Author Archive for Zero Hedge

Oil Headline Rescues Stocks From Bloodbath As Precious Metals Soar

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Market Psychology has swung from this…

To this…Losing SPY Religion

And seemingly back.

*  *  *

Gold grabs the headlines today. After beginning to surge yesterday, Hong Kong's reopen sparked a spike which then accelerated all day.

This was gold's best day since Nov 2008 and the highest level in a year…

With the best quarter in 30 years…

Perhaps even more stunning is the collapse in USDJPY since Kuroda unleashed NIRP – this is the worst 2-week drop (Yen strength) since LTCM in 1998…

Damn It, Janet!

It seems much of today's turmoil began as Hong Kong re-opened last night…

An OPEC Rumor – which struck perfectly as the S&P broke 1812 – a crucial technical level (January's intraday low back to Feb 2014)… And just look at VIX!!! Does that look like a "normal" market?

Spiked stocks briefly (enabling NASDAQ to briefly get green before dropping), and the soared again…

Techs managed to scramble green in the last hour but financials were the biggest loser…

Deutsche Bank's dead-cat-bounce died and is back to tracking Lehman's analog…

And it is spreading to US banks – Sub financial credit risk is up 18% this week – the worst week since at least 2011…

High Yield Bond yields and Leveraged Loan prices are at their worst levels since 2009…

Treasury yields crashed overnight – 2Y was down 10bps and 10Y down 20bps at its apex, before a miraculous bid for USDJPY appeared and rescued risk…

The yield curve (2s10s) collapsed even further below 100bps – to Dec 07 lows near 95bps at its lows today – leading financials lower…

The last time 2s10s was flattening and at these levels was Jan 2005

FX markets were volatile early on (with a huge drop in USDJPY when HK opened) and the USD drifted weaker…

The biggest 2-week drop in USD Index in 4 years…

Crude and Copper slumped as Gold & Silver surged…

As front-month crude plunged relative to 2nd month crude to 5 year lows..

Charts: Bloomberg

Bonus Chart: If everything is awesome, why is USA default risk on the rise?

MRS MaGoo…

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.


This Is What Central Bank Failure Looks Like (Part 3)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

First, it was The BoJ’s utter collapse from omnipotence to impotence. Then came the collapse of The Fed’s credibility in the short-term. And now, in the most egregious example of total central bank failure – the ‘market’ has priced out any chance of a rate hike through 2018… and in fact, there is now a greater chance of a rate-cut (than rate-hike) into 2017.

Based on the Eurodollar market…

And while some hoped that Janet would clear it all up in 2 days of testimony, she just made it worse:


Is This The Biggest Crisis In History?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Talking of Oil and Gold, last week Deutsche Bank showed a long-term graph of Oil in real adjusted terms, showing that the average real price since 1861 was $47.

Following on from that, Deutsche notes one ratio they occasionally look at is the ratio of various assets to the price of Gold…

Today we update the Oil/Gold ratio back to 1865 and find that the Gold price has just hit an all time high at around 44 times the price of Oil.

The previous high of 41 in 1892 has just been exceeded.

For perspective, the ratio was at 6.6 in June 2008 and only 12 in May 2014. The long-term average is 15.5. While this says nothing about where the ratio is going in the short-term surely this looks a good trade to exploit over the longer-term for those who care about such things.  

However, as we noted recently, it merely predicts a crisis and according to the chart above it is the biggest crisis in history…

The previous “biggest crisis in history” was in 1893 when a serious economic depresion hit America. We just topped that in terms of the gold/oil “crisis” ratio, making us wonder: what crisis is just around the corner, and just how big will it be?

It Was Never About Oil, Part 2: It Was Always Leverage & Volatility

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Jeffrey Snider via Alhambra Investment Partners,

Part 1 here…

The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, AIG’s “toxic waste” positions ended up registering some $20 billion profits to the Federal Reserve and the government via its (illegal) Maiden Lane SIV’s. AIG just could not withstand the liquidity demands brought about by increasing calculated volatility.

Another famous episode offers the same interpretation while providing some further insight into the world of leverage and liquidity as it exists now. Orange County went into bankruptcy with assets that were all still money good. The county’s investment fund, run by Robert Citron, was holding paper from mostly government agencies and even UST’s. Out of the nearly $20 billion in the fund close to its demise, $16.7 billion was UST’s, agency fixed rate bonds, agency floating rate bonds, CD’s and commercial paper. The problem was the combination of the floating rate FNMA’s and that the fund was increasingly leveraged as Citron’s bets were further imperiled.

Throughout the early 1990’s, Orange County’s fund was handsomely beating every benchmark. So much so that municipalities throughout the county were beating down Citron’s door in order to invest in his magic; some cities, such as Irvine, even borrowed through bond offerings just to make available cash to put in. S&P, as the bankruptcy transcript tells, even conditioned its highest investment rating on Irvine’s bonds such that they were placed in Citron’s “care.”

The manner of the outperformance was as it usually is in modern wholesale finance; available and easy leverage of all kinds and all forms. In this specific instance, Citron was building the fund’s bond portfolio not for general coupon returns but so that they were available for reverse repos. When the interest rate environment was in his favor, the Orange County fund was leveraged less than 2 to 1; when it started turning against, that was when the leverage piled up as almost a gambler’s view of doubling down to “make it back.”

As it
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Putting It All Together: When Does The Junk Bond Sell Off End, And When Should One Buy

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

UBS’ chief global credit strategist Matthew Mish has been on a roll lately. After first revealing “how the investment grade dominos will fall” in mid January (an analysis which was followed by another leg lower in IG bond prices), and then two weeks later instead of focusing on products, Mish analyzed sectors and explained “What’s The Next ‘Energy’ Sector In Credit Markets“, today he tries to put it all together and as he himself puts it, “the inquiries we have received are increasingly from investors across all asset classes and regions, and lines of questioning evolve in many directions. But the genesis of the debate comes down to three questions: first, why is the sell-off happening; second, when does it end; and third, what can slow or speed up the process?

We are certain that these are the questions asked by every single credit investor, so without further ado, here are Mish’s answers.

What is the clearing level for $1tn in stressed credit?

First, why are HY credit markets wilting? For non-credit investors the simple analogy is a balloon. The air going into the balloon was essentially inflows into credit funds. Our prior work suggests inflows have been driven by three factors: quantitative easing, credit losses and past performance. From 2010-2014 the environment was extraordinary; at its peak, the Fed was buying roughly $1tn annually in fixed income securities, crowding investors into corporate credit; defaults were low as capital markets were accessible and earnings were expanding, and prior HY returns were unprecedented. The money poured in, and credit funds put that cash to work. However, that mirage has faded; the Fed is tightening policy, defaults are rising due to commodity price declines and excessive leverage, and past performance has been negative. Outflows are triggering forced selling across real money and hedge funds.

However, the problem is not simply technical. The root cause is fundamental in nature. During that period of euphoria, credit portfolio managers were essentially forced to buy the market. The inflows were too robust. In that environment, fundamental credit analysis became secondary. Clients had yield targets to achieve, and with central banks pushing interest rates towards zero those that bought high grade credit in prior decades bought high yield; those who purchased high yield previously bought triple Cs. Unfortunately, …
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Even WSJ Admits OPEC Production Cut Story “May Be Bogus”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

He hope we are not the only ones who find it oddly confusing that moments after the WSJ reported that the UAE, supposedly speaking on behalf of the Saudis, said OPEC is “ready to cooperate on a production cut”, the very same WSJ writes that the “story may be bogus.”

From the WSJ:

Look, the OPEC thing may turn out to be bogus. Lord knows we’ve heard that line too many times to count, and oil’s at $26/barrel. Even if it is bogus, though, the episode illustrates one thing: there is still a sizable contingent of operators out there just waiting for an excuse to pounce on equities.

In other words, we still are not near capitulation.

Yes, it may very well be bogus, and no, it has nothing to do with operators pouncing, and everything to do with the latest violent short squeeze, one which was accelerated by frontrunning algos which swept away all the offers for minutes, sending the Nasdaq briefly into the green.

The WSJ also adds the following walkback:

It’s not that I think somebody planted a rumor, mind you. I’m not saying the news is wrong or that it’s being misreported. I just think that we hear this kind of talk out of OPEC a lot.

“We’ve heard this chatter enough times over the past month so take it with a grain of salt,” said Lindsey Group’s Peter Boockvar.

They have a notorious history of “agreeing” on cuts and quotas, and then going behind each other’s back and doing whatever is best for individual states.

It’s best to wait until OPEC actually does something on this front, and then to wait and see if they honor it. In other words, we’re a long way away from anything really happening here.

We expect the Saudis to chime in momentarily and explain how everyone got punked by the latest “OPEC headline” for the 6th time.

Oil Crashes To 12-Year Lows, Biggest Drop “Since Lehman”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Seconds after Oil hit the lows and NYMEX closed – and S&P broke the critical 1812 level, this hit:


Here is the source:

So, first it was Venezuela speaking for the Saudis, then it was Russia speaking for the Saudis, now it is the UAE.

And the reaction…

The last time front-month crude oil traded at these levels ($26.12) was May 2003 as WTI Crude has collapsed over 22% in the last 2 weeks – the biggest drop since Lehman in 2008. Goldman's "teens" are getting closer…

With credit risk already at record highs – and getting higher – we suspect the moment of Chapter 7 truth is getting closer.

Moments After Oil Crashes To 12 Year Lows, “OPEC Headline” Sends It Surging Again

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Seconds after Oil hit the lows and NYMEX closed – and S&P broke the critical 1812 level, this hit:


Here is the source:

So, first it was Venezuela speaking for the Saudis, then it was Russia speaking for the Saudis, now it is the UAE.

And the reaction…

The last time front-month crude oil traded at these levels ($26.12) was May 2003 as WTI Crude has collapsed over 22% in the last 2 weeks – the biggest drop since Lehman in 2008. Goldman's "teens" are getting closer…

With credit risk already at record highs – and getting higher – we suspect the moment of Chapter 7 truth is getting closer.

“Forget It”: Turkey Throws Up On EU Refugee “Plan” As NATO Sends Ships To Nab “People Smugglers”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

“Forget it.”

That’s Turkish ambassador to the EU Selim Yenel’s message to Europe in response to a Dutch plan that would resettle 250,000 refugees per year directly from Turkey if Ankara can manage to close off the Aegean sea route to Greece.

Turkey is of course a key chokepoint for migrants fleeing Syria and the situation is expected to worsen materially going forward as Hezbollah and Russia advance on Aleppo, the country’s second-largest city where the opposition is making what amounts to a last stand against Moscow’s air force and Hassan Nasrallah’s advancing army. This was the scene at the border last week:

“If Turkey is not engaged, not committed and doesn’t start to deliver … it will be very difficult to manage the situation,” Dimitris Avramopoulos, the EU commissioner in charge of migration said. “If they really want, they can do the job on the ground.”

Not so, says Yenel.

It’s unacceptable and it’s not feasible,” he said, deriding the Dutch plan. Effectively, the EU wants Turkey to let in the all of the refugees fleeing Aleppo ahead of what will likely be a direct assault on the city in the coming weeks, but as The Guardian notes, Brussels is simultaneously “demanding that Ankara close the western and northern routes to Europe.”

“We’re surprised that the Europeans should say we should open the borders to Syrians from Aleppo when we’ve been doing that for five years,” Yenel said. “It is all unfolding, another tsunami. How are we going to cope?” he asked, reflecting the exasperation Turks are experiencing after sheltering some 3 million Syrians, triple the number of total refugees German took in last year.

“Avramopoulos unveiled new plans to force Turkey and Greece to take asylum seekers back from the rest of Europe,” The Guardian goes on to write. “But the scheme would not apply to Syrians, who are virtually assured of successful asylum claims in the EU, and perhaps also Iraqis and Afghans.”

Substantially all of those entering Greece via the Aegean Sea route are either Syrian, Afghan, or Iraqi. Athens has been threatened with expulsion from Schengen if it can’t bring its procedures for coping with the migrant flows in line with European “norms” – whatever that…
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Zero Hedge

America's National Debt Bomb Caused By The Welfare State

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Richard Ebeling via,

The news is filled with the everyday zigzags of those competing against each other for the Democrat and Republican Party nominations to run for the presidency of the United States. But one of the most important issues receiving little or no attention in this circus of political power lusting is the long-term danger from the huge and rising Federal government debt.

The Federal debt has now cross...

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Chart School

Further Losses But No Breakaway

Courtesy of Declan.

The Asian session had set up for big losses, but markets were able to defend against such losses even if finishing with a lower close.

The S&P tagged the January low, but it's hard to see it holding out if there's another challenge on 1,810.

The Nasdaq was able to register a higher close (although below the prior day's close). It probably did enough to negate what is normally a bearish black candlestick, but bulls won't have any confidence until the bearish channel is broken.


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Phil's Favorites

Phil on BNN's Money Talk Show

Watch Phil with Kim Parlee on Business News Network's Money Talk

1) Phil gives his outlook for U.S. markets and the US economic economy. Canada may be heading into a recession because the energy is sector dead for years, at least, but the U.S. economy is slowly improving. What is the basis of Phil's 5% rule? Watch the video.

2) Phil explains why oil demand is falling globally and what the implications are for energy-rich economies like Canada. Hint: The TSX (Canada's oil weighted index) is not going to recover. Oil is not going to recover. Oil's not a thing anymore - like wagon wheels. This is why the Saudis aren't holding back on selling their oil. Canada is due for some painful adjustments. 

3) Natural gas - Phil gives the details of his option...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Treasury Yield Falls to 3-Year Low as Yellen Suggests Rate Delay (Bloomberg)

Treasury 10-year yields dropped to the lowest level since 2012 as falling equities drove investors to the relative safety of government debt and Federal Reserve Chair Janet Yellen said weakening stock prices pose a risk to the economy.

Oil Is the Cheap Date From Hell (Bloomberg)

It’s scary out there. The rout in the stock market that began around Jan. 1 took a turn for the worse early this month. By Feb. 10 the Standard & Poor&r...

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Kimble Charting Solutions

5-Year bull trend is ending, breaking below support

Courtesy of Chris Kimble.

The Power of the Pattern would describe a bull trend, based upon a series of higher lows and higher highs.

Using this definition, the broadest of indices in the states, are “breaking 5-year rising trends!” This could break the heart of the bulls.


This 2-pack reflects that these two broad markets are breaking below “Weekly Closing” 5-year bull trends. When long-term trends break, it is common for selling pressure ...

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Insider Scoop

MRC Global to Sell Oil Country Tubular Goods Business for $48M

Courtesy of Benzinga.

MRC Global Inc. (NYSE: MRC) announced Wednesday, that it has entered into a definitive agreement to sell its U.S. OCTG business to Sooner Pipe, LLC, a subsidiary of Marubeni-Itochu Tubulars America, Inc., for $48 million, subject to certain adjustments. MRC Global's U.S. OCTG sales were approximately $305 million in 2015. As a result of the expected sale, a pre-tax charge of approximately $5.0 million is expected to be recorded in the fourth quarter of 2015. The transaction is expected to close in the first quarter of 2016, subject to customary closing conditions.

Andrew R. Lane, MRC Global's chairman, president and chief executive officer, stated, "The divestiture of our OCTG product line is the culmination of our strategy to reduce our exposure to upstream drilling volatility and to foc... more from Insider

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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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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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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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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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! 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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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. 


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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 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.

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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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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