A forward-looking measure of U.S. economic growth was unchanged in the latest week, while its yearly growth gauge continued to slide, bolstering expectations that economic growth will ease by mid-year, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index stood at 128.4 for the week ended Feb. 19, unchanged from the previous week.
It was the lowest reading since November 13, 2009, when it stood at 127.5.
The index’s annualized growth rate declined for the 11th straight week to 14.9 percent from 17.0 percent the previous week, revised from an original 17.1 percent. It was the yearly growth gauge’s lowest level since Aug. 7, 2009 when it read 14.6 percent.
“The decline in WLI growth to a 28-week low reinforces our earlier expectation that economic growth would begin to ease by mid-year,” said ECRI Managing Director Lakshman Achuthan.
The chart above was taken from the Pragmatist Capitalist who also covered this story. Given ECRI’s strong track record, it’s worth paying close attention to their warnings. What is worrisome from a pensions’ perspective is that commercial real estate is still in the doldrums and private equity is struggling to regain its footing. If the US economy slows down again, then private markets will experience a long, tough slug ahead, leaving many pensions funds exposed to more downside risk.
This is why I agree with Peter Bookvar who thinks more money printing will go on until inflationary expectations pick up. Listen to the interview below and keep in mind that even if the Fed eventually succeeds to reignite inflation, private markets will still struggle over the next few years. And if deflation does materialize, then it’s game over for private markets and global pensions will lose trillions.
(AP) A tsunami warning was in effect for Hawaii Saturday following a massive earthquake that struck central Chile.
The Pacific Tsunami Warning Center also issued a tsunami advisory for the coast of California and an Alaskan coastal area from Kodiak to Attu islands.
The first waves were expected to arrive in Hawaii at 11:19 a.m. Saturday (4:19 p.m. EST).
The center said a tsunami has been generated that could cause damage along coastlines of all islands in the Hawaii. It said a tsunami in California and Alaska was possible.
The Ewa Beach, Hawaii-based center called for "urgent action to protect lives and property" in Hawaii, which is among 53 nations and territories subject to tsunami warnings.
"The main thing is we want everyone to take this event seriously," said Charles McCreery, director of the center.
A tsunami warning was issued for Chile and Peru by the Pacific Tsunami Warning Center, and a tsunami watch was issued for Ecuador, Colombia, Panama, Costa Rica and Antarctica.
Soon after, the U.S. Geological Survey said the quake had generated a tsunami that may have been destructive along the Chilean coast near the epicenter. The USGS said the earthquake struck 56 miles northeast of the city of Concepcion at a depth of 34 miles at 3:34 a.m./1:34 EST.
Its magnitude was initially reported at 8.3 then 8.5. An earthquake of magnitude 8 or over is classified as a "great" earthquake that can cause "tremendous damage," according to the USGS website.
The earthquake that devastated Haiti’s capital Port-au-Prince on January 12 was rated at magnitude 7.0.
One of the odder things about the universe is that the small set of numbers that define its structure, the so-called universal constants, don’t seem to have any structure of their own. You’d have thought that whatever immortal deity breathed life into the whole shebang would have at least have bothered to make sure that reality was defined in simple integer values your average gameshow contestant could remember. Yet someone’s just calculated Pi to more decimal places than you can read in a lifetime. The universe is strangely irrational, it would seem.
More likely, however, is that the irrationality lies in our heads. If you look at the way we treat numbers for investment purposes it’s probably a good job the infinite cosmos is specified in irrational numbers, because if it were otherwise we’d probably have sold it to the lowest bidder eons ago. Humans, it seems, treat numbers as an approximation to reality, unlike reality, which treats humans as an approximation to nothing.
That Friday 13th Feeling
Under standard economic theories one price should be much the same as another but all experienced practitioners know that this isn’t so – some numbers are much more likely to occur than others. Anyone with even a basic appreciation of behavioural psychology would expect no more or no less – people are as arbitrarily inconsistent about numbers as they are about everything else. In western culture, for instance, thirteen has acquired negative connotations to the point where many tower blocks omit the number from their floor numbering plans, presumably on the grounds that the universe can’t count. Beware, for fourteen is the new thirteen. Ha!
Despite the obvious irrationality of ascribing luck to a number many people are petrified of Fridays falling on the thirteenth of the month. Such is the human propensity to translate mental muddle into actual behavioural nonsense that it turns out that more accidents do occur on these days. So either there’s a malevolent demon tripping us up or our incipient fears are causing us to fall over our own feet. Mental confusion in our heads often turns into real problems in the real-world.
Round Number Attractions
It’s no surprise to find this numerological naughtiness feeding across into investment,…
Here are a few polls from Rasmussen in January and February that many will find interesting.
75% Are Angry At Government’s Current Policies
Voters are madder than ever at the current policies of the federal government.
A new Rasmussen Reports national telephone survey shows that 75% of likely voters now say they are at least somewhat angry at the government’s current policies, up four points from late November and up nine points since September. The overall figures include 45% who are Very Angry, also a nine-point increase since September.
Just 19% now say they’re not very or not at all angry at the government’s policies, down eight points from the previous survey and down 11 from September. That 19% includes only eight percent (8%) who say they’re not angry at all and 11% who are not very angry.
A new Rasmussen Reports national telephone survey finds that 63% of likely voters believe, generally speaking, that it would be better for the country if most incumbents in Congress were defeated this November.
Just 19% disagree and say it would be better if most congressional incumbents were reelected. Another 18% aren’t sure.
The latest Rasmussen Reports national telephone survey finds that 59% of voters nationwide believe cutting taxes is better than increasing government spending as a job-creation tool.
Only 15% of voters hold the opposite view and believe that increasing government spending is the better approach.
However, while voters overwhelmingly think cutting taxes is the better approach, they also overwhelmingly expect Congress and President Obama to take the opposite approach. Seventy-two percent (72%) say the nation’s elected politicians are more likely to increase government spending than cut taxes. Only 14% think they’ll cut taxes instead.
Seventy-one percent (71%) of all voters now view the federal government as a special interest group, and 70% believe that the government and big business typically work together in ways that hurt consumers and investors.
Something about SeaWorld trainer Dawn Brancheau’s ponytail may have triggered the attack. That’s what an official at the Orlando marine park told reporters the day after the 16-year veteran at SeaWorld was killed by Tilikum, a 12,000-lb. (5,500 kg) killer whale. On Feb. 24, in the middle of an otherwise routine show, the 40-year-old trainer was standing at the edge of a tank when the 29-year-old animal leaped from the water, grabbed her by the ponytail and began thrashing her about. As horrified visitors watched both from around the tank and from the viewing window below, Tilikum then dragged Brancheau underwater to her death.
Officials treated the death as a homicide — though one with a decidedly uncommon perpetrator — and within two days, investigators had been to the scene, sorted out the rapid-fire sequence of events that led to the death and essentially closed their books on the case. But the question that remained unanswered — in addition to the matter of what should be done with Tilikum now — is why the animal lashed out. What goes on in the mind of so complex a creature that causes it to become so fierce so fast — and is there anything that can be done to prevent such tragedies? (See 10 infamous animal attacks on humans.)
Tilikum is not a first-time offender. In 1991 — eight years after he was captured off the coast of Iceland — he and two other killer whales drowned a trainer during a performance at Sealand of the Pacific in Vancouver. In 1999, a man who trespassed in SeaWorld after hours and apparently jumped in the whale tank was found dead the next morning, lying across Tilikum’s back. Is the big whale a bad seed? At least one marine-mammal expert thinks that yes, that’s at least part of the answer.
"When Tilikum was wild, he was a transient, not a resident," says Russ Rector, a former dolphin trainer who is now a fierce opponent of keeping any dolphins or whales in captivity. "Resident whales are the kind that live in a fixed place, like Puget Sound. Transients travel the world, eating dolphins, fish, other whales, basically anything that gets in their way." Such animals need to be particularly aggressive, both to establish territoriality when they’re passing through and to…
We have been strong believers in the deflation theme since we have been writing these reports beginning in early 2000 (and even before). We are attaching a chart depicting the “Cycle of Deflation” which you should print out and refer to as you read this comment.
As you can see by the chart, the typical deflation starts with savings and investment which produces strong sustainable growth in the economy. However, when “greed” gets added into the equation, things sometimes change into non-sustainable growth. This is what happened in the late 1900’s when the dot com bubble mania convinced every man woman and adult child to believe that they were all supposed to be multi millionaires. They became so jealous of their neighbors who boasted about all the money they made in the market, that they also jumped into the market by buying such things as Internet Capital Group, CMGI, Iomega, JDS Uniphase, and many others of the same ilk which are now worthless.
The unraveling started taking place in 2000 and it looked to us like the American public came to their senses. We expected to have a significant recession where Americans could rebuild their balance sheets as the cycle of deflation took hold. But, instead the Fed lowered interest rates to 1% and kept them there for a year causing the public to again become jealous of their neighbors making thousands and millions of dollars on their homes. And also, believe it or not, the housing bubble brought about another bubble in the stock market. We couldn’t believe our eyes!!!
After the housing bubble burst, the stock market also collapsed causing a financial crisis “heard ’round the world”. Then, we were sure the markets and economy would fall to levels that would repair balance sheets of the household sector and allow the economy to get back to the tried and true savings and productive investment that built this great country. …
Now that I’ve had to time to read the entire AIG 10Q there’s a nasty ditty in here that in my opinion goes materially beyond the "going concern" language. It’s here:
A deterioration in the credit markets may cause AIG to recognize unrealized market valuation losses in AIGFP’s regulatory capital super senior credit default swap portfolio in future periods which could have a material adverse effect on AIG’s consolidated financial condition or consolidated results of operations. Moreover, depending on how the extension of the Basel I capital floors is implemented, the period of time that AIGFP remains at risk for such deterioration could be significantly longer than anticipated by AIGFP.
A total of $150.0 billion in net notional amount of the super senior credit default swap (CDS) portfolio of AIGFP as of December 31, 2009, represented derivatives written for financial institutions, principally in Europe, which AIG understands to have been originally written primarily for the purpose of providing regulatory capital relief rather than for arbitrage purposes. The net fair value of the net derivative asset for these CDS transactions was $116 million at December 31, 2009.
So AIG "understands" that $150 billion of credit-default swaps were written by AIGFP to European Institutions (no note by the way as to exactly what’s in there – or who owns them) for the explicit purpose of getting around capital requirements - either by banking regulators or (possibly worse) EU sovereign regulations.
When did they come to "understand" this? Did they write these swaps originally knowing that their essential purpose was to evade capital requirements, or was this a "recent" revelation of some sort?
There has been a lot of chatter over the last year about the government’s involvement in the equity markets. Yesterday’s market action was certainly odd. Several large institutions were active buyers of enormous blocks of the S&P on no news. The volume shot through the roof from out of nowhere. It was not an unusual occurrence. We have seen it repeatedly over the course of the last 12 months (see here for more). Of course, this whole discussion has a very conspiratorial aspect to it, but I think it’s less nefarious than many presume (depending on your definition of nefarious when it come to pseudo-government intervention in markets).
The usual argument with regards to government intervention in the equity markets is pretty simple. The government, or the “President’s Working Group” (aka, the Plunge Protection Team) purchases securities in big blocks and jams prices higher. Jamming, gunning, carpet bombing (whatever you want to call it) is quite simple. In any market there are down times in terms of volume. If you have the firepower (the capital) and the desire you can knock out just about every asking price on the board. Have a look at just about any Russell 2,000 stock at around noon as the volume slows to a drizzle and ask yourself what you could do with $10,000,000? Of course, the same goes for the downside. You can hit the bids and literally knock them off the board in an illiquid market (exactly what we saw in Fall of 2008 with fund redemptions).
Anyone who has ever traded in size has seen this in action. It’s like taking a machine gun to a medieval battle or sending the U.S. Army to Baghdad (not that anyone would ever do such a thing). The point is, you can slice through prices like a hot knife through butter, create a certain sentiment in the market that actually generates attention (liquidity) and then get out on the other side of the trade by selling (or covering) to the crowd you’ve attracted. Of course, if you’re someone who has a longer time horizon than a few minutes…
Look, I’m not a card carrying member of the Tea Party and I’m not an uber-conservative, but who the Hell does Obama think he is? When did we mutate from a country of laws to one driven by government fiat.
OK, I’[m overreacting to this story. It’s from Bloomberg and it goes like this:
The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.
The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.
“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”
She confirmed the authenticity of the document, which hasn’t been made public.
Somewhere in the not to distant past, when someone defaulted on a loan extended from one private party to another, the holder of the security interest had the option of taking back the collateral in the event of default. Now, without benefit of any enabling legislation, let alone judicial review the current administration has evidently assumed that it has some regal right to dictate the terms under which those contracts can be enforced.
Yes, there is a housing crisis in this country and lots of people are going to lose their homes. And, yes, there is an appropriate role for the federal government acting in conjunction with the owners of those mortgages. An absolutely laissez-faire approach to the problem is most likely not the best approach. Nevertheless, any alteration in the manner in which security rights are exercised should be subject to negotiation and agreement among all of the parties. Dictats have never had a place in American society and it’s most untasteful to see them emanating from this administration.
Absent any credible solution to the housing crisis and suddenly politically vulnerable, the President and his staffs’ jerking knees are troubling.
Bernanke is now joining Rosenberg, Ferguson and Faber, Edwards, Grice and many others in warning that the debt crisis rearing its head in Greece may spread to America, causing U.S. interest rates to climb.
With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.
Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.
"It’s not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."
Contrary view: A very smart financial expert disagrees, telling me:
Higher interest rates do not equal a debt crisis.
Greece’s situation is not comparable to the US. Greece’s situation is comparable to that of California. It makes a big difference whether you control your currency or not.
I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in p...
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In an effort to reach the angry mob, CNBC's Rick Santelli goes all Sesame Street on the numbers behind the US Debt Ceiling Rise. Focusing for two minutes on what this practically means for every man, woman, child, and politician, the shouting Chicagoan points out that when the US breaches this new limit then the world's entire population will be on the hook for $2,346 each (and $52,409 per US person).
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).
Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its...
Some combination of better made cars, and less Americans able to pay new car prices has conspired to push up the average age of U.S. vehicles to a new record high. Reflecting this sea change, one of the best investment g...
Shares of battered tech company Research in Motion (NASDAQ: RIMM) are seeing much strength during Friday's trading session.
Fairfax Financial Holdings released a 13G filing with the SEC this morning, in which they disclosed a 5.12% stake in Research in Motion.
Currently, shares of Research in motion are up over 4% at $16.85. Over the last year, Research in Motion is down over 72%.
Research In Motion Limited is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. RIM provides platforms and solutions for access to information, including e-mail, voice, instant messaging, short message service.
Top 5 RisersStockRatingAnalysisASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving.CZZSTRONGBUYThe recent earnings history for Cosan Ltd shows significant improvement while projected valuation continues to rise.STLDBUYProjected value continues to rise for Steel Dynamics while long term increases in earnings growth are also becoming more widely expected.PSESTRONGBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a fe...
Major markets and major index ETFs corrected slightly today after the stock market’s euphoric party yesterday
Major markets suffered a slight hangover today, as the S&P 500 dropped .57%, the Dow Jones Industrial Average dropped .18%, the NASDAQ dropped .46% and the Russell 2000 Index dropped .34%, after yesterday’s crazy Fed and Tech Sector induced Wall Street Party. The NASDAQ, in particular, partied very hard, so hard in fact that the NASDAQ reached its 11 year record high.
The major market index ETFs were hungover too as the SPDR S&P 500 ETF lowered .51%, the SPDR Dow Jones Industrial ...
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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).
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
Here is the virtual portfolio weekend update. Basically a recap of the positions and some notes about the trades. As usual, I'll post the previous week's P&L for comparison. Not the greatest of week in general!
AA Money
Only transaction last week as we bought back the AA Feb 9 puts on Tuesday for close to a 70% profit. The idea is to sell another set of put as soon as we get a chance.
Previous week P&L - $400.00
We lost some ground this week, but we'll keep on selling premium!
FAS Money
We also lost some ground in this virtual portfolio, but we have sold plenty of premium for the coming week. A little correction would go a long way to help! On Wednesday we sold the FAS Feb 72 puts (already good for 50%), on Thursday we added the Jan4 78 calls and on Friday we had to roll the Jan 78 puts to the Jan 80 puts. We were hoping for these ones to expire worthless on Friday, but a late stick killed that hope.
Previous week P&L - $4372.00...
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Here's the latest Stock World Weekly. We discuss the Fed's next move, and it's new policy for more QE-cating. Brief review of Sabrient's trade ideas for 2012 (already doing well) and a few new buy-writes from Phil and Pharmboy. Enjoy! (Feedback appreciated - give some life to the comment section below.)
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Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(