Henry Blodget has a good post with a couple of great graphs addressing the trends in federal revenues and expenditures. I’ll borrow the graphs and then offer a couple of comments:
Now, those sorts of numbers have been published before in one form or another but these two do a good job of bringing home the reality we face. So, what are the implications?
Blodget suggests that we either spend a couple of decades paying back the debt and suffering the implications of living on less during that period or it ends in a debacle.
I tend to agree that in a rational world the first would be a likely outcome and the second would occur if the political class continues to ignore reality. I tend to think that all the talk of deficit reduction might well be a recognition within the hallowed halls of government that we have indeed reached a point at which our ability to float substantially more debt is going to be constrained. If that’s the case then one has to ask how do you sell this to the public without a wholesale restructuring of the division of spoils in the American society. In other words, how do you maintain the status quo while you ask most of the country to put aside promises upon which they’ve constructed their lives.
You see, you might well propose that we suffer for a couple of decades in order to put the fiscal house in order, but if you offer that solution then you have to deal with an unequal distribution of suffering. Right now, the burden has fallen more or less on the private sector. At the state level, government employees are starting to feel the pinch, so we’ll see how that plays out. At the federal level, it’s business as usual.
Spreading the pain is not something that politicians are likely to willingly undertake. If you don’t do so then you risk schisms within society that give rise to radical solutions that fundamentally change structures. Look at the results of recent elections, the rise of groups like the Tea Baggers and the apparent attractiveness of populist rhetoric to get a sense of the unease that exists.
After one of the strongest rallies in the history of the U.S. Stock Market, the market may finally be in the early stages of its first meaningful correction since the rally began last March.
Don’t let the correction take away your hard-earned profits again!
If YOU continue to think the way YOU’VE always thought, YOU’LL continue to get the results YOU’VE always got.
If YOU are getting the results YOU want then continue to think the way YOU’VE always thought.
If YOU are not getting the results you want, Then YOU YOU YOU need to change YOUR thinking.
That all being said, welcome to the brave new world, the world where it’s ALL ABOUT YOU and taking control of YOUR future!
Its no secret that the markets have been vicious, especially to the conventional Wall St. Type of accounts. You know the ones we are talking about right? The ones where the battle cry/motto is:
Buy and hold. You can’t time the market. Invest for the long haul. Put your money in mutual funds where everyone gets paid except for YOU!
If you continue to do what you’ve done then you have no choice but to grin and bear it.
Managing or having your account managed in a Buy and Hope as the market goes so goes your account format IS NOT an option. Better learn how to trade, better learn how to hit and run. Better learn how to short stocks as you need to be able to make money when the market moves in either direction. Trade your plan and plan your trades.
One of the common denominators with past bear market rallies is that near the end of them the talking heads started parading around saying the worst is over, that was the bottom, you gotta buy stocks, etc. Sound familiar?
Speaking of plans: Let’s say your portfolio is $50,000 and let’s say that your whole strategy is hit and run get your $500 a week and go. Now let’s say that you do two trades a month only using 50% of your acct. That’s 1,000.00 per month times 12 months equals $12,000 per year. Divided by $50,000 equals 24% after one year. Think the indexes…
U.S. Secretary of State Hillary Rodham Clinton warned China on Friday it risks diplomatic isolation and disruption to its energy supplies unless it helps keep Iran from developing nuclear weapons.
Speaking in Paris, Clinton said she and others who support additional sanctions on Iran for refusing to prove it has peaceful nuclear intentions are lobbying China to back new U.N. penalties on the Iranian government.
The United States is the most visible leader in the new push for U.N. Security Council sanctions, and Clinton spent much of her time in Europe this week lobbying major powers whose support she needs to pass and enforce new economic penalties.
The risks of an Iranian bomb are manifold, Clinton said.
"It will produce an arms race," in the Persian Gulf, and Israel will feel its very existence threatened, Clinton said in response to a question from an audience member during a speech at a French military academy. "All of that is incredibly dangerous."
The United States has cautioned Israel publicly against a pre-emptive strike on Iran’s known nuclear facilities, arguing that such an attack would invite an arms race and retaliation.
China has traditionally resisted U.N. Security Council sanctions, saying they are counterproductive and harm efforts to persuade Iran to prove its claim that the nuclear program is peaceful.
The country most responsible for the "Arms Race" is the United States of America. US troops stationed all over the world are a destabilizing force.
We invaded Iraq without justification, blew Iraq to smithereens, and any country in region their right mind would not want that to happen to them.
Indeed, a strong argument can be made that Iran having a nuclear bomb would be a stabilizing force. If Iran could adequately protect itself, the US would think twice about invading.
One can argue this from many points of view, including China’s. China has everything to gain, both short and long term, from its policy of assisting Iran. Moreover, threats of "diplomatic isolation of China" are laughable. Think the world would go along with that? Heck, not even the US would.
With the euro having dropped substantially from a high of around $1.55 to less than $1.40 in the span of a few short months, it has sent gold buyers looking for cover, mostly as a function of the linear (and at times sigmoidal) inverse correlation between gold prices and the DXY which throughout 2009 has held surprisingly strong. Yet will a dollar scramble prove that the recent flight to gold has been premature? BofA believes that while the near-term implications for gold are as of yet undecided, relying on both € (bearish) and risk (bullish) signals, the long-term drivers for gold should be price supportive, especially for EUR-based investors. Proper positioning can be adopted using OTM gold calls, which are not only no longer as rich as they were a mere month ago, but would benefit substantially should Greece indeed follow through with an actual default and result in a flaring of all risk indicators, further precipitating a flight to euro alternatives, among which the dollar, and gold, are dominant.
Bank of America suggests:
In the case of an actual default, even an orderly one, increased systemic risk is likely to support gold prices as investors look for a safe haven. The more disorderly the default turns out to be, the more upside we see on gold. However, if Greece just muddled through the crisis or ends up being bailed out, gold may not fare that well. If the Greek problem does not spread to other countries in the Euro area, gold prices are likely to suffer due to a weaker EUR against the USD.
[T]he long-term consequences of Greece’s debt crisis for gold prices are clearly constructive, in our view. Emerging Market central banks are ever more aware that gold is one of the few viable alternatives to the USD. A deterioration of Greece’s creditworthiness, even if bad for the EUR, should support gold prices in the long run, in our view.
The main question, as discussed previously, is how will EM central banks decide to allocate their trade surplus FX reserves. Contrary to some gold-bearish perceptions, it is very likely that an increasingly deteriorating Greek situation, will force EM CBs not only to unwind € holdings and use the resulting capital to purchase dollars, but to augment their gold reserves as…
Felt like sprucing it up a bit, so here’s a snapshot of what my central 1-minute ES Workspace looks like on TS ~ TradeStation.
A look at price action on the ESH10 and VIX across the:
NYSE (cumulative) TICK
TS bid / ask Matrix
Fibozachi Inflection Bands™ ~ FIBs
Candelstick X-Ray™
Elite Oscillator™
Fibozachi - 1.29.10 – Mike Tyson CentCom – We Be Hustlin’ III – 1 min ESH10 + Matrix ~ 10:18
Fibozachi - 1.29.10 – Mike Tyson CentCom – We Be Hustlin’ III – 1 min ESH10 update ~ 10:34
Fibozachi - 1.29.10 – Mike Tyson CentCom – mint, Candlestick X-Ray, Elite Oscillator – VIX 5 min bottom ~ 11:05
Fibozachi - 1.29.10 – Mike Tyson CentCom – We Be Hustlin’ III – 1 min ESH10 + Matrix ~ 11:17
Disclosure: during any given session, we may trade any of these instruments bi-directionally. We are currently flat at the time of publication looking forward to a decent reflexive, upwards bounce into the tail end of next week.
For similar technical market calls and insights into the idiosyncratic machinations of financial markets; please visit our website ~fibozachi.com. There, you can view a body of our analytic work as well as detailed explanations of the unique design development and technical methodologies within the proprietary technical indicator packages that we employ daily to perform a comprehensive technical analysis of financial instruments (stocks, options, ETFs, bonds, futures, FOREX, etc.) across interval periods of time, tick and volume.
"At Davos, the Globalizers Are Gone,"is an excellent article by Ian Bremmer, and in sharp contrast to another excellent article I posted yesterday by George F. Smith writing at Mises Daily, By the Way, Free Markets Are Free. I would submit that the ideals of a truly free market are an illusion because we do not have the political system and laws framed in such a way as to support a truly free market system. We cannot go straight to free market remedies because we cannot dispense with the need for a functional, non-corrupted, political and legal system – laws constraining freedom – to provide the framework in which a free market can operate. And hence, "free" is not completely free and it can’t be. – Ilene
Say what you will, but one reason why globalization has had the traction it has up until recently, despite anecdotal and other evidence that it has not lived up to many of the promises of its proponents, is because of the support of the movers and the shakers. In America and elsewhere, corporate executives and other powerful interests have used their money and influence to ensure that policymakers were not swayed to move in a different direction. But the times are a-changin’. As foreign policy expert Ian Bremmer notes in a commentary for the Washington Post, "At Davos, the Globalizers Are Gone," some of the biggest supporters of unfettered cross-border trade and free markets, no doubt shaken by the events of the past two years, seem to have lost their mojo.
For 40 years there’s been a consensus view at the Davos World Economic Forum that globalization’s increasingly free cross-border flow of ideas, information, people, money, goods and services is both irreversible and a powerful force for prosperity. As with meetings of the G7 group of industrialized nations, there was broad agreement on the proper role for the state in the performance of markets. Sure, a French cabinet official and an American investment banker might spar over the relative merits of state paternalism and Anglo-Saxon labor laws, but the bargaining table was still reserved for champions of Western-style free market capitalism.
Davos has always had its critics. For those who believe globalization empowers the rich at
When the euro emerged as a consolidated currency over a decade ago, hopes were high that its advent would present a challenge to the USD as the default world reserve currency. Times were different (and much simpler, with shadow banking complexity a tiny fraction of the current $1 quadrillion+ behemoth) and as BofA says, “perception that the euro is well placed to rival the USD as a reserve currency has underpinned the increased euro allocation to a level much greater than the sum of the roles played by its constituent parts. This has been justified on the grounds that the unified European financial markets would offer similar breadth, depth and liquidity to those of the US.” Alas one concept largely ignored was that unlike the US, where there has been one consolidated bond market reflecting the underlying marginal credit and liquidity risks behind the US currency, in Europe “there remain 16 separate government securities markets with very different levels of credit risk and liquidity.” The ongoing Greek crisis has only reminded pundits of this phenomenon all too well.
What were the primary reasons for the euro’s steady climb over the past decade? The key factor has likely been emerging markets central banks’ desire to diversify their FX holdings away from dollars and into euros. As can be seen on the chart below, EUR reserves have grown from 20% of total in 1999 to 30% by 2009.
Another euro-benefiting trend has been the the flow diversification, once again as a result of EM Central Banks, which “sell down a portion of USD-denominated inflows in order to keep the currency composition of portfolios stable.” This forms a feedback loop whereby increasing perception of euro strength led to further accumulation of euros, and constant euro-favorable rebalancing of portfolios.
As pointed out above, Central Banks are now very likely to reevaluate their €-centric FX flows, in light of the just uncovered fissures in the eurozone. As BofA 1 suggests: “the euro’s weight in global FX reserves may now begin to slip back on a trend basis, with the JPY, gold, CAD and even the USD benefiting.”
Ironically, in order for Europe to regain its prior lustre and for the Euro to come out a…
Debt-O, debt-uh-oh
Interest come and we need another loan
Debt-O, debt-uh-oh
Interest come and we need another loan
Work our lives just to lose our homes
Interest come and we need another loan
Stack default swaps till they come undone
Interest come and we need another loan
Come on Economists, tell us some more BS
Interest come and we need another loan
Come on Economists, tell us some more BS
Interest come and we need another loan
6%, 7% – it’s a credit crunch
Interest come and we need another loan
6%, 7% – it’s a credit crunch
Interest come and we need another loan
Debt-O, debt-uh-oh
Interest come and we need another loan
Debt-O, debt-uh-oh
When interest comes we’ll need another loan
It was the best of times (with the IMF predicting 3.9% Global growth) and the worst of times (with Roubini saying we’re all doomed) at Davos this week as the men who rule the world gathered to divide the spoils over card games while vying with each other for podium and TV time so they could talk their various books from the safety of the Swiss mountains. Davos, a tiny village perched on a mountain with just two main streets, lacks the protests of other Global gatherings. During the annual meeting, the town is taken hostage by thousands of police. “Anyone who looks like a protester can be thrown off the train,” says Marco Leutholz, head of the local Socialist party (and that train often overlooks steep cliffs!). Sir Howard Davies (director of the LSE) writes:
The mood is certainly better than last year, when the world was ending, but it is worse than at the beginning of last week. Alessandro Profumo of Unicredit acutely observed that Davos is likely to accentuate whatever mood you arrived in, rather as alcohol does, I guess. So those who arrived nervous about the economic prospects are leaving even more jittery. If you arrived feeling pessimistic, you will leave somewhere between suicidal and homicidal.
The market background has not helped. Anxiety about Greece has grown over the past three days. In the circumstances, it was strange to see both the Greek prime minister and his finance minister here. Maybe the subtext was to show that there can be no crisis if they are munching muesli in the mountains, but though some may have been reassured, more people asked who was at home minding the taverna.
The Master and his Emissary ~ THE book of the year (period)
‘ Actions and deeds have consequences. Forethought is important. ‘
A concept that, over centuries, seems to have lost meaning in a Western world of armchair quarterback, revisionist historians who continually fail to heed the most prophetic facts uttered by Sammy Langhorne.
A historian who would convey the truth must lie. Often he must enlarge the truth by diameters, otherwise his reader would not be able to see it. - Mark Twain, a Biography
Herodotus says, " Very few things happen at the right time, and the rest do not happen at all: The conscientious historian will correct these defects. - Acknowledgments for A Horse’s Tale
… history can carry on no successful competition with news, in the matter of sharp interest.
- Mark Twain’s Autobiography
It is not worthwhile to try to keep history from repeating itself, for man’s character will always make the preventing of the repetitions impossible. – Mark Twain in Eruption
History requires a world of time and bitter hard work when your "education" is no further advanced than the cat’s; when you are merely stuffing yourself with a mixed-up mess of empty names and random incidents and elusive dates; which no one teaches you how to interpret, and which, uninterpreted, pay you not a farthing’s value for your waste of time. – Following the Equator
The very ink with which all history is written is merely fluid prejudice. – Following the Equator
One of the most admirable things about history is, that almost as a rule we get as much information out of what it does not say as we get out of what it does say. And so, one may truly and axiomatically aver this, to-wit: that history consists of two equal parts; one of these halves is statements of fact, the other half is inference, drawn from the facts. To the experienced student of history there are no difficulties about this; to him the half which is unwritten is as clearly and surely visible, by the help of scientific inference, as if it flashed and flamed in letters of fire before his eyes. When the
On December 4, 2009, The TCW Group, Inc. (“TCW”) dismissed Jeffrey Gundlach, a “key man” under TCW’s contract with Treasury, who served as TCW’s chief investment officer and the lead portfolio manager of its PPIF. At that time, consistentwith the terms of the Limited Partnership Agreement, Treasury froze TCW’s PPIF and halted all fund transactions.225 On January 4, 2010, TCW withdrew as a manager in PPIP. According to Treasury and TCW, TCW liquidated the approximately $500 million in securities held by its PPIF at a profit and paid back the loan from Treasury with interest. Treasury entered into a winding-up and liquidation agreement with TCW governing the liquidation and distribution of the fund. Treasury will allow TCW’s private investors to re-allocate their funds to a different PPIF of their choice. In this case, Treasury will still provide matching debt and equity investments.
During the formation of PPIP, SIGTARP recommended that Treasury adoptstrict “key man” provisions in its fund manager agreements, which were subsequently included in Treasury’s agreements. The agreements provide that the PPIF obtain the services of the personnel who were promised during the application process. As a result of these important “key man” provisions, Treasury had the option of terminating TCW’s involvement in PPIP because key personnel were no longer running the PPIF.
It appears even the SIGTARP wonders who is in charge:
In sum, Treasury did not conduct direct oversight of AIG’s executive compensation prior to March 19, 2009, but chose instead essentially to defer to FRBNY. This, coupled with Treasury’s subsequent limited communications with FRBNY with respect to that issue, meant that Treasury invested tens of billions of taxpayer dollars in AIG, designed AIG’s contractual executive compensation restrictions, and helped manage the Government’s majority stake in AIG for several months, all without having any detailed information about the scope of AIG’s very substantial, and very controversial, executive compensation obligations. Treasury’s failure to discover the scope and scale of AIG’s executive compensation obligations, in particular at AIGFP, potentially resulted in a missed opportunity to avoid the explosively controversial events surrounding the AIGFP retention payments and the considerable public and Congressional concern that followed. Although SIGTARP saw no indication that Secretary of the Treasury
Markets died and then rallied to flat again as European leaders “prepared contingencies” for a possible Grexit
Markets died hard and fast earlier today as major indexes registered as much as 1.5% of losses after news that Euro zone officials were unofficially “preparing contingencies” for a Greek exit from the Euro. Unofficial statements were not enough to keep markets down however, as major indexes rallied back to flat levels by the end of the day.
So the world continues to wait on Europe, as the SPDR S&P 500 ETF (NYSEACA:SPY) gained .05%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:...
The ratings agency Fitch on Tuesday lowered its assessment of Japan’s sovereign credit to A+, an investment grade just above the likes of Spain and Italy, and criticized Tokyo for not doing more to pare down its burgeoning debt.
Japan’s public debt will hit almost 240 percent of its gross domestic product by the end of the year, Fitch warned.
The new rating also heightens the pressure on Prime Minister Yoshihiko Noda to rein in spending and raise taxes at a delicate time, when the Japanese economy is still recoverin...
Europe tanked today, with all most of the major indexes losing two to three percent. The US markets followed suit, with the S&P 500 hitting its intraday low, off 1.53%, during the lunch hour. But the index began a slow afternoon rally that began accelerating in the final 90 minutes of trading. Amazingly enough, the index closed the day with a fractional gain of 0.17%. CNBC reports that "Italian Prime Minister Mario Monti and French President Francois Hollande have agreed to consider all measures to boost European economic growth, including eurobonds...." No word yet on Angela Merkel's take on the topic.
The index is now up 4.87% for 2012, which is 7.06% off the interim closing high.
ONEOK, Inc. (NYSE: OKE) today announced that shareholders voted to increase the number of authorized shares of ONEOK common stock to 600 million from 300 million in connection with the company's previously announced two-for-one stock split.
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T - AT&T, Inc. – U.S. equities are on the decline as Europe’s woes once again take center stage. Shares in AT&T, down 0.90% at $33.24 this afternoon, are faring better than most of the other Dow components so far, though options activity on the wireless carrier suggests some strategists are bracing for further declines ahead of the long w...
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...
Top 5 RisersStockRatingAnalysisWDCSTRONGBUYWestern Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run.KROSTRONGBUYKronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant.URIBUYProjected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected.SWHCBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valu...
The market remains a mess right now as we are back to the environment of latter 2011 and middle 2010 where random comments from officials across the Atlantic move everything en masse. Today the market was hit by word that preparations for Greece's exit from the EU are being considered.
Of course a denial by another official would send the market up 1% immediately. Rinse, wash, repeat – year #3.
The bigger picture right now is all stocks are moving as one asset class as our massive correlations return. Until that changes it is very difficult to bother to be a stock picker.
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
NEW: Ilene is available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here is this week's test version of the latest newsletter. We apologize for some formatting issues that need to be worked out. Please tell us what you think.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
In this article, please revisit an article written two years ago titled, "The Calm Before the Storm." This article focused on the patent cliff that was looming in the pharmaceutical industry, that was later picked up by the New York Times and several other bloggers! Subsequent articles were written about big pharma company's revenue streams, and the pros and cons of of their later stage pipelines. Other articles have also attempted to identify smaller biotechs with the potential to reap big reward...
My last weekend update is dated from January 30 so after a long hiatus, here is an update of our virtual portfolio. Since the last update, we have closed the AA Money portfolio due to a lack of enthusiasm (and activity) and I have stopped tracking the FAS strangle as the low VIX makes it hard to get rewarded for the risk! But we have added a small $5KP virtual portfolio which does not use any margin.
FAS Money
We have had to recover from a big move up by FAS and a low VIX which keeps option prices low. But the portfolio has gaine about 10% since the last update.
Last update P&L - $5499.00
IWM Money
Not a lot of activity in this portfolio where the main focus is on the large IWM BCS. But the portfolio has grown over 20% since the last update.
Last update P&L - $1998.00
$5KP Portfolio
This is the virtual portfolio that replaced the AA Money portfolio. It does not use margin and we will keep holdings under $5K.
AAPL $50K P...
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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The mood is certainly better than last year, when the world was ending, but it is worse than at the beginning of last week. Alessandro Profumo of Unicredit acutely observed that Davos is likely to accentuate whatever mood you arrived in, rather as alcohol does, I guess. So those who arrived nervous about the economic prospects are leaving even more jittery. If you arrived feeling pessimistic, you will leave somewhere between suicidal and homicidal.
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(
