Bill Cara's Blog for Feb 22, 2011 [See Post-Close report]

Leverage works in reverse too, so be careful not to jump in at the end of the spike in West Texas and Brent Crude prices.

Bill,
This comment really got my attention. The question is Is it toolate to ADD to positions?
Where are we on the spike. I would think about 75%, but it would interesting to me to get your best guess on that

watching this 2nd. So are some notable traders like the MHFT, Soros, Lampert...

Vad & Bobbyo,
I want to thank you both for the comments and suggestions. I believe I have enough information to analyze the situation a little better. Not having stops under some of my trades has bothered me for a while. thanks again!
Earl

Good morning.

6-8 Billion Dollar POMO Injection Today.

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

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Cara 100 Earnings: WMT (1.34 vs 1.31)

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BNS - Bank of Nova Scotia downgraded to Neutral from Outperform at Macquarie.

NOK - Nokia downgraded to Sell from Buy at RBS.

ORCL - PT Raised from $36 to $38 @ FBR. Outperform

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"A man who views the world the same at fifty as he did at twenty has wasted thirty years of his life."
- Muhammad Ali

"•US equity investors are living in a utopia. Prices just go one way, and that way is steadily higher."

I wanted to find a blog article I read the other day that is quite pertinent to this Credit Suisse statement and what Bobbyo was implying the other day, when suggesting Uncle Sugar was a saint.

The beef of the article was that the market has been making it so easy that there is a mass of traders who are finding religion and converting to trend trading.

I think Vad and others have made it clear that mother market knows best how to trip up the masses who foolishly follow whatever is fashionable with reckless abandon. How many nice trends, up or down, are we going to be gifted with before the market goes choppy or flatlines for years on end, ala 1970's? Who will be thanking Uncle Ben then?

Who will have the tools and skills to adapt themselves accordingly? Just some food for thought.

MELBOURNE, Feb 22 (Reuters) - BHP Billiton (BHP.AX: Quote) struck a deal to buy shale gas reserves from Chesapeake Energy Corp (CHK.N: Quote) for $4.75 billion, pitting itself against oil giants and China in the battle for the fast-growing energy source in North America.

The deal marks the top global miner's first attempt at picking up assets since failing on three mega-deals over the past three years, and sets it further apart from its mining peers with a big bet on the world's biggest gas market.

"BHP have had (three) multi-billion deals which have tipped over, so the market should be pleased that this is one that is going to go through. And it is a change of direction in terms of looking at their petroleum division," said Ric Ronge, portfolio manager at Pengana Capital.

BHP said it was buying Chesapeake's 75 percent stake in Arkansas' Fayetteville shale natural gas field, put up for sale by the No. 2 U.S. gas producer just two weeks ago to help trim a $15 billion long-term debt load.

MORE HERE:
http://bit.ly/i3fyZv

The bit I like:

BHP, which will fund the deal from its $16.1 billion cash pile, is paying much less than the $1.9 billion BP (BP.L: Quote) paid Chesapeake in 2008 for 25 percent of the same shale gas field.

"It's opportunistic, there's no doubt about that," CLSA's Bairstow said.

+60%. I'll take it.

Morning resistance established at 226.25... down baby down...

Some things to think about regarding Netflix:

Blockbuster has a bidder, http://goo.gl/kDnii

and Amazon is getting into streaming video on demand, http://goo.gl/al6g4

One of your stocks is waking up...
Earl

Hi, Earl... exited MY several weeks ago... concerned about raw material costs.. saw DCTH news.. as wrote Toby, was out at $ 11's on last move up... will wait and see what pans out.. good product... but ,,,, seems it has the ( prior ) GENZ issue of manufacture specifications... best to you..

I don't like the look of this day and will sit it out with a little QID in inventory. Still holding resource plays.

westcoaster- The morning bounce is playing out like a bull trap. Of course, we won't really know except in retrospect.

I must apologise - my fat fingers must have hit the ignore button on my iphone and put you on my ignore list. glad I caught this...
Earl

Most base metals are getting slammed today. Copper and especially nickel, zinc and lead are something I am watching to buy if I am offered a good price in the near future.

Watching copper support @ 4.2USD/pound getting nearer and nearer.

You have to hand it to Rosie for his volumous reading: Good article on the significance of the revolts so far and what it means for totalitarian regimes everywhere: http://online.wsj.com/article/SB100014240527487044...

"Until they grant their people democracy, their quest for discipline will only hasten their demise."

We're in for some rough sledding for a while methinks.

Egypt, now Libya.....Iranian warships crossing thru the Suez canal...

Unions/politicians going crazy here, stateside.

Why do I get the impression that this is just the tip of the iceberg of worldwide unrest?

Members of a small business lobbying organization tell me that the Obama Administration is afraid that the Tea Party is going to surround Washington.

NJ Gov. Christie delivers his budget speech at 2 pm.

Stay tuned. This is going to get crazier.

re: Iran warships. Iran has exactly one frigate and a supply tender entering the Med for port-call in Syria; quite rare indeed that the Iranian Navy transits the Suez [1st time in approx. 30 years], but I have to believe that 5th Fleet would crush em if necessary, not to mention the Israelis.

This is just a political ploy by Iran to get 'leadership' credit for what's happening in north Africa.

Restarting ' dcth '...

westcoaster- That sounds good. Not sure if I can swing it, but if so, there may be several of us from the Bay Area- I'll pass along the info.

Bonds getting bought - no doubt about it. Yields dropping like a rock.

Somewhere, David Rosenberg is smiling.

Somewhere, Bill Gross is selling into this strength and booking profits.

Fear is still a very powerful force out there. The Wall of Worry maybe a legitimate wall of fear. So hard to tell these days, but as lousy as bonds are, people still dive right back into 'em and that's a big tell for me.

Hi Les, just a lucky guess - I've been watching the high flying stocks, looking for the one with it's neck stretched out the most. I'm up 133.9 in 2 days but I'm pretty firm believing it's a 175 or less stock; although I'm not going to let this ride that far since these are march puts.
GL
Earl

Great minds think alike (ha,ha).... sold the 7 puts on DCTH for this month today, bgt a tad more EXK and sold the 7 1/2 calls for this month on entire position again.......hopefully it remains a cash cow.........APC back into the 77s w/ 2.5 for the 80 call this month is attrctive covered call also.....best to you both, toby

Les, I chickened out - took my 133% gain in two days, best I've ever done. Net 1008.00 - that was fun. I'm still holding my TAZ calls. Cramers podcast last week spoke of the marking heading down around wednesday and he said he was a seller - 'not a buyer'!
GL
Earl

Bigwad, you now running GS? LOL

Bill Fleckenstein will be on from 1 - 2 pm. pacific time..

just super-size it...>http://www.msnbc.msn.com/id/31510813/#41723900

In the commentary at the top of the page.

Well Kaimu; that just hit my pause button. So is this about growth? A growth rate required to support the current dynamics? Now where did they learn to juggle like that? Great post I think, it’s quite disturbing…

Bob, that too is quite disturbing!!! ROFLMAO, it won't quit. I'm going to have nightmares...

Rahm Emanuel, former lackey to the other lackey and machine politician/lawyer from Illinois wins the mayorship of the third largest city in Amerika.

Never mind that that State is a basket case and will no doubt petition on bended knees for a national public tax bond bailout (more debt with guarantees) and immediate monies from the King's privy council (Congress, Fed and Treasury)to make whole their past promises to the unions and the other tit sucking caudallies who have always voted themselves benefits...!

When will the incest stop?

Sound money presupposes sound governance and that horizon is impossible to see given our current penchant for expanding the voting franchise which now includes the mentally infirmed and even 18 year old crack heads.

To paraphrase Cactus Jack Garner "Your vote isn't worth a bucket of warm piss."

Democracies NEVER work in the long run because the "people" eventually decide to vote themselves benefits which they assume will be paid for by others. By others, today we endure the debt market of gangster bank pirates which glean points on trillions issued in the name of a government held hostage to or for the 'powers' that can command.

So. We have devolved into a command economy not unlike China. We do have better slick 'cloud' accountants that are paid to reassure us that "THERE IS NO INFLATION." When that shibbolith is denuded, all hell will break loose and not too soon for this farmboy!

"Stagflation is the talk on a cereal box. Democracy is the smile on a dog."

Crack-up booms give false hope to those who measure their wealth in stock price terms. The end game of colored confetti expansion can always be measured against a productive asset. Better to own a call on an asset than to sit in silly T-Trash that pays you NOTHING.

In short, your Federable Gummit is a joke and is broke. 'They' reward Failure. 'They' are paid to reward Failure. 'They' want to reward failure because that is their PAYDAY.

I have no idea what Rahm's salary will be. To the city it's probably a few 100 K but the percs and offshore benies may be worth a few hundred millions...

What he owes to the ward healers can never be accounted for on the public books. How he pays those debts Will be accounted for in public contracts that no one will ever question even if they know what's good for them!

We live in a circus of clowns.

nothing to chicken out on Earl. You've controlled risk and that's what its all about. Covered my short position and then read the tweet of a trader I'm learning swing trading from did the same. So starting to synchronise my thinking on risk management with a pro, a big picture outlook I unfortunately didn't learn and appreciate while working with Vad.

If NFLX is going lower then there is opportunity to reenter when probable support is lost. As it is the McClellan oscillator of $NDX stocks advancing and declining is tightening up for a possible move, but playing a very tight hand at this time. No harm in waiting until Mr Market shows his cards.

http://chart.ly/ikrwm6f

futures are green at 2:30am

Ilya & Les,

Yeah he was "elected" to run our state capital, Chicago even though his theme, "Never let a good crisis go to waste" will give him a free hand to plunder. I guess this must be the Last Days, since so many were raised from the dead to vote again. (Just assuming based on state tradition.)

Our recently elected Governor Quinn who speaks often about "shared sacrifice" has increased our taxes (5.25% personal, 9.5% business), given raises to all state staffers, and is hiring back over 900 to unfilled state job slots. All adding to the monumental debt.

Wisconsin legislators are hiding (in plain sight) here in my city while government union workers protest back home. Perhaps they will simply stay and get their unions to move down to our trough. Why not? The more the merrier.

Hey, maybe I can get a buyer then and move from the baddest state to a lake cottage up in the Badger State ;-)

ALOHA!!

So is this about growth? A growth rate required to support the current dynamics?

Growth? Under any debt based monetary regime no growth can occur without growth in debt. I would rephrase your question in monetary terms.

"So is this about DEBT?" A debt rate required to support the current dynamics?"

Then I would answer ... IT IS!

This is about "intervention" period! The future markets were designed to provide price discovery, as insurance for farmers on their production. Without futures markets the price for commodities would fluctuate wildly and farmers would be faced with more risk, but those "prices" have been distorted by government and speculator intervention(debt money). Too much money(debt) chasing too few production. In a debt based monetary system where monetary supply can be leveraged to any desired level and is there becomes a saturation point where money(debt) overruns markets.

From the speculator side I sat in front of my Merrill Lynch broker in 2006 listening to his sales speech as he tried to convince me not to redeem my annuity. He told me through the course of interrogation that the insurance companies needed at least a 7% return to show a profit. I translated that to mean that the insurance company who was paying my annuity needed 7% in order to keep my annuity viable. Back then before the GCC(Great Credit Crisis)I was more concerned about Merrill Lynch being solvent than I was the insurance company that created the annuity I cashed in. Still in an environment of lesser Treasury yields my broker validated my reasons for cashing in.

That being the case GCC or no GCC insurance companies then cannot rely on the "no risk" Treasuries since none of the US Debt is paying more than 7%. So in order to make up the difference insurance companies must resort to more risk like the rest of us. I am only doing what I am doing only because I have completely lost confidence that a USD will have any long term store of value(purchasing power) left by time I am 75 and can no longer perform manual labor.

Back to the futures. There is suppose to be a "supply" and a "demand" side, but with political intervention these markets have been totally distorted. On the demand side. Next time you are in a grocery store and you see someone pay with an EBT card look at their groceries they are buying and then imagine that much less food on the shelves. Now multiply that by 43.6 million. You can do the same for Social Security and Medicare as most senior citizens could not exist without those benefit checks, which means they are no different than those who use EBT cards. Anyone who says politics and the flow of funds controlled by politics does not effect markets is out to lunch.

On the supply side the politicals know they cannot farm or produce an ounce of gold or a ton of steel so they are more constrained as they cannot "click supply" like they can "click demand". They can lie about supply but they cannot click it! The government does have "reserves" like the oil reserves in salt caves in Louisiana and other strategic commodity reserves, but as we saw with Katrina even the government reserves are limited due to logistics. Right now there must be some serious concerns over US oil reserves as the Middle East unrest rages on. What energy policy? Many of us here can still recall the gasoline rationing of 1973 when the OPEC countries had their oil embargo. Recall that? Even and odd? There are certain true commodities like oil that the government cannot lie about for too long. So back in 1973 even with our oil reserves Americans had to ration gasoline and burn up huge amounts of time in gas lines. That was when "small was better". At the time my VW bug was selling at a premium. So America has lived through a collapse of the supply side on certain futures like oil, but we have never lived through a collapse on the demand side yet. Once again if you put the pieces of the monetary puzzle together it is DEBT that drives even the futures markets. Add that piece to the ever growing LIABILITY BUBBLE.