Bill Cara's Blog for May 2, 2011 [See Post-Close report]

Good morning.

6 - 8 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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AMAT - Applied Materials downgraded to Neutral from Overweight at JP Morgan
JP Morgan downgraded Applied Materials citing relative valuation and near-term softness in capex trends. Price target lowered to $14 from $16.

WFMI - Whole Foods downgraded to Hold from Buy at Jefferies citing checks that indicate a deceleration in comps. Price target is $64.

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"It's the 75th anniversary of the introduction of Social Security checks. For the younger viewers who don't know what a Social Security check is, you'll never see one in your lifetime, so don't worry about it." - Jay Leno

I will first say that I am not a supporter of President Obama. I did not vote for him and will likely not vote for him in his re-election bid. But I have to say that he surprised me by taking this bold decision to send the troops into this location. What would President Clinton have done. He would have a missle strike and then try and confirm the death-or maybe waited for visual evidence that it was truely Bin Laden. President Bush-I think he would have shared more info with the governments of the world and the leaks would kill the operation. The President acted like a President and I have to give him credit for that and putting to an end the long, drawn out saga of this criminal. Kudos to President Obama.

Bill I agree, it is an important event. It will be interesting to see how the market responds, and perhaps more importantly if the climate of fear in the US is taken down a notch as a result. It would be nice to travel with more than 100ml of shampoo, and without being body frisked.

As for the cynics, take a look from the other side. If one were to set about faking such a thing, what risks would attend fabrication of such an affair? Bin Laden would simply have to make a new video referring to current events, or better yet, give an interview to Al Jazeera, and what's more, it would be to his advantage to do so. That would be a high risk low payout sort of conspiracy. No, it is extremely likely that bin Laden has met his end, and kudos to the team that made it happen.

As to why his body was "buried at sea", now that is a more interesting question. Was that in the original mission operations order or was that improvised based on events? Thinking about it - if the US retrieved his body, who would bury him, and what would that burial place turn into? Wrapping his body in weights and tossing it out of the chopper solves that problem nicely.

Did the operations order specify trying to take him alive? Were I President, I'd much prefer a dead bin Laden to any information our intelligence services might manage to extract. Just imagine a trial and ... no, I don't think so. He gets to die a martyr and the world is spared a circus. Is it possible he's alive in some cell being asked questions, only to be shot while trying to escape later? I'd be surprised if we took on that liability; I'd say its possible, but unlikely.

Anyhow, thanks again to the SEALs and their support teams. Its a rare thing when the troops get to make such an impact in person - its a reason why such people serve. I'm happy they all came back.

Bill,

Yes, probably more likely today than some historical events in WW2. I knew a man who kept his actions behind the lines in Europe a secret until the 30-year rule expired.

I don't know or believe much of any news anymore. I know I can personally make any photo evidence I want to in these digital days.

Easy to fake a birth certificate? How many real Green Cards are there?

A DNA comparison still requires trust in those making the test.

My political decisions will be made on actions taken not on promises or claims.

To me, ObamaCare is the single most disastrous legislation never read and quickly passed. Our involvement in Libya (backing unknowns with declared limitations) is even less deserved than the entry into Viet Nam turned out to be (Gulf of Tonkin, fight within the lines only).

I gritted my teeth and listened to O's victory lap speech. My only outburst (my wife hates my editorial commenting) was when he claimed credit for our nation's security — "Except our southern borders!" (couldn't stifle it) — the recent WH conference exclude all governors of border states, but included corporations who would gain from amnesty.

Did anyone count the number of times he said "I"? Neither he, nor Bush should take credit for what a dedicated military has done at far more risk than any politician ever takes.

I confess he could walk across Lake Michigan to shake my hand and I would turn and walk away from this person. Too many promises, too many self-centered actions, too little care for Americans.

I expect another book from him on this "victory". How about, "The Audacity of Military Victory Dreams Realized,"?

Grym
Sorry, Vad — I had to borrow the sarcasm mode again ;-)

Bill, thanks for putting a smile on my face this morning. I've been questioning the value of leadership lately. This strong, smart young lady(90) may bring me back around. I want to learn more about how she's kept such a large metropolitan city out of DEBT for over 30 years. I highly recommend the video you linked. I can see why you're so fond of her.

http://www.youtube.com/watch?v=fY79KbCptTo

Dave,

Yes to all of your comments with one exception:

I don't see this as making any changes in airport security. Bill Cosby did a record with a bit about "Time In". The amount of time which has been invested in security "feel good" policies and procedures is akin to "The War of Drugs" and no rational approach to the problem will change it — ever.

Grym

http://www.finviz.com/futures_charts.ashx?t=CL&p=w1

http://www.finviz.com/futures_charts.ashx?t=NG&p=w1

Compare the two 4ever. How high can oil go without gas following? 2006 gas prices are interesting. Anyone remember why they spiked then, but not oil?

ALOHA!!

Okay ... so whoever had all those OBL puts is making a killing today!! Lets hope those puts made up for all the losses they took over the past ten years with that strategy!

For me this is nothing more than Carlo Gambino of the Gambino NY Mafia dying. The next guy in line moves up. It will take a lot more than just OBL to kill the Islamic Fundamentalist beliefs and if anything this now adds more danger not less as these crazies will want to avenge OBL's murder. I can't believe this makes Americans feel safer.

In the big picture I truly believe OBL can hang a banner across his cave monument stating: MISSION ACCOMPLISHED. His goal all along was for America to spend billions on the WAR ON TERROR and he has succeeded beyond his wildest dreams as the US Treasury has spent "trillions"! Of course "terrorism" has been going on for as long as I can remember and in fact back in 1972 I barely missed being bombed and shot in Israel in Tel-Aviv, as I read in the newspaper the day after I landed in Athens, Greece. Then lets not forget our own homegrown OBLs like Timothy McVeigh.

Now we will never know whether spending $1TRIL+ on the WAR ON TERROR was worth it or not since we did not go down the less costly more peaceful path of spending that $1TRIL on our own country and our own citizens building and repairing infrastructure. Instead most of that $1TRIL went into the pockets of a select few corporations that specialize in bombs and bullet production. Then also let us not forget the many thousands of US military personnel and Iraq and Afghanistan citizens that died over the past ten years. Celebrating one terrorists death can never bring back those who have died.

Let me spell out the exact cost of the $1TRIL+ we spent on the WAR ON TERROR. I will put it to you from a Public Works contractor and a stock traders perspective. One-We can NEVER get that $1TRIL back. ITS GONE ... ITS A LOSS! Now for all the neglected infrastructure repair and buildout as well as entitlements we need to come up with another $1TRIL to cover the $1TRIL we used to prosecute Middle East wars. So that $1TRIL loss is now a $2TRIL loss. The way I see it OBL cost America a huge part of our Nation's wealth in fiscal and human terms. Who knows what one of those military soldiers who died might have accomplished in their life had they not gone to War? I think the same of all the past Wars that America has participated in. I often wonder what America would look like now had we not invaded and occupied Iraq and Afghanistan. Nothing much changes in America so long as we retain the "business as usual" political and monetary monopolies.

Yes, its just another chapter in our long history of military adventures. Our love affair with the bullet is well known and will not end any time soon. The entire WAR ON TERROR has been a huge hit on our PUBLIC DEBT. The US Congress/ Treasury indebted America over $2TRIL since Feb 2009. Our Congress is now faced with raising the DEBT CEILING another $2TRIL soon to cover the past $2TRIL in spending. And so it goes, just like our love affair with the bullet our love affair with debt keeps growing. We baby-boomers never see signs that say YOUR TAX DOLLARS AT WORK any more as it is now degraded to YOUR DEBT DOLLARS AT WORK!

Celebrate today and tomorrow the sun will rise in the East again. Nothing has changed with regard to the fiscal trade deficits and debt that matter most. I doubt nothing changes fundamentally in the stock market. OBL is essentially a "blip" on a radar screen from my long term viewpoint. In fact if anything OBLs death will inspire Islamic Fundamentalist to take advantage of the current Middle East revolution even more. Last week the US Treasury was within $52BIL of raising the DEBT CEILING ... MORE DEBT = MISSION ACCOMPLISHED!!

either way, don't get too excited yet. Pull out UNG to weekly timeframe and you've got a basing pattern developing, that's all. A long way from heading higher. Yet risk/reward at these levels is looking a lot more interesting, especially if the Fed can (and probably will) kill the value of a $ these next 5 years and put commodities of all stripes into a bubble. Waiting for a $ snapback to see how natgas prices react.

Obama deserves credit for getting bin laden. george bush would have flown into dc on the space shuttle, with a silly grin on his mug.

Kaimu -

Asymmetric warfare is always cheaper for the terrorist than for the government, that's just how things work. And the USG isn't particularly good about doing things on the cheap, as we all know.

We can go on about why, and wherefore, and should we be in the ME, and energy policy much of which I would agree with, but for me today its enough to say mission accomplished insofar as a proven enemy of the nation is now out of the picture. There are a million things wrong - but this operation certainly went well. Today it is enough for me to celebrate that successful action and the men that brought it to a successful conclusion.

Like your idea of not becoming too excited just yet. Lots of supply and we're entering a period of reduced demand now that winter heating season is winding down. Prefer not to even look at UNG. That ETF acts too "crazy" for me to understand. Prefer to watch APC, CHK, OXY & XOM. The BUY alert helped alot on XOM back below $60. Continuing to watch & hopefully learn.

Agree; I could easily conjecture that the EIA weekly injection numbers are the result of marginal production increases from chemical industry due to issues from Japan. This could lead to higher NG prices later this year.
Earl

I took profits in SLV puts first thing in AM. And bought SLV calls seeing the strength. Too bad I waited some with the calls.

Right on target for June 13, with OBL assasination as a catalyst? Armstrong has a history of calling these things with spooky accuracy. See 'The Next Wave' in the list:

http://www.martinarmstrong.org/economic_projection...

Prior to the OBL news, Iran warned Saudi Arabia not to send troops into Bahrain without consequences at home.

http://tinyurl.com/3zt9pkz

Not a good time to be a Saudi prince or the owner of a Suburban with a 40 mile commute.

Kudos to the SEALS.

Cheers.

I use UNG for swing trading with no problems. Long term holding is another story. Unfortunately, I exited from UNG circa 11.5 and I'm waiting patiently for a reentry point.

Uptown or downtown by noon? Heck if I know.

But were they virgins?

LOL! Almost falling off my chair.

Hi Grym,
another thing I notices last night was the sudden change from OBL to UBL - fox news modified Osama to Usama both in print and spoken last night. Cox and Tanous on CNBC are talking about the decline of America - eyes on EU for the trigger events... What will be will be... Following the ancors here I've moved most of my investments toward gold miners and oil - my trading is way down. I tend to also agree with Kaimu's assessment...
regards,
Earl

on the following point from your WIR:

1. Traders are looking to the economic data for a long-awaited return to normalcy; however, the devil I believe will be found in the credit markets and not in the equity market.

If as you write in point 2 that corporate earnings are strong thanks to a weak dollar and not an improving economic outlook, what sort of indication are you looking in the credit markets.

I do keep an eye on JNK which is wallowing allowing here aimlessly and is failing to take out its November high. I also note TLT making higher highs and higher lows as we enter Q2. I also see declining highs in MACD and RSI in the treasury yields like the attached 5 year, suggest treasuries might be about to make a comeback.

What are you looking at in credit markets? TIA

Let her out at 98th- just wanted my money back + cab fare back to work, and she was nice enough about it.

Now savouring the delicious taste of democracy.

http://dharmajoint.blogspot.com/2011/05/after-osam...

"Will Bin Laden’s Death Burst The Commodity Bubble?"

from: http://www.investorplace.com/39278/bin-laden-gold-...

Read the comments at the bottom.

http://etfdailynews.com/blog/2011/05/02/the-sp-500...

"I believe that the actions taken by the Federal Reserve for the past 2-3 years are going to result in additional selling pressure in the future for the U.S. Dollar which will propel commodity prices and equity futures prices higher than what many will expect. While the selloff may occur within the confines of a short to intermediate term time frame, the U.S. Dollar will eventually bottom and a nasty selloff in commodities and stocks will transpire and the next leg of the secular bear market will begin. The business cycle and the technicals are aligned at this point, the question is really how long it is going to take to get there.

The end game will likely result in the Federal Reserve looking foolish while the American people and the global economy will suffer from the Fed’s ineptitude. The possibility that the Federal Reserve is forced to raise interest rates to slow down inflation at the same time the U.S. Dollar bottoms is a recipe for a potential economic disaster.

Slowing economic conditions based on higher oil prices and inflationary pressures paired with higher interest rates will result in another recession fueled by the Federal Reserve’s Keynes based economic models and decision making. Ben Bernanke was right about one thing, the Federal Reserve uses educated guesses based on their models when setting monetary policy. I posit to readers, what happens if the Federal Reserve Chairman and Governors’ price models and educated guesses are completely false?"

Amen!

The OBL bounce is gone. E-minis have moved into the red. With an RSI of 79 and the dollar seeming to find support at 73, perhaps SPX has hit an interim top? I'm just judging this one on what I assumed would be a very bullish sentiment day (capture/kill of OBL) actually resulting in a selloff.

When the market doesn't react as you expect it to, that's a tell. Jack's question earlier about VIX - the fact that VIX was up and so was SPX, and only one of them would be "right" - has me thinking right now. My money is on VIX at this point.

http://eu.techcrunch.com/2011/05/02/heres-the-guy-...

"Go away helicopter - before I take out my giant fly swatter..."

c2ski,

I never tell how I vote and I'm not smart enough to make useful predictions about election outcomes.

As far as your BS judgement goes, I will quote Sir Winston Churchill:

"It has been said that democracy is the worst form of government except all the others that have been tried."

Yes, I smell the BS and yes I find it difficult to be put in a position where my choices are among different fragrances of BS, none of which are to my complete satisfaction. But I live in a country where I do have a choice and where there is always a chance that a sweeter smelling brand of BS can emerge. I live in a country where an election can be triggered by a vote of non-confidence in parliament. That, directly or indirectly, is the people speaking up and saying to the governing party, "You've crossed the line." I live in a country where I can voice a contrary opinion and not worry that I will disappear in the middle of the night never to be heard from again.

If you are also a Canadian, may I ask: Are you voting today?

hi earl.. see the webcast is set for this week at gern.. wonder if this will do an itmn one day, and never look back ?.. best to you

Well the SLV calls stopped out at a nominal loss. I should have taken profits when I could, but didn't feel like day trading.

Yes indeed, Billinbc. I can understand apathy regarding the latest sandwich at MacDonalds, but to care so little about who represents your interests in government that you can't be bothered to make an X on a piece of paper is beyond my comprehension. There are democratic countries where voting is mandatory and noncompliance is punishable by a fine. Anyone here have an opinion on that?

Obama secured major place in history books with killing of bin laden, but, and correct me if i'm wrong, but he already has major place in economic history books with the rise of the DJIA more than 50% since he took office.

Also, econ hist books will show Clinton gave Bush a surplus, whereas Bush gave Obama $800 million deficit.

US fiscal house not in order because Bush raised debt ceiling 7 times and responsible for terrible deficits.

I remember sitting at the screen and watching in disbelief at ACOR that December morning...> http://finance.yahoo.com/q/bc?s=ACOR&t=5y&l=on&z=l......... first stop was around $ 6.00... then the next day it was $ 9, then $ 12, then.. well you get the point .. and that was for their pill that help M.S. patients that could already walk, walk Better... could you imagine what would happen if gern's spinal trials were beyond expectations ? as the author of that weekend article said " volume of biblical proportions "....

Some sort of "modern" voting process will be forced into existence by the younger voters. Wish they'd hurry up :)

Although I am not happy with the state of politics and/or the choices today in this country, I am happy with having the opportunity to X the circle. I was 5th in line at the voting station this morning at 7 a.m., and I thought to myself we need to get lives. Then I realized how stupid that thought was and that we already had things pretty good.

Jack,

We, as a country, are far too loose with security. For years I have said a Private on guard duty at a PX would do a better job.

The amateurishness can be seen at the very top. Obama told the world when we would begin to pull out of Iraq and most recently, "no boots on the ground" and "no regime change" — just plain stupid. Translation: Sit tight bad guys, we won't be much trouble for long.

LBJ went on TV to announce a bombing raid and the North had their artillery set for the right altitude in advance. Clinton — all show and no substance. Carter? At least we got him out the door in a hurry — now if we could just put a cork in his mouth. There was a time when people were shot for less. But, of course we have no Declaration of War just executive orders.

Neither Bush, nor Obama did anything to protect our southern borders beyond eyewash and everyone who matters knows it. Got to have that Hispanic vote. I suspect those here as citizens would prefer honest action.

Pakistan is no friend in any way, but getting a steady supply of dollars.

Makes me believe I could have been a General instead of a Grunt ;-)

Grym

Eric Sprott and Sprott hedge funds have sold trust units in Sprott's Physical Silver Trust (PHS.U-T 20.22 -1.43 -6.61%). The trades were made in the last two weeks of April when the price of silver (SI-FT 45.95 -2.64 -5.44%) peaked.

The trades were reported in a document published by the Securities and Exchange Commission. In total, 1.6 million trust units were sold at an average price of about $21, making the proceeds worth about $34-million. The selling unitholders were Sprott Hedge Fund L.P., Sprott Hedge Fund L.P. II, Sprott Asset Management L.P. and Eric Sprott.

http://tinyurl.com/3ll7m2e

bbarberayr "The problem with voting, I think, is that in most districts, people know their vote won't matter, unless it is a close race. So, why bother wasting a few bucks on gas, rushing through dinner to get to the polls, maybe not walk your dog if you don't perceive it is going to matter?"

I'm voting after work, and am walking to the polls, with my dog, burning no fuel, so will kill 3 birds with 1 stone.

Thank you Bill. In hearing questions of "QE or not QE" it becomes easy to forget the fundamental problems underlying these desperate policy measures. Happy to hear a different market scenario from an experience hand - helps to keep the mind open to various possibilities.

Hi All - Not sure why the rotation at this time, but some of the uranium's are catching a bid with decent volumes. The U3O8 price is not moving higher yet (~55.50/lb), but reports of tightening supplies on the spot consignments might be a trigger for some. Happy Trading

The divergence between RUT and the larger cap indexes are clear, but this is looking like a db as there is bullish divergence in the indicators in the 10 minute time frame, so I remain on the sideline.

Pull IWM out to the weekly timeframe and one can see we're just above the 2007 highs. A test of support, or a dt? Time will tell, but a top could precede analyst downgrades that are to be expected sooner or later. As always, watching and waiting for Uncle Buck to make his move.

Hi All - Noted this blip: Shares in Noront jumped 8%, after reporting that a top Chinese steel group will buy a 9,9% stake in the company, and could boost its holding to almost 20%. Funds to be used for feasibility studies etc. Another company looking to China might be U.S. Energy to run with its moly deposit in Colorado, after an option on the project was cancelled by Thompson Creek .. project is drilled out and ready to go assuming permits issue in a NIMBY situation. Happy Trading

Interesting events taking place in concert with Obama's recent decline in the polls. As we enter the political circus
called the Presidential Election 2012, the next 18 months will be one of the greatest shows ever seen. Obama
is the circus master, and his three ring show will be filled with grandiose deception and untruth. The other side (repubs) will struggle to match the Democratic Cirque du Obama.

I never paid too much attention to the Obama birth issue.. But...Why did Obama released his controversial birth certificate after two years or more of numerous requests to present it? Hmmn? All his other records are sealed. It was reported he spent considerable sums on lawyers prior to the 2008 election to darken up his past. Did he receive foreign student aid while in school? Was he listed as foreign born on other educational records? Why such secrecy? I think he and his wife are on Oprah today where he hopes to put the birth issue to bed for the last time.

I received an email this morning commenting on Obama's birth certificate. Quite interesting. Don't know the author ...they referenced Wikipedia as their source.

"At the time of Obama's birth,
it shows that his father is aged 25 years old, and that Obama's
father was born in "Kenya, East Africa". This wouldn't seem like
anything of concern, except the fact that Kenya did not even exist
until 1963, two whole years after Obama's birth, and 27 years after
his father's birth. How could have Obama's father have been born in a
country that did not yet exist? Up and until Kenya was formed in 1963,
it was known as the "British East Africa Protectorate". But, this is
not the only thing that I found that just does not jive.

The other item that I looked into was the hospital that Obama was born
in. On the birth certificate released by the White House, the listed
place of birth is "Kapi'olani Maternity & Gynecological Hospital".
This cannot be, because the hospital(s) in question in 1961 were
called "KauiKeolani Children's Hospital" and "Kapi'olani Maternity
Home", respectively. The name did not change to Kapi'olani Maternity &
Gynecological Hospital until 1978, when these two hospitals merged.
How can this particular name of the hospital be on a birth certificate
dated 1961 if this name had not yet been applied to it until 1978?".

Then we had the Bernanke dog and pony show last week, which was just more deception and lies.
Turbo Timmy said for the 40th time that the US believes in a strong dollar, the Benak agreed.

Bernanke finally said there was a little inflation but the Chairman and "the Committee" have everything under control and are watching the situation with their hawk-like vision to keep everything going as it should. Congress is on
vacation AGAIN, probably many overseas as spring is the season of junkets. When they return, more deception will be created when they debate raising the debt ceiling and making fiscal reforms. More deception. David Stockman said
Chairman Bernanke has the "vision of a blind squirrel". I might add "deaf and dumb" to his description. Either that
or its Bernanke's treasonous plan to destroy the dollar so that a new world currency agreement can be born.
Perhaps it is the only way out for the dollar which has been destroyed by excess debt.

All Caraistas who are trying to manage their savings through investin are faced with rivers of deception, which we must regularly cross, while trying to protect ourselves from those who act against us. We are seeking only truth
so we can attempt to navigate through this storm and survive its wrath with our wealth intact. The intentional deceptions offered by our leaders, many which exhibit criminal characteristics, need to stop.. now!

via puts just as I said I would. Like I said before, I don't like the most recent COT results.

Weak hands being flushed from PSLV but I didn't expect Eric Sprott to be one of them.

Eric Sprott is not weak hands, he is smart money and knows what is coming. I think it's not too late for you to hedge your silver.

Well,
UUP made a hammer on a very high volume. A reversal coming? Maybe the UUP short was not such a good idea?

Above.

Many more what would vote? Oh, you said people... LOL

http://tinyurl.com/3wpvbvl

Kudos to those of you able to ride the buy/sell waves in silver. I was never able to sleep without at least one eye open while holding significant positions in the sector. The recent shakeout? For me, that would have been more like a wipe out.

I was wondering about the after hours double-digit gains in the sector.

Earl: OK... with such nonsense, I'm in the process of succumbing and bailing from this excellent blog which have been following since shortly after inception. I shall, however address some comment to Tobyt, as previously noted, and then depart. I recall when Shark was finally ousted because of complaints about his " over the top " remarks. But this B.S. political/conspiracy stuff is indeed ( with the disclaimer, of course, that it's just my opinion ) plunging into toilet territory. Egads!!

Ok, the baby getting thrown with the bathwater scenario did not occur to me when I see PSLV still holding a high premium to NAV. All the diehard silver bugs hang out at Sprott's?

As Patrick and yourself have pointed out, buyers market returning. thanks.

"Mr Stevens did, however, warn that the fall in consumer prices which followed the financial crisis has probably finished, and inflation is now likely to be on the rise in the months ahead.

"Looking through these short-term movements, however, the recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course," he added.

"While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected."

http://www.abc.net.au/news/stories/2011/05/03/3206...

RBA a little more in tune with inflationary expectations than The Fed. Or does the United States face a different outlook? I don't think so, if I understand the cyclical nature of inflation as posed by Armstrong, Bill and others.

One can also see the RBA's response in light of the declining credit impulse in Oz as the financial crisis home rebate offers from Canberra decline to pre-crisis levels.

http://www.debtdeflation.com/blogs/2011/05/02/hous...

I'm no fan of mathematics but you've gotta admire Steve Keen for laying out in easy to understand graphs the correlation between debt and housing prices. So many housing industry insiders have been making up stories about immigration and lack of housing blah blah blah (this time it's different). Take away the debt incentive, max out housing prices against salary (means of paying the debt) and watch those housing prices stall and fall.

A stagflation scenario will be particularly nasty for the average Australian taxpayer/homeowner.

The buck is nibbling at resistance today - which I read as 73.50 on the front month futures. If it can break above that level, we might see a bit of short covering. After that its probably the 74 level that's next. Support is around 73.

e-minis, oil, gold, and especially silver have sold off as a result.