Jobless Friday - US, Japan and Europe Add More Stimulus
by Phil - March 5th, 2010 7:43 am
Wheee - more free money!
The money train left the station just ahead of the US market close yesterday when the House passed a $15Bn Jobs Bill although it remains to be seen if Jim Bunning will pass it. China doesn’t need Bunning’s permission to hand out free money and they will be "allocating 63.2 Billion Yuan" to fight high housing prices by SUBSIDIZING low-cost housing. Come to think of it - I object to that! Someone in China needs a lesson in some basic economics…
The big boost this morning came from Japan, where bonds hit the highest level of the year after the Nikkei newspaper said the central bank at its March 16 meeting may discuss additional monetary easing steps. It doesn’t matter whether this report is true or not as it already did it’s job and shot the Nikkei up 223 points for the day, erasing two week’s worth of losses in a single session. It’s hard for the BOJ to get easier than our own Fed but Chicago Fed President Charles Evans said yesterday he needs evidence of “highly sustainable” growth before supporting tighter monetary policy, while James Bullard of the St. Louis Fed said the central bank should remain “accommodative” - these are, of course, the Fed’s code words for MORE FREE MONEY!
Of course, our Futures are up 1% from yesterday’s low and the commodity markets LOVE IT and oil is back at $80.65 with copper back at $3.40 despite "weak" demand in China, where stockpiles of copper are now at 7-year highs and even Goldman Sachs has withdrawn their buy recommendation on coppper because of concern that economic recovery in developed markets isn’t on “solid footing.” “About 60 percent of China’s copper is used in the power industry, and our sales to wire-and-cable users reflected that demand is rather weak,” Chairman Wei Jianghong said, while attending the National People’s Congress.
“The demand is not very strong in the first place,” Jiangxi Copper Chairman Li said in Beijing while at the congress. “But a lot of people have long positions in the market, so I think in the first half of this year, copper prices will be good.” Copper stockpiles in China jumped to 149,478 tons for the week ended Feb. 26, 28 percent more than the week ended Feb. 12, according to the Shanghai Futures Exchange. Demand from China for global supplies may weaken because prices on the Shanghai Futures Exchange are now close to those in London, discouraging arbitrage trading, Goldman Sachs analysts…
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Fifty Basis Point Friday - China Puts First Pin in the Bubble
by Phil - February 12th, 2010 8:19 am
Thank you China!
I had put out a post last night detailing how we ended up short at yesterday’s close and at 3:21, when I published it as I was checking the Asian markets (don’t ask, I keep strange hours) it looked like I had called it wrong as the Hang Seng went into lunch up over half a point and commodities were still hanging tough after yesterday’s ridiculous run up. In fact, at 12:07, in Member Chat, I just so happened to say: "Copper $3.13 - ridiculous… Very annoying movement, not very playable like this as it can all crash back down again very fast."
Fortunately, we let our levels be our guide and cashed out our long DIA day trades in my 1:41 Alert to Members as we hit our Dow 10,165 target from the morning post. We flipped bearish to the DIA $100 puts at .62, which should have a nice open this morning. We had an FCX short play with the $70 puts that I couldn’t bring myself to let go of, even after they broke over our $72.50 stop line and my 1:50 comment on that position was: "I’m in a 4x position at avg. $1.16, now .71 so not good but I think copper run was BS so I’m willing to stick it out but very happy just to get even now. I think a big squeeze was put on commodity bears today with no energy reports to point out the demand destruction. Copper up from $2.93 yesterday to $3.13 today after taking two weeks to fall that far on the way down - that is nonsense! If I were not full I would roll up or DD but, as I said, I’ll just be happy to get back out and, if not by tomorrow, I’ll sell some other sucker my puts and roll to March."
Needless to say, despite having a rolling plan to turn the trade into a spread, I was not a happy camper as things held up into the close and then, through lunch in Asia and into Europe’s open. My closing comment to Members at 3:44 had been: "I’m still generally suspicious that we’ve had such a strong day on very low volume (Dow 136M at 3:40) when there was a storm. An amazing coincidence if nothing else…. The fact that it was led by BS commodity sector making a radical move up on NO news at all (in…
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The Hangover
by ilene - December 11th, 2009 4:38 pm
The Hangover
Courtesy of Macro Man
Today’s post will be mercifully short, as last night was Macro Man’s office Christmas party. Overconsumption of adult beverages has left him nursing a startlingly powerful hangover, and he really hasn’t got the energy to do more than point at pictures.
Thankfully, China released a veritable library of data last night that makes for interesting viewing. The latest M2 data confirm that Beijing has been throwing a pretty serious party of its own, with plenty of liquid(ity) provided….
[click on charts to enlarge]
The bill hasn’t come yet, so everyone still seems to be having a good time. Even the normally grumpy "foreign devil" guests can’t complain too much; hey, just look at that import growth!
Ah, but some early arrivals who drank deeply do indeed to be in the early stages of the same "pounding head, dry mouth, dodgy guts" ordeal that your author is currently enduring. Copper imports have started collapsing back towards trend:
As have iron ore imports:
Strangely, the one commodity sector that seems to be the most resilient is the one with the soggiest price of late, crude:
Of course, China has a relatively lower profile in the oil market than they do in, say, copper. But still, the relative divergence in price fortunes is striking. In any event, it seems as if even China cannot party indefinitely without getting a hangover. Sure, a hair of the dog approach can postpone the pain….but the more that that remedy is pursued, the more painful the hangover will be when it finally comes time to sober up.
(What's this?)
(Contrarian Profits, 12/9/09)
(naked capitalism, 12/9/09)
(naked capitalism, 12/7/09)
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Thrill Ride Thursday - CRE Crash?
by Phil - November 19th, 2009 8:12 am
What a nice day we had yesterday!
I led off my morning post saying it was time to short the Dow, Copper, Oil and the Euro and anyone playing those futures bets off my 8:27 post made out like a bandit. I even posted a nice little DIA play FOR FREE (for those of you who can’t be bothered to subscribe yet), picking the DIA $104 puts at .55. It only took 45 minutes for those puts to shoot up to .85 and I warned our Members to take it off the table on the way up and, since it was my free trade of the week, I also posted it over at Stock Talk on Seeking Alpha. This is a great way to follow-up on some of our trades and is also the back-up for our member chat whenever we have server issues so do make sure you are signed up to follow me there (just click on my picture).
Yes, I know that so many newsletter writers give you free trade ideas that make 54% in 45 minutes that it’s hard to keep track so only do it if you REALLY want to. The futures, of course, make TONS more than that as they are heavily leveraged, As I said in yesterday’s post, we have been trying to get more bullish but sometimes we just have to put our bearish foot down. In Member Chat we also took bullish pokes at EDZ, SRS, DIA $103 puts and ERY early in the morning and then we were able to just sit back and watch the dip. I was a penny early calling a bottom on copper at $3.12 but .05 on the futures contracts is a huge win and we are very nervous bears, especially on low volume days, and we take our profits quickly.
At 1:40, I said to members: "DIA - Well mission accomplished on the $103 puts and now we see what Mr. Stick can accomplish for the day. Without the RUT over 600 I have no desire to cover the March puts" and we even decided to go with the DIA $104 CALLS at 3:20 to protect us against the anticipated stick save. Those went from .65 to to .80 into the close, another very quick 20%. We don’t do this all the time, these plays are fun to make during expiration week as the premiums are low and there are huge short-term rewards for good market timing. Our longer-term short play for…
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Tempting Tuesday - You Call that a Sell-Off???
by Phil - October 6th, 2009 8:07 am
And the nonsense continues…
I don’t even have to write today’s column, I wrote all about how silly the market move was last Tuesday and, if you look at a 10-day chart, you’ll notice that they are running the same bull-trap pattern they ran last Monday and Tuesday which allowed me to predict in yesterday’s 9:21 Alert to Members that a positive move in gold, oil and copper (we got all 3) would take us up to Dow 9,535, S&P 1,032, Nas 2,070, NYSE 6,768 and RUT 586. At the day’s end, we found ourselves at Dow 9,599, S&P 1,040, Nas 2,068, NYSE 6,795 and Russell 591 so past our bounce zones, except on the Nasdaq, who used to be our leader.
After going wisely neutral into the weekend, we may have gone a little too bearish yesterday as we don’t have the same catalyst today (Consumer Confidence) to take down the market that we had last week. We have another Consumer Confidence report this evening at 5pm but that doesn’t stop the pump-monkeys from attacking the dollar this morning as they float rumors that the dollar will be replaced by OPEC as an exchange currency, which sent the dollar down to 89 Yen and $1.475 to the Euro and $1.605 to the Pound - all based on nothing but a rumor.
Aside from making someone sensible wonder why oil-producing nations, who hold $1.5Tn in reserves, would want to devalue their holdings, it also would boggle the mind of people who can do math (and the market manipulators count on the fact that you can’t) who might wonder where the extra $2Tn worth of Euros is going to come from to pay for a year’s worth of global oil at $70. I know $2Tn doesn’t sound like a lot of money these days but there are only $727Bn Euros in circulation on the planet Earth. The entire M3 supply of Euros (all of them) ever created is, as of April, 9.5Tn so is the plan to divert 20% of all the Euros on Earth to the oil trade or are they just going to print 20% more? Heck, why not? The M1 supply of Euros is already up 13.6% for the year and are trending to be up 21.9% at the rate of growth in Q3.
There is already a supply of 14Tn Dollars in the world and $2Tn worth of them are exchanged for oil during the year and $3.5Tn is sitting in bank accounts and Trillions more…
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Which Way Wednesday - Beige Book Edition
by Phil - July 29th, 2009 8:30 am
Today we get the "anecdotal" information on the current economic conditions from each of the twelve Federal Districts, we find these reports very useful as they tend not to be sugar-coated and the last BBook release (June 10th) marked a clear top to the the last round of irrational market exuberance when there was no significant improvement in the Fed’s outlook despite the market having rallied 10% in the month leading up to it.
That’s all it takes to pop a bubble - the simple lack of additional air. Members would do well to review the comments of that day as we got a quick read on the Book, which backed up our generally toppy view of the market and we jumped right on POT $105 puts for $1.15 at 2:03 as I had been targeting them as the most ridiculously overpriced stock and my quick read from the Fed confirmed it. POT fell from $117.88 that day to $92.72 on expiration day and bottomed out at $82 on July 13th. This is the way to play the Beige Book, you need to have a premise that is either confirmed or denied by the facts and you can make a play accordingly but you can’t simply REACT to the information, it can quickly be too late by the time you figure out what to do. Having a plan and alternatives based on various outcomes allows you to take advantage of market data as it comes out. That’s why we get so excited when we get our Beige Book!
BBook days are often market movers. This year’s Books came out Jan 14th (down 250), March 4th (up 100 ahead of huge drop) and April 15th (up 100) and June 10th where we went down 130, up 100 and finished the day back down just 24 points. Going back to my June 10th post, I see a lot of similarities, including the China bubble - which I also said was overdone at that time ahead of a 2,000-point pullback that began on the 12th. Oil was $71.50 that morning and it’s "just" $65.50 now and that’s a ray of sunshine if it heads lower. That was also the day I called for a class action suit against GS for their blatant manipulation of the energy markets - something I still have not found a law firm brave enough to take on!
I sent out an extensive review of the Beige Book in a 2:35 Alert to…
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The Statistical Recovery
by Phil - July 26th, 2009 8:04 am
Courtesty of John Mauldin:
A lot of bullish commentators are talking about a recovery being in the works, and they may very well be right. But it is not going to look like any recovery worthy of the name. This week we look at what I will call The Statistical Recovery. But first we take a look at what China is doing, as we continue our look at the rest of the world and ponder whether it is time to brace ourselves for an extended bout with the Muddle Through Economy*. (And yes, there is an asterisk.)
Can China Lead the Global Recovery?
China is growing by about 8% a year, which is amazing on the surface of it, as their exports are down about 20% (more in some sectors). How can that be? I continually read about how China is going to lead the world out of its global funk. And 8% growth in GDP does seem pretty strong. But we need to look a little deeper.
If I told you that the next US stimulus package would be $4.5 trillion dollars, mostly given to banks that would be forced to loan out the money quickly, do you think that might jump spending and GDP in the short term? Would you start looking for a few bubbles to be created? What about the dollar? That is the equivalent of what China is now doing. The volume of credit that is flowing into China is equivalent to one-third of their GDP. Banks that already have large problem-loan portfolios are now lending even more, in a very short time frame. China has severe capacity-utilization problems, as trade has sharply fallen; and the US consumer is unlikely to return to anywhere near the level of consumption that was the case in 2006.
The Chinese stock market is up 85% this year, and commodity and real estate prices are rising. And no wonder: the money supply shot up 28.5% in June alone. That money is looking for a home. My friend Vitaliy Katsenelson has written a very perceptive essay for Foreign Policy magazine, talking about the nature of the current growth in China.
"But don’t confuse fast growth with sustainable growth. Much of China’s growth over the past decade has come from lending to the United States. The country suffers from real overcapacity. And now growth comes from borrowing — and hundreds of billion-dollar decisions made on the fly don’t…
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Digging in the Mud for Green Shoots - How Did We Get Here?
by Phil - July 11th, 2009 5:26 pm
I’m digging for green shoots but you have to sift through a lot of manure to find them this week!
A few weeks ago I complained that the MSM was irrationally exuberant and I couldn’t find any negative articles (outside of PSW, of course, where people thought we were too negative calling for a correction) and now, less than a month later, you can hardly find anyone who doesn’t think we’re going back to the March lows. I stand by my statement to Members in yesterday morning’s Alert where I said: "It’s ridiculous for the Dow to go back to 7,500 and ridiculous for the S&P to go back to 800. While it’s easy to make squiggly lines on a chart show 10% drops ahead (which seems like a normal 50% retrace of the gains overall) I just think it’s dead wrong from a valuation perspective so I’m not inclined to play it, especially when those valuations are about to slap you in the face over the next few weeks. Maybe I’m wrong and maybe earnings will suck and Q2 will be a miss and guidance will be lower but right now I say - Show me the misses."
So I said Cramer was an idiot to be herding his sheeple into stocks when the Dow was at 9,000 and now I am saying Cramer is an idiot for stampeding the herd out of stocks at 8,000? Am I that fickle? Not really, I just believe we are in a fairly tight trading range. On June 17th I warned on June 24th, as the market "rallied" back to 8,500 I warned we were simply in the midst of a "dead cat bounce" - using the following, very descriptive graphic:
We played oil to top out at $70 for a whole month before it finally fell and I had warned people to stay out of the USO oil fund on June 6th (20% higher than here), but perhaps the last straw was when I pointed out that China was buying oil in bulk for $16 a barrel and even that was a ridiculously expensive price that more sensible buyers would not pay. Not long after that, Iraq had trouble with their own oil auction, again, no one in the industry had any real faith that $70 would hold and now, not even $60 is holding. They talk a very good game but don’t put their money where their mouths are! On Wednesday, June 17th,…
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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
(