Morning Call [6:51am ET] It’s always interesting to hear the mainstream media explain why capital market prices fall. Actually I don’t think it’s all that difficult to figure out. They are reading somebody else’s script.
Out of the mouths of young children often comes the truth. A few years ago, while watching CNBC on Bring-Your-Child-To-Work Day, the TV anchor asked one youngster what he thought of the studio, and the kid nailed it: “I always thought you talked; but I see now that you read (from a teleprompter)”
Why can’t the SEC figure this out. The on-air personalities are the puppets; the producers of the show – the ones on the phones gathering the stories from vested interests – are the puppet masters. This means of course that what is being reported as fact is really often fiction – fiction designed to mislead or deceive the audience. I call that fraud.
This morning America is awakening to a market sell-off. The spin machines will create the cover for their masters. The public will be misled once again. In any case, I wrote my Week In Review on Saturday and Sunday, and now it’s Tuesday. My read on the market seems to be playing out: Stronger Dollar; Weaker Euro; Dump-after-Pump equities; safe-haven move into Bonds and Gold.
The point is how many Talking Heads presented that picture on Friday or the weekend. The script they were reading was what the “network” wanted.
There is truth to the expression that stocks are not bought; they are sold. The SEC requires all salespersons to be qualified and registered. Why then does the SEC not investigate how the selling process works in the studios of Financial Entertainment Television? This is not a new argument. I made it in the offices of the BC Securities Commission ten years ago, and was told then by the chief registrar that the Commission was happy that TV was educating the public. I replied they were fleecing the public. We agreed to disagree.
I often wonder if some of these people in authority don’t go to their graves thinking they failed society.
I am pleased to see that the UK and European leaders are going to spend a year studying the need to restructure Humungous Bank & Broker (HB&B). The Volcker Rule may have been a cruel joke by President Obama, but the Europeans and Brits seem serious. I figure before the year is out the public will be so outraged at the banksters that politicians will have little problem enacting Glass-Steagal type legislation.
http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act
In particular, conflict of interest must be eliminated, and just by splitting the ownership and control of credit (lending) banks from asset (investing) banks, the legislators will have done a marvelous job for the people. Yes, I hear that the Americans sing that tune but won’t support it, but you know, I don’t think it will take more than a few perp walks to bring about changes in thinking.
http://en.wikipedia.org/wiki/Perp_walk
Today, the futures are showing a lot of red – unless you are long US Dollars, Yen, OJ, Pork Bellies, Lean Hogs, Gold and Bonds. But Silver (-1.0%), Platinum (-1.1%), Copper (-2.2%) and Palladium (-2.7%), Crude Oil (-3.2%), the Euro (-1.4%), and the S&P 500 (-1.6%) are getting whacked. Risk is being sold.
Equities in Europe are flashing red this morning. Sailors take warning.
Have a great day. Enjoy the volatility.
CTA Trading Desk Post-Close Report
European bourse weakness spilled over into the US opening Tuesday morning, with equity markets gapping down -1.5%. A declining Euro (FXE-0.29%) is still causing traders to run away from risk. Once the initial selling burst subsided though, savvy traders took relative strength in Apple (AAPL+1.54%) and assorted financial issues as a green light to scoop up bargains using first-hour extremes as a low risk way to play a quick rally up to close the opening gap.
Unfortunately for Bulls the rally fizzled shortly after returning to the plus column, sellers becoming increasingly aggressive after it became apparent the advance was failing.
We have cautioned several times over the past month that the price action since the end of April has been the polar opposite of the advance off the March 2009 lows. Last year, weak internals, negative divergences, falling volume, and waning momentum never could derail the upward trajectory of stock prices – much to the dismay of the Bears. Nowadays, however, it has been the Bulls fumbling the ball. Today was a perfect example of a failed set up for higher prices as the market ultimately closed near the lows of the day (S&P-1.72%).
Markets that are unable to convert bullish set ups are inherently weak. Our clear message over the past few weeks has been that a meaningful break below the February lows could unleash a torrent of selling. As the S&P has chopped around in a wide range since the May 6 flash crash it appears institutions are using rallies up to the 200-day moving average (currently 1105) to lighten up their long exposure.
Until this level is recaptured and volume increases on rallies, all advances must be considered suspect until proven otherwise.
Have a great evening
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Comments
Futures look sick this AM
Good for the shorts....Can only guess HB&B already went short last week before the markets open down.
GSK: Prolia approved for osteoporosis in women and men
LONDON/NEW YORK, May 28 (Reuters) - Amgen's (AMGN.O) new drug Prolia, or denosumab, has been approved in Europe as a treatment for the brittle bone disease osteoporosis, the U.S. biotech giant said on Friday.
It was also approved for bone loss among men with prostate cancer who are treated with hormones used to knock down levels of testosterone that feeds the cancer. Such treatments make the men more prone to fractures.
GlaxoSmithKline (GSK.L) will help commercialize the medicine in Europe, throwing its marketing weight behind a product that could reach $3.3 billion in global sales by 2014 if also approved in the U.S., according to Thomson Reuters.
The U.S. Food and Drug Administration is due to decide by late July whether to approve Prolia in osteoporosis.
Amgen and Glaxo will collaborate to market the medicine in Europe for osteoporosis, while Amgen will retain full rights for North America and for oncology indications in Europe. Glaxo will handle sales in emerging markets.
So True!
Bill,
Everything you said today is true. So obviously true that I can only conclude the answer to your question,
"Why can’t the SEC figure this out?"
is simply that they are part of it... just like the Congress, rating agencies, and the media — all are either complicit or totally naive.
Your example of the child who thought they talked reminds me of a friend who was so impressed by Reagan's speeches, "He never even looked at his notes." My friend thought the teleprompters were bullet proof glass plates.
Cara 100 Ratings Changes
Good morning. Some great discourse over the long weekend. You folks are truly the best and the brightest.
BA - Boeing Upgraded to Outperform from Market Perform at Bernstein citing valuation. Target to $81 from $80.
a double standard
So bad as this oil spill is, Kaimu had a point in yesterday's discussion. Namely, that BP is getting crucified, with full expectation they will pay tens of billions of dollars to clean up this worst oil spill in history. Let's say worst case it's 30 billion dollars of damages.
I'd like to point out that HB&B in aggregate caused a much, much worse economic disaster - when you add up the pension plan losses, home equity losses, 401k losses, and their predatory derivative sales to cities everywhere it might come to 5 trillion dollars. To make it worse, HB&B didn't have an accidental spill, it was deliberate. They deliberately spilled financial sewage onto the world, and are they required to pay to clean it up? Nope. They get hundreds of billions of cash infusion from Treasury, and trillions lent spent or committed by the Fed to prop them up.
If Goldman Sachs and all those investment firms on Wall Street just up and died tomorrow, life would go on. Try running this world without oil and see how much fun you have.
Cara 100 Update
Surprise...Surprise........NOT!
AAPL - PT Raised from $320 to $340 @ Broadpoint. Buy
In case you didn't believe there was a nuclear option for BP
http://www.youtube.com/watch?v=CpPNQoTlacU
bless those Russian technical geniuses. I believe it was Bush and Cheney that authorised the development of small bunker busting nukes. Surely HAL has a couple lying around in its inventory?
Canada CB boosts rate
Up 25bp to 50bp.
"Mr. Carney and his rate-setting panel sought to emphasize that investors should not necessarily interpret the increase as the first in an uninterrupted series."
Re: In case you didn't believe there was a nuclear option for BP
Cheney/Bush authorise nukes?... sure- anything that went "boom" got an OK ( fiancial and environmental as well we found later).
But I believe as early as the Bikini tests bunker busters were in the design phase.
Bracing for an "interesting" day today.
Ciao, Z
Mr. Cashion just made a great point
on bubbleviz... that with mutual fund cash being at all time low, if more money is withdrawn, they (funds) will have to start selling stocks to meet redemptions...
BP live
Live video feed of what BP is doing under the ocean: http://shockedinvestor.blogspot.com/2010/05/live-f...
Looks like they are trying to cut the pipe with a circular saw, whcih can be seen spinning. Pretty interesting for being so far under the ocean. If you look long enough you see fish (or their lawyers).
Re: a double standard
davefairtex,
I'll try not to rant, but I have to say I found your comments disturbing. Indeed, HB&B's aggregate economic impact may be much worse, (we don't really know, because we're not very good at measuring true environmental costs), but that doesn't excuse BP.
BP had a foreseeable incident for which they had inadequate contingency. I know generally here we trade prices, but the social equity side of this forum should be telling us to beware of companies that engage in excessive risk. Investing in BP meant supporting a gamble that they could get oil from under the Gulf without spending the money necessary to ensure they would do no harm. That bet was lost. If they'd won, (i.e. no spill), the shareholders would profit. But, they didn't, so a price has to be paid.
Was it right to bail out HB&B? I don't really know. Maybe it was necessarily pragmatic, if not "right". Should BP be bailed out? Why? There are plenty of other oil companies pumping lots more oil. I say let them pay for what they've done. I'm pretty confident I'll still be able to gas-up my car tomorrow even if BP is driven into bankrupcy by the costs.
Cara 100 Update (Final)
AAPL - estimates, target raised at UBS. Shares of AAPL now seen reaching $320. Estimates also increased, given higher realized iPad sales. Buy rating.
AAPL - price target boosted at Barclays. AAPL price target jumped to $320 from $315 on strong iPad sales. Apple announced it has sold over 2 million iPads units since its April 3 launch. Maintain Overweight rating.
JNPR - numbers lowered at UBS through 2011. Channel checks suggest that the second quarter is off to a slow start. Neutral rating and new $29 price target.
Re: a double standard
manx -
If that was a rant...well lets just say it was a pretty mild one. :) Here's my version, and it's definitely not directed towards you at all.
I'm not suggesting BP gets bailed out. Far from it. I'm AGAINST bailouts. BP should deal with the consequences of their actions. Would that we held banking to the same standard - or even a very small percentage of the same standard that we do for BP. And the cost of BPs disaster will probably be 50 times LESS than the damage HB&B caused to the people of the United States. Christ, TARP alone was 350 billion, and the Fed's mortgage buying scheme was north of 1 TRILLION, all from our pockets. And US savers are continually being screwed each quarter by 0.1% money market rates. That money is going directly to HB&B, a transfer directly from savers to HB&B, so they can continue to pay those nice bonuses for a job well done.
All I'm suggesting is, there is a double standard here. BP pays for polluting. HB&B pollutes, and ends up getting money from the Fed at 0%. Every trading day, HB&B makes money, rain or shine, they hold crap mortgages on their books marked to full value, and their executive teams collect 2007-level bonuses and go home smiling. And that's their reward for - what exactly?
Does this sound fair to you?
Re: a double standard
davefairtex,
I believe the "worst case scenario" you presented could easily be 10x that. In fact, I believe that BP's viability as a continuing company is in Washington's hands, and regardless of the lobbyists and whatever, I doubt the US public has any patience for their elected reps who won't push this issue to the extreme. So, this will be a test of America's resolve.
Just like a bank too big to fail, there is no oil company too big to fail. Life will go on.
Exeter Resource
The real question is what this mining company will fetch in the open market. Over the weekend I sent a note to the Chairman of the Board discussing my thoughts on who he should pursue discussions with when the time is right. That time will most likely start next year. In summary, I suggested that he look outside the usual big boys such as Barrick, Newmont, etc. and test overseas prospects, primarily in China. I also added that Freeport McMoran might have interest because this would boost their reserves of gold and copper significantly.
What are we talking about? Quite simply, gold reserves of over 24 million ounces and copper reserves of over 5 billion pounds. A further 10k meters of drilling is needed to encircle the mountain and professionals expect that this could further increase the reserves from 20-40% making this" the largest discovery made by the entire mining industry" in the words of Chairman Yale Simpson.
The Chairman's reply to me was " We think the points you make are "on the mark" and will be taken into consideration"
My next study will attempt to come up with a reasonable buy out value. The gold itself has a market value of over $26 billion but in fact, the starting point uses about $275 an ounce at current prices which amounts to $6.6 billion. This ignores adding in the gold equivalents on the copper of 15 million oz gold which as a by product is used as an offset to the mining cost of producing the gold.
Could Exeter get $6.6 billion? Who knows but I'll tell you this, if it got only 50% of that, $3.3 billion, it could send the stock price from $7.50 to $44.00. A pipe dream? Maybe but here is where the calculation come from. Current market cap is $565 million at $7.54. $3.3 billion is 5.84 times current cap which equals $44.00
Perhaps, I should go back to the drawing board! This does seem a bit high even at 50% of the $275 per ounce starting point.
All comments welcome!
Incidentally, the stock price should not be chased until the summer is over. As long as you can pick this up under $7.40 a share, it appears to be a very good speculation, a buy and hold, not neccessarily a trading vehicle.
Canadians have been levering up
Rosenberg says about 80% of the 5% and 6% GDP growth rates of the past two quarters are related to housing formation. The low interest rates have invited Canadians and offshore buyers to load up, and bid up prices. With China getting serious about squeezing off their bubble, it could be a tough year of adjustment ahead for those holding inventory.
Ben Tal is as reliable as they come in discussing Canadian housing. This from a friend.
"We had the pleasure of hearing Ben Tal of CIBC World Markets speak in May about the economic forecast for Canada's more-or-less immediate future. We outline the highlights from his presentation:
* The Canadian economy will expand 5% to 6% in the first quarter of this year, but due to government stimulus. Significant government spending has kept the Canadian economy moving.
* It is expected that the Bank of Canada will raise rates in both June and July although it is anticipated that the Fed will hold until 2011.
* An anticipated 75 bps rate increase is expected from the Bank of Canada in 2010, and then the expectation is that the Bank of Canada will hold off until 2011 to see what the Fed will do. In the past, when the Bank of Canada has moved independent of the Fed, the Bank of Canada soon reverses its position.
* The Bank of Canada is planning to raise its rates to slow the economy however, there are other economic factors at play: government stimulus is stopping; the Canadian dollar is strong; commodity prices are not increasing; and monetary policy itself will be more effective than interest rate increases.
* Canadians currently have the highest amount of debt ever in any period of Canadian history. The average Canadian debt-to-income ratio is 146%.
* Canadian consumer capability to spend is at a 50 year low due to increased consumer debt carried by most Canadians. While Canada has good consumer confidence, Canadians do not have money to spend!
* As for housing in Canada, supply of homes is now rising more than the demand for purchasing. The 3- month moving average for homes is negative in BC and in Quebec.
* Approximately 53% of Canadian home owners have a mortgage! (Fewer mortgage holders than most people expect!) But, the average size of that mortgage has increased from $130,000 in 1999 to $170,000 in 2009 (remember, this is the Canadian average).
* Of course, those who earn less are feeling the affordability pinch in housing the most, but there has been a 10% decrease in the number of lower income earners who hold mortgages in the past 5 years.
So, what is the prognosis?
The feeling is that there will not be a violent correction in the Canadian housing market and that interest rates will not increase significantly. The expectation is that housing prices in Western Canada will correct 5% to 7% in the next 12 months.
As regards interest rates, the expectation is that by the end of 2011, the Bank of Canada will have increased its rates by 250 bps to 300 bps (2.5% to 3.0%). Prime rate is expected to settle in between 4.75% and 5.25% by the end of 2011.
Keep in mind that the Bank of Canada had lowered its rates to "emergency rates" due to the recent recession. The Bank of Canada is not going to be tightening its policy, but rather, returning rates to "what is normal".
With respect to fixed term mortgage interest rates, there is a lot of volatility in the bond market presently. Banks are uncertain as to how this is going to play out, but the consensus is for fixed term rates to increase in the long term, but not in "any significant way".
Re: Exeter Resource
Papa - good commentary on Exeter. I think that one thing you are leaving out of your analysis (and why your estimate seems to be high) is the capital cost and balance sheet required to bring a mine of that magnitude into production. I am not sure what the expected costs are for Caspiche but would expect that it would be at least $2-4B to construct a mine of that size. This would of course leave potential suitors to the big boys that have the cash flow needed to secure funding. Few entities would be able to fund the entire mine so as opposed to an outright purchase you might see a joint-venture ala the Kinross/Barrick jv in Peru or the Randgold/Anglogold jv in Tanzania. There is another company I follow Chesapeake Gold which has a 17m oz gold deposit in Mexico but capital costs are expected to be $3B. The stock is trading at about a $300m CAD market cap. The point being, ounces in the ground are good but a strong balance sheet is needed to get them out.
DO will be the one
that will rip some a** when the reversal occures... outrageous short position, low float for such a large cap equity.. well funded ( Lowes ).. I must say, Obama's ban is ill timed, as on site inspections and clarified/enforced operating procedures (or pay huge fines/shut down) would reenforce saftey... The Pres. is just covering his own ass, at the expense of the oilers and related business in the area...
Re: a double standard
History shows that nothing and no one is "Too Big to Fail". Rome, Napoleon, the Soviet Union, and countless public companies which have disappeared illustrate this to be so.
What is usually "Too Big" is man's arrogance in believing nothing is too big to be controlled.
Truth and reality eventually surface and justice is not always what we expect.
Remember the Broadway show about the ant and the rubber tree plant?
My problem is I want things to follow MY time table ;-)
Re: a double standard
Bill, even if you are right and it's 10 times my 20B estimate, that still is UNDER the funding for HALF of the TARP program. I for one see more value in what Big Oil produces than what Big Banking produces. At least oil companies produce products that function as advertised. With, say Goldman, we know that's just not true, they produce products that are designed to blow up. And they continue to get money at 0% from the Fed, while BP's feet are being held to the fire?
On a related topic, as a matter of policy, how do we want things to look after this is all over?
If this does mean the end of BP, then I suspect that will put a damper on drilling in the Gulf, to put it mildly. What major would want to fund oil drilling when an accident could mean the end of the company?
Peak oil isn't here yet, but it's close. Is ending drilling what we really want? Life will go on if BP goes down, as you say, but five years from now when the US is having difficulty funding its purchases of oil from the rest of the world, will we end up regretting killing off drilling in the gulf? We'll be five years too late if we restart it then.
Its just a thought, perhaps a contrarian one, I know its easy to look at the accident and want to punish. You living closer to the problem have to deal with the real consequences, and there's not a lot of ways you can be compensated if your favorite beach gets covered with oil. A bunch of workers raking sand on your beach won't move the needle at all. I get that.
And maybe this is the kick the country needs to start seriously using less oil. But it makes no sense to kill off drilling all the while continuing to consume just as much oil as we ever did.
I'd sure like it if HB&B got the same treatment that BP is getting today. That's not going to happen, of course, but that doesn't stop me from wanting it to.
Re: BP
This misfortune should pump up the fortunes of the Athabasca Oil Sands. A good long term hold would be CLO.TO which covers them all.
Re: a double standard
ALOHA!!
As long as we are on "double standards" ... On May 27th, last Thursday. the US TREASURY printed up another $115.5BIL USD worth of short term "liabilities"(aka:DEBT). Current BP market cap is $117BIL, so the US Treasury printed a BP on Thursday!! UNREAL!!!
When the same politicians and their ivy league economic experts who create unending debt are allowed to chose which companies and industries will survive based on political clout America's future is doomed. Its just that simple. You can rearrange the deck chairs all you want on the Titanic but the fact is the ship will sink because nobody wants to acknowledge the iceberg(monetary system). In fact if they saw the iceberg they would rejoice that now by the Grace of God we get free ice! That is how ludicrous American politics and economics has become. Reality is out the window ... we vote for the magical feel good painless path every time!!! Only there in the Real World where BP operates there is no "painless guarantee". Saving banks is a fools game ... They know it they just don't want you to know it!! Case in point ... two of the oldest and largest banks in America went BK ... Bear Stearns and Leahman's and somehow the planet survived ... If America goes BK, yes, the sun will rise tomorrow. Pain will fall upon the anointed ones, but also an extremely heavy burden will be lifted. The extreme burden of a government that printed a BP last Thursday ...
Re: a double standard
"Remember the Broadway show about the ant and the rubber tree plant?"
http://www.youtube.com/watch?v=nIDLC8M4R28&feature...
Thanks for the memories, Grym.
Regards,
BH
Re: a double standard
Thanks for the link BH. Do you think I could I could remember "High Hopes"? Duh!
Re: a double standard
Kaimu, I'm going to point out what Niall Ferguson told us yesterday. In the history of the world's debt crisis resolutions, those who can print, do. Those who can't print, default. We aren't doing any worse than what others have done before us, but neither are we doing any better. Another blow to American Exceptionalism.
Of course if we think we'll end up somewhere different than all those others, well then, that's another matter entirely.
Re: Exeter Resource
Thanks for your response. Exeter has no intention to joint venture with anyone. This will strictly be an outright sale to the highest bidder. Estimated mine cost, an open pit, is $4 billion. The geology is like a rounded mountain which will ultimately mean taking down the mountain and turning it into one large pit. Because it is at such a high elevation, trees don't grow there and it is reasonably barren. The Chile winter is the time of our summer so that drilling won't resume until September. I have analyzed the other two major mines in the region, the Barrick-Kinross Joint Venture, Cerro Casale and Kinross Refugio Mine. The first one is 10 KM to the South and the other is 15 KM to the North. Both mines are smaller than Caspiche, with Cerro Casale larger than Refugio. Construction of Cerro Casale was over $4 billion and the preliminary report indicated that it would take 3 yrs. to build.
I have not heard of any estimates of mine building from Exeter but I would imagine it would also take 3 yrs.
Exeter has $40 million in cash which should be sufficient to complete drilling, NI 43-101 Compliant Resource Estimate in September and hopefully all other requirements before initiating takeover talks.
a bottom in euro?
Ok, now I'm really talking my book here today, but hope springs eternal I suppose.
I'm seeing a roll up in the euro's MACD. It has touched 1.21 three different times. There's a bullish RSI divergence. The MACD histogram has gone positive. Now personally I don't have a clue as to why the Euro might rally, but perhaps there are those out there who do, and are buying at this level?
Naturally if the euro does rally a bit, that should drag oil right on up with it, and US equities along for the ride as well.
$USD 90
Bill,
in regards to a series of higher highs and higher lows, how many data points are required to establish that? i ask due to the chart of the $USD, which hit a low of 70.70, then rose to 89.62 and followed with what is perhaps a higher low at 74.23. i know in the WIR you mentioned the potential for a further rally to close to 90. if the $USD were to actually print a 90 handle, would that establish a series of higher highs and higher lows over a complete bull-bear cycle?
also, i wanted to say that the morning/post-close reports and WIR have been excellent. thank you to you and your team!
Exeter Resource
Current volatilty today has given me the opportunity to pick up additional shares under $7.20. Patience is rewarded. No need to chase. I am holding long and come back in a year! Good luck everyone. Over and out.
Re: a bottom in euro?
50%
Efforts to End Oil Flow From BP's Leaking Well Are Over
Efforts to End Oil Flow From BP's Leaking Well Are Over, Coast Guard Says
http://bit.ly/ckQZyJ
"BP Plc has decided not to attach a second blowout preventer on its leaking well in the Gulf of Mexico and efforts to end the flow are over until the relief wells are finished, according to the U.S. Coast Guard’s Thad Allen, who spoke at a press conference today."
This possibly means the oil will flow until August.
Euro
I think it was here that the RBC forex guy said the Euro was headed for $1.15. You might want to give it a listen.
http://watch.bnn.ca/#clip307817
Paul Tellier on China, worth a listen. He's been CEO of some of Canada's largest corps.
http://watch.bnn.ca/#clip308149
Re: Exeter Resource
PappaD
Thanks for the heads up on Exeter
The Chinese soverign wealth fund might be attracted to this property.... Pocket change for them.. $3-6 billion for 24 million oz's of gold ... a good way to lose some of their excess dollars. In addition to having the financial strength to fund development, the Chinese have the ability export workers if needed to develop such projects.
Did you find any information on water resources needed by the project. Are they adequate?
I assume since it snows at the mine site, there should be some water available.
mortgage squatters have names and photos taken by NYT
http://nyti.ms/dd3gX3
Not the smartest move in my view.
Re: mortgage squatters have names and photos taken by NYT
NYUGrad,
I agree it is not a good idea to openly challenge them. I can certainly understand their point of view, but it would seem more prudent to be part of the crowd. (As I learned at the Reception Center on day one in the military.)
I now have had three houses vacated in my immediate neighborhood, but only one has shown any sign of action by the mortgage holder — an auction June 5th — the others have a notice on the door saying This House has been "Winterized" — kind of indicative of their chances of selling it.
I have heard of a number of people who have stopped paying due to job losses, but have not been threatened with eviction.
Re: a bottom in euro?
Armstrong in his most recent piece said the EUR could collapse, previously he had predicted that it could drop to below parity, and then rocket back up to 1.50, all within a year or two. The latter scenario might occur if the dead-weight (Greece et al) is dumped at the last minute, but what if instead Germany jumps ship?
The EUR is damaged goods, rather like BP, and as long as no serious long-term resolution of the built-in problems is reached, big money will continue to flee, and I would not take a long bet on the EUR, other than to play (if one is a forex junkie) the CB-induced short squeezes.
Re: mortgage squatters have names and photos taken by NYT
Its a sad stare of affairs. It would be much better if the govt backstopped the real estate market by direct interest rate modifications, forcing the banks to comply, and thus make all homeowners stay and pay.
This "its us home owners vs the banks" is sort of like a deflationary spiral. No action will produce a good outcome. Only time. Which in this case seems like it will take a decade for the massive inventory, negative equity, and lack of purchasing credit, to resolve itself.
there is no easy way out of this one.
Quick setup example
For those who enjoy those screenshots with brief setup description taken from real trades we execute: starting today, I will be posting one of such trades on the top of our trading log for the day, just above the description of how the day went. Today has two of those (just to mark the first day); will do my best not to miss any of the days ahead. Screenshots are clickable for larger view.
Those who like those examples and find them educational, make sure to check them daily. You will find today's at http://tradinglog.realitytrader.com/2010/06/june-1... , and then each new day at http://tradinglog.realitytrader.com/
gold here
what we have here is an ugly set up for the miners.
full stop.
bullion looking fairly good but not stellar,
but the miners, ugh, the venture exchange is yet again showing us why the jr miners as a group are so dangerous to invest in without specialized knowledge.
the large cap miners did crappy today as well, further giving leverage to my longstanding contention that they will never return to their former glory without an astounding explosion in the gold price alongside at the very least a basing/rising general market.
energy looks like it is in the final throes of its long term crash from its 2008 peak, the only people making money from crude these days are those short and those writing nonsense books about how we are running out of it and why the price will soon spike again... lets check back on these pundits 1-2 years from now and see how they obfuscate those bad calls.
im not crazy about $2000 calls on gold but i am curious to see where we move around the current pivots of $1220-1240. a move above here would really need to see volume to convince me a big move is on its way. thus far the volume has been poor especially in the miners.
Eurozone has "failed"
EU) Czech President Vaclav Klaus: Eurozone has "failed" - WSJ
- Says idea of a single European currency was a "dangerous project" that will either result in large problems or see "undemocratic centralization" of EU.
- Studies suggesting single currency would accelerate economic growth or reduce inflation were mistaken. Economic growth in Europe has slowed.
- Europe has suffered from "leisure" society of high taxes and low productivity since the 1960's.
- Convergence of inflation has not occured either, as Western/Northern Europe still has low inflation rate and another group containing Greece, Spain, Portugal, and Ireland still has a high inflation rate.
VVUS may be in play tomorrow
6:28:05 PM
VIVUS, Inc Positive Results From Phase 3 Study of Avanafil in Erectile Dysfunction Presented at AUA Annual Meeting
- evaluating the safety and efficacy of the investigational drug avanafil for the treatment of erectile dysfunction (ED), were presented at the American Urological Association (AUA) 2010 Annual Meeting. The data, "Avanafil for the Treatment of Erectile Dysfunction: Results of a Phase 3, Multi-Center, Randomized, Double Blind, Placebo-Controlled Clinical Trial," were presented by Irwin Goldstein, MD, clinical professor of surgery, University of California, San Diego and director of sexual medicine at Alvarado Hospital, San Diego, California. The presentation marks the first time these results have been shared with the medical community at a major medical meeting.
Re: mortgage squatters have names and photos taken by NYT
"This "its us home owners vs the banks" is sort of like a deflationary spiral."
Absolutely!
It looks to me like it will force a mark-to-market regardless of the bailout.
Re: Efforts to End Oil Flow From BP's Leaking Well Are Over
Yes I also saw that short article on Bloomberg and couldn't believe it, so had to do a little more digging. Here's a better link, again on Bloomberg, but it gives the whole story, so its much less misleading. Yes it seems they are giving up on trying to totally turn it off, they are now focusing on attaching another riser which will allow the oil to flow unobstructed, directly into a ship. Its NOT really like they were thinking of just letting it flow into the gulf until August sometime, or until the relief wells are successful. How many times do we find there's a totally different story behind the first headline.
http://preview.bloomberg.com/news/2010-06-01/bp-ef...
the VIX
If we were to have a double dip recession and say the VIX was to retrace 68% of its move in the first dip, Id say we have about 3 weeks or so for the VIX to hit its high mark this time round. If the market is headed down it should be one heck of a time the next couple of weeks. Im game! Since Im not an active trader Im looking for good prices to present themselves.
Re: Efforts to End Oil Flow From BP's Leaking Well Are Over
Right from the get-go it was, IMO, never the intention of BP to dead-head the well at the blowout preventer and permanently shut down the delivery of oil from it's source. Let's be frank about it - a "relief" well is nothing more than a new supply line from the source to the collection point. In other words, a way to get on with business and get a payback on the well development costs incurred. BP definitely puts safety and the environment way down the list of their priorities. When the Gulf Coast shoreline becomes a strip of oil sands Big Oil will be there with technology to harvest it and refine it - and it's possible that Albertan's will show them how to do it. After the banking fiasco and now this, it is becoming increasingly obvious that the Obama administration is all talk and will end up using taxpayer money to clean up the mess. The least that could be done is to enact legislation that creates an industry-financed disaster relief fund that is controlled by the Federal government and also legislate that all subsequent revenue that comes from this particular well goes directly into this fund to be used for remediation. There is no time for waiting years for lawsuits and other court action to bring about the money needed to get this cleaned up. Big Oil will keep this in the courts for decades.
Re: a bottom in euro?
The euro is acting like the gold standard of days gone by. Now nations within the euro need the ability to default within that structure, as they were able to do during the days of the gold standard. Although honestly they also were able to devalue as well - the recipe was, given unsustainable debt, you defaulted and then devalued.
I think the euro could collapse too, it all depends like I said on whether or not they let Greece restructure. If they simply force nations through austerity without allowing for default, it won't end well. As Les pointed out that's protecting bondholders while making people suffer, and in a democracy that will not work. I think the current approach has a very limited shelf life.
The euro did rally after briefly blowing through support this morning (presumably triggering some long stops). We will have to see if that rally has any staying power, or if the euro follows up and moves down further below 1.21. If it drops through 1.21 and closes there, that would look pretty bleak.
And I must say that at end of day, the euro trade isn't looking quite so good technically as it did this morning.
Re: Quick setup example
Thanks for adding these examples to your Log.
These are vey helpful.
Question for any geologists on blog ( or anywhere ), that is not
being asked... What is happening to the earths ' crust/mantle ' in regards to the increasing pressure from the oceans massive weight, since no replacement fluids are replacing the oil pouring out ? Is there not an ever increasing risk of a plate fracture that could cause complete devastation to the seafloor and result in any number of very bad scenario's ( tidal wave, total implosion at well site, etc ?? )...
A Little Levity
Robin Williams is at it again, with up to date commentary on the human condition... nah, it's just a lot of fun about Bank Bailouts, Congressman("They should have to wear jackets like the Nascar Racers..."), Palin, Twitter, Obama, etc, etc., ... . Things really start to pick up at video 4, IMHO.
Here are the 9 links to the concert, in order:
http://www.youtube.com/watch?v=pd2IoHbjvTk
http://www.youtube.com/watch?v=BpVIkacLXEI
http://www.youtube.com/watch?v=RIe-uNou79A
http://www.youtube.com/watch?v=LJIEy9Dgh48
http://www.youtube.com/watch?v=SoV5hXwiYDw
http://www.youtube.com/watch?v=rmA4Z0b6RpE
http://www.youtube.com/watch?v=fgLv5GjC0OM
http://www.youtube.com/watch?v=gjY7O7o7Xdk
http://www.youtube.com/watch?v=RZLEkzB75AU
Enjoy.
Swiss Gurus
I recently listened to a King World interview with Felix Zulauf. I also watched my friend and professor, Dr. Marc Faber give an hour lecture at the Mises institute. The diagnosis of each was the same. The condition of the West is financially terminal. Yet they differed, I think, on how the patient, usins, will expire. I say 'I think' because I know they are smarter than I am because they have pronounced accents whereas I have a Texican drawl. Perhaps the only difference between them is timing and semantics?
Whatever, it is a classic debate over whether we are doomed by deflation in a somewhat unclassical sense or a 'form' of hyper-inflation leading to essentially the same thing...a repudiation of debt or at best an exchange of debt for equity. I did observe that both think very highly of physical gold. Gold seems to be becomming the value investor's Occam's Razor as the definitive fall back asset. I know gold has no counterparty but neither do my black cows. I guess I will never accept gold as money but it doesn't matter. A cow may be worth a piece of gold but a piece of gold is not worth my cow. My cow gives me NEW cows and that is productive. A kilo of gold sits smuggly in my sock drawer whispering 'I am who I am. Worship my luster and believe!'
Back to the battle of the Swiss Guru's. Faber believes that money printing will lead to a form of hyper-inflation such that even stocks will appreciate ala Farben Fabriken Bayer or Thyssen during Weimar. Zulauf, the deflationist thinks that the S&P can trade as low as 500 before new currency boards can be established and (I'm putting words in his mouth) a 'new' dollar-euro can be shoved down the throats of the witless as a new medium of exchange.
As an intellectual excercise let's contemplate a bifurcated system with 'Old Dollars' and 'New Dollars'. I recall that after WWI there were in France Old Francs and New Francs. I haven't studied that phenom but it might be interesting.
I guess I'll have to side with Doc Faber on this one. The printing press, the slave to prodigality, is mightier that the broken sword of frugality. Panem et circences will rule the day.
So I guess if you believe either Swiss Guru, the asset classes are Gold, Short long treasuries, Farmland and a long term equity bet on Asia. Some would add 'canned goods, a shotgun and a mean dog.' I've got two of the three but Fifi, my poodle is a dearie. She would even lick the face of a central banker! Bad Dog!!!
Re: Swiss Gurus
Ross I have to say, I like your philosophy. I may differ on some areas, but the concept of Black Cows as a store of value is unassailable in my mind. (I like a good steak, perhaps that's why I feel that way)
But consider this. If you ever want to flee the jurisdiction (perhaps due to revolution, deteriorating economic conditions, a vengeful ex mother in law, or the government coming and taking more from you than usual every year), Black Cows are substantially less portable than that one kilo bar of gold. And if it comes time to flee, converting your Black Cows to gold may be substantially more difficult than it is right now.
In addition, even though you do not see the value in them, there is 6000 years of history of OTHER people seeing that value. While there are circumstances where holding gold is actually undesirable ("man overboard" on a Caribbean Cruise, for instance), in most circumstances gold as an insurance policy of portable wealth should pay off nicely.
Plus since I live in an apartment in the city, Black Cows don't exactly fit in my living space so well - as much as I'd like to have a few around, just to be on the safe side.
And regarding Faber and/or Zulauf, I point you again at Niall Ferguson who reminded us that in crises of this type, "those who can, print. Those who can't, default." In either case, bonds are bad, and gold is good.
Shotguns, dogs, and canned food, always useful, even if its just a blackout now and then.
Re: Swiss Gurus
"my poodle is a dearie. She would even lick the face of a central banker! Bad Dog!!!"
Nice summary, the problem with farmland is that "real estate" is the final immovable go-to for tax-hungry politicos who have exhausted all other sources.
The Russian word for real-estate is by the way just "immovables", perhaps the Russians, late-comers to the capitalist party as they are, understand something that westerners do not?
Anyway, about the dog - a nice docile dog is a very valuable asset during price controls - ask the German farmer who, to avoid the price controls on pork during Weimar, required any prospective buyer of pork to also buy his dog, at a fabulous price of course. The dog was generally let loose down the road a piece, and ran back home to the farmer.
Re: Swiss Gurus
ALOHA!!
Yes ... the definition of money includes "portability", but mainly "money" needs to be a long term "store of value". Once a cow dies its value is done, therefore the "store of value" of a cow is its lifetime, which under harsh conditions could be brief. In terms of the dog ... where I live the Weimar dog would be good with some BBQ sauce and mango chutney! It would never make it home again ...
"The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty."Winston Churchill
The key to real estate from my view is "year round food production". In my view nothing beats Hawaii. It is still as Cook described it, a "plentiful paradise". When I go to bed I hear God watering my plants and God usually waters them again prior to lunch, then the rest of the day is sunny, with a very cooling tradewind. It is so cooling that if I stand in the shade it feels like "free air conditioning". Right now I am in various phases of housing re-construction to take advantage of that phenomenon. We never run out of water or food here. If you need to be homeless this is the place to do it! In 1969 I first set foot here and vowed I would some day live here, but little did I realize it at the time that it would be for a much different reason. In 1970 my family visited Waikiki and we stayed on Waikiki Beach at the Waikiki Reef Towers, which is now the Outrigger Reef, in an oceanview room for $18 a night. Even with this "Great Depression 2" the rooms at the Reef are still over $150 a night. I call that monetary phenom "embedded inflation", which would be like the lava flows here that have been erupting non-stop since the 1980s, where one flow is stacked on top of a prior flow, and so is the inflationary pressures of government money spending like lava over many decades as the core inflation has never dissipated. This is because the "debt" is never repaid, extinguished, and more debt is piled on top of more debt until "debt attrition" makes the service of the debt such a burden that the society revolts against the powers that perpetrated the debt. Our monetary system now is "debt based" as a US Dollar is a debt derivative. Isn't it odd to revolt against power that we have voted for every decade.
"The best argument against democracy is a five-minute conversation with the average voter." Winston Churchill
That seems to be the nature of humans though. If you give some one a blank check they will fill it in with as many 999999 as possible! They will kill the Golden Goose!
As we tick off the eighth month of the FY 2010 I see the US Treasury has $7.41TRIL of outlays and only $919BIL of net tax revenues. Still spending over 8:1, $8 for every $1 of revenue.
"There is no such thing as a good tax."Winston Churchill
That is not prudent, unless you look at it from a politicians viewpoint of staying in power. Reneging on past promises is not an option 99% of voters would be pleased with. Imagine having to quit sending out Social Security checks every month or Medicare ending or food stamps no longer available or unemployment checks stopped. These are long term programs we have all paid in our dues to. To renege would be outright criminal and a death sentence to any political party who dares try it. More lava on top of more lava ... the lava of "embedded promises" flows until it can flow no more. You can starve to death in a hyper-inflationary event just as easy as you can in a depressionary one. The debate surrounds "symptoms" but in both cases the root is the human condition that allows such a monetary systems to exist. Humans have forever wanted something for nothing, to have our cake and eat it too.
"You can always count on Americans to do the right thing - after they've tried everything else."Winston Churchill
EURO GOLD
ALOHA!!
Just noticing the steep movement in gold priced in Euros over the past six months. In Euros gold has gone up 24.2% while gold in USD is only up .85%. Then if you look at the long term ten year outlook gold priced in Euros is up 233.2% while in USD gold is up 329.6%. Long term the USD has suffered more than the Euro, but the point is that in every currency over a ten year period the gold price is up. The British Pound has not fared so well with a 345.6% increase over ten years. The highest during that period is the Mexican Peso where the gold price is up 480.7% and the lowest is the Swiss Franc where gold is up 198.8% while the Australian dollar is up 200.6%, a close second and the Canadian Dollar at 206.3%, which in my mind means those three currencies have been the strongest. If the future holds up like the past ten years then it would be more prudent to buy companies traded in those three currencies rather than stay in US and UK stock markets, denominated in USD and Pounds. Another reason I chose the TSX and ASX over the LSE, AMEX and NYSE. I never buy the ADRs or the "F". Its a "money thing" once again!
Steel producer speaks out about changes to Iron ore contracts
suggesting the changes to contract negotiations is opening the way to harmful bankster speculation, at the expense of the steel producers.
http://www.spiegel.de/international/business/0,151...
TOO MUCH PROPAGANDA
ALOHA!!
It seems to me that ever since I discovered reggae back in the 1970s that these guys have been onto government lies since way back! Its about the only political music left since the 1960s.
LINK: http://www.youtube.com/watch?v=GfoZrtUM7Nc
Re: Question for any geologists on blog ( or anywhere ), ...
Though not a practising geologist, I have an undergraduate degree in the science, so I'll attempt to give my understanding FWIW.
Undoubtedly, there is positive pressure inside the reservoir, hence why oil shoots up when we poke holes through the rock. As you probably know, the pressure equalizes over time and drillers pump water into older wells to rebuild pressure and drive residual oil out. But, to my knowledge, there have been no cases of significant rock shifting resulting from the removal of oil, even before the drillers practised the technique of repressurizing with water/brine.
It's a matter of seeing the physics on the appropriate scale. The mass of the rock formations that form the oil pockets dwarfs the mass of the oil and even the weight of the column of water above the reservoir. Add to that the inherent structural integrity of the rock formation that forms the trap, which is classically an arch of sedimentary rock that has allowed the oil to collect in the upper apex of the arch.
Likewise, think of a hardrock mine, miles deep in the earth. Thousands of such mines around the world with hundreds of miles of tunnels, and millions of tons of rock removed. Some mineral-rich areas start looking like Swiss Cheese! But other than relatively minor cave-ins, you don't get significant rock movement. Plate fracture is on a much, much larger scale than the extraction of resources.
Re: EURO GOLD
We've all heard what may have seemed like wild, unfounded predictions for gold prices. Here are some charts and data which give some historic and rational illustrations relative to the unique economic conditions today.
The Many Faces Of Gold
http://contraryinvestor.com/moprinter.htm
Differences between the current period and that of the late '70's/early '80s...
• Levels of leverage in the economy both domestically and globally - night and day differentials.
• Derivatives - loaded to the gills versus nonexistent.
• Currencies - currency meltdowns back then were relegated to virtually third world economies as opposed to the major developed G7 economies.
• Globalization was not even a concept at the time.
Last paragraph:
"Again, we're not making predictions here. We're simply pointing out how human beings have acted within historical context to price the barbarous relic that just may turn out to be not so barbarous after all, nor a relic for that matter. As always, keep an open mind."