Archive for 2009

Wonderland Markets: Part I and II

Here’s the long answer to a question regarding Phil’s thoughts on which way the market is going. – Ilene

Wonderland Market 

The Queen of Hearts, 1999 (oil on canvas)

By Phil at Phil’s Stock World (in comments)  

Market direction – Interesting that this is what’s on your minds as it’s what’s on my mind too.   What is real and what is not?  Keep in mind that when the market was down 50% in March, that was not real either.  You can go back and read all my posts back then, but the gist of my arguement was, short of annihilating a good portion of the global population, the global GDP is very unlikely to fall below $40Tn (down 20%) so anything beyond that is, by definition, an overreaction. 

On the other hand, the run up to S&P 1,500 was itself overdone as we can’t just keep expanding insanely forever (outside of inflationary expansion).  There’s an interesting article in Scientific American this week asking if current economic assumptions inherently violate the laws of physics, something I used to rant about back in ‘07 but got bored with as the market went up and up anyway – despite my efforts to talk sense to it…  Oddly the chairman at Utah State is feeling my pain already, saying: ""Of course I’m trying to send a message - I just don’t expect there’s anyone out there to receive it." 

So we have a low that was too low coming off a high that was too high.  We have MASSIVE government stimulus and I not only don’t use the word MASSIVE lightly but MASSIVE is wholly inadequate to describe the level of stimulus in comparison to anything that has ever happened in the history of the world.  We have a runaway global money supply, the worst global unemployment since the great depression (and that didn’t end in 12 months you know) and pretend shortages of commodities, which is usually something that ENDS expansion, not kicks it off.  We have a dellusional population where 60% of the people surveyed believe their home prices have appreciated over the past 12 months while anyone who read this week’s housing reports can see that there is virtually not a single zip code in the united states that hasn’t lost 10%…

To say the media is uncritical is like saying my mom doesn’t think I suck.  This is not surprising when you consider…
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Euro Bests Dollar by 79% in This Millennium

Courtesy of asiablues

By Economic Forecasts & Opinions

The dollar’s value against major currencies has fallen in recent months as the U.S. fiscal outlook worsened and amid expectations that interest rates will remain close to zero for some time to fight the economic downturn.

This week, the euro broke above the psychologically important level of $1.50 driving gold prices to record levels, prompting many global central banks intervening on currency markets to slow the dollars fall.  (Fig. 1)

How Did We Get Here?

Since the financial crisis last fall, currency markets have taken their cues mostly from stock markets. When stocks plunged in March of this year, investors rushed to the safety of U.S. government bonds, pushing the dollar index up to 89.62, the highest point this year.

Since then, however, it has been a steady downward drift for the greenback. As markets steadied into a rally, traders sold Treasuries and Dollars for riskier assets and higher returns, pushing the dollar lower against other major currencies. 

The value of the euro has risen by 79% in nine years since euro hit 0.84 in Oct. 2000 (Fig. 2), and the White House has done little to curb the dollar’s slide during this period. Loose monetary policy and a weak U.S. dollar are part of the consequences resulting from the U.S. recent trends of unprecedented spending, fiscal deficits, and accumulations of government debt.

“Strong Dollar Policy”…Not

Although the current Administration officially supports a strong dollar, the latest indications came from Federal Reserve Chairman Ben Bernanke and Larry Summers, President Obama’s chief economic advisor.

Mr. Bernanke said this week that the U.S. should cut down on its budget deficit and increase the savings rate in order to reduce global imbalances. Bernanke’s statement chimed with that by Summers earlier this year, when Summers said that

“the rebuilt American economy must be more export-oriented and less consumption-oriented… and less oriented to income growth that disproportionately favors a very small share of the population.”

World War III – Currency

There are only so many paths you can take to be “more export-oriented”, and at the same time save more/spend less. We could increase our savings rate; however, with the unemployment rate around 10%, it is certainly a challenge, to say the least, for middle class…
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.01% Or .1%? A Big Difference

Courtesy of Bruce Krasting

We will probably know if H1N1 will be a hit or a miss in the next 90 days. The range of possible outcomes is enormous. In an average year we would suffer 35,000 deaths to flu. This comes to .01% of the population. There is no indication that this year will be any different. There are some worrisome issues however.

-Swine flu has its highest mortality rates in the 5-25 age range. This is asymmetric to other flu results. Typically the very young and very old segments of the population would be most affected

-H1N1 ravages the lungs of those severely affected. It is the cause of death.

The vast majority of those who will be acutely impacted will require a ventilator. Without it they will die. The question is, “Is there enough of these machines?” The answer to that is dependant on the number people who become ill. If that number is high, then we do not appear to have the respirators that may be necessary.

To my knowledge there is no national public numbers on this topic. In 2007 New York State provided some information and analysis on this issue. I will use that data to extrapolate some estimates. From the report:

*15% of the admitted patients with pandemic influenza will require intensive care,
*7.5% of the admitted patients with pandemic influenza will require ventilators,
*There are currently 6,100 ventilators in acute care settings in New York State,
*At any given time, 85% of the ventilators in acute care settings are in use, and
*70% of deaths related to pandemic influenza are projected to occur in a hospital.

NY State has a population of 20 million. Prorate the NYS information across the total population of 330mm and you get:

-The total number of respirators is 100k.
-The number of respirators that are available net of other needs is only 15,000.

In a ‘normal’ flu season 200,000 patients require hospitalization. Using the NYS number of 7.5% needing ventilation you get to that 15,000 number very quickly. In the event of a severe outbreak, triage of ventilators will be required. If one was concerned about the, End of Life Counseling debate the discussion on how to handle a shortage of ventilators will ring a bigger bell. The first group…
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The Best of Times

The Best of Times

glass half fullCourtesy of John Mauldin at Thoughts from the Frontline

It’s The Best of Times
The Elements of Deflation
It’s More Than Half Full

What’s a Fed to do? We get talk about tightening and taking away the easy credit, but we got the fourth largest monetization on record last week. This week we examine the elements of deflation, look at some banking statistics that are not optimistic, and then I write a reply to my great friend Bill Bonner about why it’s the best of times to be young. I think you will get a few thought-provoking ideas here and there.

But before we get to the main letter, I want to recommend a book to you. I am on a 17-day, 12-city speaking tour. It is rather brutal, but I did it to myself. However, one of the upsides of traveling is that I get quiet time on airplanes to read books. I am working my way through a very large stack of books on my desk. One that caught my eye – and I’m glad it did – is a book by Tom Hayes called Jump Point: How Network Culture is Revolutionizing Business. Hayes writes about how we are getting ready to experience a cultural change every bit as profound as the Industrial Revolution. He argues that as the 3 billionth person gets online sometime in 2011, it will shift the dynamic of how we interact as businesses and consumers. We get to 5 billion by 2015. The mind boggles.

Clearly, it is already changing things, and I am not sure if I buy Hayes’ thesis that 3 billion is a magical number, though it is great marketing. That being said, I found something on almost every page that I underlined or highlighted. This book made me think about the future in ways that my kids already get but Dad doesn’t.

I like to read books about "important stuff" by people who have done a lot of thinking about their subjects, and who can write easily and fluidly and communicate their thoughts without weighing me down with unnecessary verbiage. Hayes has done that. (I am sure some of you, my patient readers, wish I could be better at that!)

No long review here. Go to Amazon and read the reviews. One writer wrote: "I gave…
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(Guest Post) Cheeky Bastard Speaks: Through the eyes of an outsider

Courtesy of Andy Dufresne

 

Andy Dufresne made every effort to not remove the cheekiness of this missive, apart from very minor edits. By no means it is perfect, but it is definitely cheeky.

 

Submitted by Cheeky Bastard

 

Through the eyes of an outsider

 

The concept of Territory, deterritorialization and reterritorialization, and what is left to be killed.

 

This little column is conceived as a critique of the economy seen through the eyes of an outsider. We will try to analyze, synthesize, and re-think some of the basic (and not so basic) concepts of the economy using a line of thought which is not by itself rooted in the thought dynamics of an economist. The goal is to give an interdisciplinary new approach to some new and old parts of what constitutes economic thought.

 

Given the range of topics which we will present, it will likely take us several articles. One of the main motives which urged us to write is the privilege granted to ZH contributors—which we wish to fully exploit—to post pictures of casually and (hopefully) not so casually dressed Amanda Drury. It will be published once a week, on Sunday, mainly because we are too lazy to write it any other day. We hope you will enjoy it.

 

“History of economics is a history of studying the anachronistic processes of production” wrote Gauttari in the apex of his monumental book called Capitalism and Schizophrenia. While the expose written by Gauttari is in no way untrue, it is unsatisfactory and flawed when applied to today’s financial Territory. Still, this outdated process of thinking about the economy is prevalent with the general and mainstream economic theories and widely used by various economic structures within the State. Marxist critique of the economy and the internal condition within it is solely focused on that aspect and neglects the paradigmatic shift, or better said, the constant flow of paradigmatic restructuring and subsequent process of deterritorialization and reterritorialization. But so does the capitalist theory of economics. Philosophicaly, in their core, the difference is non-existent.

 

Before we take our thinking on this subject further, we feel a necessity to explain, in short, what the terms…
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Cheeky Bastard Speaks: Trough the eyes of an outsider

Courtesy of Andy Dufresne

 

Andy Dufresne made every effort to not remove the cheekiness of this missive, apart form very minor edits. By no means it is perfect, but it is definitely cheeky.

 

Submitted by Cheeky Bastard

 

Through the eyes of an outsider

 

The concept of Territory, deterritorialization and reterritorialization, and what is left to be killed.

 

This little column is conceived as a critique of the economy, seen through the eyes of an outsider. We will try to analyze, synthesize and re-think some of the basic, and not so basic, concepts of the economy using a line of thought which is not by itself rooted in the thought dynamics of an economist. The goal is to give an interdisciplinary new approach to some new and old parts of what constitutes economic thought.

 

Given the range of topics which we will present, it will likely take us several articles. One of the main motives which urged us to write is the privilege granted to ZH contributors—which we wish to fully exploit—to post pictures of casually and (hopefully) not so casually dressed Amanda Drury. It will be published once a week, on Sunday, mainly because I’m to lazy to write it any other day. We hope you will enjoy it.

 

“History of economics is a history of studying the anachronistic processes of production” wrote Gauttari in the apex of his monumental book called Capitalism and Schizophrenia. While the expose written by Gauttari is in no way untrue, it is unsatisfactory and flawed when applied to today’s financial Territory. Still, this outdated process of thinking about the economy is prevalent with the general and mainstream economic theories and widely used by various economic structures within the State. Marxist critique of the economy and the internal condition within it is solely focused on that aspect and neglects the paradigmatic shift, or better said, the constant flow of paradigmatic restructuring and subsequent process of deterritorialization and reterritorialization. But so does the capitalist theory of economics. Philosophicaly, in their core, the difference is non-existent.

 

Before we take our thinking on this subject further, we feel a necessity to explain, in short, what the terms deterritorialization…
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Bohemian Bankruptcy – Any Way The Cash Flows…

Courtesy of Tyler Durden





Soros on Alignment of Interests

Courtesy of Leo Kolivakis


Submitted by Leo Kolivakis, publisher of Pension Pulse.

The FT reports that Soros calls Wall St profits ‘gifts’ from state:

The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state, and taxpayer resentment of such companies is “justified”, George Soros, the fund manager, said in an interview with the Financial Times.

 

“Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”

 

Mr Soros, who joins a transatlantic chorus calling for limits on risk, leverage and compensation at big banks, said proprietary traders belong at hedge funds, not at banks, and that the compensation at Wall Street companies should be limited to prevent excessive risk.

 

“With the too-big-to-fail concept comes a need to regulate the payments that employees receive,” said Mr Soros, who will elaborate on his views in lectures in Budapest next week.

 

Some bankers have argued that limits on pay would make it difficult for them to retain their most talented risk-takers. Mr Soros agreed and said this would be a good thing.

 

“That would push the risk-takers who are good at taking risks out of Goldman Sachs into hedge funds, where they actually belong, because hedge funds take risks with their own capital, not with deposits and not with government


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Here Comes the Monetary Expansion Bubble

Here Comes the Monetary Expansion Bubble

Courtesy of Jesse’s Café Américain

us gross domestic productThe best looking economy that debt money can buy. We have included some graphs to put this in perspective. But the bottom line is that the economy may be growing nominally based on an explosion in Federal Debt. We are almost certain that the debt is being applied in ways that will do no good, provide no sustained benefit, to anyone except a few narrow sectors and especially the FIRE sector.

Too bad the chain deflator is broken, but it may catch up on adjustments. These positive numbers, especially if there is an upside surpise, are due to an unprecedented monetary inflation, not seen since the early 1930′s, and a bringing forward of future sales in automobiles through government programs.

We would submit that despite the myths that have been spread, the programs instituted by FDR were significantly effective in providing the impetus to lift the US out of the Depression. However, most of the programs were later overturned by the Supreme Court, and the Fed prematurely tightened its monetary policy, caused an ‘echo slump’ in the late 1930′s.

There is a difference this time. FDR had accompanied his dollar devaluation (vis a vis its then gold standard, about 40%) and stimulus with programs that targeted job creation and reforms of the financial sector. There was the creation of the SEC, the advent of Glass-Steagall, and widespread investigations of the corruption of the late 1920′s.

We are seeing little to none of that today, since the stimulus is largely in the form of monetary inflation and debt creation, with a small amount going to jobs, and the vast majority of the money flowing to a relatively few Wall Street banks.

Stay out of the way of the propaganda rally, but watch for the double dip W in real life.

Bloomberg
GDP Probably Grew as Stimulus Took Hold: U.S. Economy Preview
By Timothy R. Homan

Oct. 25 (Bloomberg) — The economy in the U.S. probably grew in the third quarter at the fastest pace in two years as government stimulus helped bring an end to the worst recession since the 1930s, economists said before reports this week.

The world’s largest economy grew at a 3.2 percent pace from July through September after shrinking the previous four quarters, according to the median…
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What a Tangled Web Mortgage Securitizers Weave…

What a Tangled Web Mortgage Securitizers Weave…

Miniature house and bank loan brochures

By Barry Ritholtz at The Big Picture

What happens when mortgage lenders lose proof of a mortgage?

That question gets addressed in a must read article in the Sunday NYT by Gretchen Morgenson: If Lenders Say ‘The Dog Ate Your Mortgage’.

Gretchen begins with a little history: Over the past decades, the banks and their lawyers have held the cards in litigation. Even with the institutional advantages they held, Banks were given the benefit of the doubt against the “deadbeat mortgage delinquents.”

More recently, we have learned that the bank was undeserving of that. And, we have also learned that a goodly percentage of the “deadbeats” had been defrauded — by mortgage brokers, by real estate agents, and by extension, the banks themselves.

Throw in the securitization process, rife with legal shortcuts that made attempts by good faith borrowers to work out of their delinquency problems all but impossible. Hence, you end up with a judiciary that has become increasingly infuriated with bankers…

More here.>>

 


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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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Zero Hedge

Futures Slides As Trade Tensions Escalate

Courtesy of ZeroHedge. View original post here.

S&P futures were lower on Wednesday as investors sought safety in bonds, the Japanese yen and Swiss franc in muted trade amid renewed worries over the U.S.-China spat after reports Washington is considering cutting off the flow of American technology to as many as five Chinese companies including Hangzhou Hikvision Digital Technology, the world's largest supplier of video surveillance products, expanding the US crackdown on China beyond Huawei to include world leaders in video surveillance. The dollar and 10Y yield were unchanged ahead of today's FOMC Minutes.

...



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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:

 

·       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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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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