by phil - November 23rd, 2015 8:25 am
We have, essentially, a 3-day week this week and don't expect people to stick around on Wednesday either and Friday being a half-day is a joke as it's dead as a doornail on Thanksgiving Fridays. Overall trading with be thin, which means all market action should be taken with a grain of salt and, unfortunately, we get revised GDP tomorrow morning – which is very important.
Our initial estimate of Q3 GDP was 1.5% and most Economorons think it will be revised up to 2% and why not – if GDP is so inexact that it can move up or down 33% in less than a month – what's the difference what number they paint into a holiday weekend? It's Personal Income and Outlays that really matter on Wednesday – as that's a precursor to Christmas Shopping Season. Durable Goods (also Weds) were a disaster in September (-1.2%) so hard to be worse in October but run away if they are.
In faraway lands we'll also get Eurozone PMI Reports, which are looking up so far but enjoy it while you can as tomorrow we get Germany's GDP, which may make ours look good. The rest of the Eurozone reports their GDP Thursday and Friday – so that will be worth at least checking in for on Friday morning – especially if you are a Futures player looking for some fun!
Meanwhile, oil Futures look like this, so you'd have to be a maniac to play. We played on Friday, of course and our long plays on oil (/CL) and gasoline (/RB) each made over $1,000 per contract for our morning readers (you're welcome). For those who could not play the Futures, we also had a long play on UGA options that popped 44% on the day (and will be cheap again this morning) so again, it's not like we have to be heavily invested to make money every day – we can make a fortune with these quick in and out plays – over and over again.
Getting back to cash allows us to enjoy our Thanksgiving trips without worrying about what the market is doing while we're on a plane. As noted in our October…
by phil - November 23rd, 2015 6:13 am
One Million Dollars!
That's up 66% on our main, paired portflios as we approach our 2-year anniversary. 66% is our 3-year goal for the Long-Term and Short-Term Portfolio strategy so of course we decided to lock in our gains after having a rough ride in September, when the LTP balance fell as low as +26% on September's dip to S&P 1,870. That led us, in our last review, to add another $50,000 worth of downside protection in the STP and it worked perfectly, as the October dip barely touched us.
Well, not PERFECTLY, our net balance on the Long and Short-Term portfolios has dropped from $1,020,881.30 to $1,002,144.60 – down $18,736.70 (1.8%) for the month. As I noted in our Chat Room, we did add ABX, ARO, BHI, BRCM, COH, IRBT, RIG, UNG and YHOO trades since our last review so we're hardly sitting on our hands – just playing the market cautiously in the final quarter since we're so far ahead in the game.
Unfortunately, like all prevent defenses, you end up giving back a little ground in the interest of preserving the greater victory. Of course, that doesn't stop us from having plenty of other trade ideas – they just weren't added to our tracking portflios yet.
AAPL, for instance was featured as it dropped back below $115 and IBM was officially announced as our trade of the year as it plunged to $130 and it's already begun to recover. At our Butterfly Portfolio Seminar in Washington last week, we went over 20 stocks we'll be watching in 2016 but mostly AFTER we get through the holidays intact!
It can be hard to sit on the sidelines in cash – especially when we've had such fun increasing our cash piles all year long. However, as I mentioned above, we had a $115,000 swing in the LTP in Sept and, despite making some offsetting gains in the STP to compensate – that was a little more variation than I was comfortable with. We did, in fact, go on a buying spree at the Aug dip…
by ilene - November 22nd, 2015 12:58 pm
In uncertain times, “cash is king,” but central bankers are systematically moving to eliminate that option. Is it really about stimulating the economy? Or is there some deeper, darker threat afoot?
Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . .”?
That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse.
Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers. The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates).
The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery.
That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero.
Locking the Door to Bank Runs: The Cashless Society
The problem with imposing negative interest on savers, as explained in the UK Telegraph,
by ilene - November 20th, 2015 1:50 pm
By John Mauldin
Soon after the Paris attacks, I picked up the phone to talk over the situation with my friend George Friedman. George is one of the truly world-class thought leaders on geopolitics. We had an animated 20-minute conversation. I didn’t particularly like what I heard.
George thinks we face big difficulties in dealing realistically with the ISIS threat. The more I read—and the more I listen to people like George who have worked these issues for decades—the more I think that we, as a culture, need to face reality.
I asked George to distill his thoughts into a short essay I could publish in Outside the Box, and he agreed.
This is a very thought-provoking piece with a different conclusion—which is what you can always expect from George.
John Mauldin, Editor of Outside the Box firstname.lastname@example.org
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe
By George Friedman
The attacks in Paris last Friday night were part of a long-term pattern of occasional terrorist attacks by jihadists on targets in Europe. In the European context, this stood out for two reasons. First, the scale of the attack was substantially larger than other attacks in recent years, both in the number of participants and the number of casualties. Second, it was different in the level of sophistication and planning. Securing weapons and explosives, gathering at least three teams, identifying the targets and the manner in which these targets were to be attacked involved fairly complex logistics, intelligence and above all coordination. Most impressive was their counter-intelligence and security. There were at least seven attackers and additional support personnel to secure weapons, gather information and help them hide out in preparation for the attack. No one detected them.
The large majority of attacks are detected and disrupted prior to execution by European and American intelligence services, using information, communications intercepts and the other tools available to them. No one detected this group, indicating that the group, or at least its leaders, were aware of the methods used to identify attacks and evaded them. Lone wolves evade
by phil - November 20th, 2015 8:55 am
I know – where's Mali? Who cares? Apparently, not too many of you do because the Futures have gained 0.5% since this happened early this morning, so let's just keep going and invest as if nothing bad is ever going to happen.
Today's market cheerleader was former Goldman Sachs Director, Mario Draghi, who said the ECB is prepared to deploy its full range of stimulus measures to fight low inflation, indicating that the Central Bank will apply additional easy money policies at its next meeting in December.
That sent the Euro down half a point and, so far, the Dollar is up 0.5% to match, which is pushing oil back down to $40 (the Dec contract, on it's last day) and giving us a nice buying opportunity into the weekend on both /CLF6 (the Jan contract, now $41.50) and /RBF6 (Jan Gasoline, now $1.275) into next week's holiday. For the Futures impaired – the Gasoline ETF (UGA) should be at $28.75 and that should put the Dec $29 calls under $1 – a fun way to pay for a tank of gas for next week's visit to Grandma's.
Keep in mind that Draghi is a guy who thinks Bankers should run the World, the quote in this picture comes from his actual interview in Der Spiegel in 2012 and, since then, he's simply moving his agenda forward, in a subtle(ish), diplomatic fashion:
"It is not that we want to replace the national supervisory authorities; on the contrary, we want to work closely with them. However, they need to be independent of their governments in their assessment of the problems. In the past, problems in the banking sector have been hushed up time and again.
"I am not going to mention any names. However, I am certain that we will be able to act more independently and quickly if Frankfurt is at the heart of the decision-making."
On our side of the pond, the NY Fed's Bill Dudley (former Goldman Chief Economist) was heard saying, in his opening remarks at a regulation conference: "If we begin to raise interest rates, that’s a good thing. That’s…
“Devastated” Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call
by ilene - November 19th, 2015 10:54 pm
This is a bizarre story of an overconfident and perhaps delusional trader attempting to fund his losses by collecting donations to his GoFundMe account. It's a lesson in what not to do.
The stock which Joe Campbell shorted is KaloBios (KBIO). It once traded much higher but has been falling constantly since its IPO, including a 1/8 reverse stock split in July, 2015.
Here's the Yahoo Chart of the KBIO's life as public company:
From Bloomberg: "KaloBios, which has dropped from $64 a share since going public in early 2013, reached a low of 90 cents a share on Nov. 12. [It hit $0.44 on the open, Nov. 16, 2015.] The South San Francisco, California-based company said last week that discussions about possible strategic transactions had ended and it was unlikely a viable alternative would surface."
A viable alternative did emerge this week led by the infamous Martin Shkreli of Turing Pharmaceuticals. Shkreli and his group bought over half the shares on the open market. The share buying started on Monday, Nov. 16.
KBIO chart from Yahoo. Note the wildest trading was after hours and before the market opened:
Chart from BigCharts, which does not show after hours:
The prices and volume according to Yahoo is in the table below. The number of shares of KBIO outstanding is 4.12M and the float is 3.84M. The number of shares trading today (Nov. 19) was almost 12.5M. Notice that the buying started on Monday--with the price climbing almost 300% during the day.
That's the background. Here's the story from Zero Hedge.
"Devastated" Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call
Courtesy of ZeroHedge
And now, what may be the craziest story of the day.
Less than a week ago, one of the countless fly-by-night biotech pennystocks, drug developer KaloBios Pharmaceuticals said it would wind down its operations and that it had engaged restructuring firm Brenner Group to help liquidate its assets. The company said it was "highly…
by phil - November 19th, 2015 8:44 am
Gobbledygook, I say! What other word could describe the 4 paragraphs of economic nonsense that led off yesterday's Fed minutes (highlighted text here) which said (and I sadly quote): "A number of participants indicated that they expected short-run r* to rise as the economic expansion continued, but probably only gradually. Moreover, it was noted that the longer-run downward trend in real interest rates suggested that short-run r* would likely remain below levels that were normal during previous business cycle expansions, and that the longer-run normal level to which the nominal federal funds rate might be expected to converge in the absence of further shocks to the economy…" It just goes on and on like that.
"r*" is, of course, the "neutral" or "natural" real interest rate. Well, I say "of course" because the Fed made it up and now that's what it is and soon you'll hear all sorts of blowhards on TV pontificating on what r* is at the moment – it's our new distracting talking point! The Nattering Naybob summed it up quite nicely in our Live Member Chat Room, saying:
As for their inept discussion of R, as in rates: The pace of economic activity has slowed due to inappropriate monetary policy. A lack of thin-air or ex nihilo credit growth in the NB's and CB's is a symptom, not a cause. Ceteris Paribus, the cost or price of money is represented by various price indices. Interest is NOT the cost of money, it is the cost of loan funds. Supply and demand for loan funds determines interest rates and bond prices. Demand at zero bound is present, it is SUPPLY due to NIM compression and former lending institution disintermediation that is NOT forthcoming. The 300 Phd's on staff at the Fed, who spoon feed the appointed idiots from Goldman Sachs banksters that are running it, and who have never predicted a recession in advance, don't know money from mud, much less their ass from a hole in the ground.
by ilene - November 18th, 2015 4:16 pm
Watch: Phil's Stock World's Weekly Trading Webinar – 11-17-15
(Subscribe to our YouTube channel here.)
00:02:00 INDEX: DOW, S&P, NIKKEI, NFLX, NGK, NG, GLD, SLV
00:07:38 GLD: Long-Term. it’s a great buy
00:12:42 SLV: Long-Term. explode and collapse
00:15:00 Accuweather: It’s hot right now (NY), next week is cold more usage of Natural Gas
00:21:23 5% Portfolio
00:24:50 Butterfly Portfolio
00:25:07 Short-term Portfolio
00:28:40 OOP Review, Filling Spread, BHI Spread
00:30:40 BHI Spread, Trade Idea, Puts and Calls, Long-Term Option
00:46:35 Saving Bull Calls Spread: Gold
00:59:00 GLI put GLL put good play
00:59:39 BHI: 10% difference
01:03:45 GLL: up, down, up, down…
01:16:30 We have a strong Dollar right now
by phil - November 18th, 2015 8:37 am
Woah, we're half way there – Woah, living on a prayer.
We're waiting on the Fed minutes today (2pm) and, hopefully, more indications that bad news is good news and yesterday's -0.2% Industrial Production and falling Housing Index and weak CPI and poor Redbook Sales were actually good news because the Fed will or won't tighten or whatever the narrative is at the moment – who even cares anymore, it's almost Christmas!
So far, this "rally" of the last few days has erased 30 points of the 90-point drop from S&P 2,010 back to 2,020 and now 2,050 again. Those of you who follow our fabulous 5% Rule™ know that, when we have a 90-point dip we expect at least a weak 18-point bounce (2,038) and a strong 36-point bounce (2,056) before we even begin to consider making bullish bets again. PS – the bounce needs to hold for 2 closes so we are, indeed, not even halfway there.
But we are, in fact, living on a prayer in the hopes that St. Janet and the Immaculate Fed will… oops, what is it we want them to do now? Seriously, I have lost track of the narrative as now we are, for some reason, rallying into the tightening or is it that the recent data is so bad that the Fed would not dare tighten at their next meeting (12/16) – just 7 shopping days before Christmas?
Seriously, I pay more attention to this stuff than pretty much anyone on the planet and I can tell you with absolute certainty that I have no idea what it is traders are now looking for. There is nothing but confusion in the marketplace – which is why we moved to the sidelines.
And we're not alone, by the way. Since we went to mainly cash back in July (the S&Ps previous trip to 2,100), Institutional Investors have been flying out of the market and hedge funds have been lightening up as well. Of course, some of them are our Premium Members over at PSW but we can't be responsible for ALL of the cashing out in the market, can we? No, I…
by ilene - November 17th, 2015 8:30 pm
Courtesy of David Stockman via Contra Corner
Exactly 26 years ago last week, peace was breaking out in a manner that the world had not experienced since June 1914. The Berlin Wall – the symbol of a century of state tyranny, grotesque mass warfare and the nuclear sword of Damocles hanging over the planet – had come tumbling down on November 9, 1989.
It was only a matter of time before the economically decrepit Soviet regime would be no more, and that the world’s vast arsenal of weapons and nuclear bombs could be dismantled.
Indeed, shortly thereafter according to Gorbachev, President George H.W. Bush and Secretary Baker promised that NATO would not be expanded by “as much as a thumb’s width further to the East” in return for acquiescing to the reunification of Germany.
So with its “mission accomplished” there was no logical reason why NATO should not have been disbanded in parallel with the Warsaw Pact’s demise, and for an obvious and overpowering reason: On November 9, 1989 there were no material military threats to US security anywhere on the planet outside of the suddenly vanishing front line of the Cold War.
As it turned out, however, there was a virulent threat to peace still lurking on the Potomac. The great general and president, Dwight Eisenhower, had called it the “military-industrial complex” in his farewell address, but that memorable phrase had been abbreviated by his speechwriters, who deleted the word “congressional” in a gesture of comity to the legislative branch.
So restore Ike’s deleted reference to the pork barrels and Sunday afternoon warriors of Capitol Hill and toss in the legions of beltway busybodies that constituted the civilian branches of the cold war armada (CIA, State, AID etc.) and the circle would have been complete. It constituted the most awesome machine of warfare and imperial hegemony since the Roman legions bestrode most of the civilized world.
In a word, the real threat to peace circa 1990 was that Pax Americana would not go away quietly in the night.
Ronald Reagan had called the dying Soviet Union an Evil Empire, but it was actually a passing freak of history. It had arisen by a fluke 72 years earlier—–almost to the day of the Berlin Wall’s fall—–only because Imperial Russia had been reduced to anarchy by the carnage of the Great War, enabling Lenin to storm the Winter Palace and install his own special Bolshevik brand of hell on…