Bill Cara’s Blog for May 28, 2010 [See post-close report]

Good morning.

NOK - Upgraded to Neutral @ MKM Partners. MKM upgraded Nokia citing valuation and its expectation that the company's Q2 results are unlikely to disappoint.

PG - William Blair Initiates Coverage with an Outperform.

RY - Downgraded to Sector Perform @ Scotia Capital.

RY - Downgraded to Neutral @ Macquarie.

RY - Downgraded to Sector Performer @ CIBC.

TGT - MKM Partners Initiates Coverage with a Buy. PT = $66

WMT - MKM Partners Initiates Coverage with a Neutral. PT = $55

I became very distrustful of pickens pontifications when I watched his family dump millions of shares every two or three days during that "public service" blitz for using nat gas two septembers ago.........rather self-serving...........baz22/ thanks for the heads up on ALTH

DB - Downgraded to Underperform @ Macquarie

as per my comments yesterday gold failed to really surge higher into the close, and looking over the Kitco 3 day overlay chart you see how gold has risen back up to track its own price over the last few days but not exceed it.

i have noted on this pattern for several years that it generally preceeds a sharp and sudden dump in the gold price if the price doesnt quickly rise above prior days action prior to market open.

we are moving a few dollars lower but if we breach $1204 i suspect the move will be a big one down, as opposed to a breach above $1216 which will signal the next monster up.

good luck. right now im looking bearish unless we suddenly reverse course...

RIG's locations (per Obama halt)... http://www.deepwater.com/fw/main/Listing_by_Locati...

Out AMAT and CLO.TO. Av'd down on V. Looking at RIG. (See MHFT.com: They are not liable)

ESL last night.

Hola Dr Cosa and goldbugs,
To me it seems that there is a new trend in gold movement.
Possibly the result of gross financial mismanagement world wide. And HB&B seem to be the root cause.
Normally gold has risen to "new highs" and retreated then a slow upwards crawl.
Now? Many years ago on Kitco forums people were predicting "gold at $1,000' then at $2,000 etc.
Since it's coming out of the ground at a cost of (about) $280 per ounce it's now very profitable, New mines, new discoveries, and it puts lots of cash into Mexico, (here).
So dr.cosa, do you see a new trend ?

"vast majority that will never make money for anyone outside the board room."

too true.

From the article
Warning: Crash dead ahead. Sell. Get liquid. Now

You remember Biggs: In his book "Wealth, War & Wisdom" he advises his high rollers to prepare for a "breakdown of the civilized infrastructure." Buy a farm: "Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson." Biggs is not advising small investors on what to do with their 401(k)s.

http://www.marketwatch.com/story/crash-is-dead-ahe...

12:37:33 PM

*(SP) FITCH DOWNGRADES SPAIN SOVEREIGN RATING ONE NOTCH TO AA+ FROM AAA
- Fitch anticipates that the economic adjustment process will be more difficult and prolonged than for other economies with AAA rated sovereign governments, which is why the agency has downgraded Spain's rating to AA+. Spain sovereign credit profile remains very strong, underpinned by a diverse economy and sound financial sector.
- Fitch believes Spain's economic recovery will be more muted than forecasted by the government.
- Sees the final costs of restructuring the Caja sector could be substantial.
- Fitch forecasts Govt debt to reach 78% of GDP by 2013

***Reminder: Earlier in the session the Spanish Finance Ministry updated its economic forecasts, maintaining its 2010 GDP view of -0.3%, lowering its 2012 GDP growth estimate to 2.5% from 2.9% prior and lowering its 2013 GDP growth esitmate to 2.7% from 3.1% prior

As soon as I saw the market plunging, I figured it was you, Vad. ;>)

I'd like to downgrade America!

Why do we have to listen to their prognostications, do they have more than 3-4 people covering ROW?
co

Gold caught a bid, is back in it's short-term up channel.
Miners have not.

Seasonality says I believe that gold should top out by midsummer, if it hasn't already, and then the next rally should not start until August.

This says it hasn't topped out yet:

A Consolidation & Breakout Study of Gold Updated
http://edegrootinsights.blogspot.com/2010/05/conso...

"The latest gold breakout occurred after an extremely volatile and long consolidation. To suggest that it has topped out after 3-months and 9% rally from the breakout ignores the massive energy stored within the previous consolidation."

$250 is really more like $750 when all the costs are included. You don't GET any gold if you don't pay for exploration, pay for property, 7 years of permitting, buy a crapload of machinery, build a mill, dig off the waste, and pay etc, etc, etc, ad infinitum on top of the "cash costs" number you are likely quoting. GSS used to say their cash costs would be between $180 and $200. They finally turned a profit at over $1000 gold.

If it were really $250 the earnings reported wouldn't be measured in pennies per share.

(US) House of Representatives approves legislation to extend unemployment benefits and adjust the 'carried interest' fund manager tax code
- Extends jobless benefits through Nov 30
- Bill includes $48B in taxes, including mutinational businesses and fund managers
- Includes $1/gallon biodiesel tax credit extension
- Includes delay in 21% Medicare payment cuts to doctors (costing $23B over 10 years)
- Bill designed to eventually subject approx 75% of the Carried interest income from fund managers at ordinary income rates
- Oil barrel tax raised to $0.34/bbl from $0.08/bbl
- Vote was 215-204
- Note: Senate expected to debate the legislation in June

In at $27

That's a 425% increase in the oil barrel tax.... but relatively painless at 62/100 of a cent per gallon.

U.S. Income growth outpaces spending in April
Submitted by analyst65 (109 comments) on Fri, 05/28/2010 - 08:40 #63671
By Greg Robb WASHINGTON (MarketWatch) - Personal income outpaced consumer spending in April, the Commerce Department said Friday. Personal incomes rose a seasonally adjusted 0.4% in April for the second straight month. The gain was in line with economists forecasts. Real after-tax incomes rose 0.5% in March, the largest increase since May 2009. Economists say higher income will help make the recovery sustainable. Consumer spending was flat in April.

This is a news site that may shed some light, then again any luminosity gained appears to be disappearing just as quickly if one considers there is a cycle here as well as the financial cycle.

http://presstv.com/detail.aspx?id=128098&sectionid...

FSN did an audio debate between Bill Murphy (of GATA) and Jeffrey Christian of the CPM group about two weeks ago. I just listened to it today.

After listening to the entire hour, I was really struck by the vast difference in the approach by the two people during the debate. Bill Murphy came across as being so sure of his eventual correctness that he could safely ignore the trivial details of specific matters of fact, while Jeffrey Christian seemed well researched, precise in his use of words, and had an impressive depth of experience to draw from. Of the two of them, Jeffrey was infinitely more credible to me.

The six points for the debate were selected by GATA, and Jeffrey clearly did his research on each of them. Interestingly, while I feel Jeffrey pretty much demolished most of GATA's points, the question of whether there was systematic intervention in the gold market by central banks (or their proxies) in the recent past was actually never directly addressed.

Likewise, Jeffrey was quite clear on one matter: that from its inception to 1971, the job of the central bank WAS to intervene in the gold and currency markets to maintain the pegs to gold, and other currencies. That's was - as in, past tense. While he is generally positive on gold as a holding, his thinking is that the gold market is too small for the central bankers to notice today. However he does not come right out and say that intervention isn't happening. His main points are that GATA's evidence is ill-chosen, and are often either factually incorrect or reflect an inadequate understanding of how things work in the marketplace.

I'm not coming to a conclusion about whether or not central bankers currently manage and intervene in the gold markets - but I do feel that Bill Murphy comes across as a man who is quite comfortable ignoring issues of fact because he's so sure he's right about the big picture. He might still be right, but to me he comes across as a wingnut.

http://www.financialsense.com/fsn/main.php

search for CPM group.

Hi Bill,
Just wondering on the time frame for general strikes in California!

John Mauldin's latest newsletter attempts to explain basic economics so that even a politician can understand.

Six Impossible Things
www.frontlinethoughts.com/

Unfortunately, I believe politicians will continue to avoid reality and we'll see more of the same kind of irresponsible action that allowed us to get into this mess.

Since Europe is applying the same "solution" as the U.S., apparently politics (not music or math) is the universal language.

I believe that unless BP and RIG, by virtue of the statutes cited in the article, can limit their liability from the immense damage caused and to be caused in the Gulf of Mexico and elsewhere from this massive oil flow, either BP individually or both PB and RIG will be forced into bankruptcy, depending upon how the facts concerning individual liabilities develop.

Therefore, they will try to block claims of badly harmed innocent people as well as governmental entities. If they succeed a lot of people will be a lot angrier than they are today.

I hope the mud plug stops the flow. I wish I believed that it will.

Virgin Blue slices 75pc from tipped profit, shares plunge 27pc

The airline blamed a steep drop in leisure travel and a sudden decline in consumer confidence for the lower pre-tax profit guidance of $20m to $40m. Just over three weeks ago the company narrowed its pre-tax earnings guidance to the lower end of its $80m-$110m forecast. Mr Borghetti replaced Brett Godfrey as chief executive just five days later.

Analysts were shocked by the downgrade, with several questioning whether it was "a clearing of the desk" by Mr Borghetti.

IG Markets analyst Ben Potter said it was a disastrous start for Mr Borghetti.

"The airline has blamed a rapid deterioration and sharp increase in the volatility in its operating environment," Mr Potter said in a note. "Nonetheless, it's hard to fathom how they could reiterate guidance just three weeks ago and now possibly be wrong by up to 75 per cent."

http://www.theaustralian.com.au/business/virgin-bl...

Woha! These guys are supposed to be the budget competitor to the old established Aussie airline. Either they've stuffed it up or the Australian consumer is stuffed. Things ain't looking up in the land of Oz.

...evidence is ill-chosen, and are often either factually incorrect or reflect an inadequate understanding of how things work in the marketplace.

Heh... pretty much reminds me my debates with HFT-haters. Once decided who the villain is, not bothering with actual evidence anymore - and then Benford's law of controversy comes in play: "Passion is inversely proportional to the real information available."

Took a trip out through Peoria County and into adjacent, very rural counties. Can report that tiny corn is up and doing well with abundant sub-soil moisture. Farmers will do better than Gulf fisherman. Even went past an extensive windmill area, a project of BP, I have read.

It's turning more and more into a corn mono-culture in the hi-yield corn and soybean belt. Used to be a duo-culture with more crop rotation including some wheat and oats. Very high reliance on fossil fuels for fertilizer, tractor fuel and drying the corn in the fall. (Last season the harvest was so full of moisture that several grain elevators caught fire when their overworked propane dryers overheated.)

Then there are the Dept of Ag subsidies. As Kaimu says, "It all works until it doesn't".

I saw his interview on Bloomberg and can not identify where he gets this stuff about another plume originating at 5-7 miles away. The plumes (several identified by States research vessels) seem to be a product of the dispersants applied and the source could be very well from only one wellhead.

Simmons may be promoting his own interests in seeking greater Gov involvement, even suggesting the "nuclear option". He is after all a top capitalist heavily involved in the oil industry.

Thats all we need now... radioactive as well as oily shrimp. I may have to go back to China as a source, which I don't trust either.

Gold switched to a new primary uptrend from flattening, on May 1st. The primary is the main determinant in resolving shorter-term technical impasses, per Martin Pring at pring.com. That said, the gold market is obviously much more switchable than the indexes, or large sub-indices. However, because I follow Mr. Pring's reviews and methodology, (he wrote one of the founding works of TA), I find it difficult to imagine a sudden drop of any significant degree unless Eurozone debt problems miraculously clear up soon.
The only thing IMO working against gold right now is the prevailing trend toward deflation short-term, which would favour banks utilities consumer staples; because gold does best when real-interest rates turn negative. CPI is only 2.2 right now, so ten-yr T-notes still have a positive return. If and when that changes, gold will take off like 1979.

http://www.investingdaily.com/id/17359/gold-bullio...

This guy has the best primer Ive read so far

Mokat, Illini,

I read the Simmons comments with disbelief anyone would suggest such a thing! I'd just seen the report of the other leaks a few miles from the big one (2?). To risk such a cavalier approach to this is just crazy.

Those poor people in Louisiana. First Katrina and now this. I know presidents can do little to fix such huge problems, but neither Bush nor Obama reacted with a real sense of command urgency. We need to remember that whatever politicians promise, none is more than human and often disappoint.

The media is a farce as usual.

Fossil fuel dependency should be reduced by international agreement (and enforcement if necessary). We could start by rationing fuel as we did during WW2 and force the use of other, cleaner energy. We've had 30 years since the 1970s "crisis" and could have developed a nationwide mass transport system, but instead increased oil usage.

Our city is cutting fire stations and staff due to budget issues, but still running scores of school buses daily. Kids are overweight and under developed. At 72 I am amazed at the stamina of my 91 year-old neighbor — we cut down a tree in his yard this spring and dug out the stump — something many kids would never attempt even for pay.

It's time to get serious about this.

ALOHA!!

The word "dignity"; Latin dignitas or "merit"; dignas or "worthy". Then you must consider the word "dignity" has many misplaced values. Something I learned from many years doing prison work, as "dignity" in prison takes on a 180 degree turn compared to homeowners. I actually believe being a homeowner is less about dignity than it is about "safety". My God ... we all need some sanctuary in the World and having a home has been the American Dream for as long as I can remember. I happen not to believe in that "Dream" as I believe it is more the "Bankers Dream" in reality.

That leads me to the next tangent that I have proposed here before. I think we need to completely re-examine the banking system in America and make it more beneficial to those who actually produce real income rather than those who "shuffle paper". I think we need to eliminate the "paper shufflers" in the middle of the loan equation. Right now technically the US Treasury owns Fannie and Freddie, which is where most residential real estate loans reside, so essentially the US Treasury is in the real estate loan business. The many middlemen are gone, but not by their choosing. The banker did not build the home and technically did not pay 100% of the cost to build the home. Plus the home is built one time yet when it is paid off or sold it is resold and re-loaned and repaid many times over. In a home's life it could be sold some ten times, each time sold for a higher cost than before.

Now if we can get rid of the banks and the central bank then there is no reason the US Treasury cannot write loans direct to its citizens and corporations directly. That means no fees and no interest rate regulation from some murky central bank engulfed in monetary and political elitist agendas. In fact why pay any interest? These are internal capital generated by American citizens and corporations for American citizens and corporations based within the borders of America and in legal compliance with all US laws. Why should foreigners be involved internally in any aspect and why have bonds? If in actual fact that the US Taxpayer is backing all banks and loans and debt in America then why should there be any interest on any loan to a US Taxpayer? A flat fee to cover the cost of the loan administration is all that is needed.

Right now we have a system that favors "paper shufflers" of the OPM. You put your hard-earned cash in a bank and they loan it out ten times over. What if I sent you an e-mail that said this:

Hello there ... or as we say here in sunny Hawaii ... ALOHA!!

My name is Kaimu and here is my address.

Hawaii USA

If you have any spare cash at the end of the month send it to me. I will pay you 1% for your cash, but if you, your family, your friends or a complete stranger wants a loan I will charge you 5% and a few loan fees. Sometimes those interest rates might go up, but I will always make sure I make a profit. I will also loan out more than ten times what you send me so I can grow in size, but I will be careful not to loan to people who have a poor credit history. I look forward to seeing your envelope full of cash!

Thanks!!

PS: I am honest so you can trust me, but just in case you have doubts since we have never met, your deposit would be insured by you and all the other depositors who pay taxes, but not by my bank or me personally.

Wouldn't all that smell like a con job? Yet we all go around accepting these banks as GOD! In actuality they are truly parasites that suck capital production from the economy for no real benefit other than their own self-serving agendas of personal wealth accumulation at the expense of society. In other words the complete opposite of "dignity", its BANK WELFARE. Why do we need you, Mr Drysdale? Its turned out that the combination of banks and government has been a complete disaster, which has rendered this country much less safe. Why not get rid of the bank part of that equation. If I were to make a list of top National Security threats I would list the US FED(with its member banks) at the top not BinLaden!

This post all came about when my wife and I were sitting around talking about how unsafe this country has become over the decades. It seems when we were kids in the 1950s things felt a lot safer then and as the decades have passed things feel much less safe. Its a palpable feeling in the air as many of our friends and family have less security due to job losses and money problems. While we have no debt and plenty of income there is still this feeling that America is much less safe than at any other time in our lives. Its not really talked about at social gatherings or on FaceBook or on the streets of Hilo, but the feeling is there. I have come to the conclusion its all tied to our monetary system. Our monetary system, globally, has changed since 1950. As our money is less safe so are our lives.

Dignity ... indeed!

lessmore,

Well, U.S. citizen's opinions on TARP and the health care bill meant zip to the White House or the congressional leadership, but our opinions may be a major factor in November and 2012.

I'm firmly convinced we are and have been under of bipartisan joint venture with big business, big unions and any other "special interest" groups with a big powerful lobbyist group.

It is less a government by, for and of the people than ever before.

BP is just the latest to get a pass on responsibility. I heard this week the had more than 700 violations and the next closest were tied with two each. Why do we need a congress who does nothing until there is a calamity. Presidents have some power, but the ongoing responsibility for something like this is belongs to those who have been entrenched in D.C. for decades.

They never get fined and continue to draw their full benefits regardless.

Off with their heads!

Deflationary spiral until systemic collapse that makes Lehman Bros. look like a picnic, massive leveraging of central bank balance sheets and rapid currency destruction, followed by reform. A possible scenario that is worth hearing out.

http://www.kingworldnews.com/kingworldnews/Broadca...

davefairtex.

I don't disagree with you on the value of true inner dignity... which is why I AM suggesting ending the pain sooner if you really can't afford new lower payments via modification or forebearance. I see both cases...in most, a spouse has lost a job or business has been lost temporarily or other temporary hardship like divorce or disability. Most people are working hard to recover their balance. Those are the folks for whom modification or forebearance works. Most people who find me for distressed counsults do so because their former bank or broker is either no longer around or they have been tossed around by their servicer for a year with no offer. I fear that many banks are just waiting for HAMP and MHA to expire so they can pounce with impunity.

loannetter - I know you're trying to help people out. But consider this:

I believe that this is mostly about societal programming that we've chosen to accept as fact. Bankers have constructed a storyline, which we have all parroted to our friends, family, children: "Here, pay twice as much in payments as you would have in rent, and you get the title of Home Owner. This tells everyone - your parents, co-workers, and friends, that You Have Arrived, You Are Somebody, You are Successful - and now you're smart, because You Aren't Throwing Away that Rent Money Anymore." Its all about ego. And it's really quite expensive. And the banks are laughing - well all the way to the bank, I suppose.

It didn't used to be this way. A lot of things didn't. But that's where we are now.

Do YOU want to be a tool for the banks? I'm not suggesting that you are doing so deliberately, but challenging this societal programming which seems to be benefitting only the banks may be a greater service (long term) to your customers than if you work hard so they can remain plodding oxen chained to their debt wagons lugging their unnecessarily heavy debt burden around for the next 30 years of their lives. All so they can retain that coveted Home Owner title.

"Lose your Home Owner title, and you become nothing more than a renter, you can be made homeless almost at any moment, the scum of the earth, and you will have to hang your head in shame, because you're a failure." That's the message we have to challenge, and reject.

Let the banks pounce on those underwater homes. The path may be temporarily painful, but if helped to see that all these subliminal messages are just programming by bankers trying to keep the entire nation as debt prisoners, it might actually be a helpful release for these people. And their standard of living will instantly increase, too. That's gotta be worth something, no?

davefairtex,

I don't disagree with your premise. And while it may seem I am playing a part in the banks ability to suck consumers dry...it is an individual's decision whether to be chained to their home, their computer or their trading portfolio if that brings them comfort. I provide a service for those who want that entry into what debt vehicles provide. AND I promote paying off your debt as soon as you can via speed equity or basic principal reduction payments. I heard Dr. David Suzuki speak a few years ago about communities and what struck me about his talk was an observation that for most people our homes are not investments. They are where we have our memories, our children's growth charts on the doorjambs and our pet fish buried under the peonies.

As an aside, I walk every day past a huge new greenbuilt public housing village with water views...nicer than my own modest home. I saw a guy unloading a new 47 inch flastscreen TV the other day. How does public rent assistance compute with someone who is still consuming like that?

My latest post suggests ending the pain of foreclosure sooner than later may be preferable for many. While heresy to the real estate profession (by ending those juicy short sale commissions)it is still quite a personal decision which must be weighed up like any trade. http://tinyurl.com/26zz8gk

BTW: there would be no BAC's JPM's and C's on your trading screen if they were not profiting from taking advantage of consumers. Unfortunately their aren't many careers for folks like me to to go up againt the big box banks and challenge consumer status quo. All the congressional seats are bought and paid for.

Thanks Les for posting Zulauf's interview.

Zulauf says the deflationary boogeyman caused by excess capacity and debt expanding at a greater pace than economic growth will be met by central banks creating more massive amounts of new debt leading to a Lehman -on- steroids type banking collapse which could cause a total collapse of banks and currencies and the emergence of a new form of currency... all within weeks.... a quick hyper-collapse rather than a long drawn out period of hyperinflation.

This would repudiate much of the excess debt by allowing it to be paid pennies on the dollar. Those holding cash would get slaughtered... like the Argentine scenario on a western global scale. He said precious metals, a farm and other essential assets would offer protection. His timetable was uncertain 1-3-5-7 years. He also said basic manufacturing commodities could fall 50% in the next 1-1.5 years as China will suffer a 1970 style recession from overcapacity and excessive speculation in real estate.

His scenario seems quite plausible to me.. Many Caraistas probably subscribe to the hyperinflation scenario
but few probably think a collapse of the banks and currencies would take place in a timeframe measured in a few weeks or months at most.

Zulauf mentioned that the gold supply is constrained and demand rising as confidence in fiat money falling rapidly. He said central banks have gold but won't sell, adding to the supply crunch.

I would also expect Chinesesavers will rapidly add gold as their savings assets in stocks and real estate suffer a significant pullback correction. It was reported that Greeks were recently paying up to $1700 per ounce for gold coins on the black market. Probably a similar scenario coming to a neighborhood like yours in due time.

Today, along with others who gave their life for our country, I honor my uncle, LT Charles Johnson who is buried in a massive US military cemetery in Nettuno, Italy, who died when his jeep hit a land mine during the Italian campaign. I was unable to ever know him in person as he died some years before I was born.

As Kaimu said
"Its turned out that the combination of banks and government has been a complete disaster, which has rendered this country much less safe. Why not get rid of the bank part of that equation. If I were to make a list of top National Security threats I would list the US FED(with its member banks) at the top"
I would add the Department of Defense along with their corporate suppliers as the perpetrators of war and destruction across the world. They make us less safe as well. Time to end the mindless aggression in our attempt to control the world.

A good holiday weekend to all.

davefairtex,

Any *product*, person or activity can become an addictive fixation... even good ones! Betty Ford huh...maybe I should start a debt recovery center where you go and dry out from your credit cards!

Yes, working with the seriously stressed is a sobering experience which has changed my view. I am less willing to recommend the easy choice and I often present a strategy that may require thinking. It's interesting who takes me up on these strategies and who doesn't. An elderly woman came to see me a few weeks ago for whom a combinations of programs and steps made the most sense to keep her debt under what is considered prudent. But she was determined to get into even more debt...so she went to the next bank who obliged. Later she admited she had gone for the risky option. Of course I could have offered that option but frankly thought it could backfire. I guess her banker had their manager looking over their shoulder saying "fund that loan!"

Any investment or debt vehicle can be used well or badly. Mortgages provide access to a level of stability if not sanctuary that renting simply does not afford. As a former renter myself I was often surprised how easily landlords raise rents with little regard for your ability to pay it, your privacy or your rights. Moving is tiring and expensive unless you find the upheaveal exciting. At 4.75-5.0% fixed rates for thirty years its enticing to buy now with housing prices so low...how much lower can homes and rates go? I'll have a job for a few more years with any luck! BUT for congress being paid by HB&B to kill us with more restrictive broker laws to limit our feees. The maximum origination fee on FHA loans is now 1%. So the people who need the smallest loans won't find a broker willing to fund them...don't get me going!

I know renting is great for lots of people who like to live more flexibly so buying a home would present an overcommitment that could tie you down. But for most folks buying within your means just makes sense. It is cheaper in our area to buy over renting. You get control of your world and you get price stability. Home ownership helps people form more connective bonds in communities. Even today it's actually relatively easy to get into a home with 5-10% down and keep your spare cash working hard for you by paying down your principal or in other investments. USDA and VA are funding zero down loans even now!

An interesting aside: many of the Mods have a start rate of 2.0% around five years escalating to the current conventional rate in another 3-5 years. A really smart person would pay their principal down while in the 2% range. It's certainly an incentive to get your life in order.

On the journey: I once heard of a famous yogi who was able to walk amongst the most seamy underworlds of thieves and criminals and remain untainted by them while making a postive influence with just his kindly presence. Got a better idea? :)

loannetter -

It sounds like buying right now may make sense as long as your rent is greater than the fully loaded costs of owning that home. I can definitely see housing prices continuing to drop further, as that shadow inventory is released onto the market and fewer people are able to buy because of lack of income, but at the very least, it sounds like in your area, its not actually an act of financial stupidity to buy now. And if Felix is right, buying property will provide insurance against the flash-hyperinflation scenario, as long as you don't mind dealing emotionally with the continuing drop in property values that will come immediately prior to that hyperinflation playing out. And to your point - if some idiot (i.e. the taxpayer) is willing to let you buy using zero down, that's a free call option protecting you from hyperinflation. Looking at this strictly as a trade, why would I turn that down, if my payments were less than renting a similar location? And you get all those lovely homeowner benefits thrown in there for free. That seems like a no-lose situation to me.

However, staying in a home you've dramatically overpaid for is quite another matter, and that's the issue I have with mods. If you're 30+ percent under water, does a mod make any sense at all - will it bring you to that magical place where you are paying the same or less for your property over its lifetime than it would cost you to rent today? If not, when why on God's Green Earth would you do it other than because you've bought into the whole Home Owner societal programming?

Thanks for the link, Les.

Great comments and summations from Grym, MoKat and davefairtex. This DENSA member is humbled by the brain trust that comprises this board.....the best market commentary and analysis available anywhere.

Regards,
BH

Q1 GDP up 6.1%; best in over ten years, topping forecasts. Seven straight months of growth. Carney is up tommorow with an interest rate announcement. 6 months ago he promised not to move rates until tommorow at the earliest. Will he move ahead of the Fed? Last time they tried that they had to back-peddle after the 2003 double-dip. Bonds have been in a volatile down-channel since Dec 2009, alternatively anticipating a hike this week and reacting to January and May's equity swoons. Prices are currently at the the high-end after the equity weakness of May. Could be interestingly today - to the downside. US/CAN has also dropped a penny since the GDP announcement.

Canadian Bond Universe ETF, XBB, attached.

Our family and community thanks each and every one of you who've ever served - we are deeply grateful for your sacrifices on our behalf.

Have a truly great day, Vets.

Disgraced for telling it like it is, ie the truth about war.

A 10 year (and counting) ongoing waterfall currency crash?

SDRs vrs Gold. (SDRs as a proxy for the major currencies)
http://fx.sauder.ubc.ca/cgi/fxplot?b=XDR&c=XAU&rd=...

At the bottom of this academic forex charting site's main page there are some quick links to charts for a few of the more recent currency crises:

http://fx.sauder.ubc.ca/plot.html

Jesse has something to say:

Gold Daily Chart: The Handle Forms, a Reader's Questions, and Felix Zulauf on Gold
http://jessescrossroadscafe.blogspot.com/2010/05/g...

" . . .
If people look back to the last great credit collapse worldwide which was the 1930's, and sees what happened to currencies and gold, they will obtain some knowledge that could very useful to them now. Stubborn ignorance can rationalize amost anything, and there is a peculiar tendency among people to resist the data that does not support their assumptions, until they are overwhelmed. They still have some hope due to the somewhat arbitrary nature of fiat currencies today, but increasingly less so for the very good reasons that Mr. Zulauf outlines in his interview.

. . .

As a reminder I do not subscribe to the pure hyperinflationary outcome yet, which I think is not likely in the US at least. For my way of thinking, organic hyperinflation is a function of a currency with an external reference point. At the moment, the US dollar has no legitimate external standard as a reference point, except something soft, indicative, like gold. This is a truly fascinating and almost unprecedented historical development. I cannot think of a comparable economic example.

I suspect we will see powerful deflationary forces that will be countered by monetary inflation and devaluation that is not quite sufficient to break it, because quite frankly Bernanke is no Volcker, and the monied interests will resist a deterioration of their inordinate share of the dollar wealth of the world. That is not to say that various countries and even regions will not be economically 'trashed' in the process by a predatory financial sector based largely in New York, Zurich, and London.

Within eight years I would see the US dollar financial system resolving into a currency collapse and the issuance of a new dollar with a few zeros, two or three, knocked off as was seen with the rouble. It will look somewhat similar to the collapse of the former Soviet Union, not with a bang, but a whimper.
. . . "

I agree, there is a whole lot more to this story. Germany is not a third world country. And for the president to quit while citing the cause as words he said about Afghanistan? Who are they fooling but themselves?

with the american markets closed a strange phenomena occurs with the beta pros. They are making sense today!

I have thenm all paired up in the bear and bull versions and low and behold they are pos/neg...pos/neg etc. Whereas usually the bear and bull oil for example can both be red at many times when the us markets are open. Just an observation....

2nd Ave,

And others interested in our corner of paradise: This project was officially soft re-launched this week and I can provide US or Canadian connections if you are interested. Lots are going for $99K about 1/3 the original price. Frontier Bank was taken over by Union Bank of SF but the developer is still on title and focused to the future and integrity of the offering by meeting the market. My role will be to help find the money but you may bring your own bags full. http://www.liveathorizon.com

http://www.ft.com/cms/s/0/3e1113c0-698d-11df-8ae3-...

Hussman said it well last week:
Treasury Secretary (Eddie Haskell) Timothy Geithner has scheduled a trip to Europe this week to urge European leaders "to pay better attention to potential market reactions to policy moves, and to accelerate the European rescue program." This promises to be a fiasco. What could European leaders possibly find more arrogant than to be lectured on bailout policy - not simply by the U.S., but specifically by a one-trick pony bureaucrat whose chief trick is the ability to smoothly talk the language of prudence while simultaneously pillaging the fiscal stability of an entire nation for the benefit of bondholders who made bad loans?

ALOHA!!

If anyone cared to look then they would see that every time the USA was involved in a War, whether WW1 2 or the Civil War the gold standard was suspended. The only War where the gold standard was not suspended was the Vietnam War ... instead the gold standard was eliminated. Any archive of US DEBT will show that the debt levels reached extraordinary proportions during the WW Wars as did the taxation levels that hit 94%. Yet after these wars were over the gold standard returned and that made all the difference. After the Vietnam War the gold standard did not return and you see the result ... not extraordinary debt, but extraordinary exponential debt. This is what happens when humans try to emulate the gold standard ... they cannot! The temptation to spend and print debt is just too irresistible as such mechanisms are seen as "easy" tools to retain power.

You also have to look at personal and household debt levels prior to WW1 and WW2 compared to now as well as personal savings. Add in many other factors like the fact the USA was an oil exporter during WW1 and WW2. Not today ...

Thanks to "Reserve Currency" status and the removal of the gold standard America's only virtue is that it is well armed with nuclear weapons and a huge technologically advanced military. But at what cost? You cannot solve the Worlds problems or your own with military adventurism. So many past Empires have proven this as the absolute wrong path to chose, yet here we are watching Obama outspend George Bush on Defense Vendor outlays, so the military industrial complex rolls on like the insolvent banking complex. What are our greatest exports? Monetary fraud and militarism?

The failure long ago was the permanent abandonment of the gold standard. We have not recovered since then. Look at any chart for anything related to debt and it goes exponential after 1971. All the negatives go exponential after 1971, including our standard of living and the ability to survive on a savings and a fixed income. America's idea of "savings" now is a house and a 401k! If George Bush had any say so he would have thrown your Social Security checks into the pit at Wall Street also ... Is that the strategy for retirement now ... trade your way out? For the masses that's a disaster waiting to happen! No ... the true solution is to reward savers not gamblers, but that will never happen. We refuse to vote for that.

What is happening is there is going to be a return to assets not liabilities. Paper that can be duplicated to eternity is a liability. As I have always said "real wealth" will be where money flees in the end. Goldman Sachs(derivatives) is not "real wealth" ... Derivatives are yet another tool of the "false wealth" owners to transfer "real wealth" not create it. Alan Greenspan had a real chance to regulate and end derivatives before they wreaked serious sovereign havoc, but he did not as he and any other US FED Chairman are simply owned.

I could not be more excited, or more anticipatory, than now, today. Call it what you may... divine intervention, the clouds clearing away, a hard knock on the head ( ! )... But, for whatever reason, it washed over me like a tidal wave today, that a new era is coming upon the world, and I mean in a most positive way. Like any great change, I do not believe it will happen overnight, but the seeds have been planted. People are beginning to escape the rose-colored world they have know for so long, and are beginning to take conrol of their lives and their destiny. There will be much turmoil, no doubt, but from this will come greatness. And, this change will spur new ideas, new ways of living, new ways of growth. I personally think, when history looks back at this period, with all the monentary abuses of HB&B, all the lies, theft, disent worldwide, it will also see the beginnings of when the New started to take the place of the Old, when the tiny, under-funded companies of todays start-ups learned to walk, then run and then to soar. You saw it 25 years ago with Microsoft, Apple, Cisco, etc... This is the beginning of a new age of discovery... People wonder why Bio-Tech stocks can soar so high on good news... its not so much the ' good news ' as it is the ' Hope ', the ' future positive potential '... And deep down , I truly believe people really do look for hope and the positive in life... Sure the ' Market ' will try to mislead you.. that's its job.. But it will also reward you.. Maybe we retrace back to 8600 on the Dow, and 1020 on the S&P... So be it... But just like Christmas, I am making My list and checking it twice... I can't wait for the next Bull cycle to begin.... best of trades to all.

Les you've done it again. That preso from Niall was awesome.

He looks at world history, and the behavior of governments in our predicament. He splits the world into those who can print, and those who cannot. It's simple: those who print, do. Those who cannot, default. Only one exception: England from 1815 - 1913. In addition, governments with massive debt burdens usually:
* oblige central bank and commercial banks to hold government debt
* restrict overseas investment by firms and citizens
* default on commitments to politically weak groups and foreign creditors
* condemn bond investors to negative real interest rates

This is the clearest and most succinct preso I've seen. Anyone can understand it. The only question I have is, how long will deflation (and the reflexive "flight to safety") have to run before his scenario comes into play?

It seems like the western world is bifurcating on its strategy of handling this debt crisis. Europe is staying on a "gold standard", where printing is not an option, and thus default is the only way out, while the US/UK is embarking on money printing. I am not sure how long Europe can stick with their plan - if they start embracing defaults, I think it will go well. If not, if they try and impose austerity without exposing sovereign bondholders to haircuts, the people of Europe will probably explode in protest and the result will be the end of the Euro. My guess is, the European bankers will be thrown under the bus eventually, but it might not happen right away.

We sure live in interesting times.

You've outdone yourself Kaimu. I looked in on SLR this morning to see that I've missed the train and a quick glimpse at the POG this morning leaves me with the impression that a breakout in the USD denominated price is imminent. I'm juggling strained finances and the absolute necessity of mastering the daytrading environment, so I chose to close down IB and put aside the idea of holding stocks longer time. Guess I miss out. The 10k that I opened IB with in 2009 at 1000% return on SLR = near $10M. What! A guy can dream can't he?

Yes, the Fed did the same thing with 1 trillion in mortgage backed securities. Since Treasury couldn't figure out how to make PPIP work in a way that wasn't an egregious and easily gamed gift to bankers, the Fed went and did it and called it "Quantitative Easing."

My guess - once the european banks (including the Greeks) sell off enough of their bad Greek bonds to the ECB, then Greece will be allowed to restructure.

ALOHA!!

The "real risk" takers who produce "real products" that the masses use every day never get bailed out. Only companies like GS and JPM who skim profits using fraud and OPM are worthy of bailouts ... Are HB&B banks really invaluable to society?

BP Plunges After Attempt to Plug Gulf Oil Leak Fails
June 01, 2010, 4:07 AM EDT
Business Week
By Brian Swint and Eduard Gismatullin

June 1 (Bloomberg) -- BP Plc fell the most in 18 years in London after abandoning an attempt to plug a leaking oil well in the Gulf of Mexico, the worst spill in U.S. history.

BP plunged as much as 15 percent to 420 pence, the steepest one-day drop since June 1992. The company said on May 29 a “top kill” attempt to plug the leak using heavy fluids and debris had failed. That rules out stopping the flow of oil from the well until relief drilling is completed in August.

“Until the flow of oil from this well can be halted, there will remain considerable uncertainty over the potential damages,” said Peter Hitchens, an analyst at Panmure Gordon & Co. in London. “Although we believe that the market has overreacted to the bad news, we feel that there will be little stimulus to the shares whilst this leak continues to pump oil into the sea.”

The company will now try to contain the spill by fitting a pipe over the leak later this week to bring the oil to a drillship on the surface, it said in a statement in London today. The operation may temporarily increase the flow of oil into the Gulf before a cap can seal the pipe. The cost of responding to the spill has risen close to $1 billion, BP said.

"Alan Greenspan had a real chance to regulate and end derivatives before they wreaked serious sovereign havoc, but he did not as he and any other US FED Chairman are simply owned."

If I remember correctly, he even advocated them with some sort of Martha Stewart comment like, "It's a good thing".