by phil - May 21st, 2015 8:28 am
This is just getting silly!
Look at the ridiculous and FAKE move up that began BEFORE the Fed announcement at 2pm that was completely reversed by 3pm with, as usual, twice as much down volume as up volume during the hour. There, in a nutshell, is what the entire market has been doing since we bailed on it in late March.
Don't get me wrong, we're having an absolute blast taking advantage of all this blatant market manipulation but, come on – can we ever get back to reality, where it matters how much money companies are making and what sort of return on investment they offer? While we're waiting for that to happen, at 2:11 pm I said to our Members in our Live Chat Room:
I'm back one short /TF at 1,257.50 but not a lot of conviction. Dollar at 95.72, so not seen as easy by the currency traders.
This morning we flipped long on /TF at 1,252.50, which was good for a $500 per contract gain from our short and now we're back to flat at 1,255, which was good for a $250 per contract gain from our long. Even better, the long trade idea we had on Gasoline Futures (/RB) in Tuesday's Live Trading Webinar (replay here) hit our goaaaaaaaaaaaaaaaaaaallllllllllllll at $2.06 this morning and that was good for $2,520 per contract – not bad for a free Webinar pick!
Don't worry, for those of you too cheap to subscribe to one of our Membership packages, our next Free Webinar is scheduled for June 24th – I'm sure we'll have another good pick for you then!
Speaking of economies that are burning, we'll be looking for a short entry on China (FXI) this morning as their PMI was negative for the 3rd consecutive month (and 5 out of 6) DESPITE massive stimulus. We got burned shorting FXI last month and we've been looking for another entry.
by phil - May 20th, 2015 8:26 am
Japan grew 0.6% in Q1.
That's a 2.4% annualized growth rate but, of course, that's priced in Yen, which are down 14.8% since last year so, in fact, Japan's economy, in Dollar terms, is losing 12.4% from last year. This is not the headline you'll hear in the MSM though, where the overwhelming message is "Don't Worry, Be Happy" and, in fact, Robert Shiller just wrote an article telling people to cheer the F'ck up to avoid a Depression.
As you can see from the chart above, adding 80Tn Yen worth of debt in the last 5 years has only added 25Tn Yen worth of GDP and the current 495Tn Yen GDP is still well below 2007's 505Tn Yen and, at the time 505Tn Yen was worth $5.5Tn but now, 495Tn Yen is only worth 41.25Tn so, in Dollar terms (or any steady currency), the GDP of Japan has actually DROPPED 25% since 2007 and this quarter's "boost" of 0.6% comes on the back of an additional 5% drop in they Yen since Q4 of last year.
Yet no one will mention this in the MSM. Why? Well first of all it's complicated and even NYTimes readers' eyes glaze over when you start doing math. Secondly, it doesn't fit the narrative that our Corporate Masters want you to swallow – that QE is working and more QE is better and all that matters is that the stock market goes up and everything else will be fine.
I ranted about this in yesterday's Live Trading Webinar and you can watch a replay of that HERE, so I won't get into it again. We also made $100/contract live trading the Russell Futures and our bullish trade on Gasoline Futures (/RB) that we played into the close is already up $1,000 per contract this morning as /RB is back over $2.02 already (you're welcome).
So, moving on from Japan (and I sent out an Member's Alert this morning with in-depth coverage and trade ideas), as you can see from Dave Fry's SPY chart, our record highs are still coming on record low volumes and that means that…
by phil - May 19th, 2015 8:22 am
Bad news is great news!
The Greek talks have stalled, England's CPI is deflating, German GDP slipped to 0.3% in Q1 and German Investor Sentiment (ZEW) dove to a 5-month low, dropping over 20% in one month to 41.9. That and collapsing bond prices were the last straw for the ECB, who announced this morning they would "front-load" their $75Bn monthly bond-buying into May and June, to avoid having to bother over the holidays.
Separately on Tuesday, Christian Noyer, the head of France’s central bank and a member of the ECB governing council, said the ECB was ready to go further if needed to meet its inflation target. “The purchase program will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation,” he said.
Does anyone besides me think it's strange to announce more QE WHILE the markets are making record highs? Anyone???
We have indeed fully embraced the worst kind of Voodoo Economics, with the World's Central Banks creating endless supplies of money out of thin air by simply writing checks to buy bonds which enable the Sovereign nations to go endlessly into debt. There have been, so far, no consequences for this behavior and even countries like Greece, who have no possibility whatsoever of being able to pay off their debts, are lent more and more money.
by phil - May 18th, 2015 7:03 am
Active managers finally had a good quarter.
As you can see from the chart on the right, it was kind of a pathetic quarter with Actively Managed Funds (who research U.S. stocks before they buy or sell, as opposed to ETFs or other passive funds) outperforming by about 1%, but it's the first time stock pickers beat the benchmarks since 2013, so you're going to hear a lot of crowing about it this week.
And active managers can afford to crow, because they charge you massive fees for that 1% outperformance (once every few years and following last year's 7% underperformance), so they've got lots of money for PR and advertising and that's why, this week, you'll be hearing the words "Active Management" mentioned over and over again in the MSM, who are very happy to tout the benefits of anything that pays them money.
I'm not against Active Management per se – we teach our PSW Members to be active managers of their own portfolios. I'm not fan of ETFs either as you end up buying the bad with the good – I'm simply pointing out that this small, 1% outperformance in one Q of one year should not be used to convince you that Active Managers have a clue. NO ONE has a clue as to where to invest your money that's better than your own ideas (assuming you are educated enough to be reading and understanding this in the first place).
The TREMENDOUS advantage you have when you learn to invest your own money is that you're not charging yourself fees. It's not the performance of active management that kills you – IT'S THE FEES. Even at "just" 1%, over 50 years of investing your active manager is taking 50% of your total account! Unless his long-term outperformance is better than 1% per year, YOU WILL LOSE MONEY WITH ACTIVE MANAGERS.
YOU are the best person to invest your own money and our goal at PSW is to teach you that it's not hard to do that. At the base level, you should start by investing in things you know well. When I was 7 years old…
by phil - May 16th, 2015 7:50 am
The S&P has gone nowhere since our last review.
An neither have our portfolios! Actually, we did gain another $8,092 (1%) in our Long-Term Portfolio, which is very good for two weeks and exremely good considering we're over 100% in CASH!!!
How are we over 100% in cash? Because we are BEING THE HOUSE – Not the Gambler™ and we are operating our Stock Market Casino and selling risk premium to others. That is how we can reliably get these great returns. We are NOT gambling, we are running a statistically beneficial model that allows us to collect risk premiums from people who are gambling on the direction of the stocks we own.
The actual net value of the positions we hold is -$26,825, because we kept our losers back on March 24th, when we went to mainly cash ahead of this choppy earnings period – but our CASH!!! pile has greatly increased. The S&P was at 2,104 then, it's at 2,122 now but our Long-Term Portfolio is up 12.1% since then and, depsite going to mainly cash, we have added 12 new positions in two months.
The key is that we have much less at risk now and we're simply grinding out those montly gains that we can count on by SELLING risk to others, not gambling ourselves on which way the market might go. Meanwhile, just yesterday we found two new trade ideas for the LTP – even in a rally, there are bargains to be had if you are PATIENT! As I said back in March:
While it is our INTENTION in the LTP to hold our positions over time, when we get a ridiculous run in the market like the one we've had for the past year, it is simply foolish not to take advantage of it. The stocks we bought were targeted to make 40% in two years, not 15 months and, when you are that far ahead of the curve – it's wise to turn those unrealized gains into realized ones before they disappear on you!
As we move through Q1 earnings, we'll be making a new Buy List for 2015 and, now
by phil - May 15th, 2015 8:18 am
You know pot must be legal these days.
How else do you explain these non-stop, non-pause moves up in the market on no particular volume? Can everything really be that awesome and what, exactly is it that is awesome in the first place?
Yesterday we saw Avon (AVP) jump 20% after a FAKE takeover rumor on an SEC-maintained web site from a FAKE company calling itself PTG Capital Partners who filed a document stating they would pay $8Bn for AVP, which has generally been in free-fall for two years as their business model collapses.
Despite the TERRIBLE fundamentals of this company, within two minutes of this fake filing being posted by a fake company (11:34), the stock began climbing from $6.50, all the way up to $8 by 11:45 before the 23% gain triggered a halt in the system.
That 7-minute break gave AVP time to deny that they had received an offer and the stock re-opened at 11:52 and dropped 10% that same minute, triggering another halt. Another 7-minute break and another 7-minute break and another drop of just under 10% let the stock sell off for the rest of the day. All in all it was total idiocy, but idiocy with a $3Bn company on a major exchange – not a penny stock!
"The SEC has so many forms being filed, I don't think it can check every one," former SEC lawyer, Robert Heim said. "But I think they could do a better job acting as a gatekeeper."
The filing contained many red flags raising questions about its authenticity, including numerous typographical errors and two different spellings of the company's own name. That would be highly unusual in an authentic regulatory filing, which would receive close scrutiny from companies before being posted. But robot traders and the sheeple that follow them don't read the reports, they just look for the keyword "buyout" and the frenzy begins!
That's the kind of market we're in now – it's a madhouse and it's fine if you want to play along but try…
by phil - May 14th, 2015 7:48 am
For those of you lucky enough to read our morning post (and you can have yours delivered pre-market, daily by subscribing HERE), we had re-picked a short position on S&P Futures (/ES) at 2,105 and, as you can see from Dave Fry's chart, we got a lovely drop down to 2,092, which was good for a gain of $650 per contract in the first 90 minutes of trading.
We also caught the incredibly obvious oil moves where our $61.50 entry gave us a ride all the way to $60 (up $1,500 per contract) by the day's end, though most of us were in and out during the day, profiting from the bounces as well as the drops. Like our Member, Craigsa620, who said:
Phil- I want to let you know that you really helped me make some money this morning when I probably would have lost on my own. I was stuck in doctors waiting rooms most of the morning starting at 8AM. By following the game plan you laid out and using my smartphone, I went short on oil whenever we got to 61.50 and long at 61 waiting for the spikes ahead of inventory. When 10:30 rolled around I was out after selling longs at 61.60 a few minutes earlier. I went short at 61.75-61.80 and voila, rode it down to 60.60 or so. Thank you.
All in all, it's the same general thing we did last Wednesday and we can do this on a regular basis because the oil market is MANIPULATED on a regular basis. Maybe the regulators can't see the blatant pattern of manipulation going on at the NYMEX but we sure can – so we may as well bet on it while it's going on.
Perhaps the reason no one is willing to call shenanigans on the NYMEX traders is because the biggest market manipulators of them all are our own Central Banks. In the last 3 weeks,…
by phil - May 13th, 2015 8:23 am
Now this is getting interesting.
As you can see from Dave Fry's S&P chart, we are really close to failing the bottom of that wedge we've been testing since March and the 5th time may be a charm – as that's how many times we've tested 2,100 in the last 30 days.
Of course, technically, we failed it at yesterday's close but one day does not a trend make, so we'll watch and see if the bulls have any gas left in the tank. It goes without saying that we're getting a lift pre-market – that's just the way things are supposed to be, right? We don't like to call it manipulation, just "early enthusiasm" that sets the prices higher before the bell rings and the Retail Customers are allowed to play.
On the Dow, 17,750 is the line to watch and that's been tested almost every single week since March began. Not yet this week but it's only Wednesday, which makes shorting the Dow Futures (/YM) at the 18,100 line a very interesting play this morning.
If you're not a Futures trader, you can pick up the Dow Jones ETF (DIA) June $177 puts for $2, they have a delta of 0.32 so they pick up 32 cents for each 100 points the Dow drops, which means a trip back to 17,750 would net you almost $1.50 in profit (75%) – not bad for a quick hedge. If the Dow heads over the line – especially if Nasdaq goes back over 5,000, you can kill the trade for a smallish loss (0.32 or less) which means we have a very favorable risk/reward profile on that trade – that's exactly what we like to see in a hedge.
Last Wednesday, right in the morning post, we discussed shorting the S&P Futures at 2,105 (/ES) and the S&P bottomed out at 2,060 for a $1,750 per contract gain. We're at that spot again this morning and our Members are shorting it again because – well because we LIKE making money so we're not ashamed to make it doing the same thing over and over again.
by phil - May 12th, 2015 7:48 am
Investors are selling their bonds all around the World and that's forcing yields higher despite the best efforts of the Central Banksters to keep them in check. The US has $100Bn worth of TBills to sell this week and we'll see what prices we get but the real danger is, of course, Japan, where 10-year notes carry 0.461% interest and that's already up from 0.3% in April. For a country that's 250% of their GDP in debt and using 30% of their tax revenues just to service the interest on that debt – another 0.1% here or there REALLY MATTERS!
We're short on Japan, of course, I detailed those trades in last week's posts, for that simple reason – if rates simply rise to a "normal" level of 1% – the country is going to be unable to service their debt. That's a very simple premise, isn't it?
As you can see from the chart, we've been having a fantastic time since our top call on the Nikkei at 20,000 (it went a bit over, but we stuck with it) and we already tested 19,000 last week and today we're back at 19,500 (and playing long for a bounce) but, once 19,500 fails, 19,000 may not hold this time and we could be in for a wild ride down.
The root of our cautious economic outlook lies in the chart above. Even if we ignore the outlying Japan crisis, the US, UK, Germany, France, Italy and Canada are not far behind in indebtedness. Every man, woman and child in the US owes $59,000 in debt already and it's all fine as long as no one asks anyone else to pay it back but look what happened to Greece when someone did ask for their money back...
Today, at 1pm, the US Government will ask to refinance another $24Bn for 3 years through the Treasury Auction. By flooding the World with money, the Central Banks have insured that there is a ready supply of the stuff but the reality is that Japan, China, Germany, etc. (as well as our own Fed)…
by phil - May 11th, 2015 7:39 am
China has cut rates yet again.
The 3rd rate cut in 6 months (back to 2009 crisis lows) may seem like a desperate, last-ditch attempt to salvage a faltering economy to some – but not to our MSM talking heads – who see it as a bold policy initiative, well-timed to… I don't know, whatever BS they are spinning this morning to make MORE FREE MONEY sound like a legitimate strategy.
The last two rate cuts did nothing to stop the slide in GDP (it actually increased) but THIS rate cut will be different – I guess. According to the WSJ, the move comes as senior Chinese officials are growing more fearful that the mountain of debt from the rapid expansion of credit over the past few years is weighing on efforts to pick up the world’s second-largest economy.
In one of the starkest official warnings about China’s growing debt woes, the PBOC said in its monetary-policy report Friday that the “rising debt size is forcing China to use a lot of resources in repaying and rolling over debt” while limiting the room for further fiscal expansion. Meanwhile, easing measures taken by the central bank—including two interest-rate reductions since November—have largely failed to spur new-loan demand.
The chart on the left is measured in TRILLIONS of Dollars of debts that have more than doubled in the last 7 years after tripling in the 7 years before that. Local Government Debt has been growing at a rate of 98% PER YEAR since 2007 – that's new and dangerous – especially when you consider a city like Detroit, for example, is actually "only" $18Bn in debt. The entire state of Illinois is "only" $127Bn in debt. That means China's problems are like having 50 Detroits or 10 states like Illinois in an economy half our size!
As you can see from this useful IMF chart, China's issues are a rapidly slowing GDP that can't support the debts taken on by housing, construction, rail and shipbuilders and manufacturers that were based on the assumption of continuing 7%+ growth. While decreasing the lending rates helps a little, it doesn't fix the underlying business and, in fact, it…