Archive for 2008

Brace for Layoffs

Higher unemployment to come?  Mish argues, very reasonably, that massive layoffs are coming, that the worst is ahead.  

Brace For Massive Layoffs

Main Street and Wall Street both better be bracing for layoff because they are coming. I talked about that a bit in Jobs Contract 9th Consecutive Month.

Mass Layoffs Rise

One measure of future unemployment can be found by looking at mass layoff announcements. These are mass layoffs that have been announced, and are coming down the road, but are not yet reflected in the unemployment numbers. Please note that U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says

Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm.

Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. Hewlett-Packard Co., the world’s largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September’s increase, Challenger said.

Economic data continues to suggest the Credit Crunch Has Reached Critical Mass and is rapidly picking up steam. Unemployment is poised to soar still higher. There is no driver for jobs, nor will the misguided $700+ billion bailout plan of Paulson provide any.

Bracing for U.S. Corporate Budget Cuts

BusinessWeek is is talking about Bracing for U.S. Corporate Budget Cuts

William P. Lauder was already adjusting his corporate budget for a tough holiday season. Then the financial crisis hit. Amid the turmoil, the Estée Lauder Cos. (EL) chief executive stopped at a Denver mall and found it practically empty. Now he’s preparing for the worst. "We always do scenario planning, but not to the degree that we are doing now," says Lauder. He’s asking each brand manager at the New York cosmetics giant three questions: "What must you have? What would you like to keep going? And what can you give up?"

Faced with squeezed credit and unpredictable sales, U.S. companies are bracing for budget cuts that could be far-reaching, painful, and in some cases unprecedented. Even before September’s turmoil, Moody’s Economy.com predicted that corporate operating expenses—a proxy for budgets—would rise, on average, no more than 7% annually through 2012 across 59


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Fannie Mae and the Financial Crisis

Here’s an excellent analysis by Barry Ritholtz, at The Big Picture, on the multiple causes of the financial crises and how they contributed to the current disaster.

Fannie Mae and the Financial Crisis

Excerpt:  "The Sunday New York Times has a very interesting article on Fannie Mae and the current financial crisis. They do a decent job at delving into the complexities of the GSEs, and the many factors that went into the decision making at the senior level of the company. This includes pressure from clients such as Coutrywide CEO Angelo Mozilla, pressure from Congress, and the demands from investors for the company to be more aggressive. Most of all, it looks at the ongoing competitive demands of the market place that Fannie was in.

The key to understanding the GSE story is grasping their role within the bigger picture of the economy and housing sector. While there are some pundits who prefer talking points over reality (Charlies Gasparino, Lawrence Kudlow, James Pethoukoukis, and Jeff Saut all toed the GOP line) I prefer to keep all of my analyses based on the data and facts. Rather than creating historical revisions for partisan reasons, I prefer to keep it reality based. (I’m an independant, and that’s how I roll).

The current housing and credit crises has many, many underlying sources. Its my opinion there were two primary causes leading to the boom and bust in Housing: A nonfeasant Fed, that ignored lending standards, and ultra-low rates.

This nonfeasance under Greenspan allowed banks, thrifts, and mortgage originators to engage in all manner of lending standard abrogations. We have detailed many times the I/O, 2/28, Piggy back, and Ninja type loans here. These never should have been permitted to proliferate the way they did.

The most significant element were the 2/28 APRs, and their put back provision. Just about all of these gave the securitizer/repackager the right to return the loans within 6 (or 12) months if they went into default. Hence, our proposition that the 2002-07 period was unique in the history of finance. If any of these mortgages went bad within 6 months, the undewriter was on the hook.

HOW DIFFERENT WERE LENDING STANDARDS IF YOU ONLY NEED TO ENSURE THE BORROWER WOULDN’T DEFAULT FOR 6 MONTHS VERSUS FINDING BORROWERS WHO WOULDN’T DEFAULT FOR 30 YEARS. 

In
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Hedge Funds

Knowing which hedge funds are selling and what they own might provide a viable short-term trading strategy…

Hedge funds prey on rivals

By Henny Sender, in the Financial Times.  For a video of Henny Sender discussing hedge funds click here.

Excerpt:  "Hedge funds are embracing trading strategies designed to profit from the unwinding of large positions by their competitors, market participants say.

The increasingly cannibalistic activity stems from the wave of redemptions hitting hedge funds.

More nimble hedge funds have sought to profit from the dynamic by taking short positions in securities known to be widely held by rivals. Goldman Sachs publishes a list of 50 “very important” hedge fund positions.

In its Wednesday update Goldman said: “Forced selling to cover redemptions and deleveraging . . . has put downward pressure on selected stocks.”

A favourite strategy of hedge fund managers during the bull market – mimicking the positions of others – has been turned on its head, Goldman said. “Buying the most concentrated stocks . . . has been a poor strategy during the current bear market.”

The announcement last month that Ospraie Management was winding down its flagship fund encouraged predatory activity.

One Hong Kong-based manager sent a note urging friends to short emerging and mining shares favoured by Ospraie.

Some hedge fund managers say they have been monitoring the positions held by Ospraie, if only to be ready if other funds with the same positions are forced to liquidate their holdings.”…

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Bad Medicine

James Grant discusses the new bailout bill in the Washington Post, arguing that we should recognize and write off losses, rather than inflating the currency and debasing accounting standards.  He later suggests that the Fed’s insistence that it must print hundreds of billions of new dollars, among other things, is a statement of it’s belief that "the financial truth is too awful to bear."

Bad Medicine

By James Grant

Excerpt:  "Low interest rates, easy money and malleable accounting rules are what plunged Wall Street into crisis. Yet it is low interest rates, easy money and malleable accounting rules that top the list of federal fixes. The unifying theme of the new bailout bill, all 451 pages of it, is the hair of the dog that bit you.

The unblinkable fact is that Americans own too much house. We overpaid and overborrowed, and many of us are "upside down," as the car dealers say. What to do? Recognize the losses and write them off. What not to do? Inflate the currency and debase accounting standards.

But inflation and debasement are the very policies being put in place. The Federal Reserve, not waiting for Congress, embarked last month on a radical program of money-printing. Reserve Bank credit — the raw material of bank lending — is growing at the year-over-year rate of 61 percent.

Credit creation is the Fed’s signature crisis-management policy: Let a bubble inflate, then watch it burst; clean up with lots of dollar bills...

When, in 2006, the roof began to fall in, Wall Street was in a quandary. It held outsize volumes of triple-A-rated mortgage-backed securities (MBSs). That they were not, in fact, triple-A, had become painfully obvious. Curious analysts consulted the financial statements of the top mortgage dealers, including Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley, for clarification.

Readers, however, found no clarification and no foreshadowing of the troubles to come...

Long after the crisis burst into the open, the Fed and Treasury downplayed it. It was, they insisted, "contained." Last week they asserted that, unless the House voted "yea," the wheels would come off this $14 trillion economy. President Bush himself has broadly hinted that the nation is on the cusp of disaster.

How can they be so sure? And how can they know that the unintended consequences of the radical policies they
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Liquidity Trap

Here’s an interesting article on the "Liquidity Trap" and what that means, published in the NY Times’ Economix blog section.   

Will Paulson’s Two Plans Unplug the ‘Liquidity Trap’?

Excerpt:  "Editor’s note: Mark Sunshine, president of the commercial lending institution First Capital, writes a guest post about why we may be heading into what’s called a liquidity trap. This means that monetary policy, including interest-rate changes, can’t prevent a deep depression, but that the Treasury’s fiscal stimulus plans – including a little-noticed tax change pushed through last week – just might work."

"Anyone who reads newspapers or watches TV knows that the banking system is in crisis. Credit is tight, banks are hoarding cash and short-term Treasury yields are almost 0 percent. The Fed has lost its ability to unfreeze the system and the normal circulation of money isn’t happening. Almost all of the monetary signs point to a potentially terrible new phase of deflation and dramatic economic contraction.

This week’s Fed monetary report showed that during the week ending Sept. 22, money supply (as measured by seasonally adjusted M2) increased by $165.5 billion to $7,900 billion. On an annualized basis this is an astonishing 108.94 percent growth rate. The Fed has been aggressively pumping money into the system in the hopes that radical monetary stimulus will restart lending. However, the newly created money is being hoarded by banks as they “stuff the mattress” with short-term Treasury notes. 

Here’s why these events are distressing: When the Fed douses the monetary system with cash but banks hoard it, monetary policy no longer works and the economy starts to crash. This is called a “liquidity trap” and it occurs when interest rates are at or close to 0 percent and monetary policy is no longer effective. Newly minted money is injected into the banking system but trapped by financial institutions that are paralyzed by fear...

…The liquidity trap has neutered the Fed and its chairman, Ben Bernanke, because there isn’t much that the Fed can do with money supply or interest rates to make things better (despite reports that the Fed may cut interest rates again soon). Only fiscal stimulus – tax cuts or government spending hikes intended to increase
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Rotten Weekly Wrap-Up

Etfperf1003Last weekend we had a "Wild Weekly Wrap-Up," this week was just rotten.

We lost 800 points in 5 days but we actually lost them all on Monday, got back some on Tuesday and then proceeded to lose it again Wednesday through Friday, finishing with lower lows on Friday than we had on Monday, which was one of the worst day's in market history

Friday looked like we were going to take some back and the chart on the left was from Bespoke's site with data just before the Congressional vote.  After the bailout bill was passed, virtually all of these daily numbers turned red, giving us horrific performance in both the weekly and monthly columns.  Financials, which were holding up the best, fell 9% off their highs and finished the week down 9%, just a hair over Monday's finish at the 10% rule.

Do we have further to lose?  Looking at the updated Dow weightings, we can see that the top 10 components now make up over 50% of the weighting so it's going to be all about the performance of IBM, CVX, XOM, PG, JNJ, MMM, MCD, WMT, UTX, KO.  Fortunately, none of them are financials and PG, JNJ, MCD, MMM, WMT and KO are considered "safety stocks" for a recession but IBM has been awful this week, although they should find buyers around $100.  XOM and CVX are a big concern if oil keeps falling (and we hope it does).  It was the financials who murdered the Dow on Friday with C dropping 18%, BAC, down 5%, JPM down 8%, AXP down 4% and GE down 2.5%.  The other big loser was HD, down 4% but the rest of the index did not do that badly considering…

One frightening statistic is that 29% of the financial sector is still above the 50-day moving average, compared to just 11% of the S&P, while NONE of the Dow components can make that claim.  3% of all tech companies are above the 50 dma, no energy companies or telcom companies at all can make that claim.   As noted above, Consumer Staples are the stars with 1/3 of the sector above the 50 dma but that is down from 80% in August.  Of course, when we say below, that may not do justice to it,…
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A MUST Read!

"Life will teach you the lessons, it’s up to you to learn them"  

Don’t read any further if you are happy with your trading results this year.

If you know in your heart you could have done better trading this year then you MUST learn a lesson from your trading performance.  You MUST or are you are destined to repeat it again.  And if it feels painful the first time, it will feel much more painful next time around!  The lesson you MUST learn is simple but immensely powerful; it is truly a paradigm shift in trading. 

You MUST learn to adjust your trades to the market trend.  That’s it.  If you understand what that means and how to successfully execute, read no further.

What does this ‘adjusting’ really mean?  It means no longer buying and hoping, it means no longer is a binary trading system appropriate; binary meaning no longer will you win if you are right and lose if you are wrong.  What if you could screw up on picking the direction and still win??  Well, you can when you know how to ‘adjust’  to the market trend. 

The power of knowing how to successfully and competently adjust is immeasurable.  At the very least what it accomplishes is ZERO fear and ZERO greed.  When you pre-define your risk and reward levels prior to every trade AND know exactly what Contingency Exit Plan you should execute EVEN if you are wrong, you reach a trading level few will ever conceive of - let alone reach. 

You can learn how to do this from the masters but the knowledge is guarded by most and the cost to learn is usually very expensive because you will rarely be told everything at first (and will be charged more to learn the rest!).

So, why am I telling you all this?  Because I paid the price.  I learned a most powerful trading system of adjustments which I am confident is truly the last trading system anybody needs to know.  I learned it so well, I was invited to start hedge funds and teach around the world.  But as the days went by this past year and I realized how tough trading was for many friends and how they were losing their shirts I decided I had to get the knowledge to everyone without them paying crazy fees. 

And then BAM!  Like lightning the idea came to me and I started Stock…
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Five Things

Kevin Depew argues that this time is not different, in fact, it’s reminiscent of the Great Depression.  – Ilene

Five Things You Need to Know: Bailout Passes, Stocks Limp

By Kevin Depew. Courtesy of Minyanville.

Kevin Depew’s Five Things You Need to Know to stay ahead of the pack on Wall Street:

How can this be? How can the passage of the Bailout Bill find stocks limping awkwardly into the close? Wasn’t this supposed to be our finest hour? The desperate resolution to the year-long crisis? Well, the reality we have tried to reveal here in Minyanville is that the Bailout simply will not work. 

Realizing it is not enough, by Monday morning expect some additional Federal Reserve action, perhaps a rate cut, maybe even a coordinated move between the Fed and European and Asian central banks. Even so, the market is too big, the debt crisis too large, for central banks to control.

This is evidenced by the action (and the lack of it) that continues to take place behind the back of the equities market in credit markets. Even upon passage, few corporate bonds are trading, and those that do are trading at levels that indicate a fear that there will be either massive bankruptcies even with the passage of the bill – or that the holders of the paper are in serious trouble and in desperate need of capital.

The credit markets have spoken. And they are saying – no, they have been saying all along – that the $700 billion Bailout Bill is nothing but a gnat attacking a buffalo. There has been an ongoing disconnect between stocks and credit markets for months now and even the action on Monday did little to correct it.

Risk in equities remains high on both sides. You can’t short stocks because if it is not already illegal, it is too risky to try and match wits (and capital) against the SEC, Treasury, Federal Reserve and Federal Government. No one really knows what desperate rule, mandate, acronym or Fed action will cross the wire next, temporarily crushing short sellers. Similarly, you can’t buy stocks either, because doing so means you are essentially gambling on the success of the SEC, Treasury, Federal Reserve and…
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The Who Knew

Thanks Greg, at Nakedshorts — this is the same The Emergency Economic Stabilization Act 2008 Theme Song playing in my head too.  Bizarre coincidence?

The Who knew 

 

On passage of

The Emergency Economic Stabilization Act 2008

I’ll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around me
Pick up my guitar and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again…

…There’s nothing in the street
Looks any different to me
And the slogans are replaced, by-the-bye
And the parting on the left
Is now the parting on the right
And the beards have all grown longer overnight…

…Meet the new boss
Same as the old boss

 





Credit-crunch causes Russian billionaire large automaker loss – or nyet?

Today’s tickers: Today’s tickers: MGA, WB, C, JPM, WFC, NWA & AMT

MGA – Magna International – Shares in this auto-parts supplier are lower by 10.75% at $40.75 and today we’re showing volume above the typical daily average. Some 17,445 lots are in play and focused at the December 45 and 55 strike puts. The story is interesting at the very least. Today news of the abandonment of a $1.54 billion investment by a Russian auto-tycoon was revealed. He has decided to unwind a 20 million share investment in the company established in May 2007 when shares were above $40. His goal was to tap the expertise of the manufacturer in his own auto-empire. However, the fact that the credit-crunch has spilled over into share prices at non-related companies has caused not just a loss of half of his stake, but also a deterioration in the environment for the company. Curiously, in mid-September when shares were trading at $59.77 a sizeable chunk of 60 strike puts was established at no worse than 7.0. Today that position appears to have been closed at a price of 19.20 as shares slumped. At the same time a fresh long position has been established at the 45 strike put with the premium at 7.80. The situation is curious since the open interest on the options is a mere 9,238 contracts, largely centered on the December 60 put series. While today’s volume at twice the open interest reading is explained by the possible roll from one series to the lower strike, it could be that the Russian billionaire – if he’s the investor here – didn’t lose as much as appears at first blush.

WB – Wachovia Corp. – Not too many financial companies tend to visit share price values of below $2.50 and then recover, but that’s exactly what’s going on at Wachovia today following the shock-delivery of news that Wells Fargo is muscling in on Citigroup’s bid for part of the group. The unexpected development has created a surge of 70% in Wachovia’s shares to $6.61 and has created a flurry of some 250,000 options contracts on the issue. This makes it number one listed equity on our volume scanner today. Nevertheless, reading the tea-leaves is more difficult given the fact that when liquidity gets drawn to an issue like we see today, it becomes an active traders market with volume always…
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ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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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 ...



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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.

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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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