Bill Cara's Blog for Mar 1, 2011 [See Post-Close report]

Looks like gold is setting up for a run at the all-time high of 1432, currently trading at 1421. Based on silver's continuous set of higher highs, gold should not be too far behind. Not sure if it will get there today, but if it does, the spike should be impressive.

Clearing the recent high of 1424 might push the price through 1432 all in one push - I've seen silver do this before.

Good morning.

1.5 to 2.5 Billion Dollar POMO Injection Today.

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10:00 - Construction Spending
10:00 - ISM Index
15:00 - Auto/Truck Sales

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CTSH - Cognizant reinstated with a Buy at Kaufman Bros. Target $91

NE - Noble Corporation upgraded to Outperform from Market Perform at Bernstein
citing relative valuation. Price target raised to $53 from $40.

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"Gas is so expensive now that BP actually started inspecting their oil rigs." - Jay Leno

Vad's posting from yesterday led me to find this article:

http://blogs.wsj.com/economics/2011/02/28/feds-dud...

"The central banker defended the Fed against critics in emerging markets who argue its easy money policy is driving emerging-market inflation. Echoing the views of Chairman Ben Bernanke, Dudley said U.S. monetary policy is appropriate and helpful to the U.S., and a return to U.S. growth is in the whole world’s interest. Emerging economies need “appropriate” policy if they wish to deal with rising domestic price pressures, he said."

Translated:

"Of course our money printing is causing trouble for you poor sods in the emerging markets. Our policy of deliberate dollar debasement is expressly designed to devalue our currency, cheapen our exports, and (please God somehow) inject inflation into housing so our friends at the incredibly important TBTF monster banks will have their balance sheets repaired. Although this is basically a Hail Mary pass, we're doing what is best for TBTF, as our organizational structure requires. Now then, if you in the emerging markets (and that includes you too China) don't like it, you can jolly well let your currencies appreciate. We're going to win this race to the bottom, because our people only spend 12% of income on food & energy, and your people all spend upwards of 50%. We'll see who laughs last, when your people start starving and rioting. Best of luck keeping your currency pegs, guys. In fact, best of luck staying in power."

Who gave these guys control over the money again? What a bunch of weasels.

Actions have consequences. If their fun little inflation game results in destabilizing a good chunk of the oil exporters, it will all have been in vain. Who can say what other unintended consequences will result from this. If I were an emerging markets leader, or one of those tinpot dictators, I would be very upset at this point.

The squeaky wheels will get a token drop of oil, but no CEO will ever go to jail!
Who thinks it doesn't pay to own the SEC, IRS, and the US taxpayers treasury?

http://www.thestreet.com/story/11026295/1/jpmorgan...

Ilya said:
A decline in mortgage rates makes a property more valuable just as changing the depreciation terms from 30 years to 15 years altered the economics of commercial property in the 1980's.

I strongly disagree that a decline in mortgage rates makes a property more valuable. I own a rental house in the SF Bay Area. In 2007 is was valued valued around $700k. Today the same house is valued around $500k. Mortgage rates were higher in 07 then they are today yet the value of the house is way less. Back in 07 Citibank was eager to loan me money against it. Today Citibank will not loan me any money against it.

An friend just visited his brother in Las Vegas. Houses in the brother's neighborhood sold new a few years ago for $350k. Last house sold in his neighborhood was for $140k.

I would much rather have free and clear Real Estate then leveraged Real Estate, Bear E

LOL!!!

I asked that question to the community and based on the response, and the months of watching this, I dumped my position at a loss. I actually just picked up a full position of UXG with the proceeds. (This is my FD).

Recently read this article in G & M. It's probably my bias, but I thought there was very little substance, other than CEO praising.

http://www.theglobeandmail.com/report-on-business/...

Considering that it can't contain its costs, I think it's going to under perform its peers. Even an outstanding major (i.e. Goldcorp) is kind of sluggish. It does look like juniors/mid caps are where the money should be. I have a pyramid of GG at the bottom, SLW in the middle, and UXG at the top in terms of allocation. I wished that I didn't 1/2 of my SLW position at $39! Was going to buy back at $38, but was too busy with day job...

You missed the fact that the workers HAVE given in to wage and benefits concessions.

It is their right to the protection of collective bargaining that is the whole point here.

Walker is the tool for the cheap labor/race to the bottom plutocrats.

Should there be no balance in the labor/capital equation?

Here in Florida Nosferatu was elected Governor and is hell bent on securing our status as a banana republic also.

Ciao, Z.

Sold the rest of my shares at 3.28 this morning, - buying EDZ! Holding LEI - that was a good buy to add 2000 yesterday morning.

Even FDR wrote that any public unions should not have the right to collective bargaining and it was never approved for federal workers. Its a rather incestuous relationship when the "mandatory" dues are used to elect those who give increased wealth to the same "workers". This does not occur in non-govt "industries. At one time wages were less and benefits higher because of the "safety" of govt employment which (my opinion) attracted a more risk-adverse individual but the ubnions took care of that. One can do a trick when only comparing state-employee "wages" in some categories with non-govt workers but when one adds in "benefits" it truly becomes biased toward the state worker in a good many states.

Give it up for Gadaffi the new world music star: Zenga zenga!

http://www.youtube.com/watch?v=cBY-0n4esNY

Superb translation to english. Basically they are saying "Damn the torpedoes [inflation], full speed ahead [printing presses]"

No wonder dollar is only twitching right at the support and not able to rise.

Sorry ZedII,

I'm just quoting the article... although do I disagree with your point of view anyway. The "whole point" here is who works for whom. Wherever I worked, including when I ran my own business, the "boss" (client in my case) called the shots.

Nowhere in the US Constitution is there any mention of the "right to collective bargaining".

Walker, like so many other governors, and mayors, is faced with wonderful benefits which I'm sure we would all like to have, but without the means to pay for them any longer.

Governments at any level only have what they take from us. Most people in the private sector have nothing close to what public employees have accumulated. Yet, they are the people whose money goes to pay for these cushy benefits — including wasteful deal they have "collectively bargained". The process has been highly inflationary for decades.

The problem with keeping collective bargaining is then the workers can set the specifics of their jobs. "I will not teach more than x-number of kids in my class." "I will not work in the rain." or whatever. All of which caused inefficiency and increased costs.

A "right" I will concede is the right to say, "I quit", since slavery has been abolished. BTW, I did refuse to work for some people and under certain conditions.

Chow (former army cook ;-)

Edit: The last I heard the cost to WI union workers was about a 7 to 10% wage cut. Ask anyone in the real world what has happened to health care expenses and how much is contributed to their retirement. My son had his hours cut 20% last Apr and my Medicare supplemental premium jumped 20% this year. While working I often set aside 15 to 20% for retirement — we skipped vacations when business slowed. Life in general is not about "rights" — it's about self sufficiency and taking responsibility.

This is in response to yesterday's thread.

Earl and davefairtex -

Thanks for the responses to my posts.

Fiat currency's tangible asset is DEBT. Kaimu schools us on this every week. Too much of fiat currency has been produced by gov't and now floats around electronically in the massive daily trades seeking a safe haven (carry trade). To judge the risk/return you need to look no further than the long-term bond rate. That's the rate of return for that paper asset over time. For example, the spread between the Portugese and German 10 year bond today is a whopping 4.45% owing to the higher risk that the Portugese default within the next decade.

U.S. debt, as the reserve currency, has entered into a dangerous Confidence game of the Bearded One holding key interest rates below inflation while buying up the runaway public debt. The sovereign buyers of U.S. debt have left the stage. To get buyers back into U.S. debt, rates must rise but even today's low interest on this debt cannot be covered by tax revenues. The risk of dollar collapse (hyperinflation) grows by the day.

There are two great cabals manipulating fiat currencies: OPEC and the NY banks. Both public and private debt have finally hit the wall with the FED and its NY banks to blame. Consumption is on life support. Commodity inflation export is the direct result of U.S. QE and ominously caused North Africa and the Middle East to erupt last month. Now OPEC oil production and trade in USD come into focus with all eyes on Saudi Arabia, the controlling member of OPEC. Note too that Libya is an OPEC member.

The DAVOS solution is to reliquify sovereign debt by issuing some $100 TRILLION over the next decade in SDRs to replace the USD as the reserve currency. See the Rickards interview at KWN below. Rickards is a strategist on financial security for the Pentagon.

http://tinyurl.com/4vcr8vj

Physical gold is the only asset that is arguably free of capital controls because it lacks counter party risk and is a insignificant market traded globally for over 5,000 years. Probability is high that SDRs will have partial gold backing and replace the Petrodollar. Fiat currency printing to infinity will then be cease with the SDR as a check on the exchange rates.

Let's hope war with China doesn't intercede in the meantime as the big economies secure food and energy in the asset chess game to thwart REVOLUTION.

Cheers.

Ross -

Just wanted to clarify as you seem to have a handle on the fundamentals but got a little screwy on way it comes out in the wash. The proforma on a commercial property works in this order:

Gross Revenues
Vacancy & Collection Loss
Effective Gross Revenues
Operating Expenses
taxes
insurance
maintenance
utilities
management/admin
replace reserves
Net Operating Income
Debt Service
Cash Flow

Cap Rate applies to the NOI and is a market driven metric. Regarding the net, net, net lease, that just means a pass through of the operating expenses to the tenant so that in theory the nnn lease base rate is lower than the gross lease because of the pass through by the amount of that pass through.

Your strategy to lock in debt and then pay off as inflation hits is a good one but with high risk. If the strategy goes underwater with runaway expenses and defaulting or vacating tenants as you attempt to raise rents to cover this inflation will put you underwater in a highly ILLIQUID asset. I think Bill pontificated on this in the last WIR. Great fortunes have been made but more easily and with far less risk when buying up said commercial real estate at the peak of a hyperinflationary event. Cash is king! Patience is a virtue.

Unlike the hyper trade of equities, commercial real estate can commonly transend generations. For example, Queen Elizabeth II inherited vast areas of downtown London after her ancestors established 100 year ground leases that were developed with trophy buildings by the tenant. As those century old leases expired, she took control of those prime improvements on her land and the next generation of royalty preserves wealth. Think of the best commercial real estate as an investment in your family's future generations and you can understand the logic of its true value.

Stay thirsty, my friend.

In the commentary at the top of the page.

Bear E -

"I strongly disagree that a decline in mortgage rates makes a property more valuable."

In theory, if interest rates fall, debt is cheaper and that creates value, usually through a lower cap rate. In laymen's terms, if you qualify for more debt you get to buy a bigger house. Rates are a lagging influence that can be snuffed by conflicting market forces. Moreover, single family homes move out of the metrics of rational profit motives into the emotional motives of unsophisticated home buyers and flippers seeking status (a bigger starter castle) and a quick buck via the easy money known as the Great Debt Securitization Fiasco (Fannie Mae & Freddie Mac). Over leveraged, over supplied, over sold. Interest rates are just one aspect to value but a lower interest rate will ALWAYS be a positive influence on value.

Cheers.

I sold my INP this AM, but not sure anymore if it was a good move. Especially TTM is going strong.

Dr. S. - thank you for the response - I like Rickards and posted this link a few months back http://outerdnn.outer.jhuapl.edu/rethinking/VideoA... where Kaimu took some interest in the talk given by Rickards - did not agree with everything said but no one would agree with everything... Rickards advocates the overthrow of the FED and taking their gold - adding it to American stores and going back on a formal gold standard.
regards
Earl

Hi Jack; I posted a few comments very early this morning (Feb 28 post) on some of the 2011 top picks - I too am interested in TTM but will wait for a stronger pullback - started buying EDZ at 21.9 the other day and am confident in that position while this market sorts itself out. Also commented on CRESY and SEED
regards,
Earl

I decided that if I can pick up UXG at less than a $1.00 differential over what Rob M paid, I'll take it. He paid $6.50 last week for around 3 million shares. So today I picked up a position at $7.35. I will wear the UXG tie they gave me at my next meeting with them.
RBY just updated their presentation yesterday. Changes from their Feb 3 presentation include acquiring a hoist upgrade to 2000 TPD, core zone cross cut, PEA in progress but no completion expected date (probably due to BCSC inquiry). A response was made Friday to the BCSC so we are now in a ten day window for a response. My position with RBY is concentrated with $2.50 calls although I have a stock position near $5.00.

I missed those comments, I went back are reread them. Great minds think alike I guess (pardon my modesty).

here: http://www.321gold.com/editorials/hoye/hoye022811....

He has been raising alarms about a potential crash of the all-in-one markets for a few weeks now.

Well, anyone who trades or even merely observes the market for longer than 15 days, knows there is nothing fool-proof in trading, and can't be by definition. But I just must ask - what does Blankfein have to do with it? (well, aside of blaming him for each and every wrong there is).

Regardless of the first-of-the-month effects, oil going from 97 to 100 seemed to disturb the market. That, with gold hitting a new all time high, silver continuing to set 30 year records - and with expert prognosticator Bernanke now admitting commodity inflation is present (but it will be mild and transitory, of course - just like subprime issues were contained), things are not looking too great for the bull.

I say this just in looking at volumes and price movements. Lately, down days have had big moves accompanied by large volume. Up days have been dramatically smaller volume days. I saw a similar pattern back in the april 2010 high.

I'm not jumping in short, but neither am I looking to buy any dips at this point.

I will make a radical prediction, however. Within one month, Bernanke will declare money printing a success and turn off the spigots ahead of schedule. Of course, inflation won't ever make it to home prices - the stopping of money printing will come because those with an eye on foreign policy will have noticed that our money printing is actually destabilizing one after another of our friendly oil dictator-regimes around the world with high food prices. As a result, "they" will inform Ben he must stop for the good of the country. And since "they" tend to be guys that lurk in the shadows and have black budgets and predator drones with hellfire missiles on them, he'll do what they say.

It will go down in history as a Hail Mary pass that in retrospect was doomed to fail because of unintended consequences. "Who knew that printing money would result in higher commodity prices!"

No modesty please Jack, everything I've learned positive about investing and trading I've learned from everyone here! What a blessing this board is!!! At least now I have some confidence.
Regards
Earl

Anyone have any info on this company?

It came up on a screener today. Jump at the open with high volume on no news (or at least none that I can find). It looks like it's had a nice run since November.

Thanks.

Earl -

As a Pentagon financial security analyst of high order, Rickards has stated that a last resort currency strategy will be for the U.S. to re-establish its gold dominance alongside the other major gold-holding nations of Italy and a few others.

You said:

"Rickards advocates the overthrow of the FED and taking their gold - adding it to American stores and going back on a formal gold standard."

The Fed is NOT in control of the U.S. Constitution, U.S. Treasury, nor the U.S Congress, President, or Judiciary. That is OUR gold, not the Fed's. Rickards points out that WE THE PEOPLE have more gold than any other nation on earth. So let's play a war game with a U.S. General after WE THE PEOPLE hit the streets and manage to abolish the FED in an emergency vote by the U.S. Congress. Here is my take on what Rickards has outlined in recent interviews.

Rickards: We've hyperinflated, sir!
General: Now what?
Rickards: We use our gold supply and all of Germany's gold supply in a vault in NY and use it to establish a new currency, sir!
General: Those Chinese and Germans are gonna get pissed off...
Rickards: Sir, yes sir!

http://tinyurl.com/49s23fn

Cheers.

Dr. S, I'm all for that Sir. I've listened to the Rickards presentation 3 times, I could sware he said the 'FED' also sits on 600 tons of foreign gold and we the people have close to 900 tons. Rickards can get your attention and so does Kaimu. Most of this is beyond my current level of understanding, right now I know enough to make me sound like I'm clueless LOL. But I'll keep reading. Thanks for the link, about to click it. Good luck tomorrow.
Regards
Earl

Oil is not letting the choking pressure so far.

600 tons + 900 tons wouldn't pay for the trade deficit for even one year