Archive for September, 2006

Your Tax Dollars at Work

We are being ripped off on a scale that is biblical in scope! As I have maintained all summer, we are literally bursting at the seams with oil. The total amount of oil reserves in this country is over 10% higher than at any other point in history and is approaching 20% over our historical average: http://seekingalpha.com/wp-content/seekingalpha/images/Oilinventories1.jpg This abundance does not seem to stop prices from flying up and we want to know why: http://investorsfirst.com/charts/oil.gif In my never ending quest for facts, I am never afraid to go to the source, get the other point of view, whatever it takes to make a fair assessment of a situation and my investigation into the facts on the relationship of the Strategic Petroleum Reserve and the price of oil is – that this government is being run by thieves! This is just my humble opinion, of course but feel free to judge for yourself. The facts were far worse than my initial estimates when I first mentioned it on Tuesday, as I have long blamed the SPR as a side factor in adding to the price of oil but President Clinton reminded me that I should trust nothing this administration tells us so I went deep into the archives for this report. As we know, Clinton/Gore had used the SPR as it was originally intended – as a buffer in times of crisis, where they differed from Bush is that they saw high oil prices ($30 at the time) as a crisis and used the SPR as a way to assure reasonable prices for the American consumers. After all, as any squirrel can tell you, you store nuts when they are plentiful during the summer so you can eat them during the winter (see Clinton’s remarks at bottom). To spend all your summer gathering nuts only to let yourself starve while your home is filled to the brim is not exactly Darwin’s idea of a successful survival strategy. Of course, this administration rejects Darwin on many levels! Oil was so plentiful back in 1999 when it was selling for $14 a barrel that OPEC was forced to make 4.2M barrels in production cuts. That, coupled with a rapidly recovering economy drove prices back to the 1990s average of $20 a barrel. An exceptionally cold winter caught refiners by surprise but it was speculators, including Enron
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Fabulous Friday???

So we determined last night that this rally is fake(ish). Now we have to think about why? What would the motivation be? Given the non-stop market pump-fest this week, it is logical to assume that they are trying to get retail buyers to jump into the markets. You could say that this is logical as no one likes to invest alone and, if the market is such a good thing, of course fund managers want to share the joy with as many people as possible. A pessimist might say that this is all window dressing ahead of the close of the quarter and what fund managers really want to do is get you to take stocks off their hands, then wipe you out so you will give up managing your own money and invest in their funds (which should post some very impressive Q3 numbers). Perhaps they think a downturn is coming and this is their last chance to get you investors to hand them 1-2% of your money (per year) in exchange for their “expert” advice. Having the S&P up 8% so far this year means your fund can return 10% and “beat” the S&P by 25%, especially if they cash out Monday and drop the S&P to assure you will outperform it for the year! But that would be wrong… Anyway, there are plenty of other ways for big companies to make money.

So let’s Party!!! Asia is up, Europe is up but who cares about them today – 30 companies are about to break a new high! Forget about the fact that it’s not the same 30 companies or 6 years of inflation mean this new high is not even close to break even or that the biggest gainer, XOM, added $300Bn of Dow market cap (10%) by sucking it out of our wallets at grossly inflated, possibly manipulated prices…. Party time!!! Dow 11,718 – Woot, woot!!! Let’s go!!! Yes, we may hit 11,722, a level we haven’t seen since January 2000! Why haven’t we seen it since January 2000? Well because it was an overbought peak and the market dropped 2,000 points by April 2000 and then continued a prolonged downtrend all the way back to 7,300 in early 2003 —-- but forget about that! Party time – woo hoo!

On a day like today I always turn to the…
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Thankless Thursday Wrap-Up

Mark Hurd is earning every dime today! Wow, is he good! Diffusing a horrible situation about as well as possible. Too bad we got stopped out of those $35 calls at $2.40 (although they were up 140% at the time). Still cash, cash, cash. Today was nowhere near as smooth with out oil plays as crude took off like a rocket to $64, where it did an about face at noon, failed the afternoon pump and sold off into the NYMEX close down a quarter at $62.76. This was well below the 5% retracement line we were watching at $63.28. We had our party hats all day but, despite a lot of teasing, no all-time high on the Dow. It was a lot like when you have a surprise party and, every time the door opens – people go “Shhh, shhh, shhh” and then it’s just another guest and everyone goes – “Awww.” After that happens about 10 times everyone gets tired of it and, when the guest of honor finally arrives, everyone is already partying and all he gets is a half-hearted “surprise” and feels horribly ignored (or is that just my friends?). So Dow 11,718! Pretty good no matter how silly it really is. I’m in no mood to throw a damper on it after looking at RIMM’s blowout numbers (although they are delaying the official report as they are “checking” options issues), which indicates to me that that whole sector is rock solid – so game on for PALM tomorrow too! The Dow finished just 6 points below the hoped for number, just a tick or two on a regular day and it was not for lack of trying as many components were pumped for all they were worth into the bell. As I pointed out in comments, strange moves near the close included: CAT + .15, GE +13 and down .15 at 4:01, HON +.17, JNJ + .10, JPM + .13 and down .15 at 4:01, MCD + .30, PFE + .15 and, best of all XOM, who caught a bid at $67.46 – .41 above the last trade at 4:00 and it registered at the close! That’s a $2.4Bn jump in value after the bell that’s included in that final Dow number. Chart of triple top Dow??? Look at the one-minute chart and it’s as clear as a bell. Will I be the…
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Thursday Morning

I am not interested in a rally with oil back at $63. At some point the Fed will come back into play and the idea that bond pricing indicates a lack of inflation is a fallacy. There is too much money around – that is what is keeping rates down, not low inflation. This misconception on the part of pretty much every analyst I hear is really starting to bother me (so more about this on the weekend). Holy cow! We talked about the end of M3 tracking and what it would mean for the Dollar way back at the beginning of the year and so far, all my crazy theories are right on track! Oh yes, I said I would wait for the weekend – consider that a teaser! The Nikkei broke back over 16,000 and is back to being about 30% ahead of the major indices and 15% ahead of the NYSE, which has been our leader since April. Chart here. Like us, Asia is having a commodity based rally that is nothing to write home about. An early warning sign for us was Taiwan, who settled their monthly futures yesterday and dropped a point. Europe is up this morning although Italy is having problems with debt. “If you have a positive surprise on the tax side and at the same time a negative surprise on the deficit, it means that the fundamental problem is really quite worrying,” says Stephane Deo, an economist at UBS in London. This is typical British understatement for: Ahhhhhhhh!!! What do we care what’s happening in the world when the Dow is closing in on 17,000? That’s right, we are all being dutifully distracted by the 30-company index of the Dow with is used by pumpers as a pretty, dangling ball of string to distract investors from what is really going on in the markets. It also does a great job of distracting CNBC who did not talk about a criminally negligent 6% downward revision in new home sales and a pathetic durable goods report in favor of discussing what kind of party outfits they will wear for Dow 11,700. So it’s 11,700 or (literally) bust on the Dow but, as long as we keep watching these 30 companies to the exclusion of the other 8,500, everything should be fine! The S&P tracks 500 companies and got some serious…
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Wild Wednesday Wrap-Up

Woo-eee! Ride that bronco! The markets are all over the place today and you had to be quick to make a buck. We were very quick in comments today, initiating our first oil puts at 10:19 as TSO ran into the 5% rule which felt like a safe top ahead of inventories, and we got out of oil puts at 11:21 after TSO pulled back the entire 5% for a one-hour 61% gain! Other than that the day was tricky and both the conversation and our trading reflected that, which was tentative for the most part. We cashed out a good number of our remaining positions and we are in a nice cash position to move forward, whichever way the market goes. The Dow made a lot of noise but ultimately went nowhere, finishing at a very disappointing 11,689 after being rejected from 11,700 but the S&P made a new 6-year high at 1,336.59 (you need the .59 because it only made it by .26). The NYSE added a respectable 24 points while the Nasdaq added a sad 2 but, for some reason, the QQQQs were negative for the day – indicating a certain lack of faith. Neither the SOX, which lost ¾ of a point or the TRANQ (flat) were any help at all and what really bothered me was the fact that the oil sector gained almost 2%, adding 4 S&P points for the day. As I have often said, this is nothing to base a rally on. As I said this morning, this was a good overall test of how the markets take bad news as the durable goods report was indeed worse than expected. Oil seemed to take this, plus an over 8M-barrel build in inventories (I kid you not!), as a sign to rally and tacked on $2 today to finish at $62.96 on the long-promised Super Mega Oil Pump ™. Gold also shot up today as a small scandal rocked the treasury markets indicating that they too, like the NYMEX, are being manipulated. Against a flat dollar gold broke through resistance to finish at $602. Perhaps the gold bugs are right and our entire monetary system is a sham that will topple like a house of cards……. nah! ===================================== WAG opened the day too high to buy with the $45s jumping to $2 before settling back at $1.30 where I would wait…
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Wary Wednesday

I want to be very clear that I am being bullish from a technical standpoint but I have a funny feeling in my gut that is keeping me in cash. The last few days have let us take some great gainers off the table but I’m not thrilled with the performance of the remaining picks (54 positions – up 27% over 11 days average) and maintain very tight stops. There will be an updated spreadsheet tracking all picks today at http://www.clinamengroup.com/philstocks/ for your viewing pleasure. So holding time increased 25% and profits decreased 12% (from 94% to 83%) on recently closed positions – nothing to panic about but, coupled with the weakness in open positions, you can see why I am concerned. Only 14 out of 54 open items are puts so it’s not me being overly pessimistic – but my MS/PEG play did produce 2 of my 4 worst picks (-50%)! There are a lot less doubles (8) and no triples although I do have to admit I did cash a few positions out a little early that would have made it but, like I said – funny feeling… Stephen Roach has a funny feeling about the commodity market! He says that US and Chinese demand may surprise to the downside and warns of danger ahead as funds (his is MS) follow Ibbotson recommendations to increase commodity holdings he says: “For my money, there is far too much talk about the globalization-led commodity super-cycle. It gives the false impression of a one-way market, where every dip is buying opportunity. Yet commodities as a financial asset are as bubble-prone as any other investment. As is always the case in every bubble I have lived through, denial is deepest when asset values go to excess. That’s very much the case today. After three years of extraordinary outperformance, denial over the possibility of a sustained downside adjustment in commodity prices is very much in evidence — underscoring the time-honored sociology of an asset class that has gone to excess. Meanwhile, China and US-housing-related fundamentals are going the other way — setting up increasingly tender commodity markets for unpleasant downside surprises on the demand side of the global economy.Hmmmmmmm… There are no funny feelings in Asia as the Hang Seng snapped back 213 points and the Nikkei picked up 390 – now those guys know how to
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Terrific Tuesday

That was a pretty exciting day! I’m starting to feel like Chicken Little here, trying to say the sky is falling on a beautiful clear day. While I have long contended that stocks are way too cheap, I am still baffled by the enthusiastic buying of Builders and oil companies given the current market conditions. As I was reminded in comments, I did make a bottom call on builders on 8/22, against TOL’s scary earnings report, but that was 20% ago! This just seems a little overdone at this point… Gotta have your rally cap on for this one though! I’ve never had so many stocks that I’ve set stops on not trigger for 3 straight days. They just keep going up! 24 of 30 Dow stocks were up today with just MO (for good reason), MRK, T, HON down a bit and HPQ and JPM down just a penny each. DIS (9/6 pick), CAT (every day pick), INTC (9/19 and today pick), XOM (Boo hiss!), GE (every day pick), BA (9/8 pick) and GM (not a pick but I called it to $33 yesterday) were all the top gainers (over 1.5%) other than AXP, which we usually pick but for some reason I forgot. I have moved from gravely concerned to cautiously optimistic but have not yet deployed the cash we’ve been accumulating as stops triggered. I am wondering how many pro traders are doing the same and at what point we will have to give up and just start buying stuff. There is nothing worse than underperforming the S&P for a fund and that fear is driving a lot of the buys this week. I’ll feel much better about things once we get past next Wednesday but I hope that isn’t another 300 points from now! The Dow looks like it is heading for 12,000, and I was so pleased to take a 33% profit on my DIA $117s last Wednesday… Oh well, the price of being careful! A week later, the Dow is 50 points higher and the calls are up just .15 from our exit. The S&P blew out 1,330, tested it twice and said sayonara like it was the Nikkei and I have to say that this is just fantastic! I so hope this isn’t a fake rally because it looks so good! http://stockcharts.com/gallery?spx The NYSE again is my main concern as it…
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Tuesday Morning

Cash, cash, cash. I rarely get paranoid but I am right now as the market does not feel right to me at all. Let’s remember that I am the guy who called for a bull market with record highs last time the market looked like it was topping. At the time, I said I expected a pullback but the minor drop we got that first week of August hardly qualified. http://stockcharts.com/gallery/?spx This did not stop us from going with the flow and taking a record number of open positions which yielded a record level of profits for the month but, just for this week, I have decided to get protective and move back to mostly cash. If it’s a real rally, we will have months to get in and take new positions but, if we have another Black Monday ahead of us, well – it’s a little hard to recover from that when you are heavily invested. OK, enough doom and gloom – let’s have some fun with the markets! It’s easy to be bullish with the markets looking like they do but Asia finished lower with the Hang Seng taking a 238 point hit as a “corruption probe” sweeps through China. “People are being pretty cautious, there is a sense of the economy slowing down in Japan and the U.S.,” said Yoji Takeda, fund manager with RBC Investments Asia. Europe is up in anticipation of a strong US market and it would be a real shame to disappoint them. We have the consumer confidence index at 10 am this morning and it is expected to be well over 100 with falling oil prices easing tensions. A lot of bets are being placed on the continued strength of the US consumer as $60 oil is projected to give us an extra $100Bn to spend over the holidays (as we have been expecting). As it is only a survey, it will be potluck as to whether the timing of the poll caught the right people at the right time. Another potential pothole at 10 am in the road today is the Richmond Fed Manufacturing Index. It was the Philly index that killed the markets last week and a confirming downtrend from Richmond (just 150 miles away) would not be good. We start the morning with retail sales and if they don’t trend positive, that sector may suffer. The…
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Take the Monday and Run!

Yesterday’s action really made me feel good about my cash-out call! The Dow opened at 11,536, ran up to 11,575 in 10 minutes, fell below 11,440 less than an hour later and then ran back to be rejected from 11,600 for the third time in 4 sessions. The S&P gave us a better signal, breaking over 1,325 closing at its highest level in over 5 years while the Nasdaq gave us the leadership we’ve been looking for with a 1.3% gain on the day but finishing (just slightly) below our target at 2,249. The NYSE also decided to fall just below my 8,400 target at 8,398, which makes me nervous and glad I cashed out most of my positions. Fed Pres. Fisher said there was a “serious correction” going on in housing so, this being bizzaro world, the builders decided to rally with that sector adding on another point for the day. Fisher did say that he believes the economy to be generally strong which will likely lead us back to hiking fears tomorrow but today the markets liked it. In comments, we got out of our oil puts at 11:15, when I became nervous about mixed signals in the Valero rule and Rob pointed out at 10:54 that someone cashed over 12,000 XLE Oct $50 puts (the first of many that were cashed out). Merkhava noticed that the VLO $52.50 calls had dropped unnaturally as well (and wisely bought some!). This set off all sorts of warning signals as the puts were just about to go in the money and I decided THEY must know something so we took them all off the table at just the right time. This was a great example of how sharing information on the things we are looking at helps us make much better decisions! A look at the USO daily graph shows you just how ridiculous the buying was in the oil patch from noon through 2:35 after hitting 10 month lows in European trading. It was heartening to see that and crude tested my target of $61.69 before pulling back slightly to $61.45 at the close. A look at the weekly USO chart shows that it fell to a low of $54.06 and tested $56.30 for the second time in two days. What is $56.30? It’s 5% lower than last Tuesday’s high of $58.95! Gold is
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When Life Hands You Lemons…

Oil was up today as word is that OPEC may do something about the production overrun. As I mentioned in an earlier post, this sounds very nice but, much like a kid with a lemonade stand and no customers, the markers come out and prices keep dropping until they finally have to pour it all down the drain. “Come on Phil” you may say “Surely the Organization of Petroleum Exporting Countries is more sophisticated than a couple of children selling lemonade at the side of the road.” Sadly no. They are not. In fact, it could be argued that they are in a poorer business position than your average 8 year-old because: A) The 8 year-old doesn’t keep making lemonade – even when no one is buying. B) The 8 year-old knows how to price to the market. When business is slow, they immediately drop prices to keep the consumers in the game. C) The 8 year old isn’t funding a $60Bn dollar economy almost entirely on petro dollars! According to Richard Bernner of Morgan Stanley: “Higher prices ultimately beget more supply and trigger conservation. And commodity demand tends to shrink as a share of output as economies mature and likely become more service-oriented.” In other words, while demand may be inelastic in the short run (say the past 2 years), over the longer term the supply and demand curves invert and they are just as slow to move back the other way. The greed of oil countries (who could have talked down prices before demand snapped) and oil traders literally drove prices to the breaking point. The point at which US consumers actually stopped buying SUVs! Now, 30% less SUVs over 3 years means 9 million cars that will get at least 5 miles more per gallon, consuming 40M less barrels of oil per year. That’s assuming no one is car pooling or shortening trips in any other way. As we previously mentioned, just 1 degree on the thermostat drops another 1-2% off energy consumption and you just know industrial users (including airlines) are cutting back so we could be talking about knocking close to 1M barrels a day off US consumption. Will OPEC fold up their lemonade stand? Of course not! We still use 20M barrels of oil per day and 9M barrels are produced at home. Rig count is up 20% in the continental US
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Zero Hedge

WeWork Board, Softbank Officials Push For CEO Neumann's Ouster

Courtesy of ZeroHedge View original post here.

The odds of WeWork co-founder and CEO Adam Neumann becoming "the world's first trillionaire"  maybe about to take another major hit.

In what appears to be the latest attempt to salvage the farce that is the WeWork IPO (and the massive hole it will leave in Masayoshi Son's balance sheet and credibility), ...



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Insider Scoop

Notable Insider Buys In The Past Week: AbbVie, Kraft Heinz And More

Courtesy of Benzinga

Insider buying can be an encouraging signal for potential investors.

A packaged food giant and two drugmakers saw notable insider buying activity this past week.

Some of this insider buying occurred alongside insider sales.

Conventional wisdom says that insiders and 10% owners really only buy shares of a company for one reason — they believe the stock price will rise and they want to profit. So insider...



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Phil's Favorites

Peloton IPO Guide... And Why It Makes No Sense

Courtesy of ZeroHedge

By Scott Willis via Grizzle.com

BOTTOM LINE

At the end of the day, Peloton is a gym membership pretending to be a tech company.

We fully admit the product is exciting and unique in the market, but Peloton still faces the same problem...



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Digital Currencies

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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The Technical Traders

Is A Price Revaluation Event About To Happen?

Courtesy of Technical Traders

Skilled technical traders must be aware that price is setting up for a breakout or breakdown event with recent Doji, Hammer
and other narrow range price bars.  These types of Japanese Candlestick patterns are warnings that price is coiling into
a tight range and the more we see them in a series, the more likely price is building up some type of explosive price breakout/breakdown move in the near future.  The ES (S&P 500 E-mini futures) chart is a perfect example of these types of price bars on the Daily chart (see below).

Tri-Star Tops, Three River Evening Star patterns, Hammers/Hangmen and Dojis are all very common near extreme price peaks and troughs.  The rea...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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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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Biotech

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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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

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

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

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

Some other great content in this free eBook includes:

 

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

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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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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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