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Schedule Note

Courtesy of Lee Adler of the Wall Street Examiner

The cycle screening data update will be posted Tuesday morning. I have just finished producing today’s new Radio Free Wall Street  program. It will be available shortly. Thanks for your patience!

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Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby’s Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no trouble following. As you’d expect from someone who uses words to amuse as well as educate, Frisby’s prose is informal and fluid and occasionally very funny, with lots of first-person anecdotes.

The message, however, is fairly serious: Bitcon is, just maybe, a new and better form of money, an emerging homo sapiens to the dollar’s Neanderthal. As such it’s potentially transformational.

So let’s start with a little background: Bitcoins are created (or mined) when computers solve certain kinds of mathematical puzzles. The number of bitcoins outstanding is designed to grow at a predetermined rate for a predetermined period, making its supply both limited and predictable (in contrast to fiat currencies that multiply at the whim of central bankers and politicians). And the currency can be transferred online quickly and cheaply, bypassing the traditional banking/credit card nexus.

Bitcoin book
Frisby spends the first half of his book telling the story of how bitcoin came to be, featuring the author’s attempts to track down the currency’s enigmatic creator, Satoshi Nakamoto (generally believed to be either an individual super-genius polymath or some sort of libertarian programmer collective). Frisby concludes that it’s the former and claims to have found him. You’ll have to read the book for that revelation.

He also profiles some of the early players in the bitcoin ecosystem. Silk Road, for instance, was briefly the Amazon.com of online drug sales until it was shut down by the authorities — and then subsequently reemerged in various forms around the world. Meanwhile, a lot of early adopters made and lost some serious money during bitcoin’s initial price spike:

One student from Norway bought $27 worth in 2010 while studying for his degree. He forgot about them, and then remembered them three years later. That $27 had turned into $670,000.


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M&A Deals Fail At Highest Rate Since 2008

Courtesy of Mish.

In yet another potential market topping sign, M&A Deals Fail At Highest Rate Since 2008

The value of deals that fail to complete has reached its highest level since 2008, in the latest sign that the best year for mergers and acquisitions since the financial crisis will also feature a number of high-profile failures.

Three large deals collapsed last week, adding to the list of wrecked deals and coinciding with a sharp jump in equity market volatility that sapped confidence in stocks and put a chill on the market for initial public offerings.

The biggest blow to dealmaking prospects came as US pharmaceutical group AbbVie unexpectedly dropped its support for a $55bn takeover of UK rival Shire. The sudden U-turn has undermined the prevailing belief among bankers that a US Treasury crackdown on deals that allow US companies to lower their tax obligations by moving abroad would have little impact.

So-called tax inversions have featured prominently in this year’s resurgent M&A market accounting for at least a dozen deals. But the chances of Pfizer, the US pharma company, reviving its $120bn pursuit of the UK’s AstraZeneca have been greatly diminished as a result of AbbVie’s decision, several people close to the situation recently told the Financial Times, casting doubt on the year’s biggest withdrawn deal returning.

A total of $573bn worth of deals have been withdrawn, setting this year up to surpass the $640bn in deals that went uncompleted in 2008, according to Dealogic.

Bruce Embley, partner at Freshfields, said: “It’s slightly unusual to have an M&A cliff coming without also seeing an adverse impact on equity capital markets. So I wonder if we look back on this moment as an anomaly or whether it is the start of something more volatile.”

Deals Withdrawn or Doubtful

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com



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GOLDMAN: We’re Blaming The Stock Market Sell-Off On A Pullback In Buybacks

GOLDMAN: We’re Blaming The Stock Market Sell-Off On A Pullback In Buybacks

Courtesy of 

Ever since the financial crisis, S&P 500 companies have spent about $2 trillion buying back shares of their own stock.

Some market experts have warned that a pullback in buybacks would cause stock prices to fall.

Goldman Sachs' David Kostin believes a temporary pullback may explain why the S&P 500 has tumbled from its all-time high of 2,019 on Sept. 19.

"Most companies are precluded from engaging in open-market stock repurchases during the five weeks before releasing earnings," Kostin notes. "For many firms, the beginning of the blackout period coincided with the S&P 500 peak on September 18. So the sell-off occurred during a time when the single largest source of equity demand was absent. Buybacks dip during earnings reporting months, which have seen 1.2 points higher realized volatility than in other months during the past 25 years."

The bulk of Q3 earnings announcements will be out by the end of October, at which point Kostin believes buying will pick up again.

"We expect companies will actively repurchase shares in November and December," he writes. "Since 2007, an average of 25% of annual buybacks has occurred during the last two months of the year."

Kostin believes the comeback in buybacks will drive the S&P to 2,050 by year-end.

 

cotd buybacks volatility

Goldman Sachs

 





Houston, We Have A “Fracking” Problem

Courtesy of Lance Roberts of STA Wealth Management


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Eurozone Rotting to the Core; Four Possibilities; Beyond the Math

Courtesy of Mish.

On October 6, I noted German Factory Orders Slump 5.7%, Most Since January 2009.

The previous month was up 4.9%, so I averaged the two months noting “The average result is a decline of 0.4% per month, for the last two months. That process also means four consecutive months of decline.

German numbers were particularly volatile allegedly due to timing of school holidays, but there is no way to smooth out four consecutive months of decline as anything other than overall weakness.

Germany Slashes Forecasts

On October 14, and as expected in this corner, Germany Slashes its Economic Forecasts.

In stark contrast with the rosy forecasts made just six months ago of 1.8 per cent growth this year and 2 per cent in 2015, the government forecasts gross domestic product to expand 1.2 per cent in 2014 and 1.3 per cent next year.

The data follows last week’s release of dire German factory figures, which stoked fears among top financial officials gathered in Washington for the International Monetary Fund’s annual meeting that economic weaknesses at the heart of the eurozone could undermine the global recovery.

In spite of the growing pessimism, however, Berlin still expects Germany to avoid a recession, defined as two successive quarters of contraction. After a 0.2 per cent decline in the three months to June, Berlin forecasts some growth in the third quarter, contrary to the forecasts made by some bank economists.

German Manufacturers Cut Jobs

A recession in Germany is a given, but when? Its export model has held up better than I expected given a clear slowdown in the global economy.

Today, we have another sign a German recession will come sooner rather than later: German Companies Tread Unfamiliar Territory with Job Cuts.

When the flow of containers began to slow at the docks in Duisburg a few months ago, workers at the world’s largest inland port got an early indication that Germany’s export machine had begun to falter.

Container volume at Duisburg, which sits at the confluence of the Rhine and Ruhr rivers, is still expected to grow strongly this year. But the outlook for the docks – as with the rest of German business – is suddenly looking less certain.



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Chinese Growth Forecasts Crashed to a Paltry 3.9% and are Going Even Lower – One Chart

Chinese Growth Forecasts Crashed to a Paltry 3.9% and are Going Even Lower – One Chart

Courtesy of ZeroHedge

Up until a few years ago, conventional wisdom was that China would grow at nearly double digits as long as the eye could see. Then, however, something happened, and China's 9% growth became 8%, then 7% and even lower, as suddenly the Politburo made it quite clear China would not chase growth at any cost, especially when the cost is trillions in bad debt and other NPLs, as we have explained time and again. The collapse in Chinese growth expectations is shown best on the following formerly hockeysticking chart of IMF's revised Chinese growth projections which has completely collapsed in the past few years.

However, now that "7% is the new 9%" the world may have to brace for another major repricing of Chinese growth, one which would put it just above where the consensus, as wrong as it is as usual, sees US growth in the near future: a miserable 3.9% long-term growth rate!

According to the WSJ, citing a report by the business-research group the Conference Board, China's growth will slow sharply during the coming decade to 3.9% as its productivity nose dives and the country’s leaders fail to push through tough measures to remake the economy, according to a report expected to come out Monday.

More:

The Conference Board forecasts that China’s annual growth will slow to an average of 5.5% between 2015 and 2019, compared with last year’s 7.7%. It will downshift further to an average of 3.9% between 2020 and 2025, according to the report.

The New York-based Conference Board argues that productivity in China is declining, in part because investments in infrastructure and real estate don’t have the payoff they once did. Meanwhile, government and Communist Party officials who don’t give market forces a large-enough role are stifling innovation.

“The state is too present in the market,” said David Hoffman, managing director of the Conference Board’s China center.

Such an outcome could batter an already fragile global recovery. But the report by the business-research group the


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Russia’s Crackdown on McDonald’s Intensifies

 

Consumer-safety regulators are now conducting over 200 investigations into alleged hygiene and financial violations at McDonald's restaurants in Russia. Currently McDonald's has around 450 restaurants in the country.  

Kathrin Hille at the Financial Times writes,

Russia has broadened its crackdown on McDonald’s to more than 200 separate investigations, in a campaign that makes the US fast food group one of the biggest casualties of Moscow’s festering stand-off with the west over Ukraine.  The latest salvo subjects almost half of McDonald’s outlets in Russia to probes over hygiene or finance. (Russia bites back with widening crackdown on McDonald’s – FT.com)

Bloomberg reports that the original McDonald's restaurant in Moscow’s Pushkin square is currently shut down under court order. Eight other restaurants are also temporarily closed. 

McDonald's disagrees with the decisions to shut down stores and plans to appeal.

While probes into financial matters and hygenic matters are not unusual, this number is extreme. “It is the typical approach you see when [countries] are determined to bring a business to its knees,” according to food industry executive in Russia.  

This witch-hunt started when the U.S. and European Union imposed sanctions against Russian companies and Russian officials following Putin's annexation of Crimea.  In response to these sanctions, Putin banned $9.5 billion in food imports from Western countries. Unfortunately for McDonald's, it's right in the middle of this tit-for-tat exchange of hostilities.

Sources: 

McDonald’s Says Russia Inspecting More Than 200 Outlets (Bloomberg)

Russia bites back with widening crackdown on McDonald’s  (FT.com)

Picture by girlwparasol at Flickr.

 





On The Origin Of Crashes & Clustering Of Large Losses

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Excerpted from John Hussman's Weekly Market Comment

Abrupt market losses typically reflect compressed risk premiums that are then joined by a shift toward increased risk aversion by investors. In market cycles across history, we find that the distinction between an overvalued market that continues to become more overvalued, and an overvalued market is vulnerable to a crash, often comes down to a subtle but measurable shift in the preference or aversion of investors toward risk – a shift that we infer from the quality of market action across a wide range of internals.

Valuations give us information about the expected long-term compensation that investors can expect in return for accepting market risk. But what creates an immediate danger of air-pockets, free-falls and crashes is a shift toward risk aversion in an environment where risk premiums are inadequate. One of the best measures of investor risk preferences, in our view, is the uniformity or dispersion of market action across a wide variety of stocks, industries, and security types.

Once market internals begin breaking down in the face of prior overvalued, overbought, overbullish conditions, abrupt and severe market losses have often followed in short order. That’s the narrative of the overvalued 1929, 1973, and 1987 market peaks and the plunges that followed; it’s a dynamic that we warned about in real-time in 2000 and 2007; and it’s one that has emerged in recent weeks (see Ingredients of A Market Crash). Until we observe an improvement in market internals, I suspect that the present instance may be resolved in a similar way. As I’ve frequently noted, the worst market return/risk profiles we identify are associated with an early deterioration in market internals following severely overvalued, overbought, overbullish conditions.

With respect to Federal Reserve policy, keep in mind the central distinction between 2000-2002 and 2007-2009 (when the stock market lost half of its value despite persistent and aggressive Federal Reserve easing), and the half-cycle since 2009 (when Fed easing relentlessly pushed overvalued, overbought, overbullish conditions to increasingly severe and uncorrected extremes): creating a mountain of low- or zero-interest rate base money is supportive of risky assets primarily when low- or zero-interest rate risk-free money is…
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A Funny Thing Happened On The Way To Raising Rates

A Funny Thing Happened On The Way To Raising Rates

Courtesy of Michael Pento at Pento Portfolio Strategies

It wasn’t too long ago that the stock market was busy celebrating a “great” September jobs report.  There were 248,000 net new jobs created and the unemployment rate dropped to 5.9 percent.  Janet Yellen, Ben Bernanke and the rest of Washington D.C.’s central planners deemed it a great time to take a Keynesian victory lap, basking in the delusion that they now have proved you actually can print and borrow your way to prosperity.

And, because of their success, the Fed would be able to raise interest rates without any damage to the economy.

But while crossing the finish line they discovered they were on the wrong track.  U.S. stocks have dropped for the third consecutive week and have erased all the gains for the year. The market’s anxiety stems from the global economic slowdown (that includes the United States). Industrial commodity prices, most notably oil, are tumbling and sovereign debt yields are plunging—asset prices around the world have begun to collapse. 

Ever since the late 1980’s, the Fed has viewed itself as the savior for the stock market; this is affectionately referred to on Wall Street as the Fed put.  Like a fireman standing ready to put out a major fire brewing in the economy’s kitchen, the central bank has stood ready to bail out any of the markets bad behaviors—most of which were first derived from the Fed’s provision of artificially-low interest rates to begin with.

But, today’s Fed isn’t merely waiting for a fire to start, it is using a flame thrower to light the stove.  It has stopped relying strictly on overnight repos to manage short-term rates and providing liquidity on the margin; but instead has now put the responsibility of the worldwide economy squarely on its shoulders.   

This is why  former Fed Governor Laurence Meyer recently complained that too-low inflation, “is getting to be a real issue again.” With inflation at 1.5 percent according to the Fed’s preferred index, Meyer believes FOMC policy makers aren’t likely to raise interest rates, even if the economy approaches full employment—what Keynesians believe causes inflation. 

And taking this a step further, John Williams, president of the San Francisco Fed, said in…
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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!

 
 

Sabrient

Sector Detector: Sharp selloff in stocks sets up long-awaiting buying opportunity

Courtesy of Sabrient Systems and Gradient Analytics

Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.

Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...



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Phil's Favorites

Schedule Note

Courtesy of Lee Adler of the Wall Street Examiner

The cycle screening data update will be posted Tuesday morning. I have just finished producing today’s new Radio Free Wall Street  program. It will be available shortly. Thanks for your patience!

...

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Zero Hedge

A Caliph In A Wilderness Of Mirrors

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Authored by Pepe Escobar, originally posted at Asia Times,

I'm aiming at you, lover
Cause killing you is killing myself
- Orson Welles (director), The Lady from Shanghai,1947

He's invincible. He beheads. He smuggles. He conquers. He's the ultimate jack-of-all-trades. No Tomahawk or Hellfire can touch him. He always gets what he wants; in Kobani; in Anbar province; with the House of Saud (which he wants to replace) trying to make Putin (who he wants to behead) suffer because of low oil prices....



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Chart School

Weekly Gasoline Price Update: Down Another Nine Cents

Courtesy of Doug Short.

It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny Regular dropped another nine cents and Premium eight cents. Regular is now at its lowest price since January 2011.

According to GasBuddy.com, only one state (Hawaii) has Regular above $4.00 per gallon. The highest continental average price is in California at 3.49. Missouri has the cheapest Regular at $2.76.

How far are we from the interim high prices of 2011 and the all-time highs of 2008? Here's a visual answer.

...



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All About Trends

Mid-Day Update

Reminder: David 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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OpTrader

Swing trading portfolio - week of October 20th, 2014

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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Insider Scoop

UPDATE: Bank Of America Reiterates On ITT Educational Services As Shares Surge But Risks Remain

Courtesy of Benzinga.

Related ESI Urban Outfitters Drops On Q4 Profit Warning; Mead Johnson Nutrition Shares Spike Higher ITT Educational Services Shares Soar On Preliminary Results

In a report published Monday, Bank of America analyst Sara Gubins reiterated an Underperform rating on ITT Educational Services, Inc. (NYSE: ESI), and raised the price target from $7.00 to $8.00.

In the report, Bank of America noted, “ESI shares rall...



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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

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Option Review

Release Of Fed Minutes, Icahn Tweet Boost Shares In Apple

Shares in Apple (Ticker: AAPL) are near their highs of the session in the final hour of trading on Wednesday, adding to the muted gains seen earlier in the day, following the release of the September FOMC meeting minutes and after activist investor and Apple shareholder Carl Icahn tweeted, “Tmrw we’ll be sending an open letter to @tim_cook. Believe it will be interesting.” Icahn’s tweet hit the ether at 2:33 pm ET and was met with a spike in volume in Apple shares. The stock is currently up 2.0% on the day at $100.75 as of 3:15 pm ET.

Chart – Apple rally accelerate...



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Digital Currencies

Bitcoin Has Been Getting Obliterated

Joe has found a place for Bitcoins, and if you hold a lot of them, you won't like it.

Bitcoin Has Been Getting Obliterated

Courtesy of 

Remember Bitcoin?

There's not much to say about it, except that it's doing TERRIBLY.

Here's a chart going back to earlier this summer. Charts don't get uglier than this.

Bitcoinwisdom

Interestingly, the Bitcoin industry continues to be quite excited about the prospects for the digital currency, and there continue to be announcements about expand...



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Promotions

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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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About Ilene:

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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