Bill Cara's Blog for Dec 28, 2010

Good morning.

Daytime temperatures above freezing for the rest of the week here in the Amish lands.....the Old Bull Hunter won't have to spend the rest of his vacation shoveling snow. Hooray!

------

6-8 Billion Dollar POMO Injection from Santa Ben Today.

------

9:00 - Case-Shiller
10:00 - Consumer Confidence

------

NO Cara 100 Ratings Changes at this time

------

"Denial ain't just a river in Egypt."
- Mark Twain

There was a report last night that made some sense to me. It was reported that private equity funds will release a large number of IPO's in 2011 to get these assets off their balance sheets. The thinking behind this says that if the FED is going to prop up an over-valued market it's best to dump these assets as IPO's than risk being stuck with them when the market crashes at some future time. This was coupled by a report more US regional banks will be shut down but the government won't release information on these. Sorry, no link to TV program.

I don't know about the crash part but if I were a private equity fund with assets I didn't want to be stuck with I'd do what I could to prop the market while dumping investments to push off risk.

regards,
Earl

I wonder if there is a way to invest.

http://www.wimp.com/solarhighways/

All the firms that participated in the IPO have nose bleed price targets for GM - I'm looking to buy the Feb 31 to 34 puts - will keep an eye on this and buy some if the price seems right. GM is the poster child for a government gone very wrong IMHO.
regards,
Earl

Thanks Bill - more on my favorite people. Favorite people I don't like that is. Keep them coming - my wife 'the tweetmaster' loves this stuff.
regards,
Earl

Invest in bonds!!!!

http://www.nytimes.com/2010/12/28/us/28city.html?_...

Bill -

On the one hand, it is certainly frustrating for serious traders that the TSX is shuttered and silent. On the other, I am experiencing a Vad-like state of taoistic tranquility permitting me to focus completely on the World Junior Hockey Tournament being held in Buffalo, NY. Beating the Russians? Priceless!

Bill, it's really sad - the reality of this theater is the darkness of the systems soul. Call me nuts but I'm a constitutionalist, have copies everywhere including on my Iphone. I especially like the Declaration of Independence.

We hold these truths to be self-evident...
endowed by their Creator with certain unalienable rights... among these are Life, Liberty and the pursuit of Happyness...
To secure these rights....
That whenever any form of government becomes DESTRUCTIVE OF THESE ENDS, IT IS THE RIGHT OF THE PEOPLE TO ALTER OR TO ABOLISH IT, TO INSTITUTE A NEW FORM OF GOVERNMENT.

I don't know if or when we'll ever get to this point, but waking up at 4 every morning to read and research your board and all the post - I'm so very lucky to have found this board. collectively this board has a voice of reason.

Where is the correction ;-) ?

http://www.bloggingstocks.com/2010/12/31/top-picks...

Grym; "My only changes would be to limit the power which an endless term gives to those "professional" politicians controlling the committees".

ABSOLUTELY! I'm with Glenn Beck on this one. Term limits on congress - $22500.00 year pay, BOQ housing...

Tobyt - it's really kicking today. I tried a few times to sell some calls - have 3000 shares but only tried to sell 15 calls. Good luck with it. I placed an order to sell 15 at .55 - not really expecting to log this one. Granddaughter is up and ready to get busy.
good trading to you.
Earl

by by GM (wishfull thinking). LOL:-)

Great read.

couldn't agree more. we have been pushed so far into this rabbit hole that the majority rather accept a less painful lie, than a brutally painful truth.

Bill- You're absolutely right. I almost pulled the trigger on SLW @ 36.10 yesterday. I almost reentered CSCO at the close. Those were real time options that I decided against, to my detriment.

In the commentary at the top of the page.

Swan lake ballet done by the Chinese State Circus. WOW!!!

http://www.nzwide.com/swanlake.htm

Happy New Year!!!

From another site I monitor...

~~~~~~~~~~~
I recently talked about the mortgage and refinancing application data showing an extreme slowdown and posted comments emailed to me by one of our members who is a residential loan officer who said in his area, the data was worse then suggested:

"By the way, I would say the mortgage applications are down way more than they are letting on. I have taken maybe two decent applications in the last month, compared to 10-15 a month up til the end of October. Volume has dropped off a cliff with the rise in rates. More bad news for the housing industry; as rates rise the payment goes up, which drops the amount a potential buyer can qualify for. As a result, home prices will need to come down to a level of the buyers. In addition, keep in mind that this dramatic drop in refinance activity to nearly zero will also affect the early prepayment of MBS loans on the Fed's balance sheet. It is this prepayment of MBS loans that the Fed is using to fund the POMO program. Where is the money going to come from to continue the program through next year, more printing?"

(US) PIMCO's Bill Gross: Muni bonds have a good risk reward ratio, though the risks have admittedly grown

- Do not believe any state will default but would avoid Illinois bonds. Texas has the most attractive muni profile.

- Comments that today's 5-year Treasury auction was "a stinker," reflecting the deficit difficulties that the US faces.

***Reminder: In a 60 Minutes interview on 12/20, Meredith Whitney said that she expects municipal market woes to become the biggest US economic problem apart from the housing market.

The issue with housing is it is no longer a liquid vehicle for money. Housing wont go to zero. But if you cannot sell it for a profit, then it is almost like a zero sum investment. Homes are simply not moving. think of it as a 20 yr prison term for your money.

For cash rich investors, this is a great time to buy buildings etc on the cheap, produce net cash flow while they wait this out 15-25 yrs. Then reap the benefits of the next housing boom.

But for the avg American, unless you are looking to put down roots, raise a family, and live in the home for 15+ yrs, this is a dangerous time to mortgage most of the home. Because if you stick to a 30yr mortgage payment plan, you will end up paying double for the house after interest. Basically wiping out any potential gains from the next housing boom.

The home i just recently sold about 1 yr ago was at a small loss. And since selling, comps have already listed for 13% cheaper than my closing price. so the final closing price will likely be even lower now. this town is under 1hr outside of Manhattan.

The avg apt in Manhattan is just shy of $1M. avg co-op fee in Manhattan is north of $1000 Per month! Avg per sq ft is $900-1000 per. If you live in Manhattan, you pay NY State, Federal, and a beautiful add-on 3% NYC income tax.

It makes zero cents. Unless everyone in Manhattan works for GS?

RBY is up 10% today. I Should have listened..

never seen anything like it. Volume being reduced very precisely on a daily basis. And when the volume returns in the 1st week of January? The common perception is a selloff coming - that's what I see everywhere. That's what the sentiment indicators are suggesting:

http://www.sentimentrader.com/

$VIX is having a go at pushing through shorter EMA's, the 20, 30 & 40 clearly in play. Will be watching for the breakout if and as the market continues higher going into end of week.

Between those support levels Patrick spoke of (I think they're marked in correctly) and a Fibonacci retracement from around this level here a 62% retracement could suck in a lot of bears for the meat grinder without tripping out all the major support levels.

Just thinking out loud the possibilities. Window dressing is window dressing.

What is a little scary and fascinating at the same time is that in choosing today to arbitrarily put in a fib retracement that in the big picture on a weekly timeframe, those retracement levels fit so well as support and resistance for the chart action give or take a little. Is the tail wagging the dog or is it just the way things are? Or am I just deluding myself?

The first fib retracement I ever put on a chart netted an SLW 50% retracement before bouncing to today's higher high. This 'art' is interesting.

golfer, Bill, et al. -

As long as we're inspecting Randy Smallwood, here is Forbes' information on the dude:

http://people.forbes.com/profile/randy-v-j-smallwo...

And here is Businessweek's profile:

http://tiny.cc/o4qxi

Know your jockeys, read the racing form. Cheers!

----------

p.s. Went out for a restaurant meal. Service was terrible. Didn't tip. Waiter says: "You ain't gonna give me a tip?!" I says: "Sure. Lucky Lady in the 5th at Hialeah!"

absolutely, learning everyday here. thanks again Bill

Grym - According to that chart, aren't we past the eye of the storm?

that makes cents to me.

As water finds a way back to the ocean, human nature will also find a way to press the reset button and cleanse out the crap.

the banks and the fed can only keep this up for a limited time. the people can only take so much. the bubble can only expand so much.

Bill -

Wasn't the yen a tad off this morning? In any case, it is off .07 real time a couple minutes ago, so both euro and yen are down going into Asian trading.

I asked my question about indicators as it seems useful to look for associative clues, clues such as your European auto stocks. It all helps. I also have that 'feeling' of a coiling spring, so have loaded up on TSX favorites, e.g. RMX, PMV, GIX, SMF, etc. Eager to see the nature of tomorrow's catch-up action for PMs and to buy any dips. Very interesting and entertaining times!

I reckon everyone identifies with your 'petal pickin' dilemma' with RBY. The very best lesson I learned from reading Vad is the necessity for hard stops. Funny how such an obvious little thing can be a granite cornerstone for trading success. Last week, just before the TSX closed for the holiday, and with my Cline coal (CMK.TO) nicely up 10% from the 22nd when I bought for $2.98, I just ran my EOD stop up nice and tight and, with miniscule downside, bagged the next 10% on the 24th. It makes one feel like a genius, but that's just ego speaking. Many thanks, Vad.

so ... PMV is in cyclical decline phase , a junior miner style price fluctuation , and possible drop due to its IPO on the ASX stock and possible temporary dilution? Back from Chrsitmas break and catching up. I understand its still a great purchase just wondering about the -30%. Are these the typical fluctuations to expect from a company like this is or are there additional reasons for this level of price change?

Kim2523,

I think it depends entirely on where you live. In my area unemployment is actually dropping...down to 7.5% from a high of around 8.5%. People will continue to do things that require they take out liens on their homes, move or sell and someone will figure a way to finance that. My applications (I'm a loan officer) have remained steady in this last quarter and yes, if rates do skyrocket then refinancing will slow but nobody is crying over 5% just yet!

Bill I thought this article on the growth prospects of the Emerging market in India is of interest.
" Take India. Since economic liberalisation began under current prime minister Manmohan Singh in 1991, GDP has grown by an average of 6.3pc a year, almost twice the average for the global economy as a whole. Between now and 2015, according to the International Monetary Fund, growth will average 8.4pc, again twice as fast as the rest of the world.
India has enormous problems – illiteracy, widespread poverty, high infant mortality – but so many advantages too. Almost a third of the population is aged under 15 and just 5pc over 65. The government has pledged to all but double spending on physical infrastructure by the end of the current five-year plan to 2012. " More than $500bn will be invested, with maybe twice as much in the next five-year period. The Indian population is poised on the brink of an explosion of domestic consumption as its income per capita enters the sweet spot where people, for the first time in their lives, move beyond subsistence. " http://www.telegraph.co.uk/finance/comment/tom-ste... , Bob .

yeh noticed that. I only have SLW and RBY in the account while waiting for Canada to come back online. The contrast at the opening couldn't have been more different. Each individual stock seems to have a life of its own.

Thanks for heads up on Canada opening - to take profits or not to. Having got my SLW back into green I sold off one half of the 200 shares I have in order to load up on PMV.V and GIX.TO when the time is right. If these two are where I need to be long term, well then that's where I'll put myself.

Taseko (TGB) also crossed my mind following regulatory refusal to go ahead with its prosperity gold mine. Given that it looks like its on the verge of breakout following the big gap down that came with refusal, I'll consider a small slice of this as well... just in case it gets its chance with the prosperity project in 2011. It remains a copper/moly play at present. Owned this one at .60 at the bottom and sold for pennies. Great reflation trade indeed.

Speaking of copper, looks like supply could tighten up in 2011 (I'm assuming that outlook includes normal China consumption i.e, its housing market doesn't implode). FCX's CEO Moffett highlighted the age of present mining sources of copper - almost all over 100 years old. That explains why Rio is eager to get Bougainville open again. Along with JPM buying up the LME reserves for a physical backed ETF...

http://www.fool.com/investing/general/2010/12/07/t...

TOF,

"Grym - According to that chart, aren't we past the eye of the storm?"

Yes, but it's like the eye of a hurricane, a lull before the other side hits. From what I've read the next big deal is the Alt-A.

These are likely to include not people who bought with no money down, but who under traditional standards would have needed a co-signer to get the loan. They may have had a job, but not enough income or some other circumstance which placed the loan in jeopardy.

With the unemployment situation many may be in default already or at least more risky.

http://www.investopedia.com/terms/a/alt-a.asp