Cara's Commentary & Community Chat, Fri., Mar. 27, 2009

Reality wherefore art though,
I need you to see,
Send me your heavy laden,
And I will set them free,

My name is America,
I used to rule,
Still called America,
But now just a tool,

Client's often offered to give me what info they had "so far," so I could start designing their project.

I tried to explain that was like beginning a jigsaw puzzle with one or two pieces and placing them face down.

Our 10,000 page tax code is a prime example of what you end up with.

TN_blogger,
I liked your poem. Sad, but so true.

FSLR - to Hold @ Collins Stewart

Interesting. They also cut Solarfun (SOLF) from hold to sell on Thursday. Of course, that did little to stop the surge in these stocks yesterday.

Other analysts are also trying to curb the recent enthusiasm in this sector.

Analysts are cautious on the solar stock rally

gg, slw, uxg, and many others had a beautiful 5 day trend but have now broken it with premarket action.

I know i said no more trades till i return, but if they pull gold shares down hard i might get back in.

#2son,cp

Yes, thanks great info...I think it could be a shakeout...imho

LOL! I See Paul O'Neill has been reading here! I appreciate it, but do we need a Treasury Secretary to figure it out? I mean, there are millions of Americans with CC's and right about now a whole bunch are running up against lowered credit lines and higher rates....because they are maxed out like their country.

It must be BS because Dick Cheney says deficits don't matter. :>)

Well, Barclays has stolen so much money from other companies, this may have put them over the hump.

From the Behavioural Finance mailing list on Yahoo.com, courtesy Bob Bronson(sorry if its a bit long):

"The hardest thing to accept is that the simplest explanation is really the best. Occam’s Razor. Beginning in about 1981, Wall Street and Corporate America created a new form of financing, euro dollar borrowing. Rather than sell bonds in the U.S., which was costly and slow, European branches of U.S. banks found they could sell “euro dollar’ bonds in unregistered form to non U.S. buyers. Problem was, euro investors wanted a floating rate, and corporations needed a fixed rate.

Enter the interest rate swap, a non registered, non exchange traded security whose value and liability was unknown. Banks would take on the credit risk of the corporations paying them a fixed rate and take on the liability risk to pay on a floating rate to borrowers, for a small percentage fee (but a small percentage fee on very large dollar amounts, which came to be known as the “nominal” amounts). Banks would, in their infinite hubris, balance their swap books by evaluating the credit of their counterparties and matching up fixed and floating rate obligations. It was a money machine for the banks as long as they guessed right on their credit assessments and “knew” that not only their corporate contractees but also their financial counterparties would always be in the game. IBM, triple A, Household Finance, triple A, Bear Stearns, money good, Lehman Brothers, money good, AIG, rock solid.

The nominal amount of swaps soon grew to enormous amounts, more than the yearly GNP of the world. Think of this (remember I said this would be a simple explanation) as a very high stakes poker game, where the players (Bear Stearns, JP Morgan, Goldman, Lehman) are ALL effectively relying on a stack of IOUs that they continuously trade around the table. As long as none of the players has a cardiac arrest, the game goes on. But as soon as one of the players begins to cough up blood, everyone is left to thumb through the thousands of IOUs. It’s a house of cards, ready to collapse at the first sign of an aortic infarction.

The game almost collapsed with LTCM in the late 1990s but Rubin, Summers & Greenspan brought all the players together and rescued the game. The players got smart and decided what they really needed was some good, solid life insurance policies on the players, so they began to buy Credit Default Swaps, life insurance policies on the biggest financial institutions, issued by, guess who? Some of the biggest financial players. Enter AIG, who as a sophisticated rock solid insurer, decided to write fat premium high risk insurance on banks and sold the policies to anyone, even people who had a huge interest in the demise of the insured. Imagine Met Life selling life insurance policies with huge payouts on bridge workers to their supervisors who were in charge of site safety. So you could own life insurance on Bear Stearns and still be allowed to short Bear stock, or refuse to take Bear’s credit and help in the collapse. With CDSs, the players and some of the folks watching at the rail could now help poor, fat, red faced Bear choke on a piece of gristle and reap the rewards of beneficiary.

To posit that if only some naïve Asian bank had bought Lehman and that therefore, the most dangerous poker game in the history of the world could go on forever is a complicated and incorrect answer. The question with this poker game was always when it would end and how badly. Not if it would end. It was always going to end, from the moment back in 1981 or so when IBM floated the first Eurobond issuance and the issuing bank swapped its rate, the poker game started and would eventually end with badly. It was hard to forecast the role that greedy financial institutions and inept regulators and stupid politicians would play for the next 27 years at the time."

CMM.V has closed a special financing of $65m. to be paid in gold, but the share price didn't move:

http://finance.yahoo.com/news/Century-Mining-Recei...

http://www.mineweb.net/mineweb/view/mineweb/en/pag...

I would have assumed that this financing would have guaranteed a major move in the stock, but nothing happened. Still watching it, though because financing for gold juniors is a milestone in the development of the sector.

I lowered my stink bids on UXG. What level are you looking for as re-entry on UXG, NYU?

I wonder if the CEO of Wells BAC and City Group were all feeling the sentiment that we're americans 1st and bankers 2nd when they were feeding at the taxpayer trough.

When he passed Part-D was when I realized both parties were actually the same party just pretending to be enemies.

Rob.

Semper Fi to the young men and women heading for foreign lands, and those that are already deployed to those same foreign lands.
The real terrorists are right here in the US, with the greed of the US banking system that controls the power over the people.

2nd- You bet...I like the ST counter also, hence the UCO short. I need to do some work on NG before I get a feel for it. Perhaps this weekend...NO WAY! Looking forward to a sunny 2 day's with the family. Might get to 80 degrees.

Were none of you equally bothered by the Bush tax cuts?

Enjoy your day, 2nd. I had a similar outing with my family earlier this week. We went to Anno Neuvo to gawk at the weaners and a couple of lazy juvenile bulls. ;)

"I'm going to beat you to it." How come that doesn't surprise me. Damn, it is going to be beautiful down there.

It's nice to know we're experiencing a technically oriented sell off as opposed to one driven by fear.

Are you guys up in Nor Cal? I'm in SD and it's cold and dreery this morning...

Furniture Brands paid CEO Ralph Scozzafava $3.8 million in total cash compensation last year, including a 7% salary increase, according to trade magazine Furniture Today.
Scozzafava pocketed the hefty pay package despite sales falling 16.3% at the St. Louis-based company to $1.74 billion in 2008, and a net loss of $415.8 million on continuing operations, a mere eight times its 2007 loss. In December, the company eliminated 1,400 jobs, or about 15% of its remaining U.S. workforce.
Scozzafava joined the company in June 2007 when the company's stock was above $14. The once-proud manufacturer of name-brands like Broyhill, Lane and Thomasville now trades for around 80 cents, and the company sports a piddling $40 million stock market value.
In a story about Scozzafava's bonus deal in Wednesday's Wall Street Journal, a company spokesman said "executive compensation decisions are made by an independent committee of the board of directors, which has been advised by global compensation consultant Towers Perrin."
In other words, it's the consultant's fault the company overpaid its CEO.
That answer had us scratching our heads a little -- OK, a lot -- so we rang up Furniture Brands International and asked them who hired those fair and impartial consultants. To which they kindly replied, "the board."
And who is the chairman of said board? You got it. Ralph Scozzafava.
Don't blame Scozzafava, though. He just hired the people who overpaid him.
Boy did they do their jobs well!

tof- n2s is in the East Bay, and I'm on the Peninsula.

Bush tax cuts were stupid then and obvious now.

I was more bothered by his Tariffs on Steel while he was preaching Free Trade. I guess we could only ship out the jobs who didn't subsidize his campaign.

What really bothers me about the tax code wasn't the tax cuts. It is the fact that nearly 50% of households pay no tax and actually get money back. An overwhelming Federal and State workforce coupled with these bribed voters are where I lay the blame for our government going down the tubes.

Think about it. Will State or Federal workers vote for responsible Government that spends withing it's means? Will people whose total tax liability is 5K but get 11K back vote for responsible, smaller government?

I believe everyone should pay at least some tax to have a stake in responsible government. I also think Fed and State agencies should run on budgets that reward completing the mission while spending less than allotted, rather than every agency having a mad scramble to spend what they receive so they can get more the next year. The majority of voters has no incentive or desire to vote for responsible government.

Rob.

Did anyone buy NT 4 days ago? Take a look at a 4 or 5 day chart.

http://nexalogic.com/nt.jpg

I like to look at energy commodities by using their relative strength to Gold ($NATGAS:$GOLD, $WTIC:$GOLD, etc.) ... by that basis $NATGAS's monthly RSI(7) reading is at it's lowest point ever.

I can't say when the supply glut will disappear, but I do know that Texas has 450 fewer drilling rigs working this year. Of course, the reason is that it's uneconomical at today's prices.

The cure for low prices is low prices, because the decrease in supply will catch up at some point. This is definitely on my "sit and watch" list.

"Bush tax cuts were stupid then and obvious now."

You lost me on that one... Obviously smart or obviously stupid? Bush just repeated the same thing Reagan started, and the pendulum swung too far. It obviously wasn't a result of smart policy, more like force of habit and ineptness. I don't know who was really calling the shots, but it seems ol' rat-face was, while Cheney was out cannibalizing.

Ahhh, now you're talking Rob!

covered my short on UCO from 10.25 at $9.53. I get the feeling that geopolitical risks may spark up causing oil to spike temporarily.

I moved my money into a short WFC position at $16.51.

Gee thanks Si---wish you'd showed that to us 4-5 days ago! :))
S

Craig,
I guess my main problem is that we're feeling squeezed in the middle like you're saying. We make less than Congressmen for sure and end up paying over 40% of our income in taxes.

That's life changing money for us that is wasted every year. And now this year we're going to get nailed by the AMT because we did the responsible thing and nearly paid off our house instead of jacking up our lifestyle.

Then I see people above us paying only Cap Gains taxes because they got that rule written for themselves or hiding their money at UBS and thumbing their nose at us, or just being like Geithner and not paying until he's caught.

And we know plenty of people making less than us and do get more back than they paid in income tax and FICA combined. We know one couple running a scam where they each say they're single parents and get over 10K back every year they didn't put in..

When we're paying out the you know what every year examples like this make me angry!!

Rob.

And therein lies the problem. We have people gaming the system from the top and the bottom and those of us unfortunate enough to be in the middle pay the tab for everyone.

The final laugh will be ours though when we say screw it and just earn enough to survive, like Atlas Shrugged. Hey, we may even qualify for the EIC free money at that point right?

I doubt I could take it and sleep at night though but who knows, they say greed has no bounds right?

Rob.

Tof- I covered also. Thanks for the heads up yesterday. I was thinking it, and not sure I would have done it without seeing your post. Looking to short COF @ 15.00

Mentioned yesterday. 15.20 recent top.

Priceless - A term coined by financial agencies for the purpose of having consumers purchase more than their net worth on credit cards and thereby forced into a trap of financial slavery. Priceless, therefore you must buy. After all, what good is money if you can't enjoy the finer things in life?

Hook line and sinker!

I recall seeing a Citi billboard - "Live Richly".

Billy, Ever seen what they drive in Cuba? Just to play devil's advocate....:>)

I know I plan on driving my vehicles until they no longer drive. I have no one to impress with new car debt.

Tof- The only thing that's holding me back is the sugar/b.s. meeting today in Washington.

http://tinyurl.com/cjyk2g

The "Money" Quote:

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota.

The "Runner Up" Quote:

"Now Congress is about to repeal that economic stabilizer [Glass-Steagall] without putting any comparable safeguard in its place.''
--Sen. Paul Wellstone

The "Also-Ran" Quotes:

''The concerns that we will have a meltdown like 1929 are dramatically overblown,'' said Senator Bob Kerrey, Democrat of Nebraska.

'If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,'' said Senator Charles E. Schumer, Democrat of New York.

One Republican Senator, Richard C. Shelby of Alabama, voted against the legislation. He was joined by seven Democrats: Barbara Boxer of California, Richard H. Bryan of Nevada, Russell D. Feingold of Wisconsin, Tom Harkin of Iowa, Barbara A. Mikulski of Maryland, Mr. Dorgan and Mr. Wellstone.

I haven't been to Cuba (yet) but its on the list. I think by a few years from now it will be easier to travel there from the States (and not have to bribe a customs official not to stamp my passport!).

There is definetly some elasticity in the auto market. My point was though that the price curve for autos is flattening to the point where it is not necessarily cheaper to buy used vs. new.

Or maybe we will all just ride the bus in the future - in which case maybe I should be looking to invest in bus manufacturers!

Greed is not the problem... The government is the problem. There is plenty of regulation. If the regulatory agencies were doing their job adequately the problem would not be as large and extensive as it is. More people will take oversized risks if they know the law enforcement is lax and incompetent.

We know that the human condition is going to push the envelope...those in the government must do their job so extreme and lawless actions will not be rewarded. Unfortnately, this has happened. Those in charge of enforcing the rules have failed us.

Now we are going to create more regulatory agencies and positions that will essentially do what the existing ones already are supposed to do. It will be overdone.

Isn't it to fun to wack a mole when there are so many that can't even find their hole?

CP- USD just turned green... Perhaps I wont get that pull back after all.

What could honestly come of this meeting that we don't currently know about?
(1) If it's suspension of mark to market, we already know that no one wants to do this, so at best an alternative will be drummed up. But what would that do? It would just keep these crummy loans in the system for longer.
(2) If it's revoking the uptick rule, we already know that this is going to happen.

Most likely he will come out and say he met with the bankers and they support his plan to help the industry. Even if they come out with something new, we all know that the bad loans crippling this economy are still in the system and will be in the system until they force these banks to default or until it defaults our government. That's the choice. I and anyone with a brain would choice the former but the banks have convinced the govt that its best that the taxpayers pay for the bad loans the banks profited from, which could cause the latter...

How can a company like PFG be allowed to lever up 60:1. Look at their balance sheet. They have a 60:1 leverage ratio right now. PRU has a 37 to 1 leverage ratio. This is insane.

Mark - right now I see money jumping like fleas from dead dogs over to recent gainers. I think the rally only took a little breather, the real resistance occurs at 850.

TOF:

Can't really disagree with anything you said.

Although, it's usually best to trade what you see, not what we think or feel should happen. WFC has a possible inverse H&S formation with the left shoulder at $13.49, the head at $7.80, and the "yet to form" possible right shoulder maybe somewhere between $13.50-$14 - who knows. The neckline is around $20ish, which is a key area as it also meets the downtrend line drawn from the September '08 high.

That formation, should it get completed would project back up to $32, where there is significant resistance between $30-$34.

I tried to post an annotated chart but it went over the 5 MB limit.

Again, I hear what you're saying. But in this type of quirky, volatile market, almost anything is possible.

JMO, as always.

PFG took their daily individual investment performance reports off all their covered Investments. There is no transparency anymore with PFG of any daily account performance. Investors beware, TARP money must of run out. Keeping people in the dark about their investments performance is not how an honest business should be run.

Destroying vehicles for insurance fraud means less available used car inventory! I am presuming people are doing this because the insurance payment is greater than resale value of their cars.

Call me crazy, but I'll consider it short-term disturbing, long-term bullish for autos.

salty - here's the link you asked about yesterday:
http://nexalogic.googlepages.com/skype2009b.html

2.2% - low is one way of describing it...

You know it. I'm in for sure next year :)

Rob.

covered at 16.0899 because of my stress tests comment. plus, it's the weekend, the sun came out, and speaking of stress tests, i want to be stress free this wonderful weekend.

I would bet money that everyone is going to pass the stress test. I think that "given" is already in the stock price. It will be amazing how financially sound the banks are.

Has the move ended for now?

Does anyone know if Don Coxe is continuing his conference calls.

Regards

Feeling vindicated today. Still seeing plenty of signs of short-term topping action in US equities.

dow5300

Just of note with WFC.

Reportedly lot of insider buying mid march.

Better than expected earnings coming up?

thanks OG--I think SiO2 forwarded it after you left. Glad to see you're back...stick around, the weather's fine!
S

Does anyone here follow this stock? This stock hasn't seemed to go up with the other quality oil sands companies. I can't wait to dump it but I also don't have very much information on this company or prospects. Any information would be greatly appreciated.

Thanks,

GH

I like tck as it looks like a double bottom. but i have been burned before on this tech pattern before.

2nd
made few trip on SRS and FAS and got rid of all the OEX put
also watching HNU.to. there has to be a price where NG production cost is higher than NG price?

"Bush tax cuts were stupid then and obvious now."

You lost me on that one... Obviously smart or obviously stupid? Bush just repeated the same thing Reagan started, and the pendulum swung too far. It obviously wasn't a result of smart policy, more like force of habit and ineptness. I don't know who was really calling the shots, but it seems ol' rat-face was, while Cheney was out cannibalizing.
------

What I should have said is, "Tax cuts seemed stupid then and are obviously so looking back."

ESLR has finally hit my sell limit order at $2.39 for the 1000 shares I purchased a month ago at $1.39. My next sell limit order is at $2.79 for the 1000 shares I purchased at $1.79.

Also, WHY.V hit my sell limit order at 0.33US for the 10000 shares I purchased at $0.22US in June 2008. That's a pretty long holding period for a trade, but then, it was a 50% gain in 9 months... I am now down to my "core" position in WHY.V -- 10000 shares I purchased in November 2007 at $0.4US. I'll keep them (and all my other Canadian explorers) until we recover from this recession and inflation will be raging...

On the subject of inflation: did everyone read John Mauldin's recent Outside the Box special on inflation, which points out that the Fed clearly views inflation in the 3-4% range as a solution to the problem of excessive debt in the US?

Let's say I agree with Bill's medium-term outlook about equities moving up and oil ending up in the $65 to $75 range. Let's say I think that reflation will help oil move higher. Let's say I want to use ERX to capitalize on this idea, since my cash is very limited and I want to get the greatest leverage for it. How would I trade ERX? Well, the value erosion in ERX manifests itself when the underlying index drops and then returns to the same point. The bigger the magnitude of the drop, the bigger is the value erosion. So to protect myself against this erosion in my core ERX position, all I need to do is to buy a little ERX on each dip and sell it when it returns to the previous high. The current $2 drop in ERX from yesterday's close will lead to a minimal value erosion, and so I won't bother with buying ERX at $26 or above today. That is, if this pull back ends today and on Monday ERX will zoom to new highs, I won't lose anything from value erosion. If, however, ERX drops to $24 on Monday, then value erosion will become somewhat noticeable. So instead of using up my free cash now, I will either ignore this little dip or will start scaling into ERX at around $25, if we get there today.

Hi GH,

I used to own it and recently sold it at a loss. The issues as I understand it are that there is not a hard surface over the resouce, making it hard to heat insitu for extraction, and they will need to raise a lot of money at some point. This stock is way more levered to the oil price than SU or COS.UN, and likely also has massive reserve potential, so if the price runs it could do quite well. So it is a tough one to sell because of the huge potential, but I just did not like the financing issue in the current markets.

As always DYDD.

AKL

bobbyo - thanks for thinking about this. As it turns out I have to travel to Florida early Mon for a couple days, so I will exit this trade today. A rule I made for myself a long time ago - never leave a short-term trade on while traveling.

Dave

done 19.85

I bought a few SPY $81 Puts to hedge my long exposure in ACI today should some unknown disruption occur over the weekend.

My likely intraday longs next week:

ERY, FAZ, TWM, SKF

I think that's true for me too. If you are mourning what you no longer have, you may end up undervaluing what you currently do have. For example, if as you get older you mourn your lost youth, you may lose sight of your increased wisdom and experience and are not able to take joy in that.

I guess "what I used to have" is just one lens to look at the world through. Another lens might be what Nouriel Roubini is saying about what will happen next.

Bill is always after us to ignore (for trading purposes) what the economists, financial TV, and the press are saying. And certainly, if I look at the market through Roubini's lens, I would never have shoved so much money into the market a few weeks ago. And I would be poorer for it.

Maybe one idea about increasing awareness (and possibly effectiveness) might be noticing the lenses you view the world through, and then asking yourself if they help you see and act, or simply cloud your vision.

Last week, that S. African blogger (Plierr or some such) pointed the way in one of his "postcards", but this week, the link doesn't work.

I phoned Don's office and was told that BMO had arranged it so that only their account holders may receive Basic Points and the weekly conference call for the rest of this year.

As a US resident, I don't believe I can GET a BMO account. - Ugh.

Anyone have a way around this impasse? I need my fix of Don's wit and wisdom ...

http://video.google.com/videoplay?docid=6507136891...

Creature From Jekyll Island A Second Look at the Federal Reserve

G Edward Griffin explains the FEDERAL RESERVE - a total money scam.

Todays webcast can be found at:

http://events.startcast.com/events6/122/C0018/Even...

you might need to use internet explorer, rather than firefox.

Its dated March 20, so I assume that the conference call for March 27 will be posted on Monday.

They only have one plan "Inflate or Die" that's been the plan since the Panic of 1907 ....... put the losses on the taxpayer, not us. (The banks)

http://en.wikipedia.org/wiki/Panic_of_1907

take a guess who wrote the following?

http://www.constitution.org/mon/greenspan_gold.htm

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Jock, I was able to access the call on both Firefox and Google Chrome using the following link:
http://events.startcast.com/events6/122/C0018/Defa...

The only difference I see from previous posts is the "#" at the end and I have no idea what, if any, difference that makes.

Sometimes it shows "March 20", but after clicking the "Click Here" link it opens the March 27 broadcast.

Edit: I should have checked the link in the post immediately above first; it also works for me on Chrome (never tried Firefox).

Not really funny, new HB&B term for the Glossary;

LEGACY ASSETS will now replace the term TOXIC ASSETS,

They (HB&B) have come to realize that there is no market for TOXIC assets, but after re-naming to LEGACY assets they now have real value.

RUMOR: CNBC show anchor embarrassed and attempting to avoid becoming part of the growing bigger network joke.

Vinod- "Don't fight the Fed" is a pretty good mantra. I mean, what's the alternative, and why would you want to? When making decisions in life, insisting on standing your ground against powerful forces usually comes at great cost. In some cases, you have no choice. In other cases, it's worth the price. But in most cases, it makes sense to either stand aside or go with the flow.

I agree with Vinod in that there are a lot of fund managers feeling the train may have left the station without them. However, I also feel there will be a negative bias in the markets next week leading up to the G20 meetings where the US is expected to get spanked by fellow attendees. There will be mayhem in the streets creating very bad optics for world finance. My expectation is greater amplitude in price variation and index movement as opposing strategists clash before month/Q1 end..... more daily volume than in recent weeks,but weaker prices. If damage is contained at G20 we could then have a spectacular April. Interesting times, and definitely a ST trader's market.

So when are we going to get some feedback on CTAB shenanigans this weekend? I want photos!!

I seldom look at long dated options but I just noticed that to write a put at 800 expiring in December pays you $95. I think the probabilities of closing the year much below the current levels are low. To lose money of this put you would need to close the year at about 700 on the S&P which in my opinion is very unlikely.
Am I missing something? I would appreciate comments from sesoned option traders.

"The Quiet Coup by Simon Johnson is a great, comprehensive overview of what I am convinced has happened, continues to plague our financial markets and is destroying our economy and nation."

Grym, this reminds me of sitting fireside after a full day of water skiing and frolicking along in 3 ft water on the banks of the Colorado river (Arizona side) between Hoover Dam and Havasu.

We never could resist telling spooky stories in attempt to enhance the primeval experience of sitting around that fire, one of our favorites entitled: "Got ya where I wantcha, now I'm gonna eatcha"

http://www.folktale.net/gotcha.html

Anyway, no one was ever really eaten, but it sure did scare some of the young ones... Today, the monkey has been replaced by vampires adept at sucking blood from the greatest economic power to have existed on planet Earth. Will the vampire stop sucking blood before his victim's heart stops beating?

Thanks for the memory!