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Archive for 2011

Stock Prices Have Fallen For Six Weeks In A Row

Courtesy of Michael Snyder of Economic Collapse

Well, it’s official.  U.S. stock prices have fallen for six weeks in a row.  So will next week make it seven?  The last time stocks declined for seven weeks in a row was back in May 2001 when the "dot-com" bubble was bursting.  At this point, the Dow has declined by approximately 5 percent since the beginning of June.  Things don’t look good.  So exactly what is going on here?  Well, it is undeniable that the recent mini-bubble in stocks has been too good to be true.  The S&P 500 had surged nearly 30 percent since last September.  Much of this has been fueled by the Federal Reserve’s latest round of quantitative easing, but now that is coming to an end in a few weeks and investors are a bit spooked.  Meanwhile, wars and revolutions are sweeping the Middle East, Japan is dealing with the damage caused by the tsunami and by Fukushima, Europe is trying to figure out how to bail out Greece again and the U.S. debt crisis is continually getting worse.  In addition, wave after wave of bad economic news is certainly not helping the mood on Wall Street.  In many ways, a "perfect storm" is developing and many are now extremely concerned about what the rest of 2011 is going to bring for Wall Street.

QE2 is slated to conclude at the end of June, and many investors are deeply disappointed that it does not appear that we are not going to see QE3 right away.  Many fear that the end of quantitative easing will pop the current mini-bubble in stocks and commodities.  At the moment, financial markets are more jittery than they have been in a long time.

Frank Davis, director of sales and trading with LEK Securities, says that there is a lot of pessimism on Wall Street right now….

"There’s a lot of emotion in this market at the moment, and the conversations among traders are nearly all leaning toward the bear side"

So what are some of the signs that this downturn on Wall Street may turn into a full-blown crash?

Well, according to the Wall Street Journal, junk bonds are being sold off at an alarming rate right now.  Does the following quote from the Journal remind anyone of 2008 at least a little bit?….

A steep decline in prices


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The Government Monster: Presenting The Centrally Planned States Of America

Courtesy of Tyler Durden

Bill Buckler’s latest Buckaneer report does a 10,000 foot quantification of the one most critical, yet underreported, trend in America’s transformation from past to future: its gradual, and ever faster, conversion into a totalitarian, centrally-planned state.

The proportions and the nations change, but the question remains the same. We here at The Privateer have raised this question before in relation to the US and we will probably raise it again. How did a US government “govern” a nation of 92 million people with an annual budget of $US 0.7 Billion and a TOTAL (funded and unfunded) debt of $US 2.7 BILLION one hundred years ago? The answer is very simple. For the most part, they didn’t. And because they didn’t, they didn’t indulge in economic make believe. They had no income tax to “fund” them and no central bank to print more money – if necessary.

Today, the US government “GOVERNS” 310 million people with an annual budget of nearly $4,000 Billion and a TOTAL (funded and unfunded) debt approaching $US 100,000 Billion. It takes about 5400 times as many Dollars and about 37000 times more debt to “govern” about 3.35 times as  many people as it did a century ago. Why? The answer is equally simple. Today, the US government “governs” everything. It is all pervasive. It has taken over the economy from its people.

At the same time, the present government reassures the governed that the cost involved is not theirs to bear but can be perpetually shifted to future generations if only they will continue to go along with economic make believe. Officially, this is known as the “full faith and credit” of the US government.

As for what the future holds in store for America, look no further than the outcome of every single attempt to enact a fully centrally-planned government in the history of the world.





Sean Corrigan Explains Why “This Cannot End Well”

Courtesy of Tyler Durden

From Sean Corrigan Of Diapason Securities

This Cannot End Well

Markets were briefly cheered earlier in the week by news that the Chinese government was planning to relieve its banks of up to $450 bln in poorer quality local authority loans, hence removing a looming threat to the nation’s credit-fuelled expansion.

As is usual with China, though, this was both something and nothing. Nothing because the announcement was only one of vague intent rather than a concrete proposal, much less one with a verifiable timetable. As is so often the case, the authorities may well be employing the typical ruse of benefiting from an initial headline effect and the subsequent goldfish memory capability of the vast majority of investors who only want to believe the best about the place, in any case.

Nothing, too, because the ‘bail-out’ will probably take the time-honoured form of simply re-labelling one form of irredeemable debt as a more prestigious marque—this time, perhaps, one with an MOF imprimatur on it—without altering the fact that it will remain as a low-interest drag on bank balance sheets in perpetuity.

Never mind, the banks can always shore up their balance sheets by selling another slice of overpriced equity to the biddable gweilo suckers who are so anxious to get a piece of the China-to-the-Moon action, even if they then cough up most of the proceeds by making over a series of dividends to their governmental majority shareholders with which these latter will meet the re-packaged junk interest payments.

If this seems a classic shell game of the kind so well described in Walter & Howie’s ‘Red Capitalism’, there were also rather more disconcerting echoes of Frank Dikotter’s ‘Mao’s Great Famine’ in an official news story which attributed the calamity, that the recent drought in China has given way to a series of deadly floods, to the failure of the local cadres to arrange for the peasants to ‘volunteer’ to complete water management projects in the agricultural low season as they used to do in the 60s and 70s.

Given that the during the first of these alone— the risibly named Great Leap Forward— a near-unimaginable 45 million of those same peasants are reckoned to have been starved or beaten to death, the wistfulness with which this was recalled sheds a worrying light on the unsoftened callous which still passes for the…
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Supreme Court Refuses Disabled Workers’ Case

Courtesy of Leo Kolivakis

Via Pension Pulse.

Robert Sibley of Postmedia News reports in the Ottawa Citizen, Panel refuses disabled workers’ case:

The Supreme Court failed to serve the “national interest” and thereby jeopardized the disability insurance plans of hundreds of thousands of Canadian workers by refusing to hear a case involving a group of disabled former Nortel employees, says a financial expert.

 

“It was in the national interest to hear the case so that 1.1 million Canadians could be assured their disability insurance plans were protected,” said financial analyst Diane Urquhart. “The Supreme Court of Canada has de facto allowed a court precedent to stand that compromises every health and welfare trust in Canada for disabled insured policyholders.”

 

On Thursday, a three-judge panel of the Supreme Court refused the group’s request for leave to appeal a lower court’s previous decision rejecting the former workers’ attempt to challenge a court-approved settlement of Nortel’s restructuring. As is customary, the panel did not provide a reason for why the court wouldn’t hear the group’s appeal.

 

Last June, a group of about 40 disabled Nortel employees workers lost its bid to extend benefits being terminated at the end of 2010 under a restructuring plan that involved the allocation of funds in Nortel’s Health and Welfare Trust. The restructuring plan, approved by Ontario Superior Court Judge Geoffrey Morawetz, called for future pensioner life benefits to be included in distributions of the trust.

The group, a minority among the company’s 360 disabled workers and 19,500 others covered by the agreement, objected, saying the plan would dilute existing claims of the disabled by $30 million.

 

According to court documents, an employee who earned $50,000 a year before becoming disabled would might see their annual income cut to $13,700.

 

However, the Court of Appeal for Ontario denied the group’s request for a hearing on the settlement, upholding Morawetz’s plan. The group turned to the Supreme Court, hoping it would hear their appeal of Morawetz’s decision.

 

Urquhart, a Mississaugabased financial analyst who has been working pro bono for the disabled workers, was disappointed, saying the Supreme Court should have taken the opportunity “to issue directions to Canadian employers” for maintaining the financial viability and


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Goldman Goes Short Nat Gas

Courtesy of Tyler Durden

Last week we had the advance stop order shake out warning courtesy of berserk inverted fractal HFT algos which were completely not accidental. Now we get the real thing. Just out from Goldman’s Samantha Dart: “NYMEX natural gas prices have rallied 12% in the past three weeks, largely driven by strong cooling-related demand for natural gas on the back of significantly warmer-than-average temperatures, and exacerbated by the still high nuclear outages. However, these factors are transient in nature, and their support to generation demand for natural gas will likely diminish in the coming weeks as the weather normalizes and nuclear power plants come out of maintenance…However, even after taking these transient issues into account, the supply and demand balance for gas was surprisingly resilient in May, especially given the continued impressive gains in shale gas production. We believe the production growth has been largely accommodated by additional strength in generation demand resulting from a wide discount of US natural gas prices relative to coal generation costs, as well as by higher pipeline exports out of the United States. We view the current high prices as unsustainable. In addition to the transient nature of the demand support from weather and nuclear outages, we expect the underlying balance to soften in response to the higher  prices, as production growth is further incentivized and price-induced coal-to-gas substitution diminishes. Accordingly, we recommend going short the October 2011 NYMEX Natural Gas contract, at an initial price of $4.84/mmBtu.” Translation: Goldman is now buying nat gas.


Goldman Nat Gas Short





Stock World Weekly: Snakebit

Courtesy of ilene

Stock World Weekly:  Snakebit

 

Excerpt from the Week Ahead Section

Lee Adler of the Wall Street Examiner reviewed the Treasury schedule to explain this week’s stock market action. “The Treasury calendar was heavy this week, with 3 and 10 year notes and 30 year bonds auctioned in addition to the weekly bill auctions. It got even heavier when the Treasury announced a surprise $15 billion cash management bill to tide the government over until June 15 tax collections and note and bond settlements.

About $9 billion in T-bills would have been paid down on Thursday, June 9, but the CMB issuance turned that into a $6 billion cash drain on the market. That’s not a big deal, but the swing from a paydown to a drain probably contributed to the market’s general weakness. It’s becoming increasingly apparent that POMO alone, without the help of the FCBs [foreign central banks] and commercial banks, cannot do the job of keeping both stocks and Treasuries levitated. Gains in one must come at the expense of the other.” (Our emphasis)

Quoting Seeking Alpha’s Market Currents, “The Fed surpasses China as the largest holder of U.S. Treasuries, thanks to multiple QE operations. By the time QEII ends this month, the Fed will hold 16% of U.S. paper vs. 12% for the Chinese. Hopefully, the 3rd biggest holders – American households – will pick up the slack when the Fed steps away.”

Phil replied “Whuck?!? They are totally on drugs if they think households have nothing better to do with their money than buy 10-year TBills at 3%! You know, we talk a lot about why the Fed can’t end QE2, and we keep getting distracted from this key point – who the hell else is going to buy $140Bn worth of TBills per month? The “slack” referred to in this news item is the $120Bn a month worth of notes the Fed is now buying. If you want to participate, take a quick poll of your neighbors and ask them how many TBills they’ll be buying next month, now that QE2 is running out…

“It’s hard to keep the dollar down at this point. UK Manufacturing fell the most in 30 months in April, dropping 1.5% in a single month… Saudi Arabia says they will bump up supply by 1.5M barrels a day to 10 mln bpd, another reason we will be
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It’s The Debt, Dummy

Courtesy of Jim Quinn of The Burning Platform

It’s The Debt, Dummy

I think charts tell a story that allows you to disregard the lies being spewed by those in power. Below are four charts that tell the truth about our current predicament. The first is from http://www.mybudget360.com/. The austerity and debt reduction storyline being sold by the MSM is a crock. The total amount of mortgage debt outstanding peaked at $14.6 trillion in 2008. The total amount of consumer debt (credit cards, auto loans, student, boats) outstanding peaked at $2.6 trillion in 2008. Today, mortgage debt outstanding stands at $13.8 trillion, while consumer debt stands at $2.4 trillion. Therefore, total consumer debt has declined by $1 trillion in the last three years. The MSM and talking heads use this data to declare that consumers have been paying down debt. This is a complete and utter falsehood. The banks have written off more than $1 trillion, which the American taxpayer has unwittingly reimbursed them for. Consumers have not deleveraged. They have taken on more debt since 2008. GMAC (Ally Bank) is handing out 0% down 0% interest loans like candy again.

Never has a chart shown why the country is such a mess, with no easy way out. It was the early 1980′s and the Boomers were between 23 years old and 40 years old. Seventy six million Boomers were in the work force. Was it the chicken or the egg? The financial industry peddled debt as the solution to all problems. But, it was up to the Boomers to take on the debt or live within their means. Boomers chose to live for today and worry about tomorrow at some later date. There is no doubt what they did. The chart tells the story. Boomers can moan and blame and point the finger at others, but they took on the debt in order to live at a higher standard than their income would allow. This is why 60% of retirees have less than $50,000 in savings today. This is why 67% of all workers in the US have less than $50,000 in savings. A full 46% of all workers have less than $10,000 in savings.

In order for this economy to become balanced again would require consumer debt to be reduced by $3 to $4 trillion and the savings rate to double from 5% to 10%. This…
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Larry Summers: “Welcome To The Non-Recovery” Or “Fiscal Stimulus Or (Another US) Bust”

Courtesy of Tyler Durden

Just under a year ago, we got the tax fraud, and the only remaining member of Obama’s economic Titanic, praising the US recovery. His timing top ticked the economy, preceded the Hindenburg Omen by 10 days, and ushered in QE2. Now, we get his sidekick, long since departed after totally failing (we use the more polite F-form of the word) up at his job, writing the follow up, from the cushy confines of academia, warning America that unless there is a major fiscal stimulus (because presumably the monetary stimulus which everyone praised in the form of QE2 has now been proven to only be a boost to the stock market and a bailout of European banks), this once great country which once exhibited the world’s reserve currency is on its way to another “lost decade.” We wish Summers well: perhaps 3 of those who read the following drivel will take him seriously. Two of them are Krugman and Koo. We are taking bets as to who the third one will be…

From the Financial Times:

How to avoid stumbling into our own lost decade

Even with the 2008-2009 policy effort that successfully prevented financial collapse, the United States is now half way to a lost economic decade. In the past five years, our economy’s growth rate averaged less than one per cent a year, similar to Japan when its bubble burst. At the same time, the fraction of the population working has fallen from 63.1 to 58.4 per cent, reducing the number of those in jobs by more than 10 million. Reports suggest growth is slowing.

Beyond the lack of jobs and incomes, an economy producing below its potential for a prolonged interval sacrifices its future. To an extent once unimaginable, new college graduates are moving back in with their parents. Strapped school districts across the country are cutting out advanced courses in maths and science. Reduced income and tax collections are the most critical cause of unacceptable budget deficits now and in the future.

You cannot prescribe for a malady unless you diagnose it accurately and understand its causes. That the problem in a period of high unemployment, as now, is a lack of business demand for employees not any lack of desire to work is all but self-evident, as shown by three points: the propensity of workers to…
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Treasury Yield Snapshot: The Final Weeks of QE2

Courtesy of Doug Short

Note from Doug: At the end of last week the Fed announced the final $50 billion in QE2 purchases. I’ve updated my Treasury yield charts through Friday’s close.


The behavior of Treasuries is an area of special interest in light of the Fed’s second round of quantitative easing, which was formally announced on November 3rd. The first chart shows the percent change for a basket of eight Treasuries since November 4th.

Click to View
Click for a larger image

The next chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the New York Fed’s website for the FFR.

Click to View
Click for a larger image

Here’s a closer look at the past year with the 30-year fixed mortgage added to the mix (excluding points).

Click to View
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Here’s a comparison of the yield curve at three points in time: 1) the Fed’s QE2 announcement, 2) the February interim high for the 7, 10, 20 and 30-year yields 3) and the latest curve.

The next chart shows the 2- and 10-year yields with the 2-10 spread highlighted in the background.

Click to View
Click for a larger image

The final chart is an overlay of the CBOE Interest Rate 10-Year Treasury Note (TNX) and the S&P 500.

Click to View
Click for a larger image

For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective.





 

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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