Cara's Commentary & Community Chat, Friday, Oct. 16, 2009

Off all the ultrashorts I might have opened yesterday, it had to be the one with the broken transmission this morning.

Thanks for putting proof to the question of how a company manages to earn so much money in such a short period of time. I thought about this myself, "Who took the other side of those trades that earned Goldman so much money?"

Answer: you and me and everyone else. And we didn't click the buy or sell button once, or even have a brokerage account, in order to be among the losers.

These markets are a total sham.

Update: There's no better analogy for the performance of GS "talent" than this classic Monty Python sketch (courtesy of Youtube).

Bournemouth Gynecologists v. Watchford Long John Silver Impersonators

Begins at 1:49 in the video.

Am I crazy or did GE actually beat earnings estimates by .03?

NOK - Downgraded to Hold @ Royal Bank of Scotland

ought to get hit pretty hard considering their misses and how much the stocks have run up lately.

Oh, man...how many times I've heard this since March. Revenues were lighter than expected so that is what knocked this down. I think its dangerous to be downbeat on a company and the market in general for beating estimates. When estimates are high and the economy is on a roll should that give people optimism if a company misses high estimates?

bought at $20.329

Released on 10/16/2009 9:15:00 AM For September, 2009

Prior Consensus Consensus Range Actual
Production - M/M change 0.8 % 0.2 % -0.1 % to 0.5 % 0.7 %
Capacity Utilization Rate - Level 69.6 % 69.6 % 69.4 % to 70.0 % 70.5 %

Highlights
The manufacturing sector continued to show further signs of relatively strong recovery in September. The good news is that gains are being seen across a number of industries. Overall industrial production in September posted a 0.7 percent gain, following a revised 1.2 percent jump the month before. August had previously been estimated to be a 0.8 percent boost. The September rise topped the consensus forecast for a 0.2 percent increase. For the latest month, the manufacturing component continued a recent, healthy uptrend, rising 0.9 percent after a 1.2 percent boost in August. For September, utilities fell 0.7 percent while mining output increased 0.7 percent.

Motor vehicles and parts continued to lift industrial production, gaining 8.1 percent for September after rising 6.1 percent the month before. But strength was widespread outside of autos. The really good news is that overall production excluding motor vehicles was still up 0.4 percent for September-for manufacturing ex-motor vehicles was up 0.5 percent.

Overall capacity utilization in September rose for the third month in a row, reaching 70.5 percent, compared to 69.9 percent in August (revised from 69.6 percent) and its recent historical low of 68.3 percent in June. September's figure came in above the market projection for 69.6 percent.

While it is not gangbusters, the manufacturing sector clearly has pulled out of recession bottom with help especially from autos and the boost in sales from "cash-for-clunkers." But most manufacturing industries also are showing moderately healthy gains. Equities should like today's numbers but trader focus likely is on financials as Bank of America announced large losses prior to open this morning.

Market Consensus Before Announcement
Industrial production in August increased a hefty 0.8 percent, following a revised 1.0 percent boost in July. For the latest month, the manufacturing component rose 0.6 percent after surging 1.4 percent in July. A big boost came from restocking auto inventories as the motor vehicle component jumped a monthly 5.5 percent in August after ramping up an enormous 20.1 percent the month before. But the really good news is that overall production excluding motor vehicles was still up a healthy 0.6 percent for August—for manufacturing ex-autos was up 0.4 percent. Overall capacity utilization in August improved to 69.6 percent in August from 69.0 percent the month before. Looking ahead, industrial production could decline in September as auto assemblies are likely to ease. Also, production hours in manufacturing fell 0.5 percent for the month. Nonetheless, the consensus anticipates a modest gain for industrial production

Released on 10/16/2009 9:55:00 AM For October, 2009
Sentiment Index

Prior
Level 73.5

Consensus
Level 74.0

Consensus Range
Level 71.0 to 76.0

Actual
Level 69.4

Highlights
Consumer expectations are slipping though the assessment of current conditions is little changed, in what are mixed to disappointing results for the mid-month Reuters/University of Michigan consumer sentiment report. The headline index fell back more than 4 points to 69.4, reflecting a nearly 6 point drop in expectations to 67.6 and a nearly 1-1/2 point dip in current conditions to 72.1. Rebounds underway in the housing and manufacturing sectors, as well as strength in the stock market, are likely holding up current conditions with continuing job losses likely hurting confidence in the outlook.

Inflation expectations popped up 6 tenths to 2.8 percent for one year out and are up 1 tenth to 2.9 percent for five years out. These results are odd given steady prices this month for both gasoline and food and may reflect sampling issues as sample size for this report is much smaller than the Conference Board's consumer confidence report.

Markets are reacting to this report with oil slipping, the dollar rising, and the dip in the stock market accelerating. But despite today's soft readings, consumer spirits remain well above levels in July and August.

Market Consensus Before Announcement
The Reuter's/University of Michigan's Consumer sentiment index rose more than 3 points from mid-month to 73.5. The advance from the final August reading was nearly 8 points. Gains were split roughly evenly between the assessment of current conditions and the assessment of the outlook.

I can not get enthusiastic by the EXPECTED revenue or Profit estimates since I think studying expectations is almost a waste of time.I strive to simply compare the Y/Y Qtr revenue and profits and the Q/Q revenue and profits and be able to explain any differences.

Regards

We can only hope. :-) Went short a little SU.TO yesterday at the close (sorry Davefairtex). So far, so good, but I'm ready to take this morning's profit and bail if the usual dipsters show up. God knows any short play which shows a profit won't stay around for long, as you've pointed out often.

Good point, tof. In the end, though, it comes down to expectations about what happens in the future. Given the rally since March I just believe that a lot of high hopes are priced in to a lot of these stocks, and the overall market. That wasn't the case in March.

Westin Saint Francis. Streets were blocked off this morning. Guess he's gone now.

even as dollar is higher. The opposite of the other day when gold was lower with a lower dollar. I think this is a sign of strength in gold, as it continues to move up regardless of moves in other assets classes. And I saw here http://www.goldalert.com/gold_price_blog.php that traders are buying volatility in gold mining stocks, and also that credit spreads are widening out today as equities are heading down.

---

Aloha
Sold my QID at 22.36. Sold at the tale of a gap fill from about 3 days ago should have waited for the test at 22.60.. thought of setting a sell stop at 22.57 didn't use my better judgement.Now have a buy stop at 22.63 to catch a move over the 30 minute OR high.
Posting this to try and steady my hand which is harder for me on the up side than selling to prevent a loss. Lesson 1 from Bill preserve.
A nice gain but could have made almost 50% more. ouch

Yesterday on Skype we were also wondering about the losing side of GS Trading profits since it is indeed a zero-sum game. If GS is profiting over $100M/day, then who is or will be reporting the trading losses? Who are they exactly? That's a lot of money to lose.

Handy that link to Chart Pattern trader, thanks NYUGrad.

allengg, no crystal ball or rocket science, just a convergence of hints: as I mentioned yesterday to Davefairtex, weakness into yesterday's close vs. strong ramping into the previous closes. Also USD (dead cat?) bounce, COS-UN.TO RSI (another Oil Sands issue) was already rolling over, no real move higher in SU.TO yesterday despite heavier volume, SU.TO short term EMA way above longer term EMA after the huge ramp job of the last few days in the CDN oilers. It's all screaming for a bit of a pullback don't you think? At the very least it was prudent to exit long yesterday at the close, IMO. As for oil, it wasn't actually a huge factor in my guesswork - but if this thing drops substantially further even in the face of the WTIC oil breakout, I kind of have to wonder how much gas is left in the market's tank, or as 2nd said, change in the pockets of the dip buyers.

All that said, for all I know SU.TO may finish in the green today as the ramp jobs have come later in the day. So take your profits fast and DYODD.

NYU-

"It is better for you to enter life with one eye than to have two eyes and be thrown into the fire of hell."

"I think that ethics largely went out the window in the last ten or twenty years, you pick the time frame, as executives did anything and everything to force the earnings numbers one way, with the attendant stock awards and bonuses accruing to them personally."

That's just about when I began to see it with many of my clients (medium-size manufacturers). It coincided with the time management went from either family managed or at least locally to the idea that somebody with an MBA could do a better job.

Those guys stayed only long enough to cash their options and take another (better) off in a bigger company. Some had agents just like sorts or rock stars who were always on the lookout for bigger/better contracts.

One of their first goals was to boost the institutional stock ownership and individual investors lost all influence at annual meetings.

As one of my few ST trades I dumped VTI yesterday. (It would have triggered the stop earlier today.)

I'm still a believer in a deflationary medium length trend for the economy and think the markets will soon (a few months) test the March lows. It will take a while for the "hot air balloon rally" to cool.

Mahalo for the encouragement.

Or is this too witchcraft for this audience?

My attempt attached at the EUR/USD

A lot of it could be pension and retirement accounts and we'll never hear about it.

yes i posses a phd in Elliot Wave, and here is my prediction:

the USD will embark on the 3rd wave of (i) C-wave down, part of a broader, multi month consolidation B-wave (ii) up, which could result in either a 3 of 4 C wave down or 2 of 3 B wave (i) up.

EW is voodoo.

A Cara100 stock I have held for some time. Sold some calls against stock as RSIs are quite high and I do not see it going up much more before a near-term pull back. See chart
http://finviz.com/quote.ashx?t=wag

...

...

So today I got tired of getting my butt kicked short, and when I saw this ascending triangle pattern on this stock that I just know has to go down someday, I said to myself, WWVD? So I bought it - TIF - a moderate amount it, at 41.76 at 12:50. It promptly broke out of course, it was a follower of SPX, and SPX chose that moment to stage a breakout of its own, so of course TIF proceeded to spike up, and up, and up. And its still going up. I'm doing what VAD told me to do, putting stops under the lows on the way up, letting the market take me out. But it hasn't taken me out yet.

Is it always this easy? Well it is when you have the forces of darkness on your side! I'm going to guess the shorts that entered yesterday are not so happy - I know I wouldn't be - and perhaps there is still some more short covering that is left to happen as TIF hovers around its year high, set just yesterday. Or maybe not, who knows. I got mine, and my stop will make sure I keep most of it.

Sigh. I guess it had to happen sooner or later. I do have one regret though - I'm sorry the position wasn't slightly larger. :)

Just shows the significance of this level. I am actually thinking of going short once again if Dow 10000 does not hold intraday, with a mental stop at Dow 10000. I guess that would be the equivalent of getting into FAZ again at $19, which was my original strategy.

"ethics out the window" and "always on the lookout for bigger /better contracts" no matter what the cost to society.

Sadly, that's what they must be teaching at the "elite" university Business schools today.

http://bit.ly/VaderSounds

"Don't make me destroy you"

I think that's what Vad would say. There's no dark side. Just the right side.

I swear I posted my comment before reading Vad's.

Dow returned to 10000 again -- it seems like the dip buyers are gaining the upper hand. FAZ made a lower high and a lower low over the past 20 minutes -- no sense of being in it now...

Dinner. If it works out, I'll stash two in the fridge at home. For some reason, I've never been a (two, three, whatever)-martini lunch guy.

Going to wait for an entry. Probably next week.

NYUGrad

Not a follower of E wave theory, but if you're into cycles, October 12, 2009 NEW YORKER magazine has an interesting article on financial cycles:
The Secret Cycle, by Nick Paumgarten. Don't have time to check for link, but may make interesting reading over the weekend.

"Oct. 16: Goldman stock is up 155 percent since March, and the company netted $3.4 billion in profits last quarter, quadrupling its earnings from a year ago. How did they do it? Dylan Ratigan explains."

http://bit.ly/BKhKv

OUCH! I was the one who mentioned it and sold a couple of weeks ago at 5, thinking a 20% gain in less than a month should be taken. This trading thing is so hard emotionally, even when you win you can often end up feeling like you lose, unless of course, you are Vad.

That's ironic. I bought a good amount of the stock today at $15.92.

David,
That story reminded me of the time back in the Spring of 98 when I went to close my account at Menetep Bank. My 'personal' banker, Sergei opened the bottom drawer of his desk and pulled out a liter of Stoli and said 'we need to talk of this.' An hour and a half later we were both 3 sheets to the wind but I was 'allowed' to wire out my money. Stamina indeed!

There is an old Russian saying "there are no plain women, just too little vodka."

Elizabeth Warren is saying essentially the same thing:

Elizabeth Warren at Buttonwood

I know, it is so very clear in my mind, and really just being greedy anyway. I'm not good at trading because I'm too emotional in all aspects of life, which is why I only dabble a little. I know if I ever want to get serious about trading that Vad's way is the best way.

No worries. We'll be doing plenty of 'talking of this [and that]' next week.

NYU

Thanks for the reference to Dylan Ratigan's explanation of the immoral/criminal actions committed by Paulson and Geithner in funneling $70 Billion to the Goldman syndicate with no strings attached. Definitely worth watching.

And that the Goldman grant is only a small part of the larger actions taken by the Treasury and the Fed... the scope of the theft blows one's mind. It seems time to demand the return of our money. Ratigan points out that the $3 billion Goldman earned should belong to the taxpayer. $140 Billion in Bonus pay to Wall Street.... their cut for washing the massive creation of funny money created in the last year or two.

As we approach the US debt ceiling of $12.1 trillion....(A trillion dollars laid end to end would extend in a line out beyond the Sun) how much longer can this Ponzi scheme last before collapsing? I think our creditors are working
out a plan to dethrone the New York/ London cabal of thieves... it should be quite a battle. I shall wish for truth to be the victor. We shall see.

It's a brave new world, people. Russian-founded gold producer in Venezuela (with everything else going for it) finally moving on ability to manage gov't relations ...

Even Hugo goes for the gold, and seems to be acting reasonable about getting it.

Meanwhile, Uncle Sam seems as mjuch a socialist as Hugo, but perhaps less street-smart!

I wouldn't chase Rusoro, but I would (and will) take another look (to buy more) when it dips.

FD: long Rusoro, DYODD

I posted this on another site last night, just trying to get a discussion going. For starters have a look at the attached chart. On the other site I hid the symbols, but they are both gold charts, first in $US and second in $Canadian.

----------------
The following 2 stocks are very interesting, they have different prices so I plotted them in performance mode so they can be compared directly. The initial correlation is amazing but then it changes, why? and what does TA tell us about them.

The first 3-4 months look virtually identical, same trend, same support, resistance points and they both pull back to the same point. Very high correlation and then the first one starts a new uptrend, breaks out to a new high, back tests and then continues to set new highs. The second chart deviates after the first uptrend reversal / pullback, but it never recovers it just consolidates sideways and never starts a new uptrend or new highs.

Have a look and let me know what you guys think.
So from a TA standpoint the first stock is still in an uptrend which continued after the pull back, up thru overhead resistance and is continuing to set new highs.

The second stock followed very closely thru the pullback but now its consolidating sideways, tried and failed several times to breakthru the near overhead resistance. Even if it does start a new uptrend there is significant overhead resistance to breakthru before a new high could be registered, not an easy path.

So which stock would you rather own, I own both of them. Actually they are the same stock, Gold bullion, the first being in $US and the second in $Canadian. My purpose here is to try and start a discussion about charting and Technical Analysis problems when there are currency fluctuations. In the above example two people perform charting and TA on the same item but come to very different conclusions. The whole analysis is masked by the currency fluctuations.

In my opinion the basic premise of TA is a constant value of the scale units. Now the time scale is not a problem a day is still 24 hours. But the problem is the dollar scale, a dollar 6 months ago is not the same unit today. When we see a stock breakthru overhead resistance and set new highs we assume its value is increasing, however this may not always be the case.

Anyway I've been trying to find a way to explain this concept and start a discussion, let me know your comments and if you have better ways to handle this problem in TA charting.

Also it gives a good charting example of how to compare different stocks with the percentage function along with adjusting a stock for currency by dividing it by its currency index. Here's a link to the above chart on the Stockcharts, give it a try.

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&st=2008-11-14&en=2009-11-15&id=p12877826744&a=181003012

-----------

The problem occurs immediately on the charts for any internationally cross listed stocks or commodities. How do the rest of you guys handle this situation? thanks

This will throw the hounds off the scent of Goldman's trail. Is anyone wiretapping the treasury, Fed, and Wall Street IB's? Will this really change anything?

NEW YORK (AP) -- One of America's wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that prosecutors say generated more than $25 million in illegal profits and should be a wake-up call for Wall Street.

U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.

He said the case should cause financial professionals considering insider trades in the future to wonder whether law enforcement is listening.

"Greed is not good," Bharara said. "This case should be a wake-up call for Wall Street."

"Wouldn't it be great if Congress would pay attention to Elizabeth Warren, chair of the Congressional Oversight Panel?" -

They pay attention to big lobbies with big money. Ms. Warren is an academic, a Harvard Law professor. No big money there ....

If she sounds like an outsider, it's because she is one.

Brilliant note Quasi. People who do TA usually ignore this. They also do TA for things like 2X ETFs (or worse yet, 3X), which have a built-in price degradation (a.k.a theft), yet TA ignores all this.

Similarly, people think gold has gone up this year. Take a look at gold's performance in other currencies: http://nexalogic.com/gold.html (chart updates itself automatically). It's not gold, it's just the USD that has collapsed 40%.

Would people in Brazil or Australia do TA for gold, oil, and related stocks in USD?? or simply not bother?

The worse is that investors in the US don't seem look at any of this as if they are insulated. Similarly with the U.S. stock "rally" of 2009 (rally in wooden nickels).

Oh yes, I've been back for a few months now. I live in the city - near hayes valley.

http://tinyurl.com/ygnpj9b

"Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.

"Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth."

"Robert Khuzami, director of enforcement at the SEC, said the charges show Rajaratnam's "secret of success was not genius trading strategies."

"He is not the master of the universe. He is a master of the Rolodex," Khuzami said.

"Also charged in the scheme are Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp., Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm, and Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group.

"The others charged in the case were identified as Danielle Chiesi, 43, of New York City, and Mark Kurland, 60, also of New York City."

dave- A significant percentage of posters live here. Planning to meet David for lunch on the Peninsula Monday. Beyond that, I've been thinking of a dinner in SF around the holidays, to include MarkW, veteranwang, David, vb, and now you. Send me an email if you're interested. You too, number2son.

BUT you'll have to polish up your Spanish to understand him. Jorge Ramos of Univision is, IMO, head and shoulders above any of the interviewers on the "gringo" networks.

Yesterday, Jorge interviewed the Gov. of Puerto Rico, and asked how much the gov. earned. When the gov. responded with a (modest) $63K, Jorge referred to a list documenting that 12 of the governor's aides earned twice as much. He then asked why the governor was cutting gov't jobs having promised during his campaign not to do so.

Jorge has interviewed many US and Latin politicians, and is always well-informed, well-prepared and intense in his questioning. He's been tough on Micheletti of Honduras, and various former intelligence chiefs from Latin countries.

You don't get such tough questioning and follow-ups on other US networks. Jorge was born in Mexico, and immigrated (unable to find work as a journalist at home). Another case of immigrant energy and drive, IMO, which so benefits the US.

For her, indicators like MACD, RSI, bollinger bands, etc. are WRONG and have no predictive value. Given that distributions in the market are NOT normal (per Mandelbrot, Taleb, etc.) even the concept of a standard deviation (underlain by the assumption of a normal distribution) is not applicable to market analysis.

'Nuff said.

ProudPapa,
I agree the market with the most volume may be driving the price, but what I was really getting at was the TA chart analysis question are you really making any money (real money / wealth), the chart may be misleading.

SiO2,
Yes I'm amazed at how many people think gold has gone up a lot "Hey I'm up 50% in USD". However many things like gold are generic and most people don't try to spend that gold bar anywhere else but their own country. They may be surprised if they travelled say to Canada and discovered that gold bar doesn't buy anything more than it did 6 months ago, " But Hey this is a US gold bar", ya right sorry buddy, its still just a generic gold bar same as the one from anywhere in the world.

But can't the US guy just cash it in and realize his 50% gain in $US ? Well yes but he had better spend it quickly on inventory currently on the shelves, as when the next boat full of flat screen TV's arrive from Asia they will be demanding 50% more USD's for payment on delivery, no credit. Maybe even no USD's just gold before the ship is unloaded.

SiO2
2X and 3X ETF's agree I've seen lots of TA on them too, really not accurate on several fronts, such as the time decay daily resets. Even worse, people use their standard price - volume indicators which can be very misleading as the volume on a leveraged ETF has no connection to the the price and the price is connected thru derivatives to the underlying. The only way to do TA on the leveraged ETF's is to analyze the underlying stock and take your signals from there.

Just for interest here's a long term chart of the INDU in $US and $CDN, the US broke above the 2000/1 bubble in 2008/9 and is now almost back to the 2000/1 levels, maybe a giant head and shoulders pattern will develop. But in Canada 2008 never came close to the old highs and is currently still in a long term downtrend.

http://stockcharts.com/h-sc/ui?s=$INDU&p=M&b=4&g=0&id=p73971983341

Sorry if you are not a Stockcharts member you will only see a short duration of this chart, see the attached file instead.

Now its not just the US, all currencies have an affect of distortion on the charts, makes it difficult to establish a baseline on anything.

http://tinyurl.com/ykqnyje

how lame is this? I'm replying to my own post. Really, you've got to see this...

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

second avenue, you keep blowing me away with these clips.

thanks again

vb

"Can she predict prices?"

Wouldn't surprise me...

Funny you should say that, I don't know if it's totally true,but it reminds me of another anecdote.

One day I'm talking with the Taoist priest who trained me...we were talking about when he originally left his homeland under pressured circumstances. His master told him this would be good for him. "You've never really suffered. How can you expect to help those who suffered."

According to a new book with extensive interviews of Rich, the US tried to kidnap him after the Swiss refused to extradite him to the US.

I thought you had to be a warlord or drug lord or a terrorist to merit such "tough love" from Uncle Sam.

Surprising to (naive) me that they would fire up the black helicopters for a mere renegade oil trader! - a trader now pardoned, of course, and thus unmuzzled ...

http://www.nytimes.com/2009/10/16/business/media/1...

Thanks Bill for taking the time to comment on this Dylan Ratigan tape. Very informative response as always.. Thanks again.

ALOHA !!

I call the three line items on the US TREASURY DAILY STATEMENT for US entitlements, Social Security, Medicare and Medicaid the "Three Horsemen" ... For those with a Latino bent, "Los Tres Amigos"! I lump them together because they get a large part of US Treasury attention and are all related to health and medical issues for the elderly and disabled.

For FY 2010, so far, on October 14th I saw $6.04BIL USD per day in outlays. Now I notice that Obama and his US Treasury have indicated there will be no Social Security COLA(cost of living adjustment)payments for 2010. No doubt he will increase the Medicare premiums though until some sort of healthcare reform kicks in.

I am not seeing too much mention on the new "healthcare reform" and how it will tie in with Social Security and the current Medicare and Medicaid system? Social Security is more broad than just "healthcare" yet there is some "cross over" in benefits, especially when you consider the long term disabled, etc and their healthcare costs. Then what of VA benefits? How much "double dipping" will occur in all this or will it end up being more like "double snipping"? Or will all those medical issues be incorporated in the reform? Anyone here on Medicare or VA have any links to such issues?

Bill,

Dylan Ratagan, Elizabeth Warren and before them David Walker have a good overview of just what has been going on for a couple of decades culminating in the meltdown. Those in seats of power are able to ignore them. And, unfortunately, I believe far more people are getting the sanitized version of this instead of the straight story.

Yesterday, after hearing Warren and then Ratigan, I turned on The Lehrer News Hour and heard a Harvard Professor say Goldman was able to make so much money by investing "their money" when prices were down (no mention of TARP). This kind of distortion makes people think, "Gee, I'd have done just fine if only I had bought GS."