Archive for April, 2011

Fools’ Errand?

Courtesy of Michael Panzner of Financial Armageddon 

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).

Be that as it may, here is (yet) another edition of "What a recovery!":

"When the Next Meal Is a Maybe" (Houston Chronicle)

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…
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The Cannibalization At The Top Escalates: Sokol’s (Re)Response To The Ukulele Master

Courtesy of Tyler Durden

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…
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Geithner Nixed Dodd-Frank

In case you were wondering, like I was, what Geithner’s Notice of Proposed Determination excluding FX swaps and forwards from Dodd-Frank requirements was all about.  - Ilene

Courtesy of Bruce Krasting

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.



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Measuring the Performance of the Ivy Portfolio

Courtesy of Doug Short

I’ve been posting a monthly moving average update for the five ETFs in featured in Mebane Faber and Eric Richardson’s Ivy Portfolio since the spring of 2009, when I featured my review of the book.

In addition to the monthly updates, I’ve also made a couple of generic studies of momentum investing with moving averages.

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, 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 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 website is an outstanding resource, one that I’m pleased to include in my Favorites.

The Endgame Headwinds

Courtesy of John Mauldin, Thoughts from the Frontline

The Endgame Headwinds 
If Something Can’t Happen… 
GDP = C + I + G + Net Exports 
Increasing Productivity 
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…
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Losing Faith (In The U.S. Economy)

Courtesy of Michael Snyder at Economic Collapse 

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. 

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.

Well, you know what?  McDonald’s ended up receiving approximately one million applications.

So how many of those people did McDonald’s hire?

They hired about 62,000 people.

That means that somewhere around 938,000 eager job applicants were turned away.

Just think about that.

Only about 6.2 percent of those that applied for a job at McDonald’s were accepted.

As Joe Weisenthal of Business Insider recently pointed out, that means that Harvard now has a higher acceptance rate than McDonald’s does.

Harvard accepts about

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Freedom’s 2011 Forecast & Update

Courtesy of Michael Victory

As we near the halfway point, an update on my 2011 forecast.

First, how we’ve done so far:

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…”

Check: Federal Reserve Chairman Ben S. Bernanke may keep reinvesting maturing debt into Treasuries to maintain record stimulus even after making good on a pledge to complete $600 billion in bond purchases by the end of June.


OK enough, let’s look at the rest of 2011 –

2011: The rest of the story -

I am reaffirming my expectation for significant volatility starting in the 2nd half of 2011. From my January article: “As a result, I…
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The "Real" Mega-Bears

Courtesy of Doug Short

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.

Things That Make You Go Hmmm: “My Name Is Grant Williams And I’m a Precious Metals Bug”

Courtesy of Tyler Durden

From Things That Make You Go Hmmm, April 30

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…
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EUR Non-Commercial Spec Positions Surge To Multi-Year High As USD And JPY Prepare To Take Out Lows

Courtesy of Tyler Durden

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.



Swing trading portfolio - week of October 24th,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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Kimble Charting Solutions

Banks- This is putting a smile on this sector

Courtesy of Chris Kimble.

Historically, when strong bull markets have taken place, Banks go along for the ride. Since the summer of 2014, banks have under performed the broad market by around 12%, as the S&P is just a couple of percent from all-time highs. Are banks about to act healthier and put a smile on this sector, which could help the S&P breakout above the 2,150 level?

Below looks at the Bank Index (BKX)



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Zero Hedge

Podesta Files Part 17: Wikileaks Releases Another 3,400 Emails, Bringing Total To Over 30,000

Courtesy of ZeroHedge. View original post here.

With just 2 weeks to go until the election, today Wikileaks continued its ongoing Podesta files release when it unveiled another 3,432 emails in the latest Part 17 of its release, bringing the total emails released so far to 30,235 total emails, over 60% of the total set for publication ahead of the elections.

Yesterday's release provided data on ...

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Phil's Favorites

Number of Startup Businesses Continues Lengthy Decline: Is this a Problem?

Courtesy of Mish.

The number of startup businesses continues to slide. In 1977, the share of US firms that were less than a year old was at 16%. In 2014, the latest data, the percentage was 8%.

The Wall Street Journal says Sputtering Startups Weigh on U.S. Economic Growth.

Is that the case?

The U.S. economy is inching along, productivity is flagging and millions of Americans appear locked out of the labor market.

One key factor intertwined with this loss of dynamism: The U.S. is creating startup businesses at historically low rates.

The Americ...

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Chart School

Weekly Market Recap Oct 23, 2016

Courtesy of Blain.

The week that was…

A sleepy week indeed as almost all the “action” came out of a gap up Tuesday morning and a gap down Friday morning (which was met with buyers).  Outside of those events, the indexes stuck closely to unchanged most of the week.  Earnings began in earnest but outside of some individual high profile stories it was a lot of beating lowered expectations.

“Despite a couple of good reports, we’re in the midst of another earnings season that is hardly painting a bright picture,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “Having another quarter where profits contract is not an underpinning for stocks to advance, and the market is searching for, if not demanding, a catalyst to move higher. At the moment, one is lackin...

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Misconceptions about the Nordic Economies

By The Foundation for Economic Education. Originally published at ValueWalk.

Nordic Economies

Photo by sebilden

Misconceptions about the Nordic Economies

The Nordic countries are usually mentioned in the Spanish political debate as examples of well-functioning and efficient Welfare States where the government provides citizens with a large range of social benefits. (The terms “Nordic” and “Scandinavian” will be employed interchangeably to refer to Sweden, Finland and Denmark. Norway and Iceland are excluded from my analysis.) Politicians, especially on the left side of the political spectrum, look at Sweden, Denmark, or Finland as successful social democratic experiments in which social entitlements are guaranteed by the ben...

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Market News

Breaking News And Best Of The Web

Courtesy of John Rubino.

The dollar is rising and so is inflation. Corporate debt and earnings becoming major near-term risks. China’s mortgage bubble is the biggest ever. US auto sales start to fall. Banks report surprisingly good earnings, mostly due to trading gains. Yellen considers aggressive “high-pressure” policy to engineer fast growth and rising wage inflation. Major cyber attack hits US east coast. Clinton way up in polls after final debate.  

Best Of The Web

Welcome to neocolinialism, exploited peasants! –

Why the global economy will disintegr...

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Insider Scoop

Rockwell Collins to Acquire B/E Aerospace for $8.3B

Courtesy of Benzinga.

Rockwell Collins (NYSE: COL) and B/E Aerospace (NASDAQ: BEAV)  today announced that they have entered into a definitive agreement under which Rockwell Collins will acquire B/E Aerospace for approximately $6.4 billion in cash and stock, plus the assumption of $1.9 billion in net debt.

Under the terms of the agreement, each B/E Aerospace shareowner will receive total consideration of $62.00 per share, comprised of $34.10 per share in cash and $27.90 in shares of Rockwell Collins common stock, subject to a 7.5% collar. This represents a premium of 22.5% to the closing price of B/E Aerospace common stock on Friday, Octob... more from Insider

Members' Corner

The Orlando Massacre Part 3

Courtesy of Nattering Naybob.

A continuation of a Naybob of IT's Natterings from Part 1 and Part 2...

While many Christian churches expressed grief and offered free funeral services for the victims of the Orlando shooting, the fundamentalist Westboro Baptist Church held an anti-gay protest during the funeral of the victims.

But the Westboro Baptist Church's protest rally was blocked by about 200 people who formed a human barricade on the main street in downtown Orlando, ...

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Mapping The Market

The Most Overlooked Trait of Investing Success

Via Jean-Luc

Good article on investing success:

The Most Overlooked Trait of Investing Success

By Morgan Housel

There is a reason no Berkshire Hathaway investor chides Buffett when the company has a bad quarter. It’s because Buffett has so thoroughly convinced his investors that it’s pointless to try to navigate around 90-day intervals. He’s done that by writing incredibly lucid letters to investors for the last 50 years, communicating in easy-to-understand language at annual meetings, and speaking on TV in ways that someone with no investing experience can grasp.

Yes, Buffett runs an amazing investment company. But he also runs an amazing investor company. One of the most underappreciated part of his s...

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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.


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Epizyme - A Waiting Game

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

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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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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PSW is more than just stock talk!


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! features the most important and most interesting news items from around the web, all day, every day!

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.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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