Archive for 2008

VIX New Highs Without SPX New Lows

Here’s Rob Hanna’s analysis of trading profits and losses, 1 to 10 days out, in the situation in which VIX is hitting new highs, but the SPX is not hitting new lows.  Courtesy of Rob Hanna at Quantifiable Edges.

VIX New Highs Without SPX New Lows

(Friday, October 17)

The VIX put in a huge spike yesterday to another new high. The SPX manage to hold above its recent low before rebounding. Below I looked at long-term VIX spikes that were not accompanied by long term SPX lows and performance moving forward:

In the past there this particular setup has provided traders an upside edge.

 

Reminder:  Please continue to ignore the 48-hour delay box.  All material in this section is available free and immediately, and posted at the Favorites’ backup site.  Thanks!  – Ilene  





Summit of Losers

Mish reports on Bush’s summit, and submits that the few people who called this financial crisis early should be there, instead of those who will be.  With a couple notable exceptions.   

Bush to Host Summit of Losers

In response to the Credit crisis president Bush is gathering up all the people who did not see what was coming, denied what was happening, and then failed to see the implications of what was indeed happening.

Bush Says He’ll Host Summit Soon on Financial Crisis.

President George W. Bush said he will host a summit on the global financial crisis in the "near future" and he is confident the world’s nations will weather the breakdown in credit markets.

"For this meeting to be a success, we must welcome good ideas from around the world," Bush said as he welcomed French President Nicolas Sarkozy and European Commission President Jose Barroso to Camp David, the presidential retreat in rural Maryland, for dinner and three hours of talks.

The conference agenda will include ideas on how to prevent future crises in a way that preserves the free-market system, Bush said. "It is essential we preserve the foundations of democratic capitalism," he said. He said leaders from both developed and developing nations would be included.

Sarkozy Speech

"We must reform capitalism so that the most efficient system ever created doesn’t destroy its own foundations," Sarkozy, 53, said yesterday in a speech to Quebec’s National Assembly. Sarkozy represents all 27 nations of the European Union.

Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global "early warning" system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco. 

Capitalism Reformed To Death

The problem with capitalism is that it has been reformed to death already. Now we see the Orwellian concept of putting in place a Brave New World To "Preserve" Free Markets.

It is a serious mistake to think we need to take over the free markets to save them. I have a better idea: why not let the free market…
continue reading





More Unhappy Numbers

Latest measures of industrial production, consumer sentiment and the TED spread, are not encouraging.   Courtesy of James D. Hamilton, at Econbrowser. 

More unhappy numbers

Updates on some of the series we regularly follow, and they’re not good.

On Thursday the Federal Reserve Board announced that its index of industrial production fell by 2.8% in the month of September (yes, as in 33.6% at an annual rate). That’s the biggest monthly decline in the index since January 1975. To put it in perspective, UCLA Professor Ed Leamer suggested last August that a 6-month decline of more than 3% should be characterized as a recession. That had been the one holdout among Leamer’s four indicators in suggesting that the economic situation was still not so bad. But according to Leamer’s criterion, the September drop in industrial production almost counts as a recession all by itself.



100 times the 6-month change in natural log of index of industrial production, from FRED, with NBER recessions as shaded regions and dashed line at -3.0 threshold.

ind_pro6_oct_08.gif

The good news is that the Fed attributed 2.25 percentage points of that 2.8% decline in September to the temporary disruption caused by hurricanes. On the other hand, another way to summarize the trend in industrial production is to become alarmed when there is a cumulative drop of more than 1% over a 12-month period. The August industrial production figure had already put us across that threshold, even if we completely ignore the September report.

100 times the 12-month change in natural log of index of industrial production, from FRED, with NBER recessions as shaded regions and dashed line at -1.0 threshold.

ind_pro12_oct_08.gif



On Friday we learned that the University of Michigan/Reuters index of consumer sentiment fell by 12.8. That’s the biggest drop ever recorded since the index began in 1978, and is enough to wipe out the bounce up in consumer sentiment provided by falling gas prices since this summer.

Reuters/Michigan index of consumer sentiment. Data source: FRED and MarketWatch.

cons_sent_oct_08.gif



And, to complete a threesome of updates, the TED spread has remained above 350 basis points for most of the month, though it eased slightly during the last week.

Ted spread, as obtained from Bloomberg on Oct 18.

ted_spread_oct_08.jpg

 





Collapse of 300-Yr. Ponzi Scheme

Here is another excellent essay by author Ellen Brown, at the Web of Debt.

THE COLLAPSE OF A 300 YEAR PONZI SCHEME:
THE REAL DEBATE IS CRONY SOCIALISM OR FINANCIAL SOVEREIGNTY

–Bill Saporito, “How We Became the United States of France,” Time (September 21, 2008)

Last night, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.1

Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history. 

On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.

The reversal was dramatic
continue reading





Bailout and Bonuses

Wall Street banks in $70bn staff payout

Pay and bonus deals equivalent to 10% of US government bail-out package.

By Simon Bowers in The Guardian.  

Excerpt:  "Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year – despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government’s cash has been poured in on the condition that excessive executive pay would be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany’s Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank…"

More here.





Laid off by Lehman

Tim Iacono, at The Mess That Greenspan Made, has posted an amusing note, featuring an documentary video on what it’s like to leave Lehman.

Laid off by Lehman

A former broker at Lehman Brothers explains how life has changed over the last month. Nice piano music – you almost expect to see Woody Allen appear (hat tip JE).

 

Favorite line:

I walked up to the casino table with nothing really in my pocket. And I’m leavin’ with nothing really in my pocket. But in between that time? Man, was I on a roll.

A star is born…

 

 





Swing trading virtual portfolio – Optrader

We had a couple of very good weeks in the swing trading virtual portfolio. The virtual portfolio is up 34.88% since September 2nd and 686.88% this year.

The good performance is due to an exceptional win/loss ratio as we had 16 profitable trades and only 6 losses.

But I am not proud of the extend of somel losses, as we kept some positions way longer than we should have. For example we had a 7R loss on one AAPL’s trade. This is something we need to be very focused on in the future as we will not always have such a good win/loss ratio and our expectancy will suffer from it.

Our strategy to take profits fast worked pretty well in this environment, where we could book significant profits fast. I expect the volatility to drop and we should be able to stay in trades longer.

Thank you everyone again for your participation in the comments and congrats for some great trades, especially trading ES!

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

- Optrader





Swing trading virtual portfolio – Optrader

We had a couple of very good weeks in the swing trading virtual portfolio. The virtual portfolio is up 34.88% since September 2nd and 686.88% this year.

The good performance is due to an exceptional win/loss ratio as we had 16 profitable trades and only 6 losses.

But I am not proud of the extend of somel losses, as we kept some positions way longer than we should have. For example we had a 7R loss on one AAPL’s trade. This is something we need to be very focused on in the future as we will not always have such a good win/loss ratio and our expectancy will suffer from it.

Our strategy to take profits fast worked pretty well in this environment, where we could book significant profits fast. I expect the volatility to drop and we should be able to stay in trades longer.

Thank you everyone again for your participation in the comments and congrats for some great trades, especially trading ES!

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

To view the full strategy, please click here

- Optrader





The Confidence Game

Here’s a WSJ article by James Grant, for your reading pleasure…

The Confidence Game

Excerpt:  "There used to be too much of it. Now there’s not enough. James Grant argues that the real lack of confidence is in Washington, with the administration losing faith in capitalism.

In disclosing plans to buy a quarter-trillion dollars of bank stock in the name of the American taxpayer, Treasury Secretary Hank Paulson harped on confidence. "Today, there is a lack of confidence in our financial system, a lack of confidence that must be conquered," he said on Tuesday.

What Mr. Paulson did not get around to mentioning was the excess of confidence that preceded the shortfall. Under the spell of soaring house prices (and before that, of stock prices), Americans trusted the things they ought to have doubted. But markets are cyclical, and there is always a new day. In compensating fashion, people will eventually doubt the things they ought to have trusted. Investment opportunity follows disillusionment. It’s complacency that precedes bear markets...

Federal Reserve Chairman Ben S. Bernanke and his predecessor, Alan Greenspan, were fine ones for believing impossible things. They propounded them, too. Never mind asset bubbles, they said. Not only can’t you predict them, but you can’t even recognize them after they’ve swollen to grotesque maturity. Better just to tidy up after they burst. Now Mr. Bernanke is likening our present troubles to those of the 1930s. The comparison is more confidence-sapping than he seems to realize. From peak to trough, 1929 to 1933, the gross domestic product was almost sawed in half, before adjusting for changes in the purchasing power of the dollar. No such mitigating fact helps to explain today’s set-to. It’s a crisis of competence of our financiers, of bankers and central bankers alike.

To the self-satisfied elders of the Fed, the past 25 years were a sweet validation of the art of central banking and of the efficacy of paper money. "The Great Moderation," some of them called this interlude of low inflation and subdued economic activity — neither too boomy on the up side nor too recessionary on the down side. For these manifold blessings, the officials thanked, in good part, themselves, i.e., "the credibility of monetary policy," as the president of the Federal Reserve Bank of San Francisco, Janet Yellen, put it earlier this year...

The modern financial economy requires a certain
continue reading





Government Sachs

NY Times has another worth-reading article on the appearance of conflicts of interests between the company Goldman Sachs and the "guys from ‘Government Sachs.’"  

"The Guys From ‘Government Sachs’"

By JULIE CRESWELL and BEN WHITE

Excerpt:  "THIS summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings. 

In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldman’s own board to lead A.I.G.

And earlier this month, when Mr. Paulson needed someone to oversee the government’s proposed $700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance.

Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks — now decimated — of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.

It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere. While Goldman sees this as little more than giving back to the financial world, outside executives and analysts wonder about potential conflicts of interest presented by the firm’s unique perch.

They note that decisions that Mr. Paulson and other Goldman alumni make at Treasury directly affect the firm’s own fortunes. They also question why Goldman, which with other firms may have helped fuel the financial crisis through the use of exotic securities, has such a strong hand in trying to resolve the problem.

The very scale of the financial calamity and the historic government response to it have spawned a host of
continue reading





 
 
 

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 ...

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

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.

Some other great content in this free eBook includes:

 

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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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