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July 1, 2008

Bill Cara's Community Chat, Tues., July 1, 2008, 7:40am ET

The Business Section of the Toronto Star yesterday ran a well-written story, The Flower Lady Reflects, which should be meaningful to all traders and give them cause to reflect on life as it moves by. "Joanne Argante saw her business blossom into a success but big box stores and the Internet uprooted her from her career."

The key point I make in writing about the market is about the importance of time. Over time, risks must be recognized and managed. Otherwise the market is just us, nothing more, and trading is no different than running a business because it's just a slice of life. Joanne Argante is one of us. Unfortunately she failed to deal with the risks, and time finally beat her.

O Canada! Canadian markets are closed for Flag Day aka Canada Day. The comparable US Independence Day holiday will close the markets there on Friday.

But, as the late George Carlin might have said, is anybody really independent? Certainly not in America, north or south.

There is an expression that Bahamians often use when asked "How's it going?" They answer, "Oh, gettin' by." That sums up life for most people on this earth.

Joanne Argante was "getting' by" – until she didn't. Big box stores and electronic systems have forced her to accept a new reality.

At this very moment, as I finish this blog, I am listening on my mp3 to Reba McIntyre sing "I am a Survivor." Country music is all about life. When trading, I like to listen to it.

Gettin' by.

 

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July 1, 2008

Daily Report for Tue, Jul 01, 2008

Markets Re-cap

H2 is ushering in more falling prices in global equity markets. Financials (XLF) and Consumer Cyclicals XLY) are starting the second half of 2008 at 52-week lows.

H1 closed yesterday with the DJIA (+3.50 +0.03%) at 11350.01 and the S&P 500 (+1.62 +0.13%) almost flat, while the NASDAQ Composite sank -22.65 -0.98% to 2292.98. The Toronto Exchange closed +111.82 at 14467.03.

In New York, the leading sectors were Utilities (XLU +2.4%), Telecom (IYZ +1.7%) and Energy (XLE +1.4%). Financials (XLF -1.5%) were the worst with Broker-Dealers ($XBD -2.1%) and Banks ($BKS -1.9%) both down. Retailers ($RLX) dropped -1.9%.

For the extreme Cara 100 stocks, the winners were: CCJ (+6.0%), NTES (+5.3%), DNA (+4.4%) and CEO (+4.2%). The losers were: BC (-5.8%), UBS (-4.8%), WFMI (-3.9%), and SBUX (-3.7%). RIMM was weak again too as the NASDAQ dropped.

The US long bond ($USB) was off a bit (-0.05%) to 115.59, whereas yields generally were also down a bit, so the shorter bonds lifted a bit. The T-Bill yield gained +4.6% to 1.705.

The US Dollar index ($USD) gained +0.32% to 72.53, while the Euro ($XEU -0.26% to 1.5749) and Yen ($XJY -0.15% to 97.90) lost a bit of ground.

Crude Oil ($WTIC) lost -$0.21/bbl to 140.00, while $GOLD dropped -$3.00 to 928.30.

Earlier today, the Asia-Pacific equity markets were weak: Australia All-Ords -1.35% to 5261.1; Shanghai Composite -3.09% to 2651.6; and India's Sensex 30 -3.71% to 12961.68. Hong Kong's Hang Seng gained +0.27% to 22101 and tokyo's Nikkei Dow lost just -0.13% to 13463.2.

European stocks are getting hammered today after Goldman Sachs recommended buying puts as "crash insurance". At 8:10am ET, the UK FTSE 100 is down -2.68% to 5475.3; the French CAC down -2.40% to 4328.6; and the German DAX down -1.90% to 6296.5. The big losers in Europe today were the big European banks, UBS (UBS), Deutsche Bank (DB) and HSBC (HBC).

The futures prices for the USD, Euro, WTIC Crude Oil and the DJIA are 72.635 (weaker), 1.5720 (stronger), 142.05 (+2.05/bbl), and 11235 (-104), respectively. The focus today is on the continued strength of the oil market, and its pressure on the $USD and the US economy.

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Comments & Outlook

By way of comment to those who don't understand the puts and calls options market, this piece of Goldman Sachs so-called advice is late by perhaps a year. In all likelihood, Goldman Sachs will be selling you their puts and closing short positions in the financials in the next few months.

Trading is an exercise in risk avoidance and this Goldman ploy is a classic risk transference one. It may make sense if you are a sophisticated day trader who understands options and follows markets from minute to minute, but the average trader would be misled, duped once again by HB&B "advice".

In the Week In Review, I made a comment that raised more letters to me than I can recall. I said, basically, that Bear markets generate plenty of opportunities and that, being in one today, we must be looking forward by preparing wish lists based on our thinking how the future is likely to play out.

I also looked at the promise of the high dividend yielding Telcos, AT&T (T) and Verizon (VZ), particularly for income investors, who I think should be looking for opportunities to switch from bonds (which will suffer as interest rates increase in future, which is likely). The dividends of these stocks are well protected (especially T) and growing, along with earnings growth, and the prices of the stocks nearing the Accumulation Zone. So, while the average retail investor might wish to hold off for a couple months to see how the expected broad market shake-out affects these stocks (prices will be protected with the high current yield), it is my belief that the major fund managers, having to move cash into the market, will start to move in now, and that will provide a measure of support for a summer rally.

Yesterday, in a flat DJIA/S&P 500 market session, T jumped +2.84% to $33.69 and VZ +3.27% to $35.40. Either somebody's listening or else my crystal ball is working better these days.

Btw, there are still people who do not appreciate the risks posed by Interventionists in our so-called free capital markets. The major Interventionists are the central banks of the world. They say their mandate is to stabilize prices, to our benefit, but the facts say otherwise.

For example, nine years ago there was an agreement dubbed the Washington Accord wherein central bankers agreed to sell only enough gold in the open market, they said at the time to prevent its price from collapsing. The price at that point was US$260 an ounce. Far from collapsing, today the gold price is about $930, and the 200-day Moving Average is about $865. If central banks had sold no gold since the time of the Washington Accord, where do you think the POG would be today? $1500? $2000?

The Washington Accord was extended by the Gold Agreement of September 27 2005, which limits central bank annual gold sales to 500 tonnes between 2004 and 2009. It is my belief that central banks only sell gold whenever HB&B or their major clients are ready to buy it and to the extent they want it. The "Accord" is to prevent gold from falling into the wrong hands, ie, to the public, because that would put the public into a strong position of controlling government deficit spending and its soaring debt.

Have a great day to all, and a special one Canada. Yes, it's true; you can take the boy out of Canada, but not Canada out of the boy.