Bill Cara’s Blog for Aug 23, 2010 [See post-close report]

Good morning.

FSLR - First Solar upgraded to Buy from Neutral at UBS .... solar demand will be higher than expected in 2010 and 2011. Target to $150 from $136.

XOM - PT Lowered from $80 to $76 @ Argus. Buy

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Note to Bill:

Another great WIR. Thanks for sharing your insights into US bond yields, something that's been troubling me for quite some time.

From your link:

Robert Rubin – CFR, Harvard, Goldman, Treasury, Citi
Hank Paulson – CFR, Harvard, Goldman, Treasury
Larry Summers – CFR, Harvard, Treasury, World Bank
Tim Geithner – CFR, Dartmouth, Treasury, Fed, IMF
Jamie Dimon – CFR, Harvard, Chase, Fed

AND......Lest we forget:
A native of Honolulu, Hawaii, Obama is a graduate of Columbia University and Harvard Law School, where he was the president of the Harvard Law Review. He was a community organizer in Chicago before earning his law degree. He worked as a civil rights attorney in Chicago and taught constitutional law at the University of Chicago Law School from 1992 to 2004.

Guess I shoulda went to Haavud.

Good point, O-o-o-bama is a master. Do you think he should have been a psychologist?

Look at what him and his brothers in arms are doing to the psychology of our ounce free republic and the world no less:

http://www.csper.org/goal-renew-psychology.html

Thanks for giving your time and insight for the week in revue. Every weekend that is a time spent much appreciated.

The lure being used with HPQ is the 52-wk low. And then it moves lower.

The lure with CSCO was the apparent 'relative strength' in the latter half of last week- the trap door slid down quickly this morning.

Just hypothesizing.

yes

"Good point, O-o-o-bama is a master. Do you think he should have been a psychologist?"

I think while a "Community Organizer" in Chicago he learned how to work the system like a master.

Lesson One: You want community backing? — Get them whatever they want at government expense.

Lesson Two: Make any criticism out to be racially motivated.

No, just confirms range is tightening from lack of aggressive action.

They might not have lost control, had they had at hand the tools Steve Jobs is readying:

http://www.engadget.com/2010/08/21/apple-attempts-...

Just days after the US Patent Office found it NOT in violation of copyright to "jailbreak" your iphone (so you can use foreign SIM cards when abroad, or use apps not blessed by Apple) the empire is striking back.

Patent details encompass remotely turning on the cam to see if there's an "unauthorized user" in charge of the iphone, turning on the mic to compare the user's voice to a voiceprint of the "authorized user's" voice.

"HAL, I'd like to make a phone call now."
"I'm sorry, Dave, I can't allow that ...."

Apple's patent would allow remote wiping of the phone and killing of its access to the network.

No privacy, no one is anonymous ...

The prior reading for the WLI Growth was revised down from -9.8% to -10.2%, while the latest reading came in at -10% on Friday. The WLI Growth rate have NEVER dropped below -6.7% without a recession following in the short order (the -6.7% drop was in 1987, when the stock market and the bond yield components of the index dragged it down so much during the crash). So does this mean that we should expect a recession in the short order?

Let's look at the big picture in order to answer this question. The economy had a very abrupt plunge in late 2008 to early 2009, then a very abrupt "statistical" recovery from those depths due to government stimulus and QE, and now that the stimulus & QE are fading, the artificially inflated numbers are dropping down pretty fast, back to some true level of the economy. In case you have not seen the historic WLI Growth chart (from 1970), the growth rate in the summer of 2009 was the HIGHEST growth EVER recorded. So the *numbers* in the economy had an amazing spike in the summer of 2009, and we all know what must follow an amazing spike -- an abrupt decline, which is what we are witnessing now.

My claim is that the very sharp drop in WLI we are observing was totally EXPECTED after the dose of stimulus received by the economy. So the current unusually fast decline in WLI does not mean that we are about to enter a recession -- it used to mean that in the past, when -10% WLI Growth rate was recorded after the economy was growing "naturally" for some years (and that natural growth rate was MUCH slower than the artificial "high" in the economy following the largest ever government stimulus). Thus, the recent abrupt drop in the WLI Growht Index DOES NOT give us a sufficient evidence yet about the economy going into a double dip recession. A very slow growth around 0 to 1% in GDP -- maybe. But not a -4% drop in 6 months.

In order to get a better idea of the LEVEL of the true projected level of economic activity going forward following the "artificial" spike in the summer of 2009, we should look at the ECRI US Long Leading Indicator (USLLI), which does not have stock prices as one of its components (unlike the WLI index). Here is a chart of the USLLI index:

http://www.ritholtz.com/blog/2010/07/u-s-long-lead...

which shows that unlike the WLI index that peaked in the summer of 2009, the USLLI kept growing until January 2010 and is now experiencing only a little dip according to ECRI (they sell the latest USLLI reading to their professional subscribers, so I couldn't find the latest readings on the web).

"While everyone continues to over-emphasize recent housing and employment data, ECRI points out their U.S. Long Leading Index [USLLI] is far less ominous: ECRI concluded: “In essence, the recent slight dip in the USLLI is not as pronounced, pervasive and persistent as it was before the double dip in the early 1980s.”

The big “fly in the ointment” here is the data provided by the Consumer Metric Institute: http://www.consumerindexes.com/index.html. Every stock investor should study that data and read their latest commentary (from August 20). They show that their composite index dropped below 95 only briefly during the deepest point of the 2008 recession, which occurred in early November. Then, the index bounced to 110 in the summer of 2009. After that, the index has collapsed and was at 90 in early July 2010, matching the worst reading EVER observed (in November 2008). The index did recover slightly since then and is now slightly above 94. However, if that index turns down again and heads toward 90, I would say forget about ECRI's optimism and prepare for the worst, while having a large gold position to capitalize on the inevitable new economic stimulus and QE that will be undertaken in the hopes of preventing the worst.

Incidentally, the latest commentary from the Consumer Metric Institute also mentions that the index measures only the “Consumption” part of the GDP, but does not measure the net Exports part. So if we get a precipitous drop in the $USD (which John Hussman is expecting – read his latest commentary at http://www.hussmanfunds.com/weeklyMarketComment.html), then US exports might increase and the GDP might not suffer as much as the Consumer Metric index is prediction. However, gold should zoom in the event of such a drop, so it looks like a gold position will benefit both from a GDP collapse followed by more QE and from a possible stability in GDP due to increasing net exports.

In conclusion, I'd like to point out now that the changes in the WLI Growth rate can be well predicted by monitoring the data from its key components (I saw a web site where they were doing such predictions and actually explaining how the observed changes in the key components have contributed to the latest change in the index.) So the reading that comes out every Friday is "old news."

Also, the WLI Growth Rate is a smoothed first derivative of the actual WLI index, which is now at the same level at which it was on July 2. So if the index keeps being stuck in its current range, then its smoothed first derivative will eventually become 0, and so WLI Growth will rise from -10% to 0%.

http://news.yahoo.com/s/ap/20100823/ap_on_bi_ge/us...

Kaimu, this post is for you ! - LOL

Any insight on trading VXX ?

jock - very interesting claims you make

When you say "technology is in place", do you mean the code has been implemented, and deployed on current iphones and the capability has been tested on some number of the carrier networks, or is this just a theoretical or suspected capability that "would make sense" to do? And I have to ask - you know this, how? Do you have any sort of reference I can read about this? I am also curious to know which networks this worked on - EDGE, UMTS, EVDO?

I used to write cell phone game apps a few years back, so I know a little about cell phone coding and carrier networks.

I'm referring to signaling system 7 (SS7) which dates back to ISDN days. A document whose author (per google search) is/was an Apple engineer, says:

"Every last cellphone in the US has a separate control channel in it. The phone company and the US government have the key to this channel. It allows an investigator sitting at his desk to listen through the microphone of any cellphone, even when no call is being made. He can order the phone to take video and photos too. He can also extract the contents of the address book....When a suspect is under intense investigation, a special program may be downloaded ot the phone. Normally, when the phone is powered off, it is dead .... With the special program, the phone pretends to be off, but can still follow the commands coming dow the control channel. It can send back the sound it hears while appearing to be completely off. If you want your phone to be truly dead, remove the battery."

As I mentioned earlier, the battery cannot be removed from the iphone, which is therefore always vulnerable to surveillance.

source: A Trip to the Store for Bread and Milk: Cellphone Spying, Tracking and Privacy (The True State of Privacy in 2010) - Kindle Edition - Kindle Book (Dec. 15, 2009) by Ted Kaehler

Davefairtex -

Are you familiar with the surveillance of top Greek government officials before and during the Athens Olympics? The Greeks felt so violated that they went public with their complaints over snooping on over 100 phones in the hands of high Greek officials. Ericsson acknowledged that "somebody" had activated features in the network they had supplied Greece through which any call to or from the target cellphones initiated a parallel connection to points unknown. You can find articles on this in the NY Times archive.

Earlier this year the carrier in Dubai pushed out to all blackberries on their network a "software upgrade" which RIM quickly denounced as malware aimed at de-crypting incoming and outgoing messages and emails. Of course, later on the dispute became a highly public matter, which is - no doubt - being resolved on the side of surveillance rather than privacy.

As Scott McNealy said some years ago: "Privacy? It's gone; get used to it!"

tomorrow may give the clues we've been waiting for...

Wow that's an ugly chart (HPQ - see attachment.) Have it on my watch list for a potential put write- Nov 36s are fetching about $1.25.

KC

Global markets continue their bearish consolidation, despite encouraging signs from China, with the Hang Seng in a new primary up-trend and mainland indexes rallying. Of the big five markets, however, only the DAX remains in a primary up-trend. Watch bellwether transport stocks: a primary down-trend often leads other sectors into a reversal.

October is the most bearish month in the year, with many major recorded crashes (1929, 1987). We are likely to see consolidation until the end of the quarter, followed by a breach of support. The breach, however, may either resolve into a primary down-trend or rally sharply to complete a bear trap. All we can do is remain vigilant and stick to objective signals — avoid being swayed by the mood of the market.

http://www.incrediblecharts.com/tradingdiary/2010-...

I'll wait until this range bound trading is broken with returning vol.

Shanghai Composite is fly in bears ointment. Could be turning now. Wait and watch as Twiggs suggests.

jock -

Bruce Schneier wrote a blog entry about this back in 2006:

"Unknowns tapped the mobile phones of about 100 Greek politicians and offices, including the U.S. embassy in Athens and the Greek prime minister.

Details are sketchy, but it seems that a piece of malicious code was discovered by Ericsson technicians in Vodafone's mobile phone software. The code tapped into the conference call system. It "conference called" phone calls to 14 prepaid mobile phones where the calls were recorded."

The Greek case wasn't handset based, it was switch based. This approach is quite easy to believe, because its such a low tech approach. "Every call you make is a conference call." Its an existing feature, just re-purposed. Very little testing required, and you just need the switch vendor to cooperate, which they apparently did.

The handset control features are more difficult to believe, given the sheer number of handset models out there. Can you imagine getting every vendor to cooperate, and testing the code for each vendor? Possible though. Thanks for the references.

she got dumped today.

Euro Vehicle Manufacturers and French Banks solid red

Dave.

Back when Y2k was an all-consuming issue, I read that in desperation techies were being hired to upgrade government desktop computers. Even if followed by an armed guard just what kind of security could this have been? If the guard knew what to do (or what was being done) an outsider would have been unnecessary.

I wrote my congressman (back then I still tried such) and was assured (?) all was well.

Every so often I think about the possibilities... which seem unlimited.