed down hard, it would appear we may be such a period.

I learned a decade ago that Morgan Stanley is a clown show.

less, or as the joke goes, no les(s), no more:

http://photo.net/photodb/photo?photo_id=7568154

I noted this pattern recognition in his report. I suspect by now that more than a few here can get a daily and weekly feel for this lack of confidence as it influences traders behaviour. That sort of understanding is useful when a particular setup occurs that coincides with prevailing trend. We saw it put into action on Friday on an intraday basis with someone calling TNA as the reversal occurred during the session, or davef shorting SSO in a longer time frame

What I want to learn here and from people like Armstrong is to recognise the major turning points in the market. Bill walked me into TCK at about $3 at the beginning of 2009. I sold it for .50 gain, thinking myself lucky. Well, one only needs to see the price now to see how early I sold...

Apply what I am learning in an intraday time frame to the bigger picture in sync with longer term moves in the market. What was it that the old hand said in Livermore's trading office... "well, this is a bull market".

davefairtex -

"Inflation is 'a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency.'"

If GM receives a giant bailout created from nothing by the gov't which was, in effect, expanding the money supply to do this and then GM re-enters the lending game after GMAC collapses as the only hope to sell the Volt at the "new normal" price of $42,000 (Greenspan's view), then that would be a form of INFLATION, no?

You have an solid handle on textbook economics but now apply it to real world situations and we're on the same page, my friend. It's not black and white. Ask two economists a question and you'll get five answers.

I will grant you this: If no one buys the Volt, it will represent GM's failure to deploy all that new volume of money into the economy and its bid to inflate the car market with a desperately needed hip new product will have failed.

Of course, GM's bid to sustain its overproduction and size is to sell product into China. But that's another story.

Cheers.

At the top the link fills out the Iran nuclear situation.

well, at the bottom, an oil funded more or less, commentator makes his case.

http://maxkeiser.com/2010/08/22/debunking-propagan...

Dr. S - "If GM receives a giant bailout created from nothing by the gov't which was, in effect, expanding the money supply to do this..."

Doctor, the government did not create the bailout from nothing, the UST borrowed money to do the bailout. The money already existed, in the pockets of foreigners, or domestic savers, etc. The government sold bonds to those savers, snatched their money, and handed it to GM. And we will be paying interest on this until we all die. I suspect Kaimu could find the exact treasury statement where they did all the borrowing, if he wanted to.

UST has two sources of money - taxes, and bill/note sales. Kaimu's weekly treasury rants explain in gory detail that the UST sells bonds every week or two to pay for expenditures that are vastly over and above tax receipts. Who buys these bonds? Folks who have "checkbook money" buy them. I have done so personally. Money was sucked out of my checking account, and I was given a T-bill. 6 months later, money reappeared in my checking account upon the T-bill's maturity.

Note that under QE-1 program, the Fed admitted to buying treasuries with new money, but in that case, the Fed is printing new money, NOT the UST. As we all know, the Fed is most definitely NOT the government.

Can you tell me where my understanding of "textbook economics" fails here in the real world? Perhaps you could explain your "non textbook" understanding of the process, and point out the step where the UST is actually creating money from nowhere?

You might consider viewing one of the many videos describing how money is created in our system. If after viewing one or more of them you still conclude the UST is manufacturing money from thin air, I'd like to hear why you feel that way.

nytimes.com/2010/08/23/business/23flash.html?hp

Make some noise, the people need the likes of her tough interrogations in the name of law abd order and government by the people. Enjoy. Ross, If not her, who then? Being a Canadian, I can only egg you folks on from the nosebleed section.

http://www.wikio.com/video/elizabeth-warren-rap-vi...

WIR #34 deserves comment on bonds. I am a small investor and I will not take Rosenberg's advice at this point. Don't think it leads to preservation of capital in the long or intermediate run. Maybe short term. He says "So the fact that yields are at 10% or 3% matters little in this debate". I disagree for the investor that is in bond funds. They have no maturity date. Timing is everything to bond fund investors and presently they would be buying at near the peak.

And who, unless under coercion,, would hold a bond to maturity at these rates? Governments, thats who.

For once we agree, Dr. Strangelove!
"... G.M. used federal funds to repay its TARP loan...misleading Treasury..."

If you count GM using our money to wash our loans to them while GMAC, their own predatory finance company takes TARP while apparently gaining good guy points for 'quick' (on average 6 month negotiations) on Short Sales all paid for by US Citizens with FDIC guarantees and Goldman Sachs handshakes for those really special buyback guarantees... Hey--who's counting the hens in the hen house now with this flaming fox on guard?

http://en.wikipedia.org/wiki/Ally_Financial (note name change to protect the culpable)

Interesting nome de plume...Ally as in cat?

S&P +3.10 / +0.29%
Level 1,073.40
Fair Value 1,069.92
Difference 3.48
Nasdaq +3.50 / +0.19%
Level 1,829.00
Fair Value 1,825.07
Difference 3.93
Dow +13.00 / +0.13%
Level 10,215.00

Shanghai receding on reduced vol. consolidation awaiting its moment?

http://www.telegraph.co.uk/finance/markets/7958751...

As Kaimu has remarked upon many times, land acquisition looms large in farmers future requirements as something as simple as hay requirements increase - a necessity for animal welfare, livestock feed, fertiliser replacement as prices increase, scarcity thanks to biofuel use...

Agro ETF's beginning to make a move. DBA, COW, MOO, TNA, AGU, CGA, CF etc. Perhaps the sharp drop Bill speculates on may prove an interesting entry point for the next phase. Sugar and Coffee also getting run up. Commodity speculation is alive (and no doubt kicking those who can least afford such increases).

I see the future and it has convinced me to bring lentils, beans and other staples back onto the kitchen table as an alternative to animal products, with many subsequent benefits.

Hi All - Noted news clip that the Congo has "resolved" disputes with development at Tenke ... providing this is for real, this could provide direction today for these two and others operating in the country, i.e. BAA etc. Happy Trading

Bill,

"It wasn’t that long ago we scoffed at the 10-year US Treasury paying just 3.66% annually to maturity, but today that’s all you can get from the 30-year Treasury Bond, and the yield on the 10-year Treasury is just 2.61%. That, my friends, is a cruel joke that not even the Chinese monetary authorities are prepared to buy."

It is not a joke to those who bought a while back. My 10-year Zeros are now up 15% YTD.

The view from here:

I guess Rosenberg must see what I have been looking at where I live. IMO we are already in a depression...

• Over 14% admitted unemployment.

• Homes on the market for over a year in my upper middle class neighborhood.

• More than a dozen of my former manufacturing clients have left empty factory buildings.

• City state and national pensions unfunded.

• Elderly neighbors who've lost a major portion of their life savings.

• My own business gone before I reached 65.

• A son who's lost two jobs, used his unemployment insurance and after less than one year full time back to 32 hours at less than half what he earned in 1990. (Like so many others, he can't sell his house and move.)

To "pay off debt" you need to earn more than a telemarketer is paid. Only people like Siegel, who live in a sheltered and unreal environment can think "Bonds for the Long Run" right now. The long run for many can see your 401(k) plan decimated, your home gone and living on these stupid government emergency handouts and stimulus bones they throw to the peons.

Of course all of the above has little to do with the stock market for those who are still untouched. Multinational companies will likely do just fine "For the Long Run."

lessmore,

"The move into bonds appears to be a capital preservation move. They certainly are not investing for yield."

I'm only going for yield now as opposed to M/mkt yield with a sizable sum in GNMAs (VFIIX as a parking place). But my best Treasuries trade was a few years back when the 30-year was discontinued for a time.

For some reason this scared people and I made a 30% gain in 3 months. At my age holding to maturity is medical dream ;-)

davefairtex -

Federal funds would be a catch-all phrase used by a highly biased rag (NYT) to obfuscate the source as something generated out of thin air.

Good luck with the audit, confirmation, and accounting.

Cheers.

davefairtex -

"As superman once said, 'my work here is done' - attempting to have a fact-based discussion with a faith-based individual is just wasted effort."

Are you saying faith in NYT reporting is just a wasted effort? I may have to agree with you there but unfortunately the article quotes from direct testimony under oath.

We now know the TARP funds were replaced with funny money. That's a fact based on the testimony. No one knows the details surrounding "federal funds" but why swap bonds for bonds when you can print it from thin air and lie to the public about how TARP was repaid? Sorry your textbook doesn't explain that trick.

End of the day, the Volt at $42,000 is INFLATION based on increased money supply to get it built and save the UAW pensioners in exchange for a Democratic bloc vote.

TARP funds were swapped. Let's move on, superman.

Cheers.