Archive for 2011

Everything You Wanted To Know About EFSF (But Should Be Afraid To Ask)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

With the weekend full of on-again-off-again comments from various European, Asian, and US politicians and central bankers with regard the chances of various incarnations of the EFSF solving all of our ills (or not), Nomura’s Fixed Income Research team has what we feel is one of the most definitive analyses of the various options. We have discussed the self-exciting strange attractor nature of the endgame that will be a leveraged EFSF many times recently. The Nomura team, however, does a great job of breaking down various scenarios, such as Structural Weaknesses of EFSF 2.0, Proposals for an EFSF 3.0 (and their variants), Leverage-based options, and EFSF 2.0 as TARP and how these will result in one of three final outcomes: fiscal union, monetization, or major restructurings risking the end of the euro, as everyone searches for a steady state solution to the ‘problem’ of the eurozone.

While the most elegant solutions have no official sanction, we think the necessary political resolve is yet to be forthcoming, and the technical issues are challenging if not insurmountable for many of the legal workarounds, resulting in the need for yet another round of parliamentary approvals. Consequently, we see a significant risk that the market, looking for large headlines and enhanced flexibility, will be disappointed at least in the short run.

The search for a steady state solution

In analyzing the eurozone debt crisis, the key challenge is to assess the likely path towards a steady state solution, defined as the market no longer being concerned about future default risks on government debt – at least over a time-frame that is meaningful to immediate asset allocation decisions. We have highlighted three broad alternative steady state solutions:

1. Full fiscal union and the issuance of Eurobonds with a joint and several liability structure or at least unconditional credit risk transfers to stronger countries for a extensive period of time (for sustainability to be reestablished).

2. Aggressive policy reflation, whereby the ECB significantly expands its balance sheet and its SMP program. (Given the requirement of EU governments to recapitalize the ECB, this option ultimately begins to blend into option 1.

3. Default and debt restructuring in selected non-core countries and possible end of the euro area.

Option 1 is not under consideration at this juncture since all forms

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Secular Bull and Bear Markets

Courtesy of Doug Short.

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without crystal ball, we simply don’t know.

One thing we can do is examine the past to broaden our understanding of the range of possibilities. An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends. Market historians call these “secular” bull and bear markets from the Latin word saeculum “long period of time” (in contrast to aeternus “eternal” — the type of bull market we fantasize about).



If we study the data underlying the chart, we can extract a number of interesting facts about these secular patterns:



The annualized rate of growth from 1871 through the end of August is 1.93%. If that seems incredibly low, remember that the chart shows “real” price growth, excluding inflation and dividends. If we factor in the dividend yield, we get an annualized return of 6.58%. Yes, dividends make a difference. Unfortunately that has been less true during the past three decades than in earlier times. When we let Excel draw a regression through the data, the slope is an even lower annualized rate of 1.71% (see the regression section below for further explanation).

If we added in the value lost from inflation, the “nominal” annualized return comes to 8.80% — the number commonly reported in the popular press. But for an accurate view of the purchasing power of the dollar, we’ll stick to “real” numbers.

Since that first trough in 1877 to the March 2009 low:

  • Secular bull gains totaled 2075% for an average of 415%.
  • Secular bear losses totaled -329% for an average of -65%.
  • Secular bull years total 80 versus 52 for the bears, a 60:40 ratio.

This last bullet probably comes as a surprise to many people. The finance industry and media have conditioned us to view every dip as a buying opportunity. If we realize that bear markets have accounted for about 40% of the past 122 years, we can better…
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Bernanke Getting Cold Feet On European Bank Bail Out?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Two weeks after Bernanke agreed to invest unlimited taxpayer funds in the form of global FX swap lines to prevent a worldwide dollar funding squeeze arising from the Europen financial collapse, the Chairman appears to be getting cold feet. BusinessWeek reports: “The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe’s sovereign debt crisis, according to two people with knowledge of the matter. Regulators held informal talks with some of the largest European lenders about producing a “fourth-generation daily liquidity” or 4G report, according to the people, who asked for anonymity because communications with central bankers are confidential. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person. The U.S. has already increased the number of examiners embedded in these banks, the person said.” In other words, not only after Bernanke’s pledge to fund as much money as is needed to prevent bank defaults around the world, is he actually going to have enough information to determine if there is any danger of this money not getting repaid. Well, better late than never. But at least we can permanently set aside any latent questions over whether European banks have liquidity problems. When even the Fed no longer believes you, you have far bigger problems than just liquidity (except for Dexia: liquidity there may well be the largest problem, but at least it won’t be for long).

From Business Week:

Concern is growing that European lenders may falter as Greece teeters on the brink of default. U.S. Treasury Secretary Timothy F. Geithner has warned that failure to bolster European backstops would threaten “cascading default, bank runs and catastrophic risk” for the global economy.


“The Fed is trying to understand what the pressure points are in terms of liquidity and potential risks that are imposed by foreign banks to domestic institutions in our financial system,” said Kevin Petrasic, an attorney at the Washington- based law firm of Paul, Hastings, Janofsky & Walker LLC. “There is a little bit more sense of urgency as a result of what’s going on in Europe.”


“The report requires rapid

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Koch Brothers Flout Law Getting Richer With Secret Iran Sales

Intro by Zeke Miller at Business Insider


Koch Brothers Flout Law Getting Richer With Secret Iran Sales

By Asjylyn Loder and David Evans  

In May 2008, a unit of Koch Industries Inc., one of the world’s largest privately held companies, sent Ludmila Egorova-Farines, its newly hired compliance officer and ethics manager, to investigate the management of a subsidiary in Arles in southern France. In less than a week, she discovered that the company had paid bribes to win contracts.

“I uncovered the practices within a few days,” Egorova- Farines says. “They were not hidden at all.”

She immediately notified her supervisors in the U.S. A week later, Wichita, Kansas-based Koch Industries dispatched an investigative team to look into her findings, Bloomberg Markets magazine reports in its November issue.

By September of that year, the researchers had found evidence of improper payments to secure contracts in six countries dating back to 2002, authorized by the business director of the company’s Koch-Glitsch affiliate in France.

“Those activities constitute violations of criminal law,” Koch Industries wrote in a Dec. 8, 2008, letter giving details of its findings. The letter was made public in a civil court ruling in France in September 2010; the document has never before been reported by the media.

Egorova-Farines wasn’t rewarded for bringing the illicit payments to the company’s attention. Her superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent, even after Koch’s investigators substantiated her findings. She sued Koch-Glitsch in France for wrongful termination.

Obsessed with Secrecy

Koch-Glitsch is part of a global empire run by billionaire brothers Charles and David Koch, who have taken a small oil company they inherited from their father, Fred, after his death in 1967, and built it into a chemical, textile, trading and refining conglomerate spanning more than 50 countries.

Koch Industries is obsessed with secrecy, to the point that it discloses only an approximation of its annual revenue — $100 billion a year — and says nothing about its profits.

The most visible part of Koch Industries is its consumer brands, including Lycra fiber and Stainmaster carpet. Georgia- Pacific LLC, which Koch owns, makes Dixie cups, Brawny paper towels and Quilted Northern bath tissue.

Charles, 75, and David,

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Timing the Market

Courtesy of Jean-Luc Saillard.

A while back wrote a post about a method for timing the market that I read in an old article of Active Trader (Mebane Faber – April 2009). The author claimed that using a simple moving average on a monthly chart would yield better returns over time and reduce drawdowns. The strategy between 1900 and 2008 returned 10.45% a year versus 9.21% with no timing but the big difference is the 50.31% drawdown as opposed to 83.66% without timing!

Here are some illustrations of the equity curves comparison:

Keep in mind that the vertical axis is a log scale – the difference today is between $1 million for the non-timing system and $5 million with timing!

The next graphic shows the same comparison since 1972, but also adds a curve for a margin portfolio with 2x leverage (non-IRA for example)

Once again, the vertical axis is a log scale. Clearly, the Internet bubble years between 1996 and 2001 were favorable to the non-timing system, but the subsequent crash helped the timing system recover nicely – lower drawdown do help! A leverage portfolio performs much better than its 2x leverage would indicate!

With that in mind, I though that I would refresh my charts to see where we stand. So below is the latest monthly chart with a 10 period SMA as recommended by the author. 

Click to enlarge

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From A Lexington, KY Gas Station Bathroom

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Presented without comment.

Weekly Market Commentary: Weekly Consolidation Break

Courtesy of Declan Fallon

The troubles on the daily timeframe extend into the weekly. The consolidation (‘bear flag’) breaks on the weekly charts have handed impetus back to the bears and created a whole new source of overhead supply to consume any emerging demand. For many of these ‘bear flags’ the most likely outcome is a measured move lower.

Leading down are Small Caps. Friday saw a clear break of the consolidation. The Russell 2000 looks destined to test 593 support. For bulls to have a shot there needs to be a smooth rally-and-break of 760 – anything less will only lead to indecision.

The Nasdaq, like the Russell 2000, is looking for a measured move lower. The immediate target is 2,160 with last ditch support down at 2,100. The weekly chart shows a new ‘sell’ trigger in on-balance-volume.

The Dow was another index to crack. It had already generated a ‘sell’ trigger in its on-balance-volume although stochastics have not confirmed an oversold condition.

The S&P was the only index to perhaps hang on to consolidation support. Like the Dow it has a ‘sell’ trigger in on-balance-volume, but stochastics are no longer oversold.

As for next week. if bulls can prevent the consolidation breakdowns from expanding it will be a job well done. European fundamentals will play a heavy role in next weeks action; Greece hogging 99.9% of news is an all-too obvious “victim” but it’s hard to see where the good news is going to come from. Bulls have their work cut out.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10

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Dexia Nationalization Imminent?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Back on Friday, when we closed out the Dexia long sub CDS trade, we said “We expect a partial or complete nationalization to be announced imminently, which in addition to all other side effects, would lead in a Bear Stearnsing of all accrued profit.” Sure enough, here is the Sunday Times on the very topic… And while a nationalization of Dexia, which now appears a matter of hours if not days, will be bad for anyone still long the bank’s CDS (it should trade down to pari with Belgium tomorrow, just as Bear CDS trades in line with JPM), it is pretty horrifying for SovX and Eurocore CDS in general, now that a bank which holds assets amounting to 180% of Belgium’s GDP, is about to be nationalized by the very same country. Anyone who is still not long Belgium CDS, this is probably your last chance to get on that particular train. Of course, if one is waiting patiently in line at a Dexia ATM machine, one is forgiven.

Source: Sunday Times.

Meltdown – The Conclusion: “After The Fall”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Previously, we brought you parts one, two and three of the Canadian must see documentary “Meltdown.” In this final episode “After the Fall”, we hear about the sheikh who says the crash never happened; a Wall Street king charged with fraud; a congresswoman who wants to jail the bankers; and the world leaders who want a re-think of capitalism. As one world leader handles the crisis through denial, other leaders try to re-think capitalism. Even though the causes of the 2008 meltdown are now clear, there is no magic formula to stop it from happening again. The world has to start planning for the next crisis, even as we recognise that this one is not over yet.

Courtesy of Al Jazeera


Phil's Favorites

One of the worst things you can do in this business


One of the worst things you can do in this business

Courtesy of Joshua M. Brown, The Reformed Broker

Investing is hard. This is partly because there is no bedrock to stand upon. Historical relationships between valuation and prices are not firm. Nor are the correlations between Thing A and Thing B.

The ground below our feet is constantly shifting and only the open-minded can make the mental leaps from one regime to the next. Those who choose their one or twoMost Important Things to follow religiously and base their views upon (CAPE Ratio, Fed Model, Seasonality, Economic Outlook) are going to find themselves consistently run over in The Street.

One of the wors...

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Regulators Are Going After Short-Term Loans

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

In June, the Consumer Financial Protection Bureau (CFPB) put forward a proposal to heavily regulate the short-term loans industry. The Small Dollar Lending Rule seeks to “alleviate and solve” for the “apparent weaknesses” of the current rates and short-term lenders by requiring “lenders to assess and verify a borrower’s income, housing costs, and credit and legal obligations.”

Photo by 401(K) 2013 ...

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Zero Hedge

Geert Wilders And The End Of Justice In The Netherlands

Courtesy of ZeroHedge. View original post here.

Submitted by Judith Bergmann via The Gatestone Institute,

  • It is deeply troubling that the court already before the criminal trial has even begun, so obviously compromises its own impartiality and objectivity. Are other European courts also quietly submitting to jihadist values of curtailing free speech and "inconvenient" political views?
  • If you are a politician and concerned about the future welfare of your country, you should be able to discuss the pertinent issues of the day, including problems with im...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

The Brexit economy: falling pound and rising inflation fuel fears of slowdown (The Guardian)

The British economy’s post-Brexit vote bounce is losing momentum as the weak pound and higher inflation herald a squeeze in living standards, according to a Guardian analysis.

S&P 500 Skew Unwind Shows Complacency Over Clinton Win: Analysis (Bloomberg)


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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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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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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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