Archive for 2009

Fed President Hoenig: Still Need To Address The Debt Issue

Fed President Hoenig: Still Need To Address The Debt Issue

Courtesy of Tom Lindmark at But Then What

Fed President Hoenig, debt

Throughout the recession one of the more outspoken members of the Fed has been Thomas Hoenig, the President of the Kansas City Fed. Refreshingly, he continues to speak his mind and not shy from the harder issues that most in government prefer not to address.

In a speech that was given to the Kansas Association of Bankers a month ago but just released today, he had this to say:

The U.S. economy appears to be reviving from a nasty recession, but too little has been done to resolve the underlying problem of too much debt, a Federal Reserve official says.

In a speech given a month ago, but released to the public on Saturday, Kansas City Fed President Thomas Hoenig said massive amounts of public and private debt are putting tremendous pressure on the Fed to keep interest rates low, potentially sowing the seeds of inflation or further economic imbalances.

Hoenig, considered one of the Fed’s leading advocates for low-inflation policies, said the Fed has tried too hard to boost growth in the past by keeping rates low. But low rates only encouraged more debt, and fueled an increase in the money supply that has eroded purchasing power.

Sustainable growth can’t be achieved that way, he said.

The federal government has taken on much more debt in an effort to stimulate the economy, he said. Consumer debt remains bloated. And the biggest banks are still overleveraged by about $5 trillion, he said.

The way out of the swamp will be tricky, he said.

“As we become more confident that we are at the bottom of the recession and are moving into recovery, we must become more resolute in systematically reducing our balance sheet and raising interest rates,” Hoenig told the annual meeting of the Kansas Bankers Association on Aug. 6.

Well, it remains to be seen if there is any resolve to move away from a debt fueled economy towards one that is more grounded in fundamentals. It all sounds good, however, there is no magic wand that can be waved over the economy to cause that to happen. The adjustments he calls for require years to put into place and it’s problematic at best as to whether the public has the patience and will to…
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The financial crisis explained

Lol on this one, but warning--mildly strong language towards the end.

The financial crisis explained

Courtesy of Edward Harrison at Credit Writedowns

More weekend market laughs for the financially-inclined.  Hat tip Blicklog.

 


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Unemployment and Government Jobs

Since it’s such big news, I will report on the latest unemployment report by the BLS, but I dislike spending too much time on it because I consider it one of the weaker or murkier sources of data, at least on a monthly basis.

Often it conflicts heavily with other private or more reliable sources of data, which have been collectively telling a grimmer story than today’s headline news release of an additional loss of 217,000 jobs for August 2009.

Regardless, here’s the news, with my analysis:

Unemployment rate jumps to 26-year high of 9.7%

By Rex Nutting

WASHINGTON (MarketWatch) – The U.S. unemployment rate jumped to a 26-year high of 9.7% in August as nonfarm payrolls fell by 216,000, the 20th consecutive monthly decline, the Labor Department estimated Friday.

Of course, 9.7% would be dream rate to teenagers who are now suffering their own quiet depression with a 25% unemployment rate, and for blacks and Hispanics, who are pulling up an uncomfortable second and third behind the teens.

U.S. payrolls have dropped by 6.9 million to 131.2 million since the recession began in December 2007, the government data showed. Unemployment has increased by 7.4 million during the recession to 14.9 million.

As you probably know, unemployment is measured in two ways:  the percentage rate is derived from the household data, while the actual number of jobs gained or lost is sampled from ‘establishments,’ meaning businesses.  In the paragraph above, we might note that there is now a 500,000 job difference (7.4 – 6.9) between the number of jobs reported lost by households vs. establishments.

The 216,000 decline in payrolls was close to market expectations of a 233,000 drop, but the unemployment rate rose higher than the 9.5% level expected. The unemployment rate was 9.4% in July.

Payroll losses have moderated in most industries in the past two months. Payrolls declined an upwardly revised 276,000 in July. In June and July, payroll losses were revised up by 49,000.

Oops.  A 9.5% rate expected, but 9.7% hit.  That’s a miss.  Also note the large downward revisions, totaling nearly 50k jobs for June and July.   Downward revisions are a sign of weakness.

Government Jobs

By way of commentary, we might also


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Who is going to buy gold?

Who is going to buy gold?

gold bug (edgar allen poe)Courtesy of Vitaliy Katsenelson at Contrarian Edge

This is the first in a series of what some may consider as “gold bashing” articles. I am not short gold in any shape or form. I have no axe to grind against gold bugs. I am simply presenting the other side of the argument in response to what I deem to be dishonest, gold-pimping commercials (e.g., “If gold prices went up to $5,000 this pile of gold would be worth $300,000”) that we are subjected to all day long on TV. I may be wrong, but I am honest.

Here is a trivia question for you: what country is the seventh largest holder of gold, ahead of China, Japan, and Switzerland? Well, it was a trick question: the seventh largest holder of gold is not a country, it is an exchange-traded fund, GLD. Yes, a fund that is not even five years old is the seventh largest holder of physical gold in the whole world, even ahead of mighty China.

When investors buy GLD, GLD in turn has to go out and buy gold, driving up the price. This raises a little question: who will be buying this gold from GLD when investors decide to sell it? Gold is one of those weird assets where nobody knows what it is really worth. You cannot run discounted cash-flow analysis to value it – it has no cash flows. It is an asset where perception and reality are deeply intertwined.

Investors buying the gold ETF (GLD) are influencing the price of gold, which is fair for the most part, as otherwise they’d be buying the real thing. The ease of buying GLD creates a higher, artificial demand – but GLD is still fair game.

The violent selloff in GLD will be caused by factors that are hard to predict today (e.g., hedge-fund liquidations) but that will drive the price of gold down dramatically unless a real buyer steps in (like another government sick of owning the US debt, for instance), and the gold price could get cut in half overnight. Suddenly, perception of not being a store of value will create the reality of gold not being a store of value. The gold game will be over.

Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates
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How Many Rabbits Are Left In The Hat?

How Many Rabbits Are Left In The Hat?

rabbits left in hatCourtesy of Mish

As amazing as it seems, inquiring minds are interested in hats and rabbit, more specifically, "How Many Rabbits Are Left In The Hat?"

Dave Rosenberg was rabbits and hats in Friday’s Lunch With Dave, NOT LABOUR’S DAY.

While the Obama economics team is pulling rabbits out of the hat to revive autos and housing, there is nothing they can really do about employment; barring legislation that would prevent companies from continuing to adjust their staffing requirements to the new world order of credit contraction. While nonfarm payrolls were basically in line with the consensus, declining 216,000 in August, there were downward revisions of 49,000 and the details were simply awful. The fact that 65% of companies are still in the process of cutting their staff loads is quite disturbing — even manufacturing employment fell 63,000 in August, to its lowest level since April 1941 (!), despite the inventory replenishment in the automotive sector and all the excitement over the recent 50+ print in the ballyhooed ISM index. The fact that temp agency employment is still declining, albeit at a slower pace, alongside the flat workweek and jobless claims stuck at 570,000, are all foreshadowing continued weakness in the labour market ahead. Until we see signs of a sustained turnaround in the jobs market all bets are off over the sustainability of any economic recovery.

What was really key were the details of the Household Survey, which provide a rather alarming picture of what is happening in the labour market.

First, employment in this survey showed a plunge of 392,000, but that number was flattered by a surge in self-employment (whether these newly minted consultants were making any money is another story) as wage & salary workers (the ones that work at companies, big and small) plunged 637,000 — the largest decline since March (when the stock market was testing its lows for the cycle). As an aside, the Bureau of Labor Statistics also publishes a number from the Household survey that is comparable to the nonfarm survey (dubbed the population and payroll-adjusted Household number), and on this basis, employment sank — brace yourself — by over 1 million, which is unprecedented. We shall see if the nattering nabobs of positivity discuss that particularly statistic in their post-payroll assessments; we are not exactly holding our


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Pivot Week

These are some really beautiful charts along with market analysis, posted by Naufalsanaullah at ZH.  Click on charts for a full page view. – Ilene

Pivot Week

By naufalsanaullah, courtesy of Zero Hedge  

The stock market showed a significant distribution day on Tuesday, as big volume selling dominated the day. The SPY ETF showed its biggest volume day since April with 321 million shares exchanging hands, with approximately 80 million shares traded between 10:40 and 11:40 AM, where the selling really picked up as the support trendline connecting July and August lows experienced a breakdown. SPY’s volume’s 20DMA is around 189 million shares, and Tuesday showed a 70% relative increase in volume. This is highly suggestive of big players dumping shares, which puts the 30-1 insider sale-purchase ratio last month (and 62-1 ratio in its last week) in even more perspective.

Tuesday’s big volume divergence from most of the rally since March is evident, being the biggest differential from the 20DMA since the beginning of the January-March 2009 sell off, and is analogous to distribution days in late May/early June 2008, early September 2008, and early-mid January 2009. The SPY chart below has volume with its 20DMA and the line defining two sigmas away from 20DMA volume. Tuesday was a marked exception to the trend since March, and especially since the 87.5 breakout in May, as volume on Tuesday was well above two standard deviations greater than the 20DMA. The analogues provided above (late May/early June 2008, early September 2008, and early-mid January 2009) also show volume spiking well over two sigmas over the 20DMA and beginning a reversal in price.

S&P

Below is a chart of SPY with volume and standard deviation of volume. As volume contracted since March (and especially since the May breakout of S&P 875), volume’s sigma has stayed in a tight range, with no big volume breakout days with low volume consolidation days or any of those bullish market internals. Instead, the market has rallied with no volume confirmation. Fall 2007, summer 2008, and fall 2008 also show similar patterns. The difference for the current sigma tightening is in its length, occurring over several months, which makes sense in the context of the paradigm shift in trading to almost exclusively momo-chasing daytrading. The three comparable situations in std dev of vol in the chart below led to volume expansion and price sell-off,…
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Barrons.com Videos

Here’s a couple videos from Barrons.com.  H/t Barry Ritholtz.

Barron’s Steve Sears reports that professional investors are hedging September. Besides words of caution, he sounds surprisingly bullish, suggesting some people think it’s a good idea to buy the dips (hedging the comment too). – Ilene

The Smart Money is Preparing for a Market Downturn 9/3/2009

Why the Rally Still Has Legs 9/2/2009

"This week’s slide doesn’t mean the ‘recovery trade’ has ended, says Barrons.com’s Bob O’Brien."

 


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Stealth Bear

Stealth Bear

Courtesy of Tim Knight’s Slope of Hope

I did my usual routine yesterday, going through all my charts. I found 100 new opportunities, but it is still decidedly lop-sided. 73 of them are bearish, and 27 of them are bullish. And, I’ve got to say, the bearish ones tend to be large, widely-traded outfits whereas the bullish ones are these weird little firms no one has ever heard of. So, frankly, I’m not sure what components of the indexes keep finding the strength to rise. The real strength is in all the lame, scummy stocks – – not the quality end of the spectrum.

I did notice that there are several instances of sectors that Slopers were trying to short for a long time and, finally, just gave up on in disgust. The "casual dining" sector is a perfect example of this. Some here will remember how during the Spring we kept trying to short the likes of DIN, EAT, and other eating establishments, all while the stocks kept exploding higher. (The basic theory was that people were depressed about the state of things and wanted to shove low-cost, high-calorie food into their mouths; why else would anyone elect to go to a place like the International House of Pancakes?)

The funny thing is that, after people gave up on them, they did indeed start to fall. In fact, they peaked way back in April! Just take a look at this one:

0906-din

The graph may not look that dramatic, but the stock lost 43% of its value over the past four months. That’s the kind of "performance" I’d like to see from my shorts.

The point is that the vast majority of my shorts and my potential shorts look exactly like this stock did in April. What’s agonizing and frustrating is waiting for the damned things to actually break.


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$100,000 Virtual Portfolio – The Watch List

Something went wrong with the last post and I can no longer edit it so forgive the typos.  We'll pick up where we left of and it's not a bad idea to keep a watch list anyway in a separate post so we can keep adding trade ideas in the comment section.  Of course these plays aren't just for the $100KP – just because you like taking more risk than our conservative portflio doesn't mean there's no room for a few "safer" plays, especially when they are designed to put cash in your pocket….

 

We had our watch list from Aug 23rd, and we did miss a few chances so this week I’m going to put up some wishful entries that we’ll be looking for.  For example, We’d like to buy GE $13 (now $13.87), selling Oct $13 puts and calls for $1.80 nets $11.20/12.10.  Now, I don’t care if GE is $1 or $100 nor do I care what the Oct puts and calls sell for, what I want is the combination of GE stock and the sale of the Oct $13 puts and calls that equals $11.20.  Right now that combo totals $12.05 so there is no way at the moment but on Tuesday, that was the price as we dipped to so the idea is to simply be prepared to pull the trigger next time.

To be clear, it’s the NET we focus on and if you can put in an offer at that price, great.  Otherwise we just watch for an opportunity to buy something we want when it’s on sale.  Since we have a $100K virtual portfolio and we don’t want to commit more than 10% to any position, we generally want to keep our entries on a first round at around net $2,500 so for GE above, we’d buy 200 shares.  Here’s some other trades of interest:

HRB tends to have a poor fall so we patiently wait fo a chance to sell 5 Oct $15 puts for $1+, currently .25. 

MHP held $28.50 on a big volume drop.  If we can sell 5 Oct $25 puts for .70 (Thursday’s high) that’s a nice entry ($24.30 net). 

TASR got the sell-off we were hoping for and we can pick up 500 shares for $4.50 (now $4.60) but we have to…
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$101,278 Virtual Portfolio Update – Week 2

Not bad for a second week.

We still have 75% of our buying power unused and we are right on track for our $2,500 monthly goal having already sold over $5,000 of contracts back in week one.  Being able to produce this kind of income with just $25,000 at work is a great start and we didn't even get all the fills we wanted!  19 legs are open at this point on the same 8 stock positions we started with on August 23rd and it has truly been a no hassle virtual portfolio despite the wild stock market moves indicating we have achieved our primary goal of having good balance

We have a virtual portfolio that is updated live at Wallstreetsurvivor.com (Premium and Basic Members who want to follow can used THIS LINK to sign in) with a $100,000 opening balance at standard 50% broker margins and $10 per transaction fees and we've had some difficulties at the start but their new system should be up and running next week and, if it works as intended, I'll be starting a second virtual portfolio to track a new buy list as well.  The $100KP is a very conservative virtual portfolio and a lot of the moves we've made have traded safety for profit and I know that is frustrating for our more aggressive members who find $2,500 a month (30% a year) too tedious as a goal.  

I was very excited that we had such a nice sell-off but we didn't get the chance to pull the buy trigger on new positions as the market took off Thursday afternoon and kept running.  We'll get to new possiblilities at the end of this post but, for now, let's review where we are on the current positions.  As WSS isn't working properly yet, I've copied their results page here:

DESCRIPTION PRICE PAID LAST PRICE QTY MARKET VALUE MARGIN PROFIT LOSS %
AIG CALL 30 Jan 11 $13.45 $20.00


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Zero Hedge

World Trade War I: US Asks South Korea To Join Anti-Huawei Campaign

Courtesy of ZeroHedge. View original post here.

The bilateral trade war between the US and China is gradually becoming a global trade war of global geopolitical and commercial dominance between the US and Chinese spheres of influence.

Shortly after the two largest mobile phone companies in the UK decided against launching Huawei-built 5G phones this morning, and roughly around the time a bevy of Japanese tech and telecom companies including ARM Holdings, Panasonic and SoftBank all imposed a boycott on supplying Huawei with mission critical components joining Australia, and New Zealand as major US allies to end commercial relat...



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Phil's Favorites

Overpriced tech IPOs sell grand visions but aren't worth their valuations

 

Overpriced tech IPOs sell grand visions but aren't worth their valuations

rblfmr / Shutterstock.com

Courtesy of John Colley, Warwick Business School, University of Warwick

The year of the tech IPO is 2019. Uber went public on May 10 with a US$82.4 billion valuation. Fellow ride-sharing app Lyft floated in March with a U$24 billion valuation and Pinterest had a US$10 billion IPO in April...



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Kimble Charting Solutions

Emerging Markets About To Submerge If 3-Year Support Breaks?

Courtesy of Chris Kimble.

Are Emerging Markets about to “Submerge” and head a good deal lower? What they do at (3) will go a long way in answering this question!

Emerging Markets ETF (EEM) has been lagging the broad market for the past 15-months. They hit their 50% retracement level of the last year’s highs and lows and falling resistance at (2) recently. The weakness of last has EEM trading below its 200-MA line.

EEM has spent the majority of the past 3-years inside of rising channel (1), which reflects that this trend remains up. The weakness of late has it testing the bo...



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Insider Scoop

Amgen To Buy Danish Collaborator Nuevolution For $167M

Courtesy of Benzinga.

Amgen, Inc. (NASDAQ: AMGN) took a logical step forward in buying a preclinical biotech it has been collaborating with since 2016. 

What Happened

Amgen announced Wednesday an agreement to buy Copenhagen-based Nuevolution for $167 million.

Th...



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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.

...

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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.

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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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