Bill Cara's Blog for Nov 9, 2011

"Politician Jon Corzine saw Lehman Brothers as a cautionary tale; financial firm honcho Jon Corzine saw it as a dare."

Excellent work by comedian Jon Stewart on his Daily Show last night. Seems pertinent at the moment.

http://www.thedailyshow.com/watch/tue-november-8-2...

4ever,

Well, at least we can still laugh which is better than crying, I guess.

But I think the pressure is building and hope it will bring enough change sooner rather than later.

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"Damn Jon Corzine. Eighteenth century France and England would have taken appropriate measures against that guy and his crowd. All we can do is hope the regulators of today will be pushed enough to get the job done, albeit more civilly."
— Bill today.

"Off with their heads!", was the cry 200-300 years ago....
now-a-days we are more, ....hmmm...sophisticated!
— dberryclan yesterday

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I noticed in the Jon Stewart bit that once a again, the SEC — like other government regulators recently — looked the other way. It is this lack of our traditional rules and regulations which keeps me from investing. As Jon called it, "... like betting roulette with all your money on purple."

It was the rule of law which made our nation a success for over two centuries. Until, unless we return to this stabilizing force, we will continue to deteriorate.

Grym

Good morning.

07:00 MBA Mortgage Index (10.3%)
10:00 Wholesale Inventories
10:30 Crude Inventories

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SCHW - Charles Schwab downgraded to Hold from Buy at ISI Group.

WAG - Walgreen downgraded to Neutral from Outperform at Credit Suisse based on expectations the Express Scripts (ESRX) dispute will take longer than expected to resolve. Price target lowered to $31 from $42.

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"You can avoid reality, but you cannot avoid the consequences of avoiding reality." - Ayn Rand

I thought that they'd be calling for draw and quarter. That would be a much more appropriate reward for those actions.

"I thought that they'd be calling for draw and quarter."

Before any sentence is passed, he should be forced to spend a week, locked in a hotel room, with a Greek hockey team. ;>)

How is it that the public in general puts up with this and bought the bull for the past 25 or 30 years? It started with Nixon and has carried through and it doesn't look as if it will ever change. Atlas continues to shrug. Oh yeh, let the market take care of it. And I still don't hear an uproar from the damned masses. Maybe the lobbyists are just doing their job.

Yesterday Geoff wrote "While we wait on a resolution to the European debt issues". Don't hold your breath! There is no simple solution to this problem and the CDS markets are reflecting this. Buckel up folks this is going to be a tough ride. Reality will sink in fast. Want to see a neat clip of the fools on CNBC arguing with someone smart?: http://www.businesscycle.com/#

bring those miner prices on down boys...

List of bond redemptions for 2012 (3rd page).

http://bit.ly/vJpuy7

not that we were not warned, the italian yields were creeping along before exploding.

Again, bond markets are typically smarter.

bbbbut..but....I just finsished building a beautiful portfolio!
This business is disheartening. Yes I know it's a busines and it may be inventory clearing time. 7.75% on Italian. That's life threatening. Yikes it's gone up to 8.4%

Hi Stan, I very much respect your opinion and I use options simply because I need the leverage. I just sold my 20 with a 46% profit - I could have let it ride but I'm not a professional and don't care for what this market has become. If I just put on some casino game music in the backgound I might feel better... my gold mining stocks are hanging in there just fine for the moment.
Take care,
Earl

(EZPW
Submitted by worthcap (34 comments) on Wed, 11/09/2011 - 05:56 #99499
Earl - the one problem with options is that you cannot unload them into aftermarket on a pop. This raced up to the UBB on daily which may provide resistance and would have been a good exit point if you wanted to trade around. Futs are off 25 points on SPX this morning so who knows what the opening print looks like, 30 would produce a low pole on the P&F which is constructive, but it is still in a declining tops pattern. I did not get filled on the buy below and would not chase a move into the UBB - my experience is that will produce a reaction and I will buy the reaction. Regards. Stan)

terryC -

"At first glance I believed the S.B. resignation and subsequent rise in the 10yr Italy yield above 7% was key to today's negative decline. Passing that benchmark strongly suggests another one of the PIGS is headed for the slaughterhouse."

Italy is the 3rd largest economy in Europe.

Italy's economy is larger than the three little piggy's combined: Ireland, Portugal, and Greece.

Italy must ditch the EU or pledge is 4th largest GOLD reserve in the world at 2,451 tonnes if it's not leased out already. (Them's fightin' words.)

Italy now is insolvent.

Italy owes some $3-4 Trillion.

ECB's bailout fund contains around $600-$700 Million

This is more than "another" of the PIIGS heading to the slaughterhouse, me thinks.

Cheers.

Vad,

Geoff's words from last week ring in my ears.....something like, "What surprises await us regarding the Mf Global mess."

How does a former MF Global employee refer to themselves at a local party when asked , "Where have you worked?" Answer, " I was an MF'er!"

Cheers to you all....

DB

Vad,

"IMO, the problem with EU is not in "recession or no recession" plane. It's its very existence that is in question. It's almost as if this issue is too big to grasp for many."

Your "Too big to grasp" perspective for Europe is another version of "Too big to fail". Architects of both put their foundations in sinking sand and greedy bankers expect taxpayers to bail them out of their mistakes so it can be business as usual after systemic failure. Rather, they should be going to jail.

Italy is a huge economy and the people of Italy actually have more wealth than the people of Germany (smaller economy though).

I see the rise to 7% interest being the push to get Italy to do what should have been done years ago.

'I haven't left my house in days.
I watch the news channels incessantly.
All the news stories are about the election;
All the commercials are for Viagra and Cialis.
Election - erection - election - erection
- - - either way we're going to all get screwed!' -- Bette Midler.

Vad -

As outspoken Member of the EU's European Parliament Nigel Farage has pointed out in today's KWN interview, if Italy now defaults, BANKS will fail and Europe will fall into a great depression. The "bully boys of Brussels" are a form of dictatorship now pushing Greece into a revolution with brutal austerity requirements. He suspects the PIIGS get kicked out of the euro and the euro becomes a powerful northern european nations' coalition of "a greater deutschmark zone."

http://www.kingworldnews.com/kingworldnews/Broadca...

Cheers.

Bill -

"The plot thickens..."

Insider with no past trading relationship ...

It's just got to be Goldman Sachs orchestrating the pile on once its theft was secured. Standard operating procedure.

Strike extends into third month.

http://on.ft.com/vJ4l72

Vad -

Nigel Farage is best remembered as the guy who stood up and SLAMMED the "bullies of Brussels" to their faces. The guy has big stones.

http://www.youtube.com/watch?v=2gm9q8uabTs

Edit: Oh, and he was once a gold floor trader at the LBMA!

pauldkk,

This video is why I don't watch CNBC with the sound on — it's like the noise inside a very large chicken house.

The guest who dares to say something other than what they want... gets inundated with voices overriding him.
(Note at one point he's says flat out, "You don't want to hear what I have to say." and "I'm sorry I couldn't tell you what you wanted to hear.")

Steve Liesman challenges his comments with predictions and opinions of J.P.Morgan, Goldman Sachs... the sell-siders who paint a rosy picture. (And may be doing the exact opposite of what they are saying.)

Lakshman Achuthan is looking at longer time horizons and the current interconnectedness of global economies. This falls on deaf ears with those who love sound bites and favor news which boosts their advertisers sales.

Grym

and levels to watch:

http://goo.gl/yeXH6

This Guardian UK article mentions Lucas Papademos as a possible leader for Greece- he has Federal Reserve Bank of Boston and ECB history. Mario Monti mentioned also, as a possible leader in Italy- he has EC, Trilateral Commission and Bildeberg Group history.

http://tinyurl.com/7nj4c8n

Summation: Money is missing and not likely to be found. Checks to small clients bounced. Went/is going to make whole the firms' most well heeled clients probably
http://www.forbes.com/sites/francinemckenna/2011/1...

Big mention on CNBC

Even though gold is off today, given the big move in the buck, I think PM is doing extremely well. Gold priced in euros is up 2%, and GDX as folks have noticed is barely green.

Something happened a few weeks back - the day gold jumped $50. That was the move that started PM out of its "consolidation phase" trading range, and popped it into its current bull move.

I'm not quite sure what the sea change was, but yesterday it appeared that "they" tried to hammer gold down, but the bid underlying the market was just too strong. Perhaps the euro-banks have done all the gold deleveraging they need to do? Or perhaps it hasn't started yet. Oil also is doing well, again relatively speaking - green on a day when the euro is just getting pasted.

Things are getting quite curious. I'm not sure I can make sense of it all.

I am disappointed at some of the comments here today referencing Greeks. They are inappropriate in the extreme and do not even belong in a men's locker room let alone in the caracommunity discourse. Being Greek myself has nothing to do with it because I have been one of the biggest critics of modern Greek culture of corruption. I have caught myself making similar comments and references at times, but they do not belong on this blog.

The Greek people may have become the joke of the EU and the world but I assure you the Greek people are only second to South Korea in amount of hours worked in the OECD countries. The Papandreou clan were repeatedly elected to stamp out corruption they failed. Instead corruption has infiltrated every aspect of modern Greek life. My father had to go in for major surgery but before he was scheduled to have his operation the Greek doctor heir to the proud tradition of the Hippocratic oath demanded a $5,000 euros cash in an envelope in order to make sure it all went okay. It didn't.. he had to go under the knife 2 more times. He lived but my own sense of hope for Greece was destroyed. What you see here is a failure to lead. A failure to fulfill the promises the politicians made to the Greek people. So I ask you to refrain from any vulgar references regarding the people that are least to blame for this failure. They are the ones suffering. I had the ex-deputy minister of health ready to make an arrest.. but my father would not allow it. Ordinary Greeks deserve better.

Thank you in advance for your understanding
Athan

http://www.forbes.com/2008/05/21/labor-market-work...

Hi Vad. I've been studying this type of formation in many stocks, many times per day, ever since you wrote about it. Just interested that here you labled the first high on 10/25 as outside the BB, when it displayed to me via the link on your wall that it was barely touching, but still very much inside the BB. So my question is, do you sometimes 'cheat' the interpretation if it is right up against the upper BB but not actually outside it, especially if the other elements hold true? Or is my monitor playing tricks on me?

Cwinsor,

in this particular case the upper tail of the candlestick is piercing the upper BB... try to zoom in maybe? The fact that it's only a tail and not a candle's body bodes well, means the price was rejected nicely.

Overall though, every setup doesn't present all of the elements all of the time - sometimes we have to settle for less than perfect. Which of them are crucial and which can be loosened a little bit is a matter of, umm, let's call it artistic interpretation... :) I hope to cover it as much as possible in the new course on chart patterns recognition.

(IT) Fitch comments on Italy insurance industry exposure to sovereign debt- Fitch: Contrary to what many commentators are predicting, Italian insurers may not be able to pass on most of the losses incurred from an unlikely default of Italian government debt.
- Based on our 'A+'/Negative rating of Italian sovereign debt, Fitch believes that Italian government bonds are a low default risk. However, in the extreme scenario of a sovereign default, the ability of insurers to pass losses on to policyholders would be significantly impaired, as the return on customer portfolios may be below the minimum promised to policyholders. Insurers would be liable for the additional losses

(IT) Reports that businesses and banking institutions are now requesting an immediate emergency Government - financial press
- Request budget legislation be approved quickly

ea32da32 -

"regardless would this not argue for a higher PM value relative to paper money?"

Rickards points out that Germany found monetary stability after the 1222-23 hyperinflation with the GOLD backed Reichsmark. The issue becomes at what price do you set gold after trashing (over printing) the fiat currencies? Germans set it too low and deflation led to WWII. Brits did a similar thing with the Sterling after the war and tanked theirs which lost them the reserve status to the U.S. Never underestimate the stupidity of bureaucrats to fix the gold price too low BUT because gold is now a global market, suppression of its price relative to fiat currencies will fail. The Invisible Hand is about to bitch slap the Fed and the "Bully Boys of Brussels" into submission using Asian demand, IMO.

http://kingworldnews.com/kingworldnews/KWN_DailyWe...

Cheers.

Train Wreck ? . This transatlantic Banking Cabal of banksters running too big to fail banks bought the same thing as Jon Corzine . G.S. could lose $750 million to Italian debt . M .S .$1.9 billion , J. P. M. $5.5 billion not able to guess about B. of A. or Barclays . http://tinyurl.com/c3hwrv6

(EU) EU's Barroso: Dividing Europe into Core and Periphey will not work; Germany's GDP may contract up to 3% and lose as many as 1M jobs if there is an EU split
- Would like to see more integration.
- Cannot go futher within current treaty
- NOTE: Earlier today: (EU) French and German leaders are said to be having preliminary discussions for a radical overhaul of the euro zone - financial press

we need more blood in the streets in my little opinion.....

check your mail... someone is scooping up shares, fast...

Craig,

I think this is a key comment:

"... “there is an unfocused financial rage in the United States” — and you see it in both the Tea Party and the OWS movement. Rather than mischaracterize why so many Americans — on the Left and the Right — are unhappy... "

Generally, the MSM has either chosen to overlook this possibility, or deliberately wants to distort it.

If/when a focus is developed it should, IMO, demand Congressional changes (preventing massive individual power accumulated by entrenched legislators), and the Supreme Court as well (no life-time tenure and possibly other than executive appointment).

Even in the relatively small corporations I worked with, far too much was awarded to CEOs and others. Example: A 6-figure bonus in a year when earnings were down 23.75%. The company left town in their centennial year after laying off nearly half the workforce and moving operations to Mexico, South Africa and China. At the annual meeting that year the CEO bragged they were producing castings in foreign operations at 10% of the domestic cost. Sure, no EPA. No OSHA. No regard for those foreign employees' health and safety.

The big lie is that "We are improving the lives in those countries where we set up production."

Grym

NUYGrad,

I am reminded of Louise Yamada when asked what the average person should do, saying, "Stay on the sidelines. There are only two losses that you 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." (8-16-11)

Grym

I think I'll wait until I see the buck stop making a continuous series of higher lows and higher highs intraday. I have no interest buying at this moment. Perhaps if the SPX bounces off its 50 dma...

i share that sentiment. Not trading, is trading. I am not gs and do not have the resources to eek out micro ticks on thousands of trades per minute.

this disadvantage is also my biggest weapon.

I'm not buying anything right now but I'm also not selling. The world, as we know it, and all interrelated banking arrangements, was blowing up this morning. It has been a major decline today giving up all the gains since . . . last Wednesday!!!

The world hasn't ended. Not saying it couldn't still happen, but we've given up one week's gain. Look at a chart and see what today's loss looks like compared to the gain since Bill was thumping the table the beginning of October and saying "buy".

If today was a world ending event I would have expected it to drop more than this.

for any of your money... SPIC doesn't apply, as cash is, supposedly, seperate. One of the very best out there was hit at MF.

GMCR

Good night. Lesson of never fall in love with stock, position, or company forever.

Please would you bring us up to date on the requirements to qualify as a sophisticated investor? I recall that this term (like many in finance) does not mean what one might suppose, and that even the most unsophisticated person can qualify if she has more than a certain amount of capital and income. I just can't remember what those amounts are. Also, do the amounts differ according to where one is based?

http://www.advisorone.com/2011/10/20/fpa-capitals-...

history of the current biggest municipal default: http://www.bloomberg.com/news/2011-11-09/jefferson...

How typical of HB&B and politicians. I can only imagine how much worse things are being done everyday on a federal level.

pauldkk
Re:
I think you are confusing a qualified investor with a sophisticated investor. a qualified investor should have a net worth of 1MM and an annual income of 200k. A sophisticated investor doesn't purchase stocks that are trading at rediculous multiples (GMCR).

I think your definition should be added to wiki as well.

includes 2 Cara 100 members: (from Seeking Alpha)

http://is.gd/vDFkF0

His opinions reflect those of the typical socialistic imperialist Limey urnalist who spews ink for a living never having ever been elected to anything more than cubscout master.

Whose lackey is this guy? To turn his phrase "Germany and China must crush America into reality."

I had some thoughts on Italian bonds today.

The move down in Italian bonds does not signal an end to Italy's ability to borrow. The actual impact on increased interest costs will happen slowly over time. The interest expense of Italy's outstanding debt is fixed - Italy did not sell variable rate bonds that fluctuate with market prices. There is no realtime crisis here.

Currently, I would guess that some euro banks are unloading Italian debt as fast as they can. Perhaps the lack of CDS protection as a result of the "voluntary default" of Greece has had an impact here. What can't be hedged is likely being sold - an unintended consequence of the voluntary default. Perhaps european leaders might learn to be less clever next time around?

If you believe that the ECB will eventually step in and print money to fix this problem (and acquire a big chunk of Italy's debt), then the current 7% yield might look pretty good, especially if you were an Italian pension fund and could hold to maturity. And its not the Italian government paying the 7% - you are just getting the bond at a big discount.

Note also that Ireland had a big move down in bond prices that eventually recovered. Irish 10 years were yielding 14% as recently as July 2011. Now they're trading around 7.5%. Someone made a great deal of money in a short time buying at 14%...

http://www.bloomberg.com/quote/GIGB10YR:IND

Just a little contrary viewpoint to spice things up.

Uh... so who is Bill Bonner and what is/are his expertise/credentials??

since when were credentials required to express opinion in public circulation? In the 1600's a growing capitalist & mercantile oligarchy (the Tories, Irish for 'robber') battled an increasingly harassed king and his parliamentary supports (Whigs) for control of England, bringing forth the full weight of reformation and enlightenment thought as tools of propaganda and pamphleteering turned into weekly news sheets.

The tradition of intellectual whoring has continued for 400 years and everyone has an agenda - clearly someone behind the Telegraph's international business editor does not want default here and now. Personally, I'm inclined to agree with him! Permit me to get my victory garden up and running and some further assets under my belt and some cash hoarded for the rainy day (read 'flood') soon to engulf us.

In the meantime, by all means, please crush those Krauts into inflationary submission.

MoKat,

I find this interesting and reasonable to expect long term. Since I have been right long term I tend to agree with virtually his whole picture.

I foresaw the rush to globalization as the destruction of the best Middle Class jobs (not just the low-end), the folly of the triple-digit tech boom with no earnings support, and for years wrote my representatives about over promising in the state pension department. Not brilliance, just common sense.

My only problem: Who is Bill Bonner? Is he rich?

Grym

Edit: Googled and see he is an author and blogger (The Daily Reckoning) and since we agree he must be insightful :-)

Selling.