Archive for July, 2010

Look What Surprises They Snuck Into The Financial Reform Bill

Look What Surprises They Snuck Into The Financial Reform Bill

Courtesy of Michael Snyder at The Economic Collapse 

Even just a decade ago, major pieces of legislation in the U.S. Congress would be just a few dozen pages long.  But today, it seems like every time Congress passes an important bill it ends up being over a thousand pages long.  In fact, the final version of the new financial reform law was over 2,300 pages.  Overall, as we wrote about extensively in a previous article, this much-ballyhooed new law does a whole lot of nothing, but it turns out that lobbyists and special interests were able to insert a few nasty surprises that we are just now finding out about. 

But it was the same thing with the health care reform law.  It was only after it was passed that most of us learned that it contained a provision that will force U.S. small businesses to collectively produce millions more 1099 tax forms each year.  Now small businesses from coast to coast are screaming bloody murder about that provision but it is too late – the law has already passed.  Unfortunately, there are some surprises in the recently passed financial reform law that are nearly just as bad.

So just what are those surprises?

Well, first let’s talk about what the financial reform law does not do.  The financial reform bill was supposed to "fix" Wall Street and the financial system, but it did not do much of anything….        

-It does nothing to address the problems with Fannie Mae and Freddie Mac.

-It does not eliminate "too big to fail".…
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Foreclosures Continue To Dramatically Increase In 2010

Foreclosures Continue To Dramatically Increase In 2010

Courtesy of Michael Snyder at The Economic Collapse 

In a very alarming sign for the U.S. economy, foreclosures have continued to dramatically increase in 2010.  But there has been a shift.  Back in 2007 and 2008, experts tell us that most foreclosures were due to toxic mortgages.  People were being suckered into mortgages that they couldn’t afford with "teaser rates" or with payments that would dramatically escalate after a few years, and when those mortgages reset, the people who had agreed to them no longer could make the payments.  But now RealtyTrac says that unemployment has become the major reason for foreclosures.  Millions of Americans have become chronically unemployed during the economic downturn and many of them are losing their homes as a result.  But whatever the cause, one thing is certain – foreclosures have continued to skyrocket at a staggering rate.

According to a new report from RealtyTrac, foreclosure filings climbed in 75% of the nation’s metro areas during the first half of 2010.  At a time when the Obama administration believes that we are "turning the corner", things just seem to get even worse. 

Some areas of the country continue to be complete and total disaster areas when it comes to real estate.  For example, you have got to feel really sorry for anyone trying to sell a house down in Florida right now.  According to RealtyTrac, Florida led the way with nine of the top 20 metro foreclosure rates in the country during the first half of 2010.

Ouch.

But the worst city for foreclosures continues to be Las Vegas.…
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Chief Economists are for PR

Another bad review for the Blinder and Zandi article – wrong and not only that, the economic models are a total waste of time. (For more about Eric Falkenstein and his experience with IP litigation, read our interview from last September,  The Limits of Intellectual Property.) – Ilene 

Chief Economists are for PR

Courtesy of Eric Falkenstein at Falkenblog 

Ezra Klein has a post promoting Blinder and Zandi’s model that shows massive good effects from more government deficit spending. As the model is a 1970′s vintage approach, an approach that attracted the nations best minds for decades, and was abandoned because they don’t work better than rather simple alternatives (eg, a vector autoregression of GDP, Fed Funds, and the Baa-Aaa spread). 

I found this amusing because it highlights that journalists grab whatever science supports their ends. The details are not important, you have a professor with lots of publications, he has a complicated scientific argument, it makes you an objective, rational journalist. He even quotes Narayana Kocherlakota saying macro models work, not realizing the Kocherlakota was actually talking about a very different class of models than the one Blinder and Zandi use, and forgetting that of course a macroeconomist would say macro theory works.

At one point, Klein reaches for this argument for believing in their results:

It’s also worth noting that the private sector relies extensively on these models, and it would be odd for them to give Moody’s all that money if they thought there was no predictive value.

Presumably, he infers that as Zandi works for Moody’s, his results are somehow used by Moody’s. They are, but not in the way he thinks. I used to work at Moody’s. Moody’s does not make money off their macro economic opinions, they make money issuing ratings on debt, something they are paid well for. The macro view is alluded to in any analyst opinion, but even within Moody’s it’s not like the analysts think their economist knows better than others. CNBC and the outlets need someone to comment on macroeconomic topics, so having a full time economist discuss these things makes sense. Yet, remember, economists can’t predict business cycles, or explain why Mexico is poor, while the US is rich. Sure, people have theories, but there’s no consensus, highlighting that macroeconomists don’t understand the big issues on their plate. 

I worked directly for Chief Economists at two major…
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Consumer Metrics Institute Growth Index

Doug Short compared recent data from Rick at Consumer Metrics Institute with charts of the GDP and S&P. He also provides additional interesting commentary.  (In case you missed my interview with Rick back in April, it’s here.) – Ilene 

Consumer Metrics Institute Growth Index 

Courtesy of Doug Short 

Note from dshort: The 91-day Growth Index continues its downward slide with data now available though July 29th. Note that the Real GDP numbers are updated with the BEA’s revised estimates from 2007 through First Quarter 2010. See the explanation here.


Click to View

The thumbnail chart shown here is the Consumer Metrics Institute’s Daily Growth Index with an overlay of Gross Domestic Product (GDP). This is one of the most interesting data series I follow, and I recommend bookmarking the Institute’s website. Their page of frequently asked questions is an excellent introduction to the service.

The three charts below focus on the ‘Trailing Quarter’ Growth Index, which is computed as a 91-day moving average for the year-over-year growth/contraction of the Weighted Composite Index. The index gives a nearly real-time daily snapshot of consumer behavior across a wide variety of consumption categories. The 91-day period is useful for comparison with key quarterly metrics such as GDP. Since the consumer accounts for over two-thirds of the US economy, one would expect that a well-crafted index of consumer behavior would serve as a leading indicator. As the chart suggests, during the five-year history of the index, it has generally lived up to that expectation. Actually, the chart understates the degree to which the Growth Index leads GDP. Why? Because the advance estimates for GDP are released a month after the end of the quarter in question, so the Growth Index lead time has been substantial. 

Has the Growth Index also served as a leading indicator of the stock market? The next chart is an overlay of the index and the S&P 500. The Growth Index clearly peaked before the market in 2007 and bottomed in late August of 2008, over six months before the market low in March 2009.

The most recent peak in the Growth Index was around the first of…
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Consumer Metrics Institute Growth Index

Doug Short compared recent data from Rick at Consumer Metrics Institute using chart overlays of the GDP and S&P. He also provides additional commentary. (In case you missed my interview with Rick back in April, it’s here.) – Ilene 

Consumer Metrics Institute Growth Index 

Courtesy of Doug Short 

Note from dshort: The 91-day Growth Index continues its downward slide with data now available though July 29th. Note that the Real GDP numbers are updated with the BEA’s revised estimates from 2007 through First Quarter 2010. See the explanation here.


Click to View

The thumbnail chart shown here is the Consumer Metrics Institute’s Daily Growth Index with an overlay of Gross Domestic Product (GDP). This is one of the most interesting data series I follow, and I recommend bookmarking the Institute’s website. Their page of frequently asked questions is an excellent introduction to the service.

The three charts below focus on the ‘Trailing Quarter’ Growth Index, which is computed as a 91-day moving average for the year-over-year growth/contraction of the Weighted Composite Index. The index gives a nearly real-time daily snapshot of consumer behavior across a wide variety of consumption categories. The 91-day period is useful for comparison with key quarterly metrics such as GDP. Since the consumer accounts for over two-thirds of the US economy, one would expect that a well-crafted index of consumer behavior would serve as a leading indicator. As the chart suggests, during the five-year history of the index, it has generally lived up to that expectation. Actually, the chart understates the degree to which the Growth Index leads GDP. Why? Because the advance estimates for GDP are released a month after the end of the quarter in question, so the Growth Index lead time has been substantial. 

Has the Growth Index also served as a leading indicator of the stock market? The next chart is an overlay of the index and the S&P 500. The Growth Index clearly peaked before the market in 2007 and bottomed in late August of 2008, over six months before the market low in March 2009.

The most recent peak in the Growth Index was around the first of September,…
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Michigan Consumer Sentiment Index

Michigan Consumer Sentiment Index 

Courtesy of Doug Short 

With all the other releases on Friday, especially the 3-year revised GDP, I’m a bit late in updating my monthly Michigan Sentiment chart.


The University of Michigan Consumer Sentiment Index for July is 67.8, down significantly from the June reading of 76.0. The survey’s chief economist, Richard Curtin, summarizes:

Scarce jobs and stagnating incomes have been the top concerns of consumers for some time. What changed in July was their recognition that the anticipated slowdown in the economy will keep jobs scarce for some time, while their uncertainties about future prospects were increased by the policies of the Obama administration. Rather than itching to resume old spending habits, consumers have begun to actively embrace a more defensive outlook, making them more likely to further pare their debt and increase saving and reserve funds. This new defensive posture could result in even slower economic growth and fewer jobs in the future.

See the full release in PDF format here.

Because the sentiment index has trended upward since its inception in 1978, I’ve added a liner regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions to help evaluate the value of the Michigan Consumer Confidence Index as a leading indicator of the economy.

Note: The Real GDP numbers include the Second Quarter and are now updated with the BEA’s revised estimates from 2007 through First Quarter 2010.

Click to View 

Click for a larger image 

 

****

Read more about Doug Short here > 


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Let Them Eat Cake

Let Them Eat Cake

Courtesy of PAUL CRAIG ROBERTS at CounterPunch 

RHINEBECK, NY - JULY 30: A congratulations sign on display on July 30, 2010 in Rhinebeck, New York. Chelsea Clinton plans to get married in Rhinebeck on July 31, 2010. (Photo by Bryan Bedder/Getty Images)

It is not unusual for members of the diminishing upper middle class to drop $20,000 or $30,000 on a big wedding. But for celebrities this large sum wouldn’t cover the wedding dress or the flowers.

When country music star Keith Urban married actress Nicole Kidman in 2006, their wedding cost $250,000. This large sum hardly counts as a celebrity wedding. When mega-millionaire real estate mogul Donald Trump married model Melania Knauss, the wedding bill was $1,000,000.

The marriages of Madonna and film director Guy Ritchie, Tiger Woods and Elin Nordegren, and Michael Douglas and Catherine Zeta-Jones pushed up the cost of celebrity marriages to $1.5 million.

Tom Cruise and Katie Holmes upped the ante to $2,000,000.

Now comes the politicians’s daughter as celebrity. According to news reports, Chelsea Clinton’s wedding to investment banker Mark Mezvinsky on July 31 is costing papa Bill $3,000,000. According to the London Daily Mail, the total price tag will be about $5,000,000. The additional $2,000,000 apparently is being laid off on US Taxpayers as Secret Service costs for protecting former president Clinton and foreign heads of state, such as the presidents of France and Italy and former British Prime Minister Tony Blair, who are among the 500 invited guests along with Barbara Streisand, Steven Spielberg, Oprah Winfrey, Ted Turner, and Clinton friend and donor Denise Rich, wife of the Clinton-pardoned felon.

Before we attend to the poor political judgment of such an extravagant affair during times of economic distress, let us wonder aloud where a poor boy who became governor of Arkansas and president of the United States got such a fortune that he can blow $3,000,000 on a wedding.

The American people did not take up a collection to reward him for his service to them.
Where did the money come from? Who was he really serving during his eight years in office?

How did Tony Blair and his wife, Cherrie, end up with an annual income of ten million pounds (approximately $15 million dollars) as soon as he left office? Who was Blair really serving?

These are not polite questions, and they are infrequently asked.

While Chelsea’s wedding guests eat a $11,000 wedding cake and admire $250,000 floral displays, Lisa Roberts in Ohio is struggling to raise contributions for her food pantry in order to feed…
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AIMCo Sees Returns Rebound in 2009-2010

Courtesy of Leo Kolivakis

Via Pension Pulse.

Last Saturday, Lisa Schmidt of the Calgary Herald reported that AIMCo sees returns rebound:

The province’s investment manager has won back significant ground over the past year, its chief executive said Thursday, following tough losses in 2008.

 

Alberta Investment Management Corp., known as AIMCo, said overall returns are running in the range of about 17 per cent, said Leo de Bever, who will mark two years at the helm next week.

 

“If you look at the return on the Heritage Fund, that’s sort of indicative of what we did on the endowments and for the pension plans,” he said. The rainy day fund gained $2 billion to $14.4 billion for the 2009-10 year, compared with a $2.6-billion loss a year earlier.

 

But the recent market volatility has already pared back some of those overall investment gains, de Bever also cautioned.

 

“So far, we’re still above water, but it’s mostly been because of our effort in active management. The markets themselves haven’t given us very much,” he said.

 

The crown corporation, which oversees about $69 million in provincial savings, employee pensions and endowment funds, lost 10.1 per cent on its investments in fiscal 2009. Despite the expected gains in 2010, the overall fund did not increase in value due to government withdrawals, de Bever noted.

 

Official figures won’t be released until this fall, when AIMCo files its annual report. The agency was set up by the provincial government in January 2008.

 

But the much improved performance is sure to spark a gusher in staff bonuses, an issue that needs to be monitored, said Alberta Liberal finance critic Hugh MacDonald.

 

“They are going to be rewarded,” he said, noting the agency paid out significant bonuses for the previous year when the fund lost money.

 

“We have to keep AIMCo accountable, because they have well in excess of $60 billion of Albertans’ dollars under their control.

 

“We’re going to have to wait and see,” he said.

 

“With the instability that has occurred in the financial markets, it will be five years or more before we see . . . just how effective this new approach is with AIMCo.”

 

For his part, de


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Discount Window Borrowings Plunge To Just $11 Million, Lowest Since 2007; And Other Observations On The Future Of Fed Liabilities

Courtesy of Tyler Durden

In all the recent hoopla over Excess Reserves and spurious rumors over whether or not they should generate any form of interest (readers will recall a key catalyst for a surge in the market two weeks ago was the expectedly false rumor that Bernanke would announce the elimination of any IOR (Interest Paid On Reserves) rather than keeping the even current minimal 0.25% rate), everyone seems to have forgotten that old staple: the Discount Window. And probably logically so: while the Excess Reserve issue is one that deals with excess liquidity in the banking system (by definition: otherwise it would be lent out to consumers), Discount Window-related concerns deal with the opposite, or a liquidity deficiency. Logically, the two are mutually exclusive: near record excess reserves held with Federal Reserve Banks simply means that banks are not in any want for money (of any term, but most specifically ultra-short term).Looking at the Fed’s H.4.1 statement confirms that for the week ended July 29, the Fed’s Primary Credit facility (aka the current version of the Discount Window, together with the Secondary Credit and the Seasonal Credit Facility) usage has plummeted to just $11 million: a negligible number for a “rescue facility” that at the peak of the crisis saw more than $100 billion in overnight borrowings. The finding is not surprising, when considering that the rate on the Primary Credit Facility is 0.75%. As this is higher than the rate on the 2 Year Treasury, there is very little banks can do in reinvesting capital that is more expensive than even long-term funding sources. In other words, with well over a trillion in Excess Reserves, banks are becoming increasingly self-funding, at least in the medium term, and seek to disintermediate themselves from the Fed. In looking at the same problem, but from the perspective of the IOR, the Atlanta Fed concludes: “One broad justification for an IOR policy is precisely that it induces banks to hold quantities of excess reserves that are large enough to mitigate the need for central banks to extend the credit necessary to keep the payments system running efficiently. And, of course, mitigating those needs also means mitigating the attendant risks.” An environment in which banks are increasingly leery of relying on the Fed for funding, irrespective of whether IOR at 0.00% or 0.25%, is not one in which…
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Sabrient Investor’s (H)edge

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Phil's Favorites

Scarier than the Living Dead

I can't change an oil filter.

Scarier than the Living Dead

Courtesy of Joshau Brown, The Reformed Broker 

Our current state of affairs – this is an overgeneralization – two versions of the American existence are emerging as separate entities.

There’s the Knowledge Economy and there’s Trumpism, with a lot less overlap between the two with each passing day. We’re not exactly forced to pick the one around which we’ll coalesce, it’s more that we increasingly feel compelled to. Your choice depends on where you live, what your community looks like, which media outlet you get your news from, how religious you are, what level of education you’ve attaine...



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Zero Hedge

Ignore OPEC, It's China That Dictates Oil Prices

Courtesy of ZeroHedge. View original post here.

Authored by Nick Cunningham via OilPrice.com,

The OPEC deal will lead to an ongoing tightening of the crude oil market, putting a floor beneath crude prices in the $50s per barrel in the second half of 2017, according to Helima Croft of RBC Capital Markets. She said that prices should ultimately “grind higher into the $60s” by the fourth quarter, with an...



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Market News

Market Moving News

 

Financial Markets and Economy

European Stocks Steady; Italian Banks Fall After Renzi Comments (Bloomberg)

European stocks were steady while shares in Italy’s banks dropped along with the country’s bonds after comments from former Prime Minister Matteo Renzi sparked concerns that an early election is possible.

Hong Kong Throngs of Thousands Defy Bid to Cool Home Market...



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ValueWalk

Joel Greenblatt - Individual Investors Can Beat Large Institutions And Passive Strategies

By The Acquirer's Multiple. Originally published at ValueWalk.

One of our favorite Joel Greenblatt interviews is one he did with Steve Forbes at Intelligent Investing.

In this interview, Greenblatt explains how small investors can still beat large institutions. Greenblatt also discusses why investing in indexes like The Russell 1000 and the S&P 500 are seriously flawed even though they beat most active managers.

]]> Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

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He highlights why value investors can benefit greatly from toda...



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Chart School

Weekly Market Recap May 28, 2017

Courtesy of Blain.

Another winning week for the bulls, in a year full of them!  Things kicked off with a bang with a gap up Monday as the after shocks of the Comey removal – the one thing that seemed to shake this market for 24 hours – passed in the night.   Wednesday, minutes of the Federal Reserve’s latest policy meeting showed broad agreement on plans to begin shrinking the central bank’s balance sheet and also pointed to a likely rate increase next month, as widely expected.   Another gap up to start the day Thursday and serenity was found for the week.  Every day was up for the S&P 500 to book a weekly finished of +1.4% while the NASDAQ raced ahead +2.1%.

The minutes of the early May meeting showed that members were ...



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Digital Currencies

Visualizing The Expanding Universe Of Cryptocurrencies

Courtesy of Zero Hedge

Bitcoin is the original cryptocurrency, and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.

In fact, as Visual Capitalist's Jeff Desjardins details, the innovation of the blockchain is changing entire markets, while causing ripples with central banks and the financial industry. At time of publication, the bitcoin price now hovers near US$2,200, a massive increase from this time last year.

But the true impact of Bitcoin is actually far more reaching than this – it’s a...



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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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OpTrader

Swing trading portfolio - week of May 22nd, 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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Biotech

Beyond just promise, CRISPR is delivering in the lab today

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

Beyond just promise, CRISPR is delivering in the lab today

Courtesy of Ian HaydonUniversity of Washington

Precision editing DNA allows for some amazing applications. Ian Haydon, CC BY-ND

There’s a revolution happening in biology, and its name is CRISPR.

CRISPR (pronounced “crisper”) is a powerful technique for editing DNA. It has received an enormous amount of attention in the scientific and popular press, largely based on the promise of what this powerful gene e...



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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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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

Republicans Love Bombing, But Only When a Republican Does It

By Kevin Drum, Mother Jones

A few days ago I noted that Republican views of the economy changed dramatically when Donald Trump was elected, but Democratic views stayed pretty stable. Apparently Republicans view the economy through a partisan lens but Democrats don't.

Are there other examples of this? Yes indeed. Jeff Stein points to polling data about air strikes against Syria:

Democr...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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