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





 
 
 

Phil's Favorites

Congress is considering privacy legislation - be afraid

 

Congress is considering privacy legislation – be afraid

Courtesy of Jeff Sovern, St. John's University

Supreme Court Justice Louis Brandeis called privacy the “right to be let alone.” Perhaps Congress should give states trying to protect consumer data the same right.

For years, a gridlocked Congress ignored privacy, apart from occasionally scolding companies such as Equifax and Marriott after their major data breaches. In its absence, ...



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Zero Hedge

Key Events This Week: Trade War, EU Elections, Durables, PMIs And Fed Minutes

Courtesy of ZeroHedge

Looking at this week's key events, Deutsche Bank's Craig Nicol writes that while the unpredictable nature of US-China trade developments will likely continue to be the main focus for markets again next week, we also have the European Parliament elections circus to look forward to as well as various survey reports including the flash May PMIs which may offer some insight into the impact of trade escalation on economic data. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

The European Parliament elections will kick off next Thursday with voting continuing into the weekend across the continent, with results expected on Sunday. With the elections surrounded by internal and external challenges for the EU, members di...



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Kimble Charting Solutions

Will S&P 500 Double Top Derail The Rally?

Courtesy of Chris Kimble.

The rally off the December stock market lows has been strong, to say the least. The S&P 500 rallied 25 percent before hitting and testing the 2018 high.

The old highs proved to be formidable resistance and ushered in some volatility in May… and a 5 percent pullback.

In today’s 2-pack, we look at that resistance level – could that be a double top? We can see similar patterns develop on the S&P 500 Index and its Equal Weight counterpart.

Both indexes are testing short-term Fibonacci retracement levels of the recent decline at point (2).

What takes place here after potential double top highs will be important. Stay tuned...



more from Kimble C.S.

Insider Scoop

60 Biggest Movers From Friday

Courtesy of Benzinga.

Gainers
  • Fastly, Inc. (NYSE: FSLY) shares jumped 50 percent to close at $23.99 on Friday. Fastly priced its 11.25 million share IPO at $16 per share.
  • Outlook Therapeutics, Inc. (NASDAQ: OTLK) shares climbed 37.3 percent to close at $2.10 on Friday after the stock rose over 68 percent Thursday following an Oppenheimer initiation at Outperform with a price target of $12.
  • Cray Inc. (NASDAQ: CRAY) shares rose 22.5 percent to close at $36.52 after Hewlett Packard Enterpri...


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

Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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 ...



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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

...



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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 ...



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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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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...



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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:

 

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

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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