Bill Cara’s Blog for June 25, 2010 [See post-close report]

The financials seem to have gotten a boost from the finreg announcement this morning. Will this last or is it just a speedbump? I've been short financials. Is it time to get out?

Good morning.

BUCY - Bucyrus initiated with a Buy at Jefferies. Target $65.

JOYG - Joy Global initiated with a Hold at Jefferies. Target $63.

RIMM - Downgraded to Neutral @ Robert W. Baird based on Android and iPhone market share gains. PT Lowered from $88 to $59

RIMM - PT Lowered from $120 to $90 @ RBC. Top Pick.

great link to article with concise fin reg summary -- www.wallstbeat.com

effectively what we've done is create an infrastructure to [attempt to] deal with the repeal of G-S ten years ago...better late than never, i suppose.

Bill,
The S&P futures were back yet again at 1066. Is this Battle of Hastings about over??
G

Thank you Mr. Cara for your gold,silver,GS up and USD and US bonds down heads up and S&P future call.
Could this sell off be end of quarter dumping? Somewhere yesterday I read that during earnings prices usally go up. I see that the S&P daily Stoch is heading down but yet to bottom. Could it be that the next little bull phase will be when the daily stoch hits bottom, then equities lift untill earnings are disclosed and losers get hammered?
Full moon tomorrow....
Bear E

Anyone look at copper in the last hour. WOW
(should have attached to chart - here it is)

I am told by a trader that the move in copper fortells that the sell off this week was BS to "shake" the retail investors out of postion before the "big boys" come in to do their end of month window dressing.

If after all the selling of the last few days hasn't provided enough opportunity for "them", there might just be some big upside pops left.

call me crazy but it looks like AAPL is kinda starting to roll over.

Just in time when I covered my calls. :) I tell my friends to buy what I sell, and to sell what I buy.

Seriously, I'm going to stay away from this "cult" stock. It does not move well with the other NASDAQ stocks, and I got burned pretty badly on this.

I've written here before about Paramount's 2.6M oz. inferred gold-equivalent resource at the "San Miguel" project in the Palmarejo mining district of Chihuahua, Mexico. Now there's news to report.

As background, founder Chris Crupi is not a "mining guy" but a financier, who began his career as Special Assistant to Canada's Finance Minister. He has built Paramount less like a typical GEO-led junior, and acted more like a start-up CEO, systematically putting in place various building blocks for success. Key among these was attracting Seabridge Gold's CEO to his board, and Seabridge's lead investor, Albert Freedberg, as his largest shareholder. (Chris personally is the 2nd largest shareholder.)

This week, Paramount announced its $31M all-stock acquisition of X-Cal (XCL.TO) with its "Sleeper Mine" in Nevada, historic producer of 1.7M oz. of gold. A 2009 PEA foresaw profitable future production from Sleeper's 713K oz. inferred gold resource above-ground (on the heap leach pads and in the tailings) and a 750k indicated resource in-ground. On Sleeper's 30 sq. mi. land package, there may be lots more gold. Paramount's geologists knew this mine from their Placer Dome days, studied old and new data, and feel confident there is more gold. And, there's a second "wild card" factor.

After Northgate's optioning last week of Nevada Exploration's (NGE.V) "Awakening" project, I had contacted NGE, which (uniquely) analyzes ground water for target definition in Nevada's gravel-covered basins and valleys. It seems that Paramount's "Sleeper" land package (like Northgate's nearby "Awakening") has high concentrations of gold (and "signature chemicals") in its ground water. Here is NGE's map covering both neighboring properties: http://www.nevadaexploration.com/properties/bull_c...

All of a sudden, two players - Northgate being an established mine developer and operator - have made major commitments to this "neighborhood". So, what does this week's announcement mean for Paramount?

• inferred/indicated gold resources of 713K/750K oz. - at a price of $43/indicated oz. and a fast path to "measured" and "reserve" status for these resources.
• A new prospective 30 sq.mi. land package for green-fields exploration in a 2nd mining-friendly jurisdiction (in addition to Mexico).
• An additional shot at achieving that critical mass of 5M oz. M&I which has been the company's goal.

With most juniors, I'd worry more about the difficulty of raising funds for exploration and resource definition. However, with Seabridge's lead investor and CEO on board, it's less of a concern. Over a 10 year period, Seabridge's stock price grew the most of any US listed gold stock, as they funded and executed drilling and analysis of ever-growing resources and reserves. Mr. Freedberg is - no doubt - a strong believer in this strategy.

With $23M cash, Paramount can afford a $6M annual drill program at San Miguel, and $6M for exploration and resource definition in the year after closing the Sleeper acquisition.

So, what could go wrong? - this key question must always be posed. To stay on course, Paramount will have to deliver significant, concrete progress in resource definition within 12-18 months. In this timeframe, they will need to raise funds - on terms which reward current investors. To my mind, acquisition of the Sleeper Mine - with its historical production and indicated above-ground ounces - accelerates resource definition (and thus lessens risk of failure).

Full disclosure: I have no position in the stock, nor other financial ties to the company; I have accepted the company's invitation to visit their Nevada acquisition, and will report back on what I learn, and disclose any costs they may defray.

Is China in trouble... Which China? The noodle eating northern aristocratic warlords or the rice eating, hard working southern pirates?

I'll give China her due. Their main advantage vs. the U.S. is that they are not democratic. You want to build a highway in China that cuts through a populated area? Simple. They just tell/order the populace to move a mile or two left or right. Your choice which way to move.

I am loathe to acknowledge it but China's economic statistics may well be less massaged and tainted than our own. They seem to have excorcised Marx and are trying to embrace Hume. Inscrutable as that seems! But with some truth to it for now at least.

Transitions are usually messy. Compare the industrialization of Japan, another Sino peoples. It took about a hundred years. China is but only 30 or so years into its metamorphosis. A setback of a year or two, even if it happens, would be no cause for alarm or lamentations.

China lacks social backstops. Their culture today requires male heirs and savings rates of around 40%. To pry their savings into domestic consumption will take insurance. Private or public, insurance will be the bridge, the transportation to the peace of mind that allows for a modest amount of profligacy. Today a haunch of pork with rice. Tomorrow...the tables at Macao!

But Ah! In the West we must expunge the debt that has enriched the few but has built only sandcastles against the unrelenting, rising tide of default and the embarrassment that follows on to paupers. Mia Maxima Culpa. Uh, will you take another check please? A wise barkeep soon enough learns which drunk will never pay his tab...

I know full well that the bridges, dams, highways, airports, and other infrastructure of China that have been built using the excess productivity of Chinese labour will remain. An excess of productive labour yields investable surplus capital. In the West, we have only negative capital to be paid for from the labour of our future generations. Hu is your daddy now!

For investment choose China Life. For pleasure try China Lite. Each has its own merits.

In 1979, back when I was young and thought that I was somebody I wrote a piece 'China, our last best hope.' With few modifications I could republish it today because it is still valid and may be so for the next half century.

After reading Bill's heads up pre-market I grew interested in the way the market behaved as cries of "mission accomplished" and self-congratulatory back slapping was heard coming from Washington even from where I sit.

http://finance.yahoo.com/news/Bank-stocks-soar-on-...

The news is being peddled in the same manner, although as you can read half way down the article, no one actually believes that this is the final bill, once the lobbyists have their way. Given that leverage wasn't curtailed it appears that Wall St. gets its way.

Novice that I am, I couldn't help but notice the 'shake n bake' as the market looks like it is ready to rise Monday, after a couple of false breakdowns.

I noticed the Euro edging up against Uncle buck, which was testing support, while gold sought its recent highs. Are the Euro and commodities back? Wish I'd been fast enough to jump on FCX early in the day and let it ride.

Either way a flat and frustrating session. I should have called it a day while the going was good before 11am. I did nothing but dig holes and fill them in until close.

who picks up the bill? you guessed it right.

http://www.bloomberg.com/news/2010-06-25/bp-bankru...

Could share price give us clues to such an event, were it to occur? BP is already at a 14 year low. But selling with vol. suggesting that the rats are abandoning a sinking ship...?

I am surprised at Fannie's actions. Such actions are inconsistent with the homeowner bailout that the administration has been touting.

I would be more surprised if Fannie were liquidated. Without Fannie there would be no entity to stick with ownership of the mortgages that keep the new housing and the resale housing markets limping along. Both of those markets represent jobs and the resale market prevents home values from collapsing faster and further. The only move that makes sense would be for the government to assume ownership of Fannie and end the GSE fiction. But that would not be liquidation.

Took a peek at DJIA and DJTA weekly charts today. Observations:

- DJTA(Dow Jones Transportation Average) remains in a bullish price pattern (a pattern begun, of course, March 9, 2009) despite the miserable Jan and May this year. Price action is confirmed by the Accum/Distr line and the Chaikin Oscillator even suggests a forthcoming improvement in the A/D line. (the Chaikin Oscillator is a momentum indicator for the A/D indicator) (see first attachment)

-DJIA arguably is still within a bullish price pattern but looks markedly weaker. It seems destined for a bearish 50MA/200MA crossover this week. There was a closing low for the first week of June that undercut a previous cycle low for the first week of February. That June low was during a week of extremely low volume (short week) and was completely swamped by upward price and volume action the following week; wonder if it was a bear-trap? Interestingly, there is a positive divergence in the A/D line for DJIA. Furthermore, the Chaikin Oscillator for DJIA, like for DJTA, suggests a forthcoming improvement in the A/D line for DJIA. (see second attachment)

If anyone has been following Pascal's money flow studies, I would be interested in what it's saying about the quality of the money-flow; small fish or the big guys?

Cheers.

lessmore,

Homeowner bailouts ARE inconsistent. Inconsistent from lender to lender and hypocritical. Fannie Mae is hounding folks who refuse to pay their mortgage by pursuing them to the ends of the earth while the Mortgage Bankers Asociation walked from their own underwater office building with impunity.

***edit: here's the big picture note about MBankers short selling their HQ;
http://www.ritholtz.com/blog/2010/02/mba-walksaway...

MB's short sale was essentially a 'walk away'. Mortgage Bankers sell their loans to Fannie and Freddie. NAR (Realtors) did the same thing apparently. Corporations make these decisions and they don't get their credit dinged or told they can't borrow again for seven years. If anything they are rewarded.

ALOHA!!

Once again ... I will say that the US FED will step in to prop up the CDS counterparties. They cannot afford a derivative meltdown again. Everything monetary is derived from debt, because money=debt. More LIABILITY BUBBLE.

http://ronsen.blogspot.com/2010/06/sunday-morning-...

If you aren't upset after getting your 'coffee', then something is really wrong. And this is just the tip of the iceberg.

I prefer to think of it as 'those who can't (manage responsibly), print.'

Grasshoppers tolerate crowding for a years before the increase in their levels of serotonin transform them suddenly into locusts.

Individual debtors struggle for years with their debt burdens while enjoying riches they never earned until suddenly they are broke.

Corporate and national debtors wallow in the riches of borrowed money, spending much more than they ever earned until suddenly they are broke.

For centuries, Globalization has improved the human condition until suddenly humans have overcrowded the planet, over polluted its air, land and water, over mined it, and in general over consumed its resources while denying the peril such activity poses. The "until" still has not happened, but it will. The pressure continues to build mostly from the Asian continent.

"What is wealth?" asks Martin Armstrong, and looks at the Euro's future in the framework of this question.

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

ALOHA!!

In relation to a one year HGX chart - "Does anybody think this chart suggests inflation?"

Define "inflation".

I do not look at one index full of stock prices as an indicator of anything more than "poor management" if the price is down and "good management" if the price is up! Besides I can show you other indexes like the GDX that are up not down in the same time period. An index is stock prices that are subject to the whims and agendas of management, algorithm magic and emotional traders influenced by economic winds, usually "liabilities" based on debt levels.

I am more interested not in fluctuating stock prices of some index but rather the direct impact of cost of living prices. What I have to pay for basic daily costs to live in America. After all if I look at a chart of BP is that suppose to be deflation? No. It isn't even gas price deflation! You have to quantify what money is. Stock indexes are not monetary inflation or deflation, because stocks are not money. You cannot take a stock certificate to SafeWay and buy groceries.

Here is why. If you tell me you are selling all your stocks in your portfolio and going to cash then that is only one side of the trade as there is no way you can "go to cash" without some other trader announcing he is "going to stocks". In other words there technically can be no cash on the sidelines, only fearful traders waiting to be exuberant again. In the example of BP, the BP market cap is down but not the money supply because one trader moved the same amount of cash out of BP stock and into money market funds(broker sweep account) while another trader moved out of money market funds and into BP, all at the same quoted price levels. So a portion of BP market cap has been transferred to money market funds. As long as money is debt there technically is no sidelines, because there can be no price stability in or out of the markets, because money based on debt is inherently unstable. Why else do exchange rates fluctuate so frequently? It wasn't that long ago that a number of foreign currencies were near par or above par with the USD. In fact the Euro, with all its "exposed on prime time" gigantic debt issues, is still worth more than a USD. The UK Pound is also worth more ...

The definition of "inflation" has been bantered about so much that it is starting to resemble the definition of God. The definition is always based in agendas. There is a vast difference in the "inflation agendas" between Ben Bernanke(US FED) and John Williams(Shadow Stats).

I don't hold real estate prices as a standard of measure for "monetary inflation". If the mortgage holders walks away or default the ownership of the house goes to the deed holder, which is usually some specific bank or a collection of banks. Is a deed money? The "asset", being the house, will live again to be resold and re-mortgaged(paper debt gets shuffled). Now tell me how much "skin" the bank or banks that holds the deed has in the game at this point? Has any debt been extinguished? The house is still worth x amount of debt based dollars, even if the previous owner over paid, not $0 and it is only a matter of time before the next mortgage is signed and paid for in debt based dollars again and the debt cycle is repeated. How many times has that same house been bought and sold prior to a 2010 default? If the house was first built in the 1970s then its probably been paid off at least three times over already! Bought and sold ... rinse and repeat ...

To predict human behavior on a global scale is a crapshoot, because very few of us were raised in the exact same households and got the exact same education. There are so many variables at play. There is however one predictable factor and that is that those at the top positions in government, banking and industry will do and use whatever means they have to in order to stay at the top. That has been predictable since the first caveman discovered fire. Who gives up their "fire" voluntarily? We are on a monopolistic path that will end, as all paths and monopolies do in time, and those who have been elected to lead us on this path care not what their odds are of success. They can no more quit asserting their self proclaimed "cures" than the snake oil salesman in the movie LITTLE BIG MAN! Their job is to "sell" not succeed ... They have all been excellent salesmen since Americans have been electing and re-electing "failure" for many decades now. As long as they have "buyers" CHANGE is not in the cards. I for one quit buying that "snake oil" a long time ago. You need to look to your local community for the long term, not Washington DC. Washington DC only sells empty "promises". No real cures for you and me reside there ...

You are quite right about the cost of living, which is akin to the concept in medicine where we can measure micrograms...but not kilograms.

The CPI is a farce, constructed through the use of substitution, weighting, and hedonics. A hot dog is not a steak, health care is not 6 percent of expenses, and how many big screen TVs can you put in your cave?

The real price of food, energy, healthcare, insurance, and tuition (major staples for boomers) far outstrip the reported CPI and yet if one wants to invest in US equities, the correlation to the TNX has been extreme, and if one wanted to short US bonds, one would be getting his face 'ripped off'. Yet, Wall Street lives by the 'numbers', however contrived and faulty.

We still must ask where the jobs arise, mysteriously like Botticelli's Venus. Maybe if jobs were tied to votes somehow, they would be easier to come by, then cash stuffed into Senators and Representatives pockets...

Let the selling resume.
In all seriousness, the u.s looked foolish when urging more spending and the G20 majority saying everyone needs to hunker down.

Let's see how much pop can be manufactured closing out the month.

As we are about to celebrate July 4th I question how independent we as citizens are. Maybe it should be renamed "July 4th Americas apathy day"

I see that thousands of Canadians protested at g20 in Toronto. Mean while Americans flood the apple store.

Oh and I know approx 4-6 folks affected by the inability to extend unemployment benefits. I think 1m+ affected last week. This number will now continue to pile up every week!

pretty good non-preferenced view on VVUS, ARNA, OREX ... http://www.new-prescription-diet-pills.com/

ALOHA!!

I can not believe what I am reading ... How on Earth do such fiscal derelicts accumulate such power? Do they think that the World is a fiscal paradise now after one meeting?

This is from the article entitled: G20 summit: leaders agree to halve deficits by 2013

Here is Obama saying ...
"Our challenges are as diverse as our nations," US President Barack Obama said. "But together we represent some 85 per cent of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time."

Please Mr. Obama, global challenges are not diverse at all. The global challenges are all based on currencies backed by debt and sold as political "vote chum" promises. A "liability" is a "liability", whether it is in Greece or America or on the North Pole at Santa's House. What is the difference between the UK debt and the USA debt? Nothing, as neither can ever be repaid. If it could it would have been 30 years ago. Instead its been DEBT GONE WILD for 30 years!

Is it really "economic" based? How is it? Who has their foot in every door in America? Who is spending eight times revenues? Its not me Mr. Obama, sir! I respectfully ask you to look in the mirror sir. You have not only over spent, you have over promised. I ask how can there ever be any fiscal controls when our economies are based on a monetary system whose essence is based in the hubris of the human ego? How many trillions have you spent so far in FY 2010 Mr. Obama? What deficit? Stop playing accounting tricks and get down to the only "deficit" that matters ... the REVENUE DEFICIT! Quit spending more than you take sir. Let me explain for you the basic math principle almost any high school kid has to learn.

If A=B then B=A ...

TRANSLATION: If your outlays are 800% more than revenues then you need to increase revenues by 800% so that A-revenues equals B-outlays.

And NO debt is not an asset, nor is it revenue! If it is owed and interest must be paid then it qualifies as a LIABILITY.

Here is one of the G20 participants from the UK, George Osborne, telling the global citizenry all about the newly forged fiscal discipline.

"I think people will have seen a change of tone at the G20, as people have understood the impact of the sovereign debt crisis and the necessity of countries to prove not just to international investors but to their own domestic populations that they have got serious, credible plans to live within their means."

Oh, "serious, credible plans" you say Chancellor. Now, after one weekend meeting the "stimulus packers", the "QE queens", the "bailout bozos", are now credible! Wake me when you actually have a "serious and credible" monetary system. One where the US FED is a "no-show". One where money is backed by something more "serious and credible" than "faith and credit". One where the same old recycled has-beens and failures that now populate the US Treasury and the Rotunda and the Oval Office have been relegated to the historical monetary dumpster of fiat failures. How is it sir that the same leadership that created these sovereign debt issues can be relied upon to clean it up? On what basis? Is it just because the November elections are around the corner?

Look at this ...
In a sign of how much work was involved to forge this G20 consensus, negotiators spent at least 45 hours drafting the summit's final communique ...

Now that is so impressive. I applaud all those very hard working negotiators who spent 45 hours doing God's Work! We are so lucky to have such dedicated and hard working leaders at the G20. Its inspirational, truly!

Lets take a look at how much debt the US Treasury issued in a 45 hour period. Last Thursday, June 24th, the US Treasury issued $88.43BIL USD in Regular Series Bills and another $25BIL in Cash Management Series, one year or less debt. Total short term debt issued was $113.43BIL in one day, 24 hours not 45 hours. So how much net tax revenues were "taken" in on that same 24 hour day? The answer is $1.94BIL USD. Now that is what I call fiscal magic! Mr. Obama that's all you. You are not any where close to being a fiscal role model for the World. What enormous hubris you display. Your political party is no "leadership" role model and neither is the political party of your predecessor. I am humbled by the many sacrifices our elected leaders have made on our behalf.

And what of the citizenry? How did they react to this new found fiscal credibility? How will they take to more "austerity" and higher taxes?

Outside the summit, police clashed with large groups of protestors who smashed shop windows and torched police cars on the streets of Toronto. A total of 605 demonstrators were arrested.

And traders?

Australia Shares End Down 0.7%; G-20 Fails To Impress

What a difference one meeting makes!

Yes, its that new thing called "sarcasm" ... Google it ... it was just invented yesterday!

Taxes? Yes, a definite way to increase living costs.

Here in Illinois, our latest Governor/Spinmeister Rod Badboyovich, promised not to raise taxes. The income tax was untouched, but all fees, licenses, builders' permits, etc. took a huge jump.

The effect was seen in the exodus of Illinois businesses.

When asked to account for Indiana's improved performance their governor said, "Thank Illinois for driving businesses our way." (paraphrased)

I see taxes at all levels as the next bubble to be ignored until too late.

As I recall "taxes without representation" played a part in our early history. Unless a lobbyist is working directly for your interests — you, like me, have no representation.

Ready, aim, FIRE them all!