Bill Cara's Blog for Jan 31, 2011 [See post-close report]

Hi - Noted this summary of some of the major players in this space. I have been easing into the sector for years and now have upped positions substantially ... who knows? Happy Trading
http://seekingalpha.com/article/249577-uranium-res...

Composition is changing. On-the-run purchases for this month were 35 per cent compared with 12 per cent in December.

FULL STORY:
http://bit.ly/hcpwEo

BH- Reading Vonnegut and Heller while growing up explains much of our generational philosophy:

"Some men are born mediocre, some men achieve mediocrity, and some men have mediocrity thrust upon them. With Major Major it had been all three. Even among men lacking all distinction he inevitably stood out as a man lacking more distinction than all the rest, and people who met him were always impressed by how unimpressive he was."

"Let's take a drive into the middle of nowhere with a pack of Marlboro lights and talk about our lives."

-Joseph Heller

What a great laugh - perfect way to start the day.

Nothing more concrete required by way of commentary than Bill's opening remarks df.

As for me out TZA flat while SPY pops here. Holding TLT and watching SLW like a hawk into opening.

Ditto!

(Whoops, EXCUUUUSE ME! ;)

Thanks Earl, one last chart I been keeping an eye on.

http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=0&dy=17&id=p34106023842&a=222186918&r=5033&cmd=print

I think we see CSCO at 25 by June.

Best wishes to you BAZ and TOBY, I picked up another 10 of the Mar 13 calls for .80 - so far so good. Lots of trading that's for sure.
Earl

updated: http://stockcharts.com/h-sc/ui?s=CSCO&p=D&yr=2&mn=...

Don't know the intricate details here, but the potential to lose all SATA connectivity sounds quite major.

SANTA CLARA, Calif.--(BUSINESS WIRE)--As part of ongoing quality assurance, Intel Corporation has discovered a design issue in a recently released support chip, the Intel® 6 Series, code-named Cougar Point, and has implemented a silicon fix. In some cases, the Serial-ATA (SATA) ports within the chipsets may degrade over time, potentially impacting the performance or functionality of SATA-linked devices such as hard disk drives and DVD-drives. The chipset is utilized in PCs with Intel’s latest Second Generation Intel Core processors, code-named Sandy Bridge. Intel has stopped shipment of the affected support chip from its factories. Intel has corrected the design issue, and has begun manufacturing a new version of the support chip which will resolve the issue. The Sandy Bridge microprocessor is unaffected and no other products are affected by this issue.

looks like those damn traders had that third martini early ..! will see... Re-started old/new position in CELG just now.. I have always thought they will get an offer from major pharma... may be early, but this is a powerhouse, worth more ( imhao ) than ' genz ' in the long haul... I use to think $ 75,,, I now think its worth 20% more, as off-label uses will expand.. This will be lonnnnng term hold... good luck at ' orex ' ... could be haulted at any time... ( added afew just now )..

Thank you Kenley - it's added. And I like your picks chart. Best of luck with it.
regards,
Earl

I agree. To me, EEM is a leading indicator (worked in 2009 with higher lows and some other times). I was able to make profit shorting EEM on and off since last November and especially in 2011. I sold my EMM puts on Friday and looking to reload somewhere at the 46+ level.

Leaving investors who made preparations over the weekend to board on a major gap-down stranded. Along with those who disembarked last Friday.

It would be unusual not to bounce from this level. But, that could make it a shortable lower high.

Kim- I would wager at least one fund partially sold off holdings this morning in order to build a larger position at the morning lows. My opinion is based on nothing more than the fact that given the means, I would have done the same.

Cheapy,

As I recall tear gas was unpleasant (in basic training),but not painful. Of course, they may have given us a light dose. Still I would prefer that to the alternatives you mentioned.

Our results from providing military "aid" is spotty at best. I guess I could only say this too as an alternative to sending our own troops is preferable.

All the choices seem less bad, all bad and ugly so far.

...drops to ten year low, at 66%. do you guys think we have accelerating foreclosures for '11?

Too early for scotch.

Grym- As they say, scotch doesn't know what time it is. It's funny how social etiquette necessitated the invention of the Bloody Mary, or the champagne brunch. I've always found the best time for scotch is when 'I need a drink.'

"...drops to ten year low, at 66%. do you guys think we have accelerating foreclosures for '11?"

http://tinyurl.com/4gn2rsc

Study that chart for starters.

When Fan & Fred are reckoned with there will be the biggest housing dump onto the U.S. market the world has ever seen. Do the math. It's costing U.S. taxpayers billions to just carry these empty debt generators in the form of property tax and half assed maintenance as the squatters grow in numbers and MOVE IN. The starter castle is a faux fortification in every sense of suburban culture. Run for your life. The mortgage brokers can't hold the gate much longer as the debtors revolt against their serfdom. Don't listen to NAR, the bankers, or the builders. Sell the kids. The horror ... the horror ... http://tinyurl.com/4mx6g6z

Cheers.

Grym- I'll have that Scotch now.

Most commentators I'm hearing today are talking along the lines of Murabarak, in the short term, surviving this - and the possibility, medium term, of the army backed VP as a likely successor. Regardless, I was dumbfounded by Hilary Clinton's hawkish comments over the weekend towards Mubarak. It seemed as if the U.S. administration was tacitly, at least on the surface, encouraging Murabak's demise. If Mubarak survives near-term, this could look as a serious mis-step by the adminstration. I'm sure Hilary ain't on Hosni's Xmas card list. Anyone?

Dr. Strangelove.

Anxiety pill? More like catnip. Send your gold traders some nice cammomile tea of whatever will mask the smell of adrenaline and fear.

Like today: I had the fun of talking a cat (underwriter) out of a tree with nmy calm soothing voice of reason and promises of warm milk. Whatever works!

Jack - looks like a good call on EEM puts. You looking for EEM to hit the 200ema?

I'm looking for one more leg down and/or sharp correction of sentiments. Not sure where it will take us.

that one still in ' orex ' does what Kevin Costner did in ' Dancing with Wolves '... raises arms, and rides through gunfire, twice !! Good luck to all...

loannetter -

"Postscript: same analysts report is is cheaper to BUY than RENT in 72% of US cities. Take that, davefairtex! Why? Rentals are in DEMAND by ex-homeowners."

If a RISK TAKER (home buyer) can CASH FLOW with a long-term lease to a high credit (employed tenant) and LOCK IN a low low FIXED interest rate ... it's a good bet. Indeed, inflation will melt away your debt.

Unfortunately, with oil rising above $100/barrel, the commute may make it so that the surburban location is no longer viable to the newly impoverished family living out of their Hummer.

For the uninitiated: Cash flow is gross income (rent) less vacancy and collection losses (say 5%), property taxes, fire and hazard insurance, management, maintenance, resplacement reserves, (another 50% is typical) and DEBT SERVICE (um, 80%+ of income on those propped up values waiting to crash). That leaves -30%+ that comes from YOUR pocket to pay that freshly minted debt service while you wait for the inflation kicker in the form of higher rent ....

But why buy inflated housing bubble prices onto a falling knife? Housing will not appreciate along with Ben Bernanke's inflation. Can't touch housing until Fan and Fred resolve. Moreover, rising interest rates are guaranteed and that equals less to cover debt service and that equals LESS VALUE.

Houston, we have a problem.

Cheers.

baz22/earl- Thanks for bringing this one to my attention. Not the first time an unintended effect of one drug was exploited for use in treating an unrelated condition (note the success of Propecia following the introduction of Proscar).

The combination of bupropion/naltrexone looks promising. Hope to see OREX take off. Good luck.

kenley,

Judging from the number of recent walk-aways in my neighborhood (northern Illinois) I give an unequivocal — YES!

I have heard banks are reluctant to foreclose, but when the occupants leave it unattended it requires someone's attention. One house a block from me has been vacant with a notice on the door (This house has been winterized.) for at least a year.

There are three more I know of in less than a one mile radius — two added within the past month.

Since the Christmas hiring our (admitted) unemployed percent has fallen to 14% from 15.3%. Yet houses continue to go on the market even in winter.

stock is coming back a bit - not reading anything into this information but here is the FDA link http://www.fda.gov/Drugs/NewsEvents/ucm130961.htm

it's said this is old info.

Earl

Liking the 'positivity' for a change.

As Vad has said in his flawless Russo-English, "lower can always go lowerer."

Hey, ever since I mastered English betterer, my version went furtherer:

Oversold gets oversolder until it becomes oversoldest, and then it sells some more.

This way English becomes butchereder (Grin)

davefairtex,

I did not propose to call the bottom. There is no rush. Just the facts, man. Which vary by person and locale. Renting suits many people. So does buying.

Glad you rose to the challenge as usual. DYODD!

should have stuck my head in the sand Bill

My system said go long, which I ignored and bought the breakout of the opening trading range in TZA juuuust before it rolled over and headed south. Ditto TLT. Get what I deserve. I've made a couple of entry/exit errors in the last 5 trading sessions which were quickly corrected but IB counts them as daytrading. I would have happily closed the bad trades but the SEC would lock me out of my account in order to save me from myself - so I've got to eat the trades until tomorrow - very decent of them.

http://www.youtube.com/watch?v=V1tXhJniSEc

what the big fella said.

There is definitely value there and I think you could be right even though I am not buying in.

Will we see a 1-2% move upwards like we got used to in 2010 or is it time to finally fool most people the most?

housing doesnt have to go lower for a bad situation to get worse. Just the fact it will not go up for many yrs to even get to break even, means a home is an anchor. Sapping away existing income into interest vs principal balance. thus sapping away future gains on home appreciation.

Unless you have a wad of cash and 30+ yr trade horizon and buying up rental building in severe debt at huge discount, housing/real estate is dead money.
You are fighting interest, real estate tax, inflation, upkeep costs, massive inventory to compete against, and risking being house poor. And as someone mentioned here, prevents the mortgage debt holder to move out of town if needed since they can't sell the home, or cover the mortgage with rent income.

http://tinyurl.com/4qeo7l8

Could have been posted here already(?)

The bulk of my (extended) family's net worth was made in real estate. That was true in 1970s Ann Arbor, 1990s Bay Area, 2005 Shanghai, late-2007 San Diego. There is no better investment for both you and your descendants. My Dad leveraged gains from income property in Michigan into a post-retirement home in an exclusive enclave in the Bay Area during the mid-nineties lows. One younger brother bought in Shanghai 5 years ago, and recently sold at twice the price, resulting in something like 8x ROI. Another sibling bought a new home in San Diego in 2007 for 50% of its 2006 list price. Wife and I have traded up twice on the Peninsula in the past twenty years. I have yet to meet the trader with the patience or discipline to match those kinds of gains in the stock market.

Now is a decent time to buy, IMHO.

Bill, Charlie Rose has his own website with his interviews at http://www.charlierose.com/

The Geithner interview is currently on the front page.

Here is the direct link, http://www.charlierose.com/view/interview/11438

Cheers!

NYUGrad,

Your are missing a major point: 30 year fixed rate loans have no prepayment penalty. You can pay down your note sooner and lower the effective interest rate and save a whallop. The target is to find something to buy that is LESS than the price of renting. According to Case Schiller this is fact in 72% of major USA cities today and that's all factors taken into account for comparable properties. A property is only an anchor if you really can't afford to keep it/rent it out or manage it profitably or break even. IF that is the case, one might say it was a bad investment in the first place. Like any trade...you must know when to hold 'em and fold 'em.

another approach with ' orex ' is ( drum roll, please )........... Inflation Buster !!! yes, what a great way for the Prez. to get in on the act ( might even twist a few arms at the FDA ! )... it would make a great speach.. " Food cost's are up 25 % - and cotton ?... forget about those new clothes, but hey, soon you can fit back in the older ones in storage .. and now, you guys can get in and out of that kick-a##, mid-life crisis, sports car you've always wanted ( and help out GM ) " etc...,,, Hey, maybe he really has had a conversation !!!! best to ya, earl.

$OREX: from Zerohedge: "Is Stevie Cohen's Magic Biotech "Touch" Up To Snuff In The New Year? We Are About To Find Out" http://bit.ly/i6Yxkp

NYU- When I drove to the Bay Area from Ann Arbor following graduate school, I had a negative net worth (mainly due to the balance on student loans). I drove a Tercel that burned oil, and slept on the carpet of my apartment/read at night propped against a bare wall until rental furniture arrived.

It was, however, one of the best times of my life. I explored a different exit after work each night- and there are hundreds of distinct neighborhoods/(inexpensive) ethnic restaurants in the Bay Area. I spent a great deal of time being alone with my thoughts- a very underrated activity. And music played in a mostly dark and empty room sounds a lot better.

I saved most of what I earned for three years to come up with the down payment for my first home.

I just listened to all of the interview. Geithner seemed a little naive to me and was very confident on the economy going forward, which you should expect. He implied to me that he was going to continue easy money for several years to build confidence and keep the economy moving forward. The bond market may take exception to his remarks. He also stated he was absolutely confident President Obama would win re-election. Geithner seemed a little scater-brained at times and this interview made me feel like gold was a good place to be for the long term.

loannetter -

You seem to be saying, "price doesn't matter, as long as you can rent this out for more than the cost of buying it."

Its interesting logic, but flawed in this way. If you can buy one home using a $50k down payment today, I believe you'll be able to buy two or three homes with your $50k when things finally hit bottom. And, if you ever have to get the money out (or your HEIRS have to get the money out) what price you paid is most definitely an issue.

This whole rush to buy now because we've reached the promised land of house payments < rental income argument (which was how most property was back in the day) reminds me of an old story:

A young bull and an old bull were standing on top of a hill overlooking a herd of cows.

The young bull says, “I say we run down the hill and [romance] a cow!”

The old bull replies, “How about lets walk down and [romance] the whole herd.”

I agree, in many areas now, it is a good time to buy. You can most definitely run down the hill and romance a cow right now. But if you wait for a while, it will be an even BETTER time to buy. If you are patient, you can romance the whole herd once the dust has settled a bit - translated into being able to buy either a nicer house, or MORE houses with higher overall cash flow for the same down-payment money.

Price matters. Where you are in the cycle matters. It always does. Saying otherwise is tantamount to buying your favorite dividend stock when it reaches a yield of 5%, ignoring the big red candles and a total lack of buying interest. If you are patient and wait, perhaps it will yield you 8%, or more.

This is a once-in-3-generations event. Give it some time, let it play out. Price does matter.

Generational wealth transfer with respect to real estate has played a big part in the American Dream. Each succeeding generation carried forward a little of the residual wealth of the parent in many families. Well, that's all over now. This generation has broken the chain by living beyond their means and squandering the inheritance in a death spiral of consumerism and neo-capitalism. A small liar elite has become outrageously wealthy through corruption and fraud. HB&B has been the prime force behind this tragedy and has secured it's future by gaining firm control over both the Fed and the Treasury, effectively turning the people into wage slaves who cannot enjoy the freedom of mobility within their own country. They are saddled with homes they cannot sell and are living in denial of these truths. They expect Obama to bring change when it will only happen when they do it themselves, one person at a time.

I held regular employment throughout my working years and in many of them I was possibly in the top 10% in terms of earnings. I paid down as quickly as possible mortgages and other essentials that required financing, just like many others have done. However, I also built wealth by resisting societal pressures to acquire bigger homes, cars and "stuff" and tried to emulate my parents in seeking to be where I might be able to help my children financially in the future. I saved. The future arrived, and I provided mortgages and rent-to-own arrangements and other financial assistance to my children with real estate being one asset class that has worked for me, I think, because each transaction was modest in size and I never reach beyond my means or speculated. I suspect that there are many others with a similar story, and while investing appears to be a zero sum game, the fact is that the house still controls the casino. Being human, we get taken for the loss in many cases. When we stop coming back to the table is when it all changes.

We ain't in Kansas anymore. Prices are going down until buyers can pay cash. Levering up into a home for investment is for suckers.

http://www.cnbc.com/id/41355854

Geithner sounded a familiar refrain: the U.S. will be fine because we are ‘relatively better off’ than other major economies. He wouldn’t want to trade places. So, perhaps other countries will have to deal with their problems first? But, he doesn’t consider that perhaps they will deal with them more appropriately than the U.S. or that the U.S. will become worse off than other countries if Congress fails to take action to come closer to balancing inflows and committed outflows.

I was glad that at the 17 min mark he at least admitted that decisions need to be made to move toward creating that balance. However, I still see little evidence of Congressional will to do what must be done and I don’t share his optimism that Congress will change their attitude. Both parties would need to work together to get meaningful changes made. But, I think the Republicans are very wary of doing anything that might make Obama look good…and vice versa.

I’m not sure he grasps the extent of the problem but I count as a small bit of progress that this was the first time I heard someone in a position of influence admit that the debt and entitlement promises are large enough that we cannot grow our way out of the problem.

He also blames the financial oversight system as a partial cause for the crisis of ’08, but I don’t share his confidence that the system has changed sufficiently to stave off future crises.

Lastly, it seems to be a frequent question on the board whether or not Geithner is someone to be trusted to handle his herculean task well. My opinion of him is less negative than it was before I saw the interview. On the one hand, it seems a little out of sorts (geeky) for a man in his position to wear a digital watch, and he isn’t an especially smooth orator. But, if we pay more attention to the words than how they are delivered, at least he is aware that the role of Fannie Mae and Freddie Mac must be reformed and that Congress needs to restrain future spending. Now he just needs to convince this Congress of the importance of that task (and have future versions of Congress maintain that belief). It’s not likely to happen, but I do wish him good luck.

davefairtex,
Of course price matters!

One is advised to weigh up any purchase, the cycle, the market, the moment of entry, timing to hold, and exit of any investment. One tends to live in a home and this one fact of life: that living somewhere costs you something is a fact that can be mitigated, carefullly by buying within your means IF and only IF it suits your lifestyle your values and need for location. Many people make money flipping houses (yes now) inside 90 days. A home is no more an anchor than a bad stock you can't bear to part with. It's all relative. Wait for your moment. Or watch it pass. Your choice. Many people use OPM to make their fortunes and that is essentially what a mortgage provides: entrance and timing to invest. Many people including my famly and 2nd_avenue's have done extremely well investing in real estate. Just as many have lost it all by buying beyond their means. Pushing real estate is not my business. I just find the money, honey.

FYI: cities cheaper to buy than rent: http://tinyurl.com/cheapertobuy

Nice find there on Rose's interview with Geithner and the associated commentary here.

My thoughts resonate with Jim in that Geithner was confident going forward. I've only seen the first 15 mins as my time allocated to reading today is up. The article I found of interest this morning is Mauldin's latest, which he gave over to Jeremy Grantham - very interesting observations this man has which are tied to Geithner's opening remarks.

http://www.johnmauldin.com/images/uploads/pdf/mwo0...

As a trader I'm interested in where inflation, which Geithner suggested could be managed by major emerging market central bankers, comes into our trading decisions. Grantham is great in that his analysis ties together the easy money policy we have with the 3rd year of the election cycle. He is concerned that in THEORY the emerging market inflation could stop what he calls a bubble forming in US equities if the S&P reaches 1500, but in practise US markets are unlikely to stop rising until US rates begin to rise.

Grantham says he's done major research on bubbles and although the information will not be distributed freely, there are a number of tidbits to pick up in this letter. Of interest was the illustration of Isaac Newton's own experience in the South Sea bubble (care of Marc Faber). He also has some thoughts on climate and investing which are worth considering.

So I've heard Obama in the SOTU address and Geithner in Rose's interview use the market as the marker of economic progress, which is fair enough as it encompasses the capital that is available to companies to work with, expand and profit. But Grantham points out that he invests like Bill has begun with the 5x5 strategy - in high quality, value growth investments. But as Grantham points out, "we are in Year 3 of the Presidential Cycle, when risk - particularly high volatility, but including all of its risk cousins - typically does well and QUALITY DOES POORLY." He does point out that the mitigating feature is an extreme value discrepancy in his favour at this point in time, but this "never matters less than it does in a Year 3".

So I'm wondering if this year I want to be using my hourly buy and sell signals in TNA. 1-3 day holding period and it encompasses the quality and high-beta lower quality risk of $RUT that Grantham suggests does well during this period of the Presidential Cycle. I know this is not investing in quality but I have to rationalise a sector trend into a single strategy with a small account. Requires further thought.

Grantham also illustrates the 3 year nature of bubbles. I am wondering at what point does gold cease to be normal growth encompassing whatever standard deviation is normal and the trend becomes bubble territory. Sorry I'm no mathematician but I am hugely interested in the nature and psychology of bubbles.

Grantham points out that we have had 34 out of 34 complete bubble cycles, which statistically would allow several universes to grow cold before occurring randomly. As he points out, bubbles are not to be ignored in investing decision making, and I see Geithner and Bernanke creating new bubbles with their policies. How to properly harness the returns generated by these bubbles, that's the thought I'm left with this morning...

Last thought for the day. One analyst is looking at Banks who refuse to accept lower and systemically safer ROE's. He's already projecting out to 2015 another crisis. Those banking profits will come from where? Commodities? Precious metals? Equities? Incidently 2015 coincides with a pivot point in Armstrong's Economic Confidence Model if I remember correctly.

http://www.bloomberg.com/news/2011-01-31/lonely-an...

Les that bubble article was very interesting, thanks. It totally explains in a clear and concise manner why efficient market hypothesis is total crap and why otherwise intelligent wall street types tend to herd together, and under-react to changes in the situation.

As for gold being a bubble, that's a subject dear to my heart as well. I'm planning on relying on non-mathematical indicators, such as magazine covers as well as popular feeling. Once gold is clearly the Thing to Own, and all of my friends are telling me that I should own gold, and preferably a lot of it, that's when I'll start looking for the exits. And I'll still probably be early...