Archive for 2011

Hiring in U.S. Slowed in May With 54,000 Jobs Added

After several months of strong job growth, hiring in the United States slowed sharply in May, suggesting the economy may be running out of steam once again.

The Labor Department reported on Friday that the nation added 54,000 nonfarm payroll jobs last month, after an increase of about 220,000 jobs in each of the three previous months. The gain in May was about a third of what economists had been forecasting. The unemployment rate, meanwhile, edged up to 9.1 percent from 9.0 percent in April.

“The economy clearly just hit a brick wall,” said Paul Ashworth, chief United States economist at Capital Economics. “It’s almost as if it came to a complete standstill.”

Read more here: Hiring in U.S. Slowed in May With 54,000 Jobs Added – NYTimes.com.





Another Chinese Rate Hike As Early As This Week Expected

Courtesy of Tyler Durden

For anyone who was hoping that China would be the marginal source of liquidity in QE3 absentia (or until it actually does come, which it will), manifested by a halt to monetary tightening and a relapse into that good old methadone state of loose monetary policy, it may be time to pull those SHCOMP limit bids.  China Daily just announced tha “the People’s Bank of China is likely to increase the interest rates banks must pay on deposits and the amount of money banks are required to hold in reserve to sop up the excess liquidity now found in the economy and slow inflation, said analysts. The changes in monetary policy may happen before the National Bureau of Statistics makes an expected announcement this week saying that the consumer price index (CPI), an indicator of inflation, hit a record high in May, they said.“As a reminder, yesterday Goldman predicted a multi-year high inflation of 5.5% in May courtesy of the biggest drought in 50 years and surging food prices: it turns out that the PBoC, far more responsible that our own central planning charlatans, will not stand for that.

From the article:

“The CPI’s increase of 5.3 percent in April over where it had been a year before was obviously exorbitant,” said Li Daokui, an adviser to the People’s Bank of China and professor at Tsinghua University.

“The central government should and probably will curb this continuously rising inflation by raising interest rates. It would be reasonable to raise China’s interest rates by at least 0.75 percentage points this year.”

Lu Zhengwei, a senior economist with Industrial Bank, said he predicts the one-year benchmark interest rate for deposits may go from the current 3.25 percent to between 3.75 and 4 percent. After that, the government will raise the reserve requirement ratio for banks more frequently, he said.

An anonymous analyst with China International Capital Co Ltd said the rise in interest rates will occur in June, before the government’s expected news about a large increase in the May CPI. The analyst predicted interest rates will go up one further time – probably in the third quarter.

“China’s monetary policy in the short-term won’t be loose,” he said. “The People’s Bank of China will continue to tighten it until at least the end of the


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Greek Bailout #2 Is Dead On Arrival: A Few Good Hedge Funds May Have Called The ECB’s Bluff, And Hold The Future Of The EUR Hostage

Courtesy of Tyler Durden

Even as the general market, dumb as a doorknob, had been following every headline out of Europe, soaking up the BS that Greece may after all end up being bailed out in some miraculous way, there were those who wondered about the legal basis of the Greek bailout #2, also known as a redux of the “Vienna initiative.” The problem with the second “Deux Ex Machina” bailout is that there is absolutely nothing Deus about it, no Ex, and most certainly no Machina. In fact, as it now clearly appears, the whole rescue package is flimsier than a house of cards and a quick read through the indenture makes it all too clear. The key reason why the voluntary Vienna Initiative worked back in 2009 is that the alternative was the end of the world, and nobody would profit from not going along with the herd. This time things are diametrically different. The key phrase (or two) in the proposed package: “Voluntary” and “Collective Action Clauses”… Well as the following excerpt from Citi explains, both of these critical (as in binary: without them, Greece is dunzo) assumptions are unworkable, and explains why every single Greek bond in recent weeks has been purchased by hedge funds who have remembered that the economics of “nuisance value” when the upside of bluffing the EUR printer is virtually unlimited. Which means that not only is Bailout #2 in jeopardy of not passing the Greek parliament, but that we may suddenly find ourselves in the biggest “activist” investor drama, in which voluntary restructuring “hold out” hedge funds will settle for Cheapest to Delivery or else demand a trillion pounds of flesh from the ECB in order to keep the eurozone afloat. In other words, the drama is about to get very, very real. And, most ironically, a tiny David is about to flip the scales on the mammoth Goliath of the ECB and hold the entire European experiment hostage…

The smoking gun courtesy of Citigroup:

Legal Characteristics of Greek Government bonds

After the question of whether or not a restructuring will occur and when, the next most important question for most investors is whether or not it can be done in such a way as to not trigger CDS. Lee Buchheit3 has indentified several aspects of Greek debt that are relevant.


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How Bad Is Climate Change for Your Lungs?

A new study puts a hefty price tag on climate change by linking it to the air you breathe. The report, published yesterday by the Union of Concerned Scientists, concludes that CO2-induced temperature increases will worsen ground-level ozone concentrations (the kind coming from power plants and exhaust pipes, not the kind that shields the Earth from UV rays). Higher concentrations of ground-level ozone threaten the health of millions of Americans, an impact that could cost the US $5.4 billion in 2020. If that’s not compelling enough, here’s what the study’s findings mean for you:  

If you live in the following states: California, Texas, New York, Illinois, Pennsylvania, Ohio, Michigan, North Carolina, New Jersey, and Virginia topped the list of most vulnerable populations under the projected ozone concentration increase of 2 parts per billion per 1 degree of temperature increase.

If you have asthma: Higher ground-level ozone concentrations could lead to 2.8 million additional occurrences of asthma attacks, shortness of breath, wheezing, and chest pains in 2020 compared to today.

Read more here: How Bad Is Climate Change for Your Lungs? | Mother Jones.





China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills

(CNSNews.com) - China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S. Treasury securities. Thus, until October, China’s overall holdings of U.S. debt continued to increase.

Continue here: China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills | CNSnews.com.





Goldman Apologizes For Its Horrendous December “US Economic Renaissance” Call, Begins QE3 Discussion

Courtesy of Tyler Durden

Back on December 1, 2010 Goldman announced it was “fundamentally” shifting its “bearish” outlook on the economy, when Jan Hatzius said “This outlook represents a fundamental shift in the thinking that has governed our forecast for at least the last five years” we accused the Goldman economics team, which we had previously respected, of “jumping the shark” and in describing the piece of fluff said it was nothing but “Hopium”, concluding that “Jan Hatzius used to have credibility.” Ten minutes ago, Hatzius just threw in the towel and apologized for this horrendous call. “Six months ago, we adopted the view that the economy was transitioning to a more self-sustaining recovery and predicted sequential real GDP growth of 3½%-4% (annualized) in 2011-2012. There were three reasons for our shift: a) a pickup in “organic” growth—GDP excluding the estimated impact of fiscal policy and inventories—to more than 4% in late 2010; b) visible signs of progress in private sector deleveraging, and c) another round of fiscal and monetary stimulus….It hasn’t happened.” Needless to say, this apology has made us regain some confidence in Hatzius. Of course, we fully expect that he and his entire team will relinquish their 2011 bonus (and possibly a 2010 bonus clawback) following this massively wrong call, which only Zero Hedge had the guts to call out. Anyway, we can now move on… to QE3. Just as we predicted in January (but were late by a month, expecting this preliminary discussion would occur in May at the latest), Hatzius has just launched the first shot across Bill Dudley’s bow. “So what is the hurdle for QE3?” Hatzius asks… And a very dovish Bill “You can’t eat iPads” Dudley will answer very shortly. Next up: QE 3.

Just out from Goldman Sachs

1. Six months ago, we adopted the view that the economy was transitioning to a more self-sustaining recovery and predicted sequential real GDP growth of 3½%-4% (annualized) in 2011-2012. There were three reasons for our shift: a) a pickup in “organic” growth—GDP excluding the estimated impact of fiscal policy and inventories—to more than 4% in late 2010; b) visible signs of progress in private sector deleveraging, and c) another round of fiscal and monetary stimulus.

2. It hasn’t happened. In fact, organic growth seems to have slowed anew to a below-trend pace in the first half of 2011.…
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The Real “Margin” Threat: $600 Trillion In OTC Derivatives, A Multi-Trillion Variation Margin Call, And A Collateral Scramble That Could Send US Treasurys To All Time Records…

Courtesy of Tyler Durden

While the dominant topic of conversation when discussing margin hikes (or reductions) usually reverts to silver, ES (stocks) and TEN (bonds), what everyone so far is ignoring is the far more critical topic of real margin risk, in the form of roughly $600 trillion in OTC derivatives. The issue is that while the silver market (for example) is tiny by comparison, it is easy to be pushed around, and thus exchanges can easily represent the illusion that they are in control of counterparty risk (after all, that was the whole point of the recent CME essay on why they hiked silver margins 5 times in a row). Nothing could be further from the truth: where exchanges are truly at risk is when it comes to mitigating the threat of counterparty default for participants in a market that is millions of times bigger than the silver market: the interest rate and credit default swap markets. As part of Dodd-Frank, by the end of 2012, all standardised over-the-counter derivatives will have to be cleared through central counterparties. Yet currently, central clearing covers about half of $400 trillion in interest rate swaps, 20-30 percent of the $2.5 trillion in commodities derivatives, and about 10 percent of $30 trillion in credit default swaps. In other words, over the next year and a half exchanges need to onboard over $200 trillion notional in various products, and in doing so, counterparites, better known as the G14 (or Group of 14 dealers that dominate derivatives trading including Bank of America-Merrill Lynch, Barclays Capital, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, RBS, Societe Generale, UBS and Wells Fargo Bank) will soon need to post billions in initial margin, and as a brand new BIS report indicates, will likely need significant extra cash to be in compliance with regulatory requirements. Not only that, but once trading on an exchange, the G14 “could face a cash shortfall in very volatile markets when daily margins are increased, triggering demands for several billions of dollars to be paid within a day.” Per the BIS “These margin calls could represent as much as 13 percent of a G14 dealer’s current holdings of cash and cash equivalents in the case of interest rate swaps.” Below we summarize the key findings of a just released discussion by the BIS
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Tomber de Charybde en Scylla

Courtesy of ilene

"We are headed into a Depression because policymakers have made another Depression unavoidable. A policy-driven Depression is different than a financial crisis. It is a matter of choice. It means that the objectives of the people who control the system are different than our own. There are those who will benefit from another severe downturn, but most of us will only needlessly suffer." ~ Mike Whitney

From Stock World Weekly: Tomber de Charybde en Scylla

Consumer spending comprises about 70% of the US GDP, largely coming from the income of working people. Therefore, if our policymakers’ goal is to improve the economy and boost the GDP, it would seem logical to want worker’s incomes to increase. Instead we see a sluggish economy, rising unemployment and labor taking an ever-shrinking share of national income.

Historically, labor has received roughly two-thirds of the overall national income. A 2004 paper by the St. Louis Fed asserts, “The allocation of national income between workers and the owners of capital is considered one of the more remarkably stable relationships in the U.S. economy. As a general rule of thumb, economists often cite labor’s share of income to be about two-thirds of national income—although the exact figure is sensitive to the specific data used to calculate the ratio. Over time, this ratio has shown no clear tendency to rise or fall.” (Labor’s Share – St. Louis Fed)

It appears that the St. Louis Fed was mistaken. As David Rosenberg points out, labor’s share of national income has dropped to 57.5%, the lowest level in over 60 years. Tyler Durden of Zero Hedge calls this “probably the most important secular trend in recent employment data, one that has a far greater impact on the macroeconomic themes than Birth/Death and seasonal adjustment manipulated month to month shifts in the employment pool per either the household or establishment surveys… Zero Hedge is not a Marxist blog: quite the opposite, but like Rosie [Rosenberg] we come to the same troubling conclusion: ‘Extremes like this, unfortunately, never seem to lead us to a very stable place.’” (Attention Marxists: Labor’s Share Of National Income Drops to Lowest in History)

With budgets squeezed by high unemployment and low wages, we wonder who exactly is supposed to be able to afford to keep buying gasoline as prices go higher? Consumers are increasingly stretched by stagnant
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Summary Of Key Events In The Upcoming Week

Courtesy of Tyler Durden

From Goldman Sachs

Week in Review: An awful lot of data disappointments

It is tough to find a positive data print amongst the slew of disappointing data last week. Arguably it was the encouraging production plans which accompanied Japanese IP. As has been catalogued elsewhere, the majority of the business surveys generated significant negative surprises, for reasons that are not entirely clear at this point. Analysing the business surveys also presents a quandary between levels and changes. The sharp declines are clearly worrying, but the level isn’t necessarily. After printing at multi-year highs in recent months, the levels are closer to ‘normal’. Indeed the Euroland PMIs suggest growth is tracking at 0.6%qoq, above our forecast of 0.4%. If the drops are related to supply chain issues from Japan, they could be reversed next month given Japanese production plans.

However the breadth of the weak data, which was not just confined to business surveys raise questions about the strength of global momentum. Indeed the GLI reading for May recorded momentum at zero, which does point to an uncertain outlook for global IP. Away from industrial activity, US payrolls only rose by 54k, with the weakness concentrated in manufacturing, retail trade and leisure/hospitality. In our view, only about 15-20k of the downshift in employment growth is attributable to supply-chain problems in the auto sector (adding together changes in job growth for manufacturing firms and vehicle dealers).

Market reacted to this news with a rally in fixed income, weakness in equity markets and renewed broad Dollar weakness, in particular against the Euro.

Week ahead: It is all about IP

The week ahead brings a barrage of IP data for April from all round the world, the momentum of which will be closely examined after the sharp drops in the manufacturing business surveys last week. Expectations – both ours and the consensus – are a mixed bag, but broadly, we expect momentum to slow in April. The data will be dissected for evidence of supply chain issues – which probably should be faded given the Japanese production plans published last week – and for evidence of a broader slowdown. In addition, manufacturing orders data from Germany, Taiwan, Japan and Sweden will be watched similarly.

Away from IP, the week brings a bunch of inflation prints, which are all broadly expected to show a further…
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“Escaping The Clutches Of Financial Markets” – An Essay On Europe’s Debt-For-Democracy Prepackaged Bankruptcy

Courtesy of Tyler Durden

A must read essay from Dirk Kurbjuweit, posted earlier in Der Spiegel

Escaping the Clutches of the Financial Markets

In today’s Europe, the people are no longer in control. Instead, politicians have become slaves to financial institutions and the markets. We are partly to blame — and changes are urgently needed to nurse European democracy back to health.

We are doing well. In fact, we’re doing splendidly. The economy is booming, with 1.5 percent growth in the first quarter. We are as prosperous as we were before the crisis, which has finally been overcome. Congratulations are in order for everyone.

The banks, Deutsche Bank above all, deserve particular congratulations. In the first quarter, it earned €3.5 billion ($5.1 billion) in pretax profits in its core business, and by the end of the year the bank will likely report a record €10 billion in pretax profits, its best results ever. That number is expected to rise to €11 billion or even €12 billion in two or three years.

Less than three years after the peak of the crisis, it seems as if it never happened. That is true of the economy, but it also true of us as economic subjects. But is that all we are?

No, we are also citizens and participants in a democratic society. As such, we have no reason to be celebrating. Instead, we ought to be sad and outraged. Democracy, after all, is not doing splendidly, or even well. It is gradually becoming a casualty of the financial crisis.

Rage Directed at Politicians

Trouble is brewing all over Europe. Young people with little hope for the future are protesting in Spain. In France, 1.4 million copies were sold of a manifesto titled “Be Outraged.” Young Frenchmen and -women are devising utopias that extend well beyond civil society because they no longer expect anything from it. A deep depression has descended upon Greece, combined with a rage directed at politicians and the rest of Europe.

In Germany, this is what politicians are hearing from their citizens today: “You spent billions to rescue the banks, and now I’m supposed to be footing the bill? Forget it!” Hardly anyone is willing to put up with their politicians any more. And German leaders have lost support — and some of their own legitimacy.

They seem helpless, unable to come…
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Phil's Favorites

Brexit Briefing

 

Brexit Briefing

Courtesy of Wade of Investing Caffeine

Pair of British Briefs

There is no shortage of Brexit articles, but as I compile information for my monthly newsletter later this week (subscribe at Investing Caffeine – right column), here are some of my favorite links:

1) How to Make Sense of the Brexit Turmoil (FiveThirtyEight)

2) Brexit Meltdown Charts (Ritholtz)

3) ...



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Zero Hedge

UBS CIO Warns "The Status Quo Is Over... Get Used To It"

Courtesy of ZeroHedge. View original post here.

From the desk of Mark Haefele, CIO UBS Wealth Management,

Brexit - Navigating The Aftermath In short

The effects of the UK's vote to leave the European Union have been felt around the world. Markets have re-priced to reflect heightened political uncertainty, the threat of lower growth in Europe, and the potential for deeper contagion to the global economy and financial system.

What's moved?

Equity markets initially traded down sharply but have recovered some ground during the day: the S&P 500 is currently -2.4%, European banks closed -13%, the Nikkei -8%, and the FTSE...



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ValueWalk

Warren Buffett & Bill Gates Discuss Success, Mistakes and Work/Life

By Jacob Wolinsky. Originally published at ValueWalk.

In this discussion, students from the University of Nebraska got to ask Bill Gates and Warren Buffett questions of their choosing. The questions vary widely and can be found below. Warren Buffett and Bill Gates are two of the richest people in the world and their answers and advice are invaluable to anyone looking for success.

Date: September 2005
Location: University of Nebraska

Audio is out of sync in parts.

Video Segments:

0:00 Start
0:01 Intro
3:14 Start of speech
...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Central banks ready to cooperate after Brexit result (Business Insider)

Central banks are ready to cooperate to support financial stability in the wake of Britain's vote to leave the European Union, the Bank for International Settlements said on Saturday.

Central bankers gathered at the organization's global economy meeting in Switzerland discussed the implications of the referendum.

How Americans spend their day reflects a shifting economy and population (Wall Street Journal)

Americans overall are working less and sleeping more than they were a decade ago, trends that point to an aging p...



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Chart School

Best Stock Market Indicator Update

Courtesy of Doug Short's Advisor Perspectives.

We continue to receive requests for updates to the "Best Stock Market Indicator", which used to be a regular guest post from John Carlucci. Here is an update of the "Carlucci" indicator along with a summary of John's explanation on how he uses it.

As John described it: "The $OEXA200R (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com used to find the "sweet spot" time period in the market when you have the best chance of making money."

Latest Indicator Position

According to this system, the market ...



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Kimble Charting Solutions

2007 pattern being repeated right now? Another "Push Away???"

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The NYSE index kissed the underside of dual resistance at (1) back in 2008. Once resistance held, a big push away from it took place and sellers stepped forward.

NYSE creating a similar pattern again at (2)???

This would NOT be a good place for the Risk On trade if the broad market starts “pushing away” from dual resistance at (2).

Full Disclosure- ...



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Mapping The Market

Thoughts on Brexit

I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.

For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....



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Digital Currencies

Bitcoin Tumbles 10%

Courtesy of ZeroHedge. View original post here.

One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...



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OpTrader

Swing trading portfolio - week of June 20th, 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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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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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Promotions

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!

PhilStockWorld.com 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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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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