Cara's Commentary & Community Chat, Saturday, Oct. 24, 2009

"Alas poor Yoric, I knew him well." CNBC was preceded by Financial News (Network?) but when CNBC took over, it didn't retain some of those excellent names you mentioned.

Perhaps, if we all mailed "pink slips" to CEO Immelt with the name, CNBC, written thereon, he might get a hint?
spot

Is Mr. McEwen intent on major production, or major accumulation ? I know there is ( was ? ) limited production in Nevada, but what are UXG's development plans ?

In response to Friday post #50358

I have not verified this source for data, but this article sites CreditSights.

"CreditSights, which tracks the dismal data, predicts that in the current cycle, from 2008 through 2011, as many as 1,100 banks will fail. That would wipe out 13.4% of all U.S. banks, representing 7% of U.S. banking assets."
http://bit.ly/37SGdY

as a comparison, according to this website, http://bit.ly/2s7a0R, 9000 Banks failed in the 30s. I doubt that would happen again. but those 9000 banks equated to $140B vanish due to those failures. I am curious what percentage 140B was back then of the total banking assets. That percentage may occur once again but more on a global stage, since financing is more of a global endeavor today.

NYUGrad -

I would look at $140B as a percentage of 1930s U.S. GDP to answer the financial shrink factor during the Great Depression. The predicted 7% loss of U.S. banking assets today and into the near future would be amplified by the huge increase of today's financial sector as a part of GDP by comparison to the 1930s.

Smart Move: Foreign Currency Investments

I got a few questions about what foreign currencies are good investments right now. Because there is so much interest in this matter, I thought it'd be great to discuss it here.

Now, the most important thing to remember is that investing in a foreign currency must never be considered in isolation. Consider its impact on your entire portfolio. For example, let’s say you have $20,000 in U.S. investments and you read an article that is very positive on Brazil so you go and invest $5000 in Brazil. You now have 20% of your overall investments only in Brazil which is a lot, even if you do have most of your investments in domestic currency. Ask yourself if you want to be so exposed to a single country.

A currency will do well versus the dollar for two reasons:
(1) The American economy is not doing well, so the dollar weakens. This is true at the moment.
(2) The foreign economy is doing well, so the foreign currency strengthens.

All non-dollar currencies share the first reason to some extent, so focus on the second reason. Look for currencies of countries that have low government debt, growing economies, younger population, stable politics, well-run or reforming legal systems and robust capital markets. China, Korea and India exhibit these signs. Countries that produce commodities like oil, copper etc. are also attractive as the world comes out of recession. Australia, Canada and Brazil are examples.

Again, all investing decisions must be made after considering the entirety of your financial situation.

Probably some strict Elliotician's will have umbrage with this view of QQQQ. Appreciate all comments. I think EW can be useful at all time spans, but I also think that sometimes the rules need to be bent, especially at the topping process of a major Mania. I don't know for sure that my alternate is truly even bending the rules.

This says either the top is in, or we were $.16 from the top, assuming C=A

http://oahutrading.blogspot.com/2009/10/qqqq-heret...

Again, this is no reason to get crazy short, but it is time to open your eyes. In any "normal market" the candle and the EW would be enough for me to place a short. However this "Ramp of Pimp" that our financial overlords have taken us on cannot be assumed to be over.

Since Bill blog has the capability of attaching files, here it is.

Someone said that in order to be successful in trading we have to trade like Italians drive – without looking into the rear view mirror. There is some misunderstanding of this advise – some think that no attention should be paid to history because it never repeats precisely. Of course it does not … and it always does. There is nothing new under the Moon – anywhere. Everything already happened in one form or another.
So what is the “true meaning” of “not looking into the rear view mirror”?
What happened yesterday or 10 seconds ago is a history for you – it should not affect your future decisions and if you are still “under influence” of the bad trade, or, experiencing euphoria after successful trade – you’d better turn your trading terminal off – one way or another it will affect your future trading decision and it is not always going to be positive influence.

Speaking of the history in a form it might have some helpful aspects a lot of people attempting to compare current market action with 1975 action.

Scrillhog posted interesting chart yesterday and it sparked my curiosity (I am a Curious George after all) as to how these periods will compare in terms of TD D-Wave.
For some reason I could only pull 15 years of SPX data, so I used DJIA instead.
Just as expected there are a lot of similarities of 1975 vs. 2009 rallies.

1975

2009

Based on quite similar in % terms of sizes of w1, w2 (which was very shallow – only 23% retracement) and w3 if history repeats to some extent then my expectations of steep correction in the form of w4 retracing 72% of w3 might play out very well.

But here is the more important “kicker”
1973 started the greatest bull market in history of American stock market and 1975 wave structure represents w2 of sequence UP on monthly chart.
(see this “really crappy video” which I posted on August 22nd 2009 here) 
IF that is what it is – then "P3” eagerly awaited by Ellitorians (AKA “Sheepless followers of Bobby Prechter who’s been preaching total collapse for as long as he lived) are going to be greatly disappointed and, indeed, liberated of the rest of their money.

As an added argument for “we are in w2 of new greatest Bull Makret” you can take a look at that “inflation adjusted” chart which hints that wC of A-B-C corrective of Grand Sequence Up has ended (or about to end) and market is searching for direction now.
That would play along so well with opinion of the only investor I pay any attention to – Jim Rogers, who (for one or another reason) firmly believes that “they will print so much money that market will go to the Moon”. Only complete fool might deny that it is not what has happened and I bet they will yet to come with more “creative ways” to screw dumb Joe Six Pack who thinks that he is making money if market is going up.

I’d like to conclude this useless for me historical musing (I do not trade “years” – there is no worse “trend follower” than I) by saying that the main difference between USA of 1975 and today is that there is no such country as USA on the World's Productive Map. No manufacturing, no research, not even financial services which lost any credibility in this crisis.  We have NOTHING to offer now except for struggling services industries and quite possible USA is very close to becoming “Sweden Maid” supplier country very soon.  The saddest part is that since USaA has lost it’s long standing hegemony – there will be more and more difficult to satisfy enormous appetite for fossil fuels and the rest of “prosperity” will soon be gone.
But we still make some weapons – and I am afraid it will be used at one final point – that what history tells us.

Enjoy your stay

P.S. For those of you who ironic about “stocks going to the Moon” – I’d like to offer great read by Charles Smith.

http://bit.ly/1iaGIO

"Capmark Financial Group Inc., one of the nation's largest commercial-real-estate lenders, plans to file for bankruptcy as soon as this weekend, a person familiar with the situation said."

http://bit.ly/1euZLh

When I introduced the idea of using Hurst envelopes based on centered moving averages, the question was naturally raised, "How do you extend the envelopes?" One way, I observe, is that the shorter moving average envelope touches bottom in the longer moving average envelope when there is a crossover in the MACD. Thus, that tells you where to extend the bottom or the top of the envelope. Based on the MACD for the weekly price series of $GOLD:$XEU, it appears that the price series touches the bottom of the larger envelope in late August when the price is 6.50. Thus you could confidently extend the large envelope to there and even beyond that half a period, approximately two months from that point, where you would then expect the price series to either move sideways or down. That would place you at about right now, from what I'm seeing.

http://stockcharts.com/h-sc/ui?s=$GOLD:$XEU&p=W&st=2004-01-01&id=p52273885330&a=181817662

I found Bill's suggestion to contact Jeff Immelt with our opinions of their programming to be the kind of common sense approach which may make change we want. (Forget "Change we can believe in,". I believe those changes and they make me sick:-(

I often write letters to businesses with comments both good and bad about service and products. Most recently my wife and I had a very good experience with Best Buy and the GEEK SQUAD. People need to hear these things. I know I always wanted to know if my own business was on track.

The politicians are zeroed in on reelection — any business with unhappy customers is doomed and the effect of a lost customer is much more direct than a lost voter.

"I found Bill's suggestion to contact Jeff Immelt with our opinions of their programming to be the kind of common sense approach which may make change we want."

If that were true I would still be buying American cars. In my experience it is not. In 1984 (the last year I bought American) I purchased a new American car together with a $300 body anti-rust guarantee which the dealer promoted vigorously. Two years later when I went to trade it in the dealer denied me full tradein value because the body had begun to rust. I demanded that the dealer fix it under the policy and give me full value. The dealer examined the rust spot and denied my claim on the ground that it had rusted from the inside out which he would not cover.

I complained in writing to both the dealer and the manufacturer to no avail. My final letter to both stated that I had examined my options and that I probably would prevail in Court but it was not economically feasible, and that instead, if they persist in their unreasonable position I would never again buy an American car. Their position remained unchanged and so has mine.

NYUGrad - "... watching for slope changes with the histogram bars."

Nice touch - that use of histogram bars. Slope is an indicator of momentum, and as such would show divergence with a price trend early on. The use of histogram bars really points out any divergence clearly. I like a slope(5) on a daily, but I guess others would be just as useful. See chart attachment below.

Thanks.
spot

"They (who) seek to establish systems of government based on the regimentation of all human beings by a handful of individual rulers call this a new order. It is not new and it is not order."

- Franklin Delano Roosevelt
Address to the Annual Dinner for White House Correspondents' Association, Washington, D.C., March 15, 1941

http://www.visitingdc.com/images/roosevelt-memoria...

"Those who make peaceful revolution impossible will make violent revolution inevitable. "

- John F. Kennedy

Never saw the 3 line break before, but I like the concept, similar to point and figure, also appreciate the reference to Gregory Morris, I hadnt seen his work at all.

If I get time I will review the line break method (they say you can use whatever period you wish, 2 line break, or 18 line break).

Any method to take noise out of the market is attractive..

Have a good Sunday.

ALOHA !!

My assessment of the FINSOB REPORT was in the title ... PRICE FIXING 101.

Once again after reading this linked article I see yet another mechanism for US government PRICE FIXING so as to benefit the US FED member banks. Of course it is all disguised as a "tax credit".

LINK: http://tinyurl.com/yk3zg9l

This endeavor to PRICE FIX is present at all global governments. The article regarding Brazil's new consumer class posted above by "spot" is an example.

When a government gives money to one class of people it has to fund that "charity" from another class of citizens, but what I am seeing at the US Treasury Daily Statement is that here in America that funding is coming from DEBT, as tax revenues can no longer fund the "stacked promises" ... the "stacked liabilities". No fiat currency can protect you from PRICE FIXING and liabilites. Only one asset class can do that.

So as you read this article on an innocent "tax credit" think about the people who benefit most and those who benefit least. Having a government based on fiat money is a "zero sum" game. In order for some entity to win another entity has to lose. The winner in this case is always the entity who controls the money. Rothschild built many empires over the past 250 years on that exact business model and it is still in play today.

There is no "free lunch" ... its the Brazilians turn to discover that.

Wonder if mountain waters yield better than ' flat-land ' areas.. Also, do the ' gold detector ' metal detectors really work ?

2nd. great photos, great story. thanks for the link.

I gotta tell ya, a guy could go blind trying to find the price bars on some of the charts being displayed these days. Can you really predict with greater certainty where price is headed with multiple drawn-on lines, MAs and generated overlays? I’m not convinced.

In cleaning out my “Add to Favorites” list, I found this Bloomberg piece from May. It’s a study showing the percentage gains/losses generated by eight of the most popular indicators during the period of 10/09/07 – 05/01/09.

“Of the eight strategies, stochastics, Bollinger bands, relative strength, commodity channels, parabolic systems and the Williams %R indicator generated buy and sell signals that resulted in losses between the S&P 500’s peak of 1,565.15 on Oct. 9, 2007, and its March 9 trough, the data show. They did worse as the index then rallied 30 percent through last week.”

Indicator 10/09/2007 - 5/01/2009

Williams %R -43.1%
Commodity Channel Index -40.3%
Parabolic Systems -34.3%
Relative Strength Index -34.1%
Bollinger Bands -22.2%
Stochastics -21.8%
Directional Movement Indicator +9.0%
Moving Average Convergence/Divergence +24.6%

S&P 500 -43.9%

http://tinyurl.com/ceoxm7

I've mined for gold, i.e. panning, reworking gold residue pits and vacuuming mountain streams. Lots of work, little reward! Everyone is always looking for the mother lode. I have done this in Colorado, California and Baja Peninsula in Mexico. If you are doing it as a hobby, it's fun. Otherwise, forget it!!

http://bit.ly/1XqBrg
"PALM BEACH, Fla. (AP) -- Jeffry Picower, a Florida philanthropist alleged to have extracted billions from Bernard Madoff's investment scheme, drowned in his pool Sunday, police said. He was 67.

The former New York lawyer and accountant had been a friend of Madoff for decades."

http://tinyurl.com/yh9bvul

Big gain in GDP would show end of deep recession
3.5% annualized increase would be first growth in a year

"The U.S. economy probably grew at a healthy pace in the third quarter of the year, the first economic growth in a year and a strong sign that the worst recession in the postwar era is over, economists say.

Helped by massive government stimulus that supported consumer spending and residential investments, U.S. gross national product probably rose at a an annual rate of 3.5% in the third quarter after plunging by 3.8% in the past year, according to the median forecasts of economists surveyed by MarketWatch.

The GDP numbers will be released on Thursday. GDP will be the top headline in a fairly busy week for economic data."

Sure looks like one.

http://bit.ly/3rBOe8

Be prepared to laugh

Might be aiding the rising prices in Asia tonight.
http://bit.ly/1uo1Ip

Analyst interview about the gdp report.
http://bit.ly/278ewo

With the USD falling since march, how did S Korea manage to increase exports? non U.S countries i am guessing?

WOW! By the article it sounds like all it took was a "campaigner" to start the landslide. I for one would be willing to pull my money out of the "too big to fail" banks and put them in some good, local regionals. (Truth be told, I already have). I imagine one could make a very compelling argument for doing this in the USA.

"Imagine No Moral Hazard"

Spot, thanks for your comments. I'm not sure where there is a divergence in the MACD for the graph that I included in my comment. In any case, as is always the case with cycles, if you graph just two dominant cycles, there are always other cycles that could be present in the data that you missed. With the present graph, I would actually add a third cycle based on monthly data, using an even longer period, rather than trying to refine what I already have. In any case, using this approach really does give a good idea of the superiority of the MACD over the RSI as an indicator. At the same time, however, it cannot be said that a single MACD is better than Bill's system of using three RSI's.

I was struck by the article cited by FOX 1 "Chartology Gone Mad" #50396 wherein he shows that only the DMI and MACD are more or less trustworthy indicators, whereas the RSI and other indicators lead to losses. However, this is basing trading on each indicator taken alone by itself without confirmation by other indicators. Also, perhaps the period used in the study is inappropriate for each indicator. Again, for RSI they used just one RSI and not Bill's system. However, it is an interesting study if its limitations are considered. It is not thorough enough to give the lie to technical analysis. At the same time, however, I feel the type of work John Ehler's is doing (ANN pointed out John Ehler's to me a while back) is much better than yesterday's technical analysis. He shows prices are either trending or cycling and you may have a single cycle that is valid when it is cycling, which happens about 30% of the time. He uses his own method MESA to uncover these cycles. This kind of technical analysis, I feel, has more chance of being correct than the traditional approach, I feel. I'm one of those people who is completly sceptical of Eliot wave analysis or Fibonacci methods, but I'm coming around to accepting Fibonacci, even if it is not scientific.

The big problem, I feel with technical analysis, is that you are always milking the price data and just applying different formulas to the same data set. I would think this would automatically lead to a sort of "systemic breakdown" in reliability.

Looks like the rally continues for bit longer at least (spurred on today by Korean GDP strength) and continued weakness in the USD.

Currencies Prepping for Fresh Surge Against Buck

Dollar Falls on Global Recovery; Copper Climbs to 13-Month High

I guess we are only debating short term/long term or semantics here when discussing "real world" and what now passes as such.

Yes "they should be doomed" and the current manipulation has made them into zombies. I keep thinking in logical ways and need to avoid such.

I avoided the tech bubble due to the lack of earnings in such companies. I also avoided the big bucks and only made small gains, but also avoided big losses when the inevitable happened.

Last year, as long as logic prevailed, I was doing just great with SKF — then the FDIC banned shorting of bank stocks and it dived never to resurface.

How long would fans put up with this kind of officiating in the NFL? "Yes, we know he was down on the 20, but we're letting him limp 80 yards to the goal because he's "Too Big to Fail!"

aucourrant, quasi

Nice work! I will spend more time with the ideas that you present when I return from getting my seasonal flue shot.
spot

Bought at $25.77. Earnings are on 11/3 and I think this will be a catalyst to move the stock.

I can easily envision 'real' volume coming in this week, as they start talking about the recession in terms of 'It's over, and you need to get over it.'

Not saying I agree with that sentiment. But it's not hard to envision.

...

...

Spot,

I like it — the poem, not the game.

Over time I have seen CEOs, whose annual reports I worked on, make decisions based on the short term (their likely tenure) which "doomed" the company, the employees, the city state and now the country to long term misery.

Congress acts in the same manner.

As so often mentioned here we are in a survival mode and I think Bill's present time of reflection is wise.

Coincidently with Bill's period of reflection, my wife and I went off to visit friends for a week and I chose to avoid market news by not accessing my accounts or emails. I sold all individual stocks and my VTI broad index ETF. Last night my stock and bond mutual funds showed a drop of .002% for the week. Hardly worth the time I could have spent if checking things.

I have been holding DBA and considering MOO after reading the link from Bill to the cheap food article. Since I am mainly a longer term trader I see this as a trend I want to be in on.

http://tiny.cc/6z8Bw