Wednesday Worries – Yentervention, Euro Style
by Phil - February 8th, 2012 5:16 am
78.50 on the Dollar!
The Yen finally got back to 77 and EUR/CHF back to 1.21 so my theory that the BOJ has given up on the Dollar and moved to boosting the Euro is playing out nicely.
This does not make me more bullish (expecting falling Dollar to boost the markets) because, in the grand scheme of things, this is kind of like now there are two kids building a sand wall on the beach instead of one – sure it will last longer than the wall just one kid was building but, eventually, the tide will get it anyway or, as Jimi Hendrix said more poetically: "Castles made of sand, fall in the sea, eventually."
Once you start messing around with Forex markets, you are messing with major macro forces that are hard to control. Japanese banks have $7.5Tn of Japanese bonds at 1% – what happens to the value of those bonds if the BOJ does push the Yen down 10%? Who takes that $750Bn hit? What if rates go up to 2% – what's the value of the bonds then? Who will bail out the Japanese Banks when they have a multi-Trillion Dollar (several hundred Trillion Yen) hole in their balance sheets? Do Japanese spreadsheets even have room for Quadrillions? They are going to need it!
Then there's this Bloomberg article on the Central Banks, who have doubled their balance sheets since 2006 to $13.2Tn but, magically, have caused no inflation (according to Ben Bernanke – not according to people who actually buy food and stuff). China is now sitting on $4.5Tn of other people's TBills (mostly ours) and that's up $1.5Tn in a year. The ECB is right behind them with $3.6Tn and another $1Tn supposedly coming in the next EFSF round and the Fed has $2.9Tn plus whatever nonsense they are running off book.
So, how is it that WE are the bad currency here? If the Dollar is a problem, then China, who's GDP is only about $8Tn (optimistically, possibly $5.5Tn depending on who's measuring) is almost as insane as Japanese bankers and maybe more so as they are betting on our country's ability to pay and maintain the value of the Dollar (already a fail, right?). I suppose no one can ever recognize losses and just carry more and more junk…
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DiggTempting Tuesday – Again
by Phil - January 10th, 2012 8:21 am
Well here we go again.
Once again it's Tuesday and once again it's a primary and once again we are meant to believe everything is right in America as the Futures take the markets back to levels not seen since last August. As we discussed last week and as noted by David Fry this morning:
Throughout the week Fed governors will be making speeches: Dennis Lockhart (2 speeches), Charles Evans (2 speeches), Esther George, John Williams, Charles Plosser and Jeffrey Lacker. This is part of their transparency mission and/or a campaign to pump-up investor confidence. You choose.
Yesterday we made our breakfast money shorting the Dow off the 12,350 line and today we already had a double dip at the Dow off the 12,450 line but, on the whole, it would have been easier to drink the Kool-Aid and go long.
Unfortunately, I'm a Fundamental Investor and not a TA guy so, impressive as this run may seem, it doesn't match up with the data and, so far, it's neither matching up with Q4 earnings or Q1 outlooks. We HOPE the Fed will go for QE3 (Friday's Fed speak indicated that and more today) and we HOPE Europe is fixed and we HOPE China doesn't implode – is this a sound investing premise? Let's see how things have been going in the last Quarter:
Up 15% in all of our indexes and led by the Transports, which are up 21% – even with oil up 25% over the same period which once again proves our theory that trucks and airplanes must poop oil when they run – which explains the non-inverse correlation between Transports and Fuel Costs that those of us who took Econ 101 may be familiar with.
The most interesting thing about the above chart set is the uniformity of the moves up in the majors but I think it's the NYSE and the Russell which PROVE beyond a shadow of a doubt, that this market is traded by robots. Look at those two charts – they are practically tick by tick matching – even to the point where the Russell is almost exactly 1/10th of the NYSE. Sure, you could assume some similarities in two broad indexes but this is 6 full months of daily moves that are in lockstep. That's just not natural on the order of…
Will We Hold It Wednesday – Nasdaq 2,603 Edition
by Phil - December 28th, 2011 6:53 am
Watch the Nasdaq.
That’s the index we need to catch up to the Dow now that the S&P is halfway to goal at 1,297 (from our Must Hold line at 1,235). The Dow is in La La Land, led by MCD (up 31%), IBM (up 26%), PFE (up 24%), HD (up 20%) and KFT (up 20%) while this year’s Dogs of the Dow are BAC (down 59%), AA (down 43%), HPQ (down 39%) and JPM (down 22%).
While the losers may seem to outweigh the winners, that’s not how it works as the Dow is price-weighted so BAC dropping from $14 to $5.50 "only" costs the Dow about 68 points (roughly 8 points for each Dollar), IBMs rise from $145 to $185 added a whopping 320 points.
So a 26% rise in one component and a 59% drop in another nets out to a gain of 252 points! At the beginning of the year, they had roughly the same market cap ($150Bn) but IBM has gained $70Bn and BAC has lost $100Bn which, of course, translates into a net gain of 2% on the entire Dow – BECAUSE IT IS THE STUPIDEST INDEX ON EARTH!
Our Members, of course, know this. I wrote "DJIA: The Most Useless, Overused Tool on the Planet" back in 2006, when GM was still part of the Dow so no need to rehash it all here other than to mention the fact that a 30-component index has made 5 substitutions in the 5 years since I wrote that article only serve to highlight how ridiculous it is to use the Dow to draw long-term conclusions. The Dow is manipulated because it’s easy to and Uncle Rupert sits with the other Masters of the Universe to decide how to use this headline tool to make things look as good as possible in the US markets.
That’s why CSCO and TRV replaced C and GM in June of 2009. C was at $28.80 and is down a bit, GM went BK from $45 (which would have been a 360-point loss in the Dow) while CSCO was disappointing but essentially flat and TRV is up $20, adding another 160 points so a 520-point swing (5%) on those substitutions alone. In September of 2008, AIG ($135 at the time) was swapped for KFT ($32). KFT is just $37.70 but AIG was…
Full Throttle Friday – Dollar Dive Does Bears In
by Phil - December 2nd, 2011 8:28 am
Oh what fun this is!
Now the ECB is lending the IMF about $200Bn, which the IMF can lever up to lend Eurozone countries another $500Bn and that’s before the Fed and the BOJ and all the other partners in World Crime get together and pump even more money in. Nothing gives the old Futures a shot in the arm like MORE FREE MONEY and, interestingly enough, the ECB handing out cash Boosts the Euro, now over the $1.35 line.
This is, of course, FANTASTIC for our Monday trade ideas, which were:
FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one. (Now net $4.95 – up 725%)
FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread. (Now $1.45, up net 1,350%)
JPM Jan $25 puts can be sold for $1.20 (Now .65 – up 45%)
AA 2013 $7.50 puts can be sold for $1.28 (Now $1.05 – up 18%)
VLO June $17 puts can be sold for $2.05 (Now $1.40, up 32%)
- Gasoline (/RB) futures at $2.55 (Now $2.62 – up $2,940 per contract)
Now I know that these are the kind of results you get every week so, whatever you do – don’t subscribe to our Newsletter! Why would you want these ideas EMailed to you every morning before the market opens? If they make you money, then you have to pay taxes and paying taxes is evil, right? Premium Membership is sold out but you wouldn’t want to get trade ideas live during market hours anyway. Less than $2 per day, however, gets you our Annual PSW Report Membership and you are able to read our full posts every morning, as soon as they are published.
Speaking of Premium Memberships, congrats to all who followed us last week as it was a doozy! You can tell from our titles (and our Stock World Weekly Newsletter does a great recap of the action each week and is included with that Report Membership) how we turned bullish over the week:
Keep in mind, these are titles that go out in the "In Progress" posts that…
Thrill Is Gone Thursday – Already?
by Phil - December 1st, 2011 8:11 am
Yesterday was very exciting, but now what?
David Fry summed up yesterday’s action perfectly, saying "Wednesday’s massive rally was prompted by sudden global central bank intervention adding (printing money) liquidity (reducing the lending rate overseas to zero basically) to shore up sovereign debt in the eurozone. They basically set up a swap facility to do the job in the future. Is it a cure or a bailout? No, this is a handout. And it doesn’t solve the problems the eurozone is facing."
"But, it must be said that the European leaders must have hit a dead end in talks and a potential financial panic must have seemed likely. Mind you, Mr. Bernanke is perfectly comfortable with reflation and money printing. He’s been at it for a long time. It will take years for the Freedom of Information Act to discover how much money and to whom the U.S. has given free money. Americans and others will see price increases in all products and services as a result of a weaker dollar negatively affecting purchasing power. Beyond Moral Hazard issues this is the cost you’ll see and perhaps even wonder why."
It’s the classic "stick save" that was clearly (to us) telegraphed by the very low-volume blow-off bottom last week and now, in retrospect, it is also clear that the market manipulators and their media hounds were pulling out all the stops to get retail investors to SELLSELLSELL.
As I mentioned yesterday, I’ve been railing against the market manipulation and the media nonsense that had been going on each month and today we learn that Wall Street execs did, in fact, meet privately with top Fed officials in September, according to Fed documents, and they "recommended" Central Banks make a joint effort to address the Eurozone debt crisis. Don’t forget that our Fed works for the Banksters, not vice versa! In addition to knowing well in advance this move was coming, their suggestions included boosting the global economy by buying securities, a move that may yet happen as many investors believe yesterday’s swap announcement was a prelude to additional coordinated action.
You see, it’s not enough for Lloyd Blanfein (allegedly and for example, of course, a fine man like Lloyd would never do this) to know that the Fed is going to make a massive move like yesterday – there’s much more money to be made if…
Wednesday Whiplash – Coordinated CB Action Traps Bears!
by Phil - November 30th, 2011 8:17 am
The new Beige Book is here, the new Beige Book is here!
I’m sorry but I get very excited about this kind of stuff. I love data, especially the kind of data our policy-makers rely on to make their future decisions. Although the BBook is a gathering of anecdotal evidence from the Fed’s 12 regions (see map below), the data comes from businessmen that are respected by each Fed Governor so THEY take it seriously and if they take it seriously, you’d better too.
We’ll have to wait until 2pm for today’s main event but we get early sentiment readings out of New York with the ISM Report and at 9:45 we get the Chicago PMI. We already got a TERRIBLE number on Mortgage Applications (down 11.7%) but we’ll call that a holiday thing (hopefully) and we’ll see if that’s confirmed or denied in the 10am Pending Home Sales Report.
We have Challenger Job Cuts and Productivity Numbers and Oil and OH MY GOD – SCREW THAT – MORE FREE MONEY IS HERE!!!
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
These Central Banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements
…
Just Another Cyber Monday (Manic Edition)
by Phil - November 28th, 2011 8:21 am
INSANITY!
That’s what we have today (and what we’ve been having all month) as the markets celebrate the fact that neither the US consumer or the Euro is dead – yet. Holiday sales are apparently up 16.4% from last year with 10% of those sales being IPhones and Ipads so we can thank the actually dead Steve Jobs for saving the markets from a total meltdown this month as we were on track for the worst November EVER until today.
The DOOM meter was certainly set to 100 and, in fact, 100 is about how low the McClellan Oscillator went on Friday – to a state of oversold not matched since August 8th, when the Dow bottomed out at 10,600 so holding 11,200 in this protracted sell-off was a victory, of sorts, for the bulls and certainly a victory for those of you following our Big Chart – which made us perhaps the ONLY newsletter that was bullish on Friday, when I laid out my bullish case and right in the main post – for free – suggested long ideas on:
- Oil Futures (/CL): Was $95, now $100 – up $5,000 per contract
- Gasoline Futures (/RB): Was $2.50, now $2.54 – up $1,680 per contract
And, in Member Chat – our Morning Alert had the following trade ideas:
- FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one.
- FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread.
- JPM Jan $25 puts can be sold for $1.20
- AA 2013 $7.50 puts can be sold for $1.28.
- VLO June $17 puts can be sold for $2.05
We also speculated on an aggressive AMZN long play with the Dec $200 calls at $2.50 but, overall, we take this 2% bounce after a 10% drop with a grain of salt. As I said to Members in the alert: Just like we watched with amusement while things fell earlier this week, we should take a move up just as lightly until we cross back over our Must Hold Lines – to some extent, we have selling fatigue driving this move – keep in mind my bullish discussion on hyperinflation is more…
Super Tuesday Committee Failure – So What?
by Phil - November 22nd, 2011 7:43 am
Long live the Debt! In case you are voting in the next election – here are 12 people to get rid of. Much as I may blame one party over another for this failure, they all deserve what’s coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation’s business anymore.
In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID. Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all." As I can tell you from raising my own children to be good citizens:
The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."
Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer’s area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks." Tied with Daily show viewers for best informed were NPR supporters but, sadly, only 21% of Americans get their news from NPR and only 18% from the Daily Show while 64% list Fox News as one of their frequent news sources.
In another study, World Public Opinion, a project managed by…
Monday Madness – G20 FinMins Set Two Week Deadline
by Phil - October 17th, 2011 8:01 am
Two weeks!
European leaders have two weeks to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy. “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting on Saturday.
The Brussels meeting “has the potential to turn into a positive historic moment,” Joachim Fels, London-based chief economist at Morgan Stanley, wrote in a note to clients yesterday. “But it could also easily turn into a negative catalyst.”
Europe’s plan, which has still to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($611 billion) temporary rescue fund known as the European Financial Stability Facility. “The plan has the right elements,” U.S. Treasury Secretary Timothy F. Geithner said in Paris. “They clearly have more work to do on the strategy and the details.”
The G-20 officials — who met to prepare for a Nov. 3-4 gathering of leaders in Cannes, France (and we’re fondly remembering London’s 2009 meeting with the graphic on the right) — said in a statement that the world economy faces “heightened tensions and significant downside risks.” European authorities must “decisively address the current challenges through a comprehensive plan.”
The policy makers held out the possibility of rewarding European action with more aid from the International Monetary Fund, while splitting over whether the Washington-based lender’s $390 billion war chest needs topping up. Europe’s latest strategy hinges on putting Greece, whose government forecasts its debt to reach 172 percent of gross domestic product in 2012, on a sustainable path. Austerity has plunged the country deeper into recession and provoked civil unrest that threatens political stability.
My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying:
Speaking of the illusion of power – yet another G20 meeting ends with yet another plan to have a plan but this time, for some insane reason, they only gave themselves a week to fix everything. I’ll be writing about this this morning but the gist of it is the Finance Ministers have essentially sent their own
…
Make Billion$ With StockTwits (and Win a Free Quarter!)
by Phil - July 9th, 2011 4:34 pm
Billions!
That’s right, if you followed Philstockworld on Stocktwits this past month and followed our trade ideas, you could have made Billions of Dollars. Not bad but that’s only a tiny portion of what you get at PSW every day. Needless to say, we’ve had a good month but it’s no fun being right if nobody knows it so let’s review a month of Tweets and also make it worth your while to send others to Our StockTwits Link and follow us there.
For the month of July, every new follower will be entered in a random drawing and one will be selected to win a free 1-year subscription to the PSW Report – our twice-daily Email that gives you access to all of our non-Premium posts as well as Stock World Weekly. If you are already a paying PSW subscriber and win this drawing, we will give you a 3-month extension of your Current Membership Level instead added to your current subscription.
If you are a Member and your friends subscribe and tweet us your name – one of those named members will also be the winner of a 3-month extension of that member’s current level. The more friends you have, the better the chances to win!
We’re doing this because we need to build up our social networking presence so I’ve been tweeting more in June. You can go to our StockTwits site and see all 45 Tweets posted since June 1st (there are many also before that) but I’m just going to review the ones that were less generic (we auto-tweet my posts) to give you an idea of what kind of value your friends can get out of this free service:
philstockworld Phil Davis
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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