A TALE OF TWO SILVER STOCKS: HL and CDE

From Shaza,

On pull-backs you can use Fib levels to see which one has the greatest chance. I have annotated the charts from TC Platinum version. Be sure to use the close prices not the open unless you are day trading in which case you should use moving VWAP and perhaps MA's.

If you are looking to go long a continuing trend, try to wait for a correction that is short and sharp and forms a well delineated V! It should literally look like that and about the same angle or a little less! As the price nears and peaks above the 78.6 line, be careful and make sure to look at close or if you are buying intraday, the 78.6 is NOT the price trigger! The price trigger is when it gets above it and continues. I like to put my buy up near prior lows of the correction start....Have fun with the toys!  I will write more on where to place your buy trigger later!  For more on this technique see Derrik Hobbs's work.  Dave Landry has dubbed this pattern the Gatekeeper as so many corrections fail here and turn south.

Capitulating Bears Send Short Sales to Three-Year Low in Aging Bull Market

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Feb. 28 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks about his investment strategy for global stocks and commodities. Gold advanced, approaching a record, as tensions in the Middle East boosted oil prices, increasing demand for precious metals as a protector of wealth and hedge against inflation. Rogers also discusses his strategy for the U.S. dollar. He speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Audio Download: Wood of Russell Investments on Outlook for U.S. Stocks

The biggest Standard & Poor’s 500 Index rally in more than five decades is forcing stock market bears to abandon short sales, cutting them to the lowest level since 2007 last month.

Shares borrowed and sold to profit from declines dropped four straight months and represented 3.3 percent of all stock in January, according to data compiled by NYSE Euronext. Pessimists are giving up after missing the 95 percent rally in theS&P 500 spurred by the fastest earnings growth since 1994. The monthly decrease comes as individuals added $17.6 billion to U.S. mutual funds this year after withdrawing money since April.

While short sales rose 2.8 percent in the two weeks ended Feb. 15, January’s low may foreshadow slower gains in equities as the pool of new investors shrinks, according to Doug Burtnick of Aberdeen, Scotland-based Aberdeen Asset Management Plc. To Laszlo Birinyi of Birinyi Associates Inc. in Westport,Connecticut, levels haven’t fallen enough to reverse gains or stop equities from climbing as the economy expands.

“When everybody is leaning on the same side of the boat, then there’s a risk things may go in the other direction,” said Philadelphia-based Burtnick, the senior investment manager of a fund that seeks to profit from both rising and falling stocks at Aberdeen, which oversees about $287 billion. “The market’s liquidity-driven tailwind has made people very careful on how they want to position themselves.”

Building Bulls

There are about 12 times as many investors speculating on gains in U.S. shares as there are on declines, a three-year high, according to New York-based Data Explorers, which provides research on short sales and stock lending. The firm’s long-short ratio for U.S. equities rose to 12.4 on Feb. 1 from 6.5 in September 2008 when Lehman Brothers Holdings Inc. collapsed at the height of the financial crisis.

“The appetite to short has waned as the market has risen,” said Will Duff Gordon, a senior researcher at Data Explorers. Individual companies and industries may be overvalued, “but with most companies in robust health it is not a target-rich environment,” he said.

The S&P 500 slid 1.7 percent to 1,319.88 last week. Violence that left more than 1,000 people dead in Libya sent oil above $100 a barrel, spurring the S&P 500’s first weekly loss in a month. The slump cut the U.S. equity benchmark’s advance for 2011 to 5 percent, still the best start to a year since 1997.

Stocks Climb

Stocks rose today as billionaire investor Warren Buffett said he’s looking to make acquisitions and reports signaled a strengthening American economy. The S&P 500 climbed 0.6 percent to 1,327.22 at 4 p.m. in New York.

The 46 most-shorted companies in the S&P 500 have risen 32 percent since Aug. 26, the day before Federal Reserve Chairman Ben S. Bernanke signaled he was willing to buy Treasuries to stimulate the economy, data compiled by Citigroup Inc. in New York show. That compares with 26 percent for the index.

Netflix Inc. has rallied 69 percent since Aug. 26 to $212.44 while bearish bets climbed to 25 percent of shares available for trading, making the Los Gatos, California-based movie-rental service the third most-shorted stock in the S&P 500. AutoNation Inc., the largest U.S. car retailer, has the highest level in the index at 31 percent. The Fort Lauderdale, Florida-based company jumped 46 percent to $33.51 since Aug. 26.

‘No More Gasoline’

“When short interest hits an all-time low, you always get concerned that a momentum rally is nearing exhaustion,” said Andrew Baehr, head of North America structured sales at BNP Paribas SA in New York. “Capitulation of shorts helped fuel this rally from the start, and now there’s no more gasoline.”

Bears aren’t giving up fast enough to halt the bull market, according to Birinyi. His research and money-management firm was one of the first to tell investors to buy stocks before the S&P 500 rallied from a 12-year low of 676.53 on March 9, 2009.

“I don’t see a wholesale capitulation of the short sellers,” Birinyi said. “We’re still far from the 1 or 2 percent short interest which characterized most of the 1990s and the previous decade. The bears haven’t thrown in the towel.”

Shares sold short have made up 2.3 percent of the U.S. stock market on average since 1995, according to data compiled by NYSE. The level was 1.9 percent from 1995 to December 2007. The world’s largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, the most during any recession since the 1930s, according to the U.S. Department of Commerce. Short interest peaked at 4.9 percent in July 2008.

Positive Impact

Bearish bets have held steady when adjusted for lower stock trading. They amount to 2.9 times the average daily volume on U.S. exchanges this year, data compiled by Bloomberg show. The level compares with a median of 2.8 in the past three years.

“If the equity rally continues, we expect the positive impact of short covering to be the same,” said Pierre Lapointe, a strategist with Brockhouse & Cooper Inc. in Montreal.

Short selling started to decrease as stock gains accelerated at the end of August. Increased banking regulation and stricter collateral requirements also reduced bearish bets, said Michael Gordon, who oversees about $65 billion as chief investment officer of equities at BNP Paribas Investment Partners in London.

Goldman Sachs Group Inc. shut its Principal Strategies unit that made bets with the New York-based bank’s own capital to meet U.S. regulations curbing risk-taking, the company said Oct. 19. New York-based Morgan Stanley said last month that it plans to break off its largest proprietary-trading group as an independent advisory firm by the end of 2012.

‘Prop Trading’

“The fourth quarter effectively seemed to be the end of prop trading for the investment banks,” said Gordon, who was previously Fidelity International Ltd.’s global head of institutional investment.

Individuals have added $17.6 billion to U.S. mutual funds this year, following $94.7 billion in withdrawals during the last eight months of 2010, according to the Washington-basedInvestment Company Institute. The inflows this year are the first since April, when the S&P 500 began a 16 percent decline through July.

The S&P 500 has fallen 0.7 percent on average in the 60 days after mutual fund inflows were at least January’s level of $6.1 billion, based on 10 years of ICI data tracked by Bloomberg. The figures compare with a 0.9 percent advance in the two months following withdrawals of that much.

“Most short sellers are professional money managers and the trend right now is don’t be short, so they’re going to ride that trend,” said Michael Gibbs, the Memphis, Tennessee-based chief equity strategist at Morgan Keegan Inc. “It’s verifying what all the other sentiment indicators are saying, which is that retail investors are becoming more bullish. But these indicators only tell you that the seeds may have been sown for a pullback. They don’t tell you when.”

The Ten Industries Most Damaged By Inflation and Hecla

Read more: http://247wallst.com/2011/02/23/the-ten-industries-most-damaged-by-inflation/

24/7 Wall St. has decided to investigate where inflation has the greatest potential to damage the economy.  There is plenty of ground to cover. It is clear that the cost of agricultural commodities, metals, and oil have risen substantially over the last six months, but many of those increases have not yet reached the consumer. “If raw material costs have yet to translate into consumer inflation, it is partly because high unemployment in developed markets makes it hard to raise prices,” said Oliver Pursche, co-manager of the GMG Defensive Beta Fund, on Newsmax.com. It is unfortunate that joblessness has a prophylactic effect on consumer price levels.

While inflation may lurk in some sectors of the economy, there are products and services that Americans use, like Google’s (NASDAQ: GOOG) search features and Citigroup’s retail banks, which are unlikely to be affected by inflation at all. The prices of these are not likely to rise because there are no major costs of goods to pass on.

Inflation in the United States has not approached the level that it did in the mid 1970s and early 1980s when interest rates rose to 20%.  Most economists believe that the Federal Reserve today has the foresight and tools to prevent a repeat of the price bubble of that period. That may be so, but the Fed cannot protect consumers from rising oil prices when they fill up their gas tanks or buy an airline ticket.

24/7 Wall St. took into account two effects that inflation has on an industry. The first is what the higher cost of goods means to their expenses. The other is whether companies in the industry can pass these costs along to consumers – either individuals or other businesses.

Rising prices are hurting many industries including retailers. Shoppers may reject higher prices and cut back spending to preserve their household budgets. Retailers will face margin compression if that happens. Earnings in the industry will be hurt, and in some cases this will be enough to cause layoffs.

The challenge is not unlike the one that the air freight industry faces. FedEx (NYSE: FDX) and UPS (NYSE: UPS) have raised rates to offset higher fuel prices. Each company has been able to increase shipping rates without alienating customers. The impact of this decision will not be clear until the companies announce second quarter earnings.

One advantage that many businesses have is that the effect of inflation on costs consumers must pay often lags. Large retailers probably have inventory which was made a number of months ago.  Temporary price increases in cotton and wool may not affect earnings if the period of inflation does not last long. Go to the link above for the whole story.

Hecla Mining reports record revenues in 2010

By NICHOLAS K. GERANIOS
ASSOCIATED PRESS

SPOKANE, Wash. -- The Coeur d'Alene, Idaho, company reported income of $35 million for the year. It produced 10.6 million ounces of silver and its silver reserves increased to 142 million ounces.

The company also said it had enough money to meet its financial obligations to help clean up a century of mining pollution in Idaho's Silver Valley. The company is currently negotiating with the Environmental Protection Agency for a settlement.

The company said it has set aside $262 million toward a potential settlement with the federal government, the Coeur d'Alene tribe and the state of Idaho. The parties have agreed on financial terms, but other points remain, Hecla said.

"Determining the financial terms of any settlement of this longstanding litigation is an important step forward in finally resolving this dispute," Hecla President and CEO Phil Baker said. "We hope a final settlement can be achieved by the end of the second quarter."

On Feb 18, a federal judge gave the parties an April 15 deadline to inform the court on the status of settlement negotiations. If a settlement is reached, Hecla has agreed to pay $102 million in cash and $55.5 million in cash or stock 30 days after entry of the consent decree. The company would pay an additional $25 million in cash 30 days after the first anniversary of the decree, $15 million in cash 30 days after the second anniversary, and $65.9 million by August 2014.

The historic mining district surrounding the Bunker Hill smelter was declared a Superfund site - one of the nation's most polluted areas - in 1983 after decades of mining activities left waterways and surrounding land polluted with heavy metals. Numerous mining companies have since settled with the government to help pay for costs of cleanup. The most recent was Atlantic Richfield Co., which earlier this month agreed to pay $6.8 million.

Meanwhile, Hecla Mining continues work to expand its historic Lucky Friday Mine in the Silver Valley. The company is spending $200 million to increase silver production by about 60 percent and extend the mine life beyond 2030. The expansion should be completed by 2014, the company said.

Established in 1891, Hecla is the largest silver producer in the U.S. The company has two operating mines and exploration properties in four mining districts in the U.S. and Mexico.

Bank of America, Wells Fargo May Face Fines on Foreclosures

Clipped from Bloomberg

Bank of America Corp. and Wells Fargo & Co., the largest U.S. mortgage firms, said they may face fines or enforcement actions from regulators amid investigations into foreclosure procedures.

The probes may also lead to “significant legal costs,” Charlotte, North Carolina-based Bank of America said yesterday in its annual report to the Securities and Exchange Commission. Wells Fargo, based in San Francisco, said in its filing that penalties are likely.

“I’m sure the banks are ready to put this past them and investors would certainly like to but this is not an issue that is going to go away,” Blake Howells, an analyst at Becker Capital Management Inc. in Portland, Oregon, said in an interview. “There will be more lawsuits that come down the road.” Becker Capital oversees $2.4 billion.

The largest U.S. banks have been trying to reassure investors that costs from faulty foreclosure documents are manageable. Wells Fargo said yesterday it didn’t expect litigation costs to have a “material adverse” impact on its financial position. Bank of America said it faced $230 million in fees from slowed foreclosures.

Bank of America halted foreclosures in all 50 states in October and announced in a Nov. 5 filing that it was reviewing as many as 102,000 cases to screen for faulty practices. Attorneys generalin all 50 states are investigating foreclosure practices amid revelations that lenders were seizing homes without proper documents to prove they had the right to do so.

$20 Billion Deal

U.S. regulators may try to extract $20 billion of penalties in a settlement with banks that serviced flawed loans, two people briefed on the talks said this week. Terms of an accord, from regulators led by the Treasury Department and Department of Housing and Urban Development, haven’t been formally presented to banks, according to the people, who spoke on condition of anonymity because the discussions aren’t public.

Bank of America also said a bondholder group pressuring the lender to repurchase soured mortgages has almost doubled the number of securitizations it’s challenging.

The group is disputing 225 securitizations, up from 115 as of Oct. 18, according to Bank of America’s filing. Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are among the investors, people familiar with the matter said in October.

“On the putbacks, investors have braced themselves for a multiyear workout,” Howells said. “This might, on the margin, make people rethink the potential size of the liability.”

Costs of Litigation

Wells Fargo said the high end of estimated litigation losses could be $1.2 billion beyond the reserve already set aside. Bank of America’s losses may be as much as $1.5 billion. Citigroup Inc. said yesterday that as much as $4 billion in additional costs from pending legal matters are “possible, but not probable.”

Banks are releasing estimates after the SEC, in an October letter to corporate finance chiefs, said companies should disclose potential losses “when there is at least a reasonable possibility” that they may be incurred, even if the risk is too low to require reserves.

Citigroup, the third-largest U.S. bank by assets, also said U.S. regulators are examining how it structured and sold collateralized debt obligations as part of an investigation into mortgage-related businesses.

The bank is cooperating with the SEC and other watchdogs, the New York-based company said in a filing. The probe is part of inquiries involving Citigroup’s “subprime and other mortgage-related conduct,” and other businesses affected by the credit crisis, it said.