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Posts Tagged ‘Buffett’

Warren Buffett’s Secret to Making 100% a Year

I love the Berkshire Hathaway annual report!  

Especially Warren Buffett’s letter to shareholders.  The report gives us a great view of the overall economy from a man who has his finger in every pot and his letter to investors gives us a very good insight as to how things are going in the various sectors his operations cover.  Most importantly, what I have learned in my own 40 years or reading Mr. Buffett’s reports (my Grandfather was a shareholder) is what should shape any long-term investing strategy:  Patience and performance.  

I often preach to members the joys of letting gains compound and our $25,000-$100,000 Virtual Portfolio, which is currently at $27,531 (up 10%) after 4 weeks, is an exercise in how to quickly compound small gains over the course of a year.  Primarily, we try to follow Warren Buffett’s Number One Rule of Investing, which is: Don’t Lose Money.  Buffett’s Rule #2 is: See Rule #1 and like us, it’s not that nothing Warren Buffett ever buys loses money – it’s just that he doesn’t ever buy things he isn’t willing to stick with UNTIL they make money.  Sure we take a few losses along the road but, by being selective in our entries, we don’t discard stocks that we carefully selected just because the market temporarily disagrees with our valuations.  

In our $25,000 Virtual Portfolio, it’s only been a month so we’ve only closed our winners so far and they were SPWRA with a 100% gain (these are option trades), INTC with a 40% gain, NFLX with a 42% gain, EDZ with a 75% gain, XLF with a 15% gain, VIX with a 50% gain, USO with a 53% gain and XLE with a 5% gain.  In 19 trading day we have made 28 virtual portfolio moves (counting each leg) and, as I said, netted a 10% return to date.  Interestingly, we’ve been playing it very cautious as we still have over $18,000 of virtual cash on the sidelines, hoping for a sign to get a little more aggressive next week.  

How, you may wonder, are we going to get to $100,000 by December with just $27,531 in February?  THAT is the lesson Warren Buffett has to give us and that lesson is COMPOUNDING RETURNS!  Since 1965, Berkshire Hathaway has returned an overall gain of 490,409% to it’s shareholders.  $10,000 handed
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Thanks for the Gas Money, Mr. President!

What the HELL has happened to this country? 

Did we seriously just spend $830Bn to give tax cuts to the rich when we’re already $15Tn in debt?  When 20M Americans are officially out of work and another 30M have jobs where they can’t make ends meet?  Did Obama and the Democratic "leadership" just fold like an empty suit and sell what’s left of their supporters down the river and in exchange for what?  For the extension of jobless benefits for 2M people while another 450,000 people a week are laid off?   

How does it help people who have no jobs to have an extended tax cut?  If Obama suddenly found $830Bn to spend, how about spending it to employ 16.6 MILLION people with $50,000 jobs?  THAT’S HOW MUCH $830Bn is!  Would 16.6M people getting jobs boost the economy?  It would do a lot more for the economy than giving it to a few Billionaires so they can buy more BMWs which they can drive to the next foreclosure sale so they can take away the homes of the people they are supposed to be "trickling on." 

Aside from the obvious fact that the Bush Tax Cuts certainly didn’t leave us with a strong economy in their first 10 years and we all know that Albert Einstein’s definition of insanity is doing the same thing over and over again and expecting different results so we have to ask ourselves:  Has Barack Obama gone insane?  Have the Democrats lost their minds or only their souls (and their spines)?

As you can see from the chart on the left, our "leaders" have now endorsed a tax plan that gives families earning less than $75,000 an average tax break of $900.  That’s $17 a week!  I’m sorry, I titled this article "Thanks for the Gas Money, Mr. President" but good luck filling your tank for $17 a week.  In fact, before the Bush Tax Cuts, a gallon of gas was $1.50 but the $3.7Tn of debt we took on from the first 10 years of Bush Tax Cuts led to a rapid decline in the value of the dollar, which cased to price of commodities to fly up as the relative purchasing power of those dollars declined, pushing the price of gas up to a peak of $5 and what is once again $3 and climbing under Obama’s weak leadership.  

The average…
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America is 234 Years Old Today – Is It Finished?

"The average age of the world’s greatest civilizations has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage." – Professor Joseph Olson

Is America, then, living on borrowed time?  Are we so far past our prime and so into old age as a civilization that we are now senile and oblivious to our present surroundings, causing a danger to ourselves and others?  Do we find ourselves living in the past and repeating the same old tales of our former glories over and over again to anyone who will listen?  Are we barely kept alive by various medications that only stave off conditions that are getting worse every day while still imagining that, if there were a need, we could rise up and be strong again — but not today as there’s rice pudding for desert and we don’t want to miss that!

Well I have news for you – This country isn’t old and it isn’t sick but it has been drugged and it has been beaten down and robbed and I am going to tell you that I not only saw it happen, but I think I got a pretty good look at the 10,000 guys who did it.  It was the top 0.01%!  Who are the top 0,01%?  They are the top 10,000 income earners in the United States of America.  If you THINK you are in the top 0.01%, you are not.  People in the top 10,000 know only KNOW they are in the top 0.01% but they know where they rank as well.  The median ANNUAL income of a person in the top 0.01% is $50,000,0000.  They have $350,000,000 in assets and, since 1978, that is an increase of 550% – how have you done the past 30 years?

Now we are (or used to be) a pretty rich country and the median income of the 118M people who earn enough money to pay income taxes is about $50,000 but the cost of living in the same country as people who earn an average of 976 times more than that is pretty high as well (see "The Dooh Nibor Economy").  Even worse, The 10,000 paid just $112Bn in taxes last year – that’s just over 20% of their income, while the rest
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Monday Munificence – Greece “Fixed” for “Only” $146Bn, Who’s Next?

Yay, Greece is fixed….  again.

Now we only have to worry about Austria, Belgium, France, Germany, Greece, Hungary, Italy, Ireland, Japan, Netherlands, Portugal and, of course, the UK – who all have WORSE Sovereign Debt to GDP ratios than Spain (who are up next on the "wall of worry" the markets are climbing) while we pretend that the US is in "good" shape because we "only" have $15Tn in debt on a $14Tn economy, which is how we, through the IMF, were able to write Greece a $20Bn check this weekend. 

$146Bn given to Greece is almost 50% of Greece’s ENTIRE $339Bn GDP – now THAT’s a bailout!  Bailing out Spain’s $1.5Bn economy would force us all to dig just a little deeper, despite the lower ratio and bailing out Italy’s (same ratio as Greece) $2.1Tn economy might be a stretch so maybe we can help Belgium first ($470Bn) before we all get together and figure out what we’re going to do about Japan, who have a $5Tn economy that is $10Tn in debt yet somehow has had their bonds marked to fantasy for years.  

16.5% of Japan’s tax revenues currently go to debt service (10% on interest alone) as the government borrows money at an average 1.3% (10-year rate) and you won’t here it from the happy, happy CNBC crew this morning (because Greece is "fixed" and Buffett says GS are REALLY nice guys) but Fitch released a report this weekend warning: "Japan is increasingly vulnerable to an adverse interest rate shock, given the scale of government debt and hence the volume of refinancing.  The lack of a coherent and credible plan" for fiscal discipline is likely to put downwards pressure on creditworthiness in the medium term."  According to the non-Murdoch London Telegraph:

Tokyo has until now been able to borrow at ultra-low rates of around 1.30pc for 10-year bonds, drawing on a huge captive savings pool from its own citizens. While this reduces the risk of a "temporary liquidity problem" – or `sudden death’ in ratings parlance – as foreigners cut off funding, it does not protect Japan from deeper forces at work.

The Bailout"The slow but steady drop in the domestic savings rate could eventually undercut [Japan's] ability to fund itself locally at nominal yields and makes it more vulnerable to interest rate and refinancing risks," he said. Even at the current low rates – 0.16pc for two years, and


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Armstrong Economics: Entering Phase II of The Debt Crisis

Introduction by Ilene

martin armstrongYou may be wondering why Chopshop is referencing Martin Armstrong’s writings, given Marty’s extended stay in maximum security prison.  Chopshop contends that Martin’s cyclic modeling is genius and ought to supersede whatever opinion one has of Armstrong’s case.

Armstrong is a gold-to-$5,000 guy.  Chopshop agrees that one day gold will likely reach those dollar-denominated "values", but believes that gold will likely digest its 400% gain of the past decade over the next few years before ‘going for the gusto.’

Chopshop and Fibozachi have remained steadfast in calling for first targets of 81 and 84 on the US dollar since they nailed its bottom on December 3rd.  (See also this and this.) They believe we are at a juncture within the credit crisis where "gold is much more likely to take a $350 John Edwards-style haircut before reaching $1450 and beyond."

Back to Armstrong, whose proclivity for gold stems "not from an ill-conceived loathing of the dollar but from an impeccably nuanced study of history’s mosaic.  Chopshop thinks Armstrong’s work can be appreciated by all, "not only because of Marty’s historical breadth but also because his forecasts are predicated upon explicit methodology."

So I asked Chopshop why Martin was in prison, and, for the first time he paused, answering a few seconds later that the reason is because Martin didn’t "obey the rules of Fight Club" ~ you don’t talk about Fight Club and you don’t talk about the alleged collusion of broker/dealers, investment banks, hedge funds and nation-states publicly when "they" are who you consult / manage money for. Armstrong spoke to the manipulation of silver futures by JPM, named Warren Buffett as a mystery $2 billion futures participant of "the Club" and, ultimately, spoke to alleged cabals operating from within, yet behind, financial markets.  Marty spoke about the game being rigged by the Club, being anything but a random walk. Is such the reason for his incarceration with extreme prejudice; not his Pi cycles, public-private pendulum or other brilliant work within cyclic periodicity? So basically, he’s in the hole on trumped up charges.

The long and short of it, according to Chop’s opinion, is that Martin is a political prisoner and cyclic genius who speaks to the intermediate and long-term horizon with probabilistic prescience.  He’s not selling anything and not offering actionable advice. He’s focused solely on finding robust patterns within his models and across history.  Marty has a nearly…
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Weekly Wrap-Up – Buffett’s Daring Derivative Deal Does Well

I was going to talk about Buffett’s annual letter to investors.

Fortunately, I procrastinated and other people did some detailed reporting like Ravi Nagarajan, Andy Fry, Scott Patterson and Joe Del Bruno – who does a great job of pointing out that Berkshire’s 4th quarter results were propped up by Buffett’s $1.05Bn gains in derivatives betting (something Buffett himself once called "weapons of mass financial destruction" but, as we well know – if you can’t beat them…), which accounted for 1/3 of Berkshire’s $3.06Bn profits

Buffett’s biggest bet was selling a put against the S&P 500 back in March – a move I said at the time was BRILLIANT and Buffett himself now says about his own options trading:  "We are delighted that we hold the derivatives contracts that we do.  To date, we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts."  

What did Buffett do?  Exactly what we teach you to do here at PSW - he took advantage of an irrational move in the markets and SOLD INTO THE EXCITEMENT, getting a fat premium from some sucker that bet the S&P would not hold 666 5 years from now.  Buffett effectively sold $5Bn worth of puts that expires worthless at S&P 700 between 2019 and 2027, putting $5Bn in his pocket and holding aside $1Bn in margin, which is how much he’s already ahead on the bet.  Like a good options trader, he has a plan and he’s trading his plan, making sure his investment is on track and patiently letting time do it’s work as it eats away at the put-holder’s premium. 

What about the risk?  Well I can’t speak for Buffett’s stop-loss technique but we’re talking about a company that has (had) $40Bn in cash using their excess margin to make a $5Bn bet that the S&P would not stay below 700 for 10 years.  Buffett and I both tell people – NEVER buy a stock (or sell a put against one) that you are not willing to own for 10 years.  The S&P was 5% below at the time and would have had to drop, perhaps, 20% more to cost him $1Bn so let’s call the stop 550 on the S&P where Buffett risked 2.5% of his cash against a posible 400% gain on his $1Bn risk allocation over 10+ years.  While it is true that if the S&P dropped 50% in one day Buffett would be
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Doug Kass’s 20 Surprises for 2010: Goldman Private, Gold Tumbles…

By Paul Kedrosky

My friend Doug Kass of Seabreeze Partners has out his list of 20 market/political/economic surprises for 2010. These are always fun reading, and he did surprisingly well with his list of 2009 surprises, so let’s have a look at the latest list. The only one I think is completely outrageous is the Tiger Woods prediction — what the hell are you thinking, man? 

  1. There is a glaring upside to first-quarter 2010 corporate profits (up 100% year over year) and first-quarter 2010 GDP (up 4.5%). It grows clear that, owing to continued draconian cost cuts, coupled with a series of positive economic releases and a long list of company profit guidance increases in mid to late January and early February, there is a very large upside to first-quarter GDP (up 4.5%) and, even more important, to S&P profit growth (which doubles!). The upside on both counts is in sharp contrast to more muted growth expectations. While corporate managers, economists and strategists raise earnings per share, full-year growth and S&P target estimates, surprisingly, the U.S. equity market fails to respond positively to the much better growth dynamic, and the S&P 500 remains tightly range-bound (between 1,050 and 1,150) into spring 2010.
  2. Housing and jobs fail to revive. An outsized first-quarter 2010 GDP (up 4.5.%) print is achieved despite a still moribund housing market and without any meaningful improvement in the labor market (excluding the increase in census workers) as corporations continue to cut costs and show little commitment to adding permanent employees.
  3. The U.S. dollar explodes higher. After dropping by over 40% from 2001 to 2008, the U.S. dollar continued to spiral lower in the last nine months of 2009. Our currency’s recent strength will persist, however, surprising most market participants by continuing to rally into first quarter 2010. In fact, the U.S. dollar will be the strongest major world currency during the first three or four months of the new year.
  4. The price of gold topples. Gold’s price plummets to $900 an ounce by the beginning of second quarter 2010. Unhedged, publicly held gold companies report large losses, and the gold sector lies at the bottom of all major sector performers. Hedge fund manager John Paulson abandons his plan to bring a new dedicated gold hedge fund to market.
  5. Central banks tighten earlier than expected. China, facing reported inflation approaching 5%, tightens monetary and fiscal policy in March, a month ahead of a Fed tightening of 50 basis points, which, with the benefit of hindsight, is a policy mistake.
  6. A Middle East peace is upended due to an attack by Israel on Iran. Israel attacks Iran’s nuclear facilities before midyear. An already comatose U.S. consumer falls back on its heels, retail spending plummets, and the personal savings rate approaches 10%. The first-quarter spike in domestic growth is short-lived as GDP abruptly stalls.
  7. Stocks drop by 10% in the first half of next year. In the face of renewed geopolitical tensions and reduced worldwide growth expectations, stocks drop as the threat of an economic double-dip grows. Surprisingly, though, the drop in the major indices is contained, and the U.S. stock market retreats by less than 10% from year-end 2009 levels.
  8. Goldman Sachs goes private. Goldman Sachs (GS) stock drops back to $125 to $130 a share, within $15 of the warrant exercise price that Warren Buffett received in Berkshire Hathaway’s (BRK.A) late 2008 investment in Goldman Sachs. Sick of the unrelenting compensation outcry, government jawboning and associated populist pressures, Warren Buffett teams up with Goldman Sachs to take the investment firm private. The deal is completed by year-end.
  9. Second-half 2010 GDP growth turns flat. The Goldman Sachs transaction stabilizes the markets, which are stunned by an extended Mideast conflict that continues throughout the summer and into the early fall. While a diplomatic initiative led by the U.S. serves to calm Mideast tensions, flat second-half U.S. GDP growth and a still high 9.5% to 10.0% unemployment rate caps the U.S. stock market’s upside and leads to a very dull second half, during which share prices have virtually flatlined (with surprisingly limited rallies and corrections throughout the entire six-month period). For the full year, the S&P 500 exhibits a 10% decline vs. the general consensus of leading strategists for about a 10% rise in the major indices.
  10. Rate-sensitive stocks outperform; metals underperform. Utilities are the best performing sector in the U.S. stock market in 2010; gold stocks are the worst performing group, with consumer discretionary coming in as a close second.
  11. Treasury yields fall. The yield of the 10-year U.S. note drops from 4% at the end of the first quarter to under 3% by the summer and ends the year at approximately the same level (3%). Despite the current consensus that higher inflation and interest rates will weigh on the fixed-income markets, bonds surprisingly outperform stocks in 2010. A plethora of specialized domestic and non-U.S. fixed-income exchange-traded funds are introduced throughout the year, setting the stage for a vast speculative top in bond prices, but that is a late 2011 issue.
  12. Warren Buffett steps down. Warren Buffett announces that he is handing over the investment reins to a Berkshire outsider and that he plans to also announce his in-house successor as chief operating officer by Berkshire Hathaway annual meeting in 2011.
  13. Insider trading charges expand. The SEC alleges, in a broad-ranging sting, the existence of extensive exchange of information that goes well beyond Galleon’s Silicon Valley executive connections. Several well-known long-only mutual funds are implicated in the sting, which reveals that they have consistently received privileged information from some of the largest public companies over the past decade.
  14. The SEC launches an assault on mutual fund expenses. The SEC restricts 12b-1 mutual fund fees. In response to the proposal, asset management stocks crater.
  15. The SEC restricts short-selling. The SEC announces major short-selling bans after stocks sag in the second quarter.
  16. More hedge fund tumult emerges. Two of the most successful hedge fund managers extant announce their retirement and fund closures. One exits based on performance problems, the other based on legal problems.
  17. Pandit is out and Cohen is in at Citigroup. Citigroup’s Vikram Pandit is replaced by former Shearson Lehman Brothers Chairman Peter Cohen. Cohen replaces a number of senior Citigroup executives with Ramius Partners colleagues. Sandy Weill rejoins Citigroup as a senior consultant.
  18. A weakened Republican party is in disarray. Sarah Palin announces that she has separated from her husband, leaving the Republican party firmly in the hands of former Massachusetts Governor Mitt Romney. An improving economy in early 2010 elevates President Obama’s popularity back to pre-inauguration levels, and, despite the market’s second-quarter decline, the country comes together after the Middle East conflict, producing a tidal wave of populism that moves ever more dramatically in legislation and spirit. With the Democratic tsunami (part deux) revived, the party wins November midterm elections by a landslide.
  19. Tiger Woods makes a comeback. Tiger Woods and his wife reconcile in early 2010, and he returns earlier than expected to the PGA Tour. After announcing that his wife is pregnant with their third child, both the PGA Tour’s and Tiger Woods’ popularity rise to record levels, and the golfer signs a series of new commercial contracts that insure him a record $150 million of endorsement income in 2011.
  20. The New York Yankees are sold to a Jack Welch-led investor group. The Steinbrenner family decides, for estate purposes, to sell the New York Yankees to a group headed by former General Electric (GE) Chairman Jack Welch.

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Breaking: Buffett to Acquire the Rest of Burlington Northern Railroad

Breaking: Buffett to Acquire the Rest of Burlington Northern Railroad

Buffett Railroad

image from Panoramio

It’s not for me to tell you what Warren Buffett must see ahead for transportation, energy and economic activity, you must draw your own inferences.  What I will say is that this is Berkshire Hathaway’s largest-ever purchase so you may want to come up with some kind of thesis to encompass it.

From MarketWatch:

NEW YORK (MarketWatch) — Warren Buffett’s Berkshire Hathaway on Tuesday said it is paying $100 a share to acquire railroad firm Burlington Northern Santa Fe. It will also take on $10 billion of Burlington Northern debt, valuing the total deal at $44 billion. Berkshire said the deal is its biggest acquisition ever. “Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Warren Buffett said in a press release. “Conversely, America must grow and prosper for railroads to do well. He added, “Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets.”

Source:

Buffett Buying BNI (MarketWatch)

 


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Testy Tuesday – Dow 9,650, Berkshire $60 Edition!

Wheee, this is fun!

Just two weeks ago, on October 17th, I warned in the Weekly Wrap-Up that it was "Dow 10,000 or Bust" for the next week and we failed that one and last Wednesday we were looking to hold NYSE 6,900 and THAT failed too.  Now we enter into the second phase of our limbo game where the deep-voiced guy asks the question "how low can you go?" and we’ll be setting our next bar at our long-standing 9,650 target for the Dow,  which we are already hitting in pre-market trading.  If that fails, we’ll have to look down to S&P 1,000.  As you can see from Jesse’s Chart, we took a nice bounce off serious resistance yesterday but we’re just not feeling it yet, even though the market is now as technically oversold as it was in March

Yesterday was like a roller coaster and my first Alert to Members of the morning targeted 9,775 as the on/off line for our bullish/bearish posture on our DIA covers.  We whipped past that line right about 10 am as we got good reports from ISM, Pending Home Sales and Construction Spending but by 12:45 we had broken back down so I sent out an Alert calling to refocus back to 55% bearish by adding the DIA Jan $100 ($5) and Jan $102 puts ($6.20), already covered by the Nov $99 puts ($2.50). 

The reason we mess around with our covers is we don’t want to flip in and out of our option positions, which are generally either straight bearish or well-hedged long positions, is because options carry a relatively large bid/ask spread and cost you money every time you get in and out.  So, on the whole, we’d rather let our over-riding cover plays, like our DIA spread, adjust our stance as conditions change, making a single adjustment that keeps us balanced as we ride out the market waves. 

It’s been a couple of weeks since we had a good, old-fashioned stick save but we got a mother of one yesterday (as seen in Dave Fry’s chart) which was right on schedule as Kustomz bought it up in Member Chat at 3:09 and I agreed at 3:19 that "It does feel like a pre-stick move" and we grabbed VIX $25 puts at .85 to protect ourselves from a sudden surge in complacency.

By 3:33, my next comment to Members was: "The stick lives!" but…
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David Einhorn: Short McGraw Hill (MHP) & Moody’s (MCO) – The Curse of the Triple A

David Einhorn: Short McGraw Hill (MHP) & Moody’s (MCO) – The Curse of the Triple A

Courtesy of Market Folly

While David Einhorn’s short position in Moody’s (MCO) is by no means new information, we did recently learn that his hedge fund Greenlight Capital is now also short McGraw Hill (MHP), the parent company of fellow ratings agency Standard & Poor’s. He initiated the position after a U.S. judge refused to dismiss a case against the ratings agencies. Those agencies were seeking refuge from such litigation under the notion that their opinions on ratings are protected by free-speech rights. This U.S. District Judge’s refusal to throw out the case could be a landmark ruling, Einhorn says. While this could potentially be a chink in the armor, it is also prudent to point out that 10 of the 11 claims were dismissed; a fact that Moody’s representatives have been quick to point out.

Einhorn presented his short position in Moody’s back at the Ira Sohn Conference where numerous hedge fund managers shared investment ideas. While we can’t track their short positions via SEC filings, we have covered Greenlight’s long portfolio here. Greenlight was up 16.3% for the second quarter and year to date for 2009 is up 21.5%. For more of Einhorn’s tirades shorting companies, we highly recommend reading his book Fooling Some of the People All of the Time: A Long Short Story. In it, you’ll learn how Greenlight constructs and researches investment theses. Not to mention, it’s just an interesting read and story in general.

Instead of summarizing Einhorn’s thoughts regarding why he is short the ratings agencies, we figured we’d just let him tell you himself. Embedded below is his presentation from the Ira Sohn investment conference entitled ‘The Curse of the Triple A.’ You can download the .pdf here or read on below:
 

David Einhorn’s Ira Sohn Presentation

So, while he presented that argument back in late May of this year, he appeared on television a few days ago to further elaborate on his argument. Below is the video where he presents his case to CNBC anchors:
 


And lastly, for posterity’s sake, we would also like to highlight Einhorn’s thoughts…
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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!

 
 

Zero Hedge

Police Unleash Water Cannons, Tear Gas To Disperse 'Block ECB' Protesters In Naples - Live Feed

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

As Mario Draghi unveils more wealth creation mechanisms for the world's elites, the people of Italy are revolting. Thousands have taken to the streets in Naples (where the ECB is meeting) to explain to Draghi "F##k Austerity" in a 'parade'. Police used water cannons and tear gas to disperse the crowds.

 

Napoli, webcast of the BCE press conference 2 October 2014: https://t.co/D4gx9JjFEI pic.twitter.com/MFYmGGkxQw

— anitya vava (@anityavava) October 2, 2014

 

 

&nb...



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Chart School

Regression to Trend: A Perspective on Long-Term Market Performance

Courtesy of Doug Short.

Quick take: At the end of September the inflation-adjusted S&P 500 index price was 89% above its long-term trend, up from 85% above trend the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis (see footnote below) to the question.

Below is a chart of the S&P Composite stretching back to 1871 based on the real (inflation-adjusted) monthly average of daily closes. I've using a semi-log scale to equalize vertical distances for the same percentage change regardless of the index price range.

The regression trendline drawn through the data clarifies the secular pattern of variance from the trend — those multi-year periods when the marke...



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Phil's Favorites

Federal Judge Smacks CalPERS on Sanctity of Pensions; CalPERS Liens Null and Void

Courtesy of Mish.

Exceptionally good news from California today: A federal judge ruled CALpers claim of "Sanctity of Pensions" is invalid. Today's ruling went even further than the bankrupt city of Stockton originally sought in court.

For details, please consider the New York Times article In Ruling on California Town’s Bankruptcy, Judge Challenges Sanctity of Pensions. A federal bankruptcy judge on Wednesday upended the widely held belief that public workers’ pensions have a special status in California that makes them impossible to cut, further chipping away at the idea that pensions are sacrosanct in a municipal bankruptcy.

The ruling, which came du...



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Digital Currencies

The Mexican Libertad: The Currency Solution?

Better than a Bitcoin? The Mexican Libertad is a real coin made out of silver or gold whose value is based on the price of silver or gold. It's tangible, like our coins and paper money, but the value is pegged to its weight in previous metal. 

The Mexican Libertad: The Currency Solution?

By Jeff Thomas of The International Man

The Libertad is a Mexican coin that was first issued in 1981 in .999 fine gold and then in silver in 1982. Beginning in 1991, the Libertades became the only coins in the world that were issued in the convenient sizes of 1/20, 1/10, 1/4, 1/2, and 1 ounce—again, in both gold and silver. This made them very practical if they were to be used as currency.

But of course, gold and silver coin...



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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.




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Insider Scoop

Mixed Economic Data, Ebola Scares Rattle Markets

Courtesy of Benzinga.

Related ALL The Allstate Corporation Is Now Historically Overbought And Nearing Resistance: Time For A Pullback? Marchex, Inc. Loses Third-Largest Customer, Cuts FY14 Outlook

U.S. stocks declined sharply as investors digest reports of a confirmed case of Ebola in the United States. In addition, economic data relea...



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Option Review

VIX Call Spreads Trade

The CBOE Vix Index topped 17.0 and the highest level since early-August on Monday morning amid declines in U.S. equities to start the trading week. The volatility index is off its earlier highs to trade 5.0% higher on the session at 15.65 as of 11:30 am ET. Options volume on the VIX is hovering near 360,000 contracts, or just more than 50% of the average daily reading of around 660,000 contracts. Calls are far more active than put options, as evidenced by the call/put ratio up above 4.2 in morning trading, perhaps as some traders position for volatility to stick around.

Large call spreads traded on the VIX today caught our attention as one big optio...



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Sabrient

Sector Detector: Stocks fight off predictable weakness, but expect more downside

Courtesy of Sabrient Systems and Gradient Analytics

Yes, the market showed significant weakness last week for the first time in quite a while. In fact, the Dow Jones Industrial Average moved triple digits each day. But it was all quite predictable, as I suggested in last week's article, and certainly nothing to worry about. Now the market appears to be poised for a modest technical rebound, and longer term, U.S. equities should be in good shape for a year-end rally. However, I still believe more downside is in order before any new highs are challenged. Moreover, market breadth is important for a sustained bull run, so the challenge for investors will be to put together broader bullish conviction, including the small caps.

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



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OpTrader

Swing trading portfolio - week of September 29th, 2014

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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Market Shadows

Ebola vs. Us

Ebola vs. Us

By Ilene 

Ebola is spreading too quickly for Ebola-vaccine makers to conduct typical studies of safety and efficacy on experimental vaccines. Instead, vaccines will be tested for basic safety, but then deployed with protocols devised now in order to test for efficacy essentially on the field. Testing has to be expedited because the situation in West Africa gets worse every day while there are no approved vaccines or other treatments.

The chart below is from a paper in the New England Journal of Medicine showing estimates of the virus's trajectory projecting out to November 1, 2014. If current trends continue...



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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.

The latest issue of Stock World Weekly is now available. Please sign in with your PSW user name and password. Or simply take a free trial to try out our weekly newsletter. 

...

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Promotions

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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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