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.

Follow Me on Twitter


Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. 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





 
 
 

Zero Hedge

Chinese Stocks Are Collapsing Again, Hitting New Bear Market Lows

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

As one local reporter put it, despite being told not to say anything negative, "the government appeared to have lost its ability to manage the market." Chinese stocks are down 4-5% at the open, pressing new cycle lows with Shenzhen and CHINEXT now down 25% from last week.

As The South China Morning Post reports, many investors said the government was at least partly to blame for the collapse because it encouraged them to go into the market - for months, state-owned media have issued daily commentaries to encourage people to load ...



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Phil's Favorites

Puerto Greek-o

 

Puerto Greek-o

Courtesy of 

A few things…

The twin debt blow-ups in Greece and Puerto Rico have absolutely captivated the market’s attention this week, despite the fact that they’ve been ongoing issues for years and years now.

The Greek crisis is like a barber shop – everyone gets to talk all the sh*t they want but at the end of the day, someone’s getting a haircut.

As for Puerto Rico, it is an island nation with 3 million or so residents and over $70 billion in face-value debt, or 8 times the amount of outstanding debt as Detroit. The White House has already denied that it is considering a bailout (so, does...



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Chart School

Neutral Day

Courtesy of Declan.

After yesterday's gains there was no more gas in the tank to squeeze any more out of the market. Worryingly, the Russell 2000 finished near Monday's lows in a relative loss to S&P and Nasdaq, suggesting bearish leadership will come from speculative Small Caps, and that further losses are likely. The S&P recovered afternoon losses, but the Spinning Top candlestick of today suggests the advance is slowing, and what may be emerging is a 'bear flag'. In the meantime, the index is caught in a no-mans land between resistance and support. ...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Labor Market Runs in Place; More Jobs, Participation Lowest Since 1977 (Business Insider)

The U.S. labor market took one step forward and one back in June as job creation advanced while wages stagnated and the size of the labor force receded.

The addition of 223,000 jobs followed a 254,000 increase in the prior month that was less than previously estimated, a Labor Department report showed Thursday in Washington. The jobless rate fell to a seven-year low of 5.3 percent as people left the workforce.

Goldman: "Greece...



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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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Kimble Charting Solutions

Shanghai index creates historic reversal pattern like 2007

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Much of the attention around the world seems to be revolving around a small country called Greece. What about the most populated country in the world (China), any key messages coming from there of late?

Well another Month, Quarter and Half a year are in the books. With this in mind I wanted to look at Monthly action of the hottest stock market in the world, the Shanghai Index. Above looks at the Shanghai index over the past 25-years. The 100%+ rally over the past year has pushed the Shanghai index up to its 23% Fibonacci ratio and a long-term resistance line, that has been in play for 25-years at (1) above.

As the Shanghai index was hitting this...



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OpTrader

Swing trading portfolio - week of June 29th., 2015

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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Digital Currencies

BitGold Now Available in US! Why BitGold?

Courtesy of Mish.

BitGold USA

Effective today, BitGold Announces Platform Launch in the United States.

BitGold, a platform for savings and payments in gold, is pleased to announce the launch of the BitGold platform for residents of the US and US territories. As of today, US residents can sign up on the BitGold platform and buy, sell, or redeem gold using BitGold’s Aurum payment and settlement technology. US residents will also have access to the BitGold mobile app and a prepaid card when these features launch over the coming weeks. Send and receive gold payment features are not initially available in the US.

About BitGold

...



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Sabrient

Sector Detector: Bulls under the gun to muster troops, while bears lie in wait

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

Courtesy of Sabrient Systems and Gradient Analytics

Two weeks ago, bulls seemed ready to push stocks higher as long-standing support reliably kicked in. But with just one full week to go before the Independence Day holiday week arrives, we will see if bulls can muster some reinforcements and make another run at the May highs. Small caps and NASDAQ are already there, but it is questionable whether those segments can drag along the broader market. To be sure, there is plenty of potential fuel floating around in the form of a friendly Fed and abundant global liquidity seeking the safety and strength of US stocks and bonds. While the technical picture has glimmers of strength, summer bears lie in wait.

In this weekly ...



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Pharmboy

Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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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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