Archive for 2009

Overview Of Goldman Sachs Electronic Trading: Part 1

Courtesy of Tyler Durden

Zero Hedge is starting a multi-part overview of Goldman Sachs’ Electronic Trading client-focused product suite, to demonstrate just how extensively embedded in modern market architecture are Goldman’s various DMA and “liquidity” facilitation schemes, and the depths of dark pool domination via Goldman’s global order router, and other specific topical offerings.

Our first focus is on Goldman’s DMA/liquidity/order router integrated suite, represented by REDIPlus and Sigma, as well as Goldman’s privileged access dark pool, SIGMA X.

A first and key observation is that Goldman’s Direct Market Access program accounts for over a whopping 1 billion shares daily, as disclosed to clients by Goldman itself. When one considers that the NYSE’s trading volume has recently been in the 1-1.5 billion shares per day range (a number that has been consistenly dropping over the past decade, and explains the NYSE’s animosity toward other new exchanges such as Direct Edge, which however shot themselves in the foot by procuring clients thru the adoption of such shady practices as Flash Orders), and one can see how Goldman is becoming a dominant force in the market landscape, and why all other market participants are sweating profusely. This is true now more than ever, now that the Fed and the U.S. government have indicated that no matter what happens, Goldman Sachs will never be allowed to fail, no matter how great of a risk it takes. If in the meantime, it is allowed to gain an exclusive monopoly in any one aspect of the market, so be it.

Goldman increasing domination via DMA routing also explains its careful treading when it comes to DMA discussions with the regulators: any major change (which also includes any hits to Goldman’s well-greased machine that would result as a function of a ban on Naked Short Selling, and subsequent attempts by Goldman’s well placed lobby efforts to prevent such a ban) would likely result in a need to dramatically overhaul its product offering which so far has been so efficient and attractive to new clients, it is on par to challenge the NYSE in share volume. For some very prophetic words of caution on how dangerous DMA could be if it were to go haywire, and slip out of control, we refer readers to the following discourse by Lime Brokerage principals. And, as one can expect, the debate here…
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French President Awards Obama Medaille d’Apaisement

French President Awards Obama Medaille d’Apaisement

By Op-Toons Review

 

Paris, France--For the first time, France’s highest honor, the medaille d’apaisement, was awarded to an American President.

French president Nicolas Sarkozy presented the medal to U.S. President Barack Obama for his work toward selling out Poland and the Czech Republic by unilaterally abrogating a missile defense arrangement at Russia’s insistence, and for intentionally failing to mention Iran’s illegal uranium enrichment facility at a U.N. Security Council meeting…

 

Continue reading Op-Toon Review here. >>

Read also, the associated article: Obama’s French Lesson, by Charles Krauthammer, at The Washington Post.

 


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Disgraced Former Japanese Finance Minister Found Dead

Disgraced Former Japanese Finance Minister Found Dead

drunk finance minister, Shoichi NakagawaCourtesy of Joe Weisenthal at Clusterstock

Remember Shoichi Nakagawa? He was the Japanese finance minister who resigned in disgrace early this year after a rambling, presumably drunk, press conference.

Today, he was found dead. Neither suicide nor foul play is suspected.

TOKYO (AP) — A former Japanese finance minister who stepped down after appearing to be drunk at an overseas news conference was found dead in his home Sunday, police said, ruling out foul play.

Shoichi Nakagawa was lying face down in bed when his wife found him in their Tokyo home, a spokesman for the Tokyo Metropolitan Police Department said on condition of anonymity due to police policy.

Investigators have ruled out foul play because the room was undisturbed, and they were downplaying the likelihood of suicide. Determining a cause of death will likely "take some time," the spokesman said, adding that an autopsy will be conducted as part of an investigation.

The 56-year-old Nakagawa caused an uproar when he appeared to be intoxicated at a news conference during a meeting of Group of Seven financial leaders in Rome in February. International news programs repeatedly played footage of him slurring his speech and looking sleepy.

More odd behavior followed when he visited a museum at the Vatican after the news conference. He touched exhibits and set off an alarm after entering an off-limits area.

The trip was widely seen as a major embarrassment for the Japanese government.

Nakagawa stepped down as finance minister shortly afterward, denying he had been drunk and blaming cold medicine. But the opposition demanded his resignation.

Nakagawa had been a longtime lawmaker from the northernmost island of Hokkaido with the Liberal Democratic Party, which had ruled Japan almost continuously for the last half-century. He lost his seat in parliament in Aug. 30 nationwide elections in which the Liberal Democrats lost to the Democrats, who now rule Japan in a coalition.

Stunned colleagues said Sunday that Nakagawa appeared to be in good health recently but speculated that he may have been physically and mentally drained after losing his seat.

Former Prime Minister Taro Aso praised Nakagawa for helping the country tackle its worst recession since World War II.

"I’m in such a state of shock right…
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Case Shiller CPI At Negative 5.1%

Case Shiller CPI At Negative 5.1%

Courtesy of Mish 

Case-Shiller CPI is formulated by substituting the Case-Shiller housing index for Owner’s Equivalent Rent in the CPI. For a complete description of the reasons and methodology, please see What’s the Real CPI?

The chart and commentary below is courtesy of my friend "TC" who writes:

CS-CPI continues to fall albeit at a less rapid pace and measures -5.1% YOY. Meanwhile the government’s CPI-U also continues to fall at a slower pace and measures -1.5% YOY. The divergence is to due to the government’s housing metric of Owners’ Equivalent Rent (OER) continuing to show price increases (+1.7% YOY) vs. Case-Shiller data showing price decreases (-13.3% YOY).

click on chart for sharper image

Since the Case Shiller housing market peak in June 2006, OER is up +7.7%, while the Case-Shiller index is down -30.9% – an amazing 3860 basis point divergence!

CS-CPI YOY has now fallen for 11 consecutive months and 14 of the past 18. Meanwhile the government’s CPI-U YOY has fallen for 6 consecutive months.

Thanks "TC".

With rental prices and food prices starting to drop, I expect to see CPI-U (the official CPI) to continue to decline. Moreover, with the coming end of the $8,000 housing tax credits for new home buyers and a phase-out of treasury monetization by the Fed, a reversal in the housing index is likely.

It’s highly unlikely that home prices have bottomed in the bubble areas as well as most major cities, even though some select markets, especially Florida areas that have been hammered mercilessly, may be in a bottoming process now.

Dr. Housing Bubble outlines a solid case for "the bottom is not in" viewpoint in Shadow Inventory Case Study. Please take a look. It’s a good read.

Mike "Mish" Shedlock


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The Road to Zimbabwe

Words from Casey Research, which is in the inflation camp.

The Road to Zimbabwe

Road to ZimbabweBy Terry Coxon, Editor, The Casey Report

Sprinkled among all the official talk about efforts to end the current recession, you’ll hear assurances, notably from Federal Reserve Chairman Ben Bernanke, that when the economy does revive, it won’t be allowed to blast off into runaway inflation. The Fed, we’re being promised, will prevent such a launch by reabsorbing the hundreds of billions of dollars of excess liquidity it recently created to halt the credit crisis.

Delivering on those assurances won’t be easy. There is no reliable, real-time guide to how much cash the economy needs, so deciding when to drain excess reserves from the banking system (by selling off T-bills or other Fed assets) and judging how rapidly to do the draining will be largely guesswork. And the consequences of guessing wrong will be unforgiving. Drain too fast, and the recovery stalls. Drain too slowly and price inflation comes charging out of the chute.

Figuring out how much cash is just right for the economy has always been the Fed’s central puzzle. And until late last year, coming up with a workably close answer, day after day, was the only thing the Fed really needed to focus on. Executing its decisions was easy. Since it could create money, the Fed had unlimited power to expand liquidity by buying Treasury securities (or anything else). And since it owned a mountain of Treasuries built up from past purchases ($480 billion as of last September), it had the power to drain liquidity by selling from its holdings.

That Was Then…

That picture of the Fed’s power may be changing. Even if the Fed were to show unprecedented skill (or enjoy unprecedented good luck) in judging when to drain the excess liquidity that today is an inflationary time bomb, it might find itself without the wherewithal to do so. We can estimate how close the Federal Reserve is to such a trap by examining its assets and seeing how they compare with the excess “reserves” held by commercial banks. It is the excess reserves that the Fed will need to soak up at some point to prevent the time bomb from detonating.

I put “reserves” in quotes because they aren’t what you might think they are. They’re not money that banks put away as a provision for bad…
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LET’S GET TECHNICAL

LET’S GET TECHNICAL

Courtesy of The Pragmatic Capitalist

From Decision Point:

The market has begun another correction, but so far no serious technical damage has been done. The S&P 500 remains within the grasp of an ascending wedge formation, the dominant feature on the daily chart. On Friday prices hit their lowest level of the correction, but they remained above the support of the 50-EMA and the rising trend line. Next major support is at the 200-EMA.

As regular readers know, it is most likely that prices will break down from the rising wedge pattern, and I am inclined to believe that will happen in this case. Internal conditions for the medium-term are neutral to slightly overbought, and I think the market needs to get medium-term oversold before the correction will end. Also, it is October, and a certain amount of ugliness should be expected. I hear that a number of people are expecting a crash, but I see no evidence that would make me anticipate anything more than a normal correction.

dp1 LETS GET TECHNICAL

The following Participation Index (PI) chart shows that the short-term market condition is oversold. This could signal a short-term bounce, or the end of the correction. The latter is unlikely because the market needs to get more oversold medium-term before another up leg begins.

dp2 LETS GET TECHNICAL

Bottom Line: It is very likely that the S&P 500 will break down out of the rising wedge pattern soon. With luck a breakdown will be followed by a healthy correction, but we are in a bull market and I wouldn’t bet on anything worse than that.

Source: Decision Point

 


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Sentiment: P/E, BPSPX, VIX and CPC

If you’re at all confused about why different people report different P/E values when discussing whether or not the markets are over valued, Binve’s P/E ratio breakdown is quite helpful – without knowing exactly what numbers are going into a calculated P/E value, comparing P/Es is like comparing apples and refrigerators.  – Ilene

Sentiment: P/E, BPSPX, VIX and CPC

Courtesy of Binve at Market Thoughts and Analysis

I want to review a few indicators that I was discussing in my mammoth Another Massive Chart Dump / P2 Analysis Wrap-Up post. In this post, I will be reviewing Sentiment.

Valuation – Price / Earnings Ratios:

Actually, I was discussing this topic in this post: The Long View –   Aug 27, 09. Now why am I calling P/E a sentiment indicator? I posit that P/E is as much a sentiment tool as it is an objective valuation tool. And it is too high currently (as it was back in March) for a meaningful bottom.

To explain why, let’s think about what P/E means. It is the the "payback period" for a stock’s current earnings to justify/cover the current share price. Another way to look at it is the *premium* that you place on the stock’s ability to generate future earnings. Earnings theoretically grow for growing companies, or the are stable and consistent for well-run companies. But shouldn’t a P/E for a particular company or even a sector be a well-known and consistent metric? Why would anybody pay a premium on P/E?

Because investors are emotional. They fall prey to greed and fear, optimism and pessimism.

Moreover, large scale herd-behavior for optimism and pessimism actually runs in cycles. Read this article, it is a fantastic description of this valuation cycle: http://www.zealllc.com/2007/longwave3.htm. The main upshot of the article is that these long valuation waves take about 32-36 years to run, the last bottom was in 1981, and valuation bottoms do not occur until the broad market (as measured by P/E’s on the Dow or the S&P 500, which have very similar P/Es most the time) P/E is between 6-10. Long Term (100 year) average P/E is ~14.

So let’s see what the data is saying for the S&P 500. All of the data shown is taken directly from Standard and Poors: http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

[click on charts and tables for…
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Janet Tavakoli: Risk of deflationary collapse greater now than in 2007

Janet Tavakoli: Risk of deflationary collapse greater now than in 2007

Janet TavakoliCourtesy of Mish

Janet Tavakoli is On The Edge With Max Keiser. Tavakoli says the Risk of deflationary collapse greater now than in 2007.

We’ve just interviewed Janet Tavakoli for our first episode of The Keiser Report. If you don’t know her, you should. She wrote a fantastic book, Dear Mr. Buffett. Max and I are on our second read of it. You really must get this book if you want to understand derivatives from one of the foremost experts on it who writes in plain English about how these financial tools became instruments for widespread fraud that then led to financial crisis. She also gives loads of positive advice and insight.

Here is a summary she provided for MaxKeiser.com on where she thinks we are today two years since the crisis began:

"Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay."

Travakoli makes six points about deflation. I concur with all of them. Here are three of them.

  • Our fundamental financial and economic problems, i.e. overleveraging, lack of transparency, have not been solved.
  • Since 2008, capacity utilization has plummeted; businesses have no pricing power; U.S. lost 6.7 million jobs but numbers are underreported; personal income tax receipts are down 21%; corporate tax receipts are down 58%; U.S. deficit will exceed $1.8 trillion; govt. spending is now 185% of tax receipts; 13% of mortgages are seriously delinquent and/or in foreclosure; huge decrease in personal net worth; 15 million mortgages exceed the home value. We’re on a massive debt spending spree.
  • Income on all levels is not sufficient to make debt payments.

Inquiring minds will certainly want to play the videos where she also addresses the role of derivatives.

Janet Tavakoli Part 1 

Janet Tavakoli Part 2

By the way, the reason we are worse off than in 2007 is…
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Material, Non-Public Information? Why JPMorgan Does Not Care; And Why If You Are A Corporate Insider Client, Neither Should You

Courtesy of Tyler Durden

A recurring theme on Zero Hedge over the past few months has been the inordinate (and seemingly inexplicable if one takes at face value the arguments for an improving economy) amount of insider selling of corporate shares, which has reached a staggering ratio of 30-1 of sales to buys (if not much more). A back of the envelope calculation indicates that insiders may have sold well over $10 billion worth of their own company’s shares in the last quarter alone. Aside from what implications this activity has for claims of the recession being over, as those best familiar with their businesses can not wait to offload their holdings, a larger question is one of propriety, and whether insiders are abusing inside information loopholes, particularly if they are aware of material, non-public information when selling their stock.

In this environment of unprecedented insider selling, it makes sense to refamiliarize readers with JP Morgan’s confidential presentation, “Hedging and Monetization” from February 2007, first presented by Wikileaks, which focuses exclusively on providing company insiders with mechanisms to circumvent not just regulatory curbs on insider selling, but to obfuscate market signals typically associated (but definitely not in this market environment) with an insider dumping boatloads of his or her own stock. In particular, JP Morgan latches on to the biggest regulatory loophole, courtesy of the SEC, namely Rule 10b5-1, which is a tacit understanding by the SEC that insiders can do whatever the hell they want, including trading purely on inside information, while providing affirmative defense in the case lawsuit(s) are brought up against them.

As a reminder, from the SEC’s own rulebook:

Examples of insider trading cases that have been brought by the SEC are cases against:

  • Corporate officers, directors, and employees who traded the corporation’s securities after learning of significant, confidential corporate developments;
  • Friends, business associates, family members, and other “tippees” of such officers, directors, and employees, who traded the securities after receiving such information;
  • Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
  • Government employees who learned of such information because of their employment by the government; and
  • Other persons who misappropriated, and took advantage of, confidential information from their employers.

Because insider trading undermines


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JULIAN ROBERTSON: THE GOVERNMENT HAS MISHANDLED THE CRISIS

JULIAN ROBERTSON: THE GOVERNMENT HAS MISHANDLED THE CRISIS

Courtesy of The Pragmatic Capitalist

Excellent thoughts on the hedge fund industry and the state of the economy with legendary investor Julian Robertson:

 


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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.

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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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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