Bill Cara's Blog for Nov 1, 2011

GROSS DOMESTIC PRODUCT (YOY)
Actual: 0.5% Cons.: 0.4% Previous: 0.6%

http://www.fx360.com/calendar/

U.S. banks have guaranteed a total of 518 billion dollars worth of government, bank and corporate debt of Greece, Portugal, Ireland and Italy via sales of credit default swaps.

Yet, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., the leading CDS underwriters in the U.S., report less than that amount by claiming their net positions are smaller because they purchase swaps to offset ones they're selling to other companies.

Absolute BS.

These swap contracts are worthless. They will never be paid. There will never be a hard default declared by the ISDA. These banks continue to make millions by selling worthless insurance.

http://tinyurl.com/6glhnln

ZURICH (Reuters) - The Swiss National Bank booked a profit for the first nine months of the year, helped by a rise in the value of its gold holdings, a relief after periods of big losses from currency interventions last year for which it drew sharp criticism.

The SNB said on Monday it had swung to an overall nine-month consolidated profit of 5.8 billion Swiss francs (4.1 billion pounds) from a loss of 10.8 billion in the first half.

Switzerland's 26 cantons (states) are the SNB's biggest shareholders, and the SNB has warned repeatedly that they may not receive their regular dividend this year. The SNB said on Monday its priority was to rebuild its reserves.

http://www.iii.co.uk/news-opinion/news/reuters/20402

gold saves the day hey - whudda guessed? I wander what reserves it wants to rebuild - gold maybe?

I remember Stonecipher from when he was at Sundstrand Corporation in the late 1980s. When you work on a corporate annual report you get to learn quite a lot about individual character. (Suppliers are invisible just like the black servants in the old South and talk is unguarded.)

His style was to milk a company for anything he could personally gain in the short term and then move on to the next, larger target. This followed through McDonald Douglas and Boeing before events caught up with him.

I see great similarities with Obama's rise through the public system.

Grym

Jim G,

"If called on to perform they will fail. It is that simple. It is the essence of the OTC derivative. They work if no one calls on them to work.

It has always been so."

http://www.jsmineset.com/2011/10/31/in-the-news-to...

Cara, Sinclair and others have been advising this for several years now. We cannot legislate morality, yet we must root out these financial psychopaths with boundless ambition. They are far more dangerous to this planet than any of the fears being promoted far and wide.

Honest weights and measures will destroy these instruments of imbalance. But, we need justice FIRST before they lock us into submission, while holding their ill gotten gains.

This is a global, multi-generational war.

pulse

Good morning.

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

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ERJ - Embraer initiated with a Sector Perform at Scotia Capital.

TEF - Telefonica downgraded to Hold from Buy at Deutsche Bank.

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Also of possible interest:

AU - AngloGold initiated with a Buy at Deutsche Bank.

GFI - Gold Fields initiated with a Buy at Deutsche Bank.

HMY - Harmony Gold initiated with a Buy at Deutsche Bank.

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"Men do not learn much from the lessons of history and that is the most important of all the lessons of history."
~ Aldous Huxley

http://www.bloomberg.com/quote/!ITAGER10:IND

450 bps is the trigger.

PHOENIX, AZ, November 1, 2011 – Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported the following update on the status of operations at PT Freeport Indonesia’s Grasberg mining complex.

PT-FI continues to seek a mutually acceptable resolution to the ongoing labor strike which commenced on September 15, 2011. The Company is following the established Indonesian legal process, including pursuit of a resolution through a labor court process, while continuing to seek to negotiate with the union in good faith.

PT-FI is operating the Grasberg open pit mine and the DOZ underground mine at reduced rates using non-striking employees and contractors. Since October 22, 2011, milling operations have been temporarily suspended pending repairs to concentrate pipelines damaged as a result of civil unrest which has occurred during the course of the strike.

PT-FI has initiated repairs to the damaged pipelines but has not been able to gain full access to the affected areas of the pipelines because of road blockages by striking workers. PT-FI is working with local authorities to restore access to the road and the pipelines so that repairs can be completed and milling operations restarted.

As previously reported on October 19, 2011, FCX’s fourth quarter 2011 sales estimates of 915 million pounds of copper and 305,000 ounces of gold included 185 million pounds of copper and 280,000 ounces of gold from PT-FI (average daily production from PT-FI of 2 million pounds of copper and 3,000 ounces of gold). These estimates were based on PT-FI achieving fourth quarter mill throughput averaging approximately 175,000 tonnes per day (approximately 75% of normal rates). The quarter-to-date average through October 31, 2011, including the currently on-going suspension of milling and concentrate delivery operations since October 22, 2011, has been approximately 120,000 tonnes per day.

FCX will provide further updates on the status of operations and revised estimates of fourth quarter production when access is restored and repairs are completed.

http://www.fcx.com/news/2011/110111.pdf

CME GROUP SAYS MF GLOBAL NOT IN COMPLIANCE WITH CUSTOMER FUNDS -- Bloomberg

In for a tough day. Down over 10% on "earnings release". Funny how they can have such great analysts, whose work Bill gratefully shares with us, yet the parent performs poorly. Two rounds of layoffs already this year. Hope they don't get "our" analysts in their restructuring.

yeh I started running scenarios for such a politically suicidal - or perhaps politically astute - move. Scenarios include:

1. A decision to strategically default on debt obligations. Perhaps the periphery is ready to push back against big brother takeover of their sovereignty. Maintaining the Euro and EU participation or quit and pay in Drachmas - can't say.

Remembering it is France, Germany and the Netherlands that hold the debt. Could the periphery push back hard enough and force these three to quit the Eurozone, devaluing the Euro almost overnight and creating the 40% currency devaluation required to make these countries competitive again.

2. Your suggestion. He takes it to the people and is prepared to pass the problem onto someone else if the people vote against him.

3. He imposes a democratically voted depression on Greece through a return to the drachma and gets the country back on its feet in relatively short time - say 3 to 5 years.

4. He is a political idealist who actually seeks a mandate from the people at this strategic and delicate point in EU relations and actually pulls it off in favor of continuing the status quo.

Either way Greece has it bad for the next decade. Bowing to the wish of the people, as opposed to the will of the elites to the North, ain't so stupid, if he has the courage to face the electorate. That would make him a rare bird among politicians.

But like you said, the bankers will determine his immediate fate. And that is wrong.

Clearing houses will demand margin payments at that level.

Mark,

"...That's why the banks were positively pounded yesterday and the carnage appears to be continuing today. It's why this isn't limited to the United States but is also happening over in Europe. It's why this morning the DAX is down 4%, the CAC is down 4% and the FTSE is down 2.5%. It's why nobody trusts a balance sheet -- because there is no reason to trust any of them in the financial sector as we continue today..."

http://market-ticker.org/akcs-www?post=196876

"This game is nearing its forced conclusion and you're not going to like it."

A global war, indeed. We know who has all the weapons, and we can see where they are aimed.

pulse

Nothing but more tricks. World markets hijacked by Greece - we all would of laughed at the thought a few years ago. Buy more bargains but beware of the media - they may have more tricks to give out.

The reason "nobody sees it coming" is that The SEC and banking "regulators" are averting their eyes -- on purpose!

Yep, the jig is up.

Les,

"A Finnish minister said Greece will in effect be voting on whether to remain in the euro."

Whether or not it is the "best" move at this point, emotions will likely dominate in the decision process, IMO.

Grym

davefairtex,

Fear is a great motivator and good for my bonds.

Who cares what the coupon is as long as emotion overrides all else? Now the question is when to leave again.

Grym

Yes, but the typical 3rd year is very bullish. As I pointed out this may not work this year.

http://www.snb.ch/en/mmr/reference/pre_20111031/so...

sorry but no devaluation here. A box of matches still cost the same.

The Swiss Franc remains in the upper range of recent historical prices, something that exporters will have to adjust to as the Euro sovereign debt situation plays out. The CHFEUR PEG as determined by the SNB will aid in short term stability while business readjusts.

Yes one can see the new range of $GOLD:$XSF. It rises inexorably but this is the tune playing out against all currencies. One currency's loss is the others gain. Little wonder then that central banks are big buyers in this precious metals market. I certainly am.

The above link does illustrate the unstable nature of the SNB's policy action of buying foreign reserves in exchange for Swiss Francs in order to maintain the peg. Contrary to the Franc being devalued as you insist, the Euro has returned to its previous range of 140 to 145 at the time the report was released - this Euro strength probably had something to do with SNB profitability. As we can see this week with the Euro, the situation can change rapidly.

Devaluation will not be the cross burdening the SNB's policy decision - it will be the acute instability and increasing weakness in foreign reserves that the SNB continues to accumulate that will wreak havoc on Switzerland - IF THE SNB DOES NOT STERILIZE THOSE FOREIGN RESERVES - preferably through bullion purchases.

Stabilising the Franc at these levels through currency swaps and other asset purchases, while sterilizing liquidity that risks leaking into the domestic economy (through bullion purchases) is the ideal policy choice that the SNB can make in these difficult times. This is my understanding anyway, after extensive reading of those who appear to understand the issues.

I hope this clears up the misunderstanding.

U.S. Sept. construction spending up 0.2%

"LONDON—-Embattled Greek Prime Minister George Papandreou has called an emergency cabinet meeting for later Tuesday amid an open revolt within his party over his decision to call a referendum on the country's bailout program."

Complete article from WSJ Europe here: http://is.gd/Agb7l1

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"Timeo Danaos et dona ferentēs" - Virgil

Their financials look right, http://finance.yahoo.com/q/ks?s=EZPW+Key+Statistics

http://seekingalpha.com/article/300271-5-financial... Texas based EZCorp provides short term cash loans to individuals through consumer loan stores in the U.S. and Canada, in addition to operating pawn stores in the U.S. and Mexico. The company also has a financial interest in one of the U.K.’s biggest pawnbroking businesses, and a global cash conversion business.
• Net Income: $68 million
• 3 Year Revenue Growth: 17%
• 3 Year Earnings Growth: 55%

EZCORP operates more than 1,000 pawn, buy/sell and personal financial services stores in the U.S., Mexico and Canada. The company also has significant investments in Albemarle & Bond Holdings PLC (ABM.L), one of the U.K.'s largest pawnbroking businesses with over 160 full-line stores offering pawnbroking, jewelry retailing, gold buying and financial services; and in Cash Converters International Limited (CCV.L and CCV.AUS), which franchises and operates a worldwide network of over 600 stores that provide personal financial services and sell pre-owned merchandise.

Why is greece still in headlines? they have defaulted. the only ones who cannot accept this fact is wall st and the bond holders.

the people of Greece have spoken. any austerity will be fought with flesh and blood.

There will be hell to pay if the cabinet denies the public the referendum vote it was just given.

I've just RTed letter by PASOK MP @EvaKaili who is asking Pap to call off the referendum & form a new national unit gov without him as PM

http://twitter.com/#!/MatinaStevis

Spot on, NYUgrad. Its old news. The referendum was a shameful gimmick for Papandreou to save his skin and I fear for the Greek people if they are foolish enough to vote themselves out of the European Union (although...they should never have been brought into it in the first place, but that's another story). But now, with the prospect of the referendum being revoked, it nearly invites armed revolt.

The split between Northern Europe and Southern Europe is not unlike the US right before the civil war. The North was industrious and productive, the South was sleepy and agrarian. Maybe Greece is going to turn out to be South Carolina?

Idiots playing football (which market effectively became in their hands, look at this jump just now):

(EU) G20 leaders said to demand clarification of Greek PM's plans, and stress they cannot wait several months for a referendum vote
(GR) Greek ruling party official suggests that the idea for a referendum "is dead"

If Greece goes out of the euro, it is likely other PIGS will follow with the probable result being the collapse of the euro itself. This scenario would mean that the dollar would be resored as the sole reserve currency and the dollar would rise accordingly. A euro collapse could lead to European inflation and trade wars that go global. Evetually, intererst rates will rise, further reducing bond values. If this plays out it will be necessary for the US to take advantage of the strong dollar to re-industrialize and avoid the temptation to buy offshore goods which would be cheaper than local goods in many cases. Should trade barriers exist then domestic supply will be forced on the buyer, but think of the job creation!

http://seekingalpha.com/article/302942-repeating-t...

"But now, with the prospect of the referendum being revoked, it nearly invites armed revolt."

There's a simple solution to all this. Let them vote, just fix the results. Print more money. Everyone will be happy then.

Me too. I sold some FOE puts this morning - already doing very well, added to my april TM calls. I'm as tired as anyone with Greece trying to be the center of the universe.

Great – it's brutal and getting old... digging around for an aspirin…

tell me where is sanity... yah, that's every day. A post from twitter may be the right med... funny, I'm already doing this with my 'earth element' plays.

@bclundbclund
I can't believe I am even saying this, but am starting 2 think value investing may be the way to go these days. "Dresser drawer investing"

It is very important for the eurozone banker recapitalization plan to have Greece undergo an orderly default. This is so the eurobanks have 9 months of calm placid happy music time to reduce dividends & bonuses, and raise capital at higher market valuations than they currently have.

And this whole 2 month referendum has thrown a massive monkey wrench into that plan. 2 months of chaos won't help the bankers raise a single dime. And the eurozone doesn't have enough money to bail out the banks this time around.

Question becomes is this just the tip of the iceberg, might be time to hit the exits...and stand aside

VANCOUVER, British Columbia – November 1, 2011 – Silvercorp Metals Inc. (“Silvercorp”) plans to release its unaudited second quarter results for the period ended September 30, 2011, on Tuesday, November 8, 2011, after the close of the market.

and just like Corzine, they'll be smiling in your face and telling you that everything is just peachy as it all goes down.

http://www.marketwatch.com/Story/story/print?guid=...

for PM stocks.. Will Ben start QE III ?? If not tomorrow, markets will tank, forcing his hand next week.. Italian 10 year's traded to 6.30 %... Thanks, Fleck

Remember when MF Global lost $141.5 million dollars in 2008 when a rogue trader logged unauthorized purchases of wheat futures from his home PC.

http://www.nytimes.com/2008/02/29/business/worldbu...

Strong risk management system.......right.

I honestly don't understand why this two-bit operation would have been taking gigantic positions in Euro debt. Just seems to be pretty far away from their bread and butter brokerage business. Seems to me that Corzine had illusions of grandeur at building MF Global into a prop trading outfit like GS. It was a "Get Rich or Die Trying" strategy that ended in death....for the firm at least.

Back in August Louise Yamada was saying, "There are only two losses you can take, loss of capital and loss of opportunity. I'd rather be out of the market wishing we were in, than in the market wishing we were out."

For guys like me who are not too adept at timing it's no time to be a hero.

Grym

I've always found it marginally more profitable to trade extended hours. There is more liquidity (especially for us small punters) than meets the eye.

Don't be fooled by the hugomongous bid/offer spreads. Use limit orders.

After hours trading seems to work better that pre-market. Just my observation.

dollar up, everything down.

Perhaps we can watch WHR here. The stock retests recent lows following weaker than expected earnings. Will institutional money let it go here? See attached.

One needs to be especially careful here given Papendreau's proposal for a referendum. Remember that this market has been punishing investors and politicians alike for a perceived lack of leadership - evident as Europe takes the spotlight - and the fools in opposition that created the mess in Greece make a mockery of the Greek Prime Minister's efforts to follow the austerity guidelines imposed by the EU.

http://www.telegraph.co.uk/news/worldnews/europe/g...

Market sentiment and conditions changing like this on a daily basis are not something to formulate a trading plan that isn't open to rapid change - hence I am presently on the sidelines sitting on silver.

The FT suggest that Papandreau may fail in his efforts to avoid going to the polls:

George Papandreou’s plan to hold a public referendum on the country’s latest bail-out by international lenders is a last-ditch attempt to unify his quarrelling socialist party and defuse mounting pressure to hold a snap election, his supporters say.

But it looks now as if the Greek premier’s latest display of brinkmanship may bring down his government, and could even hasten the end of his political career.

The prime minister’s declaration on Monday that the Greek people should be allowed to decide whether to adopt a new three-year austerity package in return for a debt writedown and fresh loans has been rejected by left- and rightwing political leaders alike.

Two more defections from the Socialist parliamentary group on Tuesday and the threat of a third suggest they may lose Friday’s vote of confidence, triggering the early poll that Mr Papandreou was seeking to avoid.

http://www.ft.com/intl/cms/s/0/099895da-04ac-11e1-...

How the markets react to this latest development will be important to note. SPY 1200/DJIA 11.5k is key support to watch.

It may be that Merkel's precious €1T confidence trick has already been faded.

edit: Greek Prime Minister George Papandreou has won unanimous support from cabinet for his controversial plan to hold a referendum on the EU bailout deal.

http://www.telegraph.co.uk/news/worldnews/europe/e...

Senior ministers and diplomats said the International Atomic Energy Agency's report, due to be released on November 8, will have a decisive effect on the decisions Israel makes.

http://www.haaretz.com/print-edition/news/netanyah...

A black swan to watch.

Where are the regulators?

http://www.theglobeandmail.com/globe-investor/mf-g...