by phil - April 27th, 2015 8:22 am
Here's a nice rundown of the Greek endgame, which is moving towards it's final stages as the ECB refused to consider a "plan B," even as a meeting of the block's 19 finance ministers fell apart over the weekend.
Greece doesn't just need money to service their Bonds and IMF loans, which are what the US press has been fixating on (because we are one of the parties that is owed that money). Greece also needs moneys to pay their own country's pension obligations and, of course Government salaries so perhaps you can understand the "FU" attitude the Government is beginning to have towards the ECB as the ministers insist on more and more cutbacks.
Greece has about two weeks to convince the EU to release another $7Bn to them under SOME kind of terms that will enable them to pay $3.7Bn in bonds $800M due to the IMF on the 12th otherwise that default will quickly cascade things out of control. Over the next month, that $7Bn will be used up on other debt obligations all ahead of a $4Bn payment they already owe to the ECB on July 20th. Per Goldman Sachs:
We believe negotiations could drag on likely through May and possibly into June. A ‘hard’ deadline could be July 20, when Greece faces a payment of €3.6 bn to the ECB, for which, we think, the country will not have sufficient cash. Peripheral spread volatility is likely to increase as time goes by, as investors will associate a higher probability of default to a higher probability of Grexit, although this association will depend on what conditions have led to the credit event.
by phil - April 25th, 2015 8:24 am
Take this review with a grain of salt as we went back to cash on most.
Still, it's good to take a look at what worked and what didn't – especially since those that didn't are often some of our best new opportunities! It's been a crazy market environment but we try to find at least one Top Trade each week for our Alert subscribers (and, of course, our Premium Members). I don't force them – I either like a trade enough to feature it or I don't.
Top Trade Alerts are sent out once or twice a week via EMail and Text Message from our Basic and Premium Live Member's Chat Room. These trades are just a very small portion of what we discuss during chat each day, but hopefully a good representative sample of the dozens of trade ideas we share with our Members each week in our Live Member Chat Room as well as our Weekly Live Webinars (Tuesday's replay can be seen here).
Keep in mind these are just snapshots of trades as of today – it's up to you to take good trades off the table and cut the losses (or make adjustments) on ones that go bad. We're always discussing adjustments in our Live Member Chat Room – join us there for follow-ups.
2/20 – GOGO was our pick around lunchtime as we liked the story on the provider of WiFi services for airplanes. GOGO was a part of our Income Portfolio before we cashed that out and it was just starting to rally back from the low end of the range and we didn't want to miss the breakout. I wrote quite a dissertation about why I liked them and our new trade idea was:
So, for the LTP, let's sell 10 2017 $15 puts for $4.40
by phil - April 24th, 2015 8:28 am
What is Kaisa?
Kaisa Holdings is #1638 on the Hong Kong Stock Exchange and is currently trading at 50% of it's 2014 price at $1.50 per share. That may make it seem unimportant but, in the Wacky World of Chinese Stocks – it's an $1Bn+ company. Kaisa specializes in large-scale real estate projects and has borrowed $10.5Bn for various projects but, unfortunately, just went into default for lack of $52M as it also delayed the release of 2014 financials.
Already the company's $800M worth of 8.875% 2018 bonds have dropped to 55 cents on the Dollar and 2020 notes are no fetching just 29.9% of face value and that's going to look generous as this situation rapidly spirals out of control. It is estimated that, in a full default, Kaisa's bond-holders can expect about 2 cents on the Dollar because the company has generated no real value for them after spending $10.5Bn of other people's money.
If you are an investor in Chinese notes or Chinese stocks, consider this a warning. I will remind you that these are slow-rolling crises that take quite a long time (in the timeframe of the average investor) to unwind. Well, maybe not so slow as this morning Glorious Property Holdings, who just had their debt cut to Ca (junky junk) is struggling to come up with $19.5M of the $300M it must provide on 13% notes due Oct 25th. Since the end of last year,…
by phil - April 23rd, 2015 8:30 am
The Chinese economy is collapsing.
That, of course (in this insane QE World) is being taken as good news by equity traders who anticipate another wave of free money to come gushing out of Beijing ON TOP OF the $194Bn that was announced on Monday. That's right, China's economy is so big that they need $194Bn PER WEEK to keep it afloat. How long do you really think they are going to be able to keep that up?
We're short on China with some FXI puts, but not too many yet as we don't know WHEN this madness will end – only that it will end and that it will end very badly when it does. China's PMI is once again contracting at an accelerating rate DESPITE all the stimulus but last year Chinese market rallied while the economy was clearly contracting as well – popping FXI from 32 in March to 42 in September (up 35%) before collapsing back to 36 in October.
The Sept/Oct drop happened when Manufacturing numbers were improving, which indicates that the Chinese market, like Japan's and, to some extent, the US and Europe, have nothing to do with how well the economy is doing and everything to do with how much free money the Central Banksters will be able to transfer to their Top 1% buddies.
The reason the markets don't seem to make sense to you is because you are not in the top 0.01%, where all the free money is going. From their perspective, they don't give a crap about the economy or the companies they own and invest in, they only care about how much money they can funnel out of the Government, through the banks, that can end up in their pockets.
How else do you explain the madness of CAT, who haven't had good sales numbers since the beginning of 2013 (another indication of the World-wide slump) yet have kept their stock net flat over that time period? The stock even surged to $108 (up 30%) last year before coming back to the $80s but even…
by phil - April 22nd, 2015 8:35 am
What a crazy-assed market!
With virtually NO volume at all, the S&P (along with the other indexes) gapped up 10 points at the open (0.5%) but then proceeded to sell off all day as the Fund Managers that manipulate the Futures trading sold their stocks to all the suckers who ran in to buy into the "rally" that the Media Puppets were applauding all morning.
I know it sounds like a conspiracy theory when I tell you the markets are manipulated but, just yesterday, they accused a 36 year-old guy (31 at the time) with a very small trading firm ($5M) of crashing the Global Markets in the "Flash Crash" (May 6th, 2010).
Aside from the sad fact that it took them 5 years to find the culprit, it should scare the crap out of people that a single person, with no special equipment and a fairly ordinary margin broker account could knock $1Tn in value off of global equities in less than an hour. If that's how easy it is to manipulate the entire market – how can you NOT believe that there are people manipulating individual stocks every day?
“Things like this don’t build a lot of confidence,” said Timothy Ghriskey, the chief investment officer at Solaris Asset Management LLC in New York.
“It’s ridiculous, it’s the government at its best — inept,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a phone interview. “It really is just another one of many things to deal with, it’s extremely frustrating. We’ve seen flash crashes and we’ll see them again and it’s definitely disconcerting.”
According to the government, Sarao had trading software altered to let him send and modify orders to sell stock futures thousands of times a day with virtually no risk they’d be filled. That was his goal: to make it seem like orders for futures were piling up so they’d fall and he could buy them on the cheap, the complaints say. Oddly enough – I just pointed out that same activity going on in the Oil Futures during yesterday's Live Webinar.…
by phil - April 21st, 2015 8:10 am
181 shares traded down on Friday, 81M traded up on Monday.
Is this what a rally looks like? I cannot emphasize enough that we are in CASH!!! and don't really give a crap what the market does, so I say this with all possible detatched objectiveness when I ask you – WTF are you playing with?
This market makes no sense, it moves for unsensible reasons. It goes up on no volume and the Corporate Media acts like that's the way things are supposed to be because THAT'S WHAT THEY ARE PAID TO TELL YOU. Are you paying them? No, you are not. They are paid to sell you cars and toothpaste and timeshare vacations and, worst of all, Retirement Planning because their form of retirement planning only plans to detach you from your money so the sponsors can retire rich – NOT YOU!
That clip was from 1976, about 40 years ago and not much has changed since, so why should we worry. At the time, the country was in the 4th year of a recession having just ended a pointless war that ran up the National Debt and left us with huge budget deficits. At the time, we had a lot of inflation at the same time because we didn't have a Fed pouring money into the economy and oil shot up from $50 (inflation-adjusted) to $100 per barrel over the next few years during the Iranian Revolution.
After the Iranian Revolution, things calmed down and oil collapsed all the way to the $20s where, except for the Gulf war, it pretty stayed until 2000 when the Commodity Futures Modernization Act deregulated the trading of energy contracts and led to the modern age of oil prices manipulation that has nothing to do with the Fundamental laws of supply and demand.
That's why the price of oil has gone from $45 to $57.50 (up 27%) in just over a month with no change in supply or demand and that's how the price of gasoline has gone from $1.23 a gallon on January 13th to $1.92 a gallon this morning (up 56%). Keep in mind, there…
by phil - April 20th, 2015 9:04 am
AND IT'S NOT HELPING!
Is what I would have said if I had more room in the headline. More monetary stimulus is not the answer to every Economic ill – especially in China where even infrastructure spending is failing them. Why? Because they tried to rush their economy from the early 19th (farming) to 21st (tech) Century without stopping to build a middle class that may demand the products they hope to build their economy on.
China had their industrial revolution about 20 years ago – ours lasted from 1900 to 1960 and then we busted in the 70s and converted our economy in the 80s and 90s to a tech-driven one. There was an economic hiccup in the 1930s, of course, but that happened because too much easy money given to Corporations and the Investing Class led to massive wealth disparity while the previous farming economy crumbled leading once-comfortable people into abject poverty while the top 1% popped champagne on their yachts – until the bubble burst and they all drowned together.
Well, thank goodness we've learned that lesson, right? NO – not right at all! We are idiots and we are making the same exact mistakes that led to the Great Depression and applying the same fixes that led to the Great Depression. This is INSANE!!!
These are normal business cycles and you can't wish them away and you can't paper over them. All these so-called "stimulus" programs do is enrich the Top 1% on the backs of the Bottom 99% and push off the pain (eventual austerity or debt default) to a time AFTER the Top 1% have had a chance to pull out and move on to greener pastures.
Take oil, for example, after getting a black eye on last week's sudden surge, we have recovered very nicely by sticking to our fundamental guns and shorting oil at the $58 line with a bit of conviction. That's given our Members two excellent wins in the last two days of $1,000 per contract on Friday and another $1,500 today. My comment to our Members on Friday morning in our…
by phil - April 19th, 2015 7:53 am
That's how much our bearish Short-Term Portfolio is now up as of Friday's close. In just three weeks of trading since our last Portfolio Review on March, 30th, where we very wisely cashed out the majority of our long positions ahead of the coming correction, we've added $19,055 in virtual gains.
Even better, in our Long-Term Portfolio, we left our "losing" positions in the materials space in the energy and material space and, without any changes since other than adding a couple of new positions (we had a lot of cash, so why not), our larger Long-Term Portfolio has jumped $43,237 (6.1%) during the same period. We could not have picked a more perfect combination of long and short positions to ride out the last 3 weeks of the market!
That has driven the Primary Trading Strategy that we teach our Members at PSW (of keeping a Long-Term Bullish Portfolio with a Short-Term Bearish Portfolio) to a new record of $968,512, up $368,512 (61.4%) from our $600,000 start right after Thanksgiving in 2013 (17 months). We have these gains, at the moment, because our timing was PERFECT. But, our timing wasn't perfect by accident – it's the design of the Long/Short strategy that we are able to hold onto our positions when our timing is NOT perfect UNTIL it is. It makes us look a lot smarter than we actually are!
We were off track into the end of the year because we flipped bearish a bit too early but being off track wasn't so painful in the Short-Term Portfolio because we still had our long positions in the very bullish and much bigger Long-Term Portfolio. More importantly, because we had a goal of making 20% a year, when the Long-Term Portfolio hit the 40% mark on March 30th, we decided it was ahead of schedule and cashed out our winners, letting the losers we still had faith in ride.
by phil - April 17th, 2015 7:30 am
They are pulling out all the guns this morning and firing blanks. As you can see from the front page of the WSJ, our friendbuddypal Jon Hilsenrath (aka "The Fed Whisperer") has poked his head out like a groundhog and, scared of the economic shadows he sees – has proclaimed 6 more weeks of FREE MONEY for all!
That gave us a nice little pop early this morning BUT, over in Europe, they are FLEEING into bonds, sending Germany's 10-year notes down to 0.07% – a new all-time low. This is coming on the heels of Greece's Finance Minister accusing Europe's creditor powers of trying to force his country to its knees by "liquidity asphyxiation".
"Toying with Grexit, or amputating Greece, is profoundly anti-European. Anybody who says they know what will happen if Greece is pushed out of the euro is deluded," he said. The warnings were echoed by Eric Rosengren, head of the Boston Federal Reserve, who said Europe risks sitting off uncontrollable contagion if it mishandles the Greek crisis, even though Greece may look too small to matter.
"I would say to some European analysts who assume that a Greek exit would not be a problem, people thought that Lehman wouldn't be a problem. If you measured the size of Lehman relative to the size of the US economy it was quite small," he told a group at Chatham House.
Greek bonds, of course, went flying higher. Up to about 13% this morning. Watch that 15% line, which is where Europe begin to melt down back in 2011. The 4-year bonds already jumped 4.5% this morning and are now hovering around 27% and the 2:1 inverted yield curve indicates investors are once again seeing a very high possibility of default.
Even worse, the last time Greek yields were flying there were two rounds of bailouts to help stem the tide. This time, the ECB and the IMF are demanding PAYMENT instead of offering a hand. Greece simply cannot afford to pay out money and be forced to borrow more short-term money at 27% – even an economoron understands that much, don't they?
by phil - April 16th, 2015 8:25 am
I was going to say something nice about yesterday's gains – but they are GONE already.
That's right, the Futures have reversed all of yesterday's BS low-volume gains so fast, I didn't even have a chance to say that I don't trust the gains because they were based on low-volume BS BUT the long-term technicals were starting to shape up. But they're now gone.
Have I mentioned how happy we are to be in CASH!!! lately?
Still, I hear a lot of you silly people are still playing this ridiculous game so let's pretend it's not all just manipulated BS aimed at tricking you out of your money and talk about earnings and the economy as if they matter – OK?
Oil shot up 5% yesterday, from $54 (/CLK5) to $56.70 on the nose which made the weak retrace line $56.16 and the strong retrace line $55.62 per our 5% Rule™, which works best when a market is being entirely traded by machines that are programmed to take your money. I'll let you be the judge of whether or not that's happening:
While it's possible to have healthy consolidation at the strong retrace line ($55.62) a failure there can quickly lead to a 50% pullback ($55.35) but a failure at the 50% line means the whole move was BS and you can expect to see $54 tested again before you'll get another run-up. We got off on the wrong side of oil on Tuesday, shorting into the NYMEX contract rollover next week, but those of us caught with open contracts scaled into a break-even at $55.50, so now we're just watching that line to see what happens.
Those are the technicals but FUNDAMENTALLY, OPEC is reporting a huge surge in production, further feeding the glut with a predicted surplus of 1.5M barrels per day projected for 2015 despite optimistic projections of "steady" demand (or lack thereof). The bullish case for oil rests entirely on the HOPE that US production will be cut back in the second half of 2015 (but it's only April 16th).