Cara's Commentary & Community Chat, Thursday, Oct. 22, 2009

Released on 10/22/2009 8:30:00 AM For wk10/17, 2009
New Claims

Prior 514 K

Consensus 519 K

Consensus Range 510 K to 525 K

Actual 531 K

Highlights
Initial jobless claims edged higher in the Oct. 17 week, up 11,000 to a higher-than-expected level of 531,000 (prior week revised higher from 514,000). But the four-week average continues to move lower, down for the seventh week in a row to 532,250 for a decrease of about 20,000 from month-ago levels, a decrease that points to improvement for the October employment report.

Continuing claims, down 98,000 in data for the Oct. 10 week to 5.923 million, are roughly 100,000 below month-ago levels. But the indication from this reading is difficult to assess, reflecting an uncertain combination of new hiring together with the expiration of benefits. Those receiving extended benefits fell more than 16,000 to nearly 465,000 while those receiving emergency compensation rose nearly 41,000 to 3.391 million (data for these readings is for the Oct. 3 week).

There was very little initial reaction to today's results though commodities and stocks did tick lower. Next reading on the jobs market will be Tuesday's consumer confidence report from the Conference Board which includes assessments of current conditions in the labor market along with consumer assessments of future conditions.

Market Consensus Before Announcement
Initial jobless claims fell 10,000 in the October 10 week to 514,000. Continuing claims also fell, down 75,000 to a sub-6 million level at 5.992 million in data for the September 26 week.

The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, after falling in five of the past six weeks.

There is little sign that employers are willing to hire, even as the economy shows signs of recovering.

The Labor Department says new jobless claims rose to a seasonally adjusted 531,000 last week, from an upwardly revised 520,000 the previous week.

Wall Street economists had expected only a slight increase, according to Thomson Reuters.

The number of people continuing to claim benefits dropped for the fifth straight week to 5.9 million, from just over 6 million the previous week.

Good morning from Pennsylvania, home of the 2009 National League Champion Philadelphia Phillies.

POT - Credit Suisse Initiates Coverage with a Neutral.

SAP - Downgraded to Neutral @ BOA/Merrill Lynch

http://tinyurl.com/ykbanl2

2nd,

You're too kind.

I attribute about 80% of this years gains to using the resources on this site, Bill's Commentary, the Community Chat, the Cara 100 and the RSI Tool.

The other 20% is patience.

Regards,
BH

NYU - You're the expert now. People seeing the dollar up today are probably expecting this drop. What do you say...the dollar drops today and the S&P goes down?

Trying the "fade the good news earnings" short @ 77.75.

I have my eye on MCD as well.

Released on 10/22/2009 10:00:00 AM For Aug, 2009
Prior
M/M change 0.3 %
Y/Y change -4.2

Actual
M/M change -0.3 %
Y/Y change -3.6 %

Highlights
U.S. home prices fell 0.3 percent in August on a seasonally adjusted basis, according to the Federal Housing Finance Agency's monthly House Price Index. The previously reported 0.3 percent increase in July was unrevised. On a year-on-year basis, the House Price Index fell 3.6 percent in August, compared to down 4.2 percent in July. The U.S. index is 10.7 percent below its April 2007 peak.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally-adjusted monthly price changes from July to August ranged from down 1.6 percent in the South Atlantic Central Division to up 1.2 percent in the Pacific Division.

The moderate cost segment of the housing market is still under mild downward pressure on prices, likely due to continued high foreclosure rates and tight credit. We will get a broader picture on house prices next week with the Case-Shiller home price index.

Bill,

I have been watching the contra move upward for weeks and wonder if you or others here can suggest a solid shorting strategy that can be put in place before the seemingly inevitable price collapse? Thanks!

according to http://www.goldalert.com/gold_price_blog.php there were large put purchases on the SPY and IWM at the open:

"SPY March 70 puts, bought 14,000 and SPY March 90 puts bought 2,500; IWM customer bought 10,000 Nov 59 puts at 1.51"

it actually led to a " bidding war " with others who also qualified.... So, does this mean the buyer has $ 8,000.00 ' to play with ' at Tax Payers expense ?

Amen...

SCO didn't show a strong reversal off the lows like DUG did.

Caterpillar Picks Oberhelman as Next CEO - NYTimes.com http://bit.ly/2oFEnn

interesting - looking at it now, it is up much more than the sco with oil down a little and gas actually up. These things are kookoo

60 to 70? I wouldn't go that far. Estimates are for $1.54 next year and they are guiding higher. Still, it looks a little pricey to me. I think CAT is more ridiculous though.

I am def not expert. Just looking at past charts and time frames for clues.

Hm why is Dow up with nasdaq down?

Good morning ( eastern ) Team,
How was the vacation ? Yeah, just messing with JCG ! It does amaze me, however, that the high-end spending is steady... Do you still have Apple ? Good choice on your part... anyway, good trades ..... Baz

U.S. FCC staff recommends open Internet rule http://bit.ly/GV6bY

* Draft rule would allow for 'reasonable' net management

* Public comments accepted until Jan. 14

* Replies due March 5 (Adds background, details)
- Staff at the U.S. Federal Communications Commission on Thursday recommended establishing an open Internet rule aimed at restricting network operators from favoring some content over others along landlines and wireless platforms.

The full FCC slate of three Democrats, led by Chairman Julius Genachowski, and two Republicans are expected later to decide whether to propose a so-called network neutrality rule.

Even after a flurry of lobbying in the last several weeks by opponents like AT&T Inc (T.N) and Verizon Communications Inc (VZ.N), the commission is expected to approve the issuance of the proposed rule and accept public comments until Jan. 14.

The draft rule would allow for "reasonable" network management by broadband providers to unclog congestion, clear viruses and spam, and block unlawful content like child pornography and the transfer of content infringing on copyright.

I'm not short but looking to be.
(LAMR) Lamar Adv.
It's a debt issue. Debt to equity 3.38x.
$2B worth of debt. Twice as much as 06. Equity is basically 1/2 of same period. Sales have to return to 06/07 as do record profit margins
for bottom line to breakeven. No P/E give no E.
Just my two cents.

Two days ago I recommended this because the RSI7 dropped below 10 and at the same time Goldman Sachs downgraded it. It is now up almost 10% and I sold covered calls on half my position (Nov 7.5) and expect it to test the
7.58 level. At that point I will sell the remaining half. I think it will eventually retest the low of 6.47 again where I will think about reloading.

hate to say this gang but heres my stance:

i am 3/4 out of my entire gold position.

if we suddenly rocket back above $1068 ill have to jump back in but my anticipation is a dump in gold, and teh miners in particular to get the smack down.

all the talk about the resurgence of JR's is simply a more elaborate and collective effort on the part of the crooks to get you to believe that now, after years of falling they will return. if a jr. cant get financing or make money at $1050 gold they likley never will until $2000 gold.

good luck, ill be buying again in the low $1000's should we fall that far.

Lacking significant 'event' protection in your strategy, Dr.?

heading lower and lower. Traders are searching the safe haven.

Added a few more $109 November puts at $2.71. I'm watching GS deteriorate.

I think the bulls are defending GS because everyone and their niece is watching that as a guide for the market.

near future,,, If one is willing to buy and hold ( heaven forbid ! ), there are some low priced entries with recent, interesting developments... a little DD might go a long way...

They even cajoled a few bears of the closets this morning. Maybe this is the "triple-dark" version.

NYU. What are your thoughts on AKAM? Do you have good knowledge of the company? Current stock price? Potential takeover candidate. I bought a little a week ago.

Maybe sale price at 21.45 on olives wow the buying

Quite amazing. Darkness Unlimited.

Remember I said yesterday it won't be easy for bears? Well, we haven't made new highs and it still can turn just one of "won't be that easy" spikes - gut-wrenching, nerve-wracking and puke-inducing. My working assumption is just that: market makes sure it scares the living daylight out of those who piles up on a short side so it can proceed down with as few passengers on board as possible. Event challenging that assumption would be making a new high in a slow steady fashion - if that happens I'll retreat to my cave to search for bull mask I just put in the closet for the winter.

It sure is huh? I just bought a couple more SPY $109 Puts at $2.2

Almost every body is keeping a close eye on GS for direction to see where the market will go from this point. It's the only market indicator left these days to give you a certain indication on where things are going from here. Forget housing numbers; forget employment numbers; forget fraud and accusations; forget politicians and their lies, forget the FEDS…, etc. Just keep a close eye on GS and how their stock is doing and trade the whole market accordingly, long or short. This is my conclusion, any one disagree???

The person who bought those IWM puts lost $0.5M by now, the person who sold them, pocketed $0.5M.

With the SPY Mar 70s, the loss was only $70k, and with the 90s the loss was $62k.

How sweet it is to sell options...

"Event challenging that assumption would be making a new high in a slow steady fashion - if that happens I'll retreat to my cave to search for bull mask I just put in the closet for the winter."

Aha- so opinionless trading does not necessarily mean one has no opinions on market direction. (Just joshing.)

At that point will they still be a deal,maybe

Unfortunately nothing that isn't public info already.

They are leader in their space. The white house and other govt websites use them for defending against dotbot and various cyber attacks.

Their industry is under intense pricing pressure.

I say, all you need to know is in the charts.

at 53.00 but I can't hardly breath yet in one direction with this kind of movement. Not ready for that and didn't see this strength coming, it's into an hour plus . wow

Just took a little MSFT off the table and replaced with BRCM

gold stocks have acted rather sluggish the past week and a half. I think it's just consolidating the recent gains, but they could suffer more if the equity markets start going down again.

The Dow was rejected from 10100, so maybe today was not the start of a move to new highs but just a test of the bear's resolve. I will take off FAZ tomorrow, though, if Dow will be above 10100 by the time I wake up.

Yet aapl closes flat. and their earnings were the most tech-tacular thus far.

I am keeping an eye on global currencies, banks, gold and options activity.

guessed wrong, my bad

Today's move in SPX pretty closely correlates with the move in the dollar, if you look at the 5 minute chart for both of them.

The big mover on my board was XHB, which at one point was up +5%, on no news that I could find, so I'm going to call it a massive short covering rally. Tomorrow we have existing home sales, which since we're going into the fall selling season without the home buyer incentive may provide some excitement. Mortgage aps also dropped recently, which may be giving us a clue to where home sales will be.

I reloaded some of my XHB during the move up today. We will see if that was a wise move tomorrow.

ALOHA !!

The US Treasury only acknowledges receipt of $86BIL USD in TARP repayment and still TARP funds are being dispensed every other day, although not at the $BIL rates of before, only $100M rates!

In terms of repayments if you divide that $86BIL by five that's $17.2BIL per company.

Why five? Here:

- Goldman Sachs
- JP Morgan
- Bank America
- Wells Fargo
- Citibank

Somehow $86BIL USD does not cover all the TARP funds paid directly to these banks according to the US Treasury Daily Statements that is. Who do we believe Bloomberg reporting it or the US Treasury. Hummmmmm??

Now lets consider the backdoor guarantees.

JP Morgan got $138BIL to take over Bear Stearns and make derivatives bets solvent. Goldman Sachs got paid $50BIL through the AIG backdoor to guarantee derivatives.

So what is the difference between an outright direct loan of TARP monies and a government backed guarantee through the backdoor of Bear Stearns and AIG and Merrill? I would say there is no difference since without the guarantees JP Morgan and Goldman Sachs would be out of business and not making those supposed record profits. How hard is it to profit when you get the US government to guarantee your solvency as your competitors file BK?

If I did not know better I would swear it was all PLANNED CHAOS(aka: Mises)!

ELIMINATE THE US FED ...

Placed a sell limit order for these shares at $18.92. If instead of hitting my sell limit order FAZ goes down tomorrow (and Dow breaks above 10100 and S&P breaks above 1100), I'll take off all my FAZ and will wait for a better entry.

I read somewhere that there is a lot of speculation that Congress is going to pass a $15,0000 credit for homebuyers. NAR and NAHB lobbies are in full press.

Beware that existing home sales could turn out to be a lot stronger than usual as people were in a frenzy to buy a home to be able to close before the tax credit expired. Maybe the market will see through the number, but most likely not; they will say housing is rebounding strong (we all know how Cash for Clunkers ended). More info at
"Mini Boom in Existing Home Market"
http://tinyurl.com/yk3b34e

Best of luck.

I have no doubt that the housing credit will live on after the intended expiration at end of nov.

And I am 100% going to try to sell both rental props in nc, a rare State with net inflow of new residents.

Housing is dead money for another 10 yrs in my humble opinion. If they increase the 8k to 15k and lax rules, I will likely try to sell the home I live in and switch to rent month to month, so I can prep to be able to leave the ny area on a drop of a dime if I have to.

Rome is burning.

Bill - What's your take on today's action?

"We recognize that we may be early in signalling a strong note of caution, but it appears to us that in recent days, the strongly rising stock market has shifted investor sentiment from outright pessimism and caution towards a warm feeling of complacency." This is the natural outcome of a straight up 7 month market. Can we have those 7 months back please? I'd play it differently.

Good article on The Fool. Sorry didn't save the link

Can America Innovate Itself Out of Stagnation?
· By Jennifer Schonberger
October 22, 2009

One of economists' greatest fears is that the U.S.'s financial recovery will be doomed to the same fate as Japan's economy: a decade or more of stagnant growth.
Despite the fact that there are major differences between the U.S. economy and the Japanese economy, the U.S. may be vulnerable to the same unconventional cause that sealed Japan's fate. This is according to Clayton Christensen, Harvard Business School professor, author of The Innovator's Dilemma, and the foremost expert on innovation in the U.S., who recently visited The Motley Fool headquarters.
That unconventional cause is innovation stagnation. According to Christensen, every industry that constituted the engine of Japan's economic miracle was "disruptive."
That is to say, companies started competing in Japan's market from the bottom and rapidly worked their way to the top of the market through innovation, transforming industries whose products historically were complicated and expensive into something affordable and simpler for a much larger population. By that point, companies had finally reached the promised land of high margins at the upper end of the market.
At the same time Korea, Taiwan, and Singapore came in on the low end of the very industries that had propelled Japan's growth stealing those markets. Now enter China and India from the bottom, which are racing up market as fast as possible.
"It wasn't just Toyota (NYSE: TM) that [stole the market from] General Motors," said Christensen. "Honda (NYSE: HMC) did it to the motorcycle industry, Canon (NYSE: CAJ) did it to Xerox (NYSE: XRX), Sony (NYSE: SNE) did it to RCA, Mitsui did it to ship building and by 1990 those companies had gone from the low end to the high end of the market. There just wasn't anywhere to go."
This is evidence, according to Christensen, that there really are microeconomic roots to countries' macroeconomic prosperity and stagnation. "I really worry about America because there's nowhere to go," he said.
Now turn to the U.S.
Christensen says the U.S. economy got disrupted out of manufacturing by the Japanese and that now we're getting disrupted out of engineering and creativity by India. "We've led the world in technology not because the Americans are technologists," he said. "We've just been a magnet for the best in the world, and now if our immigration policy tries to systematically turn those immigrants [away], and they can't come here -- or they don't come here -- I really worry what will become of us."
Indeed Christensen is not the only expert that's worried about this scenario. Charles Geisst -- the man who called the 2008 financial meltdown four years prior in a book entitled, Undue Influence: How the Wall Street Elite Puts the Financial System at Risk, and a professor of finance at Manhattan College -- told me in an interview that he thinks a Japan scenario could be on the table for the U.S. economy.
Tyler Cowen, George Mason University professor of economics and co-creator of the popular economics blog marginalrevolution.com has a slightly different spin on innovation, pointing out that the current crisis is fundamentally about the real economy.
Cowen points to recent innovations like Web that are life-enhancing but not necessarily substantial creators of jobs or revenue in the real economy. To Cowen's point maybe the stagnation Christensen and Geisst predict has already happened. Cowen notes that about ten years ago the real economy began to stagnate because revenue models crashed. As a result banks, like Citigroup (NYSE: C) and Bear Stearns (now owned by JPMorgan Chase (NYSE: JPM)) sought to innovate in areas like subprime mortgage securities that provide debatable benefits to the real economy.
Those are the thoughts of Christensen, Geisst, and Cowen, but we'll let you have the final word. Share your insights on innovation and a possible lost decade in the U.S. in the comments section below.

Bill,

I have been regularly reading your blog for over three years, but have never yet posted. I'd just like to say thank you for sharing your knowledge and insights into the capital markets. I work for a Hedge Fund in Toronto in a support role, but have probably learned more here about how the financial system works then at my job. I will try to contribute some insight from time to time.

Also, thank you for introducing me to Silver Wheaton last October, after you posting they would make it through the financial crisis, I purchased some shares, and I am very happy with that trade :).

Thanks

After reading an article today by Pritchard entitled "Euro at $1.50 is a disaster for europe" (link below) I wondered what correlation there might be between the euro and SPX. Turns out, at least for the past month, that correlation is quite strong - and indeed over the 7 month rally, you can pretty much see SPX rise right alongside FXE.

Perhaps one of our more clever people here can quantify it for us.

Article link: http://tinyurl.com/yl99om2

""The euro at $1.50 is a disaster for the European economy and industry," said Henri Guaino, right-hand man of President Nicolas Sarkozy."

(Of course, the key player is not the French but the Germans, since they are the senior partner in the Euro firm.)

60 Minute chart of SPX, with an overlay for FXE.

http://stockcharts.com/h-sc/ui?s=SPY&p=60&b=5&g=0&...

Barring an outside shock (which could happen at any time), I think the bears will need a day or two to recharge.

Who's left?

(a) Early summer bears. They may in fact be a well-rested contingent of bears. After all, they were taken out early, they've had time to deal with it, and may now have accumulated enough ammo (financial and psychological) to take another stab at shorting. After being castigated by fellow bears for being early casualties of the rally, they now have the upper hand- the punishment dished out by the market in July and August was nothing compared to the devastation that followed.

(b) Closet bears. Well, at this point in the rally, these bears would have to be so far inside the closet that they walk and talk like bulls. Unlikely to be unleashing hell on the bulls.

That's it. All other bears (IMO) have been neutralized for the remainder of the week. Monday might be the next reasonable time to open shorts?

I was looking at the different currencies and eyeballing them against the 60 minute SPX chart and noticed the euro seemed to have a better correlation than the other currencies. I suppose I'm just searching for a "tell".

It's one crazy world we live in. I'm one of those newly turned short term bears only because of prices relative to valuations and what i'm seeing in terms of the charts.

i recently looked at the projected earnings for the S&P 500 for 2010 and compared it to earnings in 2009. operating earnings are projected to be $73.54, which compares to $54.87 for 2009. That's impressive...expecting a 34% ramp up in earnings in one year. In 2002 operating earnings ramped up 18.5% from 2001.

Next resistance for the euro is at around 153. Nosebleed territory for the euro: March 2008 - June 2008 the euro was around 153-158.

Yah, and the RSI 7's are in distribution territory. Don't really know how applicable that is to a currency ETF (FXE).

not untill then...

http://www.thestockmasters.com/twenty-first-house-...

Stock markets are up 60% plus. How does this rally stack up with previous ones?

Here are some key criteria of what previous 60% rallies have looked like when analyzed across 10 different key economic dimensions :

* Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
* Consumer Confidence: 95.5 average; 53.1 now
* Capacity Utilization: 79.9% average; 66.6% now
* Year over Year Industrial Production: 4.1% avereage; -10.7% now
* ISM: 53.9 average; 52.6 now
* Payroll employment gains over period: 2.2% average; -2.0% now
* Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
* Year over Year growth in total credit market debt: 9.3% average; 3.0% now
* Year over Year growth in household debt: 8.8% average; -0.1% now
* P/E Multiple: 16.8x average; 20.0x now

baz - it sounds to me like he's getting ready to short imminently. of the ones he's looking at, semis, i think SNDK is a true dog and could be shorted at will. i think their earnings will completely fizzle out in due time.

I think a 34% jump in earnings is a little too optimistic to be honest. when the stimulus from the govt comes off i think the debt load will make things harder to grow.

http://tinyurl.com/ykzz2uv

Above chart was posted a few days ago from a poster on the obamagirl website and intends to show an upper and lower "rail" for the longer term bear or bull. The S&P appears to be converging to a crunch point. Other market observers including Bill have been noticing that.

Primary source for the data is the individual known as "Swinger" who posts at http://obamagirl7.blogspot.com. The thread was brought to my attention by Cara Community poster Greg not long ago.

Would like to hear more from Greg or others about "Swinger" and his trading tool which is recently available for a fee (His financial interest may be a royalty or similar derived from his black box math magic.) My own limited checks over the last year say it is spot on. Swinger says it is best for intermediate and long term but works for short term as well. Based on the trend is your friend. Long and intermediate terms bullish since July until proven otherwise.

Going with the sinister take, wouldn't it be really sinister if we wake up and futures are down big and all of those poor shorts that set tight stops ended up getting stopped out today with losses and guessing what to do while all of those poor longs that bought on a move back up to 1090 (and on its way to 1,120!) are trapped looking to sell? Ahh the sinister nature of this market.