I’d like to welcome Jess to Phil’s Favorites! Jess’s WallStats provides an assortment of colorful and engaging graphics to help visualize the financial world. – Ilene
Many aspects of this graphic can apply to the rest of the Big Three but I focused on GM since they are in the most dire position. GM has many woes, the least of which is a shortfall of money, so why do people think that an infusion of cash will do anything but prolong the agony?
So here it is, a visual guide to why GM won’t be around much longer. Unless ofcourse they can actually form a game plan to get some of these metaphorical shipping containers off their backs. Another thing I wanted to stress is that the conversation about the decline of General Motors involves singular finger pointing. “It’s the unions”, “It’s management”. Bottom line is you will need a lot of fingers because the root causes are plenty and the cumulative effect is what’s taking this ship down.
Jess’s WallStats is a new venture by Jess Bachman, the creator of TheBudgetGraph.com and "Death and Taxes". With "Death and Taxes" as it’s flagship product, WallStats.com aims to release new and exciting visual pieces every few months. A little history…Initially launched as TheBudgetGraph.com, Jess Bachman wanted to create a way to visualize and conceptualize the United States federal budget. More here.
I am so excited – it’s always exciting to set a record and this budget is expected to show a $1.7Tn deficit, $15,000 per US household so make sure you look under your couch for some loose change – every bit helps. Not much helped yesterday as we had another roller coaster session in the markets, heading down 200, then up 250, then down 150 into the close, yet somehow the VIX closes lower! I suppose it was a normal "Which Way Wednesday" and our pre-markets look just as volatile. We were 60/40 bullish (full covered on our long DIA puts) into the close but added some SKF calls at the lows, just in case we were wrong. Overall, we finished right around our watch levels, as I said to members – better than nothing but not something yet.
I got a little nervous as the Russell was rejected at our 411 target, which chased us out of our very successful day trades on IWM and FAS right at the high of the day. At 3:37 I called an end to our FAS trade that began at 10:21 saying: "FAS crazy high now, no way do I blow this overnight so trailing stop into the close based on .15 on XLF (now $8.33)." You can see on the chart that 3:38 was the EXACT moment that FAS started falling. Did we do that? We did a little more bottom fishing early in the morning, adding WFR and MSFT at the day’s low and hedging CY and HCBK in the afternoon, both of which had good finishes.
Since the pre-markets are looking up at the moment (7:30), we’ll look at some upside targets (downside watch levels remain the same) for today: Dow 7,400, S&P 780, Nasdaq 1,450, NYSE 4,850, Russell 415. Those are our minimum levels to call today a "success." If we can ignore the President telling us that every American family needs to borrow another $15,000 (pushing us over that magic $100,000 per family mark) in order to pay this year’s bills – then I’m pretty sure we can breeze past the rest of the bad news.
Speaking of bad news: GM posted a $9.6Bn loss in Q4, that’s a loss of $66,000 per US worker they employ (144,000) in 3 months. Please remind me again why it is…
As Charles Darwin so presciently said, "it is not the strongest of the species that survives… nor the most intelligent that survives. It is the one that is the most adaptable to change."
"Companies must reinvent themselves if they hope to see better days."
“It is with our passions as it is with fire and water; they are good servants, but bad masters.” --Roger L’Estrange, Aesop’s Fables, 1692
Today’s financial landscape is akin to a forest fire, scary and dangerous yet necessary to establish fertile ground for an eventual rebirthing.
As we witness historic wealth destruction, it’s easy to get caught up in the gloom and doom. Acrimonious flames are rapidly spreading as social mood shifts, tempers flare and patience runs thin.
The point of recognition is here and it can be downright depressing.
There are three lenses with which to view this once-in-a-lifetime event—optimism, pessimism and realism—and each has a role as we wade through this process of price discovery.
Optimism is necessary to identify winners in the new world and find the future franchises of tomorrow.
Pessimism is warranted when viewing organizations that lack financial staying power or are encumbered with too much debt.
Realism is required to understand that time and price are the only arbiters of our financial fate and there will be inevitable casualties of war.
Welcome to the reverse Industrial Revolution, where most companies must reinvent themselves if they hope to find their way to better days.
Now that it’s arrived, offering any semblance of positive perspective is widely considered Pollyanna. While the other side of the business cycle will take time—measured in years, not months—the simple truth is that in order to get through this, we needed to go through this.
The fact that we’re going through it now is on the margin constructive.
The leaders coming out of a crisis are never the same as those that enter it and this will…
In Philadelphia, thousands ambled into line, guided there by an unseen hand, unable to explain why.
NEW YORK—Drawn by a strange force they could neither resist nor describe, millions of Americans reportedly dropped what they were doing Tuesday and, acting as if by instinct alone, gathered into one massive nationwide breadline.
According to witnesses, citizens across the country exited their homes in near unison, leaving behind growing stacks of bills, empty kitchen cupboards, and what was once a life of comfort to form the spontaneous, 2,000-mile-long queue…
"I was on the phone with my bank when it happened," said Dennis Weinback, an out-of-work school teacher from Alabama who has already made 85 cents selling wooden pencils to others in line. "I just put down the receiver, got dressed, and walked out the front door."…
Added Weinback, "I don’t really remember it, but I must have also made a trip to the attic, because I was wearing my grandfather’s old tweed jacket when I got here."
In the hours since the breadline formed, a number of unexpected and vaguely familiar events have taken place. Shortly after 10 a.m., three men slowly approached a nearby trash can, filled it with old newspaper, and lit a fire to warm their weary hands. Minutes later, observers reported seeing several women, suddenly overcome with inexplicable sorrow, pull their children close to the warmth of their breast…
At press time, nearly 250 million Americans had found themselves waiting in line for bread. Though few could explain how they wound up huddled together in the cold, clad in threadbare fedoras and fingerless black gloves, others seemed less surprised.
"I told ‘em it was coming," said 97-year-old Wyoming man Howard MacGregor. "They didn’t listen to me, oh, no, but I tolds them. I did."
It’s been a volatile market but you don’t need me to tell you that right? Bears hit stocks hard in the early going only to see things turn sloppy around mid-day. However, Bernanke in continued testimony indicated no immediate intention to nationalize banks and that helped those share prices. This in turn lifted equity indexes.
The 1:30 PM Stick Save Express arrived to rally stocks powerfully off their lows. But, in the end there was no taste to hold on as stocks caved near the close.
Volume was similar to yesterday but breadth was decidedly negative which only means the McClellan Oscillator will not be lifted too far off its lows.
That sums things up for today. The day-to-day volatility remains just way too high. You put your toe in the water and you lose your entire leg. So you must be patient unless you’re day trading. The latter has been the venue and style of choice that can produce results. Most investors don’t have the time or fortitude to deal with markets on that basis.
The Treasury auctions continue. While bonds are getting sold the results in the aftermarket for them haven’t been good. There are more bonds to be sold than you can shake a stick at which is why many want to short.
There are just two more trading days in the month and it’s hard to imagine we’ll close the month flat or even higher. But, we’ve witnessed some powerful bear market rallies since the bear first made its appearance.
Let’s see what happens.
Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, TBT, GLD, GDX and FXE.
Today’s tickers: ANF, LBTYA, LCAPA, VIX, ITMN, HD & LLY
ANF – Abercrombie & Fitch Co. – Shares of the specialty retailer are off slightly by less than 1% to stand at $22.35. ANF has long since abandoned its original 1982 mission to supply rugged, high-quality, outdoor gear – which they provided at that time to outfit such well known 19th century stars as Teddy Roosevelt and Ernest Hemingway for their respective safaris. No, today the clothiers promote styles for a new kind of jungle, that experienced by the youth of America – well at least for those who can afford the pricey pre-torn jean skirts and frayed sweatshirts which have undoubtedly been emblazoned with the A&F logo in as many places as possible. ANF climbed onto our ‘most active by options volume’ market scanner with a number of investors dabbling in the March and April contracts. In March at the 22.5 strike price, one investor appears to have sold a 9,500 lot straddle by selling puts for 1.67 each while shedding the same number of calls for a premium of 1.58 apiece. The gross premium amounts to 3.25 on the trade and yields breakeven points at $19.25 on the downside and at $25.75 on the upside. This individual has seen that ANF shares have remained stable despite the fact that the Dow Jones Industrial Average has reached its lowest point in 12 years time. Implied volatility has come off by 7% to 66%, further evidence which this straddle seller can reference in justifying his opinion that shares of the retailer will remain within the specified breakeven points of the trade until expiration next month.
LBTYA – Liberty Global, Inc. Class A – The company provides video, voice, and internet access services to countries around the world, and today has experienced a 3% decline in shares to $12.45. One investor initiated a covered put at the April 10 strike price by selling 15,000 puts for a premium of 40 cents, while simultaneously selling underlying shares of the media company. This investor likely expects shares to fall and the position was established in order to take in premium today while at the same time providing an exit strategy at a share price of $10.00. The 52-week low on the stock stands at $9.67, while the put premium of 40 cents arguably protects a buyer only if shares break beneath it. In…
Ben Bernanke, Belle of the Ball? Not quite, and I do feel bad for him. His predecessor was "the Maestro" but I doubt Main Street would buy Ben a beer in a bar, but they might sucker punch him.
Still, he sparked a rally yesterday in an oversold market, and is gaining fans in certain circles:
Federal Reserve Chairman Ben S. Bernanke spurned outright federal control of U.S. banks in favor of a public-private partnership that the government would eventually exit.
Bernanke told lawmakers yesterday the government would use supervision instead of shareholder control to guide major banks, and warned against dismantling their franchises. The remarks eased concern Treasury Secretary Timothy Geithner’s financial plan would push aside private shareholders, and spurred the biggest gain in financial shares in a month.
“Bernanke was a voice of reason and he provided clarity in areas where others have failed,” said Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. LLC in New York. The Fed chairman assured markets that “the nation’s banking regulators were not proposing nationalizing banks.” Bloomberg
Yesterday could very well prove to be the high-water mark of Bernanke’s tenure, but at least he will get a good night’s sleep for a change. Truth be told cleaning up after Greenspan is probably beneath his pay grade, but somebody’s got to do it.
The debate over nationalization has been confusing to most people – I had thought grabbing the usual suspects, cleaning them up and spitting them back out was a reasonable idea, and something the market would eventually embrace.
But even Chris Dodd is now standing down…Is it completely dead?
Josh Rosner apparently won’t rule it out, and it really does not sound so terrible:
Joshua Rosner, an analyst at the investment research firm Graham Fisher & Co. in New York, said the government may not run banks with the same sort of control it now has over mortgage finance companies Fannie Mae and Freddie Mac, which are under federal conservatorship.
Competitors are already putting the screws to Citigroup, asking regulators to effectively neuter them, and it is hard to see their capital markets operations reaching their former glories, like when…
As pointed out previously, "nationalization" means different things to different commentators. The labeling game causes confusion and distracts from the main arguments. This article by Henry Blodget clarifies his objectives – whatever we call the process.
We are very much in favor of the US government forcing banks to tell the truth about how little their assets are worth (take the writedowns) and then going to the shareholders and bondholders to fill the capital hole.
It is hard to see how the government can do this without actually temporarily seizing such banks. Thus, in cases where it is warranted, we support "nationalization."
We are NOT, however, in favor of the government actually running the banks. This would be a disaster.
One of the big flaws of the current approach to the crisis, in fact, is that the government is already quasi-managing the banks (see Citi), while insisting that it not actually taking them over. As today’s Wall Street Journal illustrates, the current situation at Citi is probably worse than temporary nationalization.
Monica Langley and David Enrich, Wall Street Journal: Citigroup executives are attempting to strike a seemingly impossible balance: Run the business in a way that will please their new federal masters, but also help the bank rebound from $28 billion in losses over the past five quarters.
Former federal officials have dubbed Citigroup the "Death Star," comparing the bank’s threat to the financial system with the planet-destroying super weapon in the "Star Wars" movies. Privately, in the words of one official, they regard the banking giant as "unmanageable."
Complicating the issue is the government’s back-and-forth between bouts of micromanaging the banking giant and periods of ignoring it. In trying to be neither an active nor a passive investor, the U.S. is directing the business without a firm strategy or particular expertise.
Central to the confusion: There’s no one individual or entity in charge of the federal oversight of Citigroup.
That’s because banks like Citigroup are regulated by a patchwork of agencies including the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. The Treasury Department also has oversight because it’s the
Sale of existing homes dropped 5.3 percent in January, bringing them down to near the lowest levels since 1996. The median home price was down 14.8% from year earlier, from $199,800 to $170,300. That’s the lowest level since 2003.
Standing inventory of homes on the market fell, which is a bit of good news. But since the annual rate of home sales fell, the months of supply of homes for sale actually went up. In December we had a 9.4 month supply. At the current rate, we have 9.6 months worth of houses. Obviously, the declining prices of existing homes will depress new home construction, as well.
The drop in home sales shows that the decline in the housing market is proving resistant to declining mortgage rates. The average 30-year mortgage rate declined 5.05% in January, a big drop from 5.29% in December. But that drop failed to spark buying.
The failure of January’s lower mortgage rates to stabilize the market for homes could be bad news for policy makes and others hoping that tax credits and government jiggered mortgage rates could stop the decline. The market’s downward trajectory, the new numbers suggests, will not easily be reversed.
A huge factor in pushing down the prices of homes is the number of foreclosed sales. Forty-five percent of the sales in January were from foreclosures. Without foreclosures, of course, the housing market would be far less liquid, with even fewer home sales. But at least we could pretend our homes were still worth more.
Want a bit of hopeful news? Sales didn’t decline in the West, which has been ground zero for so much of the housing crisis. Perhaps that actually is a sign of stability. Sales fell 14.7% in the Northeast, 5.7% in the Midwest, and 5.7% in the South.
Looks like Wave 4 has ended, but a rally back to today’s open and/or highs would suggest that this decline is only a B wave and any subsequent rally is a C wave. Either case suggests new lows for this entire leg down.
Doesn’t it seem that there is always just one more Wave 5 to go?
These charts are screaming, "Yes we can," to another Wave 5 decline at the doorstep. Here are my charts, which should be read in light of the Volatility Cycles [below] post.
This first chart is a 60-minute DJI chart showing a uptrend channel containing prices of a Wave 4 with potential targets just above current prices:
This next chart reveals ultimate lows as forecast by my software:
Finally, some internal indicators suggesting either Wave 4 is about complete as of Tuesday’s close, or possibly after one more big up day to the upper Wave 4 target:
VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from volatility. If investors see high risks of a change in prices, they require a greater premium to insure against such a change by selling options. Often referred to as the fear index, it represents one measure of the market’s expectation of volatility over the next 30 day period.From Wikipedia, the free encyclopedia
Below is my Sixty-minute Trend and Elliott charts on the VIX:
One characteristic of market volatility is that stock prices usually move opposite volatility.When stock prices rally, volatility drops, when stock prices fall, volatility rises. Forecast one, forecast both. The EW chart shows the VIX completing five waves up yesterday and today, what appears to be an "A" wave down. This should be
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Deflation simply means falling prices. The 4-pack below reflects that the bond players believe in the deflation theme as the yield on the 10-year note breaks below the 2009 and 2011 lows.
Speaking of deflation and falling prices, the CRB has now broken below last summer's lows, the CRX is at last summer's lows, and Crude Oil finds itself on key rising support.
With the only real catalyst on the horizon not due for nearly one month - that would be the Greek elections of June 17 which while presented as the make or break event for the Eurozone, we believe will be once again inconclusive, resulting in no actual government, but merely more elections down the road - here is the daily sequence of events of what we can expect: i) Europe releases definitive rumor that everyone is preparing for a Greek exit full of bombastic jargon and details of how Greece will be annihilated if it does exit the EMU; ii) immediate election polls are...
China Automotive Systems, Inc. (NASDAQ: CAAS) oday announced that its wholly owned subsidiary, Great Genesis Holdings Limited, has entered into a definitive agreement to sell its equity interest in Zhejiang Henglong & Vie Pump-Manu Co., Ltd, to the Zhejiang Vie Group Great Genesis's joint venture partner in Zhejiang. This transaction is subject to local regulatory authority approval.
Founded in 2002, Zhejiang, which designs, manufactures and markets power steering pumps, is located in Zhuji City, Zhejiang Province. According to the Agreement, Great Genesis will sell its 51% stake in Zhejiang to Vie Group for RMB52 million, which represents a 24% premium as compared to the May 20, 2012 estimated net book value of approximately RMB42 million. According to unaudited accounting information, Zh...
The small Mediterranean country of Greece has been more than a thorn in Europe’s (NYSEARCA:VGK) back for the past eighteen months; it has been the focal point of foreign press on Europe, and in this case all press is not necessarily good press. To truly understand the scope of the Greek debt crisis, one must analyze the Greek economy and its overall importance to the Euro. As ever more countries bid to enter the Euro, now Greece appears to bid for an exit, the first ever in the Euro’s history. A Greek exit from the Euro has been likened to a w...
Top 5 RisersStockRatingAnalysisWDCSTRONGBUYWestern Digital 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.KROSTRONGBUYKronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant.URIBUYProjected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected.SWHCBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valu...
The market remains a mess right now as we are back to the environment of latter 2011 and middle 2010 where random comments from officials across the Atlantic move everything en masse. Today the market was hit by word that preparations for Greece's exit from the EU are being considered.
Of course a denial by another official would send the market up 1% immediately. Rinse, wash, repeat – year #3.
The bigger picture right now is all stocks are moving as one asset class as our massive correlations return. Until that changes it is very difficult to bother to be a stock picker.
EXPR - Express, Inc. – Shares in apparel retailer, Express, Inc., dropped nearly 30.0% today to a new 52-week low of $16.38 after the company projected full-year earnings below those expected by analysts. Options on EXPR are far more active than usual today, with overall volume on the stock currently at 4,460 lots, up nearly 2,000% over the stock&rsq...
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
NEW: Ilene is available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here is this week's test version of the latest newsletter. We apologize for some formatting issues that need to be worked out. Please tell us what you think.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
In this article, please revisit an article written two years ago titled, "The Calm Before the Storm." This article focused on the patent cliff that was looming in the pharmaceutical industry, that was later picked up by the New York Times and several other bloggers! Subsequent articles were written about big pharma company's revenue streams, and the pros and cons of of their later stage pipelines. Other articles have also attempted to identify smaller biotechs with the potential to reap big reward...
My last weekend update is dated from January 30 so after a long hiatus, here is an update of our virtual portfolio. Since the last update, we have closed the AA Money portfolio due to a lack of enthusiasm (and activity) and I have stopped tracking the FAS strangle as the low VIX makes it hard to get rewarded for the risk! But we have added a small $5KP virtual portfolio which does not use any margin.
FAS Money
We have had to recover from a big move up by FAS and a low VIX which keeps option prices low. But the portfolio has gaine about 10% since the last update.
Last update P&L - $5499.00
IWM Money
Not a lot of activity in this portfolio where the main focus is on the large IWM BCS. But the portfolio has grown over 20% since the last update.
Last update P&L - $1998.00
$5KP Portfolio
This is the virtual portfolio that replaced the AA Money portfolio. It does not use margin and we will keep holdings under $5K.
AAPL $50K P...
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...
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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
(