Author Archive for ilene

2007 All Over Again, Part 3: Banks Starting To Implode

Courtesy of John Rubino

So far, each financial crisis in the series that began with the junk bond bubble of 1989 has been noticeably different from its predecessors. New instruments, new malefactors, new monetary policy experiments in response.

But the one that’s now emerging feels strikingly similar to what just happened a few years ago: Banks overexposed to assets they thought were safe but turn out to be highly risky see their balance sheets deteriorate, their liquidity dry up and their stocks plunge.

This time it’s starting in Europe, where bank stocks are down by over 20% year-to-date and credit spreads are exploding. For a general look at this process see Is Another European Bank Crisis Starting?

Not surprisingly, the scariest stories are emanating from Italy which, despite inventing the mega-bank concept during the reign of the Medici, seems unable to grasp how money actually works. Check out the following Wall Street Journal chart of non-performing loans. When 16% of an entire country’s borrowers have stopped making their payments, that country is pretty much over.

Italy non performing loans

All eyes are therefore on Italy’s Banca Monte dei Paschi, which has a non-performing loan ratio of 33% and, as a result, a plunging share price. When the Italian economy finally blows up, this will probably be where it starts.

But here the story takes an even more disturbing turn. It seems that the other lender now spooking the markets is none other than Deutsche Bank, pillar of the world’s best-performing economy. Shockingly-bad recent numbers have combined with questions about its mountain of derivatives and exotic debt to put DB in a very uncomfortable spotlight. Excerpts from analysis of the aforementioned debt:

What Deutsche Bank’s Plunging CoCo Bonds Just Said about the Bank’s Future

(Wolf Street) – Shares of scandal-plagued, litigation-hammered, loss-ridden Deutsche Bank, one of the largest and least capitalized megabanks in the world, closed at €16.32 today in Frankfurt, down 50% from April last year. Investors are fidgeting in their seats, cursor on the sell-button.

In October, it had announced that it would shed divisions, clients, and employees, and hopefully some risks, and that it would scrap its dividends.

January 20, the bank reported “earnings” – in


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Now we separate the Pros from the Pretenders

Courtesy of Joshua M. Brown, The Reformed Broker

Today’s MLP of the Day – Energy Transfer Partners LP, ticker symbol ETE. In a tersely-worded 8K, the company announced the replacement of their CFO. I don’t know anything about the company, but the investors in the name are clearly shooting first here and getting the hell out of dodge. Shareholders in this and many other MLPS are now learning an abject lesson in portfolio construction and the true nature of risk-reward tradeoffs in fixed income.

ete

For a 4.5% income stream in ETE during the salad days of MLPs, investors endured almost complete wipeout of their principal.

We’re seeing portfolios come in to us lately loaded with securities that carried high yields at the time of purchase, but that also carried extreme risk – a foreign concept during the QE years when anything could be financed and refinanced at will.

The pros knew not to construct income portfolios laden with “bond alternatives” or, at a minimum, to keep these holdings small and compartmentalized. The pretenders replaced the Treasury slots of their fixed income holdings with garbage so they could promise clients (and prospective clients) a current income higher than what the guy down the street was offering.

And now we separate the pros from the pretenders, as the potential risks become actual risks, and, in many cases, permanent losses.

If you’re an advisor who won business over the last few years by out-delivering on current yield in your proposals, your time of reckoning has come. Because all fixed income must be looked at from a total return perspective, not merely quoted in terms of the trailing 12-month’s dividend yield.

Read this if you haven’t yet:

The MLP Myth Blown to Smithereens (TRB)





Utilities Winning By Not Losing

Courtesy of Dana Lyons

While the broad stock market has been getting hammered, the utility sector hit a 52-week high this week – and achieved a significant relative breakout.

Our firm’s philosophy when it comes to investment selection, i.e., where to invest, is to concentrate in the strongest performing areas of the market. We refer to this as relative strength. Typically, this means the sectors that are rising more than the rest, especially on a risk-adjusted basis. Occasionally, though – in a market correction or bear market – it can mean the sectors that just aren’t losing ground, or are losing the least.

This is the case currently with the utility sector. For, while most areas of the market are off to a historically weak start, utilities are up 8% for 2016, as measured by the Dow Jones Utility Average (DJU). Furthermore, while the DJU is up a mere 1.7% over the past 52 weeks, it is nevertheless at a 52-week high.

image

Additionally, as the chart indicates, the utility sector has broken out of a well defined downtrend on a relative basis versus the S&P 500. While there is no guarantee, this does suggest that, over the longer-term, the utility sector could be in the early staged of out-performance versus the market. And based on past occurrences when we have witnessed relative breakouts of some variation (e.g., 2000, 2007), this is not necessarily a positive development for stocks overall.

It remains to be seen whether similarly challenging times will materialize for the broader market versus utilities over the longer-term, but that trend certainly is in effect at the moment.

*  *  *

More from Dana Lyons, JLFMI and My401kPro.





JPMorgan Unveils The “Bogey” For NIRP In The US

Courtesy of ZeroHedge. View original post here.

Ever since early 2015, we have repeated that with the world caught in a negative rate "race to the bottom", which even S&P now admits, it is inevitable that the US will join the rest of the DM central banks, especially after the flawed and much delayed attempt to hike rates into what is at least a quasi recession.

Now, with sellside chatter that it is only a matter of time before the Fed will likewise join the fray despite stern warnings by the likes of Deutsche Bank that more easing will only exacerbate conditions for global financial firms, JPM's Michael Feroli has set the "bogey" or the catalyst for what will be needed for the Fed to finally admit defeat and go not only back to zero but below it:

While we earlier mentioned that negative nominal rates should affect the economy no differently than ordinary policy easing, there is some evidence that the exchange rate channel is particularly pronounced in the case of NIRP. The leadership role of the Federal Reserve in the global monetary system may lead to some hesitancy to engage in what may be uncomfortably close to a skirmish in the currency wars. Lastly, there is the political issue. To be sure, political concerns about NIRP are not unique to the Fed; presumably one reason central bankers abroad sought to limit the pass-through to retail depositors was to avoid pushback from the political establishment. Even so, it seems reasonable to judge that the Fed’s current political situation is more parlous than is the case among its overseas counterparts. For all of the above reasons, we believe the hurdle for NIRP in the US is quite high, and we would need to see recession-like conditions before the Fed seriously considered this option.

So the "hurdle is quite high", but all that will be needed for Yellen and co. to surpass this hurdle is for "recession-like" conditions to emerge.

Which means be on the lookout for "recession-like" conditions because a few more days of stocks crashing and wiping out years of the Fed's carefully planned out "wealth effect" and the Fed wil have no choice but to beg the Department of Commerce to come up with quadruple seasonal adjustments that make every data…
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Chesapeake Plummets Over 20% On Report It Has Hired Bankruptcy Attorneys

Courtesy of ZeroHedge. View original post here.

The saga of the gas giant Aubrey McClendon built, Chesapeake Energy, enters its endgame, when moments ago following a Debtwire report that the company has hired Kirkland and Ellis as its restructuring/bankruptcy attorney – typically a step taken just weeks ahead of a formal Chapter 11 filing – the stock has plunged 22% to $2.40, the lowest price in the 21st century, and for all intents and purposes, ever.

In a few weeks we will see just how many banks were properly "provisioned" for this now imminent bankruptcy that may just unleash the default wave so many have been waiting for.





What The Charts Say: “Now Is The Time To Worry”

Courtesy of Lance Roberts of Real Investment Advice

RALLY FAILS, ALERTS RISE

Last week, I discussed the boost the market received as the BOJ made an unexpected move into negative interest rate territory combined with end of the month buying by portfolio managers. I wrote:

“However, the announcement by the Bank of Japan (BOJ) to implement negative interest rates in a desperate last attempt to boost economic growth in Japan was only the catalyst that ignited the bulls. The “fuel” for the buying came from the end of the month portfolio buying by fund managers.”

But more importantly, was the push higher by stocks that I have been discussing with you over the last couple of weeks. I wrote:

“Over the last few weeks, I have suggested the markets would likely provide a reflexive rally to allow investors to reduce equity risk in portfolios. This was due to the oversold condition that previously existed which would provide the “fuel” for a reflexive rally to sell into.

I traced out the potential for such a reflexive rally two weeks ago as shown in the chart below.”

Previous Chart

SP500-MarketUpdate-012916-2

As I stated then, the most important parts of the chart above are the overbought / oversold indicators at the top and bottom. The oversold condition that once existed has been completely exhausted due to the gyrations in the markets over the last couple of weeks. This leaves little ability for a significant rally from this point which makes a push above overhead resistance unlikely.

“Just as an oversold condition provides the necessary “fuel” for an advance, the opposite is also true.”

Here is the problem.  I have updated the chart above through Friday’s close.

SP500-Chart1a-020516

The rally failed at the previous reflex rally attempt during the late December/January plunge. This failure now cements that high point as resistance. Furthermore, the market continues to fail almost immediately when overbought conditions are met (red circles), which suggests that internals remain extraordinarily weak. 

HEAD & SHOULDERS – NOT JUST DANDRUFF

The good news, if you want to call it that, is that the market is currently holding above…
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The 3 Economic Stories of 2015

 

The 3 Economic Stories of 2015

Courtesy of 

JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore. And welcome to this edition of the Hudson Report. Now joining us is MichaelHudson. He’s an economics professor at the University of Missouri Kansas City, and he has a new book out titled Killing the Host. Thank you so much for joining us, Michael.

MICHAEL HUDSON: It’s good to be here, Jessica. Since we last talked I’ve also been appointed a professor at Peking University in Beijing.

DESVARIEUX: Awesome. Congratulations. So Michael, let’s get right into it and talk about the big stories of 2015, economic stories, I should say. What would you say are thethree most important stories that people should be aware of?

HUDSON: Well, the leading story is that the economy has not recovered. That the 1 percent have recovered, but the 99 percent have not recovered. And there is no sign of recovery, or even any sign that the presidential candidates running in next year’s election are trying to do anything.

The next story is that the 1 percent have recovered. I’m told that the largest sustained gains in any kind of asset have been number one Andy Warhol paintings, and number two, Stradivarius violins. These are trophies for the rich. They’re going way up while wages are not going up and consumer prices are not going up.

And the third story would be international, that the United States has changed the rules of the International Monetary Fund. Essentially, the U.S. has dragged Europe into an economic war against Russia, China, and the BRICS.

DESVARIEUX: Can you be more specific about that last story? How are they doing that?

HUDSON: Well, earlier this month the International Monetary Fund changed its rules that it had had since 1945. The whole international financial system since 1945 was based on the fact that governments when they’re bailed out, or when they borrow from other governments, they have to repay their debts, and that the IMF is going to bring leverage to make sure that the international, intergovernmental finance system remains intact by saying it’s not


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Inflation is the Monster Hiding in the Closet

Courtesy of EconMatters

We are near the low in bond yields for the year, and with the global markets selling off but the employment numbers holding in there, we have a real conundrum for bond investors.





Four of the Largest Wall Street Banks Hit 12-Month Lows Last Week

Courtesy of Pam Martens

Sanford (Sandy) Weill, the Man Who Put the Serially Charged  Citigroup Behemoth Together

Sanford (Sandy) Weill, the Man Who Put the Serially Charged Citigroup Behemoth Together

Last Wednesday something noteworthy happened on Wall Street. Four of the largest Wall Street banks, each holding trillions of dollars in derivatives, hit new 12-month lows in intraday trading. The banks are Bank of America, Citigroup, Goldman Sachs and Morgan Stanley. The banks recovered a little ground by the end of the week. These banks have two other things in common: they have been spending billions buying back their own stock and they all received bailouts during the 2008 crash.

Over the past six years, publicly traded companies in the Standard and Poor’s 500 Index have bought back $2.7 trillion of their own shares according to Bloomberg data. There are four major problems with this strategy: much of the buybacks are financed with debt; some of the buybacks simply offset insider selling or stock awards to executives; none of the money goes to growing or innovating the company; the timing of the buybacks could lead to stock market manipulation.

In the September 2014 issue of the Harvard Business Review, William Lazonick sized up the share buyback phenomenon like this:

“Given incentives to maximize shareholder value and meet Wall Street’s expectations for ever higher quarterly EPS, top executives turned to massive stock repurchases, which helped them ‘manage’ stock prices. The result: Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back shares for what is effectively stock-price manipulation.”

The SEC has a very lax rule, known as 10b-18, which provides a multitude of openings for stock price manipulation. As we previously reported, Wall Street banks can even carry out buybacks in their own dark pools as the self-regulators on Wall Street look the other way.

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Apple’s Trek to the Ordinary

Tim Knight explains his bearish call on Apple Inc. stock which is largely based on the loss of Steve Jobs. 

Apple's Trek to the Ordinary

Courtesy of Tim Knight at Slope of Hope

Over the past ten months, in steps almost too small to be noticed by the mass media, Apple has shed over two hundred billion dollars in value. That's nearly one quarter of a trillion dollars in wealth which would have fed shareholder dreams of new houses, new boats, new jewelry, and mink coats, but……….it's gone.

The thing is, I think the slide is far, far from over. I wrote a piece earlier this year (which got picked up by some of the mainstream press) predicting that Apple would fall to the mid-70s. We're already heading into the low 90s, so my goofy prediction is seeming a little less insane.

0126-gloomy

Of course, it wasn't that long ago that buying Apple was a "no brainer" – indeed, a "bargain." God knows it wasn't hungry for media attention. This is the unedited home page of MarketWatch a while back:

0910-aapl

So what's behind this fall? Lots of things (not the least of which is a wildly-overvalued market which, ultimately, will pound the Dow back into 4-digit land), but for Apple specifically, I think it's simple: the magic is gone again.

When I say "again", I am referring to something in my own personal experience. I worked at Apple HQ from 1987 to 1990. Steve Jobs had left the company two years earlier, although there was still Jobsian memorabilia scattered about, such as the 1985 planning binder from the Finance department which had an image of a dollar bill with Steve's face instead of George Washington's. On the bottom of the dollar bill were the words In Jobs We Trust.

This was the Sculley era. That is, John Sculley, the Pepsi boy whom Jobs famously lured to Apple in the early 1980s and, by the late 1980s, was sailing along with the winds of Jobs' former product prowess pushing his sailboat…
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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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Zero Hedge

WTI Crashes To $27 Handle As US Energy Credit Risk Spikes Above 1500bps To Record Highs

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

BTFD?

Because nothing says stability like record high credit risk...

And the effective yield on US HY Energy credits has broken above 20% - 400bps above 2008 crisis highs...

...

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Phil's Favorites

The Economy In Pictures: We've Seen This All Before

Courtesy of Lance Roberts of Real Investment Advice

Last week, I gave a presentation discussing the current market environment and the economy. As I was preparing the slide presentation, I noted some concerning similarities to a presentation that I gave in 2007. At that time, I was regularly discussing the potential onset of an economic recession, and then like now, I was dismissed as being a “perma-bear.” There was no inverted yield curve, the vast majority of the media saw no recession in sight, and the Federal Reserve continued to tout a “Goldilocks” economy. Yet, a year later, it was quite evident. 

Currently, there is a plethora of commentary strongly suggesting that the U.S. economy is nowhere near recession currently. That may very well be the case, however, by the time the data is revised to reveal the recession ...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Gold Up 12%, Silver Up 11% YTD As Stocks Crash ... Again (Business Insider)

Gold jumped 2 percent to a 7-1/2-month high yesterday, briefly touching the psychological level of $1,200 an ounce. Falling bank shares and stock markets and worries over global economic growth and a new financial crisis prompted investors to seek the safety of gold.

Kuroda's Three Strikes Drive 10-Year Yield Below Zero: Chart (Bloomberg)

Japan’s benchmark 10-year yields touched a record low of minus 0.01 percent Tuesday in the wake...



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Kimble Charting Solutions

Nasdaq to follow Silver and decline 30%+?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

When assets reach prior highs, its time to pay attention from a Risk On & Risk Off basis.

The chart on the left is Silver, going back to the mid 1970’s. As you can see it reached $50 in the early 1980’s and then quickly reversed, losing over 90% of its value in the next 14-years. Then it embarked on a rally, starting in the early 1990’s. This rally took Silver back to the $50 level in 2011, which ended up being a “Double Top” nearly 30-years later. After hitting the $50 level again, buyers disappeared and sellers stepped forward....



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Chart School

Sellers Start Day, Buyers Finish It

Courtesy of Declan.

Tech averages had the weakest start, Powerful gap downs had set things off, but buyers were able to make a comeback into the close. However, morning gaps remain. Volume climbed to register as distribution, which for the Nasdaq was the second day of distribution in a row.


The Nasdaq 100 is on the fiftth day of selling in a row. The August swing low wasn't fully tested. Bulls will be looking for a bullish 'morning star' where today's candlestick 'hammer' is followed by an opening gap, then a rally for the rest of the day. Should this emerge, then a move to test 4,300 is next. If there is a weak open, then any chance for a bullish 'hammer' based on today's action is signifi...

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OpTrader

Swing trading portfolio - week of February 8th, 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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ValueWalk

Why Most Investors Fail in the Stock Market

 

Why Most Investors Fail in the Stock Market

Courtesy of ValueWalk, by  

Throughout the past 30 days of wild volatility, here’s what I didn’t do.

Panic. Worry. Sell.

In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our  mind and ignored it.

If you read Howard Marks latest memo, ...



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Digital Currencies

2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Courtesy of Charles Hugh-Smith at Of Two Minds

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open t...



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Sabrient

Sector Detector: New Year brings new hope after bulls lose traction to close 2015

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

Chart via Finviz

Courtesy of Sabrient Systems and Gradient Analytics

Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.

Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...



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Promotions

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!

PhilStockWorld.com 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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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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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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