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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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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!

 
 

Phil's Favorites

The 10 Biggest Energy Company Bankruptcies

The 10 Biggest Energy Company Bankruptcies

Courtesy of Andrew Topf of OilPrice.com

Running a multi-billion dollar energy company isn’t easy. Just ask the executives in the corner suites of some of the energy companies that have gone bust over the years. Some, like Enron, were brought down because of insider malfeasance. A few, like ATP, blamed damaging government policies, while others went off the rails due to market forces that left the company and its shareholders flat-footed, deep in debt, and eventually broke. Here are the bankruptcies that will be etched into the tombstones of failed energy fortunes for time immemorial.

1. Enron. Bank...



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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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Zero Hedge

Whatever You Do, Ignore These Signs

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

But, but, but the market's at record highs...

 

 

Source: Cagle via The Burning Platform

...

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Insider Scoop

Euro Continues Lower On Encouraging US GDP

Courtesy of Benzinga.

Related EWI Euro Responds To Federal Reserve Conclusion Euro Steady Above $1.27 Ahead Of Fed Meeting Conclusion

The euro fell further below the dollar on Friday morning as poor economic data from the region weighed on investors’ confidence.

The common currency also lost some ground after U.S. GDP data came in better than expected on Thursday...



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Sabrient

Sector Detector: Bullish conviction returns, but market likely to consolidate its V-bottom

Courtesy of Sabrient Systems and Gradient Analytics

Bulls showed renewed backbone last week and drew a line in the sand for the bears, buying with gusto into weakness as I suggested they would. After all, this was the buying opportunity they had been waiting for. As if on cue, the start of the World Series launched the rapid market reversal and recovery. However, there is little chance that the rally will go straight up. Volatility is back, and I would look for prices to consolidate at this level before making an attempt to go higher. I still question whether the S&P 500 will ultimately achieve a new high before year end.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then o...



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OpTrader

Swing trading portfolio - week of October 27th, 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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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.

Here's the latest Stock World Weekly. Enjoy!

(As usual, use your PSW user name and password to sign in. You may also take a free trial.) 

 

#455292918 / gettyimages.com

 

...

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Market Shadows

Bill Ackman's Big Pharma Trade Is Making Wall Street A Super Awkward Place

 

#452525522 / gettyimages.com

Intro by Ilene

If you're following Valeant's proposed takeover (or merger) of Allergan and the lawsuit by Allergan against Valeant and notorious hedge fund manager William Ackman, for insider trading this is a must-read article. 

Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Linette goes through the con...



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Option Review

LUV Options Active Ahead Of Earnings

There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...



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Digital Currencies

Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby's Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...



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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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