by phil - April 20th, 2017 8:31 am
"I went down to the crossroads, fell down on my knees.
Down to the crossroads, fell down on my knees.
I'm standin' at the crossroad, babe, I believe I'm sinking down." – Cream
Earnings are simply not that exciting.
The growth in earnings was SUPPOSED to come from the Financials and the Energy Sector and we've gotten so-so reports from the Financial Majors and oil just collapsed to $50.50 yesterday (a profit of $2,500 per contract for those of you who followed our morning call to short at $53!) and that can't be great for Q2 profits if we stay down here, can it?
We've been telling you for years what a complete and utter scam the oil market is and knowing it's a scam is the secret to our success. Today is the last trading day for the May contracts and they still have 25M barrels of fake, Fake, FAKE!!! open orders to get rid of – down 100,000, 1,000-barrel contracts (80%) since Tuesday's post and, lo and behold – June is up 55,000 contracts (that are also FAKE) while the other 45,000 fake orders have been distributed across longer months – in order to fake that demand down the road as well.
Since we KNOW the trading is FAKE!!!, we KNEW they had to get rid of over 100,000 May orders in 2 days and we knew that would put pressure on oil and that made a good short – it's not very complicated and we do it ALL THE TIME because, although it's a total scam – it's a very predictable one…
After today, however, we will be flipping long on oil and, in yesterday's Live Trading Webinar, we identified a great long position on the Oil ETF (USO), using July call options and, of course, we'll be looking for opportunities to go long on oil in the Futures (/CL), using our brand new oil trading range chart. Oil will be pumped back to $55-60 into July (and then we'll go short…
by ilene - April 19th, 2017 3:13 pm
Courtesy of Joshua M Brown
This is blindingly smart and fast-paced stuff from the master of Amazonology, NYU professor Scott Galloway.
Scott Galloway speaks at L2’s Amazon Clinic about how Amazon is disrupting retail. Not only has Amazon changed consumer shopping habits, it has changed the relationship between shareholders and investors. Investors are no longer satisfied with steadily growing profits; instead they seek fast growth and strong vision – even at the expense of profitability. See video for insights on the future of brand, Alexa’s effect on households.
by phil - April 19th, 2017 8:32 am
5,440 was our line in the sand.
Since March 21st we've been using that line to short the Nasdaq Futures (/NQ) as a move above that line was in no way justified without some real improvements in earnings and now, with earnings season upon us, we're still not seeing evidence yet that the market should be breaking higher.
In that same 3/21 post, we had 11,550 on the broader NYSE and now the NYSE is at 11,375 – down 175 (1.5%) while the /NQ is back at 5,415 this morning. Our Long-Term Portfolio was up 148.9% that morning and, as of yesterday's close, we're at +162%, gaining $65,402 in less than a month so we certainly aren't complaining about the extended rally and, as I said at the time, BALANCE is key and we have been using some of those profits to bulk up our hedges into earnings.
Aside from being long on the Nasdaq Ultra-Short ETF (SQQQ), we also have shorts on Nasdaq leaders Amazon (AMZN) and Tesla (TSLA) and neither one of those are doing well at the moment as more and more money has been pouring into the leading stocks while the rest of the Nasdaq has been selling off. Propping up the index leaders while selling the rest keeps the "dumb money" flowing into the Nasdaq while the "smart money" heads for the exits – leaving the dumb money to hold the bag.
The Chaikin Money Flow (CMF) is an oscillator derived from the Accumulation/Distribution Line. CMF values are calculated by adding all the A/D line values for the period and dividing this by the total volume for the period. When there is strong buying pressure with high volume, this pushes the indicator higher and strong selling pressure with reduced volume pushes the indicator lower. The Accumulation/ Distribution line either reaffirms the trend or gives a warning that the trend is about to change direction.
We had massive inflows into the markets since the election and especially since the beginning of the year but there was a drastic turn in mid-March and money was actually flowing out of the market last week. Seems to me people are getting nervous and the VIX confirms this – the only thing…
by ilene - April 18th, 2017 10:15 pm
Courtesy of Zero Hedge
A 'shocking' discovery was made when a pair of researchers at Harvard Business School decided to analyze the impact of higher minimum wages in San Francisco on restaurant failures…hint: they went up.
Entitled "Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit", this latest study on the devastating consequences of minimum wage was conducted by Dara Lee Luca and Michael Luca and concluded that each $1 increase in the minimum wage results in a roughly 4-10% increase in the likelihood of a restaurant going out of business.
In this paper, we investigate the impact of the minimum wage on restaurant closures using data from the San Francisco Bay Area. We find suggestive evidence that an increase in the minimum wage leads to an overall increase in the rate of exit.
This paper presents several new findings. First, we provide suggestive evidence that higher minimum wage increases overall exit rates among restaurants, where a $1 increase in the minimum wage leads to approximately a 4 to 10 percent increase in the likelihood of exit, although statistical significance falls with the inclusion of time-varying county-level characteristics and city-specific time trends. This is qualitatively consistent but smaller than what Aaronson et al. (forthcoming) find; they show that a 10 percent raise in the minimum wage increases firm exit by approximately 24 percent from a base of 5.7 percent. Differences in sample and specifications may account for the differences between our study and theirs.
Moreover, as we've pointed out the past, it's the low-income workers, the ones that minimum wage hikes are intended to help, that end up getting hurt the most when misinformed liberal politicians decide to meddle in labor markets. But, as this new HBS study points out, low-income workers don't just lose their jobs when minimum wages are hiked…they also lose access to cheap casual dining options as lower-rated, cheaper restaurants are much more likely to fail when their costs are artificially raised.
Next, we examine heterogeneous impacts of the minimum wage on restaurant exit by restaurant quality. The textbook competitive labor market model assumes identical workers
by ilene - April 18th, 2017 3:43 pm
by phil - April 18th, 2017 8:29 am
Our man, Mnuchin, is on the case!
In an interview with The Wall Street Journal last week, U.S. President Donald Trump said a “too strong” dollar made it difficult to compete with other countries in trade, pushing the currency lower. Yesterday, Treasury Secretary Steve Mnuchin told the Financial Times he agreed with Trump and that the Dollar's strength was hurting exports, sparking concerns are that the United States could take a tough trade stance against Japan, which has been wary of Trump's complaints that it and other countries have artificially weakened their currencies.
In even worse news for the markets, Mnuchin said it was now unlikely that tax reforms will come in time to have an impact on 2017: “It started as [an] aggressive timeline,” the former Goldman Sachs banker said in an interview with the Financial Times. “It is fair to say it is probably delayed a bit because of the healthcare.”
Mr Mnuchin rebuffed suggestions that Washington may be seeking to depreciate the currency via verbal interventions following remarks from Mr Trump last week. “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing,” said Mr Mnuchin. “It’s a function of the confidence and the strength of the US economy.”
In other words, as I said on Thursday, it's yet another issue on which the Administration flips or flops on – depending on the day. If you don't think this sort of thing affects the markets – just ask Mnuchin's bosses at Goldman Sachs, who just had disappointing earnings (told you so!), who said the atmosphere of policy uncertainty caused the 0.16 (3%) earnings miss and $500M (5%) revenues miss.
Goldman Sachs (GS) is a Dow component and is down $6.50 pre-market and that should cost the Dow about 50 points at the open. This will be good for the SKF trade we talked about yesterday. Speaking of things we talked about: In last week's Live Trading Webinar (Wed 12th, 1pm), we called for a short on oil right at the open (2:03) and we expected a drop back to $52.50 for a $1,000 per…