Bill Cara's Blog for Sep 7, 2011

From Doug Kass' Twitter feed....

"My gnome, high above the Alps is hearing that the EU is considering suspension of bank mark to market acctg. as we did in US in 09"

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

When they get done crying, they'll start talking trash!
BAC and C will need taxpayer assistance or they will soon fail. Both are down over 40% in 4 months....hows that working out for equity holders?

http://money.cnn.com/2011/09/06/technology/yahoo_c...

http://money.cnn.com/2011/09/06/news/companies/ban...

Okay, Les. :-)

Google the title. You can get past the paywall that way.

Les,

I guess we can assume her grandfather was a union member during their hay day. This kind of thinking is what caused Detroit to be surpassed by Japanese autos in the 1970s.

As one who ran my own business and regularly worked holidays and weekends, where an 8-hour day nearly never happened (except in recessions), I can tell you my alternative would have been to hire someone when busy and lay them off when slow.

This is just what any company would need to deal with. There are times when an extra few hours are needed on the spur of the moment in order to meet a customer's need.

If she were talking about current conditions where salaried people are working two or more jobs for a company who is off-shoring I could agree. Of course, they would simply say,"Good-bye and good luck finding work anywhere else."

My son is now working his job and that of a fellow worker who was let go, but... this company is down to the bare bones. The loss of customers to China and Mexico has put them on the ropes. If my son adopted her advice he, and the rest of the twenty people, would be out of work immediately.

As a flat out rule of "no overtime" — this is pure baloney! (As are most generalities, IMO.)

Grym

P.S. Ask Bill how many hours he works. Should he hire someone and go home after 8 or 40 hours?

Anglo American (rumoured to be) preparing a $120 offer.

I usually don't disagree with posts but I will here. OT does not increase the overall efficiency of an organization. It leads to burn out and poor decisions but 1st we need to compare apples to apples (Small business Vs Larger Companies). I agree with you when starting up or growing a small business you need to do what's required to succeed.

In my line of work ,optimising the efficiency of mining companies and getting the most out of their assets (people and equipment). OT is usually the signs of poor leadership (unable to trust or delegate to others), Processes don't support the business (do not align with the business drivers), lack of systems to manage the work and lack of a competent workforce. OT (or the expectation of) usually leads to losing your best people. A healthy work life balance is required for longterm success.

Again this applies to larger companies and not the very small business. But if you look at many of the small business success stories (becoming large) occurs after the leaders stop micro managing, start implementing systems and processes and get others to start managing the day to day operations allowing the leader to focus on growth and growing the business.

This guy is trying to wrestle the title of Captain Obvious from me:

(GR) UBS European Economist: Greece is insolvent and needs to default on its sovereign obligations

"In my 44 years in the foreign exchange market, this is the first time that I have seen a country switch its currency from free floating to quasi fixed. In one fell swoop, the Swiss have converted their currency from a bastion of safety as solid as the granite of the Matterhorn, to a patient in intensive care on the verge of going into a coma.

They are hitching their wagon to the Euro just as it is about to run over a cliff. Now Europe’s banking crisis and sovereign debt disaster is Switzerland’s. They have just taken ownership and shall suffer the pains and travails that come with it. A much weaker currency is the assured result."

http://www.madhedgefundtrader.com/september-7-2011...

So as the Euro gets trashed, so does the Swiss Franc. That I hadn't thought of, given the relative strength the Euro has shown for some time now compared to other major currencies. Of course when the currency war goes global we're all gonna be in deep doggy doo. Damn these idiots in charge!

It's funny that I want to trade, I love buying and selling regardless of what the buy and hold crowd would say, but Bill's logic of holding gold based assets here makes for undeniable logic, regardless of short-term volatility.

OT is part of the chemicals/hydrocarbon processing industry; staffing is as much a function of specifict to each site as having two pumps for each specific process, where three pumps would be mismanagement of resources, requiring preventive maintenance on mostly useless, surperflous equipment, so plants follow logical covenants that set these staffing requirements as you would design a process to be efficient. Some plants have more overtime then others, again it depends on the process, and safety is a major part of these considerations. Hiring extra staffing for these processes is unnecessary and won't happen.
Regards
Earl

JNPR - PT Lowered from $37 to $30 @ Stifel Nicolaus. Buy

Why is it trading at $88 if the offer is $120?

day trading opportunity for the swift and nimble.

TLT looks ripe for the slaughter. Thanks to Vad for giving me new target ideas and Earl for the setup. gotta love this game.

Rumour and conjecture at present.

Les,

I understand what I read, but don't understand why. Someone must be making a lot on this situation, but it is beyond my comprehension.

"Sound as a dollar" is long gone, but now the Swiss too?

For some time I have used the phase as a simple solution to most criminal activity, "You only have to shoot the first one."

Seems we're too late for that — globally.

Grym

If I read the schedule correctly, we're only $45B from the limit.

Debt Limit $14,694
Yesterday $14,649

These are not transposed.
At this rate, we'll need another raise in the limit by Friday.

Sound is as sound does.

California, can you tell me about the difference between supporting them on jobless benefits or supporting them on welfare? The only difference I can see is that welfare includes health benefits.

Grym,

The SNB is prepared to sacrifice Swiss buying power in order to remain business competitive and they are theoretically prepared to spend whatever it takes to do that. Guess who pays that bill?

Sounds like we're on the road to becoming a banana republic. This currency affair is not a "6 month and its finished" issue. This currency volatility will play out over years.

The Euro will devalue as the cost of bailing out their periphery grows and a Swiss banker has sworn to go down with them.

I understand their reasoning, but am now more concerned than ever that some portion of our wealth is covered by precious metals. I have less faith in the Swiss Franc's future.

"No one ever got to be the best at what they do by working only 40 hours a week."

Time has nothing to do with excellence. Motivation and desire to be the best do.

Or as I say in my clinics, "Practice does NOT make perfect. PERFECT PRACTICE makes perfect." Yes, time to practice can be a factor, but not to everyone and not to every skill or job.

Some people are smarter, more skilled, or have abilities (or deficits) others don't. We aren't all created equal. The number of hours worked has little if anything to do with it. AAMOF, sometimes more hours equals less ability or quality.

US Economic Data Site. Over 100,000 economic series, 30 releases.
Charts, data download.
Econoside

[How does this data service look? should we incorporate it as a feature of the blog? /Bill]

AMZN, ULTA, WYNN, AAPL, BIDU, LULU, CMG, GMCR, PCLN.

A number (most of them?) are underperforming the indexes. In the hourly time frame looks like rollover time. Respect your stops if you're long here. FWIW

DBK.DE is closing up over 4%. The Europeans say UP today...

NYUGrad, right on.

I can't disagree with the fact that talent is important. Would you rather go to a brilliant intern with one successful brain tumor operation or an average surgeon with 1,000 successful brain tumor operations if (G-d forbid)you or your wife was having a brain tumor operation? Skill is great but experience (practice) and having seen and worked around the possible problems is more important in many situations.

according to some reports.

Thanks for the bail out. we shall take your tax payer money and lay people off. Booyah.

$24,000.

That's the average student debt in America, according to a report last year from the Project on Student Debt.

For many students, that figure is modest. Take Aleesha Nash, a graduate of New York University. "Logging into the Federal Student Aid website," she writes on the Huffington Post, "I see that today my balance is $104,104.63 for a percentage of the information in my head."

http://huff.to/nGTZ0M

EDIT: students are better off taking initiative in junior highschool, to take part in various mentorships to find what they might like, then in hs, working for free half days in the profession. then after graduating, working in that professions for very small earnings, in replacement of the college credits.

Who am i going to hire? someone who busted ass for 4 yrs and does job well today, who can now go to my competitor. or someone coming out of college with book smarts, who i have to pay to train and take risk of not knowing if it is a right culture fit?

Over time, you will see less importance of structured education, except in disciplines such as medicine.

European (and US) debt crisis solved! If we could only get more judicial types involved...

Not going to fight a low volume bear rally...

XLF 3.3% higher on 29% of 65 day average volume.

Party on.

Google "Probe Into Goldman Widens" and click on 1st search result for full WSJ article.

http://bit.ly/nqjgCL

Video: http://on.wsj.com/oHdruN

"I said it yesterday and it bears repeating. What we are seeing here is eerily reminiscent of 1998-99 and tobacco stocks. Remember? The litigation then was going to wipe them out also. It worked out VERY well for investors then and I am becoming more sure every day this will also."

http://www.valueplays.net/2011/09/07/fhfa-v-bank-o...

A big read, but for those with skin in the game...

econoside.

Looks interesting.

Thanks,
Grym

For the short to medium term I'm seeing higher lows and higher highs. I'm not quite sure why the market is rallying, but it does seem to be doing so.

Lows: 1100, 1120, 1140. Highs: 1200, 1230.

Splitting hairs I fear. If you don't like the word rally, we can use the word cupcake. The market is cup-caking. Higher highs and higher lows.

Am I advocating buy-and-hold? No I am not. I'm just observing the current price action. If it tips over tomorrow and drops through 1100 I would not be shocked. Dismayed perhaps, but not shocked.

Perhaps the reason why is because everyone has already fled to safety - TLT is at its cycle high, the VIX is still quite elevated, and as a result perhaps there's nobody left to sell. Clearly the eurozone is about to blow apart, and the only sensible thing is to bail out of equities, and as a result the market is rallying. How perverse can it be?

i meant new highs and higher lows.

We are on the same page. I have been taking some longs too.

sitting out until obama drops the bomb thur.

outstanding article westcoaster. A must read. thanks.

Almost strapped in. Just need a fill on SPXU @ 17.83 [17.82 will fill the gap].
Short: ERY, TZA, PCLN, Hopefully SPXU.
Tomorrow it will be either "bulltard burgers" or crow for me.

On the flip side, it was recently reported that the collective debt of US universities is approximately ONE TRILLION dollars. Producing students with weak skills and paying sports coaches up to seven figure salaries. The whole educational system is over-rated and over paid.

The goal of sending everyone to college is a misguided policy for a society.
Many who attend shouldn't and alternatives should be provided for those more adept to learning skills more in harmony with the needs of industry which supply the jobs and wages for millions. Politicians exacerbate the problem by calling for more and more and more, which only lead to bigger and bigger failure.

" landlocked US assets ".. still say ACI will be taken out, because they Do have excellent port access...> http://www.bloomberg.com/news/2011-09-07/anglo-not...

Earl, the risk / rewards are very good here. Your 1120ish area call sounds like you have been peeking at my charts because that is my target over the next few days. Watch the close to see if they run the stops on the shorts. Still hoping my SPXU will get filled then. If you go short let me know. We can do some grilling together because we will have the beef! ;-)[Hopefully not crow]

LOL - very funny GW. I did sell my ANF and XOM calls both up 50/40% one day for another one of my best days ever. At 3pm I bought a couple SDS calls - just to continue testing my short term t/a. Those 3X are not really my cup of tea. Ilya said last week you better get your beef now - prices are going up soon...

Oh yes, I have those charts quite handy LOL:-)
take care
Earl

The Kennedy assassination?

I want to thank Bill and everyone else that discussed SVM on friday. It was timely truth telling.

Navel-gazing it is.

If respect for the law is not practiced by those who enforce it, how will you expect people to support the efforts of social order?

The G20 display of incarceration without just cause is contrary to our entire system of justice. Do you imagine these links are not connected to an overall disdain for the public? Why have those responsible for the abuses not been charged with any number of crimes, including unlawful confinement, assault with deadly weapons, etc.?

http://www.thestar.com/news/torontog20summit/artic...

You would expect justice for SVM shareholders from these institutions?

pulse

My point is: using this kind of extremely loose connections one can argue any point. Citing a few cases of alleged injustice as a proof of injustice surely coming in current case? By such logic, no case since at least 2006 (the earliest in the chain cited) has seen any fair resolution. None whatsoever. Is this so? And if it isn't, then maybe case in question has a chance...?

I guess I just prefer better arguments than loose collection of unconnected cases.

Vad;

All these things are connected, even loosely.

If you wish to bring it closer to investing, one could examine the Bre-X case(though I suppose this would be 'old news') Stelco's folding, or any number of junior explorer manipulations NOT investigated. An educated examination of typical routines designed to separate speculators from their financial assets is simple. However,the initiation of 'the hunt', does not happen at the OSC with any regularity which their frequency should dictate.

Also try to tie together Coventry capital and the first opportunity to expose the reality of Asset Backed securities.

I could also refer you to Bill's friend (we have posted here) to see the results of persecution to those not beholden to Mr. Big, standing on principle. These are very real tragedies, unaddressed by current authority.

I could direct you to any number of injustices perpetrated (many with 'the best of intentions') which have resulted in extreme catastrophe. We are forced to live with curable diseases because we allow the original infection to multiply, ultimately disabling the host.

Best regards,
pulse

Vad;

Tying together loose connections, see if you can see the money/regulation/quiet population/catastrophe links associated with ignoring problems at their root - this has taken decades to evolve, and here it is;

http://emsnews.wordpress.com/2011/08/31/japan-gets...

When will truth be embraced?

pulse

Pulse,

I see you really intend to direct me to all injustices ever perpetrated. Meanwhile, my point was... oh never mind.

Yes! to Bill's morning comments, but the Beige Book report does not excite me or give me any degree of confidence.

"No double-dip recession" is of course based on the 2 down quarters definition. But for the majority of people who can't find work, can't sell a house and are depleting their savings this has little meaning. For the One Percent Crowd there has not been a recession... yet.

I simply cannot accept the "view that the recovery continues but at a very sluggish pace" — because there has been no recover only a re-covering over the toxic junk. I would say there will be no second dip, but only because we never got out of Dip One.

"Consumer spending is up somewhat but largely on motor vehicle sales." Spending within what economic strata? Around here only high end homes are selling and new construction is the McMansion variety. People with money and a job can get really good deals. I have mentioned my getting reductions on needed home repairs.

Manufacturing is growing but at a slower pace. Yes, and any jobs added are a much lower wages than 20 years ago and with few if any benefits.

Any report from the Fed is hardly information I can take seriously. Bernanke is a pompous clown, IMO, and in the same class as Alan "Greenspam". It is in his interest to paint a better picture. This guy (according to the GAO audit) has spent $16 Trillion on secret deals with US and foreign companies — he should be prosecuted. Any guidance from them comes across to be like Charlie Brown's parents taking to Snoopy...

Waa, waa, waa!

Grym

vad;

My intent was to demonstrate that ignoring lawless behaviour allows it to multiply - in the most horrible of ways.

Obviously, this effort of mine is not directed at you. However, when you pose responses which appear to question my logic (see "Off the deep end"), I will attempt to correct your perception of my words and motives.

pulse

http://bit.ly/pZ8fRb

I have mentioned before that they should have accepted Google's offer, yes?

I got nothing against a fraudulent business that makes millions, and millions upon millions of dollars and doesn't produce nothing of value, or contribute nothing to my countries economy. More power to the parasites!
BAC and C are in desperate mode, and our tax dollars (tarp) are not near enough to sustain the crooks behind the black curtains. With out the working peoples monthly retirement contributions, both those so-called banks would be bankrupt and standing in soup lines like the rest of the working people they stole from............
Game AUWN!
Invest in guns, gold is secondary in the near future!

ALOHA!!

Here is the link to the OVERTIME video from Rebecca Costa's show Countermeasures ...

LINK: http://empowerme.tv/rebecca-costa-explains-the-imp...

With so many people over extended in debt yet still trying to capture the lifestyle of their parents it becomes less viable to turn down overtime. In fact I know people who have two jobs to keep their head above water.

From an employer perspective the last thing I want to do is pay time and half for overtime as I was forced to do under California law and IBEW rules. Rebecca's concept works well for trade and labor unions where you can call out a guy the next day that you do not have to train up. Usually you do not need to train people to push brooms and dig dirt ... usually! A lot of electrical work is relatively unskilled as well such as pulling wire, t-bar fixtures or doing production work. Besides even most IBEW apprentices know the basics and have the basic tools. I was very patriotic back in my contracting days as I rarely even asked employees to do overtime work. Something about pay nearly twice as much for way less than twice the production ...

Great response, so you want to put me to task.

I lived in Brazil off and on for 9 years during the worst inflation they knew. There were no public assistance programs that I knew of. The people had respect for themselves and their country. The hungry would knock on your door one time and ask for what ever you could spare. They never came a second time.

Here we expect everything from government if we are a Democrat. The machine feeds, cloths and houses you and your generations. Many have no skills beyond opening the mail for a check or waiting for the government debit card to be recharged. That is how it is in the USA. Now a new layer of truly needy need services from a system overwhelmed.

For starters lets get the people we have identified as not belonging here back home. We as a society have millions who belong somewhere else. The military might have individuals who are out who could work for INS in place of no job. The GI bill could be modified to retrain them as officers.

Next we contact the people who can't pay for the big fancy homes they bought and show them the door as others who work and pay their bill could move in ( a reward for doing the right things in life) allowing them (foreclosure hangouts) to step down into something they can afford, My house that I payed off years ago.

The Fed's can stimulate the economy by allowing tax credits for major purchases that put factory workers back on the production line. Not everyone wants a shovel ready job as shovels are for leaning on as the caterpillar does the work. Example purchase carpet and receive a 20% rebate from the government.

Allow drilling in California and the Gulf for oil we desperately need. It seems we buy it from OPEC and pump it into the ground (Strategic Reserve) so they have our cash and we have some oily mud. Don't make them go so far offshore they can't control the operations. Jobs, jobs, jobs.

If the government has to hand you money lets have your hands do something to get it. In Brazil the streets are cleaned all day by hand. If you want a hand out you must show up to clean the parks, remove graffiti, mow the grass by hand. Also drug testing to get the check as if your floating all day you don't look for work.

Just giving money to people does not make them fish. The hand is out for another fish.

As we continue to layoff the work force we must offer training to them if they need assistance, no job no hope no future.

Show them the future by allowing them to gain world class skills that are exportable. Japan did it, Korea did it, China is doing it.

We are all waiting for the return of the $5,000 car why not make it here.
The Pres has no problems unbankrupting Government Motors but the cars are more than my house was. With $5 gas and $50,000 cars we have no chance.

Time to return to South America? O the dollar is 40% of what it was then, rats.

Ironically, the FLSA (Fair Labor Standards Act) was originally enacted in 1938 as the result of Depression era 25% high unemployment. One of the goals of the FLSA was to stimulate hiring by making it more expensive to force people to work a 60+ hour week. Hence time and a half overtime.

Ron

http://www.fool.com/investing/general/2011/09/07/i...

"You wish to limit your experience here to trading (really?), I choose to examine the links with human behaviour"

I take offense in this. Anyone monitoring my posts knows very well that there is much more to me and my contribution than that.

Now, it's one thing to reveal and analyze connections between various phenomena, including human behavior and trading; endless ranting about everything under the sun is completely another. Your original post on which I reacted was an eclectic collection of unconnected complaints drawn together by ears, and in a very labored way linked to SVM - so I suggested to try and stay focused.

At this point I strongly urge you to stop this needless pollution and focus on constructive discussion. Lord knows we face enough problems as it is. I'll take absence of response to this post as constructive.

Thanks for the link good Dr. I'll have to make time for it. Meanwhile, this event is one of those surprise variables. Now the Swissie neighbors will be forced to reciprocate & the dominoes will drop. You can't make this crazy stuff up.

Btw, the Rep debate this evening actually allowed the other good Dr., Mr. Paul, speak. Fancy that. Several participants called for the immediate firing of the bearded one, none of which was Ron P. Next up is President Obama's infrastructure, payroll tax extending, blah blah blah speech. Wonder what surprise variable(s) he has up his sleeve?

This would all be interesting if it weren't so socially unequitable.

I've noticed that the price of barbaric yellow metallic gold has risen from $1500/oz to $1800 plus during the last six months or so. Kudos to you gold holders. You will know when to cash in your hoard, not by some future price but when you can earn a positive 2% over the real inflation rate on your cash. Today that would be close to 7% plus on 3 month T-Trash. I'm simply adjusting for a pre Boskin commission rate of purchasing power destruction and using a straight edge and a green crayon on a double spaced Big Chief tablet and allowing for slippage due to the occasional wood chip therein embedded...to arrive AT... But everyone knows the simple math...

I've also noticed that the price of rough rice (brown gold) has risen from 13.5 cents to over 18 cents today.

Pity the families (in the billions) who spends 50% or more of their income on food. Their cost of living has gone up by 16% since March if their staple food is rice.

Perceived lack of social justice results in mostly placard parades, sit downs, pushing matches, rock throwing and some civil unrest. Lack of food results in anarchy, mayhem and bloody death.

The Chinese are learning from the west money alchemy. Gardez!

Some financial innovations that aren't going to end well

http://humblestudentofthemarkets.blogspot.com/2011...

Posted: 07 Sep 2011 12:57 AM PDT

Most of the time, innovation can be good. Other times, they have unintended side effects. This is especially true of financial innovations. Paul Volcker famously said that the banking's greatest innovation was the ATM.....

Something tells me that this isn't going to end well. This is one of those times when the markets really needs some adult supervision and we can't all walk around with the attitude that risk management is for pu**ies.

Les,

"What is to be done? To find an answer, listen to the markets. They are saying: borrow and spend, please. " — Martin Wolf, Financial Times

While I am always a close listener to the bond markets, I must disagree with several of the article's basic points and notice an absence of nailing what I am convinced is the basic cause of the global malaise — corporate and individual greed. This was a well orchestrated scheme which has yet to reach a crescendo.

Preceding the subprime mortgage crash here in the US we began exporting most of our manufacturing. This had been the backbone of the middle class and the life's blood of the black population's exodus from sharecropping.

In the early 1990s I argued against shipping local jobs to Mexico and China with the CFO at a fastener company — my client for over 20 years. His opinion was based solely on Comparative Advantage. That being the drag of US regulations which raised the per employe costs here to many times that in cheap labor countries.

Added to these factors were decades of unfunded political promises to special interests — pensions, health care and outrageous union concessions. Apparently this was even being topped by many in Europe.

After borrowing and spending $ trillions, to claim the solution is to "borrow and spend" would be ludicrous if it weren't what we will most likely continue to do.

Grym