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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (13762)	10/20/2004 11:22:25 AM
From: mishedlo	Respond to of 116555

Let's Hide Out In RIMM It is going to keep rising forever. The first trillion $ company. Plenty of room to grow. Mish

To: zonder who wrote (13762)	10/20/2004 12:18:11 PM
From: mishedlo	Respond to of 116555

Heinz on housing & silver trotsky (corporate profits&the consumer) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved if one looks at the performance of the US economy using corporate profits as one's yardstick ( as opposed to the cooked up hedonically distorted GDP data ) , then the economy has been on a slippery slope since 1997. as Dr. Richebacher has repeatedly pointed out, '97 was the year when corporate profits have reached their highs, and they've been declining ever since ( with some ups and downs in between of course ) . manufacturing profits have largely disappeared...technology companies in the aggregate have been losing money for 4 years in a row. retail and financial services cos. have managed to snatch an ever bigger share of the shrinking overall profits pie ( lately, energy and mining cos. have of course caught up ) . it follows from this disparate sectoral performance that a consumer recession would basically wipe out what there currently is in terms of corporate profits. consumer spending in turn has depended on once-off stimuli in recent years ( tax cuts and the refi orgy ) , and a continued vast expansion of the credit bubble. the fact that Greenspan has recently once again professed that the biggest pile of household debt in mankind's history is 'nothing to worry about' ( i quote: "....Greenspan said it was unlikely that either the high level of household debt or the big rise in housing prices represented serious threats to the economy because Americans appeared to have sufficient resources to keep meeting their loan payments." ) is a major reason to sound the alarm bells. the man is one of the worst economic forecasters around, and a well-known contrary indicator. of course a 'big rise' in home prices isn't an imminent threat - but falling home prices ( that's what follows after 'big rises' ) will be. Greenspan's polyanna pronouncements stand in stark contrast to what the governors of the BoE say about soaring credit card and mortgage debts in the U.K. - these guys are worried, and urge the population not to overdo it. Greenspan seems to extend an invitation to keep digging, in spite of what they say about finding yourself in a hole. the reasoning is faulty also because it does not matter whether people manage to scrape up the money while the going is still relatively good. what one must ask is "what happens when there's a grave economic setback". will households still be able to afford this enormous burden then? will they be able to withstand a Japan-like decline in home prices? the answer to these questions should be obvious. interestingly, these remarks were made in a speech to a banker's association - and the banking system is more exposed to real estate risk than ever in its entire history. over 60% of bank assets are somehow tied to the mortgage credit bubble, which is yet another eerie parallel to Japan in the early 90's. you could say they're asking for it...they've been indulging too much in a good thing. in the meantime, as someone has recently remarked, we see the very last marginal buyers enter the housing market - the people who aren't even asked for a down payment anymore ( because they simply don't have the money ) - they can borrow that as well. the pool of buyers seems finally exhausted - which means we're fast approaching 'interesting times Date: Wed Oct 20 2004 09:22 trotsky (wiffo) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "Especialy ( sic ) in regard to proving that a ridiculous situation is ALLOWED to EXIST, whereby the total sum of silver metal shorts excedes the total above ground supply of the silver metal in inventories. This is clearly ridiculous, and illegal. Yet no action has been taken to reedress this obvious gross and illegal irregularity." the problem with this statement is that A ) it's an unproven allegation ( we don't know for sure how big the overground supply of silver is - since only COMEX publishes the numbers. that's why Ted Butler always stresses the 'visible' inventories. however, i note that GMFS estimates far bigger silver inventories to exist in Europe. whether their numbers are exact or not, one presumes that these estimates are based on industry surveys ) . and B ) it is patently NOT illegal to hedge more silver than is in inventories. many mining companies have silver hedged 10 years out. these hedges concern mostly as yet UNMINED silver. one could say it's not wise to hedge that far out in the future - but it is definitely NOT illegal. this is what the PAAS CEO essentially told Mr. Butler a few months ago - that there exist numerous over-the-counter derivatives arrangements concerning unmined silver hedges, and that some of these hedges are probably offset via COMEX futures ( 'netted out', since the counterparties of the miners in otc contracts are by necessity LONG silver in those contracts ) . C ) something you haven't mentioned, but is a frequent contention by Mr. Butler, namely that 'speculators' are 'not allowed by law' to 'determine prices'. this implies that a large amount of commercial trading is speculative, and indeed, one can infer via circumstantial evidence that this is true. however, a look at CFTC regs reveals that it is NOT illegal for commercial hedgers to enter into speculative positions. it would be ridiculous if that were the case ( it wouldn't even remotely resemble a free market anymore ) . furthermore, prices are determined by the sum of demand and supply, including demand and supply provided by speculators. in all this lamenting about 'silver price suppression' no-on stops to think that silver has risen 100% from low to high over the past few years. i know, everybody sitting on silver thinks $20/oz. is a birth right, but it isn't. a 100% rise is plenty - and guess who made it possible? that's right, it was the evil speculators that drove up the price. without them, liquidity in the market would disappear, and price determination would become a lot more difficult. D ) one must admit that the hedger short position in silver is , and always has been, exceptionally large. one must also acknowledge that hanky-panky is going on in ALL futures markets ( as well as the stock market ) when options expiration is close. but it is a big leap of faith to ascribe all of this to a huge conspiracy of international scope, that presumably has been active undetectedly for a number of years. market manipulations HAVE taken place in the past, and the idea shouldn't be dismissed out of hand. but usually such manipulations take place in a well defined time period, and have specific short term , profit maximizing goals. many manipulations have been exposed ( see Sumitomo and copper, for instance ) . since there's a huge hue and cry in silver without any proof being submitted save the not-too-convincing circumstantial evidence of the CoT positioning data, one must assume that various people in the know have also checked the facts. funny enough, not a single 'whistleblower' has piped up, and not one word from any of the bodies in a position to come to a definitive judgment on the matter has been heard to the effect that the allegations might have merit. what we do get is MORE unsubstantiated allegations from various sources ( which draw on each other as it were ) . we can summarize: so far, no proof exists that any laws have been broken. none of the authorities that have been informed about the allegations have seen fit to take action beyond saying that they believe the allegations to be unfounded ( the CFTC, and even Elliot Spitzer have been informed ) . a prominent silver mining CEO has EXPLAINED why it is possible in the metals to have derivatives positions exceeding 'visible inventories'. and lastly, the silver price has advanced by 100% in its most recent significant rally. where's the beef?

To: zonder who wrote (13762)	10/20/2004 1:05:48 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Eurodollars I do not like this price action here at all They refuse to rally much even when treasuries do. I had a mess of dec 06 96.75 calls that I paid 34 for I want to hold them but do not want to ride out a potential downdraft either Decision: Write Dec 06 97.50 calls for 17 That puts me in a position with 17 at risk to make a possible 75 It also takes some cash off the table to redeploy elsewhere. I will sit on that for now. If greenspan goes ahead with 2 more rate hikes I will go massively long eurodollars Mish