Bill Cara's Blog for Oct 3, 2011

Good morning.

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

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AMZN - Upgraded to Buy @ Stifel Nicolaus due to its low cost position, sustainable growth, upside from Cloud and Kindle growth, and strong fundamentals. Target $280

FCX - Freeport McMoRan upgraded to Buy from Hold at Deutsche Bank citing valuation and a strong balance sheet. The firm lowered its price target for shares to $48 from $60.

FSLR - PT Lowered from $168 to $107 @ Stifel Nicolaus. Buy

GG - Goldcorp upgraded to Buy from Hold at Deutsche Bank citing valuation and a strong balance sheet. The firm lowered its price target for shares to $54 from $56.

KO - Coca-Cola downgraded to Neutral from Overweight at JP Morgan citing valuation and expectations for negative earnings revisions due to currency and the challenging macro environment. The firm lowered its price target for shares to $76 from $80.

KSS - Kohl's upgraded to Overweight from Neutral at Atlantic Equities based on new product launches and promotions which should help 2H11 sales. Price target is $62.

PG - Procter & Gamble upgraded to Overweight from Neutral at JP Morgan citing valuation and expected margin expansion from cost savings. The firm raised its price target for shares to $75 from $70.

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"Blessed are the young for they shall inherit the national debt." - Herbert Hoover

http://bit.ly/q5ygEx

In trying to answer this question, I decided to look at the copper/gold chart, something I've never done before. If we take as given that gold is a good store of value, looking at historical copper/gold relationship might prove enlightening.

From the high in Feb 2011, copper:gold ratio has retraced 75% of its gain after the mid-Feb 09 lows. So if we're headed back to the dreadful days of March 09, we're 75% of the way there. It is curious that copper/gold bottomed 15 days before the SPX back in march 09.

http://stockcharts.com/h-sc/ui?s=$COPPER:$GOLD&p=W&b=5&g=0&id=p12705013411

Another interesting view is SPX in gold. Note that it has already blown through its march 09 lows by perhaps 13%, but then proceeded to rally somewhat.

http://stockcharts.com/h-sc/ui?s=$SPX:$GOLD&p=W&b=5&g=0&id=p34427737763

Me thinks that after the margin calls are cleared today, we should rebound nicely.

The POMOs start today. Wonder what effect it's going to have this time around?

Late last week, there was a spike in random speculation that the German government was preparing to exit the eurozone—and that in fact, the Germans had gone so far as to print new Deutsche mark bills and mint new Deutsche mark coins. The fact of the rumor is no big deal—there are always rumors.

The fact that the financial community took such nonsense so seriously points to the big deal in this situation—the underlying worry that a lot of market participants are fearing: What if the Germans all of a sudden cry, “&%ç*"?!”, and let slip the bonds of the eurozone?

Can they leave the eurozone? Sure they can—anything is possible. But is it likely that the Germans will leave the eurozone? In a word, no—because they are a creditor nation. (more)

http://gonzalolira.blogspot.com/2011/10/germany-wi...

Above.

"Across all operations in the schedule listed below, the Desk plans to purchase approximately $44 billion and sell approximately $44 billion in Treasury securities over the month of October."

http://www.newyorkfed.org/markets/tot_operation_sc...

Is this the POMO you talking about - net zero? Looks like operation twist to me.

PURCHASING MANAGER INDEX MANUFACTURING Germany
Actual: 50.3, Cons.: 50.0, ,Previous: 50.0

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PURCHASING MANAGER INDEX MANUFACTURING EU
Actual: 48.5, Cons.: 48.4, Previous: 49.0

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PURCHASING MANAGER INDEX MANUFACTURING UK
Actual: 51.1, Cons.: 48.9, Previous: 49.4, Revised from 49.0

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

Torontonian, JohnnyOneLot,

As I was reading Geoff's comments today I was once again struck by how different we can all perceive the same situation. He mentioned the "slow growth" opinions, but I see virtually no growth in jobs, security, domestic or global economy. "Slow Growth" to me is political speak for stalling with no good ideas.

While he is skeptical of another recession, I see us as in another depression (masked by government programs added since 1903s). The entire world has too many people, too few workers needed and too few world class thinkers dealing with a whole new situation with 20th century strategies and ideas.

Other considerations are whether a person is a trader and thinking shorter term, how much you have available to risk, how many people your investments must support, and added to those in my case, how old you are.

I view the ERCI call on the economy as far more important than what the markets will do.

With a U.S. 70% consumer dependent economy, dismal job outlook, rising taxes (especially at state and municipal levels) and no one pushing for a market valuing of assets and restoration of rules — I'm not even considering any long term equities yet and will continue trading bonds as they bob a few basis points over weeks or months.

As I have for the last decade, I'm ready to exit any or all with any drastic change in policy or market action.

BTW, such definitions as "two months of a down market = recession is, IMO silly and meaningless. I am more concerned with what I see and hear is happening to people I know.

Grym

FD: I will hold my gold and likely buy more GLD for trading soon.

"Final Flush in October"

"The final Q2 GDP report, a deep lagging indicator, was also revised up from 1.0% to 1.3%. These figures are telling us that the stock market has got it all wrong, that the economy is actually improving faster than anyone believes, and that you should be loading the boat with risk assets."

http://www.madhedgefundtrader.com/september-30-201...

i've seen many references to uxg in this thread, but i don't think i've seen a post about how the shares will be affected/diluted via the proposed merger. i'm interested in learning more about that if anyone can comment.

Three years ago, I left my 15-year career as a financial professional because I was disgusted and disturbed by the rampant evidence of corruption in the relationship between our banking system and our government.

At the time, the Tea Party was emerging and I was confident that between their exploding wave of anger and our newly minted President’s soaring aspirations for all of us - we would align to confront and resolve the blatantly corrupt relationship between banking and our government and more broadly BUSINESS and STATE.

I was sure that the obviously aligned interests of Obama’s constituents combined with the Tea Party’s libertarian principles about money and government, rigorous bank reforms in a simple, fair and transparent way would follow. And more importantly, I believed Obama’s energy and the Tea Party's would align to separate BUSINESS and STATE in order to bar banks, or any other special interest, from corrupting policy in a way that breaches fundamental fairness in our nation and prevents adaptation in a time of rapid change.

Their combined wave of energy was magnificent: Obama, scintillating and inspiring, harnessing a digital wave AND the Tea Party, raw and rebellious, screaming in unison: “We’re not going to take this any more!”

Little to none of this happened and I was wrong. And I feel I must do something about it.

As it turns out, I'm not alone. In just five days, 80,000 of us have signed a petition to get money out of politics. To make this happen, we will need to grow this movement, and that starts with your voice.

When we hit 100,000 signers, we are going to do a special show on getting money out of politics from Washington DC, deliver our 100k signatures to Congress, and issue what we call a “High Surf Alert." Attached to the high surf alert will be a link to a 3-paragraph letter from all of us explaining that we have signed this petition with the intent to send it to others.

This way we can harness the wave to grow our effort, lest we waste it on a bought and paralyzed government. When we are bigger we can then direct our attention at them.

I want to explain to my viewers why I feel so strongly about this and I want to hear your thoughts too!

You can tell me your story in one of two ways. One, click here and leave a comment on why you want to get money out or two, film yourself talking about GetMoneyOut.com, put it on YouTube and send it to dylan@dylanratigan.com. I will use these video clips and stories on my show. I want people to see that it's not just me, that there are hundreds of thousands of us, millions of us, with one message: Get. Money. Out.

After 3 years of doing my best to marshal resources with dozens of impassioned collaborators to highlight obvious corruptions and solve problems together on TV, in person and on the Internet -- I found it doesn’t matter what I or anyone else thinks or does about a given policy idea -- because the entire media, and the two-party political apparatus that sets the debate is being funded by a relatively narrow group of major interests and any solution that threatens those funders is simply never discussed.

While our healthcare, educational, banking, military, energy, trade and tax policies all have great room for improvement, I believe that the events of the past few years make it clear that until we get money out of our political system, we cannot begin on any of it.

I recently learned that 94% of the time the candidate that raises the most money wins. Policy, race, gender, tie color, voice, age... all can be ignored in a candidate because – 94% of the time the candidate that raises the most money wins.

So this past weekend when I saw the Occupy Wall Street/Occupy America protests spontaneously erupting in 60 cities, as the New York protesters heading into their 3rd week - I decided to walk over Friday evening to Zuccoti Park to see what they were doing.

I live 5 blocks away and worked 2 blocks from the square they are in for years, this Friday was one of my first trips back to that street corner in years and I was both fearful and excited to see what was going on. I have also never been to a protest like this.

On the internet it said their message is this:

“Occupy Wall Street is leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are the 99% will no longer tolerate the greed and corruption of the 1%.”

They said they we non-violent, had a policy of no drugs or alcohol in the Park, and didn’t allow bullhorns or amplifiers of any kind – they communicate by repeating out loud a given speakers words in short sentences. The short sentence requirement for speakers (not easy for me!!) has the duel benefit of keeping speeches short -- and avoids that being “talked at” feeling that can result from electrical speech amplification.

When I arrived Friday there was a boisterous crowd in good spirits from all walks of life -- the hippies, young people and Tea Partiers I expected -- the old ladies and local lawyers I was encouraged to see as evidence for this group's broader appeal.

I was able to talk to different groups over a few hours and it was clear that we were in agreement. Our government is bought, and we need to do something about it. In fact, you don’t have to go to Zuccoti Park or any other protest to know that!

Unrelated to any of these protests, we have started this petition to get money out. We have done so because we all agree, that until we do so, we will be prevented from engaging in the debate we all desperately need on virtually every issue to end this corruption.

I wanted them to know that I agree with them and that I support their principle, to learn from them and share with them my own efforts.

I asked on Friday if I could return the next day, Saturday, to address their General Assembly in their unusual speak and repeat fashion in Zuccoti Park. They told me if I came back the next day and signed up at 6:30 I could secure 5 minutes, I did so and a few hours later was granted time to speak.

Here is what I told them:

“My name is Dylan. I live five blocks from here. I think you people are crazy. I love the way you communicate. The world has noticed your voice. You have been here for three weeks, and you should be very proud of what you have accomplished. For fifteen years I worked as a financial services professional. Have you guys said that yet? I can't believe I'm here talking to you. I'm here because I agree with you. I made the decision three years ago to leave the financial services industry. I did that because it was clear that the financial services industry was purchasing both political parties. I believe that the fundamental problem with our collective desire to demand the debate America deserves is that both of our political parties are funded by well-heeled individuals, because they are bought. So I have been asking myself what the hell I'm going to do about this. I have decided that I am going to devote all of my resources, whatever those resources may be, with the knowledge that the decision to devote resources is much more important than what your resources are. I believe that you and every other group of people who know for a fact that the government is bought and are making the decisions to make 2012 the year our voice will be heard. I ask myself -- what do I do with my voice? I look at myself like an angry villager. I am irate. I know that if I cannot harness my personal rage for positive change I will harm myself and not help anybody else. My question to myself has been how do I harness fire in myself? You can either burn yourself in the town square or you can deliver a single a message to your government. My message is that the government is bought. If we do not separate business and state, and harness this energy to make that the central mission of this years' election we cannot begin to do the work we have to do. Thank you for giving me some of your time and congratulations on your success.”

I agree with their principle, I don’t know what will become of their movement, but I know I want to help them because I agree with them. I also agree with Ron Paul, Lawrence Lessig’s #rootstrikers and millions of other disgusted and disenfranchised American’s who know that their government is bought and are mad as hell about it.

In fact I think the singular message of ending our corrupt government function and the money that changes hands to facilitate it is the one goal almost everyone shares. Not surprisingly our efforts at aligning in a world of divisive issues makes us an underdog. Last week Politico described our effort like this:

“MSNBC’s Dylan Ratigan is bent on banning money from political campaigns through a constitutional amendment, which is about as likely as the Cubs winning the World Series the night lightning twice strikes a massive earthbound asteroid.”

But I believe if we approach the disparate communities with humility and shared principle, and a narrow focus, from Occupy Wall Street to factions of the Tea Party and beyond -- to offer support, debate and learning, we have in 2012 our best chance yet to end the blatantly corrupt relationship between BUSINESS and STATE.

The battle for me now is how best to harness all the fire that I feel for actionable positive change.

Since I devoted myself to this issue of about how blatantly corrupt our government has become -- I feel I have tried three methods to resolve it:

1. Scream! -- It felt good to express myself, but I found it to be an intense energy that alienated people with no positive harness to direct it.
2. Fight! -- This also felt good, but rarely led to any resolution or positive action.
Or
3. Help! -- Convert that rage into action everyday FOR something that is based on broad principles with a narrow goal. (You can start by adding your voice!)

I believe our decision to form this petition and use our voice to demand a real debate about an Amendment to get Money Out of politics in 2012 gives all of us something to be FOR -- and a tool that can do it. We may agree on nothing else, but can we all agree to do this.

Truth to Power,

Dylan Ratigan
http://www.getmoneyout.com/

http://business.financialpost.com/2011/09/27/risks...

Les,

I agree with that article.

I also like the way this site is(often)encouraging readers here to begin to load up the truck with value. I'm not experienced enough to have a strong opinion, but in my humble opinion, I see the stage being set for another leg down, the "recession" and "sky-is-falling" talk to get "deafening" this month, maybe into Nov. Then, look up in the sky, here comes earnings season!! Earnings will probably be good and expectations have probably been "manufactured low" so we can all be "Surprised!" OMG, you mean the world is not ending??

Also, we may just approach that majical time we have been talking about for months now, when the "political will" may be present to put the press into hyper-speed. Yippee!! The Savior of the financial universe, Ben the "Bernake-mint-aholic" will rise like the morning sun and save our whimpering little indebted asses with none other than, "more debt!"

Ahhhh! It makes such good TV drama! I feel like I'm watching saturday morning TV back in the 70's.
Happy Trading, DB

I wonder if AAPL is being set up for a good beat the numbers play coming
Oct 18th after market closes? Probably a whole lot of good names gonna be set up too?

:-)

I think AAPL will report exceptional results with a huge beat. More importantly, what will the official outlook be for the final quarter? That, in my mind, will determine market direction more than any other single factor. :) if only it could be boiled down to one thing. Seriously, AAPL is an outstanding company with fantastic products and a huge following. I would consider it a BIG surprise if they didn't announce positive in all regards well into next year.

Well, at least it hasn't been a Black Monday. Yet. Still half an hour to go & we've seen some big moves in that timeframe as of late.

Still, even our beloved utilities are struggling on the slippery slope. Only good takeaway from today is that prices of excellent CARA100's are coming our way! Where is that top 50 list anyway? :)

Ok, so perhaps twist-op will be negative for miners, but good for zero-coupons. Think EDV, possibly TLT until BENFED switches gears. ???

"I'm expecting a mixed bag with the better part of the mix maintaining present guidance. IMO"

I'm thinking maintaining, leaning better. Lower labor costs, steady to slow sales growth, stealth inflation on the revenue side - smaller packaging at same sales prices. Demand is there for basic products & also at the higher end. Those discretionary products in the middle get squeezed, but will still meet expectations.

Since we all know that futures are manipulated(right?), gold & silver may get another shellacking before year-end to harvest the longs.

Dr. S - my first response re: AMR....Say it ain't so! This IS their Black Monday, dadburn it.

No other way to read it, NYUGrad. This was the first down day in a while where I didn't nibble. Market is going to have a rough week, methinks.

I still don't understand who is plowing capital into 30 year treasuries at 2.77%. That money is going to experience a negative real rate of return after adjusting for inflation.

I think the beating that US bank stocks are taking is pricing in the end of the world. Not panic selling, so not sure what to make of it, but every bank simply can not fail, yet that is what's being priced in over and over again with each fart (or lack thereof) out of Europe. Its already March of '09 for most US bank stocks. RSI's are in the toilet. They're either going to turn sharply at some point in the next 3 months, or there will be another major failure.

Keep that powder dry and stay patient.

http://tinyurl.com/5swv8o7

Bulls can make money, and bears can make money, but pigs get slaughtered. "Squeal like a pig."

Above.

nebish,

"I still don't understand who is plowing capital into 30 year treasuries at 2.77%. That money is going to experience a negative real rate of return after adjusting for inflation."

And I don't understand why people seem not to realize there is money to be made trading Treasuries the same as TLT. I don't buy them "to have and to hold" — I'm not married to any market.

WHOSX (all Ts) is up 8.38% since I bought it back 9-19-11 check out the APR. That's why. It covered all my losses in 2008 and then some.

Grym

CSTR made the "Up on Unusual Volume" Nasdaq site list http://tinyurl.com/54y2n
Now we know why, a Carista who blogged "Long with very large position in CSTR." :)

Craig,

http://www.mcclatchydc.com/2011/09/29/125709/wall-...

This show's that the big money holds the balance always. Sometimes it's a seesaw but the the 99% always lose.

Craig (Dylan), I applaud your decision to stand up and be counted. I have also signed the www.getthemoneyout.com petition and forwarded it to friends in other cities. Friends who helped register black voters in Georgia although it meant losing clients who found out, friends who stood by me in hard times and friends who have participated in supporting some of the very greediest corporations in spite of their own sense of shame.

As we look around at the current landscape there are no 'evil' persons, just evil deeds perpetrated by the greedy souless people for whom there is never enough. The hungry ghosts with tiny mouths and enormous hungry bellies they cannot feed. If we become aware that we first have choice. Choice about how much is enough and just when to stop accepting less than we deserve we can start to make some sense.

It is easy to join the couch potato cynic club and say it can't be done. Why the hell not? Our country was founded by individuals who did not accept the status quo of an empire. Never Never Never quit.

Thank you. Susan

"By using the excuse of a so-called 'currency imbalance', this will escalate the exchange rate issue, adopting a protectionist measure that gravely violates WTO rules and seriously upsets Sino-U.S. trade and economic relations," foreign ministry spokesman Ma Zhaoxu said in a statement posted on China's official government website (www.gov.cn) on Tuesday.

"China expresses its adamant opposition to this." (more)...

http://www.publicbroadcasting.net/kbia/news.newsma...

comments from Ambrose yesterday were pertinent and worth reading in their entirety:

"They get away with economic murder and thus far our country has just said, 'Oh, we don't care. This legislation will send a huge shot across China's bow,” said Senator Chuck Schumer.

The risk – or solution? – is that the US will opt for a variant of Imperial Preference, the pro-growth bloc created behind tariff walls by the British Empire with Scandinavia, Argentina and other like-minded states in 1932. This experiment has been air-brushed out of history by free trade hegemonists.

We are not there yet, but a global double-dip would take us to the edge. US democracy cannot allow America’s precious stimulus to leak out to countries that have bent their exchange rates, tax systems, and industrial structures towards predatory export advantage. It cannot let broad (U6) unemployment ratchet up to 20pc or more. (more)...

http://www.telegraph.co.uk/finance/comment/ambrose...

(Mauldin) let's talk about what's happening in this crazy economy. You started saying we're in a liquidity trap some time ago. Where are we in that process?

(McCulley) I like how you ask the question as, "where are we in this liquidity trap" because that allows me to fine tune the diagnosis. Most of the marketplace, and the policy makers even more so, are still debating the diagnosis: Are we, or are we not, in a liquidity trap? To me, it's absolutely critical that this diagnosis is made correctly.

Because if you conclude that you're in a liquidity trap — and I do unambiguously embrace that conclusion — it has profound implications for the right set of policies. It also has profound implications for how markets will discount the policies. What this means is that policy is not a matter of a large menu, encompassing, "Well, we might know we're in a liquidity trap and we also might not be in one, therefore we'll do... (more)

http://www.investorsinsight.com/downloads/otb/mwo1...

Others here more knowledgeable on money matters may disagree with this conversation, but I found this interview with a former PIMCO executive and failed applicant for a Fed position interesting.

"Ministers also agreed after a meeting in Luxembourg that Greece could wait until mid-November until it receives the next installment from its existing emergency aid program, piling more pressure on Athens to tackle its debt problems." (more)...

http://www.reuters.com/article/2011/10/04/us-euroz...

that explains DBK.DE down over 5% today. Pressure ratcheting up on the market once again.

http://bit.ly/pA3DAE

Some estimates here. Obviously, the strike is a big worry.

nebish,

I don't know when it will "top out", but believe it will continue to fluctuate in the slightly lower range it entered with the Twist. All you need to remember with TLT is "Buy high and sell low" ;-)

In my opinion US Ts (and the USD) will still be considered the best of the bad as all nations continue a slow crumble.

Half a century of conditioned reflex is a long time changing and as EuroLand evaporates both will do better.

WHOSX has actually done better for me than TLT. After I wrote yesterday I went back to check my records and saw I had initially bought a very large (for me) chunk. I held it for a few months and cleared well into 5-figures. I wouldn't do that now, but that was before so many rules were suspended and I had more confidence in the game. (There is a penalty for selling WHOSX before 60 days, but if things turn suddenly I'll do it.

If I sell at 1.5% TLT will net me 2.5% which is the 10-year out there on the bond curve for buy & hold people and a year for most equities.

I am only playing with small bites these days and am 70% cash, but this year one 4-month holding of VWESX gained 6.8% or about 19% APR including the 5% div.

Grym