Archive for September, 2008

All Bets Are Off

Courtesy of Howard Lindzon.  This is depressing.

All Bets Are Off…

First off…I apologize.

I have been very patient telling people to stay away from this market since January, but Thursday and Friday I was buying and rather large quantities of Apple, Amazon, Google, Russia and Gold. Other than Gold, it’s been a shitstorm after today. I have been doing my buying on Twitter and disclaiming it with I don’t think the average investor should be following me. Problem is, many still have.

For me, it was easy to short indexes and retailers as I was doing all day on twitter, but for most, they are now quite buried in just a few short days and not likely to have been shorting as I was. I have a low tolerance for pain so am happy to shed stocks at a loss, but most investors are not. This market is so viciously bearish that it will rip the heart out of the complacent. I know better and for that I apologize to all the new investors that come here.

The reason I chose Amazon, Google and Apple are for their growth (at least perceived Growth oportunities in my eyes). When the shit hits the fan, I would rather own companies that are growing. If I were to make a guess as to which three internet and mobile businesses would grow the fastest over the next 5 years, regardeless of market conditions, I would choose these three companies. Same today. Now, I am hoping for an abatement of selling. That’s never a good position to be in when owning stocks. 

Today, I did no buying in these three names until the close (sold puts earlier in the day) and it looks like I will see no relief for a while. My total portfolio lightness will allow me to be wrong on a few stocks right now, but losing money still sucks. So what went wrong TODAY?

In hindsight, everything. As Mathew points out , ‘bloodbath’ was the word of the day for ‘Google Juice’

The market has been demanding a large scope bailout plan for weeks. The market has been chewing through financials one by one until it gets what it wants.

Let’s not kid
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Congress Calls WallSt.’s Bluff

This pretty well sums it up, amazing.

Congress calls Wall Street’s bluff, and we lose

Commentary: How rejecting a $700 billion plan cost us $1 trillion

By David Callaway, MarketWatch

SAN FRANCISCO (MarketWatch) — Congress called Wall Street’s bluff Monday, and investors, savers, retirees and employees around the world lost their shirts. 

Excerpt:  "While groups of politicians bickered like schoolchildren over the failure of the House of Representatives to pass Treasury Secretary Henry Paulson’s $700 billion bailout plan, the S&P 500 Index plunged to its worst day since the week of the 1987 stock-market crash, wiping out more than $700 billion in the index’s market value.

In other words, we all just spent that $700 billion today — and still didn’t get a rescue plan.

You’re doing a heckuva job, Congress. See full story on House vote.
Let’s be clear: The fat cats on Wall Street are still rich. And there must be several dozen of them in total. They were worth many millions, and now they’re just worth several millions.

But by making this about a bailout of fat cats and not what it clearly was — an emergency rescue of the global financial system — Congress imperils the investments, deposits, money markets and life savings of millions of Americans, to say nothing of people around the world.

Is it Election Day yet?
Even the notoriously splintered government of Belgium was able to engineer a rescue of banking and insurance giant Fortis over 48 hours this weekend. But our own representatives, faced with the gravest economic threat in 70 years, took more than 10 days to hash up this rescue plan, and then rejected it anyway.

In total, more than $1 trillion was wiped off the value of the entire U.S. stock market Monday, as measured by the Dow Jones Wilshire 5000 Index…"

 





PPOTW – Congress Assassinates the Markets

I have nothing to say about this, I'm still in shock but I can't wait to hear everyone defend their party's handling of this debacle.

$1Tn in market value was lost today – good thing they didn't spend that $700Bn, right? 





Swing trading virtual portfolio – Optrader

Great time to start a new post as we only have a couple of positions opened.

To learn more about the swing trading virtual portfolio (strategy, membership etc.), please click here

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- Optrader





Financial woes help send interwoven commodity manufacturers reeling

Today’s tickers: POT, XLF, NCC, SOV, GD, AAPL, RIMM, C & BGG

POT- Potash Inc. With the financial bailout package unfolding before our eyes, the reality is once again a realization that the degree to which financial toxins have become entwined in the global body is greater than anybody guessed. The simultaneous failure of European financial institutions serves to remind us that other central banks and treasury officials elsewhere have some of their own nursing to do especially in light of the revelation that the alternative (for the U.S. economy) is not likely to be a pretty sight. The rally in the dollar coupled with the prospect of weakening demand has helped bury commodity prices. Shares in this fertilizer manufacturer have slipped 7.4% to $136.52 and stand well-off a 52-week high at $240 and change. Around 13% of open interest is in action today with a notable trade occurring in the December contract at the 170 strike, where 4,800 lots appear to have been sold at a premium of 9.90 per contract. The calls have a 35 delta inferring a one-in-three chance of landing in the money within three months. Elsewhere the October 130 puts appear to have been bought in defense of further reckless share price declines, while there also appeared to be evidence of selling higher strike October calls as if a door was slamming firmly shut behind upside potential for this company’s share price.

XLF- Financial Select Sector SPDR – A 7.5% decline in the price of the key sector SPDR was a clear interpretation of events as investors sold stock in component financial stocks. However, the options activity was far more balanced with buyers and sellers keeping the put/call ratio at around a value of 1.0 indicating a more neutral picture. Even at the December 20 strike puts where volume rang up 38,000 lots by 12:30pm there was no discernible pattern to net. In the October contract the 19 strike calls were purchased while the 22 strike was sold. The 19 strike puts were bought while the 18 strikes were sold. In the November contract the 17 puts were sold while the 23 strike calls were sold. This lack of pattern makes interpreting today’s activity about as clear as mud.

NCC- National City Corp. – With a 52-week high of $27.21 shares of this regional bank are in free-fall today trading with a…
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Wake Me Up When Sept. Ends

A favorite Green Day song, plus some numbers from Market Tells, courtesy of Adam Warner at Daily Options Report.

Wake Me Up When September Ends

 

I forget where I read it, but someone (or many) wondered what if we decline on a Bailout deal? Then what?

Well, here we are.

The VIX did "predict" a Monday gap on the news. But the logical assumption was that it predicted an upside gap. But that logic looks wrong. "Rennie" from Market Tells leaves this in the comments.

"VXO settled with a solid gain Friday despite the S&P’s afternoon charge into positive territory. That’s a generally negative indication for the short-term. When the volatility index increases on a day when it ostensibly shouldn’t, it’s a short-term red flag for stocks. The table below lists each of the last thirty instances in which the VXO closed up 5% or more on a day when the S&P settled higher. Note that in 24 out of 30 cases, or 80% of the time, the S&P posted a subsequently lower close within the next two sessions…

VXO +5% or more, S&P Closes Higher
09/26/08… S&P500 ???
09/12/08… S&P500 -4.7% one session later
08/10/07… S&P500 -0.1% one session later
07/05/07… S&P500 +0.4% two sessions later
09/27/06… S&P500 -0.1% two sessions later
11/23/05… S&P500 -0.6% two sessions later
09/01/05… S&P500 -0.3% one session later
12/20/04… S&P500 +1.3% two sessions later
11/12/04… S&P500 -0.0% one session later
10/29/04… S&P500 +0.0% two sessions later
10/11/04… S&P500 -0.2% one session later
06/01/04… S&P500 -0.4% two sessions later
12/30/03… S&P500 -0.1% two sessions later
12/18/03… S&P500 -0.1% one session later
11/27/02… S&P500 -0.3% one session later
03/24/00… S&P500 -0.2% one session later
03/23/00… S&P500 -0.2% two sessions later
12/30/99… S&P500 -0.6% two sessions later
05/12/99… S&P500 -1.9% two sessions later
07/13/98… S&P500 +0.8% two sessions later
03/20/98… S&P500 -0.3% one session later
02/17/98… S&P500 +0.5% two sessions later
05/27/97… S&P500 -0.3% one session later
05/14/97… S&P500 -0.8% two sessions later
05/05/97… S&P500 -0.3% one session later
03/17/97… S&P500 -0.8% one session later
11/25/96… S&P500 -0.1% one session later
11/20/96… S&P500 -0.2% one session later
11/15/96… S&P500 -0.1% one session later
09/03/96… S&P500 -0.8% two sessions later
05/09/96… S&P500 +2.5% two sessions later"

He has more here.





Monday Mourning – Too Little Too Late?

Well we seem to have our bailout package but it also does not seem to be helping.

Pre-market trading (7am) is down considerably but it's possible that there is still some worry as the package has not yet been voted on but the selling is a bit overdone.  As it stands now, the bailout program (now renamed the Emergency Economic Stabilization Act of 2008) will provide $250Bn immediately, $100Bn more if the President decides it's necessary and $350Bn subject to additional Congressional approval.  The bill expires on Dec 31st, 2009 and assets are to be purchased at "market value," whatever that is

Another thing hammering the financials is a provision that a broad-based fee will be assessed, apparently against the whole industry, to pay for any lossess incurred by the government in funding this bailout, oops, Stabilization Act.  The government also gets warrants to participate in the upside for the financials but, between that and caps on compensation, well-capitalized firms will have little reason to participate so we can expect our warrants to be coming from the dregs of the dregs of our financial markets.   

The Treasury will also establish an insurance program to cover losses with a risk-based premium also paid by the financial industry – another scary cost for the financials.  We should be retesting last week's lows today but, if we survive it, I'm actually thinking we may have a short-term bottom here, well called by Warren Buffett last week.  WB has no bottom and the two bidders that are possibly going to prevent this country's 3rd largest bank failure ever (all this year) are down to C and WFC and it looks like they are not willing to pay very much after seeing how cheaply JPM got WM last week.  I don't see WFC as being able to absorb the potential losses so look for C to get a sweetheart deal for the bank.

Over in the UK, mortgage lender Bradford and Bigley has failed and will be taken over by the Treasury as a crisis of confidence, more so than debt took them down very quickly.  "The Treasury with the other tripartite authorities, acting in their respective capacities, sought a range of private sector solutions before taking this action," the UK Treasury said Monday. "However, with its financial advisor, HM Treasury
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Bittersweet Moment in History

Mish’s thoughts on the U.S.’s reliance on China and other countries, the recession (underestimated), the bailout plan (not helpful), and, if you click on the link (So, Who Won The Debate?), the debate between Obama and McCain. 

US Treasury to rely on China and the Middle East to finance bailout?

The Wall Street Journal is reporting Financial Troubles Humble U.S.

The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of what could total $700 billion in Treasury debt expected to finance the bailout. Foreign investors also are needed to shore up the depleted capital of the nation’s financial institutions, seen in the plan by Japan’s Mitsubishi UFJ Financial Group to buy a large stake in Morgan Stanley, which is weighed down by bad debt and market distrust.

This is a bittersweet moment in U.S. economic history. In one sense, the growing importance of foreign cash represents the triumph of a half-century of U.S. proselytizing for a global financial system in which money flows from those who have it to those who need it. But it is also an unmistakable sign of U.S. economic decline. The global financial system the U.S. designed had anticipated that American banks and financial firms would be the world’s financial lifeguards; now those institutions are like exhausted swimmers a stroke or two away from drowning.

The financial crisis makes clear how much the interests of foreign lenders have become a top concern in Washington. A big reason the Fed and Treasury stepped in to rescue mortgage giants Fannie Mae and Freddie Mac, say U.S. financial officials, was to reassure foreign leaders including China, which holds roughly $1 trillion in U.S. debt, that U.S. securities were safe. "Superpowers do not normally ask their diplomats to reassure other nations on questions of credit-worthiness," says former U.S. Treasury Secretary Lawrence Summers.

Foreign lenders have a great deal of sway. If they were to dump U.S. government debt — or be unwilling to buy more — the interest rates needed to attract buyers of Treasurys would soar. The already fragile U.S. economy would absorb yet another hit.

China, Saudi Arabia and other big foreign holders are unlikely to take antidollar measures precisely because they own so much U.S. debt. To the extent the dollar declines, so does the value of those nations’ holdings. Mr. Summers


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Bailout Bill Update and Text

Bailout bill unveiled, heads to House

Excerpt:  "WASHINGTON (MarketWatch) — Democratic congressional leaders announced their agreement Sunday on details of a massive financial rescue plan proposed by the Bush administration, releasing a draft text trumpeting taxpayer guarantees and caps on executive compensation.

The draft bill, titled the "Emergency Economic Stabilization Act of 2008," follows days of legislative wrangling over a $700 billion plan proposed by Treasury Secretary Henry Paulson as U.S. financial markets teetered on the edge of a collapse triggered by the U.S. mortgage crisis.

The bill will be introduced in the House of Representatives Monday morning and then head to the Senate, said Senate Majority Leader Harry Reid, D-Nev.

"This isn’t about a bailout of Wall Street, it’s a buy-in so we can turn our economy around," House Speaker Nancy Pelosi, D-Calif., said at a press conference announcing the agreement.

The draft legislation would authorize $250 billion immediately, with another $100 billion upon presidential certification. A further $350 billion would also be available subject to congressional approval…

Read proposed legislation"…

 

Text includes some executive-pay caps, taxpayer protections

By Ruth Mantell & Andrea Coombes, MarketWatch





WallSt., Meet MainSt.

Here’s a balanced article on the bailout plan, discussing Nouriel Roubini’s suggestions and the effect of credit drying up on the average American citizen.  Courtesy of Stormy, at Angry Bear.  

Wall Street, Meet Main Street

By Stormy

For the man on the street, the proposed bailout seems like nothing more than handouts to the rich. To him, the fortunes of Wall Street are distinguishable and separate from his fortunes. "Let the suckers sink."

While I deeply sympathize with this view, we all must see how what is happening on Wall Street affects everything, from house mortgages, to car and student loans, to credit cards, and more.

Quite simply, credit is drying up.

If credit disappears, then everyone--rich or poor--is affected. The farmer needs a sizable loan to carry him through the rough times. The poor student needs a loan so that he can position himself better in marketplace. The small town may to float a bond to cover a much-needed fire engine. Already, student loans are becoming increasingly difficult to obtain. Car loans and mortgages are becoming more and more problematical.

To tell Wall Street to take a hike makes for a good sound bite, but it may not be really wise. What happens on Wall Street governs the level of credit, the grease that makes loans and bonds possible.

The problem is: How to fashion a comprehensive plan that addresses everyone’s needs. Our country is mired in debt. Only the very well off can stand alone, fretting foolishly over a million lost here or there. The rest of us, even if all our bills are paid, stand to suffer as the economy crashes around us. Jobs will be lost; incomes will dwindle.

To understand the depth of our dilemma, I would like to go through Nouriel Roubini’s rescue plan. In his solution, he does hit most (not all by a long shot) of the buttons. I do this summary as much for myself as for others.

Take note: We are faced not with a mere recession, but a real depression. It is no accident that parts of the Roubini plan harken back to the Great Depression.

Roubinis plan, which is far more intelligent that what so far has appeared in the public media, only begins to touch on our real difficulties.…
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Phil's Favorites

Decoding the Fed

 

Decoding the Fed

Courtesy of John Mauldin, Thoughts from the Frontline

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effe...



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Zero Hedge

The Verdict Is In: "Negative Rates Are A Huge Negative For Savers, Low-Income People, And Investors"

Courtesy of ZeroHedge View original post here.

With the IMF's annual meeting now concluded, few topics discussed during the past week which saw the IMF downgrade its outlook for the global economy to the lowest GDP since the global financial crisis...

... evinced as powerful a response as negative interest rates, and for good reason: long seen as the last "red line" of central banks before they are forced to admit defeat, some $15 trillion in debt now trades w...



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Digital Currencies

Five hurdles blockchain faces to revolutionise banking

 

Five hurdles blockchain faces to revolutionise banking

Shutterstock

Courtesy of Markos Zachariadis, Warwick Business School, University of Warwick

Blockchain is touted as the next step in the digital revolution, a technology that will change every industry from music to wast...



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Chart School

Gold Stocks Review

Courtesy of Read the Ticker

Gold stocks are swinging back forth between the range, and a break out swing higher is due. Gold stocks are holding a near perfect Wyckoff accumulation pattern. All should get ready to play this sector. Yet we must recognize that gold stocks are a one of the most crazy rides at the stock market fair, so play very carefully.

More from RTT Tv







GDX PnF chart from within the video

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Important channels around the HUI.
...

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The Technical Traders

Treasuries Pause Near Resistance Before The Next Rally

Courtesy of Technical Traders

Our research team believes the US Treasuries and the US Dollar will continue to strengthen over the next 2 to 6+ weeks as foreign market and emerging market credit and debt concerns outweigh any concerns originating from the US economy or political theater.  Overall, the major global economies will likely continue to see strength related to their currencies and debt instruments simply because the foreign market and emerging markets are dramatically more fragile than the more mature major global economies.

We believe the US Treasuries may surprise investors by rallying from current levels, near price resistance, to levels above $151 on the TLT chart. 

Our belief ...



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Insider Scoop

48 Biggest Movers From Yesterday

Courtesy of Benzinga

Gainers
  • Hepion Pharmaceuticals, Inc. (NASDAQ: HEPA) shares climbed 43.2% to close at $3.58 on Thursday after the company announced the publication of a research article, "A Pan-Cyclophilin Inhibitor, CRV431, Decreases Fibrosis and Tumor Development in Chronic Liver Disease Models," in the peer-reviewed Journal of Pharmacology and Experimental Therapeutics.
  • Synthesis Energy Systems, Inc. (NASDAQ: SES) rose 26.9% to close at $9.20 after surging 12.24% on Wednesday.
  • Assembly Biosciences, Inc...


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Kimble Charting Solutions

Bank Index Breakout? Stock Market Bulls Sure Hope So

Courtesy of Chris Kimble

One of the most important sectors of the stock market is the banking industry and bank stocks.

When the banks are healthy, the economy is likely doing well. And when bank stocks are participating in a market rally, then it bodes well for the broader stock market.

In today’s chart, we look at the Bank Index (BKX).

As you can see, the banks have been in a falling channel for the past 20 months. As well, the banks have been lagging the broader market during this time as well – see the Ratio in the bottom half of the chart above.

That said, th...



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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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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

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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.

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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...

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