by ilene - March 31st, 2009 10:29 pm
Rob Hanna describes the 1930s-like trading environment he’s expecting for the next few years. – Ilene
Courtesy of Rob Hanna at Quantifiable Edges
I don’t normally reprint large sections of the Subscriber Letter on the blog but I’ve received several inquiries about the longer-term and I figured, “What the heck.” Below is from this week’s intermediate-term outlook:
The question that I keep hearing over and over is “Is this rally for real?” What needs to be considered when formulating an answer is what constitutes a “real” bull move. It is my contention that the current environment most resembles that of the 30’s from a trading standpoint. Certainly the kind of damage that has been done to the market has not occurred since at least that time period. Additionally, volatility levels reached during the course of this bear have reached levels not seen since at least the 30’s in some cases.
I’m of the belief that the market is likely to trade in a very wide range over the next few years. It is unlikely to begin a new secular bull market during this time. Rather I believe we are likely to see both bull and bear runs occur. Some of these, such as the October and November rallies, may be too quick for most traders to capture significant portions of. Others may last several months before reversing course in a convincing manner. Below I’ve again pulled up some charts from the 30’s. In this case I’ve overlayed the zig-zag indicator in light blue.
What the zig-zag does is identify all moves of at least 15% either up or down from close to close. You’ll notice there were a substantial number of these moves during that time:
Late 1929 – late 1934. (created with Tradestation, click on charts for larger image)
Lots of sharp sizable moves can be seen during the period. The 1932 low seen here is "the" low.
So is it for real? Well, I’m not at all convinced that we’re looking at a
…
by ilene - March 31st, 2009 9:21 pm
At the heart of our dark, collapsed economy, is the derivative monster. Jesse’s Café Américain has displayed its vital statistics with very colorful charts.
Courtesy of Jesse’s Café Américain
The heart of our financial crisis is reckless speculation with "too big to fail" funds by a relatively small group of US based money center banks.
There is sufficient circumstantial evidence from their concerted lobbying efforts to undo and resist regulation to show planning and forethought in what is an almost amazingly straightforward case of fiduciary and financial fraud. Many a blind eye was turned to the decline of the nation as it occurred, as the media and politicians and financial regulators were caught up in a seductive web of corruption.
The perpetrators are still in place, relatively unrestrained, and certainly not facing anything that might be called ‘justice.’
Before there is any recovery, the banks must be once again restrained and balance restored to the economy and the financial system. The efforts of the Obama Administration are hopelessly ineffective, conflicted, and supportive of continuing losses.
The Prime Suspects [click on chart for sharper image]
The Killing Field
The Wagers on Failure
The Wages of Speculation
by Robin Hood Trader - March 31st, 2009 8:50 pm
Market Update, courtesy of Robin Hood Trader
Week over week, the DOW gained 498, the SPX was up 48 and the COMPQ was better by 88.
Come join us at marketamer and learn how to consistently pull money from the markets.
…
by David Fry - March 31st, 2009 8:36 pm
Dave Fry at ETF Digest, March 31, 2009
Sometimes it’s just too obvious so let’s just let the image tell today’s quarter and month-end story.
I’m not real sure we can make too much of this type of activity until we get past Friday’s employment data since today’s action may just be bogus frankly.
Volume was again below average while breadth was quite positive.
March wraps-up with some green as cynically one might believe some tape painting was present. But it is what it is.
I don’t have much to add today since I’m pretty focused on the rest of the week’s news and actions. Remember, we have much to come this week with earnings, more economic data and the all important employment report.
Let’s see what happens.
Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, XLF, XLI, XLY, GLD, DGP, DBP, DBB, DBC, USL, EFA, EEM, EWY, EIS and FXI.
The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.
by ilene - March 31st, 2009 8:07 pm
Tim Iacono reports on record annual declines in home prices. 
Courtesy of Tim Iacono at The Mess That Greenspan Made
The January report(.pdf) for the S&P Case-Shiller Home Price Indices shows both the 10-city and 20-city index once again making new record annual declines of 19.4 percent and 19.0 percent, respectively. Price indices for all 20 cities are shown below.
The top to bottom position on the right (corresponding to the order of the legend in the upper left to aid in viewing the data) saw a few changes last month, both Phoenix and Minneapolis moving down a notch or two.
As shown below, Phoenix maintained its leadership role in year-over-year price declines with an astonishing 35 percent plunge. Las Vegas and San Francisco are not far behind with declines of more than 30 percent as indicated in red and Miami may be ready to join that select group.
Minneapolis joined the ranks of 20+ percent annual decliners, moving from -18.4 percent to -20.4 percent in January. That group now numbers six as indicated in blue.
What the heck is going on in Minneapolis with those back-to-back five percent month-to-month declines? That’s the sort of thing you see in Phoenix and Las Vegas, but Minneapolis?
David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, noted:
Home prices, which peaked in mid-2006, continued their decline in 2009. There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSA’s falling more than 20% in the last year.
Indeed, the two composites are very close to that rate and have been reporting consecutive annual record declines since October 2007. The monthly data follows a similar trend, with the 10-City and 20-City Composite showing thirty consecutive months of negative returns.
You’d think that at least the pace of the price declines would slow, but it’s not.
*****
John Mellencamp- "Little Pink Houses"
by ilene - March 31st, 2009 5:46 pm
Karl Denninger reports on the AIG "Patient Zero" Cassano’s reckless activities and wonders who else is involved.
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Courtesy of Karl Denninger at The Market Ticker
Hmmm….. this is interesting….[The Executive Who Brought Down AIG, ABC News]
"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples’ hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he’s wrought on America."
Oh, I see. There’s that nasty "F" word, and this one you can say on TV!
But let’s not be misdirected by bonus payments and "special legislation" eh? After all, anyone who believes this guy acted alone must be smoking something….
After the huge losses became known, Cassano was fired from AIG in early 2008, but he still received a salary of $1 million a month until Congress intervened. AIG has received about a $180 billion in bailout funds so far.
Ah. Let me see if I can grok this. Here’s a guy who allegedly "hid" huge losses, was fired for it, but got a $1 million a month "salary" after being "fired", and he acted alone? That’s why they paid him $1 million a month after firing him?
You expect The American People to believe that?
It gets better:
An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.
"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."
Yes, and again, there was nobody else within the firm that saw something like "Lichtenstein Subsidiary Profit, $10 billion" in the internal accounting of the company and thought that was funny? 
Anyone remember the infamous "barge transactions" from the era of ENRON?
Of course AIG’s CEO
…
by Option Review - March 31st, 2009 5:42 pm
Today’s tickers: TROW, BDK, EWZ, AMZN, PLD, MON, POT, XLF & WFC
TROW T. Rowe Price Group, Inc. – Shares of the financial services company have risen by 6% to $29.01 amid broad market gains for financials. TROW appeared on our ‘hot by options volume’ market scanner after one investor sold 16,300 calls at the July 35 strike price for a premium of 1.90. This trade was enacted for one of two plausible reasons. It could be pure naked selling in which case the investor takes in the 1.90 premium afforded by today’s 6% increase in the underlying share price. The trader is then left short 16,300 calls which he would need to buy back at some point in the future before expiration. Another explanation could be that this trade is a covered call. If this is the case, the investor purchased shares of the underlying stock and sold the calls to create an exit strategy. If shares were to rise through $35.00 by expiration this investor would enjoy the 1.90 in premium plus an additional 20% gain on shares of the underlying.
BDK The Black & Decker Corporation – Shares of the global manufacturer and marketer of power tools and home improvement goods have increased by more than 5% to $32.20. Shares are gaining amid improvements in other durable goods companies today as well as on the coattails of news regarding BDK’s increasingly large debt offering. The company has upped the size of the offering to $350 million from the previously announced $250 million, according to one news source. Option traders responded by picking up calls in the April and May contracts. At the April 35 strike price some 5,400 calls were scooped up for an average premium of 70 cents. Reflecting even more optimism, investors looked to the May 40 strike where over 2,100 calls were bought for an average of 66 cents apiece. Investors seem to be looking for BDK to put the $350 million in borrowed funds to good use in the hopes that such action will spur shares to continue to move higher.
EWZ iShares MSCI Brazil Index Fund – The Brazil ETF has added more than 2% to its share price today and currently stands at $38.12. A butterfly spread established in the near-term April contract caught our attention. The investor constructed the butterfly by purchasing the wings and selling the body. At…
by ilene - March 31st, 2009 3:24 pm
Tim Iacono writes on the vanishing Social Security surplus; now you see it, soon you won’t. – Ilene
Courtesy of Tim Iacono at The Mess That Greenspan Made
Among the plethora of new ills plaguing the U.S. economy as it goes stumbling toward its uncertain future is a problem that, until very recently (meaning two days ago), was believed to be one reserved for the latter half of the next decade – the dwindling social security surplus.
Recall that, for decades, incoming payroll taxes have gone directly to government expenditures while IOUs piled up in a filing cabinet somewhere, famously visited by former President George Bush in early 2005 after an election win compelled him to boldly go into his second term as a reformer before he began quacking like a duck.
The initiative to reform the nation’s second largest entitlement program and undo the marvelous mid-1980s accounting change that would make the U.S. budget deficit look deceptively small for decades was a resounding failure and the quacking started long before most had ever dreamed.
In retrospect, if the nation couldn’t forge some sort of fundamental reform to its entitlement programs back in early 2005, when household wealth had soared to once unimaginable levels just before the housing bubble met its pin, is there any realistic possibility that substantive reforms will ever come voluntarily?
In any event, word now comes from the CBO (Congressional Budget Office) that yet another fallout of the recent economic tailspin is that payroll taxes have fallen off a cliff along with home values and stock prices leading to the real possibility that the Social Security surplus will turn into a deficit much sooner than originally thought, all but vanishing next year according to the most recent calculations.
Last year, the CBO figured the surplus would be $80 billion this year and next, rising from those levels before falling to zero in about ten years. The most recent projections are for a slim $16 billion surplus this year and just $3 billion next year but, given the rosy predictions that usually come out of Washington, a deficit is certainly within the realm of possibilities.
While
…
by ilene - March 31st, 2009 1:23 pm
Here’s a cool graphic representation of the incestuous relationship of the financial sector (and companies in other sectors) with the government. – Ilene
It’s well known that at least a piece of the TARP gets funnelled right back into Washington DC when banks donate to politicians. So which lawmakers are connected to which bailed out institutions. The center for Computational Legal studies has created a stunning visualization tracking TARP recipients’ political contributions to the members of the 110th Congress.
It’s visually arresting and a very cool way to see all the interconnections. David Zaring at the Conglomerate points out that banks are pretty equal opportunity donors to politics, giving to both parties at pretty similar levels. Some banks, however, are slightly more red than blue and some more blue than red.
Here’s a partial list
That probably won’t come as a shock to most people. But what might is the fact that the Democrat leaning banks, boosted by Goldman’s hefty campaign contributions, give more than the Republican leaning banks.
As the image we’ve excerpted from the chart suggests, the center of a lot of things are the biggest TARP recipients and Senator Chris Dodd.
by ilene - March 31st, 2009 11:38 am
As an introduction, Phil’s words: "Zero Hedge claims to have "inside information" from a trader who claims essentially that the "good earnings" claimed by C, BAC et al that led to the rally of March 10th were nothing more than a gift from the Treasury, funneled through AIG in the form of ridiculously profitable counter-party trades that made Billions for the banks which AIG turned around and wrote off as their stupefying losses. If true, it’s a hell of a scandal…"
Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.
I present the insider perspective of trader Lou (who wishes to remain anonymous) in its entirety:
"AIG-FP accumulated thousands of trades over the years, all essentially consisted of selling default protection. This was done via a number of structures with really only one criteria – rated at least AA- (if it fit these criteria all OK – as far as I could tell credit assessment was completely outsourced to the rating agencies).
Main products they took on were always levered credit risk, credit-linked notes (collateral and CDS both had to be at least AA-, no joint probability stuff) and AAA or super senior portfolio swaps. Portfolio swaps were either corporate synthetic CDO or asset backed, effectively sub-prime wraps (as per news stories regarding GS and DB).
Credit linked notes are done through single-name CDS desks and a cash desk (for the note collateral) and the portfolio swaps are done through the correlation desk. These trades were done [in] almost every jurisdiction – wherever AIG had an office they had IB salespeople covering them.
Correlation desks just back their risk out via the single names desks – the correlation desk manages the delta/gamma according to their correlation model. So correlation desks carry model risk but very little market risk.
I was mostly involved in the corporate synthetic CDO side.
During Jan/Feb AIG would call up and just ask
…
January 27th, 2012 1:52 pm
Largest Central Banks Now Hold Over 15 Trillion in Fictitious CapitalCourtesy of Russ Winter of Winter Watch at Wall Street Examiner
I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in p...
January 27th, 2012 1:40 pm
Reminder: David is available to chat with Members, comments are found below each post.
January 27th, 2012 12:55 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
In an effort to reach the angry mob, CNBC's Rick Santelli goes all Sesame Street on the numbers behind the US Debt Ceiling Rise. Focusing for two minutes on what this practically means for every man, woman, child, and politician, the shouting Chicagoan points out that when the US breaches this new limit then the world's entire population will be on the hook for $2,346 each (and $52,409 per US person).
...January 27th, 2012 12:35 pm
Courtesy of Doug Short.
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).
Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its...
January 27th, 2012 11:15 am
Submitted by Mark HannaCourtesy of MarketMontage. View original post here.
Some combination of better made cars, and less Americans able to pay new car prices has conspired to push up the average age of U.S. vehicles to a new record high. Reflecting this sea change, one of the best investment g...
January 27th, 2012 10:05 am
Courtesy of Benzinga.
Shares of battered tech company Research in Motion (NASDAQ: RIMM) are seeing much strength during Friday's trading session.
Fairfax Financial Holdings released a 13G filing with the SEC this morning, in which they disclosed a 5.12% stake in Research in Motion.
Currently, shares of Research in motion are up over 4% at $16.85. Over the last year, Research in Motion is down over 72%.
Research In Motion Limited is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. RIM provides platforms and solutions for access to information, including e-mail, voice, instant messaging, short message service.
...January 27th, 2012 12:00 am
Top 5 RisersStockRatingAnalysisASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving.CZZSTRONGBUYThe recent earnings history for Cosan Ltd shows significant improvement while projected valuation continues to rise.STLDBUYProjected value continues to rise for Steel Dynamics while long term increases in earnings growth are also becoming more widely expected.PSESTRONGBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a fe...January 26th, 2012 6:16 pm
Courtesy of John Nyaradi.
Major markets and major index ETFs corrected slightly today after the stock market’s euphoric party yesterdayMajor markets suffered a slight hangover today, as the S&P 500 dropped .57%, the Dow Jones Industrial Average dropped .18%, the NASDAQ dropped .46% and the Russell 2000 Index dropped .34%, after yesterday’s crazy Fed and Tech Sector induced Wall Street Party. The NASDAQ, in particular, partied very hard, so hard in fact that the NASDAQ reached its 11 year record high.
The major market index ETFs were hungover too as the SPDR S&P 500 ETF lowered .51%, the SPDR Dow Jones Industrial ...
January 26th, 2012 1:38 pm
Today’s tickers: DB, ATHN & LSI
...
more from Caitlin
January 23rd, 2012 8:56 am
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
Optrader
...January 22nd, 2012 10:09 pm
Here is the virtual portfolio weekend update. Basically a recap of the positions and some notes about the trades. As usual, I'll post the previous week's P&L for comparison. Not the greatest of week in general! AA Money Only transaction last week as we bought back the AA Feb 9 puts on Tuesday for close to a 70% profit. The idea is to sell another set of put as soon as we get a chance. Previous week P&L - $400.00 We lost some ground this week, but we'll keep on selling premium! FAS Money We also lost some ground in this virtual portfolio, but we have sold plenty of premium for the coming week. A little correction would go a long way to help! On Wednesday we sold the FAS Feb 72 puts (already good for 50%), on Thursday we added the Jan4 78 calls and on Friday we had to roll the Jan 78 puts to the Jan 80 puts. We were hoping for these ones to expire worthless on Friday, but a late stick killed that hope. Previous week P&L - $4372.00...January 22nd, 2012 2:52 am
NEW: Elliott and Ilene are available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here's the latest Stock World Weekly. We discuss the Fed's next move, and it's new policy for more QE-cating. Brief review of Sabrient's trade ideas for 2012 (already doing well) and a few new buy-writes from Phil and Pharmboy. Enjoy! (Feedback appreciated - give some life to the comment section below.)
Click this link for this weekend's newsletter, and sign in or sign up.
...January 18th, 2012 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
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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Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Philstockworld, LLC (PSW) nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. |
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