Archive for the ‘High Mailing Priority’ Category

The New Abnormal: Living with Negative Rates

 

The New Abnormal: Living with Negative Rates

Courtesy of Wade of Investing Caffeine

Crazy Lady

Pimco, the $1.5 trillion fixed-income manager located a stone’s throw distance from my office in Newport Beach, famously (or infamously) coined the phrase, “New Normal”. As former Pimco CEO (Mohamed El-Erian) described years ago, around the time of the Great Recession, the New Normal “reflects a growing realization that some of the recent abrupt changes to markets, households, institutions, and government policies are unlikely to be reversed in the next few years. Global growth will be subdued for a while and unemployment high.”

As it turns out, El-Erian was completely wrong in some respects and shrewdly prescient in others. For instance, although the job recovery has been one of the slowest in a generation, 14.5 million private sector jobs have been added since 2010, and the unemployment rate has been more than halved from 10% in early 2009, to below 5% today. However, the pace of global growth has been relatively weak since the 2008-2009 financial crisis, which has forced central banks all over the world to lower interest rates in hope of stimulating growth. Monetary policies around the globe have been cut so much that almost 25% of global GDP is tied to countries with negative interest rates (see chart below).

Source: Financial Times

Source: Financial Times

The European central banks started the sub-zero trend in 2014, and the Bank of Japan recently joined the central banks of Denmark, Sweden and Switzerland in negative territory. The negative short-term rate virus has spread further to long-term bonds as well, as evidenced by the 10-Year German Bund (sovereign bond) yield, which crossed into negative territory last week (see chart below).

Source: TradingEconomics.com

Source: TradingEconomics.com

The New Abnormal

The unprecedented post-crisis move to a 0% Fed Funds rate target, along with the implementation of Quantitative Easing (QE) by former Federal Reserve Chairman Ben Bernanke, was already pushing the envelope of “normal” stimulative monetary policy. Nevertheless,…
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Maybe stop forecasting where you think rates will go

 

Maybe stop forecasting where you think rates will go 

Courtesy of Joshua Brown, The Reformed Broker

These are the Federal Reserve’s expectations for where interest rates are headed, by year, from a Washington Post op-ed by Larry Summers. Suffice it to say, it’s not going well.

Screen Shot 2016-06-16 at 8.14.15 AM

That orange line – let’s take a guess which direction it’s headed.

Here’s Sir Lawrence:

Watching the Fed over the last year there is a Groundhog Day aspect. One senses they really want to raise rates and achieve a more “normal” stance.  But at the same time they do not want to tighten when the economy may be slowing or create financial turmoil. So they keep holding out the prospect of future rate increases and then find themselves unable to deliver. But they always revert to holding out the prospect of rate increases soon, partly for internal comity and partly to preserve optionality.

It’s getting old, this game.

Source:





The 5 Fatal Flaws of Trading

 

Picture via Pixabay.

The 5 Fatal Flaws of Trading

By Elliott Wave International

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or turn a profit — and more importantly, do it consistently. How do they do that?

That's an age-old question. While there is no magic formula, Elliott Wave International's Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. Maybe you'll find some helpful ideas from Jeffrey's observations. 

The following is an excerpt form Jeffrey Kennedy's Trader's Classroom Collection eBook.

Why Do Traders Lose?

If you've been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn't seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can't seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, "How do you stop the Hand?" Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 — Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won't work over the long run. If you don't have a defined trading methodology, then you don't have a way to know what constitutes a buy or sell signal. Moreover, you can't even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly,


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Living ‘The American Dream’ In These Cities Is Not Possible

By TheRedPin.com

[As cross-posted at Zero Hedge, here.]

"The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement."

That idea – and those words, written by James Truslow Adams in 1931 – forms the foundation upon which the country was built.

But that foundation has cracked.

It’s one thing to fantasize about living the American Dream from regions outside the United States. It’s another to be already living in America and to not be able to attain it.

And while the American Dream ensures that no one is legally barred from reaching their full potential, it doesn’t prevent individuals from being held back in other ways. After analyzing the cost of living and median income levels in 74 U.S. cities, we found significant obstacles to obtaining the American Dream across the country.

Picture Perfect, American Dream–Style

Imagine it: You own a 1,480-square-foot home with a one-car garage, perfect for your family of four and all your needs, all nicely contained by a manicured front lawn and a white picket fence. You also have the funds for two adults-only dinner dates and one trip to the movies per month.

Sounds nice, right? That version of material wealth and comfort will cost you roughly $3,547 per month, or $42,548 per year.

The bulk of your expense is not even the mortgage; instead, it’s the monthly groceries. Clearly, you have very hungry mouths to feed.

Don’t forget, it will cost you approximately $245,000 to raise a child until the age of 18. And the typical American Dream usually includes at least two children.

Getting Ahead, Just by Demographics

Based on three criteria, we can easily divide the 323.5 million people living in the United States into “those who can afford to live on easy street” and “those who cannot” – the “haves” and “have-nots,” a concept that American literature has widely explored and that American citizens experience every day.

According to our research, the


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These Two Charts Show Exactly How BLS Shrinks the CPI

Courtesy of Lee Adler of the Wall Street Examiner

This chart shows how much the Bureau of Labor Statistics (BLS) suppresses rent inflation in its CPI measure. It’s a major tool the government uses to suppress CPI.

Actual Rents Vs. BLS Fantasy- Click to enlarge

A problem with the economic establishment’s focus on the CPI to measure “inflation” is that the CPI was never intended to measure “inflation” per se. Its purpose has always been to index government benefits, salaries, and contracts. The goal is to keep costs down by manipulating index to increase at the lowest possible rate that the BLS can present to the public with a straight face and the pretense of statistical accuracy.

The biggest tool that the BLS gives for manipulating CPI is the idea that housing prices do not count toward inflation because houses are assets, not consumption goods. Apparently the rationale is that assets don’t “inflate,” they “appreciate.” The BLS historically included house prices in CPI, but that became problematic because they were increasing too fast, pushing CPI up at a rate which the government simply could not afford. So the BLS stopped including house prices in CPI in 1982 after a couple of years of double-digit increases in CPI. In the place of actual housing inflation, the BLS substituted a made-up number called Owner’s Equivalent Rent (OER) .

The BLS starts with a survey of renters re how much rent they are currently paying. That becomes the basis for a line item in the CPI called Rent of Primary Residence. The BLS uses that item as a basis for annually benchmarking OER. Then they ask a tiny sample of homeowners how much they think their house would rent for. The BLS uses that survey of owners to estimate the rate of increase in OER, between the benchmark rent surveys. This method of “measuring” rent increases has consistently and systematically suppressed the recognition of the actual inflation rate of rent.

Anyone who spent half their life in the real estate business and anyone who has ever rented an apartment for a few years and then moved to another apartment, knows well that rent after a couple of years living in the same place is not the same as what the rent would be if they were moving to a comparable apartment.

The rent you are paying after you have lived in a place for a few years is set by the initial


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PhilStockWorld.com Weekly Trading Webinar

 

PhilStockWorld.com Weekly Trading Webinar 06-15-16

Tuning into Phil's Weekly Trading Webinars is a great way to learn what we do at PSW during the trading day. You can subscribe to our YouTube channel here and review our previous Webinars. 

[For LIVE access to PSW's Weekly Webinars - demonstrating trading strategies in real time - join us at PSW — click here!]

  

Major Topics:
 
00:01:34 Canadian Banks
00:02:56 Levels: Weak bounce lines, 5% rule, Trade Ideas
00:15:28 Short Term Portfolio: TZA, SQQQ,
00:16:48 Long Term Portfolio
00:18:37 Butterfly Portfolio
00:20:37 5% Portfolio
00:21:40 Options Opportunity Portfolio
00:23:14 Hedges
00:30:26 How much hedges is enough?: Trade Ideas
00:38:08 Options Opportunity Portfolio: Trade Ideas
00:40:08 SJB
00:41:21 Bullish on YG and SI
00:42:29 Margins on Interest charts
00:44:12 Long Term Portfolio: ABX
00:44:58 ABX Trade Ideas
00:51:52 Checking on the Markets
00:52:06 FOMC FED Minutes
00:58:59 Checking on the Markets: DX, TF, DOW Trade Ideas, Weak Bounce, Strong Bounce
01:10:38 GM Dividend Stock Trade Ideas
01:15:33 CL Trade Idea
01:19:06 Wall Street Journal: Fed Statement Tracker
01:23:55 Buying Calls and Puts
01:26:08 More Trade Ideas…





Evans-Pritchard, McWilliams, and Luntz on the Implications of Brexit

 

Evans-Pritchard, McWilliams, and Luntz on the Implications of Brexit

Courtesy of JOHN MAULDIN, Outside the Box

In the wake of Orlando, I feel somewhat ambivalent about dragging us back to the world of economics. As I write this note, it is still unclear what the reaction of the country will be to the largest shooting massacre ever on US soil. Everywhere I turn, it seems that people are trying to spin this in one direction or another, always filtered through their own worldviews.

My friend David Kotok of Cumberland Advisors frequently offers common-sense commentary on a wide variety of topics, and he sent out his observations on the recent tragedy with a good summary of the rather stark and unpleasant choices in front of the American people. We are using drones to kill American citizens in Yemen. The surveillance of Americans is already intense. The terrorist in Florida was a homegrown American citizen and had already been investigated twice by the FBI. You can read David’s commentary here. This event has major implications for surveillance and what will pass for privacy in the future. Guaranteed to make Baby Boomers uncomfortable.

But moving on, for your Outside the Box reading today I bring you something I never expected to see: Ambrose Evans-Pritchard, writing in his regular Telegraph column that he is going to vote for leaving the EU, that is, for Brexit. Ambrose is unabashedly pro-European, while being very critical of the European Commission and the way Brussels runs things; but he is also a patriotic British citizen (who mostly lives in France, I think). His access to the inner circles of Europe is amazing and leaves me a tad jealous. His explanation as to why he will vote to leave the EU doesn’t focus on the usual rhetoric (which I think he probably disdains). Rather it is a thoughtful analysis of the role of nation states and the significance of national sovereignty.

He leads off like this:

With sadness and tortured by doubts, I will cast my vote as an ordinary citizen for withdrawal from the European Union.

Let there be no illusion about the trauma of Brexit. Anybody who claims that Britain can lightly disengage after 43


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How did Brazil go from rising BRIC to sinking ship?

 

How did Brazil go from rising BRIC to sinking ship?

By Steven M. Helfand, University of California, Riverside and Antônio Márcio Buainain, Universidade Estadual de Campinas

Most of the headlines in recent weeks have focused on Brazil’s troubling political crisis. But the country is also in the midst of a deep economic recession.

The economy has been shrinking since the second quarter of 2014. It contracted by 3.8 percent in 2015 and is expected to shrink by a similar amount this year. Earlier this month, the Organisation for Economic Co-operation and Development (OECD) said it sees the recession continuing into 2017.

Yet it was only in 2009 – in the middle of the global financial crisis – that the Economist magazine featured a story entitled “Brazil takes off,” with a photo of the Corcovado – the iconic statue of Christ that overlooks Rio de Janeiro – launching like a rocket. That article emphasized why Brazil deserved to be one of the “BRICs” – the rapidly growing economies including Russia, India and China that now account for nearly 25 percent of global GDP.

How could the outlook for Brazil have changed so rapidly? Is this sort of boom and bust unprecedented or a recurring theme in Brazil’s history?

In this article, we provide a historical perspective on the current economic crisis, relying on our own scholarship and years of analysis of the Brazilian economy.

Brazil arrives

Brazil has been knocking at the door of the developed world for quite some time.

It has been dubbed the “country of the future” since Stefan Zweig coined the phrase in the title of his 1941 book. And that future seemed attainable.

From 1900 to 1980, Brazil had one of the fastest-growing economies in the world. Income per capita rose faster in Brazil than in the U.S. The country was transformed from a rural, agricultural economy – producing coffee, sugar and other products for export – into an urban, industrial powerhouse.

Yet a closer look at Brazilian economic history reveals frequent cycles of boom and bust, where considerable optimism fell by the wayside, leaving behind unfulfilled dreams. The future, it seems, has…
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Visualizing The Over-Education Bubble – Student Loan Delinquencies Are Soaring

Courtesy of ZeroHedge. View original post here.

What do you get when you combine skyrocketing tuition costs, a lack of growth in high-paying jobs, moral hazard, and America’s largest-ever generation of students?

As VisualCapitalist's Jeff Desjardins explains, it’s a recipe for a mountain of $1.3 trillion in student loan debt – much of which is not being paid for.

Courtesy of: Visual Capitalist

 

Very Delinquent Students

With many students graduating with high debt loads, a growing number of students are becoming delinquent on their loans. The most recent estimate by the Federal Reserve Bank of New York estimates the percent of 90+ day delinquent loans to now be at 11.0%.

This puts student loans at a higher delinquency rate than credit cards (7.6%), auto loans (3.5%), and mortgages (2.2%). It’s also particularly interesting because historically credit cards have had the highest rates among all types of consumer credit. Despite this, student loans “passed” credit cards in delinquency frequency at the end of 2012.

Why are student loans the most troubled form of consumer debt right now? It’s the result of a clear mismatch between supply and demand for college-educated workers.

The Overeducation Bubble

Have college graduates been oversold on the prospects of a college degree? Or is the market for high-paying jobs not materializing as expected in the current low-growth economy?

Either way, many college grads are punching below their weight in the job market. In a 2014 study, economists affiliated with the Federal Reserve Bank of New York found that up to 49% of recent college graduates aged 22 to 27 were working in careers that do not requite any college education.

Based on this and other factors, renowned investor Peter Thiel has called higher education to be a bubble:

If a college degree always means higher wages, then everyone should get a college degree. But how can everyone win a zero-sum tournament? No single path can work for everyone, and the promise of such an easy path is a sign of a bubble.

He’s backed


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We behave a lot more badly than we remember

 

We behave a lot more badly than we remember

Francesca Gino, Harvard Business School and Maryam Kouchaki, Northwestern University

In a 1997 U.S. News and World Report survey, 1,000 Americans were asked the following question: “Who do you think is most likely to get into heaven?” According to respondents, then-president Bill Clinton had a 52 percent chance; basketball star Michael Jordan had a 65 percent chance; and Mother Teresa had a 79 percent chance.

Guess who topped even Mother Teresa? The people who completed the survey, with a score of 87 percent. Apparently, most of the respondents thought they were better than Mother Teresa in regards to their likelihood of getting into heaven.

As the results of this survey suggest, most of us have a strong desire to view ourselves in a positive light, especially when it comes to honesty. We care very much about being moral.

In fact, psychological research on morality shows that we hold an overly optimistic view of our capacity to adhere to ethical standards. We believe that we are intrinsically more moral than others, that we will behave more ethically than others in the future and that transgressions committed by others are morally worse than our own.

So, how do these beliefs of our moral selves play out in our day-to-day actions? As researchers who frequently study how people who care about morality often behave dishonestly, we decided to find out.

Unethical amnesia

One key result of our research is that people engage in unethical behavior repeatedly over time because their memory of their dishonest actions gets obfuscated over time. In fact, our research shows, people are more likely to forget the details of their own unethical acts as compared to other incidents – including neutral, negative or positive events, as well as the unethical actions of others.

 

 

What do we forget? Lew (tomswift) Holzman, CC BY-NC-ND

We call this tendency “unethical amnesia”: an impairment that occurs over time in our memory for the details of our past unethical behavior. That is, engaging in unethical behavior produces real changes in memory…
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Zero Hedge

This Is What Draghi Said To Spark Speculation Of Another Global Central Bank Bailout

Courtesy of ZeroHedge. View original post here.

Both Janet Yellen and Mark Carney may have previously announced they would withdraw from the ECB's Forum in Sintra, Portugal (due to pressing market stabilization issues), but it was what Mario Draghi said here that has captured the market's attention this morning. The head of the ECB avoided mentioning the U.K.’s vote to leave the European Union but instead called for greater alignment of policies globally to mitigate the spillover risks from ultra-loose monetary measures

“We can benefit from alignment of policies,” Draghi said a...



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ValueWalk

Bill Gross on 'What'd You Miss'

By Jacob Wolinsky. Originally published at ValueWalk.

Bill Gross on ‘What’d You Miss'”>Bill Gross on ‘What’d You Miss’

Streamed live 5 hours ago
Today on ‘What’d You Miss,’ co-hosts Scarlet Fu & Alix Steel bring you live coverage of the market close and talk to Standard & Poor’s Chief Global Economist Paul Sheard about the G7 meeting. We’ll also bring you Erik Schatzker’s interview with Bill Gross, live from FI16 in Los Angeles (http://la.bbgfi16.com/). We’ll hear from the bond king on central bank policy and his outlook for global growth.

‘What’d You Miss’ with Alix Steel, Scarlet Fu, and Joe Weisenthal airs every weekday on Bloomberg TV from 4 – 5 pm ET:

The post ...



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Phil's Favorites

Australia Central Bank Worried About Deflation - Does Study, Blames Aldi

Courtesy of Mish.

The Reserve Bank of Australia is so concerned about deflation that it did a study on why prices are so low despite a 33% collapse in the Australian dollar vs. the US dollar since June 2011.

The RBA blamed competition and discounters like Aldi.

Australian Dollar vs. US Dollar

Worrying Trend

Lower prices are precisely what consumers want and need. Nonetheless, this headline from “down under” reflects prevailing silliness: ...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Worlds Top Fortunes Fall $196.2 Billion Since Brexit Bombshell (Bloomberg)

Global markets erased another $69.2 billion from the combined net worth of the worlds 400 richest people Monday, bringing the total since the U.K. shocked investors with a vote to leave the European Union to $196.2 billion in the last two trading days.

Global stocks extend l...



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Chart School

S&P 500 Snapshot: Brexit Selloff Continues

Courtesy of Doug Short's Advisor Perspectives.

Friday's global selloff continued today as the S&P 500 plunged at open and continued through the morning. The sell-off recovered slightly over the following hours, but hit its -2.24% intraday low in the final hour. The index continues in the red at -2.12% year-to-date.

The flight to treasuries continued today. The 10-year note closed at 1.46%, down 11 basis points from the previous session.

Here is a snapshot of past five sessions in the S&P 500.

Here is a daily chart of the index, which has dropped below its 50-day moving average. Volume, as we mentioned above, increased dramatically.

Here's a look at the VIX volatility index, the celebrated "fear gauge" market indicator. Today's selloff continued well...



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OpTrader

Swing trading portfolio - Week of June 27th, 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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Kimble Charting Solutions

Global Leading Indicators, testing 6-year rising support channels

Courtesy of Chris Kimble.

Long before last weeks Brexit vote, Germany’s DAX index has been an upside and downside global stock market leader, over the past few years. Below looks at the pattern the DAX has created over the past decade.

CLICK ON CHART TO ENLARGE

Since mid 2009 the DAX has remained inside of rising channel (A). The top of this channel was hit in April of 2015. Since hitting rising channel resistance, the DAX has ...



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Mapping The Market

Thoughts on Brexit

I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.

For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....



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Digital Currencies

Bitcoin Tumbles 10%

Courtesy of ZeroHedge. View original post here.

One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...



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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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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Promotions

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!

PhilStockWorld.com 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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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 jennifersurovy@yahoo.com 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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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