Archive for 2010

Swing trading virtual portfolio – week of February 8th, 2010

This post is for live trades and daily comments. 

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- Optrader





The Meaning of “Monty Python and the Meaning of Life”

Amusing analogy, and while the finer details may be hard to appreciate, like the difference between dying from contaminated salmon mousse and an e-coli-laced burger, I believe Robert Waldmann’s argument is correct — food poisoning kills.  And slicing, dicing and spreading contaminated beef through the hamburger supply, kills most efficiently. What we have here is not one bad can of salmon. - Ilene  

The Meaning of "Monty Python and the Meaning of Life"

Courtesy of Robert Waldmann at Angry Bear

Barry Ritholtz argues that the problem with mortgages was underwriting standards and not securitization. He appeals to the very great authority of Monty Python. Click the link.

Ritholtz seems not to be familiar with this new idea in economic theory called "Nash equilibrium". Over -rated yes. Totally irrelevant not so much. One can not assume that underwriting standards are exogenous. If there had been no MBS, no firm would have underwritten those mortgages. It was exactly because it was possible to blend them, and then sell them to people who didn’t spin the mortgage tapes before buying, that the mortgages existed in the first place. 

Raw hamburger texture

Let me work with his analogy. First, while I have great respect for the Monty Python team, few people have been killed by canned Salmon. Even blended into mousse, it kills fairly quickly and can be tracked back to the canner. The way bacteria work is that if you mix some contaminated stuff with other stuff you have trouble for sure. It doesn’t work that things seem fine until people notice.

At a way lower cultural level than Ritholtz I appeal to road runner cartoons. Wile E. Coyote runs along in mid air until he notices. Then he falls. As noted by everyone, this is the way financial markets really work. The non Monty Python quality humor is based on the fact that gravity doesn’t really work that way. Neither do bacteria. Analogies between rotten mortgages and rotten Salmon fail for this reason.

Notably, the ingredients in the Salmon mousse are few enough that the dead diners immediately know what went wrong when death points at the mousse. That’s not the way MBS work let alone CDOs of MBSs or CDOS of tranches of CDOS.

A better analogy would be making hamburger. Bits from hundreds of steers end up in the…
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Bottled Water Syndrome

The Drinking Water Profiteers

Bottled Water Syndrome

Courtesy of JOSEPH NEVINS writing at CounterPunch

Portrait of a young woman showing a water bottle

In mid-January, I received a mass email asking me to donate $10 for bottled water and other supplies for participants in an important immigrant rights march in Phoenix. Given the ever-repressive and cruel political climate in Arizona for immigrants (especially unauthorized ones), I was unequivocally in support of the mobilization. Nonetheless I was taken aback by a request to contribute even nominally to an effort to buy bottles of water for what turned out to be, according to some estimates, more than 20,000 people.

Certainly there are other ways—ecologically sustainable and less expensive ones—to provide water for such a multitude. How, why, and to what effects bottled water became the preferred way to do so for myriad people and places far beyond a single event in Phoenix is the focus of Elizabeth Royte’s powerful and compelling book, Bottlemania: Big Business, Local Springs and the Battle Over America’s Drinking Water.

I’ve never been a fan of bottled water, considering it ecologically damaging—in the United States alone 30-40 million single-serve bottles per day end up as litter or in landfills—and economically foolhardy, another capitalistic trick to con us into purchasing  something from profiteers that we don’t shouldn’t have to. But as Royte powerfully illustrates, the increasing commodification of drinking water is far more complex, and dangerous, than at least I appreciated.

Until recently, the sale of single-serve bottles of water was rare. While the United States had regional bottled water companies as early as the nineteenth century, such entities mainly supplied homes and offices with large containers of the life-sustaining liquid (for water coolers, for instance). This situation began to change in the 1980s with the entry of Perrier into the U.S. market and its successful television advertising which stressed that a little luxury—a bottle of the French water—was available to everyone.

Other companies, like Evian and Vittel, followed, employing the likes of Madonna and fashion models, to help equate bottled water with personal health, fitness, and glamour. That, combined with the invention of polyethylene terephthalate (PET) plastic—which made water easily portable—helped the U.S. bottled-water industry boom: between 1990 and 1997 its annual sales increased from $115 million to $4 billion. (By 2006, the figure was $10.8 billion; globally bottled water’s income was $60 billion.)

This
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AIG-GATE: THE WORLD’S GREATEST INSURANCE HEIST

"If the money used to bail out AIG and the banks had been used to bail out the states instead, the states would not be facing insolvency today."

AIG-GATE: THE WORLD’S GREATEST INSURANCE HEIST

Business As Usual in New Bond Street After Jewellery Heist

Courtesy of Ellen Brown at Web of Debt 

Rumor has it that Timothy Geithner is on his way out as Treasury Secretary, due to his involvement in the AIG scandal that is now unraveling in hearings before the House Oversight and Reform Committee. Bob Chapman writes in The International Forecaster:

Each day brings more revelations of efforts of the NY Fed and Goldman Sachs to hide the details of the criminal conspiracy of the AIG bailout. . . . This is a real crisis on the scale of Watergate. Corruption at its finest.

But unlike the perpetrators of the Watergate scandal, who wound up looking at jail time, Geithner evidently has a golden parachute waiting at Goldman Sachs, not coincidentally the largest recipient of the AIG bailout. At least that is the rumor sparked by an article by Caroline Baum on Bloomberg News, titled “Goldman Parachute Awaits Geithner to Ease Fall.” Hank Paulson, Geithner’s predecessor, was CEO of Goldman Sachs before coming to the Treasury. Geithner, who has come up through the ranks of government, could be walking through the revolving door in the other direction.  

Student Using Microscope in Lab

Geithner has been under the House microscope for the decision of the New York Fed, made while he headed it, to buy out about $30 billion in credit default swaps (over-the-counter derivative insurance contracts) that AIG sold on toxic debt securities. The chief recipients of this payout were Goldman Sachs, Merrill Lynch, Societe Generale and Deutsche Bank. Goldman got $13 billion, roughly equivalent to its bonus pool for the first 9 months of 2009. Critics are calling the New York Fed’s decision a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been put through bankruptcy proceedings in the ordinary way. In a Bloomberg article provocatively titled “Secret Banking Cabal Emerges from AIG Shadows,” David Reilly writes:

[T]he New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom


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Why Amedisys (AMED) will hit $85

Here’s PSW member Tuscadog’s detailed analysis of the company Amedisys (AMED). Tuscadog feels this is one of the few solid opportunities in the stock market, and he suggests a massive short squeeze may be coming due to AMED’s 53% short interest. – Ilene

Amedisys, Inc. provides home health and hospice services to the chronic, co-morbid, and aging American population. Its home health services include skilled nursing and home health aide services; physical, occupational, and speech therapy; and medically oriented social work to eligible individuals who require ongoing care. The company also offers clinically focused programs for chronic conditions and various diseases,… (Yahoo financial, more here.>>)

Why Amedisys (AMED) will hit $85

Courtesy of Tuscadog, member at PSW

Doctor standing outdoors with elderly patient

Feb 23rd may be ‘Judgment Day’ for the AMED short interest.

This is a long posting based on a lot of research and high level interviews I’ve conducted. I’m a private (long term) investor in Amed and I don’t appreciate the way Amed has been ‘jerked around’ by the hedge funds with false rumors and shorting, hence my willingness to share my analysis with small investors. These are my opinions based on my own extensive research, so invest at your own risk. For background on Amed pay particular attention to the 7 articles by Daryl Davis in the ‘Financial Blogs’ section of the Yahoo Finance page for Amed.

UPDATED GUIDANCE WILL BE A NIGHTMARE FOR SHORTS:

Amed will likely release 2009 EPS on Feb 23rd of around $4.90 to $5 and, more importantly, it will give guidance for 2010 based on the status quo on Medicare billing rates for 2010 (i.e. as already issued for 2010 by The Centers for Medicare & Medicaid Services, CMS). Based on the company’s growth rates and CMS’s announced approved rate increase for 2010 (which translates into a 1.8% net increase for 2010 after two flat pricing years) Amed will likely provide 2010 guidance in the $5.60 to $5.70 range.  I believe actual results outcome will likely be higher, in the $5.70 to $5.90 range.

The 15 analysts who cover AMED are likely waiting for Amed’s guidance update and to see if there are any Health-Bill developments. The Suntrust  upgrade Monday to a $70 target is using a pessimistic assumption of a revision to a retroactive 2.5% Medicare billing rate reduction for 2010. Currently, analysts eps forecasts for 2010 include varying degrees of…
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Weekly Charts + The Reverse Cup & Handle Chart Pattern

Courtesy of Market Tamer

Weekly Charts

Dow Jones


S&P 500


NASDAQ


 

The Reverse Cup & Handle Chart Pattern

- The inverse of a Cup & Handle Chart Pattern.

 

-The stock bounces off of a support level and moves higher on unremarkable volume.

 

- A “Rounded Top” forms and then subsequently moves lower on increasing volume producing “The Cup”.

 

- The pattern is completed when a Bear Flag forms producing the handle.

 

- The breakdown occurs when the stock breaks the low of the handle on increasing volume.

 


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You Had Better Cage The Monster CONgress

You Had Better Cage The Monster CONgress (AIG/GS/CDS)

Courtesy of Karl Denninger at The Market Ticker

Vinyl Ready Art - Holidays

I’ve been writing about this now over a year in regard to the mess that became of AIG, their "financial products" unit, and what I believe is culpability not only of certain financial parties but more importantly our regulators of these firms.

Now The NY Times has published a new article that makes clear that my clarion call for major changes in these areas of the market were not only spot-on, but are even more necessary today than they were back then.

A.I.G. had long insured complex mortgage securities owned by Goldman and other firms against possible defaults. With the housing crisis deepening, A.I.G., once the world’s biggest insurer, had already paid Goldman $2 billion to cover losses the bank said it might suffer.

A.I.G. executives wanted some of its money back, insisting that Goldman — like a homeowner overestimating the damages in a storm to get a bigger insurance payment — had inflated the potential losses. Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities.

Read that carefully.  The NY Times is making this sound like AIG had insured losses against securities Goldman was holding.  That’s what insurance is, right?

Here’s the problem: Goldman didn’t own the securities.

In addition to offering to cancel its own contracts, Goldman offered to buy all of the insurance A.I.G. had written for several other banks at severely distressed prices, according to three people briefed on the discussions.

Negotiating with Goldman to void the A.I.G. insurance was especially difficult, Federal Reserve Board documents show, because the firm did not own the underlying bonds. As a result, Goldman had little incentive to compromise.

Now do you see the outrage in these so-called "protection devices"?

They aren’t.  They were raw bets.  Very highly-leveraged gambling instruments that had a very low cost at origination – a cost all out of proportion to their eventual potential return.

We do not let "just anyone" buy insurance.  You must have an insurable interest.  That is, I can’t buy fire insurance on your house.  If I could, I might – and so might 20 of…
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The OTHER Reason that the U.S. is Not Regulating Wall Street

The OTHER Reason that the U.S. is Not Regulating Wall Street 

Courtesy of Washington’s Blog

Mature businessman dancing along street with briefcase and umbrella

Sure, American politicians have been bought and paid for by the Wall Street giants. See this, this and this.

And everyone knows that the White House and Congress – while talking about cracking down on Wall Street with strict regulation – have actually watered down some of the most important protections that were in place.

For example, Senator Cantwell says that the new derivatives legislation is weaker than the old regulation. And leading credit default swap expert Satyajit Das says that the new credit default swap regulations not only won’t help stabilize the economy, they might actually help to destabilize it.

But the U.S. is not being sold out in a vacuum.

On March 1, 1999, countries accounting for more than 90 per cent of the global financial services market signed onto the World Trade Organization’s Financial Services Agreement (FSA). By signing the FSA, they committed to deregulate their financial markets.

For example, by signing the FSA, the U.S. agreed not to break up too big to fails. The U.S. also promised to repeal Glass-Steagall, and did so 8 months after signing the FSA.

Indeed, in signing the FSA and other WTO agreements, the U.S. has legally bound itself as follows

• No new regulation: The United States agreed to a “standstill provision” that requires that we not create new regulations (or reverse liberalization) for the list of financial services bound to comply with WTO rules. Given that the United States has made broad WTO financial services commitments – and thus is forbidden by this provision from imposing new regulations in these many areas – this provision seriously limits the policy [options] available to address the current crisis.

• Removal of regulation: The United States even agreed to try to even eliminate domestic financial service regulatory policies that meet GATS [i.e. General Agreement on Trade in Services] rules, but that may still “adversely affect the ability of financial service suppliers of any other (WTO) Member to operate, compete, or enter” the market.

• No bans on new financial service “products”: The United States is also bound to ensure that foreign financial


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Duck Tales inflation lesson

Duck Tales inflation lesson

Courtesy of Tim Iacono at The Daily Bail

Even though this is a cartoon, it provides a pretty good explanation of what goes on in a pure fiat money system where trust is placed in the central bank and the government to not abuse the power that they and only they have to create money.
 

Spotted over at The Daily Bail where there seems to be an inexhaustible supply of interesting things to watch on YouTube.

 


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A review of 2009 Super Bowl commercials

A review of 2009 Super Bowl commercials

Courtesy of Tim Iacono at The Mess That Greenspan Made

Get ready for a whole new batch of memorable Super Bowl commercials in a few hours – at least, that’s the hope. Here’s a compilation of the best from last year’s game.
 


The rhinoceros is quite funny, but, if you ask me, those baby ETRADE spots are just creepy.

 


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Zero Hedge

Obamacare To Unveil "Price Shock" One Week Before The Elections

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The writing was on the wall long before the largest US insurer, UnitedHealth, decided to pull the plug on Obamacare in mid April.  Then, just a week later, Aetna’s CEO said Thursday that his company expects to break even, but legislative fixes are needed to make the marketplace sustainable.

"I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, wh...



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Phil's Favorites

Mathematical Jackasses

Courtesy of Mish.

With the exception of emerging market countries in trouble like Brazil and Russia, and complete hyperinflation basket cases like Venezuela, can anyone name a central bank that genuinely wants a stronger currency?

Today, the Bank of Japan is at the top of the whiner list of strong currency complainers, despite the obvious mathematics.

Bank of Japan Governor Haruhiko Kuroda warns Current Yen Strength Risks Harming Japan Recovery“.

Speaking to reporters in Frankfurt Monday, Kuroda also reiterated that BOJ policy makers won’t hesitate to expand monetary stimulus in order to achieve their 2 percent inflation target. The central bank’s board lef...



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ValueWalk

Brazil Bans WhatsApp Once Again - 100 Million People Lose Access

By Jacob Wolinsky. Originally published at ValueWalk.

Brazil Bans WhatsApp Once Again – 100 Million People Lose Access

As Brazil’s economy collapses and the leader of the country faces impeachment for corruption the Government is focusing on the important issues… banning Whatsapp – below a petition from a pro free-speech group (which does not include Glenn Greenwald) demanding that Brazil allow WhatsApp to be used once again in Brazil

What would happen if you suddenly lost access to your messaging app? That’s what just happened to 100 million people in Brazil this afternoon.

...



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Chart School

Markets Rally But Breadth Remains Weak

Courtesy of Declan.

Monday enjoyed some follow through upside after Friday's afternoon recovery. However,  gains were on very light volume given the distribution which carried most of last week. Also, market breadth remains in decline from overbought levels.

The Nasdaq frames this neatly. The rally has come off a bull defense of the 50-day MA on higher after a series of heavy volume selling days. MACD, On-Balance-Volume and +DI/-DI are in well established 'sell' triggers along with a sharp relative underperformance against the S&P.  Bullish dip buyers will be pleased with today's action, but other factors are running against them.

...

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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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Digital Currencies

"The Claims Don't Add Up" - Is The "Unmasking" Of Bitcoin's Satoshi Nakamoto Just A Publicity Stunt

Courtesy of ZeroHedge. View original post here.

Earlier today we reported that in what many are convinced is just another self-gratifying publicity stunt, Australian entrepreneur Craig Wright "outed" himself as bitcoin's mysterious creator "Satoshi Nakamoto" by unleashing a major PR campaign and revealing his "identity" to three media organizations - the BBC, the Economist and GQ.

As ...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Wrong-Way Bets Rule U.S. Stock Market's $3 Trillion Recovery (Bloomberg)

Here’s what happened during the rebound in equities that added nearly $3 trillion to U.S. share values in 10 weeks: mutual funds hoarded cash, short sellers tightened their grip on bearish bets and individuals bailed out of the market.

Fed Ponders Catchup With Economic Theory Signaling Rates Too Low (Bloomberg)

When does treading carefully lead to falling behind?

...



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Kimble Charting Solutions

Crude Oil- Suggesting to "Sell In May" again?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

It’s that time of year to hear the “Sell In May” message. This theme usually applies to stocks. Could it also apply to Crude Oil?

The above chart compares Crude Oil and the S&P 500 the past four years.

A year ago, Crude Oil and the S&P 500 both peaked the first of May at (1) and then proceeded to create a series of lower highs and lower lows for the next 9 months.

To start off this year, both created reversal p...



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OpTrader

Swing trading portfolio - week of May 2nd, 2016

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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Insider Scoop

Mednax's Unit MedData To Buy Duet Health For Undisclosed Terms

Courtesy of Benzinga.

Related MD Benzinga's Top Downgrades After Rounds Of Financing, Is Healthcare M&A Picking Up?

MEDNAX (NYSE: MD)' unit MedData, Inc., disclosed the acquisition of Duet Health, which is engaged in developing of patient engagement software, as well as, mHealth solutions. The terms a...



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Biotech

PRGO, VRX and an Overpriced Papa

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

By Ilene 

Remember this? It was Monday. PRGO is down from around $130 to under $100 since I started following it LAST WEEK. That's down almost 25% in a week, and almost 50% in the last year. So I wrote, 

"Perrigo CEO Joseph Papa leaves Perrigo (PRGO) to lead Valeant (VRX) while PRGO issues a warning about missing earnings expectations. Not surprisingly, PRGO stock plummeted today. 

Robert Ingram, Chairman of the [Valeant] Board, stated, "The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time. He has a strong shareholder orientation,...



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Mapping The Market

About that debate last night

Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,

The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now. 

And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now. 

Phil writes back,

I was expecting them to start throwing poop at each other &n...



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We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

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News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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