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In the News, 3-29-15

From around the Web:

Business Insider presents the 10 things in tech you need to know today. Company mentioned include Apple, Google, Amazon, Yahoo, Facebook and Uber.

Alasdair Macleod at GoldMoney argues "though the Fed would deny it, it is clear from the minutes of the last Federal Open Market Committee (FOMC) meeting that a rise in interest rates has been put off indefinitely" in Central Banks Are Paralyzed At The Zero Bound. Macleod continues,

"The Fed Funds Rate, which is the interest rate the Fed targets to set all other rates, has now been less than 0.25% for six and a quarter years, gradually declining from roughly 0.15% to about 0.10% today. It was set at a target range of between zero and 0.25% in December 2008… If normalisation is the result of economic recovery we will be familiar with the playbook. Demand for money in the economy picks up, and instead of pyramiding bank credit on reserves held at the Fed, the Fed feeds back the excess reserves to the banks by selling government securities into the markets. The bear market in government bonds should be manageable because of underlying pension and insurance company demand coupled with a diminishing budget deficit. This is the long-understood theory behind withdrawing from deficit financing."

Effective Fed Funds Rate

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Forbes explains: Why Oil Could Be Facing A 20-Year Bear Market.

In the past, the usual “oil crisis” was caused by self-serving news items of an oil shortage, causing soaring prices. Just 2-3 years ago, the fear mongers said that the world had “seen peak oil,” meaning that oil production would be on a long term decline and there would be big shortages. Instead, oil production is now at a high

The current crisis is one of plunging oil prices and a glut as far as the eye can see. (Read more)

Share Ferro at Business Insider writes that there is no shortage in oil storage capacity, and it's unlikely that there will be, in Sorry, but there was never an oil storage crisis:

Crude oil storage inventories in the US are at their highest levels in decades. Is that going to cause the price of


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Can the Eurozone Survive? Not in Its Current Form Says PIMCO; Mish Response

Courtesy of Mish.

Echoing statements I have made many times, PIMCO says the single currency area must become a “United States of Europe” in order to secure its future.

Please consider Eurozone can’t survive in current form, says PIMCO.

The eurozone is “untenable” in its current form and cannot survive unless countries are prepared to cede sovereignty and become a “United States of Europe”, the manager of the world’s biggest bond fund has warned.

The Pacific Investment Management Company (PIMCO) said that while the bloc was likely to stay together in the medium term, with Greece remaining in the eurozone, the single currency could not survive if countries did not move closer together.

Persistently weak growth in the eurozone had led to voter unrest and the rise of populist parties such as Podemos in Spain, Syriza in Greece, and Front National in France, said PIMCO managing directors Andrew Bosomworth and Mike Amey.

“The lesson from history is that the status quo we have now is not a tenable structure,” said Mr Bosomworth. “There’s no historical precedent that this sort of structure, which is centralised monetary policy, decentralised fiscal policy, can last over multiple decades.”

PIMCO said the rise of populist parties demonstrated how uneasy some people had become about the euro.

“[Persistently low growth] manifests itself in a lack of support in the common currency, so then it leads to the rise to power of political parties that want to end it,” said Mr Bosomworth.

PIMCO said the rise of populist parties demonstrated how uneasy some people had become about the euro.

“[Persistently low growth] manifests itself in a lack of support in the common currency, so then it leads to the rise to power of political parties that want to end it,” said Mr Bosomworth.

Nothing New 

I certainly agree the eurozone cannot survive unless it becomes the “United States of Europe”.

There is absolutely nothing new in this announcement other than who said it. I have been talking about this for years….



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The American Dream Part 2 – We Now Live In A “Pimpocracy”

Courtesy of Bill Bonner at Acting-Man blog

Shabby Immensity

Today, we continue mouth wide open (Part 1 here) … staggered by the shabby immensity of it … a tear forming in the corner of our eye.

Yes, we are looking at how the US economy, money and government have changed since President Nixon ended the gold-backed monetary system in 1971. It is not pretty.

We already know about the money. Since 1971, it’s been a credit-based, not a gold-based, system. The pre-1971 economy had three key characteristics:

1) It was healthy – Industry made things and sold them at a profit

2) It was fair – Financial progress was fairly evenly distributed.

3) It was solvent – The US was a creditor, not a debtor, nation.

cartoon_bushPimp_stockmarketHooker_472x373

Cartoon by David Horsey

 

Change in global share of manufacturing output, selected countries (via Vox EU)

Platitudes and Hypocrisies

Americans still say they believe in free markets, democracy and financial rectitude. But only as platitudes and hypocrisies. America’s industries have largely been shipped over to China and other lower-cost producers in the emerging world.

That didn’t “just happen.” The Fed’s EZ money financed it. American consumers borrowed to spend more than they could afford. Walmart met their desires (if not their needs) with “Everyday Low Prices,” courtesy of low-paid Chinese workers.

This sent US dollars to China. The Chinese used the profits to build even more, and better, factories. Pity the American businessman who tried to compete. He was overwhelmed. He had to pay wages 10 times higher than the Chinese. He also had to bow to regulations – tax, environment, labor, diverse bullying – that left him hobbled and fettered.

There’s not much left of America’s industrial economy. Seventy percent of the US economy is made up of consumer spending. Manufacturing has fallen to just 12% of the economy… down from 24% in 1971. And it’s now the main source of wealth in only seven states. The deindustrialization of the US is blamed for the slipping wages of low- and middle-class Americans. So is immigration. And robots.

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Buffett buys Kraft Foods: A big bite

 

The Economist discusses the merits of Buffett's latest acquisition, Kraft Foods. 

Buffett buys Kraft Foods: A big bite 

Berkshire Hathaway’s latest big deal is quite a mouthful

WARREN BUFFETT says he likes to buy companies that are easy to understand and are performing well. His latest deal, the $50 billion acquisition of Kraft Foods that was announced on March 25th, passes only one of those tests. Most people can get their heads around the slices of processed cheese and hot dogs that Kraft churns out—indeed Mr Buffett, known to favour plain fare, would probably like to get his lips round them, too. But as a business, Kraft is a bit of a mess.

Last year its revenues were stagnant and its volumes and profits fell. Its chief executive left in December. It generates 98.5% of its sales in the mature markets of America and Canada, where, the suspicion is, a new generation of healthier eaters no longer aches to scoff a Kraft Macaroni & Cheese, followed by a plate of Jello and washed down by a Capri Sun drink.

Kraft’s predicament is in large part a result of its turbulent ownership over three decades, in turn a testament to the hyperactivity of Wall Street’s dealmakers. It has been the subject of seven big mergers or spin-offs since 1980, including an unhappy spell under the ownership of Philip Morris, a tobacco firm, between 1988 and 2007. Most recently Kraft was separated from its global snack brands in 2012, which were renamed Mondelez International.

Reflecting Kraft’s troubled past and iffy present performance, Mr Buffett is not buying it alone, nor managing it. Instead he is working with 3G Capital, a buy-out firm with Brazilian roots which is the closest thing the consumer-goods industry has to a miracle-worker. In 2013 Berkshire Hathaway, Mr Buffett’s investment vehicle, teamed up with 3G to buy Heinz, another food company, with each taking 50%.

Keep reading Buffett buys Kraft Foods: A big bite | The Economist.





Who Should-And Who Shouldn’t-Take Vitamin D

Are you supplementing with vitamin D? I have been; my levels are consistently low. In Who Should—And Who Shouldn’t—Take Vitamin D, Alice Park suggests that supplementing with more than 600 IUs is too much. Her argument makes sense: there isn't enough data to understand the effects of vitamin D (or specifically, trying to increase blood levels vitamin D) and the dangers of over-dosing are not clear. Not addressed, was the question of whether some people should take more D to make up for lack of sun exposure. 

Here's what experts say, based on the latest evidence…

By  

Does your diet need a little extra D? For researchers, it’s one of nutrition’s most vexing questions. “It’s the wild, wild west,” says Dr. JoAnn Manson, chief of preventive medicine at Brigham and Women’s Hospital and professor of medicine at Harvard Medical School. “The issue has become murkier over time rather than clearer.” Research is mixed about whether doctors should routinely test for vitamin D levels, like they do for cholesterol, and whether people should be supplementing their diets with vitamin D pills.

Keep reading Who Should—And Who Shouldn’t—Take Vitamin D | TIME.





Wally Becomes Chief Economist for Dilbert, Predicts “Bubble in Monetary Policy”

Courtesy of Mish.

On the lighter side, in the March 28, 2015 Dilbert, Wally becomes the new chief economist.

Wally: "The exchange rate on derivatives will trigger a bubble in monetary policy and deflate the Yen."

I like the phrase "bubble in monetary policy". It aptly expresses precisely what has been happening globally.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

 




The Beard Has Spoken

The Beard Has Spoken

I’ve written plenty about the markets over the past six months since I started growing the correction beard. But I regularly get questions related to one post or the other that I’ve already answered somewhere else. So I thought I’d try to write a more comprehensive view aggregating much of what I’ve written over that time so it’s all in one place. The underlined words and phrases below link to articles for further reading.

The stock market has done very well over the past six years. In fact, there are only a few other times in history where it’s seen a 200% rise in such short a time. This has led many to believe that investing in the stock market is an easy game when they should really be on guard against just this sort of hubris.

This may be the single greatest mistake investors make – extrapolating recent performance out into the future, especially after the sort of historic run we have seen lately. Momentum can be a powerful force and even an effective trading strategy on its own but in this case long-term investors are likely to be sorely disappointedStocks are just as overvalued today as they were in 2000. Why, then, should, investors expect a vastly different result?

You may counter this idea by saying, ‘forecasts like that aren’t usually worth much,’ but, in my humble opinion, everything is a forecast. Buying stocks today is making a forecast that they will generate an adequate return over the coming decade. If that’s what you’re doing, I challenge you to show me why your forecast is more valuable than mine. I’m sincerely curious. And please know that in making this forecast, I’m not trying to scare you. I’m trying to help you.

Like some very smart people I know, you may also try to justify the extreme overvaluation in the stock market right now by pointing to ultra-low interest rates. Rather than justifying high valuations, though, low-interest rates confirm the idea that equity returns will also be ultra-low going forward.

Because stock market valuations have remained so high for so long, it’s


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Why We Feel So Poor, In Two Charts

Courtesy of John Rubino.

Among the many things that mystify economists these days, the biggest might be the lingering perception, despite six years of ostensible recovery, that the average person is getting poorer rather than richer. Lots of culprits come in for blame, including the growing gap between the 1% and everyone else, negative interest rates (which starve savers and retirees of income) and the crappy nature of the new jobs being created in this recovery.

But one that doesn’t get much mention is the changing nature of the bills we’re paying. It seems that Americans are spending a lot more on health care, which leaves less for everything else. Here’s an excerpt from a MarketWatch report of a couple of weeks back, with two charts that tell the tale:

Share of consumer spending on health hits another record

The percentage of money U.S. consumers spend on health care rose in 2014 for the third straight year to another record high, according to one government measure.

Some 20.6% of total consumer spending in 2014 was devoted to health care, including prescription and over-the-counter drugs, annual figures from the Commerce Department report on personal expenditures show. That’s up from 20.4% in 2013.

Health-care expenses has been rising for decades regardless of government efforts to control costs. The percentage of consumer spending on health care rose from 15% in 1990, topping 20% for the first time in 2009.

Consumer spending healthcare

With the health-care pie continuing to expand, consumers are paying the same or less as percentage of their spending on most other goods and services compared to 10 years ago.

Americans spend a smaller share of their money on cars and clothing, among other things. The percentage of money they spend on housing and going out to eat is basically unchanged over the longer run.

Not surprisingly, the only other major category to show a sustained increase in spending over the past 25 years is education. The share of money Americans spend on college has climbed to 1.59% from 0.9% in 1990.

Consumer spending habits

————– End of Excerpt ————-

What this means is that we’re spending more on two big categories — health…
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Patriot Act Vote Coming Up: Google joins Apple, Others Requesting Spying Controls

Courtesy of Mish.

The Patriot act expires in June, and anyone in their right mind would wish the entire concept to go away entirely. NSA Spying has a 100% perfect track record of failure.

Sadly, the answer to the question Would NSA Data Surveillance End With Patriot Act? is a resounding "No".

The National Security Agency would lose its legal justification for collecting data on Americans' phone and email activity if Congress does not reauthorize the Patriot Act by June 1, but privacy advocates are skeptical about whether that would mean the end of the controversial surveillance program.

President Barack Obama has called on Congress to pass a bill that would end the bulk surveillance program while keeping certain spying powers intact for national security reasons. The clock is ticking, however, as the NSA loses its legal authority for domestic surveillance provided by Section 215 of the Patriot Act in June. If Congress does not renew that provision then the Obama administration will not push to continue the program, although its absence would damage America’s national security, says Ned Price, a spokesman for the National Security Council.

“If Section 215 sunsets, we will not continue the bulk telephony metadata program,” Price tells U.S. News. “Allowing Section 215 to sunset would result in the loss, going forward, of a critical national security tool that is used in a variety of additional contexts that do not involve the collection of bulk data.”

 The NSA, however, could invoke other legal powers to continue the data collection program without Section 215 of the Patriot Act, says Harley Geiger, senior counsel for the Center for Democracy and Technology advocacy group. The government has also conducted bulk collection of email metadata in the past using Section 214 of the Patriot Act, for instance, which is also called the Foreign Intelligence Surveillance Act “pen trap statute,” Geiger says.

“The FISA pen trap statute does not have a sunset and would not be affected by a sunset of Section 215,” he says. “For these and other reasons, we believe that legislation to end bulk collection would be more effective than merely letting Section 215 sunset. However, we believe Congress should sunset Section 215 if effective reform is not possible.”

Passing surveillance reform may be difficult in


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5 Things To Ponder: Random Musings

Courtesy of Lance Roberts via STA Wealth Management

This weekend's reading list is a bit of a hodge-podge of reads on a variety of different topics. However, before we get into it I wanted to address an interesting statement by the Atlanta Federal Reserve President Dennis Lockhart who Thursday:

"Atlanta Federal Reserve Bank president Dennis Lockhart said on Thursday there was little risk of a misstep that would force the Fed to lower rates once it begins raising them.

The economy is in solid shape to weather the upcoming turn to tightening monetary policy Lockhart, said at an investment education conference in Detroit.

"'Conditions are pretty solid,' said Lockhart, who regards an initial rate hike at the June, July or September Fed meetings as a high probability. 'I take the decision pretty seriously,' Lockhart said. 'Once we start, I want to be able to move deliberately towards higher rates.'"

This is a pretty common meme among the majority of economists as of late, and particularly surprising coming from the Atlanta Fed President considering:

  1.  The U.S. is currently more than 6-years into an economic recovery (long by historic standards), and;
  2.  The Atlanta Fed's own GDPNow forecast is pegging a near 0% growth rate for the first quarter.

But let's take a look at the decline in durable goods orders this week. Paul McCulley, the former legendary economist and fund manager at PIMCO, viewed durable goods a bit differently than the mainstream analysis generally given. He preferred the year-over-year trend of the 3-month moving average of core CAPEX orders as an indicator of broader economic activity over the next few quarters. If you are currently "bullish" on the direction of the US economy, you may want to take a closer look at the chart below.

Core-Capex-3Mo-AnnChg-032615

Secondly, core CAPEX has been negative on a monthly basis for 6-consecutive months. Since 1992, there have only been 5-instances where core CAPEX orders have been negative for 4-or more consecutive months. The first three instances were leading indicators of future recessions. In 2012, there were 6-consecutive months of decline as the economy got very close to a recession but was saved by Central Bank interventions and the warmest winter in 65-year. The…
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Zero Hedge

Did The Fed Just Whisper "Fire" In A Crowded Market?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Authored by Mark St.Cyr,

This past Friday saw what many like myself can only describe as a blatant example of just what’s wrong with both the economy – as well as the markets.

At precisely 15 minutes before the closing bell on Wall Street the now Chair of the Federal Reserve, Janet Yellen gave a press conference detailing further insights into upcoming monetary policy. I guess two days worth of FOMC discussions, along with a press conference detailing all that was discussed immediately after, followed by a question and answer session about all those “insights and decisions...



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Phil's Favorites

In the News, 3-29-15

From around the Web:

Business Insider presents the 10 things in tech you need to know today. Company mentioned include Apple, Google, Amazon, Yahoo, Facebook and Uber.

Alasdair Macleod at GoldMoney argues "though the Fed would deny it, it is clear from the minutes of the last Federal Open Market Committee (FOMC) meeting that a rise in interest rates has been put off indefinitely" in Central Banks Are Paralyzed At The Zero Bound. Macleod continues,

"The Fed Funds Rate, which is the interest rate the Fed targets to set all other rates, has now been less than 0.25...



more from Ilene

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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Chart School

ECRI Recession Watch: Weekly Update

Courtesy of Doug Short.

Friday's release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 131.6, up slightly from 131.2 the previous week. The WLI annualized growth indicator (WLIg) is at -3.2, up from the previous week's -3.6 and off its interim low of -4.9 in mid-January.

"The Song Remains the Same"

As I type this, the featured article on the ECRI website remains the February 23rd piece, "The Song Remains the Same" (full report requires a subscription), which illustrates the shrinking GDP growth during the seven business cycle expansions since 1970:

For a ...



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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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Insider Scoop

Raymond James Downgrades Power Integrations To Market Perform

Courtesy of Benzinga.

Related POWI Benzinga's Top Downgrades Benzinga's Volume Movers

Analysts at Raymond James downgraded Power Integrations Inc. (NASDAQ: POWI) from Outperform to Market Perform and removed the price target of $57.00.

Power Integrations shares have dropped 18.42% over the past 52 weeks, while the S&P 500 index has surged 10.69% in the same period.

Power Integrations' shares fell 1.51% to $51.65 in pre-market trading.

Latest Ratings for POWI DateFirmActionFrom...

http://www.insidercow.com/ more from Insider

Sabrient

Sector Detector: Bulls retake the wheel, with a little help from their friends at the Fed

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

Courtesy of Scott Martindale at Sabrient Systems

Well, it didn’t take long for the bulls to jump on their buying opportunity, with a little help from the bulls’ friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing clichés continue to work -- “Don’t fight the Fed,” and “The trend is your friend.”

In this weekly update, I give my view of the cur...



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OpTrader

Swing trading portfolio - week of March, 23rd, 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

Bitcoin vs. Uber: Bitcoin Lovers Respond to Mish

Courtesy of Mish.

I recently commented that it would not surprise me if bitcoin plunged to $1.00. That was not a prediction, it was a comment.

Still, I still feel a collapse in bitcoin is likely.

For discussion, please see Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?

In response, reader Creighton writes ...

Hello Mish

While I'm not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.

While it's likely that the US government watching Bitco...



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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Option Review

Cypress Semi Draws Bullish Option Plays

Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...



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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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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 this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

...

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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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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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About Ilene:

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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