Archive for 2009

Property Rights Take a Hit

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In this article, Peter Schiff discusses the practical problems with a government’s abrogation of contract and property rights for some "contrived greater good." That is deeply disturbing enough but it goes further. Our Constitution gave specific powers to different branches of government to hold the powers of government in check. The loss of these checks and balances goes beyond the financial world "twilight zone" horrors unfolding before us now, it undermines the entire structure of our governance. – Ilene

Property Rights Take a Hit

By Peter Schiff, writing at LewRockwell.com

“Crony capitalism” is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law. Unfortunately, this week’s events demonstrate that the phrase now more aptly describes our own country.

On Monday, the Supreme Court refused to hear an appeal from Chrysler’s secured creditors based on the government’s argument that the needs of other stakeholders outweighed those of a few creditors. In this case, the Administration concluded the interests of the United Auto Workers outweighed the interests of the Indiana teachers and firemen whose pension fund sued to block the restructuring. Given the enormous financial support that the UAW poured into the Obama campaign, such partiality is hardly surprising.

When making their investment in Chrysler just a few months ago, the Indiana pension fund agreed to commit capital because of the specific assurances received from the company. In allowing this sham bankruptcy to be crammed through the courts, we have shredded the vital principal of the rule of law, and have become a nation of men, rather than one of laws.

The risk that legal contracts can now be arbitrarily set aside will make investors think twice before committing capital to distressed corporations. Oftentimes enforcing contracts imposes hardships. That’s precisely why we have contracts.

Without absolute faith that deals will be honored, it will be extremely difficult for U.S. companies to borrow money. This will be particularly true for those companies already struggling with too much debt. Without the ability to issue secured debt,
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Where Are We Now? Five Point Summary

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Where Are We Now? Five Point Summary

Courtesy of Simon Johnson of The Baseline Scenario

What happened to the global economy and what we can do about it

1. Financial markets have stabilized – largely because people believe that the government will not allow Citigroup to fail.  We have effectively nationalized any banking system losses, but we’ll let bank executives enjoy the full benefits of the upside.  How much shareholders participate remains to be seen; there will be no effective reining in of insider compensation (my version; Joe Nocera’s view).  For more on how we got here, see the Frontline documentary that airs on Tuesday and Paul Solman’s explainer wrap up.

2. The real economy begins to bottom out, although unemployment will not peak for a while and could stay high for several years.  Longer term growth prospects remain uncertain – has consumer behavior really changed; if finance doesn’t drive growth, what will; is the budget deficit under control or not (note: most of the guarantees extended to banks and other financial institutions are not scored in the budget)?

3.  More broadly, there is sophisticated window dressing in the pipeline but no real reform on any issue central to (a) how the banking system operates, or (b) more broadly, how hubris in finance led us into this crisis.  The financial sector lobbies appear stronger than ever.  The administration ducked the early fights that set the tone (credit cards, bankruptcy, even cap and trade); it’s hard to see them making much progress on anything – with the possible exception of healthcare.

4. The consensus from conventional macroeconomics is that there can’t be significant inflation with unemployment so high, and the Fed will not tighten before late 2010.  The financial markets beg to differ – presumably worrying, in part, about easy credit leading to dollar depreciation, higher import prices, and potential commodity price inflation worldwide.  In all recent showdowns with standard macro models recently, the markets’ view of reality has prevailed.  My advice: pay close attention to oil prices. 

5. Emerging markets are increasingly viewed as having “decoupled” from the US/European malaise.  This idea was wrong in early 2008, when it gained consensus status; this time around, it is probably setting


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We Waged a War Against Drugs, And Drugs Won

We Waged a War Against Drugs, And Drugs Won

marijuanaCourtesy of Mark J. Perry’s CARPE DIEM

Here in the United States, four decades of drug war have had three consequences:

1. We have vastly increased the proportion of our population in prisons. The United States now incarcerates people at a rate nearly five times the world average. In part, that’s because the number of people in prison for drug offenses rose roughly from 41,000 in 1980 to 500,000 today. Until the war on drugs, our incarceration rate was roughly the same as that of other countries.

2. We have empowered criminals at home and terrorists abroad. One reason many prominent economists have favored easing drug laws is that interdiction raises prices, which increases profit margins for everyone, from the Latin drug cartels to the Taliban. Former presidents of Mexico, Brazil and Colombia this year jointly implored the United States to adopt a new approach to narcotics, based on the public health campaign against tobacco.

3. We have squandered resources. Jeffrey Miron, a Harvard economist, found that federal, state and local governments spend $44.1 billion annually enforcing drug prohibitions. We spend seven times as much on drug interdiction, policing and imprisonment as on treatment.

It’s now broadly acknowledged that the drug war approach has failed.

 ~Nicholas Kristof in yesterday’s NY Times

 
 
MP: Note the "War on Drugs" is actually a war against generally peaceful American citizens who decide to buy, sell or ingest drugs that are somewhat arbitrarily considered to be illegal by government officials, e.g. cannabis sativa, an annual, dioecious flowering herb that grows naturally all over the world.

 

 


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The $3.6 Trillion Leveraged Loan Wall of Debt

For a free subscription to Phil’s Stock World, click here (it’s easy, no credit card required) – Ilene

The $3.6 Trillion Leveraged Loan Wall of Debt

Courtesy of Mish

The Deal Magazine has an interesting discussion about That Worrying Wall Of Debt.

The leveraged loan market got accustomed to big numbers over the past decade. There’s $3.6 trillion, the amount of leveraged loans made since 2000, according to Thomson Reuters’ Loan Pricing Corp. There’s 735-fold, the amount of growth between 2003 and 2007 in the volume of collateralized loan obligations — the funds that helped fuel the loan market’s surge after the tech and telecom bust of 2001. And there’s $375 billion, the amount of bank debt used to fund leveraged buyouts completed between 2005 and 2007.

But right now, the leveraged loan market is fixated on one number: $430 billion, the amount in leveraged loans due to mature between 2012 and 2014. Despite the big numbers of the past, this might be simply too big. Indeed, the $430 billion figure is already worrying lenders, borrowers and loan-market investors alike as they struggle with the possibility that a large portion of those loans will neither be repaid nor refinanced, raising the specter of a wave of defaults among the debt-fueled LBO borrowers of 2005 through 2007.

As one executive at a private equity firm describes it, the availability of so much cheap debt profoundly affected how sponsors did business because it encouraged them to change their focus. "The PE firms were not investing in specific industries," he says. "They were investing in the capital markets."

This strategy was predicated on faith that loans could be continually refinanced, that exit options in the form of the equity markets or mergers and acquisitions fueled by more financing would be easily available and lead to profits that justified the outsized risk the sponsors were taking. There was also the belief that an ever-expanding economy would allow companies to keep increasing their Ebitda and pay down debt. The strategy had more than a few similarities with the one used by people who borrowed in increasing amounts to finance home purchases and hoped for either a quick flip or continually rising prices that would make debt more manageable.

The article discusses various ways that this debt can be paid back, but I am inclined


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California Foreclosure Moratoriums An Exercise Of Stupidity

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California Foreclosure Moratoriums An Exercise Of Stupidity

Courtesy of Mish

Except for bankruptcy attorneys, most want the massive spike in foreclosures to end. However, it is impossible to wish foreclosures away or for that matter legislate them away. Unfortunately, economic illiterates do not understand the dynamics.

Please consider CA Lawmakers Impose 90-Day Foreclosure Moratorium.

California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

But supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.

This bill is no more likely to work than a bill declaring poverty to be illegal or the sky to be green.

Home prices will bottom when they bottom, unemployment will bottom when it bottoms, and foreclosures will stop when they stop. Those are simple economic facts.

The 90 day extension gives anyone sitting on the edge of walking away as well as those wanting a reduction in principle an incentive to stop paying their mortgage, safe and secure in the fact they cannot be thrown out of their house for another 90 days.

This bill is pure idiocy and will not stop a single foreclosure. Instead, the bill will increase late pays and foreclosures. It’s an exercise of sheer stupidity.

Mike "Mish" Shedlock
 


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Dow Theory Nonconfirmation in Transports and Industrials

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Dow Theory Nonconfirmation in Transports and Industrials

Courtesy of Corey Rosenbloom of Afraid to Trade

There’s interesting chatter in the “Dow Theory” community as to whether we’re experiencing a non-confirmation in the Industrials and Transports currently – namely, the Industrials are at a new high for 2009 and are above the 200 day SMA while the Transports are not.  Let’s take a look at both.

Dow Jones Industrial Index:

One may also ask the question “Is there a ‘Three Push’ Reversal pattern forming in the Dow Jones?”  It would appear so, with three consolidating ‘pushes’ or impulses up that have formed on three lower highs in the 3/10 Momentum Oscillator.  That alone is a serious non-confirmation of higher prices.

We also see a volume divergence setting in underneath price, with volume in the Dow Jones Index (1.1 Billion today) reaching a level that is clearly below the recent average – more importantly is the “trailing off.”

One can also see the multitude of ‘dojis’ (often known for their ‘reversal’ signal) that have formed over the last two weeks – that is showing signs of serious indecision.

In terms of Dow Theory, the Industrials have made a new high and have risen above their 200 day Simple Moving Average which is classically bullish… but the Transports Index has not.

Dow Jones Transportation Index:

Again, while the Dow recently formed new highs for 2009, the Transports could neither break above their May highs nor its 200 day simple moving average.

A negative momentum divergence has also formed as well as a negative volume divergence.

I could have easily titled this post “Major Sell Signal in the Dow Jones Index” but I dare not be so bold, given the ability of the market to rise against a negative fundamental and technical backdrop.

From a chart (technical) standpoint, the chart is literally screaming “sell signal,” but still we operate in a world of probabilities and stranger things have happened, so do continue to guard your risk and do your own analysis for additional insights.

Corey Rosenbloom, CMT
Afraid to Trade.com

 

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Key Quotes from Biden on the Stimulus

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Key Quotes from Biden on the Stimulus

Courtesy of TIME, Mark Halperin

From NBC’s "Meet the Press":

"No one realized how bad the economy was. The projections, in fact, turned out to be worse. But we took the mainstream model as to what we thought — and everyone else thought — the unemployment rate would be."

"Everyone guessed wrong at the time the estimate was made about what the state of the economy was at the moment this was passed."

"The bottom line is that jobs are being created that would not have been there before."

"Can I claim credit that all of that’s due to the recovery package? No. But it clearly has had an impact."

Photo: Getty, courtesy of TIME

 


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How to Earn a Free PSW Membership (and Make Money Too)

20,000 referrals!

That's pretty good and up 1,000 since May 1st so thanks so much to all who have participated this year.  Unfortunately, I could write out the names of the participants and thank them individually with far less words than I will actually use in this post!  Still in our first year of the PSW Report we now have over 20,000 Email subscribers.  Thank you so much to Members who referred their friends to Free Trial Newsletter Subscriptions using this very simple member link

Amazingly, even with the incentive of locking in either a bonus 20% discount or a Free Newsletter Subscription through next quarter for referring just ONE person, many people did not refer anyone.  I saw the movie "UP" with my kids last year and, if that grouchy old man can make a friend, I'm sure you guys can find one too - so I'm going to give everyone a second chance this month to earn their bonus 20% discount by referring 5 people to our FREE EMail Newsletter.  

My goal is to get 50,000 people on the newsletter list.  OK, actually my real goal is to get 100,000 but we'll start with 50,000 and work from there!  If you are a newsletter subscriber, this affects you too as the free trial subscription lasts 3 months but you can keep it FREE by referring another person.  All that is required is your friend's name and EMail address put in the little box and, like magic (if you can accomplish this feat 5 consecutive times) you will save 20% on your next renewal (if you haven't already gotten the bonus discount of course) or extend your FREE newletter subscription.  The person you are sending the newsletter to must "Opt In" (accept your invitation).  Once they do, you'll see the credits right on your member page.  This is IN ADDITION to any other discounts you already have on our new system (which also gives members a discount based on time as a member).

Members are already seeing the benefits of expanding our subscriber base, we have been able to build new relationships, bring in more writers and enter into arrangements like our new reports from the Value Walk with regular reports from from OpTrader, etc.  Our plan is working perfectly – we are building up subscribers and bringing on great new services but we have to keep it going so please - refer a friend this week! 

The idea behind…
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Tomgram: Michael Klare, Goodbye to Cheap Oil

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Tomgram: Michael Klare, Goodbye to Cheap Oil

Courtesy of Tom Engelhardt’sTomDispatch.com, with guest author Michael T. Klare

Buckle your seatbelt, you may be going nowhere — and it could be a very bumpy ride. Oil futures have just passed $71 for a barrel of "light, sweet crude oil" (sweet for energy stocks, anyway) on its way to… well, we don’t know exactly where, but it won’t feel good, not at the pump and not in the economy either. In the Midwest and scattered other locations, gas prices are already at the edge of $3.00 a gallon and the height of summer isn’t even upon us.

Much of this sudden rise has been fueled by OPEC production cuts, investor dreams of a global economic recovery (and so a heightened desire for energy), and the enthusiasm of market speculators. Explain it as you will, the price of crude, which hit a low of about $32 a barrel in December, as the planet seemed to meltdown economically, has doubled in recent months.

Oil is like the undead. Just when you think it’s gone down for the count, it rises from the grave ravenous. As Clifford Krauss of the New York Times reported recently, gas prices have risen 41 days in a row, and yet the price at the pump is still "lagging behind the increase in the price of oil." According to Tom Kloza, chief oil analyst at the Oil Price Information Service, consumers are now shelling out one billion dollars a day to keep their tanks full. (It was $1.5 billion last summer when the price of a barrel of oil hit an astronomical $147.)

Whether this is the energy version of irrational exuberance and a mini-bubble to be burst as further economic bad times hit or the reality of our near future, sooner or later, far worse is in store on the energy front, as Michael Klare, author of Rising Powers, Shrinking World: The New Geopolitics of Energy, makes clear. But don’t listen to him. Instead, check out his latest energy scoop — the real news he found buried in the most recent report from the U.S. Department of Energy, whose seers have put irrational exuberance


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Ron Paul on HR 1207

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Congressman Ron Paul on the Federal Reserve Transparency Act, HR 1207:

 

 

 


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ValueWalk

Wage Inflation - Gradually And Then Suddenly

By Salient Partners. Originally published at ValueWalk.

“How did you go bankrupt,” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

“What brought it on?”

“Friends,” said Mike. “I had a lot of friends.”

? Ernest Hemingway, The Sun Also Rises (1926)

How Trump’s nominee for the Fed could turn central banking on its head Buy The Dip: BAML Eurozone equity rally remains on – but ECB set to change m...

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Zero Hedge

EU Faces Dilemma: To Stand Tall Or Kneel

Courtesy of ZeroHedge. View original post here.

Authored by Alex Gorka via The Strategic Culture Foundation,

The White House indicated that President Donald Trump is preparing to sign a sweeping Russia sanctions measure, which the House took up last...



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Insider Scoop

What Moves US Steel Shares More, Earnings Or Trump Talk On Trade?

Courtesy of Benzinga.

Related X 20 Stocks Moving In Wednesday's Pre-Market Session 12 Stocks To Watch For July 25, 2017 ...

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Phil's Favorites

Senate GOP advances a health care bill. Now what?

 

Senate GOP advances a health care bill. Now what?

Courtesy of Jeffrey Lazarus, Georgia State University; David McLennan, Meredith College, and Rachel Caufield, Drake University

On July 25, Senate Majority Leader Mitch McConnell narrowly managed to keep a Republican effort to reform health care alive. We asked our experts to consider the importance of this procedural vote and what happens next.

Jeffrey Lazarus, Georgia State University

Which...

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Digital Currencies

SEC Cracks Down On "Initial Coin Offerings": Concludes Tokens Are Subject To Securities Laws

Courtesy of ZeroHedge. View original post here.

In potentially groundbreaking news for the blockchain community, moments ago the SEC issued a press release, referencing an investor bulletin on Initial Coin Offerings, which concluded that DAO Tokens, a Digital Asset, are securities for ...



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Biotech

Biologics: The pricey drugs transforming medicine

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

 

Biologics: The pricey drugs transforming medicine

Courtesy of Ian HaydonUniversity of Washington

The cells inside this bioreactor are the real pharmaceutical factories. Sanofi Pasteur, CC BY-NC-ND

In a factory just outside San Francisco, there’s an upright stainless steel vat the size of a small car, and it’s got something swirling inside.

The vat is stud...



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Chart School

Tech Gaining Momentum. Small Caps Recover.

Courtesy of Declan.

Tech markets continued the good work from Friday as buyers continued to bid up the Nasdaq and Nasdaq 100. Large Caps posted small losses but this was more about attention elsewhere than any Large Cap specifics.

The Nasdaq experienced a mini-breakout from the consolidation over the last 3 days (traders on the hourly time frame may find some joy here) which keeps the index on course to test larger upper channel resistance. Technicals are net bullish but its relative performance against peer indices which is doing particularly well; Large Caps in particular.

...

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OpTrader

Swing trading portfolio - week of July 24th, 2017

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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Members' Corner

Why we need to act on climate change now

 

Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...



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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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Just click here at 1 pm est and join in!

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan 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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About Phil:

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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