Bill Cara's Blog for Apr 12, 2011 [See Post-Close report]

Good morning.

New POMO Schedule Due At 14:00 Today.

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8:30 - Trade Balance
8:30 - Import/Export Prices
14:00 - Treasury Budget/New POMO Schedule

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DEO - Upgraded to Buy @ Jefferies. Target $91

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New census data shows that the population of Detroit has fallen by a shocking 25% in the last decade. The city council warns that if the trend continues, they may be forced to change the city's nickname from "Motown" to "Lesstown." -- DailyComedy.com

Submitted by Grym (3345 comments) on Tue, 04/12/2011 - 07:40 #83680 (in reply to #83673)

Loannetter,

"Interesting to see you you two have taken this subject to educaton and offshoring of jobs. My beef was being a woman in an industry that obviously pays us badly."

In no way did I mean to ignore the equal pay issue. It was around during my entire working life and I see it still is.

Like the 1964 Civil Rights act was supposed to eliminate racial prejudice, it was to do likewise with the gender issue. What we ended up with is super-spin backed by eyewash quotas and high profile tokens.

Because I was too contrary to work for others (and because I was born when the US was in ascendancy) I set my own prices for what I did beginning at 19. My wife, also self-employed as an editor/proofreader, always charged too little for her services (she'd disagree with this comment, but won't see it ;-). Don't know if it's an "guy thing" or individual tendency — I suspect the latter. She is more concerned with being liked, I'm stubborn and pretty quick to get my back up.

Either way, in my view people should be paid in true, free market fashion — paid for what you do — not what you are.

As the companies began to dump older, experienced and therefore more costly people, I found myself shut out of places I had serviced for as long as thirty years. The young kids who knew little about the process and what could save money and/or do the job better, tended to favor people their own age, experience, style of dress and haircut. I was just too old to go for an earring and still had a 1970s length beard.

Discrimination will touch most of us in one way or another. How we deal with it is all that matters — others can't feel it and legislation won't prevent it.

In my case, in a way it was the free market that did it — cheaper products due to software with templates for design and clip art (creativity goodbye). Price cuts with beginning level pay to inexperienced ad managers, foreign competition driving clients to go for price over all.

I can complain, but I can either work for peanuts or work with my savings, which pays better and I can keep my pride.

Grym

Silver Wheaton CEO resigns, stays on as consultant; appoints co's Pres Randy Smallwood as new CEO.

Company announces Randy Smallwood, currently the company's President, has been appointed CEO. He will replace Peter Barnes, who has resigned effective April 11, 2011. As part of the transition process, Barnes has agreed to enter into a consulting agreement with co.

http://on.wsj.com/ii6CJU

"Had the Libyan crisis emerged at a time other than during peak European refinery maintenance, $125 a barrel might already be a distant speck in the rear-view mirror," it said. Refinery-maintenance shutdowns probably peaked in March and the usual seasonal rebound in activity could add between two million and three million barrels a day to demand by the summer, the report said.

CAT - Caterpillar upgraded to Buy from Neutral at Buckingham. Price target is $135

dave- I concede that the response to AA earnings has me second-guessing my take. At this point, I'm weighing whether to sidestep a possible squall, or keep driving.

A lot of us fit that bill. I, like I assume you are, am somewhat more fortunate than most. Being a curmudgeon led me to seek my fortunes by following a path less travelled. Life has been and continues to be a lot of fun.

mayhem,

Except for what I see happening to our country and the outlook for my kids being manipulated. A report today shows the CEOs are up 12% while the average worker is static or down.

I'm with Stiglitz that eventually this will be bad for all of us.

Hang in there until we can hang those now in control — My kind of fun ;-)

Sara Eisen on Bloomberg Radio this morning quoting Chinese central bank adviser Yu Yongding

"China's holding of US dollars like a fridge full of rotten food"

Why is it that Euro has breached $1.45?
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Roger Bootle in the UK Telegraph:

"The masses are to get the message that their enlightenment means nothing"

Why is it that everybody & their brother knows the truth, thanks to the internet, but _____________(you fill in the blank)?

4ever,

The euro is more like a proxy for the old Deutschmark. I think Germany has benefitted from a weak euro just as much as the weak periphery nations' economies have benefitted from cheap debt.

Just wanted to remind everyone that I believe Obama was taped saying two or three years ago that he hoped the price of gas would double (or something to that effect) to help facilitate his agenda......still believe USA has one of the largest (oil/gas/coal. etc) energy reseves in the world but obviously flailing about in the use/developement of same.....

dave- If we are in fact pulling back (significantly) here, I'm guessing we zig up later this afternoon, then zag down again tomorrow.

My own sentiment appears to have jumped off the wall of worry. Not yet replaced by hope- but as soon as I begin 'hoping' for a recovery in prices, I will not hesitate to cash out.

I entered just before the close yesterday. Thinking about adding on strength. I like both sentiments (rock bottom) and T/A (higher lows and highs).

My take is the markets could be following the 2007-2008 script from now on, ie dollar falling coincided with markets falling. This new trend started in February this year as I posted about it before.

BTW, I'm glad I sold my last allocation of GDX yesterday, thanks all who mentioned dire prospects for gold/silver yesterday (even if short term).

re:The doubling of gas price-

If that's the article I read pre-election, it was in response to a question on how Europe had dealt with oil dependancy. Raising taxes on motor fuels, particularly high pollution, low efficiency gasoline while directing consumers towards diesel with 25% lower tax/litre (and 20% better mileage).

This was desirable with the advent of clean diesel technology,the Mercedes Bluetech, etc.

Of course the political leadership had the balls to push that policy, and the people had the intellect to appreciate it.

The bigger picture is Europeans aren't dependant upon cars, they have a wealth of transport choices...thanks to that tax $$.

Better than the Saudis getting it.

I'm bothered by the feeling our system of government is too corrupt/partisan to pass sensible legislation.

Ciao, Z.

I sold my XLF puts I held over the weekend.

Plan to reenter later.

Hi Californa Kid; thanks very much for your thoughts. I've pretty much lost most short term concern for the market and am still a buyer with adding to UNG, CGR, LEI, DNN, TLR & for grins bought a little CXZ. I still have my Canadian gold & silver miners. I think you statement below was right on. We use ~1.8MM Troy ounces of silver with each catalyst charge, every 2 years, of that some 93% is reclaimed but that is our process, many others don't do so well.

(Hold shiny elements of your choice. Uranium is a product like silver in it is hard to recover from industrial use. )

Thanks again!
Earl

I like the part where "pigs get slaughtered." Bait the traps, and stand back because they will get caught, I hope. I like to see people squirm when they are caught in their own trap. That may take some time but I won't worry about them while I wait. There are too many things for me to do.

ZedII,

"The bigger picture is Europeans aren't dependent upon cars, they have a wealth of transport choices...thanks to that tax $$."

Yes, think of what would have happened if instead of supporting the big banks we'd begun a passenger mass rail project to follow the Interstate Highway System. Talk about job creation! Think of the mortgages it would have saved. AND, of course as you point out, the gas savings too. Instead of model railroads we could have little model cars to play with ;-)

"I'm bothered by the feeling our system of government is too corrupt/partisan to pass sensible legislation."

But it's worked so well so far. Ask any banker, big oil guy or stock salesman.

Both are natgas ETFs but GAZ performed better in the last several days, despite similar long term track. Anyone knows the difference?

That money you've been paying for gasoline, where's it going, what's it being used for?

Sure you've seen the ski resort dome built in the desert before, but now the world's tallest building, a mile high, at a cost of $30 billion.

The Kingdom Tower, which, when complete, will stand one mile high—it takes 12 minutes to ascend to the top via elevator. (First thought is to chew gum on the elevator to keep your ears from popping!)

http://tinyurl.com/6jzw86p

I think the architectural company is out of Chicago.

Speaking of the drop today in the price of energy, it appears all energy companies being thrown out together, including some nat gas companies like EP, XTXI and EOG.

No current position but looking. DOYDD.

From finviz, relative volume is about normal.

http://finviz.com/

Note the little blue volume meter next to the charts for DOW, NASDAQ, S&P 500. They read just under 1.0.

The volume for some of the energy companies is distinctly above normal though.

Interview with new SLW CEO coming up on CNBC

Wouldn't be buying UNG for long term. Too many issues around rolling contracts - almost guaranteed to go to zero in the long run.

Better off buying a Nat Gas producer like a Encana or I also own small caps Openrange, Fairborne and Anderson for good nat gas exposure.

Time horizon determines tactics. In trading discipline trumps conviction. Yesterday, acknowledging the right for one to change his mind, you stated SP 500 to 5000; if you think this today's action is meaningless.

Again, time horizon is the key, perhaps having two baskets one for ST and one for LT can help us all with internal conflicts we all experience in our pursuit of a secure retirement (or whatever our/your goals are.

2nd like you say trading is not easy, I'll 2nd that.

The problem I have with linear projections like yesterday's 9% growth rate is that it is not unusual for stocks to modulate in a 30-50% range up and down. I know myself well enough that I do not handle that type of movement against me well there fore I seek a different way. Basically just talking out loud to myself. FWIW

Executive summary: from 20-38 days of QE2 remain. Less than I thought. Are you ready? I'd expect: dollar rebound, LT treasury drop, PM drop, equity market drop. Have the markets priced all this in already? Are they pricing it in right now? This is what makes trading such fun.

From John Hussman:

http://www.hussmanfunds.com/wmc/wmc110411.htm

We can evaluate the pace of QE2 in two ways. One is by looking directly at the monetary base. QE2 transactions expand the Fed's balance sheet, increasing its assets (Treasury debt) and simultaneously increasing its liabilities (currency and bank reserves). So we can measure the progress of QE2 by calculating the change in the monetary base since QE2 was initiated.

Monetary Base 11/03/10: $1985.1 billion
Monetary Base 04/06/11: $2490.3 billion
QE2 completed based on change in Monetary Base: $505.2 billion

A second way to evaluate the pace of QE2 is to go directly to the information on "permanent open market operations" (POMO) conducted by the Federal Reserve Bank of New York. However, the POMO figures also include reinvestment of principal repayments from mortgage-backed securities. So a portion of these transactions do not change the monetary base - they simply exchange mortgage-backed assets with Treasury securities. The cumulative par amount accepted by NY FRB from 11/04/10 through 04/07/11 is $523.2 billion

A $600 billion addition to the monetary base from QE2 would leave the Fed with only about $94.8 billion of QE2 transactions remaining. Alternatively, the targeted size of the Fed's SOMA (System Open Market Account) portfolio is $2600 billion at the end of QE2 (this is the primary repository of assets backing the monetary base, the remainder representing the Maiden Lane portfolios and about $11 billion in gold). As of April 6, the SOMA portfolio was already at $2421 billion. This would leave a larger $179 billion remaining to QE2, putting the program about 70% complete. The average pace of Fed purchases since February has been about $5.5 billion per business day, with about $4.7 billion adding to the monetary base, on average (the rest representing mortgage principal reinvestments). That leaves QE2 somewhere between 20 to 38 business days from completion.

The next FOMC meeting is on April 26-27. While there has been some debate on whether the Fed might decide at that meeting to terminate the policy of QE2 early, that debate is actually moot. By the time the Fed meets later this month, QE2 will already be at least 85% complete.

Hey Grym,

Saw this from late yesterdays post. To recap: my pride went out the door when I started selling loans after my previous egolives in advertising. Now folks folks trust me with financial decisions because I'm not so doe-eyed. We use what we have at our current disposal!

re: "I'd expect: dollar rebound, LT treasury drop, PM drop, equity market drop."

Are you sure about bonds? The yields went up as soon as Fed's monetization started. I would expect them to go down again.

This means prices of 16.67/17.40/19.98/19.74. Entry prices were in the 18.0x/17.9x/20.32/19.8x range.

Why? Because I'm hoping that prices will either (a) ramp up into the close, or (b) gap up Wednesday morning. Either would give me 'feel good' exits, and either may well happen. But personal history favors selling positions immediately.

Hi Bbar... I agree UNG is not a long term investment & never will be; I like your other picks. I have July calls because there is a 'chance' of a NG rally slim as that might be - SA is liking the short side here at the bottom. I'll take the other side and I'm up a little change even after today; March 7th UNG put in a bottom and March 25th was a short term top - I think we'll re-test that March 25th in the next 3 weeks and with July calls might not be a bad trade.

http://seekingalpha.com/article/263130-energy-outl...

regards,
Earl

This is the transaction that hurts the most. Given the option, I would have closed first thing this morning. Unfortunately, rules re opening/closing positions are designed to benefit fund managers, not fund investors.

Hi tob & earl... started my position in ' dvax ' this pm... really like the science... in and out for many years, however, phase III updates this qtr... best, baz...

I sure did - (SA is liking the short side here at the bottom. I'll take the other side). They could be right but hey, I'm looking for a move above 11.25+ :-)
regards
Earl

Hi Baz,
Thank you for the lead - I noticed it was down a tiny today - Fidelity kind of reined me in a bit LOL. but you know I'm not going to take a big loss just because they have issues moving money around...

I might be able to write some calls if things 'settle' down a bit ;-)

regards,
Earl

jack -

Regarding bonds - I'm betting on a supply-demand thing. China is tightening and not exporting as much, Japan is going into recession and selling if anything. Nobody is the marginal buyer, unless the market tips over and sinks. Thus, rates rise when the Fed is no longer the 800 pound gorilla.

They are the largest owner of treasuries in the world, you know. And the biggest buyer too. Thus, when they stop buying, rates should rise. That's just my current thinking.

The great wall of worry continues despite a 2 year bull market. This will keep this market going much higher much longer than most people think. The latest fears are rising oil prices killing margins. I suspect this will be yet another unfounded fear.

http://tinyurl.com/3awx54s

Here’s a sobering thought as earnings season begins in earnest:

There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines.

This modified P/E was made famous in the late 1990s by Yale University professor Robert Shiller, particularly in his book “Irrational Exuberance.” In this modified P/E, the denominator is not current earnings per share but average inflation-adjusted earnings over the trailing 10 years. This modified ratio — sometimes called P/E10, or CAPE (for Cyclically Adjusted Price Earnings ratio) — has a markedly better forecasting record than the simple P/E.

Anyone know much about CAPE?

Above.

Hi Grym,
If I could laugh in Soros face I would - what a pathetic individual. Let him spend his money and pull in sycophants to suckle his tits. He's a twisted old man that can pay to surround himself with what did they call them - academics! There is no better place on earth to witness the soulless, hitleresk forms of know it all humanoids then in soroesk style academia. I’m not speaking of or to the academics with souls…

take care
Earl

So Volcker and Stiglitz are pinheads? Volcker is not even an academic but they both have credentials. The author of the "online WSJ" article is an associate of T. Boone Pickens, definitely not an academic who has money to burn for far right causes.

"Mr. Gainor is the Boone Pickens Fellow and the Media Research Center's Vice President for Business and Culture." The WSJ is now controlled by Rupert Murdoch. Enough said. Except that it is good to see some are thinking about a solution to reform the rotting financial system.

A little late to the party yesterday, vis a vis the gap n trap Patrick remarked upon. I loaded up on SLV puts as this ETF slid under its 5 day moving average. Perhaps I've picked a tough nut to crack - the commodities as a whole are playing much more nicely - but what I saw yesterday with a futures screen full of red was a change in the market. Intermediate or longer I have no idea, but I think end of QE2 talk is making itself felt.

Futures are all green this morning, so a bounce is playing out, but I'll be looking to reinsert myself into TWM as the wave consolidates at this higher level. That's me over thinking the trade and losing my place and it cost me a lot of what I gained to unwind the long trade I accidently placed myself in. The market is an unforgiving teacher.

Still trying to break this barrier at 13% YTD, but my PMV.V holding has lost 50dma support and now appears ready to visit 200dma support, where I have my next buy order ready. So holding 13% with a small losing position ain't so bad.

Looks distinctly bearish to me.

http://blogs.forbes.com/afontevecchia/2011/04/11/p...

seems to be the market question du jour.

Dave & Jack,

"Thus, rates rise when the Fed is no longer the 800 pound gorilla."

When QE2 was announced the Ten-Year rates rose last fall — not supposed to happen. Even Bill expected them to fall when I asked for clarification.

With Bernanke at the Fed, "Don't fight the Fed" has taken on new meaning. There are NO RULES! This is not a boxing match — there is no referee. He fights dirty.

I wished I'd saved the URL, but I read within the past week the Fed has quietly made another accountability change. He did away with FASB accounting, imposed a "No Short Zone" on selected banks, he is making it up as we go along. He has passed mouse money to places we know of, but how many we know nothing of?

I made more money than ever before on SKF and lost it by being too confident — then the no short deal took it all back. I will not make any assumptions. These days anything can happen.

Grym

Les - "Not inherently evil, but people trapped in a prison of their own making and behaving according to the rules of their joint"

Now that's the question. Were the people in the Gestapo evil, or just behaving according to the rules of their joint? How much personal responsibility do we have for the decisions we make every day to "follow the rules"? I think the world determined at Nuremberg that just following orders doesn't give you a pass.

Another view is that while its true that the current system rewards troublesome behavior, for 50 years we had no banking issues, and then suddenly problems started to sprout up. Why was that? Its because the rules were changed - the inmates started running the asylum. Any wonder things got crazy?

From this perspective, I don't give them a pass here either because THEY are largely responsible for writing the rules!

As a parallel: the Nazis first wrote the rule book, and then proceeded to act badly. Same case here.