Bill Cara's Blog for Dec 26, 2011

I hope everyone enjoyed their Christmas, thanks given to those who stuck around in what was a very challenging 2011, no doubt we've a few more years like that in front of us. What doesn't kill our account makes us stronger. What doesn't confuse us with lies and deceit can together make us wiser.

Here's to a dollar down, gold up year or at least for a quarter. The ECB has well and truly kicked the can here - but it could keep the credit vigilante horde at bay for another quarter or three. Those peripheral nations being thrown to the dogs - Greece and Portugal are clear candidates - will be important as a preview of what may go down later.

From Reminisces of a stock operator:

Page 83

And right here let me say one thing: after spending many years on Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me.  It was always my sitting.  Got that? My sitting tight.  (keep in mind this was written early 1900s.  In context he means to let your winners run once you are in the move at the right time.  Don't settle for 5% profit after buying apple at 18 when you could have sat tight)

Page 84 
The market does not beat them. They beat themselves because though they have brains they cannot sit tight.

112
Stocks are never too high for you to begin buying or too low to begin selling.  But after the initial transaction, don't make a second unless the first shows you a profit.  (this is a rule I also follow and am glad to see it in my first read of this book.  I generally do not participate in avg down.  That is a recipe for death by thousand cuts.  At least for my time frame of trading)

Page 116
I began to realize that the big money must necessarily be in the big swing.  Whatever might seem to give a big swing it's initial impulse, the fact is that it's continuance is not the result of manipulation by pools or artifice by financiers, but depends upon basic conditions.  And no matter who opposes it, the swing must inevitably run as far and as fast and as long as the impelling forces determine.

That since the entire list moves in accordance with the main current there was not so much need as I had imagined to study individual plays or the behavior of this or the other stock.  (my read on this is get the major trend right and you will be above 99% of the public.  But in the next chapter he also mentions being early and correct is a bad as being wrong and on time.)

...

And how media has put a black out on Ron Paul. below is a clip by Jon Stewart mocking the media for not giving RP his due.

http://bit.ly/suowhY

The business round table in action i presume.

Vad,
All good things come to an end. Gone are the days of a nickel ferry ride to Staten Island as well a a dime token to ride the sub system.

Specialists used to claim an eighth, then a dime and now a penny or less. Where did the specialist's go?

Ad valorem taxes in Texas used to average 1.25% but today no less than 2.25%. The sales tax in Texas was 5% on non food items 30 years ago and today surmount 8%. One need only itemize their telephone/communications costs to see that taxes comprise more than 30% of the total. Last time I looked, taxes were and are not now a component part of the CPI calculation.....

Given that most of the hoi poloi don't day trade for a living, taxes on financial transactions won't bother them a whit. To wit, you are outnumbered.

Clearly Herr von 'Berliner' Schaeuble, AKA ' The Jelly Dougnut ' has intellectually surpassed times 2 the Peter Principle. In the end, a transactions tax is for revenue only and has nothing to do with speculation and markets per se.

The last hold out to a transactions tax will be the winner. London? NYC? Mauritania?

If it's true that good money drives out the bad, then might it be true also that trading will seek out the least cost venue?

I used to be considered the cheeky shylock 40 years ago when I charged my clients $600 dollars to buy a thousand shares of telephone at $50.

The casino, however configured demands that a player pay for the house overhead and the croupier, tax included.

No doubt it'll be blamed on the HFT, daytraders and speculators, as results deteriorate. Already in Switzerland the guaranteed return on pension funds for retirees enshrined in legislation is being steadily eroded. Pension managers are no longer making the returns of yesteryear. Falling through 6% and counting with each new attempt to further reduce return requirements. Slowly the water heats up to boiling temperature.

And when sovereign debt markets implode.... oy vey

ALOHA!!

CHART#4-Note that investment demand in North America is at 1990 levels when the POG was virtually flat! Also Europe is way behind as well. For North America to reach investment demand of 1980(last bubble) we need another 18%+. For Europe to obtain the same 1980 demand it would have to increase 14%+. It seems East Asia and India have picked up the slack of North America and Europe.

CHART#7-Distribution matches 1980 as net central bank sales and "disinvestment" have completely dried up. Now all that is left is recycle and mine supply, which you will notice recycle is edging up as those who fall financially either through job loss or real estate gambles must sell off their PM to make ends meet. Also do not ignore any institutional who must liquidate PM holdings to cover losses.

CHART#9-Confirms what we already knew which makes explorers turned producers like SLR that much more valuable.

CHART#14-Explains what I was saying years ago about GLD which is that they will not have enough supply to meet their business model, but since the average investor will not be able to access physical the big institutionals(US FED member banks) will own the GLD supply thanks to the little guys. Notice that tonnage has been range bound since Q2-2010 even as the POG has increased from $1200 to $1700. Does anyone holding GLD or any of the other HB&B PM products really think those vehicles were designed to benefit you in the long run?

CHART#15-Then I look at what the gold pundits say about the huge jewelry demand from India and you see that has been a lie for the past year. The jewelry demand based on tonnage is not coming from India but China, Hong Kong, Japan and Russia! With the large majority coming from Hong Kong and Russia. Russian demand is not even on the map of these pundits.

CHART#22-Yep, the Europeans and the Chinese obviously want more physical gold! They take their "money" more seriously! Americans are more complacent along with our debt saturation, which immobilizes any investment funds we may have accumulated to this point. I see that so often in my own sphere. "Hey, if I had any free cash I'd have bought gold and silver a long time ago but I'm all tied up in real estate and my mortgage and the cost of basics is through the roof!" Not quite the same picture of Americans pre-dotcom bubble in the 1990s! WHAM-BAM!! The tech crash and the real estate crash have crushed US investors free cash flows. Those HB&Bers were so clever to rig the real estate market right after the tech crash because all I ever heard from people I knew then in 2002 was that they would never get back into the stock market since they preferred to stay in real estate. The common reasoning was that they have never gotten burned in real estate since prices always went up and it was something they "know" ... something "tangible"! So where does that leave long term investors? Most of them look to the "faith and credit" assets, which are massive liabilities in disguise. That will be the Mother of all Busts when you see how much interest rate derivatives are depending on low rates. Coming soon in the next SOUND MONEY! Now there is a growth sector that is way outpacing global gold mine production!

CHART#25-Mine production is higher than ever over the past three years which means those who are actually producing have done well to boost cash flow considering the POG has risen substantially from the $1000USD level. I would look to producers who are low cost and ramping up production for best share price appreciation over the long run. Naturally the ones with no debt and no hedging float to the top.

Now look at the share prices of the major gold producers since the peak of 2008 ...
LINK: http://tinyurl.com/6r6n46w

In the end consumers pay every tax ever levied. What's new?

Who would ever pay a 7% interest equalization tax to buy stock in Fuji Photo in 1967? I did.

Fairness is a function of where one sits in any food chain.