Archive for July, 2009

Free Money Runs Out, Congress Authorizes More

Free Money Runs Out, Congress Authorizes More

cash for clunkersCourtesy of Mish

With $1 billion already wasted Lawmakers Vote on $2 Billion More to Replenish ‘Clunkers’ Program.

The U.S. House opened debate on an emergency measure to add as much as $2 billion to the “cash for clunkers” program after a burst of demand exhausted most of the initial $1 billion.

The initiative to encourage new-car sales is still in operation, White House press secretary Robert Gibbs told reporters today. Members of Congress had said late yesterday that the clunkers offer was being suspended.

“If you were planning on going to buy a car this weekend, using this program, this program continues to run,” Gibbs said. “If you meet the requirements of the program, the certificates will be honored.”

Named the Car Allowance Rebate System, the program provides credits of as much as $4,500 for the purchase of a new car when turning in an older vehicle to be scrapped. Lawmakers had expected the program to generate about 250,000 vehicle sales and to have enough money to last until about Nov. 1.

The funding was offered as an amendment to legislation by Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, which would ban incentive pay for Wall Street executives.

‘Cash for Clunkers’ Runs Out of Gas

Inquiring minds have found some interesting quotes in the Wall Street Journal article ‘Cash for Clunkers’ Runs Out of Gas.

Michael J. Jackson, chief executive of AutoNation Inc. said "It was an absolute success. There’s a very compelling case the government should put more money into it. It’s a great stimulus to the economy."

Actually a very compelling case can be made that the CEO of AutoNation is an economic illiterate. All the program does is shift demand forward. Those clunkers were going to die at some point. Now sales are up this year which will cut into next year’s demand, at the expense of everyone not getting free money.

Why anyone should be surprised at the "success" in generating demand for free money is beyond me. There is always demand for free money. Yet, interestingly, everyone seems surprised by the "unexpected success".

If the government wants more "success", it can give everyone $4,500 for a car. Short-term demand will soar. But long-term demand for cars would crash for the


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More On “The Less Bad Is Good” Mantra…….

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More On "The Less Bad Is Good" Mantra…….

Courtesy of Jan-Martin Feddersen of Immobilienblasen

The perfect fit to yesterdays post But Still Better Than Expected…….. ….

Paßt wie die Faust aufs Auge zum gestrigen Post But Still Better Than Expected……..
 

[cartoon+spin+bull+vs+bear.jpg]

Refining, the weakest link in the recovery Stephen Schork via FT Alphaville

Demand, not only for gasoline, but for other major products markets as well, is going the wrong way, i.e. from the top left to the bottom right on the charts. Thus, Big Oil is straining under the weight of poor margins.

It is now hard to reconcile these earnings reports, demand was lousy in the second quarter (and it not any better today). Yet, this market was being fed a fantastic lie back then… the less bad is good mantra.

Thus, whereas spot crude oil on the NYMEX finished the first quarter just below $50 a barrel (49.66) it finished the second quarter just below $70 (69.89). Crude oil rallied 40 percent as profits at the world’s largest oil companies were tumbling.

Why?

Because this market wanted to ignore the obvious and lull itself to sleep with silly pseudo-intellectual catchphrases… green shoots, crocuses, mustard seeds and this season’s rookie of the year… the second derivative.

Thus, while we were led to believe that demand for oil was rising in the second quarter, hence the justification for that 40 percent surge on the NYMEX, we now have the balance sheets from Exxon, Shell et al. that prove it was a lie.

Look at the screenshot of headlines we pasted on the top of today’s report. Profits for Big Oil are down as demand is at generational lows.

However, look at the very first headline, the NYMEX was higher yesterday because “… corporate earnings boost confidence…”

Huh?

According to this one article, demand for oil and therefore profits for oil companies are down, but the NYMEX rallied yesterday because Motorola (mobile phone maker) had a smaller than projected loss and Calphalon (cookware) and Paper Mate (writing instruments) had better than expected profits

. Bloomberg screenshot headlines

You really cannot make this up……

Das ist so absurd das man sich unweigerlich fragt ob wir schon wieder den 1. April haben…. :-)

 

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TGI Failure Friday: Four Banks Down

Courtesy of Tyler Durden

4 down as of 6:30 pm

  • Integrity Bank, Jupiter, Florida
  • First BankAmericano, Elizabeth, New Jersey
  • First State Bank of Altus, Altus, Oklahoma
  • Peoples Community Bank, West Chester, Ohio




Uh Oh…. (GDP Interpretation)

Uh Oh…. (GDP Interpretation)

Courtesy of Karl Denninger at The Market Ticker


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The Great Reflation Experiment

Courtesy of Tyler Durden

Must read from The Boeckh Investment Letter:

 

hat tip SunSurfer

Attachment Size
The Great Reflation Experiment.pdf 340.8 KB




Senator Edward Kaufman Joins Fight Against Market Opacity

Courtesy of Tyler Durden

July 31, 2009
A Level Playing Field For Investors
By Sen. Edward Kaufman

Efficient and free capital markets are essential to all that makes America great: investment in private enterprise, the availability of capital to expand and grow our economy through innovation, and the ability to save for retirement in hope our investments will support us in later years.

Regrettably, we now have an unfair playing field for investors. This leaves us with, in effect, two financial markets: one for powerful insiders, who use high-speed computers and privileged access to information to exploit loopholes for profit, and another for the average investor, who must play by the rules and whose orders are filled almost as an afterthought. This situation simply cannot continue. It is the financial equivalent of “separate and unequal.”

Every day we learn more about the features of this two-tier system. Dark pools, collocation of high-speed computers at the exchanges, flash orders. Abusive short selling, the loophole of choice in 2008, was only the first sign of how the powerful on Wall Street make profits unhindered by the rules the rest of us must follow.

Here are just four areas where the SEC needs to act urgently to protect investors and restore market integrity.

First, the SEC should restore the substance of the uptick rule. This rule, a mainstay of investor protection for 70 years until it was repealed in June 2007, required investors simply to pause and to wait for an uptick in price before continuing to short sell. Without such a rule in place, investors who own stocks are more vulnerable to organized “bear raids” – abusive short selling combined with coordinated “misinformation” campaigns – which many believe contributed to the demise of Lehman Brothers and Bear Stearns, key elements in the collapse of our financial markets last year.

Second, the SEC should implement tougher rules that will stop naked short selling through an enforceable system. Naked short selling is the practice of selling stocks without first locating or borrowing the actual shares needed for timely delivery at settlement, sometimes in a concerted action to manipulate a stock price downward. This week, the SEC made permanent a temporary rule they had enacted last fall, proposed some new transparency measures, and announced plans for a Roundtable discussion on September 30.

That is some progress, but not enough. Two months from…
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Dark Pools Refuse To Go Quietly Into That Dark Night

Courtesy of Tyler Durden

As expected, dark pool operators have responded, getting concerned that after the recent escalation in the Flash trade scandal, they are the next natural target. And what surprise that their only retort, as per this WSJ article, is that they provide liquidity, and make stock trading cheaper. Right down to the generic script. At least they haven’t used the mutual assured destruction defense clause quite yet.

Geoffrey Rogow at the Wall Street Journal reports:

Several dark-pool executives told Dow Jones Newswires that Mr. Greifeld’s far-reaching proposal would have calamitous effects for retail and institutional traders.

“Undisplayed liquidity adds to execution quality,” said Bob Gasser, chief executive of Investment Technology Group Inc., which is credited with creating the first of the modern-day dark pools roughly 20 years ago. “You can come up with all kinds of anecdotes, but the simple fact is, on behalf of all investors, dark liquidity adds to execution.”

Other alternative-trading system executives called Mr. Greifeld’s stance on the issue opportunistic given lawmakers’ recent focus on related issues, and suggested that Nasdaq OMX is acting defensively after losing market share to non-displayed trading venues.

And here is where the prisoner’s dilemma gets interesting:

Several dark pool officials also noted that both Nasdaq OMX and NYSE Euronext, which has also been losing market share, maintain non-displayed liquidity pools.

But as the NYSE has publicly disclosed, the SLP – that most questionable of recent NYSE liquidity programs has no advance look characteristics. So Zero Hedge assumes that the dark pool operators, in a preamble to full out exchange war are referring to some else. Zero Hedge would be quite curious to understand what that is, especially since the NYSE has been a vocal opponent of non-displayed liquidity.

Furthermore, as Ray Pellecchia disclosed to Zero Hedge recently, “we’re not aware of a way to re-route flash data from another market to the NYSE. To the extent that anyone sees flash data it would be in the context of their being a member of another (non-NYSE) market, and any resulting trades would take place there.

And some more tidbits from the WSJ:

As dark pools have grown —


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GDP In Pictures: The Truth

GDP In Pictures: The Truth

hellCourtesy of Karl Denninger at The Market Ticker


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The VIX Breaks

Courtesy of Tyler Durden

The VIX just went parabolic

 

 


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The "Money On The Sidelines" Fallacy

Courtesy of Tyler Durden

It seems these days any time a pundit is cornered by facts indicating the deplorable state of the economy, the traditional fall back is "…but the tons of money on the sidelines is just waiting for a 0.003% pullback to pour back in."

It makes sense to consider this argument.

I present Exhibit A: a chart of the Net Wealth of US Households. This is defined as the total amount outstanding in U.S. money market Funds and the total market cap of U.S. listed stock. All else being equal, one can see why the administration is so concerned with the market decline impact on the psychology of the U.S. consumer: confidence is the name of the game. Net Wealth declined from a peak of $22 trillion to just under $12 trillion in early March, and now, compliments of the bear market rally, has bounced higher to $15.4 trillion, a 30% decline from the peak.

 

net wealth of US households

Of course, and much more troubling, is that "all else" is nowhere close to being equal. When considering consumer wealth, one also has to look at the right side of the balance sheet, and as the Fed’s Flow of Funds Report indicates, consumer debt has not budged, and has stayed essentially flat as the equity market: the key component of consumer wealth has gotten decimated.

Exhibit B: Total Household Debt:

 

household debt

Alas it does not follow the chart in Exhibit A, not even closely. So the question is: what has been the bottom line impact on household "equity": i.e., taking the debt component of balance sheet and superimposing it vis-a-vis net wealth. The result is scary.

Exhibit C: Household Equity.

 

household equity

From the end of 2007 through Q1 of 2009, household equity has declined by 94%. Is it surprising that today’s GDP number would have been a complete debacle if the consumer had been left alone to prop the U.S. economy, on whom 70% of the economy is reliant? Obama pulled a Hail Mary with the stimulus: without it there would be no debate America is in a depression right now. The only remaining question is how long can Congress and Senate extend such Subsidy programs as Cash for Clunkers before the rest of the world throws up in America’s protectionist face.

But back to the money on the sidelines.

Exhibit D indicates the…
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Zero Hedge

Explosion Hits Russia's Largest Virus Lab Which Houses Plague, Smallpox, Ebola And Other Deadly Viruses

Courtesy of ZeroHedge View original post here.

A sudden explosion at a Siberian virus research center on Monday reportedly left the facility engulfed in flames, according to several Russian news outlets. 

Firefighters and other emergency personnel were dispatched to the "Vector Institute" located several miles from Novosibirsk - an emergency which was upgraded "from an ordinary emergency to a major incident," a...



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Phil's Favorites

The future of work will still include plenty of jobs

 

The future of work will still include plenty of jobs

Even though the future is unknown, Canada’s employment rate has risen steadily from 53 per cent in 1946 to more than 61 per cent today. (Shutterstock)

Courtesy of Wayne Simpson, University of Manitoba

There is now widespread anxiety over the future of work, often accompanied by calls for a basic income to protect those displaced by automation and other technological changes.

As a labour economis...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Insider Scoop

New Relic Cuts 2020 Sales Guidance, Announces Changes In Management

Courtesy of Benzinga

New Relic (NYSE: NEWR) has reaffirmed its second-quarter guidance and cut its sales guidance for fiscal year 2020 from $600 million-$607 million to $586 million-$593 million.

The company’s chief technology officer, Jim Gochee, and chief revenue officer, Erica Schultz, have resigned. New Relic also named board member Michael Christenson as its chief operating officer. Christenson joins from his ...



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The Technical Traders

Metals are following downside sell off prediction before the next rally

Courtesy of Technical Traders

It is absolutely amazing how the precious metals markets have followed our October 2018 predictions almost like clockwork.  Our call for an April 21~24 momentum base below $1300 followed by an extensive rally to levels above $1550 has been playing out almost like we scripted these future price moves.

Now that the $1550 level has been reached, we are expecting a rotation to levels that may reach just below the $1490~1500 level before attempting to set up another momentum base/bottom formation.  And just like clockwork, Gold has followed our predictions and price is falling as we expected. Just look at our October 2018 chart where we forecasted the price of gold...



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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...



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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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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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