Bill Cara's Blog for Dec 16, 2010 [See post-close report]

jobless claims come in at consensus of 420k, 1k less than last week.

"Initial jobless claims for the December 4 week declined 17,000 to 421,000. The four-week average, which smoothes out weekly bumps, fell 4,000 to 427,500."

So some stability here. Still, 400+k initial claims still too many.

http://fidweek.econoday.com/byshoweventfull.asp?fi...

housing starts a little above consensus and above prior .519M coming in at .555M. So a little stability in Nov following Oct plunge.

http://fidweek.econoday.com/byshoweventfull.asp?fi...

Good morning.

6-8 Billion Dollar POMO Injection Scheduled Today.

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8:30 - Initial Claims (420K vs 425K) Continuing Claims (4135K vs 4078K)
8:30 - Housing Starts (555K vs 545K) Building Permits (530K vs 560K)
8:30 - Current Account Balance Q3 - (-127.2B vs -125.3B)
10:00 - Philly FED

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Cara 100 Earnings After The Close: ORCL, RIMM

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AAPL - PT Lifted from $380 to $395 @ Kaufman Bros. Buy

JOYG - PT Lifted from $88 to $96 @ RBC. Outperform

MCD - McDonald's coverage resumed with a Neutral at Goldman. Target $88

NOK - Hudson Securities Initiates with a Buy. Target $12

ORCL - Upgraded to Outperform @ Macquarie. Target $37

SBUX - Starbucks coverage resumed with a Conviction Buy at Goldman. Target $44

WAG - Walgreen initiated with a Neutral at Guggenheim. Target $41

WFMI - Whole Foods initiated with a Neutral at Guggenheim. Target $47

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"Doubt everything. Find your own light."

-Last words of Gotama Buddha, in Theravada tradition

Tight stop.

Damn- OK, so the first spike down gets bought. Awaiting the next wave.

I currently have a box of 2 1/2 exterior deck screws that I switched to as the 3" ones got more expensive.....its how they do our inflation nbrs....substitution or "enhanced" features....... maybe the deck screws now have an extra x% of stainless steel in them????? kidding of course.......many of the sites that I read for shorter term movements are getting increasingly skittish...hoping any correction waits till after the new year starts.......off the top of my head I believe the market normally tops in early jan and drifts down into late feb..........best to all

Lends new meaning to the term 'getting screwed'.

Same thing for hardware up here in the Great White North, although at present tool dealers are offering deep discounts on power tools, hand tools, and wrench and socket sets, as they compete for customers. E.g. Stanley black ratchet and socket set (79 piece I think) that normally sells for $150 is today $50 at Canadian Tire. That's what I call a handy dandy loss leader.

Canadian Tire and Rona are Canadian-owned big boxers that compete with the American big box Home Depot.

check out the ' High Prices ' clip from the movie.. little too dicey to paste !!

...

The SEC is about to require retailers carrying store-brand products to report whether the goods contain minerals from so-called conflict areas of Africa.

Notice that they will be required to track the origin of GOLD.

http://www.sec.gov/news/press/2010/2010-245.htm

11:48:45 (GR) Moody's places Greece rating on downgrade review; multi-notch downgrade would be possible- Moody's decision to initiate this review was prompted, despite significant progress in implementing a very large fiscal consolidation effort, by the increased uncertainty over (1) Greece's ability to reduce its debt to sustainable levels given the recent substantial upward revision in debt levels; (2) the substantial revenue shortfall that we have observed in 2010; and (3) the level and conditions of ongoing support that would be available to Greece in the event that its market access remains cut off. Therefore, Moody's review will focus on the factors, namely nominal growth and fiscal consolidation, that will drive the country's debt dynamics over the next few years. It will also consider implementation risk, which appears to be particularly high in 2011 for both political and administrative reasons. - Moody's says that a multi-notch downgrade would be possible if it concludes that there is an increased risk that Greece's debt-to-GDP ratio will fail to stabilize in the next three to five years, or that there is a greater risk that EU support will turn out to be less strong after 2013 than the rating agency had previously assumed. - REMINDER: on 12/2, S&P placed Greece BB+ long term sovereign rating on Watch Negative; affirmed its 'B' short-term sovereign-credit rating.

for a small change.
Still keep sizable EDZ and UUP positions with tight stops. I guess I could lighten them up before the closing hour.

Plan to reenter January puts if they go on sale between tomorrow and Holidays.

The bond position opened yesterday seems fine. Plan to add some more. Maybe tomorrow?

GL to all of you.

ToddinFL,

"After I pulled up the quotes for these 3 and adjusted for stock splits and told her how much they were worth collectively at this point, she refused to go through any more stocks."

I know he feeling... I sold PNRA with a"good gain" (3X) WAY too soon.

After 40+ years I have a lot of those. My absolute worst was selling FedEx with a short term triple, shortly after the IPO.

What's the secret to my success? TIMING ;-)

the short term trend is clearly down.

http://railfax.transmatch.com/#

Exactly like in December 2009.
My read is a correction is coming sometime between now and mid January. The only problem is Holidays are very bullish time of year, that can delay the correction, just like a year ago.

Can someone tell me how consumerindexes.com managed to screw up with their prediction of Armageddon in 2010?

http://www.consumerindexes.com/history.html

done

Visa Inc. Visa and Mastercard: Fed issuing proposals on interchange fees; lays out two proposals for capping debit card fees- With respect to the interchange fee standards, the Board is requesting comment on two alternatives that would apply to covered issuers: (1) an issuer-specific standard with a safe harbor and a cap, or (2) a cap applicable to all such issuers. The proposed rule would additionally prohibit circumvention or evasion of the interchange fee limitations (under both alternatives) by preventing the issuer from receiving net compensation from the network (excluding interchange fees passed through the network). The Board also is requesting comment on possible frameworks for an adjustment to interchange fees for fraud-prevention costs. With respect to the debit-card routing rules, the Board is requesting comment on two alternative rules prohibiting network exclusivity: one alternative would require at least two unaffiliated networks per debit card, and the other would require at least two unaffiliated networks for each type of transaction authorization method. Under both alternatives, the issuers and networks would be prohibited from inhibiting a merchants ability to direct the routing of an electronic debit transaction over any network that may process such transactions. - Under Alternative 2, an issuer would comply with the standard for interchange fees as long as it does not receive or charge a fee above the cap, which would be set at an initial level of 12 cents per transaction. Each payment card network would have to set interchange fees such that issuers do not receive or charge any interchange fee in excess of the cap. - EFTA Section 920 requires the Board to establish interchange fee standards and rules prohibiting circumvention or evasion no later than April 21, 2011. These interchange transaction fee rules will become effective on July 21, 2011.

from Felix Salmon, this video on how Smithfield Farms treats it's pigs. No wonder their ham doesn't taste so good. Their pigs are treated worse than Iraqis at Abu Ghraib.

http://www.humanesociety.org/news/press_releases/2...

I sold a couple puts on this early last week - wish I could have sold more but am not and never will spend money I don't have (no margin ever). I think it's just getting started - target $55.

Thanks for the alert, Vad. More confirmation that it pays to wait for 'prices to come to you.'

Looks like they can't have it both way and need to make a decision soon.

Jack -

"Looks like they can't have it both way and need to make a decision soon."

Just ask yourself which one supports the cause for more inflation and I believe you will have your answer.

Jock, H no you're not alone. I typically go back and read the entire blog post in the evening. I've heard much of what you're refering to, my wife being a blogger herself and was in on the ground floor Tea Party here in the Clear Lake area south of Houston Texas. The middle class is being attatcked from all sides so my wife and I have to split up our efforts - she on the political end and myself trying to keep ourselves above water financially. Commerce Dept is seaking an online privicy bill of rights - fat chance that will be in our favor. It will probably provide for jail time for those of us who complain about spies. I'll eventually cut my Iphone out and go back to a regular cell phone without text. I googled myself and was shocked to see that every post here and most everywhere else is listed - at least I believe that what I was seeing. So if you think it's getting bad it already is. try to google yourself and see what I mean. I can probably track you down and be at your front door no matter where you are given a few days - scarey.

I guess I'm too thick to figure it out myself.

I'm not saying this scenario will happen, but can't help but remember Bill himself was worried about 1987-style crash just a couple of months ago.

http://dshort.com/charts/Chris-Kimble-Chart.html?S...

I bought RBY today. Reloading from when I sold the day it went up 30%+.

Jack - I don't really take much stock in those charts. People can draw lines all over the place to support their position/argument.

I am neither German nor Swiss, but I can tell you that that is not German!! Schwyzerdütsch (Swiss German) is what it is and far away from clean German. I had to listen to it twice to understand what on earth they were talking about.

Faber says the markets could have a few more good months but more and more QE is required to push up stock prices and if that does not happen then the relative comparison of less QE could actually work as QT (tightening) which would make markets go down.

He likes the Japanese stock market and still sees some potential in Vietnam and even Switzerland as long as interest rates are low (asset price inflation). Asian dividend rates are 5-6% in some places and if I understood it correctly then he also likes Asian corporate bonds.

Faber still likes precious metals and says that they still are not expensive and recommends to accumulate some every month.

Many thanks!

Jock, let me add my thanks for your reporting on the ongoing invasion of our privacy. Thanks too for your notes on Junior miners.

As an FYI there's a fairly new ETF that focuses on explorers, called GLDX. I have a small "skin in the game" position as I expect that as the gold mania develops the focus will change from GDX thru GDXJ to GLDX and I'm hoping to learn how to use the GLDX/GDXJ RSI as an indication that its time to get out.

Thanks, ChrisM, for your kind words.

RE juniors and trading, I think there are two perspectives:

1. gold is going to be strong for a long time, so buy and hold. Grit your teeth through the corrections.

2. time your holdings; trade in and out per indicators like RSI's.

I'm tempted to try to buy juniors only when they're really cheap, then hold and "grit". BUT, to trade ZSL (double inverse silver bullion ETF) to hedge when juniors and metals correct.

Sounds easy, doesn't it! But NOTHING about trading is easy. FWIW.

Let me throw in mine. I see the VIX at a real low. Chances are it wont go much lower. Maybe down to 15, from 17.5. It will at some point move in the other direction. By the looks of the VIX chart it seems it doesnt take too long to make a move off the bottom. It could see 30 real easy and quickly. The risk/reward here is quite favorable to go long the VIX. It should be a good move. The only impediment is time. My bet is we see a good vix play here.
Merry Christmas to the whole family.

What happened today at noon.... both gold and silver fell off a mini cliff... one big seller? Anybody have any ideas? They were down in Euros as well as Dollars. Was it the CTFC report?

Hi Chris and thanks so much for the thoughtful response.
Regards
Earl

MoKat -

"What happened today at noon.... both gold and silver fell off a mini cliff... one big seller?"

That's been going on for a long, long time. Study the chart:

http://www.gold-eagle.com/editorials_02/speck06280...

Edit: This article is out of date and I can't find the current intra day chart but, as Led Zeppelin used to say, the song remains the same. It's out there somewhere.

This stock look attractive LT but if you are just trying for % returns the jan 5 put for .35 gets you a 7% cash on cash return........AKS 15s look interesting here also...........crown molding in closets?? .... no comments (or skill for that matter).........best to all, toby

http://tinyurl.com/3xwv4e7

The end has come and found us here
With our toys scattered all around us here
The puzzle that we never found an answer for
Still asks us, darlin', just what all the games were for
And here we stand in a box of sand

Where's the playground Susie?
You're the one who's supposed to know her way around
Where's the playground Susie
If I don't stay around?
If I don't stay around?

The carousel has stopped us here
It twirled a time or two and then it dropped us here
And still you're not content with something about me
But what merry-go-round can you ride without me
To take your hand ? How would you stand?

I'm starting to gear up for 'retirement.' (Yeah, I know it's still at least eight years away.) And the more I ponder the prospect, the less enamored I become about the idea of spending the years trading. I have my sights on avocations more suited to my temperament. Writing. Music. Reading. Time with the family. Let's face it- when the time comes, it won't be memories of market action that flash before my eyes.

I'm still watching them to see how things play out. Based on dshort's charts and the delays in GDP reporting vs. the CM reporting, we could see some effects for this next GDP report, but I'm also wondering if the current stimulus (10% of GDP) has had a big effect that did not show up in the CM consumer purchasing data. Without knowing what CM is tracking, its tough to know.

Looking at XLY (consumer discretionary) the market certainly seems to be quite happy with consumer behavior, and the retail sales data likewise.

Here's my new business model: "Cash for Silver" Will it be successful?

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I tend to agree with Dr. Strangelove. Here's my (rambling)thoughts:

The best performing ETFs over the last year were silver (SLV +74%, SIVR +74%, AGQ +159%) - I believe it's a "trend with tailwinds". Buy the dips?

The CFTC will eventually get it right, but it'll take time while they allow JPM & HSBC to unwind their positions.

Possibility of production shortage in just a few years.

Some people believe that since silver and gold produce zero income that zero growth is guaranteed. I disagree with this notion. What was the best performing ETF again? Price growth can occur.

Monetary/fiscal/debt issues will continue driving folks to precious metals. I'll get cautious on silver when I see businesses spring up with "Cash for Silver" slogans. That may not even matter. All that "Cash for Gold" has done over the last year is push gold scrap sales higher than jewelry sales. It's a good business model - buy from the herd at 25%+ discount and sell at full market price.

Precious metals markets are relatively small. As bond holders begin to sell, they should purchase equities and allocate a portion to PMs. These will be big players like pension funds and insurance companies. Prices should rise as they squeeze through the chute.

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We're seeing several interesting changes in the global financial picture and most are USD negative. China/Russia using native currency for exchange. Can China/India be far behind? 30yr mortgage rates are now back over 5% (at Chase). US has $14T in debt. Wow. TBTF banks are bankrupt if forced to use actual value instead of mark-to-make believe asset valuation. Bad CDS swaps are lurking under the radar. Europe and several US States sure look like they're about to belly up. USA credit rating in trouble.
USA is spying on it's citizens, just like big brothers do.

Remember though, while most of these negative/bad changes are happening in broad daylight before our eyes, markets are dancing to a different beat. A lot of positive earnings growth figures have been reported and are anticipated to continue upward. If we see a carry over from 2010, then Small-caps, Internet Cos and PMs should do well in 2011. I know Bill said this was the toughest market he's traded. And that's from the trading wizard! So, be careful, delay may be preferable to error in positioning/reallocating. Who knows what tomorrow will bring.

Thank you Dr Strangelove, who's got their finger on the button and are they sane? I need to see that movie again.

I'm tired of trying to read your link on this phone so I sent it to my work email and will print it out. I've heard that MS was short silver but how to prove it... Does it make sense so many institutions would be short, would get it so wrong that they would make such an error? This is what has troubled me about silver. I'll have to finish reading your link. Thank you very much for taking the time to share this.
Regards
Earl

I had an elderly German friend in mid 80's who was a well to do chemical industrialist. His daughter, about my age at the time was married to a German dentist and for some reason they were going through the process of becoming Swiss citizens. I think it had to do with taxes or estate planning for her father but I didn't pry. They had to master Swiss German which is a real corker of a language. Very Gutteral with dangling syntaxes galore...

Faber can stand on his head and speak pig latin for all I care but he is one of only 4 or 5 men that I take very seriously. He is an erudite Jim Rogers without an Alabama accent but a distinctive one of his own. I knew him briefly at White Weld before he pushed out to the Kong.

I'll send a tin of spiced butter biscuits to anyone who can answer why he still wears that ratty ponytail!

The worst real estate mistake of my life...My German friend was liquidating his interests and moving to his port winery estate in Portugal. We used to laugh at his admitting to having only been a lowly corporal in an SS Panzer division in WWII but given his family's position, that was hardly likely! He would only tease me so I never pressed the point.

I hope this 'aside' isn't too booring but it was one of my lessons learned about buying cheap assets using a cheap currency.

My German friend's home was at the end of a winding road north and in the hills overlooking Baden Baden. It backed up to a national forest. It was built around 1975 to typical German fireproof standards and was a two story 350 meter chalet with a full basement. The copper plumbing coming out of the boiler in the basement made my heart go pitter pat! There was an unfinished swimming pool there also. The 20 foot high glass window walls looked over the town and gave me an impression of being on a cloud. I swear it felt like I was Zarathrustra!!!

He was asking 1,200,000 D-Marks. The D-Mark to the dollar in 1983 was ranging between 36 to 40 cents. I could sense that this was a bird's nest on the ground. My problem was how to rationalize the debt and/or income enough not to burden my cash flow. I punted (alas) and bought a slightly used BMW M-1, chasis # 451 in their homologation series, which is another story about eventually selling exotics to Japs that thought they ruled the universe. What can I say. Nicki Lauda was also one of my heros!

Baden Baden is somewhat like Aspen on steroids but with old money and a really old world stately casino. Ian Flemming probably played Chem De Fer there. I'm sure that that chalet would sell for 2.5 million Euros today or the equivelent of about 9 million D-Marks...In 83, it was offered under replacement cost with an undervalued currency. In the 'there is no inflation' arguement, copper in '83 was probably 75 cents a pound, maybe less.

My point is this. Faber moved to the Kong 35 years ago. Jim Rogers moved to Asia a few years ago. So the two smartest guys I know don't live here. I still do but I'm old and poor. I'm just a dusty desperado destitute of 'chance' gone wrong but with a poodle dog, beef critters and a 3 year old Porsche...Go Figure..

GO WEST, YOUNG MAN. GO WEST........Another of my heros was Hjalmar Horace Greely Schacht, the El Primo Reichsbank head after the Weimar fiasco! Bill might have a recollection of him in history as the financial architect of the Bahama's push in the 1950's to become a mega tourist Mecca.

Ross

I am speculating that the Bovespa might be Jim Rogers emerging market short that he spoke of in the interview linked yesterday I think. That or China.

If small tech growth stocks are the way forward as Bill is investing in, what does Brazil have to offer?

Now that is an interesting doc. Doc. The 8 largest COMEX traders net short half of global annual silver production.

I don't know much about futures, but it must be expensive to roll over those contracts if they're maintaining these positions. Who is paying the bill trying to keep a lid on paper precious metals prices?

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I ditched that SLW 39 Jan put for a loss of 50%. Now a covered call and I see $silver back above 29. The market knows how to play. My bad for not letting prices come to me.

NGD hit my stop after bouncing strongly Tuesday. The follow through I sought didn't occur and with good reason as we saw in yesterday's action. These losses have calmed down my irrational exuberance.

Jock, I also value your posts. The key to what to do, of course, is in the "action plan". Would love to know your thoughts on...

"how to defend yourself against new incursions"

Barry,

"how to defend yourself against new incursions"

We could take a lesson from The Professionals (politicians) and lie a lot :-)