Bill Cara’s Blog for June 17, 2010 [See post-close report]

Bill, I for one hope you will continue the morning call in addition to the WIR. I am a big fan and still have much to learn. Your comments and perspective will be hard to replace!!

Thanks for all you do!!

Good morning.

AAPL - PT Raised from $320 to $340 @ Kaufman Bros. Buy

AAPL - Apple initiated with a Buy at Janney Montgomery Scott. Target $320

ABV - AmBev initiated with a Neutral at UBS. Target $112.68

AMZN - Amazon.com initiated with a Market Weight at Thomas Weisel. Target $13

EXC - Exelon downgraded to Underperform from Neutral at Macquarie. Target to $39 from $44.

FSLR - Credit Suisse upgraded First Solar to Outperform from Neutral. The firm raised estimates given expectations for strong demand and lower costs and believes pricing upside for Q2/Q3 is not reflected in valuation. Target to $150 from $110.20

NOK - Nokia downgraded to Neutral from Buy at UBS. UBS downgraded Nokia following the negative pre-announcement and said the company lacks competitive products. Target to $8.86 from $14.53

SNDK - SanDisk coverage assumed with a Neutral at Goldman. Target $40

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Clueless Upgrade Of The Month Club - Main Selection:

BP - BP Plc upgraded to Buy from Hold at Collins Stewart. Collins Stewart upgraded BP to Buy after the company cancelled its dividend payments and agreed to put $20B in a claims escrow fund.

Perhaps the share price has improved on the 5-year CDS spread narrowing.

BP PLC 425.64 bps -149.80 bps -26.03%

I mean, no sh*t it went well. The "strong" members of the Euro are being forced to buy the weakest members bonds. Look at the demand outside of the domestic market and you'll seee there is none.

NOK - price target cut at Barclays to $10 from $12 on lower guidance. Estimates lower through 2011. Maintain Equal Weight rating.

Ouch!

Thanks. Same level of ineptitude back then as now.

I recollect Colin Twiggs saying to expect a retest of the 1.25 level before heading lower again.

There have been three oil spills larger than the on-going Deepwater Horizon spill but time will tell if this will be a record.

#1 Lakeview Gusher, California (land) from 1910-11, 9 million barrels, destroyed the valley.

#2 Gulf War Oil Spill (water), 1991, 5.5 to 11 million barrels

#3 Ixtoc I Oil Spill, Mexico (water, Gulf of Mexico), 1979-80 for 290 days, 3.3 to 3.5 million barrels

#4 Deepwater Horizon, 2010-ongoing or 58 days +, 2.8 million barrels est so far

The historic spill list is staggering:

http://en.wikipedia.org/wiki/Oil_spill#Largest_oil...

http://en.wikipedia.org/wiki/List_of_oil_spills

The Ixtoc I Oil Spill is very similar to the Deepwater Horizon spill with identical cause of failure but was only 160 feet deep (diving range) compared to Deepwater Horizon's 5,000 feet. As for warm Gulf waters, I found this:

"The fact that the [Ixtoc I] spill happened in warm offshore waters made the effects of the Ixtoc I spill less than they otherwise might have been, experts agreed. Warm temperatures accelerate the evaporation, weathering and microbes' consumption of oil. Much of the oil stayed offshore, evaporating or settling out on the sea floor.

'We were surprised there were so relatively few effects,' said Olof Linden of the World Maritime University in Malmö, Sweden and part of a United Nations expert group that assessed the Ixtoc I spill.

There's a rule of thumb that for every 10 degrees Celsius increase in water temperature, chemical and biochemical reactions happen twice as quickly."

And this:

"But a tropical storm did much to reduce that damage. 'We had a tropical depression come in and raise the water level and it eroded the shore a little bit,' Gundlach said. 'It removed 80 percent of the oil that was on the shore of Texas.'"

http://news.discovery.com/earth/gulf-oil-spill-ixt...

So, the Exxon Valdez oil spill was very slow to clear because of the cold water temperature while the Gulf War's intentional spill of staggering size presumably cleared quickly because of high water temperature.

BP (British Polluters) last major spill was Prudoe Bay, Alaska oil line leak of 5,053 barrels in 2000.

Looks to me like the industry has a long track record of disasters. Certainly, due to location and size, this one will cause more damage than any other in history as Bill has stated. The company that caused the Ixtoc I oil spill used soveign "immunity" to limit its liability. Wonder if the UK will allow BP the same such immunity claim or let it go down with the rig ...

Cheers.

Bill -

I took on some euros and swiss francs yesterday :-) ECB's Trichet is loading up the QE debt wagon for Spain as predicted. Looks like the ball is in Bernanke's court ...

Cheers.

Bill,

If it's not a daft question: Why has gold gone parabolic today? Is it a reaction to the interventionism you talk about?

Thanks Bill. Point taken.

Bill is this sort of volatility in currencies matching pre-1987 crash?

Bullish signal for a bounce?

http://stockcharts.com/h-sc/ui

Using FXE as a proxy, weekly chart, and an RSI 7

Jim Rogers is presently "interim" long the euro.

"“That’s not the way it’s supposed to work. I don’t think it’s good for Europe, and I don’t think it’s good for the world to bail out people who have failed. Debasing what has been a strong currency and making it weaker and weaker is in the end going to destroy the euro. In the interim, I’m long the euro. It’s time to go in and take the other side. It got beaten down so much.” - Jim Rogers

If anyone wants to get off the unemployment check gravy train, let me know.

baz22 got me interested in ARNA (2.94) and one can sell the Jul 3put for $.35 which is a great % play/return, still short RIG puts, this mo 40 &45 and next mo 35 (thanks Port2013 for plug). SD (6.71)is an interesting oil/nat gas play and the sept 6 puts are $.55.........I try to only do options that yield at least 2-3% per mo on cash secured positions.....HL is still my favorite metals play as the options (puts or calls) consistently meet that criteria........JAG is also intersting as a gold/braz play. Also CDE in 14s. Do not know how I would start my day if Mr Bill did not post am comments.......

Dr. Strangelove: If BP = British Polluters I guess you haven't looked at the list of shareholders recently, and perhaps you have conveniently forgotten Bhopal, Exxon Valdez, Pacific Gas and Electric Company,.....

This disaster isn't a national thing. Incompetence, impatience, greed, and ineffective regulators are found everywhere. In this instance it appears that the ineffective regulators are particularly prevalent in the USA oil industry. On top of that you have RIG and HAL (which are definitely not British companies) apparently knowing their client was doing the job wrong but not being willing to tell their client where to go. "We were only obeying orders" has never been a good defence.

I'm British but it wasn't my country that fouled up the Gulf of Mexico. It was a multinational company that has its headquarters in London. Not the same thing. I resent my country being blamed by President Obama (and, it would appear, you personally) for something that we, as a nation, had no control over.

STD, TEF, BBVA, REG all up today.
Tiny TTVA however is down.
(From FinViz world heat map.)
Btw, EWP hanging in there too.

market this morning and has quietened, hopefully to the benefit of other markets for closing (the meandering market is killing me)

Buy Buy Baby is coming in to replace the old tenant Circuit City.

Thats got to be a few hundred jobs for local part time workers. It has been such an eye sore for residents, and prob a headache for the landlord.

Kaimu said: "Now they are sitting on the sidelines in bonds with the belief that they are finally safe."

You are right. Eventually, when [hyper]inflation arrives, they will get fleeced in bonds. However, bond bulls Rosy and Shilling (to name two of just a handful) make valid points to hold bonds as investment vehicles in the short to medium term where they see deflation/disinflation. I am hard pressed to find bond bulls today and just from a contrarian perspective, that makes them an investment to consider. In the long run, I agree with you, all fiat and their debt is, toast. Go gold.

Here is Shilling with his views on bonds (5 min. video):
http://tinyurl.com/342hvwr

Amen Kaimu. The biggest bubble in the history of the world is right before our eyes and we are missing it through disbelief. When corporates trade through sovereigns, the people are speaking. I distrust corporates as well since their respective sovereign may someday deem a corporation as an asset of 'the people.' Perhaps Chavez is just ahead of the curve?

I read recently that U.S. corporations have over a trillion in cash on their balance sheets. A tempting morsel. Nah, we can print that much digital cash over a weekend.

In spite of bad reports including Empire State, Housing Starts, PPI, Industrial Production, CPI, Jobless Claims, Leading Indicators and the Philly Fed Survey + bad earnings from BBY and FDX. I really don’t know how much more bullish the market action could be.

Could be the slow uptrend that we had in Feb - March. Might lead into earnings season in July (as in that quarter) when shares will be handed off - but one day at a time...

TOF,

Earlier today you said "90% short, 10% cash". That is not "leaning" short, that's more hanging on a thread by your ankles from the rafters over a bed of sharp pointy knives. Be careful and nimble, as Bill says. I get the sense that this rally is trying to extend to the end of quarter, painting a somewhat palatable picture on EOQ statements.

FD: 32% short, 47% long, 21% cash.

Dr. Strangelove,

You said: "The issue with hyperinflation and an indermediate hold of bonds is that, it will be a currency event, not an economic event."

Possibly. And this is indeed happening with the Eurozone as we speak. The currency has collapsed within a matter of weeks. For fleecing to be more effective, speed is of the essence.

In the longer term, a collapse of the dollar is a high probability, or indeed, inevitable. My portfolio is about 15% bonds (TLT, IEI, BSV, etc.) and is comfortably hedged with significant holdings in gold, some commodities, AUD, CAD, DXY and TIP.

I still find it difficult to conceive that the rug could be pulled from under a reserve currency at a pace Mr. Armstrong and Mr. Sinclair fear. It is after all an Empire and empires, like the Roman, for instance, take decades to fall. In today's world, decades may be shortened to years, but not days. JMHO.

If you have links to Mr. Armstrong and Mr. Sinclair work, please share. I would like to take in their opinions.

AAPL either inverse h&s or topping action
http://bit.ly/aDb2LO

No clue how this plays out. If you look at the weekly chart it shows a much more diff picture.

http://bit.ly/aslqP9

No position. But i was one of the 600,000 iphone 4 pre orders.

Strangelove -

I see your Irish Potato Famine and I raise you Mai Lai.

This could go on for ages (I see you still have the Black Hole of Calcutta to play) and if we push it too far Mr. Cara will moderate us both off his board. All nations do ghastly things from time to time. But this disaster was not caused by a nation. It was caused by a corporation, a corporation is owned by its shareholders, and the shareholder list of BP is by no means exclusively British.

When you say "BP is indeed British and we Americans only failed to regulate YOUR corporate responsibility" I am puzzled. How exactly is the British government supposed to ensure that BP drills its holes properly in the Gulf of Mexico? By the same token, how is the USA government supposed to control American rigs operating in the North Sea? It just doesn't work like that.

So far as the shell game to preserve power is concerned I agree, and that is why I think it does no good to blame Britain for BP's negligence. I believe the blame lies squarely with BP, and I hope it goes bust, just as I hope the zombie banks and other zombie businesses will go bust, so that lessons are truly learned and more care is taken in future. But I expect to be disappointed. No government seems to have the guts to let failed organisations go bust any longer, and that is why people feel they can get away with monstrous actions. However if BP is saved by a government it won't be the British government that does the job. It will be the American government, if it succeeds in capping BP's liability. Another personal view: I think they will fail to achieve that.

Turning aside from the sovereign/corporate issue, if I am even half right about this I suspect that owning BP's shares will be a bad idea but there are certain to be more trading opportunities. If an investor is not too troubled by the moral aspect then for a longer-term hold I think the bonds might be worth having. I think there will be enough left to satisfy the bondholders' claims even if the shareholders are wiped out, as they should be.

By the way, Strangelove, how is that errant arm of yours these days? Not amputated yet?

teamonfuego,

I agree that Apple is a top notch company. Closest thing to rock star as there is in business. I consider them the enabler of consumers via tech. The Cisco for consumers.

But prices are sometimes detached from fundamentals.

A text book h&s requires volume in the right shoulder and on the neckline breakout. and with all those gaps in the chart, i am not too sure it can be labeled a potential h&s.

I've also learned that it is very very hard for companies to stay #1 forever. Look at MSFT, AOL, Yahoo, GM, Merrill Lynch, etc.

I'll buy some of Apple's products, but not their stock at these levels. But good luck with your trade.

jragusa -

Martin Armstrong: http://www.martinarmstrong.org/economic_projection...

Read his short essay "The Money" regarding how velocity can hit overnight as a shift to hyperinflation. Spooky.

Jim Sinclair: http://www.jsmineset.com/

Nobody provides the depth of knowledge offered by Bill Cara for the average trader, though. Armstrong and Sinclair have rather fascinating vitas that go with their depth of knowledge.

Dr. S.
" Zounds! I was never so bethump'd
with words
Since I first call'd my brother's father
dad!"

Allow me to mediate this cat fight with a quote from Jefferson.

"Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains."

Your history is also somewhat jaded. The Russian Army defeated Nazi Germany. We came in late and just mopped up...The pacific was a different matter...

Breaking even one of the three fetters to enlightennent is said to assure 'stream entry'. The stream entrant is one who is well on their way to achieve enlightenment in this lifetime.

The three fetters are:

1. Fixed Self-view
2. Doubt
3. Dependence on rites and rituals

These are the counterparts to the fetters:

1. From Habit to Creativity
2. From Vagueness to Clarity
3. From Superficiality to Commitment

The teachings on these obstacles can seem quite simple, yet like most teachings the deeper we delve the more we find.

I often imagine giving up my self view. Precious and well polished, it is not fixed, it never was fixed, cannot be fixed....yet I try to habitually fix my self ego as something to identify with as of value. What happens when I release those fleeting concepts of self and allow creativity and responsiveness to life, it's joys and it's challenges? As long as I am rooted in habit I am stuck with nowhere to go. A creative self view gives me miles of space in which to evolve!

"The Russian Army defeated Nazi Germany. We came in late and just mopped up...The pacific was a different matter..."

I would say the U.S. production capability defeated Nazi Germany. Without or supplies the Soviets may have won... but not until the Nazis ran out of ammo and the Russian army's numbers allowed them to slaughter them with clubs.

The second front (D-Day) made it happen far sooner, without question.

I have a friend who was at an interrogation of German prisoners near the Rhine. One German soldier commented he knew the war was lost when he saw a clerk using paper clips. They were short of everything.