Every once in a while I like to post a collection of recent reports that should, in theory, help to undermine the enthusiasm that so many in Washington and on Wall Street have for the notion that the U.S. economy is ‘recovering.’
Of course, few of those people are interested in the truth, or even a version or reality that is at odds with their own, but I soldier on regardless.
Fools’ errand? Maybe (though probably not for those loyal FA visitors who are interested in knowing where things really stand).
A ground-breaking study takes a look at how many families in area counties are struggling to put food on their tables
Every day more than 700,000 people in Harris County are uncertain about where they will get their next meal. Not all of them are poor — many are working people who don’t qualify for federal food programs.
These are among the findings of a recent study that provides the first detailed look at hunger at the county level. Harris County families struggling to keep food on the table have a food budget shortfall of $12.97 per week, per person. To fill the meal gap, $277 million is needed annually to ensure that every person has three meals a day, according to the report’s calculations.
The federal government defines food insecurity as limited or uncertain availability of nutritionally adequate foods. On average, food insecure families go at least seven months of the year without enough food, the study said.
The study, based on 2009 figures, was conducted by Feeding America, a national hunger relief organization, with the goal of helping local food banks develop better strategies to target hunger. Food banks traditionally have relied on state and national data to…
David Sokol’s attorney Barry Wm. Levine fires right back, and it is now popcorn time.
“David Sokol is deeply saddened that Mr. Buffett, whom he considered a friend and mentor, would disparage him as he has done today. Neither Mr. Buffett nor the Audit Committee at Berkshire has requested to speak nor has spoken to Mr. Sokol since his resignation was made public by Mr. Buffett on March 30th. Mr. Buffett drafted the March 30th press release announcing Mr. Sokol’s resignation in cooperation with Mr. Charlie Munger and Mr. Ronald Olson both of whom are Berkshire Board Members. They know the law and they know the Berkshire policies. In that context, Mr. Buffett correctly declared Mr. Sokol’s conduct lawful and indeed was effusive of his praise of him. There is no new information or new fact which has become available to them since that press release was issued on March 30th. At no time did Mr. Sokol attempt to withhold information from Mr. Buffett, Berkshire Hathaway or the Audit Committee. Every question asked of Mr. Sokol on or prior to March 30th and any information requested of him has been provided. The Audit Committee report, which was prepared by the law firm of Munger Tolles & Olson contains errors and omissions, both of which could have been avoided if the Audit Committee had inquired of Mr. Sokol.
It is alarming that Mr. Buffett would be advised to so completely flip-flop and resort to transparent scapegoatism. After 11 years of dedicated and hugely successful service to various Berkshire Hathaway subsidiaries, Mr. Sokol would have expected to be treated fairly. That would have been in Berkshire’s interest.
Let me be clear about central facts: At no time did Mr. Sokol violate the law or any Berkshire policy. At no time did Mr. Sokol intend to personally profit at the expense of Berkshire or its shareholders. At no time did Mr. Sokol mislead or deceive. Such a conclusion would be wholly out of character and the Berkshire Board is keenly aware of that. At all times he faithfully discharged his fiduciary duties to Berkshire, a company he heroically served and continues to regard with reverence.”
Oddly this is an almost identical take to ours from earlier. The next Levine iteration will most certainly have an exhibit A…
Tim Geithner made a big choice Friday afternoon. He excluded FX spot and forwards from the Central Clearing requirements of Dodd-Frank ("D-F"). Tim’s words:
Treasury is today issuing a Notice of Proposed Determination providing that central clearing and exchange trading requirements would not apply to FX swaps and forwards.
The basis for Tim’s big decision was made clear in the Treasury announcement:
In contrast to other derivatives, FX swaps and forwards always require both parties to physically exchange the full amount of currency on fixed terms that are set at the outset of the contract.
Okay!Got that? Interbank FX is excluded from D-F because it requires a settlement. Unlike FX futures that have zero expectation of actual cash settlement (AKA: A bet) the FX spot and forward market requires that the parties exchange the currencies.
I think many people will like this distinction. The thinking is that if actually delivery of a commodity or currency is required, then it is a commercial transaction and not a bet speculation. But actually those folks don’t understand how the system works.
Tim Geithner knows how it works inside and out. He worked on the Fed desk in NY. Therefore he knows that the basis for his decision is flawed. The simple answer is that only a small fraction of interbank FX spot and forward transactions are actually settled for cash. They are netted out and settled by an outfit called CLS.
What’s CLS? A good description comes from Tim’s former employer, the Fed:
Is CLS a big deal? Does this outfit settle the lion’s share of all interbank spot and forward settlements?You bet it does. The Feb. numbers were a Multi-Trillion dollar blow out:
As a result of CLS 98% of all FX spot and forward transactions are netted out and settled with no delivery of the underlying currencies. So the argument that Tim has put forward in defense of his big choice is actually bogus.And he knows it.
Investing strategies are not the primary focus of my website, and I don’t personally track the performance of the Ivy Portfolio other than to highlight the monthly signals. For ETF performance tracking and backtesting, I use ETFReplay.com, an excellent website for analyzing the performance of individual ETFs and ETF portfolios based on customized moving-average strategies. There are many free tools on ETFReplay.com. However performance backtesting of portfolios does require a paid subscription.
The image below illustrates my research on the Ivy Portfolio since 2007. If you click the image, you’ll open a HUGE version that also shows the monthly performance over the complete range as compared to SPY (SPDR S&P 500 Index). For cash, I’ve used SHY (Barclays Low Duration Treasury (2-yr).
Now, the portfolio in this illustration doesn’t *exactly* match the Ivy five. I picked 2007 as my starting point to show the performance from before the market peak in the Fall of that year. Thus I was forced to make one substitution for the Ivy ETFs — EFA (iShares MSCI EAFE Index Fund) in place of VEU (Vanguard FTSE All-World ex-US ETF), which was launched in early 2007 and didn’t produce a 10-month signal until December of that year. But the substitution presumably understates the all-Vanguard IVY portfolio: I make this assumption because VEU has outperformed EFA since the March 2009 market low (129.5% versus 108.3% as of April 29).
For anyone interested in researching momentum investing with ETFs, the ETFReplay.com website is an outstanding resource, one that I’m pleased to include in my dshort.com Favorites.
The Endgame Headwinds
If Something Can’t Happen…
GDP = C + I + G + Net Exports
Toronto, Cleveland, LA, Philadelphia, Boston, and Italy
I have written repeatedly about the Endgame in the weekly letter, as well as in a New York Times best-seller on the same topic. By Endgame I mean the period of time in which many of the developed economies of the world will either willingly deleverage or be forced to do so. This age of deleveraging will produce a fundamentally different economic environment, which the McKinsey study referenced below suggests will last anywhere from 4-6 years. Now, whether this deleveraging is orderly, as now appears to be the case in Britain, or more resembles what I have long predicted will be a violent default in Greece, it will create a profoundly different economic world from the one we have lived in for 60 years. This makes sense, in that the prior world was defined by ever-increasing amounts of leverage. Outright reductions in leverage or even a significant slowing of the rate of growth is a whole new ballgame, economically speaking.
In all this I have explained the various options facing the developed world, but I have refrained from putting forth my own estimates as to what will actually happen and what the environment surrounding that outcome will be. That is about to change. I have been giving this a great deal of thought and research. While my conclusions will be somewhat controversial (I know, surprise, surprise), with enough to offend almost everyone on some point, I hope that I can muster enough clarity to help you think through your own personal views and how you will respond to what I think will be yet another crisis on the not-too-distant horizon. Whether that is Crisis Lite or Crisis Depression is up to us and the politicians we elect. I argue that we need to choose most wisely, because we are at a crossroads that is as critical as any since 1940.
As I start this letter, I am on a flight to San Diego, where I will co-host my 8th annual Strategic Investment Conference. As usual, I will be the last speaker on Saturday. This letter will be the beginning of that speech, and we will conclude (hopefully) next week. What I hope…
Are the American people losing faith in the U.S. economy? The statistics that you are about to read might surprise you. Not everyone believes that the U.S. economy is dying (there are still millions out there that will swallow anything that the mainstream media tells them), but the reality is that there is a growing chunk of the population that has completely lost faith in our leaders and in our economic system.
A brand new Gallup poll has found that the number of Americans that believe that we are in a "depression" is actually larger than the number of Americans that believe that the economy is "growing". That is absolutely shocking because according to official government figures, the U.S. economy is growing right now and virtually nobody in the mainstream media or the government has used the term "depression" to describe the economic downturn that we went through recently. In fact, according to Gallup a total of 55% of the American people believe that we are either in a recession or a depression right now. This is clear evidence that the American people are losing faith in U.S. government economic statistics and instead they are basing their opinions on what they see in their own communities. Despite the pablum about an "economic recovery" constantly being spewed by Ben Bernanke and Barack Obama, faith in our economic system continues to decline. The truth is that the American people are not stupid. They can see what is happening to the economy.
Back when I was a teenager, one day I walked over to the local McDonald’s and filled out an application and was immediately hired.
But that is not how it works today.
Recently, McDonald’s made headlines when they held a National Hiring Day. Some commentators pointed to that event as evidence that the economy was recovering.
Forecast: “It could be US municipal defaults, policy shifts from the Chinese, EU crisis, or an expanded war inthe Middle East.”
Check: Although not officially declared a war, the ‘kinetic military action’ in Libya is an expansion of the ongoing wars in the Middle-East. Continued shifts in Chinese policy – evident by the April agreement between the BRICS to establish mutual lines of credit in local currencies, an important step towards the initiative to reduce/end the reign of the dollar as the world’s single reserve currency. Earlier this week it was reported that The Peoples Bank of China plans to shed $2 trillion of U$D assets. While this should not be a surprise and it will likely be a multi-year plan, it is still significant.
Forecast: “As food and energy prices rise, nations will feel the sting of money printing(already happening). This will only increase the number of civil protests (RIOTS). Developing nations will feel the brunt of higher inflation, which will lead to various measures to control price increases (e.g., Russia’s recent announcement of food controls or COMEX margin hikes).”
Check: Egyptian protests began just as I finished this piece and two weeks later, on 11 February, Mubarak resigned from office. Protests have since spread to Bahrain, Syria, Tunisia, Yemen, Jordan, Saudi Arabia and even Wisconsin. There have been three COMEX margin requirement increases for silver futures since this article (four in 2011 – 1/21, 3/24, 4/24, 4/29).
Forecast: From a follow-up post (1/30) “QE2 appears to be an exercise in replacing the toxic assets purchased from the banks for Treasuries. Instead of returning any money back to the Treasury, they are exchanging the toxins for Treasuries. Thus, the Fed’s balance sheet will remain in the $2T…”
It’s time again for the weekend update of our “Real” Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.
This chart is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the “real” all-time high for the S&P 500 occurred in March 2000.
Here is a nominal version to help clarify the impact of inflation and deflation, which varied significantly across these three markets.
See also my alternate version, which charts the comparison from the 2007 nominal all-time high in the S&P 500. This series also includes the Nasdaq from the 2000 Tech Bubble peak.
My name is Grant Williams and I’m a precious metals bug.
There. I’ve said it.
It feels good to get that off my chest.
Of course, those amongst you who have been riding alongside me these past few years probably already had a sneaking suspicion that was the case and, I imagine, several more of you are now tutting, rolling your eyes and muttering “I KNEW it. Where’s that ‘Unsubscribe’ button?” (bottom of the last page – no offence taken). Well today, we’re going to talk about precious metals again I’m afraid, but in a broader sense if that helps at all. For readers who are over the whole precious metals thing, there’s a nice cartoon on the last page and you’ll find several stories about alternate subjects scattered throughout pages 7 to 15). For those of you still reading at this point, join me inside the recesses of my mind. Please keep your hands and arms inside the carriage at all times.
Whenever I look at an idea as either a potential trade or a possible thematic shift, the very first question I ask myself is ‘does this idea make sense?’. Plain old common sense. Nothing to do with the numbers or the likely quantum of any associated move, but would the idea seem reasonable if presented to someone with either zero, or at best a very limited background in finance?
Whilst stories around individual stocks can fulfill this criterion reasonably regularly, they often operate in confined parameters (a particular geography or a particular market segment for example) and so an idea is easier to explain and simple to quantify. It is much harder to find bigger picture, macro ideas that make secular sense because, for the most part, these ideas– but it is these big picture shifts that contain the possibility to make real money.
To illustrate this point, one of my favourite charts of all time demonstrates how, by making a single trade in each decade, it was possible to take $35 in 1970 and turn it into $159,591 in 2008. Of course, had you then made a 5th decision and completed the circle by reinvesting that $159,591 back into precious metals – this time silver – in 2008 (and, to ensure nobody accuses me…
Commodity speculators may or may not be the vile criminals the president and his new working group are making them out to be, but they sure have made their view clear on where they think the USD and the EUR (the JPY not so much) are going. Below is the latest update from the CFTC Commitment of traders report on the three key currencies. While there has been some modest short covering in both the USD and JPY, both continue to trade like the carry funding currencies they are. And with bullish spec positions in the EUR at a multi year highs, the only question is whether the yen or the dollar will be the carry currency of choice in the next beatdown. Of course, how the EUR is expected to retain its lofty perch with all of the PIIGS soon to go under is beyond us, but hopefully it makes sense to Trichet, who is stuck between an inflationary rock and a insolvent peripheral hard place.
Turmoiling markets... We love the smell of volatility in the morning...
Ari seems to sum up how the Greeks feel about Troika (and perhaps how the Germans feel about the Greeks)
Greek elections very definitely anti-status quo, Greek bank stocks and bonds crashing, re-plunging crude oil prices, a crashing Swiss Franc, Russian downgrade and collapsing Ruble, so BTFD in US equities...
When black markets in currencies develop, you can be 100% sure the official exchange rate is overinflated.
In Venezuela, the fixed rate of exchange is 6.3 bolivars to the dollar, the floating rate of exchange is 50 bolivars to the dollar, and the black market rate is 184 bolivars to the dollar. The latter is what the currency is really worth at the moment.
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
Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...
Summary: The Sentier Research monthly median household income data series is now available for December. The nominal median household income was up $537 month-over-month and $2,072 year-over-year. That's a 1.0% MoM gain and a 4.0% YoY gain. Adjusted for inflation, the numbers were up $738 MoM and $1725 YoY. The real numbers equate to a 1.4% MoM increase and a 3.3% YoY increase, thanks to -0.37% drop in the Consumer Price Index.
In real dollar terms, the median annual income is 5.1% lower ($2,900) than its interim high in January 2008 but well off its low in August 2011.
Background on Sentier Research
The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for the previous ye...
In a report published Monday, Albert Fried & Company analyst Rich Tullo initiated coverage on TubeMogul Inc (NASDAQ: TUBE) with an Overweight rating and $23.00 price target.
In the report, Albert Fried & Company noted, “While TUBE shares are up 120% since the IPO the lock up expired on January 14, 2015, which means insider stock is potentially for sale. Despite the overhang, we think there is room for share growth as TUBE expands domestically, and globally and also as TUBE launches new applications such as Performance TV Ad buying. While the TUBE revenue model is complicated, we think investors will growth comfortable with the model as several industries such as Internet Search and the Oil Industry also have pass throughs. TUBE has less than 1% media buying ma...
An interview with John Ehlers of Stock Spotter and Mesa Software
Ilene: John, in our last discussion about trading systems in general and yours in particular (Can trading be reduced to cycles, stresses and vibrations?) you mentioned Monte Carlo simulations and their use in measuring performance. Can you explain more about how you measure the performance of a trading system?
John: Let's start with comparing trading with gambling. The two have several things in common. In both ...
So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
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 firstname.lastname@example.org 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.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.