Cara's Commentary & Community Chat, Mon., Dec. 29, 2008

Last Tuesday Fidelity made an interesting filing with the SEC. It was interesting both in its timing and in the dollar amount involved.

Fidelity almost always files all of their SC-13s on the 10th of every month, with the exception of February when the 10th filings are supplemented with other filings. So the filing last Tuesday was an unusual exception insofar as timing is concerned. It was also unusual since that was their only filing for that day.

The filing was for Wuxi Pharmatech (WX). Here are the details:

Old holdings: 3,780,615 shares

New Holdings: 77,326,288 shares

Increase: 73,545,673 shares

Based upon a closing price of $7.18 on the previous day, the apparent cost for the increased shares is $528,057,932 – a significant Big Bet, even for Fidelity.

An unpopular (with some) but unavoidable observation Sharky. I wondered what they were thinking a while back when they suggested loading the Palestinians on trains and sending them somewhere....the showers presumably. We've all read about the oppressed becoming oppressors and here it is in our face.

A very touchy topic. No doubting the rockets of Hamas are trouble, but then again we have very few rockets fired from Canada or Mexico, so I suspect maybe it's something else.....

"does anyone here wonder if the Jewish nation attacks the Arabs from time to time in order to provide good markets in which to unload precious metals and oil futures?"

This might be an opportunity to unload, but I don't think this was Israel's primary motive for retaliation. When constantly being bombarded by rockets, no matter the reason, citizens quite likely expect their leadership to react immediately in some way. Perhaps as likely, Hamas have futures and metals they want to unload and so provoked Israel? Hamas primarily receives support from Iran, so maybe Iran is behind this fiasco with futures on their list of motives?

edit: Then again, I wouldn't put it past GS and MS to have a hand in this affair, they've cornered the market at being cold blooded and greedy.

QT...Sorry that your sensibilities have been offended. Rather than being sick, I prefer to think of myself as being someone who thinks for himself and who refuses to swallow whole and undigested the crap that comes out of the American media about how Arabs are bad and how Isreali's are good, inherently. It is by our actions that we are judged. Am I sick, or is lobbing a bunch of cruise missiles through the living room window of an innocent family sick? Once again, I'm sorry you disagree but I am comfortable in my choice.

No matter who's telling the truth, we don't get the entire story from the media, only selective bits and pieces from media on both sides. One cannot make comprehensive decisions based upon piecemeal information, the whole thing stinks from the head as usual, and people are dying.

Bill

You wrote that for 2009 you see "$60-75 oil and possibly $1500 gold". Do you have a target in mind for silver in 2009?

Thanks.

it is so darn hard buying rising PM stocks while the broad averages plummet. It just feels wrong, even though it's right. Like Wiley Coyote, how long can they defy gravity?

$880 represents key resistance for gold so expect a nice battle in this area. Gold broke above this level in Asia, held relatively steady in Europe, and then fell in NY without surprise. Expect some play between $875-$885 until this key area is resolved in either direction.

PM stocks showing strength today as the DOW starts to decline. This divergence tends to indicate stronger gold prices ahead.

Bill,
I liked your comments on BAC in the WIR. So much so that I am using it as my day trading vehicle since my downside risk is low. In the next downdraft if we have one I will put 1K shares in my wife's retirement acount. She can't collect for 6 years. The dividend comments were enlighting.

What goes up, must come down.

davefairtex,

we do recognize those, just one of posts where this was discussed: http://caracommunity.com/content/caras-commentary-...

This weekend I saw gold went up $20, and I immediately ran to bloomberg with the question in my mind "hey, what caused gold to jump like that?" Unfortunately, there was no comforting narrative for me to read. I fall into this sort of trap all the time - running to some "authoritative source" for the Answer. Sometimes, like today, I write things to remind myself of the truths I'm supposed to believe and be following. Sorry if it comes out like I'm trying to tell you all what you should be thinking. That's not the intent - nor the reality.

Right now, I have no comforting narrative as to why gold is up $50 since I bought it. This makes me nervous. :) But I look at the chart and I think that it looks encouraging. So I try and focus on that.

I was able to figure out why gold dropped $200 after I went long in september, but alas only after the fact. If I'd skipped trying to figure it out, and watched the chart instead, I'd have taken only a small loss, not a large one.

original ST positions up 20%-> pressing the trade, but with a tight leash...

We seem to have run into some issues with the Skype chat today (in particular, we can't get the website comments to the chat). Since the person who implemented it in the first place (SiO2) is unavailable, I have no idea if we will be able to get it working again. With that in mind, I turned on a very "beta-quality" (i.e., buggy) chat room on this site. So if someone really wants a streaming comment interface where they can chat with other users, they can try this out: http://caracommunity.com/chatroom/chat/1

Feedback is welcome. If people really like it, I'll see if I can work out the bugs.

davefairtex - I respectfully disagree, extracting meaning from narrative fallacy is part of the art. The more you know about history, the higher the grade of ore.

If it had been me who'd bought Yamana this morning, with the Dow now down 95 and oil crashing the stock would be doing a death-dive. But because the stock actually KNOWS for a fact that I'm not in it, it's free to advance unencumbered by the Shark:)

Good article on financial activities best "not" questioned...

Of course, some of these largest banks, such as Citigroup, are not so secure themselves. But more than that, the money used by the larger banks to acquire the others is capital that could have been used to make the loans our economy is desperate for—and of course, that’s what they were supposed to do with the public money in the first place. But most importantly, remember that the reason we’re paying to bail out these banks at all is that they are “too big to fail,” in the language of the business press—in other words, if these huge banks go under, the loss of employment, lending, and tax revenue could do profound damage to the greater economy. So if these banks were too enormous to allow to die in the first place, why in God’s name would we be paying them to get even larger?

The mergers are large-scale—the Financial Times calls them a “wave of consolidation as banks scramble to use the cash on takeovers and bolt-on acquisitions.” BusinessWeek reports “what could emerge is a barbell-shaped system with megabanks, small banks, and little in between.” The business reporters for the New York Times describe the Treasury Department as “using the bailout bill to turn the banking system into the oligopoly of giant national institutions.” An oligopoly is a market, such as banking, dominated by a few very large companies.

If any doubt remained, it was put to rest by the minor scandal that has emerged over a quiet change to the tax code made by the Treasury Department. This change allows banks to apply the losses of other banks they buy against their own taxes. In other words, when a bank buys a struggling smaller bank, the buyer can deduct the money lost by the struggling bank against its own tax bill. This is clearly meant to further encourage merger activity—for example, when Wells Fargo bought Wachovia, it paid $15 billion. But Wachovia’s losses total over $19 billion. Meaning, Wells Fargo was paid by the government for buying a highly valuable bank, for a profit of $4 billion, at our expense.

http://www.counterpunch.org/larson12292008.html

Where? I don't see any chatroom?

shark - I think the metal bull is in it's infancy, considering the quantity of spending going on. Personally, I think we've seen a bottom for oil, but I'm still expecting several retests of that bottom.

I likewise found the BAC comments very interesting.

I agree Mr. Chicken. Or is it Mr. Pookie?

North American Paladium Ltd: PAL on Amex +20%, PDL on TSE up 46%.

edit: Duh. TSX was closed Friday. Anyway both moved nicely.

Either, or pooch-la-rookie works too. :)

This article reveals the suspicious nature of some of the highly irregular movements that tend to occur in the NYCOMEX gold and silver pits. Anyone invested in mining companies may find it worthwhile, especially the incorporated gold charts...

Every time a geo-political event, or a serious economic happening, such as the collapse of Bear-Stearns, causes gold to rise, (as it would be expected to do since it has always been a ‘safe haven investment’), the price immediately gets trounced, and investors and producers accept this new price as ‘THE price’, since the new event has now been discounted.

Whenever common sense tells you something is happening that should cause a rise in the price of gold and silver, you can count on intervention to cap the price. As a result, millions of investors and mining companies have lost billions of dollars that they would have earned if these markets had been allowed to run their normal course.

http://tinyurl.com/7vrxxv

shark- http://caracommunity.com/chatroom/chat/1

Rusoro up 35%; their prey, GRZ, up 15%! Viva la revolucion! Hacia la victoria siempre! viva el socialismo del siglo 21!

re suspicions about NYCOMEX- i just accept the games as part of the trade...

Both up 35% today. Something coming out of Venezuela or the tide raising all boats?

ALOHA !!

This BAILOUT has nothing to do with saving employment or the US economy or anything vaguely related to America and Americans. It has a great deal more to do with saving the venerable US FED and its member banks, which if you look at a list of US FED banks it is all the ones that are failing and all have gotten US TAXPAYER monies from TARP. What the US TAXPAYER has unwittingly saved temporarily and what Hank Paulson failed to disclose was this was a BAILOUT of the corrupt FIAT MONETARY system itself. Who trades and holds the vast majority of US Federal Reserve Notes other than the US FED and its member banks? They are heavily exposed to FIAT, which is why they operate mainly in the futures markets that control "real wealth" like oil and gold using the SUPER leverage multiplier that has caused their ultimate failure ... "derivatives"!

The TARP has been used to rescue FIAT from total and complete collapse ... period! One look at the benefactors and it is plain as day! Don't let anyone tell you any different!

This TOO BIG TO FAIL is a fallacy that has been perpetrated to mean the entire FIAT system, of course, that is never discussed on CNBC or even in the US CONgress hearings. ITS NOT THE BANKS ... ITS THE MONEY STUPID!! Without the MONEY intact the US EMPIRE has no basis to exist.

History, in terms of monetary and fiscal history will show that the $700bil TARP was the biggest mistake EVER ... even worse than the Vietnam War! Even though US TAXPAYERS fought like hell to get this BAILOUT rejected(80% against), it turns out we have TAXATION WITHOUT REPRESENTATION in Washington DC. Without representation combined with a "long train" of abuses, then the US Declaration Of Independence must be instated and the current two party aristocracy must be removed from power. The Declaration Of Independence allows for WE THE PEOPLE to eradicate abusive government by whatever means necessary and NO, even revolution is NOT AGAINST THE LAW under these circumstances. Those now in power being REVOLTED against would definitely see it as "illegal" though.

I believe that after TARP and OBAMA fail Americans will be in the streets like they were during Vietnam, only this time it will be across the board, rich and poor, all colors, all occupations, all classes ...

ITS THE MONEY ...

ALOHA !!

"the devaluation of the dollar and the rapid increase in the money supply in 1933 and 1934 ..."

But the main part of that speech was left out. What was it FDR devalued the US Dollar to? Hummmmm??? What "real money" could a paper currency devalue to? What FDR did was essentially announce to the World that the US Dollar was NOT as good as gold money and was NOT worth as much as it was previously thought.

The National Debt in the USA in 1930 was $16.2bilUSD. By time FDR was done with the NEW DEAL in 1939 the US National Debt was at $40.4bilUSD, more than double and gold was over 5 times higher. Today the US National Debt sits around $11trilUSD and gold at $870USD. Today the US government spends $36bilUSD per year just on the USDA food stamps program(SNAP). In 1937 the total US National Debt was $37bilUSD, so we spend the 1937 Debt on just food stamps ever year! I suspect that the USDA food stamps program will get even more funding when OBAMA takes office.

As a point of reference in 1835 Andrew Jackson was the only US President to ever pay off the US National Debt to $0 and balance the US Budget. There has never been a time since 1835 when that has happened. During that time there was no income tax, no social security, no medicare, no foreign US military bases, no TARP, no fiat money and above all ... NO US FED!

shark,

we played SLW today, so it's easy one for me. It did form ascending triangle but the warning signal of failure was lower high at 11:25, another at 11:55 - 12:10. As it lost subsequently support at 6.40 - 6.45, it was done as a breakout play and turned into bounce (which we didn't take, mostly for the reason of falling asleep).

Our trade was 6.30 break with stop under 6.15, called at 9:33, triggered right away. Then we did a so-called umbrella trade - partialling out, riding part of original position with additional scalping around the core. Have a look at our trading log after the day is over to track the details, quite a nice concept which I intend to deploy much more often once we are out of low volume aimless wandering.

taking the position opened @ 6.22 off the table...back to 150% of allocation...

Anyone speculating on the required $30B capital raise-up that GMAC hasn't responded on? Might be a good short...?

vinod- yes, it's hard to second-guess decisions being made by the Israeli leadership; they're not idiots...i can't imagine living across the border from a hostile population, but if i were living next door to a hostile neighbor, i can understand at some point minor 'differences' boiling over into a major conflict; some personalities are difficult to 'reason' with...

vinod- wish i had your problem, man...if you've been spending as much time day trading as it appears, then you should look into declaring yourself a day trader for tax purposes; maybe Vad can help...

teamonfuego - I thought we might hear from you on BAC :)

I sold some Jan 12.5 puts. If put to me my cost basis would be 11.67 and I'd immediately right covered calls to lower my cost basis even more.

brown-cal- the true 'heroes,' of course, are the countless individuals who have exercised restraint/continue to exercise restraint on a daily basis in the actions they take/don't take...on a broader scale, i just don't know...'irreconcilable differences,' or feuds that continue for generations-> what exactly would that indicate? even if a majority of the population on both sides agrees on peace, it only takes a few individuals to incite further aggression...zero tolerance for hate crimes on both sides might theoretically do it, but i don't see aggression being punished-> that tells me there's widespread tacit approval on both sides...

Sold at $2.28, I'm sure Israel has thoroughly pummeled the Gaza by now and oil will fall again.

seamus- excellent post, highly adaptable to any situation, really...the ability to ignore/dampen noise in pursuit of a goal is something we all admire-> the QB who watches a blitz unfold in slow-mo/eludes tacklers/completes the pass, or the trader who watches a set-up unfold/ignores emotions/completes the trade...what would it be like to be 'in the zone' all day every day; i suppose Casey could teach us a few things...

2nd

your reference to slow-mo fits right in with the very focused human response . . . recall interviews of individuals in traumatic situations (like shootings or military operations) where their recall is tunnel visioned while the sounds are blocked out . . . come to think about it, remember an after game interview of a star player who had been "in the zone" that game . . . said he couldn't hear the crowd (despite the loud uproar mentioned by the broadcasters) . . . his focus was on the field, where his success drove victory for his team.

Heck of a nice move in TBT starting at 2pm!

There are a lot of traders talking about the Short treasury position - almost everyone seems to be waiting for the first shoe to drop. Not just here, but around the internet trading blogs. That worries me (but then again, I worry a lot).

jrinbc - "There are a lot of traders talking about the Short treasury position - almost everyone seems to be waiting for the first shoe to drop. Not just here, but around the internet trading blogs. That worries me (but then again, I worry a lot)."

Treasuries will eventually fall, but there are a whole host of economic reasons I can think of for them not to, in the meanwhile. The market dynamics are more complicated this time around, when was the last time housing prices and big ticket items dropped this much? These projections still don't project a rosy picture IMO.

I agree. let me win the lotto every yr. I will gladly pay half of it every yr for the rest of my life to taxes happily.

anyone want to give me the winning numbers?

Ckickenpookie, I agree, they will eventually fall. In a previous time as a novice trader (I've upgraded myself from "novice" to "Lower Apprentice" now that I've ditched CNBC, Cramer, my "financial advisor" and my mutual funds)I would have probably jumped in to TBT today, if not sooner.

Now, I'm thinking " Wait, Waaaaiiiit, and look for good technical confirmations. Early entrants , I believe, are asking for trouble. Lightning fast reflexes are the only potential salvation, and I'm still working on those.

I appreciate the insights, sir.

CP- the old guy is aka the guy who has evaded an early demise (due to accident, illness, or other misfortune)...;)

2nd - "CP- the old guy is aka the guy who has evaded an early demise (due to accident, illness, or other misfortune)...;)"

Sage thought my friend, fly low and slow, throttle off the turns and keep your bird clean.

Sub $600, fools like me will be willing to trade all but a year or two's worth of paper for metal.

Why? Because at that price there will be no exploration, no new mines, and mines will be going bankrupt right and left, resulting in a large decline in production. Today's $650 is Y2K's $300. The last dumper will dump, and then in hindsight everyone will realize how silly they really were.

"Paper is poverty" - Thomas Jefferson

Nice response to the noise Cheapy!
Even if there is extreme deflation, central banks and treasuries will "reflate" even more and print/issue more and more paper.

What fiscal trick, what sleight of hand could prevent the inevitable? Unless they plan on total default....

Yeah, myself, I always get a kick out of the death by shooting statistic. Now, many foreigners are always tickled about this "American" preoccupation, 2nd Ammendment aside, but I find it interesting how the media reports on shootings, but not those in self-defense. What also would be interesting, is the comparison between persons who are killed in auto accidents or by medical malpractice. People would be very surprised. Of course, they don't outlaw doctors, because they're trying to help. I guess it's the same excuse for the Fed, or our elected officials...huh, Kaimu....

GMAC receives $5B in bailout funds

7 minutes ago

(AP:WASHINGTON) The government says it will provide $5 billion to the GMAC Financial Services, the funding arm of General Motors Corp., from the $700 billion bank rescue program.

The Treasury Department also says it will lend up to $1 billion to General Motors so that it can participate in a debt for equity swap with GMAC, which is seeking to raise additional capital. The loan is in addition to the financial assistance the government announced Dec. 19 for GM and Chrysler LLC.

Last week, the Federal Reserve approved GMAC's application to become a bank-holding company, which enabled it to receive money from the financial rescue fund.

I'm still uncommitted on the gold side of TOG. My reasons are four-fold, I guess. 1) Gold is near historically high levels the last year or so. 2) Much of gold's allure is due to fear and uncertainty - surely we are near(past?) a peak in that! 3) Gold doesn't really accomplish much towards global economic development; as others have said, you can't eat it, it doesn't pay an income, and while it has perceived value, it's been a looong time since I've ever seen anyone pay for something on the retail level with gold, and 4) the intermediate trend is down (since March '08) - two lower highs and two lower lows.

I wish someone could convince me otherwise as I'd hate to miss a jump to $1500-$2000. The ONLY catalysts I see for gold going forward are 1)runaway inflation, but for that - aren't there TIPS, which pay an income in the interim? or 2) a total collapse of the US$ - I doubt Volker will let that happen :P

In the meantime, of course, there are lots of trading opportunities in the shiny stuff :)

Guys,
I found an interesting stock which might be worth reviewing:

The stock is MOS.
The financials look very good with a low debt equty ratio. All other numbers look promising as well.It has dropped by 64 % since its 52 week high.

It is currently tradig above 50 day moving average. ( 33 vs 30 ) but below the 200 day average of 78.87.

How does the stock look technically ?

I am thinking of taking a position soon.

Rusoro, soon to be annointed winner, up 48% today; their prey, GRZ up 25%. But why is the loser, KRY up 45%?

KRY has no assets worth buying. They're mere contractors to gov't miner CVG, which holds the concession to Las Cristinas. KRY's chairman in VZ was one of the main coup plotters vrs. Chavez in 2002.

And who is CVG's JV partner? - Rusoro! What does it take for people to read the handwriting on the wall?

Why is this story important? More and more countries may decide to "do it their way". The results will take some getting used to ....

FD: long Rusoro

http://www.cnbc.com/id/15840232?video=978741162&pl...

http://www.apexsilver.com/home.html

bad news for SIL

Paul,

Impossible to have FID hold more shares than the O/S of the stock.

I would be reluctant to place everyone in the media who has a contrary opinion as "selling his book". It seemed like a reasonable presentation. Several gold stocks doubled in a few months. They may be overextended. Carter said nothing about gold long term.
Frank

I agree with Worth's presentation. The daily chart clearly shows these stocks and the GLD etf are at key resistance levels. I expect a pullback. If that doesn't happen and we break through to the upside, well then we should pay heed to what Guy ("I'm no gold bull") Adami said with respect to the break out from that pennant.

FWIW.

File attached on daily GLD chart. RSI is > 70 and note resistance line. I also see a bearish divergence on the MACD (not pictured).

All good points No.2. Bearish divergence on the RSI too. I guess Adami's 'Im no gold bull' was what made me question.

Thanks guys
Profits to all
Ad

The whole Alaska going under Russian rule again is what makes this article totally absurd. Like hell Americans will fight internally while valuable pieces are under threat of falling into the hands of their rivals.

I think there's serious concern about the disconnect between parts of America (i.e. North West vs. Deep South), but I don't see the next 1.5 years bringing the USA to the brink of breakup. Still, with rising unemployment, it should be interesting to see what ensues.

I wonder on what exactly this Russian Academic is basing his wild theory.

Good points on GLD IF it pullsback under support (where it is now) but I would also note UUP is opening lower and my GLD macd is still up, stoch up, all MA's up. We *are* at the line so we should see some resolution soon....
A 70 RSI can go to 90....

Fazeli - Who knows how or why he came to such conclusions, supposedly he has access to "privileged" economic information gathered by KGB. I wonder what folks think when reading stuff like this... It's kind of in line with Taleb and other doomsday forecasters. I can't help hearing those words whispered by Bush "This sucker could go down" and wondering what he meant.

CP and goldbug,
Thanks for adding your perspective. Makes sense in your analysis.

Igor might wanna start breaking some bread with Mish:

http://globaleconomicanalysis.blogspot.com/

The WSJ is following the rest of the cat litter box liners into the abyss it appears....

stockcharts.com