Cara's Commentary & Community Chat, Mon., Mar. 9, 2009

I'm not nearly market savvy enough to determine whether or not it's a case of the dog wagging the tail, but watching the global markets synch with the $USD is fascinating.

Last time the $USD got up near then subsequently over 88, the markets tanked pretty hard... back in late November. When it dipped back down below 88, the market rallied hard. If I remember right, on Friday (Nov. 21st), $USD opened up above 88, then shot down during market hours and the Dow ran about 500 pts. Dollar rallied back after close, but opened down a few points on Monday and continued down. Market rallied about 1300 points over the next 5 days.

I was watching $USD closely back then... I've been watching it closely again since it crossed over 88 near the start of March. Watching the European market and US futures in relation to $USD right now is eerie. When it first breached 89, Dow futures fell off about 130 and European markets tanked.

$USD right now is in a tight, strong trend channel upward. If it breaks down below 88 -- especially into the low 87's, the bounce should run a bit if the relationship is analogous to Nov. But, it doesn't look ready to break the trend just yet, so that bounce might be short lived (and I've seen reports traders abroad are shorting the $USD, so the squeeze might bring back support quickly).

Pretty fascinating to watch the machinations occur globally in this environment... even if I don't have a clue of what it all truly means ;-)

By the way, I LOVE this site. Thanks Bill for all the great work you do!

Did anyone else have trouble opening the IBM Letter? Does anyone have a good link where I can find it, or was it only sent out to shareholders?

Thanks

Maybe those who have been misled into believing that the repeal of Glass-Steagall was a good thing for America will come to their senses after reading that report. Furthermore, maybe they will also finally stop listening to those who would mislead them and start thinking for themselves.

NEW YORK (MarketWatch) -- CF Industries Holdings Inc. said Monday its board of directors rejected a $3.6 billion offer from Canadian fertilizer giant Agrium Inc. as "grossly inadequate" while tweaking its own offer to buy Terra Industries despite a rebuttal from its smaller rival.

CF said it'll now pay $27.50 in stock for each share of Terra Industries

http://tinyurl.com/bjflnp

(Disc: Long TRA)

whoops. Caught with my pants down there. Market's already opened...

Machiavelli has taken up residence in Washington D.C. and lives as a lobbyist. We have known this for many years but you have shown us how he is working today.

Right on. Any entrepreneurs into any of the business sectors listed in the "Smarter Planet" section (pp 7-9) should be interested also. If this is Palmisano's vision, I see IBM as an alternative to venture capital and government grants in getting someone to look at your own ideas in Smart Traffic, Smart Healthcare, Smart Power, Smart Communications, Smart Water, and Smart Food technologies.

why's BAC going through the roof?

maybe they just ran out of reasons to sell ;)

>maybe they just ran out of reasons to sell ;)

oh, sort of like a why did the chicken cross the road thing?

>BAC - Don't worry, they're just having a good morning.

*Oliver Twist* "Please sir, I want some more" :)

Thanks Bill. Turns out I was just using an old version of Reader. Upgraded and it worked.

swissrobinson,

I can't do youtube (only on dial-up)

I'd appreciate a brief summary of his view

I was noticing that the beta boys you referenced last year and market psychology stocks that you also referenced are mostly higher...what do you think about these events, if they are events. Do you think they will pick up more/less volume from here? Thanks for any input.

Similar to Friday's late day surge, the DOW this morning received an almost a 200 pt. boost at the open when compared to pre-market conditions. With gold and silver taking a simultaneous hit at the NY open, one gets the feel of the invisible hand of the PPT at work. We will see if they can scare the shorts into covering to create another fictitious rally. With the shorts beginning to wise up though, the PPT may have their hands full as the day progresses.

If companies realize it takes management AND labor as partners instead of adversaries, everyone can make a decent living. We've gone from a union dictated model with employees being paid even when not producing to a condition where top management has been receiving outrageous salaries and benefits. Both created a condition which was doomed to fail and finally has.

While I think we have some different political views in general, I absolutely agree with this statement. Companies work best when employees and employers act as partners. I don't think that can happen when the employees are dictating terms on the company that hurt the company in the long run (GM's unions, for example). I also don't believe it can happen if management is making 100+ times what lower-level employees are making (most large companies these days). In the first case, the employees are putting their welfare before that of the company as a whole, and in the second, management has no incentive to make good long-term decisions -- their incentive is to stay employed for a few years, which is enough so they never have to work again!

If everyone is working together towards the common goal of strengthening the company, I believe it creates more success for everyone in the end.

Both very strong today.

I'm considering setting up an account to buy gold with either Bullion Vault or Perth Mint. I would appreciate any comments on which of these services is better for purchasing allocated gold. For example, is one of these cheaper in terms of commissions? Is one viewed as riskier in terms of the safety and chain of custody? Any comments are welcome.

Try having a couple of friends/acquaintances drop by:
http://tinyurl.com/dc43xz

Actually his reasoning is not illustrated in the review.

Some of the reasons America remains top dog:

1. America's navy continues to dominate the world
2. It has a trade and military advantage by virtue of it facing two major oceans.
3. America will be hungry for migrants as its own population contracts. It's economic status will be enhanced by a surging economy and large population in Mexico.
4. China may well disintegrate (see bloomberg review) and in any event is sufficiently hemmed in by geography so as not to be able to project power.
5. I recall Friedman arguing that India is not a country but a competing collection of states artificially cemented together. They will not have global clout economically or militarily.
6. Europe I suspect will not get its act together anytime soon so as to challenge the US. I recall Friedman pointing out that Europe is fond of retaining dinosaur industries that are uncompetitive. America's destructive capitalism (we're witnessing it now) will aid in bringing forth new ideas and business force and creativity that will enable the US to surge ahead once again.
7. Russia (see review) I think has enough on its plate with its own internal infighting between power groups and is sufficiently hemmed in by China, Middle Asia and Europe (especially if Europe absorbs former Soviet states) to keep it from being a global player. Russia, like Europe also has a terrible time integrating immigrants into its society, a positive glue that the US does not lack.

etc.

CONTROL CONTROL CONTROL - it's all about control.

Banner Bank has announced they will offer mortgage rates as low as 3.875% in an attempt to liquidate new homes an condos in Oregon and Southwest WA. The move comes as a means to give their builders a means to start selling homes and gives the bank a stronger position by allowing its borrowers to potentially stay solvent.

It's not profitable but I wonder if any other banks are willing to follow suit and try to get the housing market moving again.

sold my shares at 10.40 that i bought Friday at 8.72. Debating on whether or not to hold on to USB for the longer term as I'm more comfortable with them because I think they are a more conservative bank.

A GS hack that bungled much before he became Treasury Sec. Very sad indeed.
http://tinyurl.com/dxpdzt

Anyone know?

Marc Faber says the stimulus packages will touch off a big bear rally - get out of gold. I don't believe it. Jim Rogers says forget stocks, get out of the city, buy land and go into farming. I don't buy that either. Certain experts say the market has already bottomed and is ready to shoot up. I don't believe it. The only one I believe at the moment is Don Coxe who says there has to be a big and sustained run on basic metals - especially copper, zinc, nickel, aluminum. That makes sense to me. I am playing with the idea committing a percentage of my tiny stake to the relevant etfs. comments welcome.

TT doesn't need help with ideas, GS has everything buttoned up.

One or more of these, but progressing?:

http://finance.yahoo.com/q/hl?s=XLF

I just know who NOT to believe. the rest is up to us.

QT,

Any recs on a short etf to buy now?

vb

REW

"The only one I believe at the moment is Don Coxe who says there has to be a big and sustained run on basic metals - especially copper, zinc, nickel, aluminum."

If you want to go with Don Coxe's more diversified approach (ag/energy/metals), you might look to his commodity strategy fund: cox.un on the TSX.

Don Coxe to me is like a broken clock, except that instead of being right twice a day, he is right twice a decade.
From where will come the increased demand in the near term? Certainly not US housing, or car production. China looks hugely overbuilt. Yes there are many mine closures, and they don't reopen with the flick of a switch, but there is a lot of inventory to work through. I wouldn't be in a hurry.

The problem with Cox.un is anemic volume at best. 6800 shares traded as of 1:30 today.

Want to thank you all for responses. That's one of the great strengths of Bill Cara's blog. Friendliness and willingness to help. Much to ponder and much appreciated.

on the same weekend the usual round of calls that China is buying gold, that indian demand will pick up once they realize gold is going higher, that a myriad of activities are taking place that will lead to higher gold...

and gold is falling.

against a backdrop of why the US is having a bear market bounce, how it looks toppy..for the past 2 months...

the USD is still advancing and gold is falling. it looks as though gold is destined to fall should the market rally. i wonder how much and if the gold stocks will pick up along w/ the hype in any market rally or just track gold on the way down

im really growing tired of people constantly citing what the chineese or arabs or indians are doing that will explode the gold price. none of it has ever come to fruition and isnt at play. russia was supposedly buying gold and look at where we stand a few weeks later... when will people abandon these ridiculous notions that gold will explode when other nations start to buy gold, they dont realize someone has to sell it to them.

A long time ago I wrote a program (at Bill's request) to get the buy and sell alerts for the Cara 100 from the RSI tool and determine how well they could perform if you opened positions based on those alerts (I just assumed you'd go long on a buy alert and short on a sell alert) and closed them at the BEST POSSIBLE PRICE in the next 60 days (note that I use daily closing prices, so there are likely actually better prices that could be achieved during the day). I don't think I ever posted those results, even though I run that program automatically every night.

After remembering it today, I decided to look at it and see how bad the RSI system was working in this market. In my mind, in a down market, you often get buy alert after buy alert as the price keeps dropping, which can affect the usefulness of the system. While there's some truth to that (you shouldn't just blindly trade based on technical indicators), the performance has actually been generally positive. After checking with Bill, I decided to share those results with the community.

Bill comments: It's the experience and involvement of a trader that leads to effective closing of transactions, and that even when opening a new position where a Buy alert is given, we often wait to find lower prices or sometimes we precede the Alert during a day when knowing that the end-of-day indicator is going to give a Buy signal. Moreover, when a signal is given, we always look at how trades in the peer group are operating. The system, then, becomes part of the art and science of trading. By itself, it may not work.

Remember, this is data based on an ability to exit each trade on the best possible day. So don't expect to match these performance numbers in your own trading based on buy/sell alerts, unless you can see the future. :)

Here are the results: http://rsi.caracommunity.com/RSIApp/performance.html
(Note: I re-ran this a moment ago, so a few of the trades are based on intra-day numbers for today. This will be fixed when it runs again overnight, but until then you should probably ignore the few trades that it suggests could be closed today.)

Here you go Dr.. you can add the Hedge Funds to the list now.

Hedge fund investors turn to gold in bet against central banks

http://tinyurl.com/agg72v

I bought mine here:
http://www.booksonbiz.com/estore/index.php?main_pa...

I really find that concept appealing. It reminds me of an article on healthcare that was posted here which tried to say that exploding healthcare costs made it a "growth industry". I pointed out that it was an absurd way of thinking of it, because we'd all be better off if we could be healthy and spend less to do it (in other words, just because someone can make money off of it doesn't mean it is good for society).

I remember when I first learned about the GDP, I wondered how basically adding up all the money that changes hands could really be an accurate barometer for the economy. I think the idea of GPI addresses that directly -- just because money changes hands in some activity doesn't make that activity good/positive; just because no money changes hands in some activity doesn't make that activity bad/useless.

Thanks for the information on the GPI concept.

I know we were working on the Amazon/Amazon.ca issue, but it obviously isn't resolved. As I understand it, since it was originally published in Canada, there were hoops to jump through to show that we had distribution rights in Canada. I'm sure this won't be an issue for the next book, but that's little consolation now. If you can't find it through other sources, let me know and I'll see what we can do to sell you a copy directly.

The banks are insolvent?? The gov has no plan anyone believes will actually address the problem?? The credit markets are once again seizing up??

Here's another concept it touches upon, and I've lifted the concept from this site rather than type it out: http://www.gaianeconomics.org/chrematistics.htm

... the distinction between the social and natural resources economies (oikonomia), and the money economy (chrematistics). The term oikonomia, from which the term ‘economics’ is derived, is concerned with the management of the resources of the household for the benefit of all its members over the long run. If the term ‘household’ is expanded to include the ecological resources of the land and its peoples, its institutions, language, shared values and history, we can visualise an economics designed to benefit the community as a whole. Chrematistics, on the other hand, relates to the manipulation of property and wealth so as to maximize short-term monetary exchange benefits to the individual owner. We conclude, in The Politics of Money, that no community or civilisation can exist without oikonomia, the natural and social resources economies which sustain human life on earth. However, chrematistics, the economy of short-term personal monetary gain, has come to dominate human society. Its cancerous growth now threatens the human species with extinction (see The Politics of Money pages 226-229). Ordinary people in their everyday lives collude in this destruction as they secure their money incomes first, with the never-quite-achieved intention of getting around to thinking about the longer term implications of their impact on the social and ecological infrastructures – eventually.

I guess trading and investing is really the short-term activity of seeking profit, and I suppose we are just trying to do the best in the system in which we live. I'm sure Casey would agree, as he clearly lives for, and tries to spread long-term beneficial ideas of living, but visits this board, so likely partakes in trading/investing as well...

Oh I don't discount the idea that the state can run our lives in a manner more destructive to our liberty than the rudimentary economic tools used in the present epoch.

But when I see the approaching train wreck coming my way in Europe, America is looking somewhat progressive by comparison. The best that can come out of this mess for Europe is that some of the EU institutions will be hardened and centralised instead of the ad-hoc nationalist approach we have now.

Russia's been overproducing unwanted produce a la socialist style to offset the coming social disaster - they clearly have much economic reform awaiting them.

China doesn't have an economy unless America and Europe buys. Forget that for the next few years.

I see a mix of economic and political reform which will put the US back on track to growth (until the idiots screw up again) - but as the big guns like Soros suggest, growth induced through investment, not consumption (back to the 50's indeed).

Never forget Grym. The military-industrial complex has provided the world with its present technologies. It will provide the US with a leading edge of new technologies for a new economy.

For example, I'm astounded to hear of production fuel cells for the US military - field generators and submarine propulsion. The hydrogen's gonna come from water sooner or later - for sustainable clean energy.

Science fiction is being developed into reality in our lifetimes. That is indeed the basis for a new path to growth.

>The banks are insolvent?? The gov has no plan anyone believes will actually address the problem?? The credit markets are once again seizing up??

Stop that negative clap trap! You're either with us or against us...

(I have a fair weight of my capital invested in financials so excuse me if I take the contrarian view:)

If the market bounces as a result of the mark to market issue and CAT gets up to $30-$32, I will be initiating a short position on it. They have a ton of debt with a lot of exposure to "submerging" markets.

With The Rohm and Haas deal complete where is Dow headed. They obviously over paid for this deal, but their stock probably reflects that. So will it go up, down or be dead money.
Bob

funny you should mention that
got some @ 6.04

I've used BullionVault and found it easy to use with no problems. I chose to have the bullion held at the Zurich vault.

Well, I did miss the point of the original question and I apologize for the sarcasm. However, there is nothing 'negative or 'claptrap' about what I wrote. If you want to dispute the claims I made I am more than willing to listen as I would like nothing more than to buy into XLF at 6 and have a reasonable hope of not getting crushed.

Anyone,

if the USD is to fall. Against what measure will it fall?
It looks to me like all currencies are destined for weakness....

DB

Dont know if it is or not, but thats how I am playing it mental stop at 5.88 and absolute stop at 5.55. Profit target 6.50 ish.

"if the USD is to fall. Against what measure will it fall?
It looks to me like all currencies are destined for weakness...."

It needs to fall against it's largest deficit trading partners. Trade is not trade when deficits accumulate to unsustainable levels.

"if the USD is to fall. Against what measure will it fall?"

Perhaps against the price of gold, butter, guns etc - i.e., inflation

If unemployment is growing, and retail sales are falling, for example is saying so unacceptably negative? With respect, there is no "with us or against us" in taking a negative view of what is going on in the market. We're all entitled to our own viewpoint.

In @ 2.64...out 2.72.

For Banner to offload properties in default at lower than market rates is absolutely profitable! The other banks who were known for funding builders are now underwater holdi g a high % of nonperforming assets. No doubt the FDIC is behind their generosity.

FAZ: 150 by Mar 20th

BAC looks like a total crap shoot. I will remember Bill's new years lessons from 2008. Any company can go to zero. I would add, and so can BAC.

As to trading it's daily action......crap-shoot on any given day, I'd rather guess on the weather 2 weeks from now....my 2-bits

I like the way slw is trading and will likely pick up some at ~5.95-6.00 USD. However it will be a partial buy with the gap of jan 15-16 being my next buy target... happy to wait for the price to come to me...if it ever does.
S

QT,

when to buy faz?

You and mucklovin were right on the tech drop. (I got into REW after your post and it went straight up.)

Strangely quiet.

QT - i got out of FAZ on friday and bought some FAS today.... If u look at the chart for FAZ, it goes up straight for 8 or 9 days & does the same going down. Today it dropped quite a bit in AM

I may be wrong, but I think TARP might be behind their generosity. Actions like this from more community bank would be a welcome relief to builders.

Loanletter -correct me if I am wrong but you are in the NW correct?

Since your previous calls were all correct, you have my attention. Especially since the selling so far doesn't qualify for a panic yet. However, the call would be more useful if it was supported by some king of TA or EW analysis besides gut feeling.

Is this based on the 650 support that was not reached yet?

"it looks as though gold is destined to fall should the market rally."

dr.cosa, it might be that the fall in gold today has nothing to do with the impending market rally. I would actually expect the opposite: when a sustained multi-month bear market rally finally begins, $USD will start weakening as a safe haven (Bill wrote about it many times), and all commodities and PMs, I believe, will do very well because of the weakening $USD AND because people will believe that the economy is picking up (and hence we are closer to the ultimate inflation when the velocity of money picks up across the globle). Maybe QT's prediction about a market collapse in the next few days will materialize, and in the light of that collapse and a $USD moonshot gold is already weakening...

From what I can tell, as soon as the boys from the Fed went home, gold did just fine. Today I see that it got pounded at 10am, 12 noon, again less dramatically slightly after 1:00 and the last time at 2:00. After that low, gold rallied $10. It looks like gold had pretty good support after about the 920 level, because the 1:00 and 2:00 interventions didn't cause a large drop, and the rebounds were reasonably strong.

What I call "interventions" are the times where there was a significantly larger volume, and a substantial initial point decline in GLD. I wish I had futures market volumes, but stockcharts does not give me that.

If this really is a valid pattern, there's gotta be a trade in here somewhere. At the very least, how GLD responds to the first intervention of the day could give us a clue to how well it might perform for the rest of the day.

Then again, I could just be chasing shadows...

In case you were trying to figure out which banks are the least risky, here is a great place to start. Granted the figures are from 6/30/08, but it's pretty clear which banks were the more conservative ones:

http://3.bp.blogspot.com/_oFZa8yk9ndQ/SO0ysWh6pwI/...

Thanks for the link to The SOLD_OUT pdf ,it is a must, read very informative.It reminded me of an article I read recently pointing similar accusations to the current uk government and their close relationship with the Square Mile in London and how they made a pact not to interfere with the banks and there dealings as long as they had large tax revenues to spend on there pet projects ,must of which have been failed costly experiments.Now a similar financial situation exists here as in the US ,i.e. dire. Here is a link to it :-

'Labour is still too cosy with the City'

http://tinyurl.com/batzvf

If (or should I say when?) the US Government confiscates the gold market should the treasury market implode b/c of our skyrocketing deficits, what will happen to the Gold ETF?

I don't think people have contemplated this issue. There is not even close to enough gold to back up amount of paper that is being traded in the Gold ETF (GLD). This is almost a completely worthless ETF in my mind, akin to the South Sea bubble created almost 300 years ago.

I'm kinda prejudiced in favor of the weekly charts. The large volume breakdown from 800ish certainly got my attention.

Could a frenetic rally happen? Sure. Last time I looked there were over 50K calls traded on the March SPY 75 strike. Somebody thinks it can happen...and maybe that's why it doesn't.

So, I'm almost all cash with a big chunk of March 75 SPY calls at .35 cents and some FAS 'crack'.

Hardly a statistically favorable choice.

"The second argument sounds more well reasoned to me..."

Agreed, the second argument (Rosenberg) reflects with current phenomenon and assuming my rudimentary comprehension of economics is correct, the longer this situation exists, the more correct the first argument (Buffett) will be.

Obviously there's some kind of tug-o-war going on and for obvious reasons it's not a good idea to be on the wrong side. The wild card of a new administration doesn't seem to have changed the game negotiated behind closed doors. Regardless, we can be confident there are reasons, and we'll have to make lemonade from the sour fruit.

So what's new and when will the tide reverse direction? Perhaps once the unpublished goals are met and sweeping policy change is announced (ideal case), or after prolonged financial agony forces change. I vote for the former ASAP because the latter seems incredibly destructive.

C'mon Sharkie,

this is fun....keep it that way!!!

I'm a fan of NOV as well. Insiders were major buyers back in November, the company has twice as much cash as debt, and it was trending upwards since December, vs. SLB which was trending slightly downwards. And I'm trading it. :)

What a great read that "Sold Out" article is in Bill's first comment today. Still bashing my way through it, but I loved the way the writers closed out the Executive Summary, on page 20:

"If we are to see the meaningful regulation
we need, Congress must adopt the view
that Wall Street has no legitimate seat at the
table. With Wall Street having destroyed the
system that enriched its high flyers, and
plunged the global economy into deep
recession, it’s time for Congress to tell Wall
Street that its political investments have also
gone bad (i.e. their excessive campaign contributions
and lobbying). This time, legislating must be to
control Wall Street, not further Wall Street’s
control."

Bold text is my insertion.

There is a good chance FAZ could hit that target if this wave down which we are in plays out. But we are currently in DANGEROUS TERRITORY right now!!!! We are in the process of finishing primary wave 1 down which started 10/07. The current [minor] wave down we are in could end at SP630-650. Then a wave up will follow to maybe SP 735+/- followed by a wave down which will complete wave 1 down [615?]. Then a multi month rally should take place after that.

***BUT***.... this minor wave down which we are in now,
could TRUNCATE at any moment and a snap back rally will occur trapping you. So think twice on this. I am NOT in FAZ and don't plan to be right now.

vanillabean: So you "banked some coin" today...Good!
KaChing$$...KaChing $$$... ;-)

I'm not a market wizard nor a skilled a chart reader, but I just placed MCD,JNJ,KO,PG,MSFT on a chart together. All except MCD has broken the NOV lows......looking like uncharted waters for some one like me. These companies are all known for their cash cow status, correct?

Selling is occurring to meet some obligation for cash and the good companies are getting thrown out too. This could reflect that future earnings are in question, correct?

What else is going on?

Bill - "The link is attached to a comprehensive report of the reasons why the financial system collapsed. If we are to learn from our mistakes, let no one re-write history."

Thanks for providing the link, this documents the chain of events better than any single resource I can think of.

Is it too late to go short? As you know, we aren't your children, we simply value you opinions highly!!!

CP - "Is it too late to go short?"

Haha. Exactly my thought, Chickenpookie.

kaimu - I for one certainly agree, three trillion percent and rising exponentially!!!! It would keep honest government honest; step #1 in effecting change for the better if only government had some inkling of the meaning.

Religion/Money/State

Man! We're getting right down to the nub of this whole problem now...a bottom can't be far off :P

"please explain Glass-Steagall"

Quoting from "Sold Out":

The 1932-34 Pecora Hearings, held
by the Senate Banking and Currency Committee
and named after its chief counsel
Ferdinand Pecora, investigated the causes of
the 1929 crash. The committee uncovered
blatant conflicts of interest
and self-dealing by commercial
banks and their
investment affiliates...

The Pecora hearings concluded that
common ownership of commercial banks
and investment banks created several distinct
problems, among them: 1) jeopardizing
depositors by investing their funds in the
stock market; 2) loss of the public’s confidence
in the banks, which led to panic
withdrawals; 3) the making of unsound
loans; and 4) an inability to provide honest
investment advice to depositors because
banks were conflicted by their underwriting
relationship with companies....

Glass-Steagall’s strict
rules originated in the U.S. Government’s
response to the Depression and reflected the
learned experience of the severe dangers to
consumers and the overall financial system
of permitting giant financial institutions to
combine commercial banking with other
financial operations.
Glass-Steagall and related laws advanced
the core public objectives of protecting
depositors and avoiding excessive risk
for the banking system by defining industry
structure: banks could not maintain investment
banking or insurance affiliates (nor
affiliates in non-financial commercial activity.

Eery how we don't learn from history.

"please explain Glass-Steagall"

An entire dissertation:

http://www.investopedia.com/terms/g/glass_steagall...

O.K., I'll set myself up for a fall:

A small tax on each financial transaction
would discourage speculation, curb the
turbulence in the markets, and, generally,
slow things down. It would give real economy
businesses more space to operate
without worrying about how today's decisions
will affect their stock price tomorrow,
or the next hour. And it would be a steeply
progressive tax that could raise substantial
sums for useful public purposes.

And that is bad because...?

I understand it would impose an additional cost on yours and other trader's business, but, with ~25% of this new (crappy?) economy devoted to financial markets (much more in the U.K, I understand), perhaps it's just a long overdue place for gov't. to obtain their pound of flesh.

"And that is bad because...?"

Bill has explained the ramifications quite clearly, I think that was in his WIR or Sat report. Every coin has two sides... Anyway, we've been discussing the subject at length.

I know, I've read it. I've just not heard any dissenting opinions - not unexpected on a blog of traders. This is an industry based on fear and greed which has, historically, created an endless series of heartache and expense to innocents. What's so wrong with having the people (i.e. government) tax it, so that when it blows itself up, like it always does, and always will, there's a bit in the public kitty to apply towards stabilizing it.

Furthermore, a little cost barrier to participation in the financial markets can't be all that bad - I, personally, don't feel that comfortable knowing that every Joe-sixpack, all revved-up after watching, for e.g. Cramer on CNBC, can log on to their e-trade account and make decisions that affect the future of the companies whose securities I have decided to hold.

Well I guess my concern is it flies in the face of free market spirit. Otherwise would or could possibly help a non-trading imbecile like me who doesn't realize there's more than one meaning to the word comprehensive.

Mackinaw

How do you feel about someone who bought a 500K house and then decides he can only afford 250K and we should "forgive" the balance. I don't want to pay for the excesses of the investment banks and more importantly I have no faith that the fund would be applied to it anyway.

To me the tax looks like a penalty to trading. Is it trading that got us here?

Or, are traders (the market indexes) reacting to what shape the big banks are in and the boom/bust cycle of capital markets?......

obviously a bust for now

To take from trading seems like a losing proposal.

Instead, simply put the press in warp drive and issue light years of debt!!!

Beam me up Scotty!

I just took delivery of Canadian Maple Leafs minted 2009 .9999 pure gold, 988.00 US or 1265.000 I bought in the the high range, in fact I have been buying physical
since gold was 700.00 per ounce. I have some money in Central Fund, Central Gold Trust, and of course the mining shares, but if gold pulls back I will buy more physical every time in increments of a 50.00 price deviation.

My advice is have physical,close at hand, silver dollars, the last place you want to keep them is in a safety deposit box, it is illegal in Canada to have cash in your safety deposit box at a bank. Certificates are just paper, a promissory note.

After you make your first physical purchase of gold, then you start buying in cash,as any transaction over 10K is reported, do you want your government to know what your assets are, and where they are, real assets are safer buried under the doghouse, at least you can dig em up and barter them for more dog food.

Scanning today's posts was fun.

The community is really taking a deeper look.

At times the best answer: is no answer.

For example when Bill posts:

reasons why we're in this mess
The answers no longer matters since it has gone out of hand, out of control. With things so out of control all piece meal solutions will corresponding be out of control and in reflection do as much damage. IT seems we are in the negative feedback loop. The whole shebang is going to end up in a new system eventually...

So how to answer such a beast of a problem?

With no answer!

Let the beast fade, rather than prolong its death throws and permit it to continue to hurt more innocent people. Is the current system really worth saving? From what I read here every day, it seems like the answer is no. Yet people hang on to it, since it is what people know.

If you look into how abuse victims re-act, the population pretty much follows the classic abuse victim's profile.

I suppose we are in the middle of a massive reboot. I personally don't want to be around to feel that boot. (no matter what form that boot takes I should add)

I help people jump out of personal negative feedback loops all the time. It isn't hard, provided you make sure they are ready to do so. It's all timing really and holding heart in a special way (some Taoist tricks of the trade). It's not time to fix or answer this larger economic negative feedback loop... simply becuase those who run the show are not ready yet, and we the people seemingly haven't learn enough of a lesson to want to make a difference. Look at how people cling to the idea of a depression, or cling to the idea that it must be bad... Too many people are holding onto an investment of self punishment... Which is part of the problem.

With all this potential being released: it doesn't have to be negative for our future.. But many people are only holding on to that currency in order to let go right now... So no answer is best again, since it lets people stop believing the future has to be so negative...

The potential for a good outcome is as likely as a negative outcome... what jiggers the results in how we perceive the solution to be... and right now too many people are holding on to the idea of the larger negative cycle. (Re-inforced by the current mess)

You don't throw your hand into the turned on meat grinder to save your ring that just slipped off... You turn off the meat grinder. Until we see this financial meat grinder fully turned off... you won't see me stray far from my waterfall in the backyard.

So the best answer is no answer, patiently skip off to the side , invest in yourself, family, local community etc:

Investing and having faith in yourself. All positive outcomes no matter what happens in the current mess. Take this tact and you jigger the odds in your favor to weather this mess to achieve positive outcomes from the releasing potentials.

Simplest generic answer I can think of.

Everyone will have personal variations on how to implement and grow from the generic answer.

Peace my friends!

I bought DOW, COLM, and AEO. DOW only VERY small position. Something very rude happened to DOW today. So I'm a bit grumpy. Does anybody have an insight into what is happening here?

Mackinaw- Anyone with the bulk of his/her stock portfolio in retirement accounts already trades with significant disadvantages:

(a) A ban on "excessive" trading- if one is deemed to be trading excessively (ie, deemed a "day trader"), the account may be limited to one trade a quarter.

(b) Options are disallowed. So you want to control risk utilizing straddles? Sorry.

(c) Shorting is disallowed. You want to bet on the market going down? Sorry.

(d) Admittedly, in some cases, the use of short exchange-traded funds is allowed, which can be a great equalizer. However, (e) is more likely.

(e) In most cases, money in company-sponsored retirement plans means your fund choices are severely limited, and will most certainly not include exchange-traded funds that bet on the short side. Even given a wide selection, you are still hamstrung with (a), (b), and (c).

Let's compare trading to stock car racing (also a high-risk sport that requires quick reflexes and where experience counts). So they're now telling you that on top of (a) allowing you to refuel only at certain times, (b) taking away your roll bar, and (c) limiting the use of aerodynamic strategies to professional drivers only (ie, not you) they now want to tax your potential winnings to the point where you will make money only if you come in first or second place. Why? Because a few irresponsible drivers who didn't know what they were doing caused a few wipe-outs and destroyed the track. So let's leave the racing to the irresponsible, and repair the track by taxing the hell out of the amateurs.

swissrobinson,

"The military-industrial complex has provided the world with its present technologies. It will provide the US with a leading edge of new technologies for a new economy."

No question the military-industrial complex has been responsible for a great many advances, as has the space program. I am a true believer in the idea the Mutual Assured Destruction deterrent got us through the Berlin Wall and Cuban Missile Crises. The lack of a religiously fanatic player was probably a major factor as well.

This is no longer the case and our turning inward has already begun. While I agree with many of Ron Paul's views, his tendency toward military withdrawal from foreign bases I see as a step to replay the 1930 rise of Japanese Imperialism and Fascism in some other form and location — N. Korea? China? Iran? Russia?

Unity as in United States is what has held us together — we need to get it back. A two class society is a sure loser.

http://tinyurl.com/54qccl

If you're long right now (as I am), it's a depressing read. But I can't ignore dissenting opinions.

Oh dear! Plzzzz. Seriously, you guys are starting to sound like Paulson and his mid-Oct. visit to Capitol Hill which scared the he$$ out of the legislators to provide $700 Billion which, basically, vanished. I mean would a small tax (negotiable amount...really) end your business? Many countries have equity taxes. China, for example had one, and when the market started tanking, they lifted it, hoping to draw back in the speculators to lift it.

Well, it hasn't been agreed upon yet, so there's hope yet that it's really small :P

Amen 2nd.

Mackinaw- your logic is so wrong on many counts I don't have time to add it all up except for one point. Blaming billy beer can from booya nation for your stocks going down is just plain silly.

Now a little rant on Retirement account limitations.

I have experienced these retirement restrictions today. I did a bad thing. I guess I took a free ride in one of my Ira's and I feel so bad. You see in cash accounts it takes 3 days for a trade to settle. 3 days in the age of computers to settle a stock transaction. Heck I can order a case of Depends from Amazon.com and get it to my front door in two days, but yet it takes three days to settle two mouse clicks in the information age. I knew the rule and I broke it, so I guess I deserve the limit placed on my account. I am so guilty please forgive me community for freeriding. Hope you all take it easy and forgive me.

Mr. Freerider.

Well, the suggestion is .5%. 1000 x$40 x .5%? Yes, it would end my business; business of all active traders; business of all online brokers and much more. Then when there is no liquidity for your, buy and hold investor's, stock and the spreads are at 30-50 cents, that will be added cost for you as well - providing your broker and the exchange itself still function after losing so much business. If you think it's simply a fear-mongering, I hope we will never have a chance to check it out.

More importantly though - why do it? Who benefits?

Mackinwa - I'm glad you're arguing the other side of the coin, this board does tend to be too one sided at times. I respect an honest effort to examine both sides without automatic bias. Again, my feeling is this tax is engineered or will be manipulated to provide advantage to a select few. That said, if it benefits a majority then perhaps I could support it.

Mac- None of my colleagues, friends, or acquaintances...none at all...are in cash. They are riding the markets down. Even the ones with significant weightings in bond funds. None of them trade. None of them gamble. Yet they feel as if they're playing Death Wish 2. What about ultra-high net worth players? Even leaving Madoff and friends out of the discussion, you're looking at a record number of hedge funds/value funds/even Warren Buffett for crying out loud mailing out mea culpa letters. No need to apologize for feeling confused.

proudPapa is right. Why not just tighten margin requirements?

Support of a trading tax?
Are we kidding me?

This is why we do not let academics play in markets. they have no understanding besides what the view looks like from their ivory tower windows.

A .25% tax per trade or .5% round trip is... lack of a better word dumb.

it will hinder liquidity and increase volatility. What does that mean? Larger variance between the BID and ASK as their will be less participants in the market. See again, we are trying to "socially" address a symptom not the problem. This would be a detriment not a bonus to the market. What happened after the short selling ban? those stocks went up (short covering) and then went down because of NO BIDS!

As bad as some people hate shorts, they fulfill a purpose to provide liquidity. Markets are not meant to go up forever, it is your job to ensure that you are not chasing demand instead of letting prices come to you.

Let me rephrase that... Typically if prices go up, demand goes down In markets, if prices go up, so does demand. Social herding... Now the herd is realizing that prices are going down and betting that way, to me we should be near a bottom on that feeling but the social herd may push this down lower... time will tell.

Solutions like those, just show that they have no fundamental understanding on how markets work. Just like the congress person from Oregon. Do your job and let the free market take care of itself. In fact mr congress person, DO NOTHING because anything or everything you do only makes our problem worse!

GREG - Short term interest rates aren't going up anytime soon. Rates won't go up until the economy turns and that is not happening till late 2010 at the earliest. Yeah stimulus might, might make a blip on the GDP, no thanks to the fuzzy math the government uses... carry the one, drop the three and put a seven there... ok got it!

The question about your loan (ask loannetter) is what are your goals with the home? are you currently on a full amortized loan? Your loan could adjust lower the next adjustment, then again it might not. Have you lived there a long time? Are you going back to another 30 year loan? plan on paying the home off? tried calling the servicer asking to fix the rate for a longer period of time.

The obama plan is nothing more than a 5-6 free lease on your loan. Essentially drops your rate for a fixed period (if it is owned by fannie or freedie), chances are if you loan is more than 417k it is not because it was a JUMBO loan. Unless you live in Hawaii or Alaska or own a du-quadplex.

What are your recovery costs for refinance?
Any way you look at it, job verification will be a must too... Lots of things to consider as the decision might not be easy but make sure you know all your "p's and q's".
Loannetter would be a good resource for answers, I would assume..

Either way - pretty sure the trading tax presentation is DOA.

Limiting margin for hedge funds is addressing the symptom. Finding managers that are prudent and smart, well that is the source of the disease.

Thinking of it further, trading on margin/leveraged is not unlike the margin/leverage of the last 30 years in the form of credit cards, auto loans, increasingly lax mortgages, and home equity loans. It's just on a different time scale.

Consumer credit built a consumption bubble over 30 years that is being unwound now. Margin/leverage builds shorter term stock (bond, fx, etc) bubbles that are unwound quicker and faster, causing the volatility and dislocations. Think about it, margin is just debt, borrowing purchase power from the future accelerating markets up. When future comes and margin is called/paid, demand accelerates down. In stock markets it takes months to years, in economy it takes years to decades

I disagree. A stupid manager can do no harm if he can't use margin. A prudent and smart manager will be lured to the big returns offered by use of margin and become corrupt, just a matter of time.

In your previous post you said 'let free markets do their job'

I'm starting to see all debt as anti-free market. It's all manipulated by interest rates and banks, so how is that free market?

Margin and debt might probably be fine if everyone was alloted a finite amount so you don't get ballooning debt fueling housing speculation and LTCM situations. But why bother? Get rid of fiat and fractional reserve lending like Kaimu says and voila, half the sh*t that went wrong the last 30 years couldn't happen

"Either way - pretty sure the trading tax presentation is DOA."

So am I. I simply don't see the benefiting party to push it through - it's a lose-lose proposition for everyone involved. Wrote about it recently,
http://www.realitytrader.com/blog/2009/02/securiti...

BTW, China increased such tax in 2007 to COOL DOWN their overheated market (http://www.chinadaily.com.cn/china/2007-05/30/cont...). Surely cooling down is exactly what our markets need right now :)

Casey,

I guess the reason we have such vigorous debate on the board is that a) we enjoy trading and b) hope for a brighter future (and participate through the market) but c) not get burned by further downside.

I'm mostly out of the market myself as well, which allows my trading to be much more emotionally detached, which is a great learning experience.

And I suppose discussing all the negative news and data is just a way of preparing for the future. Does it change the way I live my life? A little bit, mostly just in ways of disaster preparation which everyone should have anyhow. But I still go to work, continue to learn non-economic stuff, and spend lots of time with my family, this blog (LOL! just kidding :)

Have no fear, the Donald has a new book out that will help you all.

http://img26.imageshack.us/img26/3373/trumpreal.jpg

:) very much so!

In my long winded way I was trying to remind people not to make the negative a personal self fulfilling prophecy.

Potential is neither good nor bad, just what we label it to be in retrospect.

Why not concentrate on the positive aspects and trends to better navigate the times.

So that we can avoid the stampede of those making sure it turns negative.

I have stopped fighting bulls and bears and move to chickens

Here is a shot of Bill Fighting the bulls and bears :)

Kaimu can correct me on this, but I think if you're in the USA you must go through an intermediary to deal with Perth Mint, whereas with Bullion Vault you deal directly. BV appears to be very "correct" in their approach to ensure that they're not used for tax evasion or money laundering, but they don't have the history of Perth, so perhaps require a little more faith in their integrity from a customer's perspective.

.5% round trip? Don't forget, on LOSING TRADES TOO.

Ask John Vogel about how that .5% will affect your returns...he's built a system of funds around this very concept. Over time we're talking perhaps hundreds of thousands to millions in *individual* returns

If you want to stop wall street and stop retirements and stop investment and stop foreign investment in the U.S....then tax trades.

Yeah, let's stop encouraging foreign investment, that is a great idea....

I know I would move my funds overseas and trade foreign stocks tax free until I repatriated the funds, or move in with my Canadian relatives.....

Doesn't that tell you something, the Chinese lifted it? Yes, Mackinaw, intraday trading would be over tomorrow. Do the calculations. take .5% out of a round trip stock transaction.

We're not talking capital gains, we're talking a sales tax that can equal or exceed the gain on a single intra day trade. Not to mention, if your trade ratio is 65%. That means 35% of your trades fail.

Now, add in a 1% stop for those failed trades, on which you will also have to pay a transaction tax, and where does that leave you. Well, let's see...you lose the 1% of your capital on the stop, and you lose .5% of the gross value of the stock transaction. So, if I have a $15k trading account, I risk $150 on each round trip trade (+commissions). So, on a $50 stock (1k)shares, on a stopped trade, I lose $150+$500 on transaction tax, before commissions. I have to make that up on my other trades.

On a 1:1 return on that $150 I'm willing to risk, I normally make $150 (-commissions). I would have to risk 4x the capital under current conditions just to break even on a trade, never mind trying to make up for losing trades.

Now, the average investor pockets what..10% a year. So, 20 round trip trades adds up to 10%.

As far as the reduce volatility issue...As I said, just look at the vix over the last 20 years, it elevates during times of financial stress (duh) just like we do during times of emotional stress. As Bill says, the market is us. Doesn't it make sense that the markets are stressed now? We don't know what's going on with: 1)the gubmint's version of financial hide the sausage, 2)what the off balance sheet, SIVs, CDOs really are worth. 3) and we have the repeated historical precedent showing that often what is done is the wrong thing done out of political expedience. THAT IS STRESSFUL!!!!

Kaimu....where are you?!

Is there limits on number of trades, Day trading allowed? and how long is your settlement time.

Any one else noticing how easy the money has become on the short side? ... too easy. I think it's now time to play on the other side or stay flat.

dow5300

Another thing to love about Canada besides Molson, Neil Young and socialized medicine. Now which Providence has a tropical climate, so i can look for some property.

For a capitulation trade? Might add it for my 7 year old.

"Another thing to love about Canada besides Molson, Neil Young and socialized medicine. Now which Providence has a tropical climate, so i can look for some property."

Or I bet we could move to Bahamas right next door to Bill....

Vad, Everyone, what is the prognosis on this. Sell the news, Short term bounce, Or like that nimrod said on fast money a 100% move in the xlf. When will we know something.Maybe the best move will be to stay the heck away from financials.

Placing a sell stop limit order on 2/5 of my remaining SLW, stop at $5.99 and limit at $5.9. As I posted already today, I don't like the recent action in gold, and so I don't want to lose big time on the PM miners if gold/silver collapse. In addition, I sense that a big rally will come soon, and so selling some SLW and buying some 3X ultra-long might be a reasonable "lateral move" to do at the beginning of a rally. I already have a large position in ERX, and so if the market gaps up one day and runs away from me on full steam, not letting me open any new long positions, at least my ERX position will double and compensate all the losses I took by closing my ultra-short shorts (both FAZ and ERY).

Papa,
It could be the level of agreement you have with the broker. If you look into why that is so, you may be able to get it changed. It may have something to do with the cash reserves you currently have in the account.

ALOHA !!

Try trading on the ASX ... Only the Home Of The Free And The Brave could come up with a "transaction tax" ... Socialism USSA style!

A tax transfers wealth from one entity who is productive to another entity who is not. This is the nature of America and its BIG GOVERNMENT where the irresponsible are subsidized by the those who are responsible.

Who voted for that?

I quit that game in the 1980s ...

Banks who fund construction loans anticipate the money will only be 'out' for about 9 months. They generally use the LIBOR as their index so it's volatile but cheap. When they roll over to permanent buyers, they get a long term payees(3-5 years is the avearage these days of buy and hold mortgages). Saying that; the wannabee builders up our way went on a mad piling on of larger and larger homes for the seemingly unquenchable thirst of Californ-I-A-ers moving north with their cashed in city chips, which ran up values. Now nobody has the dosh for these big ugly boxes in the 500K plu range. In fact the new sqeeze up here is on 300-500K now. After all if you can buy a 500K house for $400 at 3.985% then why pay the real price for a $300K home? Quantity not quality abounds here. Some very good builders did the right thing and landed in the middle and I know excellent several builders with homes on the market over a year. They have exhausted their own funds 9 months ago. Any price will move these empty homes. Unfortunately $300K is still far above what the working wage person can afford. I asked our Building Industry Association CEO a few week ago what made him think the 'market would recover' and his answer fell flat ...mumbling something about the temporary nature of this economic cycle with more 'the demand is there' rhetoric. What he fails to accept is that todays younger, savvier, (or older more sophisticated import) qualififed Home BUYER has become more discerning, less interested in flamboyant excess and seeks quality over quantity closer to town and a decent school where they can walk to a cafe. Many of the Homes on the block at these low rates are slammed up cheek by jowel on tiny lots behind shopping malls, isolatee between highways. No sidewalks, no libraries, no public parks. Our planners have let this go on unabated and now even they are out of jobs. Don't get me going. I studied design at the feet of Buckminster Fuller.

ALOHA !!

As I see it and I have mentioned this before many times here. Most of these bullion storage companies like GoldMoney, Bullion Vault and even the Perth Mint are insured by Lloyds. Lloyds is running on fumes ... So when, not if, Lloyds goes under these vaults will no longer be insured. Only the Perth Mint has an extra layer of insurance ... the State of Western Australia insures and guarantees accounts. Is the State Of Western Australia trustworthy? Well, so far ... so good. Is Lloyds with huge counterparty exposure trustworthy? NO! Lloyds already had a run in with reorg back in the 1980s! I don't recall the State Of Western Australia ever having reorg issues in over 100 years ...

So here you have your gold stored in a vault that is not owned by GoldMoney or BullionVault and is soon not going to be insured for losses. Now losses you might think would be a robbery or crime of some sort at the vault. True, but that would also apply to shipments of bullion in transit purchased by vaults. Do planes crash and ships sink? Who insures those transactions?

ViaMat owns the vaults ... What is the financial status of ViaMat and what counterparties does ViaMat have? I do not know ... do you? That info was not available to the public at the time I was doing my research on ViaMat's website. The Perth Mint owns its own vault on the premises. One stop shopping ... The Perth Mint fabricates bars via AGR Matthey, stamped with the Perth Mint seal. Does GoldMoney and BullionVault fabricate anything? In fact both GoldMoney and BullionVault list AGR Matthey bars on their bar lists. So even they buy from the Perth Mint and so do many other dealers.

Perth Mint cost more but the liabilities in terms of insurance and verifiable counterparties are less.

Once again the Perth Mint offers the only truly "allocated" storage of bullion in the World. Can you as a BullionVault owner go to the Zurich vault and ask to see "your gold"? What are your assigned bar numbers? As the owner have you ever seen your Zurich vault? Have you ever seen the gold in the vault? Have you ever even been to Zurich? If Switzerland defaults like Iceland what are your guarantees? I do not know ... I've never been to Zurich or had the opportunity to discuss these issues with Swiss National Bank or Swiss attorneys. I have been to Perth and seen the Perth Mint gold and I know the Perth Mint counsel and the manager. In fact I can e-mail them and they actually respond rapidly.

DYODD!!

"Have you ever even been to Zurich?"

Yes, the food is fantastic and the coffee to die for.

Forgot the link: Check out your bank on this free rating site: http://www.bankrate.com/brm/safesound/ss_home.asp

You can view their public financial statements. They have a Star rateing system and comments on areas of exposure. Fascinating stuff. DD for investors!

Not to understand a man’s purpose does not make him confused.

>"The second one is from Australia pointing out that the nature of these credit boom/bust cycles cannot be blaimed on a single goverment but rather the human nature that repeats the same mistakes every other generation."

I cannot help but recall the famous expression used by T.S. Eliot, as quoted by Robert McNamara in what I believe was reference to the happenings in Iraq:

"We shall not cease from exploration and the end of all our exploring will be to arrive where we started... and know the place for the first time."

Having studied a major in politics and now studying a major in English Literature, I tend to have greater respect for the writers than the politicians - they tend to show (and preserve) greater evidence of thought.

Vad,

caught you on video on the realitytrader website. You said you've only been in-country since 1996 and you didn't speak English? I'm bloody impressed with your fluency now, having just read your article.

Or perhaps I'm looking in the mirror and finding myself deficient after being in French speaking Switzerland for 8 years and I still can't write French. Gonna have to pull my finger out, you're embarrassing me :)

What are your impressions of Ukraine right now? Are they going to pull through this mess or are they on the verge of collapse?