by ilene - June 30th, 2015 5:07 pm
By John Mauldin
(Originally published on June 27, 2015)
“If this were a marriage, the lawyers would be circling.”
The Economist, My Big Fat Greek Divorce, 6/20/2015
Greece is again all the buzz in the media and on the commentary circuit. If you’re like me, you are suffering terminal Greece fatigue. You just want Greece and its creditors to “do something already” rather than continually coming to the end of every week with no resolution, amid finger-pointing and dire warnings from all sides about the End of All Things Europe – maybe even the world.
That frustration is a common human emotion. Perhaps the best and funniest illustration (trust me, it is worth a few minutes’ digression) is the story about one of my first investment mentors, Gary North, who was working in his early days for Howard Ruff in Howard’s phone call center before Gary began writing his newsletters and books. (Yes, I know I am dating myself, as this was the late ’70s and early ’80s, just as I was getting introduced to the investment publishing business. And for the record, I knew almost everyone in the publishing business in the ’80s. It was a very small group, and we got together regularly.)
Howard set up a phone bank where his subscribers could call in and ask questions about their investments and personal lives. One little lady had the misfortune to get Dr. Gary North on the line. (Gary was the economist for Congressman Ron Paul and went on to write it some 61-odd books, 13,000 articles, and more – all typed with one finger. He is a human word-processing machine.)
This sweet lady lived way out in the country and was getting older. She asked Gary if he thought it would be a wise idea for her to move into the city (I believe it was San Francisco) to live with her daughter. Not knowing the answer, Gary helped her work out the pros and cons over the phone, and she decided to move. A few days later she called back and said that she couldn’t bring her dog with her because of…
by phil - June 30th, 2015 8:30 am
Down in the pleasure centre,
hell bent or heaven sent,
listen to the propaganda,
listen to the latest slander.Pump it up until you can feel it.
Pump it up when you don't really need it. – Elvis
China has set a new Global record by dumping almost $200Bn (over 1Tn Yuan) in stimulus into their overheated markets in just two days. Sunday night it was a rate cut AND lowering the reserve requirements for banks and yesterday afternoon they dropped another $50Bn in a "Reverse Repo" operation and, to cap it off this morning, the Finance and social Security Ministries published draft rules that would permit the state pension fund to invest up to 30% of its net asset value in securities, potentially allowing ANOTHER 600B yuan ($97B) to enter the market.
Take 30% of our retirement savings and buy stocks that already gained over 100% this year in an attempt to prevent a bear market from wiping out all of the gains – BRILLIANT!!!
Certainly Chinese speculators thought so as the Shanghai went from down 5.6% at the open to up 5.6% at the close! This allowed them to save a little face at the close of the Quarter and, more importantly, promises Fund Managers a whole new round of suckers to dump shares into in July.
10% happens to be a Strong Bounce off the 25% drop, per our 5% Rule™, so we're not going to be too impressed until we see some follow-through. Like us, Bloomberg is skeptical, saying: "China's Magic Tricks Can't Save Its Stock Market" warning us:
Only time will tell if Beijing's bag of tricks is empty. But if it is, the fallout on global markets could dwarf the impact of Greece's flirtation with default. The world, after all, has had a few years to contemplate a Greek exit from the euro. But if the world's biggest trading nation suddenly hit a wall, it would
by ilene - June 29th, 2015 8:30 pm
Courtesy of David Stockman of Contra Corner
Late Friday night a solid blow was struck for sound money, free markets and limited government by a most unlikely force. Namely, the hard core statist and crypto-Marxist prime minister of Greece, Alexis Tsipras. He has now set in motion a cascade of disruption that will shake the corrupt status quo to its very foundations.
And just in the nick of time, too. After 15 years of rampant money printing, falsification of financial market prices and usurpation of democratic rule, his antagonists—–the ECB, the EU superstate and the IMF—-have become a terminal threat to the very survival of the kind of liberal society of which these values are part and parcel.
In fact, the Keynesian central banking and the Brussels and IMF style bailout regime—which has become nearly universal—-eventually fosters a form of soft-core economic totalitarianism. That’s because the former first destroys honest financial markets by falsifying the price of debt. So doing, Keynesian central bankers enable governments to issue far more debt than their taxpayers and national economies can shoulder; and, at the same time, force investors and savers to desperately chase yield in a marketplace where the so-called risk free interest rate has been pegged at ridiculously low levels.
That means, in turn, that banks, bond funds and fast money traders alike take on increasing levels of unacknowledged and uncompensated risk, and that the natural checks and balances of honest financial markets are stymied and disabled. Short sellers are soon destroyed because the purpose of Keynesian central banking is to drive the price of securities to artificially high and unnatural levels. At the same time, hedge fund gamblers are able to engage in highly leveraged carry trades based on state subsidized (free) overnight money, and to purchase downside market risk insurance (“puts”) for a pittance.
Eventually bond and stock “markets” become central bank enabled casinos—-riven with mispriced securities, dangerous carry trades, massive unearned windfall profits and endemic instability. When an unexpected shock or “black swan” event threatens to shatter confidence and trigger a sell-off of these drastically over-priced securities, the bailout state swings into action indiscriminately propping up the gamblers.
That’s what the Fed and TARP did in behalf of Morgan Stanley and Goldman back in September 2008. And it’s what the troika did in behalf of the French, German, Dutch, Italian and other European banks, which were stuffed with unpayable Greek and PIIGS debt, beginning in 2010.…
by phil - June 29th, 2015 7:38 am
I love a good distraction!
One of the great things about being good at forecasting the Futures is that we were not only 100% prepared for Greece to melt down (our Short-Term Portfolio was already up 152% as of Friday's close) but we're already done talking about it and looking ahead to the much bigger Financial crisis in CHINA!!!
If you are a typical short-term, short-sighted, impatient investor (they kind we make money off every day), now is a good time to click away and look for someone to explain to you what's going on in Greece. I liked Felix Salmon's "I Haven't Been Paying Attention. What's Going On In Greece?" enough to send it to the 1,000 people who asked me that this weekend. Greek markets are closed today (and will be all week along with the banks) but the Greek ETF (GREK) is trading and will open down 15-20% by my estimation.
As I said, I'm bored with Greece, we discussed it all weekend (and all year, and all month) in Member Chat, so you can catch up HERE, and we already played our strong bounce lines in the Futures and took our profits at:
- Dow (/YM) 17,670
- S&P (/ES) 2,075
- Nasdaq (/NQ) 4,430
- Russell (/TF) 1,264.20
Those are the strong bounce lines per our fabulous 5% Rule™ and we were able to predict them last night at 6pm, when the market opened and I tweeted out our long ideas as well as the exits and even used Seeking Alpha's Stock Talks to make sure all my readers got a chance to play. Now it's time to look at CHINA!!!, where the bi-weekly emergency measures to prop up their markets have already FAILED this morning. As I said on Friday in "Let’s Ignore China (again) and Terrorism Today!":
At $47.75, FXI should open lower this morning and we do expect China to step in with more stimulus but the Aug $45.50 puts at $1 are still a fun way to play if you don't like
by Market Shadows - June 28th, 2015 7:17 pm
Talks between Greece and its creditors have broken down over the weekend and stock futures are tanking. The Greek stock market, and Greek banks, will be closed for the next week…. Could anyone have possibly seen this coming…?
Tsipras takes Greece to the edge of the precipice (Financial Times)
The FT takes a harsh view of Mr Tsipras' political tactics while also criticizing the creditors' uncompromising position and the political leadership in the eurozone. The result: an unfortunate, unnecessary standoff.
The threat to the euro has always been a soluble problem cloaked in an aura of political impossibility. But with each day, both sides seem more willing to indulge in blame shifting rather than constructive engagement. Greece now stands on a precipice. It is increasingly hard to detect the path of retreat.
After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece's banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing.
Banks are expected to be closed all next week, and there will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday. Capital controls are likely to last for many months at least.
The drop in stocks comes after a wild weekend of headlines out of Greece that saw talks between Greece and its creditors break down, Greece call a referendum vote on the latest bailout terms for next Sunday, while Greek banks and the Athens stock exchange have been closed for at least the next week.
Greece also has a €1.6 billion payment due to the IMF on Tuesday, which it appears they will miss.
Brace for a Sell-Off: Here's how the markets will respond to this weekend's debacle in Greece (Mohamed El-Erian at Business Insider)
Given developments over the last 36 hours —
by phil - June 27th, 2015 6:52 am
Things are getting crazy!
The markets have been zig-zagging all over the place but, fortunately, it's what we expected and our Long-Term Portfolio sits at $723,544, that's up 44.7% and down $23,859 (3.3%) from our last review but, fortunately, our paired Short-Term Portfolio did it's job and protected us, finishing the week up 152%, at $252,003 – just shy of a cool million from our $600,000 start on 11/26/13 (up 66% in 18 months).
Our dual portfolio system allows us to be smart "buy and hold" investors in our large Long-Term Portfolio while navigating the choppy market waters in our much smaller (1/5th) Short-Term Portfolio, which hedges the LTP and lets us take advantage of short-term opportunities when they present themselves – like shorting Netflix (NFLX) at $700 last week - that was EASY MONEY! Setting up BALANCED portfolios is the key to our success and a few useful articles on the subject are:
- Setting Up A Hedged Portfolio Part 1 – Financials
- Smart Portfolio Management – The $25,000 Virtual Portfolio
- Smart Virtual Portfolio Management II – The $100,000 Virtual Portfolio
- Smart Portfolio Management – Part III – $1,000,000
Although we've been running our current virtual portfolios since Thanksgiving of 2013, we are constantly adding new trades and the key for all of us is to find that balance and take the new trade ideas that work to give us even better balance and add those. That's why, although we have dozens of trade ideas each month and almost a dozen Top Trades each month, very few of those picks end up in one of our portfolios. You can't play every game – the important thing is to learn HOW to play, so you can win when you do!
Top Trades began last October and all 3 of our initial picks (GSK, MAT, RRD) are well on track. In the last two months, we've been on a major roll with 20 out of 25 of our trade ideas (80%) coming up winners already and only one (LL) really off track. We do these reviews on trades that are 2-3 months old (so we're doing May now) as there's no point in reviewing trades we just initiated. Keep…
by phil - June 26th, 2015 7:53 am
And how was your morning?
Probably better than it was for people in France, where an Air Products (APD) factory was attacked with a car bomb. Our markets have become so jaded to terrorism that they spiked HIGHER minutes after the attack (6:40). Meanwhile, in China, the Shanghai Composite continued to tumble, down a whopping 7.4% on the day, which is amazing since they halt stocks at 10% so only a few of them DIDN'T go limit down for the day.
We've been warning you about this (and shorting China with (FXI), (FXP) and (CHAU)) for over a month now but this time may be different as Morgan Stanley (MS) warned it's investors NOT to buy the F'ing dip in what is now China's $8.8Tn market (was over $10Tn when we started shorting).
“This is probably not a dip to buy,” wrote Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley in Hong Kong. “In fact, we think the balance of probabilities is that the top for the cycle on Shanghai, Shenzhen and the ChiNext has now taken place.”
Chinese markets peaked out on Friday, June 12th and I called the top on Monday, June 15th, with "Monday Meltdown – Greece and China Race to Default" in which I said:
China is only better off than Greece in that they get to print their own money and make up their own economic statistics without the fear of being audited (it was an audit of Goldman Sach's cooked books that began the Greek crisis). That means China has less chance of having their backs placed against the wall than Greece but that doesn't mean that, like fellow BRIC nations Brazil and Russia, investors won't simply lose confidence in what is more and more obviously an unsustainable system.
Since last June, the Chinese markets have gained $6Tn (150%) in PRICE (not value!) as margin debt climbed from $100Bn to $358Bn (250%). Meanwhile, net inflows of cash into the Chinese markets were just $200Bn. $200Bn + $358Bn is not $6,000Bn is it?
by ilene - June 25th, 2015 9:30 pm
Watch Mark Dice fail to practically give away a 10oz bar of silver while standing right in front of a coin shop. Passersby were either too lazy or too dismissive of the silver's worth to even get the bar appraised. As Phil writes, if you think that "hoarding physical metals (gold, silver) will keep you safe in a market collapse, let this be your valuable lesson for the weekend. This is why I crack up when people tell me they keep a supply of gold coins or silver in a safe 'just in case.' If paper money becomes worthless, I advise people to have a stockpile of water filters instead."
If you can't trade a $160 bar of silver for a half drunk latte or bowl of noodles now, wait until the end of the world is really upon us.
Courtesy of ZeroHedge.
Seemingly confirming the national new normal, dumbing-down-ness, the following clip shows Americans have absolutely no idea about the value of precious metals. When asked if they would like to purchase a 10oz silver bar (worth $160) for just ten bucks, every single one refused… one even refused to handover a half-drunk Starbucks coffee for the silver bar.
Mark Dice does it again…
Exposing the staggering ignorance of the average American even more, the clip was filmed right in front of a coin shop.
We wonder what the same interviews would be like in China or India or Russia?
by ilene - June 25th, 2015 2:18 pm
By John Mauldin
The common meme in today’s world is that we are slowly (or perhaps even rapidly in some instances) destroying our global environment. Not just by way of global warming, but pollution, over-farming, water usage, and increasing use of all sorts of resources taken from the ground. Post-apocalyptic movies and books are the rage, showing us living in a world where man has ravaged his environment and our lives have been degraded if not destroyed. Our failure to deal with global warming and the destruction of the environment are key components of the mantra repeated by the mainstream media, pundits, and politicians.
Technology is supposed to somehow save us from our dystopian future by creating new ways to clean the environment, feed us, and help us become more thrifty and less wasteful. But when? When will we see those breakthroughs, that light at the end of the tunnel?
A few years ago I met Jesse Ausubel, who ran a two-week-long think tank for the US Department of Defense at the Naval War College, tasked with thinking about the challenges of the next 20 years. The Office of Net Assessment brought in 15 futurists from a number of disciplines and personnel from each branch of the military who were the heads of future-scenario planning for their respective branches. We sat for over a week, 10-12 hours a day plus dinners, thinking through the issues we might have to face. Andrew Marshall, who was 93 and had been running that department since he was appointed by Nixon in 1974, gathered this group of nonconsensus thinkers each summer to think about long-range issues. I was fortunate enough to be part of the group for two years.
Jesse corralled this herd of cats into a cogent work group and kept us on track. The experience was exhausting but exhilarating. It was soon clear that Jesse was not only capable of organizing a group of eclectic minds, he was also a…
by phil - June 25th, 2015 8:13 am
Stick to that and everything else don't mean s**t, as old Curly would say. What that one thing is, we have to figure out! This week, our one thing is not Greece but the Nasdaq, which needs to hold that 5,200 line (on the /NQ Futures, about 4,550 on the index) if we are to believe that other things, like Greece, can be ignored as our own markets move on to new highs.
We're still watching 2,120 on the S&P, of course and 1,300 on the Russell would be nice to make but it's the Nasdaq, where all the hot stocks are, that should be leading us higher in a real rally that's not going to get dragged down by the Fed, or Greece, or China, or Russia, or our Negative GDP or anything that investors used to worry about in the times before things were different – like they are supposed to be now.
You know I DETEST low-volume rallies and here we are in another one and I've certainly given up hope that the S&P will lead us into the promised land. That means the torch has been passed to tech (and we have SQQQ as a hedge in our Short-Term Portfolio) and that means we should take a look at the only tech company that matters, Netflix (NFLX).
No, I'm just messing with you! We shorted the crap out of them yesterday on that ridiculous pop over $700 and we already made a ton of money on the Icahan-inspired pullback. Obviously I'm talking about Apple (AAPL), which is almost 20% of the Nasdaq in weighting and, if you add in all the Apple suppliers, probably about 25% of the Nasdaq's moves depend on what AAPL does on any particular day. Overall, the Nasdaq won't make new highs if AAPL doesn't make new highs.
Does AAPL deserve to be at new highs? Well, as a disclosure, it was our Stock of the Year selection for 2015 and 2014 and 2013 before that so it's safe to say we like AAPL and we are not debating the merits of the company but we did cash out of the trade as AAPL…