Friday Follies – No Jobs but Hey, Look at Facebook!
by Phil - February 3rd, 2012 8:19 am
Distractions.
That's all we have lately. Greece's silly $171Bn loan is meant to distract us from Europe's $17Tn debt hole and the US continues to borrow $171Bn PER MONTH to cover it's deficit and we don't even talk about Japan as the debt climbs over 220% of their rapidly declining GDP and who knows what's going on in China but, generally, when you have double-digit declines in home prices on a monthly basis – there's going to be a problem down the road.
This may be my last bearish post before drinking the technical Kool-Aid this weekend and we've already selected 5 trades for our Members that will make 200-500% if the market keeps moving forward and there are still plenty of stocks we can make a lovely Buy List out of if this rally has legs – especially the way we like to bet, since our hedges allow us to make very nice returns, as long as we simply hold our current levels.
There's the rub though – are the current levels sustainable? The nice thing about consolidations like the one we've been having this year is that they firm up a floor and give us a very obvious exit point on the way down so we can move some of that sideline cash into play – as long as we hold 12,500 on the Dow and 1,300 on the S&P and 2,800 on the Nasdaq – pretty simple strategy, right?
Notice the 2nd row has our major indices priced in Euros and our third priced in Yen. My main issue has been that we've been much weaker than it seemed as the Dollar's relentless decline masked a downturn in the inflation-adjusted price of our stocks (and the weak Dollar also serves to inflate revenues reported by multinational companies) but, at the moment, we're at our breakout levels by any measure so we may as well go with the flow until we see a proper reversal.
First we need to get past our NFP report at 8:30 of course. I'm expecting a miss but will the market even care or will that just mean Uncle Ben has an excuse to pump up the QE according to their new "formula"?
Keep in mind that what Bernanke said last week regarding the Fed's system for determining policy boils down to – As long…
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DiggMonday Morosity – “Hard Times Ahead” says Rajoy
by Phil - November 21st, 2011 6:41 am
Mariano Rajoy won the biggest majority in a Spanish election in almost 30 years, and told Spaniards to brace for hard times as the nation fights to avoid being overwhelmed by the debt crisis. Bonds continued to drop. Rajoy’s People’s Party swept the ruling Socialists from power after eight years, winning 186 of the 350 seats in Parliament, compared with 110 for the Socialists’ candidate Alfredo Perez Rubalcaba.
“Hard times lie ahead,” Rajoy, 56, told supporters outside the PP’s headquarters in Madrid, giving no new details of his plans. “We are going to govern in the most delicate situation Spain has faced in 30 years.”
Spanish borrowing costs continued rising toward euro-era records (6.6% this morning) even as the PP won a mandate to slash the budget deficit, overhaul the stagnant economy and reduce the 23 percent jobless rate. Rajoy, who hasn’t given details of his proposals, won’t take over for a month, prompting him to say on Nov 18th he hoped Spain wouldn’t need a bailout before he’s sworn in. Miguel Arias Canete, head of the PP’s electoral committee and a former minister, said today markets need to give the party time, as ministers won’t be appointed until Dec. 21 and Spanish law doesn’t allow Parliament to resume any sooner than Dec. 13.
So NO QUICK FIX IN SPAIN IS POSSIBLE – let’s face that fact now so we’re not endlessly surprised by it as the rumor-mongers can now have a field day attacking the lame-duck outgoing Government ahead of the transition. Meanwhile, our own do-nothing Congress looks to be heading towards certain disaster as we have what appears to be a TOTAL FAILURE of the US Deficit Reduction Committee to do anything to actually reduce our deficit.
Now I don’t want to point fingers (cough, Republicans, cough, cough) ahead of our National Holiday that celebrates unity and goodwill and crap like that. Let’s just say "they" couldn’t agree, so now it’s going to be Hard Times for America as we, in theory, will kick in $1.2Tn of automatic cuts including (gasp!) over 5% of our nation’s Trillion-Dollar annual Defense budget. Oh, not until 2013, of course because our Government doesn’t really have the balls to cut anything under any circumstances.
EXCEPT, of course, aid to the poor. THAT they can cut and cut and cut and cut. Payroll tax cuts –…
Friday Follies – Greece Job
by Phil - November 4th, 2011 8:24 am
Papandreou is trying to convince us he almost destroyed (the) Universe to get my consent. – Opposition leader Antonis Samaras
Ah the old "destroying the universe" ploy. It’s the same one the Republicans are using in the Senate as they once again kill Obama’s $60Bn infrastructure program that was meant to provide direct aid for highway and rail projects and set up an infrastructure bank. Without 60 votes, bills can’t even make it to the Senate floor so nothing gets done.
This is ironic because, on the same day, China APPROVED another $160Bn of infrastructure spending – just to build new underground subway systems in 28 cities by the end of the decade – creating millions of Chinese jobs, lowering transportation costs and laying the foundation for continuing to kick our asses in the 21st Century. So, to be fair, the Republicans aren’t destroying the Universe to advance their political agenda – just America.
Meanwhile, China’s subway plans are coming AFTER they have developed the World’s largest high-speed rail lines to connect to their World class shipping ports so goods can now be whisked around the country in a cheap and efficient manner while the knuckle-draggers in Congress debate whether or not it’s worth fixing the potholes that are ripping the tires off trucks on our nation’s roadways.
You don’t make a nation great by talking about how great we are – you make a nation great by building a great nation and we are doing almost the exact opposite – squandering what once seemed to be an insurmountable lead in education, transportation, utilities, health care, housing and even environmental progress – and turning America into what is now one of the lowest-ranked developed nations in each of those categories.
Rather than employ millions of people to maintain our infrastructure, we allow it to decay and ship our manufacturing and jobs overseas to Nations that are willing to invest in their future and that leads to trade deficits that suck hundreds of Billions of additional Dollars out of our economy along with the hundreds of Billions of Dollars we ship overseas every year to pay for our addiction to oil because, for 40 years now – our Republican leaders have told us it’s too difficult to kick the habit. Vote these fools in again and we’re doomed – that’s all…
FHFA Friday – Potential Lawsuit Tanks Banks
by Phil - September 2nd, 2011 8:18 am
$30 Billion – that’s bound to get their attention!
According to the WSJ, the Federal Housing Finance Agency is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble. The suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims arguing the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.
Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues, agrees with what I told Members in last night’s chat:
"While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again.”
In other words – MADNESS! What was the point of spending Trillions of Dollars bailing out the Banks if you are going to turn around and sue them for $30Bn and drop their stock price another Trillion, causing them to need another bailout?
Perhaps this is the denouement of a week of scary market rumors that seem to have been designed to stop the markets from breaking too high. We were speculating on this last night in Member Chat before this…
Thrill-Ride Thursday – Will Dudley Do Right Save the Day?
by Phil - August 18th, 2011 8:02 am
Wheeeeeeeeeee!
Now THIS is an exciting ride. We had a great sell-off in the Futures this morning – the same Futures that I mentioned, in yesterday’s Morning Post, that we had shorted at S&P 1,200 and Russell 710 in a post I had titled "1,200 or Bust!" Of course we also called for our usual monthly oil short with the (/CL) Futures hitting $99 on yesterday’s inventory and now down to $86 (up $3,000 per contract).
Of course, for the Futures Impaired – we still have our straight USO Sept $32 puts at .90, which we whittled down to a .75 in yesterday’s Member Chat as well as the very lovely idea of the SQQQ Sept $25/28 bull call spread at $1 (spread with short RIMM Sept $22.50 puts to make it FREE) that I mentioned right in the 2nd paragraph of Tuesday’s post. Those were just the ideas we gave away for free! In Member Chat, yesterday’s morning Alert to Members was this:
As I said earlier, we like the Futures short at RUT (/TF) 710 and S&P (/ES) 1,200 but the big play today will be shorting oil (/CL) below the $88.50 line or, hopefully, below the $90 mark if they get that high. Expect the Dollar to re-test 73.50 and, if they hold it, then it’s a great time to hit the shorts but, with oil, we’re waiting on that inventory report at 10:30.
As an overall short on oil, the Sept $32 puts are down to .65 and .60 is a good spot to DD in the $25KP (10 more). AFTER that, with an average of .75 per contract, we want to consider rolling up to the Sept $33 puts, now .90 for .30 or less.
Another fun way to play an oil sell-off is the SCO Aug $53/54 bull call spread
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Generations of Pork: How Greece’s Political Elite Ruined the Country
by ilene - July 7th, 2011 1:44 am
The latest tranche of loans from the EU and the IMF has helped buy debt-ridden Greece some time. But the Greeks will find it hard to get back on their feet. Their country has been ruined by three political dynasties, which created a bloated system of cronyism that is hard to change. By SPIEGEL Staff.
[...]
Regardless of whether it happens under Papandreou alone or with both politicians working together, if Greece starts economizing, it risks choking its own economy. "It’s like a cat chasing its own tail," says Greek economics professor Yanis Varoufakis.
Former IMF chief economist Kenneth Rogoff recently warned: "If they just continue with the European Union’s austerity program, they’re going to be in slow growth or recession as far as the eye can see, and at the end of the day they’re still going to default."
And it’s not as if Greece hasn’t already adopted austerity measures. Athens managed to cut its budget deficit from 15.4 percent of its gross domestic product to 10.6 percent last year, thanks to its first austerity package. The government made cutbacks in salaries, retirement funds and social benefits, among other things.
This austerity policy also caused 200,000 people to lose their jobs last year, with unemployment reaching an all-time high of 15 percent by late March.
With pay in the private sector also often falling by 10 to 20 percent, consumption likewise dropped by nearly 10 percent and the recession intensified. It’s a vicious circle. Since taxes need to increase and spending needs to decrease, the situation is likely only to get worse.
Full article here: Generations of Pork: How Greece’s Political Elite Ruined the Country – SPIEGEL ONLINE – News – International.
Stagflation 2011: Why It Is Here And Why It Is Going To Be Very Painful
by ilene - February 24th, 2011 10:16 pm
Courtesy of Michael Snyder at Economic Collapse
Are you ready for an economy that has high inflation and high unemployment at the same time? Well, welcome to "Stagflation 2011". Stagflation exists when inflation and unemployment are both at high levels at the same time. Of course we all know about the high unemployment situation already. Gallup’s daily tracking poll says that the U.S. unemployment rate has been hovering around 10 percent all year so far. But now thanks to rapidly rising food prices and the exploding price of oil, rampant inflation is being added to the equation.
Normally inflation is a sign of increased economic activity, but when the basic commodities that we depend on to run our economy (such as oil) go up in price it actually causes a slowdown in economy activity. When the price of oil goes up high enough, it fundamentally changes the behavior of individuals and businesses. Suddenly certain types of economic activities that were feasible when oil was very cheap are not profitable any longer. When the price of oil rises to a new level and it stays there, essentially what is happening is that more "blood" is being drained out of our economy. Our economy will continue to function when there are higher oil prices, it will just be a lot more sluggish.
In some way, shape or form the price of oil factors into the production of most of our goods and services and it also factors into the transportation of most of our goods and services. A significant rise in the price of oil changes the economic equation for almost every business in the United States.
Today, the price of WTI crude soared past 100 dollars a barrel before closing at $98.10. The price of Brent crude increased 5.3 percent to $111.25. The protests in Libya are certainly causing a lot of the price activity that we have seen over the past few days, but the truth is that oil has been going up for a number of months. Right now we are only seeing an acceleration of the long-term trend.
Things are likely to get far worse if the "day of rage" planned for Saudi Arabia next month turns into a full-blown revolution. Up to this point, the revolutions that have been sweeping the Middle East have been organized largely on Facebook, and now there are calls all over…
What Most People Don’t Realize About The Fed’s Superpowers
by ilene - January 27th, 2011 2:33 pm
Bob Prechter’s Conquer The Crash reveals whether the Fed really can rescue the US economy
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By Elliott Wave International
Since its creation in 1913, the primary intended role of the U.S. Federal Reserve Bank has been that of protector. In theory, the central bank was bestowed with the power to shape monetary policy in a way that would keep both booms and busts in check. The two main tools at its disposal — interest rates and money creation — would provide a "ceiling of normalcy" above expansions AND a "net of safety" below contractions.
To this day, the financial mainstream holds great faith in the Fed’s ability to fulfill its save-the-day duties — as these recent news items make plain:
- "Why Raising Fed Funds Rate Is Positive For Equities." (Seeking Alpha)
- "Fed’s Moves Lift All Asset Classes." (Associated Press)
- "US Stocks Erasing Losses: The aggressive moves of the Fed have been an important driver for the stabilization of stock prices." (Bloomberg)
But of all the variables the Fed creators took into account, there’s one glaring factor they neglected to consider: Namely, it cannot force consumers to spend, creditors to lend, or businesses to borrow. The events of 2007-2009 "credit crunch" and the subsequent "Great Recession" made that obvious. Remember how the government was upset at banks for sitting on the bailout funds instead of lending them out to consumers? And consumers weren’t exactly lining up on the street to get a loan, either.
The Fed’s inability to change social mood is the central theme in Chapter 13 of EWI President Bob Prechter’s NY Times business bestseller book Conquer the Crash. There, Bob describes the Fed’s strategy of lowering the federal funds rate to stimulate spending to be as effective as "pushing on a string." Writes Bob:
"The primary basis for today’s belief in perpetual prosperity and inflation with an occasional recession is what I call the ‘Potent Directors Fallacy.’ It is nearly impossible to find a treatise on macroeconomics today that does not assert or assume that the Federal Reserve Board has learned to control both our money and our economy. Many believe that it also possesses the immense power to manipulate the stock market. The very idea that it can do these things is false."
And so begins one of the most groundbreaking studies into the very real INABILITY of the Fed to fell the great bears of economic declines, or…
Stock World Weekly
by ilene - January 23rd, 2011 3:20 pm
Here’s the newest: Stock World Weekly Newsletter. Comments welcome! – Ilene
Archives here.
Fickle Friday’s Jobs Report
by Phil - January 7th, 2011 8:29 am
I don’t know what the Jobs will be but I’m betting on disappointment.
I had said to Members yesterday that I liked the Jan QQQQ $56 puts at .77 and the Weekly (next week, not today) QQQQ $56 puts at .53 as good ways to play a jobs miss. My comment in Member Chat was that I felt the ADP figures pushed expectations up significantly higher and now we would be much more likely to disappoint with almost any number short of 250,000 jobs added.
The key is the seasonal adjustments but there was already some very disturbing jobs numbers in the Gallup Poll, which came out last night and showed unemployment RISING from 9.3 to 9.6% in December and, even worse, the number of Underemployed workers shot up from 18.5 to 19%, just 0.5% lower than we were in January of last year.
Gallups Job Creation index showed no improvement in December but it is holding +10, which is the best net level we’ve had since October of 2008. So we have ADP going one way, yesterday’s unemployment numbers were flat and Gallup says things are getting worse. 8:30 will be very interesting indeed.
While we wait for the number, let’s take a look at last week’s post to see how things are tracking. Monday morning I mentioned we liked FCX short at $120 (a trade that was reiterated Tuesday morning) as we felt the run in copper was overdone. It was a rough week but FCX is down at $116 now so we’re on track at the moment of course we took a spread in chat, which was the Feb $119/110 bear put spread at $3.60, selling the Jan $120 calls for $3.60. That spread is now $4.60 and the calls have dropped to $2.30 for a nice net $2.30 gain already.
I said that $90 was already ridiculous for oil and we shouldn’t go any higher. We picked up the USO Feb $40 puts on Tuesday morning in Member Chat at $2.10 and those are now $3.70 so a nice $1.60 gain there, which is about the same as if we had just shorted the stock as it dropped from $39 that morning to $37.68 now. That’s where puts are very useful, you don’t have to commit as much as a short on the stock, you limit…
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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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