Friday – QE Fever Turns To QE Forever!
by phil - September 14th, 2012 8:28 am
$85Bn a month!
Oh boy was I wrong when I said Ben Bernanke wasn't crazy enough to ease into a bull market. Yesterday, he exercised the full power of the Federal Reserve to confiscate your wealth and hand it over to the bankers. That's right, by engaging in what many consider reckless money-printing practices and announcing there is no end in sight, Bernanke caused the Dollar to fall below 79, down from 84 (6%) before all this QE talk began.
That's like taking all $100Tn worth of US Assets – everything you worked for your entire life – and just devaluing them by 6%. Many of our Conservative friends decry the 1% tax on wealth imposed by the French – but at least they are honest about it. At least they debate it and vote on it. Not Bern Bernanke – the Federal Reserve Chairman simply decrees that you will contribute 6% of your dollar-denominated assets towards more bank bail-out and there's no cut-off if you are below the top 2% – this is a confiscation from every man, woman and child in America.
How far down will Dr. Bernanke take your Dollars? That's the beauty of it – there's no limit! He warned Corporate America yesterday that he will continue to give them FREE MONEY as long as they keep refusing to hire more workers. The less American workers they hire – the more money he will give them. Sure, they can hire and spend overseas (most are) because that won't affect US unemployment rates but, if they start hiring Americans – THAT's when he will begin to take away the punch bowl.
See how this scam works?
It is hard to see how another round of QE would help the economy. Long-term interest rates are already at historic lows. With rates this low, even if QE put effective downward pressure on rates — a dubious proposition — the economy would be unlikely to benefit. If a 3.5% mortgage rate is of little consequence, there is no reason to believe that a 3.4% or even 3.3% rate would suddenly produce results.
Nor would quantitative easing result in a burst of money creation, as per traditional monetary policy, because the Fed now pays a quarter-point interest on excess bank reserves. With little growth in the demand for…
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Wunderbar Wednesday – $650Bn ESM Approved – So What?
by phil - September 12th, 2012 8:27 am
Europe is getting a $650,000,000,000 bailout!
The German courts approved the ESM and the markets are up almost half a point in all the excitement. Stimulus really works, doesn't it? As I have been saying, all this stuff is baked in – the only shocker you'll see is if Uncle Ben fails us – again – tomorrow. For those of you with very short attention spans, he just failed to provide QE3 at Jackson Hole two weeks ago but the markets have rambled higher, unperturbed, because he didn't say he WOULDN'T give us QE3.
What should really worry the bulls this morning is that the Dollar dipped all the way to 79.64 on this fantastic news out of Germany and all the futures managed was to get back to yesterday's highs. Oil had a good old time rocketing to $98 but has already crossed our shorting spot at $97.50 (/CL) and we'll likely take the money and run on any turn back up and short them again AHEAD of inventories, which should show a nice build as the shipping channels re-open.
As noted in Member Chat this morning (among many other things), there are over 600M barrels on order at the NYMEX and as of the 20th, 165M of those barrels have to be rolled to the next 3 months that already have over 500M barrels on pretend order so we can expect some real scrambling out of oil longs between now and next Thursday (we're short on oil with SCO Oct $37 calls, now $2.45 in addition to our Futures targets).
What's keeping oil prices from tanking (also discussed this morning) is another round of "Israel Willl Attack Iran By Lunch" articles that seem to crop up every time NYMEX traders find themselves faking demand for more contracts than they can comfortably unload. Usually, that number is 500,000 contracts (1,000 barrels per contract), not 600,0000 and usually the new month they are rolling into only has 40M open barrel orders – not stuffed with 110M barrels already like January is.
Clearly demand for crude has fallen off the cliff – as evidenced by the chart on the right which illustrates how a combination of the recession and Obama's rising CAFE standards are causing a very steady drop in US demand by as much as 2Mbd less than we used in 2007.
At the same…
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TGIF – Stop the Rally, We Want to get Off!
by phil - September 7th, 2012 8:30 am
This rally is never going to end!
Just look at this chart – we're breaking every level. THIS time is different – not only are we going to go on to 1,450, we're going to 1,500 and 1,550 and then 1,600 and then we're going to 1,700 and 1,800 and 1,900 and then we're going on to take on 2,000 – yeeeeeergh!
Sorry, I was channeling my inner Dean… Now that I've calmed down, I realize that this chart that got me so excited was actually the chart from March 5th and, as you can see from my end of February headlines like "Sell in March and Go Away," "This is the End – But For Who?" and "Fake-Out Thursday (March 8th) – Dollar Sacrificed on an Altar of Lies" – where I pointed out that rumors of more Fed easing (by John Hilsenrath of the WSJ, of course) had dumped the Dollar to 79 and that was accounting for the 1% gain in the S&P that day so – don't be fooled!
The ECB had just dropped $712,800,000,000 in fresh stimulus on the 29th and I asked "Will Another $712Bn Buy Us Another Day at 13,000?" Was I early? Yes. Did we miss the end of the rally? Yes. In fact, our $25,000 Portfolio at the time was so bearish, we were down almost $8,000 with huge bearish bets like 10 Short XRT March $55 calls, 10 short GLL March $17 puts, 10 April SCO 31/39 bull call spreads and 10 SCO short March $34 puts, 5 short FAS $88 calls, 5 March TZA $18 calls, 10 short SQQQ June $14 puts, 40 USO April $40 puts, 5 short FAS March $75 calls, 10 long FAS March $85 calls and 10 short FAS March $89 calls (a bearish spread), 10 TLT March $114/115 bull call spreads and 10 DIA March $129 puts.
The only bullish play we had at the time in our virtual portfolio was DMND, where we had 4 hopeless June $29 calls which we lucked out on when they spike on rumors in mid-March. Every other bullish position had been dumped and we were practically 100% bearish because the rally, at that point, seemed totally ridiculous. Just a months later, the Portfolio turned around and was up $8,000 and by May…
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Friday Fake Out – The Bear Trap is Sprung!
by phil - June 1st, 2012 8:26 am
Oh you people are such suckers!
You panic out of positions at rock bottom prices and you'll sit there like a deer in the headlights when we bounce back until we're already too high again and then you'll chase the top – only becoming fully invested after we've already exited. Don't blame me – I try to warn you, but no one listens to me.
This morning the markets are in full panic more and that's fine with us as not only are we still "Cashy and Cautious" but what did we tell you Wednesday morning? "TZA July $19/25 bull call spread at $1.50, selling $18 puts for $1.05 for net .45" along with EDZ at $17.23 and SQQQ at $51.80. SQQQ is at $53.79 (up 3.8%) and EDZ is $17.90 (up 3.9% and the TZA hedge is already at net .80, which is up 77% in just two days (so far) – now that's a hedge! When you have your hedges in place, THEN you can bottom fish with impunity and boy is the fishing good out there!
Today we get our Non-Farm Payroll numbers and there's a rumor out there that it's a big miss at 120,000 or lower. CNBC has been pretty much reporting it as a fact all morning and Europe is freaking out for that and many other reasons so I had occasion to look back at last month's NFP report, where we predicted it would be a miss with the the title: "The Blow Jobs Deal to the Market Could be Huge." That was 10% ago on our indexes are back to testing last week's lows, where we began to get bullish with our Twice in a Lifetime List of stocks that are back at their 2009 panic lows which we still like enough to sell puts in (giving us an additional 15-20% discount on initial entry).
That post capped off a week of bearish picks as we followed through with our plan to cash out into the April rally – it's those bearish profits we're now GAMBLING with as we bottom fish but, as noted above – we're hedging our bullish bets because there's no limit to how badly investors can freak out in the stock market – CASH remains KING!
A quick review of the week leading up to the last NFP report is a nice view of…
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Monday Market Meltdown – Global Wheeee Edition
by phil - April 23rd, 2012 8:08 am
Now THIS looks a little more realistic, doesn't it?
Last Monday we pointed out that the run-up, that was coming DESPITE a myriad of Fundamental negatives we were tracking, was essentially a load of crap aimed at bringing in more suckers before they pull the rug out from under the market. To keep ourselves from getting sucked in by the hype, we drew some very simple lines across our mult-chart which were 50% retacements of the month's dip. Not making those lines during last week's actions kept us from making poor decisions as the market hype continued all week. My warning was:
"How many times will the bulls be sucked in by the same empty promises? How many times will they reach into their pockets and BUYBUYBUY the snake oil valuations sold by the Reverend James Cramer?"
Tuesday I got a lot of sheeple angry by calling them sheeple for falling for Cramer and the rest of the Mainstream Media hype and we discussed a few of our hedges that were working already, like TZA, TLT and SQQQ as well as two that were still playable: CAT May $95 puts at $1.10 – up just 15% from our initial entry and DXD May $12 calls at $1.35, up just 12% from when our Members got the Trade Idea. Despite the market moving up, I reiterated my sell-off targets of Russell 775 and S&P 1,325.
Wednesday we tried to find reasons to be bullish, presenting both sides but judgment was once again for the bears after weighing the evidence as I pointed out that the lack of economic improvement for the bottom 90% could not be ignored – something Nick Sarkozy just discovered this weekend. In the morning post, I mentioned going back to the well and shorting oil again as it dared to reach for $104.50 again – another lovely pay-off last week and we caught it again this morning at $103.50 (/CL Futures) for a quick $500 per contract – so far.
Thursday we were having great fun and we had a bullish spread on CHK at $17.20 that may still be playable this week as the market dips again. We discussed our goal of re-shorting PCLN (back in the July $560 puts at $8.50) and we added a nice CMG spread in the morning post, selling the May $475 calls for…
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Thrill-Ride Thursday – Here We Go Again
by phil - April 19th, 2012 8:28 am
Wheeeeee!
We are just loving these crazy-assed market moves. Every morning we have a pump job to short into and every afternoon there is a BS stick-save to re-establish our shorts. It's merely a matter of time before those floors begin to crack. I mean, really – how much of this abuse can they take?
Notice, in Dave Fry's SPY chart, the high-volume selling followed by low-volume pumping – that's the very unhealthy pattern the "rally" was built on, which means there really aren't any buyers waiting to scoop up shares when they dip – just Trade Bots that tease the indexes higher so the IBanks can keep pulling in the bag-holders as the "smart money" stampedes for the exits.
Yesterday was great fun. As I noted in the morning post, we went short on the Oil Futures (/CL) at $104.50 in our morning Member Chat and even in the morning post there was still time to catch it at $104. Oil sold off all the way to $102.60 at 2:10 and my 2:14 comment to Members nailed the turn as I said:
Oil coming right to our goal at $102.50 ($38.50 USO) so let's not be greedy and look to take $1.20 off the table on those 1/2 USO positions in the $25KP and $5KP as it's better to get out while the gettin's good.
That's what we mean when we talk about taking non-greedy exits (I had set $38.50 as my USO target for our exit at 11:08 but it didn't look like we'd get it so we got out). We caught the bottom and got out clean and this morning we got a chance to re-load our shorts at $103.50 on that predictable morning pump. Sure, you can say the markets aren't fixed and maybe we just have amazingly good timing – either way we make the same money!
We did manage to find a few things we liked, one of which was CHK, as the stock plunged to $17.20 on much ado about not too much as people took issue with the CEO borrowing money to invest in their wells. We didn't think it was such a big deal and our trade idea at at 10:23 in Member Chat gave us a good opportunity to buy right into the day's low at…
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Tempting Tuesday – Baa, Baa to the Sheeple!
by phil - April 17th, 2012 8:27 am
Wheeeee, what a ride!
As you can see from David Fry's chart of the SPY, we're all over the place but, notably, there's a method to the market's madness as high-volume selling is followed by low-volume buying – allowing the funds to dump out onto the retail bagholders at top dollar while the carnival barkers in the MSM tell the sheeple to buy those f'ing dips.
Cramer said, in last night's show, that the Dow is composed of big international companies that were finally able to break free from concerns over Europe’s debt crisis. For the entire month of April, these stocks were held hostage to the Europe’s debt troubles. Cramer said most of these companies have no real ties to Europe, though, so the fears are overblown.
We ended up with what amounted to a frontsie-backsie day where all of the last month's winners, stocks that were unaffected by the weak euro and the miserable European stock markets, got pummeled, while the losers that had become risk free shorts because of an expected European decline were actually able to rally.
What a moron! Seriously – "frontsie-backsie"??? I guess he needs to treat his audience like they are 2 because bigger kids might realize that telling investors to ignore Europe would be just as idiotic as an Asian or European carnival barker telling the rubes over there to ignore America when making investment decisions. Is it really possible, in this day and age, that people still believe America is immune to what is happening in the rest of the World?
Look at the downtrend in the Global Commodities Index – do you think you are immune from that? I guess, to some extent we are, because CNBC's sponsors continue to use any excuse to pump up the PRICE of commodities, no matter how much DEMAND falls off (see yesterday's chart on gasoline volume consumption).
As Fundamental investors, we can often be a bit ahead of the curve but we find the market usually catches up to reality at some point. Cramer and his ilk know they can fool all of the people some of the time and some of the people all of the time (known as their "core audience") but even the mighty Corporate Media can't fool all of the people all of the time.
Almost a month…
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Very Good Friday – Wrapping up a Great Week (for the Bears)
by phil - April 6th, 2012 8:45 am
NOW things are getting interesting!
Who wants a market that goes up and up and up – where's the sport? Even the Nasdaq finally blew it's 15-week winning streak and that helped us decide to stay pretty bearish going into yesterday's close. This morning we went over the news and the week's data to position ourselves for the Futures and my conclusion to Members in our special 4:03 am Alert was:
Next week we get the BBook, PPI and CPI but the focus will be on earnings and AA is not likely to get us off to a good start so I simply don't see anything in particular to be bullish about at the moment.
The point I had been making (with many charts and graphs) was that it didn't matter if we added even 250,000 jobs – it still isn't enough to begin to fill in the hole in any meaningful way and, even more important, the QUALITY of jobs we have been adding is TERRIBLE!
It doesn't matter if you give everyone a job if they are only minimum wage jobs. We need our consumers to have an income to spend and aside from inflation (real inflation, not the Fed's BS numbers) eating into their buying power, when someone loses a $50,000 job and replaces it with a $35,000 job – that's NOT an improving economy – not for the long run, anyway.
Of course the stock market will like it, at first – as lower wages paid for the same job = greater Corporate Profits but that only works as long as there are people outside your country who have money to buy your goods.
As we noted just yesterday with the Retail Reports, the high-end stores are doing very well as the top 10% is doing well but those serving the bottom 90% are struggling because, clearly, these people are running out of money. While the market has been content to "ignore and soar" during this gathering storm, now we begin to see the size of the wave that's coming in and it's starting to look scary indeed…
8:30 Update: An anemic 120,000 Jobs added in March! That's about 1/2 of what was expected by Economorons, who can't even get a handle on a major, critical number like Payrolls – how scary is that? So many of…
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Wednesday Wheeee – No More QE For You!
by phil - April 4th, 2012 8:38 am
I hate to say I told you so but…
Oh, who are we kidding? I could not be happier saying I told you so and neither could our Members as our "Sell in March and Go Away" strategy seems to have hit the nail on the head – and it's only April 4th!
Back then (2/24), we were still bullish but the plan was to let the rally run its course and cash out ahead of earnings and our plays from that Wednesday (2/22) which I posted right in the morning post for all to see, have performed very well, of course.
We had April SQQQ and DXD hedges that failed, of course, but those were paid for by the short sale of AAPL 2014 $300 puts for $15, which are already $10.75, so up 28% already on those pays for a lot of protection.
Another offset we had looked at was the short sale of FDX April $80 puts at $1.10, which expired worthless (up 100%). We also looked at longer-term put sales on SKX, with the Oct $12 puts fetching $1.55 per contract, now $1.25 (up 19%), and the T 2014 $25 puts at $2.15, now $1.75 (up 18%).
Along the same vein, the XOM 2014 $65 puts at $5, now $4.05 (up 19%) were sold to pay for the SU 2014 $25/37 bull call spread for $6 for net $1 on the spread. The bull call spread is still $6 but that's net $1.95 now – up 95% on the combo. Our other bullish play on oil was the USO June $40/46 bull call spread at $2, selling he SCO Oct $26 puts for $3 for a net $1 credit. The USO spread has fallen to $1.40 but the short SCO puts dropped to $1.65 a net gain of .75 – up a quick 75% on a fairly neutral oil play, which was BRILLIANT as it covered many, many of our aggressive oil shorts over the month that went VERY well.
Our other trade ideas from the morning post (and the logic and strategies are detailed in the post):
- AA 2014 $10 puts sold for $2, still $2 – even
- X at $28.49, selling Jan $25 calls for $8.50 and 2014 $20 puts for $2.95 for net $17.04/18.52
…
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Friday Fade – March Goes Out Like A Lamb (To the Slaughter)
by phil - March 30th, 2012 8:27 am
Good morning sheeple!
After being jammed into equities all month on an endless string of empty promises, I'll bet you're wondering what to do next.
Well, isn't that the problem? You shouldn't be waiting for someone to tell you what to do with your money – it's ridiculous. The whole industry of Financial Advisers is ridiculous – swarms of leeches who prey on your confusion and take 1% of your money or more PER YEAR. Did it ever occur to you that 1% of your money per year is HALF of your money after 50 years in their care?
That's right, you work hard to make money, you sacrifice to save it and then you PAY someone else to take it from you and play with it. Isn't that silly? We pointed out on Monday that the average performance of even the best Financial Advisers is WORSE than flipping a coin yet still, the vast majority of people in this country let other people handle their investments – that's not even rational…
Of course, the Financial Community does their best to keep the whole thing as confusing as possible and the regulators pass rules that herd small investors into very narrow ranges of choices, most of which are funds that collect fees of some sort. How is it that our Grandparents did quite well for themselves just buying AT&T and putting it in a draw for 30 years – getting their dividend checks and benefitting from the growth of the company? Was Grandpa that much smarter than you?
No, he wasn't – he simply wasn't influenced by the Big Business-backed Mainstream Media who sell investments the way they used to sell cigarettes – telling consumers that many products that are dangerous to your financial health are actually good for you or, in the very least – will make you "cool".
Unfortunately, by accident or by design, investing and economics are not taught in our schools – other than to the business majors who end up going to work for the companies whose sole purpose in life is to get their hands on your money and rape you for fees – isn't is interesting how things worked out that way? All the "sophisticated" investors work AGAINST you and all the unsophisticated investors – the perennial bottom 99% – simply go to work and, if they accidentally accumulate…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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