Cara's Commentary & Community Chat, Friday, Jul. 10, 2009

I think I will take it easy today, as best I can. From yesterday around 1600 eastern, I now know were my left kidney ends and my left urethra starts from my kidney into my bladder. The emergency room physician said from the ultrasound and x-rays it looked like I had almost passed a medium sized Kidney stone. They gave me finally at 1800 some pain meds intravenously...they got mixed up with emergencies (ie. car accidents). I guess I picked a bad day to have an attack...the first...and I am hoping the last...although I pretty much know this will be a never-ending story. One doctor said the pain had been compared by woman to childbirth...I do not know if I would go that far, but it was very difficult and I will remember it for ever.

Yikes, take it as easy as possible TN. I know the guy that holds the world record for cystine stones. I saw the darned thing and can't believe he passed it out his.....YES childbirth might be equivalent if a woman passed a 20 lb child. In this case it was the size of a medium marble, w/o the nice smooth finish. He has the morphine pump and kicks that habit every time he has another stone. I hope I never experience it, even the little ones are extremely painful.

What do you make of this chart [Slosh Report]? I heard one interpretation expressed this way..

"the Fed is ‘draining the swamp’ and thus I expect a considerable dislocation (i.e. large drop) in equities by the end of OPX week."

TN_blogger

:-( .... My father had those.... very painful. After the first one he always drank a lot of cranberry juice and water. The day you pass it you will be so happy.

Take it easy TN_blogger and I will keep an eye on your FXP for you.

Good morning.

BBBY - PT Lowered from $32 to $31 @ FBR Capital. Market Perform

INTC - PT Raised from $10 to $12 @ Auriga U.S.A. Sell

PBR - Upgraded to Buy @ UBS. PT Raised from $32.75 to $45

---------------

Note to TN_blogger,

Sorry to read of your health problem. You're in my thoughts and prayers.

Regards,
BH

http://ronsen.blogspot.com/ Ron Sen
http://weeklyta.blogspot.com/ John Lee
http://www.ritholtz.com/blog/ Barry Ritholtz
http://davelandry.com/ Dave Landry
http://www.slopeofhope.com/ Tim Knight

Its a friday. The economy is just plain miserable. The government has no solutions other than to add more onerous regulations and layers of bureaucrats, and print massive amounts of additional debt to hand out to their buddies, and yet only gold mining stocks have crashed?

Conceivable we see it. Not so sure we close on it.

[Note: I believe he meant 920 as near term resistance for gold not 620]
~~~~~~~~~~~~

‘Trader Dan’ Norcini:

“Up and down, back and forth, in and out; she loves me, she loves me not – after everyone and their mother ran to the hills yesterday avoiding “risk”, today they decided that they had forgotten their underwear and toothbrush and ran back to go and get them once again. RISK is back (at least for today) and when it is, down goes the Dollar and down goes the Yen, up goes the Euro and the Commodity currencies, up goes crude oil, and of course, up goes Ol’ Yeller, i.e. gold.

I have been wondering how much longer the Japanese monetary authorities were going to sit idly by as they watched the insanely schizophrenic speculators bidding their currency to Timbuktu. They finally issued a statement and that was enough to take some of the wind out of the Yen’s sails as any speculator, that does not respect the Bank of Japan has not been out to their woodshed as has yours truly. They can put some kind of “whoopin” on you. Even at that, the Dollar was so out of favor today that the Yen came well off its worst levels of the session.

With that in mind, crude oil did struggle to move higher even as the algorithms had the hedge funds buying it and I think that were it nor for crude’s inability to move beyond the session high of 61.62, gold would have taken out $620. For now, $620 is serving as near term resistance as it was support prior to yesterday’s sharp price decline in the gold price. Now it is attracting selling by fresh shorts moving in to take advantage of a rally to sell. In addition, short term oriented traders (the one minute bar chart geeks) are selling up near that level and trying to book a few dollars in profits.

After yesterday’s big rush to safety, the bond market promptly puked and gave it all back. This is exactly what I am referring to when I state that today’s markets are broken and that hedge fund lunacy is destroying their integrity. The wild price swings are indicative of ZERO analysis being done by human beings. Rather what we are seeing is the result of a dog walking its master on the leash. Computers are running our markets and that is what scares the hell out of me. How does a bunch of on and off circuits sit down and do a studied analysis of a market from a fundamental basis? Answer – it does not.

Now you can see why Goldman Sachs has its panties all in a bind about their little ol’ computer program… that is what investing has boiled down to these days – who can get their order in front of the next guy and get it to the exchange the fastest… As a long time speculator I used to be proud of my profession but I must say that this new breed of fund managers and their quant boxes disgust me because it feeds into the notion that we are nothing but a bunch of low-life parasites who produce nothing useful. At least we once did a lot of analysis and provided liquidity and served as a conduit for commercials looking to offload risk. We have now been reduced to a bunch of leeches sucking money out of the hands of those who actually still believe that the markets serve as a price discovery mechanism. Trading/Investing has morphed into a hopped up video game on steroids. “

No, cheapy, you're not alone.

What I'm seeing out in the real world is frightening, to put it mildly. As usual, our elected representatives are clueless, throwing more worthless currency on the fire and serving their special interests instead of the people.

It wouldn't surprise me to see this whole thing come crashing down and a second American Revolution come to fruition.

Regards,
BH

The thing about risk is that you don't own your own risk.

The market is set up so that somebody can write a lien against your risk and expect payment for it, own it outright, or own the underlying asset. But holding somebody's risk is by far the most desirable position.

Its a very odd take on the notion of propriety, and there's a cartel.

The only few blogs that I read on a daily basis, besides this, are:

1) www.slopeofhope.com, explains his trades on charts
2) www.smbtraining.com, from a prop firm, blog posts usually are mini lessons in day trading
3) xtrends.blogspot.com, not for his trading tips, but for his reasonings behind his views
4) marketsci.wordpress.com, quantitative analysis, interesting perspective and they actually post their research results
5) maoxian.com, trading journal, again, for his thorough explanations of his trades

...

...

The Bill Cara blog is the best site to learn how to trade the stock market, discuss stock market news and talk about stock market today and stock market quotes and prices. Here is a list of the top 10 stock market blog sites on google. Consider adding these sites to the top of your website site if they meet your other criteria.

Seeking Alpha Stock market blog list
http://seekingalpha.com/article/3033-the-stock-mar...

Stock market blog - the url gets this blog number one position on google.
http://stockmarketblog.com/

Deep market stock market blog
http://www.deepmarket.com/

Stock market idea blog
http://www.stock-market-idea.com/

Bull trader blog
http://www.thebulltrader.com/

seo suggestions
Include powerful key words to headings and meta tags to help with your search engine placement. Keywords include online stocks, stock market, stock quote, finance, investing

have a great day and weekend. I am on the sidelines now!!

vb

QQQQ getting bid hard

...

long yamana 8.53

...

Actually, I just wanted to give FredC a workout ;)

how many algos can they run on financials in one morning? elsewhere...

Cara being my alpha

1. Gary Kaulbaum (Radio and podcast) Live daily show at 6pm eastern. his callers are annoying.
http://tinyurl.com/3ecug

2. Chart Pattern Trader (Daily evening chart videos)
http://thechartpatterntrader.blogspot.com/

3. Day trader blog (i have never bought anything discussed here) but he does provide a lot of chart analysis
http://weeklyta.blogspot.com/

4. Financial entertainment news. Not much info you can trade on
http://zerohedge.blogspot.com/

5. Stockcharts.com blog
http://blogs.stockcharts.com/

Here's something to think about:

1. Wall Street firms are known as 'sell side' because they are net sellers of investment instruments/vehicles. We, the retail investors, are known as 'buy side' because we, in general, buy instruments/vehicles from the sell side.

2. Wall Street firms refer to themselves as the 'smart money.' Retail investors are referred to as 'dumb money.'

3. The dumb money has been told by the smart money for decades that buying the market is the true path to wealth.

4. If buying is so great, why is the smart money a net seller?

When I became a net seller (long and short), my win/loss percentage went through the roof. Not that selling is easy - it has it's own problems, to be sure, but overall it's much better than buying as far as a win/loss percentage goes. Especially when it comes to options. Until very recently, options have been very expensive on an historical basis and that makes sellers of options much more likely to win - regardless of the direction of the underlying.

2nd

[you can book mark these if you want]

INDX

day chart----> http://tinyurl.com/l22ljx

min chart ----> http://tinyurl.com/lfnxkv

Nasd

day chart----> http://tinyurl.com/lstw4v

min chart ----> http://tinyurl.com/nlf3ro

Cheapy, Bull hunter, Bev,

I am by nature a worrier. My graphic design business demanded a lot of creative thought and I usually began with the question, "What if...." and it carries over to everything for me.

When the Cold War ended I wrote my Congressman that it would possibly result in a nuclear guessing game due to a lack of central control when the Soviet Union dissolved.

In the mid 1980s I saw the first local off-shoring by one of my clients and started to worry about the next generation's jobs. (I never thought it would get me too.)

Now I see the US Constitution being ignored, due to the massive power held by Wall St. and the federal government.

While I certainly don't rule out the inflation threat (I hold gold), I am currently expecting more deflation for some time to come.

Here are a couple of links to article which I see as disturbing for the longer view.

-----------

From GDP to Jobs to Trade and Fear, Full Economic Recovery Could Take Years

Bridging the economic chasm could take years
By Mortimer Zuckerman Posted June 22, 2009

http://tiny.cc/SHApd
-----------

Second Quarter Review
Debt acts as a Brake on the Monetary Engine

www.hoisingtonmgt.com/pdf/HIM2009Q2NP.pdf
------------------

Going with the Flow
http://contraryinvestor.com/mo.htm

FXI 5 min chart...watching the channel. Yesterday [blue] it walked up the channel nicely before breaking out.

http://tinyurl.com/lw7zjg

Automated front-running on an unfathomable scale

This post is a guest contribution by Bill King*, well-respected and straight-talking author of The King Report.

For the past several years Street operators have assumed the computer jockeys who were being employed by proprietary trading departments on The Street were developing algorithms that would find other algorithms that represented buyside orders so prop desks could trade against those orders.

Another trading prop that has been occurring for years that certain firms feed their electronic trading systems into prop desks so traders can see in real time money flows into and out of stocks and groups.

However, recent revelations are forcing the Street to consider the possibility of automated front-running on an unfathomable scale. The two "front-running" issues are: 1) "queuing" [of orders] - finding orders loaded into a system, particularly limit orders, and trading against them; and 2) "latency" - discovering and then front-running electronic orders of a penny or more by exploding the latency or lag in execution.

HFT (high-frequency trading) is being done on every electronically traded item on a global basis. Ergo, firms could be making pennies a few billion times per day . It was imperative for the NYSE and other exchanges to price securities in pennies to disguise "HFT" and to provide ample trading opportunities.

While the Street is percolating with anger and curiosity about "High-frequency Trading" there are also frustration and astonishment that the media, regulators and our duly elected are not addressing what could be the biggest financial abuse story of our time, if not history.

Though the blogosphere is all over the 'HFT' trading story an important piece of the puzzle has not been publicized enough. Few people realize that exchanges actually pay firms to trade against order flow when they act as a SLP - "Supplementary Liquidity Provider".

Exchanges will pay firms ¼ of a penny if they "provide liquidity" when an order appears in their system. This is extra incentive to front-run order flow . Theoretically a firm could "scratch" all day and profit.

Over the past decade the move to electronic trading and pricing in pennies was heralded by Street insiders as a means to improve liquidity for clients. This appears to be a deception. Virtually every facility benefitted proprietary trading at a select few firms. Who's the patsy?

Anyone with a modicum of industry experience understands that "providing liquidity" is at best a euphemism for front-running order flow.

Source: Bill King, The King Report, July 10, 2009.

My selections below are not trading blogs per se. I find this is the only trading blog I need because Bill C. and the community reference anything of importance a trader would need on a daily basis.

I am more of a "big picture", macro, person who likes to canvass as many viewpoints as possible before coming to my own conclusions on trading strategies. Here are five sites that I review regularly.

1) http://www.calculatedriskblog.com/
This is my preferred site for timely analysis of economic reports.

2) http://market-ticker.denninger.net/
Karl Denninger writes short, pithy, "no holds barred" analyses and opinions on current market or economic items. I admire his concise writing style, and also find it entertaining.

3) http://globaleconomicanalysis.blogspot.com/
Mike "Mish" Shedlock does a good job of dissecting economic reports. He has both feet planted in the "Deflationista" camp and I enjoy reading his reasoning for that stance.

4) http://www.theoildrum.com/
This site has a peak oil theme, but there are several knowledgeable contributors who discuss all forms of energy-related issues.

5) http://www.financialsense.com/
Jim Puplava's site hosts an eclectic collection of contributors and viewpoints. I have downloaded his weekend audios for years, and have learned much from the guests he has interviewed. The interviews are archived on the site.

Someone needs to clear this baby for take off....

Sorry that was a 1 min channel

http://tinyurl.com/lw7zjg

QID 5 min 7 day chart

http://tinyurl.com/kspa2s

Watching the upper channel wall.

Hey G- No chart pro here...but I like to look at the 10 month chart. 2 dips below that and recent support @ 4.40 in early April. Not sure what you mean by "It hasn't been lower than current going back to 2005." It closed at 2.79 on 03/03/09. GL

Craig- Could you squeeze another $.50 out of this sucker for me...Limit @ 48.01.

The longer it takes to normalize global currencies, the worse the economic damage will become. I expect US manufacturing will begin gaining ground in the not-so-distant future, due to an inflating Yuan. Because of an ill-managed dollar peg(leveraging to support the trade imbalance), the Chinese are looking down the bore of a double-barrel in terms of their currency.

I meant "followers".... I been making 2x [double] chocolate muffins this morning and been running back and forth between the stove and computer. Proof that you can't do both. Expect today to be slow. Looks like I was wrong. Again!

Bert,

I totally agree. Sadly, too many are lobbyist catering and big money connected.

https://online.kitco.com/bullion/index.html

Caraista Sarah Hadasseh referred me to a local vendor in SF. I haven't taken that step yet, but at silver below 12 I will be seriously looking into it. Why don't you deposit your purchase price into my Paypal, and I'll take care of it ;)

Seriously, I can email you the info if you want.

AIG is setting themselves up to be the short of the century.
Just like shooting fish in a barrel........

http://evilspeculator.com/wp-content/uploads/2009/...

the note on the chart remarks:

"We could be completing wave E here followed by a drop towards 77 or 76."

Bill and others,

In today's daily report, Bill states:

"Philosophically, owning gold in these uncertain times is a lay-up, but the lackluster day to day action of the underlying security is disconcerting. When unsure of the near-term trend, W.D. Gann recommended concentrating on the weekly charts; immediately Bulls should feel better, the main trend unequivocally pointing higher."

Could you explain why Bulls should feel better after looking at the weekly charts? What I'm seeing on the weekly charts on gold miners (GDX) is: MACD just had a negative crossover, stochastic is not yet oversold. The only positive chart maybe RSI(7), which is in accumulation zone now, but not turning up yet.

Thanks! Justin

I agree, but ya' never know what those durn traders will do !!... over the past week Capesize prices have pulled back... Panamax FAA contracts gained yesterday, with Q 3 contracts rising $ 750.00 to an average of $ 20,000.00..(spot rate is $ 23,000.00)..Supramax Q 3 closed around $ 16,800.00 ( spot is at $ 18,600.00)... some point out that China's iron ore stockpiling is slowing, and port congestion is diminishing... But, China ain't the only country still breathing..

Les,

His outlook on silver looks pretty dire, if we complete this right shoulder.
http://tinyurl.com/l3lpfs

He also comments "I still expect Gold to breach its 680 low either this year or early next year."

I would be a buyer there in some shape or form.

solari.com/blog/

Catherine Austin Fitts - If you haven't read her piece on Dillon Read it is a MUST READ for those who recognize that there is a club (and you an I ain't in it). The kind of inside information from somebody who has battled in the financial trenches- an honest look at the markets (will seem familiar to those who follow Bill's insights on HB&B)

financialsense.com

- Puplava website has excellent daily pieces and a podcast I listen to faithfully...

Look at APMEX, remember to compare prices amongst all the dealers as they
can vary greatly.

1. jessescrossroadscafe.blogspot.com
2. globaleconomicanalysis.blogspot.com (Mike Shedlock/Mish)
3. dollardaze.org
4. bankimplode.com (The Bank Implode-O-Meter)
5. market-ticker.denninger.net

I am speechless. I am done complaining and writing letters to local and federal officials who don't care.

http://tinyurl.com/nkh5e2
"A.I.G. Seeks Government Support for Bonus Payouts"

http://tinyurl.com/llooxn
"But there's still the $235 million in retention bonuses owed to about 400 employees of AIG's Financial Products (FP) division that the company has to deal with. Public furor erupted in March when it was revealed that AIG had paid out $165 million of retention bonuses to those employees."

Sure.

globaleconomicananalysis.blogspot.com
ritholtz.com
patrick.net
econoday.com
theautomaticearth.blogspot.com

I was actually watching this one all day like a STUNAD! Not really all day, as I was out for the past 2 hours on a wine buying mission. But I admit I was looking at AIG as a potential short at open. Then I established that it looked more like a long. I saw the crazy inverted hammer looking things in a one minute chart and wondered, at 9.15 cents, "should I buy"? Then I got involved in the Yamana long adventure. Least I didn't lose my undershorts.

Oh wait...wtf....where'd my bvd's go?

Yep, that's why I look at 1 month of days...:>) We've been all over the road today.

Airlines doing a bit of a 180 this morning on news that Continental Airlines has received anti-trust immunity to partner with other airlines on routes etc. CAL has been rallying on the news - rest of the airlines getting pulled up with CAL.

Disclosure long CAL @ avg $9.54. long UAUA @ avg $3.35

Will be watching the tape to gauge the legitimacy of the rally as the day goes on. Airlines have taken a beating this week even as oil has been falling (which in the case of CAL for instance, which is mostly unhedged, doesn't make much sense). I am thinking that lots of weak hands were out prior to todays news. Airline rally could have legs...

FredC - feel free to short the airlines when you get back from the Hamptons :-)

at amag now...

Vad said "Letting someone to see the orders before they become visible to the world is real problem."

Beautifully said!!!

This reminds me of a few years ago when some mutual funds were allowing favored entities to purchase mutual funds after the 4 pm closing net asset value was posted thus assuring themselves of a profit.

The media and HBB then went on a witch hunt and branded this as "market timing" and used it to instill trading fees on fund timers. This was not marketing timing, a real timer has to make his bet prior to knowing price and outcome.

The guilty were involved in outright fraud whereby the trader knew the outcome prior to the bet. Nice work if you can get it.

..but I can't tell if it will be recorded today or next week.

Be careful with that strategy, knifecatcher. Timing is everything when it comes to shorting ultra-shorts. It's best to short FAZ when the market is oversold (which is what I am waiting for). I don't want to bother with shorting FAS at all -- its volatility decay is much smaller than that of FAZ (about 6% per month recently) but it can totally kill you during a crazy bank rally like we had since March lows.

If you don't have a crystal ball, then you must keep your position size small so as not to get wiped out at the worst possible moment. You should allow for one of the ultra-shorts to grow 4X (FAS grew 5X between March and May). Recall the amount of buying power you had just before you opened your short on ultra-shorts and make sure that it has decreased only by at most 10%. Don't forget: if the market falls apart now and FAZ triples or quadruples, then your other long positions will get decimated and your buying power will fall greatly. So FAZ can easily eat up all your buying power and you'll get a margin call, like I did in March when I shorted FAZ in February (in a reasonably oversold market after FAZ jumped 20% in one day).

Stopped out of KBH this morning at 12.19.

Canadian dollar perhaps putting in a bottom? Daily MACD about to roll up, looks like support at 85, bullish divergence in RSI - might it actually happen this time?

That should be good for gold. One hopes.

"Tuesday Jan. 19
Concurrent sessions.
(1) High-level training (Vad Graifer), including mentoring in a live trading session."

Vad- Is this the one that comes with a money-back guarantee?

Here's a quick enjoyable read on how egalitarian communism is a worker's paradise:

China's Bureaucrats Stir Anger by Approving BMWs for Officials - Bloomberg

Of course, their lips say Yuan, but their eyes say Yen. If Chinese officials really believed the dollar was going down and not jawboning, then they are probably going to buy up the Yen.

The Japanese commercial banking sector is probably as big a player in globalization as Wall St., only we are so disconnected from that space that we don't see the effect at all.

The 24/7 Wall St. Twenty-Five Best Financial Blogs (Bill's is 3rd on this list):

http://247wallst.com/2009/01/21/it-has-been-ove/

The other source I try to check everyday are the economic reports prepared by David Rosenberg, available for free from the Gluskin Sheff’ website, but you have to register with an email address. Each weekday you get an email titled Breakfast with Dave or Lunch with Dave, which gives a brief summary with a link to a PDF file if you want to read the whole report. He is a prolific writer - the reports are often 4- 6 pages long, and are excellent. Invaluable - I just hope it stays free.

https://ems.gluskinsheff.net/

That might be a good time to open/add to shorts.

Seems to be a short squeeze brought on by news that our government is going to be paying bonuses to AIG scum, frightening shorts into correctly deducing that more bailout money, if/when necessary, will also be in the offing.

Playing with AIG short feels like playing with the wrong end of a Howitzer. But hey.....You never know....

Yesterday I came across a contributor to ibank.com who writes on NG. He previously contributed under the name Veritas5 if you want to search the site for previous articles.
http://ibankcoin.com/dr_cane/2009/07/10/natural-ga...

The EIA released another short term energy outlook on July 7.
http://www.eia.doe.gov/steo

Thanks...will do the best I can...lol

I only have two hundred shares of FXP, but it is moving up...this is good...thanks for watching it.

See how SPY does its initial drop yet MACDh tells another story as it is increasing at the same time. Will look to see if MACD can tell a story like that more often on a 1 min. chart. Would have made a good entry signal.

Sold some 91 GLD Jul calls against the 92's I had bought and so foolishly held on to. Gold doesn't look like it wants to do anything serious so I will recapture a small amount of this disastrous loss. I swear off betting on gold. And should gold show some strength into opex week, well hallelujah.

night all.

edit: just downloaded paint.net and spruced up the image with some trend lines to clarify.

Thanks for the natural gas blog link, Tom! Excellent analysis. Will read it every Friday from now on.

“New data reported out of the U.S. Department of Agriculture has raised concern that farmers are going without fertilizer. Add in a report of another price drop in potash in India and you have the double whammy.”

http://tinyurl.com/l9od3b

Sold everything at the close:

QID closed out flat around 34.63.
FXP closed out at a minor profit at 13.03.
TYP closed out at 23.54 for a minor loss.

I guess this means had I listened to my intuition earlier in the day, I would have made a few dollars more.

It remains to be seen if Gann (as I interpret his writing, which probably doesn't mean much right now) would have been right in having me hold on until next week.

But I'll sleep better this weekend being in cash. (I would also guess that Gann, were he alive today, would probably say NOT holding 2x/3x into a weekend would trump continuing with a trend...more likely, he would probably advise NOT playing the ultras to begin with).

A couple that may have been omitted.

Minyanville.com Trades posted right or wrong but always honest. A community like this one, and committed to financial literacy. Therefore a great compendium of commentary from independent traders and their allies. Many are professional money managers.

Zerohedge

I am sorry, Bill, about the name error -- I should have checked to make sure I recalled it correctly from the e-mail you sent some time ago.

I asked this earlier, but did not get an answer so I'll try again.

Bill and others,

In today's daily report, Bill states:

"Philosophically, owning gold in these uncertain times is a lay-up, but the lackluster day to day action of the underlying security is disconcerting. When unsure of the near-term trend, W.D. Gann recommended concentrating on the weekly charts; immediately Bulls should feel better, the main trend unequivocally pointing higher."

Could you explain why Bulls should feel better after looking at the weekly charts? What I'm seeing on the weekly charts on gold miners (GDX) is: MACD just had a negative crossover, stochastic is not yet oversold. The only positive chart maybe RSI(7), which is in accumulation zone now, but not turning up yet.

Thanks! Justin

http://tinyurl.com/kwcy88

I am thinking outloud, but if it breaks below and closes under $7.07 ish neckline, that 30 day will cut thru the 50 and it's game over.

I assume Bill wanted favorite (financial) blogs as opposed to finance sites such as Seeking Alpha, so:

http://www.ritholtz.com/blog/

http://wishingwealthblog.com/ ...says when to be in or out.

http://shockedinvestor.blogspot.com/

http://www.capitalspectator.com/

http://kevinsmarketblog.blogspot.com/ ..good for some occasional TA.

Also like http://www.thekirkreport.com/ and http://www.randomroger.blogspot.com/ but not so much since the bear really started growling last year.

I think so.

This past week I would have had far better success going with intuition. Sure, it may have been an isolated occurrence (having more success deviating from 'the plan'), but I'm not so sure. I've rarely been wrong tuning in to my sixth sense (that's why we have one, right?). It's more likely I'm a long way from understanding Gann.

Let's say Gann were transported forward in time to 2009, and given the challenge of trading the 2x/3x ETFs. Some of his rules still apply, of course:

(a) Small/manageable position sizes.
(b) Even intraday, trading with the trend increases odds of success. (For instance, my confidence in continuing to re-enter FAZ on weakness today was based on the fact financials were clearly selling off. On the other hand, I should have exited QID on strength and stayed away, as investors were clearly bidding up the QQQQ.)
(c) Never let a profit turn into a loss +/- When in doubt, get out. Well, that's pretty much why I exited the ultras at the close. Holding through the weekend and hoping for a drop on Monday would leave positions exposed to any number of surprises possible over the next 60 odd hours. No reason to do that given the opportunity to exit essentially flat on the day.

Modifications that may be needed:

(a) Profits on positions with the potential to decay significantly in value if held overnight should be taken the same day. After all, you have captured 2x to 3x of the gains possible in a trend move already. Why allow a whipsaw move the following day negate what are already reasonable gains?
(b) Waiting for a definite change in trend before taking profits? If your trading time frame is minutes, you're pretty much left with gut feel, no? When you see a profit that looks 'good,' take it.
(c) Would Gann even trade the ultras? Sure he would. Why? "'Cause it's fun, son!"

http://www.youtube.com/watch?v=wXBba77U1_Y

Joni backed by Pat Metheny and Jaco.

Can't get enough of Metheny?:

http://www.youtube.com/watch?v=qJPfBCSjCSc&feature...

Can't get enough of Jaco?:

http://www.youtube.com/watch?v=0YtcsnMvIPA&feature...

Metheny tribute to Jaco:

http://www.youtube.com/watch?v=1qo4RC1Qd2w&feature...

http://www.youtube.com/watch?v=GGMHSbcd_qI

1975. What a year.

4.5% Dividend Yield
P/E 11
PEG Ratio 0.6

Disclosure: I just started with a tiny position, but interested below $30

TOF- Were those last two orders filled AH today yours?

CP- Any idea what goosed FTWR today?

I can vouch for Bill's calls on gold (2006-07). Just when goldbugs sink into despair, the sector will spike faster than you can chase it. One reason exposure should not exceed 10% of the portfolio. Any higher, and you risk serious emotional swings. (If for some reason you have serious exposure, just hang in there. I've been there. $1000/ounce will materialize when you least expect it. Making money in the markets is hard work, all of the time. Don't get the impression it's 'easy' for any of us.) JMO.

Just so everyone knows what in the world we are talking about...I'm the last one on the right... http://tinyurl.com/muqm94

cheapy- It's called 'despair' because the loss of hope is real. When it actually hits $1000, your frame of mind will be completely different. I don't think you'll be selling as much as possible. You'll know when the move occurs. How many of us believed SLW/TCK would rise again when they were trading at 2 and change, let alone gain 400-700% in a few months? No one.

Mark- Is that the 'before work' or 'after work' photo of the crew?

I'm ashamed to say I SOLD my SLW that day at about 2.75 for a small loss. IIRC it was only 20,000 shares, but its sad to make mistakes like that. Luckily I bought and held other gold miners around that same time frame. I had no faith in SLW surviving with the bankruptcy rumors being spread everywhere at the time, and as luck/fate would have it, I was probably THE LAST person to hear it and be shaken out by it.

I've watched way too much profit disappear at $1000 in the past few years.

This blog is full of stories like that. Someone here had 5000 shares of FXP in the fifties. Needless to say, he was no longer holding the day it (briefly) hit 183. But think about it- unless you're comatose, it would take superhuman conviction to hold through the kind of volatility FXP experienced prior to hitting that high, and no one here except Craig is Superman.

(And if he really was comatose, well, he would be holding 5000 shares today @ 13.)

http://www.youtube.com/watch?v=U5ajstaLBMA

http://www.youtube.com/watch?v=KnhKcCwZwl8

March/April 1973- After dropping out of Michigan my freshman year, hitching to San Bernardino with my roommate (where we split up)/ then North on I-5/ central Washington state/ somehow ended up in a small town washing dishes>> the only entertainment (besides watching farm boys take on two cops at a time in the bar) was a juke box I was free to play on Sundays when the place was closed. I must have played these two a hundred times.

Must have been Ellensburg....home of our cowboy college, CWU.

cp, we've gotten close about 3 times now, I think. The first time I was smart enough to sell, but the last couple I have only sold a bit and wish I'd just dumped more or all. As 2nd put it, the word "despair" is accurate each time it fails.

The only worse thing I can think of is to be a "multi-millionaire", and all in USD cash the day the dollar finally collapses.

"Not worth a Continental"

And BTW, a Continental Dollar is now worth about $75 if its in good condition. The Founding Fathers would roll over in their graves if they knew...

Johnny Rivers.

http://www.youtube.com/watch?v=mo3Wqf86N4w

Was there a hipper spy than Patrick McGoohan?

http://www.youtube.com/watch?v=-UMezQESUBg

Thanks for all the response so far. However, I'm still wondering why Bill thinks the weekly charts are bullish. I just want to know what I missed. The monthly charts are actually looking somewhat bullish.

Music for goldbugs...

Appropriate for the current state of debasement, disbelief, and despair, IMO

http://www.youtube.com/watch?v=fvr7nkd_IJM

2nd- I know how old you are and I'm sure you know how old I am. I thought the double capital would convey my humor!! Too bad about new artists. I was hoping you might have found a few that I hadn't. And I mean a few. Ah, well...isn't the best thing about music are the memories that go along with it?

Someday I do hope we meet...perhaps a exchange of ill gotten booty at the end of the year at the 23rd Amendment. I haven't been to the City in a while.

No, I got it. Just countering humor with humor (and a little realism). Here's a song from 1997 that I sometimes play when I'm by myself. A downer, but (along with Sarah McLaughlin) one of the few I like from the late nineties. If there's ANYthing later than the late nineties, I can't think of it.

http://www.youtube.com/watch?v=axpuVLQ_m4w

Mark- Two I would include in the ipod:

Make Love Stay- Dan Fogelberg

http://www.youtube.com/watch?v=-DsnCjI4RmA

First Episode at Hienton (I bought the sheet music to the entire album in 1970 and spent the summer learning them all- this was my favorite):

http://www.youtube.com/watch?v=aTuKDK9U0qg

wrong blog!

Dan Fogelberg is a Peoria, IL native. There was quite a writeup in the local paper about him when he died. Most touching was about the song he wrote remembering his high school sweetheart, which was after a chance encounter with her in town after he was well known.

Again, unfortunately, I did not catch up to his music until recently. Neither is Peoria my home town although I now live there.

Quite a guy, Dan.

Looks like Elton is coming to Seattle in November so I might get another opportunity to hang with the band and take my wife and her best friend around to some Seattle sights, sounds and eats then catch the show at the board and backstage.

Mark, like 2nd I listen to a lot of the best of the good ol' days. The problem is I don't get a lot of chances to listen to much radio anymore. Seems like I'm always in front of a computer....

"justin - Bill is a chartist, he sees things we do not (obviously)."

I hope Bill will comment on this. I'm here to learn.

Options 701: Buying Straddles

July 10, 2009
By Jeff Fischer

Why buy a straddle?

* You believe a stock or index will move dramatically, but you don't know which way.
* You believe volatility will increase in general, so the value of the options you're buying will increase.
* You want to leverage potential returns when the underlying investment moves meaningfully in either direction, but limit your risk.

Have you ever thought a stock was about to make a significant move -- but you didn't know which direction it would go? Maybe a big earnings announcement is looming, an acquisition is pending, or a stock has recently soared and could keep going -- or turn at any moment. Most investors would sit on their hands, unsure what to do. But if you buy an option straddle, you can set yourself up to profit whether the stock goes up or down, while risking only the small cost of a few options. This makes buying a straddle attractive as a bullish or bearish strategy. In fact, buying a straddle can be superior to shorting a high-flying stock outright, since you'll profit even if it keeps rising -- but also profit if it finally flames out.

Whether bearish or bullish, this strategy positions you to make money as long as the underlying stock is especially volatile in one direction, moving at least (as a general guideline) 10% to 30% in the coming weeks or few months. The strategy works because you gain a much larger profit on one side of your straddle than you lose on the other (more on that later). And, to answer your burning question, it's called a "straddle" because your calls and puts sit symmetrically on either side of the same strike price -- while expiring in the same month, on the same stock.
Pros and Cons

Before we walk you through an example, let's go over what can go right or wrong. On the plus side, when you buy a straddle, your profit potential is unlimited -- the more the underlying stock moves in one direction, the more you can profit on that side of your trade. However, as with any option you buy (as opposed to writing options), you can lose your whole investment -- in this case, if the stock stays tightly range-bound, the options would eventually expire with little or no value.

The clock also plays a large role, as the biggest drag on a straddle purchase is the time-value erosion of the options. Buying a call and a put, you've paid two option premiums, and with each passing week their value erodes unless the stock's volatility increases. If the underlying stock doesn't make a significant move in either direction, your options will steadily lose value. Plus, the underlying stock needs to move enough so that one side of your straddle (either the calls or puts) gains enough value to offset the losses on the other side.
A Straddle in Action

Now let's "straddle up" and see how the strategy works. Here are the basics:

* You buy ("buy to open") an equal number of calls and puts on the underlying stock or index (usually you'll do this as a stand-alone strategy, so you won't own the underlying stock).
* The strike prices of the calls and puts should be the closest available to the current price of the underlying stock or index (also called "at the money").
* The expiration month on the calls and puts should be the same, and usually you'll choose an expiration up to four months ahead if you expect volatility soon, or six months or more if you want more time. Having more time for the strategy to work can be an advantage, but will cost more up front.

Let's use a real world example. Motley Fool Pro holding Autodesk (Nasdaq: ADSK) has been volatile as investors try to determine when business will improve. Suppose you believe the stock will move aggressively, in one direction or another, depending on the company's outlook in its next quarterly report. With shares at $17.50, you could set up a straddle that expires in three months, buying the October $17.50 puts for $1.65 each and the October $17.50 calls, also for $1.65 each. Your combined cost per contract is $3.30 ($330) -- so, if you buy three contracts of each, your up-front investment is $990.

Say management sees business improving, and the stock returns to $22.50 the next month. Your calls are now worth at least $5 each, up from $1.65 each, while the puts are worth very little -- you're losing money on them. Overall, though, your $990 investment is worth more than $1,500, a gain of more than 50%. On the flipside, if Autodesk's guidance is weak and the stock falls to $12.50, your puts are worth more than $5 each and your calls have little value. Your profit in this case, as with the opposite side of the spectrum, is 50%.

What if your thesis is wrong, and Autodesk stays within a few dollars of $17.50 for a few months? You're losing money on both the calls and puts in this case, and you might want to close them ("sell to close") early to get some capital back -- unless you believe volatility will increase significantly and soon.
Taking Follow-Up Action

Straddles can benefit from more active management once the position is in place. There are two ways to potentially boost your profits while being defensive:

* If the price of the underlying stock increases to the next higher strike price (compared to the strike price you used to set up the trade), you may want to -- depending on the number of contracts in play and your commission costs -- close your existing puts and buy puts at that next-higher strike price to increase your profit potential. This is called "rolling up" the puts.
* Inversely, if the underlying stock declines to the next lower strike price, you should consider selling your calls and buying new calls at that next-lower strike price. This is called "rolling down" the calls.

While increasing the total cost of your strategy, these follow-up moves increase your chance for higher profits on any subsequent stock move. Roll up and roll down sparingly, though -- reacting to every zig and zag in the stock can be a detriment when you consider the commissions, option premium costs, and the fact the stock could easily swing the other way again.
Closing a Straddle

If your original thesis holds true and a stock makes a big move, you'll make more money on one side of your options than you'll lose on the other. If you believe volatility is subsiding, consider closing ("sell to close") both of your positions at the same time to lock in your profit. If you wait until expiration, you may slowly lose extra value in your options, or the stock may reverse on you again.

If your strategy isn't working in time, you may want to close both positions early to recoup some capital and rethink your strategy. Your calls and puts serve to hedge each other in the early going. However, both options will steadily lose value if the stock isn't making a move one way or another.

Finally, although it's unorthodox, if you earn a quick profit on one side of your straddle, you may want to lock in that profit and let the losing side stay active. You won't have much value left on that side anyway, and if the stock reverses, you may regain some of the losing option's worth without risking the profits you've already secured on the closed side.
Bottom Line on Buying Straddles

If you believe a stock is going to move significantly -- but you don't know which way -- buying a straddle is a way to profit on either side. The enemy of the straddle-buying Fool is a stable or merry-go-round stock price, as the value of your purchased options will steadily erode unless the stock makes a lasting, meaningful move in one direction or another. But when you expect a big move either up or down, consider buying a straddle. Questions? Please visit our All About Options board.

Robert Rodrigez and Bill Gross. Yeah, I know its from Prieur's site, but worthwhile stuff is worthwhile stuff, wherever it comes from, I figure.

They are more long term views, but listening to them, I heard people seeing the world from a more realistic view than whats on CNBC.

http://feedproxy.google.com/~r/wordpress/VYxj/~3/6...

"How many of us believed SLW/TCK would rise again when they were trading at 2 and change, let alone gain 400-700% in a few months? No one."

HOW TRUE!!!!!!!!
I dumped my TCK [BIG position] @ 8.5 and my SLW [MEGA position] @ 7.75... MISSED a huge rally a week or so later. IF... I had only waited.

Life is short. This blog does it for me.

I read the opinions of other commentators when called for, but if I were to wade through them every day + read/respond to comments on their blogs, it would be a full time job. Not to mention information overload- you're going to blow your circuits.

There's much to be said for keeping life simple. I've seen people chase investment seminars/gurus/communities looking for perfection, but they're wasting their time. Life is not necessarily greener on another blog, and if you've found a system that works, stick with it.

To be honest, the secret to trading success is understanding yourself (there's not a system around that does not place "Know Thyself" at/near the top of its priority list). When I post my thoughts here, that's exactly what I'm trying to do. It almost doesn't matter which blog I post them on. But I like the community here.

Grym - Banks - "Just wondering...next week the earnings should look pretty good, right?"

This is what I'm half counting on for a lift to my refiner(Oil is too high), shipping(Oil is too high), equipment, and infrastructure equities (stimulus distribution is the other half). I'm staying away from the bank lies if/until they reach new lows (BAC~$3).

The big inflation/deflation oscillation: see attached.

Bonus - I'm making a bundle front-running 2nd's trades. ;)

Thinking about the relationship between oil and gold....

US govt holdings of Gold only amount to 2.75% of the outstanding public debt--which has now advanced to 11 Trillion.

If gold were to go up 40x, the books would balance!

perhaps we'll see the price differential of one outperform the other (Oil has just done this, now gold's turn at bat?).

Or you can follow the big boys by robbing a bank. 1) If the effort fails, all your needs are tended to 2)if the effort succeeds, you will (hopefully) have enough bounty to tend your own needs.

Based on what I heard on Bill Moyer's Journal last night, seems like health insurers stocks should be weak on Monday due to the bad publicity.

http://www.pbs.org/moyers/journal/07102009/profile...

The insurer highlighted was Cigna (CI). Looking at their financials on FinViz I see a company with a lot of debt that is making very little on invested capital and pays only a very small dividend.

Justin, I don't see much difference in the weekly or monthly charts, if one takes a longer timeframe.

From this chart I'd take Bill's call of a long steamy summer before gold hits Twigg's target of 800 and something.

http://tinyurl.com/nprweo

Give the fed some time to shoot themselves in the foot vis a vis the USD. An autumn return to Gold bullishness? Previously posted chart showed greenback being squeezed into a triangle. Suggestion of decent movement to come in following days/weeks?

heard from Bloomberg on the Economy podcast. Japanese have sold 100 billion USD in T-bills the last three years. Likely to continue silently selling the 500 billion remaining over coming months and years in order to delay the catastrophe the awaits the Japanese economy.

Analyst I listened to who travels a lot (not a Washington beltway or wall st warrior) predicts Japan as the next global economic crisis in the following decade.

Take care of the little details.
1. Make sure your parents beneficiary forms are in order. The largest portion of a lot of people's estate is their 401K, IRA, tax advantaged accounts and investment accounts. These vehicles ARE NOT subject to your or your parents Last Wills and Testaments. The beneficiary form controls how the money will be inherited and maybe more importantly how/IF it will or CAN be taxed.
Talk to Mom and Dad and make sure the proper people are named. If possible in your country/state etc. use a TOD, or Transfer on Death beneficiary form.
IT DOES'T matter what the darned will says, your broker will distribute according to your (or your parents) beneficiary form and it will pass TAX FREE/DEFERRED into YOUR IRA/401K/investment accts through a TOD. Yes, the TOD works with investment accts too. Also, life insurance beneficiary forms and life insurance is important....and TAX FREE. If it's possible, make sure you insure your parents for the maximum you can afford. Do the same for your kids. DO NOT NAME YOUR ESTATE or it will be TAXED. Name individuals on the TOD/beneficiary form.

2. Consider a HSA (health savings acct) health insurance policy. The funds used are pre-tax and build tax free as they roll over year to year and you add more and more. Any interest/profits you make in the acct are also tax free.

Now the interesting part. Distributions from an HSA are tax free only if used for healthcare (see the IRS forms and info) and included as one of these tax free expenses is long term care insurance premiums. YES, long term care insurance can be paid TAX FREE, or at least a portion as right now (2009) you can put $3000 per year into your HSA tax free, and if you are 55 or over (2nd...) you can put aside another $1000, or $4000 per year.

Also, drugs, including non-prescription drugs are also on the list of acceptable health care expenses. Stuff like Advil, aspirin, and shark's prescription marijuana....which should make him consider moving to California.

I'm thinking of this stuff all the time....

Hmmmm.....this source of vacation info seems pretty reliable....LOL!

...

cheapy- Feel free to keep the topic going indefinitely. It's something I think about every day. Keeping each other updated (and up-to-date) seems well within the framework of 'Capital Markets and Social Equity.'

I don't think it's as simple as saying "There is no logic," or "It's fuzzy logic."

Human behavior is predictable, no? In most cases, it takes a human to predict human behavior. The beauty of the algo boxes is the distillation of observations of human behavior into well-constructed models that fire off (theoretically) almost as reliably as our own neurons, although I have my doubts. (Maybe David can weigh in on this.)

The edge that a small trader would possess, however, is still substantial. Regardless of how well an algo-box functions, it can not replicate the speed/complexity of human thought. Nor would it (necessarily) detect nuances that our intuition readily incorporates into instantaneous decision-making. Betting on an experienced trader v a box would still carry very high odds, IMO.

were selling in the $ 225 - $ 150 range last year ? I just have to think the boys were short their own stock after $ 150..... just hold on to what was left at $ 150.00, 'put' it down to $ 40 ish, load up on calls, etc, make a fortune... Question now is, if/are they selling again ????

"Carbon trading must be globally regulated

By Simon Linnett
Published: 11:00AM GMT 31 Jan 2008

Simon Linnett, Executive Vice-Chairman of Rothschild, has called for a new international body, the World Environment Agency, to regulate carbon trading.

In a recently published paper, Trading Emissions, for the Social Market Foundation, Mr Linnett argues that the International problem of climate change demands an international solution.

Unless governments cede some of their sovereignty to a new world body, he says, a global carbon trading scheme cannot be enforced and regulated.

"An urgent global response." This was how Nicolas Stern described the problem of carbon dioxide emissions, in his recent review of the economics of climate change. The sense of an impending crisis infuses our all debates on this issue."

http://www.telegraph.co.uk/earth/earthcomment/3323...

Carbon forms the backbone of biology for all life on Earth.

http://en.wikipedia.org/wiki/Carbon-based_life

Yeah, but can he sing? Great video LOL.

P.S. Looks like he has his retirement plan in place.

shark- Yes, vinod is one cool dude.

Looking forward to checking out Vad's site during some downtime in August. Sounds like the kind of place where I can be myself:

[09:36] {vinod} ty-vad and meno for rimm
[09:36] {nemo} who is meno?
[09:37] {Threei} invalidated
[09:38] {vinod} nemo-now i got my fingure fat like boss
[09:38] {nemo} lol
[09:39] {nemo} I thought that was a phonetic freudian slip on your opinion of my demeanor

[10:57] {Threei} so far so good... come on you slimy no-good reverse-split piece of financial crap
[My thoughts exactly earlier in the day:
Re: FAZ @ 55.31/ Off 55.93, back in 55.59
Submitted by 2nd_ave (2705 comments) on Fri, 07/10/2009 - 09:39 #36405 (in reply to #36404)]
[10:58] {jfjf64} easy vad easy
[10:58] {Threei} lol
[10:58] {nemo} stop mincing words vad, tell us how you really feel
[10:58] {Threei} wanna know how I really feel?

For some reason, there is always plenty of this going down every day:

06[09:43] * magoo slaps vinod around a bit with a large trout

06[13:26] * Threei slaps magoo around a bit with a large roll of cash

..but I assume that's common practice among traders who are making a lot of money.

It's not called "reality" trader for no reason ;)

My rule of thumb for retirement savings and debt is 6x annual earnings at 55, with only .05% debt, 12xannual earnings at 65 and NO DEBT, at a minimum. I was "there", until I lost 1/2 of everything at 58 years of age in a managed account at Fidelity. Now, I'm here! Thank you Cara Community!

LOL! I haven't heard him sing but he plays EVERYTHING musical. If I were a betting man I wouldn't bet against him and I would advise all here to take the same odds.....this kid's got a thoroughbred musical/singing pedigree. 1. Dad sings and has obvious ability or he wouldn't be where he is. 2. Mom sings (she's the middle back-up singer in the video) and has sung for Perry Como and various other artists. 2nd, remember surfing Champion Corky Carroll? He had a band in the 70's-80's...Corky and the Corkettes, Kathy was a Corkette.
BOTH his maternal Grandparents sang professionally...they were relatively famous back-up singers for Perry Como, Sinatra, Disney, etc. I would bet most of us (and ALL of our parents/Grandparents) have unknowingly heard his Grandmother sing and never knew it. Those angelic vocals in Cinderella, Snow White, various Disney classics.

Had a bit of a closer look at the POG, GLD and GDX. Can't say I'm encouraged by them.

http://tinyurl.com/the-POG

http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=0&mn=4...

http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=0&mn=4...

MACDh positive change is weak in GLD. Volume anemic. Max pain is 90, so I'm looking for gold to hold this week before falling after opex.

The MACDh in GDX has a negative divergence, so the miners appear to have no go-go juice in them, signaled by the low volume here as well.

A little uplift this week and will be watching stochastics on all three for a possible drop sometime soon.

FWIW, Cramer sees the POG reversing and heading higher. To give him credit, he's reportedly right 50% of the time...

A serious move in the dollar downwards would be the only game changer I can think of at the moment. Unfortunately Europe may well suffer higher rates of business bankruptcy and strife in the coming quarters as more labour friendly Euro policies force businesses to maintain staff on the payroll even as they'd like to shed them, especially in France and Germany. Who knows, a downtrend pushing investors into US bonds with some crap shooting at Euroland's woes in the 2H might hold the dollar up - which is inflationary, isn't it?

The Fed would get everything it wants - gold bugs be damned.

jmtcw

Cheapy,

I don't think it is possible to plan for retirement by setting a dollar amount. IMO, now more than ever, you will need to perpetually monitor the inflationary trend.

Generally a growth stock mutual fund over time has kept pace with inflation, but so many factors are questionable today I'm not sure I would count on that. Just look at what happened to most mutual funds this past year.

Obviously your big problem is no job. You are at what used too be considered the prime income years for most people. This has also changed — drastically and rapidly. I made a good living as sole support for a family of four from 1961 to 1989 and for two of us until 2003, then my business went to hell in a hurry as globalization made price the only consideration. My son is single and doing the same kind of work I did, but just making ends meet.

I had to dip into my retirement funds a couple of years before Soc. Sec. eligibility, but because I never believed this program would last until then I always saved at least 20% of my annual income — regardless of what we may have liked wanted do or others were doing.

Best wishes at finding a job and a sustainable income. If you are able to move I'd say go for anyplace where they are hiring. And SAVE, SAVE, SAVE! This is going to be a long slow recovery.

Les - "a downtrend pushing investors into US bonds with some crap shooting at Euroland's woes in the 2H might hold the dollar up - which is inflationary, isn't it?"

This is deflationary, capital moving from high risk to low risk represents economic contraction.

Les,

The issue is not "increased productivity", rather an extra $1.50 for the same productivity. This is true for both skilled or unskilled. I know plenty of skilled workers (including myself) who have experienced this recently. Quality is often not a consideration.

If they can figure a way to automate, they will. We can count on it.

What the increase in minimum means is there will be fewer people flipping and the wait for a burger will be longer. My favorite pancake restaurant is already contemplating this. Just look at any retail store and remember how it was for a customer before they did their inventory while the customer waits. Look how few clerks there are now.

Another example: If illegal immigrants unionize and demand high enough pay — someone will design a machine to pick produce. As a matter of fact a machine has been developed to cut the plants used in making tequila. This has always been a specialized skill, but by cloning the plants making them all alike, it is now possible to mechanize the process.

My graphics business was replaced by computer templates a secretary can use and stock artwork and photography. A CD with 300 to 600 illustrations is available for what I used to get per drawing.

Que sera, sera!

Grym - 1)"I can't see a general inflation, but I sure see some pretty sustainable deflation in housing, jobs, etc. as we've discussed before. I will change my Treasuries leaning when we see two or three job gains in the 500,000 range. I just read we need 125,000 new jobs per month just to keep up with the additional people entering (who would like to enter?) the workforce."

Under the right circumstances, this situation could conceivably change over night. Considering the debt/GDP ratio, I'm pretty sure I don't have to worry about the $USD becoming worth considerably more than gold. aside: I even know some folks who withdrew their cash and placed it on their premises as if the paper doesn't represent the same thing they were attempting to avoid.

2) "All this questioning of "do we need a second stimulus" is useless unless it is a stimulus which reaches the individuals who normally go to work, pay their bills and are now living in fear for their jobs and homes."

Well, the first stimulus supposedly hasn't been spent yet, we'll see.

3) "I expect we will see increases in US manufacturing even without protests and added tariffs. These jobs will be much lower than those past and with fewer benefits. The US auto industry will need to set this pattern or it will simply disappear."

China cannot afford to continue subsidizing American consumerism, prices of foreign goods will increase tremendously(as they would have if not for intervention), this will bring forth an industrial renaissance(and jobs) of sorts.

I'll call it an inflationary depression for the time being, congrats on resolving your plumbing problem. The last time I met a plumber, he was handing me money (for his boat, a hole in the water where one throws his money BOAT: Bring On Another Thousand). ;)

Wow, Bill, that breakdown of how to approach an earnings season was really helpful. A mixture of common sense, some really clever analytical methods, and a reminder of the techniques to enforce trading discipline. Taken all together, hopefully it will put the odds in our favor.

cheapy - Perhaps Germany more closely meets the definition as any, they were forced to print money to buy gold, then pay their debts in gold in order to make reparations?

Edit: Actually This was only part of it, the majority of printing was done in order to finance the war. They were maintaining large budget and trade deficits.

I believe they suffered a bout of deflation just prior to shifting into hyperinflation?

The US holds a small amount of gold in proportion to the current debt, but we should also take into account other hard assets like silver and real estate.

OK, I have been lurking long enough, time for me to come out of the closet. I must say it was 2nd Ave that drew me out. I enjoy his commentary so much, particularly the music and anecdotal stories, that I just had to comment on some new music. I wanted to recommend trying some John Mayer music, although I have to believe you have heard some already. When I first heard some of John’s songs on the radio it was nothing out of the ordinary. Then one day I heard him doing a radio interview at a local radio station before a concert. What struck me was that early on one of the big things that helped his career was getting the chance to be the warm up band for one of Sting’s tours. That was a pretty big vote of confidence and as time has passed I have come to appreciate Sting’s ability for identifying talent, of course Sting is one of my favorite musicians.. I am really amazed at the sound John gets out of his guitar and his songwriting capability. I should add that I am a FredC guitarist (you know, poser) mostly of the Neil Young 3 chord style guitar. It just boggles my mind what this young kid can do with the guitar and I have been trying to study him to learn, but not with much success. Anyway, I suggest giving him a try.

Being such a big Sting fan, I also want to share my favorite youtube video. To me this video highlights what an incredible development the internet has become in our lives. In this video you basically have Sting and the guitarist from his band sitting in your living room playing a song. How cool is that?

http://www.youtube.com/watch?v=037uSAIahho

Craig commented that he doesn’t get the chance to listen to radio much anymore. For that I suggest internet radio, try Pandora dot com. You set up your own radio stations by selecting an artist. Then they start playing songs of that genre and you can rate them. Soon you have a radio station playing all the music you like. I have discovered a lot of new music this way. For instance, my John Mayer station started playing stuff like “Counting Crows” and I found I liked their music. They are called either “grunge” music or a grunge band, I don’t really know what that is, but I have surprised myself that I now listen to grunge music. Others that I have learned to like are Coldplay, Goo Goo Dolls, Howie Day, Jason Mraz as just a few examples. It is a cool way to learn about new music, it has definitely expanded my horizons.

One more tidbit. Recently, I bought a second computer with a 24” monitor to have more trading info available to me. I also added a pair of $100 Bose computer speakers to my system. That has taken my concert youtube videos to a new level that I highly recommend to anyone listening to this stuff by computer and not some home entertainment system. The sound quality of those speakers rivals my monster Polk audio speakers. Great for blaring some Pandora while watching the markets each day. Trading has become a lot of fun lately. I start my day with a double shot iced Americano, fire up my two computers, and then with a mouse in each hand, let the games begin. My next step is to soon sign up for Vad’s trading course. I am pretty sure if Vad walked by my desk and saw some dude with a mouse in each hand with music blaring all “hopped up on goofballs” he would simply say, Mornin FredC, have you seen my 2X4? LOL. Here is one of my favorite John Mayer songs.

http://www.youtube.com/watch?v=NCxtHCV0N-M

Of course, many thanks to Bill for all he does!

Wonderful story Vinod. I wish both of them happiness and success here.

This was sent to me by a dear friend, and what is interesting is not the content as much as the fact SHE saw/found it and passed it along. Adding a sad comment in the end of the e-mail.." Guess we can't win either way".

WIP is SPDR DB Intl Govt Infl-Protected Bond. It is on a tear since March lows. For 3 months, TLT is very neg, TIP slightly so, SPY somewhat positive and WIP up 10% but looks like leveling.

I owned for months but gave up a bit prematurely in May because there was no dividend in 2009. In 2008 there was a monthly distribution. I still don't know what happened with the dividend. ETF Connect confirms no div, Yahoo and FinViz say 3.7% yield.

Anybody have a clue? The State Street website has no info the last time I looked.

According to the Yahoo interactive chart (with events -> dividend feature turned on), the most recent ex-div date was 12/29/08. Looks like there's no divy according to Yahoo interactive chart...

Craig- I wanted to send you an e-mail regarding a problem we are having with one of our dogs...and "contact author" is not available. I also noticed mine isn't available, not sure why. 2nd has my e-mail address if you have time to respond. We just lost one and that's enough if possible.

Thanks CP- I'll send you an e-mail after dinner.

Whatever your opinion of Adrian Douglas or GATA, this could have very large repercussions and I think its an important read for all

THE ALCHEMISTS

By Adrian Douglas

In the Middle-Ages alchemists toiled in vain to transmute lead into gold. One wonders why they used such an expensive starting material, such as lead, when modern alchemists in the gold world have succeeded in transmuting paper into gold. This article reveals the anatomy of a scam that has been perpetrated on investors and goes a long way to explain and tie together developments in the precious metals markets in recent years.

As many readers may know, I have recently been reporting on how delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the "flow" of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?

The COMEX states:

"Delivery:

Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange.”

This seems unequivocal until you find this exception:

"Exchange of Futures for Physicals (EFP)

The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position."

The COMEX trading rule book clarifies further:

“104.36 Exchange of Futures for, or in Connection with, Product (Physical)

(A) An exchange of futures for, or in connection with, product (EFP) consists of two discrete, but related, transactions; a cash transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and the buyer of a quantity of the physical product covered by this Section. The quantity of physical product must be approximately equivalent to the quantity covered by the futures contract."

So what this means is that contracts can essentially be settled without going through the COMEX warehouse. Futures contracts and a physical commodity equivalent can be exchanged outside of the exchange and an EFP form can be filed to the clearing department at the COMEX. What's more, the physical commodity doesn't have to meet the specification of the COMEX Gold Contract of being 100 troy ounce bar or three 1Kg bars of 995 fineness.

So what can be delivered as the physical gold commodity? This is where it gets very interesting. On February 18, 2005, the NYMEX, parent of the COMEX, issued this announcement:

http://www.cftc.gov/files/submissions/rules/selfce...

“Exchange Rule 104.36, which governs exchange of futures for physicals (“EFP”) transactions on the COMEX Division, refers to a “physical commodity” as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.

The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded Funds (“ETF”) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.

Thus, acceptable gold-backed and exchange-traded ETF funds include, but are not limited to, the iSharesCOMEX® Gold Trust (ticker: IAU), which began trading on the American Stock Exchange on January 28, 2005.

The trust is an exchange-traded Fund that provides a means of obtaining a level of participation in the gold market through the securities market. The trust shares are intended to constitute a means of making an investment similar to an investment in gold. Each trust share represents a fractional undivided beneficial interest in the trust’s net assets which consist primarily of gold held by a custodian on behalf of the trust. The shares of that trust are expected to reflect the price of gold less the trust’s expenses and liabilities”

So the gold ETF with the symbol IAU started trading on January 28, 2005, and three short weeks later the shares of IAU became equivalent to real physical gold in the eyes of the COMEX for delivery against futures contracts in an EFP transaction! If that doesn't blow your socks off, I don't know what will.

Also note that the ETF mentioned is a COMEX product! How convenient! Where are the regulators? This ETF is not equivalent to gold. Note the description “Each trust share represents a fractional undivided beneficial interest in the trust’s net assets which consist primarily of gold”. All that is being guaranteed is that each share is a fraction of the ETF assets. The net assets could be 1 oz of gold while the face value of the total shares sold could be 100 million ozs!

The notice does not restrict which gold ETF’s are eligible so clearly the infamous GLD is also eligible to be considered as good as physical gold in an EFP transaction.

Right from the inception of the gold ETF’s GLD and SLV, the Gold Anti-Trust Action Committee has deduced from studies of the ETF prospectuses that these funds very likely do not hold gold and silver to fully back the issued shares because the prospectuses don't categorically require it [1][2]. In fact, the ETFs may have no gold or silver at all.

What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.

Now all becomes clear. The system is the ultimate alchemy. If ETF shares are NOT backed by gold but are accepted by the COMEX as equivalent to physical gold... presto! You have turned paper into gold -- and paper is a lot cheaper than lead.

A futures market is supposed to provide price discovery for a commodity. In the gold market this notion has been hijacked because settlement can be made with a derivative instrument, such as an unbacked or partially backed ETF share. If that derivative instrument is not backed by gold on a 1:1 basis the scheme allows an artificial apparent increase in the supply of gold and so distorting price discovery toward lower prices.

Such a scam would be in grave danger of becoming exposed if anyone knew the true inventory condition of the vaults of the ETFs. That problem is easily solved by having HSBC be the custodian of GLD and JPMorgan be the custodian of SLV.

I have not found anywhere that COMEX accepts ETF’s as an equivalent to physical silver for an EFP transaction, which probably explains why silver warehouse movements are much larger than those of gold, and perhaps may indicate that physical silver is the Cartel’s Achilles heel.

We have all wondered how GLD could have amassed a stunning 1,100 tons of gold in less than five years without the gold price exploding. This represents buying 10 percent of all global gold output each year. What's more, in the last nine months the ETF holdings almost doubled, adding approximately 500 tonnes or 23 percent of annual global production. And this when the signatories to the second Washington Agreement on Gold have reduced their gold sales to a trickle, from 500 tonnes per year. If the GLD shares are unbacked or only partially backed by gold, the alleged 1,100-tonnes gold holding would be easy to achieve with just the use of a printing press for the share certificates.

In looking at COMEX reports the EFP transactions are reported under “Other Volume”. This category is huge compared to delivery notices. For example, on July 8, 2009 the gold price fell by $20. Looking at the relevant COMEX report

http://www.cmegroup.com/trading/energy-metals/file...

On page 4 “Other Volume” is 9,540 contracts or 954,000 ozs, while the much more visible delivery notices were only 17 contracts or 1,700 ozs! Looking at many reports the “Other Volume” category is orders of magnitude larger than the delivery notices. What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETF’s or even if any are. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares. But the COMEX should be transparent; they should be required to publish exactly what is being traded as “other volume”. In fact if the COMEX wants to be above suspicion it should insist in its rules that EFP’s must be settled with gold that meets exactly the COMEX gold contract specification. The EFP then would facilitate delivery instead of facilitating a change in delivery obligations. Why was it necessary to introduce a mechanism to exchange ETF shares in lieu of physical gold? Where there is smoke there is fire.

Adding credence to this supposition is that GLD have gained wide acceptance with mutual funds, pension funds, and university endowment funds. Many sophisticated investors believe them to be equivalent to investing in bullion. This makes this fiat paper bullion scam easy to perpetrate.

It would appear that the COMEX gold warehouse is merely a window dressing displaying an almost static 2.5 Million ozs of dealer owned gold inventory. But it would appear the vast majority of settlement occurs out of the average investors view AND, therefore, out of the view of the regulators. This means that the COMEX is not what it seems. Delivery for an EFP only needs to be “substantially the economic equivalent” of the deliverable commodity! A default could occur at any time if this sorcery of swapping paper for paper suffered a serious setback.

The members of the Gold Cartel must be very proud of themselves for succeeding where the ancient alchemists failed. In fact, they are so proud they decided they didn't need to limit the scam to the COMEX. They have implemented it on the Tokyo Commodity Exchange too.

On October 29, 2008, the TOCOM made the following announcement:

"Based on the Memorandum of Understanding signed in January this year, The Tokyo Commodity Exchange (TOCOM) and Tokyo Stock Exchange (TSE) have launched 'Inter-market Cooperation Workshop' in efforts to improve convenience for participants of both markets, and studied to reinforce cooperation between the commodity market and the stock market.

In light of the study at the workshop, TOCOM has added a 'physically backed commodity ETF' as a possible physical for EFP (Exchange of Futures for Physicals) transactions at the exchange, which allows seller and the buyer, who holds agreement for physical transactions, to conclude the contracts in the commodity futures market without continuous trading of physicals.

Therefore, the SPDR® Gold Shares, physically backed commodity ETF listed on the TSE, which has a correlation with the gold spot price, can now be used as a physical for EFP transaction on TOCOM's gold market.

Thanks to this new arrangement, it is expected that the link between TSE's SPDR® Gold Shares market and the TOCOM gold market will be strengthened and that the price reliability, as well as the liquidity of both markets, will be enhanced.

For inquiries about this news release, please contact:

Planning Department,

The Tokyo Commodity Exchange”

http://www.tocom.or.jp/news/2008/20081105-1.html

Notice the comment that the "liquidity of both markets will be enhanced." There can be little doubt about that! They can print as many ETF shares as they want and they can then settle as many EFPs as they want ... and guess what happens to the price of gold with such an apparent increase in liquidity. Yes, it will be suppressed. As they said in the release, "the price reliability will be enhanced."

Now that reminds me of Alan Greenspan, who said, “Central Banks stand ready to lease gold in increasing quantities should the price rise." But why get the central banks to lease the real stuff when an ETF can print up an IOU that the unsuspecting investor will accept to be as good as gold?

Does this mean that the Alchemists of the Gold Cartel have discovered the Elixir of Life for their gold suppression scheme so that it will go on forever? No, absolutely not. Faith in anything paper is going out of fashion. California is shortly going to discover that people don't like IOUs. Central banks outside of the G7 countries are buying gold, and I am sure they know about this alchemy. I doubt that the Chinese will accept GLD shares for settlement of futures contracts.

If you want an investment in bullion, then make sure you have an investment in bullion. In my opinion what I have presented here, and what other analysts have written, indicate that GLD and SLV are not investments in bullion. They are IOUs in bullion. Take physical delivery of gold and silver from the COMEX. They have only 2.5 million ounces of the real stuff in the gold inventory. That is a paltry $2.3 billion at today's price.

The Gold Cartel is desperate to suppress gold and keep the dream of a "strong dollar" alive along with maintaining low interest rates by using a mechanism described by Professors Summers and Barsky in their research paper "Gibson's Paradox and the Gold Standard." The London Gold Pool used real gold to try to suppress the gold market, and it failed. The paper IOU is going to be even less successful. Imagine what will happen to the gold price when the holders of the paper IOUs go looking for physical gold instead. The Gold Cartel has built a dam on the river of physical gold demand, thinking that it is clever enough to defy the laws of supply and demand. Wait until the dam bursts to experience gold fever such has never been seen before.

Buy real gold and silver before the dam bursts!

Adrian Douglas

July 10, 2009

Hmm, no comment on this for an hour so I will make one:

There is not enough real gold to go around for money, granted. That in itself is an indictment against a gold standard, in practical terms. An "Energy" standard is much more feasible for the planet. AU will retain its beauty for people who love jewelry that looks nice and lasts forever.

I think it's pretty astonishing that you can settle your futures contract with shares in IAU or GLD.

It makes my head hurt to think about how these crazy warehouse receipt games are played these days. The moral of the story to me is, once simple things start getting complicated, its a sign of problems in the offing. Futures used to be a single level derivative - a GC contract entitled you to a delivery of 3 kilos of gold at a time certain, with the default risk being the COMEX. Now, a gold future entitles you to being a "general creditor" to the assets of the GLD fund? That's not the same thing at all.

"Ok, so in exchange for your bit of paper you want actual gold. Well instead of that, here's ANOTHER bit of paper, that we are told is backed substantially by gold - but that you cannot actually convert INTO gold. But its basically the same thing, so you shouldn't mind, right? After all, what could go wrong?"

Can you imagine a situation where, if one of the big firms really do have to deliver on their shorts, they can start paying off in shares of GLD? Legally, it sounds like they can do exactly this. Now imagine that firm ran the GLD fund. How convenient would that be? Wow, like printing money it would be.

Its like playing musical chairs, with 100 dancers and about 3 chairs. And Goldman Sachs is one of the dancers, and they know when the music will stop. Good luck getting a chair. Just hope the music keeps playing.

Let's see, what's the right quote. All our best thinking got us here? No, wait, that's not right.

Ah yes. IT ALL WORKS UNTIL IT DOESN'T!!

This week gold made a new low relative to its July top, and it has clearly broken down through the rising trend line drawn from the November low. The next is support at about 870, and there is major support at about 700. On Friday the 20-EMA crossed down through the 50-EMA, which generates a sell or neutral signal using the Trend Model. Since the 50-EMA is still above the 200-EMA (meaning that gold is still in a long-term bull market), a neutral signal has been generated for gold. Looking at the weekly and monthly charts, I am inclined to believe that gold has put in a longer-term top, meaning that I think the 700 level will be tested eventually. My guess is sometime early next year.

http://www.financialsense.com/editorials/swenlin/2...

This explains why gold should rise and COMEX has created its scam to counter the hoarding of it (10 out of 10 for effort on the behalf of Uncle Sam):

"In all previous episodes shame and disgrace were part and parcel of the government’s default on its promises to pay. Not so in 1971. In this latest experiment with irredeemable currency there was a new feature: far from being a disgrace, the default was presented as a scientific breakthrough; conquering “monetary superstition” epitomized by gold; a triumph of progress. Sycophant governments and central banks overseas that were victimized by it and had to swallow unprecedented losses due to the devaluation of the dollar were not even allowed to say “ouch!” They were forced to celebrate their own undoing and hail the advent of the New Age of synthetic credit, irredeemable currencies and irredeemable debts.

The regime of the irredeemable dollar was put to the test soon enough. In 1979 the genie escaped from the bottle. The price of oil, silver, and gold were quoted at twenty times that prior to 1971; in the case of sugar the rate of increase was more like forty times, so much so that the Coca Cola Company found it too expensive to put into coke and started using corn syrup instead. Interest rates were quoted in double digits well past the teens. There was panic across the land and around the globe. Hoarding of goods became a way of life. Everybody was expecting the worst."

http://www.financialsense.com/editorials/fekete/20...

Von Mises.

http://www.thedailybell.com/index.asp

Excerpt: We are heading down a road that leads to national socialism. That is, industrial fascism and socialist-style redistribution of wealth in the name of "social justice."

http://pics.livejournal.com/a_kolesnichenko/pic/00...

http://www.bloomberg.com/apps/news?pid=20601087&si...

I already posted on Friday my reasons for buying POT. Now that I have a small core position in actual shares (at the cost basis of $87), the next step in my "scaling in" strategy is to sell puts on POT. If these puts expire, then I won't be too upset about POT "running away from me" as I already have some shares (that's why I start my accumulation strategy with first buying some shares after a large decline in the stock price and then proceed by selling puts). I have just placed a sell limit order on August $80 puts for $10 so as to get it off my mind. If executed, the total number of my POT shares will double and will get to about 8% of my portfolio. The effective purchase price of $70 will be the one seen at the lowest point in March, so I think that would constitute a "good deal". Planning the trade and trading the plan...

Two concurrent stories: High-speed computer algorithms make up 70% of NYSE trading volume and US and South Korean go’s sites are hacked.
What if the two stories melded…computer hacker crashes the market?

by Thomas Sowell

If you want a good read on a summarization of the origins of the crisis, or at least a comprehensive framework from which to work. Especially interesting was the chapter "The Politics of the Housing Boom."

Sorry for not providing a summarization, but Mr. Sowell's writing is succinct, such that accurate summarization would be, well with my intellectual limitations, deleterious to their meaning. However, from the dust jacket:

"The politics behind all this is another story full of strange twists. No punches are pulled when discussing politicians of either party, the financial dangers they created, or the distractions they created later to escape their own responsibility for what happened when the house of cars in the financial markets collapsed."

O.K, here's a little more:

He does cite the "Community Reinvestment Act of 1977" as the butterfly's wings that led to this cyclonic financial debacle in housing. The pressures on lending institutions started in Bush I's administration because of statistical differences between white and black mortgage approval rates which were trumpeted in the newspapers at the time.

These racial bias charges significantly increased government involvement in the mortgage industry. Now, I used the terms "black" and "white," but as I made the point several months ago, race was THE vanguard banner which opened the door (barn door,or perhaps flood gates would be better)to lower income strata of every demographic group.

Love this quote:

"In 1995, the regulators created new rules that sought to establish objective criteria for determining whether a bank was meeting CR standards...For banks, simply proving that they were looking for qualified buyers wasn't enough...they had to show they had made a requisite number of loans to low- and moderate- income (LMI) borrowers. The new regulations also required the use of 'innovative or flexible' lending practices to address credit needs of LMI borrowers and neighborhoods."

"I 1993, the Department of Housing and Urban Development, 'began bringing legal actions against mortgage bankers that declined a higher percentage of minority applicants than white applicants.' Lenders than began lowering their down payment requirements and income requirements. HUD also brought pressures to bear on Fannie Mae and Freddie Mac to increase their purchase of mortgages made to low-income and moderate-income home buyers. In 1996 HUD set a target that 42 percent of the mortgages...for people with incomes below the median income in their areas."

This technique snowballed around the country...therefore, lending institutions were forced to increase risk. Think about it, new securitization processes (fantasies they turned out to be) gave the appearance of mitigating risk, as did CDSs, If I were a lending institution and were pressured as such, I would want to get riskier loans off my books and use whatever tools available to further mitigate those risks.

"In plain English, the regulators imposed quotas...Because banks are federally regulated...they need government permission to do many things."

To that end, in his bibliography:

"The insistence of the Clinton Administration that banks with unsatisfactory ratings under the 1977 Community Reinvestment Act be prohibited from diversifiying their business is from A3 of the October 22, 1999 issue of the Wall Street Journal..."

So basically government said, you either lend to more, less-qualified people, or this carrot known the recision of the Glass Steagall Act won't be available to you. So you better get in line or you'll be left behind by your competitors. NICE

I'm hearing voices in my head...no one voice...Kaimu

Oh, an to be true to the fact that he wasn't just taking potshots at the Dems,
he cites Bush II's move to legalize Zero downpayment mortgages...in other words, homebuyers that have no skin in the game...now that's a big DUH!!!

"FNM and FRE mortgage guarantees totaled more than 2 trillion dollars. That is larger than the Gross Domestic Product of all but four nations."

"Market criteria had long require such things as substantial down payments, as well as income and credit histories that made continuing payments likely. But all that was brushe asie in the political crusade for "affordable housing" and bigger home ownership statistics."

Mmmmhhhh...having flashbacks of that little newspaper twirp in The Fountain Head.

Was there a single money manger (Canada or US) who went to cash before last years crash and avoided the losses? In my review of the various available tables I cannot find one.

David

Re algo boxes, you may find the this interesting. It caught my attention.

John Mauldin's current Frontline Weekly Newsletter references Themis Trading White Paper, called "Toxic Equity Trading Order Flow on Wall Street."

Mauldin: “They outline how large brokers and funds can buy and sell a stock for the same price and still make 0.5 cents. Do that a million times a day and the money adds up. Or maybe do it 8 billion times.”

“All this "algo" (algorithmic) trading also gives a very false impression of volume.

The Real Force Behind the Explosion in Volume and Volatility

http://tinyurl.com/knbyxj

Looks like TK of Slope of Hope nailed it last March with his prediction.
Note the 3 graphs.

http://slopeofhope.com/2009/07/bear-in-mind.html

davefairtex, cheapy, Chickenpookie, Les,

All of what each of you points out as having happened is disturbing. Perhaps the most disturbing is what we know was the outcome of the WWI global economic situation... WWII.

I think it is quite likely the national leaders around the world would choose a similar path again. It is human nature to dodge responsibility, shift blame and unify against a common foe. And if you can't put them to work at a machine, put them on a machine gun — 16 million in uniform before war's end.

CP,

I found the link you posted to the Brown-Brothers Harriman article very interesting. I don't know exactly what caused the lower wages for the masses between 1922 and 1929, but guess rather than job losses it was possibly the availability of margin trading used by the upper income people. The average Joe would not have been involved until far too late and then lose his shirt.

Today he is unlikely to want to invest if his 401(k) was cut 40 to 50% and may not have the funds to do it. Gold would hardly even be something he would consider. Many here are only concerned with keeping a job and their house.

The article didn't mention the wealth transfer off-shoring provided, but I saw plenty of evidence with the management of companies whose annual reports I designed. The effect also promoted the idea that productivity was higher than was real by not counting the cost of foreign sub-assemblies installed here.

what a load of crap.

there has been talk of the COMEX defaulting for years.
its never materialized.

every few months someone comes out saying that the november or september COMEX contract is going to go bust because of some suspicious volume study going on. as always GATA seems to quote "inside" sources that we are to believe have some sort of specific knowledge that they are kind enough only to share with GATA who are consistantly wrong other than the macro call of a higher gold price over the years.

none of the defaults in gold, none of the US dollar collapses and nothing really of what they have claimed has come true other than a gradual increase in the gold price.

so yes, do as they say and get gold now!!! before its too late and the price is back in the 800's and you can sit on your hurried purchases and wonder why these guys are telling anyone anything. then you can simply blame the manipulative forces that are messing with gold, not yourself for drinking the kool-aid.

hey remember when Iran was starting their oil-bourse in Euro's and wouldnt accept US dollars? what happened with that? what about Russia and China dumping US dollars? lots of articles and conjecture, but they're still at the auctions soaking them up... what about the USD collapse?.....

these groups exist to take the piss out of you, to make you think gold is about to explode and to rush in and buy, they have no sources, only claimed falsehoods that have never been proven to exist, of course gold may explode upwards any day now, but a broken clock is right twice a day.