With more people focusing in on Elliott Wave as the current decline from 2007 conforms to an ideal Elliott Pattern, let’s take a look at a potential count that begins in October 2007 and is broken-down in respective subdivisions all the way to March 2009.
S&P 500 Daily Elliott Wave Structure:
(You’ll need to click to view the full picture)
I won’t go into much detail so as to let the proposed wave labeling speak for itself.
I’m relatively new to Elliott Wave and am stunned at how the Wave Structure has played out almost perfectly to the rules and guidelines developed by Ralph Elliott in the 1930s.
Impulse Waves subdivide into 5 Waves (in the larger trend) and Corrective Waves (labeled “ABC”) subdivide into 3 Waves.
The 3rd is never the shortest, but is oftentimes the longest wave (this plays out on almost all subdivisions).
What’s amazing me is that if you look closely, the October near-vertical downward plunge is located in the Wave Structure exactly where you would expect it to be, confirming the count: Sub-Wave 3 of Fractal Wave (3) of Major Wave 3 down. To me, that’s chilling.
It’s also known as the “Point of Recognition” where people begin to “catch on” that we’re in a bear market and they generally stop buying pullbacks. Until then, it was feasible to some investors that things weren’t so bad… though October officially changed that all.
Now, it seems everyone’s a bear and people – even on TV – are saying we’re going to be headed down for a long time and there’s no bottom in sight…
But if you look at the Wave Structure, we need a Wave (4) up and then a Wave (5) down to finish off Circled (Major) Wave 5 before launching upwards into some sort of upwards ABC Correction.
For now, take a moment to study over the Price Wave Structure that began in October 2007 and try to internalize it – to me, it appears a textbook example in real life of the Elliott Wave Principle.
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AIG will receive additional federal assistance of up to $30 billion as part of a revamped government bailout, The Wall Street Journal’s online edition reported Sunday, citing unnamed sources.
This morning details of what the next Government (taxpayer) bailout of American International Group (AIG) will look like are beginning to unfold. Also tomorrow morning (AIG) is expected to announce the largest corporate loss in United States history.
(AIG’s) Board of Directors are being called to a special Sunday night meeting to vote on another rescue for the company.
Information coming off the wires…
BOARD TO VOTE ON NEW BAILOUT PACKAGE THAT WOULD EASE THE TERMS OF THE BAILOUT!
- The revised (AIG) agreement is expected to include an additional equity commitment of about $30B, more lenient terms on an existing preferred investment, and a lower interest rate on a $60B government credit line
- The new equity commitment would give (AIG) the ability to issue preferred stock to the government at a later date
- (AIG) will also give the Federal Reserve ownership interests in American Life Insurance (Alico), which generates more than half of its revenue from Japan, and Hong Kong-based life insurance group American International Assurance Co (AIA) in return for reducing its debt
- (AIG) may also securitize some U.S. life insurance policies and give them to the government to further reduce its debt.
I think our great Government is really trying to find a way to put the taxpayer squarely at risk for taking the hits on these so called toxic assets by spinning some nonsense about getting a great deal on their value. Twenty five cents on the dollar are some numbers currently circulating. Check out this article “propping up a house of cards”. It seems surreal and amazing that our Government poured 250 billion into (AIG)…a quarter of trillion dollars to save this company. It is a penny stock for god sakes and (AIG) is just an empty shell. Throwing
Braunie at The Market Guardian is not optimistic that Warren Buffett’s investment style will make a successful comeback any time soon. As Joe Weisenthal‘s article (below) further illustrates, it’s not only the change in market forces that is so discouraging, but also the government’s ability and willingness to change the rules mid-game.
The Oracle Warren Buffett told his shareholders Saturday that 2008 was the company’s worst year on record, as the per share value of both the Class A and Class B stock fell 9.6%. In his annual letter, Buffett said neither he nor Charlie Munger, his partner in running Berkshire, can predict winning and losing years in advance, and that no one else can. “We’re certain, for example, that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond – but that conclusion does not tell us whether the stock market will rise or fall.”
The Old Oracle Buffett has had the worst 5 months in his career. His balance sheet is filled with bull market positions in this bear market. He hasn’t hedged his $38 billion of short puts. Warren is watching his fully invested position go down the drain. If stocks go to the p/e levels of 7-9x that we saw in ’74, he will be wiped out. I was recently reading an article where the author (a respected trader) said that he suspects Berkshire could be going to ZERO within the next 12 months. Seems very far fetched but who would have thought a year ago Dow 6000’s?
Mr. Buffett’s October investments were a complete show to help build confidence in the market. His infusions into Wells Fargo and Goldman Sachs were at least as dumb as the GE debacle. The act was stupid and egotistical of Buffett to think he could control market psychology. Buffett failed to recognize the situation for what it was -the end of an economic era. Like Greenspan, could this Guru of investment soon be a discredited?
It’s very sad to think Warren Buffett will witness the destruction of the company he built so many years ago. An entire
Since I’ve been writing about preferred and common stock so much this week, I thought I would just try to explain the arithmetic of the Citigroup deal announced today. (By the way, it isn’t a done deal: all it says is that Citi is offering a preferred-for-common conversion to its outside investors, and the government will match them dollar-for-dollar, although the WSJ says that several investors have agreed to participate.)
Right now, according to Google Finance, Citi has 5.45 billion common shares outstanding. It is offering to convert up to $27.5 billion of preferred shares held by “private” investors other than the U.S. government (like the government of Singapore and Prince Alwaleed) into common shares, at a conversion price of $3.25. That would create another 8.46 billion shares. For every dollar that is converted, the U.S. government will also convert one dollar of its preferred stock, up to $25 billion; that is the $25 billion from the first round of recapitalization back in October, which is paying a 5% dividend. (Fortunately someone realized we should convert that before converting the second chunk, which pays 8%.) That would create another 7.69 billion shares. So if everyone converts as much as possible, there will be 21.60 billion shares outstanding, of which the U.S. government will own 7.69, for an ownership stake of 36%, the number you read in the papers. (Actually, if the private investors convert exactly $25 billion and not $27.5 billion, the government would own 37%, but that’s a detail.) The other private investors would own 39%, and current shareholders would own 25%.
The government got some warrants on common shares in connection with the earlier recapitalizations. I assume the warrants it got for the first investment will no longer exist (because that first investment is being “paid back”), but the warrants on the second investment, if exercised, would presumably push the government up a couple percentage points.
Where did the $3.25 price come from? Who knows. Yesterday’s closing price was $2.46. If that price had been used, the government’s target ownership percentage would have been 38% instead of 36%,
We were bearish going into the week but not this bearish. It is unusual though that we have a weekly wrap-up with nothing but negative plays as we did last week but there was nothing very positive in the outlook after the action of the week of the 16th through the 20th, pictured here on this chart.
As I said in the last Weekly Wrap-Up: "Of course nothing beats sector specific covers against your own mix of positions but we like using the DIA puts as general virtual portfolio coverage although, as I mentioned last week, both the DAX and the Qs may now have farther to fall." The Qs ended up dropping 8.5% for the week while the DAX tumbled 6%, underperforming other global indexes as we had expected it would. Our hedge play , the DIA June $77 puts, which we went with at $8.22 on Friday and half covered with March $75 puts at $3.85 ended up at $9.85 and $5.40, not much improvement but accomplishing it’s goal of converting a net $6.29 entry into puts that are now 100% in the money to our net entry. At this point, every point down on the Dow is a penny we realize in intrinsic value. Per our original plan, the $75 puts can still be rolled to 2x the Apr $66 puts, now $2.32, allowing for our long puts to be $11 in the money against the puts we sold. The reality is more complex than that as we day-traded the covers around and rolled up the longer puts but we went into this weekend with the same bearish half-cover, not wanting to take chances after Friday’s poor performance.
On Monday morning, I was not at all enthusiastic about our prospects for the week as we had the Bernanke testimony Tuesday and Wednesday and Trichet started us off with a thud by stating: ""In recent weeks we have seen the first signs of falling credit flows. An important part of this fall is demand-driven. However…there are indications that falling credit flows reflect also supply-side factors and tight financing conditions associated with a phenomenon of deleveraging. If such a behavior became widespread across the banking system, it would undermine the raison d’etre of the system as a whole." Perhaps he was channeling Nouriel Roubini, who on Saturday had told the Wall Street Journal: "J.P. Morgan…
Citigroup plunged 39% on Friday to $1.50, a price last seen in 1992.
The plunge was in response to a Citigroup U.S. Accord on a Third Bailout that will convert the government’s preferred shares to common, thereby diluting existing common shareholders and exposing US taxpayers to more losses.
Citigroup Inc. and the federal government agreed to a third rescue that will give U.S. taxpayers as much as 36% of the bank but expose their ownership stake to greater risk from the recession and housing crisis. The deal will punish existing shareholders of Citigroup, who will see their stake diluted by 74%, and likely do little to change the awkward relationship between federal officials and management of the New York company.
Depending on how many current holders of Citigroup preferred stock agree to a similar move, the company’s tangible common equity could surge to $81.1 billion from $29.7 billion at Dec. 31. That would reverse the recent slide in tangible common equity — a gauge of what shareholders would have left if the company were liquidated — that fueled a downward spiral in Citigroup shares.
The conversion leaves taxpayers exposed to the risk of greater losses. The government’s preferred holdings had stood ahead of common stock in Citigroup’s capital structure, meaning they were less likely to lose value if the company’s woes continue to mount. In addition, by converting much of the U.S. stake to common shares, Citigroup won’t have to pay the hefty dividend payouts that were attached to the preferred stock.
"The government is bending over backwards to not go along the lines of nationalization," said Bernie Sussman, chief investment officer of Spectrum Asset Management, a unit of Principal Financial Group Inc. that manages about $6.9 billion in assets. "They had the alternative to completely zero out the common stock."
First of all, stop right now if you haven’t read Warren Buffett’s Chaiman’s Letter in the Berkshire Hathaway Annual Report. He can tell you a lot more about the state of the economy than I can. Although I will go over some of the highlights of The Oracle of Omaha’s 100-page report, you should read the whole thing – go ahead and read it, then come back – I’ll wait…
Berkshire Hathaway has produced a compounded annual gain in value of 362,319% since it’s founding in 1964, about 10 times what you would have gotten investing in the S&P 500, roughly a 20% annual growth rate. Included in that figure is a 9.6% decrease in book value last year, the first loss since 2001 and the second loss EVER. The average S&P company dropped 37% of their book value in 2008 and this year is looking worse already. "By the fourth quarter," says Mr. Buffett, "the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear."
Buffett does not provide a positive outlook, he expects a rough 2009 and "for that matter, probably well beyond" but that does not shake his outlook that, over time, investments made today will pay off in the future. He has a quote that is almost identical to one of mine: "Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down."
Commentary on the housing market was: "The 1997-2000 fiasco should have served as a canary-in-the-coal-mine warning for the far-larger conventional housing market. But investors, government and rating agencies learned exactly nothing from the manufactured-home debacle. Instead, in an eerie rerun of that disaster, the same mistakes were repeated with conventional homes in the 2004-07 period: Lenders happily made loans that borrowers couldn’t repay out of their incomes, and borrowers just as happily signed up to meet those payments. Both parties counted on “house-price appreciation” to make this otherwise impossible arrangement work. It was Scarlett O’Hara all over again: “I’ll think about it tomorrow.” The consequences…
When high-ranking executives are fired from a company, for whatever reason, they don’t go to the back of the unemployment line. Instead, they typically receive compensation in the form of the “golden parachute.” Golden parachutes can include severance pay, cash bonuses, stock options or other benefits. In the case of the financial crisis and the ensuing bank failures, if it seems like these executives are being rewarded for poor performance, you may be right. Here’s a look at what some bankers made on their way down.
Acknowledging that "we cannot borrow our way out of debt," Ellen Brown suggests the Federal Reserve stimulates our debt-ridden economy by creating new, essentially interest-free money, which does not have to be paid back. Here’s how.
“Diseases desperate grown are by desperate appliances relieved, or not at all.” – Shakespeare, “Hamlet”
Moody’s credit rating agency is warning that the U.S. government’s AAA credit rating is at risk, because it has taken on so much debt that there are few creditors left to underwrite it. Foreigners have bought as much as two-thirds of U.S. debt in recent years, but they could be doing much less purchasing of U.S. Treasury securities in the future, not so much out of a desire to chastise America as simply because they won’t have the funds to do it. Oil prices have fallen off a cliff and the U.S. purchase of foreign exports has dried up, slashing the surpluses that those countries previously recycled back into U.S. Treasuries. And domestic buyers of securities, to the extent that they can be found, will no doubt demand substantially higher returns than the rock-bottom interest rates at which Treasuries are available now.1
Who, then, is left to buy the government’s debt and fund President Obama’s $900 billion stimulus package? The taxpayers are obviously tapped out, so the money will have to be borrowed; but borrowed from whom? The pool of available lenders is shrinking fast. Morever, servicing the federal debt through private lenders imposes a crippling interest burden on the U.S. Treasury. The interest tab was $412 billion in fiscal year 2008, or about one-third of the federal government’s total income from personal income taxes ($1,220 billion in 2008). The taxpayers not only cannot afford the $900 billion; they cannot afford to increase their interest payments. But what is the alternative?
How about turning to the lender of last resort, the Federal Reserve itself? The advantage for the government of borrowing from its own central bank is that this money is virtually free. This is because the Federal Reserve rebates any interest it receives to the Treasury after deducting its costs, and the federal debt is never actually…
Most markets these days are manipulated to some extent, and this is nothing new if we look back through the history of financial markets. But there are some strange things happening right now in the oil market worth mentioning.
U.S. equity futures traded lower in early pre-market trade following a weaker than expected GDP report from the eurozone for the first quarter. GDP growth rose to -0.2 percent on a quarterly basis from -0.6 percent but missed forecasts of a 0.1 percent contraction. Weakness was notably seen in Germany, France, and Italy in the report, with the annualized rate of growth for Germany dropping to -1.4 percent vs. 0.2 percent growth forecast.
In other news around the markets:
The U.K. had fewer people claim unemployment benefits in April than expected, a positive sign for the labor market as the ...
Bernard Baruch (August 19, 1870 – June 20, 1965) was the son of a South Carolina physician whose family moved to New York City when he was eleven year old. By his mid-twenties, he is able to buy an $18,000 seat on the exchange with his winnings and commissions from being a broker. By age 30, he is a millionaire and is known all over The Street as "The Lone Wolf".
In his two-volume 1957 memoirs, My Own Story, Baruch left us with the following timeless rules for playing the game:
“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any &lsq...
So, what did the market want today? Nothing it appears. It traded on weak volume and had very little movement. This morning the market hated commodities especially silver, but by days end, the market liked silver, gold and even oil but not the dollar. Why?
Last week the economic reports were tough, with bad misses on more than one occasion. But the market tended to ignore the bad news, probably because money continues to pour into equities from money market funds, long term fixed income, and many struggling foreign economies. On Thursday, investors finally caved to even more bad news from Initial Jobless Claims and weak Housing Starts. Then on Friday, when Michigan Sentiment and Leading Indicators posted large positive surprises, the money came pouring back to generate qui...
It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, the average for Regular increased seven cents and Premium four cents. This is the third week of price gains after nine weeks of declines, which followed eleven weeks of price rises. Since their interim high in late February, Regular is down 11 cents and Premium 16 cents.
According to GasBuddy.com, eight states are averaging above $4.00 per gallon, up from four last week. Six states are in the 3.90-4.00 range, up from two last week.
VOYA - ING US, Inc. – Shares in ING Group’s U.S. retirement, investment and insurance business are up as much as 8.0% today to $26.98, the highest level since the company’s May 2nd IPO. ING US was rated new ‘buy’ at BTIG LLC with a 12-month target share price of $31.00 today. The stock has rallied nearly 40% over the IPO price of $19.50, and some options traders are positioning for the price of the underlying to extend gains during the second half of the year. November expiry options are the most ac...
Again, not much to add to this market in terms of analysis – nothing matters other than central banks. Last Wednesday/Thursday there were some 9 economic reports, 7 of which were disappointing or could be considered as such and all it got was one rare day down, and then new highs Friday. Markets are up 10 of the past 12 sessions and 17 of 21. Friday's move to 1666 was an exact 1000 point rally from March 2009's 666 bottom. Since this most recent leg of the move has been medium fast rather than a huge spike ala 1999, things are not necessarily overbought on the daily chart but we are seeing extremely rare action on the ...
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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).
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I am going to share with you how I manage my IRA and the power of reducing your cost basis. My goal each year is a 20% return in my IRA. Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis. To illustrate the power of reducing your cost basis here are some trades we did last year. These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.
We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...
Stock market posts another record setting week, but the big news came after Friday’s close.
Courtesy of NASA
The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...
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Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi. Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward. So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...
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