Bill Cara’s Blog for January 12, 2010 [See post-close report]

Good morning.

MYGN - Downgraded to Underperform @ Oppenheimer

US Fed earned record $45 bln in 2009: report
(AFP) – 4 hours ago

WASHINGTON — The US Federal Reserve turned a record profit of 45 billion dollars last year even as it plowed money into teetering banks to prevent a financial collapse, The Washington Post reported Tuesday.

The country's central bank played a pivotal role in propping up the US economy in the midst of the sharpest recession since the Great Depression, spending billions of dollars on a highly controversial bailout of financial institutions.

The Fed's unconventional moves led to a windfall for the government, the Post reported on its website, citing its calculations of figures it compiled from public documents.

It said the Fed will return 45 billion dollars to the US Treasury for 2009, the highest earnings in the 96-year history of the central bank. The largest previous refund was 34.6 billion dollars, in 2007.

The daily said the profits -- earned in large part from the Fed's aggressive bond-buying as it aimed to push down interest rates and stimulate growth -- were far higher than the expected profits of Bank of America, Goldman Sachs and JP Morgan combined.

The figures lend weight to claims by President Barack Obama's administration that the Fed has been largely successful in its drastic intervention in the US economy and the protection of the American public.

"This shows that central banking is a great business to be in, especially in a crisis," Vincent Reinhart, a former Fed official and current resident scholar at the American Enterprise Institute, told the Post.

"You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit," Reinhart added.

In addition to the bonds, the central bank also made money on its emergency loans to banks and financial firms, some of which repaid billions of dollars in loans and interest payments in 2009.

The newspaper reported that Fed chairman Ben Bernanke has received a modest raise for 2010, bringing the annual salary of one of the most powerful figures in the United States to just 199,700 dollars, with no bonus.

That is in stark contrast to the multi-million-dollar compensation received by several top bank executives, and as major US banks gear up to announce annual bonuses for top executives while bracing for a political firestorm over compensation practices that critics say fueled the global financial crisis.

Yep, I usually agree with Simon Johnson, but here he is proposing something that makes little sense. Had we not forked over billions to these institutions, then this wouldn't even be under discussion.

Bill, did you see Kevin Drumm and David Corn on Bill Moyers' last Friday? Drumm also has a new article in Mother Jones about the utter corruption in Washington when it comes to making good legislation. It's true of just about every area of government, the most recent prominent examples are the financial sector and healthcare.

One of the outrages Drumm documents is the fact that hedge fund managers have bribed lawmakers into taxing their income at the capital gains rate.

The problem you rightly identify, however, cannot be solved so long as these selfsame banks are allowed to exert such extraordinary influence over the people who are supposed to be regulating them. Until The People can address the cancer eating away at our political system, reform of the financial sector will remain a pipe dream.

Perhaps there is a little bit of pre-auction buying by a non-profit-oriented entity with a goal of ensuring a smooth auction? Either that, or its the news from China that they're increasing reserve requirements - taking away the punch bowl, as it were.

TLT is approaching the Triple RSI accumulation/buy zone.

Paired trade TMF:TMV shows the bond bears getting frothy.

Also TLT max pain is 95 for Jan, 90 for Feb.

Black box trading?

FD: long TMF

Looks like I'm on the other side of that trade. Long TBT. ;)

But I am seeing a rough channel. I've attached a 60 minute chart on TBT to illustrate. I'll nibble here a bit more and put my stop below that lower channel.

Update: Added a second view of that lower channel.

slash insurance companies, slash 401k guardians, slash forced to be banks so they can collect TARP money........
PFG
LNC
HIG
GNW
PRU
It only stands to reason, GS, JPM, BAC all bragged about record brokerage profts in 2009, so whats to stop the 401k guardians from record profits while the working people's 401k's keep dwindeling!
It's all a huge ponzi scheme anyway!!!

ELX 5 min chart
http://bit.ly/4A9T3Y

clearly defined area of risk. No position as I am taking a break but still watching charts. one could put a tight stop at 12.39 ish

Not advice. Just the type of setup i look for.

No position

Anyone else following this story?

http://abclocal.go.com/wtvd/story?section=news/loc...

vb

nebish,

I was wondering the same thing in regards to this being a realized or just a paper gain. Of course if an entity buys up the vast majority of any security, that's a whole lot of demand and will drive the prices up. So yes, when marked to market against prices they themselves inflated(which they happily do to realize profit so they can reap bonuses) they have a profit.

But when they start to unwind their portfolio, who's going to step up then? Where will the demand come from? If there is no private sector demand, they'll just keep holding and waiting. And of course, then they'll forgo mark to market, and sit on the their 'assets' quietly hiding the losses.

What a joke...

http://bit.ly/5vVTqs

What clients? Who is the letter to? Santa Clause? they trade to win for themselves, with other people's money.

In China they would be executed in the street.

Do you keep longer term records, or stats, on price moves based on float vs. percentage increases vs. daily/week to week price movements on below $ 10.00 equities ?

What a bunch of weasels. I think Bill might have mentioned this before - oh, perhaps a couple of hundred times. Well its nice to see that they are actually admitting to what they do.

"Here's a bunch of trading ideas. We've probably established positions in each one of these Ideas long before we let you in on the story. We've also probably spread the news through our press contacts, and whispered in Cramer's ear, and when you get the Idea and start acting on it, that's when we go into distribution mode, and you're left holding the bag."

A compete Lack of Fiduciary Responsibility.

"When we talk to you, we're not acting as your Financial Advisor. " Why on God's Green Earth would anyone, and I mean anyone, listen to these guys about anything after reading that letter?

I'll say once more: it's what Bill has been saying all along. A financial advisory service does not belong in the same shop as proprietary trading. How much simpler can you get?

I did alert you guys about HIG yesterday, right? :) I didn't know anything about earnings -- just read its chart. This morning, at the open, I sold 3 out of 5 call options I had on HIG. The other 2 calls are a free ride for me now, as their cost basis has been reduced to 0.

know you like trading BAC... think it will be taken back to $ 15.80 ish tomorrow before JPM's Thrusday report ? That appears to be the big gap area ( off 6 week chart )...

Grym, does this mean you are not sending Ben a Christmas card this year ? !!!

baz - i like BAC a lot. i think they are very undervalued and will save a lot of money on cost savings from the merger of them and Merrill. I'm not in it, but if it goes under $16 I'm going to be back in. the risk to the company is continued pressure on big banks to break up and additional taxation on their earnings. however, i think their earnings potential in a few years is too great to let those other things keep it down.

http://bit.ly/7IcjgN

I'm rowing along side you david.
Long 15.51, so me thinks I'm rowing a little harder then your puts play.
The sell off is a complete knee jerk reaction.
I'll sell for 3-4% and be happy when they hand it to me.

I recently was laid off from my finance job and have decided to focus my extra time on taking my knowledge of the capital markets up a notch. I was wondering if anyone had any suggestions on "setting up my trading room". What equipment, software, books, etc would you suggest that I obtain to try to make this happen.

TIA

GH

Loannetter,

I sent my best idea to each of the candidates (since 1990), so I'm sure it is on his desk and there is no need for this grandstand gesture :-)

I'd recommend taking the money you have saved up and buying a business...

Hi All - Very bad deal this evening - lots of damage. How about a dozen hospital ships in 12-18 hours. Happy Trading
MAP 4.5 2010/01/12 23:47:39 18.471 -72.851 10.0 HAITI REGION
MAP 4.5 2010/01/12 23:35:40 18.437 -72.811 10.0 HAITI REGION
MAP 4.8 2010/01/12 23:27:37 18.482 -72.810 10.0 HAITI REGION
MAP 5.1 2010/01/12 23:12:04 18.390 -72.570 10.0 HAITI REGION
MAP 5.5 2010/01/12 22:12:05 18.485 -72.556 10.0 HAITI REGION
MAP 5.9 2010/01/12 22:00:42 18.321 -72.848 10.0 HAITI REGION
MAP 7.0 2010/01/12 21:53:10 18.451 -72.445 10.0 HAITI

Since last post lots of additional aftershocks. Not unusual but intensity seems menacing. Probably a good oportunity for the U.S. to show the stripes providing the powers that be allow it. Pray for these folks.
MAP 5.4 2010/01/13 01:36:34 18.595 -72.892 10.0 HAITI REGION
MAP 5.3 2010/01/13 01:32:45 18.384 -72.950 10.0 HAITI REGION
MAP 5.1 2010/01/13 01:16:52 18.431 -72.856 10.0 HAITI REGION
MAP 4.6 2010/01/13 01:05:50 18.537 -72.666 10.0 HAITI REGION
MAP 5.2 2010/01/13 00:59:06 18.257 -72.914 10.0 HAITI REGION
MAP 5.0 2010/01/13 00:43:28 18.541 -72.486 10.0 HAITI REGION
MAP 4.8 2010/01/13 00:23:57 18.410 -72.716 10.0 HAITI REGION

Ah Grym....it does my heart good to know you keep trying. We must register our distaste with our feet, our advice, our votes, our money, our love.

I just wanna say one word, just one word - plastics! Err no, that's not it:

http://www.realitytrader.com/bvo.html

I've got several unused and otherwise unnecessary books sitting in my cellar if you'd like to part with your hard earned cash. I did sign up for one year's subscription to stockcharts.com, but will not be renewing it either as freestockcharts.com is more than adequate for using indicators in real time on the 1 min. chart. IB is turning out to be pretty good for scalping.

Maximum profit with minimum overhead...

* The Wall Street Journal

Last month, Sens. Maria Cantwell and John McCain proposed a measure that would revive parts of the old Glass-Steagall Act, the 1933 law that separated investment from commercial banking. After having been diluted many times over the years, Glass-Steagall was largely repealed in 1999, permitting a wave of consolidation in the financial industry.

The latest crisis has provoked a new debate over the old regulatory regime. Nobel laureate economist Joseph Stiglitz has argued that the repeal of Glass-Steagall had an "especial role" in making the financial calamity of 2008 possible. Former Fed Chairman Paul Volcker, currently the head of the President's Economic Recovery Advisory Board, has called for a new separation between commercial banking and riskier financial activities.

Any discussion about breaking up the financial industry, however, runs into a powerful stereotype: the overwhelming consensus belief in the risible backwardness of Glass-Steagall.

In 1999, the last time the 1933 law was being debated, it was routinely described as a "Depression-era" law, a "relic" of a benighted age, "venerable," "obsolete," "outdated," "archaic," insufficient to meet the public's "sophisticated needs" in the bold new era of accelerated everything. The measure that overturned Glass-Steagall in 1999 was, of course, called the "Financial Services Modernization Act."

Having government forbid everyday commercial banks to take gambles on high-risk schemes, why, that just didn't make sense to the enlightened minds of 1999. We had learned by then to trust the market. Besides, what could go wrong? Fears about speculative risk were so 1933!

Today, it is that old critique of Glass-Steagall that strikes one as a relic in need of modernization. Reading through journalistic accounts of the old regulatory regime from 1999 is like watching long reels of ecstatic dot-com commercials or flipping through the metallic-and-fluorescent pages of old copies of Wired magazine and remembering the mind-blowing prosperity that the Internet was supposed to be bringing us.

The business-culture delusions of the '90s may seem obvious today. But at the time, our great thinkers assured us that we had turned a historical corner and the "old rules" no longer applied. Prosperity was eternal. And government was a dinosaur, serving only to impede our pursuit of info-age excellence. Again and again, the narrow agenda of particular interests were cast as freedom for all of humanity.

Consider "The Twilight of Sovereignty," the influential 1992 manifesto by former Citicorp CEO Walter Wriston. Here was a man who had spent much of his career warring against Glass-Steagall and other federal banking regulations. In his book, however, he did not criticize regulation so that Citi might be permitted to become a grotesquely distended too-big-to-fail financial supermarket gambling in whatever schemes would bring the richest bonuses. Certainly not. Wriston instructed us to give up on regulation because we had entered a new stage of history and regulation was now technologically obsolete. "How does [government] track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them?" he asked.

Half-baked historicism like that was persuasive stuff in those days. On the occasion of the old banking law's repeal, President Bill Clinton intoned that Glass-Steagall was "no longer appropriate to the economy in which we live. It worked pretty well for the industrial economy. . . . But the world is very different."

Today, as we begin to debate Glass-Steagall all over again, the old stereotypes are simply being pulled out of deep-freeze. The futility of efforts to "turn back the clock" are noted. A clever put-down from an anonymous Treasury official is much repeated: it "would be like going back to the Walkman."

The old law's revival is said to be a way of pandering to the low emotions of the public, as opposed to its higher faculties of reason. A Business Week story on the subject understands the Cantwell-McCain proposal as a way of "soothing public anger over bailouts and bonuses." Politico's account of the measure chalks the whole thing up to "populist angst," whatever that is.

What no one has yet grasped is that pooh-poohing Glass-Steagall in this way is about as sound a move as was slapping down your savings on shares of TheGlobe.com.

One of these days, we will finally dispel the "New Economy" mysticism that beclouds this issue and begin to think seriously about how to re-regulate the financial sector. And when we do, we may find that the answer involves some version of the idea behind Glass-Steagall—drawing a line between banks that the government effectively guarantees and banks that behave like big hedge funds, experimenting with the latest financial toxins. Hopefully, that day will come before Wall Street decides to take another headlong run at some attractive cliff.

Write to thomas@wsj.com.

Loannetter,

"We must register our distaste with our feet, our advice, our votes, our money, our love."

• Feet: Directing a good swift kick would make me feel much better.

• Advice: (BLEEP)

• Votes: I have voted at least once AGAINST each successful candidate since Nixon.

• Money: My new scanner/printer may give me the ability to keep up with the Fed in this dept. ($20s may attract too much attention, $1s eat too much paper, Abe would give it an honest look.)

• Love: I would love to be able to put the above into effect.

It's either laugh or cry time :-)

I have often said the "New Globalization" is the same as the old globalization Queen Isabella was using when she sent Chris out to find "The New World."

I have something to sell.

You need or want something.

We need to agree on a price.

So how will that ever change?

long at 45.45.

$INDU moved in an hour what is usually a day's range and during the amateur hour.

Now that's a gap up

"Can you imagine what the panic in the markets would still be like if the NW airliner had been brought down on Christmas Day by an explosion and the Homeland Security people still didn't know exactly how it had been done? And there's always the Israel wildcard as they just might take some things into their own hands sometime soon which will likely also get the United States involved. You bring up many good points but any new conflict may not be diversionary at all."
--------

Yes, I can imagine if it had been a successful attack. Obama would likely do as Bush did and back some larger scale military "feel good" response.

I can also imagine what it would be like to live in Israel where for decades they have been only minutes away from similar attacks or worse.

They cannot afford to wait for investigations, embargoes or the U.N. to write a nasty letter. I remember reading years ago they removed the computers from the F-16s they bought from us — no time to wait for them to boot. This was later confirmed in a conversation with a rep. from McDonald-Douglas I spoke with.

If my home were invaded I would shoot the intruder first and figure out what he was up to later.

My feelings were as high post 9-11 as anyone's, but I believe the invasion of Iraq was an idiotic response to a non-national (Iraq) threat. (especially using a force one quarter what the military had deemed necessary)

We should have called for an international force similar to Interpol first and then, using our Special Ops teams along with those of as many other nations as possible, gone after the individual Jihadist cells wherever they were detected.

I can also imagine this as a better solution — just not so profitable to certain interests. The recommendation to "shop as usual or they will have won" was a juvenile attempt to allay fears and continue business as usual.

The airport security is unbelievably stupid also. While avoiding a possible violation of political correctness it ignores the fact that subways, amusement park, and a million other targets go unprotected while our borders are as porous as ever.

Treating these guys like criminals with Constitutional rights is so stupid I cannot believe we are doing this. This is a real war and will continue to escalate at the will of the enemy. In prior wars out of uniform fighters on either side were summarily shot. Change the rules for one side and lose the game.