Cara's Commentary & Community Chat, Mon., Dec. 1, 2008

I just turned off comments on the old site and turned them on here. FYI, here are the comments that slipped past me on the old site before the switch:
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Looking back at what the S&P does in the month of December, I don't see a lot of upward movement during this month in previous years. Possible reasons for stagnation include money movement out of Mutual Funds to avoid capital gains taxes, "tax purpose stock sales" in November that can't be rebought until after Jan, cash needed for holiday spending, and so on.

Of course, there is always a "bargain" somewhere.

Posted by: spot at December 1, 2008 7:32 AM

$cpc and $nyhl weren't confirming the "rally"

Posted by: bsi87 at December 1, 2008 7:44 AM

Good morning:
Reagrading Bill's comment "...bond yields rise a bit and the $USD to fall before I am really convinced that the initial seven-session rally is sustainable into a two or three month one..."

Does this mean that if the dollar looses value then bond yields are relatively lower and people will want to move to equities for higher yields?

Thanks-still learning.

Posted by: yaya at December 1, 2008 7:45 AM

Hi,

I am trying to make sure that I am understanding certain things.

[BC wrote:
For equities to continue to prosper, the pre-requisite is a healthy credit market. That is not the case today.

Credit markets must be made to work for corporations or else there will be an extended recession, possibly depression.]

1

A week ago I wrote, “Thankfully, the equity market is close to a bottom, and many traders are beginning to see values in prices and that the quality of many corporations has remained intact.”

"...bond yields rise a bit and the $USD to fall before I am really convinced that the initial seven-session rally is sustainable into a two or three month one..."

(i) the equity market rally is not going on forever (unfortunately there will be another test of the lows), ]

Right

Posted by: newbee at December 1, 2008 8:06 AM
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Let me know if there are any problems.

starting to look interesting. TLT/IEF in RSI distribution mode. SHY rsi sell signal.

full disclosure: long RYJUX

Sold 1/3 of my position in SLW last week and looking to buy again in the $3.60 to 3.75 CDN range as I expect its price to come to me again at least one more time.

TLT 107.50, ouch, real yields after fees and expenses must be negative (and quite negative after inflation).

sticking a bid in at 46 (close - 10 day ATR) for half position and trailing an 80 cent buy stop on other.

long RYJUX, no TBT

LFL upgraded to STRONG BUY.

http://www.incainvest.com/

SiO2

IMO - there is Zero inflation. Inflation has been negative since July. The data doesn't show that of course. Interest rates are net positive even if the 10 year gets to 2%.

JPM - predicts 2% 10y note...
http://tinyurl.com/6nasu6

don't expect a USD crash anytime soon. There is a global shortage of dollars (swap lines, russia examples). It may go down in short and over long term but middle ground the dollar is going to rise much more.

Hey guys,
I made it to the new blog site. I hope everyone had a great Thanksgiving.

It's looking like I should have sold my DDM calls Friday. I was thinking we'd drop today but figured shorting the market Friday was the obvious trade so it wouldn't work. Shows how much I know.

Rob.

It seems strange that metals and oil are dropping this much with the dollar only marginally higher. It looks like de-leveraging or a coordinated effort to crush prices to me.

Rob.

Hey guys I made it

MADRID, Spain -- Spanish construction company Sacyr Vallehermoso said Monday it has agreed to sell its highway-operating unit, Itinere, to Citigroup in a deal valued at nearly 7.9 billion euros ($10 billion).

With a rush to stimulate through lower rates, I'm anticipating low Treasury yields would tend to ease corporate bond yield pressure. I'm keeping an eye out for the "magical" 90Y/USD number I've read about, as this is supposed to be a limit for some reason, at which point Japan is expected to execute "dramatic action". I have no idea of what this would entail...

CDO's remain toxic mortgage securities as the job market flounders and real estate prices continue to plummet, CDS policies seem to have the banking industry in a quandry. Is this because they might be forced to cover their policies and won't be able to cover? We're told there are insufficient/none reserves to cover CDS policy redemption, which many of which are written against CDO's. So, if CDO's represent a majority of CDS', and were made whole, wouldn't this in turn make the CDS quandary whole?

is there any way to change the font on the new site to mirror that of the old site? its tough to read through these posts with this new font...

Yay...this site does not have the hypnotic eye anymore. Much better. I agree with the font comment above.

I like the look of your new digs, Bill. As a software geek, I have to mention that you should consider providing OpenID support for this site. It would make the transition for all of us that much easier.

As for SLW, I'm also looking to reload as it pulls back yet again. I'm waiting for a retrace below $3. And again, any buy here needs a stop at the 52-week low.

I also love the RSS feed for comments. Now I can stay on top of the great discourse using a feeder.

I also like the fact we can edit our comments. A big plus for those of us with fat fingers and/or a hasty disposition. ;)

10 day ATR is 23 bucks.

full disclosure: long (at higher levels)

I saw 102,700 shares on the bid at $3.08 USD.

SLW holding up better than what i expected for 400 down on dow and 50 on the S&P.

bsi - if atr is 23 then do you expect a 23 pt swing between yesterday and today?

re: FONT - much better!

It might make sense to establish an exchange if these policies have value. Is there an exchange for CDO's?

I picked up 3000 SLW @3.24C. Looking for more of a pullback to add another 3000 under 3.60. This stock is like a option without a expiry date.

"Is there an exchange for CDO's?"

No. There has been serious talk about establishing such an exchange. Transparency is essential and has sadly been missing and contributing to the present day problem.

ICE and CME have been mentioned as exchanges that could provide such an exchange. I believe both ICE and CME are interested as it would add value (profit) to their organizations.

No present position in ICE or CME.

I originally kept OpenID turned off because I didn't want to explain it, but I guess I can just turn it on and anyone who doesn't know how to use OpenID just won't use it.

So people can use OpenID now. If you already have an account, just go to Site Index -> My Account, and click on "OpenID identities" to add your OpenID provider(s). You can log in using the normal log in block on the front page using OpenID.

If you don't know what I'm talking about, just pretend I didn't say anything. :) The site will work just fine for people without OpenID.

The way I understand it, as CDO defaults rise due to defaulting mortgages, owners of these asset-backed securities will move to cash in on CDS backstops. It's just not clear to me what percentages of CDO's have CDS policies written against them, or the ratio of quantity of either. CDO's BTW, were an integral part of the S&L crisis of the late eighties.

Obviously the banking industry is attempting to sweep the entire matter under the rug while bleeding the FED/Treasury dry.

read this about treasuries...

http://blogs.wsj.com/marketbeat/2008/12/01/crowdin...

look at this.

http://rsi.caracommunity.com/RSIApp/RSIApp.html#ie...

Looks like $3 USD is the new support line. Let's see how strong it holds up.

All day it looks like small amounts of selling to knock it down, only to follow by 20k and 100k lots to buy.

is there a double inverse ETF out there? I'm not a big fan of options but I want to get the leverage in case I'm correct.

I'm not quite sure I following this.

Bought JNJ & MSFT this morn with money freed up from tax loss selling last month. Figure they are good for a hold or a trade. Price is everything and quality counts too. I traded MSFT successfully six times last month at even lower prices. Still holding more losses but don't consider them losers yet because they are quality which I can hold. Am not using margin presently.

nice one on the new site.

just put in a small position on HGU this afternoon @ $7.61,
lets see how this recent dump in gold plays out. it doesnt look natural, the USDX is stilling just
above $87.... waiting for treasury auction to conclude...

how do we look for bill's comments ????

do we still have to refresh to see new comments???

BSI - do you know what the balance sheet looks like with the new Hercules buy out? I'm trying to get my hands around it. It looks like they had $1.5 Billion in cash/lt investments. I would assume a 30% hit to the LT investments part so lets say $1.0 Billion as of now to be very conservative. They assume $700 Million in debt with this deal so their net cash would be $300 Million. Their market cap is $500 Million right now. I'd be more comfortable buying at their cash level (which is ridiculous to think of but in this market its reasonable) but I think you will still do well at these levels.

buy stop 28

The Daily Report is posted.
One way to get there:
Go to Home, hit December 2008 link on left side.

Bush said he felt responsible for the economic downturn because it's occurring on his watch, but he added: "I think when the history of this period is written, people will realize a lot of the decisions that were made on Wall Street took place over a decade or so" before he became president.

http://news.yahoo.com/s/ap/20081201/ap_on_go_pr_wh...

sv,

Bill's comments will be in a different color (he's been slow getting to the new site this morning, so give him time). If you look in the "Post for testing comments" post, my comments show up as his will here (it highlights the author of the main post). You can also bookmark him, as Quasi says. Once he starts posting, you'll be able to see his comments here: http://caracommunity.com/user/5/comments

Jeff

Thanks to some help from Jeff, it looks as though I am officially "delurking".

First of all, congratulations to Bill on this new site, truly world class.

I feel as though I know many of you just from lurking for many months, whereas none of you know me. My wife and I are a husband/wife real estate team who live and practice real estate north of Atlanta. That gives me no special insight to trading, so I will probably still lurk more than not; but if I see anything particularly interesting first hand in real estate, I will point it out.

Bill, thanks for the calls on SLW & GG. They have helped repair some of the self inflicted damage I incurred earlier in the year. I look forward to the TOG continuing as we move forward.

My best to you all.

Sonnypage

NYU Grad:

The PM Conference information is very much appreciated.
It was not on my radar this morning.

Regards,

JR

There have been more bottoms predicted for this market than Florenz Ziegfeld put on display in the follies. Since anybody is entitled to a guess, mine has been and still is 6,200 - 6,500.

Congratulations Mr Cara on an improved site. Very professional, very useful. Thank you very much.

And thanks also to those knowledgeable traders who share. Every day is an education.

Regestering on this new site was smooth sailing for me.
and I am out in the country on dial up.

I wish I could say it is smooth sailing for my portfolio.
I have been away from my portfolio for quite a while and it way, way down.

Investing in stocks has lost me a fortune.

The utter nonsense that so many people put out is disgusting.

I am amazing and dumbfounded by tlt...since 1:00pm there has been a massive run-up...any explanation why someone would want to tie up their money at sub 3% for 20yrs?

I will re-read Bills Options strategy page several times before i get into writing puts. I am sincerely thinking about this strategy for companies like SLW, X, XOM, but only with capital ready to buy if the stock is put to me.

But i am curious if anyone has any cautionary tales i need to be mindful of.

Example. lets say i have $12,000 as dry powder.
March 09 SLW $2.50 Puts trading at .64 cents.

for fully capitalized strategy (no margin) should i just calculate:
12,000 / 2.50 = 4800 shares = 48 contracts = $3,072 put premium income today?
If the stock goes below 2.50 and gets put to me, my avg cost would be $1.86?
(4800 x 2.5 = $12,000 - $3,072 = 8928. then 8928/4800 shares = $1.86?

Please correct my math as you see fit.

RSI 7 day <10 for TBT

TLT RSI 7 day is 81. My guess is that it approaches/exceeds 90, then it reverses.

and yes, that entry sucked rocks.

Bernanke just concluded his speech here in Austin. the Treasuries took off at almost the minute he started his speech. 10 year futures went from 121'24 to 123'09.
Now falling back to 122'20 thereby forming a continuing bearish divergence in numerous timeframe charts

That upward blast on TLT over the past hour looks pretty strange. Might be interesting to see how it acts after the 2 P.M. ET when margin calls start kicking in. I would expect to see TLT pushed back to the days highs to cause some forced selling/capitulation. If it looks like TLT is being propped up going into 2:10 and/or 2:20 ET, might be time to take advantage and go long some TBT sub-45.

Interesting to see the Canadian dollar hanging tough at about even with $USD for the day.

Also, keeping an eye on USO as it moves closer to last weeks 52-week low of 39.16.

how are they going to pay for their gold, or back a gold related currency?

China, their manufacturing industry is collapsing b4 our very eyes. How can they grow if there is no one on the other side of that trade?
The other countries as India is in China's boat as Russia/Brazil provide overpriced resources that world can't afford because prepetualy credit creation has all but stalled.

Don't expect any of them to sell usa t-bills/notes as that might be their best investment.
that was a very sad statement but essentially the truth.

Times change very fast.

I just log on to this site today and one of the lady who works with me show up. She looks at Bill’s picture on top left corner of the site and said that guy is very cute.

Try ^GOLD Yahoo uses a carrot instead of dollar sign

Rugger09 - Don't think ^GOLD will work, but try ^GOX - that might do it for you.

That's great news for consumers! if we can't control ourselves from borrowing without being able to repay, at least they are forcing this behavior to stop. I guess earnings of credit card companies are going to be rocked soon. and regardless of what the Detroit bailout looks like, dealerships are still going to feel the pain with tightened credit to consumers. i suspect more than half the dealerships will go under eventually.

I wonder if vw will lower my lease buy back in 2010, if i just act like i dont want the car for the buyback and plan to return the car to them/vw financial? My plan was to buy the car back and own it outright. maybe i can negotiate the buyback. if they say no to my offer, than they will have to take back a vw with 30,000 miles that will have to go to auction. :)

got lucky on FAZ. sold everything at 71.50 that i bought at 70.5 and 58 (avg 61). and i moved that into FAS at 23.02.

it's taxed as income...so the best place IMO to write puts or calls is in an IRA...I like to write puts on a down day and write calls on an up day

Paulson now speaking; let's see what treasuries do now

That was the WEAKEST applause I have heard from an audience when a recent public figure spoke.
Paulsen was not well received, it appears.

poor communicator

From here, you can see metals commodities:

http://finance.yahoo.com/futures?t=metals

Thanks CP, I use Kitco quite frequently including the slick K-cast feature. What exactally is gcz08.cmx?? Many thanks.

right Now

These scams are targeted at those who never studied, forgot, or are unable to apply the basic laws of thermodynamics to real life. If you like this scam, I have the newest, just improved plans for the Pogue carburetor which I can let go for a reasonable fee.

Long TBT @ 45.10

I've got one of those liquefied hydrogen wells in my back yard, four-nines pure!

Over the weekend I was looking at charts for various indexes like the dow, s&p, etc. And they were all sitting right against their trendline. Being an optimist I figured the strong moves might get em to push through. Guess not! In hindsight, decreasing volume should have been a clue...

Trying my hand at attaching a chart...

Note my primitive analysis and advanced wording ;)

Also note that the wording should have a '?' at the end, since i really don't know what i'm doing :P

The arrogance behind the two fisted stealing is what stinks!
There is no exit door for the taxpayers anymore..........
Pa told me that greed breeds more greed.....he wasn't to far off.

today remineded me of the dog days of october.....

kangaroo tail reversal a few days ago shows 20 as a potential entry. 10 day ATR is 6.40. That subtracted from the close is 16.

proud papa
The chart looks great - a new level of communication for this site.

RSI 7 day now 51. 10 day ATR is .21.

Might take 2-3 days for mkts to bottom out.

My order executed at $22, a much better purchase than SSO at the same price.

Last one out the door, blow out the candle.

Look out below.

talk about humility. i went from up some 30% to even in a matter of one hour. i filled my FAS position at 23.00 after taking a big gain on FAZ. went to lunch thinking good thoughts and came back from lunch regretting i didn't make lunch and save that money....

Helm, take us down to 7000....

Even the institutions and large specs will tire of swapping increasingly worthless FRN's back and forth. As more and more hedge & mutual funds remove liquidity, this market will continue to flail around like a blindfolded child swinging at a peanut sized pinata.

I think today's action was natural. We had a 20% up move from 2 fridays ago. The volume today was pretty light...in fact it was less than half what it was on the 21st of November. Sure, we know that not too much has changed in those 10 days. But we also know that the Fed is going to backstop everything, that the automakers will most likely be bailed out, that gas prices are significantly lower, and that a huge stimulus package is on its way. I continue to be bullish in my long term accounts and am trading in my short term account with an eye toward the long term trend i'm seeing...

today was fairly neutral but we are not out of the woodwork by a solar system.

Meredith Whitney was on CNBC saying that the big financial companies she follows were very expensive at these prices. She said that WFC was the worst one of the bunch. JPM, C, BAC, GS, COF are all in trouble with earnings estimates that need to be cut over 50%. Jobs are the number one liquidity for consumers, which they are losing by the day. Credit cards are the 2nd liquidity for consumers, and the banks are contracting them by about $2 trillion next year.

She said she has never missed a bottom, and we are NOT there yet.

She is not negative all the time, but until banks contract their balance sheets, then start lending; the problems will not go away with all the money the government is throwing to just plug holes.

Next shoe to fall: CC companies cutting lines to consumers!

Where was she on Friday to tell me to buy FAZ (up 41% today)????

Worse beginning of a month since 1932!

If tomorrow starts to fall, I think investors will be jumping ship...

Kerry - Great find.

we could add commercial real estate, LBO rollover debt, Alt-A/Pick your nightmare loans, SBA Loans...

We just retraced 50% from last week's gains, Market sees what is ahead but there is still some positive stimuli ahead as well.

Between jobs, big three auto, sales, massive gov spending... Hopefully we can rally from some sort footing for more of a sustained rally.

On the weekend, I posted that I was baffled by the price action in treasuries and wondered if it wasn't due to the Fed monetizing all this bailout debt at a new break-neck pace.

http://tinyurl.com/69kh3g

Makes you wonder if this price action in treasuries has anything at all to do with flight to safety or is just some massive pass-the-inflating-buck-around game by Paulsen, HB&B, and the FED?

typically a flight to treasuries is a safety play.

If inflation is lets say negative 3% and the 10 year yield is 2.5% you net gain is 5.5%...

We live in a fiat world and if treasury action doesn't SAY deflation, I have no clue what would.

Even the pundits who speak on TV say it isn't happening.... Hmmm... are those the same people who said the USA would not enter into recession or the USA had a 40% chance of recession.... hmm.... are those the same people who stated that the world has decoupled, starting with EU, then CHINA and Japan.... hmm....

The world needs more credit, it seems obvious that they will allow the USA to issue that credit. bond yields down, prices up. The problem is no one, group can make the debt fast enough as it being destroyed even faster.
Debt is unwinding, credit is contracting... All assets will go down.

adjust accordingly.

What are the different colored bands? 1,2, and 3 s.d.'s?

Noting in concrete, but I used a simple 36mo ma with BBands at 1.25, 2.5, 3.5. Of course, a SD at 3.5bBand is extraordinary but don't let that stop you. These markets are NOT standard distributions.

Good luck, and let me know if you come up with something you like better for Crude. :)

I try not to draw inferences.

I just like to buy 'em cheap and sell 'em dear. LOL.

a great discussion on treasuries at mish's blog, good annotation to the TOG:
http://globaleconomicanalysis.blogspot.com/

Deflation and flight to safety per EDS seems like what is happening right now. If near zero yields on long term treasuries occurs and the Fed starts buying T's from the Gov, it is a last ditch, unprecedented change in tactics. I think Ben is blowing smoke. He has to reassure China, Japan and OPEC.

Besides, I don't think this deflation thing will get very far. The last time it was mentioned a few years ago it was Greenspan who was proven to be blowing smoke. Buying T's by Fed would be seen as "massive pass-the-inflating-buck-around game by Paulsen(sp), HB&B, and the FED?". With inflation to follow.

I suppose he could be blowing smoke or he might just be laying it out as he plans. Attacking the long-term yields (now that the short end is clobbered) while at the same time reinflating the Capital Markets with lots of new funny-money might just be a dynamite way to administer electro-shock to the economy. And, as you say, with inflation to follow.

One of my co-workers who is from Taiwan where she worked at Standard Chartered Bank was boasting about how great CDS's were. She said "I sold lots of them and they were very profitable." I said, "But today they could be bringing down the bank because they didn't put aside enough cash to make good on them!" She said, "No they are great, I got a good bonus." I said "Good thing you left and moved to Canada." Unfortunately, we don't have too many money for nothing products to sell here right now. We have to fight it out the hard way.

JNK: I like the symbol, but I think the industry should do away with that name. Can you imagine sharing at a cocktail party that you just bought a lot of junk?

I have been reading the blog for years and have learned & learned. Add me to the list of readers who likes the new
site. I have only one request, consider using a slightly larger font for us who find this current font size difficult to read. Thank you and keep up the great work.

Looks like I made it! (formerly known as NT)

I've popped into that site from time to time over the last 18 months. Their currency guy is pretty good. The rest have had some spectacularly ill-timed recommendations - but haven't we all :(. To their credit, they've certainly been crying chicken-little for a long time.

CDS' are definitely good for a song and dance but not much else as far as I can tell! Can't comprehend why governments are backing these with taxpayer money, it makes as much sense as a perpetual motion machine.

With all of this printing of money from the globe and doesn't it seems that everyone is convinced that there will be massive inflation?
Global rates down to zero, means that we will have inflation?

Were these the same people who didn't see this financial crisis coming? (yup)
What type of inflation did Japan have from their ZIRP? (not much)

It would seem that all of this massive would cause inflation but I'll argue that we don't understand how bad this credit contraction is going to be.

Lets face this fact. The world took on WAY to much leverage from 2002 to 2008, thanks to USA and EU banks taking on leverage from 25 - 50 times their balance sheets.

Global asset prices were driven up from LEVERAGE not capital derived from labor. Working income should increase prices of assets, not "fantasy land" credit/leverage.

Now there is a massive amount of leverage that must do something because the underlying prices that they were tied too has dropped. The leverage must unwind, central banks are taking on some of the leverage to follow in the footsteps of the banks that took on the 25-50xs leverage. All this will do is sustain some of the leverage out there... much of it will default.

Even if the globe starts to re-lever and build up more credit, the OLD DEBT and max'd out consumers can't take on any more debt. The earnings that many corporations made were from additional leverage in the system which allowed earnings to go up. In fact, earnings might of peaked in many industries and will take TIME to build up.

US bonds have been flying off of the shelves lately, many are screaming that they should bubble or go down. Yeah they "could" correct some in the short term but in the long term, better stick to the trend until we could make an argument that we are seeing an increase in productivity, more jobs, credit markets to clear up and consumers to have less debt and no recession.

Until the system is wiped clean/debt defaulted. This is going to be a long decade. Maybe not as long as Japan's two decade long lost decades but we have already had one. This will be a traders market not a buyers market.

Our statistics are going off of a cliff faster than Japan and we making history. Wait, wait till you see how fast China's numbers go down.

Time to rethink out strategy as the facts are there but we chose not acknowledge them.

norm

Audio Clips of Murray N. Rothbard's Book: http://tinyurl.com/5gbvqe

Currently listening to the one which outlines, in excruciating detail, the process Helicopter Ben is proposing to buy treasuries: http://tinyurl.com/6bzxjh

Bernanke's speech today is summarized at the link below. Seems he is willing to buy more of the asset based toxic waste from the Banks, but I don't see a mention of buying back Treasuries in this article. Also says further rate reductions might not be a favored tool at the Dec 12 FOMC, BUT a Fed member says maybe up to a further half point might be dropped just so no one thinks that Bernanke isn't trying hard enough.

My guess is a "surprise" quarter point rate drop by the end of the week to match other Central Banks,and then, another quarter point drop at FOMC. Thus, the Banks will have gotten the most they can before Bush leaves office. Time will tell.

http://tinyurl.com/66x6z3

They may buy, they could be already buying as they could be using the tool of quantitative easing... and many others...

The attachment is the PLAYBOOK of the FED. This is the FRB/US.

http://tinyurl.com/6glve3

It's kind of odd coming from Citi.

Yeah that will raise an eyebrow. When I read that article, I stopped and thought... Wasn't this the same bank that said they were well capitalized no more than two weeks ago? Then they got another 20 bill from the gov and had over 300 billion backstopped from the FED.

That along with all the Cash for Gold commercials sort of makes me feel like it is time to do the opposite of what they say.

Good find though NYU!

I am trying to stay optimistic but looking at the charts and seeing how all the money we've wasted on the banks has had no effect makes me think this may be far worse than the Great Depression. All of these lightning-fast lower high rallies look eerily like the charts from the early 30's.

If the charts prove true we could easily see S&P 200 by the end of next year or early 2010.

That's why I've decided to let what I currently have in the market ride until we see DOW 11-12K, which seems like it could be 5 years down the road from here.

And the only way I'll add more is if we get to S&P 200.

And hopefully we'll print a higher high sooner than later but if we don't then I'll have plenty of money to re-enter the market at that point.

Otherwise, I feel like I'd be one of the fools averaging down during the 30's who lost everything. I'm comfortable with the amount of money we have in the market currently. Even if it all goes to zero I'll still be able to sleep at night and I don't even feel stressed currently. I just feel angry at my stupidity for going long way too early when I was prudently short and in cash for so long.

Rob.

feel you pain as we have all have taken a painful blind beating (at least I have, my ignorance made me deserve it too).

If you feel that we could drop that low. Get in cash because you'll be able to buy more stuff in the future as prices go down.

why risk capital.

How long (with you thoughts on the downside charts) would it take for you to recover from SnP 200?

play it safe, make a 'trade" here and there and you'll be just fine.

Cash isn't a bad place right now.

The feeling I got over the weekend that the market was going to plunge today turned out to be correct, unfortunately. I tried to ensure that I will keep some gains from last week by placing a sell stop limit order on SLW, but unfortunately the PM's crashed in London, and so SLW opened with a gap down and missed my sell limit order. Did anyone figure out why gold/silver crashed so strongly in London?

What upsets me the most about this market is that I was able to trade only minimally all the huge swings we were having since mid-October. I think the way to trade this market is to buy put options on the way up and close them on the way down (I don't want to short anything, because when a real bull market starts, I don't want to have an unlimited loss on my short position). If we drop below 750 level on S&P500, then I'll start buying some 3X long ETFs (buying call options at that point would be too expensive because of the huge volatility premium), which I will be selling on the way up.

What 3X ETFs are there besides FAS?

Thanks...

Amen

takes a bit to get used to..but overall i like it

And I do realize that limiting my losses is the next tactic I have to seriously work on once my capital is freed up again. I can't tell you how many times I've earned 50-75% in a few months just to go back to even again after suffering a heavy loss. And then it takes a few months to make it back to 50% up again.

Eventually I will learn all my lessons and be trading like a pro.

I'm confident of that.

Rob.

nemo - the 15 p/e is an estimate based on the fact that the earnings will drop so fast that the market won't have time to be marked down to the level it normally would in a non-credit crisis environment. I'm thinking that the earnings rebound will be priced in by the time we hit the cycle lows for earnings.

honestly, i don't know where the bottom is. my guess is it's around 700 to 750 which is what we hit 2 weeks ago. i think that the earnings rebound will occur in a stagger for 2 years then rebound quickly the 3rd and/or 4th year (perhaps 30% in one or two of those years). by the 6th year from now i would expect earnings of $120. so my long term account is based on this assumption and that's why i'm all in.

Sweet. Great job on the site, korvus. Bill's team has first-rate tech talent.

A thought has just occurred to me about a riskless way to make money with 3X ETFs: invest X dollars into BGU and X dollars into BGZ. Locally, the position will not change. But over time, BGU will more than double at some point, while BGZ will still be greater than 0. Also, if BGZ resets daily, then it will fall gradually as the Russel 1000 index oscillates in place. Does anyone see a flaw with this strategy?

Interesting idea. Suppose you invested 10k in each. Assume 20% increases (decreases) for the next 4 days.

BGU 10k 12k 14.4k 17.3k 20.7k
BGZ 10k 8k 6.4k 5.2k 4.2k

I'm missing something too. Bid-Ask spreads? Difference in actual performance? (e.g. today BGU down 25.98% while BGZ only up 25.17%) What about the effect of time on the trade (if it takes more than 4 days of 20% moves? Interesting thought, but I'm afraid it will take someone smarter than me in these matters to give a decent explanation. Seems to good to be true from this dumb guy's perspective.

KC
(The poster formerly known as MCM)

KC: the strategy of investing X dollars into BGU and X dollars into BGZ will make money (guaranteed) if the market keeps moving in one direction. For example, had you started with 2X dollars on Nov. 20, then on Nov. 28 you would have 0.57X + 1.56X = 2.13X dollars (BGZ declined by 43% while BGU grew by 56%). However, as I mentioned previously, BGZ declines if the market fluctuates. So if the market oscillates AND declines, then the BGU position will decline because of the market decline while the BGZ position will not grow as much and may even decline because of the oscillation/daily reset effect.

ALOHA !!

Recalling the DOORS song THE END ... Like Morrison says "Nobody gets out alive"! Then you hear what Tanta said, "We're all subprime now!" And here is what Keynes said many decades ago, "In the long run we are all dead." Then Von Mises responds with, "But unfortunately nearly all of us outlive the short run. We are destined to spend decades paying for the easy money orgy of a few years." Haven't we been paying for the failed policies of the two party aristocracy our entire life? We have ... we know of no other way, because we fear CHANGE ... real CHANGE! With REAL CHANGE the "Welfare/Warfare State" would have to die. That would mean eliminating the US FED and WE THE PEOPLE would need to be responsible for our own lives and our own futures instead of depending on the statist NANNY STATE!

I do not say this to depress people's outlook but sometimes you have to set aside "depression" and GET REAL! One way I "let go" was to give up my upper lifestyle of my San Francisco days and dump the entire AMERICAN DREAM into the DEBT dumpster that it is! Nobody has ever convinced me that accumulating more DEBT is the way to prosperity. A few of us can win the LOTTO, but most of us do not!

While the "OOOHS and AHHHS" of the two headed idiot club known as the "Hank and Ben Show" talk about buying Treasuries, which is just another useless step in fighting deflation the ultimate end is not in what the Bank Of Japan did in the 1990s but what FDR did in the 1930s. This is why I say this a monetary crisis in the end.

This is direct from Ben Bernanke's speech in 2002 ...

READ ON:
"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934. The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation."END

NOWHERE BEN? PLEASE-E-E-E !!!

So by 1934 in three years time INFLATION was back on top with one simple little old DEVALUATION of the US PESO! Why cannot this fiat strategy be deployed yet again? It can and it will since government cannot fulfill its promises and retain power in the statist tradition via "deflation"!

Problem with that cure is the WORLD is very different in terms of "real wealth" and the US Peso has been devalued, in terms of purchasing power, down to 95% of its store of value over the past 95 years since the US FED was created. The USA is no longer a "creditor nation" as it was and we import more than ever historically. Still the idea that the FDR regime had is the same in that the only way we can pay off debts is to inflate not deflate. Remember that FDR had to default on the gold standard in order to accomplish his amazing INFLATION trick! We have long ago defaulted on the gold standard back in 1971 during the Nixon regime! But the real risk is that devaluing against endless counterparty risk and liabilities will derail devaluation and result in default, when total CONFIDENCE(the C WORD)is lost ... To pull off what FDR did will result in a US Sovereign Credit Rating down grade. B+ here we come!! Otherwise a S&P AAA will become meaningless, which for the most part it is already! If you buy AAA then you buy CPI and Birth Death! If anything subprime and the MBS fraud taught us is that AAA is meaningless.

Those who keep speaking of "deflation" only talk in short terminology, which is the unenviable mindset of growing up in the boomer generation where Leave It To Beaver episodes solved the family's problems in 30 minutes! I will believe "deflation" when the AMERICAN DREAM is unwound to the point where I can buy a new home for $1,800USD, like I could if I were alive in 1908, prior to the US FED'S creation. Inflation/Deflation its all relative over the past 100 years and Japanese cost of living is nowhere near deflationary levels. Go to Tokyo and GET REAL! Assets deflated but the money supply did not and "assets" are NOT money!

I have been preparing since 1997 for what we are now facing. I have done the best I can do to insulate my family from the 3day supply chain and the US Peso meltdown, which is the next leg in the great financial meltdown that has been a monetary meltdown all along disguised with claims of "BANK CRISIS" and "CREDIT CRISIS" and "REAL ESTATE CRISIS" and "STOCK MARKET CRISIS". What do you think all these "CRISIS" will add up to?

This is why we are seeing WE THE PEOPLE fail while those major US BANKS that created this mess, like JP MORGAN and GOLDMAN SACHS, prosper in the "PLANNED CHAOS"! The elite are trading US TAXPAYER guarantees for "real wealth"! US BANKS have on deposit at the US FED over $1tril(that is $993bilUSD more than the long term historical average of $7bilUSD, a 14,190% increase)at interest rates better than what Treasuries pay so why would these US Banks move that money out of the US FED? They will move it when assets have tanked to levels they deem "carpetbagger" worthy and prior to a US Peso devaluation. This would leave the elite BANKERS and their families with the most valuable assets bought at fire sale prices and the US TAXPAYER(WE THE PEOPLE) with the least valuable toxic derivatives and worthless debt capped off with a worthless Peso! It is that simple! WE THE PEOPLE will own the "false wealth" that JP MORGAN now owns. They will have totally switched the game on us when most will still be sitting on the sidelines holding devalued Pesos. Welcome to JP MORGAN'S version of Ludwig Von Mises PLANNED CHAOS! You can trade all you want and some will be successful but most will not. That is just how rigged CASINOS operate, the masses will lose or else LAS VEGAS and WALL STREET would not exist. You have to consider what is the BASIS of your wealth? Is it GE or WMT? Or is it what you are handed when you get dividends, interest or cash out? ITS THE MONEY STUPID! In THE END it is what value your paper currency retains in terms of what you can buy with it. That is known in monetary circles as "Store of value" and as I have said many times the global fiat currency lacks any long term value. That my deflationary experts is known as INFLATION! The cost of living has not risen ... the US Peso purchasing power has fallen. That has been the long term parasite of the US DOLLAR and WE THE PEOPLE. Don't ever forget that ... Short term is just that!

The TOG really is to not hold US Pesos when the devaluation comes ... there is no "if"!

As Mises says on the topic of money supply ... "No nation need fear at any time to have less money than it needs. All present-day governments are fanatically committed to an easy money policy."

We are in the cycle where JP MORGAN profits most!

Is there anyone here who really is surprised that TODAY it is officially declared that the USA is in a recession, that the experts say started a year ago! Is that not laughable? So in essence the "experts" are a year late in their analysis. So much for US FED models!

And when will they announce the US Peso default?

Jeff - You don't have to change the background for this purpose - why not change the color or size of text? Bright blue text would certainly stand out for quick scanning. Great work!