Archive for the ‘Phil’s Favorites’ Category

Interest Rate Differentials Increasing Financial Market Leverage To Unsustainable Levels

Courtesy of EconMatters

We discuss the rate differentials between Switzerland, Britain, Europe, Japan and the United States and how this Developed Financial Markets carry trade is incentivizing excessive risk taking with tremendous leverage and destabilizing the entire financial system in the process in this video. You want to know what is behind weekly market records, borrowed money via punchbowl central bank liquidity. This ends badly every time Central Banks. You can run this model 1 Million iterations, and it plays out the same way, the financial bubble implodes in on itself where liquidity evaporates into nothingness. It is ironic that when the bubble pops, given all the Central Bank infused liquidity to create this bubble paradigm, that all liquidity dries up, and all the sudden there is no real liquidity at all in the system when everyone direly needs it!

 
Conclusion:
 
Central Banks need a coordinated response to figure how they get out of this Developed World interest rate differential problem that risks blowing up the entire Global Financial System because of poor incentives in regards to promoting excessive leverage, poor risk management and imprudent investment decision making processes. My solution would be for the first four Central Banks to tighten Monetary Policy more than the US Federal Reserve. However, the status quo relationship is untenable, and the next alternative would be for the Fed to surprise market participants, showing traders to be on their toes, that there are risks to excessive leverage with borrowed central bank carry funds in a Risk-Off Environment.
 




The transgender bathroom controversy: Four essential reads

 

The transgender bathroom controversy: Four essential reads

Courtesy of Kaitlyn Chantry, The Conversation

Editor’s note: The following is a roundup of archival stories related to transgender issues in education.

On Feb. 22, President Donald Trump’s administration revoked protections allowing transgender students to use the bathrooms of their chosen gender identity. The joint letter from the Justice Department and Education Department rescinds the May 2016 guidelines issued by former President Barack Obama.

This reversal further divides those who contend that these decisions should remain in the hands of individual states, and those who believe that gender identity should be federally protected as a civil right. Also back in the spotlight: questions as to whether transgender students are protected under the anti-discrimination provision of Title IX.

We’ve spoken with scholars from multiple disciplines around the world, who have weighed in on the social, psychological and political issues impacting transgender students. Here’s what you need to know.

Why the bathroom controversy?

In 2014, the Department of Education’s Office for Civil Rights (OCR) issued a document that, among other things, clarified the federal civil rights protections of transgender students:

Title IX’s sex discrimination prohibition extends to claims of discrimination based on gender identity or failure to conform to stereotypical notions of masculinity or femininity and OCR accepts such complaints for investigation.

Why then, have school bathrooms become the center of the transgender civil rights movement?

The March 2016 “bathroom bill” in North Carolina played a big part. Banning people from using public bathrooms that don’t correspond to the biological sex listed on their birth certificates, the bill catapulted transgender rights into the national spotlight. Alison Gash, a professor of political science at the University of Oregon, breaks down why there was such a backlash on both sides of the aisle.

At the heart of the debate is a very real fear of violence. Gash explains why transgender students need “safe” bathrooms:

Studies show that transgender students could be harassed, sexually assaulted or subjected to other physical violence when they are required to use a gendered bathroom. One survey… found that 68 percent of participants were subjected to homophobic slurs while trying to use the


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Seeking truth among ‘alternative facts’

 

Seeking truth among 'alternative facts'

Courtesy of Peter Neal Peregrine, Lawrence University

Part of what I do as an archaeologist is judge between competing claims to truth. Indeed, you could say this is the entire purpose of science. Before we make a judgment about what is true, there are facts that have to be examined and weighed against one another.

When Trump’s senior advisor Kellyanne Conway made her now infamous reference to “alternative facts,” many viewers were stunned. But I am a scientist. I spend my days trying to pull “facts” out of the remains of the past. After thinking about what Conway said, I realized that it was not ridiculous at all.

There are always “alternative facts.” What matters is how we decide which of those alternative facts are most likely to be true.

Science or authority?

What made Conway’s suggesting “alternative facts” about the size of the crowd at Trump’s inauguration seem so ridiculous was that, from a scientific perspective, it was obviously false. In science, we use empirical observations to generate “alternative facts” that we judge against one another using established bodies of method and theory and logical argument. Photos of the relatively small crowd at Trump’s inauguration gave empirical evidence that Conway’s “alternative facts” that the crowd was enormous were unlikely to be true.

Neanderthal stone tools, c. 50,000 to 70,000 years old in Landesmuseum Württemberg, Stuttgart, Germany. Wikimedia Commons

 

I’m often asked how archaeologists know whether an object is a stone tool rather than a fragmented rock. We don’t always. Looking at the same rock I might see a tool, while another archaeologist might not. Through science we can usually determine what is true.

We look at how the rock was broken, and whether the breaks were more likely from natural or human processes. We look at wear on the stone to see if it matches that of other known tools. In short, we use empirical observations and methods to decide which description best represents reality.

Conway’s statement was not based on a scientific perspective, but rather on a much older tradition of deciding what is true: the argument from…
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Fuse is Lit! Target2 Imbalances Hit Crisis Levels: An Email Exchange With the ECB Over Target2

Courtesy of Mish.

Eurozone Target2 imbalances have touched or exceeded the crisis levels hit in 2012 when Greece was on the verge of leaving the Eurozone. Others have noted the growing imbalances as well.

I had a couple of questions for the ECB regarding Target2, which they have answered, I believe disingenuously.

First, we will explain Target2, then we will take a look at various charts, viewpoints, and the email exchange with the ECB.

Target2 Background

Target2 stands for Trans-European Automated Real-time Gross Settlement System. It is a reflection of capital flight from the “Club-Med” countries in Southern Europe (Greece, Spain, and Italy) to banks in Northern Europe.

Pater Tenebrarum at the Acting Man blog provides this easy to understand example: “Spain imports German goods, but no Spanish goods or capital have been acquired by any private party in Germany in return. The only thing that has been ‘acquired’ is an IOU issued by the Spanish commercial bank to the Bank of Spain in return for funding the payment.

This is not the same as an auto loan from a dealer or a bank. In the case of Target2, central banks are guaranteeing the IOU.

Target2 also encompasses people yanking deposits from a bank in their country and parking them in a bank in another country. Greece is a nice example, and the result was capital controls.

If Italy or Greece (any country) were to leave the Eurozone and default on the target2 balance, the rest of the countries would have to make up the default according to their percentage weight in the Eurozone.


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Germany, Italy, France Insist UK Accept €60 Billion Bill Before Brexit Negotiations Start: Election Wildcards

Courtesy of Mish.

The EU’s chief negotiator, Michel Barnier, took a position earlier this week that the UK accept a €60 billion breakup bill before Brexit negotiations begin.

Today, the Financial Times reported Germany and Italy back European Commission on Brexit.

Berlin and Rome are backing the European Commission’s plan to rule out starting trade talks with Britain until the UK gives assurances on a multibillion-euro Brexit bill and citizens’ rights.

German and Italian officials say they support Michel Barnier, the chief EU negotiator, in seeking progress on divorce terms as an opening step. France is uncompromising on the estimated €60bn bill, while Spain is more wary of attempts to “punish” Britain.

Such stances are preliminary since EU member states have still to take a formal position.

Christian Kern, the Austrian chancellor, confirmed the commission’s €60bn estimate. “The cheque should be around €60 billion; that’s what the European Commission has calculated and this will be part of the negotiations,” he told Bloomberg.

“We agree with the commission,” said one German official, referring to the so-called divorce clause of the EU treaty. “Any Article 50 agreement will have to include the UK’s assurances that it will honor the financial commitments it undertook as an EU member state.”

Negotiation Tactic or a Real Stance?

The article labeled the stance “preliminary”. And a recent Eurointelligence report commented: “It is a mistake to think, as some commentators do, that the EU is strong and united in its approach to Brexit. That is only apparently so because the negotiations have not yet started, so we are still in the sound-bite stage with lots of reference to “cherry-picking” and the like. We noted a recent comment from Sigmar Gabriel that the EU should not penalize the UK, which we know is also the position of Angela Merkel. Germany will be a force of moderation. Once both sides are confronted with the actual costs of Brexit, they might conclude that they want to minimize those costs. That process has not started yet.”

For a change, I mostly disagree with the Eurointelligence assessment.

For sure, there is not a united front. But France, Germany, and Italy pretty much hold the EU’s cards. Let’s also not forget that Brexit has become a religious battle.

Merkel Contradictions

Merkel’s statements about not wanting to punish the UK,


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New Home Sales Rise Half of Economists’ Expectations, Supply Surges

Courtesy of Mish

New homes sales hit the skids in December, down 10.4 percent. December numbers were revised slightly lower today.

The ever optimistic economists in the Econoday survey expected a huge rebound in new home sales in January from 535,000 units to 576,000 units SAAR (seasonally adjusted annualized rate).

Instead of the expected 41,000 increase in units, sales rose by 20,000 units.

New home sales have lost some traction and it’s not because of tightening supply. At 555,000, January’s annualized pace came in more than 20,000 below the Econoday consensus and includes a big downward revision, not to December which is 1,000 lower at 535,000, but the cycle high in November which has been cut by 23,000 to 575,000. This report is one of the most volatile on the calendar which puts the priority on moving averages including the 3-month average which has fallen steadily from a cycle peak of 587,000 in September to only 555,000 (which is the same as January’s rate).

Supply, however, is no longer as thin as it was, at 5.7 months at the January sales rate vs low 5 month rates through most of last year. The number of new homes on the market, at 265,000 for a 3.5 percent monthly jump, is a new cycle high (since July 2009). Permits for single-family homes have been on the climb which points to more supply ahead.

Rising supply is negative for prices and at $312,900, the median fell 1.0 percent in the month. The year-on-year rate, however, is still very solid at 7.5 percent.

Econoday labeled the report “constructive” even though the three-month average is down by 32,000 SAAR units and prices in January fell.

Econoday placed supply at 5.7 months, but Mortgage News Daily stated “At the end of January there were an estimated 261,000 homes available for sale (a non-adjusted figure.) This is a larger inventory than existed during any month in 2016 and represents a 6.4-month supply at the current rate of sales.”

This is not March rate hike kind of news. CME Fedwatch shows the March rate hike probability is 22.1 percent.

Mike “Mish” Shedlock

Original article here.





It’s Bubble Time

Courtesy of Chris Martenson of PeakProsperity.com

It's impossible to predict with certainty how much more insane our financial markets will get before an inevitable correction. But my personal bet is: A lot!

For my reasons why, take a few minutes to watch the chapter on bubbles below from The Crash Course. For those who haven't seen it before, the takeaway is this: bubbles pop only when greed in the market has been exhausted:

Bubbles make no sense economically. Or rationally. But they happen all the time as a part of the human condition.

Even while financial bubbles are enabled by dumb monetary and banking decisions, their actual genesis is rooted in primal human emotions. Greed on the way up, and fear on the way down.

The hardest part about these bubbles is not being swept up in them.  As the above video shows, history is chock full of asset bubbles. We humans just never seem to learn. Like Charlie Brown's endless attempts to kick Lucy's football, we get suckered in by the promise of easy riches, only to end up flat on our back when the market suddenly yanks that promise away.

Wash, rinse, repeat.

Most of you reading this might be thinking “Hey, I’m a reasonable intelligent person. I won't fall victim to the next bubble.” Perhaps, but maybe not. The numbers say that the majority of you will. Unfortunately, being smart — even a genius — is no protection against being ruined by a bubble.

Remember from the video that even Sir Isaac Newton, easily one of the most brilliant humans ever to live, got his clock cleaned by the South Sea Bubble:

Newton Poor Chart

(Source)

Bubbles are much easier to enter than to exit. As they build, all your friends and neighbors are diving into the pool and enjoying easy riches. You deserve some of that good fortune, right? And there will be plenty of eager parties willing to help you get on the bandwagon. 

But when the bubble pops, though, action becomes much harder to take. At first, everyone assumes that the sudden drop is a temporary aberration and


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Are Big Banks’ Dark Pools Behind the Run-Up in Bank Stock Prices?

Courtesy of Pam Martens

Source: FINRA

Source: FINRA

By Pam Martens and Russ Martens: February 24, 2017 

The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks?

This time last year, Wall Street banks were in a slow, endless bleed. The Federal Reserve had raised interest rates for the first time since the 2008 financial crisis on December 16, 2015 with strong hints that more rate hikes would be coming in 2016. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. Money gravitates out of dividend paying stocks into bonds and/or into hard assets like real estate based on the view that it will appreciate from inflationary forces. This is classic market thinking 101.

Bizarrely, to explain the current run up in bank stock prices, market pundits are shoving their way onto business news shows to explain to the gullible public that bank stocks like rising interest rates because the banks will be able to charge more on loans. That rationale pales in comparison to the negative impact of outflows from stocks into bonds (if and when interest rates actually do materially rise) and the negative impact of banks taking higher reserves for loan losses because their already shaky loan clients can’t pay loans on time because of rising rates. That is also classic market thinking 101.

Big bank stocks also like calm and certainty – as does the stock market in general. At the risk of understatement, since Donald Trump took the Oath of Office on January 20, those qualities don’t readily come to mind in describing the state of the union.

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The Cost Of Screwing This Up The Border Adjustment Tax Unimaginable

By Mauldin Economics. Originally published at ValueWalk.

I believe that truly free trade helps everyone. But that’s not what recent so-called free trade deals have given us.

Instead, they delivered something quite different from the kind of free trade that Adam Smith and David Ricardo envisioned.

Globalization Perks Are Distributed Unevenly

AmberAvalona / Pixabay

I explained this at length last July in the “The Trouble with Trade” issue of my free investment newsletter, Thoughts from the Frontline (subscribe here for free). Here’s an excerpt:

“Free trade” deals are no longer simple documents. The Trans-Pacific Partnership (TPP) weighs in at 5,544 pages. It’s a boatload of rules and regulations. I know there is talk that this deal was negotiated in secret, but that is far from the truth.

You and I weren’t asked for input; but lots of people were, let me assure you. I can guarantee you that rice farmers in Texas and California were pressing their congressmen and others for access to the lucrative Japanese market, and Japanese rice farmers were trying to figure out how to limit the damage.

For the record, Japan imports about 10% of its rice from the US, most of which they turn around and export as foreign aid or use for animal food. It is not that Japanese rice is that much better; indeed, the fact that US rice is so close in quality makes Japanese farmers nervous. And US rice is 1/3 to 1/2 the cost of Japanese rice.

Of course Japanese companies want access to US markets, where they can compete quite well, thank you, against US firms. And those US firms want to keep the protections and prices they have. This tit for tat has gone back and forth in hundreds of industries in the 12 countries involved in the TPP.

I can guarantee you that wheat farmers or corn farmers or cattle or hog producers have a different view of the whole process than US rice farmers do. And their views are different again from those of equipment manufacturers or software developers, or pick any…
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News You Can Use From Phil’s Stock World

 

Financial Markets and Economy

Oil sold out of tanker storage in Asia as market slowly tightens (Reuters)

Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories.

Saudi Arabia's Oil Wealth Is About to Get a Reality Check (Bloomberg)

Saudi Arabia has said oil giant Saudi Aramco is worth more than $2 trillion, enough to consume Apple Inc. twice, and still have room for Google parent Alphabet Inc.

The kingdom may have to settle for less. A lot less.

End of Bacon Boom Sends Pork Prices Tumbling the Most in Three Years (Bloomberg)

The bacon boom seems to be ending.

Wholesale prices for pork bellies, the cut used for making bacon, plunged 14 percent on Wednesday, the biggest slump since August.

Dream of Offshore U.S. Wind Power May Be Just Too Ugly for Trump (Bloomberg)

Offshore wind companies have spent years struggling to convince skeptics that the future of U.S. energy should include giant windmills at sea. Their job just got a lot harder with the election of Donald J. Trump.

Landlords Are Taking Over the U.S. Housing Market (Bloomberg)

As rising home prices, slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of renters—and landlords.

Where Are the Toilets? Order Glut Stretches Giant Jet Makers to Limit (The Wall Street Journal)

The aviation industry is bulging with orders for new planes. If only it can get them made.

There were so many almost-finished jetliners, missing their engines, piled up at an Airbus SE factory in Germany last May that executives joked they were in the glider business.

Stocks ease, dollar poised for weekly loss as Trump rally pauses (Reuters)

Commodity-related sectors led European shares lower for a third straight session on Friday while the dollar was poised for a weekly losses as the "Trumpflation trade" lost momentum.

Mnuchin's Ultra-Long Bond
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Zero Hedge

The Revenge Of Comet Pizza

Courtesy of ZeroHedge. View original post here.

Submitted by Howard Kunstler via Kunstler.com,

Remember that one? It was about as weird as it gets. A meme generated out of the voluminous hacked John Podesta emails that some conspiracy connoisseurs cooked up into a tale of satanic child abuse revolving around a certain chi-chi Washington DC pizza joint. I never signed on with the story, but it was an interesting indication of how far the boundaries of mass psychology could be pushed in the mind wars of politics.

Sex, of course, is fraught. Sex and the feelings it conjures beat a path straight to...



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Phil's Favorites

Interest Rate Differentials Increasing Financial Market Leverage To Unsustainable Levels

Courtesy of EconMatters

We discuss the rate differentials between Switzerland, Britain, Europe, Japan and the United States and how this Developed Financial Markets carry trade is incentivizing excessive risk taking with tremendous leverage and destabilizing the entire financial system in the process in this video. You want to know what is behind weekly market records, borrowed money via punchbowl central bank liquidity. This ends badly every time Central Banks. You can run this model 1 Million iterations, and it plays out the same way, the financial bubble implodes in on itself where liquidity evaporates into nothingness. It is ironic that when the bubble pops, ...



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ValueWalk

Southeastern Asset Management: "We Welcome Unpredictability"

By Advisor Perspectives. Originally published at ValueWalk.

Ross Glotzbach is Head of Research and a principal at Southeastern Asset Management. He serves as a co-manager for Longleaf Partners Small-Cap Fund and has been a research analyst at SAM since joining the company in 2004. He was an investment banking analyst at Stephens, Inc. in Little Rock from 2003 to 2004. He holds an AB degree from Princeton University with a major in Economics and is a Chartered Financial Analyst. Mr. Glotzbach has been a guest lecturer at the University of Memphis, is Chairman of Memphis Grizzlies Preparatory Charter School, and serves on the board of Ballet Memphis.

I spoke with Ross on February 15.

Southeastern Asset Management

In your fourth...



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Kimble Charting Solutions

Crude Oil; Energy stocks suggesting its about to fall, says Joe Friday

Courtesy of Chris Kimble.

Below takes a look at the price action of Crude Oil, Energy ETF (XLE) and Oil & Gas Exploration ETF (XOP) over the past three years.

Could Energy stocks be suggesting the next big move in Crude Oil again? Which direction are they suggesting?

CLICK ON CHART TO ENLARGE

At this time the intermediate trend in Cru...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Oil sold out of tanker storage in Asia as market slowly tightens (Reuters)

Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories.

Saudi Arabia's Oil Wealth Is About to Get a Reality Check (Bloomberg)

Saudi Arabia has said oil giant Saudi Aramco is worth more than $2 trillion, enough to consume Apple Inc. twice, and still have room for Google parent Alphabet Inc.

The kingdom may have to ...



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Chart School

Good Recovery

Courtesy of Declan.

In early morning action it was a clear swing to sellers after yesterday's non-event. However, buyers came back and were able to make a good chunk of these losses into today's close.

Large Caps remained the most attractive as defensive stocks often are during times of doubt. The S&P registered higher volume accumulation as intraday action proved to be relatively tight.

The Nasdaq suffered larger losses, but there was no distribution to go with it. Technicals were relatively immune to today's action.

...

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Members' Corner

People With Cats Will Understand?

Courtesy of Nattering Naybob

Taking a "potty break" from "in the Toilet Thursday" or "Thursday's in the Loo."

This week's subject is self evident, starring two lovable felines Cole and Marmalade in, People With Cat's Will Understand.


...

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Digital Currencies

It's Time To Beat Up On Credit Suisse and Their Woefully Misinformed Bitcoin Advice

Courtesy of Reggie Middleton at Zero Hedge

Credit Suisse has been posting cryptocurrency advisories over the last few weeks. They are quite one-sided, although couched in the appearance of objectivity. To explain why it's couched in the appearance of objectivity, and not actually objective, let me give you some background. 

The Obama administration enacted a law known as the Fiduciary Rule, as per Investopedia

The Department of Labor’s definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients' interests above their own. It leaves no room for advisors to conce...



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OpTrader

Swing trading portfolio - week of February 20th, 2017

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

NSA May Be Withholding Intel from President Trump

By Jean Luc

These GOP guys were so worried about Hillary's email server and now we find out that we had something close to a Russian mole in the White House. In the meantime, Trump keeps on using his unsecured phone, had high level conversation in his resort in front of dinner guests! It's getting so bad that rumors are now circulating that the NSA is not sharing information with the WH:

NSA May Be Withholding Intel from President Trump

By 

….Our spies have had enough of these shady Russian connections—and they are starting to push back….In light of this, and out of worries about the White House’s ability to keep secrets, some of our spy agencies have begun withholding intelligence fro...



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Promotions

Phil's Stock World's Las Vegas Conference!

Learn option strategies and how to be the house and not the gambler. That's especially apropos since we'll be in Vegas....

Join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017            

Beginning Time:  9:30 to 10:00 am Sunday morning

Location: Caesars Palace in Las Vegas

Notes

Caesars has offered us rooms for $189 on Saturday night and $129 for Sunday night but rooms are limited at that price.

So, if you are planning on being in Vegas (Highly Recommended!), please sign up as soon as possible by sending...



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Biotech

The Medicines Company: Insider Buying

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

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene

 

 

 

Insider transaction table and buying vs. selling graphic above from insidercow.com.

Chart below from Yahoo.com

...

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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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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.

Market Shadows >>