I rely on a variety of resources, including newsletters, blogs, and the mainstream media, to try and figure out what the future holds.
One publication that has always been helpful in this regard is Barron’s, the investment weekly, which I’ve been reading for several decades. Among the features I enjoy are Alan Abelson’s Up and Down Wall Street column and the Q&As with experts who, in many cases at least, seem to have been selected because they actually know what they are talking about (unlike many of those who are regularly quoted or profiled elsewhere).
What I especially look forward to, however, are the "Roundtable" issues, which feature articles drawn from moderated discussions between a select group of old hands, many of whom I respect a great deal.
Luckily enough (for those who don’t subscribe, at least), the financial weekly seems to be running a promotion whereby some of the material from the January 10th issue, which includes the first installment of the Annual Roundtable discussion, is available for free to nonsubscribers (though I’m not sure how long that will last).
Anyway, here is an excerpt from the article, entitled "Hang on Tight!" which includes a welcome sampling of the always straight-shooting and thought-provoking insights of Marc Faber and Fred Hickey.
Our go-to group of investment experts sees tough times for the economy — but good fortune for stockpickers.
ONCE UPON A TIME, WE LIVED IN A WORLD where asset-price inflation begat leverage, which begat more asset inflation, in a virtuous circle known as the great bull market. We bought bad art, good wine and vacation homes (many), and stocks "on the dips," which made us rich. And geniuses, of course.
Then the big, bad wolves — greed and excess — came and popped our bubble, and the markets’, and all the pretty assets fell to earth. The fairy god-mother — bearing a strange name for a godmother, Uncle Sam — tried to clean up the mess with great gobs of money, but little success. The
Having earned been paid $115 million since 1999 for taking lunch and, on a busy day, pontificating, former Treasury secretary Bob Rubin capped his payoff for helping debauche Glass-Steagall, without which intervention Citi might still be a functional financial institution rather than a ward of state.
Not forgetting, of course:
Inside and outside the bank, Mr. Rubin is blamed by some for pushing Citigroup to rev up risk-taking as the housing and derivatives bubbles expanded — a move that has saddled Citigroup with tens of billions of dollars in write-downs and necessitated a sweeping government bailout of the financial giant…Citigroup’s share price is down 70% since he came on board.
In the next turn of the revolving door, NakedShorts has the over/under on Hank Paulson joining the board of JP Morgan Chase (or similar) at Sep. 2009. And is taking the under. (Related links after the jump).
Bailing on another Ponzi
The eponymousJ. Ezra Merkin resigned as chairman of GMAC LLC, slipping over the gunwales of the Cerberus-GM joint venture under cover of a “board restructuring” triggered by a TARP-funded bailout that, but for the fact that TARP has no rules other than whatever Hank & Neel say they are, seemed to have broken every rule in the book.
Mr Merkin stands at an intersection of two of the largest current business stories — the federal bailout of the auto companies and the Madoff financial scandal.
In addition to being chairman of GMAC, Mr Merkin is a hedge fund operator who invested more than $1.8 billion of his clients’ money with Mr Madoff. Mr. Merkin’s three private investment funds — Ascot, Ariel and Gabriel — are among the largest of the so-called feeder funds that placed investors’ money with Mr Madoff without their knowledge, according to the investors. Mr Merkin collected millions of dollars in management fees annually for his work.
Among all the allegedly professional money managers hit by the Madoff fraud, Merkin has been
Here’s another EW analysis, making it clear that EWers in general believe that the market is approaching a turn from a corrective move up (wave 4) to a final move down (wave 5) to complete an Elliott Wave cycle. Differences between analyses are in the details of current wave 4, with the consensus being that wave 4′s end will result in another significant leg down in the markets.
Three updated charts of the S&P 500 index as of Friday’s close. In descending order, the Weekly, the Daily and a 60 minute chart.
The chart above is our main compass, a Weekly S&P 500 chart that is in the midst of a five wave sequence down from the 2007 highs. There are three clearly designated completed waves and by implication, a Wave 4 that has been sliding and slinking its way sideways to up against the major downtrend. A previously drawn wedge is placed earmarking this 4th Wave with the hope of isolating either an extended Wave 4 by a break upwards out of the wedge, or a completed Wave 4 by a breakdown below the wedge. As is obvious, neither an up or down breakout has yet occurred. By zeroing in on a couple shorter time frames, maybe we can glean some clues as to which way prices are headed.
Above is a Daily chart with a broader view of the 4th Wave. I’ve drawn in a channel that encompasses all price action since the November 21, 2008 low. Superimposed on that price action is a simple ABC sequence culminating with a Wave 4 top as of the close on Tuesday, January 6, 2009. What isn’t clear on this chart is whether or not Friday’s decline broke the bottom of that upward rising channel. For some clarity, let’s look at the 60 minute chart below.
Whoa, Nellie (not an orthodox Elliott observation), this chart shows a break of that lower trend line clear as a bell.
The phrase means simply "very clear." A bell is used as a model of clarity because the sound of a bell
Citigroup signaled a breakup of its unwieldy financial supermarket model with a possible deal to sell a share of its prized retail brokerage business to Morgan Stanley, said several people with knowledge of the discussions, underscoring the enormous problems the bank continues to confront even after receiving taxpayer bailout funds.
The new chapter of wrenching change came as former Treasury Secretary Robert E. Rubin, who came under fire for his strong support of that model in an advisory role that helped fuel the bank’s troubles, said he would resign.
The developments highlight how badly Citigroup has been damaged by the global financial crisis. Deepening losses, declining confidence in its leadership and a desperate need to raise capital have forced the bank to rethink the strategy it has clung to for years.
“This is either a one-off or the first inkling of a dismantlement of the company, taking apart of what John Reed and Sandy Weill did,” a senior executive with ties to the company said, referring to the two leaders who forged the landmark deal to bind Citicorp and Travelers Group in 1998.
With pressure mounting on Vikram S. Pandit, Citigroup’s chief executive, the company’s executives say the decision to split off Smith Barney, the “crown jewel” brokerage business he said he loved a few months ago, suggests the bank’s troubles are so deep that he is looking to reshape the company in a former image of itself.
While a deal is not yet final, such a change would position Citigroup to look more like Citicorp — a global franchise with strengths in trading, corporate and investment banking, and international consumer banking — than the bloated and unwieldy company it has become.
It also could lead to yet another shift in power on Wall Street. A joint venture with Morgan Stanley would create the nation’s largest brokerage network of 20,000 advisers, edging out Merrill Lynch’s thundering herd of brokers that Bank of America snapped up in September. Citigroup and
Securities regulators have done a lot of stupid things over the past year, but the SEC’s temporary ban on short selling financial stocks was probably the biggest. SEC chairman Chris Cox called it the biggest mistake of his tenure and the unintended consequences to Hedgistan, combined with the downfall of Lehman Brothers, unleashed a 1-2 punch that decimated the gang that probably deserved a medal, as opposed to the enema they received.
My take is that Hank Paulson (after being goaded by brokerage CEOs) strong-armed Cox into the move; intimidation seems to be a big part of Paulson’s management style. Bernanke does not seems to stand up to him either and will finally crawl out from under his desk as Paulson leaves town in two weeks.
But one of the more asinine proposals regulators have been floating is to restrict communication between money managers. Dan Loeb of Third Point LLC is never one to back down from a scrap, and penned a response to regulators who were seeking to blame shorts for talking amongst themselves and driving down the stocks of brokers:
Such conversations permit us to test our hypotheses and refine our thinking and, as a result, we believe that participating in give-and-take with other managers is in the best interest of our investors. Our outside counsel has examined this matter thoroughly and assured us that our position is consistent with the securities laws and that we have not violated any law in connection with these communications.
Now an industry group is rallying behind Loeb and the BuySide. Great news, but what took so long?
The hedge fund industry is concerned that a proposed FINRA rule designed to prevent the intentional circulation of rumors for the purpose of manipulating the market will interfere with the beneficial free flow of investment ideas. In a letter to FINRA, the Managed Funds Association said that proposed Rule 2030 would impair the ability of money managers to receive and investigate the validity of market information and have a negative impact on the overall efficiency of the marketplace. The MFA urged FINRA…
ROBIN HIT THE BULLSEYE AGAIN THIS WEEK!! THE FOLLOWING IS THE NARRATIVE FROM LAST SATURDAY’S 1/3/2009 BLOG WHEN ANALYZING THE DOW AFTER IT HAD CLOSED THE WEEK AT 9035:
“My bet is that the index may flirt with higher levels but very briefly and then will retrace to test 8348.”
THE DOW CLOSED AT 8599 ON FRIDAY [...]
-The INDU closed Friday right on its’ lower trendline. The bearish move of this past week could begin to falter at this level, however, the index is more likely to continue its’ retracement to retest recent lows at 8348. We are moving in a 700 point range between 8348-9065. From a longer-term perspective, we have been making a [...]
In the beginning of our series on Risk Graphs, we talked about each of the individual trading instruments. Among those discussed was the short call. The short call is a marvelous tool when used in tandem with other instruments. However when used alone, it is known as a ‘Naked [...]
Any way that you measure it, we’re in for some rough sledding ahead. We are about to see the result of a disastrous 4th quarter 2008 in the upcoming earnings season. Already, we’ve gotten some ‘Same Store Sales’ figures on several retailers and they weren’t pretty. Jobs numbers indicate further job losses. We ended the [...]
Early last week, stocks broke out, with the S&P 500 setting a new high with blue skies overhead. But then the market basically flat-lined for the rest of the week as bulls just couldn’t gather the fuel and conviction to take prices higher. In fact, the technical picture now has turned a bit defensive, at least for the short term, thus joining what has been a neutral-to-defensive tilt to our fundamentals-based Outlook rankings.
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-ranked stocks from the t...
The chart above takes a look at the U.S. Dollar/Yen ratio over the past few decades. Monthly resistance line (1) has been in play for the past 18-years. As the month of May is nearly over with, the US$/Yen is making an attempt to break above this long-term resistance line.
It is frequently expressed that Yen weakness, can be a positive for the Nikkei 225 index. Below looks at the Nikkei Monthly, over the past 30-years.
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
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Understanding the new normal of a business model is key to the success of any company. The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place. Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.
Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants. This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales. However, in the c...
Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.
On Monday, the Nasdaq (NDAQ) stock exchange said it would ...
Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching.
Phil writes: If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher. Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8. So, if anything, I think the pressure should be up, not down.
UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
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 firstname.lastname@example.org 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.
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 PSW Investments, LLC d/b/a PhilStockWorld (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.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.