Daily Trading & Social Commentary for Nov. 13

GDXJ started trading 3 days ago

http://tinyurl.com/yl99kj5

one man's view
http://tinyurl.com/y9r8f4k

components
http://tinyurl.com/yh57x3b

Dr. Strangelove said (post 52363), “Telestar3d -

"...the Fed is simply immobile for at least the next two years."

The Fed can alter the reserve ratios of financial institutions and profoundly contract monetary supply. The Fed is, I assume, behind the banks' 'extend and pretend' game allowed by the FDIC, OTS, and that other regulator I can't think of right now. That is, in effect, an easing of reserve ratios without a declaration of such. Fund rates are only one of the Fed's small but powerful arsenal of tools.

The only thing that could immobilize the Fed would be an ACT OF THE U.S. CONGRESS.

My reply,

Dr. Strangelove, first off, I run on the premise that the FED will not even think of raising rates until unemployment peaks and begins to turn down. This is how the FED has acted historically and I do not expect them to change stripes this time around.

I’m sure you have noticed that the banks are taking all the free money and hoarding it on their balance sheets. Why should they lend out to weak borrowers when they can just buy the 20 year treasury and make 3.5% spread for basically doing nothing. They also know that many commercial real estate loans are coming due which they have on their books and the CRE assets do not support their outstanding loans. This is another reason why they are not lending so their capital reserve ratios do not fall to levels which cause the FED to declare insolvency and have them liquidated or taken over.

This leads me to conclude that although he FED could alter/raise reserve ratios to contract money supply, it does not have a snowball’s chance in hell of happening anything soon. Last I checked the FED is trying save the banks not put them under.

The whole point of quantitative easing is to increase the velocity of money in circulation and raising reserve ratios is in opposition to quantitative easing. The FED St. Louis’ adjusted monetary base has recently broke out to new highs. What one needs to understand here is that rather than curtailing liquidity in the system, the FED is again aggressively injecting it.

Why is that?

Luggie, thank you for your insights, I will keep that in mind when looking at that graph. Here is another graph, slightly different.

I have found 2 very intriguing regional banks that I think are worth watching:

1.) IberiaBank (IBKC)
2.) Southwest Bank (SWBC.ob)

The first bank just took over $2 Billion worth of assets from Orion Bank after the close, assisted by the FDIC. In addition to this, they took over another bank earlier this year with assets of about $500 Million. These two transactions have significantly increased their assets and future earnings potential and best of all the FDIC is at least sharing if not assuming the losses.

The second bank is a very illiquid one, but still quite interesting. They had about $320 Million in assets before getting involved in 2 takeovers this year. The two takeovers boosts their assets about 75% to around $560 Million. I believe their current potential earnings are about $4 Million per year, which equates to about a $50 Million market cap or more than double their current market cap. This doesn't take into account additional takeovers they may be a part of.

I believe some of these FDIC takeovers could offer us unbelievable opportunities to make a lot of money in the regional banking space over the next few years.

Score22 - Did you check out who the author of that GDXJ piece was? a newsletter writer who covers juniors, and claims his are up 22x from the bottom. I doubt that. He does raise some valid points. I wouldn't buy GDXJ.

teamonfuego - interesting catches. Are you sure the second one isn't SUNwest Bank?

Is it easy to find out how much of losses FDIC will share in a given takeover?

"Pierre Lassonde calls it competitive devaluation"...

which is a central component of the policy of "beggar thy neighbour":

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

http://www.investopedia.com/terms/b/beggarthyneigh...

If my memory serves me correctly this policy was one of a number of factors that led Japan to war in 1941.

Vad wittily replied to this observation that the neighbour with the arsenal and willingness to use it is a "robber". Highway robbery indeed.

so competitive devaluation gives improved exports + stock market recovery. What is the weakness of this scam? restoration of protective barriers? further consolidation of bloc trading partnerships like the EU and NAFTA at the expense of Doha? A market recovery taking the shape of a square root as opposed to an L looks possible. Do we still trade US markets in such a future?

questions, questions,

bon weekend.

http://ronsen.blogspot.com/2009/11/saturday-mornin...

Telestar3d,

While I wish the Fed were immobile, I agree with your view regarding rates. With actual unemployment (using BLS data*) running at above 17% nationally a raise any time soon would be devastating to the economy.

Not only are banks not lending and making money while sitting on the taxpayer "donated funds", consumers are generally in an emergency rebuilding-their- savings-mode — the strongest since WW2.

Unless/until we get actual job growth and improved personal balance sheets I believe it is impossible for Bernanke to pull off his deeply held belief in the power of the Fed to control this disaster.

The worst part of it all is while the Fed, the Treasury, the Congress and Obama administration dole out aspirins and Rol-aids (and a large helping of propaganda), the infection continues to spread.

I am largely doing the same thing as the banks by keeping most of my cash in the Vanguard GNMA fund (VFIIX) and waiting for the better prices for long term equity purchases. I never owned any bullion until last year and as of today it is up 48%.

Fear is a great motivator and for the time being will trump individual greed, IMO.
--------

*
"Let's look at the real number in the establishment survey. If you don't seasonally adjust the number, the actual change in unemployment for October was 641,000, or about 450,000 more than the seasonally adjusted number. And the Bureau of Labor Statistics added 86,000 jobs that they simply guess were created through the so-called birth-death ratio. Interestingly, the birth-death ratio number is not seasonally adjusted, so it is just added to the unemployment number. http://www.bls.gov/web/cesbd.htm

The total (U-6) employment rate is at a record high of 17.5% (this includes those who are part-time for economic reasons). There are now over 10.5 million people who have lost their jobs since the beginning of the downturn."
The Glide Path Option
by John Mauldin
November 6, 2009

cheapy,

"Since we are getting to where we can't borrow more, the only options left are to export more and import less. "

Makes a lot of sense and I hope this will mean a resurgence of manufacturing jobs in the US. Tech is a "worker-lite" category and a lot of the service sector is now being handle offshore. We need to make things people need or want both here and in other countries.

I used to have a business which did just that. What a concept! ;-)

Bill / Korvus,

RE your request for additions to the daily market report. As I like to look at databases in chart form is it possible to add a link in the RSI tables were we could view the RSI D-W-M data for a particular stock as a chart. I find it helps to see how the flow between them develops over time.

Attached is a chart of GOOG for the last 2 years with the 3 RSI's overlayed. Note I can't do this directly in Stockcharts, I had to produce each graph separately and then overlay them with the PainNet image program.

I wouldn't want to see all the charts directly in the Market report, just a link if we wanted to pull them up.

thanks for all you do

I've been a reader of the linked blog since someone here pointed me there 2 weeks ago. I've read thru his cv and archived posts over the past year, and the writer is deep in experience, his ideas are on the money, he is well connected, one of us, and would be an appropriate invitee to a Cara Community conference anytime.

http://blog.madhedgefundtrader.com/

He suggests in Global Market Comments November 13, 2009 the following what he says is bargain portfolio insurance:

Buy January 1030 S&P 500 at around $19

I have little experience with options so put this out for discussion and also help with
1. where to get quotes on options
2. how to place the order
3. sizing

Thanks in advance to anyone who can help me understand this. It seems an appropriate time to buy some portfolio insurance.

I was rereading an article from the August 2006 issue of Active Trader magazine. An interview of Aaron Brown who was the risk manager of Morgan Stanley who states " the Fed does its job by adding risk to the economy. ...it is doing its job by being unpredictable. There is a certain tension in the economy; If you make the currency too predictable and strong, you encourage people to save regularly and count on these interest rates, currency valuations and inflation rates over long periods of time. It is similar to a policy of putting out little forest fires but then every 20 years or so there will be a tremendous fire that destroys 100 times as much. The Fed is here to create a lot of small forest fires. Those little fires kick a few people out of ruts and into action, and maybe bankrupt a few businesses that would have had to go anyway. If your view of the Fed is that it is out there looking after your interests and is going to make sure your retirement is secure - well first, I don't think they'd want you to think that."
These exerpts from the article don't give the full flavor to his thinking,but if you can find the two issue article and read it, it would shed a lot of light on what went wrong and why the current path by the Fed is going to cause a bigger disaster in the future. Or, maybe a big surprise is just ahead.

Dan

Dan

in regards to Genzyme's Friday notification to FDA of small contaminants at their production facility, GENZ might be dropped to the high $ 30's or extremely low $ 40's ( reminiscent of CELG's low rev.'s a few months ago, and how they were taken doen to $ 38.00 ).. This may present an opportunity not seen in several years.. Caution prevails, but is worth watching..... It will probably be a 3 step process..

I know we beat up the bankers about the housing crisis, but who authorized the abhorrent lending standards/requirements in the first place?

This from Mish: "On November 5, the Richmond Register was asking What does the FHA think it is doing?

Exactly who made Bernadine Shimon think that she could buy a new house shortly after declaring bankruptcy and losing another home to foreclosure? The American taxpayer, that’s who.

Without a Federal Housing Administration willing to guarantee a $125,000-plus mortgage, this Denver-area schoolteacher’s recurring “dream of homeownership” could not come to pass. Shimon’s down payment was a tiny 3.5 percent.

This single mother is so strapped that she had to cash in her retirement savings to come up with the 3.5 percent. Her case was cited in a New York Times article about, not surprisingly, the sad shape the FHA finds itself in."

http://globaleconomicanalysis.blogspot.com/2009/11...

This all goes back to the politicians, the true architects of ruin...through the CRA they've forced the reduction of lending standards. The beat goes on, we pick up the banks, and we continue this crap insuring that joe taxpayer will keep getting screwed. Since nobody in their right mind would by CDO's with this manure, it'll go right to the GSA's, which are explicitly guaranteed by the government...which means....you and me.

Hi Nemo - FHA loans have been with us long time and the Denver teacher you speak of bought at the peak of government intervention to get everyone a home so they can vote for the party of the people. Sadly she bought too late in the process. Nothing wrong with the 3.5% down - also she pays a healty chunk monthly of mortgage insurance to protect the lender authorized by FHA to deliver the mortgage to her if it is in fact an FHA. Gifts from parents or raiding the 401K are typical, but a Denver teacher is in a PERA (Public Employees Retirement Fund) that does not allow the cashing in of the retirement. Further the FHA will not allow a recent foreclosure and/or bankruptcy in the underwriting process to get this loan. I get the N.Y. Times daily and have learned best not to take it as gospel truth - they appear to have a particlar bias. You are right the problem goes back to the government (read House banking committee)which really dropped standards in the mid 1990's (but not FHA standards)to bolster voter cooperation - a true tragedy for the borrower, us and the world economy. Happy Trading

Looks like there is some solid insider buys going on at HBAN:

http://finance.yahoo.com/q/it?s=HBAN

(FD: Long at $3.86 this week)

Nemo and Luggie,

Your comments serve to point out what I see as an increasingly difficult problem — getting the facts.

Maybe it has always been so, but today I think there is such a rush to be first that investigative reporting is becoming a lost art.

Newspapers have been in financial trouble and many have folded (pun just delivered itself) in recent decades. Deadlines persist and a skeleton staff takes shortcuts. The internet with "Googling" and "Wikipedia-ing" have made plagiarism an excepted skill. We have little idea how much circular quoting is reinforcing partial truths.

This is then added to the bias being served.

Many people (including some in journalism) are still unaware how skewed government data are. There is little need to flat-out lie when a simple "seasonally adjusted" is used and may or may not be mentioned. When "beating the analysts' expectations" passes for improvement and when massive behind the scenes injections of tax payer dollars move $billions each day.

We are all on 24/7 overload.

“Where is the wisdom we have lost in knowledge?
Where is the knowledge we have lost in information?”

T.S. Eliot, ‘Choruses from “The Rock”.

I don't agree with Ritholz in how the CRA was at the core. It's the leverage that began the cascade...call it the butterfly flapping it's wings that produced the hurricane. The politics that began the leak in the dike holding up lending standards that undermined the collateralized debt machine. I don't look at it as a poor minority issue. I look at it as a lever, that opened up the door to everybody across the socioeconomic spectrum to feed at the trough that was initiated under the lending standards debasement caused by the CRA.

Look, a middle class white guy like me could have qualified and received a ninja loan also...and my ability to do that originates with the CRA, which was an attempt at social engineering by politicians...that was my original point. I remember (not his name unfortunately) a gentleman on tout TV who is a famous distressed asset buyer being asked by his caddie on whether he should sell his condo's in Las Vegas-he bought them sight unseen as a speculative investment.

It is the law of unintended consequences...the intentions of the CRA were one thing...the ripples were far wider than anybody could expect.

And don't get me wrong, the poor woman is probably at wits end, we just approve of financial "moral hazard" all up and down the socioeconomic spectrum. Hell, the government bailed out the banks in the Asian, Mexican, Russian, (insert your rescue here) and LTCM crisis, so if they should be bailed out, why shouldn't the little guy.

Dave Fairtex...you of all people should know how a little leverage in just the right spot produces one helluva result. :)

From Ritholz:

1) Home sales in CRA communities would have led the national home market higher, with sales gains (as a percentage) increasing even more than the national median;

2) Prices of CRA funded properties should have risen even more than the rest of the nation as sales ramped up.

3) After the market peaked and reversed, Distressed Sales in CRA regions should lead the national market downwards. Foreclosures and REOS should be much higher in CRA neighborhoods than the national median.

4) We should have reams of evidence detailing how CRA mandated loans have defaulted in vastly disproportionate numbers versus the national default rates;

5) CRA Banks that were funding these mortgages should be failing in ever greater numbers, far more than the average bank;

6) Portfolios of large national TARP banks should be strewn with toxic CRA defaults; securitizers that purchased these mortgages should have compiled list of defaulted CRA properties;

7) Bank execs likely would have been complaining to the Bush White House from 2002-08 about these CRA mandates; The many finance executives who testified to Congress, would also have spelled out that CRA was a direct cause, with compelling evidence backing their claims.

Points 1-4 are irrelevant to the effect I see. If the CRA led the general debasement of lending standards, which I posit it did, the greatest damage would take place where the best speculators could organize their efforts, and would be most profitable, which would not likely be the poorer less desirable areas.

Point 5-6 is irrelevant because banks are being propped up and quietly taken over. Ritholz finished his book last year. How many banks have failed since? We won't know for years how many banks failed as a result of this crisis. Also, again, my point was about the GENERAL debasement of lending standards across the spectrum.

Point 7-They were making money hand over fist across the spectrum while the CDO machine was working-why complain.

Time to stock up on the Red Bull……….

http://tinyurl.com/ybzolzf

Edit:

Humor is the great thing, the saving thing. The minute it crops up, all our irritations and resentments slip away and a sunny spirit takes their place.
Mark Twain

In terms of your claim that the CRA provided "bad moral leadership" and started the trend towards bad lending standards - certainly it's tough for me to prove a negative to you, especially when I suspect such a claim aligns so perfectly with your biases. Yet I say to you, without data providing a smoking gun that ties CRA legislation somehow to losses, your claim is just speculation - a proof by assertion, or a proof by a preponderance of the CEO anecdotes. I do not find such proofs compelling.

I think the story is much simpler. Originators were motivated through big fees and securitization (where ownership got transferred - "its not my problem loan anymore") and whose buyers were placed into slumber by reliance on FICO scores and models that said "housing prices never go down". That's it, end of story. No CRA is required. Just greed and the ability to pass the trash off to a bagholder.

Use Occam's Razor. The simplest explanation - the explanation with the fewest elements necessary to completely explain the situation - is most likely to be correct.

http://quotes.ino.com/chart/?s=NYBOT_DX&v=d3

Looking at the 3-month chart for $USD I see that it made a head-and-shoulders pattern at 76 and then broke down to 75. Now, it made a very similar (in shape and scale) head-and-shoulders pattern at 75 and looks ready to break down to 74. If I see $USD under 75 tomorrow, I am definitely closing my shorts until it hits 74, at which point it will be ready for a rebound and I'll reload my shorts.

"In terms of your claim that the CRA provided "bad moral leadership" and started the trend towards bad lending standards - certainly it's tough for me to prove a negative to you, especially when I suspect such a claim aligns so perfectly with your biases."

This reminds me of the classic, "Well sir, when did you stop beating your wife" rhetorical device. Dave, you need to be more specific about this lightly disguised ad hominem attack. Please be specific for the community about what you believe my biases to be, I would like to know myself.

ALOHA !!

As one of the many Americans who had to suffer through the Vietnam War era and having seen a number of friends either dead or ruined for life I must post this "warning" to future generations of Americans forced to accept the consequences of US Foreign Policy blunders and the unending cost of Defense. Which came first US FOREIGN POLICY or BIN LADEN?

When it comes to US FOREIGN POLICY only the faces change!

God only knows what is said behind closed doors! For an example of what is possible behind closed doors just review the LBJ TAPES. LBJ sent tens of thousands of young Americans to their death just so he could look good for another year or so, long enough to pass the buck to the next President! Let’s take a brief look at telephone transcripts during 1964 between LBJ and Robert McNamara(RM). Just keep in mind that the Vietnam War did not officially end until 1975, more than ten years after this conversation.

LBJ: Uh, tell me, I, I saw a little glimmer of hope on Vietnam in some, uh, paper today, uh, where we'd routed some and killed a few and run 'em out or somethin'. Do you have any--are you getting good cables on them at all?

RM: Well, I read that article, Mr. President, the, the uh-

LBJ: Give me another one of those.

RM: The official battle report wasn't as good as the newspaper report, for once. We got a little; we got a break in the press.

LBJ: Has Carl Rowan gettin' any of his propaganda people out there now?

RM: Yes, I think so and I'm going to check again before I go the end of the week and uh, tell him that I want to talk to Lodge about that while I am there. I'm just sitting here, as a matter of fact now, writing a cable to Lodge that I'll send Monday, telling him if he agrees, I'd like to stop by on my way home and I will cover that subject with him and be sure before I leave that Ralph's people are actually are on the way.

LBJ: Have we got anybody that's got a military mind that can give us some military plans for winning that war?

RM: Well, Buzz Wheeler is going out with me.

LBJ: I know but he went out last time and he just came back with, with planes, that are all he had in mind, wasn't it?

RM: Well we, uh, yes, well he had more than that but he emphasized the planes. And the planes, Max Taylor agrees, are not the answer to the problem. Whether we should have more planes or not is another question, but it's not going to make any difference in the short run, that's certain.

LBJ: Let's get some more of something, my friend; because I'm gonna have a heart attack if you don't get me something. I'm just sitting here every day and uh, this war that I'm winning and I'm not doing much about fightin' it, and uh I'm not doing much about winnin' it, and I just read about it and uh. Let's get somebody that wants to do something besides drop a bomb, but uh, that can go in and take in after these damn fellas and run them back where they belong. It looks like-

RM: Looks like we want to tell Kahn- [recording interrupted- tone indicates that material was removed by National Archives for national security reasons]

LBJ: Well, we need to shoot that guy. We need somebody over there that can give us better plans than we've got, because what we've got is what we've had since '54. We're not getting it done, we're, we're losing so we need something new. It's uh, if you pitch this ol' southpaw every day and you wind up as the Washington Senators and you lose, well uh we'd better go us get us a new pitcher.

RM: I know it-

LBJ: Let's find one. And tell those damn old generals over there to find one for ya, or you gonna go out there yourself…

As history shows LBJ committed more than 150,000 more US troops to the Vietnam War after this conversation was recorded. What must Obama and Bush have been saying to their McNamaras and Generals behind closed doors? Only the faces change on US Foreign Policy and Defense spending.

Clear evidence that politicians only expertise is at "getting elected". Once they are in office they hand off the decisions and footwork to the vast legions of YES MEN left over from prior regimes. Could Bush and Obama be much different than LBJ in that regards?

Here is a link to the LBJ tapes ...
LINK: http://americanradioworks.publicradio.org/features...

I would also like to post this link to the movie Dr. Strangelove where you will hear the contents of the USAF B52 survival kit! The three gold coins he speaks of $100 worth is now worth $3375! Don't forget the Russian Bible ... A good weekend in Vegas indeed ...

LINK: http://www.youtube.com/watch?v=F5qqfsQGYus

Both the LBJ TAPES and the movie DR. STRANGELOVE were made in 1964 ... but only "one" was released to the public. Imagine how the Vietnam War would have turned out if the LBJ TAPES were released in 1965 instead of 2005 ...

ALOHA !!

POG at $1130USD ...

Not only is gold up and silver as well, but all base metals are moving up, with copper up some 1.5% and Zinc up 2.5%.

POG green across all currencies. The POG/AUD has blasted above the $1200AUD resistance at $1210AUD.

All ASX listed PM and base stocks are up 6% to 14% ...
SLR = 600% YTD gain
SRL = 400% YTD gain

The USDX down knocking on the 74 door!

Some news on gold here that may be kicking the price up in the Aussie markets somewhat. Contrarian? I keep seeing a number of these types of articles in the media talking about central banks being net buyers, yet I do not see any data that is showing central banks buying other than India. However I believe a number of central banks have been buying off and on over the years, but without fanfare or media coverage. Central banks across Europe have been selling and leasing thousands of tons of gold for many years now, net sellers, yet in the rarest moments has the media ever disclosed the buyers. If there are sellers then there have to be buyers somewhere and with such huge quantities sold over the past eight years I can only think that other central banks would be the buyers. Then again if central banks are net buyers then there have to be sellers. So far the only disclosed "seller" has been the IMF.

It's too bad there is no transparency any where, especially when it comes to central banks. If these private banking cartels known as "central banks" insist on ruining our financial future it would be nice of them to at least let us in on it with a 20 minute delay! It doesn't have to be real time! HA!! Does IB have a central bank trading platform I can subscribe to? How about a live feed to the 400 traders at the US FED? Where do those guys go to lunch at?

READ ON:
BlackRock says central banks will be net buyers of gold
By James Regan

Reuters
Sunday, November 15, 2009

LINK: http://www.reuters.com/article/businessNews/idUSTR...

SYDNEY, Australia -- Central banks will be net buyers of gold this year as they diversify away from the U.S. dollar, global commodities investment fund BlackRock said on Monday in comments that helped drive bullion to fresh record highs.

BlackRock is one of the world's largest fund managers, boasting a total $1.4 trillion under management across all asset classes. It is manager and adviser to the U.S. Federal Reserve and its views can influence the direction of global markets.

Evy Hambro, who runs two of the world's largest commodities funds, BlackRock World Mining Fund and Gold & General Fund, gave an upbeat outlook for gold during a media briefing in Australia.

His forecast for net central-bank purchases of gold this year would, if met, mark the first year in two decades when the world's central banks bought more gold than they sold. They have been net sellers of gold each year since 1988.

"The most recent break-out in the gold price in U.S. dollars has caused most gold prices to start trending higher at the same time," Hambro said, adding that investors were now looking for gold to rise in other commodities as well as U.S. dollars.

"When you start to see the price rising in a range of different currencies, it is a clear sign of a very strong market to come," he added.

Spot gold stood at $1,123.70 as of 0216 GMT after touching $1,126.30 per ounce, a record, compared with the notional New York close of $1,118.50, helped higher by Hambro's bullish outlook, according to financial broking group IG Markets.

The previous record was $1,122.85 marked on November 12.

Bullion was also gaining on renewed appeal as a hedge against the U.S. dollar's weakness and inflation risks.

In other currencies, gold has not reached new highs since early 2009. In Australian and Canadian dollars and the South African rand, it peaked in February.

But Hambro said investors were now "looking for price rises across all currencies" as central banks build up their gold holdings and global supplies tapered off.

"Gold's role is gathering a lot more attention in terms of risk diversification," he said.

Hambro also said that the high level of gold production in China, which has replaced South Africa as the world's biggest producer, was not sustainable, pressuring world supply.

China's gold production rose 13.49 percent in the first half of 2009 from a year earlier to 146.505 metric tons, according to the Ministry of Industry and Information Technology.

Hambro also said U.S. demand for commodities was starting to show signs of recovery. This, along with stronger Asian demand, set the stage for a prolonged bull market, he added.

Hambro said China's rapid rise would underpin the next bull market. China accounts for about 40 percent of demand in almost every commodity and more than half the demand in some commodities such as steel and copper during the second quarter of 2009.

"Obviously other countries as well (that are) in a similar position to China, such as India, Brazil, and so on are also having another magnifying affect in terms of the commodity picture," Hambro said(more)

If life were only so simple it would be great.

However, many things change. To compare US troops in Africa to the Viet Nam War is a big mistake.

Our overarching military concerns in the early 1960s were a carryover of the global communist scare. The idea being that "world communism" was a unified threat to freedom. The events immediately following WW2 in Europe (Stainist takeover of Eastern Europe) and the victory of communists in China (Mao) convince many if not most this was so.

Today the declaration of Jihad against virtually anyone other than their brand of Muslim religion is totally different and knows no boundaries.

PC treatment of such terrorists will be the end of civilization as we know it.

Obama's "Let's all just play nice together" approach is more dangerous than anything else.

"I've noted that we are facing a predictable second wave of defaults, based on a mountain of scheduled resets for Alt-A and Option-ARM mortgages, which began in recent weeks and will continue through 2010 and 2011. One of the counter-arguments against such concerns is the assertion that “the majority of these mortgages have already been modified.” Unfortunately, this assertion is not true."

Good morning.

New Coverage:

GSK - Deutsche Securities Initiates with a Hold.
RIMM - Auriga U.S.A. Initiates with a Hold. PT = $66
RY - Barclays Initiates with an Underweight.

I'm over at Vad's place learning something new.

I didn't use a defined setup in the RIMM short I played on Thursday (a paper trade) and had to cover prematurely to be somewhere else, but the multiple MA resistance I noted on the 60/15 min charts I continue to watch suggested reasonable probability of a short working out. Hindsight is always 20:20 and the price/volume action when the plunge did occur is noted for future reference.

Looking forward I see favourable shorting opportunities with HGSI, another stock that has been offering good daytrade and scalping opportunities. Plenty of MA overhead resistance and the stock is presently in the red even as futures are green. Note that this is not in any way Vad's trading style nor a recommendation. Have fun this week.

"I was trying to spare them my long diatribe unrelated to trading."

Let me make a connection...

1)A historical macro-economic event with an arguably significant cause originating in the political sphere, which drove the markets to the brink of collapse.

2) With the blame being laid solely at the feet of Wall Street, the popular backlash may allow the same denizens in DC to escape blame and perhaps levy a trader tax in popular retribution.

I don't know about you, but 1 wreaked havoc with me, and 2 will.

S PCS are in Triple RSI buy alert. Suggest running your own RSI scan and look at the options expiration max pain. Not much potential.

Many other in distribution/sell mode.

Do your own homework.

Sales at U.S. retailers rose more than expected in October as consumers bought more motor vehicles and other goods, but the previous month's figures were revised sharply downward, a government report showed on Monday.

In a report that pointed to gradual improvement in spending, the Commerce Department said total retail sales increased 1.4 percent last month, the largest advance since August, after dropping by a revised 2.3 percent in September. Sales in September were previously reported to have declined by 1.5 percent.

Analysts polled by Reuters had forecast headline retail sales rising 1.0 percent last month. Sales in October were boosted by a jump in new vehicle and parts sales, which surged 7.4 percent.

In a separate report, the Empire State Manufacturing Index, which measures activity in New York, fell to 23.51 from 34.57.

Stock futures pared earlier gains and losses in the US dollar accelerated following the data.

Auto sales had slumped 14.3 percent the previous month following the expiration of the government's popular "cash-for-clunkers" incentive program in August that had buoyed demand for motor vehicles. Previously, the government had reported auto sales falling 10.4 percent in September.

With government stimulus behind the bulk of the economy's 3.5 percent annualized growth pace in the third quarter, there are fears that rising unemployment will continue to weigh on consumer spending and hold back the recovery.

Excluding motor vehicles and parts, retail sale rose by a smaller-than-expected 0.2 percent in October after increasing 0.4 percent in September, and advancing for a third straight month. Economists had expected a 0.4 percent increase.

Gasoline station sales were flat in October after rising 0.9 percent in September. Core retail sales excluding autos, gasoline and building materials rose 0.5 percent, advancing for a fourth straight month.

Sales of building materials dropped 2.4 percent last month after falling 0.6 percent in September.

Manufacturing Falls

A barometer of manufacturing in New York State fell in November, suggesting factory activity moderating for the first time in four months, the New York Federal Reserve said in a report on Monday.

The New York Fed's "Empire State" general business conditions index fell to 23.51 in November from 34.57 in October, which had been a five-year high.

Economists polled by Reuters had expected a reading of 30.0 in November.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

The moderation in growth was broad-based, fueling concerns that a key driver in the current U.S. economic recovery has hit a speed-bump.

The component on new orders—a proxy for future activity—fell nearly by half to 16.66, while the employment index fell to 1.32 from 10.39 in October.

The pullback in growth put less pressure on prices manufacturers said they paid this month. The prices paid index fell to 10.53 from October's 19.48.

Despite less optimism on current conditions, the survey's six-month outlook index advanced to 57.00, a level not seen since October 2004.

To me this is a weird story. Gold a precious metal because its supply is very limited. Thats why its expensive. It has always been in short supply. But its use is very limited also. Thus, most of the gold that has been mined by man remains stored in vaults. It is of no consequence that fewer grams of gold can be extracted today from ore than 100 years ago. Gold production now as then remains in vaults.

The argument that gold is money doesn't cut it. I have never seen anyone at my local Walmart trying to purchase a TV set with a gold bar. Gold is not used as money any more. Those who buy gold are just investing in a commodity.

In my view this is a concocted story to continue the gold run up as long as the manipulators wish.

ECA - estimates lowered at Morgan Stanley through 2011. Company cut its production guidance, though the upcoming split should help create value.

Have one trade. If SMH >= 26.30, buy SSG at market.

Do your own homework.

out for 5.5% gain.

out for lunch money

capitulation trade. Buy stop 1.93/1.94 limit good for the day.

max pain 5 bucks for Nov/Dec.

Do your own homework

I don't recall ever living thru market conditions like we're presently seeing.

Can the dollar crash/market melt up continue indefinitely?

I'm frozen in the moment....lost in what seems to be uncharted territory. I want to short the market so badly but am afraid of bucking the current trend.

Anyone here care to predict market movement over the next few months?

Regards,
BH

lessmore -

"Since gold is commodity money would it not have to be used under some barter system which establishes gold as an accepted method for payment for goods and services and repayment of debts? I do not know of any such system."

That's because we live in a fiat currency world. Paper money backed by gold is that barter system and the U.S. went off the gold standard in phases ending in 1971 by Nixon when he closed the gold redemption window to foreigners.

Cheers.

You and I talked a few months ago about people trusting their financial advisor's, etc... I agree wiyh you, now... I have begged someone close, to take profits this week, and they won't... Reason ? Taxes... Even I agree with Cramer on this one..." Nobody ever got hurt taking profits "..... Whoever gets crushed now deserves it.....

Why too early to short?
SPX is forming a nice divergence on RSI and MACD. VIX is building a higher low. And U$D cannot be falling nonstop. It's even building a nice divergence itself on RSI and MACD.
To me, it looks like today is decent short entry point IF it is wise to play short in the face of dollar being killed by the powers.

I don't think the markets are that abnormal. Remember that we just went through a huge crisis where everyone was worried about the safety of their safest assets. In any period where you come out of that there is sure to be a big snap back rally. Although it was on a much smaller scale, look at the 1997/98 Asian credit crisis and its effect on our markets.

A rally back up to the 1100 to 1200ish level is not that crazy given we're clearly not on the same path we were this time last year. The markets and financial system have been backed up by governments world wide so fear is gone which means people can go back to actually living their lives. In order for the markets to go much higher we will need to see significant job growth. So I think the rational person would agree that we'll probably be in the 1050 to 1200 level for the next year or so. I think anyone expecting a crash is ignoring what we had last year.

However, I believe there will be a heightened chance that we get a nasty quick correction of 15% or so over the next year. All it would take is a few bad economic reports in a row. So I think it's wise to keep a small part of your portfolio constantly in near term SPY puts.

the future,,,,,, CRN, GEO, CXW ... Wait till the People Really get hungry.. States cannot afford the upkeep anymore...

“Clearly, retailers are selling their shares in droves and only weeks before the beginning of the holiday seasons that accounts for 30% of all retail sales.”

http://tinyurl.com/yaahjmt

-------

So far, I've held off on shorting the retailers. If one believes that holiday sales will be disappointing, then shorting prior to November 27 (Black Friday) is in order.....or will the media spin poor sales into cotton candy?

Regards,
BH

I see that copper finally broke out above $3, and rather decisively. As the tradition goes, I just covered at $84.62 the small bunch of FCX shares I shorted last week at $82.75, for a loss of $187. It was a small position, but I still don't want to keep an outright FCX short when copper breaks out above $3 after consolidating around this level for a LONG time. Who knows how far it will go now? I am still keeping my 1 naked call on FCX with a strike price of $85 -- here the time is on my side, and if the market takes a pause at the current high for the year, then my call will decay away.

Grym - Perhaps we should just realize that there are alot of smoke and mirrors. Better to render the meddlers powerless with actions that indicate they don't matter and get on with enjoying the best parts of this short life.

Bert,

What actions do you see as rendering them powerless? It appears to me they have become more powerful than ever before.

Here is a funny from Mish today along those lines.

-----------

One Day At The Bank Branch
By Charles Goyette

An old farmer walked into a rural branch of Washington Mutual to open a savings account. Being a conservative sort, he asked, “What happens if Washington Mutual goes broke?”

“Well,” said the branch manager, “in that case I suppose we’d be taken over by somebody like Chase Bank, and they’d make sure you got your money back.”

“But what happens,” asked the farmer, “if Chase goes broke?”

“In that case,” the manager answered, “you’d get your money back from the F.D.I.C.”

Not satisfied, the old farmer asked, “And if the F.D.I.C. doesn’t have enough money?”

“Then your money would be covered by the United States government.”

“And if the government is bankrupt?” he asked suspiciously.

“Then the Federal Reserve would just print you up some new worthless dollars.”

“But what if the Federal Reserve is finally put out of business?” asked the old man.

“Well, in that case, you’d lose all your money,” said the manager. “But really, wouldn’t it be worth it?”

teamonfuego -

"P/E of 60? Come on you can't really believe that, can you? I'd rather look at the prior quarter's earnings, annualize them and then add a bit for growth. Including a once in a lifetime negative earnings into the equation is putting too much emphasis on a one time event and not looking forward..."

Maybe negative earnings is the new normal.

Stopped out at $4.95 and $4.82 for a small net gain...

Hi All - 18.5 mm shares traded today on this pup I still have in the pound. No news I could locate, but someone must have a clue about how Chavez will dispose of this property right. Hope some of you got in and out with a few sheckels. Happy Trading

ALOHA !!

Now if only he would do that to the US CONSTITUTION instead of the US FED!

Today I nailed my first long term capital gain since Oct 1 and I don't know whether to laugh or cry. You see, I only made 12 cents on the sale after commissions. Laughable but I was glad to be out, finally. The stock was Sotheby's (BID) which has a high Beta and a low div return at the present price.

BID and TIF are indicators of the high end consumers and perhaps those are coming back now. I am not too sure that Joe six-pack is in such good shape.

wanna see a nice kangaroo tail reversal to confirm.

Early=wrong in most cases.

nice kangaroo tail reversal. Buy limit 24.57. Max pain 30 bucks for Nov/
Dec.

Do your own homework.