by ilene - November 28th, 2016 7:14 pm
Since the election this month of Donald Trump as the US president, something considered to be a new phenomenon has become a focus of attention. Some suspect that false news may have swayed the election. Perhaps equally as important, some claim this false news was planted by Russian intelligence under orders of President Vladimir Putin, who allegedly supported Trump’s election.
Given that a recount of votes in some states is likely—with some saying Russians might have hacked voting machines—it increasingly is not simply a matter of politics but of geopolitics.
During the Korean War, the Soviets planted a false story that the United States was using biological weapons in Korea. In those days, such stories were planted in newspapers.
For example, an Indian journalist might be induced to publish a story quoting American generals who had visited India, stating that Korea was a perfect testing ground for germ warfare. Once the article was published, other newspapers might begin quoting the Indian story.
As the news circulated around the world, the reference became prestigious British or French newspapers. The story would no longer quote its forgotten origins in India and would now be treated as credible—if not quite news. The quoted generals would be asked for interviews and refuse them.
By the time the story made US newspapers, it would focus on the generals’ refusal to confirm or deny the use of chemical weapons in Korea. A lie had become accepted truth. But it’s actually not true. The story was adopted full-bore by communists around the world, as well as sympathizers, and those whom Vladimir Lenin called “useful idiots.”
These useful idiots were not communists, but were prepared to believe whatever they heard that portrayed the West as monsters. They were priceless to the Soviets since communists were always suspected of being pro-Soviet for some reason. But the useful idiots were not communists. They simply would believe anything. But alas, over time, the public came to know who they were, and they were lumped in with the communists.
by phil - November 28th, 2016 8:17 am
This is strange.
Trump claims millions of people voted illegally and is using that argument to claim that a recount of the election results is not necessary. Fortunately, he doesn't have his finger on the button just yet and there will be a recount in 3 states (MI, PA and WI) and, though it's not likely to change anything in the end, it's likely to cause a bit of market turmoil – in addition to everything else that's going on.
Imagine if the election is overturned and the entire 10% Trump rally evaporates overnight – that would be interesting. Nothing to worry about so far as we've made it to end-of-month window-dressing time and it's very unlikely "THEY" will let the markets drop away from record highs to close out November but December is going to be trickier as we have that Fed meeting on the 14th and this week already we have 7 Fed speakers to pave the way to the anticipated hike:
As you can see, just the Dallas Fed on the calendar this morning but then things heat up quickly as we get our 2nd estimate of 3rd Quarter GDP tomorrow after the hawkish Fed VC, Fisher has his say but Dudley cleans up after the data and then we see how confident the consumers really are. Friday is non-Farm Payroll but first we have to get past the OPEC meeting on Wednesday and there's another part of the recent rally that might reverse hard and fast if no deal is reached.
As you can see from the earnings calendar, we've pretty much run out of interesting companies to watch so the data becomes more important this time of year, until the earnings cycle starts again in January.
Fortunately, our friends at Goldman Sachs were kind enough to lay out a roadmap for us that takes us all the way through 2017, where the firm predicts we'll finish as 2,200 on the S&P which, unfortunately, is 13-points LOWER than we closed on Friday. In fact, our Q1 S&P projection is for 2,125, down 4.2% from where we are now but clearly…
by ilene - November 27th, 2016 6:28 pm
Ever heard of an Alpha quote? That’s how best to classify, “Show me the money!!!”
It didn’t take you but a nanosecond to picture Jerry Maguire screaming that line into his phone. The shame, for lack of a better word, is that another quote from the same movie, that’s almost as good, will only live on to minor fame.
Getting to the not quite as famous quote requires that you navigate not one, but two scenes in the 1996 Tom Cruise blockbuster. Sports agent Maguire has landed an Odessa, Texas high school superstar quarterback. In perfect stereotypical form, the boy’s father is chief negotiator. Out Maguire drives to dusty West Texas to seal the deal, on paper, to which the father replies: “You know I don’t do contracts, but what you do have is my word. And it’s stronger than oak.” One firm handshake later, we see an elated Maguire driving off singing and pounding his steering wheel to the beat of Tom Petty’s “Free Falling.”
Of course, a betrayal follows as sure as night follows day and the father signs, yes signs, with a rival agent offering a sweeter as in “Sugar” deal. But what about the strength of that oak? A pumped-up Maguire arrives for the young star’s big moment and learns that in all likelihood Cushman Senior does sign contracts. To that Maguire bitterly retorts, “I’m still sort of moved by your, ‘My word is stronger than oak’ thing.” The moral we saw coming: Always get it in writing.
But what happens when those written words still aren’t good enough? The occasion of the release of most Federal Open Market Committee (FOMC) Meeting Minutes would seem to be a great opportunity to get a behind-the-scenes take on all those round the table machinations. Minutes of lame duck meetings – no press conference, no action – hold even greater appeal, especially if multiple dissents accompany the decision. Hence the media jockeying for instant live reaction at 2 pm EST three weeks to the minute from the moment the statement is released. Hey, it beats waiting around five years for the meeting transcripts.
by ilene - November 25th, 2016 8:30 pm
Black Friday – the name elevates images of people standing in long lines, fighting the crowds to grab the best bargains of the year, and filling the shopping carts to the rims. But, as FreeShippingCode.com notes, from another perspective Black Friday is the day when retailers try to push their sales to the last limits in order to maximize their profits, i.e. move from red (loss) column to the black (profit).
While the shoppers try to grab the best bargains of the year, the retailers, on the other hand, try to achieve their Black Friday sales targets, this battle continues till the end of the day to mark the winners and losers of this battle.
The Changing Battlefield
Black Friday sales reached record levels in the last year, but if you are wondering why you did not see those long lines and scenes of shoppers fighting for the best bargains, it is because most of the Black Friday shopping last year was done online. Sales data from last year reveals that 51% Black Friday shoppers used their smartphones to shop online and only 49% headed to the shopping malls and big retail stores. Shoppers have all the good reasons to justify their choice of using their mobile phones and desktops to do their Black Friday shopping online.
A Look At Some Of The Winners
The online shopping landscape has dramatically changed the shopping behavior of Black Friday shoppers, as a result, many big retail giants with profound online presence and popularity are enjoying good sales and profits. Let us have a look at some of the major retailers who were able to make it to the victory stands last year.
Amazon came first with a big chunk of the online sales (35%) in the last Black Friday season. Apple with its popular iPad and iPod brands also enjoyed a good Black Friday season last year. Similarly, REI despite its early announcement to remain closed on the big day recorded 26% increase in the online traffic.
Every year Black Friday creates demand for
by ilene - November 25th, 2016 7:48 pm
Courtesy of George Monbiot
The combination of automation, complexity and climate change is dangerous in ways we haven’t even begun to grasp.
Wave the magic wand and the problem goes away. Those pesky pollution laws, carbon caps and clean power plans: swish them away and the golden age of blue-collar employment will return. This is Donald Trump’s promise, in his video message on Monday, in which he claimed that unleashing coal and fracking will create “many millions of high-paid jobs”. He will tear down everything to make it come true.
But it won’t come true. Even if we ripped the world to pieces in the search for full employment, leaving no mountain unturned, we would not find it. Instead, we would merely jeopardise the prosperity – and the lives – of people everywhere. However slavishly governments grovel to corporate Luddism, they will not bring the smog economy back.
No one can deny the problem Trump claims to be addressing. The old mining and industrial areas are in crisis throughout the rich world. And we have seen nothing yet.
I have just re-read the study published by the Oxford Martin School in 2013 on the impacts of computerisation. What jumps out today, to put it crudely, is that jobs in the rustbelts and rural towns that voted for Trump are at high risk of automation; while the professions of many Clinton supporters are at low risk.
The jobs most likely to be destroyed are in mining, raw materials, manufacturing, transport and logistics, cargo handling, warehousing and retailing, construction (pre-fabricated buildings will be assembled by robots in factories), office support, administration and telemarketing. So what, in the counties that voted for Trump, will be left?
Farm jobs have mostly gone already. Service and care work, where hope for some appeared to lie, will be threatened by a further wave of automation, as service robots – commercial and domestic – take over. Yes, there will be jobs in the green economy, more and better than any that could be revived in the fossil economy. But they won’t be…
by phil - November 25th, 2016 7:47 am
Why not, nothing is out of bounds now that investors have shown they are prepared to accept insane valuations for stocks. We're still skeptical and very well-hedged (and our hedges are getting crushed) but it's more than offset by the ridiculous gains in our long-term positions so party on Trumpmerica!
As you can see on the chart, we came off the 10,000 line in 2011 rose 75% to 17,500, pulled back to 15,000 (33% retrace) and now we're on the road to 20K in one mighty leap since the election, adding 1,000 points since election day – not even counting the 500-point sell-off that occurred right before the rally began (blow-off spike down).
The 5% line off 18,000 was, of course, 18,900 and you can see we had a brief pause there before shrugging off resistance and heading higher. The 7.5% line is 19,350 and not too much upside resistance there and then it's a hop, skip and a jump to 20,000 – no problem!
In fact, the Russell 2,000 is just under 1,350 and that's up 200 points since early November (not counting their spike down) and that is just shy of 15% so the Dow is MILES behind if the move in the Russell is real (we have bet it is not but those bets are killing us!). The Nasdaq is up 4.3% and the S&P is up 5.5% and the NYSE, the broadest index, is up 4.8% so it's really the Russell that's a huge outlier – and that's why we're shorting it.
HOWEVER, we could be (and have been) very wrong about the Russell and, if so and it heads higher still, then it's the other indexes that should be catching up so we can hedge our hedges with long positions on the Dow, S&P and Nasdaq. For example, the Dow ETF (DIA) is at $190 so a 5% move in the Dow would be $199.50 and we can make the following play to gain leverage:
- Buy 30 DIA March $188 calls at $6.70 ($20,100)
- Sell 30 DIA March $193 calls ar $3.75 ($11,250)
- Sell 5 AAPL 2019 $97.50 puts for $10 ($5,000)
by ilene - November 24th, 2016 2:36 pm
Best wishes for everyone to have a Happy Thanksgiving!
I am not feeling it myself,… so how about some cartoons to go with this special day?
Courtesy of Joshua M Brown
by ilene - November 24th, 2016 2:10 am
And So it Begins: Normalizing the Election
It didn’t take a clairvoyant to predict that President-elect Donald Trump would be almost instantly normalized by the press since he had already been normalized by them when he was a candidate. After a "60 Minutes" interview, Lesley Stahl declared him “more subdued and serious.” NBC’s Andrea Mitchell reported approvingly upon the transition as if proposed White House counselor Steve Bannon and proposed attorney general Jeff Sessions, two men with racism in their pasts, were ordinary appointments. Mitchell’s colleague at NBC, Chuck Todd, chastised Senator Harry Reid, after his eloquent and impassioned attack on Trump, for being “too harsh.” And so the media fell into line. To which we can only invoke John Oliver’s emphatic post-election pronouncement: “THIS IS NOT NORMAL.”
That, however, is only one of the media’s derelictions. Far more serious is their normalization not of Trump but of his voters. The former is typical cowardice under threat of reactionary populism. The latter is an endorsement of reactionary populism that may have far-reaching consequences for whether the country can ever be reunited after having been torn asunder.
First Trump. The media impulse to render Trump ordinary, and their sudden disinclination to criticize him is natural reflex. The press needs him as it needs all presidents because the press need access. Trump was fairly brilliant in branding the mainstream media as his opponents and, worse, a group of snotty elitists who disdained not only him but also his supporters. The general public doesn’t much like the press to begin with and Trump ramped up the hatred, so that, according to some reports, a cluster of his supporters began using the term “luginpresse,” or “lying press,” which is how the Nazis characterized those organs that opposed Hitler. More, they began to intimidate the press, verbally and even physically.
Under normal circumstances a candidate who incited his supporters to attack the press might raise First Amendment issues. But these are not normal circumstances, so Trump can target the press with impunity. Their only recourse is to make peace, which is what they seemed to be doing when they met with Trump this weekend, and peace means less rigorous coverage. The…
by phil - November 23rd, 2016 8:28 am
Last time all our indexes hit all-time highs together was back in good old 1999 and that party was never going to stop either – unitl it did, of course. The pullback in 2000 wasn't even that bad, if you don't count the silly run to 5,000 on the Nasdaq that made no sense, then the pullback from 4,000 to 3,000 was very normal – it was only the crazies that bought stocks up at Nasdaq 5,000 that got really burned….
Of course, that Nasdq wasn't the same Nasdaq we have today. There is no more Pets.com (Amazon delivers our pet food), there is no more WebVan or Kozmo (Amazon delivers our groceries) and, of course, there is no more Books-a-Million (yep, Amazon).
Aside from Amazon, who lead the overpriced team in the new dot.com bubble with market cap that is 179 TIMES their projected (forward) earnings, other survivors of the crash of 2000/2001 are AAPL, HPE, IBM, MSFT, GOOGL, INTC, CSCO, ORCL and IM, who are especially notable as they actually compete with Amazon yet they still survive.
So clearly it is better to be a company that actually makes stuff – especially stuff that other apsiring tech companies buy from you. For AAPL, it's tech employees who buy there stuff and for GOOGL – they advertise all the stuff people are trying to sell you. Yet AMZN has a $373Bn market cap – bigger than all the dot.com stocks put together back in 2000!
Amazon was coming back to reality before the election but now it's off to the races again and, while we're not worried about our Jan $900 short calls we sold for $8.10 the last time AMZN popped (now $1.98 so we're up 75%), it is getting interesting again as a short for those brave enough to point and say "Emperor Bezos has no profits!"
Well, they do have profits but they are all in their cloud storage division – the rest of the business is actually running at a loss this year. Anyway, it's an interesting stock to short. I favor the April $850 ($90)/780 ($50) bear puts spread at net…
by ilene - November 22nd, 2016 8:57 pm
Courtesy of Michael Batnick
The S&P 500 just made an all-time high for the 11th time this year, and the 1134th time since 1928. Today, the Dow Jones Industrial Average crossed 19,000 for the first time ever. The natural inclination is that now might not be the best time to put new money to work. The data doesn’t support this, at least not in the short term.
The table below shows that average returns six months and one year following an all-time high has been stronger compared with all other days.
Taking a longer-term view, 18% of all months have closed at a new all-time high. You can see them represented below by the green dots. New highs are nothing to fear, in fact they are the cornerstone of every great bull market.
The people that use all-time highs to scare you are the same people who told you that the 27% selloff in the Russell 2000 earlier this year was the canary in the coalmine. Small-cap stocks are now at all-time highs and 40% off their February lows. The main takeaway is this; it’s true that every nasty bear market we’ve ever had followed an all-time high, but all time highs on their own is not a harbinger of bad things to come.