What the market knows.

I have found that market participants close to wall street tend to receive market information which no one should even have access to. Case and point: Everyone knew that Chuck Prince was going to be fired on Sunday the 4th of November, three days prior to it occurring.

So when I see a company falling as fast as Ambec Financial (ABK). It makes me wonder what everyone knows that we do not, and what the CEO is not telling us. Especially after THIS
article.

Here is a video of Robert Genader (The Ambec CEO) defending Ambec while his company's stock and the general stock market were in free fall.

Chart of Ambec Financial (ABK)

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Markets and Balancing Rocks

This is currently the US stock market

Today seemed like a very panicky day in the market, but it was not. The two charts below illustrate that the market tested support and resistance throughout the day.

1 Month S&P Emini Chart

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6 Month S&P Emini Chart



I have added support levels
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These charts are the 1 month, and 6 month S&P 500 December futures . Futures markets, are some of the most highly liquid markets in the world. What concerns me is that the market was quickly sold off at resistance, and it looks like it is now in balancing rock mode. If it gets just the right push, we could be going right back below 13,000 on the DJIA in short order. In my opinion there are a few safe places to put your money right now, and few of them involve the U.S. stock market.

I think that the number one single thing to buy for the long term is: The Jim Rogers Commodity Trakrs. This index was created by Jim Rogers. Jim Rogers stores a large chunk of his money in this index. He also holds various foreign currencies like the Chinese yuan, Japanese yen, and Swiss franc . I think that the best way to make money is to follow what a billionaire does. Unless they buy an airline, that is a sign that a billionaire will soon become a millionaire.

I will post later about how I plan to make money in the coming days/weeks/months. Three words: commercial real estate

Jim Rogers On Kudlow

Jim Rogers talked about all of the most important issues affecting world economics and how to profit from it Friday on Kudlow. One word: Commodities.

How high does Jim Rogers think oil will go within 10 years? You'll have to watch and find out.

If you do not know who Jim Rogers is. He started a hedge fund with George Soros in the late 1960's. The goal of the fund was to make $500,000 each and retire after ten years. They ended up topping that goal by a few dollars and making $10 billion dollars.

Is The Chinese Renminbi (Yuan) /Dollar Peg In Jeopardy?

Bloomberg is reporting that Hong Kong currency traders are betting that the Renminbi/dollar peg will be reevaluted.

Currency traders are betting in the forward exchange rate market that the Hong Kong Monetary Authority will abandon its currency's 24-year peg to the U.S. dollar as overseas investment floods into the city.

In the forward currency market, an investor can buy Hong Kong dollars now for delivery in 12 months at HK$7.7106 per U.S. dollar, above the HK$7.75 top of the Hong Kong Monetary Authority's permitted trading range. The authority sold HK$7.828 billion ($1 billion) to defend the currency yesterday, twice as much as two previous interventions since Oct. 23.

It has become costlier to place bets on the peg ending. Volatility implied by U.S. dollar-Hong Kong dollar options expiring in six months rose to a 10-month high of 1.25 percent, according to prices from Tullett Prebon Plc. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.

``What the forward market is telling you is that the pressure is not going to go away anytime soon,'' said Russell Jones, global head of foreign exchange and fixed-income research at RBC Capital markets in London, who believes the link will remain. ``The monetary authority is going to have to keep intervening to maintain the peg.''

I view this as a clear warning sign that the dam has signs of bursting in this market. The recent financial turmoil here in the U.S. is starting to create a high level of distrust between investors and dollar denominated assets. Especially within the investment banking sector. People from other countries are starting to ask how they can own dollar denominated assets when the underlying asset is declining and the currency is declining.

The US Dollar index is the calculated using the exchange rate against 6 other major currencies:

Weighting of each currency in the index:

Chart of the US Dollar Index:

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I would not be surprised to see the Renminbi added to the list on the USD index in the coming years.

Down Goes Citi!!! Down Goes Citi!!!

When a stock like Citigroup declines 20% in a month, I think that it is a call for serious concern. It has now become obvious that they have been hiding their losses. Today they announced a $6-$10 billion dollar write off.

Citigroup faces a write-down in the range of $6 billion to $10 billion, mainly because of exposure to subprime mortgages and collateralized debt obligations, CNBC has learned.

The size of Citi's write-off is still being debated, though a source told CNBC that Citi's board is pressing company finance executives to clarify the issue. The firm's audit committee is also scheduled to meet Sunday, in advance of the emergency board meeting.

Chart of Citigroup:

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Citigroup currently has a market cap of $182.69 billion. If they write down $8 billion dollars of losses (middle range of $6-10 billion). On Monday, 4.2% of the company will vanish into thin air.

Looks like the juice has been made

Banking shares never recovered on the last rally.

It looks like the brief squeeze was used to sell and to short at higher levels.

The dollar is falling almost .01 against the euro, and gold made another new high at 810.60. I expect gold to open higher next week and continue upward. I think that the fed will not step in again soon to help out the struggling banks. I am also expecting the market to rally on hopes that the fed will do something over the weekend. It seems like investors are deeply worried about banks like Citigroup and Merrill Lynch.

Rumors are flying that Citigroup may cut its dividend, or even worse that it is potentially insolvent. The company stopped all lending in California on October 31st.

There are claims that Merrill Lynch attempted to hide assets by selling them to hedge funds with an agreement to purchase them back at a later date for a set price. Not only is this unethical, but I am sure that the government will be looking into this. The pressure from the street to beat estimates is tremendous, but lying, cheating, and stealing to get there is much worse than just taking the loss. Now is a good time to remind you about how great of a place America is. Where else can someone tank the company stock, hide liabilities, make unethical decisions, get fired, and leave with $130 million dollars?

Yes, America is a great place.

Watch out for the Squeeze

A lot of stocks look oversold to me at this point. I wouldn't be a buyer just yet, but I would cover my shorts if I was short.

Subprime Zombies

Yesterday was Halloween, but the zombies are still out and about today in the market. Sub prime zombies feed on rate cuts. If they do not get at least 50 bps at a time the zombies come out and feast on companies like ABK, MTG, PMI, RDN, etc. It looks like they are done feasting for today, but I am sure that they will get hungry again in the next few days/weeks/months. Mortgage resets tend to add to their hunger as well.