Archive for the ‘High Mailing Priority’ Category

Lighten the Darkness

 

Lighten the Darkness

How dark money is subverting democracy in the UK.

By George Monbiot. Published in the Guardian 17th May 2017 (Dark money is pushing democracy in the UK over the edge)

How is this acceptable? A multimillionaire City asset manager has pledged to spend up to £700,000 on ousting Labour MPs who campaigned against Brexit. Jeremy Hosking will use his money to ensure that there is as little parliamentary opposition to a hard Brexit as possible. Why should multimillionaires be allowed to try to buy political results?

Allowed? That’s too soft a word. It is enabled by our pathetic, antiquated and anti-democratic rules on political spending. Hosking claims he wants to secure “the sovereign future of this independent-minded democracy”. But there is no greater threat to sovereignty, independence or democracy than the power money wields over our politics.

There are three categories of concern here. The first is transparent political funding, such as Hosking’s. Then there is opaque funding, that the Electoral Commission has so far failed to prevent: a shocking example has been uncovered by Peter Geoghegan and Adam Ramsay of openDemocracy.

We already know that a vast payment was made by Northern Ireland’s Democratic Unionist party (DUP) for a newspaper advertisement urging people to vote for Brexit. Remarkably, this ad was not circulated in Northern Ireland, but only in England and Scotland.

This might suggest that someone was making use of Northern Ireland’s secrecy regime. Political donations there remain hidden from view. Funders wishing to disguise their identities can use Northern Ireland as a back channel into UK politics. After sustained pressure, the DUP revealed that the money came from a donation of £425,622, passed through an organisation called the Constitutional Research Council.

But the original source remains a mystery. Though electoral law in Great Britain states that “a donation of more than £500 cannot be accepted … if the donation is from a source that cannot be identified”, the DUP claims that it doesn’t need to know who provided this money. All we know about the Constitutional Research Council is that it’s run by a man called Richard Cook, who lives in a small house outside Glasgow. He…
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Fun with Dow Stocks!

 

Fun with Dow Stocks!

Courtesy of Joshua Brown

This past week was the anniversary of Charles Dow’s creation of his Dow Jones Industrial Average in 1896. Love it or hate it, the average has persisted for some 120 years as our most popular gauge of the health of Corporate America.

The original index was comprised of just 12 stocks, many of which were railroad companies – the tech stocks of their day. The first big change to the index came in 1916 when it was expanded, and then again in 1928. There was a major replacement of component companies in 1932 during the Depression. In 1997, stalwarts Bethlehem Steel, Westinghouse Electric, Woolworth and Texaco were replaced with Johnson & Johnson, Wal-Mart, Hewlett-Packard and Travelers, to better reflect the world we live in today.

Just for fun, I send you now over to this great interactive graphic from the Wall Street Journal. You can trace all of the ins and outs of the DJIA and even trace the history of inclusion on a company basis.

Have a blast!

The Ins and Outs of the Dow Jones Industrial Average (WSJ)





One Bank Spots An “Amber Warning Sign” Inside The Vol Complex

Courtesy of Zero Hedge

In a time when record low volatility has spawned a cottage industry of vol and Vix experts, with analysts desperate to explain either why volatility is where it is [or where it will be next week], here the simplest explanation is [that] the record injection of liquidity by central banks pushing risk assets to all time highs [and] the fact that even hedge fund are barely trading as we showed last week (chart). [Even] though there is no causal link between backward-looking implied or realized vol and future events, few have come up with a comprehensive analysis or theory of which volatility metric is relevant or appropriate when discounting risk inflection points.

One such attempt, one of the better ones we have seen, comes from Deutsche Bank's Dominik Constam who in his latest Global Market Strategy letter believes he has found what may be a fulcrum predictive vol indicator which, as he writes overnight, is "an amber warning sign that momentum in stocks might be peaking over the coming months."

As Konstam simply frames it, "in general equity prices are negatively correlated with volatility, which is consistent with an emphasis on protection and levered exposure to the upside. Rising prices are associated with falling volatility and falling prices with rising volatility. Rising (and expectations of rising) prices convert call exposure into the underlying and reduce concern for the need for protection. Volatility demand is satisfied at lower volatility prices. Falling prices creates more concern for protection."

That – absent any reference to Greek letters, to central banks, to CTAs and risk parity funds, or to vol ETFs – is about the simplest, and most accurate explanation for why vol is where it is at any given moment. What does it mean for the future?

Spikes higher in correlation, either much less negative correlation or positive


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Ben Carlson on Market Breadth

 

Ben Carlson on Market Breadth (Video)

Courtesy of Joshua Brown, The Reformed Broker

Ben had a hit on Bloomberg TV last night talking about his recent piece on market breadth and why it’s perfectly normal to see the market being led higher by some very big winning stocks. His research shows that this is always the case during bull markets and that broader measures of the internals are healthy, not sick.

Check this out:

…and you can read his expanded thoughts on the topic here:

A Few Big Stocks Don’t Tell the Whole Market Story (Bloomberg View) 





PPT and the “God of the Gaps”

Joshua does not believe in the PPT God.  

PPT and the “God of the Gaps”

Courtesy of Joshua Brown, The Reformed Broker

Writing in centuries past, many scientists felt compelled to wax poetic about cosmic mysteries and God’s handiwork. Perhaps one should not be surprised at this: most scientists back then, as well as many scientists today, identify themselves as spiritually devout.

But a careful reading of older texts, particularly those concerned with the universe itself, shows that the authors invoke divinity only when they reach the boundaries of their understanding. They appeal to a higher power only when staring into the ocean of their own ignorance… (The Perimeter of Ignorance)

Earlier this week, CNBC Fast Money hosted a former trader who came on to discuss the Plunge Protection Team urban legend as a bonafide explanation for why the market has been acting the way it has.

Leaving aside the fact that, three years ago, I had already explained this phenomenon of short and sharp corrections followed by new highs as a function of the business model shift within the wealth management industry, the former trader was very short on specifics or data or logic of any kind.

The video is below, but you can watch it later, it’s just a rehash of the old story about how a “Working Committee on Markets” had been established under President Reagan to prevent the stock market from going down ever again, and the “team” is made up of various people at the SEC, the NYSE etc.

 

Now obviously, the existence of a Plunge Protection Team (or PPT), is demonstrably ridiculous. Especially when you consider the fact that we’ve seen the market cut in half twice during the last 17 years, with dozens of instances of 10 and 15 percent corrections all along the way over the last 29 years since the end of Reagan’s term. The idea that there could be some clandestine, bipartisan shadow organization, with enough money…
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International Inflation Cycles Sync Up

 

International Inflation Cycles Sync Up

Courtesy of John Mauldin, Mauldin Economics

My friend Lakshman Achuthan, Co-Founder & Chief Operations Officer of the Economic Cycle Research Institute (ECRI), has done some really interesting work on international inflation cycles, and in today’s Outside the Box he shares it with us. This is a special treat – ECRI does not normally make its material available outside of its client base. I am truly grateful that he allows me to share this. Lakshman will be joining us at SIC this week in Orlando, to the great benefit of the attendees.

It turns out that inflation volatility has been greatly dampened in the 11 OECD (advanced) economies in the 21st century, as compared to the late 20th century: It’s now only about a quarter of what it was then. Additionally, the domestic inflation cycles of these countries have increasingly come into sync. These two trends have made it possible for ECRI to devise a leading index of global inflation cycles that offers earlier and more accurate forecasts of cyclical turning points in international inflation.

In concluding this short but groundbreaking piece, Lakshman adds,

The synchronization of international inflation cycles highlights the importance of global factors in assessing domestic inflation prospects. Our analysis underscores the 21st-century reality that the timing of inflation cycles may be beyond the control of any individual central bank. Yet this very development makes it possible for ECRI to provide even earlier signals of peaks and troughs in the inflation cycle.

Lakshman’s piece runs with an argument that my friend John Vogel wrote about this morning, highlighting another piece of research. I’ve been arguing for years that the world is basically in a long-term deflationary trend, despite all the monetary intervention and money printing. It’s a bit difficult to measure, but the cost of producing goods is dropping. Which means that the cost of living will continue to fall – at least as far as purchasing goods is concerned (as opposed to buying services like healthcare and education). As John writes (somewhat controversially):

What I think is more interesting is the productivity created by CHEAP oil and natural gas. We don’t measure this, no fault of men like Prof. Gordon who think in


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Beyond the CBO score: How Trump Budget and the AHCA are dismantling America’s safety net

 

Beyond the CBO score: How Trump Budget and the AHCA are dismantling America's safety net

Courtesy of Simon HaederWest Virginia University

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President Trump and House Speaker Paul Ryan, to his left, celebrating the House passage of the AHCA on May 4. Evan Vucci/AP

The Congressional Budget Office (CBO) on May 24 released its long-awaited analysis of the American Health Care Act (AHCA) passed by the House of Representatives three weeks ago. The Conversation

While the score was not dramatically different from an earlier one, it nonetheless drew a significant amount of news coverage. Countless articles talk about the AHCA’s dramatic effects on insurance coverage and premiums.

However, this focus is decidedly too narrow and missed the larger endeavor by President Trump and Speaker Paul Ryan to initiate a dramatic disinvestment from the nation’s disadvantaged, particularly in terms of health care.

Working in one of the nation’s poorest states, West Virginia, I encounter the challenges of poverty firsthand. It complements my academic work on the historic development of the American safety net and the historic role of public hospitals. The combination of the AHCA and the Trump administration’s budget would hollow out America’s safety net that has evolved since the New Deal and the Great Society.

The Congressional Budget Office and the American Health Care Act

The Congressional Budget Office (CBO) is a nonpartisan congressional agency created in the early 1970s during the Nixon administration. It was envisioned as a counterweight to the dominance of the executive branch and the president in policymaking, particularly when it comes to budgeting. It was also supposed to infuse policy decisions with nonpartisan, analytical information. The assumption is that policymaking is better when it is informed by facts and when we are aware of the effects of the legislation before passing it.

By and large, the CBO has lived up to its expectations. While far from perfect in its projections, it is generally held in high regard by politicians and scholars alike. As such, it has held a dominant role in some of the nation’s major legislative…
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“When It Comes To Trading, Romance Is For Losers”

By Kevin Muir, The Macro Tourist blog

(As posted at Zero Hedge.)

A few readers have asked me to tell more stories about trading. They encouraged me to share more of my experiences throughout the years.

After giving it some thought, I decided that instead of taking the easy road and recounting a tale of when I was fortunate enough to nail some trade, I would approach from the opposite direction. In keeping with my theme that all I bring to the party is 25 years of mistakes, I have decided to recount a losing trade. And not only that, instead of just picking one losing episode, I will confess a weakness I still struggle with today.

But before I do that, I would like to talk about a book. I have always been a big Michael Lewis fan. Ever since reading Liar’s Poker as a young kid trying to make it onto a trading desk, it has held a special place in my development. Throughout the years, as Michael has published more books, I have devoured them with a ferocity reserved for just a handful of authors.

Yet when Lewis published his most recent book, The Undoing Project, I did not rush out to buy it. The story of two psychologists and their relationship throughout the years? It sounded hokey and not at all interesting. Deciding Michael had finally jumped the shark, I ignored the new release.

Lucky for me, my old man is retired and has more time on his hands. More importantly, he did not suffer the same prejudices. He bought it. After reading it, he plopped it in my hands and encouraged me to give it a whirl.

Was I ever wrong about my initial impressions. Michael Lewis’ The Undoing Project could be one of his finest books. As traders and investors, we should all be forced to read it.

The psychological concepts the two main characters discovered are essential to understanding the constant battle we are all fighting when we trade. The themes throughout the book are complex and become more nuanced, but at its heart, the book is about the understanding that human beings do not act rationally with anywhere near


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Can The US Economy Ever Get Back To 3% GDP Growth?

Courtesy of Zero Hedge

ConvergEx's Nicholas Colas asks "Can the US economy get back to the 3% GDP growth it enjoyed in the 1980s – mid 2000s?"

White House economic policy makers say “Yes”.

Most professional economists say “No”.

History says, “Worker productivity drives economic growth, not politicians or economists.  Fix productivity and you can get to 3%.”

History may not be laconic, but it has a point.

Since the end of World War II, productivity growth has been the most important factor in GDP growth – even more so than greater female workforce participation.  So how does the US improve worker productivity?  That conversation has been hijacked by the tech sector, but the answer must lie elsewhere.  No one doubts that 21st technological advances are impressive, but they have done nothing for measureable productivity or wage growth (unless you write code).

When I started as a Wall Street analyst in 1991, I spent countless hours in the corporate library searching for old annual reports and other financial statements.  If you wanted Chrysler’s 1982 10K, it was on a CD-ROM and you printed it out on nasty smelling chemically treated paper.  Back issues of the Wall Street Journal were on microfiche – images on plastic index-card sizes you needed to pop into a projector to read.

Now you can get all that information and more on the Internet, delivered to your smart phone/tablet/PC, at any hour and in any place on the planet with a wireline or wireless phone connection. Countless data providers will make a historical financial model for you on the fly. Stock price charts are free from Yahoo! and Google, plus many other sources.

All this has made me much more productive – I doubt I could write these notes as frequently as I do without the Internet.  Once a week, maybe…  Twice in a pinch.  But daily?  Let’s put it this way – I could, but you might not find them as useful.

One easy example: the Richmond branch of the Federal Reserve has a must-use US economic overview they keep updated on a weekly basis. Whenever I have to give a


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Predictions – A Fool’s Errand

 

Predictions – A Fool’s Errand

Courtesy of Wade Slome, Investing Caffeine

Making bold predictions is a fool’s errand. I think Yogi Berra summed it up best when he spoke about the challenges of making predictions:

“It’s tough to make predictions, especially about the future.”

While making predictions might seem like a pleasurable endeavor, the reality is nobody has been able to consistently predict the future (remember the 2012 Mayan Doomsday?), besides perhaps palm readers and Nostradamus. The typical observed pattern consists of a group of well-known forecasters bunched in a herd coupled with a few extreme outliers who try to make a big splash and draw attention to themselves. Due to the law of large numbers, a few of these extreme outlier forecasters eventually strike gold and become Wall Street darlings…until their next forecasts fail miserably.

Like a broken clock, these radical forecasters can be right twice per day but are wrong most of the time. Here are a few examples:

Peter Schiff: The former stockbroker and President of Euro Pacific Capital has been peddling doom for decades (see Emperor Schiff Has No Clothes). You can get a sense of his impartial perspective via Schiff’s reading list (The Real Crash: America’s Coming Bankruptcy, Financial Armageddon, Conquer the Crash, Crash Proof – America’s Great Depression, The Biggest Con: How the Government is Fleecing You, Manias Panics and Crashes, Meltdown, Greenspan’s Bubbles, The Dollar Crisis, America’s Bubble Economy, and other doom-instilled titles.

Meredith Whitney: She made an incredible bearish call on Citigroup Inc. (C) during the fall of 2007, alongside her accurate call of Citi’s dividend suspension. Unfortunately, her subsequent bearish calls on the municipal market and the stock market were completely wrong (see also Meredith Whitney’s Cloudy Crystal Ball).

John Mauldin: This former print shop professional turned perma-bear investment strategist has built a living incorrectly calling for a stock market crash. Like perma-bears before him, he will eventually be right when the next recession hits, but unfortunately, the massive appreciation will have been missed. Any eventual temporary setback will likely pale in comparison to the lost gains from being out of the market. I profiled the false forecaster in my article, The Man Who Cries Bear.

Nouriel Roubini: This renowned…
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Zero Hedge

Visualizing The Possible City Of London 'Brexodus'

Courtesy of ZeroHedge. View original post here.

The EU in Brussels has now given official powers to its top Brexit negotiator, but former French diplomat Michel Barnier is not expected to begin talks until after the UK general election in June. As Statista's Dyfed Loesche notes, Banks and financial institutions are already preparing for the world after Brexit and planning to pull some of their staff from the finance hub in the City of London...

...



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Phil's Favorites

Market Moving News

 

Financial Markets and Economy

A definitive breakdown of the gloomy state on Wall Street (Business Insider)

While Wall Street bank revenues appeared to bounce back in the first quarter of 2017, with banks posting strong results in fixed income trading in particular, industry-wide revenues were still down on the same period from 2012 to 2015. 

Vietnam's Prime Minister Says He's Confident of 6.7% Growth Goal (Bloomberg)

Vietnamese Prime Minister Nguyen Xuan Phuc said he is confident economic growth this year will meet a goal of 6.7 percent without adding ...



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ValueWalk

Jesse Livermore - 21 Investing Rules That Have Stood The Test Of Time For 77 Years

By The Acquirer's Multiple. Originally published at ValueWalk.

Before the modern day tweeter @Jesse_Livermore, there was a famous investing legend also called Jesse Livermore. The original Livermore was born in 1877 and died in 1940. Livermore was famous for making and losing several multimillion-dollar fortunes and short selling during the stock market crashes in 1907 and 1929. Livermore was an investing genius who unfortunately could not stick to his own rules – Which is why one of his rules – “The human side of every person is the greatest enemy of the average investor or speculator”, is so relevant to every investor.

]]> Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in ...



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Chart School

Friday Kept Week's Performance Intact - Semiconductors Strong

Courtesy of Declan.

Memorial weekend brought with it holiday style trading on Friday. It was positive finish for bulls who were able to maintain and in some cases, build on, gains from earlier in the week

Best of the action came in the Semiconductor Index which finished with a new closing high. The rally from April brought with it an acceleration in pace, comparable to the latter part of 2016.  Relative performance against the Nasdaq 100 hasn't breached resistance, but it's very close. Semiconductors spent a long time in the doldrums after the 2000 peak, but they are finding their groove now.

...

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Digital Currencies

Visualizing The Expanding Universe Of Cryptocurrencies

Courtesy of Zero Hedge

Bitcoin is the original cryptocurrency, and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.

In fact, as Visual Capitalist's Jeff Desjardins details, the innovation of the blockchain is changing entire markets, while causing ripples with central banks and the financial industry. At time of publication, the bitcoin price now hovers near US$2,200, a massive increase from this time last year.

But the true impact of Bitcoin is actually far more reaching than this – it’s a...



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Market News

Market Moving News

 

Financial Markets and Economy

Hedge Fund Billionaire Paul Singer: If Trump Agenda Fails, a Recession Could Follow (Fortune)

Market watchers who thought the stock market would drop if Donald Trump were elected were burned following his win: markets rose to new highs instead.

U.S. inflation path since 2012 is worrisome, policymaker says (Reuters)

The current level of U.S. prices is noticeably lower than what it would be if the Federal Reserve had delivered on its 2-percent inflation target, St. Louis Federal Reserve President James Bullard said, calling the trend "worrisome."

...



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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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OpTrader

Swing trading portfolio - week of May 22nd, 2017

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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Biotech

Beyond just promise, CRISPR is delivering in the lab today

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

Beyond just promise, CRISPR is delivering in the lab today

Courtesy of Ian HaydonUniversity of Washington

Precision editing DNA allows for some amazing applications. Ian Haydon, CC BY-ND

There’s a revolution happening in biology, and its name is CRISPR.

CRISPR (pronounced “crisper”) is a powerful technique for editing DNA. It has received an enormous amount of attention in the scientific and popular press, largely based on the promise of what this powerful gene e...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

Republicans Love Bombing, But Only When a Republican Does It

By Kevin Drum, Mother Jones

A few days ago I noted that Republican views of the economy changed dramatically when Donald Trump was elected, but Democratic views stayed pretty stable. Apparently Republicans view the economy through a partisan lens but Democrats don't.

Are there other examples of this? Yes indeed. Jeff Stein points to polling data about air strikes against Syria:

Democr...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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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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