Author Archive for ilene

Stupid Stuff, Late-2016 Edition

Courtesy of John Rubino.

Cyclical turning points tend to feature large numbers of people doing and saying what in retrospect turn out to be amazingly dumb things. Think GM highlighting its line of Hummers just before an oil price spike bankrupts the company. Or half the world betting that tech stocks with infinite P/E ratios would keep rising in 2000. Or pretty much everything that was said and done in the housing market in 2006.

Today’s financial bubble is vastly bigger and more wide-spread than any of its predecessors, so the stupidity is correspondingly global and varied. Some examples:

GM bets big (again!) on gas guzzlers

General Motors third-quarter earnings widely beat expectations

(CNBC) – General Motors reported much higher-than-expected third-quarter earnings on strong North American truck and SUV sales, calming fears that a U.S. auto market slowdown would dent profitability. Overall, GM said third-quarter net income more than doubled to $2.8 billion, or $1.76 a share, from a year earlier.

Rival Ford Motor, due to release third-quarter results Thursday, warned in July that a slowing U.S. auto market would put its full-year profit forecast at risk.

The contrast between the GM and Ford outlooks in part reflects different bets on oil prices in the past. Ford during the past decade spent heavily to boost the efficiency of its top-selling F-series pickup truck by engineering a light, aluminum body, cut back production of large sport utilities and focused on small- and medium-sized cars.

Ford executives have told analysts that with gasoline prices relatively low, it is harder to recover the costs of fuel-saving technology from consumers.

GM stuck with the large SUV market, and now controls more than 70 percent of that market in North America. Models such as the Cadillac Escalade start at more than $70,000.

GM’s results and its outlook depend primarily on strong U.S. and Chinese economies. The company said it lost money in Europe, South America and in Asian markets outside of China.

That’s right, GM is once again on the wrong side of history, and not just because 12-mile-per-gallon SUVs are vulnerable to the next (inevitable) oil shock. Such vehicles’ high sticker prices also make them a luxury purchase for most families, and luxuries will be the first things to go in a downturn.

Meanwhile, relying on the US and China for growth is

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Kansas Ends Bad Economic News by Not Reporting It

In evaluating the results of real-life economic policy experiments it is important to measure them. Avoiding this step in the experimental process detracts from what could be a valuable learning experience, which could, potentially, put some incorrect theories to rest. For instance, consider Kansas. 

“What’s measured, improves.”

So said management legend and author Peter F. Drucker about the value of using metrics to define specific objectives within an organization.

Drucker is no longer with us; if he were, he might want to have a few words with Republican Governor Sam Brownback of Kansas. Brownback, despite promising to measure the results of a “real life experiment” in cutting taxes, has decided to cancel a quarterly report on the status of the state’s economy.

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World’s First Commercial Driverless Delivery: 45,000 Cans of Beer

Courtesy of Mish.

Otto, a driverless technology company bought out by Uber, just completed its first driverless mission.

It was a beer run of 45,000 to 50,000 cans of Budweiser from an Anheuser-Busch facility in Loveland, Colorado to a destination in Colorado Springs, about 120 miles away.


A quick check of my calendar says this is still 2016, not 2045, not 2030, and not the twelfth of never.

A driver did take the truck from Loveland to a weigh station in Fort Collins but from that location Otto took over for 100 miles without driver intervention.

A human driver then completed the city delivery.

There are at least five news agencies commenting on this story. Some versions said 45,000 cans other 50,000 cans.

Reuters reported that Otto was paid the market rate of $470 for the job using one of its trucks outfitted with the new technology.

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One of the worst things you can do in this business


One of the worst things you can do in this business

Courtesy of 

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 two Most 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 worst things you can do in this business is take a given correlation and then extrapolate it out to infinity. Correlations – especially between markets and asset classes – are ephemeral. Sometimes they exist and sometimes they don’t. Sometimes perfectly correlated markets become perfectly inversely correlated.

Think about the stocks / crude oil relationship from earlier this year. Now you see it (and it dominates every day’s discussions), now you don’t (…..and it’s gone).

And no one waves a flag when these relationships are about to shift.

This spring, I posted the below chart – a ratio between emerging market stocks and the S&P 500 vs the US dollar index. You can see how powerful the inverse relationship had been – strong dollar meant weak EM relative to US large caps:


Right after I wrote that, as if on cue, the dollar peaked and then sold off, and EM stocks went crazy to the upside. The relationship held and traders were rewarded for recognizing its power.

Now that’s a trend that seems pretty indefatigable, right?

Except here’s the problem – as too many people become aware of it or start to place their bets on it, the relationship between one thing and the other begins to price all of this “certainty” in. This “common knowledge” then serves to change the relationship or even completely invert it until the prior correlations become unrecognizable.

My friend Jon Krinsky at MKM Partners takes a look at the emerging markets rally – now up almost…
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Start Now


Start Now

Courtesy of Joshua Brown, The Reformed Broker

This is from the Wall Street Journal this week and it is absurd:


It just shouldn’t look this way. If you’re a millennial holding 70% of your investable assets in cash – and you’re not on the verge of buying a home or paying off the entirety of your student debt – you are squandering the most precious resource known to investorkind: Time.

When it comes to compounding, time is more valuable than any analysis, research, investing tools or trading service. You can be the most boring investor on earth and, with enough time spread out before you, outperform virtually anyone.

A new book I’m reading tells the story of how Ben Franklin, the original proponent of compounding and investing in America, chose to bequeath his assets upon death. Franklin was the recipient of loans as a young man and they enabled him to get started in his trade. He wanted to do the same for generations of American young men who had served apprenticeships and were ready to go into business.

According to ‘Rule of 72‘ authors Tom Jacobs and John Del Vecchio, Franklin left 1,000 pounds sterling ($122,0000 in today’s money) each to the town of Boston and the city of Philadelphia. But there were strings attached…

“For the first 100 years, the money could only be used to loan to help young tradesmen starting out – just as others had loaned money to him. Franklin chose to invest his estate in the future of America, apprentices who would grow businesses and form the backbone of his favored cities.

The interest rate that the tradesmen would pay was 5% annually. In this way, the fund would continue to grow for decades.

The authors go on to quote from Franklin’s will, which further stipulates that “At 100 years, the cities could withdraw 75% of the money” to be used for public works – bridges, aqueducts, fortifications, public buildings etc. And then at the second 100-year mark, 200 years after Franklin’s death, the cities could have all of the money. Talk about long-term planning!

Ben Franklin was America’s Da Vinci. He understood a great many…
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Rajoy to Form Minority Government Thanks to Abstentions: Expect No Stability

Courtesy of Mish.

Mariano Rajoy is headed for another term as Spanish prime minister following two inconclusive elections.

It’s been 10 months since Spain has had a government, but King Felipe asked Rajoy to try one more time while pressuring the socialists to support or abstain in a parliamentary procedure.

Abstain it is.

Bloomberg reports Rajoy Faces Vote This Week as He Moves to Reclaim Power in Spain.

Caretaker Prime Minister Mariano Rajoy will face a second confidence vote in the Spanish Parliament on Thursday, this time with the tacit support of his Socialist rivals, as he seeks to confirm his return to power.

Rajoy said that King Felipe has asked him to seek lawmakers’ backing at a meeting in Madrid Tuesday. Speaking at a press conference, Rajoy pledged to reach out to other parties as he aims to govern for the next four years, though his People’s Party has just 137 out of 350 deputies.

“I will focus on the issues that unite us, setting aside those which divide us, or making an effort to turn them into topics that don’t divide us any longer,” Rajoy said. “It’s obvious that we’re entering an era when it will be necessary to talk and negotiate. That’s what I’ll say during my investiture speech.”

Spain’s establishment parties are set to seal an unprecedented compromise to end a 10-month political stalemate which has included two elections since December and risked triggering European Union budget sanctions. The settlement between the two biggest groups in parliament will bring a measure of stability to Spain as the rest of the major euro economies face national votes over the next year.

Expect No Stability

Bloomberg has two key details wrong. First, Rajoy does not have the tacit “approval” of the PSOE socialists. Rather, the PSOE will abstain, under pressure, for political reasons.

Second, even with the help of Ciudadanos, a party that will begrudgingly enter a coalition with Rajoy’s PP party, Rajoy’s parliamentary math falls short of 50%, the essence of a minority government.

No End to Political Gridlock

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The Secrets Of Self-Employment: Overhead And Capital Accumulation

Courtesy of Charles Hugh Smith, Of Two Minds

So how can someone earning $15 an hour as an employee get ahead? The short answer is: they can't. One worker earning $15/hour will struggle to get ahead, which I define as building capital that generates an income stream.

A family with four adults working full-time at $15 an hour with benefits can get ahead; together, they're earning $60/hour plus another $40/hour in benefits. Assuming they live under one roof and live frugally, their combined earnings of $100/hour will enable investing in income-producing capital.

There is another path to getting ahead: self-employment. Working for yourself isn't for everyone, but it does provide two avenues of wealth-building that are not available to employees: overhead and capital accumulation.

Consider a typical Corporate employee, and what the company charges customers for their time. The corporation charges the customer $100 an hour for the employee and pays the employee $20 an hour. The other $80 an hour goes to the corporation for labor overhead (Social Security, healthcare, pension /401K contribution, workers compensation insurance, etc.), general overhead (office, vehicles, accounting, Internet, phones, etc.) and profit.

Now consider the self-employed person who charges $70 an hour for the same work. The customer not only gets a 30% discount, they get someone who is motivated to do the job well enough to earn a referral or renewal of the contract.

The self-employed worker has $50/hour for overhead and hopefully some profit. The corporate employee earning $20/hour has to pay for his/her own vehicle, Internet service, etc. out of his/her wage.

The self-employed person pays the business-related expenses for vehicles, tools, Internet and phone service, accounting, home office, healthcare and other overhead expenses with pre-tax income--the $50 an hour he/she earns above and beyond the $20/hour wage.

The self-employed worker is also constantly investing in the capital of his/her enterprise. Capital comes in many forms: new tools, skills, contacts, collaborators/ subcontractors-- all the many variations of intellectual, social and human capital that create value.

In the corporate/employee setting, the corporation captures much or most of the employees' capital accumulation. The self-employed worker captures 100% of all capital accumulated.

Over a decade, this accumulated capital generates wealth that is unavailable

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Caterpillar Warns Of “Economic Weakness Throughout Much Of The World”, Cuts Guidance

Courtesy of ZeroHedge. View original post here.

As we previewed yesterday when we showed that for 46 consecutive months industrial bellwether Caterpillar has failed to post a retail sales increase…

… it should probably not come as a surprise that moments ago CAT not only badly missed revenues, reporting $9.2 billion well below the $9.80 billion expected (courtesy of the usual non-GAAP fudging, CAT managed to "boost" its EPS enough to beat estimates, reporting adjusted earnings of $0.85, above the $0.76 consensus), but it also once again slashed full year guidance, now expecting revenue of $39 billion, and EPS of $3.25 per share excluding restructuring costs, down from the guidance of $40.0 to $40.5 billion and EPS of $3.55 provided just three months ago. 

But it was outgoing CEO Doug Oberhelman's commentary in the release that was more troubling, to wit:

"Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged.  In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives, and around the world there are a significant number of idle mining trucks."

"While we are seeing early signals of improvement in some areas, we continue to face a number of challenges.  We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum.  Whether or not that happens, we are continuing to prepare for a better future.  In addition to substantial restructuring and significant cost reduction actions, we've kept our focus on customers and on the future by continuing to invest in our digital capabilities, connecting assets and jobsites and developing the next generation of more productive and efficient products"… "Many of our businesses, including mining, oil and gas, rail and construction, are currently operating well below historical replacement demand levels in many parts of the world."

That said, it was not all gloom:

"there were a few bright spots this quarter.  Both the construction industry and our machine market position improved in China.  Most commodity prices, while low, seem to have stabilized.  Parts sales have increased sequentially in each of the last two quarters.  Our machine

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Bill Clinton Era SEC Chair Tells Elizabeth Warren to Muzzle Herself

Courtesy of Pam Martens.

Arthur Levitt, Former Chair of the SEC, Promised to Be Wall Street's Uncle, and Delivered

Arthur Levitt, Former Chair of the SEC, Promised to Be Wall Street’s Uncle, and Delivered

Yesterday, former SEC Chair Arthur Levitt penned an OpEd for the Wall Street Journal, effectively telling Senator Elizabeth Warren to stop criticizing Mary Jo White in public. White is the current Chair of the SEC that Senator Warren publicly asked President Obama to fire this month for her bad leadership.

Senator Warren is a genuine champion of the investing public and understands how the SEC has become a lapdog to Wall Street under White’s inept leadership. Levitt is part of the Bill Clinton machine that de-regulated Wall Street and turned it into a massive looting racket in the 1990s through today. It’s important to take note of Levitt’s effort to muzzle Warren in the pages of the Wall Street Journal. Expect to see more of this coming from a lot more of Wall Street’s cronies.

Arthur Levitt was appointed as SEC Chair by President Bill Clinton in 1993. Levitt served until 2001, making him the longest serving SEC Chair. Levitt had previously been Sandy Weill’s business partner in a Wall Street brokerage firm. In 1998, when Weill wanted to create Citigroup by merging his Travelers Group, which owned an insurance company, brokerage firm and investment bank, with Citibank, an insured depository bank – an illegal merger at the time under the Glass-Steagall Act — Levitt and his other cronies in the Bill Clinton administration eagerly got the ball rolling.

During his long tenure, Levitt presided over the serial looting of the public by Wall Street. Levitt was in charge when two university professors discovered that the Nasdaq stock market had been fleecing investors for more than a decade in an illegal price-fixing scheme. Levitt was in charge when Wall Street’s fraudulent research and IPO pump and dump schemes led to the great tech bubble crash, wiping away $4 trillion in market value. Levitt was there when JPMorgan and Citigroup helped Enron cook its books.

So when Levitt tells readers of the Wall Street Journal that “Mary Jo White has been a firm, thoughtful SEC chairman who, through speeches and a carefully chosen agenda, has made herself a capable steward of an essential agency,” one should take it with a grain of salt.

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How One Billionaire Became a Gold Bug

Courtesy of Mish.

Hugo Salinas-Price, a hard currency advocate, and the founder of Mexico’s Elektra retail chain explains in the following guest post how he became a gold bug.


How I Became a Gold-Bug by Hugo Salinas Price

My father was Hugo Salinas Rocha -“Salinas” was his father’s surname, and “Rocha” was his mother’s surname; the custom of using both parents’ surnames is universal in Latin America. Father was a successful merchant in Mexico City, and in the 1930’s he ran a store in downtown Mexico City. The store belonged to a company founded by his father, Benjamin Salinas Westrup and to the partner he took into the business, his brother-in-law, Joel Rocha Barocio; the company name used their initials: “SyR” (the “y” means “and” in Spanish).

I was born in 1932. As a little boy, I loved to play in my father’s store after school hours, and one afternoon when I was perhaps eight years’ old, one of the salesmen took two gold coins out of his vest pockets (men wore vests in those days). They were the large, 1.2 ounce gold “Centenarios” that had been minted to celebrate the 100th Anniversary of Mexican Independence from Spain in 1810. The salesman balanced the two coins on his forefingers, and placing them near my ear, he gently touched one against the other. The sound was the delightfully pure ringing of gold!

A couple of years later, when my father was driving home after the store closed, he pulled out a lottery ticket from his coat and said: “This lottery ticket did not win a prize, but it did win a refund of $100 pesos. I’ll give you the refund. What would you like to buy with the refund?” I unhesitatingly replied: “Buy me some gold coins!” So the next day, a salesman from my father’s store took me on a short walk downtown, from the store to a side-street. Three or four men in suits and wearing hats – men wore hats in public, in the 1940’s – were posted along the sidewalk, and were clicking gold coins in their hands. They were gold-traders, and clicking gold coins was their way of attracting the attention of customers.

At that time, the silver pesos we used as money could be exchanged for gold pesos at a rate of five

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Zero Hedge

Evolution Of An Investor (A Peek Into My Mind)

Courtesy of ZeroHedge. View original post here.

By Chris at

I was interviewed recently by Vesper Capital, a fund which manages a fund of funds for FX trading strategies. The interview was broken into 3 parts.

In the first part we discuss formative years:

(click on the image to listen to the podcast)

Then in part 2, we discuss assessing risk, how psychology can interfere with investing, and much more:


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Presidents Can't Fix The Economy

By Mauldin Economics. Originally published at ValueWalk.

Ever wish you could time-travel back to an earlier, simpler era? Many folks do. We differ only in how far back we want to go.

This year’s intense presidential campaign only adds to our nostalgia.

Hillary Clinton supporters long for the 1990s… when Bill was president and the economy was booming. Many Donald Trump voters have an earlier destination in mind… maybe the 1950s, when we had few foreign military entanglements and American industry led the world.

Photo by geralt (Pixabay)Economy

I have bad news for both groups:...

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Chart School

Tech Hold Breakout,.but S&P Wedge Bound

Courtesy of Declan.

It was a mixed day for indices. Large Caps remain bound by wedge support/resistance, but Tech broke upside yesterday from similar wedges and held those breakout today.

There was little change for the S&P over the last couple of days. The one technical change was the MACD trigger 'buy' as other technicals stayed on the bearish side.

Meanwhile, the Nasdaq cleared wedge resistance yesterday, and was able to hang on to the breakout despite today's loss. It too enjoyed a MACD trigger 'buy', but had an On-Bal...

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Phil's Favorites

Stupid Stuff, Late-2016 Edition

Courtesy of John Rubino.

Cyclical turning points tend to feature large numbers of people doing and saying what in retrospect turn out to be amazingly dumb things. Think GM highlighting its line of Hummers just before an oil price spike bankrupts the company. Or half the world betting that tech stocks with infinite P/E ratios would keep rising in 2000. Or pretty much everything that was said and done in the housing market in 2006.

Today’s financial bubble is vastly bigger and more wide-spread than any of its predecessors, so the stupidity is correspondingly global and varied. Some examples:

GM bets big (again!) on gas guzzlers

General Motors third-quarter earnings widely beat expectations (CNBC) – General Motor...

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Kimble Charting Solutions

U.S. Dollar Rally: A tale of two chart patterns

Courtesy of Chris Kimble.

This article was originally written for See It Market.

The U.S. Dollar Index has been trading in a wide consolidation pattern over the last 18 months or so.  But after the recent U.S. Dollar rally, that consolidation has formed two distinct chart patterns.

And as you may have guessed… one is bullish while the other is bearish.



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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Oil Rises as OPEC Chief Barkindo Seeks to Resolve Output Plan (Bloomberg)

Crude advanced as OPEC’s secretary-general was due to visit Baghdad on Tuesday for talks aimed at resolving a deal on output after Iraq said it should be exempt from planned cuts.

Iron Ore Hoisted on Coat-Tails of Coal’s Record Rally in China (Bloomberg)

Iron ore is surging thanks to its bulk-commodity compatriot, coal. Iron ore futures in Singapore ad...

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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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Members' Corner

World Series 2016

Courtesy of Nattering Naybob.

The good news... Waiting since 1945, after 71 years, the Chicago Cubs have a chance to win their first WS since 1908.  The bad news... The Cubs face an Indian's team that has been waiting since 1948 to win a WS and last appeared in 1997.

CLE swept BOS, and took out TOR who had swept TEX, and has only lost ONE post season game.  That being Game 4 ALCS at TO, yet, during that series, no Indians starting pitcher made it through more than six innings. 

In fact, Trevor Bauer, only lasted two outs during his one start, leaving Merritt and the pen to bear the burden of over eight innings of baseball.  Mid range reliever Merritt notched a victory in that game with ERA 1.80; WHIP 0.60 with 5 IP. 

What does all that tell you? Oddly enough, without Carr...

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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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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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