Toppy Tuesday – Can the Dollar Fall Faster than our Indexes?
by Phil - December 14th, 2010 8:27 am
It’s a race to the bottom!
While we may have thought we were flatlining yesterday near our breakout, Europe and Asia had a different view of our markets as we pulled back -0.5% to -1.73% when priced in other currencies. While you may not care what happens in other countries, there are 6.5Bn people who would disagree with you there and the US is not the World leader anymore (despite what the citizens of the US may think) – we can no longer afford to ignore things like how exchange rates affect us. Here’s the chart for the Dow, S&P and Nasdaq priced in Dollars, Euros and Yen for the past two months:
Fortunately for the bulls (especially the commodity ones), the dollar has resumed it’s pathetic decline as Obama and The Bernank have combined to dilute our currency by another $2Tn over the next 48 months, from about $14Tn to $16Tn (+14%) plus, possibly, the $110Bn of new $100Bills the Treasury is trying to run off. This has sent the dollar back down from it’s Thanksgiving high and now it’s going to be all about whether or not we can hold that 78.5 line as our Congress finalizes their vote on the Obama Tax Cuts and another $1,000Bn of US debt taken by our citizens in order to hand another $650Bn to the top 1%.
When $100Bills are being printed faster than rolls of Charmin are being made, your currency is probably on it’s way to a crisis. You reach a certain point at which it’s cheaper to just wipe your butt with dollar bills than to go to the store and buy toilet paper and, of course, we’ve all seen pictures of Germans in the 1920′s, fueling their fireplaces by burning bills, which were cheaper than wood. Of course stocks and commodities are going up when priced in dollars – they are making more dollars every day, even Disney now has cartoons trying to explain to kids why this is a bad idea.
On top of the relentless devaluation of our dollar-denominated assets, we also have wild rumors driving up demand for commodities by speculators, who are generally those same top 1% who are being handed money by our Government at a rate of $2Bn per day. If you had to put away $2Bn a day, where would you…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggFederally Frightened Friday
by Phil - February 19th, 2010 7:56 am
The Fed raised the discount rate – Big Deal!
As I said in my Weekly Wrap-Up, recessions are for wimps and kudos to the Fed for finally pulling out the stick after all the soft talking they’ve been doing. Meanwhile, I do not see what all the fuss is about – I did the math for Members last night and banks borrow about $89Bn at the discount window on a good day and 0.25% of $87Bn is a grand total of $22M – this is NOT going cause the fall of Western Civilization people! What it does do is stop making the Fed the lender of first resort, which was never supposed to be their function in the first place.
The MSM should be more concerned with the end of the TALF, which is where the Fed buys up toxic assets from the banks at face value (we’ll all be paying for that later) and they just announced that the Fed’s holding of Mortgage-Backed Securities went over the $1Tn mark yesterday, bringing the Fed’s Balance Sheet to $2.25Tn of very questionable assets that they’ve bought for us from the banksters.
Speaking of banksters – Kudos to Matt Taibbi for his excellent Wall Street’s Bailout Hustle. As I said to Members, if it wasn’t for Matt and Dylan Ratigan, I would have to be writing about this stuff instead of following the markets. Thank goodness there are a few top-notch people investigating this nonsense with the ability to communicate their findings in a way that makes it interesting:
The nation’s six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007.
The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from
…
THOUGHTS ON THIS MORNING’S DATA
by ilene - January 20th, 2010 2:17 pm
THOUGHTS ON THIS MORNING’S DATA
Courtesy of The Pragmatic Capitalist
This morning’s shot across the bow came to us courtesy of China on reports that several Chinese banks have been told to curb their lending for the remainder of the month. There is a growing sense of concern about the Chinese markets. With property prices surging and a stimulus package that is still running hot, the Chinese might have added too much gas to their own fire. Market participants are very aware of the importance of the Chinese markets to the global recovery. Losing Chinese growth would certainly cause a massive relapse in the global economy. If China sneezes the world will catch a cold….
Making matters worse is the growing concerns in Greece. As we mentioned earlier today the term structure in Greek sovereigns inverted – something we saw in Merrill and Lehman CDS just months before they went bust. This puts global leaders in quite a quandary. I view last nights vote in Massachusetts as a sign that bailout nation is over with. Any politician that votes for a bailout going forward will be tarred and feathered. While Greece is likely to receive some form of aid this growing negative mentality could create future problems should another U.S. corporation (or state) require assistance from the Federal government. We tried to kick the debt can down the road and it’s looking like we’re going to need to kick it again (or heaven forbid – deal with it!).
Earnings were a bit mixed this morning, but generally better than expected. Aside from misses at Coach and Bank of America, the numbers were fairly strong. The banks continue to report better credit trends, but a cautious tone has many analysts scratching their heads over the true strength of the bank balance sheets. I agree with Felix Zulauf who thinks the banks are dead money from here.
The Redbook and ICSC data were both robust again and showing signs that the consumer is willing to spend despite continued de-leveraging. ICSC reported a 2.6% climb in year over year sales while Redbook reported a 0.9% climb.
In other news, PPI came in fairly benign at 0.2% and housing starts disappointed to the downside. Neither were major market moving news as the headlines have been dominated by the Republican victory and the concerns in China.
Big Blah (CPI)
by ilene - December 16th, 2009 2:14 pm
Big Blah (CPI)
Courtesy of Karl Denninger at The Market Ticker
From the Bullcrap Lie Society (BLS) of our government this morning:
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months the index increased 1.8 percent before seasonal adjustment, the first positive 12-month change since February 2009.
Most of the change was due to energy; gasoline was up sharply (as we saw yesterday in the PPI.)
Core was a literal zero.
Food was up a bit, but I continued to be puzzled by the difference between gasoline and "fuel oil."
Why? Because "fuel oil" (that is, heating oil) is exactly the same thing as #2 diesel – that is, road diesel fuel. The only difference is the tax (and the presence of dye in the heating oil to denote that the tax has not been paid.) But for the legal (tax) issues you can run "heating oil" in your diesel car or truck, and vice-versa – they are identical products.
Used vehicles were also up materially – a reflection of the distortion from "cash for clunkers" still present in the data (it hit its maximum in October at +3.4%) Prices for new vehicles were also up (again, the maximum was in October) – again denoting the "back-door" bailout of the automakers from cash-for-clunkers. Unlike the new vehicle deal however, which you got a tax credit for, the buyer of a used car just got plain old-fashioned screwed through price-jacking caused by constraints in supply. (Just wait though – in the new year when people can’t make the payments on those CFC deals, you’ll see what happens to used car prices…. supply and demand you know.. 
)
Medical care was up as usual (gee, how come it keeps rising faster than overall inflation?) and shelter costs were down (remember, this is not "housing", as that would expose reality – it is "owners equivalent rent")
All in all a blah report – but given the PPI that’s expected – the fun and games in the CPI report resulting from yesterday’s PPI should show up in a month or two.
Toppy Tuesday Morning
by Phil - September 15th, 2009 8:10 am
Can we break higher on this low volume?
We’ve been waiting for traders to come back from their summer breaks but no sign of them so far. Sill the market volume is at historic lows and still 80% of that volume is concentrated on a dozen financial stocks that simply get traded back and forth by robots every time the market needs a push in one direction or another.
As David Fry’s chart indicates, the only big volume stick we’ve seen in the past two months have come attached to big sell-offs. In mid-August we were "just about to break higher" but gapped down instead and then again at the end of August, we reversed our low volume "recovery" with a big sell-off. Here we are in the middle of September (that every two week thing) and THIS TIME, the analysts say it’s different. Different I guess because the volume has dropped by another 1/3 since our last fake rally.
This, of course, does not stop us from "going with the flow" as running with the bulls can be very profitable but we are hedging A LOT and very cautious in our trade set-ups as we know how fast this can all turn around. We took our short profits at yesterday’s morning dip and added a mix of long and short plays during the day. We did put our foot down on SRS and the Russell, playing the SRS to go no lower than $10.25 and the Russell not to break $600 this week and we’ll be sweating out that one this morning as the pre-market pump has already jammed the futures up 40 points since Europe’s open.
Asia was mostly flat this morning but that does little to describe the madness at the Hang Seng, which was closed for the morning due to a Typhoon and opened for just 90 minutes in the afternoon where they dropped like a rock that was tied to a rock that was wearing cement shoes into the close. Still, thanks to a 200-point gap up into the delayed open, the Hang Seng managed to finish the day down just 68 official points. As soon as the US markets closed, dollar repair crews were rushed to the scene and they managed to get it back over 91 Yen in time for Japan’s open and that helped the Nikkei stay above that critical 10,200 line we’ve been…
Monday Markets – Mr. Obama Goes to Wall Street
by Phil - September 14th, 2009 8:29 am
Today should be very interesting!
One year to the day after Lehman Brothers collapsed and precipitated a financial crisis that reverberated across the globe, President Obama will deliver a major speech on the financial crisis at Federal Hall in New York City at midday on Monday. According to the White House: "He will discuss the aggressive steps the Administration has taken to bring the economy back from the brink, the commitment to winding down the government’s role in the financial sector and the actions the United States and the global community must take to prevent a crisis like this from ever happening again."
As I had mentioned in our Year One Review of the Stock Market Crash, Obama and Wall Street did not get off to a great start but, even after the March crash, we are still up 20% since he was sworn in in January as the President has been EXTREMELY accommodative to Wall Street’s needs (ie. free money) so far. That has been the carrot - perhaps now it is time for the stick…
The Treasury just released a document entitled: "The Next Phase of Government Financial Stabilization and Rehabilitation Policies" which, at 51 pages, is a pretty neat review of the crash as well but I still prefer mine as it saves you an hour and has much better pictures. There are many charts in the government’s documents and they are not all that encouraging. As the report concludes:
We must address the structural weaknesses in our financial system that this crisis revealed. The Administration is working to gain approval of a detailed set of proposals to reform our regulatory system to address these weaknesses and keep our financial markets and economy on track to a sustainable recovery.
In addition to Obama speaking at noon, we have 3 Fed Governors making speeches today. Duke speaks on Regulatory Reform at 8:30, Lacker talks about Financial Regulation at 12:30 (right after Obama) and Yellen gives an Economic Outlook at 3:50, just in time for a stick-save into the bell so we could have a wild ride this morning!
Speaking of the Fed, I just read a great book called "The Creature from Jekyll Island," which our man Ron Paul calls: "What every American needs to know about central bank power. A gripping adventure into the secret world of the international banking cartel." The book tears…
Testy Tuesday Morning – The Spin Is In!
by Phil - August 18th, 2009 8:21 am
We did get our stick save yesterday – only it came at 7:45 pm!
That’s right, on pretty much no news at all and without any global markets open, the US futures all took off in synch at 7:45 last night and went up and up and up into Asia’s open. There was no particular news and Jim Cramer had just finished telling his viewers that the markets may be overbought. Cramer also is now targeting a "3-5% decline," which is amazingly the exact decline I predicted last week and he also swiped my BBT pick as his "find of the day." So good morning Jim, nice to have you back! We don’t mind Cramer stealing our buy picks because we have a full day advantage over his flock so welcome aboard suckers – er, fellow Cramer fans…
Anyway, so the after-hours markets were flat but the ubiquitous futures market took off as soon as all the retail traders had their trading accounts turned off for the night and you would have thought something huge was happening to watch the relentless, non-stop, 3-hour climb in the Dow, the Nasdaq, the S&P and even the Russell futures that led into the Asian open. Did this blatant manipulation of the indexes fool Asian investors? Of course it did! The Nikkei opened at 8pm EST and had gapped down to 10,200, exactly 4% off the high of 10,620 on Friday. As I said to members in yesterday’s chat, that 4% line is critical in the follow-through day on the 5% rule as it represents our expected bounce off 5%, so holding that line is still bullish.
Well, never let it be said that Mr. Stick doesn’t know how to paint a bullish picture and the Nikkei was rescued from failing that 4% line by the relentless futures buying between 8pm and 10:30, which coincided with 9pm to 11:30 on the Nikkei, which just so happens to be when they close for lunch. What happened at 11:30 Tokyo time? Well, suddenly everyone lost interest in the US futures and they fell ALL THE WAY BACK to where they started in just 60 minutes. Please Congress, whatever you do, don’t look into this nonsense – better to just sit there in your little offices and say "the market forces are too complicated for me to understand" and let 12 people control the world, that’s what America’s all about right?
So, where was…
Will We Hold It Wednesday? Industrial Production Edition
by Phil - July 15th, 2009 8:27 am
Whee, this is great!
Any excuse to take the markets higher and INTC was a good one last night. We’re thrilled because my 2:43 Trade Idea for members was "INTC Jan $17.50s for $1.28, speculative naked call with earnings tonight." We don’t do those very often but we looked primed for a pop and not much was expected from Intel, who were still expected to earn just 8 cents this quarter by the 44 analysts who are paid to follow them, despite the fact that they earned .11 last quarter (an 8-cent upside surprise) and had earned .28 last year in Q2. That made the long call an excellent play since we were also willing to stick with them and add to the position if INTC had missed. As it is, that should give us a nice 50%+ pop this morning!
Other trades ideas from yesterday’s Member chat were a GS put spread, AIG puts (and we can’t wait for "earnings" on them!), DIA puts and calls as momentum plays, a YUM ratio backspread for the $5,000 Virtual Portfolio and a JPM bear put spread. So we weren’t overly enthusiastic in the run-up, mainly because we loaded up the truck in last week’s dip with 18 bullish plays that I reviewed in the weekend wrap-up. So we are looking for short plays to defend ourselves until we are sure what we have here is more than the proverbial "dead cat bounce" off our 33% retrace (which I discussed in Monday’s post). As I mentioned in yesterday’s post, our upper targets to break the dreaded head and shoulders pattern are: Dow 8,500, S&P 930, Nasdaq 1,825, NYSE 6,000 and Russell 510. We’re making good progress but nothing would be worse than failing this breakout and confirming the downward pattern so it will still be a tough week to get through, especially with todays manufacturing data, which we are concerned about.
I think David Fry summed it up for the skeptic’s camp yesterday saying:
The AP headline today read: “Goldman Sachs’ $2.7B profit shows the firm’s prowess.” Good Grief! You have to hand it to Da Boyz, they know how to bedazzle Main Street. Anyone with a HAL 9000, their bad debts taken off their books, billions in public money to trade and most of their competitors (Bear Stearns and Lehman Bros.) eliminated should do just dandy. “Prowess”? My okole!
INTC…
Turning Up Tuesday – Can We Hold It?
by Phil - July 14th, 2009 8:18 am
I WAS really excited about yesterday’s rally.
Meredith Whitney gave us the catalyst for the bear squeeze we expected But THEN I saw Cramer last night. Nothing scares me more than watching Cramer’s bandwagon do a 180 degree turn and head my way as he’s been wrong and wrong and wrong and then wrong for months now. Still, I’m going to try to ignore that noise and keep a level head, dealing with facts rather than fads to figure out which way thing will be going. We were happily buying last week while Cramer was herding his sheeple out of the market and we’ll be enjoying the free ride as he stampedes the masses back in, especially during expiration week but we’d rather see some honest, uptrending consolidation based on earnings than going back to early May’s roller coaster model that hurt so many investors on both sides.
We are, of course, thrilled with the move so far, as you can see from the new buy list that I put up over the weekend. We cashed in our FXPs right at the top and went long on the DIA $83 calls at .40 as our 2nd trade of the day (the first was a long on GOOG into earnings). Those calls finished at $1 (up 150% and we are done, of course) and we also went long on GLD while it was still low in our 10:31 Alert and I put up a hedged play on TNK but that was it. We did all our buying last week, when things were cheap and we just spent the rest of the day waiting to see if we would make our target levels.
As I said in yesterday’s morning post, we were looking for 1,750 to hold on the Nasdaq as our primary indicator that we were going to hold our 33% pullback levels on the broader index so it’s not really rocket science to see where that DIA trade came from as we timed it for right when the Nasdaq crossed back over the line after the morning dip. Having a trading premise is always helpful and, in the 9:32 level watch to Members I had said: "Without $60 oil the best we can really hope for today is to claw back to our middle set of figures. Earnings can take us up over the higher numbers as the market rotates out of commodities…
Fall Down Friday – EU GDP Disappoints
by Phil - May 15th, 2009 7:04 am
It looks like they pushed this week one day too far.
Oddly enough, investors seem shocked this morning that the EU GDP was a 10% miss, falling 2.5% for the quarter and 4.6% for the year, the worst ever recorded. They were led down by Germany’s 3.8% quarterly decline vs. forecasts of a 3.2% drop. We knew this was coming on Wednesday, when I mentioned right in the morning post the the EU March Industrial Production figures indicated a certain miss in the GDP report and, of course, that’s how our members played the markets into the close yesterday. What is really baffling is how is it that other people can’t figure this stuff out until they see the actual data? Who are these economic "experts" they keep polling, who have yet to be right about anything this year?
Anyway, let’s keep our head in the game. CNBC has a parade of oil bulls on this morning trying to counter the facts but clearly this is a major disappointment for the commodity pushers, who were counting on jacking us back over $60 a barrel for the holiday weekend next week, the traditional start to "summer driving season." Well, bad news kids, summer may be canceled as it’s kind of hard to sell a turn-around story for Q2 when Europe’s Q1 was 78% worse than Q4 (-1.4%). That is NOT what they call getting worse more slowly. I may not be one of the "expert" economists polled by the WSJ but I do know some basic physics and it’s kind of hard to point to a 78% quarter over quarter acceleration to the downside as a sign of a summer turnaround.
Note the graph on the left doesn’t include this quarter so you have to imagine another red line that breaks below the bottom of the chart and stops 1 more segment below the -2.0 line – THAT’S today’s number. Don’t worry though, Cramer tells us that yesterday’s anemic performance (in which we failed to take back our levels and sold off into the close off a very weak bounce) means the bull rally is back! Meanwhile, also on CNBC – Marc Faber of the "Gloom, Boom and Doom Report" warned us this morning that Capitalism itself may be collapsing. Faber says a sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen. …
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(