Archive for 2009

Greece risks financial Armageddon while Ireland makes cuts

Greece risks financial Armageddon while Ireland makes cuts

Courtesy of Edward Harrison at Credit Writedowns

Pastel coloured shops

The Irish government announced draconian spending cuts of 6 billion Euros in order to stave off a debt crisis in the worst modern-day downturn in the nation’s history.  Even so, Irish government bond yields have been rising relative to German government bond yields, the benchmark for the Eurozone.  Over the past five years the spread had averaged about 40bps. Now it is 170bps. But, the Irish seem to be making the necessary cuts forced on them by lower tax receipts and currency union.

The Greek government, on the other hand, is not taking the same tack. Witness comments by the country’s Premier as reported in the Telegraph by Ambrose Evans-Pritchard:

Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state.

Nice sentiment. But what does that mean in practice?  I see this as asking for trouble.  The only way to interpret this statement is as a vow not to take the same draconian up to ten percent pay cut measures the Irish are now taking – ones that are likely to lead to strikes and social unrest. But, the reality is the Greeks have no other choice.  Either make the cuts or face national bankruptcy. It’s as simple as that.

To be clear, these cuts will mean depression in Greece as similar measures in Latvia have done. Evans-Pritchard says:

Mr Papandreou has good reason to throw the gauntlet at Europe’s feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.

Indeed, as I indicated in a recent post, market participants are talking openly of a …
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2009 REVIEW & 2010 PREVIEW

2009 REVIEW & 2010 PREVIEW

Man in car holding road map, smiling, portrait, close-up

Courtesy of The Pragmatic Capitalist

The following is the excellent 2009 review and 2010 preview by PFG Best:

As we approach year-end, I thought it would be helpful to share a quick recap of 2009 and an outlook for 2010.  Feel free to call or email me with any questions: Eaven Horter (ehorter@pfgbest.com).

It’s my belief the main market drivers of 2009 were interest rates and risk aversion.  Let’s first begin with the Federal Funds rate.  The last elongated period of sub-2% interest rates lasted 3 years – from December 2001 to November 2004.  This time period was post-9/11, when our country rebuilt itself in many ways, where low interest rates led to several “asset bubbles” that did indeed end up popping – easy credit and real estate made for a dangerous duo.  We are currently just over a year with the Federal Funds rate under 2%, which dropped below the 2% level in October 2008.  The current rate was set just a year ago – a historical low of 0% to 0.25%.  However, the US economy and global economies are MUCH worse off now then post-9/11.  With this in mind, an easy case can be made that Bernanke’s continued message of an “extended period” of low interest rates is truly not just rhetoric.

An interesting consideration for this current recession and interest rate scenario is how much more interconnected the world economies are now versus earlier in this decade.  What were emerging economies eight years ago are now developing nations, which makes for less of a reliance on larger countries, such as the United States.  An example of this is how the world has moved from a G7/G8 focus to a G20 circle, bringing important players into the global economic decision making process.  With this interconnectedness, especially in relation to the United States, we saw a focus on commentary and policy from Foreign Central Banks and the large effects these had on global markets – just look to interest rate increases in Australia and how that affected the value of the USD and the AUD.

Luckily, some of us have learned from our histories and we’ve now begun to see lawmakers take proactive measures in respect to asset bubbles.  An example would be the


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BULL VS. BEAR: THE 2010 OUTLOOK

BULL VS. BEAR: THE 2010 OUTLOOK

Courtesy of The Pragmatic Capitalist

A few different perspectives from highly respected traders for 2010.  This week we have Todd Harrison vs. Jeff Saut and John Markman:

The bulls:

The bear:

 





Hmmm…. Dubai (Again) – More?

Hmmm…. Dubai (Again) – More?

Courtesy of Karl Denninger at The Market Ticker


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Italian Prime Minister Berlusconi Attacked At Rally In Milan, Condemned As “Act Of Terrorism”

Courtesy of Tyler Durden

Populist anger is starting to awake all over the world, as the G-20′s actions continue favoring only the "aristocratic" banker class. We hope Berlusconi’s mistresses will still find him just as attractive even with a black eye, bleeding lips and busted teeth.

 





Jon Stewart on Glenn Beck’s Gold Interest

Jon Stewart on Glenn Beck’s Gold Interest

H/t to Barry Ritholtz

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Beck – Not So Mellow Gold
www.thedailyshow.com
Daily Show
Full Episodes
Political Humor Health Care Crisis

 


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Finreg I: Bank capital and original sin

This is a very thoughtful article on the banks, the financial system, government and regulation. I share Steve’s feeling of bleakness, maybe more so, because while Steve suggests workable solutions are possible, it seems to me that given the political money system controlling government, real, long-lasting solutions are unlikely. (My yellow highlights.) - Ilene

Finreg I: Bank capital and original sin

God warning Adam and Eve

Courtesy of Steve Randy Waldman at Interfluidity

I have always flattered myself that I would someday die either in prison or with a rope around my neck. So I was excited when The Epicurean Dealmaker invited me to write about financial regulation and crosspost at a site called The New Decembrists. But my views on the topic have grown both more vehement and more distant from the terms of the current debate (such as it is), and I’m having a hard time expressing myself. So I’ll ask readers’ indulgence, go slowly, and start from the beginning. This will be the first long post of a series.


Banks are not financial intermediaries. Their role is not, as the storybooks pretend, to serve as a nexus between savers with capital and entrepreneurs in need of capital for economically valuable projects. Savers do transfer funds to banks, and banks do transfer funds to borrowers. But transfers of funds are related to the provision of capital like nightfall is related to lovemaking. Passion and moonlight are often found together, yes, and there are reasons for that. But the two are very distinct phenomena. They are connected more by coincidence than essence.

The essence of capital provision is bearing economic risk. The flow of funds is like the flow of urine: important, even essential, as one learns when the prostate malfunctions. But “liquidity”, as they say, takes care of itself when the body is healthy. In financial arrangements, whenever capital is amply provided — whenever there is a party clearly both willing and able to bear the risks of an enterprise — there is no trouble getting cash from people who can be certain of its repayment. Always when people claim there is a dearth of “liquidity”, they are really pointing to an absence of capital and expressing disagreement with potential funders about the risks of a venture. Before the Fed swooped in to provide, 2007-vintage CDOs were “illiquid” because…
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Americans More Pessimistic On Economy, Nation’s Direction

Americans More Pessimistic On Economy, Nation’s Direction

Thumbs Down Gesture

Courtesy of Mish

 

A Bloomberg survey shows Americans Grow More Pessimistic on Economy, Nation’s Direction.

Americans have grown gloomier about both the economy and the nation’s direction over the past three months even as the U.S. shows signs of moving from recession to recovery.

Almost half the people now feel less financially secure than when President Barack Obama took office in January, a Bloomberg National Poll shows.

Those concerns have put consumers in a miserly mood as they head to the mall for holiday shopping, with half the country planning to spend less on gifts than last year and few buyers willing to run up credit-card debt for Christmas.

The mood among members of Obama’s own Democratic Party has shifted most dramatically: While Democrats remain the most positive, the proportion saying the country is on the right track dropped to 58 percent from 71 percent in September. Among independents, 26 percent say the country is on the right track, down from 29 percent in September.

“The recession may be over, but the administration seems to be losing the battle when it comes to winning the hearts and minds of Americans,” says Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “This is important because the spending of consumers is the main factor that will turn the economic recovery into a self- sustaining one.”

Poll Highlights 

  • Only 31 percent expect the economy to improve in six months
  • 81 percent say persistently high unemployment is a major threat
  • 60 percent say stimulus plans have no effect or actually hurt the economy
  • Only 26 percent feel more secure now than when Obama took office
  • Only 33 percent view Bernanke as favorable
  • Only 8 percent plan on spending more for the holidays, while 47 percent plan on spending less.

Click here to see the Bloomberg National Poll questions, answers, and methodology.

Mike "Mish" Shedlock


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Wrap-Up – Too Bearish or Just too Early?

Well, we've been here before.

Once again the market has staged a spectacular recovery on virtually no volume and mixed news.  While we went into last weekend just a little bit bearish (about 55%), this Friday the market topped out about 150 points higher than last Friday, closer to the top of our range so we went much more bearish on Friday, perhaps too bearish considering this was the best Friday finish since Nov 6th and we haven't had a down Monday since October 26th.

Our plays this week turned very bearish to balance out the more bullish set we took in the first week of the month (see last week's Wrap-Up).  Almost all of our bullish trade ideas have already made 20% and some are way over our goals as we were able to cash out a lot more winning bullish plays and press our bearish plays, turning the $100K Virtual Portfolio extremely bearish and twice as invested as last week.  Big winners from the last wrap-up included:

  • DIA $104 puts sold at $2.25, now $.55 – up 75%
  • DIA $103 puts sold at $1.65, now .30 – up 81% 
  • SONC Jan $10 puts sold for .85, now .55 – up 35%
  • DIA $104 puts sold at $2.55, now $55 – up 78%
  • BAX artificial buy/write (too complicated to summarize) – over goal already!
  • AMZN Dec $150 calls sold at $4, now .10 – up 98%
  • USO Dec $39 puts at .82, now $3.50 – up 326%
  • FXP Dec $8 puts sold for .70, up 64%
  • OIH Dec $120 calls sold at $3.25, now .27 – up 92%
  • AMZN Jan $140/135 bear put spread at $2, now $3.60 – up 80%
  • IWM $60 puts sold for $1.30, now .72 – up 44%
  • NSH June buy/write at $18/20.25, now $25.86 – ahead of goal  
  • AMZN Dec $145 puts sold at $5 (average), now .25  – up 85%
  • AMZN Dec $150 calls sold at $3, now .10 – up 96%
  • TBT June $42/26 bull call spread at $1.80, now $2.60 – up 44%
  • TBT June $42 puts sold for $2.15, now $1.30 – up 40% (pair trade)
  • SRS Dec $8


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On the Value in Housing

On the Value in Housing

Glazier and paper hanger

Courtesy of Jake at Econompic Data  

Felix Salmon recently made the case in his post Against Liquidity:

Investing shouldn’t be about safety: it should be about calculated risk.

and…

Liquidity is not ever and always a good thing.

And I completely agree. But both of those points seem to be in conflict with a more recent post of his The Housing Speculators Return. I don’t always agree with Felix Salmon, but I typically understand his thought process. That is not necessarily the case in this post. Per Felix:

It bears repeating: homes aren’t investments, they’re places to live. If you can buy a nice house for less than you’d otherwise pay in rent, then go ahead and buy — no matter what the market looks like, or where mortgage rates are. On the other hand, if you’re looking for an “investment”, stick to securities. You can sell those much more easily when you need some money, and they won’t drive you into possible bankruptcy and homelessness if they go down rather than up.

Let me go through my grievances with that one paragraph, then I’ll detail my personal thoughts on housing more broadly.

Homes Are "Only" Places to Live

In addition to living in a home, a house can serve as a long term investment that produces income (i.e. he makes just that point with his alternative to owning… RENTING, which is just paying another homeowner for the right to live in that home).

Rent Must Be More than a Mortgage Payment to Justify Owning

This ignores the fact that rents (typically) rise, while a fixed rate mortgage payment doesn’t. BLS data shows that the cost of renting typically rises by the rate of inflation over the long run.

Thus, if you plan to live in that home for a long period of time (there were previous generations who bought to live in home the rest of one’s life), then as long as rent moves higher than a mortgage at some point in time, you may be better off (not to mention the tax benefits of writing off interest). That includes after 30 years when a homeowner no longer has a mortgage, but renters…
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ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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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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