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Archive for February, 2011

China Forced To Deny It Will Experience HYPERinflation In 2011, As Russia Unexpectedly Hikes Interest Rates

Courtesy of Tyler Durden

And now for this evening’s stunner, via Dow Jones. “There won’t be hyperinflation in China this year, the state-run China Securities Journal reported Tuesday, citing Yao Jingyuan, the chief economist of the National Bureau of Statistics. The abundant stocks of grains and main agricultural products in China are key factors in stabilizing consumer prices, the newspaper quoted Yao as saying. China’s consumer price index rose 4.9% in January from a year earlier, picking up from December’s 4.6%.” So putting aside what official denial means about the validity of a story, not to mention this utterly bizzare and completely out of left field statement, China’s best and only reason why it won’t have hyperinflation is that it has “abundant stocks of grains and agricultural products.”… We can, at best, hope that this has to be some early version of an April Fool’s joke, or else things are truly far worse than anyone expected.

Also, just where does China put the threshold cut off on “hyper” – 10%? 20%? 50%? Is it at least safe to say that China may well experience mega, turbo, or nitrous inflation (and we generously put all three terms to the left of “hyper” on the X-axis)?

In the meantime, Russia, which will soon come out with comparable warnings, unexpectedly hiked interest rates by 0.25% to 8.00%:rest

The Russian Central Bank unexpectedly raised its key interest rate by 0.25 percent to 8 percent for the first time since the economic crisis over two years ago.

The Bank of Russia said in a statement that the rate hike, effective from Monday, was needed due to the high inflationary pressure and the expected rise of capital inflow into Russia as the world oil prices surge on the unrest in the Middle East.

“There are grounds for capital inflows into Russia due to higher oil prices,” the central bank said in a statement accompanying the decision.

By tightening its monetary policy, Russia is sending a strong signal that it views rising prices as a greater threat than slow economic growth.

Since the start of 2011, according to the Rosstat data, customer inflation in Russia reached 9.7 percent in a yearly term, mostly due to rising food prices. Earlier, in December 2010, central bank Chairman Sergey Ignatiev said monetary policy makers next year will focus on


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China Forced To Deny It Will Experience HYPERinflation In 2011

Courtesy of Tyler Durden

And now for this evening’s stunner, via Dow Jones. “There won’t be hyperinflation in China this year, the state-run China Securities Journal reported Tuesday, citing Yao Jingyuan, the chief economist of the National Bureau of Statistics. The abundant stocks of grains and main agricultural products in China are key factors in stabilizing consumer prices, the newspaper quoted Yao as saying. China’s consumer price index rose 4.9% in January from a year earlier, picking up from December’s 4.6%.” So putting aside what official denial means about the validity of a story, not to mention this utterly bizzare and completely out of left field statement, China’s best and only reason why it won’t have hyperinflation is that it has “abundant stocks of grains and agricultural products.”… We can, at best, hope that this has to be some early version of an April Fool’s joke, or else things are truly far worse than anyone expected.

Also, just where does China put the threshold cut off on “hyper” – 10%? 20%? 50%? Is it at least safe to say that China may well experience mega, turbo, or nitrous inflation (and we generously put all three terms to the left of “hyper” on the X-axis)?

In the meantime, Russia, which will soon come out with comparable warnings, unexpectedly hiked interest rates by 0.25% to 8.00%:rest

The Russian Central Bank unexpectedly raised its key interest rate by 0.25 percent to 8 percent for the first time since the economic crisis over two years ago.

The Bank of Russia said in a statement that the rate hike, effective from Monday, was needed due to the high inflationary pressure and the expected rise of capital inflow into Russia as the world oil prices surge on the unrest in the Middle East.

“There are grounds for capital inflows into Russia due to higher oil prices,” the central bank said in a statement accompanying the decision.

By tightening its monetary policy, Russia is sending a strong signal that it views rising prices as a greater threat than slow economic growth.

Since the start of 2011, according to the Rosstat data, customer inflation in Russia reached 9.7 percent in a yearly term, mostly due to rising food prices. Earlier, in December 2010, central bank Chairman Sergey Ignatiev said monetary policy makers next year will focus on


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American Monster: Excerpts from The Madoff Tapes

Here’s an excerpt from The Madoff Tapes, and Jesse at his best, calling out the fraud and greed characterizing our power structure and offering little hope for the future. – Ilene 

 Pic credit: MTTS (Via Jr. Deputy Accountant)

Courtesy of Jesse’s Cafe Americain 

“It’s unbelievable. Goldman … no one has any criminal convictions—the whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”

Here are some brief excerpts from a story in New York Magazine called The Madoff Tapes. The story runs to nine pages, so consider this just a taste and read the whole thing when you have the time. I thought Steve Fishman did a terrific job of letting Bernie talk and of presenting his thoughts in a orderly manner without a lot of interpretation and editorial intrusion. He has real talent as an interviewer, and seems a natural reporter. 

But while you read this bear in mind that you are seeing reality interpreted through the eyes of Madoff, a master manipulator and pathological liar, an individual perhaps in deep denial, but the question is, to whom. 

His psychiatrist in prison tells him he is not a sociopath because he has remorse. I think his major remorse is that he was caught. The article implies that he is a narcissist. I think he is all of the above, and much, much, more.   

Always full of self-pity and the quick deflections of a classic con man, he seems to blame his corruption on the failure of his father’s business, and a personal vow never to let it happen to him, a resolve that became an obsessive compulsion.   Besides, everyone was doing it.  He just did more of it, more quickly and with an automated efficiency that turned into raw fraud when the easy gains evaporated.   It is a microcosm of the US financial sector today.

Sometime in the future someone is going to do a thorough analysis on what was common in the background of these fellows who were drawn to Wall Street in the 1980′s and beyond, and what made them the way they are. But we can discover what set them free to do their worst, and that was the undermining of regulation,…
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Oxen Group Nightly – Feb. 28 – Stock Market Recap





US Military Counter-Libya Preparation Update: USS Enterprise Now Back In Mediterranean

Courtesy of Tyler Durden

Earlier today, we reported that the US military is in the process of repositioning its forces in the area around Libya “to be able to provide flexibility and options.” And while we have yet to get an updated US naval map for this week (the last one can be found here), it appears that the USS Enterprise which was previously on its way to the Straits of Hormuz has made a 180 and has now backtracked completely through the Red Sea and is now once again north of the Suez, where it has joined the big deck amphibious warfare ship Kearsarge. This means that the USS Vinson is again left alone to protect the highly combustible gulf region, which now includes both Bahrain and Oman, in addition to Yemen and of course Iran and Saudi, on revolutionary watch. It may be time to send Abraham Lincoln, which in turn is patrolling the South China Sea, back to the Persian Gulf as the possibility of a flashpoint escalation there is far greater than around Indonesia (which however would leave all of Korea and China unguarded). Keep an eye out on CVN 74 and 76 – Stennis and Reagan. If those two start making a move west, then next steps can be extrapolated quite easily.

AFP has more:

“We’re studying all options to ensure that Colonel Gaddafi understands that he has to go. I know that people have mentioned military solutions, and these solutions are being examined by the French government,” Fillon said in an interview with RTL radio.

One option on the table was using NATO air power to impose a no-fly zone over Libya to stop Gaddafi from using air strikes against his own people. However, such a step would require UN approval, experts said.

 For any military intervention featuring air power, US commanders could turn to the USS Enterprise aircraft carrier, which is currently in the Red Sea, as well as the amphibious ship the USS Kearsarge, which has a fleet of helicopters and about 2000 Marines on board.

As of Monday, the nuclear-powered USS Enterprise had moved to the north of the Red Sea, near the Suez Canal, according to the US Navy’s website.

As recently as last week, the carrier was in the Gulf of Aden, when it was part of


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…To The Shores Of Tripoli

Courtesy of Jack H Barnes

The Empire is stirring. You may not notice it initially and you may not care yet: in time you will. The US is the only military in the world that can invade a prepared and defensive nation – not only expecting to win; but to dominate the event.  Pax Americana is coming to an end.

Outside of an attack on Hawaii like Japan used in 1941; the US picks its wars.  The only functioning Empire in the known universe, America has the capacity to unilaterally act with overwhelming force.

It normally takes years for a situation to reach a critical boiling point where the US will intervene.  The GW I & II era took 6-9 months of obvious preparation time before occurring.  Kosovo was an aerial war with no real ‘boots on the ground’ until the outcome was in the waning stages.

Afghanistan started out as a special ops cowboy war; it has now slowly grown into the largest armed conflict on the planet currently. The Iraqi war is winding down with combat troop levels dropping to historic low levels since 2003.

Normally, the U.S. is slow to act; however when the Empire does act, under most circumstances it is prepared to handle two individual wars at the same time. The Iraqi war is winding down currently, giving the US the capacity to act unilaterally again.  The US has a military budget that is larger than the rest of the world combined.  This gives it the capacity to act in its own best interest on demand.

World War I & World War II are both prime examples of the US arriving into an ongoing conflict with overwhelming muscle.  The above will provide you with the context of what is next to come.

When an Empire decides to attack another nation, there are a set of dances that both sides normally undertake: it’s akin to a ritual courting, in reverse.  The outcome of this public ritual dance is war, not a peaceful diplomatic outcome.    With the benefit of hindsight, these signs are unmistakable.  The US and England have always had a unique international relationship and is one prime example.

While the US is the current Empire, the US was originally part of the last Great Empire.  Those old relationship bonds run deep and true.  While the media loves to try to highlight the gap…
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Wake Me, Shake Me

Courtesy of James Howard Kunstler   

     A quickening of events pulses through lands where for so long time stood still, and the oil – what’s left of it – lies locked for the moment beneath hot sands – woe upon all ye soccer moms! – while Colonel Gadhafi ponders the Mussolini option – that is, to be hoisted up a lamp-post on a high-C piano wire until his head bursts like a rotten pomegranate. Then the good folk of Libya can fight amongst themselves for the swag, loot, and ka-chingling oil revenues he left behind. Meanwhile, Hillary Clinton scowls on the sidelines knowing how bad it would look if US marines actually hit the shores of Tripoli (and perhaps how fruitless it might turn out to be). And Italian grandmothers across the Mediterranean wonder why there’s no gas to fire up the orecchiette con cime di rapa. 

       The fluxes of springtime run cruelly across the sands of Araby, clear into Persia where the ayatollahs’ vizeers toy with uranium centrifuges and thirty million young people wonder how long they will allow bearded ignoramuses to tell them how to pull their pants on in the morning. Along about now, I wouldn’t feel secure standing next to somebody lighting a cigarette in that part of the world. 

      Pretty soon we’re going to find out just how fragile things are in the Kingdom of Saudi Arabia, there at the heart of things oily. Last week, King Abdullah wobbled out of his intensive care unit to spread a little surplus cash around the surging population, but let’s remember that their share of the oil "welfare" has been going down steadily in recent years – a simple matter of numbers really. Putting aside even the common folk, a thousand princes from dozens of different tribes pace restively in the background awaiting the struggle that must follow King Abdullah’s overdue transmigration to the farther shore. All along the western coast of the Persian Gulf and down toward the Horn of Africa, dark forces stir. Fuses sputter in Kingdoms from Bahrain to the Yemen.

     Also last week, Wikileaks released papers signifying that Saudi Arabia’s oil reserves were quite a bit less than they had claimed. It was basically an old story, one that the late Matthew Simmons had published in 2005 just from poring over reams of production data from…
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Is PIMCO The Fed’s “Agent Provocateur” In Scuttling Billions In Legal Putback Claims Against JP Morgan And Bank Of America?

Come back to this after reading:  What I don’t understand is how, Blackrock, for example, holding "an estimated USD 3.4bn of BofA equity," could make a settlement with BofA that is considered binding to any other party. – Ilene 

Courtesy of Tyler Durden

Perhaps it is time for JP Morgan to revise its estimate for putback liability claims. As a reminder back in October, it was none other than JP Morgan which said: "We estimate putback risk to be approximately $23-$35bn for agency mortgages, $40-80bn in non-agency and roughly $20-30bn for second liens and HELOCs. However, there are a number of reasons why these estimates are on the high end, including losses already taken and loss reserves established."

Well, there appear to be a number of reasons of why these estimates may have been on the very low end as well, the first one being that the bank itself just announced "it faces up to $4.5 billion in legal losses, in excess of its established litigation reserves, should its worst-case legal scenario occur." And if JP Morgan is seeing billion more in putback exposure, then what should Bank of Countrywide Lynch say, which just reported that the amount of debt which is being put against the firm for fraud of various types has just doubled from $46 billion to $84 billion. Luckily, according to a DebtWire report, PIMCO and BlackRock are actively doing the Fed’s bidding in attempting to form a splinter group within the putback litigants and to settle with BofA for a nominal charge. Will the Fed be once again successful at subverting justice?

From the WSJ:

The SEC has requested the additional disclosures on what banks could potentially face on legal losses on top of what they have set aside. The banks all face a rash of lawsuits regarding the financial crisis and collapse of the housing market, particularly from investors who purchased mortgage-backed securities that later tumbled in value.

The bank already accounts for what it considers a reasonable estimate of losses in a litigation reserve, a number it doesn’t make public. The $4.5 billion figure would be a worst-case scenario on top of that number. It said the additional losses could be zero, though it could also go higher as the bank can’t yet make estimates on the more than 10,000 legal proceedings it faces.

To those…
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CNBC On The Case For $130 Silver

Courtesy of Tyler Durden

Nothing new for regulars here. Yet the fact that CNBC, following Cramer’s endorsement of gold, is now apparently pushing silver on retail is very troubling: can’t the fast money crew just stick with pitching Netflix or some other widowmaker to their demographic. That said, since per Nielsen, said demo did not even register in recent surveys, we are not all that concerned. That said, the people still demand Doug Kass to appear with an immediate rebuttal how he is all in short silver, just to neutralize the suddenly disconcerting feng shui.





A Look At The Lawsuit Against Michael Lewis, In Which We Find That Brad Pitt Has Bought The Movie Right To “The Big Short”

Courtesy of Tyler Durden

Earlier today, some hilarious news hit the tape after it was made public that disgraced CDO trader Wing Chau has decided to go nuclear and sue Michael Lewis and Steve Eisman due to their all too honest representation of the Harding Advisory asset manager, in Lewis’ book “The Big Short” (not spared from the lawsuit was even book publisher W.W. Norton). “Michael Lewis was sued by Wing Chau, president and principal of Harding Advisory LLC, who accused the writer of defaming him in his 2010 book. The book “depicts Mr. Chau as someone who ignored his professional responsibilities, made misrepresentations to investors, charged money for work that was not performed, had no stake in the CDOs he managed, was incompetent or reckless in carrying out his responsibilities, and violated his fiduciary duties by putting the interests of ‘Wall Street bond trading desks’ above those of his investors.” It appears that Chau missed at least one additional defendant: Jody Shenn of Bloomberg, who in 2010 wrote a scathing article titled “How Wing Chau Helped Neo Default in Merrill CDOs Under SEC View” which provided just as damning and just as accurate a portrait of the (allegedly) pathologically greedy manager who presided at the “center of an epidemic of conflicts of interest.” And while we present the key highlights from Shenn’s piece which is a must read for anyone interested in what will surely be a recurring drama in the coming months (the Michael Lewis op-ed repartees will be worth the price of admission alone), what appears to have forced Chau to take this career ending step (sorry Wing, no more AUM for you) is that he is about to hit the silver screen. In the full lawsuit we read that “Brad Pitt’s production company, Plan B Entertainment Inc., has bought the movie rights and is working with Paramount Pictures Corporation to produce [The Big Short] film.” Well isn’t that special…

Here are some of the choicest quotes by Jody Shenn from his May 2010 article:

In early 2007, with subprime-mortgage defaults soaring, Wing F. Chau teamed with Merrill Lynch & Co. to create a $300 million pool of assets that shared a name with the main character in The Matrix movies who discovers reality isn’t what it seems.

Neo CDO Ltd. was a complex construction. More than


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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!

 
 

Zero Hedge

ECB's Asset Monetization Advisor Says There Will Be No Full-Blown QE

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

When two months ago, the ECB announced it would hire Blackrock as an advisor for its "Private QE" ABS and Covered Bond purchase program, many eyebrows were raised, mostly out of cynical curiosity whether the ABS purchased would be those structured by the "advisor" itself. Well, according to today's detailed fresh off the printer, pardon the pun, term sheets on the program, it appears that the eligible securities will be almost exclusively of European origin, so one can probably exclude Blackrock advising the ECB on buying ABS structured by Blackrock itself.

However,...



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Chart School

Is the Stock Market Cheap?

Courtesy of Doug Short.

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1993.23. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

● TTM P/E ratio = 18.4 (18.2)
● P/E10 ratio = 26.0 (26.0)

The Valuation Thesis

A standard way to investigate market valuation is to study the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias.

...

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Phil's Favorites

Initial Unemployment Claims Per Millions Workers Reach All Time Record Low

Courtesy of Lee Adler of the Wall Street Examiner

Initial unemployment claims virtually always hit their low for the year in the first week of September, but the September 27 week cracked that low to reach an all time record low in claims per million workers. This is an unsettling fact illustrating just how distorted and overheated the US jobs market is in some sectors. Companies can’t find the workers with the qualifications they need, so they’re not laying off. In the past, such conditions have been the precursor to bear markets in stocks along with economic contractions.

The headline, fictional, seasonally adjusted number for initial unemployment claims came in at 287,000. The consensus guesstimate of  Wall Street economists had been 297,000. There was little reaction in the markets, which may have been more focused on Super Ma...



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Digital Currencies

The Mexican Libertad: The Currency Solution?

Better than a Bitcoin? The Mexican Libertad is a real coin made out of silver or gold whose value is based on the price of silver or gold. It's tangible, like our coins and paper money, but the value is pegged to its weight in previous metal. 

The Mexican Libertad: The Currency Solution?

By Jeff Thomas of The International Man

The Libertad is a Mexican coin that was first issued in 1981 in .999 fine gold and then in silver in 1982. Beginning in 1991, the Libertades became the only coins in the world that were issued in the convenient sizes of 1/20, 1/10, 1/4, 1/2, and 1 ounce—again, in both gold and silver. This made them very practical if they were to be used as currency.

But of course, gold and silver coin...



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All About Trends

Mid-Day Update

Reminder: David 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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Option Review

VIX Call Spreads Trade

The CBOE Vix Index topped 17.0 and the highest level since early-August on Monday morning amid declines in U.S. equities to start the trading week. The volatility index is off its earlier highs to trade 5.0% higher on the session at 15.65 as of 11:30 am ET. Options volume on the VIX is hovering near 360,000 contracts, or just more than 50% of the average daily reading of around 660,000 contracts. Calls are far more active than put options, as evidenced by the call/put ratio up above 4.2 in morning trading, perhaps as some traders position for volatility to stick around.

Large call spreads traded on the VIX today caught our attention as one big optio...



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Sabrient

Sector Detector: Stocks fight off predictable weakness, but expect more downside

Courtesy of Sabrient Systems and Gradient Analytics

Yes, the market showed significant weakness last week for the first time in quite a while. In fact, the Dow Jones Industrial Average moved triple digits each day. But it was all quite predictable, as I suggested in last week's article, and certainly nothing to worry about. Now the market appears to be poised for a modest technical rebound, and longer term, U.S. equities should be in good shape for a year-end rally. However, I still believe more downside is in order before any new highs are challenged. Moreover, market breadth is important for a sustained bull run, so the challenge for investors will be to put together broader bullish conviction, including the small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, re...



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OpTrader

Swing trading portfolio - week of September 29th, 2014

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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Market Shadows

Ebola vs. Us

Ebola vs. Us

By Ilene 

Ebola is spreading too quickly for Ebola-vaccine makers to conduct typical studies of safety and efficacy on experimental vaccines. Instead, vaccines will be tested for basic safety, but then deployed with protocols devised now in order to test for efficacy essentially on the field. Testing has to be expedited because the situation in West Africa gets worse every day while there are no approved vaccines or other treatments.

The chart below is from a paper in the New England Journal of Medicine showing estimates of the virus's trajectory projecting out to November 1, 2014. If current trends continue...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

The latest issue of Stock World Weekly is now available. Please sign in with your PSW user name and password. Or simply take a free trial to try out our weekly newsletter. 

...

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Promotions

Last Chance! See The 'Google-Like' Trading Algorithm 'Live' TODAY

Traders and Investors,

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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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