Thank GDP It’s Friday – Reality Cheque in Davos
by Phil - January 27th, 2012 8:22 am
It's World Economic Forum time!
This is one of my favorite conferences as the Global Elite head over for their annual gathering and schmooze-fest where they end up wandering around and trying to get seats with the cool people at lunch and trying to find out where the good parties are and getting told there's no tables at the restaurant they want to go to – just like normal people! Nassim N. Taleb described it to Tom Keene of Bloomberg Television, the event is “chasing successful people who want to be seen with other successful people. That’s the game.”
The minimum price for admission to the conference is $50,000 for a membership to the World Economic Forum plus a $20,000 ticket to the conference so $70,000 before trying to get a hotel room at a place you won't be embarrassed to mention to the other guests. Getting to Davos is also a nightmare at the best of times but worth it for the skiing, if not the schmoozing. In short, it's group of people who have at least $80,000 to blow on a weekend sitting around discussing the problems ordinary folks like themselves face in the ever-changing global economy.
The event is being be well-covered (best so far by Josh Brown) and we will get many, many sound-bytes and, like any conference, there is sure to be some enlightening information if you are lucky enough to catch the right lecture but I'd probably enjoy it a lot more if someone sent Ricky Gervais to ask a lot of awkward questions and point out what BS this exercise is than having to spend another week watching the CNBC girls throw their panties at passing Billionaires.
Meanwhile, in the real World, the UK's GDP CONTRACTED by 0.2% in Q4. In short, the country is sliding back into recession, with economists expecting another dip in the first quarter of this year. As one expert tells the Wall Street Journal:
"Our bet is that the U.K. is now back in
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DiggSabrient Risers – 1/27/2012
by Sabrient - January 27th, 2012 12:00 am
Top 5 Risers |
||||
| Stock | Rating | Analysis | ||
| ASBC | BUY | Many analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving. | ||
| CZZ | STRONGBUY | The recent earnings history for Cosan Ltd shows significant improvement while projected valuation continues to rise. | ||
| STLD | BUY | Projected value continues to rise for Steel Dynamics while long term increases in earnings growth are also becoming more widely expected. | ||
| PSE | STRONGBUY | An increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a few weeks ago make Pioneer a company to watch. | ||
| DELL | BUY | An increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a few weeks ago make Dell a company to watch. | ||
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Big Prints In Deutsche Bank Put Options
by Option Review - January 26th, 2012 1:38 pm
Today’s tickers: DB, ATHN & LSI
DB - Deutsche Bank AG – Heavy trading traffic in Deutsche Bank put options this morning, one week before the investment banking firm is scheduled to report fourth-quarter earnings, may mean some traders are bracing for a pullback. Shares in DB are currently up 0.40% to stand at $43.80 as of 12:40 p.m. in New York. The single-largest put trade on the stock today was the purchase of 9,500 puts at the April $40 strike for a premium of $2.45 each. Though the put options were not marked as a spread against stock, it is possible the put buyer seeks to protect the value of shares already in his or her portfolio. Alternatively, the investor may be taking an outright bearish stance on DB over the next three months. In the latter scenario, the trader may profit if Deutsche Bank’s shares plunge 14.3% to breach the effective breakeven point at $37.55 at April expiration. Meanwhile, the purchase of a 2,000-lot Mar. $35/$45 put spread at a net premium of $2.75 per contract yields profits – or downside protection – to its owner in the event of a 3.5% decline below the breakeven share price of $42.25. Traders populating DB options are overwhelmingly favoring puts over calls ahead of earnings, with today’s put-call ratio hovering just below 15.0 and overall put-call interest greater than 1.4.
ATHN - athenahealth, Inc. – One cautiously optimistic investor appears to have purchased a sizable position in athenahealth put options this morning in order to hedge a long position in the stock. Shares in the provider of cloud-based business services for physician practices rose 1.05% to $57.91 this afternoon, extending gains realized earlier in the week on the heels of a new…
Free Money Thursday – Quoth Bernanke “Forever More”
by Phil - January 26th, 2012 8:25 am
But where's my Trillion Dollars?
Federal Reserve officials said they expect to keep short-term interest rates near zero for almost three more years and signaled they could restart a controversial bond-buying program in yet another campaign to rev up the disappointing economic recovery.
The Central Bank's pronouncements came after a two-day policy meeting from which officials emerged still frustrated at the slow pace of growth and a bit more confident that inflation is settling down after climbing last year. The combination of persistent slow growth and low inflation, Fed Chairman Ben Bernanke signaled in a news conference after the meeting, could give the Fed leeway to take more action to support the economy, though he didn't commit to it.
A bond-buying program—also meant to push down long-term interest rates—could be the next step. Mr. Bernanke said there would be a "very strong case" for even more action by the Fed "if the recovery continues to be modest and progress on unemployment very slow and inflation appears to be likely to be below target for a number of years out."
What amazes me is not one reporter at yesterday's news conference asked Dr. Bernanke what is COSTS to ARTIFICIALLY keep rates 3.75% below what his own board considers "normal" for another 3 – 4 years. Maybe that's because we don't know what it cost already, do we? We do know the Fed now has a $3Tn balance sheet. Since I don't recall a bake sale at which the Fed sold $3Tn worth of cookies, I have to imagine that money was borrowed from somewhere and don't things that are borrowed eventually need to be paid back?
I mean, I understand that, since Reagan, there has been a massive effort to destroy the American Education system and make the beautiful sheeple as dumb and compliant as possible (a less crazy article on the subject here) – but surely there must be some reporter who was accidentally exposed to some rudimentary economics who can come up with a better question than "when in 2014?"
Apparently, it is beyond the grasp of the MSM that, when the Government borrows money at 3% and lends money at 0.25% – SOMEONE has to pay that 2.75% difference. I don't know how to put this in the "new math" terms my kids are learning but, in old math, if I…
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Sector Detector: Bulls get support from the Fed
by Sabrient - January 26th, 2012 12:27 am
Reminder: Sabrient is available to chat with Members, comments are found below each post.
Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Bulls found fresh legs on Wednesday with support from the FOMC, despite the reluctance of Greece to “play ball” with its creditors, which has been depressing investor sentiment. Everyone seems to agree that the unresolved debt crisis in Europe is the main thing holding back global economic recovery and the snorting stock market bulls. To be sure, the situation in Europe is not good.
The worry is that Greece might be too far gone to save, and then others will fall in a domino effect. To comply with the European Banking Authority’s stress tests, European banks must raise capital and deleverage their balance sheets, so they are unloading their government debt holdings—but this hinders credit and economic growth. It’s a catch-22.
Nevertheless, the “risk-on” trade continues, as emerging markets, Nasdaq, small caps, and commodities are the leaders, while U.S. Treasury bonds are lagging. Among the 10 sector iShares, Basic Materials (IYM) and Technology (IYW) have been the leaders this week—with IYW getting a big boost from Apple Inc. (AAPL) after its incredible earnings report on Tuesday. Apparently, investors believe that the U.S., Asia, and emerging markets can weather whatever storm that emanates from Europe.
The release of the FOMC Policy Statement gave stocks and gold prices a boost, while knocking down the dollar. Although they projected somewhat slower GDP growth, they also indicated that the fed funds rate would like stay rock-bottom at least through 2014, and they left open the door for further policy action, assuming inflation remains low and unemployment high. “Don’t fight the Fed” was the mantra that goosed the bulls.
However, economic growth will continue to be sluggish until the dollars that have been printed by the Fed actually makes it into the economy.
The M1 Money Multiplier (MULT) is the ratio of M1 to the St. Louis Adjusted Monetary Base. It essentially reflects the amount of money individuals and businesses have for consumption or investment relative to the money available for banks to lend. Since the bull market in equities and fixed income began in the early 1980s, MULT has steadily declined from around 3.0 to below 1.0 today (0.833 on 1/11/2012). But when the financial crisis hit in 2008, MULT fell hard even as the Fed expanded…
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Sabrient Risers – 1/26/2012
by Sabrient - January 26th, 2012 12:00 am
Top 5 Risers |
||||
| Stock | Rating | Analysis | ||
| ASBC | BUY | Many analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving. | ||
| CZZ | STRONGBUY | The projected value for Cosan Ltd is still rising quickly even though past earnings have already improved significantly. | ||
| GRS | BUY | The projected value for Gammon Lake Resources is still rising quickly even though past earnings have already improved significantly. | ||
| PSE | STRONGBUY | The long term projected growth rate for Pioneer is rising, and this is happenening at a time when historical earnings have already increased significantly. | ||
| ATU | BUY | Actuant is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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