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Debt Be Not Proud

Thoughts from the Frontline: Debt Be Not Proud

By John Mauldin

Some things never change. Here is Eugen von Böhm-Bawerk, one of the founding intellectuals of the Austrian school of economics, writing in January 1914, lambasting politicians for their complicity in the corruption of monetary policy:

We have seen innumerable variations of the vexing game of trying to generate political contentment through material concessions. If formerly the Parliaments were the guardians of thrift, they are today far more like its sworn enemies. Nowadays the political and nationalist parties … are in the habit of cultivating a greed of all kinds of benefits for their co-nationals or constituencies that they regard as a veritable duty, and should the political situation be correspondingly favorable, that is to say correspondingly unfavorable for the Government, then political pressure will produce what is wanted. Often enough, though, because of the carefully calculated rivalry and jealousy between parties, what has been granted to one has also to be conceded to others — from a single costly concession springs a whole bundle of costly concessions. [emphasis mine]

That last sentence is a key to understanding the crisis that is unfolding in Europe. Normally, you would look at a country like Greece – with 175% debt-to-GDP, mired in a depression marked by -25% growth of GDP (you can’t call what they’re going through a mere recession), with 25% unemployment (50% among youth), bank deposits fleeing the country, and a political system in (to use a polite term) a state of confusion – and realize it must be given debt relief.

But the rest of Europe calculates that if they make concessions to Greece they will have to make them to everybody else, and that prospect is truly untenable. So they have told the poor Greeks to suck it up and continue to toil under a mountain of debt that is beyond Sisyphean, without any potential significant relief from a central bank. This will mean that Greece remains in almost permanent depression, with continued massive unemployment. While I can see a path for Greece to recover, it would require a series of significant political and market reforms that would be socially and economically wrenching, almost none of which would be acceptable to any other country in Europe.…
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Comment by zeroxzero

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  1. zeroxzero

    FT took a very hawkish view of Yellen's testimony today.  I thought she was just blowing smoke, frankly, and wouldn't dare send a bearish signal to equity markets, since housing and employment are not exactly motoring upwards.  I wonder if they're right.

    ~~Federal Reserve Chair Janet Yellen takes her seat to testify at a Senate Banking, Housing and Urban Affairs Committee hearing on "Semiannual Monetary Policy Report to Congress" on Capitol Hill in Washington, February 24, 2015. World shares held near record highs on Tuesday after Greece produced a list of proposed economic reforms, and the dollar rose on expectations Federal Reserve chair Janet Yellen would signal the Fed was still moving towards raising interest rates.

    FT front page 9:22PM GMT

    ©Reuters 
    9:22pm GLOBAL ECONOMY -- Fed paves way to raise rates this year
    Yellen optimistic on economy and sees risks in waiting too long
    • Video Dovish Yellen may need to swoop







The Easy Oil Is Gone So Where Do We Look Now?

The Easy Oil Is Gone So Where Do We Look Now? 

By Andrew Topf of Oilprice.com 

In 2008, Canadian economist Jeff Rubin stunned the oil market with a bold prediction: With the world economy growing at 5 percent a year, oil demand would grow with it, outpacing supply, thus lifting the oil price from $147 to over $200 a barrel. 

The former chief economist at CIBC World Markets was so convinced of his thesis, he wrote a book about it. "Why the World is About to Get a Whole Lot Smaller" forecast a sea change in the global economy, all driven by unsustainably high oil prices, where domestic manufacturing is reinvigorated at the expense of seaborne trade and people's choices become driven by the ever-increasing prices of fossil fuels. 

In the book, Rubin dedicates an entire chapter to the changing oil supply picture, with his main argument being that oil companies "have their hands between the cushions" looking for new oil, since all the easily recoverable oil is either gone or continues to be depleted – at the rate of around 6.7% a year (IEA figures). "Even if the depletion rate stops rising, we must find nearly 20 million barrels a day of new production over the next five years simply to keep global production at its current level," Rubin wrote, adding that the new oil will match the same level of consumption in 2015, as five years earlier in 2010. In other words, new oil supplies can't keep up with demand. 

Of course, Rubin at the time was talking about conventional oil – land-based and undersea oil – as well as unconventional oil sands. The shale oil "revolution" in the United States that took off soon after the publication of his book has certainly changed the supply picture, and the recent collapse in oil prices has forced Rubin to eat his words. With U.S. shale oil production soaring from 600,000 barrels a day in 2008 to 3.5 million barrels a day in 2014, the United States over the past few years has flooded the market with new oil from its shale formations, including the Eagle Ford in South Texas and the Bakken in North Dakota. According to the Energy Information Administration (EIA), total…
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JP Morgan to charge big clients fees on deposits

Emily Glazer at the Wall Street Journal reports on JP Morgan's move to reduce large deposits, worth about $390 billion, down to about half of that. The fees will presumably force the clients into switching to other ways of holding their money and/or other less liquid investments. The stock market likes the news, shares are up about 2.5%.

To read the full WSJ articles, paste the title into Google's search bar and click, then click on the article from the WSJ in Google's list.

J.P. Morgan to Start Charging Big Clients Fees on Some Deposits

New deposit fees likely to reduce deposits by billions

J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.

The largest U.S. bank by assets is aiming to reduce the affected deposits by up to $100 billion by the end of 2015, according to a bank presentation Tuesday morning.

J.P. Morgan to Reduce Up to $100 Billion in Certain Deposits

Plan comes as bank seeks to discourage certain deposits amid new regulations, low interest rates

The plan won’t affect the bank’s retail customers, but some corporate clients and especially an array of financial firms, including hedge funds, private-equity firms and foreign banks, will feel the impact, according to an internal bank memo reviewed by The Wall Street Journal. The bank is focusing on around $200 billion of certain “excess” deposits from financial institutions out of a total $390 billion of financial-institution deposits, according to the presentation.

J.P. Morgan is making the moves because certain deposits are less profitable to handle than they used to be. New federal rules essentially penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment.

[...]

The Wall Street Journal reported in early December that J.P. Morgan and several other banks, including Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp. , had spoken privately with clients in recent months to inform them that new regulations are making some deposits less profitable, in some cases telling clients they would charge fees or work to find alternatives for some of the deposits. The moves have thrown into question a cornerstone of banking, in which deposits have been seen as one of the industry’s most attractive forms of funding.





Comment by rookie

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  1. rookie

    Anyone recollect the TWTR recent bcs recommendation?







Comment by Burrben

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  1. Burrben

    I'm using ScaleTrader today to scale into 1@49.25 1@48.75 1@48.25, taking profits at each 0.26c buy.







Comment by phil

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  1. phil

    Good morning!  

    Hang Seng opened back up and ended the day flat after a 200-point pop but Shanghai still on vacation and /NKD still not holding 18,500.  India had a sharp sell-off on a corruption crackdown that didn't make the top 1% happy. 

    President of India's Speech to Parliament in Full

    Pranab Mukherjee said that India's government was committed to development for all as it looks to jumpstart the economy and boost investment.

    Indian Outsourcers Struggle to Evolve as Growth Slows

    Japan Shares Hit Fresh 15-Year High

    Shanghai exchange to open doors to foreign short sellers.  Foreign investors will be able to short Chinese shares next month for the first time under the Shanghai-Hong Kong Stock Connect programme, in the latest move by China’s regulators to open up the country’s stock market.

    Chinese Cars Fall Farther Behind

    Europe has been fading since the open as Greek euphoria turns into "so now what?"  HSBC's earnings were a train wreck and yanked the FTSE down (they make up a big percentage) and, of course, Greece isn't officially fixed yet as we await them turning in their weekend homework assignment.  

    Tsipras Can Expect More Humble Pie

    Europe File: Greek leader Alexis Tsipras will have to capitulate on yet more issues if he is serious about putting Greece’s place in the eurozone beyond doubt, says Simon Nixon.


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Comment by pstas

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  1. pstas

    Phil- I looked through the list of Webinars and note the descriptions don't specifically mention "futures" but a few times. Anyway to find the ones dedicated to futures trading? Perhaps some keywords to aid a search through these informative presentations?







How Greece Got Outmaneuvered

How Greece Got Outmaneuvered 

By John Cassidy at the New Yorker

Excerpt:

To the surprise of nobody except a few alarmists, the finance ministers of the European Union reached a deal with Greece on Friday, extending the country’s existing bailout until the early summer. Greece’s new left-wing Syriza government had been telling everyone for weeks that it wouldn’t agree to extend the bailout, and that it wanted a new loan agreement that freed its hands, which marks the deal as a capitulation by Syriza and a victory for Germany and the rest of the E.U. establishment.

[...]

In retrospect, it is clear that Tsipras and Varoufakis overplayed their hand. Their early bluster riled up the Germans and alienated other players that they needed to win over, such as the E.C.B. and the European Commission. Since Varoufakis is an academic game theorist, this is a bit surprising, but perhaps not entirely so. Having been swept into office practically out of nowhere, Syriza’s leaders were understandably giddy, and understandably eager to meet the demands of the popular protest movement that was responsible for their rise.

Full article: How Greece Got Outmaneuvered – The New Yorker.

Cartoon and articles shared by Josh Brown of the Reformed Broker: What Greece Won

 





Why the Workforce Still Shrinks as Job Growth Rises

Why the Workforce Still Shrinks as Job Growth Rises

By Elliott Wave International

Editor's note: This article was adapted from the February issue of The Elliott Wave Financial Forecast, a publication of Elliott Wave International. All data is as of Jan. 30, 2015. (Click here for the full version of the article, including specific near-term forecasts.)

A significant hint of economic softening is the slight decline in average hourly earnings in December. It came despite "a healthy 252,000 increase in jobs. "Economists are struggling to explain the phenomenon," says the Associated Press. "I can't find a plausible empirical or theoretical explanation for why hourly wages would drop when for nine months we've been adding jobs at a robust pace," says a perplexed economist.

Workforce is still shrinking

The chart above of the U.S. Labor Force Participation Rate presents a similar conundrum. Why is it falling when job growth is rising? The answer, we think, is the emerging force of deflation.

Notice that the peak participation rate of 67.3% came from January to March 2000, as the major stock indexes topped, after which inflation first began to falter. When stocks rallied to their 2007 top, there was a mild bounce in the rate, but the latest stock market rally failed to generate any sustained rise in the rate of work force participation. Workers appear so discouraged that the pool of available employees is back to where it was in 1978.

The opening chapter of Robert Prechter's, Conquer the Crash, illustrates various other measures depicting a long-term economic deterioration. He writes, "The persistent deceleration in the U.S. economy is vitally important, because it portends a major reversal from economic expansion to economic contraction."

As "great" as it was, the Great Recession of 2008-2009 was just a prelude. Click here to continue reading the complete version of this article, a part of the newest issue of EWI's newsletter, free.


This article was syndicated by Elliott Wave International and was originally published under the headline Why the Workforce Still Shrinks as Job Growth Rises





 
 
 

Zero Hedge

STiNKiN BuLLeTS...

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

.

BLOOMBERG NEWS (April 2014)--- On April 14, Newsmax.com reported that the USPS was seeking to buy a large amount of ammunition on the heels of similar purchases by the Social Security Administration, the U.S. Department of Agriculture, and the National Oceanic and Atmospheric Administration.

This alarmed some people whom Newsmax described as “second amendment advocates.”

One was Philip Van Cleave, president of the Virginia Citizens Defense League. “The problem is, all these agencies have their own SWAT teams, their own police departments, which is crazy,” he told the website. “Do we really need this? That was som...



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Phil's Favorites

Greece Negotiations Resume Again; "Constructive Ambiguity"; Schäuble Outmaneuvered!

Courtesy of Mish.

On Friday, the German Bundestag Backed the Greek Bailout Extension. Ahead of the vote, many commented that Greece collapsed.

It's not all that simple as I have explained.

The likely explanation for the alleged collapse of Syriza is Greece did not have a primary account surplus. Had it left now, it would have been forced off the euro, violating a campaign promise of Syriza.

Caving in required temporary caving in of other campaign promises.

Both Sides Got Something

The four-month extension gives Greece a better chance to prepare for default while allowing Greece to stay on the euro. The extension also give the ECB four more months to prepare for Grexit or default.
...



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Chart School

Moving Averages: Month-End Update

Courtesy of Doug Short.

Valid until the market close on March 31, 2015

The S&P 500 closed February with a monthly gain of 5.49%, the largest one-month gain in 40 months. All three S&P 500 MAs and four of the five the Ivy Portfolio ETF MAs are signaling "Invested". In the table below, monthly closes that are within 2% of a signal are highlighted in yellow.

The Ivy Portfolio

The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I've also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.

For a facinating analysis of the Ivy Portfolio strategy, see this article by Adam Butler, Mike Philbrick a...



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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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Market Shadows

Kimble Charts: Coal

Kimble Charts: Coal

By Ilene 

Chris Kimble's chart for KOL shows a recently beaten down ETF struggling to pull itself up from the ashes. As the chart shows, KOL has recently drifted down to levels not seen since the financial crisis of 2008-9.

Bouncing or recovering with energy in general, coal prices appear to have stabilized in the short-term. Reflecting coal prices, KOL has traded between $13.45 and $19.75 during the past year. Bouncing from lows, KOL traded around 2% higher yesterday from $14.26 to $14.48 on high volume. It traded another 3.6% higher in after hours to $15, possibly related to ...



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OpTrader

Swing trading portfolio - week of February 23rd, 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: Sector rankings stay neutral with few bullish catalysts on horizon

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

Courtesy of Sabrient Systems and Gradient Analytics

Stocks are hitting new highs across the board, even though earnings reports have been somewhat disappointing. Actually, to be more precise, Q4 results have been pretty good, but it is forward guidance that has been cautious and/or cloudy as sales into overseas markets are expected to suffer due to strength in the US dollar. Healthcare and Telecom have put in the best results overall, while of course Energy has been the weakling. Still, overall year-over-year earnings growth for the S&P 500 during 2015 is expected to be about +8%.

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



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Digital Currencies

MyCoin Exchange Disappears with Up To $387 Million, Reports Claim

Follow up from yesterday's Just the latest Bitcoin scam.

Hong Kong's MyCoin Disappears With Up To $387 Million, Reports Claim By  

Reports are emerging from Hong Kong that local bitcoin exchange MyCoin has shut its doors, taking with it possibly as much as HK$3bn ($386.9m) in investor funds.

If true, the supposed losses are a staggering amount, although this estimate is based on the company's own earlier claims that it served 3,000 clients who had invested HK$1m ($129,000) each.

...



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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.

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