Bill Cara’s Blog for Aug 19, 2010 [See post-close report]

http://fidweek.econoday.com/reports/rc/2010/Resour...

so plug the new number into the graph provided yesterday in Econoday's short take on initial claims as an indicator of double dip and it is now looking likely. the graph for initial claims is rolling over and heading south, which is bad.

Continuing claims continue to muddy the picture. Are they back at work, part-time work or dropped from benefits?

Daily growth index now has y/o/y consumer durables "contraction watch" is currently below -%5 drop. I think consumers figure out about their own employment numbers before it shows up in government statistics...

"I think consumers figure out about their own employment numbers before it shows up in government statistics..."

I agree with the information from the government carrying less authoritative appeal that consumers are doing it for themselves. I have a question however...do you think that the overall market will be correlated to this? Or will the, fill in the blank, push it up this summer like it does from time to time? We have seen some unlikely outcomes recently, other factors I do not have the bandwidth to assimilate.

Consumer metrics is for me a forward indication of where things are headed. As far as it being a stock market crystal ball - its not. But it tells me, absent serious government spending or intervention, the overall economic trend is down, and is continuing down more rapidly than before. That way I don't expect "surprisingly" good retail sales numbers, for instance.

Right, got it...Yes, crystals balls are so ephemeral. I do know that the fed is rattling its saber; whether thats its tooth or real metal we shall know in the fullness of time.

Gold Heads For $1260

http://www.incrediblecharts.com/tradingdiary/2010-...

Nice read on KCG

*(US) AUG PHILADELPHIA FED: -7.7 V 7.0E; first negative reading since July 2009

*Sub-Indices:
- Prices Paid: 11.8 v 13.1 prior
- New Orders: -7.1 v -4.3 prior
- Employment: -2.7 v 4.0 prior
- Inventories: -11.6 v 4.5 prior

ALOHA!!

GM OPM(Other Peoples Money) IPO ...

Found this on the GM website ...

"General Motors Company (the "new GM") currently has no publicly traded securities. Please note that none of the publicly owned stocks or bonds issued by the former General Motors Corporation (now renamed "Motors Liquidation Company"), including its common stock currently traded on the Pink Sheets over-the-counter market under the ticker symbol "MTLQQ", are or will become securities of General Motors Company, which is an independent separate company."

Pity the poor idiots on the pink sheets trading MTLQQ ... Why then are those shares even allowed to trade at all?

I am looking at GMs 10Q financials for Q2/2010 ...

One thing I have to note is that it cost $1.2BIL to "reorganize". A lot of lawyers and HB&B on the US taxpayer payroll, skimming OPM.

What is immediately noticeable and sticks out like a sore thumb is that the line item "Total Costs and Expenses" has gone up since last year when GM went BK.

Here ...

6 months ended 2009 = $60.6BIL
6 months ended 2010 = $61.7BIL

What is that? What has CHANGED? So the unions are still running the costs up even though they now own GM. Then I read headlines like this "GMs Balance Sheet Draws Praise Ahead Of IPO". Come on ... It took me all of five minutes to see that nothing has CHANGED at GM except that the prior debt has been eliminated to make it look profitable again, but how long will that be the case when the line item "Total Costs and Expenses" keeps rising?

Then where is the mention of the "derivatives liability at GM Daewoo" of $24.1BIL up from $23.1BIL a year ago? Right there under "Liabilities".

Total Assets of GM is listed at $131BIL.
Total Liabilities of GM is listed at $101BIL USD.

Since the FASB changed how GOODWILL is reported, then if you reduce the GM Assets by the $30.5BIL you get a net worth of GM of $0(assets minus liabilities). It used to be prior to 2001 companies had to write-down or deduct GOODWILL.

GOODWILL - The amount above the fair net book value (adjusted for assumed debt) paid for an acquisition. Goodwill appears as an asset on the balance sheet of the acquiring firm and must be reduced in the event the value is impaired.

No GM explanation of how fair net book value is calculated under the new FASB rulings. Further here is a statement in the Notes saying their GME will be "impaired" with benefits.

We recorded Goodwill of $30.5 billion upon application of fresh−start reporting. If all identifiable assets and liabilities had been recorded at fair value upon application of fresh−start reporting, no goodwill would have resulted. However, when applying fresh−start reporting, certain accounts, primarily employee benefit plan and income tax related, were recorded at amounts determined under specific U.S. GAAP rather than fair value and the difference between the U.S. GAAP and fair value amounts gave rise to goodwill, which is a residual. Our employee benefit related accounts were recorded in accordance with ASC 712, “Compensation — Nonretirement Postemployment Benefits” and ASC 715, “Compensation — Retirement Benefits" and deferred income taxes were recorded in accordance with ASC 740, “Income Taxes.” Further, we recorded valuation allowances against certain of our deferred tax assets, which under ASC 852 also resulted in Goodwill. These valuation allowances were due in part to Old GM’s history of recurring
operating losses, and our projections at the 363 Sale date of continued near−term operating losses in certain jurisdictions. While the 363 Sale constituted a significant restructuring that eliminated many operating and financing costs, Old GM had undertaken significant restructurings in the past that failed to return certain jurisdictions to profitability. At the 363 Sale date, we concluded that there was significant uncertainty as to whether the recent restructuring actions would return these jurisdictions to sustained profitability, thereby necessitating the establishment of a valuation allowance against certain deferred tax assets. None of the goodwill from this transaction is deductible for tax purposes.

In the three months ended June 30, 2010 there were event driven changes in circumstances within our GME reporting unit that warranted the testing of goodwill for impairment. Anticipated competitive pressure on our margins in the near− and medium−term led us to believe that the goodwill associated with our GME reporting unit may be impaired. Utilizing the best available information as of June 30, 2010 we performed a step one goodwill impairment test for our GME reporting unit, and concluded that goodwill was not impaired. The fair value of our GME reporting unit was estimated to be approximately $325 million over its carrying amount. If we had not passed step one, we believe the amount of any goodwill impairment would approximate $140 million based on the estimated differences at June 30, 2010 between the fair value to U.S. GAAP adjustments that gave rise to goodwill, primarily related to employee benefit plans and income taxes.

Then here is US Taxpayer funds getting exposed to Venezuela and Chavez and his currency controls to the tune of $428MIL USD ...

Venezuelan Exchange Regulations

Our Venezuelan subsidiaries changed their functional currency from the BsF, the local currency, to the U.S. Dollar, our reporting currency, on January 1, 2010 because of the hyperinflationary status of the Venezuelan economy. Further, pursuant to the official devaluation of the Venezuelan currency and establishment of the dual fixed exchange rates in January 2010, we remeasured the BsF denominated monetary assets and liabilities held by our Venezuelan subsidiaries at the nonessential rate of 4.30 BsF to $1.00. The remeasurement resulted in a charge of $25 million recorded in Cost of sales in the three months ended March 31, 2010. During the six months ended June 30, 2010 all BsF denominated transactions have been remeasured at the nonessential rate of 4.30 BsF to $1.00.

In June 2010, the Venezuelan government introduced additional foreign currency exchange control regulations, which imposed restrictions on the use of the parallel foreign currency exchange market, thereby making it more difficult to convert BsF to U.S. Dollars. We periodically accessed the parallel exchange market, which historically enabled entities to obtain foreign currency for transactions that could not be processed by the Commission for the Administration of Currency Exchange (CADIVI). The restrictions on the foreign currency exchange market could affect our Venezuelan subsidiaries' ability to pay its non−BsF denominated obligations that do not qualify to be processed by CADIVI at the official exchange rates as well as our ability to benefit from those operations.

How many potential GM IPO shareholders want to be roped in with Chavez? Where is the "preferred" in that?

Then there is the BK and sale of Saab and the sale of 1% of Shanghai GM in order to obtain a $400MIL line of credit in Feb 2010. If you have to sell part of your most profitable operation to get credit what does that say?

Then the GM purchase of AmeriCredit whereby they paid $130MIL to obtain MBS and GSE debt along with foreign government debt and corporate debt.

Then there is the $5BIL in restructuring costs for Opel that is yet unfunded and will not be addressed until after the IPO.

Not exactly an IPO I would buy, but then I am not a Pension Fund or a CNBC goon!

LINK: http://www.gm.com/corporate/investor_information/sec/

So much for shorting the 10 yr bond, short the Dow. What about the price of eggs in China?

Yap, they defy any TA. I got stopped out a few times already and may need to forget about the trade. The only thing that makes me think TLT is vulnerable, there is a huge divergence between TIPS and TLT (TIP:TLT). This clearly show that the markets priced in deflation now. That is fine, but somehow I don't believe Fed will allow significant deflation to show up if they can (this is what Marc Faber claims too). So there are 2 scenarios: one, this is a trade-able bottom in whatever risk asset one likes or second, a burst of huge deflation will overwhelm Fed momentarily (a la 2008) with all markets crashing. One can pick and choose one of those scenarios. So, in short, I have no idea what will happen.

OMG, stock charts just showed a TLT trade over $145! This must be a mistake. What is going on?

A nice bit of logic from David Rosenberg which you won't hear from the equity bulls.

We don’t understand it. The equity bulls hate the Treasury market and seem as though they are fanatic in their calls for higher rates. Yet if you are bullish in equities, wouldn’t it make more sense to want the cost of credit to go down to stimulate economic growth (and last we say, the earnings that equity investors pay for are part of the economy)? The bond market is now the only game in town — with policy rates at 0% and tapped out on the fiscal front. It’s all up to the bond market — long-term interest rates — and at least Ben Bernanke understands this even if most portfolio managers and market commentators do not.

Whoa! That's from 1994. Great stuff.

Interesting percentage moves depending on the time frame that you choose. http://tinyurl.com/2cjbnzh

I find repetition in exposure facilitates deeper understanding. Different sources discussing the same issues allow for greater texture especially in regard to complex concepts. To that end.

Money and Banking
The UCC Connection
By Sean Conrad
Date: Jul 24, 2003

http://tinyurl.com/2aooouk

To the question "Is this stuff actionable?" I confirm that it is quite actionable. The fundamental precepts described relating to contract law are manifestly important in the following debacle:

Homeowners' Rebellion: Could 62 Million Homes Be Foreclosure-Proof?

by Ellen Brown

http://tinyurl.com/34dq9js

Unfortunately, while actionable, applying the law and legal concepts is not entirely without its pitfalls. Dancing an inch away from the snarling, drooling teeth of a chained 800lb man-eating gorilla is great fun... until the chain becomes inadvertently unlatched. One misstep in the procedures and the gorilla is on your chest and at your throat. Just stating your name at the wrong moment will be construed as a binding contractural agreement to act as surety for your token in the game and the repercussions will be meted out with great and resounding malice. Furthermore, just because you know who you are and what you're doing doesn't mean that the police officer, or his immediate superiors with whom you are dealing have a clue. You can be both legally and lawfully correct in your position and statements, and be in jail due to their ignorance.

But persist long enough while avoiding the pitfalls and eventually you will work your way up the courts to those who know exactly who you claim to be and what you are doing. At that point, the tables turn quite quickly and dramatically. Any question about that, just ask the hand full or so Federal circuit court judges from the great state of Alabama who have recently had their bonds inextricably leined for dishonoring their oaths in the persecution of individuals who knew who they were and what they were doing... sovereign individuals, secured party creditors who could not be persuaded to contract unwittingly.

The Feds have a huge problem on their hands in all of this. And they know it. Several judges who weren't leined (made personally and financially liable for their actions) decided to retire early and inexplicably shortly after these events.

Keep asking the hard questions. Keep pushing the limits of your own understanding and education... Know thyself.... Life is far grander than most of us currently dare to imagine.

Happy trading.

"What is that? What has CHANGED? So the unions are still running the costs up even though they now own GM. Then I read headlines like this "GMs Balance Sheet Draws Praise Ahead Of IPO". Come on ... It took me all of five minutes to see that nothing has CHANGED at GM except that the prior debt has been eliminated to make it look profitable again, but how long will that be the case when the line item "Total Costs and Expenses" keeps rising?"

Excellent analysis and commentary, Kaimu. And you are correct about GM. Absolutely nothing has changed except that even more incompetent managers (that have to base any decisions on the whims of their political and union bosses) are in place than before the bankruptcy. Once again, the champions of "change" have offered nothing of the kind.

Not long ago TNA and TZA were selling for the same price per share. They are both triples and decay even faster than SSO. If one could short both of them, both would be winners regardless of which way the market went. (Assumes that they couldn't be called at a moments notice). Many more variations of this with FAZ and FAS; EDC and EDZ etc. etc.

Dave, what a trade. No it was more than that it was a brilliant move!!!

MntGntx wrote,
"just ask the hand full or so Federal circuit court judges from the great state of Alabama who have recently had their bonds inextricably leined for dishonoring their oaths in the persecution of individuals who knew who they were and what they were doing"

MntGntx how about providing some particulars regarding the judges and their acts or alleged acts with links. Maybe others understand the nature of your claim here. I do not.

Last week 500,000 people pledged to boycott Target for their corporate greed and funding ultra right wing politicians.

These folks got off their rears and took it to Target--literally!
http://tinyurl.com/27evpbc

loannetter:

Is this really any different than George Soros funding of moveon.org. Or the ABA (american bankers assoc.) giving to both Obama and McCain?

I can't imagine 3, 4, 5, million shares traded in C in after hours, but their is extreme volume going on now. These market sells tell me the government is jumping off the C band wagon. But, why?
Right now the volume after hours is triple the regular session 350million volume.
Could get interesting Friday for C holders... if there are any left!

You reap what you sow Pandit!!!!!!!!!!!!!! Next time try accounting 101 instead of your double trick accounting. People beware of these Pandit smoke screens, you will be the real loser's!!!!!!!!!!!1

I'm sure I can dig up a new diaper for ya?????????

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

Well, Bill called that Trade of the Generation back then.

This totally makes sense and thus I'm bearish on bonds (making money on this trade is another story). The recent rise in TLT reminds me December 2008 when Fed stared buying bonds to suppress yields. The intervention worked but was short lived.

Here is the linky for subscribers.
http://tinyurl.com/33tj844

Not understanding the nature of this claim is entirely reasonable. The claim is mired in back story to which you and, to a great degree, I myself am not privy. The fact that the entire story is not public knowledge is by design, I assure you. Here is an indication, a ripple, that is the result of the stone of which I speak:

http://tinyurl.com/25t7xk7

If you'll read down further, you will find these comments from someone who is privy to details.

"This is HUGE news! The $50Billion maritime lien filed against the Houston District Court Corporation has been sustained and is now in collection phase. These 3 judges are now broke, wiped out professionally, and now all their assets have been seized and will be sold to help satisfy this lien. Additionally the Sheriff also a named party to the action and the District Attorney will be shortly following these 3 out the door, also personally and professionally bankrupted and contributing their assets to settling the lien. The case that was their nadir is: Commercial Bank of Enterprise Alabama v Josie Park Broadcasting Inc. The bulk of the seized assets to satisfy the $50B lien will come from the casino money which has been proven to illegally conspired to steal the Wjrm Ch *67 broadcasting company. Additionally, this huge victory in de facto court firmly establishes the de facto courtroom bona fides of one litigator, Tim Turner (NON-ESQUIRE.) Turner is not only one of the winning litigators, but also a part-owner of Josie Park Broadcasting, Inc. Last but not least, litigator Turner is also Commander of the legitimate, re-inhabited De jure 100 member Alabama Militia, and one of the two de jure appointed Alabama senators under the re-established De jure Alabama republic. Last but not least, Turner is one of the 4 Guardian Elders of the Restore America Plan, which received some MSM press coverage (March 27, 2010...Wolf Blitzer on CNN, Christian Science Monitor, USA Today, etc.) The portion of the article above which states the state is trying to save money is simply spin. A bankrupt defacto court is out of business, period. Their corporated bond has been arrested. The STATE OF ALABAMA judiciary is reeling. Details are just beginning to emerge."

The specifics of the court case referenced are on file as a matter of public record, along with details of the findings. I will attempt to find and link for those interested. But even then I imagine that it will require additional interpretation to make "sense" of the legal intricacies involved and the ramifications.

I attended and graduated from the University of Alabama and maintain friends who practice law and who work for various federal alphabet agencies in that region. Through these connections, I can verify the significance of this case... even if I am not entirely abreast of the details.

Sincerely,

Social justice/equity? The times they are a changing

MntGntx wrote:

"I will attempt to find and link for those interested."

I have no further interest. I was just curious. Thanks.

"You want to buy a 10-year bond at 2.6%, go right ahead. Even the Chinese govt officials are not that stupid." - Bill Cara

Look what Ronald McDonald is doing:

http://tinyurl.com/36be72r

Jim Sinclair’s Commentary

"Mc Donald’s better have enough net yuan profit or Ronald McDonald is a raving economic idiot who will have to get his job back at the circus. How can people be so dense?"

Maybe Hello Kitty told the U.S. clown that the peg will stay despite the pledge to unpeg. Makes me wonder.

Hi bigmother,

I am unaware of the intentions of George Soros and others. According to Buddhist philosophy: the intent of your action weighs more than the action itself. So if anyone gives $ to opposing parties to win friends knowing the gift will cancel out so does any potential of good karmic result...in fact this would be deemed a negative karmic act to willfully misguide another for one's own benefit.

Fortunately, the world has become a more transparent place thanks to the Internet and blogs like this-- so even the ABA, Bill Cara and Barney Frank can be seen clearly for whom they are. Our cultural conversations have been exponentially expanded. Thank goodness!

(Bill, Barney sleeps with the enemy and talks out of both sides of his orafice!)

Wondering if taxation might have something to do with it Bill:

RBS Partners transferred ownership of more than 13 million Sears shares to Lampert's direct ownership and to limited partners of his legacy partnerships during the quarter, filings from recent months show. As of Monday's close, the shares are worth about $874 million, and comprise more than 20% of the shares previously held by RBS.

A similar approach was taken to RBS Partners' sizeable holdings in AutoNation Inc. (AN) and AutoZone Inc. (AZO), with transfers of at least 15.8 million AutoNation shares, or more than 25% of its stake, and 4.8 million AutoZone shares, more than a third of the firm's stake, over the course of the quarter. All were previously disclosed in regulatory filings.

The Sears, AutoNation and AutoZone moves were efforts to head off potential new levies under consideration in Congress, tax expert Robert Willens said. The bill in question is stalled in the Senate.
"In the event that it passes, if and when he decides to sell the shares, the gain will be a capital gain...not ordinary income," which would greatly reduce applicable taxes, Willens said.

Read more: Lampert's RBS Shows Smaller Citi Stake, No Sallie Mae Stake - Investing - Dow Jones Newswire - SmartMoney.com http://www.smartmoney.com/news/ON/?story=ON-201008...

S&P -0.60 / -0.06%
Level 1,070.70
Fair Value 1,073.88
Difference -3.18
Nasdaq -2.50 / -0.14%
Level 1,817.50
Fair Value 1,822.36
Difference -4.86
Dow -11.00 / -0.11%
Level 10,224.00

Euro autos getting hit hard, French banks not far behind

We have sparse economic releases today. To wit, the last release of leading indicators leaves room for self education:

Seven of the 10 indicators that make up the Conference Board’s leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. The group estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation.