Posts Tagged ‘insolvency’

The Tidal Forces Ripping Europe Apart

Tidal forces are pulling the European Union apart. On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet, rendering many of the smaller European states insolvent. On the other end, Europe is unwilling to carry out sovereign default and restructuring of debt of any one of its member nations. So as Europe gets closer and closer to the Global Depression, we are seeing as these two opposing forces—insurmountable debt vs. unwillingness to default and restructure—pull the continent apart as surely and relentlessly as tidal forces. — Gonzalo Lira

The Tidal Forces Ripping Europe Apart

Courtesy of Gonzalo Lira

In July of 1994, a comet named Shoemaker-Levy 9 crashed into Jupiter—it was quite a sight. 

According to astronomers, Shoemaker-Levy was a comet that was captured by Jupiter’s gravity twenty or thirty years before it was discovered. As the comet circled Jupiter, at one point it passed the Roche limit—the line around a large mass where its gravity will rip apart a smaller mass by way of tidal forces. 

Comet Shoemaker-Levy,
after Jupiter’s tidal forces
ripped it apart. 

By the time Shoemaker-Levy crashed into Jupiter, tidal forces had had their way with the comet. As the picture shows, it was no longer a single comet—it was a string of small lumps of rock and ice

Tidal forces are pulling the European Union apart. 

On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet. These debts and liabilities are near-term enough that there is only one way to characterize many of the smaller European states: They are insolvent. 

On the other end, Europe is unwilling to carry out sovereign default of any one of its member nations. Indeed, there is a sense that—constant drumbeat of the Germans aside—Brussels is unwilling to evencontemplate the very notion of sovereign default and debt restructuring. Brussels and the European Central Bank believes in bailouts, not default, because they believe that the entire European project rests on the non-default status of all the EU members. They believe that all EU debt is backed by the entire EU, no matter how irresponsible the EU country that issued the EU debt. 

As we watch Europe get closer and closer to the Global Depression,…
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See, The Gun Is Loaded!

See, The Gun Is Loaded!

Courtesy of Karl Denninger of The Market Ticker 

No, no, not the ECB’s.

The "currency speculators" – cough - BANKS that were shorting the hell out of the Euro.

Let’s see if I can figure out what’s happened here.

  1. Banks shorted the Euro, (correctly) surmising that Greece, Portugal, Spain and others can’t possibly cover their debts.
     
  2. The ECB freaks out as the Euro heads toward PAR and calls "emergency meetings" (forgetting, I might add, that the Euro traded under PAR not that long ago.)
     
  3. The ECB and Eurozone decides to "defend" the Euro with €1t in "defensive measures", including buying bonds of bankrupt sovereigns (gee, that’s nice – monetization by another name.)  Since the ECB and EuroZone cognescenti is of course connected to the large banks in Europe (including France, where Sarkozy is located) these banks know to back off on Friday (notice the nice little uptick?) to lock in their bonuses from these insanely-profitable trades against their own currency.
     
  4. The very same banks, including the ones in Sarkozy’s back yard, see the very nice spike and short the Euro even harder, (correctly) surmising that they have successfully stuck the gun up the nose of the ECB!
An armful of gambling chips

Rinse and repeat until you have all the money.

Naw, it wouldn’t be that simple, would it?  Why of course it would.

See, lending someone money when they’re bankrupt can’t possibly make them not-bankrupt.  It can only make them more-bankrupt.  As a consequence the ECB’s action is self-destructive and doomed to fail, and as a consequence there is no reason for these banks to back off at all!  Indeed, quite to the contrary – they have (correctly) deduced that they can make billion in bonuses by shorting their own currency to destruction, forcing ever-larger "interventions" by the ECB!

If you’ve ever seen a meth addict goose himself with his drug of choice to the point where his teeth literally fall out, you know how this story ends. 

The only winning play is to refuse to play at all, and force the bankrupt to recognize their insolvency and reorganize their debts.  That’s it.  Attempting to paper over insolvency never works, and the market has now deduced this, as I expected – although I didn’t think it would happen quite this quickly.

"All in" by the ECB drew not a "ok, ok your pot!"…
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Chart of the Day: State Budget Gaps 2010

Chart of the Day: State Budget Gaps 2010

Courtesy of Edward Harrison at Credit Writedowns

This is not just about California. Come Summer 2010, the most severe gaps will be closed via budget cuts or tax increases unless the Federal Government can pull a rabbit out of the hat.

statebudgetgaps2010

Source

Policies for Increasing Economic Growth and Employment in 2010 and 2011 – CBO

See also Illinois enters a state of insolvency

 


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How the Servant Became a Predator: Finance’s Five Fatal Flaws

Here’s an excellent, must-read article by William K. Black.  Special thanks to New Deal 2.0. - Ilene

How the Servant Became a Predator: Finance’s Five Fatal Flaws

By Bill Black, Courtesy of New Deal 2.0

money-shark-150 - preditor stateRoosevelt Institute Braintruster William K. Black explains how the finance economy preys on the real economy instead of serving it. He shows how both have become dysfunctional and warns that we must not neglect the real economy — the source of our jobs, our incomes, and the creator of goods and services — as we focus on financial reform.

What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.

1. The financial sector harms the real economy.

Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.

Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:

• Corporate stock repurchases…
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The Real Reason the Giant, Insolvent Banks Aren’t Being Broken Up

The Real Reason the Giant, Insolvent Banks Aren’t Being Broken Up

good banks, insolvent banksCourtesy of Washington’s Blog

Why isn’t the government breaking up the giant, insolvent banks?

We Need Them To Help the Economy Recover?

Do we need the Too Big to Fails to help the economy recover?

No.

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.

In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer – who was Ben Bernanke’s thesis adviser at MIT – say that – at the very least – the size of the financial giants should be limited.

break upEven the Bank of International Settlements – the "Central Banks’ Central Bank" – has slammed too big…
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A Stimulating Train Wreck

stimulating train wreckOne of my favorite outfits is Sprott Asset Management, located in Toronto Canada, because their analyses tend to be quite data-rich and "reality-based" as well.

In this excellent, short-and-sweet report, the case is made that a 3.5% boost to GDP from government stimulus spending alone will hit in the third quarter of 2009.

This means that whatever reading is turned in, you should mentally subtract 3.5% from it, because "growth" resulting from government deficit spending is not real growth at all, it is merely consumption borrowed from the future.

Are you stimulated yet? We hope you are, because we’ve just witnessed the largest economic stimulus in the history of the world. Never before have so many government dollars been thrown at the economy to prevent a depression. When added together, the combined financial, monetary and fiscal stimuli in the US are more than the cost of the two World Wars and “The New Deal” combined.

Stimulus spending worldwide has taken the form of a combination of tax cuts, transfer payments (free money) and infrastructure investments on roads, schools, railroads etc. In the US, the financial and stimulus contributions have been especially impressive in scale.

According to CNN’s bailout tracker, the various US government departments have committed to stimuli worth $11 trillion dollars and have issued cheques totaling $2.8 trillion dollars thus far in 2009.

Neil Barofsky, the Special Investigator General for the TARP program, has estimated that the total cost to the US taxpayer could be as high as $23 trillion.

The vast majority of this stimulus has been directed at the financial sector – a complete waste of money in our opinion, supporting a segment of the economy that never deserved to be bailed out.

Nonetheless, the US taxpayer has spent massive sums, committed to promises worth even more and may ultimately owe debt in the double-digit trillions when all is said and done. Nice of them to spend so generously, wouldn’t you say?

Although the stimulus has been fantastic for the stock market, it has generated very little benefit for “Main Street”. To make matters worse, the effects of the stimulus packages have already started to wear off.

To explain why, we must mention the American Recovery and Reinvestment


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Phil's Favorites

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

We're about to get a clear example proving the stock market is not the economy (Business Insider)

When the results come in, US economic growth and earnings are on pace to show very different grades.

Gross domestic product is forecast to grow by 1%, according to Bloomberg's estimate for the advance reading expected Friday.

Euro-Area Economic Confidence Surges to Highest in a Decade (Bloomberg)

Euro-area economic confidence jumped to the highest in almost a decade this month, a testament to a continued improvement that may soo...



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Zero Hedge

Trump Calls Schumer's Bluff: "If There's A Shutdown, There's A Shutdown... Democrats Would Be To Blame"

Courtesy of ZeroHedge. View original post here.

With Democrats seemingly unsatisfied with Republicans dropping border wall funding and adjusting on Obamacare-related items, it appears President Trump is calling Schumer's and Pelosi's bluff, proclaiming "If there's a shutdown, there's a shutdown," adding that Democrats would be to blame if the federal government was left unfunded.

Schumer today:

  • *SCHUMER: TRUMP CONCESSIONS BRING SPENDING DEAL CLOSER TO FINISH
  • *SCHUMER SAYS 'SOME STICKING POINTS' LEFT ON SPENDING BILL TALKS
  • *S...


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ValueWalk

An Earnings Miss? So What?

By Investment Master Class. Originally published at ValueWalk.

By Investment Master Class

“Estimates miss earnings, not vice versa” Market Veteran

An opportunity to purchase a quality business at an attractive prices often presents when a company misses a quarterly number and analysts downgrade their numbers to reflect the lower new estimate.  This seems to have become more prevalent in recent times with investors and analysts having an increasing focus on short time periods, leading to an over-reaction in the share price. Fear, herding and other behavioural factors come into play. However, the key is to remain unemotional ...



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Chart School

Semiconductors Tick Along

Courtesy of Declan.

It was another quiet day for indices but the Semiconductor index was able to add over 1% on the day. This also helped post gains to the Nasdaq 100, although there was a relative gain for the Semiconductor Index against the latter index.


The Nasdaq 100 registered an accumulation day despite its underperformance against Small Caps. The index remains well placed to make a move to upper channel resistance.

...

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Digital Currencies

Bitcoin Spikes To Record Highs

Courtesy of ZeroHedge. View original post here.

US dollar prices for virtual currencies are soaring. Both Bitcoin ($1343 highs) and Ethereum (as we described previously) are at new record highs as China regulators/exchanges appear to have 'stabilized', fears over the so-called 'hard fork' have abated, and hopes for an ETF have been revived by an SEC review.

Back above the price of gold and at record highs, Bitcoin rallied notably overnight after China's largest bitcoin exchanges introduced a flat 0.2% fee on eac...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Euro-Area Economic Confidence Surges to Highest in a Decade (Bloomberg)

Euro-area economic confidence jumped to the highest in almost a decade this month, a testament to a continued improvement that may soon prompt a policy shift at the European Central Bank.

European Bank Bulls Seek ECB Tapering Hints as France Risk Fades (Bloomberg)

Investors are waiting to see whether Mario Draghi joins in the optimism that has engulfed the region&r...



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Kimble Charting Solutions

S&P 500; Dangerous place to run out of gas!

Courtesy of Chris Kimble.

Could the “Weekly Closing Highs and Lows” of last year, be impacting stock prices in 2017? The Power of the Pattern thinks so! Below looks at the S&P 500 over the past couple of years. where we applied Fibonacci to the “Weekly Closing Highs and Lows” of last year.

CLICK ON CHART TO ENLARGE

The S&P 500 ran into the 161% extension level at (2) and it stopped on a dime, at the end of February. Following a small decline the rally the past two weeks has it testi...



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OpTrader

Swing trading portfolio - week of April 24th, 2017

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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Members' Corner

Should I buy that stock?

Courtesy of Phil Stasukaitis (pstas)

I was asked by my local investment club to do a presentation on "how to buy a stock?" As I pondered the question, I began by noting all the elements that I monitor regularly and which come in to play as part of my decision process. As the group is comprised novices to experts, I tried to gear my discussion to cover both basics and more advanced concepts.

Four Part Discussion

  1. Macro Economic Indicators
  2. Market Indexes
  3. Fundamental Analysis
  4. Technical Analysis

1. Macro Economic Indicators

We'll start with reviewing some basic concepts and measurements that have direct effects on the stock market. 

A. Gross Domestic Product (GDP)

...

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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

Republicans Love Bombing, But Only When a Republican Does It

By Kevin Drum, Mother Jones

A few days ago I noted that Republican views of the economy changed dramatically when Donald Trump was elected, but Democratic views stayed pretty stable. Apparently Republicans view the economy through a partisan lens but Democrats don't.

Are there other examples of this? Yes indeed. Jeff Stein points to polling data about air strikes against Syria:

Democr...



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Biotech

CAR-T & CRISPR - the Future is Now

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

PSW Members....it has been a while since my last post, but since many have all been on the board following the chat, it is time for a scientific lesson in a few of the companies we are long.  In addition, another revolution is coming in the medical field, and it will be touched upon as well.

CAR-T - stands for Chimeric antigen receptors (CARs) and the T is for T-cell.  

From the picture above, T-cells are one cell type of our immune system that fight off infection as well as they are one player at keeping rogue cells from becoming cancerous. Unfortunately, cancer somehow evades the immune system and so it begins.

CAR-T came along in the late1980s via a brilliant scientist, Zelig Eshhar...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan 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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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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