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Clinton Presidential Documents c.1998: “Who’s on First?”

Courtesy of Larry Doyle.

Every now and then I come across a document or statement that simply stops me in my tracks. In the process of pondering the weight and importance of the embedded message, I am typically left totally aghast.

Today I had one of those experiences as I continued to review the treasure trove of material in the recently released documents from the Clinton Presidential Library. From a document covering the work of the Council of Economic Advisers, I almost spilled my coffee when I read the following:

There is a case for a lender of last resort in catastrophic cases (Greenspan.)

Uncle Alan effectively acknowledges the ‘too big to fail’ problem all the way back in 1998 when we experienced the meltdown of the hedge fund Long Term Capital Management.

Improved capital standards–Capital standards are seriously broken. We need to improve measurement of risk and capital so that banks have adequate capital against the risks they run.

Be mindful that at this point in time Wall Street firms were supposed to be able to leverage themselves at a maximum of 12 to 1. Even by that standard, this document is highlighting that the President’s advisers felt that capital standards were not sufficient. Fast forward 6 years and those capital standards were eroded so Wall Street firms could triple their leverage.

You can’t make this stuff up.

They then asked themselves the following:

. . .  should we address leverage in the system?

If I were not reading a document from a presidential library, I may have been confused to think I was reading a script from an Abbott and Costello skit when I see how the advisers answered this question regarding leverage:

We should not address leverage per se, because it is too difficult to define given derivatives and is not the proper measure of the problem. We should control excessive exposure to risk.

Let’s see here. Leverage is too difficult to define given the unknown risks lurking within the derivatives markets, but there is a need to control excessive exposures to risk.

Huh? What? “Who’s on first??”

Is it any wonder that the big money interests on Wall Street were able to ply their trade and fill the coffers of those in Washington to relax the net capital standards and triple their leverage in the process? We still…
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ECB Threatens Negative Interest Rates; Bank of NY Mellon Threatens Charging for Euro Deposits

Courtesy of Mish.

ECB president Mario Draghi has been making lots of noise recently about cutting interest rates because the euro is too strong and banks aren’t lending enough.

Realistically, there’s not much room to cut with rates already at a rock-bottom .25 percent.

Some suggest negative interest rates are the just the ticket to spur lending. Should that happen, the Bank of New York Mellon Eyes Charging Clients for Euro Deposits.

Bank of New York Mellon said it was considering charging clients for depositing euros if the European Central Bank decides to cut key interest rates below zero.

The potential move by the world’s biggest custody bank comes after Mario Draghi, president of the ECB, said last week that the region could require “further monetary stimulus” to offset a strengthening euro.

“If the eurozone were to go to negative rates that would actually present the opportunity for us to charge for deposits and we are giving that very serious consideration,” Todd Gibbons, BNY Mellon’s chief financial officer, said on a conference call as the bank unveiled its first-quarter earnings.

Reflections on Forcing Banks to Lend

For starters, banks lend when they believe they have creditworthy customers and lending is worth the risk.

An attempt to make banks lend to non-creditworthy customers is not only foolish but reckless. How many times do we have to march down that path to prove it?

Banks Should be Banks

Moreover, and as I have commented before, banks should be banks. I see nothing at all wrong with banks charging a slight fee for deposits.

Banks ought not be lending demand deposit accounts in the first place. The practice is fraudulent. Thus, it is natural for banks to charge for safekeeping of such deposits.

If the ECB forces banks into a corner where they have to start charging for deposits, arguably the system will be better off for it.

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Tuesday Humor: QE Was For “The Man On The Street” Says Chairman Emeritus Bernanke

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada…

  • Bernanke Says US Economy Is Heading Towards Complete Recovery

Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began…



Chart: Bloomberg

Chart o’ the Day: Energy Breaks Out

Chart o’ the Day: Energy Breaks Out

Courtesy of 
One of our fave sectors for 2014 continues to be Energy. Valuations are depressed relative to the rest of the S&P 500 and performance has lagged since the rally began in the fall of 2011.

In the meantime, commodity prices have been resilient despite all the deflation talk and China slowdown concern. On top of that, shareholder-friendly initiatives across the sector seem to be popping up everywhere – from increased dividends to the willingness to spin off non-core assets and break apart empires. This is bullish.

Here’s Bank of America Merrill Lynch’s technician Stephen Suttmeier with the technical set up:

We highlighted Energy as a sector showing good tactical relative strength. Two signs of relative rehab for the sector that we highlighted in our Monthly Report were

1) reclaiming the prior relative lows from 2010 and 2012 and

2) sustaining the move above the 13, 26, and 40-week moving averages relative to the S&P 500. S&P 500 Energy has done both.

In addition, S&P 500 Energy is pushing to new all-time highs with confirmation from the sector advance-decline line (side bar). The relative set-up for Energy is similar to that of October 2010, when the sector moved above its 13, 26, and 40-week relative moving averages and outperformed until April 2011.

…and his chart, showing the relative breakout of the sector versus the S&P 500:

Screen Shot 2014-04-22 at 10.50.06 AM


Energy remains tactically strong
Bank of America Merrill Lynch – April 22nd 2014


The Potential Bubble the Federal Reserve Cares Most About

The Potential Bubble the Federal Reserve Cares Most About


In the aftermath of the 2008 financial crisis, economists debated whether the Federal Reserve should be involved — at all — in pricking bubbles. The housing bubble, and subsequent financial crisis, had led to a disastrous result: Hundreds of banks had failed and millions of Americans had lost their jobs. At the time, many still believed the emergence of future bubbles could only be prevented through financial regulation, and not through interest rate hikes.

Today, however, as interest rates remain at historically low levels and are expected to stay low at least into next year, there is growing concern among investors, economists and central bankers that a new bubble has emerged, and that increased regulation isn’t enough to stop it. Led by a powerful Fed governor, there’s a growing call for the Federal Reserve to raise interest rates to prevent this bubble from growing.

So what bubble are we talking about? It’s not the one you might expect.

Most of us worry about bubbles in housing and stocks because that’s what we own. But those markets are not really what worries the Fed the most. Central bankers are more concerned about the far bigger, but less sexy, bond market. That’s because a bubble exploding in this market could lead to another devastating financial crisis.

Keep reading The Potential Bubble the Federal Reserve Cares Most About | FiveThirtyEight.

Debt Rattle Apr 22 2014: What Is The Earth Worth (6 Years Later)?

Courtesy of The Automatic Earth.

Edwin Rosskam Workers and hurricane shelter in tobacco field, Puerto Rico January 1938

Once more for everyone who’s got even the lightest slightest shade of green in their thoughts and dreams and fingers, I’ll try and address the issue of why going or being green is a futile undertaking as long as it isn’t accompanied by a drive for a radical upheaval of the economic system we live in. Thinking we can be green – that is to say, achieve anything real when it comes to restoring our habitat to a healthy state – without that upheaval, is a delusion. And delusions, as we all know all too well, can be dangerous.

It’s not possible to “save the planet” while maintaining the economic system we currently have, because that system is based on and around perpetual growth. It’s really as simple as that, and perhaps it’s that very simplicity which fools people into thinking that can’t be all there is to it. Switching to different fuels, alternative energy forms, is useless in such a system, because there will be a moment when the growth catches up with all preservation measures; it’s not a winnable race. There will come a time when a choice between preservation and growth must be made, and the latter will always win (as long as the system prevails). It would be very helpful if the environmental movement catches up on the economics aspect, because it’s not going anywhere right now. It’s a feel-good ploy that comforts parts of our guilty minds but won’t bring about what’s needed to eradicate that guilt.

If you’re serious about preserving the world and restoring it to the state your ancestors found it in, it’s going to take a lot more than different lightbulbs or fuels or yearly donations to a “good” cause. That, too, is very simple. You won’t be able to keep living the way you do, and preserve the place you have in your society, your job, your home, your car. That is a heavy price to pay perhaps in your view, but there is no other way. Whether you make that choice is another story altogether. Just don’t think you’re going to come off easy.

What makes it harder is the question whether we, as a species, are capable…
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Jamie Dimon: JPMorgan Employs 30,000 Programmers

Courtesy of Pam Martens.

There is now overwhelming evidence that Wall Street firms have entered a race to the bottom in high-tech trading wars. To grab the best programming talent, Wall Street firms are paying top dollar for the best and brightest coders and developers and potentially sapping the ability of other U.S. industries – those that make real products – to compete.

Just this month, Jamie Dimon, CEO of JPMorgan, told the firm’s shareholders in his annual letter that JPMorgan employs “nearly 30,000 programmers, application developers and information technology employees who keep our 7,200 applications, 32 data centers, 58,000 servers, 300,000 desk-tops and global network operating smoothly for all our clients.”

According to Anish Bhimani, Chief Information Risk Officer at JPMorgan Chase, in an interview published at the Information Networking Institute (INI) at Carnegie Mellon, JPMorgan has “more software developers than Google, and more technologists than Microsoft…we get to build things at scale that have never been done before.”

Obviously, not all of those tech guys are engaged in creating ever more rapid trading strategies; but to stay competitive with the technology arms race on Wall Street, new algorithms, programs deploying artificial intelligence, and high-speed routing techniques are being created at break-neck speed across the industry.

Industry insiders say that Wall Street is a potent force in campus recruiting, seeking out the computer whiz kids with large pay deals months before their graduation and before non-financial firms have had a chance to even schedule an interview.

An online advertisement at efinancialcareers says that “The market for intelligent and sophisticated programmers within finance is still booming, and not just for those with existing finance experience. The world’s top financial institutions are continuing to search for the most talented technologists from an array of backgrounds…” Salaries are listed at $150,000 to $400,000 for programmers skilled in C, C++, Core Java, Low Latency, Multithreading, FX [Foreign Exchange], Equities, Futures, Perl, Python, TCP/IP, High Frequency, Bank, C#, Operations, Python, Unix, Linux.

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How Bill Ackman Scrambled To Acquire Over $3 Billion In Allergan Calls Knowing Valeant Would Submit A Bid

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

In yet another page of the activist investor's sleaze book, last night Bill Ackman showed that when it comes to unethical way to generate "alpha" he truly may have no equal, when we learned that together with serial-acquirer and emplyee terminator Valeant, Ackman's Pershing Square would join in on a debt-funded (thank you ZIRP) acquisition of botox maker Allergan.

Nothing about that is odd. Where the story, however, becomes a near-criminal farce (if the US actually had a regulator which itself was not an agency designed to promote and reward criminality in hopes of getting a job as a kickback), is that as Valeant was preparing to announce its bid, Pershing Square – well aware of what was coming – was buying, and buying, and buying Valeant stock. Actually, Ackman bought almost no stock: in fact he only bought some $76 million in AGN stock in late February. The balance: all call options, accumulated on an almost daily basis through March all the way until April 21, the day the news was leaked.

Bloomberg explains:

Ackman began buying Allergan stock Feb. 25 and then in March switched to over-the-counter call options to accumulate his stake, regulatory filings show. A buying pause April 9 and 10 helped lower the price, before Ackman resumed in earnest April 11, according to two people familiar with the matter.

Valeant was interested in the unusual arrangement with Ackman because the hedge fund could amass more of Allergan’s shares before making a public disclosure, said a person familiar with the matter. The shares rallied the most since 2009 in the six days before the stake and bid were disclosed yesterday, soaring 22 percent, and trading volume last week approached the highest level in a year.

Why? Because Ackman had accumulated so many calls, it was in his interest at this point to leak the "news" about not his but Valeant's involvement, which is always happy to trade off its balance sheet and future growth prospects in exchange for a pop in the stock price here and now, even if that means firing thousands of workers, and actually cutting back even more on the company's own internal…
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Everyone knows about the big Internet scams: the e-mails advertising diet pills, the proposed Nigerian bank transfers. But we tend to overlook the milder forms of truth-stretching that have come to shape online living, and it’s hard not to. They’re often perpetuated by big and reputable companies, like Apple, Seamless, and Amazon.

Take search. General search sites, like Google and Bing, are pretty straightforward: you type in a query and get results ranked by some measure of relevance; you also see clearly marked advertisements. This experience tends to shape our expectation that searches deliver relevant results. But the same search on sites like Amazon or Seamless turns up not only relevant results but disguised advertisements, as well. As George Packer recently wrote in the magazine, “Few customers realize that the results generated by Amazon’s search engine are partly determined by promotional fees.” GrubHub Seamless, the merged food-delivery engine, recently revealed in an S.E.C. filing that “restaurants can choose their level of commission rate … to affect their relative priority in sorting algorithms, with restaurants paying higher commission rates generally appearing higher in the search order than restaurants paying lower commission rates.”

These practices seem to run afoul of Federal Trade Commission policies. …

Keep reading The Many Deceptions at the Heart of the Internet : The New Yorker.

Revealed: Scientists ‘edit’ DNA to correct adult genes and cure diseases

Revealed: Scientists ‘edit’ DNA to correct adult genes and cure diseases


A genetic disease has been cured in living, adult animals for the first time using a revolutionary genome-editing technique that can make the smallest changes to the vast database of the DNA molecule with pinpoint accuracy.

Scientists have used the genome-editing technology to cure adult laboratory mice of an inherited liver disease by correcting a single “letter” of the genetic alphabet which had been mutated in a vital gene involved in liver metabolism.

A similar mutation in the same gene causes the equivalent inherited liver disease in humans – and the successful repair of the genetic defect in laboratory mice raises hopes that the first clinical trials on patients could begin within a few years, scientists said.

Keep reading Revealed: Scientists ‘edit’ DNA to correct adult genes and cure diseases – Science – News – The Independent.


Zero Hedge

Algos Getting Concerned Low Volume Levitation May Not Work Today

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

It has been exactly six days in which algos, reversing the most recent drop in the S&P with buying sparked by a casual Nikkei leak that the BOJ may, wink wink, boost its QE (subsequently denied until such time as that rumor has to be used again), have pushed the market higher in the longest buying streak since September, ignoring virtually every adverse macroeconomic news, and certainly ignoring an earnings season that is set to be the worst since 2012. Today, the buying streak may finally end on rumors even the vacuum tubes are scratching their glassy heads if more buying on bad or no news makes any sense now that even the likes of David Einhorn is openly saying the second tech bubble ha...

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Phil's Favorites

China Manufacturing Output and New Orders Contract Once Again

Courtesy of Mish.

Chinese manufacturing remains in contraction for 2014. Output and new orders were down for the 4th consecutive month, but at a slightly reduced pace according to the HSBC Flash China Manufacturing PMI.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said:

“The HSBC Flash China Manufacturing PMI stabilised at 48.3 in April, up from 48.0 in March. Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident...

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Chart School

STTG Market Recap April 22, 2014

Courtesy of Blain.

We continue in this "V shaped" move off last week's touch of the 200 day moving average on the NASDAQ.  The S&P 500 gained 0.41% and the NASDAQ 0.97%.  The indexes are nearing overbought near term so a day or two of rest would serve the bulls well to try to attempt a new leg higher.  In economic news existing home sales hit 4.59 million in March, versus a 4.55 million estimate.

In terms of the indexes the S&P 500 stalled at the trend line that connected the lows of summer 2013; some congestion lies ahead at year highs.

The NASDAQ has come back from deeply oversold conditions as this index is heavy with biotech and momentum stocks.  The dotted blue line is the previous high; since early March we have not seen the NASDAQ make...

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Market Shadows

Soy Numero Uno

Soy Numero Uno

By Paul Price of Market Shadows

Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.

When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.

The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009.  Since then profits have recovered.  They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.


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Option Review

Casino Stocks LVS, WYNN On The Run Ahead of Earnings

Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.


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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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What the Market Wants: Market Poised to Head Higher: 3 Stocks to Consider

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

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Yesterday, the market continued its winning ways for the fifth consecutive day.  The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high.  Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red.  All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.

Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...

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Swing trading portfolio - Week of April 21st, 2014

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

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here...

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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Click here and sign in with your PSW user name and password, or sign up for a free trial.


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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...

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See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...

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Here We Go Again - Pharma & Biotechs 2014

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

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...

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FeedTheBull - Top Stock market and Finance Sites

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.

Market Shadows >>