Bill Cara’s Blog for June 8, 2010 [See post-close report]

Goldman estimates the cost of the Gulf of Mexico spill clean-up and proposes either a dividend cut, dividend holiday or in the worst-case scenario a rights issue.

http://bit.ly/bNJXn3

Today, government workers, translated to teachers, nurses, doctors, etc... are protesting in the streets of Spain. Their salaries were slashed 5% and pensions frozen. Let's hope this doesn't become violent. OTC derivatives and resulting payouts to HB&B execs are knocking over countries like dominoes. Transferring private debt to the public should be a crime, period. Debt cannot be solved overnight for most people. The enormous world debt, now public, will not be resolved anytime soon. Will the eleven year experiment called the Euro end over the next year or two? That's the real angst.

7:44 DJ.... thinks ban will be extended to 12 months... RIG, DO, ATW, etc...

as depositions get taken by a lawyer noted for taking on big oil:

http://motherjones.com/blue-marble/2010/06/rigs-fi...

AET - Wells Fargo Resumes Coverage with an Outperform.

This is a bear market, but don't tell anyone.........

Tue Jun 8 08:17:00 EDT 2010 | Briefing.com
S&P futures vs fair value: +3.50. Nasdaq futures vs fair value: +6.50. Last evening Fed Chairman Bernanke stated that the economic recovery remains moderate, but that the unemployment rate is likely to remain high. The comments came in the wake of an underwhelming monthly jobs report this past Friday. Concern about the implications of that report and ongoing uncertainty regarding Europe's financial conditions have sent the S&P 500 down almost 5% over the course of the past two sessions. The latest reminder about Europe's financial woes came from a Fitch review of Britain's fiscal challenge, which was deemed formidable. Europe's major bourses are under pressure in the wake of the report, but the euro has managed to gain ground against the greenback. Strength in the euro has helped prop up stock futures for domestic markets.

Hey Bill,
Thanks for the heads up on these two - STD & BBVA. When I think of STDs, something else entirely comes to mind. Wouldn't touch either of these banks with a ten-foot pole. On the other hand, one of the Cara100, XOM, presented great value on the buy alert for long term investors - real assets, little debt, excellent leaders and essential product. Good to see the RSI tool working again.

Kaimu,

I admire many of your posts greatly, but you have to understand that I WAY WAY over allocated myself to metal when I exited some big wins a few years back. That to me is a lot different than only having 10% or 20% metal, like most bozo advisors have recommended. I do trust metal in general much more than paper, only because paper has proven itself unworthy time and again since its inception. But there also have be point in time where the price of gold measured in paper has gotten to extreme levels relatively speaking, to the purchasing power of paper, and buyers or holders of metals beyond those points have taken severe beatings compared to if they had unwound some of their positions and traded off for some other asset class.

My point with "basket of currencies" was to avoid putting anything more in US dollars than necessary, because I don't want to overexpose myself to the potential of a hyperinflation, and my social security checks will already be in US dollars, and instead weighting it to other currencies of countries with only small amounts of debt. My intent is/was to do this on a huge spike in gold, similar to the spike 30 years ago, where it rose about 50% in a year. I think peeling off 1/3 at that point and diversifying it out to other asset classes when everyone else is panicking into gold would be prudent.

I thought it through some more, price point wise, and another way of looking at it is total currency + government debt expressed as a ratio for today / 1979 and take the result times the 1979 price of gold, from say $700 to $850, that being the "unwind area" where you could consider gold to be bubble priced vs other asset classes.

But hey, what do I REALLY know? I'm just guessing as best I can, just like I have been since 2002.

Well written and duly noted.

"Au contraire, Good Dr. S. Gold is a ware. It has a price.

As to the 5,000 year history of gold as money, I would point out that Egyptian money thought was very much like ours. A written receipt was considered a money transfer. After the Ptolemiac conquest of the fellahen Egyptian civilization, gold, silver and copper coins received from the Greeks in payments were beaten into nuggets and traded as wares. I won't go into the Chinese copper bells and draperies as their symbolic money thought but historically, slavery has had a more lasting place than gold as money." - Ross

Why don't you tell that to Mr. T? I'm sure he'd agree that all those gold chains around his neck symbolize less value than THAT barbaric relic known as slavery. Then you can be his prison pillow with a crayon face ;-)

"Julius Caesar's lament on finding no gold and silver in Brittania was metted with huge slave gathering parties that transferred tens of thousands into the Empire. The slave market on Delos processed 10,000 a day." - Ross

Yes, and this led to a kind of corporate farm that drove down the price of wheat and ruined the coastal soldiers' farms in the centuries before Christ. Young Tiberius was killed for attempting to dole out land to the masses. Only the iron fist of a Roman general with the armed forces behind his back could control the hell wraught by slavery within the Republic. See Cotton Plantation Economics and the U.S. Civil War.

"Granted there is no upkeep to gold but if a work asset (slave) can exceed his upkeep, the slave becomes better than gold. Roman slavery wasn't the sugar plantation slavery of the West. Roman slaves could be lent at interest and many slaves had business interests that exceeded their masters. But history has been revised to dovetail into the polemic of the day. Shameful yet calculated by the vote getters." - Ross

Using slaves to act as teachers for your children was indeed problematic for the wealthy Romans. Mistakes were made. But we digress.

"I will say again, I can put a JM kilo and an RBC kilo in my sock drawer and spice it with porno mags but they refuse to copulate and give me even a copper farthing!" - Ross

Try a money tree. They're really neat. By the way, slaves die, get hurt, grow old, lay idle and require food and shelter in the off season, run away, get emancipated, get impregnated by YOU ... See George Washington

"Framed over my desk is a handkerchef from the election of 1896. William Jennings Bryan from Nebraska and Arthur Sewell from Maine. In bold letters is printed 16 to 1. Tarriff for revenue only. Most know his 'Cross of Gold' speech. That was the end of the bimetallic standard. I point this out because as late as 1900, people still believed that some metals were money. America had built canals and railroads and electrified cities with bond debt but politicians were still argueing over what is money." - Ross

Well, the 1878 silver trade dollar on my desk suggests that silver worked okay until politicians altered free markets with tarriffs and other flawed ideas. The 'Crime of '73' was about expansion of the money supply and velocity through a bi-metallic backing that was rejected. Sound money policy can win elections? Yes, it can.

U.S. Constitution demands that no state shall "make any Thing but gold and silver Coin a Tender in Payment of Debts," Article I, Section 10. Please tell me where the Amendment to the U.S. Constitution to repeal this Rule of Law exists or was even attempted other than the coinage acts establishing the gold standard. Cowards, I say. We have trillions in bond debt owned by foreigners and runaway household debt to boot. Now what? Re-enact slavery? Debtors prisons and Colioseums?

"Gold can be an a discipline but only if everyone agrees to the rules. Moon rocks as well. There can be no standard of standards as long as there are democracies. Hate to say but the sheeple have become 'cargo cultists.' That term is good for a WIKI..."

Ass backward. If not all agree to the rules, and they never do, only gold can be the discipline. Gold will always eventually re-establish the basis for value. See the euro, Austrian Economics, and Abe's speech about fooling all the people all the time.

"I own the barbaric relic because I truely believe in the 'faster greater fool' theory. I have a dear friend who 'still' owns several thousand ounces of Bunker Hunt's $40 silver from the early 80's. He has been surly for 30 years thinking his silver was 'money.' Of course EVERYONE knew in 1980 that $800 dollar gold would be be be be be WOW $1200 in 2010!!! Nice return if you were a sleeping idiot!!" - Ross

At least gold beats the major indexes over the same period. See Nikkei 225.

"Price is reality and timing is everything. I truely appreciate honest discussions but I detest someone trying to blow smoke up my kilt..." - Ross

Gold is trending up now and that equals reality. Is this disingenuous? Do tell but keep the humor button on.

Cheers.

I have no idea where gold is headed in the short and intermediate terms. It might be on its way to $1500 this year, or it may be headed to $800.

Longer term, I think it has to head much higher for a simple reason which I explain to myself in this manner.

When it came to the U.S. budget and deficit, we used to talk in billions. Now, we are talking in terms of trillions. We know that this is being done by the debasement of our currency. How can a debasement of this magnitude contain the nominal price of gold at present levels in the long run?

TZA‎ up 3.05% (typo) up 1.xx%
Dow up 0.44%
Nasdaq down 0.90%
AAPL down 1.25%

Something is fishy. i think there might be some rotation of money into the Pfizer's and other blue chips. but riskier assets are being sold since last night, and beyond.

I don't think this dance ever ends, NYUGrad :)

June 2, "Go to Cash: Facts and Fiction"

http://tinyurl.com/2d2jjfu

June 8, "Go to Cash – In Plain English"

...

If you want to understand the extent of the environmental and economic destruction in the Gulf of Mexico, I suggest you read this account:
http://tinyurl.com/35w4qo6

Here are excerpts:

"As we neared Barataria Bay, the smell of crude oil in the air was getting thicker and thicker. An event that always brought joy to me all of my life, the approach of the fishing grounds, was slowly turning into a nightmare. As we entered Grand Lake, the name we fishermen call Barataria Bay, I started to see a weird, glassy look to the water and soon it became evident to me, there was oil sheen as far as I could see. Soon, we were running past patches of red oil floating on top of the water. As we headed farther south, we saw at least a dozen boats, in the distance, which appeared to be shrimping. We soon realized that shrimping was not what they were doing at all, but instead they were towing oil booms in a desperate attempt to corral oil that was pouring into our fishing grounds. We stopped to talk to one of the fishermen, towing a boom, a young fisherman from Lafitte. What he told me floored me. He said, "What we are seeing in the lake, the oil, was but a drop in the bucket of what was to come." He had just come out of the Gulf of Mexico and he said, "It was unbelievable, the oil runs for miles and miles and was headed for shore and into our fishing grounds". I thought, what I had already seen in the lake was enough for a lifetime. We talked a little while longer, gave the fisherman some protective respirators and were soon on our way. As we left the small fleet of boats, working feverishly, trying to corral the oil, I became overwhelmed with what I just saw."

"We continued farther south towards Grand Terre Island. We approached Bird Island. The real name is Queen Bess Island, but we call it Bird Island, because it is always full of birds. It is a rookery, a nesting island for thousands of birds, pelicans, terns, gulls etc. As we got closer, we saw that protective boom had been placed around about two thirds of the island. It was obvious to me, that oil had gone under the boom and was fouling the shore and had undoubtedly oil some birds. My God. We would see this scene again at Cat Island and other unnamed islands that day. We continued on to the east past Coup Abel Pass and more shrimp boats trying to contain some of the oil on the surface. We arrived at 4 Bayou Pass to see more boats working on the same thing. We beached the boat and decided to look at the beach between the passes.

The scene was one of horror to me. There was thick red oil on the entire stretch of beach, with oil continuing to wash ashore. The water looked to be infused with red oil, with billions of, what appeared to be, red pebbles of oil washing up on the beach with every wave. The red oil pebbles, at the high tide mark on the beach were melting into pools of red goo in the hot Louisiana sun. The damage was overwhelming. There was nobody there to clean it up. It would take an army to do it. Like so much of coastal Louisiana, it was accessible only by boat. Will it ever be cleaned up? I don't know."

BSCH didnt come up as the ticker. Do you have ticker for the first bank.

I see BSBR
BCDRF
SAN

all related to Banco de Santadar *******

BBVA itself is a working ticker for your second listed bank.

Don't know how far the parallel goes, I am totally indifferent to gambling so don't have first hand experience - but the mindset and discipline of a professional card player as described in movie Rounders is close in many regards.

True. both worlds are def rooted in probabilities.

over the long run the house wins at black jack. Over the long run the investor wins at trading. An investment is a trade, just with a long term horizon. I know what game I like. If a day trader or high frequency trader had a long position and flipped a switch and became a long term holder his odds of winning are almost assured.

I started off in Blackjack. No matter how good you think you are, the house has an edge. I successfully switched to poker, primarily tournaments, with some success. Although poker is a simple game to learn, it is difficult to master. It takes reading and understanding the game thru a slew of books in understanding the fundamentals, and then playing thousands of hours online and in casino atmosphere. In my first tournament, I reached the final table. In my second tournament, I won and collected $3,000. From then on I was hooked.
Trading has been a learning experience for a long time with generally overtrading and making the broker rich! Only until recently have I been able to master trading and basically I am a day trader of the SPX only, either the SSO or the SDS. I use various indicators on an intraday basis for confirmation of a buy and subsequently raise stops continually to keep the profits locked in. Although whiplash can occur frequently with a short leash, scalping profits do add up. I don't need a homerun, only a single with a high batting average.

see that Rudd's Administation is really sucking wind. per Bloomberg notes... maybe the mining tax proposal might be shelved or reduced ?

ALOHA!!

SNAP-Supplemental Nutrition Assistance Program
Two line items on the US Treasury report that I follow are for Food Stamps and Unemployment Benefits. Food Stamps used to be reported on a separate line item but is now combined with "Food and Nutrition Service". As of June 7th here is where these two line items are YTD for FY 2010:

UNEMPLOYMENT BENEFITS - $111.5BIL
FOOD & NUTRITION - $61BIL

TOTAL = $172.5BIL USD

I will list other line items that these two totals exceed on a YTD basis:
-EDUCATION
-FEDERAL SALARIES
-HUD
-INTEREST ON TREASURIES
-TARP PAYMENTS

Amazingly enough the cost of SNAP is running at the same rate of SDS unemployment rates(U6) above 16%. Makes sense that if you are on unemployment then you would go over to the SNAP offices to get free food. There is no way tax revenues can keep up with all the expenditures the US Treasury needs to keep the current two political parties in power, so enter more and more "debt"!

THE BREAKDOWN
According to the United States Department of Agriculture, statistics for the food stamp program are as follows:

* 51 percent of all participants are children (17 or younger), and 65 percent of them live in single-parent households.
* 55 percent of food stamp households include children.
* 9 percent of all participants are elderly (age 60 or over).
* 79 percent of all benefits go to households with children, 14 percent go to households with disabled persons, and 7 percent go to households with elderly persons.
* 36 percent of households with children were headed by a single parent, the overwhelming majority of whom were women.
* The average household size is 2.3 persons.
* The average gross monthly income per food stamp household is $640.
* 41 percent of participants are white; 36 percent are African-American, non-Hispanic; 18 percent are Hispanic; 3 percent are Asian, 2 percent are Native American, and 1 percent are of unknown race or ethnicity.

How many Americans were on Food Stamps in the past?
Program Expansion - FSP Participation Milestones in the 1960s and Early 1970s.

In April 1965, participation topped half a million. (Actual participation was 561,261 people.) Participation topped 1 million in March 1966, 2 million in October 1967, 3 million in February 1969, 4 million in February 1970, 5 million one month later in March 1970, 6 million two months later in May 1970, 10 million in February 1971, and 15 million in October 1974. Rapid increases in participation during this period were primarily due to geographic expansion.

So much for defeating poverty and hunger in America ... All this debt and nothing to show for it, except more debt. In 1970 around when LBJ decided it was time to really fight poverty(aka: THE GREAT SOCIETY) the ratio of Americans who were on Food Stamps was 3% of total population, now in 2010 it is 13% of the US population. The marvels of a huge centralized bureaucracy never cease to amaze me in terms of ineptitude and inefficiencies. Has anyone considered that poverty and hunger increase as our money buys less and less? Yet more Washington DC failures to add to the list and now Washington wants to run America's healthcare ... Hummmmm ... What "hubris"!

In October 2008, the beginning of the FY 2009 total people on SNAP(Food Stamps)was 31million and in March 2010 it is now at 40.5 million, so in a 16 month time period some 10 million Americans needed to get government food assistance. The population of the Los Angeles city is 4 million. Chicago city population is 2.8 million. San Francisco city population is near 1 million. Houston city population is 2.2 million. Add up all four cities and the total is around 10 million. Los Angeles, Chicago, San Francisco and Houston! That is how many people went onto Food Stamps in 16 months time, so that is a lot of people!! Where would those 40.5 million people be without SNAP? In the streets like the Greeks is where. It is in the current US government's best interest to keep destitute and starving Americans off the streets, out of sight and out of mind. So SNAP is subsidizing SafeWay and other super markets.

How can there be any economic recovery in America when the numbers of Americans on SNAP(Food Stamps) is constantly growing in substantial amounts? This data jives with the numbers the US Treasury is putting out on the cost of Food and Nutrition and Unemployment, up 240% since FY 2009.

I might add that the SNAP website is showing how they will be providing food to the stricken populace who have lost their employment due to the Deep Horizons oil spill disaster. I suspect the numbers on SNAP rolls to increase substantially starting in May 2010 data.

Bernanke today claims the economic recovery is moving ahead but with "pain". Who is recovering other than bank CEOs and stock brokers? I wonder if Bernanke has ever been on Food Stamps. I doubt he has. Then how can he possibly know what "pain" really is? Government and banking is totally disconnected from the average citizens.

I did buy a book on winning in Blackjack a year before I began to take an interest in trading. I was interested in the card counting technique that permitted a player to get a leg up on the house. Alas my one experience in the casino was with a 6 stack electric shuffler and I quickly realised the odds were vastly in favour of the house.

Baz, I suggested to Kaimu that such a proposition (shelving/modification of the tax) could be used strategically for trading if done at the right moment. i.e, a pop in the share price of miners to be gained. Mind you, with his little gem of a stock SLR.AX I don't think he need be concerned by such a decision.

But this is about the voters. And I think we've worked out at this blog that the future for the voter is not pretty. Deflationary or inflationary, eventually a store of value will be placed upon those goods and resources that count in the real economy. The value of resources to the Australian economy is already noted:

http://www.smh.com.au/opinion/politics/federal-int...

and likely to face higher rates of taxation, once the Australian voters realise they are STILL primarily a resource nation. Smarter politicians/voters will understand that taxation must wait until after the cyclical downturn in China. This is a vote of dislike upon the Prime Minister himself. I look forward to him getting the boot and someone more politically adept taking office and quietly continuing negotiations.

"Reserve Bank governor Glenn Stevens says the rapid deterioration of Europe's debt crisis should serve as a warning for Australian households to reduce their debt."

http://www.abc.net.au/news/stories/2010/06/09/2922...

Ross -

I'm "hackneyed" and you're funny. Fair enough. Best of luck with your slavery investment. I don't know how you do it.

Cheers.