Bill Cara’s Blog for February 18, 2010 [See post-close report]

"It’s hard to trade these markets when you have so little respect for the people who run it."

Right you are Bill—and it's hard to live in a country "when you have so little respect for the people who run it" too.

"Patriotism is supporting your country all the time, and your government when it deserves it." --American author Mark Twain (1835-1910)

The problem now is determining if ANYONE in government positions of "trust" internationally, is truly trustworthy.

There are times when the greatest expression of patriotism is criticism of the government and its’ institutions.

Here's a (partial) quote from Bill's 2/9/10 post:

JG Barredo at CitiSecOnline in Manila is another technician I review weekly. His support and resistance levels are presently as follows:

DJIA:
Recommendation: Lighten into rallies
Support: 9,999 – 9,678 Resistance: 10,369 ‐ 10,426

S&P 500:
Recommendation: Lighten into rallies
Support: 1,029 – 1,019 Resistance: 1,100 – 1,116

NASDAQ:
Composite Recommendation: Lighten into rallies
Support: 2,100 – 2,024 Resistance: 2,208 – 2,252

Patriotism is the last refuge of a scoundrel.
Samuel Johnson

A favorite, underused (IMHO) quote from a founder of my country.
And another;
Nobody told me there'd be days like these
Nobody told me there'd be days like these
Nobody told me there'd be days like these
Strange days indeed, strange days indeed
John Lennon

jd- That's a great line. You could say Lennon was a 'founder' of sorts for the Boomer generation. A generation famous for another quote- "I'm trying to get it together." We do need to get it together.

http://www.nationalpost.com/story.html?id=2576329
http://www.rollingstone.com/politics/story/3225514...

At one time, I thought that owning tobacco stocks was revolting.
That is, until I experienced the organized crime at GS.

sold at $30.5

DOW JONES NEWSWIRES

The U.S. Justice Department is expected in the next 20 to 30 days to approve without conditions a deal to make Microsoft Corp. (MSFT) the exclusive provider of search on Yahoo Inc. (YHOO), the New York Post reports Thursday, citing a person familiar with the matter. A Justice announcement will be timed to coincide with an expected approval from the Europen Union's executive body, the European Commission. The Justice Department and Microsoft declined to comment. Yahoo didn't return calls seeking comment.

It sure looks like it: http://futuresource.quote.com/charts/charts.jsp?s=DX%201!&o=&a=V%3A60&z=800x550&d=MEDIUM&b=CANDLE&st=

According to TA, dollar should correct some ST, right (negative divergence and topping MACD on daily charts)? LT could be a different story though.

I'm actually shocked how well PM are holding in the face of this dollar strength (especially silver and miners). The last night action was a total headfake.

FD: long SLV GLD and GDX in different instruments.

Jack I see your triple top in USD. And I also see that for the first peak gold bottomed at 1044, the second peak, gold bottomed at 1078, and for the third peak, gold bottomed at 1100 - helped no doubt by the IMF's gold sale announcement after hours.

Silver looks much the same.

I have to but think this is gold bullish. Though the volatility might be dramatic if the buck breaks above 80.80.

Sorry about that Bill. I like GE because I think the time to buy industrials/conglomerates is when industrial production is rising. We have had several good industrial production reports, whether you believe them or not, and at 15 times trough earnings, I think GE is a solid value stock. Plus, the chart looks nicely upward sloping.

http://www.marketwatch.com/story/italy-draws-atten...

I'm thinking that gold isn't so much a USD story, but rather a euro confidence story. If you look at GLD:FXE (gold priced in euros) you will see that gold broke above the previous gold/euro peak two days ago and has been moving up since then.

Its not just US citizens fleeing their currency for somewhere safer - the europeans are doing it too, maybe even more so given the situation in Greece, Spain, etc. Perhaps the game played yesterday with IMF gold wasn't aimed at us in the US, it was aimed at traders in Europe. Perhaps its not a coincidence that the "IMF gold sale" came a day after gold broke to new highs in europe?

Bill I think it would be useful to have CC members have a signature byline that gives info below each post. I have seen this on other sites. It could give a lot of information to judge a person's post. Example Below

Anyway Why would anyone buy GE? :).

_________________________________________________________________________________________________________

Bobbyo
Motto: "Beer is Gods way of saying he loves us." Ben Franklin
Technical/tape reading
Swing Trade 30 min charts.
Day Trade: 2/5 min charts.
Rank: Apprentice
Experience: 4 years.

I'm getting a feeling that an explosive move is coming, most likely to the upside. I wouldn't be surprised if we see 1120 very soon. The reason I'm thinking this is because the bears have just not been able to keep this market down. Yes, the volume is terrible, but we have seen it trend up and up for the past 2 weeks now and with the exception of the jobless claims, almost all of the economic reports and earnings reports have been positive. And to top it off there is still significant bearish sentiment out there...

and with that i'm sure the market will sell off!

Went long at $33.51. Have been watching this stock for a few years. Worldwide leader in geothermal. Steady revenues. Global operations. From my research there are large technological barriers to competition in the geothermal market. So not only do they produce electricity, they also supply technology/expertise to other developers. I am considering this a long-term investment. Recent negative action due to some problems at a geothermal unit in Hawaii and a recent acquisition - both just short-term in my opinion. Pays a modest dividend.

ALOHA !!

On industrial/manufacturing in the USA ...
LINK: http://tinyurl.com/ydjsc9j

On US unemployment durations ...
LINK: http://tinyurl.com/yh26fm6

On US government employees ...
LINK: http://tinyurl.com/ycwgrxd

These three graphs tell the story in America and I am sure these same three graphs are not too far off in Europe as well.

It is interesting to note that at the peak of manufacturing in the USA in 1980 there were 19.5 million jobs and now we have shed 8 million manufacturing jobs since that peak. Over at the US government employee side of the equation the US government has added 7 million jobs over that same time period. When I see those sorts of gaps being filled by government largess I call that PRICE FIXING, a general term I use to describe government largess filling private sector gaps in order to retain political power. What would happen if government did not fill those gaps created by malinvestment?

When the expansion of government crushes the private sector you get Socialism followed by Totalitarianism. In the case of the US government we currently have "Crony Socialism". By viewing these three graphs along with what I report on the US Treasury Balance Sheet I do not see where "capitlaism" can exist. In fact capitalism does not exist now ... Capitalism with the absence of "competition" is just socialism. Two monopolies run America and I see no indication that either wants to relinquish the status quo.

"Government is essentially the negation of Liberty" - Ludwig Von Mises

How could you be offending anyone.In fact out of your many posted trades, that is the first time I remember one not referencing a line of thinking. Please keep posting your trades! I was just giving Bill a suggestion that would give a newer viewer a perspective of where a trader is coming from without that trader having to repeat over and over what his trading style is.

Where did the volume go?

If you look at popular tickers, one of the lowest volume days since the week of xmas.

http://www.cnanalyst.com/2010/02/top-10-bestperfor...

Interesting list. Pretty much a continuation of last year in that the smaller companies most tethered to a turnaround in the economy are doing the best.

Pensions- Just One More Empty Coffer

The Pew Center of the States just released a study of state and municipal pension funds and concluded that pension obligations were short $1 Trillion. The study did not have data past 2nd qtr 08. Current conditions are obviously worsening as revenue continues to fall and assets are devalued.

Government workers should be nervous, as the words Chapter 9 are heard more frequently as of late. Down the road a bankruptcy judge may be determining what beneficiaries get paid. Retired airline pilots can tell them how it works. I assume the public at large will not be too sympathetic as government pensions are cut in half.

The average US private worker gets $10K in benefits while government workers get $50K. Lots of government and military white collar workers become double and triple pension dippers by retiring and then returning to work in another government job.

A reality check is upcoming as the great Ponzi scheme unravels.

Either the government will default on its obligations or print money and devalue the currency in order to satisfy
those obligations. As Richard Russell says "Inflate or Die".

I wanted to thank Kaimu for providing us with the daily or weekly details of actual government spending
and debt expansion.... it boggles the mind.

http://www.pewcenteronthestates.org/

Shares of German automaker Daimler (market cap $45 bill.) lost almost 10% within minutes this morning. It seems the news came somewhat "unexpected".

http://nyti.ms/cGsrrv

The links to suicide note appears: http://bit.ly/dBrYCm

The suicide note in question: http://bit.ly/csrEWV

He also set his house on fire. http://www.statesman.com/

"We should at least retest the highs before going any lower."

Could be, but I just bought a bit of EUO and EFU for a medium to long term hold due to what I see as Greece becoming the slippery slope (couldn't resist) for the EEU. (Looking at 6 month charts.)

Considering a short on VNQ as well.

Wow that's ridiculous. How can they honestly project that?!?! If only we could all get 7000% returns in one year! I don't think any of us would be working. I somehow managed to get a 2000% return in one of my accounts last year (I only had like $400 in it in March and decided to go long the riskiest stocks I could find in the S&P 500) and every time I look at that performance I start to daydream...

Its a very crazy mess we are all living in. I highly doubt, with all the unemployed, under-insured, and deeply in debt Americans, this is the last of these extreme actions.

Our elected leaders better wake up fast. These individuals are putting themselves, their families, and complete strangers at risk.

from the site:

"Below are the top Canadian stocks with highest upside potential, calculated as the difference between current price and Wall Street analysts' average target price."

I am guessing the answer lies in the fact that no Wall Street analysts currently cover broken penny stocks like CRU.TO. There may be some ancient projections that were made years ago when this stock was upwards of $20. Given that CRU.TO just avoided bankruptcy by allowing a huge investor to dilute the heck out of its shares, I'd say this research is about as useless as it gets.

http://railfax.transmatch.com/

Gaining market share and traffic ahead of the competition. Buffett couldn't afford this one. Rail traffic is recovering overall and, in particular, for UNP at a nice clip. Company's massive PP&E should hedge inflation in the almight buck.

Own it.

"Those people in that IRS building are only employees struggling through life in a terrible economy."

I see this s the crux of the problem for those of us who want to change it and conversely the ace in the hole for those reigning over us.

Fed raising discount rate.

i guess they waited for the markets to close.

"Fed boosts rate banks pay for emergency loans; consumers not affected." WSJ.com.

Is this a big deal? arent there many other ways for hb&b to pick our pockets?

My guess is the market opens up down a decent amount tomorrow then rallies to breakeven then sells off a little bit into the close. I personally don't think this is a big deal at all and doesn't really change anything other than investors' sentiment that what the Fed says going forward will be reacted to with less skepticism, at least in the next few months...

ABB top, NGD flop

Big deal or no, I have no clue. However, looking at the rally in the past 5 trading days with light volume, and a number of cross current (divergence) in dollar, euro, spx, gold, gdx, etc. It feels like someone in the knows selling it up for the event, right in front of OPEX.

I think this is what Bill meant when he was talking about gradual deleveraging. The Fed action should cause some more.

Right now the Fed has just been talking about possible bad news to come, and now we see them actually taking an action to remove a punch bowl. This is the first bit of bad news in a long, long string of bad news Fed items to come. With continual Fed tightening on the horizon, with liquidity being drained from the market, do you really want to be long?

Unless of course you bought because of all the green shoots...

Gold -11, SPX -10 in after hours trading.

The Producer Price Index (PPI) increased 1.4% in January, well above the consensus expected 0.8%. The PPI is up 4.6% versus a year ago, and is up at a 9.8% annual rate in the past six months.

On Thursday February 18, 2010, 4:46 pm
WASHINGTON (Reuters) - The Federal Reserve said on Thursday it was raising the interest rate it charges banks for emergency loans, citing improvement in financial market conditions.

The Fed said the discount rate would be increased to 0.75 percent from 0.50 percent, effective Friday.

"Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities," the Fed said in a statement.

"The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," it said.

dr.cosa look at the euro - it dropped at the same time gold did. It was all due to the Fed announcement that happened after hours...

the fed made their precious annoncement,
and on cue commodities, especially gold dumped, and continue to do so.

my fear has been that it will be some time before gold will be able to rise in a climate where rates are on the whole moving up, even if the rise is 1/4 point jumps every quarter.

it could be some time before gold begins to move up in sympathy with rising rates, though we know it has happened before. the question is how much does gold have to fall before hand?

if you thought gold miners were a bad investment with rates falling towards zero, pray tell me what you think will happen with rates on the slow and steady rise?

id like to see if a wash out occurs before making any longer term decisions. gold could defy us all and dump $100 over night before proceeding to breach its 2009 highs in short order... either way, hold onto your asshats!!!

stocks up, or vice-versa ? Seems the miners ( even if ABX is not admired ) are reporting good results and guidance... As all the world's currencies' become Fiat Money, its just a matter of time.... In hind-site, gold laughed at the IMF today... so what if it goes down ? Hell, what doesn't?

The down move was on heavy volume too. Big tick at about 8 minutes before close was 25k shares @ 13.51. Close was 13.40 with a few other big ones on the way down.

Re: CEF

ALOHA !!

DISCOUNT RATE
The discount rate is defined by the US FED on their own website:
"The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window. The Federal Reserve Banks offer three discount window programs to depository institutions: primary credit, secondary credit, and seasonal credit, each with its own interest rate. All discount window loans are fully secured."

While it won't get mentioned in mainstream media the "secondary" discount rate was already at 1%, 25 basis points above the newly raised primary discount rate as announced today at 0.75%. Both the discount window and Fed Funds rate are rates charged either by the US FED or consenting banks to boost reserves. So in effect the cost to boost reserves has gone up .025%, which is not that significant right now considering the reserve rate is between 3% to 10% and just on transaction deposits. This puts a squeeze on the banks that parked reserves at the US FED who are being paid interest to do so, especially if these same banks are playing an internal carry trade. Borrow at the discount window at 0.50% and deposit at the US FED for a 2.25% return. To me the US FED is telling these banks that they need to make loans not play carry trades.

On the Fed Funds Rate side of the equation two kinds exist the "nominal", set by the US FED FOMC and the "effective rate" which is negotiated between consenting banks. This discount window would not effect consumer loans from the aspect that such rates are for loans issued to increase a banks required reserves not mortgage loans, consumer loans or margin.

However exemptions have been raised on reserves. Here is the 102nd reserve exemption revision since 1959:
"#102-Effective for the reserve maintenance period beginning December 31, 2009, the low-reserve tranche for net transaction accounts will rise from $44.4 million to $55.2 million. The reserve requirement exemption will rise from $10.3 million to $10.7 million. These actions will lower total required reserves by an estimated $1.24 billion."

As banks went into meltdown mode in 2008 reserve exemptions were increased, so raise the rates then raise the exemptions, which nullifies the rate increase to a degree. Of course none of these reserves based on transaction accounts cover any of the banks toxic liabilities on bad loans and derivatives exposure. As we found out the hard way why should bank reserves cover such toxic gambles when they have the US Taxpayers "infinite reserve" on hand.

DEBT
Just to show what effect the IMF gold $6.9BIL sales has on the BIG PICTURE, on Wednesday the US Treasury had outlays(spent) of $8.01BIL USD just on Social Security Benefits for one day. They could have bought all the IMF gold and had $1.11BIL left over to buy GG stock!

This is what Clinton said about the US DEBT in 2000 ...
"President Clinton: The United States on Track to Pay Off the Debt by End of the Decade
December 28, 2000

Today, President Clinton will announce that The United States is on course to eliminate its public debt within the next decade. The Administration also announced that we are projected to pay down $237 billion in debt in 2001. Due in part to a strong economy and the President’s commitment to fiscal discipline, the federal fiscal condition has improved for an unprecedented nine consecutive years. Based upon today’s new economic and budget projections for the coming 10 years from the Office of Management and Budget (OMB)."

This shows you that some of the same Clinton economic advisers who now advise Obama were saying America would be "debt free" in 2010, based solely on a two year surplus. Obviously Clinton and his advisers thought the TECH BUBBLE would last ten more years! What a great contrarian play if you had the foresight to buy gold in 2000 the same year Clinton claimed America would be "debt free".

I will still stick to my guns and say that increasing "nominal and effective rate" Fed Funds will be negative for the USD, as rates rise so does perceived risk. Right now the US Treasury debt issues are screaming "high risk"!

Tao Te Ching - Lao Tzu - chapter 56

Those who know do not talk.
Those who talk do not know.

Keep your mouth closed.
Guard your senses.
Temper your sharpness.
Simplify your problems.
Mask your brightness.
Be at one with the dust of the earth.
This is primal union.

He who has achieved this state
Is unconcerned with friends and enemies,
With good and harm, with honour and disgrace.
This therefore is the highest state of man.

ALOHA !!

2nd ... "This therefore is the highest state of man."

That would mean that the US Congress and the White House and Rush Limbaugh is the lowest state of man. Hummmmm ... HA!!

need i say more?

http://bit.ly/cA3m6j

ALOHA !!

Thanks ... Taibbi mentions Morgan Stanley one of my ex-brokers from the tech bubble days!

Check out the leverage chart and look who is at the top along with Bear Searns.

LINK: http://upload.wikimedia.org/wikipedia/en/9/9f/Leve...

I am noticing that Morgan Stanley is not paying back its TARP yet. Are they the next Lehman's on the next bank crash? Its nice that we have focused all our attentions on Goldman Sachs and JP Morgan and Citi and left Morgan Stanley relatively free from scrutiny.

Let me just say the US Treasury makes these guys 30% leverage look like Sesame Street!

Rule a nation with justice. <===inadequate translation ""normal, natural" better
Wage war with surprise moves. <==="deceitful" moves" more accurate from "Ch'i"
Become master of the universe without striving. <"without striving" = "wu wei"
How do I know that this is so?
Because of this!

The more laws and restrictions there are,
The poorer people become.
The sharper men's weapons,
The more trouble in the land.
The more ingenious and clever men are,
The more strange things happen.
The more rules and regulations,
The more thieves and robbers.

Therefore the sage says:
I take no action and people are reformed.
I enjoy peace and people become honest.
I do nothing and people become rich.
I have no desires and people return to the good and simple life.

Just a thought...what "the sage says" is an ideal that Lao knew would never exist in this world, one filled with chaos, absurdity and suffering and that will always be that way. When you see words like "reformed," "peace," "honest," "rich," and the definition of "good and simple," be careful of the images they conjure in your mind(verse 12 addresses this phenomena). Those images are founded on definitions imbued in you by the society in which you live. The taoist definitions are likely not the ideal you hold.

Also, if you look at Verse 5, the foundation lesson in Taoism - "Nature is unkind, it treats the myriad things like sacrificial straw dogs" and think about what this means in the context of the final paragraph and the aforementioned terms in verse 57.

People are reformed because they are forced to bear the brunt of their decisions. Society doesn't pick them up. They become "honest" because "justice" in Nature is swift and brutal. Richness must be taken in the context that Taoism is, at it's core, a spiritual discipline. The key to spiritual growth in Taoism is contentment in life-the Taoist definition of success. Contentment means being satisfied (without desires) with one's situation...that is wealth in the Taoist context.

Dow was at 9800 last week.

God's work.

Interesting that MS was (is?) shown to be leveraged like that, cause of the finnies I trade I've found this one to be good for a b/d setup many a time. I will continue to hound it.

8am Central European Time: Dow -94, $81.3. Nice swindle, whoever pulled this off. Is this the day?

ALOHA!!

I just finished reading the Mish take on the US FED raising the discount rate to 0.75%. He pretty much says the same as I do in terms of the effect on "lending" Then he goes on to say this:

"All the news articles on this hike are reiterating this is not a change in policy. Say what you want, but this appears to be a change in policy from doing nothing to tightening."

This is the same as the Bloomberg article says "tightening" and the same as the Hoenig rant about "pain" and "tightening". I have to ask ... who are they "tightening"? I also have to ask Mr. Hoening ... "Who isn't feeling some pain already besides Goldman Sachs execs and Oprah?" Is it the rampant huge spending in the retail sector with credit card rates at 30%? Is it all those SubPrimers buying McMansions again as the media keeps announcing record foreclosures? Is it all those small business guys who are borrowing wildly starting the SBAPRIME BUBBLE, to expand their business as they file loss carry backs on their 1040s? Is it those 52 million Americans on unemployment and food stamps that need to stop spending like drunken sailors? Among all my friends and business associates I know of none that are even taking out a car loan! I know many who have cut their credit cards in half and I know many who have essentially gone into credit hybernation, yet this is the same Mish who rants for many months about how there is this super deflation and nobody wants credit and we're all losing our jobs and broke. However, here he is now saying the USD is going up because the US FED is "tightening" by a 0.25% rate hike. It is the perception of "tightening" but there is nothing left to "tighten" except the US Treasury, which Mish never mentions in any of his formulas or rants on deflation. To think the US Treasury will "tighten" is misguided. By raising the US Debt Ceiling another $1.9TRIL on Friday, 2/12, it seems moronic to think the US Treasury will force Congress to tighten by cutting spending just because the US FED hikes the discount rate or any rate for that matter. I have already posted here US Treasury data that shows since 1970 the US Treasury has average outlays(spending) of 31.7% of GDP over this 40 year period, even when Volcker had Fed Fund Rates at 20%. I mean the US Congress is committed to spend trillions more to stay in power if they have to. I have never seen a trend reversal there. I have said that one of the main distractions to the US FED policy of currency destruction has been the "interest rate side show"! If interest rates meant anything in terms of the USD maintaining its "store of value"(aka purchasing power)or in terms of the US government spending less and being fiscally responsible then I must have blinked and missed it all.

When it comes to the USD and the US Congress the "short term" is just that!

hit 110 per max pain options expy Thursday.

March showing 105.

FD: Long DZZ

Off to work.

GL/good trading.

Good morning
Enjoyed all the great wisdom from yesterday, particularly the Tao-I used to read it daily.
As all days are pivotal in such extreme times, today is no different in relation to the move up from the "correction". Like most, I am watching yesreday's high. I played the break over a downward trend line on 2 day ES mini chart. It broke higher in the morning, retraced then spiked into the close. At the moment, the post market sell off has retraced about 50% from the overnight lows and the action at 8:30 may render my play meaningless. If the futures (market) continued to move up, 1096-1099 e mini will be the obvious place for the shorts to crush it lower. But with many buy stops hit yesterday, the shorts may wait for mutual fund Monday's close to remount. With the fed announcement after close, it would seem obvious the invisible hand may be at work. Dangerous point here IMO.
Good luck
"Put your faith in principles, not people" Dr David R Hawkins

Nemo, I'd be inclined to interpret the sage's ideal in the context of patronage to a given ruler and thus advice as to how better rule one's kingdom. In what context have you learnt of the development of this philosophy? During Sun Tzu's period many a scholar intellectually gambled with their lives by promoting various strategies to many a prince during the Warring States period - the riches or pain awarded were commensurate with their success.

Giving Griffith's translation of "Art of War" a flip through, it is pointed out that by the Warring States Period - the probable period of publication of this text, armies were large, organised and led by professional generals. This differs from the time of Laozi or whichever author wrote Tao Te Ching, which was probably the Spring and Autumn Period. At this period warfare was often poorly organised, ineptly led and haphazardly supplied. It would not surprise me then to find this philosophy being developed by someone intelligent enough to understand what could keep the peace in an increasingly decentralised and unstable period of China's history - ableit a period with a blossoming intellectual movement.

Given Griffith's remarks that peasants were seen as less valuable than horses and cattle, it would appear in my mind to be an exercise in humility for rulers that this text would be most pertinently applied to. Justice in nature for a ruler without a well trained and armed military force could well be peasant revolt, amongst the many other angsts elites suffered then and now. Perhaps an annotated copy could be sent to the White House?

These are just my thoughts. Taoism clearly applies to many individuals today and I certainly look forward to reading more.

PS: I also note a difference of translation between the internet based text quoted here and another text being sold on Amazon. I read that Tao Te Ching is a puzzle. Wondering if the translation alone could keep a scholar busy for years.