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Archive for the ‘Phil’s Favorites’ Category

Fed Statement Today: Between a Rock and a Hard Currency

Courtesy of Pam Martens.

Jeffrey Gundlach, DoubleLine CEO,  Tells CNBC's Bob Pisani What He Think the Fed's Really Up To With Its Interest Rate Talk

Jeffrey Gundlach, DoubleLine CEO, Tells CNBC’s Bob Pisani What He Thinks the Fed Is Really Up To With Its Interest Rate Talk

The Federal Open Market Committee (FOMC) of the Federal Reserve will release its monetary policy statement at 2 p.m. today against a backdrop of extraordinary global events since its last statement on December 17. Since that time, deflationary forces have picked up steam in the 19-member Eurozone forcing the European Central Bank to announce a large scale quantitative easing program to buy up government bonds in the hope that the added liquidity will spike spending and inflation.

A political earthquake has also been unleashed by the Coalition of the Radical Left, known colloquially as Syriza, seating their candidate, Alexis Tsipras, as Prime Minister in Greece. The win came on a platform to end austerity and renegotiate the terms of the Greek bailout. This is causing spasms in stock and bond markets in Europe over concerns it could lead to Greece’s exit from the Euro or cause other debt-laden Eurozone members to ask for similar concessions.

Here at home, tremors have been picking up pace since the December FOMC meeting. Large corporations have been announcing big job cuts: American Express, 4000; Coca Cola, 1600 to 1800; IBM, at least 2000 with rumors suggesting the number is far higher; Schlumberger, 9000; Baker Hughes 7000; U.S. Steel 750.

Part of the downsizing problem is the global economic slowdown but another serious headwind for U.S. based multinational corporations is the strong U.S. dollar which has gained about 20 percent against other major currencies over the past eight months. A strong dollar hurts U.S. based multinationals’ earnings and can erode market share by making their products and services less competitively priced for consumers in foreign countries who are making their purchases in weaker currencies. U.S. companies which have already blamed the strong dollar for crimping earnings include Procter & Gamble, Pfizer, DuPont and Goodyear.

U.S. multinationals know they have the Fed to thank for the dollar’s strength. The Fed’s persistent chatter that it plans to raise interest rates later this year on the premise of improved economic conditions here at home has put a prop under the dollar and led much of the world to believe that the U.S. is back to its goldilocks economy – not too…
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Clash Over Sanctions: Syriza Opposes Sanctions on Russia, Calls Them “Neocolonial Bulimia”; Negotiation Rules

Courtesy of Mish.

The Blowout Victory of Syriza has taken on some new meaning outside of Grexit possibilities.

Please consider Greeks Rebuff EU Call for More Russia Sanctions.

A spokesman for the ruling coalition of Alexis Tsipras, prime minister, said Greece had not approved a statement from EU heads of government that asked their foreign ministers to review further sanctions in response to the latest flare-up of violence in eastern Ukraine, blamed by the US and most European nations on Russian-backed separatists.

The Greek statement raised questions over whether the new government, led by the radical leftist Syriza party, would support a continuation of existing EU sanctions, including visa bans and asset freezes on Russian officials and Moscow-supported separatists, when they come up for renewal in March.

German chancellor Angela Merkel warned last month that Moscow was trying to make some Balkan states “politically and economically dependent”.

[Mish comment: But hey - political and economic dependence on Germany and the Troika is of course perfectly acceptable]

Nikolai Fyodorov, Russia’s agriculture minister, suggested on January 16 that, if Greece’s debt woes forced it to leave the EU, the Kremlin would help Athens by lifting a ban on Greek food exports that forms part of the measures adopted by Moscow in retaliation for western sanctions.

Syriza has already given a taste of its foreign policy outlook in the European Parliament, where, since last May’s elections, its MEPs have adopted a number of pro-Russian positions, including voting against a EU-Ukrainian association agreement.

Costas Isychos, a Syriza foreign affairs spokesman, last year derided western sanctions on Russia as “neocolonial bulimia” and praised the military efforts of the Kremlin-backed separatists in Donetsk and Lugansk in eastern Ukraine.

Syriza’s 2013 party manifesto demanded Greece’s exit from Nato and the closure of a US navy base on the island of Crete.

Though a Nato member, Greece in modern times has often enjoyed warm relations with Russia, and the Soviet Union before it, no matter what the political complexion of the government in Athens. The two countries are culturally close, with a shared Orthodox religion, and leftwing Greeks in the cold war used to have an anti-US, anti-imperialist outlook very close to the views of Moscow.


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Looks like we got ourselves a ballgame

Looks like we got ourselves a ballgame

Courtesy of 

On October 15th, I officially declared the Relentless Bid era over (see There She Goes, My Beautiful World).

It wasn’t a bold call, markets had been acting differently since at least last August. Selloffs were occurring with more frequency and less stocks were rising as we made subsequent new highs. The days of “just buy anything” in the stock market had come to a close, the return of winners and losers, volume and volatility, was nigh.

Fast forward a few months later and it looks like we got ourselves a ballgame once again. The no-vol, sleepy grind higher has been replaced with all sorts of drama. Confusing economic data points abound. Global macro bullshit is back. People are talking about Greece like it’s an actual economy and not just an abandoned museum with $350 billion in debt.

I don’t know the real reasons for why BTFD isn’t working so automatically, so effortlessly, anymore. Neil Irwin at the New York Times says it’s because of currency fluctuation wrecking the earnings reports of US multinationals and because the drop in crude has castrated capex budgets from coast to coast. That all sounds realistic, sure.

But the why isn’t terribly important to me. The what, however, is very interesting.

I submit to you that this new phase of deflation fear and headline-humping is actually a good thing for both the markets and for the professionals – like myself – who work here.

Financial advisors, traders, hedge fund managers and other asset assigners cannot distinguish themselves when the only thing that goes up is the S&P 500 and it goes up every day, every week, every month of the year. We mostly waste our efforts and our time in that atmosphere, which had been in force for approximately 24 months straight until this winter. When investment profits become automatic for anyone who simply shows up, and diversification looks increasingly asinine with every quarter, we become almost useless – vestigial. 

Here we are, discussing hedges and protection and non-correlated asset classes and Value at Risk calcs and risk-adjusted returns and it’s like a giant f***ing joke as the ice cream man remains parked right


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Greek Payback Math at 0% Interest

Courtesy of Mish.

Payback of Greek Debt

Greece has something like €315 billion of public debt.

Forget about that. Instead focus on liabilities as presented in Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited.

The above total is a “modest” €256 billion to be paid back over time.

  1. Assume 0% interest
  2. Assume a Current Account Surplus of 3% of GDP
  3. Assume Greek Debt-to-GDP is 176%
  4. Assume Greek Debt €312 billion
  5. Assume Greek GDP is €178 billion

Point 5 is derived from points 3 and 4. The numbers seem to vary a bit depending on the source, but they should be close enough for this exercise.

Payback Math at 0% Interest

Let’s assume that Greece can run a 3% current account surplus for as long as it takes to pay back €256 billion.

3% of €178 billion is €5.35 billion. To pay back €256 billion it would take about 48 years. That assumes 0% interest and a 3% current account surplus every year for 48 years!

Those calculations ignore rising GDP. But they also ignore a huge burden on Greek citizens for 48 years.

Let’s be honest: Greece is not going to run current account surpluses of 3% per year for perpetuity.

Unrealistic Debt



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Email From US Special Forces Veteran; 500 US Blackwater Mercenaries in Ukraine? US Backs Ukrainian Neo-Nazis

Courtesy of Mish.

US Special Forces in Ukraine?

In response to US Special Forces in Mariupol? I received an interesting email from “Dan” a 23-year Army veteran with four years in special services.

Dan writes …

I was a soldier in the US Army for 23 years including four years in Special forces Stationed in Germany. I would agree that there is a strong likelihood that this is a US Special Forces soldier.

I can tell you that we were issued AK 74s and would use them on a mission such as this. That is about all I would really want to say at this point.

It is obvious to me that our strategy is the Balkanization of the various hot spots in the world, Syria, Ukraine, Iraq and so forth.

You can call me if you want I’d be happy to talk with you. All the Best

I did call Dan. We chatted a bit. He pointed out special fireproof gloves on the soldier.

I asked him about the rifles. Dan had high praise for them. “Exceptional” was the exact word. They  are widely distributed to special forces units in Europe.

Dan was “disgusted” with US operations stirring up trouble in numerous hotspots including Ukraine.

More English Speaking Soldiers in Mariupol

Over the weekend more videos of English speaking soldiers in Mariupol turned up. Around the 14:40 mark, talk is in English. This time it sounds British rather than US.



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A Fresh Look at Stock Market Sentiment

A Fresh Look at Stock Market Sentiment

Courtesy of , TraderFeed

 

 

I recently took a look at changes in the number of shares outstanding of the SPY ETF as a sentiment measure.  When traders are bullish, shares are created in the ETF; when they are bearish, shares are redeemed.  This is a useful sentiment gauge, because it reflects what traders are actually doing in the market, not just their stated sentiment.  

What is interesting is that we have seen considerable share redemption in SPY since the end of the year.  Indeed, shares outstanding are down on a 5, 10, and 20-day basis.  Since 2012, we've had 23 non-overlapping periods of such share redemption.  Ten days later, SPY was up 18 times, down 5 for an average gain of 1.18%, compared with an average 10-day gain of .43% for all other occasions during that period. 

Although we are not so far from all-time highs in SPY and have bounced well off recent lows, bearishness on this measure continues.  Interestingly, the put/call ratio for all listed U.S. equities has been above .90 for the last two trading sessions, also above average.  

As noted yesterday, I have concerns about the longer-term pattern of breadth among U.S. stocks.  One reason for tracking different market measures is that we can avoid confirmation bias by observing when things are not lining up.  Right now, sentiment is not lining up with a picture of a topping market.  There are times when flexibility is as important as conviction:  a big edge in markets is retaining the option of not trading and waiting for clarity before placing bets.

Further Reading:  Options-Based Sentiment





It’s Not The Greeks Who Failed, It’s The EU

Courtesy of The Automatic Earth


Matson Aircraft refueling at Semakh, British Mandate Palestine 1931

In what universe is it a good thing to have over half of the young people in entire countries without work, without prospects, without a future? And then when they stand up and complain, threaten them with worse? How can that possibly be the best we can do? And how much worse would you like to make it? If a flood of suicides and miscarriages, plummeting birth rates and doctors turning tricks is not bad enough yet, what would be?

If you live in Germany or Finland, and it were indeed true that maintaining your present lifestyle depends on squeezing the population of Greece into utter misery, what would your response be? F##k ‘em? You know what, even if that were so, your nations have entered into a union with Greece (and Spain, and Portugal et al), and that means you can’t only reap the riches on your side and leave them with the bitter fruit. That would make that union pointless, even toxic. You understand that, right?

Greece is still an utterly corrupt country. Brussels knows this, but it has kept supporting a government that supports the corrupt elite, tried to steer the Greeks away from voting SYRIZA. Why? How much does Brussels like corrupt elites, exactly? The EU, and its richer member nations, want Greece to cut even more, given the suicides, miscarriages, plummeting birth rates and doctors turning tricks. How blind is that? Again, how much worse does it have to get?

Does the EU have any moral values at all? And if not, why are you, if you live in the EU, part of it? Because you don’t have any, either? And if you do, where’s your voice? There are people suffering and dying who are part of a union that you are part of. That makes you an accomplice. You can’t hide from that just because your media choose to ignore your reality from you.

And it doesn’t stop there. It’s not just a lack of morals. The powers that be within the EU deliberately unleashed shock therapy on Greece – helped along by Goldman Sachs and the IMF, granted -. All supra-national organizations tend towards zero…
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Scientists figure out to unboil an egg

 

Scientists unboil an egg, and it may be a big deal

By Robert Ferris, at CNBC.com

It may seem like a mere parlor trick, but it is an achievement that could "dramatically" cut costs for cancer treatments, food production and other research in the $160 billion global biotechnology industry, according to a press release that was posted online Friday.

It also means "unboil" is now a word.

As anyone who has ever cooked an egg knows, egg "whites" are clear until they are cooked. Egg whites are high in protein, and when they cook, the proteins start to unfold, and then fold back up in a tighter, more tangled structure. This is why they go from being clear and mucus-like to white and rubbery.

Researchers at the University of California, Irvine, and Flinders University in Australia have figured out a process that can pull apart the tangled proteins, allowing them to refold and return to their original structure.

Keep reading Proteins and research: Scientists figure out to unboil an egg.

*****

Next up: Scientists turn a chicken back into an egg…

Picture via Pixabay. 

 





Swiss Franc Yield Curve Negative for 12 Years; Bond Crash – Austrian Bank Raiffeisen; Another One Bites the Dust

Courtesy of Mish.

The casualties continue to pile up in the wake of the Swiss National Bank dropping its peg to the euro.

(See Rabbit Hole Intervention Fails: Wild Moves in Swiss Franc as Switzerland Abandons Euro Peg; Morals of the Story).

The first moral of the story was “Don’t borrow money in other currencies, especially long-term mortgages.

The same applies to lenders. And banks that lent money in unhedged Swiss francs to customers in Poland, Hungary or elsewhere now finds collection difficult.

Austrian bank Raiffeisen is in deep trouble doing just that.

Austrian Bank Raiffeisen’s Bonds Crash

Bloomberg reports Raiffeisen Debt Signaling Distress as Currency Woes Mount

Raiffeisen Bank International AG (RBI)’s junior bonds slumped to levels typically viewed as distressed after gains in the Swiss franc added to woes triggered by the tumble in the Russian and Ukrainian currencies.

Subordinated bonds sold by the Vienna-based lender slid as low as 63.4 cents on the euro, with yields of as much as 10 percent, after trading at 91 cents at the start of December, according to data compiled by Bloomberg.

Investors are concerned because European Union rules forcing losses on junior bondholders before banks can get state aid came into force in Austria on Jan. 1. The government has injected about 8.1 billion euros into three banks in the past six years and guarantees on bonds of stricken Hypo Alpe Adria Bank were revoked to avoid a taxpayer-funded bailout.

Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moody’s Investors Service. The largest part of these are in Poland, where the franc has appreciated 17 percent against the zloty since Jan. 14, threatening to push up defaults on the bank’s 2.9 billion euros of mortgages in the Swiss currency.

Ruble Losses

Interestingly, Raiffeisen is also the third-biggest foreign bank in Russia after Societe Generale SA  and UniCredit SpA….



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This Is What It Means To Lose A Currency War

 

This Is What It Means To Lose A Currency War

Courtesy of John Rubino

The term gets tossed around a lot, but the meaning and consequences of a “currency war” aren’t intuitively clear to most people. Especially confusing is the idea that you lose the war when your currency goes up. The suddenly very strong dollar, for instance, should, one would think, be a good thing, since it seems to imply that the rest of the world is impressed enough to covet our currency.

That’s true in a sense, but in another sense — and beyond a certain point — it becomes a potentially huge problem, because a strong currency makes exports (priced in dollars) more expensive and therefore a tougher sell. Consider today’s headlines:

Commodities rout slows Caterpillar
CHICAGO (Reuters) – Caterpillar Inc on Tuesday reported lower quarterly net profit that missed expectations as lower prices for copper, coal and iron ore hurt mining equipment orders, and warned the recent fall in oil prices would make for a difficult year in 2015. The report sent the company’s shares down nearly 6 percent in premarket trading.

Plunging profits have sent shares of Microsoft tumbling
Microsoft shares slid more than 7.6% in pre-market trading after second-quarter earnings showing a dip in earnings. Microsoft reported earnings per share of 71 cents, meeting estimates but falling below the 78 cents reported during the same quarter last year.

Procter & Gamble Profit Down 31%, Hurt by Exchange Rates
Procter & Gamble’s second-quarter earnings sank 31 percent as the strong U.S. dollar cut into the performance of the world’s largest consumer products maker.

The Cincinnati company, which sells products ranging from Tide detergent to Crest toothpaste, said Tuesday that exchange rates will remain a challenge well into fiscal 2015, especially in the second half of its year. Overall, it expects foreign exchange to chop its core, fiscal 2015 earnings by 12 percent and reduce its revenue by 5 percent.

And why should we care about falling corporate profits?

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Zero Hedge

Chinese Stocks Drop 3rd Day In A Row On Margin Crackdown As Yuan Tumbles To Record Discount Versus Fix

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Chinese stocks are trading lower again (on margin crackdowns) - the first 3-day drop in 3 weeks - back into the red year-to-date. Despite weakening the fix this evening, the 'market price' for USDCNY is trading at a record 1.93% discount to the official rate - inching ever closer to the 2% peg limit. At 6.2522, the market is just 40 pips away from forcing policy makes to intervene (selling the USD and and buying Yuan) - which realistically is perhaps a positive for the Chinese to unload some USD reserves. This move comes as China’s currency overtook Canada’s dollar to rank fifth for global payments last month with a record market s...



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Market Shadows

What Would You Do?

What Would You Do?

Courtesy of Paul Price

Suppose you had the technical ability and raw materials to print up counterfeit dollars, euros or yen that were identical to the real things. Assume you could spend them as fast as you could create them with no fear of any repercussions.

Would you prudently print up only as much fresh currency as you needed for your current lifestyle? Would you create just a bit more than that to help relatives or those in need?

It is most likely you’d have your printing press running 24 hours a day, seven days a week. Becoming the richest person in the world would confer great power upon you.

You could rationalize this action because you plan to use the money for good purposes. Imagine the warm feeling you’d get by giving every person in America one million do...



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Phil's Favorites

Why The U.S. Shale Boom May Come To Abrupt End

Courtesy of Arthur Berman via OilPrice.com

U.S tight oil production from shale plays will fall more quickly than most assume.

Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.

Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling. At the same time, average well productivity has decreased by about one-third.

This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts.

Most shale wells today are drilled from pads. One rig drills many wells...



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Chart School

Bearish Engulfing Patterns

Courtesy of Declan.

Today's end-of-day losses were disguised by the relatively light declines at the close. Markets opened strong, but were unable to maintain premarket strength. The consolidations in place since the 'Santa Rally' are holding on, but markets can ill afford additional losses from here.

The S&P finished on the 38.2% Fib retracement of the 'Santa Rally'. Aggressive longs may view this as a head-and-shoulder reversal; if this pr-oves to be the case then markets have to rally from the cash open. The S&P is a case in point.


The Nasdaq experienced a very wide day; opening above its 20-day and 50-day MA, but finishing well below these moving averages, and on...

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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 January 26th, 2015

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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Sabrient

Sector Detector: With the Fed fading into shadows, investors look overseas for new catalysts

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

Courtesy of Sabrient Systems and Gradient Analytics

By Scott Martindale

Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...



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Digital Currencies

Jitters After Bitcoin Exchange Suspends Services

So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.  

Jitters After Bitcoin Exchange Suspends Services 

By 



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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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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.

Click here and sign in with your user name and password. 

 

...

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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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!




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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.

Market Shadows >>