Archive for 2008

Bubbleology

Excerpt from Barry Ritholtz’s post called "Bubbleology" on the Big Picture blog, recommending reading WSJ’s Bernanke’s Bubble Laboratory.

Friday’s WSJ front page article, Bernanke’s Bubble Laboratory, is must reading:

"First came the tech-stock bubble. Then there were bubbles in housing and credit. Chinese stocks took off like a rocket. Now, as prices soar on every material from oil to corn, some suggest there’s a bubble in commodities.

But how and why do bubbles form? Economists traditionally haven’t offered much insight. From World War II till the mid-1990s, there weren’t many U.S. investing manias for them to look at. The study of bubbles was left to economic historians. . .

Now, the study of financial bubbles is hot . . . Among their conclusions:

"Manias can persist even though many smart people suspect a bubble, because no one of them has the firepower to successfully attack it. Only when skeptical investors act simultaneously — a moment impossible to predict — does the bubble pop."

Its now at the free section of WSJ.com.





Steel Prices

Here’s an article from Trader Mark on steel prices, inflation, and the threat to the "global growth" story on the horizon. 

WSJ: Fast Rising Steel Prices Set Back Big Projects

 

Inflation is a tax on all people, companies, and countries. This is exactly the type of thing that we are beginning to see in the corporate world [May 14: Deere Earnings - Why I'm Avoiding Equipment Stocks] and what I believe is the largest threat to the ‘global growth’ story. The ‘World of Shortages’ thesis I’ve been talking about since day 1, continues to devour everything in its path. At some price point it no longer makes sense to build things, even for China (although they are forced to, to swallow up the masses of populace moving from the countryside to the cities). I have to say I’ve been amazed that the steel companies can continue to pass along all costs to their end customers but at some point this stops. The point seems to be closing in.

Unfortunately as investors this races some serious questions; much of the current investing themes are based on global growth. If that takes a sharp downswing, we face the potential of (a) global recession and (b) not much to invest in – I guess we’d have to flee back into US banks and retailers? Yikes. And if you think global recession seems far fetched keep in mind, in 2006 (I don’t have the exact figures) but something like 156 of 157 nations showed GDP expansion. So the opposite is not out of line. Oil at $175-$200 and raw material costs at levels that simply make it not worth to build (for most countries) and/or makes producing products unprofitable for many companies would cause serious hardship. Not saying this is the road we will travel, but simply outlining one potential path. At some point these high prices go from being "cute" and "great for companies that product these things" to major threat to global growth.

  • Relentless increases in the price of steel are halting or slowing major construction projects world-wide and investments in shipbuilding and oil-and-gas exploration, setting the stage for a potential backlash against steelmakers.
  • In Turkey, a construction association said


continue reading





California Leading the Way

Discussion of California (my home, L.A., but not anymore) courtesy of  Mish.

California Leads Way To Consumer Bust

 

The International Herald Tribune reports Californians leading the way to consumer bust.

As it did when the housing bubble began to burst, California is leading the way in the next leg: a consumer bust.             

Squeezed by rising unemployment, inflation in food and energy costs and plunging home values, Californians are cutting back on spending. Besides causing woes for state and local government, the cutback is giving California’s economy another knock and makes further job losses, home repossessions and banking problems more likely.

The figures are pretty bad. The median home price has fallen by 29 percent in the year to March, according to the California Association of Realtors, and repossessions are increasing.

Unemployment hit 6.2 percent in March, up 1.2 percentage points from the same month last year.

But most important, in the 10 months to the end of April, sales tax receipts in California are actually down in absolute terms. Gasoline tax receipts are essentially flat. When you factor in that there would have been considerable inflation during the period, and that some essentials like gasoline would have risen sharply in cost, the picture is clear: Californians are tightening their belts.

And California matters. It accounts for 13 percent of the U.S. economy. It was also where more than a third of the non-mainstream home loans, like subprime and Alt-A, were made in 2006 and 2007, making it very important to the health of the banking system.

"California is big enough that it is going to drag a lot of the nation down with it," said Christopher Thornberg of Beacon Economics, a consultancy in Los Angeles. "You can’t have collapsing consumer demand in California and not expect it to have an influence."

"People have racked up a phenomenal amount of debt, savings rates have been at zero and the piper has to be paid," Thornberg said.

Vallejo, a city in Northern California, said last week that it would file for bankruptcy, prompted by rising costs and falling tax receipts due to the housing slump.

Governor Arnold Schwarzenegger is expected to unveil plans for $15 billion in bonds backed by lottery revenues to help plug a state budget hole.

Insanity Continues In California Budget Proposals

Arnold is back at it again, thinking that borrowing can fix


continue reading





For Greg, on nnvc.ob

From Ilene to Greg and all on Nanoviricides (NNVC), May 17, 2008

During the bird flu scare a couple years ago, we found nnvc.pk trading at .10 a share, which seemed pretty cheap for a biotech company working on a cure for the bird flu pandemic.  Yeah, I know, there was no bird flu pandemic, and there is no "nanoviricide" cure for bird flu either, but that's besides the point.  Anyway, the stock caught on and I sold mine way too soon after realizing that the science they were claiming simply didn't make sense.    

So, to answer Greg's question on nnvc.ob, I'm posting an email from a friend who works in the field of medical research.  The email was in response to me sending him their latest press release (below), just for fun.  I think nnvc.ob attracts a number of "fans" who either for emotional reasons or financial reasons will take issue with this, and hopefully NOT send me emails.  On the other hand, this is the kind of thing that's worth knowing when you're thinking about investing long-term in the stock of a penny biotech company with no product and no published articles in medical journals describing their work.

NNVC.OB:  Opinion from a friend

Again, this is total nonsense.

This is NOT how business is done. The results of studies like these are ALWAYS published. Nobody cites some supposed big-shot (Menon is NOT a big shot). Nobody ever says "The famous Dr. So-and-So has certified that the product is effective" or any such nonsense. Nobody would believe that, regardless of how famous the guy is, because of the obvious conflict of interest.

Passing peer-review is the critical, essential test of the data. The company has an obvious conflict of interest, and so does Menon, since he is part of the company and obviously owns a ton of shares.  They have every motivation to lie through their teeth and say the thing does whatever they want it to do. And they know there is no way anybody can catch them in their lies, because THEY have the data (that is, if any actual data exists, which is doubtful). And they will never open their books to outside inspection. Without peer review, there is no way at all for anybody to assess the accuracy or validity of…
continue reading





Murky World!

This weekend, let’s digress into the murky world of psychology!  Murky only because it is not often as clear as the clean world of technical analysis that can provide crystal clear buy and sell points!  And murky because it involves something less tangible than fundamental or technical due diligence.  Instead, it demands an understanding of the human psyche and how we can be affected by different behaviors and circumstances.  In this section, we will share with you some findings from leading psychologists and we encourage you to relate the findings to your own stock market trading.  If possible, look honestly at your own trading activity and try to improve from the observations noted below.

In stock market trading, understanding the psychology of the crowd is critically important when attempting to improve your own trading activites.  Psychologists are aware that the psychology of a crowd differs from that of the separate individuals composing that crowd.  It is generally considered that there is a crowd of separate individuals and a composite crowd in which the emotional natures of the units seem to blend and fuse.  The change arises from the influence of attention or deep emotional appeals, or common interest.  Think only of the fear that dominates traders’ minds and drives their actions when big sell-offs occur.  The predominant characteristics of this "composite-mindedness" of a crowd are the evidences of extreme suggestibility (hitting the panic button and selling all positions!), response to appeals to emotion (fear-driven panic sales), vivid imagination (it could get worse!) and action arising from imitation (everyone else is selling so I should too!)

Professor Frederick Morgan Davenport once noted

"The crowd is united and governed by emotion rather than by reason.  The explanation of this is that the attention of the crowd is always directed by the circumstances of the occasion"

And Emile Durkheim observed in his psychological research that the average individual is "intimidated by the mass" of the crowd around him, or before him, and experiences that peculiar psychological influence exerted by the mere number of people as against his individual self…..a suggestible person (may be) brought under the direct fire of the imitative suggestions of those on all sides who are experiencing emotional activities and who are manifesting them outwardly….

Human beings in times of panic, fright, or deep emotion of any kind, manifest the imitative tendency of sheep, and the tendency
continue reading





Weekly Wrap-Up

What a great way to end an option period!

We went from 100 points below our month's 12,850 target to 100 points above it over the course of the week and that's not bad targeting for 30 day's of crazy Dow moves.  Still we were hedged to the cautious side and many of our callers ended up in the money and we remain on the side I would not call bearish but more like bullish and expecting a drop.

It's a testimony to how well members are learning our system that we had a pretty quiet Friday, with just 315 comments, despite a pretty chaotic day.  Every month we have less and less questions about rolling and repositioning which is our best indicator that things are going generally well for people.

We had a fortunate flat-line into expirations and an unfortunate drop in the VIX that has devalued our long-term holdings to some extent.  Still, our virtual portfolios came out very, very well this week and we are excited to be starting next week with a new $10,000 Virtual Portfolio, a new Stocks Virtual Portfolio and a new Day Trading Virtual Portfolio,

  • Our Short-Term Virtual Portfolio gained just 6% on the week as our protective puts were taken to the cleaners and our oil puts continued to take a beating.  We're concentrating our attention now on XOM June $95 puts, now $3.70 as well as SU June $135 puts and SU Sept $125 puts as our key oil shorts that we intend to roll up at any opportunity until we get our pullback.  Right now about 7% of the virtual portfolio is short on oil, we're willing to build to 10% before we start hedging.  For the year we're up 286% so we can afford to take a chance as oil is up close to 40% over the same period.
  • The Long-Term Virtual Portfolio also picked up 6% on the week.  That's great considering we took on the burden of most of our June covers already, paying the spreads and commissions for the next month early on.  34 of our 53 positions are covered and we'll be covering up about half of the rest next week.  The virtual portfolio is up 137% for the year.
  • Our Stock Club Virtual Portfolio also


continue reading





Taking Profits in Apple

 

This appears to be working great!  Trying another one.

Chad Brand, The Peridot Capitalist, on taking some profits in Apple off the table.

Taking Some Profits in Apple

 

Shares of Apple (AAPL) rose nearly $5 today to close at more than $188 per share. The company is faring very well during an overall weak time for consumer spending, thanks to a strong product lineup, and Wall Street is excited over the prospects for the company’s forthcoming next generation iPhone.

This overall bullishness is the polar opposite scenario we saw back in February when I wrote that Apple’s Valuation Looks Attractive Again amidst worries over a consumer-led recession and a lapse of new product introductions from the company. Since then the stock has soared from $119 to $188, for a gain of 58%. As a result, the shares have gone from very compelling from a valuation standpoint (22x 2008 earnings estimates) to fairly valued in my eyes (34x 2008 earnings estimates) and accordingly I have been taking some chips off the table at current prices.

Apple Stock Performance – 2008 Year to Date

This is not to say the fundamental outlook for Apple has changed (it hasn’t), just that the stock no longer looks extremely undervalued as it did several months ago. The company remains a reasonable core technology holding in my view, just no longer in any significantly elevated portfolio weighting.

Full Disclosure: Long shares of Apple at the time of writing, just in less quantity than before





Gauging Market Strength

There are new articles on the backup site, and this is a test to see if I can post here without generating emails. 

Gauging Market Strength After a Move to New Highs

Brett Steenbarger’s analysis of current market strength, excerpt:


Whenever a market makes new price highs or lows over a period of time, I like to examine whether the number of individual stocks making fresh new highs or lows has expanded. This tells me whether the move has been broad-based or simply dominated by a limited number of sectors. Interestingly in the recent market, we’ve seen considerable sector rotation, with new highs lagging as the stock indexes moved higher. Most recently, however, as noted in my Twitter comment, we’ve seen leadership from the small caps as well as NASDAQ stocks, suggesting a broadening of the rally.

Today we hit fresh price highs in the NASDAQ and Russell 2000 indexes, as those markets have moved nicely off their March lows. As the above chart of the NYSE Composite Index indicates, we came close to price highs in the broad market before backing off in the afternoon. The helpful chart from Decision Point shows, however, that new 52-week highs among NYSE common stocks expanded, reaching a fresh post-March high.





Volatility in dry-bulk shippers in focus as Baltic Dry Index hits new high

Today’s tickers: DRYS, SNY, YHOO, HNZ, SLE, ALL, SINA, DGL, TIN, CSCO, RIMM

 

DRYS- Option traders following the dry bulk shipping industry are getting a headstart on a big move from Dryships, ahead of its earnings on Monday. Earlier today Bloomberg reported that the Baltic Dry Index, which tracks commodity shipping rates, hit a new record as Chinese demand pressures have collided with a limited supply fleet. Shares rose nearly 6% to $104.90, and a look at the gap between implied and historic volatility shows option traders bracing for even rockier seas. The 75% implied volatility represents a 15% elevation above the historic level, and this reading could rise even further as Monday’s after-the-bell earnings announcement is imminent. With twice as many calls trading today as puts, it’s tempting to suppose that the consensus is for further upside, but it is worth noting that puts at the 100 and 105 strikes have traded well in excess of open interest today, trading mostly to buyers, and principally in the May contract, which expires tomorrow (before the earnings announcement). These may be long volatility positions going through in combination with calls at the same strikes, or simple defense against a Friday pullback in the share price.

 

SNY- Shares in French drug giant Sanofi-Aventis rose 2% to $38.29 today on news that it plans to ask FDA officials to reopen their application for heart drug Multaq. FDA regulators rejected the drug in 2006. Option volume increased to more than 25 times the normal level, with most of this concentrated in June 35 calls, which traded to the middle of the market on volume of 9,000 lots for $3.30. If these were long positions, the breakeven on the contract would suppose a return to late-January/early-February price levels for Sanovi-Aventis shares within the next month.

 

YHOO- Yahoo! – Shares rose 1.2% to $27.48 on news of Carl Icahn’s blueprint for a proxy fight that could force Yahoo to return to the deal table with Microsoft (…IF they’re willing!). Implied volatility pulled in by more than 25% as the market seemed assured that with Icahn at the helm, the hemming, hawing, and hand-wringing over Yahoo’s fate won’t last much longer. Option traders put nearly 358,000 options in play by mid afternoon. Earlier today we observed an early long volatility play that could indicate a trader taking the other side of the volatility…
continue reading





Friday Already?

This has been a very exciting week, too bad it's ending.

Will there be Hell to pay for this week's party or are we back to 1999 party mode as the market tosses off bad news and plows ahead, regardless of all obstacles.  You can't fight the bulls, you can only run with them while it lasts and hope you don't get trampled or gored at the end!

The oil bulls are on the march today after the Senate gave the market a scare by attaching greater oversight of the energy markets to the Farm bill, meaning the end is much closer than they thought.  This sent oil down $4.50 a barrel in one hour on the NYMEX, which was really clearing out the suckers because the bill hasn't passed yet and they manipulated the price right back over $125 at the close and have run oil back over $126 again in overnight trading.  The crux of the legislation is aimed at closing what is known as the "Enron Loophole,"  This is legislation that was passed by Bush, who's campaign was financed by Enron who also supported the Taliban in Afganastan, funneling hundreds of millions of dollars to the people who were supporting Bin Laden pre-911.  

In 2000, at the urging of Enron and other large energy traders, a provision was slipped into an omnibus bill conference report that eliminated CFTC oversight of energy commodities traded by large companies outside of the regulated exchanges. This so-called Enron loophole has severely restricted CFTC oversight of energy trading.

Until laws were relaxed, ALL energy trading took place on the regulated NYMEX.  In the late 1990s, Enron began to change all that by developing a way for companies to trade energy futures electronically, using computer software that operated outside of the regulated exchange markets – so-called “over-the-counter” trading.

Enron later collapsed, but the concept it pioneered of electronic over-the-counter trading, outside of the regulated markets, took off. In 2000, a group of oil companies and financial institutions, including BP, Amoco, Shell Oil, Totalfina Elf oil company, Deutsche Bank, SG Investment Bank, Goldman Sachs, and Dean Witter, founded a company in Atlanta, Georgia called the Intercontinental Exchange, or “ICE.” ICE specialized in electronic over-the-counter trading of U.S. energy commodities. In 2001, ICE expanded…
continue reading





 
 
 

Zero Hedge

Auto Shares Surge As Fiat, Renault Confirm Merger Talks

Courtesy of ZeroHedge. View original post here.

With President Trump in Japan for a state visit and most of Europe headed to the polls to vote in the quinquennial EU Parliamentary elections, there was enough news to keep market watchers occupied during what was supposed to be a quiet holiday weekend in the US. 

But on top of these political headlines, on Saturday afternoon, the news broke that Italian-American carmaker Fiat Chrysler had approached France's Renault with a merger proposal that would leave the shareholders of each carmaker with half of the combined company, in a tie-up that would create the world's third-largest au...



more from Tyler

Phil's Favorites

Trump and the problem with pardons

 

Trump and the problem with pardons

Courtesy of Andrew Bell, Indiana University

As a veteran, I was astonished by the recent news that President Trump may be considering pardons for U.S. military members accused or convicted of war crimes. But as a scholar who studies the U.S. military and combat ethics, I understand even more clearly the harmful long-term impact such pardons can have on the military.

My researc...



more from Ilene

Insider Scoop

Jefferies Sees 60-Percent Upside In Aphria Shares, Says Buy The Dip

Courtesy of Benzinga.

After a red-hot start to 2019, Canadian cannabis producer Aphria Inc (NYSE: APHA) has run out of steam, tumbling more than 31 percent in the past three months.

Despite the recent weakness, one Wall Street analyst said Friday that the stock has 30-percent upside potential. 

The Analyst

Jefferies analyst ...



http://www.insidercow.com/ more from Insider

Kimble Charting Solutions

DAX (Germany) About To Send A Bearish Message To The S&P 500?

Courtesy of Chris Kimble.

Is the DAX index from Germany about to send a bearish message to stocks in Europe and the States? Sure could!

This chart looks at the DAX over the past 9-years. It’s spent the majority of the past 8-years inside of rising channel (1), creating a series of higher lows and higher highs.

It looks to have created a “Double Top” as it was kissing the underside of the rising channel last year at (2).

After creating the potential double top, the DAX index has continued to create a series of lower highs, while experiencing a bearish divergence with the S...



more from Kimble C.S.

Chart School

Brexit Joke - Cant be serious all the time

Courtesy of Read the Ticker.

Alistair Williams comedian nails it, thank god for good humour! Prime Minister May the negotiator. Not!


Alistair Williams Comedian youtube

This is a classic! ha!







Fundamentals are important, and so is market timing, here at readtheticker.com we believe a combination of Gann Angles, ...

more from Chart School

Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



more from Bitcoin

Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



more from Biotech

ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



more from ValueWalk

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...



more from Our Members

Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



more from M.T.M.

OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

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



more from OpTrader

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

...

more from Promotions





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...

Learn more About Phil >>


As Seen On:




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.

Market Shadows >>