Will We Hold It Wednesday?
by Phil - February 17th, 2010 8:27 am
We’re back!
On Monday, Jan 25th I set our 5% Rule bounce levels at: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 and watching those levels kept us out of trouble as we stayed bearish on the first bounce in early February. Now it’s the 16th of February and we are so close, but yet so far, from finally getting back over the line which indicates a resumption of the bullish trend. Of course, we called the bottom at the 10% line (also noted in that post) as some of our 8% bounces held and did some aggressive bottom fishing but NOW it’s decision time. Do we take our quick profits and cut and run or do we get set for a bigger rally?
Fallondpicks shows us in the chart on the right that we have clearly broken out of our downtrending channel and happy days are here again as we forget all about Greece and those other STUPID countries as well as the fact that no one bought our T-Bills last week or inflation in Europe or the 5%, single-day pop in commodity prices here or our debt or the collapse of the EU - that was all so last week, I feel embarrassed to even bring it up but it’s a slow news day and we need some filler…
As I said in yesterday’s post, I’m done with Greece and I’m done with worrying about the GDP. Like the Chinese, we need to embrace the New Year and look forward, not backwards. Sure those concerns are still with us and still unresolved but that doesn’t mean we can’t go back to ignoring them. Isn’t it funny how, as soon as GS is implicated in manipulating the Greek crisis - the crisis eases off and we have a huge rally that takes everyone’s mind off it? Just a coincidence I’m sure. After all, GS doesn’t control the markets… Remember - they said that the program they use to manipulate the markets was stolen in July - so it can’t be them!
Of course much of this rally is being fueled by a sharp 1% pullback in the dollar at the top of a 5% run - after all, who could have possibly expected that? Perhaps boss-man Ben may have missed the signs but KC Governor Hoenig just put out a paper called "Knocking on the Central Bank’s Door" for the Commission on Budget Reform Policy in which he…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
China - The Mother of All Black Swans
by Phil - February 17th, 2010 1:50 am
Courtesy of Vitaliy N. Katsenelson:
Have I mentioned I like TBT lately? I also like Vitaliy, who sends me tons of good stuff so I’m making up for not posting him more often by catching up a little:
- Vitaliy was also recently interviewed on Yahoo’s tech ticker here.
- Yesterday he was on CNBC with Maria mispronouncing his name - discussing our range-bound outlook.
- Here’s Yahoo giving him more time on the same subject.
- Welcome to Another Lost Decade
- Q&A on Range-Bound Market with the FT
(What's this?)
(naked capitalism, 2/18/10)
(Dividend Growth Investor, 3/10/10)
(Investment U, 3/3/10)
Investing in China,
Yahoo!,
ProShares UltraShort 20+ Year Treasury
at Wikinvest
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
2010 Tin Tiger Tuesday
by Phil - February 16th, 2010 8:23 am
The year of the Tiger begins!
Chinese New Year is a serious business with tens of millions of migrant workers in China, as well as many from overseas, traveling home to have reunion dinners with their families. In addition to fireworks, celebrants like to wear new clothes from head to toe (preferably red as it drives away evil spirits) and they exchange red envelopes and red packets called “Ang Pow”. These Ang Pows are usually are passed out during the Chinese New Year’s celebrations, almost always containing money (from a couple of dollars to several hundred). Per custom, the amount of money in the red packets should be of even numbers. The number 8 is considered lucky (for its homophone for “wealth”). In addition to red envelopes, which are usually given from elders to the younger, small gifts (usually of food or sweets) are also exchanged between friends or relatives. Gifts are usually brought when visiting friends or relatives at their homes. Common gifts include fruits (typically oranges, and never pears), cakes, biscuits, chocolates, candies, or some other small gift.
The Year of the Tiger is considered lucky and this year is the year of the Metal Tiger, which explains all the commodity hoarding and the tigier is also considered auspicious for risk-taking and bravery. Traditionally, all debts are paid by New Year’s and there is much emphasis on looking forward and letting go of the past. The Chinese markets will be closed all week but we can expect a lot of forward-looking behavior when they come back so I’m liking FXI March $40 calls for $1 as long as our markets hold positive as we could get a nice pop next week as China plays catch-up.
BCS will be popping the financials this morning with some great LOOKING earnings but much of it came on the sale of their Global Investors unit to Black Rock for a $9.9Bn gain so nothing at all to get excited about. Impairments were up 49% but slowed in the second half and guidance indicates the worst is over. Also goosing the market this morning is SPG offering $10Bn for GGWPQ, the bankrupt version of what was GGP. This works out to about $9 for shareholders who hung on - we had taken a flier on them in the spring under $1 but got the heck out at $5 as THAT seemed high but I guess not and I”m now very glad our IYR shorts got stopped out last week because IYR…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Love Letters (Weekend Reading on Valentine’s Day)
by Phil - February 14th, 2010 8:25 am
Happy Valentine’s Day!
Last Valentine’s Day was as Saturday, following a frightening Friday the 13th, where we had fallen through the 8,000 line on the Dow. I wrote a very interesting post that morning discussing how I came about my political views, which is good for new Members to check out. We also flipped short that day on SKF, too early at $130 but that ended well as we kept after them and it was our biggest bet by March 6th, which eventually returned over 1,000%. We also stopped shorting GOOG at $350 (it did keep going to $300 but the upside was nice too). I closed the morning post with:
For us, it’s all about the levels as we try to remain unbiased as investors, no matter how voraciously we defend our political views. Dow 7,800, S&P 820, Nas 1,460, NYSE 5,100, Russell 437 and SOX 203 all better continue to hold today but, even if they do, we’re nowhere near where we want to be and we’re going to take some bearish covers into the weekend - just in case. So whether you are a witch celebrating the horrors of the 13th or waiting for a rose from your true love the next day, remember to be careful out there - we are certainly still deep, deep in the woods!
That Tuesday (Monday was President’s day) we fell 300 points and another 300 points by the end of the week! That was a fitting way to mark the 80th anniversary of the St. Valentine’s Day Massacre when Al Capone’s "South Side" gang, dressed as cops, rousted a garage run by Bugs Moran’s "North Side" gang and had them stand against the wall and then executed all 7 men. They shot them 70 times with machine guns and made their escape by using the Capone men dressed as cops to "arrest" the other Capone men and drive them away from the scene in broad daylight. Now that’s what I call a good plan!
Here’s a great chart that summarizes our year to date. Someone else found this, I wish I knew how to use StockCharts this well, they have tons of good things in there:
It’s a bit worrying that XLU is doing so poorly - so much for diversification keeping you safe… It’s going to be worth rummaging through the utility companies looking for good dividend payers who are on sale. SO is one we like to play with a 5.6% dividend and, as long as they…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Interest Scams and How to Avoid Them - Mortgage Madness!
by Phil - February 13th, 2010 8:29 am
Last week we talked about Predatory Lending.
This graphic (click to enlarge) gives a good diagram outline of the basics to avoid. Most of them make their money by charging fees that seem reasonable but turn out to be insane: Payday Loans that can hit you with 360% interest, Rent-To-Own arrangements that have you paying two to three times more than the item costs and, of course, the second greatest scam of them all - Credit Cards - particularly the ones that are supposed to help people "re-establish" their credit. What is a greater scam on the American consumer than credit cards, you may ask? Why your home mortgage of course!"
Now I know you, my sophisticated readers, find it obvious that ARMs and Balloon Payments are bad ideas but, in my previous life in the real eastate title business, I found that even the most savvy investor often fails to consider the long-term costs of even a conventional mortgage. Many people make poor home investing decisions because they don’t fully understand the debt they are taking on or the alternatives available to them.
This did not matter when homes went up and up and up because even a bad investment made a little but "this time it IS different" and we may be in for an entire decade in which we may not see ANY rise in the value of homes - this is what has happened to Japan for the last TWO decades. I’m going to go over some of the numbers, give you a few tools and see if we can’t find some ways save you $100,000 on a $200,000 loan and show you how to set your kids up for life - does that sound interesting?
Home Costs
Currently homes are, at least, reasonably priced in many parts of the country and the government is offering a first-time home buyer tax credit of $8,000, provided that you stay in the home for 36 months. This isn’t a tax deduction like your mortgage interest, which reduces your taxable income – a tax credit actually reduces your total income taxes owed. In addition, some states, such as California, are offering tax credits for home buyers that will further reduce your tax liability. Keep in mind that the federal program ends on April 30th of this year, and while it could end up being extended, it isn’t a given.
As a long-term investment, homes are not terrible as they are not likely to drop more than another 20%. So, as long as you REALLY want to live in that home for 10…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Welcome Our New Sponsor - PolluterHarmony.com
by Phil - February 12th, 2010 5:22 pm
That’s right folks, there is nothing we turn down!
Last month we introduced you to our very special friends at The Predatory Lending Association and they have had a very busy month pushing through new legislation to makes sure that gravy train will never end. This month we are proud to anounce our newest sponsor, Polluter Harmony, the #1 matchmaking service for polluters, industry lobbyists, and politicians. Now it’s easier than ever to buy and sell influence in order to sabotage America’s clean energy future.
It takes strong relationships and the right chemistry to devise schemes that successfully evade or destroy environmental regulations. Sometimes, members of Congress, polluters, and lobbyists are so busy that they don’t have time to find those perfect relationships. Plus, now that the Supreme Court has removed restrictions on corporate electoral spending, it’s more important than ever to find the right match. Isn’t it worth it, to make sure your corporation’s or client’s money turns into a fruitful relationship?
Here’s one of many PHarmony testimonials, this one from Billionaire Charles Koch of Koch Industries:
After building relationships all over the country, I wasn’t sure I’d find someone out there for me. Though I was skeptical at first, I finally decided to try PolluterHarmony, hoping to meet my perfect partner.
When the PolluterHarmony compatibility test matched me up with a Democratic senator from Arkansas, I was sure the site was a scam. How could a Libertarian like me possibly relate to a Democrat? But then I read Blanche’s profile, I realized maybe I was wrong. She wrote that she loves discovering new places, especially for oil drilling. More importantly, she considers herself someone who likes taking risks, like with public health and safety. Best of all, she had one of the worst environmental voting records of any Democrat on Capitol Hill.
When we first met, I knew I’d found my match. Within a few weeks, I was funneling thousands of dollars into her campaign fund while she quietly worked to stall climate and clean energy policy. I’m really glad that I overcame my doubts and tried PolluterHarmony. Without it, a billionaire oil baron like me would have never met my Democratic match from Arkansas.
Isn’t that special? Just in time for Valentine’s Day, the new website was launched alongside an online advertising campaign. In coming weeks, organizers will also take to Capitol Hill to help promote PolluterHarmony’s compatibility formula, which matches polluters and politicians based on their love of dirty energy, …
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Fifty Basis Point Friday - China Puts First Pin in the Bubble
by Phil - February 12th, 2010 8:19 am
Thank you China!
I had put out a post last night detailing how we ended up short at yesterday’s close and at 3:21, when I published it as I was checking the Asian markets (don’t ask, I keep strange hours) it looked like I had called it wrong as the Hang Seng went into lunch up over half a point and commodities were still hanging tough after yesterday’s ridiculous run up. In fact, at 12:07, in Member Chat, I just so happened to say: "Copper $3.13 - ridiculous… Very annoying movement, not very playable like this as it can all crash back down again very fast."
Fortunately, we let our levels be our guide and cashed out our long DIA day trades in my 1:41 Alert to Members as we hit our Dow 10,165 target from the morning post. We flipped bearish to the DIA $100 puts at .62, which should have a nice open this morning. We had an FCX short play with the $70 puts that I couldn’t bring myself to let go of, even after they broke over our $72.50 stop line and my 1:50 comment on that position was: "I’m in a 4x position at avg. $1.16, now .71 so not good but I think copper run was BS so I’m willing to stick it out but very happy just to get even now. I think a big squeeze was put on commodity bears today with no energy reports to point out the demand destruction. Copper up from $2.93 yesterday to $3.13 today after taking two weeks to fall that far on the way down - that is nonsense! If I were not full I would roll up or DD but, as I said, I’ll just be happy to get back out and, if not by tomorrow, I’ll sell some other sucker my puts and roll to March."
Needless to say, despite having a rolling plan to turn the trade into a spread, I was not a happy camper as things held up into the close and then, through lunch in Asia and into Europe’s open. My closing comment to Members at 3:44 had been: "I’m still generally suspicious that we’ve had such a strong day on very low volume (Dow 136M at 3:40) when there was a storm. An amazing coincidence if nothing else…. The fact that it was led by BS commodity sector making a radical move up on NO news at all (in…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Alert, Alert - How to Make 68% in 4 Hours with ETF Options
by Phil - February 12th, 2010 3:21 am
A lot of people ask us how our Alerts work.
There’s not much to it actually. Alerts are free to Premium Members but they are just Emails that come from our normal daily Member Chat from myself, Optrade or the Oxen Group. Opt and Oxen usually send out trade alerts but I tend to concentrate on things I consider important enough to send out in case someone is away from their computers or (Heaven forbid!) on some other site. One Alert I send out almost every morning are our daily level watches and then, if something big changes, I’ll send out another one but I don’t do it often as I don’t like to bother people with Emails. We have special feeds for members who want to have every comment sent to them anyway.
Usually I send out my first alert just after the bell so we can see what the market looks like at the open. Sometimes we see a good play, sometimes we don’t. Today looked uncertain so posted two possible DIA plays at 9:33 in Chat that were sent out on our Alert system (it’s just an Email!):
So that’s it. This comment from Member Chat gets converted into an Email and ends up in your in-box a few minutes later. On top are my normal level selections for the day with comments about what to look for. As I had mentioned in the morning post, I didn’t even feel it was possible to make it to our 10,300 levels so I didn’t even bother cluttering this post with them this morning. We looked a little weak so I was more concerned about the downside but we held our downsides like a champ and bounced back nicely.
In chat, we took quick profits on the $99 puts and my follow-up comments were:
9:37: "Boy, we can almost count on these morning sell-offs lately. EU funds I think so I still want that upside play."
9:56: ".95 was plenty for the puts. For me, that’s a .15 buffer to enter the longs, now .75 but I don’t want them unless they either get back to .70, (where I’ll risk 1x with 1x at .60 and 2x at .50) or back over 10,020 with a stop right there."
11:19: "Let’s watch that 10,058 line, we either get through it or it’s a good place to buy the DIA $99 puts again."
11:48: "We’re moving now!!! Too much, too fast I think but maybe we get to…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Thursday - Are We Thawing Out or Melting Down?
by Phil - February 11th, 2010 8:28 am
Greece is resolved!
Well, sort of, maybe - who knows? The EU made some nice noises and it does seem there is an agreement which I detailed in my previous post so let’s move on and see what that’s going to do for us today. We’ve been playing for a resolution in Greece giving us a boost back to test 10,300 but yesterday’s market movement was, as they say at Wharton, LAME and we’re going to have a tough time punching through 10,058 and 10,165 on the way to 10,300 today (see yesterday’s Dow charts), even if the Dow were so inclined.
10,300 is 2.6% higher than yesterday’s 10,038 close but a little far away considering commerce is still shut down in about 1/3 of the US today as we sit under a massive amount of snow. This kind of weather is bad for most retail but good for HD and LOW, who sell salt and shovels and other fun snow stuff. Business people are stranded all over the country, moms are suddenly found unexpectedly with kids at home and people can’t park anywhere - a big problem when you have this much snow as you run out of places to push it to.
Another problem with snow is it’s an unavoidable cost, like disaster spending, that couldn’t be hitting cities at a worse time. Washington DC had already blown through their $6.2M snow budget for the year before yesterday’s storm, which may double the costs, adding to the city’s debt woes. 230,000 Federal employees are off for the 4th day in a row today, costing the US government $100M a day in lost productivity. Public transportation is down and over 6,000 flights were canceled with travelers being told "maybe Sunday" for flights they missed on Wednesday - Greece’s national strike is nothing compared to the economic impact of this storm!
Speaking of coming storms. We’ve been leery of getting back into SRS but I’m back to liking them (and the short IYR plays) as a report by the Congressional Oversight Panel shows nearly 3,000 small banks may have to dramatically cut lending as losses on commercial real-estate loans, which could reach as high as $200B-300B. Banks "are about to get hit by a tidal wave of commercial-loan failures." This should finally push an issue we’ve been discussing since last Fall onto the front pages, where we can make some money.
We’ve learned to be very cautious with SRS but I do like the…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Bailout? Greece Don’t Need No Stinking Bailout!
by Phil - February 11th, 2010 7:35 am
We have us a classic Mexican standoff over in Europe.
European debt markets have been on a roller coaster as they try to parse the EU smoke signals to judge whether Greece will win financial backing from its neighbors, or just verbal support. So far this month, the 10-year Greek yield has swung between 6.05 percent and about 6.8 percent as hopes for help waxed and waned. The euro, however, didn’t exactly jump for joy at the prospect of an aid package, which tells you that a salvage operation for Greece is no panacea for what ails the common currency’s economies and now Greece is saying they don’t want or need a bailout with Greek Finance Minister George Papaconstantinou saying: "The worst possible signal which we could send out is one calling for outside help."
Actually, I’m pretty sure the worst possible signal they could send would be defaulting on their debt but who am I to question our oldest Western civilization? It does seem that the EU has come to an arrangement that is NOT a bailout, just a loan with VERY EASY terms - kind of like TARP, which worked fine over here so I’m pleased but we don’t have the details yet (7 am).
Perhaps Papaconstantinou has a point as Peter Coy writes:
The European Union’s experiment with a single currency is deep in crisis because Europe failed to learn from the Greeks. Not today’s Greeks — the ancient Greeks, specifically Odysseus, the hero of Homer’s epic poem. Odysseus knew his limitations. Realizing he was vulnerable to temptation, he ordered his sailors to tie him to the mast of his ship. That way he could listen to the bewitching song of the Sirens without obeying their call to steer the ship onto the rocks.
Today’s Sirens are the investors and traders of the global bond market, who lure nations into tapping abundant credit at low rates when times are good. If a nation borrows too much, those open-handed investors abruptly turn into vigilantes who punish the country by making new loans scarce and expensive. Greece has fallen into that trap, Bloomberg BusinessWeek reports in its Feb. 22 issue. It got low-interest loans by promising to behave responsibly and keep its budget deficit low. That gained it admission to the single-currency zone in 2001.
But because Greece was never tied to the mast, it kept spending. Its debt is now about 125 percent of gross domestic product, more than double the supposed EU ceiling. Eventually,…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(