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Trade the Bollonger Band Squeeze

Archive through September 13, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through September 13, 2010

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p3t3
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Post Number: 36
Registered: 04-2010

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Tuesday, September 07, 2010 - 09:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




p3t3 wrote on Tuesday, September 07, 2010 - 07:38 pm:

....much less susceptible to bullying by the Executive


Party Executive: The MRRT (Resources Tax) is up for the vote on the floor of the Reps. As a member of the party (say, ALP) you have to vote "yes".

Member: But I have miners in my electorate. If I vote yes they will campaign against me and I will lose my seat in the next election (which could happen at any time).

Party Executive: Party discipline rules. Vote "yes" or be expelled from the Party.

Member: Hhmmm. Vote "yes" and lose my seat, or vote "no", go sit on the cross benches and hold the balance of power with the other independents. And be seen to be standing up for the wishes of the electorate, probably increasing personal following. Tough choice.


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p3t3
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Wednesday, September 08, 2010 - 02:33 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




ody wrote on Tuesday, September 07, 2010 - 06:55 pm:

The NBN is something that I support in principle, but I do not trust THIS government to put in place a system that is properly costed and effective at the same time. I think that, going by Labor's record, yet more money is certain to end up in the wrong pockets, and that once again the work will be poorly supervised.


In my view the very significant disadvantage Gillard suffers is having a moron as Deputy.

It was Swan and Ken Henry who cooked up the MSPT, and Rudd swallowed it whole - to his very great cost. It was all done while the Rudd camp was locked into War Strategy mode, having come into government just as the GFC tsunami was breaking over global financial markets. While ever an urgent response was needed to momentous events the "gang of four" (limited to two in the case of the MSPT) were able to get decisions done largely without scrutiny - either from within the Cabinet (or the broader Party) or provided by external consultation.

Times have changed. It is much less likely that the Gillard government will be able to obtain a similar absence of scrutiny - particularly after the (very public) outcomes from the Home Insulation and Education Revolution building programmes. Unlikely that history will repeat while independents need to be accommodated to get implementations done. Indeed the result is likely to be that much less gets done....if anything at all.... i.e. implementation gridlock might prevail.

That scrutiny is also likely to be applied to the NBN rollout. Indeed, it is unlikely that Conroy will be able to continue the lack of transparency in plans and costings that has been such a feature of the policy so far. The independents have been clear about the need for greater transparency and accountability, and the net is awash with guidance from people with extensive industry experience about how an NBN could be done more efficiently and cost-effectively. The alternatives will now have to be addressed rather than ignored, and considerable negotiation skill applied to get outcomes that a much broader audience of critics can find themselves able to live with.

The alternative will be a return to the polls in the short term - still a distinct possibility.

Just my view
Pete







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bridog
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Username: bridog

Post Number: 166
Registered: 06-2009

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Wednesday, September 08, 2010 - 07:02 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Always good to see Eugenio throw the cat amongst the pigeons. Judging by the shrill replies and the fact the markets haven't yet fallen off a cliff, could it be that some are worried about having to cover their shorts?

Never mind fellas, sooner or later you are gunna be right, so there will always be a time you can shout triumphantly "There you are, I told you so!"

In the meantime is there any positive news from the US? Yes there is! The following is an abridged version of an article from CNN Money. The facts are included, the commentary is not:

Farming a recovery
Of all the industries impacted by the recession, U.S. agriculture remains relatively resilient as prices soar for everything from meats to grains, mostly on demand from markets overseas.

American farmers will export $107.5 billion in agricultural products this fiscal year that ends Sept. 30, the second highest ever after the 2008 record of $115.3 billion, The New York Times reported, citing federal estimates of farm trade and income.

U.S. corporate buying frenzy
Last month was the busiest August on record for mergers and acquisitions volume worldwide, and the $286 billion worth of deals announced marked the highest monthly level since July 2008, according to Dealogic.

The activity was driven by companies in sectors ranging from technology to agriculture. This included BHP Billiton's (BHP) unsolicited $43.4 billion bid for Potash (POT), as well as Intel's $7.7 billion bid for McAfee (MFE). And Sanofi-Aventis' (SNY) $18.5 billion offer for Genzyme (GENZ, Fortune 500) on August 29 raised the total value of global hostile bids to date to $133.8 billion, a 26.6% increase over the previous year.
Global volume of mergers and acquisitions is at $1.8 trillion so far in 2010, up 24% from the previous year during the same time. One of the most interesting aspects about the peaked activity is that the value of deals in Europe and Asia rose this year, but the number of deals in each region was unchanged. The U.S. came in as the unlikely bright spot amid a fragile economic recovery. The value of M&A deals here increased only 5%, but unlike other regions, the number of deals was up 42%.

Detroit.
The Times called Detroit an "economic bright spot," highlighting a series of improvements at The Big Three: Ford Motor (F, Fortune 500), General Motors and Chrysler. Indeed, the industry has made huge strides. Ford churned more money in the first six months of this year than in the previous five years combined. GM, which received a $50 billion taxpayer bailout following its bankruptcy in June 2009, has filed for one of the biggest public stock offerings in U.S. history. And Chrysler is hiring new workers.

Manufacturing growth
The Institute for Supply Management's factory index rose to a three-month high of 56.3 from 55.5 in July. Most economists predicted it would fall to 52.8 or worse. A reading of more than 50 generally signals growth.
What's more, the surge in manufacturing has translated to jobs, though growth has been concentrated to mostly temporary employment, Tig Gilliam, Adecco CEO for North America told Fortune last week. Though the latest Labor Department report released last Friday suggested that manufacturing jobs fell more than expected in August, temporary jobs rose 17,000. And Caterpillar (CAT, Fortune 500), the Peoria, Illinois-based maker of construction and mining equipment, has announced it may add up to 9,000 workers globally this year.


Old enough to know better . . .

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market_mad
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Post Number: 462
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Wednesday, September 08, 2010 - 09:09 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




eblode wrote on Tuesday, September 07, 2010 - 09:41 am:

Laugh again tomorrow when the DOW goes up after Obama's Labor Day speech which will again encourage the market to head north.




Hahaha! I am laughing again this morning.

Eugenio strikes again - gets bullish and the Dow drops 107 points. (Sorry mate, couldn't resist )

I made some good money on the short side last night - thanks mate.

MM


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bridog
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Post Number: 167
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Wednesday, September 08, 2010 - 09:14 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



"Now is the time where I would go aggressively equity and away from fixed interest because the risk is gone," Dr Gelber said.

Economy heading for boom, says economist
7/09/2010 10:41:56 AM
Australia's economy will be strong and is on the upswing for a boom within the next decade, a leading economist says.
BIS Shrapnel chief economics Frank Gelber, speaking in Brisbane on Tuesday, said the boom will come as a result of the country's strong exports to the thriving continent of Asia, a strong mining sector and fiscal stimulus during the global financial crisis.
"All of the pre-conditions that led to the GFC are gone," Dr Gelber said.
"The mining drivers are here for another five years at least.
"Five years from now this economy is going to be really strong coming from an undersupplied, under capacity situation.
"The boom won't mature in 18 months, it will take six or seven years, or eight or nine."
But the equity markets are gushy he said, which is keeping a lid on the upswing.
"Now is the time where I would go aggressively equity and away from fixed interest because the risk is gone," Dr Gelber said.
The US, UK and some European markets will take more than a decade to recover, Dr Gelber predicts.
Nor does he say those markets are having a double dip recession, because they didn't recover fully from the original hit from the financial meltdown.
Australia's situation is totally different from overseas and the country is emerging from a relatively mild downturn.
Specifically, he said Queensland had recovered well, as it was the first state hit the hardest as the GFC hit.
"There was a time where year-on-year went negative, but they are strongly positive again," he said.
But it is not only mining holding up the economy, Dr Gelber said because the stimulus was largely responsible for staving off the impacts of the GFC.
"We would have had a recession had it not been for a very strong household handouts and government investment," he said.
And with nearly 80 per cent of exports going to Asia, he says that's been another saviour.
"The strength of Asia is been an incredible windfall for us," he said.
The unemployment rate will also drop below 5 per cent by mid 2011, which will mean the country will run into labour and capacity constraints two years from now.
"Then we'll see the re-emergence of demand inflationary pressure and the Reserve Bank freaking out because inflation's going up," he said.
"And they'll fight it with rising interest rates and will cut the housing boom in the bud before we have a chance to supply our under supplied markets."

Source Money (MSN)


Old enough to know better . . .

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eblode
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Wednesday, September 08, 2010 - 09:44 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,

Always a pleasure to see you happy.

Eugenio

PS Send me your address as I must confess I had lost that AUD bet.


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bridog
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Wednesday, September 08, 2010 - 10:01 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Letter to Tony Abbott:

Tony,

You lost the election for one reason and one reason only: NBN broadband.

What you did:
Totally opposed the concept

What you should have done:
Acknowledge the concept and promise to find a way to implement it in a cost effective and open manner.

That you didn't shows you are out of touch with modern times and have little knowledge of business large or small, or the aspirations of millions of ordinary people.

Please get your head around it for next time.

Bridog


Old enough to know better . . .

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breaker_1
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Post Number: 245
Registered: 10-2009

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Wednesday, September 08, 2010 - 10:19 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Fibre optic does'nt last long [20 years] then some ones got to fix it

We have next G out here and it works well
new mobile system which I can't remember will be even faster
Nobody in the bush could give a rats about broadband there are more important issues


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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billt
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Wednesday, September 08, 2010 - 10:21 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bridog

My commentary on the economic fundamentals is purely US based. Interestingly your article seems to agree:

“The US, UK and some European markets will take more than a decade to recover, Dr Gelber predicts.”

I agree!

Just a few comments on the four items you mentioned:

Farming
Doesn’t matter how bad things get, Americans still eat! They are the world champions on that front! US Agriculture had a good year due to great climate conditions and ‘mostly on demand from markets overseas’. That doesn’t spur the fundamentals of the economy on….but we all know that.

U.S. corporate buying
Companies with strong balance sheets will always be on the hunt for acquisitions in this climate. Organic growth is becoming more difficult to sustain on falling GDP so to keep the investors happy M&A will always prevail for the stronger well run companies.

Auto Sales: Detroit
The problem is that US Consumer Confidence has stalled, and in August Auto Sales fell to a 28-year low.

ISM Manufacturing
ISM Manufacturing steadily increased in the last 12 months before topping out in April 2010 @ 60.4. The figures in May @ 59.7 looked fine. Unfortunately in June the index came off hard falling to 56.2, and it has bounced along at these levels since, July @ 55.5 & August @ 56.3. The problem is that the index has fallen sharply and has not recovered.

I just love it when the press tells you half the story!

The problem for the USA is:

GDP is falling,
National Debt rising & will accelerate due to more stimulus
Deficit rising & will accelerate
Unemployment is rising
Real Personal Income if falling
Real Personal Spending is slowing
Housing Starts sharply falling
Homes Sales sharply down
Building Permits sharply down
Auto Sales 28 year low
Real non-residential flat
Non Defense Shipments falling
ISM Services falling
Chicago PMI falling sharply
Food Stamp Recipients rising
300 banks bust, many more to come

The US Consumer has decided not to buy a new house, a new car, is worried about his job, has falling real income, knows many unemployed, worries what bank to put their savings in, sees 41 million around him on Food Stamps, and is not spending.

How you use this information and what effect it will have on the Australian market is up to the individual. I post this information simply to assist!

I elect to position & swing trade the short side on the US markets, and hold my shiny gold....

Bill


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billt
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Wednesday, September 08, 2010 - 11:41 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Coalition Policy Costings to my mind was a major issue for the Independents.

The Coalition ran on ‘reducing the debt, cutting the waste, better economic management’ ....

The Coalition procrastinated in getting their Policies costed by Treasury – it was a bad look, which looked like they had something to hide.

In the end, there was a $11 billion black hole, and the Independents used words such as ‘trust’ in the discussion that followed. Tony tried to explain it away, but it was not defensible.

The Independents may simply have wanted the ‘most fearful’ Party in government, one which had less likelihood to return to the polls. However, I sense that the $11 billion ‘black hole’ was a key concern.

Some in the Bush suggest that this huge expenditure on NBN is a waste of money - I just feel until we get our National Debt back in the black, large expenditures such as NBN should be put on hold. We should learn to live within our means - the sovereign debt levels of USA, Europe, Japan & UK are prime examples of what not to do, yet both sides of Australian politics seem happy to keep raking up the Debt.

....disallussioned voter


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ody
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Wednesday, September 08, 2010 - 12:34 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some afterthoughs a propos of other posts

Heaven help those who listen to Dr Gelber as a forecaster: he has been so often and so drastically wrong that it is dangerous to take seriously anything which he says.

As to why the rural independents went to Labor (which is what made the Coalition lose its chance to govern), Windsor is the more comprehensible one for the two. As far as I can guess Oakeshott went for "consensus politics" so as to become a minister, or at the very least to stay in power for the longest possible time. The NBN seems to have been a point with both, and indeed others. But it is not the case that the NBN lost the Coalition power all by itself. It would have done well to offer something better than it did, but for Windsor the clincher - as he has in various forms repeated for some weeks now - was that he feared that if he placed Abbott in power, Abbott would on any positive sign seek re-election so as to strengthen his hand, and in particular to do so within the next 8 months. This would indeed, for Windsor, have been a risk, as he might then have lost his seat. As his purpose is to retain that, and as he could squeeze more out of Labor than out of the Coalition, he supported Gillard. And it is difficult to fault his politics in this - he played quite a cunning hand.

Whether or not more seats would have been won if Abbott had adopted something like the NBN we shall never know. I do think he made the wrong choice, but when it comes to the final evidence to look at, viz. what made the two independents go to Labor, the NBN is not the major factor: what counted was that the "big" parties, as they argued, take them for granted, and Labor was at this moment the one they could "milk", as it would offer them more than the Coalition so as to buy them. And so far it looks as though this calculation was spot on. Katter felt differently because in his case the Coalition offered more; and he admitted he could not stand Gillard's knifing of Rudd ("I am a Queenslander", etc.).


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market_mad
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Wednesday, September 08, 2010 - 02:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Food for thought for the second half of this month;

3 out of every 4 days on the Dow Jones Index over the last 100 years have been down days in September. The last half of September is traditionally a very soft period. In fact, from the 11th to the 30th September there have been on average just 2 up days out of 19 over the past 100 years.

Cheers
MM


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billt
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Wednesday, September 08, 2010 - 05:16 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM - Stop winding these guys up! Don't upset them...

1 out of 4 'up' days in September means circa. 5 'up' days out of 22.

We have already had 4 'up' days.

Hmmmm....I'll just get my calculator to work out how many are left....

Bill


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billt
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ody
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Thursday, September 09, 2010 - 07:51 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



While this is bad news, let us also remember that US authorities usually report in an upbeat fashion, so the truth is probably worse. This comes from Business Spectator.
-----------------------------------------------

Fed report suggests US growth easing

Published [in Business Spectator] 4:44 AM, 9 Sep 2010 Last update 5:56 AM, 9 Sep 2010

QUICK SUMMARY | FULL STORY

By Mark Felsenthal of Reuters

WASHINGTON - The US economy has shown "widespread signs" of slowing over recent weeks, the Federal Reserve has said in a report suggesting that while the recovery has been faltering, the economy may skirt a second recession.

The Fed said in its Beige Book compilation of anecdotal reports that modest growth was the most common characterisation of economic activity in Fed districts, primarily those in the western and middle portions of the country such as San Francisco, Dallas, and Kansas City.

However, other areas, including New York, Philadelphia, and Chicago, reported economic growth was mixed or had slowed.

"The economy continues to plod forward, neither gaining momentum nor lurching back into recession," BMO Capital Markets economist Sal Guatieri said in Toronto.

The Fed said consumer spending appeared to increase even as shoppers were limiting themselves to essential items, a further sign the economy may escape a relapse.

However, a separate Fed report showed consumer credit had contracted for the sixth month in a row as households repaired their balance sheets after a debt binge in the early 2000s.

Upward price pressures remained quite limited for most categories of goods and services, and wage pressures were also subdued, the Fed said.

"The reports suggested ample supply of qualified applicants for open positions," the Beige Book said.

Economists are divided over the degree to which the nation's 9.6 per cent jobless rate reflects a labour market battered by a deep recession and sluggish recovery, or a mismatch between workers skills and locations and the jobs available.

US unemployment partly structural

In a speech in Montana on Wednesday, Minneapolis Federal Reserve president Narayana Kocherlakota said that more than a quarter of US unemployment could be due to a mismatch between workers' skills and jobs. The Fed, by easing financial conditions further, would not be likely to have much impact in reducing unemployment if this is the case, he said.

Markets paid the report scant notice as it was seen as confirming that the recovery had flagged over the summer.

The hard hit housing sector showed further declines after an initial drop following the expiration of a popular tax credit, the Fed said.

The Beige Book was prepared ahead of the Fed's next policy-setting meeting September 21, where policy makers will debate whether to provide further support for the stumbling recovery.

The Fed cut interest rates to near zero and then bought longer-term securities worth more than $US1.7 trillion to pull the economy out of one of the deepest recessions in decades.

It had appeared set to start withdrawing stimulus, but as the recovery's green shoots withered over the summer, it moved to resume buying securities to hold its portfolio at a steady level.

Policy makers are debating whether the Fed needs to actively increase the size of its holdings to supply additional stimulus.


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billt
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Thursday, September 09, 2010 - 08:21 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Widespread Signs of Deceleration

hi Ody

Reading the report the phrase that seemed to sum up the mood was:

...."with widespread signs of deceleration"......

The anecdotal information contained in the beige book is consistent with the slew of recent economic reports which I have alluded to showing that the burst of growth in late 2009 and early 2010 has not persisted through the US summer, as the impact of the fiscal stimulus and of businesses rebuilding their inventories fades.

The policy of zero interest rates and massive fiscal stimulus has not worked.

With a massive Deficit & massive Debt the options become more difficult:

1. More Fiscal Stimulus & Debt;

2. Raise Taxes, cut Expenditure and repay the Debt;

3. Cut Taxes, cut Expenditure

Ody, in the interests of my further education, which of the 'Economists' do you rate, and which ones are to be avoided!

cheers

Bill


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bridog
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Thursday, September 09, 2010 - 10:43 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

AXM: The old double or nothing stock I have previously discussed seems to have some serious interest in it in the last few days with volumes rising together with the price.

KGL: My other favourite goldie has been going great guns with increasing price and volume. Lucky I took up the rights issue at 6.5c. They claim to be producing gold in 12 months at a cash cost after copper credits of US$25.
Thats right Twenty Five dollars. Whats not to like about that? The country?

Anyhow, back to work . .


Old enough to know better . . .

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eblode
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Thursday, September 09, 2010 - 11:29 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bridog,
Nice play on KGL. Sold out of CZA & EXS on stops. Bght PMV & BLD. Gotta to know when to hold em and when to fold them.

Eugenio

In todays Age a guy wrote " Looks like God favored the atheists to win. "


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ody
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Thursday, September 09, 2010 - 01:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Just a snippet that may be useful ...
--------------------------------------------------
It must be remembered that we are about to enter the worst period of the year for US equity markets seasonally from 11th September on. Also large Fund Managers have only just returned from summer holidays in America and the current rally has been on very light volume. European debt problems are beginning to resurface again, gold is breaking out to new highs and the Yen is at 15 year highs and continuing to rally.

Most other markets are signalling that big investors are preparing for the US to re-enter a recession. The equity market will wake up one day and I reckon it will be within the next 2-4 weeks.

Murray Dawes
for The Daily Reckoning Australia
Editor, Slipstream Trader


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paint
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Thursday, September 09, 2010 - 04:44 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

US International Trade figures due out tonight (8:30am)

Consensus B $-46.8 B, Range $-53.4 B to $-43.0 B


Market Consensus Before Announcement
The U.S. international trade gap in June spiked to $49.9 billion from $42.0 billion in May. Exports fell 1.3 percent, following a 2.5 percent gain in May. Overall imports advanced 3.0 percent in June after rising 2.8 percent the month before. The widening of the trade gap was primarily in non-oil. The nonpetroleum deficit widened to $40.0 billion in June from $32.2 billion the prior month. The petroleum goods gap, however, narrowed to $21.2 billion from $21.5 billion in May.


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ody
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Thursday, September 09, 2010 - 06:31 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



"Good" employment figures

During the past year the nation has apparently created 350,000 new jobs, and the latest figure reduces unemployment to a very low figure. While I know there is argument as to what constitutes a job, I suppose the same definition has been used throughout the year, so by any standard we have seen a big increase. Also, although the prices for housing have gone up and down a bit, overall they have been very high, with phenomenal rises in e.g. Melbourne. Our son bought a very good house not really that long ago: now a piece of land the same as his, but WITHOUT A LARGE HOUSE INCLUDING TWO BATHROOMS ETC WHICH HE HAS, in the same street and a very similar position, has sold for the same price as he and his wife had paid for the land INCLUDING their house.

Consumption is also again on the rise, with yet more Australians finding it necessary to buy new cars etc.

My assessment is that this is a pampered, blind nation that thinks it is in some very special, invulnerable position. When Donald Horne wrote _The Lucky Country_, his title was partly ironic: he meant that this was a lucky country in terms of its resources, but unlucky in terms of what Australians were doing, or failed to do, to the place. It seems to me that inherently little has changed. We are still (or again) very much primary producers. As Katter did not fail to point out recently, our industrial base has largely disappeared, and agriculture is in deep trouble.

The major source for our wealth is mining, and there can be no doubt that this industry is very vulnerable to risk. The risk of a huge mining tax is only one very real problem. Unless a miracle occurs, we SHALL have a mining tax of magnitude, although Brown has promised not to push for the 40% which the foolish Treasurer originally urged Rudd, who hardly understood the matter at all, to go for. (Swan had been reading Henry, and thus concluded that a mining tax was a great idea.) It is not at all inconceivable that Labor itself will alter the mining tax, with Brown's approval, so as to tax uranium and a whole lot more. After all, Gillard urgently needs to find money to pay for the wishes of the independents. At the very least there will be great uncertainty about this whole area, and investment will suffer to the extent that we shall have less money coming in from abroad than we would have got under Abbott, and more money will be invested, by Australian companies, in other, less heavily taxed countries. This latter prospect will currently be particularly attractive as our dollar is actually quite high, so that assets abroad are correspondingly cheap. It is a pretty sure bet for any company that the high dollar will eventually revert to a more normal level (e.g. 70 cents or so), which would mean that in the years to come an asset bought now at the rate of 90 cents should do very well, in Australian terms.

China is once again beginning to worry about its property boom, and it would not be at all surprising if we were to see another squeeze there. Prices for coal and iron ore simply cannot continue to rise, and if anything are, on a consensus view, both vulnerable to falls. Most of the truly grand results we have seen in this regard will not be sustained year after year.

There is just one sensible step we can rely on, and that is that the Reserve Bank will raise interest rates in a country whose economy is clearly overheating, or at least close to doing so. Banks, too, will keep the pressure up, as their money is getting costlier to acquire. It would be really desirable to see the country's excessive behaviour reduced, and to see more efforts directed towards both saving and responsible spending, which should be directed towards a far more diversified economy, by way of investment rather than consumption. And so long as about 80% of private wealth goes into property we shall never build up anything like a mature economy.

All in all, I see both residential property and the share market as at risk in this country, though I dare not predict just what the size of the falls will be or quite how soon they will occur.


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eblode
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Thursday, September 09, 2010 - 06:43 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
You mentioned that the "major source of our wealth is mining". True. But what happened to the wool industry? Once upon a time we all agreed that Australia lives off the back of their sheep. Today we hardly hear a word about the wool industry.Years ago it was considered the mainstay of Australian wealth. What happened? Or did mining overwhelm it?



Eugenio


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bridog
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Friday, September 10, 2010 - 01:50 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM, I think October plus a week each side is the most dangerous period for markets on average followed by April/May. Often it starts building back up in December and goes on to a high in March. From memory October is when most of the "black" days occurred.

Of course a downturn is not guaranteed and didn't happen last year. However come the week after next, I'll be tightening up stops in protection mode.

Cheers


Old enough to know better . . .

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market_mad
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Friday, September 10, 2010 - 10:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bridog,

Actually, September is the worst month for stocks over the past 100 years. October is remembered because of '87 etc and of course, more recently in 2008. But historically, September provides the worst returns on markets.

Cheers
MM


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peterloh
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Friday, September 10, 2010 - 11:02 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bridog and Eblode,

You may be please to read this extracted from Bloomberg written by Stephen Green dated 9 September 2010.
I quote:

"To understand what is going on with China's economy, just look at wheel loaders. They are tractors with a big shovel on the front to pick up and move earth or coal. Such machines are used to build roads and railways or to dig black stuff out of shallow mines.

China is, as we all know, an investment-heavy economy, so wheel-loader sales are a pretty good leading indicator: Companies only buy them if they plan to use one over the next 24 months. In July, 15,823 new loaders rolled out of the showrooms. That represented a 50 percent increase in seasonally adjusted sales compared with a year earlier"

CHINA IS ON THE MOVE!!!!

Cheers

Peter


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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eblode
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Friday, September 10, 2010 - 11:15 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Peter,
You just confirm my belief that we are just at the base of a great bull market.
This week was another positive week and it will continue right on towards Christmas. My only fear is that the present government doesn't derail this build up of confidence in the Australian economy.

Eugenio

Right now I'm punting on ABC and BLD to get some big orders from Christchurch.


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ody
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Friday, September 10, 2010 - 12:18 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio, wool etc

Sorry no to get back to you earlier.

There are two main reasons why Australia and New Zealand have both, as commonwealth countries, lost their former wool trade, and thus the wealth that that trade used to accumulate for them.

(1) Once Britain decided "to go into Europe" that finished the power of the NZ economy savagely, and that of Australia significantly. New Zealand had to a large extent been dependent on agricultural exports to Britain which it felet it could take for granted, such as wool and butter. The Brits were, of course, only interested in their own welfare, and although "the Antipodes" had assisted them in several wars, acknowledged no obligation whatever to them. At one stroke, this market was virtually annihilated, as e.g. the import of butter into Britain became a European matter. In each and every instance, preference had to be given to a European country. New Zealand has not recovered from this shock until this day.

(2) Wool was until the advent of such artificial fibres as polyester very widely used in clothing. It has simply - worldwide - become much less essential and important in this capacity. As well, wall to wall carpets have become much less popular. Result: any wool-producing country has to compete with its rivals for a market much less strong that it once was. For that matter, butter has become less popular for health reasons, and because many cuisines of importance and influence use it less than e.g. Britain (which is even itself now eating quite differently). And meat is also no longer as popular, at least in the West (it's getting fashionable in the East), mainly for health reasons. So Australia, though not as seriously as NZ, is greatly affected by these changes.

Both countries, instead of building up major industries, have been only very mildly successful or enterprising in that sphere.

The eventual result is that the NZ economy is utterly vulnerable. Tourism, of course, is a help, but waxes and wanes.

From a top 5 economy around 1960, NZ is now generally well down, into the thirties.

Australia has, particularly of late, done much better, but without its success - largely accidental - in resources, it would probably be in much the same position as NZ. Both are, we must accept, in essence backward economies, that - in a 19th century way - remain far too reliant on primary production.

Resources success in various ways flows into the Australian economy and leads to e.g. investment in housing, buying imported TV sets etc. Hence one gets a sense of a seemingly diversified economy. However, it is in fact very narrowly based in what it actually produces, and particularly in what it can successfully export. From e.g. a German perspective, where it has long been understood that for ongoing wealth one needs to be able to export value-added goods, this economy looks crude, naive, and fragile, though for the time being lucky.


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eblode
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Friday, September 10, 2010 - 01:19 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Many thanks Ody,
Your analysis of the wool market was as clear and comprehensive as the professional lecturer you are.

Eugenio


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ody
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Friday, September 10, 2010 - 01:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Peter - Eugenio: supposed "bull market"

Nearly 16000 wheel loaders is, for a country as large in area and population as China, almost certainly a comparatively unimportant number, even if it is 50% more than a year before. The number probably indicates what we have known for several years, namely that China is under development. What it does not indicate is just how many wheel loaders China uses/needs for X % of output within the economy, or as an addition to current economic activity, etc. Without consideration of such factors, the figure only confirms that China is continuing to grow, which noone has ever doubted. The far more important questions are, at any time: (a) By how much is the economy deliberately being restrained so as to avoid yet more property inflation etc? Or (b) how much danger is there that the economy is overheating? Or (c) Is the economy actually not active enough and does it need stimulus? This latter is the least likely scenario.

Just to take one particular figure, without considering it in ANY context, like this number for wheelloaders, is largely meaningless.

And, Eugenio, to claim that this somehow proves that we are embarking on a "bull market" is just plain silly. Almost all known figures for the world economy suggest either (a) a double dip (variously seen as 20-40% likely), or (b) prolonged slow growth (60-80% likely). Economists of any note - particularly among those with a proven track record in relation to the bull market we have had and its subsequent demise - dismiss the likelihood of a bull market as highly improbable at this stage.

Most commonly the assumption among those who have generally been right is that both the global economy and share markets will be at best very mediocre performers and hardly move forward for many months to come, with possibly a change some time (often assumed to be late) in 2011, but more likely in 2012. And even then that does not necessarily mean a bull market.

In 1987, the malaise was serious, but nothing like what we have had this time. It was not until 1993, however, that the share market - although of course there HAD been rallying since 1987 - embarked on what could be described as a new bullish phase. From 1993 until the time the dotcom bubble burst was a great time to be in the market, overall. Indeed, in Australia, the dotcom bubble was not even that serious. Certainly those who did not get back in early in 2003 missed out on a great opportunity.

The important thing is to make a distinction between the odd rally in a bear market on the one hand and a bull market on the other. What we have had in this bear market is a bear rally of considerable magnitude in 2009 and the beginning of 2010. It was proclaimed the beginning of a bull market by many, but - as several of us predicted here - has proved not to be so, and demonstrably isn't at this moment.

That scenario was always extremely unlikely, and really only adhered to by those who do not understand the nature of financial crises. A bull market starting in 2009 was in fact a physical impossibility. And a bull market right now is also virtually impossible. We are weighed down not only by the fact that the approach adopted to the crisis did nothing to solve it at its basis, while in fact the stimulus provided has made matters ultimately worse as a result of (a) avoidance of a real solution, (b) obfuscation resulting from this, leading to misjudgement, and (c) creation of new stimulus and bubble-formation. The amount of debt in the world is much larger than at any previous time in history, and will inevitably cause further crashes if markets attempt a prolonged bull run.

The complete misunderstanding of these issues was manifest recently in Julia Gillard's claim that Labor had "created" or "saved" 450,000 (or even 500,000) jobs. No mere spending of taxpayers' money can do so, except for a very brief period while that money literally "buys", quite artificially, activity that demands labour. As soon as the money is spent, and no new money added, the economy has to find its own means of sailing further. That is the really hard part, and where Keynesianism usually falls down. If new stimulus is then provided, the situation becomes extremely dangerous. Yet this is what Obama is flirting with.

Even IF the stimulus money spent in this country did temporarily provide the sole course for jobs growth (of course it didn't, as the economy was strong anyway), the artificial "buying" of those jobs - not as something likely to last, but as a temporary creation - is ultimately largely meaningless and indeed potentially dangerous for the development of an economy longer-term. The really difficult period is what we have come to approach, in the world at large, or are already in. The US economy may not actually fall into a hole, but it is very obvious that there is far less growth than we had been so tediously told for so many months. In Europe this will also be so. The essential point is that you cannot spend your way out of trouble: only genuine, sustainable economic activity can ultimately provide success, not ongoing wasteful subsidies.


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peterloh
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Friday, September 10, 2010 - 03:29 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



It is not all gloom and doom.

This is part of an article published in the Business Section of the Wall Street Journal on the 10th September.


"In other data, China continued to see recovering appetite for copper in August on the back of purchases at trading houses in expectation of rising downstream demand in the fourth quarter.

Analysts and traders said more copper shipments would be brought in to the world's largest copper consumer in the coming months as smelters and fabricators place orders in the third quarter in preparation for the traditional high consumption season in September and October.

"It's the anticipation of higher prices and stronger demand that will drive copper consumers and trading houses to continue to buy from overseas markets because a still-growing China does need industrial metals to build more infrastructure," said Wang Mingyi, an analyst with Galaxy Securities Futures."

Cheers,

Peter


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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rdumas
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Friday, September 10, 2010 - 03:32 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

Here is a good video of an interview of Roubini being questioned about his thoughts about a double dip recession. He clearly indicates that it has not been priced into the market and hence we can expect equities to go down from here.


http://videos.geourdu.com/video/7Kn2y2cHDgE/Roubini-On-Double-Dip-mp4.


I'm sure that Bill will find his comments about gold of particular interest.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Friday, September 10, 2010 - 03:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Another Roubini interview. Here is one that was done in August 2010 where he discusses the global issues and what the dilemma's are facing regulators in dealing with them. It gives a very interesting insight into the problems faced by the various economies including China.



http://videos.geourdu.com/video/_4yN00qGBbI/Tea-with-Nouriel-Roubini-professor-o f-economics-economist-com-video.html


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Friday, September 10, 2010 - 04:15 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



thanks Rudy for the Roubini clip -

I watched that live at the time, but struggled to pay close attention as I was watching the boats behind him on Lake Como! Roubini does also need to come with subtitles - wow, he talks fast!

Roubini always talks sense.

One observation: the markets have had those reduced US GDP figures (1.6%) that Roubini mentioned since 26 August, and the market expectation has been for 1.3% to 1.4% for several weeks before that date.

What happened! SPX rallied from 1040 to 1100.....which made little sense! Go figure....

Roubini's reasoning for any further POG uplift stems from either a 'risk - flight to safety' or an 'inflation' theme. In the short term the 'risk' factor must be a reality, and at some point 'hyper-inflation' is always a possibility as the Western Economies debasement of money supply spirals out of control. The issue for us here in Aus' is whether the $AUD continues to appreciate due to the normal factors of Rising Commodities (the China story) and the Interest Rate Differential with the US. There is a possibility that although POG may rise, the $AUD may continue to hold its own, and break away from its normal pattern of falling with the equity markets. I'm watching that space right now!

Thoughts Ody??

For those reading this, I would suggest a quick visit to Rudy's EWW thread and Rudy's recent post which looks troublesome if you are a Bull!


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ody
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Friday, September 10, 2010 - 04:17 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Rudy

For the moment I am not succeeding in downloading those videos, but I shall keep at it. Here is a textual statement in the meantime (very recent, though from a few days ago):
--------------------------
Sheldon Filger

Writer, founder of GlobalEconomicCrisis.com
Posted: September 7, 2010 04:14 PM

Nouriel Roubini Sees Growing Risk of Double Dip Recession in the U.S.

NYU Economics Professor Nouriel Roubini believes that the risk of a double dip recession is growing in the United States. He assesses the probability of a double dip at 40%, the other scenario being subpar economic growth (under one percent), which feels like a recession in terms of high unemployment, growing public deficits, declining home values and increased losses among banks and financial institutions.

"You don't need negative economic growth to feel like a recession when growth is well below trend growth," Roubini said in a recent Financial Times interview. Even if a double dip is technically avoided in the last quarter of 2010, Nouriel Roubini's forecast for 2011 is dire. He sees the risk of a double dip recession increasing, along with widening credit spreads and interbank lending rates. Compounding his gloomy projection, Roubini sees little left for policymakers to grapple with, either on the monetary or fiscal side. In particular, he sees another flurry of quantitative easing by the U.S. Federal Reserve as being "impotent."

The downbeat perspective of Roubini on the U.S. economy extends to Europe, where he believes the recent impressive growth figures in Germany are merely temporary. Furthermore, he points out, Germany is the best performing economy in the Eurozone, where the remaining countries are facing disaster. Half of the Eurozone is already experiencing a double dip recession. In addition, Japan is courting a double dip, and even strong emerging economies such as China are showing signs of an economic slowdown.

The economist known as "Dr. Doom" is actually trying to view economic trends in a realistic manner. If his interpretation of emerging trends strikes a chord of doom and gloom, one needs to look critically at those trends rather than marginalize the messenger. It should be recalled that when Nouriel Roubini issued his warning about the coming collapse of the financial order as we once knew it, based on a house of cards and subprime mortgages, he was harshly ridiculed by many mainstream economists. All the more reason to listen to what he has to say about the current state of the global economy.

Overall, I have not seen Professor Roubini so gloomy on the state of the global economy since his prescient warnings of financial Armageddon approaching in the months leading up to the implosion of the investment banks in the summer and fall of 2008.


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rdumas
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Friday, September 10, 2010 - 04:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

I found that it took a while to get the website up but once there the video's work well. You will get it in the end and they are very well worth while viewing.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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eblode
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Friday, September 10, 2010 - 05:03 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
The one lesson that every successful trader knows is that the market is a two forked viper that will strike when you least expect it in a downward spin or for no reason one can truly understand suddenly rise and keep rising and rising.
These are the realities of being in the market. I have been listening and reading about doom and gloom for months now. I've seen terrible forecasts showing prophetic dives to 3800 for months now.....and still nothing happened. Roubini, Houdini, and all the rest can only try and guess the future. If they are right they are prophets, when they are wrong they are forgotten. I play the market without prejudice. My stops are in place, my companies are solid and I believe we are going to have a great new bull market ahead of us.

Have a great weekend,

Eugenio


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rdumas
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Friday, September 10, 2010 - 05:11 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio,

The problem with only reading things with a cursory glance is that you miss what people are actually writing. My medium term prediction has for some time now been a move down to the 3850 level on the XJO but I have consistently been calling a rallying move in recent times. If you are going to misrepresent my calls so badly then I'll remove you from the market wrap list.

If you read a little more carefully you will see that the market has been doing what I have been saying. Anyway mate, the short term rally is about finished now so you will find that your stops will begin working next week.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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paint
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Friday, September 10, 2010 - 05:27 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy - you have been calling this market almost to the day for a while now - and I'm happy with my shorts on WBC, MQG, IRE and SGP I put on today. Have a great weekend all.

I agree that there have been some great long opportunities this month... but happy to jump to the other side now.

Enjoy the weekend all


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eblode
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Friday, September 10, 2010 - 05:32 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy,

I shall be carefully watching this coming week for any weakness in the market as I have been doing for some time. Forewarned is forearmed.

Eugenio


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sway
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Friday, September 10, 2010 - 06:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Paint
Be very watchful on the SGP short. The others look OK though.
Just my 2c of course
Cheers
Sway


This is not a recommendation or advice. As they say .... DYOR.

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rdumas
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Friday, September 10, 2010 - 08:16 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Paint,

Thanks for your supportive comments.

I agree with Sway's caution about SGP. Whilst it is moving down at the moment, the move looks to be corrective and possibly almost over. We have had a 3 wave move down and are close to wave equality between the first and third wave.



Note that the corrective pattern concern is supported by both the fact that we are at the lower boundary Bollinger Band and the %R indicator is ready to move up.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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paint
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Friday, September 10, 2010 - 10:12 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



HI Rudy / Sway - thanks for your comments. I am now seeing the trade from a different light and will probably exit on Monday. Have a great weekend.


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p3t3
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Friday, September 10, 2010 - 11:46 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




peterloh wrote on Friday, September 10, 2010 - 11:02 am:

"To understand what is going on with China's economy, just look at wheel loaders. They are tractors with a big shovel on the front to pick up and move earth or coal. Such machines are used to build roads and railways or to dig black stuff out of shallow mines.

China is, as we all know, an investment-heavy economy, so wheel-loader sales are a pretty good leading indicator: Companies only buy them if they plan to use one over the next 24 months.


Hello Peter

Ody has already been pretty tough on this quote, but there is a flaw in it's argument I reckon :
in the video clips (links provided by Rudy in other posts) Roubini is arguing that China's rate of investment at 50% of GDP is unsustainable. That after not-very-long the marginal investment goes into activity that is no longer capable of providing a justifiable or sustainable return on that invested capital. That leads to bad debts, empty buildings (already being reported), unused shopping centres, unnecessary roads, bridges...etc. The powers-that-be might be able to keep the bad debts hidden and construction going-on in the short term, but Japan is the example of the longer-term outcome of that policy.

China has also had earthquakes and floods sufficient to justify a spike in earthmoving equipment demand, though the work being done by that equipment isn't likely to earn much export income. It does, however, represent internal consumption so it shows up as demand. Is it productive in the "wealth creation" sense? Economists say "yes", but I've yet to see a country get rich on natural (or man made - think BP's Deepwater Horizon) disasters.

As Ody pointed out a single number taken out of context can be a misleading indicator.

Just my view
Pete


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ody
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Saturday, September 11, 2010 - 11:24 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Part of Alan Kohler's Saturday morning letter for the Eureka Report
-----------------------------
Week in View


By Alan Kohler


Last night
Dow Jones, up 0.5%
S&P 500, up 0.5%
FTSE, up 0.1%
Gold, down 0.4%
Oil, up 3%

The week
Australian All Ords, up 0.5%
S&P 500, up 0.5%
Gold, down 0.4%
Oil, up 4.1%



Employment & housing

Last Saturday morning I reported that US unemployment had risen from 9.5% to 9.6%; this week in Australia we crossed to Munchkinland, where unemployment has fallen from 5.3% to 5.1%, and everything is in Technicolor instead of black and white. As Dorothy would say if she had landed Down Under: "I don't think we're in Kansas any more, Toto."

The United States has officially been in recession since December 2007 – 33 months ago. Normally, this long after the start of a recession, the economy is [by now] hitting new highs. GDP is normally up 12%, housing starts up 27%, retail sales up 25% and employment up 5.5%, according to Dave Rosenberg of Canadian broker Gluskin Scheff. This time employment is down 6%, GDP is still down 1%, housing starts are down 47% (!) and retail sales 4%.

What's more the economy looks stuck, and Barack Obama is trying to bolster his flagging presidency with a $50 billion infrastructure plan to fix up 4000 miles of rail and 150,000 miles of roads, announced at a rather strange town hall-style rally, with the President in shirt sleeves and everyone cheering like mad. Three days later the plan already looks dead because Republicans and Democrats alike are against adding to the deficit, even though Obama said the plan would be "paid for", which no one believes.

Oh woe is America – 16.7% of people either can't find a job or can't get enough work, and only 45% of people between the ages of 16 and 24 were employed last month, down from 60% at the height of the tech boom. Eight million jobs have gone.

Meanwhile in Australia, we're nearing full employment once more. Our employment report for August came out on Thursday and showed spectacular growth: an extra 53,100 full-time jobs. A total of 267,100 new full-time jobs have been created in the past year, which is three-quarters of the total new jobs (349,700). Australia, in other words, is having a normal recovery, even though the levels of private debt in this country are as high, if not higher, than they were in the United States.

One difference is housing. The US is stuck in a feedback loop caused by the collapse of the housing bubble, in which house prices fell by a third and stayed there, leading to low consumer confidence and spending, leading to high unemployment, leading to low demand for houses.

On some measures, Australian house prices went up more than America's, but were not in a bubble. That's largely because Australia's population growth is one of the highest in the OECD and as a result there is excess demand for houses over supply of about 25,000 a year; default rates here are 0.5% because owners are liable for their debts if they walk away, unlike in the US; Australia's urbanisation rate is higher than just about every other developed country; and more than 80% of Australians live near the coast, which always costs more.

And also there is no bubble in housing credit in Australia: growth in lending is actually below average. Underlying US housing before 2007 was a colossal bubble in credit, fuelled by excessive financial engineering and hard-selling by bankers and brokers.

On Monday the IMF and the International Labor Organisation will hold a joint conference in Oslo to talk about the crisis in global employment. Whether it achieves anything is another matter, of course, but they have issued some papers and will make some speeches. Olivier Blanchard, the IMF's chief economist, said yesterday that GDP growth in the advanced economies is too tepid to get unemployment down, that he fears it will become a "structural problem" – whatever that means – and that Something Must Be Done.

There are now 210 million people in the world without a job, an increase of 30 million since 2007. Three-quarters of the increase is in the advanced economies, especially the United States, which has lost 8 million jobs and can't get them back.

American politicians are now complaining again about the strength of the Chinese currency, which has appreciated exactly 1% in the 12 weeks since the Chinese government announced it would allow a more flexible exchange rate, and switch from a peg to a basket. The renminbi went for an initial 10-day spurt against the US dollar (actually, because the greenback was falling against everything) and then went into reverse in August.

This week US Treasury Secretary Timothy Geithner issued an official whinge and the renminbi had another little spurt – up 36 basis points.

Internally, American policy is locked up in an argument over stimulus versus deficit. Don't be surprised if the next step is protectionism, as they start seriously looking for someone else to blame.

In Australia, the next step is inflation because the unemployment rate is getting to that point again where it causes inflation (below 5%) – or at least the Reserve Bank thinks it is. And it's true that skills shortages are becoming dire and that in some professions – engineering in particular – wage pressures are starting to really take off. This is starting to have an effect in the non-mining states as well. That means interest rates are likely to rise again this year.


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ody
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Saturday, September 11, 2010 - 11:38 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Avoiding the - hitting the fan, or an obstacle on this site

If your text says that e.g. gold "is [xxx] hitting" a particular level, that will only be accepted for publication if there is something that comes between the "s" and "hit". I presume this is due to the work of perverse American moralists. No Australian would give a "s" [xxx] "hit" if the word was posted as a four letter one, leave alone that it would even OCCUR to them to think of s--t if they were to read "is" followed by "hitting". The kindly "dug" as he was then called (I believe) explained the problem to me after I had many times been plagued by it.

There is no real cure for this problem if you are quoting someone else. You have to read your piece, and somehow remove the supposedly offensive material (at the same time making editorially plain that you are interfering with your quoted text). Otherwise the "-hit" will hit the fan, or at least the perverse squeamishness of those who constructed the relevant system. And if you write a piece of your own, be mindful to avoid writing "s" at the end of one word and "hit" after that, or you will have to re-read your own post, too, to avoid this potential cause of offence to your delicate fellow-readers!

This situation is perverse and obnoxious beyond belief. I would really like Colin to get this idiocy removed, if at all possible. After all we are grown-ups in Australia, not perverse puritans living in the US.


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sway
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Monday, September 13, 2010 - 01:27 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



For comment/attack/ridicule as you may see fit:

I generally don't use TMF much, but I keep an eye on it to show divergences. It would be possible to infer from the chart below that this trend break is for real. There is no real resistance now until we test 5000.

xjo1


If you think 5000 is a pipe dream, have a look at the next chart which shows the XJO long term with a 2SD channel. Who would bet against a reversion to the mean at approx 6000 over the next 6-12 months?

xjo2

Cheers
Sway


This is not a recommendation or advice. As they say .... DYOR.

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ody
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Monday, September 13, 2010 - 02:48 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sway: market going up

Your charts fully suggest the possibility of the market recovering in the way you suggest, though I think the initial difficulty for our index (XAO, which is after all more like a "real" market index than the XJO) will be not only to get beyond 4700, but to stay there conclusively. Since the fall from 5000 in April, the market has in essence moved sideways, and has on two previous occasions looked as though it would get up beyond around 4600, only to fall away again twice. Although here in Australia we currently have some items of good news which help, even so there is also only moderate sentiment on the part of many and not a little fear about the GLOBAL situation. So this may well mean that until sentiment changes more widely we shan't see anything ongoing. In the US, notably, the moves up have been supported by thin volumes.

Even so, sentiment can change, of course. Globally it is not easy to see how and why it would change upwards, and global sentiment ultimately also tends to take Australian sentiment with it. Nevertheless, there are also always times when a rally does occur that actually "goes against the grain" - partly because psychology has reached such a point that it turns in the opposite direction from where it had been going, even if that is against the fundamentals. Market sentiment and fundamentals only partly interact, although usually, if many are negative about fundamentals, it is difficult to generate a rise. Company results have been quite varied, but warnings about lower earnings have been plentiful, which means that it would require some real courage, and on the part of many people, to see a firm and sustainable move up. Fears about interest rate rises will also weigh on people.

As against that, there has been a great flow into the country from successful exports, and unemployment is low. This will lead many to feel that the Australian economy is actually going very well, and that companies will do well do. These people are in that case pitching that judgement against that of most economic analysis, and of course they could well take the market up. Once the RBA moves against them, however, or ANYTHING truly new and nasty happens globally, I doubt that "decoupling" would continue. Inflation in Australia is a real danger, and the prices of many assets are actually high, which would suggest that we'd soon move into a danger zone. Actually it's not just decoupling which we are seeing, for of course the Australian market is not the only one that has seen some moves up.


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sway
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Monday, September 13, 2010 - 03:39 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Ody. I checked the XAO charts. The divergence is almost identical. Using the 30odd years XAO data in IC, the long term 2SD channel is the same as well.

Cheers
Sway


This is not a recommendation or advice. As they say .... DYOR.

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peterloh
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Monday, September 13, 2010 - 03:40 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sway, looking at your charts and from my own observation I am even more optimistic about the world economy. Copper price at a 4 months high and still climbing. Nickel has climbed from $15000 ton to currently $22,200 plus, in which margin is lucrative followed by good prices for other base metals.For good measure the little battler is at 93c again.Industrial equipments ordered by China continued to increase, which means there is only one thing, that industrial activities is on the increase. I am hopeful even the US and Europe is on the mend though at a slower pace.







-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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paint
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Monday, September 13, 2010 - 03:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio,

Some good news on CZA

 
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