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B4 The Bell Turdsday


Guest yobob1

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The only sectors up yesterday were chemicals($DJUSCH) and what used to be the widows and orphans haven, utilities($UTY). Although we have moved away from the heady days of Enron and those of similar ilk, utilities should be scrutinized carefully - they ain't your father's electric company anymore.

 

PMs are about where they opened yesterday in NY, having gained ground in Asia and then giving it back in London so far this AM. Forex is about flat all around and the 10s are just under 4.20. Watch for spreads opening on emerging market and junk. Do you suppose a few are wondering if there might be a little risk in those? Nah, why worry about the credit rating on an entity that couldn't get a secured credit card with a dedicated deposit equal to twice the credit limit. They must be "safe" or my borker wouldn't have told me to jump in with both feet in order to get the measly yield they offer. Will return of principal concerns begin to outweigh return on principal once again?

 

Imagine, just a teeny, tiny change in Al speak and the whole mess freaks out. I really believe that unlike 2000, investors are going to be much quicker to pull the plug. Fool me once, shame on you. Fool me twice shame on me, I think Sphinxter's experience yesterday with Ameritrade illustrates what one can expect to happen on a broader scale in the event of a GMTFO day. Stops may be of little use in that event.

 

Europe is playing catch up in the equities and Japan continues it's downtrend that actually led the US markets by several days. Futures are modestly higher in the US. I wonder if we'll revisit an old pattern where higher pre-market futures meant little after the markets opened?

 

I really think Al's little gaffe was more of an excuse than a cause. I think it was just time. Tim Woods work indicated that about week 68 after the inception of this rally was a likely turning point. If I'm not mistaken, this is week 68.

 

Miners, what to do, what to do. This is just my opinion, I wouldn't be panicked out of core positions established a ways back, but I'd be wary of speculative (all?) juniors and the weaker majors - those I think should be traded like tech stocks for the time being. If we get a major collapse in the equities markets at some point in the future, I think there will be plenty of time to kick around in the rubble and find the little gems that inadvertently got squashed in the mele.

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Excellent start to the day Yobob.

 

Here's a few charts to get things rolling.

 

First, the 3 a.m. futures ramp job didin't get much done. A couple of points is all.

 

globex.png

 

As expected, the sharp sell-off in the euro is reversing some. I don't have the figures but I am pretty sure I saw the euro trade at the .8100 range yestidy.

 

exr24_eu_en_2.gif

 

Gold and silver doing just fine and are where they were at yesterday's open.

 

Most gold stocks are not.

 

Gold at 327 euros is actually pretty strong compared to recent performance. It's been trading as low as 322 euros.

 

t24_au_en_euoz_2.gif

 

Silver looks great. Lots of strength. The sell-off in the silver producers was a buying gift yesterday - assuming you could trade.

 

t24_ag_en_usoz_2.gif

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While Prechter certainly isn't right or accurate on all things, there is little doubt in my mind that when it comes to deflation, he's on the right track. I really think if you bet on inflation you'll be mowed down by deflation sneaking up behind you. The best defense against deflation?

NO DEBT OF ANY KIND - AND THAT INCLUDES A MORTGAGE!!!!!!!. Clear enough? :lol:

 

Why did I put the term "deflation fighting" in quotes? Commentators tell us that the Fed is fighting deflation by aggressively lowering its interest rates, but is that an accurate assessment? After all, the result of deflation - its primary outward symptom - is lower prices. And what has the Fed been doing? It spent over a year lowering the price of renting money. Within that period, in fact, the Fed lowered prices more than anyone! It has participated in the initial phase of the deflationary process as if it were a merchant on the street discounting its wares to a disinterested public. It did so in response to slack demand for its product - credit - just as the auto manufacturers and others are doing with their products. Deflationary psychology brings about lower prices, and the Fed has been lowering its prices. It is powerless to stop the trend.

 

Deflation Has Arrived

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Yobob - I think Prechter is absolutely right about deflation - it is coming.

 

What I find fascinating is that the Fed is pursuing exactly the worng policies to save us from deflation. They are chasing away symptoms but not causes. Blind fools on an errant quest.

 

Why does deflation happen? The primary cause of deflation is excessive debt that lacks a mechanism for re-payment. In this regard, non self-liquidating debt is far more likely to contribute to deflation than any other type.

 

In the US, all consumer debt, which has doubled since 1995, falls into this category. So does all government debt. Corporations have been borrowing like crazy but it is questionable to what extent they have directed these funds to productive investments. GM's $13.5B borrowing extravaganza in 2003 was used to paper over a hole in their pension fund. That ain't productive.

 

So, in the end, we have the Fed applying MORE credit to a system that is facing a deflationary spiral due to the effects of too much credit.

 

See, while the fed can raise and lower rates, while they can push more liquidity into the system, they can't direct what the system does with that easy credit.

 

All the signs that I see indicate that the US consumers chose to buy SUVs, redecorate their kitchens, adn take trips to Acapulco, while businesses fixed pension plans and re-purchased their option give-aways on the open market.

 

More of the same ain't going to do anything but create a situation where the inevitable correction is more violent and structurally damaging.

 

Is Al really a god? I say he's a dangerous fool. A blind one.

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Excellant GENTLEMEN of coarse I don/t think that guy in India

 

would exactly call Sphinxter a gentle.....man.

 

Nevertheless like you both pointed out ina way Wednesday simply became

 

Tuesday again,

 

What I found alarming was what happened to Sphinster.

 

Now there is a new rule trade/invest with the assumption you will not

be able to exit.

 

Good luck today all. :unsure: :unsure:

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Great opening yobob and sphinxter!

 

I have been stating for a while (and so has Doc) that the negative money supply is a sign of a collapsing credit bubble. Prechter may turn out to be right, my main disagreement with his outlook is that I believe the Fed and the government in general will use all kinds of panic measures when they realize the economy is approaching a depression. Don't know exactly when it will come. The Fed's current policy of relying on Japan to offload the $500 billion+ current account deficit will not work out for much longer.

 

Also have had yobob's opinion of gold issues for 4 to 5 months now, and it's still bes to stay with the top five miners or CEF.

 

Won't be able to check in until tonight. Good trading.

 

latest news out of Japan may have changed the dynamics a little

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I spoke alittle about balance sheets yesterday. I honestly believe that homework in that arena can help uncover potential shorts by looking at a company's vulnerabilities. The fundamentals tell you why and then TA can perhaps tell you when. Here's a little example that might surprise you. Campbells Soup. As American as apple pie, good, wholesome, you name it but you wouldn't expect that a solid brand name company like this would have a balance sheet thats a total wreck. Unfotunately it's a pdf file and I dont seem to be able to find a way to copy and paste any of it, but take a look.

 

Campbell's balance sheet

 

Here's what I see. Up to last year they had negative shareholders equity. Yes buying their stock bought you nothing but debt. It gets worse. Looking at the most recent annual balance sheet we now see that there is a small amount of shareholder equity, but is there really? Look at the assets. Yup, almost half of the assets are "goodwill or intangibles". Goodwill and $4 will get you a latte. Current assets (what you might be able to convert to cash) are half of currrent liabilities (what you need to pay in a year or less). On top of all that they have long term debt that would easily excede their liquidation value. This is a hollow shell of a company whose primary product is losing shelf space to store brand labels and to slightly upscale products such as Progresso.

 

As bears we need to keep voicing the reasons. Simply following the charts and timing entries and exits doesn't tell the rest of the world what's really wrong and why. I just think it's important that we eventually get back to where the fundamentals are the primary reason for one's actions and not be like the bulls and guilty of just trend following on specious reasoning.

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Great opening yobob and sphinxter!

 

I have been stating for a while (and so has Doc) that the negative money supply is a sign of a collapsing credit bubble. Prechter may turn out to be right, my main disagreement with his outlook is that I believe the Fed and the government in general will use all kinds of panic measures when they realize the economy is approaching a depression. Don't know exactly when it will come. The Fed's current policy of relying on Japan to offload the $500 billion+ current account deficit will not work out for much longer.

 

Also have had yobob's opinion of gold issues for 4 to 5 months now, and it's still bes to stay with the top five miners or CEF.

 

Won't be able to check in until tonight. Good trading.

 

latest news out of Japan may have changed the dynamics a little

HB, If you don't think that the last three years already represent panic measures by both, what would it take to qualify as such? (rates cut to effectively negative, two, count em, two tax cuts with instant advance rebates and huge spending increases (25%)) As I see it with a sinking labor market as the faithful Sleddog chronicles, they are really down to only one option. Helicopter drops of cash into the streets.

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Jeremy Grantham, chief investment strategist of Grantham, Mayo, Van Otterloo had this to say to shareholders recently: "Today we have substantially the worst prospects for long-term global investment returns of my 35-year career when all asset classes are considered, particularly for U.S.-centric investors. The asset classes collectively are simply the most overpriced they have been. There are no large categories that are good hiding places."

 

When everything is overpriced, the next really big move doesn?t generally lead to everything getting super-duper overpriced. :lol:  :lol: And when most everyone grows exceedingly complacent, it doesn?t bode well for preceding trends.

 

BEST OF MARK ROSTENKO

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?????

 

Strong Volume Growth Propels UPS to Record Quarterly Profit

Thursday January 29, 8:00 am ET

International Profit Jumps More Than 50%

U.S. Ground Volume Surges

 

http://biz.yahoo.com/bw/040129/295093_1.html

 

 

8:03am 01/29/04 [uPS] UPS Q4 EPS 75C VS. $1.32 YR-AGO

 

 

Ok which is it?

 

UPS tops by a penny in Q4 (UPS) By Michael Baron

NEW YORK (CBS.MW) -- United Parcel Service (UPS) reported fourth-quarter earnings of $856 million, or 75 cents per share, down from its year-ago profit of $1.5 billion, or $1.32 per share. Excluding a gain of $18 million related to redemption of long-term debt, the Atlanta package delivery firm earned $799 million, or 70 cents per share in the latest quarter, beating the mean estimate of 19 anal cysts polled by Thomson First Call by a penny. The year-ago fourth quarter included a net gain of $832 million as a favorable settlement with the IRS offset a restructuring charge. Excluding items, UPS earned $670 million, or 59 cents per share, in last year's equivalent period. Revenue jumped 8.2 percent in the latest three months to $8.93 billion from $8.26 billion in the same period a year earlier. The company delivered 3.44 billion packages in 2003, an average of 13.64 million per day. Looking ahead, UPS sees earnings of 58 to 62 cents per share for the first quarter, and it's targeting earnings growth of 12 to 18 percent for the full year 2004. The current average anal cysts' estimate is for a profit of 62 cents per share in the March period. The stock closed Wednesday at $72.44, down 35 cents.

 

Ahhh, the ol' beat by a penny routine!

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Great thoughts yobob and sphinxter!

 

debt gona sink the ship :o

 

 

only thing I can't get behind 100% is POG

 

in a deflation enviroment.I mean like gold drops to 250.00

 

wont that 250.00 buy alot more than it will now with POG 410?

 

then there is the other thought when bonds and paper burn

 

POG will shine???

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SWEET! Gold and silver getting slammed.

 

Matrix says "Only approved asset classes are alllowed to rise, when we say they do".

 

Now, since I was locked out of my account from 2:48 to 6:45 yesterday, all of my trading positions in gold and silver are effectively wiped out and I am dedeply underwater.

 

Ameritrade has earned my unending and deeply bitter enmity for all of time.

 

Waht I have failed to consider, possibly because I can't know about its details so why bother, is the extent of the impact of the hedging business on the stock, bond, currency markets.

 

It now appears that some big bets have been placed across the markets and these are unwinding with the bond market.

 

From appearances, someone has been playing a short-the-dolor, long the bond, long gold trade. Now that bonds are getting killed, all the other markets are in turmoil.

 

My only consolation is that this volatility is likely causing some other parties even more pain than I am experiencing. Faaaaaarrrrr more.

 

Hee hee hee.

 

Each round of increased volatility brings us that much closer to another LCTM.

 

Bring it on.

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I have been stating for a while (and so has Doc) that the negative money supply is a sign of a collapsing credit bubble.? Prechter may turn out to be right, my main disagreement with his outlook is that I believe the Fed and the government in general will use all kinds of panic measures when they realize the economy is approaching a depression.

Me too.

 

Prechter is really talented as a contrarian anal cyst, picking up mass blind spots where everybody's unconsciously on one side of the boat. But he's had a preconceived notion about deflation and $200 gold for almost a decade now. I think he's letting his forecast override his analytical ability in the article linked by yobob.

 

During 2001-2002, "deflation" chatter was all around. It was the biggest deflation scare since 1986.

 

Now the universal consensus among Matrix economists and media shills is that "inflation is nowhere to be seen," even as raw materials, taxes, services, tolls -- you name it -- soars out of sight. My contention has been that the focus on the narrow CPI -- which is depressed by the flood of goods from China engendered by the Credit Bubble -- has made the 'experts' blind to asset inflation. That's the alternate place that inflation shows itself, when you suppress 'CPI inflation.'

 

If Japan and China stop propping bonds and the buck, Ben Leeson Bernanke has already told us that he will print dollars and buy T-bones; i.e. monetize them directly. He'll buy them through the Gang of 23 to comply with the law, but the end result is the same.

 

The U.S. had a searing experience with deflation during 1930-33 which threatened to tip over the system. The authorities will stop at nothing to prevent that from happening again. I don't think propping the Credit Bubble with 'helicopter drops' is technically difficult -- plenty of Third World regimes have pulled it off. We will soon be one, too.

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