This Will Knock Your Socks Off!
by phil - August 26th, 2006 7:34 am
I was just reading through some articles on Clinton and Banking Regulation (yeah I know, get a life..) when I came across this gem entitled “Clinton’s Post-Impeachment Push for Power” in the Phyllis Schlafly Report: http://www.eagleforum.org/psr/1999/mar99/psrmar99.html In this 1999 article, the Republican poster girl (don’t call her a woman, she hates feminists!) villifies Clinton for wanting to intervene with the UN in Kosovo. If you read this article and subsitute Bush for Clinton (unfortunately we have) and Iraq for Kosovo (except, this time, against the UNs wishes) you will be truly amazed at how every single thing they said was so horrible about Clinton is being done by Bush right now! What’s funny is the things they never never let Clinton do. Not ha ha funny, but tragic funny, like the way that Republican attack dogs were so concerned with bringing down the President that they let national security go out the window! They said Clinton was using Kosovo to distract from his problems (Lewinsky, Whitewater). Clinton didn’t have domestic issues as the economy was going gangbusters, we were running a budget surplus and making great economic and environmental progress so personal issues were all they had. Clinton was accused of having “no clear-cut military goals” and that “there is no hope that our involvement can eliminate the causes of the conflict, and there are even questions about who is at fault in the civil war. Clinton’s Kosovo war will, like Bosnia (where we still have 6,900 U.S. troops), become a permanent, no-exit, costly U.S. project.” Sound like any wars we know? Except we have 138,000 troops in Iraq in a permanant, no-exit, costly U.S. project! I love this point they make: “Second, by putting U.S. troops in Kosovo, Clinton is provoking terrorist attacks by Islamic radicals connected to Saudi renegade Osama bin Laden, who has declared a worldwide war on Americans. Fanatics bent on jihad against the “Great Satan” United States could hardly ask for a more tempting target than Americans deployed close to terrorist bases in northern Albania.” Clinton wasn’t ignoring Bin Laden, he was going after him. Also, in hindsight, it looks like there was a more tempting target after all, and Bush led us to that promised land. The article derides Clinton for predicting on Jan 22 (of 1999) “that it is “highly likely” that a terrorist group will attack on American soil within the next…
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Weekly Wrap-Up
by phil - August 25th, 2006 11:58 pm
Can you believe Bernanke stole my speech?
Check out what I wrote last night and compare it to Ben’s remarks today:
http://philstocks.blogspot.com/2006/08/waiting-for-word.html
Eerie similarities do not even begin to describe it!
Well, I said on Monday that I would be happy with a mild consolidation and here it was…
It was a very low volume week but the consolidation pattern looks excellent with a strong upward bias. We may get more of the same next week (last week of Summer + holiday) but anything other than a sell-off will have me getting very bullish for September.
The whole Armageddon thing was a bust but the oil people quickly proxied the tropical depressions (excuse me, potential Cat 5 hurricanes) to serve as the bogey man for the markets.
It’s always something and the big something is now the UN response to Iran’s response, which seemed friendly enough on the surface but with the psychos involved in the negotiations, you can never be sure! I hear Iran has some fairly unstable people too…
Also, on Monday I said: “You shouldn’t read much into the rise in oil prices until they get back to $73.50 as it is the same effect as taking any option contract a month further, you are paying for the time value of the delivery….” Oil closed out the week at just $72.51 after being firmly rejected from $73.50 this morning.
The dollar climbed 1% for the week and gold dropped 1% so that link remains solid while oil, for all its gyrations, was essentially flat. Oil has not had a flat week that led to a sell-off in a long time and that does worry me just a bit.
Copper also drifted with gold against the dollar as the BHP strike dragged on but, even with 8% of the world’s production shut in for the third week, there doesn’t seem to be any shortage…
Gold is up 20% for the year so far but looks like it needs to retest $600 if it is to gain any ground. However, failure at $600 could throw gold back to $550 and traders are loathe to let that happen if they don’t have to.
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There is not much to review as we took pretty much everything off the table but we still have a few puts and leaps in play from…
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Inflation Nation
by phil - August 25th, 2006 11:29 pm
You often hear that we are not a nation of savers but Americans have deposited $1.5T since 2002, bringing our total people’s total savings to just under $4 Trillion, about the same as the rest of the planet combined!
http://research.stlouisfed.org/fred2/series/WSAVNS
While it may be a small part of our total income, it’s quite a large total income to begin with!?
The joke is that we are being paid less money for our savings than at any time since 1960 so again I will point out that you are being fed a line of crap by bankers! They are holding $4T of your money and paying you 2% interest yet if you want to buy a home you must pay 7% (plus fees!).
http://research.stlouisfed.org/fred2/series/M2OWN?&cid=29
This is what is holding rates down, the massive availability of cheap cash right here in our own country yet you will never hear it from our government (other than Ben hinting at “Global liquidity”) because they work for the guys that borrow your money and lend it back to you.
Keep inflation down at all costs: At the cost of your wages, at the cost of your home’s value, at the cost of runaway commodities, just to make sure you pay back the bank in a way that they get to maximize their inflation adjusted profits.
That is our government’s policy.
What would you really care if gas were $5 a gallon as long as minimum wage was $15 an hour? You could afford a $1M home if you could count on a 5% raise every year to bring down your mortgage payment. Even the property tax increases wouldn’t seem so bad if your salary kept going up…
The math is simple. You take on a $4,000 a month mortgage on a $600K home and you take home $7,000 a month – it’s a struggle but you make it happen. If you get a 7% raise every year in just 11 years you will be taking home $14,000 a month and paying the same $4,000 mortgage. Great for you, bad for the banker who has to pay his clerk double what she made when you first came in there.
It’s also great for the economy as you have much more disposable income to spend. Even if your $3,000 in living expenses also doubled in 11 years you would still be making $4,000 a month more than…
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Finally Friday
by phil - August 25th, 2006 7:33 am
Oh I am so sick of this!
Tropical Storm Ernesto (after 4 storms have come to nothing) has run oil up a dollar overnight (plus yesterday’s dollar rise) and natural gas pricing is back to $7.50 on what could have been a fairly nice market day…
No sooner is tropical storm Debbie given the all clear than Tropical Depression 5 (it still isn’t strong enough to be properly named Ernesto) has the oil pumpers screaming on all channels that this may disrupt world oil supplies. How many times will people fall for this rubbish? Apparently, a lot!
CNBC is on full-scale hurricane watch. I think I have to violate my don’t short oil into the weekend rule and take some puts on this idiocy. Last year, after an actual hurricane actually destroyed major platforms XOM shot up to $64, it’s all-time high at the time.
Anyway, we will get a nice preview of both the doomsday scenario played out well in advance of this Wednesday storm (if ever) as well as the major market moving words of Uncle Ben. A very good day to stay in cash if ever there was one.
Asia was mixed today but the oil spike came in European trading and thos markets aren’t too happy about it so far. Like us, they are waiting for Fed direction but the bond market is still betting they are done raising. I think that if Bernanke was planning on saying they were done, he simply can’t do that now with oil back over $73. I said this at the last meeting, the Fed will not ease monetary policy to finance $80 oil!
We will continue to watch our market levels today but, just as we throw out oil movement on the way down, we need to factor out its effects on the way up. I’m going to be more concerned with watching the reacions of individual stocks and sectors to see how they react to spiking oil as well as Fed direction.
Let’s keep an eye on USO at $68.50 to see how seriously speculators are taking this oil situation but I think that between the storm an unresloved Iran situation we will get a lot of action into the weekend. Also watch SU who are resting just under the 50 dma at 80.50 for a long-term outlook. Oil itself may have some trouble with the 50 dma…
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Waiting for the Word
by phil - August 25th, 2006 2:40 am
The market is looking for an excuse to rally.
All it will take is one word, or phrase, from Bernanke. I’ve got my money on “Soft Landing” but maybe he has something new up his sleeve, something to place his stamp on.
If we don’t get a positive reaction today, then we may be in for another week of pain, or a even a total meltdown so let’s be real careful – but I have my finger on the buy trigger, just in case.
To do this right, we really need to kill the commodity bubble but perhaps it will have to “soft land” as well. That would be a really neat trick, one I hadn’t previously considered, that oil can drift back below $60 against rising demand that will make us and OPEC happy.
Can the world really be that organized? Have the Central Banks really gotten a handle on the global economy this quickly? Japan is showing signs of it, with a booming economy and no inflation. Germany too. If you look at our economy without all the doomsayers chiming in you would have to say “Wow!” compared to pretty much any other time in history.
We have 2 nations of 1 Billion people each, on the other side of the planet, that are entering their own industrial revolutions, but with much less smoke than we had in ours. Just 200M Americans and Europeans industrializing 100 years ago led to 60 years of amazing economic growth around the world, there is no precedent for what is happening now.
Here is an excellent article that gives you a background on the situation:
http://www.moneyweek.com/file/15199/why-an-inflationary-bust-is-inevitable.html
Where the Dr Faber and I disagree is in the end-game. Like most highly educated economists, Dr. Faber has been taught by the best that the world is made up of nations that win or lose economic battles and that the American consumer is the center of the universe. This is simply no longer true.
Microsoft doesn’t care whether a laptop boots up in English, Kanji or Swahili, as long as the windows logo moves across the screen. Nor does National Semiconductor really care what nation is buying chips today. Federal Express gets a package to Kuala Lampur as fast as they get it to Quincy, MA and the Simpsons are one of the most popular shows in China (written in New York, drawn…
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Thursday Wrap-Up
by phil - August 24th, 2006 4:05 pm
Another very nice consolidation day!
There was nothing for us to really play as the S&P never got over 1,300 and oil was up all day with bad Valero Rule signals. Apple overcame exploding laptops to stay positive (why didn’t I buy it at $52???) and GE and AXP held the line all day but without the S&P or Nasdaq confirmation, it was just too risky to play today.
Nonetheless, we played WSM on that crazy sell-off this morning. In comments we picked up the $30s for just .65, a full $2.65 less than they were yesterday! Who can resist? They finished the day at .90 but we got half out at the first run at $1.05 (up 60%), reducing our basis on the remainder to just .25.
So we held on all the indices on another light volume session. Expect fireworks tomorrow starting at 10am when Bernanke addresses us from Jackson Hole. The next Fed meeting is Sept 20th and Ben has got to talk tough because they probably can’t really raise the rates so close to elections. Expect him to blast commodity prices, possibly with a Greenspanesque “irrational exhuberance” statement.
The Fed is now in a corner where they have damaged the economy to the point where lingering commodity prices can kill it. They can force a recession, which will guarantee pullbacks in commodities or they can attempt to talk them down. Since all he has to do is read one of my recent oil posts to into the cameras, I think he will go with the talking option.
Gold dropped to $628 as the dollar firmed up against tomorrow’s speech. The Fed premium works like the terror premium and the “Gentle Ben” scenario has been priced in already so rates and the dollar are pushing higher as some of the 70% betting on no more rate hikes decided to hedge a little today.
Oil made a nice run at $72.50 but ultimately failed but you wouldn’t know it from XOM’s reaction, as the stock flew up $1.09 to a new all-time high of $70.72. This give Exxon a $420Bn market cap and runs their p/e up to 11, near the top of the sector. XOM has marched to the beat of it’s own drummer this week, pulling 3% ahead of the other majors:
http://finance.yahoo.com/q/bc?s=XOM&t=5d&l=on&z=m&q=l&c=cop,sun,cvx
What struck me as most interesting was that SU, who look…
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Thursday Morning
by phil - August 24th, 2006 8:50 am
This is a very tricky day for the markets. I’m hoping yesterday’s knee-jerk reaction to the housing slowdown is replaced today by “Fed is dead” speculation as there is virtually no way the Fed can contemplate raising rates with this key economic indicator in the toilet. The R word will come back into play for a few days, which should be just the ticket to move oil under $70 but the reality is that we do indeed have a strong economy – just imagine what would happen if the $146Bn premium we are currently paying for oil ($20 per barrel x 20Mbd) could be spent on other, more economically productive things… While Exxon may miss out on $3Bn a quarter in profits (don’t worry, they will limp along at $7Bn a quarter) there will be 100 other companies, for example, that can add another 120M in revenues – each quarter! And that’s just Exxon! That’s right, the economic health of the United States of America is being sucked dry by oil companies and foreign cartels and the President has not done a thing! Perhaps that is because the last President that told people to save some energy by putting on a sweater was quickly replaced by a cowboy actor and this president’s father (former head of the CIA, close personal friend of the Saudi Royal Family)… Do you remember when they hired an actor to tell Americans that we should stop all this silly conservation talk and focus on the “shining city on a hill?” Perhaps it was something we wanted at the time but, in retrospect, it was not what we needed. Despite Mick Jagger’s (LSE grad) best advice, politicians are always trying to give us what we want, rather than what we need. Al Gore said we needed a .50 per gallon gas tax back in 1993 so we could spend $150Bn a year on alternate energy research to avoid a potential crisis down the road. Republicans killed that bill faster than universal health care based on the logic that paying $1.50 a gallon for gas would destroy the economy. Gore pointed out that all we would have to do is improve gas mileage in cars by 25% and the net cost to American people would be negligable and oil companies spent more money to defeat Al Gore in 1990 than any other candidate in history! In retrospect,…
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Wednesday Wrap-Up
by phil - August 23rd, 2006 4:05 pm
That was not so bad!
With oil off 2% across the board the oil sector cost the S&P .3% of the .45% it lost for the day. Couple that with a lackluster showing from the miners (down 1.5%), builders (-3%) and the brokers (-1.5%) and it’s amazing it held 1,290. We are 2% off a 4 year high on the S&P…
The Dow may have ended up just shy of 11,300 but the NYSE held 8,300 and the Nasdaq took a nice bounce off 2,125 to get back to 2,135.
This came on a day when when major sectors crashed, NSM gave a horrendous report and Iran claimed they would have a “nuclear breakthrough” (and we don’t think they are giving the world cold fusion). If I gave you this background and asked for an estimate what would you have said we’d be down on the Dow? 100pt? 200?
So I remain cautiously enthusiastic. The S&P wisely kept us out of buying any calls today but we will keep them on the burner for tomorrow.
Housing was just the disaster we predicted this morning, thank goodness we bailed ahead of the report. Our call on KBH $40 puts was right on the money with a .70 open and a $1.50 close (up 115%), not bad for a day’s work!
Oil dropped $1.34 to finish at $71.76, very bad when you consider we have rolled into the October contracts! We killed our oil puts today as they made too much money to continue to risk them overnight. I was disgusted by the pumping activity at around 1:30 and just didn’t trust the AH action.
Gold finished just above my target at $633 as the terror premium leeched out of the metals market as well. The dollar lost roughly .3% today.
At this point we are stretching my comfort level with the “consolidation” just a tad which is how we ended up mainly in cash today. Still, even if we quit now it has been a pretty successful week – but where’s the fun in that?
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MSFT had a great start but pulled back a lot, we didn’t play but I still like the Oct $27.50s, possibly for .15 tomorrow.
SUNW $5s held steady at .10 even though the stock went up 4%.
HPQ and SHLD held up well today.
We made several nice intraday put calls:
- XOM $70 puts
…
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Wary Wednesday
by phil - August 23rd, 2006 5:22 am
This will be a tough one.
The economy is looking scary and we have no resolution in Iran (or anywhere else for that matter) so everyone is taking a big step back. Without new leadership it will be hard for the market to get back in gear.
Housing is damaged as Bob Toll used the word “Hard Landing” but I disagree. Housing prices from 2000 to 2004.5 grew at an average of 4% per year. From mid 2004 through January housing prices grew at a 10% rate. Now we see prices pulling back 5%, but it is 5% from a ridiculous spike that added 15% to the price of housing in just 18 months.
If a stock pulled back 5% after a 15% gain you wouldn’t jump out the window would you? We are 6 months into a 5% drop in housing and still have another 15% of overpricing (pricing above the 3.5% normal increase this decade) to wash out before we can get back on track. If the Fed insists on tightening we may get a sharper correction than we are bargaining for but, either way, either prices have to come down or sales will stagnate at this level (much like what is happening to oil).
This is not a hard landing, just a correction to the norm. The Fed came back with a vengeance yesterday saying all sorts of scary things so let’s get ready to cut our losses on the builders and just watch for a while. The inventory report is out later but I will be looking to take advantage of an uptick to cash out of this too volatile sector.
If you don’t want to dump current positions right away you can balance by shorting KBH who are double trouble as the first builder under options scrutiny regarding suspicious grants made to the CEO himself. Sept $40 puts are .75.
Watching for a while may be the way to go with the markets on the whole. If I’m right about oil we may get a pretty steep decline there that will hold back the broader markets
Asia was down slightly on the prospects of additional Fed tightening slowing the US economy while Europe is also drifting down despite huge earnings from Nestle.
We are still watching our Monday levels and we didn’t expect more than consolidation for the first half of the week so more…
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Oil’s Slippery Slope
by phil - August 22nd, 2006 5:56 pm
After a weekend off I am back to checking into this oil scam.
One key ingrediant to unraveling a lie is to look back at the story as it unfolds. In the case of oil and oil projections we don’t have to look very far back to see how the story changed.
The EIA released a study in June which gave us the worst case scenario for oil pricing and here is the graph:
http://www.eia.doe.gov/oiaf/ieo/figure_32.html
There’s $100 oil on the chart, but look at the date – 2030! We are already way over the red line on this chart, which predicted a 2006 high of around $60 based on production levels vs. demand. Everything above $50 is just a fear factor!
As we know, demand is dropping below expectations and production is back on track after Katrina. No matter what people say about supply the fact is there are no shortages and no country has had to tap their reserves either.
Despite what you hear, during the entire 2005 hurricane season, with 25% of the nation’s oil capacity off-line for weeks, we got by with a draw of less than 10M barrels (out of 82Mbd of Global production):
http://www2.spr.doe.gov/DIR/SilverStream/Pages/pgDailyInventoryReportViewDOE_new.html
As you can see, these barrels have already been replaced and our nation’s SPR sits at 687M barrels out of a capacity of 727M (94%). US consumption is, at the current pace, 20M barrels a day of which we import 14 and produce 6. Since half of that 14 comes from Canada and Mexico and another 4M barrels come from non-opec countries, that leaves just 3M barrels a day that we get from OPEC and, yes, Iran.
http://www.eia.doe.gov/oiaf/aeo/gas.html
So IF Iran totally shut off oil AND stopped us from getting ANY OPEC oil for 6 months, we would still have half our reserves available. Iran, on the other hand (and the neighbors they cut off), would have effectively cut off 90% of their revenues for 6 months and likely plunged the world into a recession that would drastically cut oil demand.
This of course assumes that they actually cut the oil supply off, rather than sell it to someone else because if they sell their oil to someone else, then we just buy the oil the other person didn’t buy and nothing changes for us at all.
The non-stop parade of oil “analysts” who debate…
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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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