Cara's Commentary & Community Chat, Tuesday, Jun 23, 2009

Good morning.

Upgrades:

BHP - to Buy @ Citigroup
SBUX - to Outperform @ Robert W. Baird

...when he reads this commentary. He's the one person who is always countering Bill's predictions for gold. To me, Bill's logic here seems very sound. It is easy to understand and makes a lot of sense to me so I will be a buyer of SLW and YRI today.

Here's a thought for my American friends: if you agree with Bill's logic and are bullish on SLW for the reason that the US$ will be weak, then wouldn't it make more sense for you to be buying on the TSX (SLW.to) so that you will also receive the FX gain?

Fascinating opening comments.

in a situation where major market indexes drop significantly, does it carry all stocks down with it? In particular, would it be expected that an OTC stock which was growing sales at a rapid pace would also take a hit, or would its sales and profit growth protect it from dropping?

Market, sector, then stock specific in that order explain a stock's movement. Can't remember if that's Valueline or IBD's conclusion.

In any case, my experience is that an individual stock has difficulty rallying when the broad markets are declining.

They already made hundreds of billions by running treasuries up. TLT up from 88 to 92 is $400 billion if the auctions are $over $100 billion worth.

...

2nd- It just came available to short at Schwab. I'll probably wait until Thur. mornings inventory report.

Bill,

You indicated the following...

"But, the price of gold did not peak until 1980, and it only did so after the US fiscal and monetary authorities put in place a set of conditions that set the course for many years for a stronger $USD. Ask yourself if that’s the case today."

Also, you have surmised the price of gold is going to rise significantly in the mid to long term. So following the above reasoning...does that mean that you believe conditions are now being created to for a strong dollar longer term?

Please let me know what I am missing...

Thanks

Should your gold stash be big enough you can lease it and get a "return" on your gold. Check kitco.com for lease rates and try a search of seekingalpha for articles on what the lease rate represents.

BBBY - numbers increased at UBS through 2011. Company should post a small comp sales improvement this quarter. Equal-weight rating and new $28 price target.

ALOHA !!

I see the entire "money" thing as a "Game Of Confidence". The C WORD comes to mind, and all we ever see on TV and the FOMC is a bunch of salesmen hired by various "paper" elites trying to sell us on their product. It is obvious that really all the US Banks ever had to sell was "confidence" ... in their paper product, the US Dollar, and whatever exotic rate rocket du jour they could paste together out of their "bag o trix"! Have you ever seen someone with a lot of money in action? Someone who wants to park a wad of cash? They will scour the internet and call their bank and ask what is the "highest" rate they offer? If one bank has a high rate of 5.1% and another advertises 5.3% this person will go with the 5.3% bank. What is that called? Human nature really! That all worked until banks like Wamu and Countrywide and IndyBank started to collapse and people saw actual "bank runs" on TV. Remember that? When that happened those high rate goonies got religion. The average American does not want to do any due diligence they just want the maximum return for the least amount of effort and they really don't care how the banks pay those high rates. In fact many would consider having to go down to the bank and open one of those high yield accounts too much effort. These are the "usual sheep" that are constantly being fleeced by the "usual suspects'! Even though the US FED may publish the CPI in the less than 1% range most Americans don't feel like it is. Nothing has gone down, like electric bills, water bills, food, health insurance, car payments, credit card rates, gasoline ... all the things you need to survive on a daily basis. Loans are cheap if you can qualify ...

Another phenom is that more family members are in trouble and struggling more so than ever in the past. That means anyone who has spare cash becomes the target for "family loans" ... assistance. Perhaps that struggling family member has drained their 401k and their other cash reserves and are nearly homeless. Perhaps it is junior who just graduated from college or high school who cannot find a job and so must stay with his parents to make ends meet. There are all sorts of hardships now that were not there four years ago. Of course the US government will PROMISE the moon in order to placate the masses who are struggling. Yet as more and more get fleeced by fraudulent Wall Street and horribly misguided economic practices of our government there will be less and less resources available for those who have exhausted their last hopes. All any government ever does is BUY TIME. That is what they have been doing ever since I have been alive. They keep rolling that DEBT BALL into the future like an army of Dung Beetles. At some point the DEBT BALL gets so huge that it stops rolling. Like Craps you don't want to roll a seven and crap out! We're all at the Craps table rolling dice, but most American's would rather pass the dice to the US government to roll. Roll they will ... that's their specialty. They've been rolling for decades and decades!

In reality the "fly in the ointment" has been a hoax. The reality is that the "real" CPI has been eroding those 5% returns for decades now. Net tax and after "real" CPI you are losing money by parking it all in a bank. Remember Volcker raised the Fed Funds double digits to convince gold and silver hoarders and fearful foreign central banks to rely on the US Dollar. Imagine if that happened today? Of course, that also forced the US government(counterparty) to pay out double digits to survive, since the US government is always creating DEBT. Part of the reason the US FED wants rates so low is so that OBAMA will not have to spend a fortune on interest to fund his Stimulus. Imagine if Fed Funds were now at 17% what it would cost the US government to fund a "recovery"? They sell this by saying these low rates are to help revive the real estate sector and the economic recovery will arrive sooner for the masses. Yet who's spending the most right now? The US government is ... so who needs to benefit the most from low rates? After all we have an ever expanding military to feed on top of ever expanding PROMISES to pay for on a daily basis. Go look at the US TREASURY DAILY STATEMENT to see our government's daily spending. Could the US government realistically afford 17% now? Could we afford to rescue banks at 17%? So was Greenspan really lowering rates to pump a new Bubble or did these guys know a bank collapse was coming that far in advance?

From an "export" perspective a STRONG DOLLAR is like kryptonite. All other "exporting" countries sporting the fiat logo are in that same boat. Think Japan wants a strong Yen? Or Germany wants a strong Euro? Or China wants a strong Yuan? The past strategy of these countries was to sell their currencies and buy up US Dollars since America was the designated driver ... "CONSUMER NATION" ... a STRONGER DOLLAR did little damage since a large part of our export manufacturing was overseas anyway being globalized and Americans have PHds in SPENDING!

With fiat you get these ever shifting sands ... "dodging bullets" becomes our life! I for one would really love to see a boring, unsexy World where I did not have to "hedge" my financial existence and dodge central bank bullets MATRIX style! I recall a World where wages were lower and interest rates were steady, where MBA and CDO did not exist and I had a nice savings and I could get a meal for less than one US Dollar. Nobody had to be gambling in the stock market because a gallon of gas was always 25 cents and did not move up and down by 50 cents every few weeks. It was a time when you never saw a bank CEO or central bank Chairman on TV. Gangs were the neighborhood kids playing softball not the "drive-bys" of today! The only government official on TV was just the US President. There were challenges then like Cuba and Civil Rights, but not much else and the vast majority of the population did not fear for their financial futures. Has life gotten that much better for the masses in America? Seems the rule of thumb is ... THE MORE DEBT OUR GOVERNMENT TAKES ON THE WORSE OUR LIVES BECOME ... Its TRILLION now! WHO WANTS TO BE A TRILLIONAIRE?

Only one kind of monetary system allows that much DEBT to grow so rapidly.

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY!

thanks for your tireless work on keeping us all up to date. Appreciate it very much.
s

btw, I am 100% cash at this point because I am totally unsure of what to do.

That's the smartest thing to do when a speculator cannot determine the direction of the trend - just step aside and watch.

Trading just because one wants to be a part of the action often leads to losses because you lack a game plan and/or conviction.

If a speculator can figure out a niche where they can carve out small but consistent profits, then that's much better than trading in things you don't fully understand or where you lack expertise.

Bill, I actually thought today's daily report was brilliant, it really put the gold trade in perspective for me. Pl. dont restrict yourself by moderating your thoughts....

go back one time frame and check moving averages.

If u trade in days, look at weekly MA.

I'm looking at the SPX 26 week EMA. It appears to have flatten out and perhaps turned up slightly. But despite the rally off the March lows, the 50 day EMA hasn't crossed above the 200 DEMA. So that doesn't get me too excited about getting long.

RSI model on the ETF's aren't showing any bull ETF's near buy points. A few bear ETF's like FXP and EEV have given Triple RSI buys.

Doing nothing is a course of action and sometimes it's the best course until there is clarification.

And expect the unexpected.

The inverse of the inflation-adjusted Dow since 2000 looks like a parabolic rise. The Dow/Gold ratio is said to reach a1:1 ratio. Gold has a lengthy bull market ahead of it in the way of playing catchup, but most see the bull at an end.

So assuming a Dow vs. Gold valuation of one to one and a target price of 5000, which is within sight, then the returns will be great in bullion. Notwithstanding, there should be some prime opportunities in the mining sector.

But there's the rub. The gold has to come from somewhere.

(iPhone)

everyman - Gold is still legal tender, maybe not always easily negotiable. The majority of banks could not pay interest on gold because they couldn't in turn use that gold to generate more monies. They can take USD deposits, pay a little interest, lend out the deposits at higher rates, and generate a financial return. For the most part they can't do that with gold, especially the locally owned or small regionals. So the fly in the ointment with gold as I understood Bill was stating this morning is the financial return in and of itself, not the legal tender aspect that you brought forth. imo, g

Edit - If I had read more posts before replying I would have seen that Bill and others had weighed in on the topic. Have a great day, G

"All of a sudden, the consumer is acting as though he had some sense. Naturally, government officials are determined to put a stop to it."

~ Bill Bonner

Bill wrote "In retrospect, I ought not to have used such an expressive writing style, particularly when many readers are in a foul mood, having lost a lot of their portfolio value."

For the first time I have to disagree with our mentor.
I've recently been kicking myself for not selling my none-too-small amount of SLW for a tidy 65% gain. A while back someone wrote "..and pigs get slaughtered".
My original plan ("Plan the trade, trade the plan") was in fact to sell it all at a 62% gain but I got piggish looking up into the blue skies and so I've been feeling a little foul mooded myself lately.

Bill's commentary today has rectified all that for me. It is what it is and I am who I am and hope is resurrected.
"Waiting is..." as Robert Heinlein once wrote.

Bill,

I agree with your sentiment. Let me say I am one of those non-professionals, so I do ask questions probably "missing the obvious" to the professionals. I may just need clarification with a one sentence response and would welcome that...but many times no response is forthcoming...that's ok.

This site definitely provides a wealth of knowledge and I am learning.

Thanks

yes, but don't forget the powers of green m&m's

area.. was looking for $ 66.50 range, but to many funds need this one for mid-year. My concern was the tax-benefit related gains, and palm... watching exel to trace toward $ 4.60... much lower vol. .. vicl will release info on cmv vaccine next week... need update from Mr. Rob on uxg... rumors ( just that.... rumors) on cpst announcement... incy looks steady (could be the suprise winner this year )..am talking to rtk rep. this week and will post any meaningful info on rtk/peabody progress...

well said Bill,

ive never claimed to be anything more than some nut who loves gold and geo-politics. i find the few times my name is brought up by newer folks on this board its usually misappropriating statements i never made or ideas ive never expressed.

i traded my way in gold from nothing to secure a down payment for my current condo and my car. ive lost and won, though the last year mostly lost, and i hold down a full time job, part-time school and a soccer career while doing it. i am an armature in every sense of the word and i would hope no one at any point thinks anything else of me.

i love disagreement because it keeps things true, and i try at least i think i try to offer my own opinion in a manner that fits the tenor of this board.

J

Ha! If you count losing $$$ I'm a pro.
If you want to learn something or make money then I'm the biggest neophyte here.
Which is why I'm here.....I need all the help I can get.

( real money)...several long term drybulk contracts expire soon and then alot will go spot market...dryships has 60.5% long term thru 2009, and will be 56.0% in 2010... (14 out of 37 ships now at spot).. average long term time is 1,490 days.. these imply 47% premium against Q-3 ffa rates... (daily capesize rate is $ 88,937.00 today)....just mentioned, because of nm buying 4 cape ships this week... (fwit).

bought back in at $11. It has held up really well after a nice run last week. I think it has another run in it.

Reminded of the necessity to watch these straddles fairly constantly, for those who are not familiar with Si02's play. Impressive how trader sentiment can flip in an instant, although GLD is also bobbing up and down like a prize fighter today.

Hard to have the discipline to hold steady when range bound trading doesn't produce desired results fast.

Bought deep out of the money puts on SPY (85) as we were getting revved up about a drop the other day. Sold out at substantial loss to see them regain significant value later. Shouldn't have anticipated intervention at such an early hour of the day. Corrected this stupid trade with some 89 puts which were profitably sold yesterday (and again, way too early) which covers a little of the loss.

Note to myself: don't be pressured into selling in amateur hour and don't buy deep out of the money calls because they're cheaper.

i'm angry when I follow old emotional foolish trading habits....i lose $ and heart......I'm very glad to read this sight, honestly assess my trading decisions, and see those habits fall away....it's a great challenge for me to make money in the market...too much foolishness for too many years on my part.....no more

happy trading to you all

newbee

Some refer to it as 9:30AM-10:30AM...

I look at it from 9:30AM - 10:10AM

1st hour of trading.

Characterised by small investors, fed morning headlines on Yahoo finance et al., making emotional trades that can be taken advantage of by the pros.

UUP is down -0.28, which I consider significant. TBT is in the basement but did a little 11am bounce. I suspect the guv'mnt has been in buying treasuries this morning (CP has a link I could not locate) and may/may not continue after their lunch break. I don't trust TBT here. Just an amature opinion DYODD.

Bill said "but I am always nervous that rank amateurs are often perceived as something more than what they are"

That is so true. From my experience with newsgroups, posters with the highest number of postings are mistaken as "experts" on the subject by members. What I would suggest doing is adding a link from the poster's name to his bio which may include a picture, type of trader (example swing), profession ect...Years trading ect... (I noticed that we can add these things to our account profile but is it visible to others on the blog? If not, I think it would be a good feature to make live.)

ps - I thought dr. cosa was an expert on gold based on his name. thanks for clarifying this.

I also want to add that I,ve received better advice from non-professionals in this blog than from my long time investment broker. My brother lost a fortune with Smith Barney. Now he is doing his own trading too.

vb

Interesting movement in GLD and Si02's straddles. Just realised that GLD is tracking roughly the movement in POG on the minute chart (duh!). So as GLD started rising up from the downward spike and gained momentum the GLD 92 call purchased gained over 7%, which was pretty decent but I'm shy of selling things too early, which I always do.

What I should have realised, having tracked the Kitco gold chart long enough, is that gold was not going to spike upwards immediately after recovering from this downward spike, unless the bulls are really in control which is not the case today.

So realising this I can use the kitco chart to sell into these little periods of strength and then repurchase at the original price.

Call is presently up 2.7% net fees. Not enough to make we want to swing in and out but with a decent amount of capital (say 10 thousand on each leg) this could certainly be a profitable game.

edit: back up to 7%.

Econoday tells me there's a 2 year note auction today. That, plus the dollar hitting the skids hard is probably why gold is rallying. Auction results at 1PM Eastern.

http://mam.econoday.com/byweek.asp?cust=mam

"The average family was £7 a week better off during May following a fall in mortgage repayments and other living costs, research has showed."

RE:>Econoday tells me there's a 2 year note auction today. That, plus the dollar hitting the skids hard is probably why gold is rallying.

hmmm, wondering if the Fed has to buy its auctions this week to keep a lid on things. Might be good for POG for another day or two.

Can't see dollar staying down forever, especially once window dressing is finished.

edit: speak of the devil, big volume moving into GLD now.

please? What are your target exit percentages? Do you jump in and out or buy and sell once only?

On behalf of the "rank" and the "amateure", I'd just like to say I appreciate the dialogue on the blog. I don't always agree with what's being said, or plan on implementing the various investing techniques, but the information adds to the foundation from which I make decisions.

John Smoltz when he was a pitcher for the Atlanta Braves said that he learned he could be good at many things, or really good at a few things (paraphrase). That's where I am. In a continual state of understanding where I am, what I'm doing, and trying to do it better.

Todd,

You seem to be an adherant to the CANSLIM rules. How close do you follow them? How has it worked out. I am sure many people have made a lot of money using it, but for a newbee following it to the letter is really in danger of losing a lot of money. One example if you pick a IBD 100 company for a swing trade you need to realize that limiting your loss to 8% is hard to ensure. As you probably know these stocks could gap down 25 to 50% in one night. A stop loss is no protection. I learned this the hard way. I think the IBD 100 really illistrates the point I am trying to make. I am positive that the same set ups that would give a buy signial in a IBD company a CANSLIM buy signial, is the same setup that would give a short signial to someone else. Cup and handle failure? Probablly a professional. I just picked up an IBD two weekends ago and noticed that the IBD 100 is nearly completely different from the last time I read it a year ago. What ever happened to EZCORP.
Bob

You bring up a valid point = don't drink the koolaid.

IBD is very helpful for the new investor to identify a set of rules/guidelines, and then identify those companies that are performing well in the markets. Their basic premise that strength typically begets strength, and conversely weakness begets further weakness, is useful.

The IBD newspaper, and the IBD 100 is probably misused by many amateur investors. If they randomly happen upon IBD during the beginning of a new bull market, they can instantly become blind followers and wrongly believe they've found the holy grail of investing. They look at the IBD 100 as a ranking of the strongest stocks and thus buy blindly without following sound money management principles.

In the past, I adhered more to the IBD principles, but have since seen the tremendous value of a different methodology (buying on extreme weakness with the proper use of daily, weekly, monthly RSI) with Bill's approach.

Even so, Wm. J. O'Neil recommends taking partial profits after a stock is up 20-25% to lock in some gains. He also says that you should never allow a gaining stock to turn into a losing stock. Those are sound money management principles.

So I guess I'm developing into a varied tool trader. I see the value of buying high and selling higher in a brand new bull market, yet see the value in hitting the singles and doubles in difficult markets using Bill Cara's approach.

One has to be able to recognize what type of market you're in and adjust their trading style accordingly. It's a tough gig. The market behavior/action of the 1980s and 1990s is very different from what we're seeing now, and probably from what we'll see in the the unforeseeable future (given current economic stress & excessive debt in the global financial system).

* To pay $4.55 per share
* Deal to bolster HIV and cancer testing
* Lab Corp shares down 1 pct, Monogram shares up 169 pct
NEW YORK, June 23 (Reuters) - Medical testing company
Laboratory Corporation of America (LH.N) said on Tuesday that
it has agreed to buy Monogram Biosciences Inc (MGRM.O), a maker
of diagnostic products for HIV and cancer, for about $106.7
million.

LabCorp plans to acquire all of the outstanding shares of
Monogram for $4.55 per share -- a premium of about 170 percent
over Monday's closing price -- and said the deal would cut its
2009 earnings by about 12 cents per share but add slightly to
2010 earnings.
LabCorp shares were down 64 cents, or 1 percent, at $65.07
at midday on the New York Stock Exchange. Monogram shares
soared 169 percent to $4.52 on the Nasdaq.

ALOHA !!

Bill agree here ... "Moreover, it's quite often not true that professionals are better than amateurs, as in every walk of life ..."

I cannot tell you how many times the so-called professional could not see past their own "degrees" hanging on their walls! What we see now in Washington DC and the US FED and IMF are all conclusive proof that professionals fail. They have all, in their own special professional ways, brought us to the brink of financial collapse ... to fiscal ineptitude!

The one true asset the IMF has they are now selling so they can raise funds to keep their doors open! How ironic that a bank built on FIAT now depends on GOLD for its very survival. So far the IMF cannot print its own currency to save itself, its at the mercy of "member" nations and apparently the "member" nations are too busy saving themselves to throw more money at the IMF!

Further ... even in my own field of electrical contracting we always ran rings around the "professional" engineers and architects on paper and in meetings. Time and time again these guys clearly do not do their homework but instead relied on their "status" to carry them. I have to say they looked very foolish and have cost the California and US taxpayers PLENTY in their lack of preparation. Some I found to be just plain half-wits and others more than competent just not detail oriented enough. I can't tell you how many inspectors I have met in my 20 years who did not know the difference between three phase and single phase and could not wire a three-way switch to save their lives! Somehow they got to be "inspector" and they stay there because I would be foolish as a contractor to point out to their bosses that they have idiots working for them. The more stupid the inspector the less he got in our way! Then when we got to CISCO ... forget it ... inspectors were useless and that is why we loved the "black box" World that CISCO dwells in! All they could inspect was "push the button and it works", but of course any eight year old could do that!

Give a man power and stature and you can make him dance to any tune ... Its not surprising then that there is no shortage of degreed "professionals" at the US FED and Wall Street. Are they really smart or do they just "skim" with the rest of the insiders doing their insider trading scams. I always wondered how well people like Bernanke and Timmy and Paulson would do if they were not insiders. What if they had to get out here and trade with the rest of the "herd" every day? What if they actually had to risk their own money for once? How would they like their rules then? Would they care about "naked shorts"? Would they be upset to see their pals Goldman trading against their clients orders? How would they feel to be in our shoes now? Would they want a level playing field and social equity? Would they call this "free markets"? Would they applaud the US CONgress and the New World Order and the Iraq War and the STRONG DOLLAR POLICY? All rhetorical questions ... so what is the BIG diff? It all boils down to "they're them and we're us" and they CONTROL our money! I guess they can live with that!

IT IS WHAT IT IS ...

I'm having a hard time sitting on my hands. Trying to resist forcing a trade. Don't see many setups. SLW looks to have the dwindles and the chart looks awful. Holding it. Down the slope of hope again. At least pocketed a few bucks from covered call writes.

Bill
Your comments obviously struck a cord with many today.
I personally thought it was brilliant.
The part that hit home for me though was the following:

"In retrospect, I ought not to have used such an expressive writing style, particularly when many readers are in a foul mood, having lost a lot of their portfolio value. Sorry, but I just write stuff in 15 minutes. This isn't Shakespeare."

I'm one of those guys who lost big time last year. Not because I didn't listen to you but rather I didn't find this site until it was too late. I don't have the words to properly thank you for your guidance since that time.
Sometimes (often) I confuse time frames of what you are telling us and I'm uncomfortable asking but that's my problem not yours.

Please continue to tell it the way you see it.

thanks in advance... baz.

Bill, Same here. I would think as long as you do not pull an authoritarian rabbit out,we would all consider the input as something to reflect upon.

Do you mean to say that possibly the dynamics for learning will be harmed because of possible group shifting or group shaping type factors?

But did they? Barry as usual is on top of this one. He writes:

An emailer asks: “Why do you diss the monthly numbers when they are improving?”

Well, because they are not really improving, if you understand the seasonality associated with them.

Let’s have a look at the monthly numbers relative to these seasonal trends. They ALWAYS improve from January through the Summer, as this is the prime season (many families want to be settled in the new house before the new school year begins in September) with actual improvements

http://www.ritholtz.com/blog/2009/06/seasonal-home...

FD: short XHB, MTH, KBH

Todd-

The Cara community, IMO, includes a higher than average number of individuals who don't fit the standard mold.

One cannot rule out what might be referred to as anomalous achievements. The world is full of unconventional, yet successful individuals. They're neither anti-social nor difficult to understand (ie, I'm not talking about lone wolves)- but they are able to process information differently, and often highly creative. I for one would not rule out success taking the road less traveled, or even the road yet-to-be discovered/invented.

What Bob points out are not conflicts so much as paradoxes. And life is full of them. Sometimes they're not meant to be 'understood,' just appreciated.

But I know what you mean ;)

Lay off of Bill or I'm gonna send 2nd over to your house to kick your %%%.

If you don't like the way mining stocks are going down, and who does, you might prefer the way this cabernet I'm drinking goes down. Cheers! Just don't drink and then trade:)

I'm serious...You don't wanna see 2nd when he's pissed off!

with 2 by 4 in hand

From a gold newsletter touting Switzerland as a safehaven for Gold bullion:

"The global financial and economic crisis has recently found its way into Eastern Europe, and the troubles brewing there center on the Swiss franc. The apparently dire situation led economist Arthur P. Schmidt to predict that Eastern Europe’s difficulties would pour over disastrously into Switzerland. His predictions grabbed the headlines and a bit of attention.

So, in keeping with the Casey, “Intensely Curious, Focused on Facts,” we dug behind the headlines. Here’s the big nothing we found.

Engaging in a carry-trade-like gamble, individuals and businesses in Poland, Ukraine, Croatia, Hungary, Latvia, and Belarus borrowed heavily in Swiss francs, attracted by low interest rates. They crossed their fingers for trouble-free repayment as, for a while, their currencies strengthened against the franc. But that strength didn’t last. The global economic slowdown hit Eastern Europe hard, and their currencies fell sharply against the Swiss franc, turning mortgages and other franc-denominated debts into horrible burdens. Said fingers are now doing a lot of pointing at who’s to blame. The size of the problem, according to Schmidt, is 230 billion Swiss francs (US$200 billion), and the difficulty of collecting on the loans supposedly threatens Swiss banks with huge losses that could bankrupt the country. Schmidt refers to Iceland’s recent national bankruptcy as a model.

We don’t blame him for trying, but the report incorrectly assumes that all the Swiss franc loans to Eastern Europe originated at Swiss banks. They didn’t. In fact, it’s Austria’s banks that have the greatest exposure to Eastern Europe. The day after the headlines, Credit Suisse released a report citing the latest figures from the Swiss National Bank that show Swiss bank loans to Eastern Europe totaled just SF33 billion (US$28.7B), or 6% of Switzerland’s GDP. In contrast, Iceland’s banks had lent over 1,000% of GDP.

Our conclusion: we see no evidence of an impending banking crisis or national bankruptcy in Switzerland. Heidi is safe."

http://finance.yahoo.com/advances

simple visual aid for 1 view of today's action

Great post, Kaimu--loved the line about dung beetles: "All any government ever does is BUY TIME. That is what they have been doing ever since I have been alive. They keep rolling that DEBT BALL into the future like an army of Dung Beetles. At some point the DEBT BALL gets so huge that it stops rolling."

You made me think about an article by Fekete wherein he refers to the "Iron Law of the Burden of Debt." There is a paper of his that makes a good argument that a declining interest rate regime makes the debt burden grow worse, which he demonstrates mathematically. However, I can't find that paper because he has the titles to all his papers written in blue over a blue background at his website. Perhaps you are familiar with that the idea, in any case.

You just made my day :)

From the preliminary programming drafts, CTAB 2010 promises to be even better. Wait till you see it

Greg: MM's can be naked short. They usually cover at the end of day as they don't like to take overnight risk. This explains the spikes you often see on the close as they want to finish flat and correct imbalances in their books. Your last question about things that happen on the open are usually on account of the market orders placed by amateurs during amateur hour (market orders placed on the opening on account of news stories floated by newspapers or financial television).

Les
If you are interested in hearing more about this, Bob Hoye of Institional Advisors makes the same type of argument, almost exactly. For me, it's just another piece of info to think about. I believe Hoye though also thinks that the $USD will rise which doesn't make a lot of sense to me. Perhaps a combination of both lower costs and rising gold price makes for the best bull case.
The other piece which coincides with Bill's comments that gold is money is the simple ratio of gold:spx over the last 8 years. Forget inflation adjusted etc. etc., the fact is it's outperforming and looks like it will continue to do so.

Les,

interesting article,

i havent seen a GOLD:CCI used to make a bullish case for miners.

most of his arguments are the same. academically i lack the knowledge to
say conclusively if we are in deflation or inflation, i enjoy watching others more knowledgeable debate it, but it doesnt really matter.

whats matters is the price of our gold stocks. the idea that gold stocks are cheap relative to gold has been a recurring theme for years now, so gold stocks have a lot of catching up to do. i dont believe this will happen in an environment where people are broke, loosing their jobs and divesting from stocks in general. ive said many times that the stocks will have their day should gold explode upwards, understandably, but without a major thrust the gains realtive to any gold price advance are still far short of where we were a few years ago.

look at the $CDNX for a good idea of how great an index can bounce back from its lows yet still remain so far off its 2009 highs, it could be an eternity before they return there. the damage has been great.

central to my conception of gold stock issues is that there is much we dont know of that goes on in their hedging programs, and that they employ clever wordsmithing agencies to blame anything and everything else as to why they arent making more money: labour costs, geo-politics, energy and FOREX/base metal hedging.

people forget that the incompetence and selfishness rampant on wall street exists in the hearts of many men in all types of businesses. some would say mining is the original method of bilking money before M.E.R.'s were collected from under performing mutual funds.

why am i skeptical? simple:

most mining men and newsletter writers claimed gold miners were underperforming last year because energy prices which make up the bulk of their costs were too high. when energy collapsed the situation didnt reverse itself. now many are simply claiming that whatever the reason, things will soon reverse course and improve because of "inflation" and/or a "higher gold price".

my question is: why would a higher gold price only now bring the miners out of their multi-year malaise? why $920 to $1000 and not $780 to $900? and do you believe during this rise in gold oil will go from the current $70 to $15 (about the same fall it made from $120 to $30)....

as always, a broken clock is right at some point, and people have been clamouring for higher miners for years. eventually i believe they will be right, but in effect, they were never right, only persistent for a long time while claiming the end was nigh. theres a difference.

Dollar weakness is only perceived to assist equities - much like supportive to commodities. But, this is just financial media "explanation" for rise in equities and commodities. Equities are simple, bear market rally. Commodities are simple, lower production = increased prices (same as 1970's), but this too will subside when overall supply and demand meet (and rather quickly as fast money moves out). Having a 19 year high in supply for oil will cause prices to get back to potentially 10 - 15 a barrel, same for Nat Gas to around 1-1.50...

As a monetary phenomena definition, deflation is here despite all the reflation attempts by central governments. Money, credit, loan demand is shrinking, here and abroad, which will persist for years regardless of governmental wishes for loans to take place. The dollar will remain weak due to explicit quantitative easing policies as compared to other currencies. The true test for a replacement of the dollar will be if the dollar index breaks 70 - but, while others may say a replacement is likely, I don't really think so.

Just as we Americans screwed the pooch by using homes as ATMs during this decade, I think the mental shift from frivolity to frugality is here and now as defined by the rapid ascent of the savings rate. As Americans buckle down and "do the right thing" by paying off debt (deflationary), we will, in-turn, demand that from our government (over years), especially if the value of our dollar diminishes to the point of rapid increase in import prices.

Keep in mind, the difference between Weimar, Zimbabwe, et al, concerning rapid price increases from imports (price inflation vs monetary inflation) is that the US possesses all the raw materials needed for basic necessities. If our dollar decreases in value and the Toyota Car rapidly increases in price, guess what, we will buy American cars. Once our "outsourced" jobs no longer make viable sense, companies will utilize American labor. So, while it is easy to say the dollar is doomed, and in a fiat currency this is true, all other currencies that exist are essentially fiat as well. Now, if the Euro goes linked to Gold... all bets are off...

shark- I'm a man of restraint- I would just make a phone call ;)

Mouse money.

I been looking at archives again. This one from near the market low:

"who to believe?"
Submitted by tango6 (284 comments) on Mon, 03/09/2009 - 12:13 #15932

"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."

Well, Faber comes out well so far and so does Coxe for the base metals. I have no idea if they still say the same.

BTW, there are some interesting comments to the old post.

Here it is. I tried to be as concise as possible (I mean, less words equals less letters eqauls less opportunities to mistype things, and heavens know I miss no opportunity to do just that).

http://www.realitytrader.com/blog/2009/06/averagin...

I like maps, especially ones you can zoom on. The User Location Map on Cara Homepage is real nice but I don't think it is up to date. I revealed my location as Peoria, IL some time ago in my user profile but there is no one pinned in Illinois save Chicago.

Which brings another point. Why do so many not post a user profile? At least location. To me it makes it so much more interesting to know where someone is talking from. I know many have revealed it during the discourse but that does not put it on the "Map".

I know who has the only pin in Hawaii but I wonder who the heck is that in the north Pacific ocean? Another interesting one is in the far north of Canada.

"Why do so many not post a user profile?"

My take (which applies to me) is:

(a) Privacy. How many of us can afford to be tracked during the day by colleagues/subordinates/higher-ups? You pretty much need to be retired, self-employed, or free of any fallout (ie, incognito) in order to post honestly and spontaneously.

(b) Prudence. 99% of interactions on the Web will be free of malice. The other 1% can turn your life upside down. Why leave the door open?

Human nature being what it is, I find it difficult to take any long(er)-term short positions prior to EOQ. It is way too easy to pull a rabbit out of that floppy hat to drive prices up just in time for bonuses to be paid.

On the other hand, can it be as easy as going short June 30? Of course not.

There are a few of us here in Canada's far north (generating REAL wealth). It isn't quite the end of the world, but you can see it from here. If you are ever miffed at your weather and want to feel better, you can most likely msg me and I can make you feel much better about your temperature situation. HA! Only joking, it is quite rugged and beautiful up here but in an 'acquired taste' sort of way. Sort of like grappa.

toady
Pronunciation:
\ˈtō-dē\
Function:
noun
Inflected Form(s):
plural toad·ies
Etymology:
by shortening & alteration from toadeater
Date:
1826
: one who flatters in the hope of gaining favors : sycophant
synonyms see parasite

I submit Geitner qualifies in relation to HB&B and the President has provided him a toad stool/podium.

Pro-trader has formal education and they make living of their education while Amateur traders have self education about trading and they usually make fortune out of it

Bill, Vad, Thanks for the input on this subject. I see the "Never average down" in a majority of trading rules for traders on the net and I have seen it many times on this forum. I average down or should I say "scale in" nearly half the trades I make. Usually I play regression to the mean setups or oversold set ups. I will take a 25% to 50% position and then put another buy order (stink bid) where probably most traders would put a stop loss. Why? I wish I had a fin for every time my stop loss trigger was the low of the day,week or month. If one side of the trade is wrong the other side has to be right. Right? Of coarse i would only do this strategy on a certain breed of stock. I would do this on the Msfts, the VZs, CSCOs, MCD, XOM, Best of breed, low debt,low multiple, high cash type stocks. I would never do it with a Drys, Baidu, Jr miner, high multiple, high debt stock and at this time I would not average down in a financial, 2x or 3x Etf. I believe my Average down/scale in method is a low risk method, but certainly not risk free. In addition I will always have a stop loss. I know I probably risk a bigger % loss in this method, but I feel I have a higher % of winners to make up the difference.

Thanks Vad. Nice insight....

My message was merely: Thanks for the reply. It just turned hot and humid suddenly here in Illinois.
Makes me want to watch 'Ice Road Truckers' every night.

Illini- Nice and toasty here in Sonoma, but without the humidity. Have you ever seen the show where they build a off shore oil rig in some fjord in Norway and tow it out to sea? Wild stuff.

percentage wise, I believe palm has more upside than app... but, I do believe both rimm and apple will be great shorts in about 3 more months...

Here is a picture from Northern Canada. This is the darkest it gets right now. So it is really easy to lose track of time up here. I sometimes read well into the night without really knowing what time it really was. Sun starts coming up around 3-4AM. We get the opposite in winter.

We are 2 caraist up here in Yellowknife. Work is usually too busy to post much but I always make an effort to read every night. I am presently 95% cash and am looking for my re-entry into PMs and other miners (including Oil). I enjoy trading these as I have been working in the industry for a while now (Gold and diamonds with some exposure to nickel). Prior to reading these blogs I strictly followed company fundamentals expecting prices to be a direct relation to how well a company did financially. I have since added some basic technicals and psychology into the mix which has given me a better appreciation to what trading really is about.

RE:>Imagine running for public office in a virtual life and becoming a prominent figure but in your real life you are a garbage collector - all run on your cell phone.

One is obliged to ask in response to such an idea - "who benefits from this?" I see the phone manufacturer benefiting from perceived need for higher spec phones to facilitate interaction, the telco's benefiting for obvious reasons, the manufaturer of secondlife will likely benefit in some manner from this project - just ask the creators of facebook. Application creators will get their cut, I've even heard of real estate companies moving in to this virtual world to sell something, but what do we gain from it?

The garbage collector in real life continues to load up on debt to be 'somebody' in a fantasy world, but I'm not sure that this is to his/her benefit. Secondlife appears to me to be a continuation of the same old, same old.

Not to dis your conceptualisation VB - these Da Vinci surgery robots in hospitals tell me there is a future in virtual interfacing - but I see the angle your neighbour is selling for his profit.

I learnt that this is the notion of 'technological determinism'.

http://en.wikipedia.org/wiki/Technological_Determi...

ALOHA !!

VB ... Thanks for the insight!

I love this comment of yours ... "At the time it looked great and the whole of asia was going to pour into Hong Kong to see the mouse."

THE MOUSE!!! No others exist! Disney branded THE MOUSE for sure!

We live in the jungle and my wife hates to see a "real" MOUSE, but MICKEY seems adored by all. I never really could understand the MICKEY MOUSE phenom or the MOUSEKETEERS thing ... As a kid I enjoyed Disney movies but outgrew the themes quickly as I got older. Hummmmm ...

The FLU!! I think Asian governments, in more recent times, have had more "close encounters" than the US government in that department. I am not sure what the US government policy is. Would the FAIRMONT HOTEL in San Francisco quarantine guests? How about THE PLAZA in NYC?

Thanks again ... Mahalo!

Hi Greg - my understanding is that yes it is legal. MM's are hired to "make a market" i.e. keep the bid and the ask reasonable so the spread is not too large. Open market orders at the open drive the price up and then it settles down usually after the first hour or so. That is why I was taught never to place these types of orders as they are a MM's dream come true and that is how they trap people in at the high of the day often times knowing human psychology.

Illini,

I doubt if the two of us make a template for Illinoisans, but some definite similarities. While I was always subdued and quiet in school after a few years in business I realized there are so few real experts — mostly a bunch of BSers who push their way.

As I gained confidence I began sending opinions to newspapers, harassing my representatives and speaking up in business meetings. Surprisingly, I found most execs welcomed an honest difference of opinion if it was backed with reason or humor.

The CEO at a company known for a strict dress code commented, "I see you've grown a beard, (1976 Bicentennial) you know we don't allow that for our employees. When are you going to shave it?"

I said although it didn't affect my work quality, I would be happy to get rid of mine if he would allow me to paint over the one in the lobby portrait of their founder. To the relief of others at the meeting he thought it quite funny. I did work for the cllient for another 25 years until they left town — still have the beard :-)