Archive for June, 2006

Friday Morning

We’re having a big Fed party and I just have to hope we don’t end up with a big hangover: Commodities are running wild as the dollar weakens against perceived Fed weakness. The fact of the matter is that the Fed cannot stop raising rates (unless we stop spending more money than we have) as our expanding economy is being fueled by a Trillion dollars worth of deficit spending. Asia picked up huge gains, right around 400 points in China, Japan and India with India being the biggest percentage gainer (4.4%). Oddly enough, the Japanese market is responding to data that shows their core consumer prices are rising, probably because they read my “inflation is good” article. Look for nice action on our Toyota and MTU trades at the open and take the money off the table. Europe is up about a point in a commodity based rally (ho hum). Airbus is filing a suite against “unknown persons” for “unauthorized disclosure” of a meeting in which the company discussed production delays of the A380. Wow, things are so bad there that this is what they choose to worry about? One scandal brewing there is the fact that many Airbus executives dumped stock ahead of the public finding out about the delays. The CEO claims he had “no priviledged information.” Then what are they suing about? A 1% drop in the dollar offsets a 2% rise in the markets to International equity funds so they may not seek to throw good money after bad today if that weakness continues. It will be all up to the US fund managers to decide how badly they want to salvage this quarter but I certainly wouldn’t want to be holding anything but cash on Monday, just in case this is all just one big round of window dressing! The Dow is exactly .50 below the 50 dma so anything up is good there, the S&P looks a lot stronger and may head to its 50 dma of 1,277 if we are lucky while the NYSE is within shooting distance of its 50 dma of 8,207. Any downward movement or rejections off the 50s will be a real sign of weakness and funds will be wary of being caught on the wrong side of the markets two quarters in a row. On the other hand, a triple index breakout above the 50s…
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Thursday Wrap-Up

Woopie! I don’t know why we are so excited but – yay! The Fed did exactly what we thought it would do and people were so relieved that everything that wasn’t nailed down got bought. On Monday I said we needed four things to rally: Funds need to salvage the quarter (they do – in fact CNBC featured this fact today) The Basel CB meeting needed to go quietly (it did) Tuesday Consumer confidence number needed to beat 103 (it did) Finally, Fed statement needed to give us something to make us believe they may pause (they did) So of course people are buying today. I was so surprised at the strength of the buying that I took a short position on the Dow though (sorry) right at the close because this seems like an overreaction to me and also because it partially covers the longs I let ride into the close (RHAT, HOV and MU). The S&P blew through 1,260 but time ran out before it could reach the 50 dma at 1,276. This is nothing to complain about but it will be an early test of the market’s resolve in the morning. The Dow also fell just short of testing 11,200 after the Fed sent it racing through 11,100 despite a failure there earlier in the day. The Nasdaq put in a 3% gain on a 4% SOX rally but we still have a lot of work to do there. So why did I short the Dow at the close? Some big tech like IBM and TXN hit profit taking at the close, I would have preferred to see buyers to the end. We are testing technicals in the morning so a pullback would not be surprising but I wanted to stay in my longs. It was another commodity led rally, only followed by the broad market for a change. Oil moved up $1.33 to $73.52 so you can see why the oil patch would get excited but how is this helping BA or the transports or DOW or DD? It amazes me when the things they point to as the cause of a drop are ignored like they don’t matter on a rebound. Gold pushed up to the $590 mark but was again rejected while copper pricing makes that PD deal look pretty smart. ===================================== It didn’t take a genius to pick winners today but the monkey…
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Fed Thursday

Yesterday’s “rally” came on weak volume in a late rally but indexes holding key levels seems to have been enough to excite both Asia and Europe all posting 1% plus gains across the board.

Our futures markets look strong as well but we still need to see if we can break the same technicals as yesterday: Dow 11,100, S&P 1,260, NYSE 7,932. Of the three, only the NYSE is close enough to give an early signal while the Nasdaq is so far out of the money that we can only watch the 2.100 mark to the downside which would be another (but by no means final) nail in the coffin.

The SOX are on a death sprial but held 429 thanks to a herculean effort by Intel who took their $100Bn market cap up 3.3% offsetting crushing losses by MRVL and TXN. The Sox are off 20% since 5/8 and must either turn up here or they are very likely to make another 5% down leg. Only a very positive Fed announcement can save them at this point. It should be noted that the 20% loss represents a drop from 535 to 429 but it will take a 25% gain to recover – one of the pains of market math.

This is why we try to stop out with no more than a 20% loss – it becomes far too hard to recover once you get past that point. Since many people follow that rule, there is a large danger in the SOX index that another few points down will trigger waves of selling that could bring all the markets back to last year’s lows.

Other than that, things look pretty good today!

In preparing for our Maserati challenge (I’ve decided to get a Range Rover Sport for myself though) I am setting up a tracking screen on ESignal of just the SOX as I think this will be very key over the next couple of months. By the way, the challenge will not start until July 17th as I forgot I will be on vacation the second week of July.

Oil seems happy over $72 and gold is holding $580. There is a natural gas inventory today that is unlikely to be very surprising but a rise in nat gas above $6.50 is a big buy signal on beaten down BTU, who have not participated in the oil sectors…
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Weak Wednesday Wrap-Up

Now XOM goes up 2.5%?!? I guess I pulled the trigger on that one a little early but I would have just worried about it all day and done a poor job at my meetings…

None of the indices did anything spectacular but at least they didn’t head lower. The NYSE never made 7,932 and the S&P never got near 1,250 so I don’t feel like I missed anything at all. Let’s remember that last Wednesday was a very big up day and today’s action only brought us halfway up that candle.

Also the way we got there: Oil, Commodities, Transports (for commodities) is no way to base a rally – especailly when oil is up based on strong demand at the $70 level.

Rates are now, 5.25% or greater across the board and oil held $72 despite a big afternoon drop that was erased by fevered buying in the last half hour of trading (see I didn’t say manipulaition!). Oil inventories showed a huge 3.4M barrel draw with gasoline down another million barrels against anticipated builds. The draw was actually caused not by surging demand (although that is how they are spinning it) but due the 448,000 barrel PER DAY lower imports! That’s 2.4M barrels in just a week. Distillate inventories jumped 1.8M barrels as refiners chose not to run as much gasoline (partially due to a shortage of mandatory ethanol) plain and simple.

I suppose I’m guilty of overthinking the oil market because I know it’s all BS so I don’t participate in many rallys (kind of like Prof in housing) but I got my wish and we are setting back up for a nice fall before next options expiry.

Gold did just what we thought it would but a little sooner than expected, opening at the day’s high and dropping all day long. You would think with rising rates and inflation concerns it would hold on a little better but gold is just not holding the fear premium the way oil is.


CAG had so-so earnings on declining sales but didn’t suffer much for it so ADM actually gained 2% today and the $40 puts ran down to $1.30 (down 25%). Since the stock didn’t quite make it to $40.33 it may still be a good time to buy tomorrow but right at the close would have been perfect!

BA had a week…
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Worrying Wednesday

Ah, the pre Fed day!

Japan couldn’t wait to sell off, dropping 285 overnight and crashing right through the 15,000 mark putting it in danger of forming it’s own death cross. I think its very ironic that Mad Money had a special last night on fantastic Japanese investments – the virtual portfolio Cramer suggested lost over 2% just hours after the show. Timing is everything!

I endorse Cramer’s picks but, as my readers know, I haven’t endorsed a buy on anything for about 3 weeks now – very dull but safe. I have become very concerned of late by the constant stream of advice from pundits and newsletters telling people what sectors to get into in the midst of the worst sell-off since ’02.

Europe is flat to down again and I don’t expect much out of our own markets ahead of tomorrow’s Fed announcement. At home, we need to keep a close eye on 10,900 for the Dow or 11,000 to the upside as well as the downside psychological break-point of Nasdaq 2,100. I will again be staying out of the market if the NYSE can’t retake 7,935, its 200 dma.

Today is oil inventory day and MER upped their target price for oil to $67, still a little shy of reality but an indicator that no one is expecting oil to go lower despite 10 year high inventory levels. Oil traders are already preparing for bad news by saying, “sure there’s a build but next week is a big driving week” and, of course – Hurricanes are Comming! For now I’d rather see the oil sector go up to give us more fuel for shorts on the way down.

As predicted last night, gold made a spectacular recovery in Asia and Europe overnight but, if the manipulation game is on, we can expect another US sell-off around noon today so it might be smart to take it off the table by then and consider a rebuy in the afternoon although I will stay out entirely until after the Fed announcement as a .50 hike could really hammer the gold market.

The past two week’s rise in oil and gold has come against a 2% dollar recovery so look for a big jump in commodities if the Fed gives any indication of a pause.


I’m going to take a pass on today as I have…
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Terrible Tuesday Wrap Up

Ouch! What was that?

As I said in the comments this morning, the second Paulson’s testimony began I knew we were doomed. You cannot discuss the US economy in any kind of detail without sending investors running for the doors. Add to that the ridiculous party positioning that makes a mockery of the whole thing and it’s amazing we only dropped 120 points.

The SOX were the poster boys for a false recovery, dropping 2 week’s worth of gains in just one day:

The Nasdaq came to a halt right at the critical 2,100 mark, below which we may test last year’s lows again. The S&P failed the 1,250 mark so severely that I’m willing to bet the 200 dma is heading there (which means at least a couple of weeks below that mark).

Tomorrow the Dow will test 10,900, all it will take is one wrong word from the Fed and we could be looking at a 200 point drop!

Oil held strong but gold got a huge rejection off of $595 mid-day, giving up 2% in 4 hours of trading. The drop was an American engineered event as it began the moment the European exchanges closed and, had I been there, I would have been buying gold at the close but ready to get out if we blow the $580 mark.


The S&P and the NYSE both kept us out of mistakes today – this is why I pick tracking indicators, it helps to have a good objective rule to keep you from throwing cash around!

Our gold plays gapped up today – lucky for us because that was the peak for the day. Even MRB took a plunge at the close to $2.96.

EBAY was such a disaster that I crossed them off my watch list, giving up the full 5% today and only saved by the bell.

I’m very pleased to have gotten out of JNJ at $1.20, even though it went lower as they had a big jump in the AH for reasons that are not clear yet.

I cheated and picked GM $27.50 puts up for $1 but I got out at $2 as I had to leave and didn’t want to leave it unattended (even though I hopefully talked someone out of buying it at the 5% mark). The $27.50 puts finished the day at $2.25!

INTC was another…
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Testy Tuesday

Trader Mike pointed out yesterday that the Nasdaq has made what he calls a “Death Cross” ie. the 50 dma has fallen below the 200 dma. I have to agree that this is a very powerful signal from which few stocks recover. I’m just not positive that indices follow the same rule as an individual stock but you could easily make the argument that it is more so.

Yesterday’s Global Banker’s Conference in Basel, Switzerland yielded a mixed bag of news:

  • Global growth is strong, putting all CBs on inflation watch.
  • Housing prices are dropping worldwide.
  • Inflation is generally under control but, bankers believe, only because of their intervention.
  • China’s economy is growing by 10% a year and there is no way to stop it.

Like any good tea leaves, the meeting can be interpreted in several ways but I was heartened by the tone of the conference and the attitude that the bankers need to rethink this war on inflation as it may no longer be the appropriate policy for individual countries.

So I would have to put the CB meeting in the plus column of the four things we need to turn the market. So far funds are not putting money in, but they may be the last to move. Today we turn our attention to to consumer confidence which must be over 100 and really needs to top 103 to get funds off the fence.

Asia was flat to down, Europe is flat to down, we should be flat to down but the danger is still there for a big downturn.

I don’t see the follow through I was hoping for yesterday and we need to keep our eye on that Nasdaq mark as any downward movement could spell significant trouble ahead. There are many people out there who will tell you that this index looks good and that one looks bad but that is BS! The indices generally move in tandem and anything outside of that is an aberration so the Nasdaq will absolutely drag the entire market down with it if it goes.

The S&P is the one to watch today as it is sitting right at 1,250, where it has been having trouble for the past week. Failure to break over this mark soon will make the 200 dma of 1,262 (it’s been creeping up) unobtainable in…
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Monday Mop-Up

Ahhh, what a relief that was!

An especially good performance when you take into account that LEN lowered guidance against a good (although possibly inaccurate housing report) but the commodities once again turned in a fairly strong performance and the SOX closed up just half a point (as did most indices) so I will still be waiting for some follow through.

Most of the buying came in the last half hour of the afternoon as our key inicators held their technicals but the Nasdaq had a choppy finish trying to gain 12 points and the S&P continues to treat 1,250 as resistance which is making 1,260 very cold and lonely as it has not been visited since June 9th.

GE gave me some hope at the day’s end but TXN was a big disappointment as it failed to break $30 on an otherwise good day. APPL also had a nice finish but the first 6 hours of trading were just awful for them. I was very glad to get $1 for my .80 TXN calls which was the only trade I made all day as they opened nice and low but I would have been better off just cashing out on the initial run at 11.

As expected, the NYSE was our best possible indicator, giving an early strong indication that buyers were coming in just around lunchtime. This coincided with the close of European markets as an uneventful Central Bankers meeting gave investors a sigh of relief. It looks to me like individual investors are bargain hunting and we will need to see today followed through with volume tomorrow before we can even begin to say we may be coming out of the woods.

Oil is up another $1 to $71.80 and we know that’s going to hurt down the road. Gold held steady at $587 which was good enough for the beaten down gold miners to make small gains.


PD did indeed blow through the 5% rule to finish down 8% for the day while N and FAL both pulled back a little as the stock they are getting is devaluing quickly.

JNJ lost a whopping 2% today but opened too low to play.

XOM $57.50s only came down to $1.60 but finished the day at $2.20 (up 35%).

We can hope for a good day tomorrow but I’m still wary…

Just Another Manic Monday

Asia is flat to down, Europe is flat to down as the global markets are on Fed watch.

The Dow is right on the 11,000 mark so it bears (oops, don’t say bear!) watching while the S&P continues to treat the 200 dma of 1,260 like an unobtainable goal and the Nasdaq seems like a real lost cause. This is the perfect recipe for a huge rally!

To get a rally this week several things have to happen:

  • Funds need to try to salvage the quarter. As we are close to negative the question is whether they would rather take a small loss or work hard to post a small gain needs to be answered but the quarter ends on what should be a wild Friday.
  • Today’s meeting of Central Bankers in Basel needs to go off without incident.
  • Tuesday’s economic forecast needs to be strong with consumer confidence over 103 and home sales flat.
  • Thursday’s Fed statement needs to give us something to hold on to at the same time as the ECB makes a statement.

If all of the above happens, we could have a really good week, otherwise – probably not!

Let’s keep our eye on the NYSE which is right under its 200 dma of 7,928 and provides a nice, broad view of the markets.

Warren Buffet gave Bill Gates $37Bn this weekend (and I told there was no way America was going to win the World Cup!) and PD is giving N $40Bn (these soccer fans…) who is giving FAL $20Bn (cheapskates) in one of the more complicated deals of the weekend.

Oil and gold are off a bit on another quite weekend but it will take another few days for the new shot of terror fear to drain out of the markets.

Much like Asia, I will just watch and wait today hoping for a sign.

I fear another commodity rally today that will again give us false hopes to be dashed by the Fed. My big prediction is that if the 10 year hits 5.5% (possible if we get a half point hike) then the markets will drop another 5% as money flows into the safer securities (although there was a great article by Ben Stein in the Times this weekend that made the argument that our notes are literally not worth the paper they are written on).
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Weekly Wrap-Up

Another week we are glad to see the end of…

Dow was down 25 for the week after a big 120 drop on Monday and a false 175 point rally Tuesday and Wednesday.

The other indices followed suit and appeared weaker, if anything, than they did last week. Next week will be spent waiting for the Fed and then interpreting the Fed so we need to just hunker down for the long haul.

Oil held $70. gold held $580 and copper held $3.15 all of which are signs that the markets are heading in the wrong direction. How can there be such a robust demand for commodities if the global economy is slowing.

The big deal of the week was APC’s takeover of KMG and WGR for an amount that makes a statement that high commodity prices are hear to stay.

We wisely stayed out of the week so all of the reviewed picks should be taken with a grain of salt as these were, for the most part, short-term trades at best.


AAPL is working out so far with the Jan $55s up $1.10, we put $2.50 in the bank for selling the $60s which are still $1.20 out of the money at $2.30 but may threaten this week if bargain shoppers come in. Still not bad for a $9.40 investment so far.

ADBE was one of the only trades we stuck with for the long haul and the $30s finished at $1.35 (up 125%).

ATYT had an up and down week but we had the $15s for a buyout bid that seems less likely after losing 15% to $1.

BBY was a good example of why we get out fast in this market as a great pick on Monday ended Friday lower than the week began:

CAL held up despite hints of a scandal in the Airline industry but the Aug $25 puts held steady at $1.10. I like the risk/reward on this one as long as they don’t break $29.

INTC continued downward and the October $20s lost 25% to .45 as this stock does not look like anything is going to save it. The first Xeon servers roll out this week so it will be all about the reviews but I’m expecting a recovery (Fed permitting).

JNJ held up well but the Aug $60 puts went
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Zero Hedge

Explosion Hits Russia's Largest Virus Lab Which Houses Plague, Smallpox, Ebola And Other Deadly Viruses

Courtesy of ZeroHedge View original post here.

A sudden explosion at a Siberian virus research center on Monday reportedly left the facility engulfed in flames, according to several Russian news outlets. 

Firefighters and other emergency personnel were dispatched to the "Vector Institute" located several miles from Novosibirsk - an emergency which was upgraded "from an ordinary emergency to a major incident," a...

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Phil's Favorites

The future of work will still include plenty of jobs


The future of work will still include plenty of jobs

Even though the future is unknown, Canada’s employment rate has risen steadily from 53 per cent in 1946 to more than 61 per cent today. (Shutterstock)

Courtesy of Wayne Simpson, University of Manitoba

There is now widespread anxiety over the future of work, often accompanied by calls for a basic income to protect those displaced by automation and other technological changes.

As a labour economis...

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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Insider Scoop

New Relic Cuts 2020 Sales Guidance, Announces Changes In Management

Courtesy of Benzinga

New Relic (NYSE: NEWR) has reaffirmed its second-quarter guidance and cut its sales guidance for fiscal year 2020 from $600 million-$607 million to $586 million-$593 million.

The company’s chief technology officer, Jim Gochee, and chief revenue officer, Erica Schultz, have resigned. New Relic also named board member Michael Christenson as its chief operating officer. Christenson joins from his ... more from Insider

The Technical Traders

Metals are following downside sell off prediction before the next rally

Courtesy of Technical Traders

It is absolutely amazing how the precious metals markets have followed our October 2018 predictions almost like clockwork.  Our call for an April 21~24 momentum base below $1300 followed by an extensive rally to levels above $1550 has been playing out almost like we scripted these future price moves.

Now that the $1550 level has been reached, we are expecting a rotation to levels that may reach just below the $1490~1500 level before attempting to set up another momentum base/bottom formation.  And just like clockwork, Gold has followed our predictions and price is falling as we expected. Just look at our October 2018 chart where we forecasted the price of gold...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 


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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...

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The Big Pharma Takeover of Medical Cannabis

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


The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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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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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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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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