Archive for the ‘Phil’s Favorites’ Category

Weekend Reading: Should I Stay Or Should I Go

Courtesy of Lance Roberts of Real Investment

It has been interesting as of late reading the numerous views espousing the value of “indexing” and lamenting the short-term underperformance of some fund manager. What is more interesting is a large majority of these individuals have only been involved in the markets post-financial crisis. In other words, many of these individuals have never lived through a 2000 or 2008 type financial market event.

It is only during these periods where true investment “metal” is tested as the battlefield becomes a vast wasteland of bodies and failed ideas. Despite strategies that promote the value of long-term investing and the benefits of indexing, it is the realization of “loss” that derails even the most well-intentioned of individuals.

“Everyone’s got a plan, until they get punched in the face.” – Mike Tyson

But that is a realization that only occurs “after the fact.” Like the prey being hypnotized into immobility by the gaze of the snake as it slowly tightens its coils, investors are lulled into sense of complacency by a market, and the ongoing commentary, that seemingly “can’t go down.” 

Maybe, I have just been around too long. Over the past 25-years, I have seen just about everything that happens to investors fiscally and psychologically and the market environment that drove those outcomes. The current market environment of back-and-forth action is not unlike that seen just prior to the major market corrections in 2000 and 2008. As shown in the chart below, there are too many similarities to simply be coincidence.


Could this time be different? Sure. Is it likely? Probably not.

The only question in my mind is “timing.” Which brings me to “The Clash” and the reading list for this weekend.

Should I stay or should I go?


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Diving Into Seasonal Adjustments: Today’s Conversation With the BLS

Courtesy of Mish.

This morning I posted Jobs Rise Less than Expected 160K; Employed -316K, Fulltime Employment -196K.

The number in question is Fulltime Employment at -196,000. Zerohedge arrived at -253,000.

Attempting to sort things out between the table I used and the one ZeroHedge used, I noted the numbers don’t add up.

There is a discrepancy in part-time employment numbers this month of 1,366,000 between two different tables.

With that introduction, let’s dive into Household Table A as compared to Household Table A9.

Table A9

Table A9 2016-05-05

Employment dropped by 316,000. That’s the number I used in my report. It matches the number in Table A.

Continue reading here…

The King of Debt Proposed a Very Bad Idea

Trump needs a do-over. It's one thing that Trump likes debt, it's another thing that he likes debt because he can default on it. That is not OK when you're the US. 

Hearing Trump talk about economics gives one an instant understanding of why he has declared so many bankruptcies. ~ Andy Borowitz

Here is the GOP’s Presumptive Nominee on Negotiating Treasury Payments

Courtesy of Joshua Brown, The Reformed Broker

I’m not a Hillary fan and I voted for Romney last time, so don’t even think about pigeonholing me into a partisan / bias debate.

But I have to just point out, this is the mentality of the GOP’s presumptive nominee for the Presidency, on how he thinks about Treasury bonds, which are the bedrock of global capitalism and geopolitical stability in the Milky Way galaxy:

Asked whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.”

He added, “And if the economy was good, it was good. So, therefore, you can’t lose.”

If this doesn’t frighten you or bother you – regardless of your party affiliation – then you’re either an anarchist or an idiot.

The whole world runs on the premise that US debt is risk-free in terms of return of principal, backed up by our status as the world’s reserve currency and the enforcement of the US Navy, Army, Air Force and Marine Corps. You can mess with just about anything else you want, but you can’t mess with that. Ted Cruz tried in 2011 and we should have deported him on the spot. This is a no-go zone for dilettantes and ideologues.

Sorry, I just had to say it. Others will say much the same thing in a thousand articles that will be written today.

He thinks this is like an Atlantic City shakedown against Lehman Brothers or something. Or maybe he doesn’t. Maybe Jared and Ivanka will read the reactions and talk him off this ledge.

Fortunately, like almost everything Trump says about finance and…
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News You Can Use From Phil’s Stock World


Financial Markets and Economy

Treasury Market Liquidity Still Robust, Officials Show in Blog (Bloomberg)

The world’s largest debt market is sound and traders’ ability to transact remains robust, U.S. Treasury Department officials said in premiering a liquidity gauge Friday in a blog to be posted on the government’s website.

Pumpjacks are seen in Lagunillas, Ciudad Ojeda, in the state of Zulia, Venezuela December 22, 2015. REUTERS/Isaac UrrutiaOil stable as production outages offset impact of stronger dollar (Business Insider)

Oil prices were steady on Friday after a run up on supply disruptions, especially in the Americas, where wildfires continue to rage near Canada's huge oil sand fields, tightening a market suffering global oversupply.

Oil prices dip as focus returns to global supply glut (Market Watch)

Oil futures edged lower on Friday as traders looked beyond recent supply disruptions in Canada and Libya and focused on the global crude glut.

The Downside of Hedging Currency Risk for Stock Investors (Wall Street Journal)

The U.S. dollar’s weakness this year has shown the downside of hedging currency exposure when investing in overseas stocks.

'Paralyzing Volatility' Means Trouble for Wall Street Giants (Bloomberg)

There’s plenty of volatility, but what happened to the volume?

Banks Face New Rule That Magnifies Loss Reserves in Weak Economy (Bloomberg)

A new accounting rule that will force banks to set aside provisions for bad loans long before they sour could cannibalize profits and eat into capital at U.S. lenders.

Big drop in bullishness for U.S. stocks could actually be a good sign (Market Watch)

The U.S. stock market’s recent weakness represents little more than investors taking a breather before they mount another rally.

Want to bet on millennials? Buy these stocks (Market Watch)

We’re about to find out how many more millennials found jobs as social-media managers, fixie repairmen or whatever, allowing them to move out of mom and dad’s basement.

GM, Lyft to Test Self-Driving
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Showdown! In Leaked Letter IMF Tells Germany “Debt Relief for Greece or IMF Drops Out”

Courtesy of Mish.

It’s showdown time.

The IMF has threatened it will pull out of the Greek bailout program unless Greece gets debt relief.

German Chancellor Angela Merkel, Austria, Finland, and the other Eurozone creditors will not like today’s development one bit.


Please consider IMF Tells Eurozone to Start Greek Debt Talks.

The International Monetary Fund has told eurozone finance ministers they must immediately begin negotiations to grant debt relief for Greece despite German opposition, upending carefully orchestrated negotiations ahead of an emergency meeting on Monday.

In a letter to all 19 ministers sent on Thursday night and obtained by the Financial Times, Christine Lagarde, the IMF chief, said stalemated talks with Athens to find €3bn in “contingency” budget cuts, which have gone on for a month, had become fruitless and that debt relief must be put on the table immediately, or risk losing IMF participation in the programme.

Athens is facing €3.5bn in debt payments in July that it needs bailout aid to pay, and EU officials have told Greek government officials they do not want messy negotiations to continue during the Brexit campaign — meaning if no agreement is reached this month, leaders will not begin discussions again until just weeks before a possible default.

Similar last-minute talks a year ago rattled the Greek economy and raised questions about whether Greece could be ejected from the eurozone.

Relations between the IMF and Athens, already strained after last year’s brinkmanship, have reached a new low in recent weeks following WikiLeaks’ publication of a transcript of a private teleconference between Mr Thomsen and other IMF officials — a transcript Greek officials claimed showed the IMF was negotiating in bad faith.

Ms Lagarde stuck by the IMF’s assessment that such reforms would only produce a primary surplus of 1.5 per cent in 2018 — not the 3.5 per cent the EU has mandated.

“We do not believe that it will be possible to reach a 3.5 per cent of GDP primary surplus by relying on hiking already high taxes levied on a narrow base, cutting excessively discretionary spending, and counting one-off measures as has been proposed in recent weeks.”

Leaked Letter

Dear minister:

Program discussions between Greece and the institutions have made progress in recent weeks, but significant gaps remain to be bridged before an agreement

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Corporate Tax Receipts Reflect Economic Slowdown

Courtesy of Pater Tenebrarum of

Tax Receipts vs. the Stock Market

Following the US Treasury’s update of April tax receipts, our friend Mac mailed us a few charts showing the trend in corporate tax payments. Not surprisingly, corporate tax payments and refunds mirror the many signs of a slowing economy that have recently emerged. An overview in chart form follows below. First up, corporate tax receipts in absolute figures.

1-corporate tax receipts

Corporate tax receipts in absolute dollars and cents – this is quite astonishing considering that the amount of money in the US economy has increased by roughly 125% since early 2008. Corporate taxes by contrast haven’t even made it back to the 2007 peak.


The next chart shows tax refunds to companies – these traditionally increase when companies aren’t doing as well as they would like:

2-corporate tax refunds

Corporate tax refunds have begun to turn up – they have led the last downturn by about 7 months

The next chart shows the underlying trend in the form of the 12-month rolling change in net corporate tax receipts. This shows actually a quite noteworthy development: the 12 month rolling change has just crossed into negative territory to the greatest extent since late 2007 (there was a very tiny dip below the zero line in 2011 as well, during the peak of the euro area debt crisis):

3-corp tax 12 month rolling

12 month rolling change in net corporate tax receipts.

Mac had the interesting idea to compare gross corporate tax receipts to the S&P 500 index as well. In a way, it can be thought of as an alternative market valuation measure. As he notes to this chart:

“The market and tax receipts began to diverge at about the exact same time that QE1 began.”

4-SPX vs. tax receipts

Corporate tax receipts (red line) vs. the S&P 500 (blue line), indexed since 2005. Note the large positive gap prior to 2010 and the persistent (and now widening) negative…
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Favor Delivery: How Many Reckless Drivers Driving Without Insurance?

Courtesy of EconMatters

No Parking Sign Means NO Parking

One of my friends in Houston Texas recently had a run-in with a driver of a company called NeighborFavor Inc. d/b/a Favor Delivery.  

It was actually a fairly minor fender bender type of auto incident where a Favor Delivery driver (or runner as Favor calls them) parked at a Fire Lane No Parking Zone directly behind my friend’s garage for a quick drop-off on the job.  My friend inevitably backed into the Favor Driver’s car. 

Driving without Insurance Is a Serious Matter

My friend complained to favor’s corporate office about its driver’s illegal parking causing the accident, and also filed a claim with the runner’s personal auto insurance co. The initial communications by Favor seemed to think the driver’s insurance co. should cover this claim. Then the driver’s insurance company noted an “exclusion paragraph” that the personal policy does not cover “liability arising out of operation of a vehicle while it is being used for a fee” which includes delivery for profit.  

This means that Favor driver was driving illegally without proper insurance while on the job!   

My friend immediately communicated this “exclusion” and how the driver was actually working for Favor without proper insurance, and if Favor has a corporate policy to cover its drivers on the job.  The subsequent communication from Favor simply denies any wrong doing, yet did not answer the very important question regarding its driver insurance coverage. 

Who Is Favor Delivery?

Based on Google search and emails between my friend and Favor, I understand Favor Delivery is one of those start-ups catering to the Millennial or Gen Y lifestyle of having everything delivered.  Favor’s business model is very similar to Uber that anyone can apply and become a runner making extra bucks delivering for Favor.  Favor Delivery has no company fleet, and each runner makes delivery on the job using their personal vehicle without any company sign or logo.  

Is Favor Delivery a Responsible Corporate Citizen?

The first question that comes to mind:  How can any legitimate company say it with a straight face that its driver was

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Jobs Rise Less than Expected 160K; Employed -316K, Fulltime Employment -196K

Courtesy of Mish.

Initial Reaction

Today’s employment report shows an increase of 160,000 jobs, well under the Bloomberg Econoday consensus estimate of 200,000 jobs and below the entire consensus range of 175,000 to 245,000.

Revisions took April from 215,000 down to 208,000.

The household survey was far weaker than the payroll survey. Employment actually declined by 316,000, with fulltime employment down 196,000.

Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +160,000 – Establishment Survey
  • Employment: -316,000 – Household Survey
  • Unemployment: -46,000 – Household Survey
  • Involuntary Part-Time Work: -161,000 – Household Survey
  • Voluntary Part-Time Work: +41,000 – Household Survey
  • Baseline Unemployment Rate: +0.0 to 5.0% – Household Survey
  • U-6 unemployment: -0.1 to 9.7% – Household Survey
  • Civilian Non-institutional Population: +201,000
  • Civilian Labor Force: -362,000 – Household Survey
  • Not in Labor Force: +562,000 – Household Survey
  • Participation Rate: -0.2 at 62.8 – Household Survey

Employment Report

Please consider the Bureau of Labor Statistics (BLS) Current Employment Report.

Continue reading here…

Trumped! Why It Happened And What Comes Next, Part 2 – The Peace Deal

Courtesy of David Stockman of Contra Corner 

When it comes to the economic future, a Trump presidency could bring either a shitstorm or salvation. Regrettably, the odds of the former are immensely the higher. That’s because Trump is a welcome, but extremely unguided missile.

On the one hand, his great virtue is that he is a superb salesman and showman who has captured the GOP nomination and has a serious shot at the White House with absolutely no help whatsoever from the Washington/Wall Street establishment.

So unlike any other candidate in recent memory, he owns his own talking points; is not saddled with a stable of credentialed advisors schooled in three decades of policy error and failure; and has the hutzpah to trust his own instincts——many of which, especially on foreign policy, are exactly the rebuke that Imperial Washington and its legions of parasites and racketeers so richly deserve.

On the other hand, the Donald’s policy thinking, if you can call it that, is thoroughly inchoate. His policy pronouncements amount to little more than spontaneous eruptions of sentiment, prejudice, hearsay, bile, applause lines, wishful thinking and disconnected non sequiturs. That’s where thoughtlets like Muslim bans, mass deportations, a Trump Wall on the Rio Grande, paying off the national debt, 40% tariff barriers, obliteration of ISIS and numerous other stray verbal hand grenades come from.

Yet occasional wild pitches are not really the problem, and the cynics are surely correct in predicting that Trump will excise most of them from his patter even before the GOP convention. The real problem is that Trump has no detectable economic philosophy or policy framework, and it is in that arena that he could go careening off into a cacophony of misfires, mistakes and statist mayhem.

To wit, Trump has already said that he likes the Fed’s low interest rates, is considering a minimum wage hike, thinks social security and medicare should remain untouched, will rebuild the military, intends to drastically increase spending for veterans, wants to slash income taxes on corporations and individuals, thinks a big infrastructure program is warranted, plans to spend tens of billions on border security and the Wall and will drastically hammer $2.2 trillion of imports in order to bring jobs back home.

Not only is most of that unaffordable, counter-productive and wrong. More importantly, Trump’s mish mash of economic policy utterances thus far fails to address why the Washington/Wall Street/Bicoastal/Bubble Finance status quo is failing main street so…
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Phil on Money Talk (Updated)

Here's Phil on BNN's Money Talk (yesterday):

Phil has an interesting discussion with Kim Parlee on Japan, the "tipping point" on Japan's massive debt, the country's unsustainable situation, interest rates, helicopter money to people, the velocity of money, growing the economy, putting people to work. What happens at Japan's tipping point?


After the break, Phil provided some trade ideas.

Trade ideas:

Baker Hughes (BHI) is very interesting as we're likely at a lot point for CapEx spending in the energy sector and, at $45.50, BHI's market cap is down to just $20Bn and they are about to get a check from Haliburon (HAL) for $3.5Bn, which is over 15% of their entire market cap.   They are using $1.5Bn of the money to buy back stock and another $1Bn to pay off debts and that will leave them with $1Bn in cash to play with while many of their competitors are going bankrupt and leaving assets lying around that BHI can pick up for 10 cents on the Dollar. 

So we like them for a long-term turnaround and we can take advantage of the heavy premiums with this spread:

  • Selling 10 BHI 2018 $35 puts for $3.50 ($3,500)
  • Buying 10 BHI 2018 $40 calls for $11.40 ($11,400)
  • Selling 10 BHI 2018 $50 calls for $6.50 ($6,500)

That's net $1,400 on the $10,000 spread that is starting off over $5,000 in the money at $45.  The potential return on cash is net $8,600 for a 614% profit in 19 months and all BHI has to do is be over $50 for the full payout.  To the downside, if BHI is below $35 (23% below the current price), in addition to losing the $1,400 cash, we will be obligated to buy 1,000 shares for $35 ($35,000) for a total cost of $36,400 or $36.40/share – still 20% below the current price – and that's the worst case! 

Although it seems like we talk about AAPL all the time – that's because it's

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Zero Hedge

Treasury Introduces New Rules To Stop Tax Evasion, Kind Of

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

In the wake of the Panama Papers being released, the U.S.Treasury announced that it will use existing powers in order to make two rule changes that are intended to stop tax evasion.

First, in a rule which amends the US Bank Secrecy Act, the Treasury said it will require financial institutions to verify the identity of the real people, or "beneficial owners", who control companies opening account...

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Sohn Conference Finalists Long AMERCO; Greenhaven Long EXOR

By Jacob Wolinsky. Originally published at ValueWalk.

AMERCO – Sohn Conference Finalist Long AMERCO—An Undervalued $7Billion Company Hidden in Plain Sight Long Investment Idea Price Target: $502/share

Alexandra Esparza

MBA Candidate at the Yale School of Management

May 4, 2016

Also Greenhaven has a great presentation on Exor its mostly images so we did not do a post you can find the PDF here ->  Esparza_AMERCO



Value Creation, but Under the Radar

• Virtually uncovered by the Street – only one sell-side an...

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Chart School

S&P 500 Snapshot: Mediocre Jobs Report? No Big Deal

Courtesy of Doug Short's Advisor Perspectives.

All eyes were on this morning's employment report for April, which largely disappointed expectations. The equity market was little fazed by the light growth in nonfarm new jobs. The S&P 500 bounced off its rather unremarkable -0.55% intraday low about 90 minutes into the session. It slowly rallied to its 0.35% intraday high as the final hour approached and ended the session just a tad lower with a 0.32% closing gain.

About that jobs report ... is "mediocre" an apt description? Consider: The number of new jobs came in at 160K, well below the mainstream expectation of about 200K. On the other hand, since January 2011, nonfarm payrolls have increased by an average of 0.15% monthly with a high-low range of 0.26% to 0.03%. The April increase was 0....

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Phil's Favorites

Weekend Reading: Should I Stay Or Should I Go

Courtesy of Lance Roberts of Real Investment

It has been interesting as of late reading the numerous views espousing the value of “indexing” and lamenting the short-term underperformance of some fund manager. What is more interesting is a large majority of these individuals have only been involved in the markets post-financial crisis. In other words, many of these individuals have never lived through a 2000 or 2008 type financial market event.

It is only during these periods where true investment “metal” is tested as the battlefield becomes a vast wasteland of bodies and failed ideas. Despite strategies that promote the value of long-term investing and the benefits of indexing, it is the realization of “loss” that derails even the most well-intentioned of individuals.


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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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Kimble Charting Solutions

Crude Oil testing resistance, fear index testing support, says Joe

Courtesy of Chris Kimble.


Once Crude Oil started turning weak in 2014/2015, many stock markets around the world have struggled to move much higher.

Crude Oil hit support in February of this year and has rallied almost 50% off the lows and stocks have followed to the upside.

Joe Friday Just The Facts;  What Crude Oil does at resistance above, could have a large impact on stocks going forward, as Crude is testing resistance and its fear index is testing support.


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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Oil Patch Bankruptcies Hit $34.3 Billion (Value Walk)

The number of oil patch bankruptcies continues to rise, and the number of companies filing for creditor protection is accelerating, that’s according to according to law firm Haynes and Boone LP’s May Oil Patch Bankruptcy Monitor.

Oil Price Drop Vanquishes Cutting-Edge Projects (Wall Street Journal)

The wo...

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Digital Currencies

"I Can Only Say I'm Sorry" - Self-Professed Bitcoin "Creator" Can't Provide Proof, Backs Out

Courtesy of ZeroHedge. View original post here.

Two years after Newsweek wrote an inaugural article upon returning to print in which it "unmasked" bitcoin creator Satoshi Nakamoto and which turned out be a hoax (the author "found" Nakamoto using a white pages search), earlier this week the world was fixated on the story of another self-professed bitcoin "creator", this time Australian entrepreneuer Craig Wright, who &quo...

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Cantor Says Relypsa's Veltassa Metrics Look Favorable

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

Courtesy of Benzinga.

Relypsa Inc (NASDAQ: RLYP) shares have plummeted 51 percent year-to-date, under pressure from debt-financing related concerns. Cantor Fitzgerald’s Mara Goldstein reiterated a Buy rating for the company, while reducing the price target from $42 to $41. The analyst believes the 1Q16 results would be “a stabilizing force for the shares.”

Positive Data Points For Veltassa Launch

Veltassa metrics look favorable so far, including a low payer rejecti...

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Swing trading portfolio - week of May 2nd, 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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Mapping The Market

About that debate last night

Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,

The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now. 

And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now. 

Phil writes back,

I was expecting them to start throwing poop at each other &n...

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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! 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 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.

Thank you for you time!

FeedTheBull - Top Stock market and Finance Sites

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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