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Archive for May, 2009

Administration’s Statement On General Motors Bankruptcy Filing

Courtesy of Tyler at Zero Hedge

Administration’s Statement On General Motors Bankruptcy Filing

On March 30, 2009, President Obama laid out a framework for General Motors to achieve viability that required the Company to rework its business plan, accelerate its operational restructuring and make far greater reductions in its outstanding liabilities. After two months of significant management engagement, General Motors has developed such a plan and has already begun to make progress toward its achievement. The Company has also secured commitments of meaningful sacrifice from all of its major stakeholder groups, sacrifices sufficient for this plan to proceed forward. As a result, the President has deemed GM’s plan viable and will be making available about $30 billion of additional federal assistance to support GM’s restructuring plan. To effectuate its plan, General Motors will use Section 363 of the bankruptcy code to clear away the remaining impediments to its successful re-launch.

For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world. Today will rank as another historic day for the company—the end of an old General Motors, and the beginning of a new one.

General Motors Restructuring – Shared Sacrifice

The President made clear throughout this process that every one of the Company’s stakeholder would be expected to sacrifice, and that none would receive special treatment because of the involvement of the government. The resulting agreement is tough but fair, and has garnered broad support from GM’s major stakeholders:

  • Operational restructuring: GM is undertaking a significant operational restructuring that will address past failures, dramatically improve its overall cost structure, and allow the company to move toward profitability even if the auto market recovers slowly. As a result of this restructuring, GM will lower its breakeven point to a 10 million annual car sales environment. Before the restructuring, GM’s breakeven point was in excess of 16 million annual car sales.
  • The UAW has made important concessions on compensation and retiree health care that, while difficult, will help save jobs for active employees, pensions and health care for retirees, and make GM more competitive. In virtually every respect, the concessions that the UAW agreed to are more aggressive than what the Bush Administration originally demanded in its loan agreement with GM. Among other things, the UAW’s existing VEBA – to which GM


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Why the Countertrend Rally Can’t Be Stopped

Click here to sign up for a free subscription to the PSW Report.  It’s easy!  – Ilene

Oxen Trade of the day:  Toyota (TM).  Read more here.

For those wanting bullish, here’s a list of reasons for a market "melt-up."  Comments welcomed…

Why the Countertrend Rally Can’t Be Stopped

30032-22.jpg money not enuf image by ronnieliutiankhiewCourtesy of James Kostohryz at Minyanville

I’ve previously described the fundamental and technical rationales for an aggressive move to go 100% long in the US equity market. A complete argument for the countertrend rally was published in Op-Ed: Is a Countertrend Rally Inevitable?.

In this article, I’d like to update the case for what I believe will be stage II of the countertrend rally.

Fundamental Drivers

1.  A series of announcements of decisive and increasingly coherent policy actions by governments and central banks around the world.

I think that there can be little doubt that this has occurred. While there are still policy measures that are yet to be announced, I believe this factor has pretty much played itself out. At this point, the risk of governments messing things up may be fairly equally balanced against any further upside from policy initiatives.

2. A dramatic turn in the economic growth dynamic.

Of all of my predictions, this has always been the most important. My proprietary statistical work has thus far proven prescient, and it’s strongly indicating that we’ll continue to see very strong momentum in the economic data through June and possibly July. Economists’ and analysts’ numbers are still too low, and so the surprises throughout the second quarter will continue to be to the upside.

Indeed, as I’ve pointed out in several articles, such as in Op-Ed: Surprises Continue to Drive the Rally, many indicators aren’t just going to show turns in the second derivative, several are actually going to show positive growth! The blue-chip economists haven’t figured this out yet. This is going to be a shocker and will keep the rally going.

3. Consensus economic views are far too bearish.

This is still the case. The media is filled with pundits talking about the “certain collapse of the dollar,” “currency debasement that will inevitably lead to inflation,” and “crushing debt levels.” Most of the arguments in favor of these apocalyptic views are based on discredited…
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Told ‘Ya So (GM: ZERO!)

Courtesy of Karl Denninger at The Market Ticker

Told ‘Ya So (GM: ZERO!)


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Ackman On General Growth

Courtesy of Tyler at Zero Hedge

Ackman On General Growth

Just in case anyone needs to read page after page (for 68 in total) of a highly focused "research report" on why GGP is a phenomenal investment, look no further (from Ackman’s Ira Sohn presentation). It is likely that investors in the PSIV fund will also be happy to read comparable such materials for why their Ackman-managed investment in Target is down 93%.

What is quite hilarious is the very open bashing of Goldman/Merrill Lynch REIT darling Simon Property Group (SPG) on pages 53-56. Any chance a possible GGP-SPG pair trade at Pershing Square has gone horribly, horribly wrong? Either that, or based on GGP’s stock price (the market is wrong!), SPG should be trading materially lower. Readers decide.

 





Mortgage Meltdown, More Pain To Come

Click here to sign up for a free subscription to the PSW Report.  It’s easy!  – Ilene 

Mortgage Meltdown, More Pain To Come

Courtesy of Mish

T2 Partners has a phenomenal series of charts on the housing crisis stating Why There Is More Pain To Come.

The report is 69 pages almost all of them loaded with charts. I took a liberal selection below, adding plenty of comments, but please take a look at the original article for many additional charts. All charts below are from the article. Click on any chart to see a sharper image. Quotes from the article in italics. My comments are in plain text.

Case Shiller vs. Lawler

Nearly everyone is familiar with Case Shiller. I suspect most have not heard of Lawler. Interestingly there is a feud of sorts between the two as noted by the Wall Street Journal article Outlook for Home Prices Clouded by Spat Over Historical Trends.

Yale University economist Robert Shiller has often dazzled audiences with a chart showing home prices from 1890 to present. Someone even used Mr. Shiller’s chart to make a YouTube video that puts its viewer on a roller-coaster ride over peaks and valleys in home pricing. It’s a bumpy ride.

Now another economist, Thomas Lawler, says Prof. Shiller’s chart is "bogus." Mr. Lawler says Mr. Shiller cobbled together data that are inconsistent and sometimes unreliable. Mr. Shiller defends his work and accuses Mr. Lawler of making "wild allegations."

No one has found a precise way to measure changes in house prices. Because no two homes are exactly alike, changes in the price of one won’t necessarily be matched even by apparently similar homes nearby, much less those hundreds of miles away.

But that doesn’t stop analysts from extrapolating from what may be dubious data. In a March 30 report, T2 Partners LLC, a New York hedge-fund manager, drew on the Shiller chart to conclude that on average U.S. home prices need to drop another 13% to get back in line with the long-term trend.

Mr. Lawler has created an adjusted version of the Shiller chart, backing up his view that house prices already are nearing a bottom in much of the country. A T2 partner called Mr. Lawler’s critique "valid."

I guess we need to define "nearing a bottom". We also


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Recent New Debt Issuance Update

Courtesy of Zero Hedge

Recent New Debt Issuance Update

A few new debt issuance datapoints for inquiring minds.

First – not only has HY issuance in May skyrocketed, but IG issuance is also on a tear. The past 2 weeks have seen a staggering amount of new investment grade issues: just over $28 billion. The average new issue coupon has dropped to a weighted average of 6.508%, while the current average spread to Treasuries on the 37 new issues since May 18 is T+322.

[click on tables and charts for larger images]

Also looking at non-TLGP issues (non-FDIC guarantees), it seems investors’ amnesia has come back with a vengeance and the pick up in non-guaranteed issues will soon surpass those coming with guarantees (the notable exception is Citi, which manged to place a non-TLGP issue two weeks back, only to go back to TLGP crutches last week).

Lastly, demonstrating that in the mindset of new issue purchasers, all is back to good, the dramatic acceleration in convertible offerings is also quite staggering. Yet, these still do not come cheap, as the average adjusted yield on the YTD converts is 12.37%, a 2.20% premium over comparable bond yields.

 


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MUTUAL FUNDS INFLOWS SURGE

Courtesy of The Pragmatic Capitalist

MUTUAL FUNDS INFLOWS SURGE

Mutual funds flows remain a fantastic way to gauge small investor sentiment which is often inversely correlated to future stock market returns.  Stock fund flows for April surged to 12.33 billion.  As you can see in the chart below stock fund flows have had a very high inverse correlation to stocks.  Small investors pull their funds at exactly the wrong time and invest at exactly the wrong time.  The early figures in May are also showing strong stock inflows with over $7B in flows for the first two weeks.  The last time we saw flows this high was right at the March ‘08 high.

fndflws

Source: IBD





Sunday Readings

Tyler Durden’s Sunday Readings

Just when you thought there is no escape from a quadrillion dollar deficit, this comes along

 

And on that note, Geithner "No one is going to be more concerned about future deficits than we are" (Bloomberg)
54% of GM bondholders approve debt swap plan (Reuters)
GM prepares for bankruptcy announcement (AP)
Caterpillar, Xerox say hiring won’t pick up until economy improves…. But hasn’t it been improving for three months now? (Bloomberg)
Green shoots in escapism (Financial Armageddon)
Chart of the day: Japan vs US on Quant Easing (Michael Krause’s Market Take)
Treasuries, dollar "only game in town" (Bloomberg)
Troubled bank loans hit record high (NYT)
Sotomayor comments on race, gender troubling, Republicans says (Bloomberg)
Paul Tudor Jones on the brilliance of chartists (Alpha)

 





I Am Marla’s Observations On Artificial Selection In Chrysler Dealerships

I Am Marla’s Observations On Artificial Selection In Chrysler Dealerships

Ok. You fuck me, then snub me. You love me, you hate me. You show me a sensitive side, then you turn into a total asshole. Is this a pretty accurate description of our relationship, Barack? This most recent nonsense is only the latest schizoid break. As you are no doubt aware, conspiracy theories are flying to and fro suggesting that the list of dealers that would be confiscated/dissolved/appropriated/killed by Chrysler the Auto Task Force was politically generated. Most versions of this tale mention a sort of Nixon enemies list approach to dealerships and cite snippets of data on the mostly republican political contributions of closed dealerships. We didn’t really want to believe that about you. Quips like "Dealer List Targets GOP" sound like dead cats meowing to us.

Such stories interest us, but all stories involving the Chrysler travesty and the pending GM daterape interest Zero Hedge. Zero Hedge is a bathtub of squirming desire and skepticism. Yes, we think there is a lot that goes on that someone isn’t telling us (or you). Still, parsing the dealers through an enemies list to determine closures seemed entirely unlikely to Zero Hedge. If true it should (but probably wouldn’t) be the end of any administration. That sort of rank thuggery should be the end of any administration, no matter what its denomination.

Regardless, even if some sort of preference was manifesting itself, Zero Hedge doubted that an "enemies list" would be the mechanism. It does seem that Chrysler was not particularly involved in the process. That’s suspicious, but not damning without more. It is least political poison though. It is asking for trouble anytime economic decisions like this are made with tainted or potentially tainted political methods. This from Reuters citing Leonard Bellavia, of Bellavia Gentile & Associates, who represent some of the dealers being terminated: 

"It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers," Bellavia said. "It really wasn’t Chrysler’s decision. They are under enormous pressure from the President’s automotive task force."

Control of the list would present the opportunity for a bit of mischief by the automotive task force. Still, Zero Hedge thought it much more likely a "crony" list would be employed, granting


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Wild Weekly Wrap-Up

What a wild week that was!

We got such a good sell-off last Friday that we went 1/2 covered into the weekend on our DIA puts (a little bearish) but we had already cleaned up on quick short plays on the Dow and USO and we were very much in cash but still making bullish plays at the time.  I did a 3-part series on dividend-paying stocks over the weekend, elaborating on the 21 dividend payers we picked that Tuesday along with our $104,340 Virtual Portfolio (used to be $100,000) so we had no shortage of bullish ideas but it didn’t take us long this week to turn pretty bearish.

Last Friday morning (22nd), ahead of the holiday weekend, with the Dow at 8,323, I sent out an early alert to members saying: "I’d go long on the Dow here but frankly I’m just not in the mood today.  Still full covered on long DIA puts  and still in the DDMs but just hanging out and watching today since you can’t take the action seriously anyway."  Our plays that day ran the gamut:  We sold BAC July $10 puts for $1 (now .66), took a TBT spread that has been a wild ride but right back where we started and an ICE bull call spread ($90/$100, selling $90 puts $2.33, now .57) that is right on track.  All that came before 11:33 on Friday, where I rightly called a top at 8,342.  We made nice profits on DIA puts and took an EXM and T hedges that are doing well.  One of our best plays on Friday was the USO $32 puts at .80 we took into the weekend, those cashed out Monday morning at $1.05 (up 44%) – those USO trades were followed through in detail in our Members Only post: "Stupid Options Tricks - The Salvage Play."

As I mentioned, we have been mainly in cash for over 2 weeks now so mainly we’re just taking small opportunities and having fun while we wait for the market to break one way or the other.  One article I wrote over the holiday weekend was a timely update to "How To Vacation-Proof Your Virtual Portfolio," something anyone not in cash needs to take under strong advisement and DO NOT miss the very generous free video lesson from Sage’s Market Tamers that is on that post.  Our…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Phil's Favorites

Newsflash To Fed: 122 Billion Bottles Of Beer On The Wall Is About Asset Bubbles, Not Jobs

 

#455488306 / gettyimages.com Newsflash To Fed: 122 Billion Bottles Of Beer On The Wall Is About Asset Bubbles, Not Jobs

Courtesy of  

While Janet Yellen and her band of money printers work themselves into a tizzy over whether two buzz words—-“considerable time”—– should ...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




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...

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Zero Hedge

Treasuries Rally As Hilsenrath Hints "Considerable Time" Language Will Remain

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The last week has been dominated by sell-side strategists raising hawkish concerns about this week's FOMC with a focus on the drop of the "considerable time" language describing the period from the end of QE to the start of rate hikes. The Wall Street Journal's Fed-whisperer Jon Hilsenrath just dropped a rather large hint that that the "considerable period" language will remain... and bonds are rallying.

 

 

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Chart School

Producer Price Index for August Was Unchanged

Courtesy of Doug Short.

Today's release of the August Producer Price Index (PPI) for Final Demand was unchanged month-over-month seasonally adjusted. Core Final Demand was up 0.1% from last month. Investing.com correctly forecast Core PPI but was looking for a comparable 0.1% increase in the headline number.

The unadjusted year-over-year change in Final Demand is up 1.8%, up slightly from last month's YoY of 1.7%.

Here is the essence of the news release on Finished Goods:

The Producer Price Index for final demand was unchanged in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.1 percent in July and 0.4 percent in June. On an unadjusted basis, the index for final demand increased 1.8 percent for the 12 months ended in August......

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Promotions

See Live Demo Of This Google-Like Trade Algorithm

If GOOGLE, the NSA, and Bill Gates all got together in a room with the task of building the most accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you… they never got around to building it, but my colleagues at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing but traded a handful of conservative alerts since its inception, you would have experienced portfolio gains exceeding 200%!

Plus, when you register for the webinar you’ll g...



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Sabrient

Sector Detector: Bulls go down swinging, refusing to give up much ground

Courtesy of Sabrient Systems and Gradient Analytics

Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-r...



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OpTrader

Swing trading portfolio - week of September 15th, 2014

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 ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly. Enjoy!

[Sign in with your PSW user name and password, or take a free trial here.]

Image courtesy of Business Insider, Jay Yarow's This Is The Best Description Of How Apple's Business Works Right Now.

 

...

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Option Review

Big Prints In VIX Calls

The CBOE Vix Index is in positive territory on Friday morning as shares in the S&P 500 Index move slightly lower. Currently the VIX is up roughly 2.75% on the session at 13.16 as of 11:35 am ET. Earlier in the session big prints in October expiry call options caught our attention as one large options market participants appears to have purchased roughly 106,000 of the Oct 22.0 strike calls for a premium of around $0.45 each. The VIX has not topped 22.0 since the end of 2012, but it would not take such a dramatic move in the spot index in order to lift premium on the contracts. The far out-of-the-money calls would likely increase in value in the event that S&P500 Index stocks slip in the near term. The VIX traded up to a 52-week high of 21.48 back in February. Next week’s release of the FOMC meeting minutes f...



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Digital Currencies

Making Sense of Bitcoin

Making Sense of Bitcoin

By James Black at International Man

Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.

Opinions differ as to what constitutes "money."

The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...



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Market Shadows

Helen Davis Chaitman Reviews In Bed with Wall Street.

Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews In Bed with Wall Street. 

By Helen Davis Chaitman   

I confess: Larry D...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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