Archive for October, 2010

Drinks With the President.

Courtesy of madhedgefundtrader

President Barrack Obama certainly arrives at a party like a rock star. Three silver GM Suburbans flanking an armored black Cadillac limo screech to a halt with lights flashing, and all of the roads in the immediate vicinity closed to traffic. A dozen sunglass bedecked Secret Service agents leap out, immediately scanning the perimeter. The president bounds out and briskly walks to the plush Atherton home, where he enters through the kitchen of former EBay executive and California state controller, Steve Wesley.

For a mere $30,400 donation to the Democratic National Committee, I received a sweaty handshake and an assembly line photo with the once South Chicago community organizer. A Koch brother I am not. The event came on the heels of the President’s 45 minute private audience with the Golden State’s own version of royalty, Apple’s (AAPL) Steve Jobs.

It was all part of a broad swing through the Western states to rally the faithful, and to top off the DNC’s coffers, which has raised a record $50 million in California this year. Perhaps Obama just wants to be among friends. While his national job approval rating languishes at 47%, it is 55% here, and an eye popping 72% among Democrats.

With a short two weeks until the election, the online betting site, Intrade (click here for their site at http://www.intrade.com/ ), is giving an 95% probability that the Republicans will win control of the house. But to me, this is all starting to take on the flavor of a consensus trade that I love to fade. The Democratic Party has become the BP of American politics. Expectations of its imminent demise may be greatly exaggerated, but not for the reasons you expect.

Since the 2008 election, some 4 million “millennials”, “generation Y’s”, or “echo boomers” have gained the right to vote. Have you spoken to your kids lately? The only issues they care about, the environment, global warming, gay rights, and ending the war, are overwhelmingly Democratic ones.

Another 2 million immigrants have also joined the rolls. Thanks to the racist rants by many Tea Party candidates – last week Nevada Senate candidate Sharon Angell said she thought many Mexicans looked like Asians—I would be surprised if any of these voted conservative.

Sure, only 30% of these groups vote at all. But when election results swing on…
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Stock World Weekly

Hello Everyone and Happy Halloween! This weeks’ newsletter is available here.  Feedback much appreciated. 

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Bank of England Head Mervyn King Proposes Eliminating Fractional Reserve Banking

Courtesy of George Washington

Washington’s Blog

Mervyn King – the governor of the Bank of England – has proposed abolishing fractional reserve banking.

As the BBC noted last week:

Mervyn King, the governor of the Bank of England, has tonight made a big intervention into the debate on banking reform. In a speech at Buttonwood, New York, he [listed] much more radical proposals.

 

1. Forcing the riskiest banks to hold capital “several times the magnitude” of requirements at present.
2. The Volcker rule-style enforced breakup of banks into speculative and non-speculative arms.
3. The “Kotlikoff proposal”, which forces banks to match each pool of risks with a requisite amount of capital, preventing losses in one spilling over into another.
4. Stunningly, Mervyn King imagines the “abolition of fractional reserve banking”:

 

“Eliminating fractional reserve banking explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy. If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not co-exist with risky assets.”

 

King does not advocate any of these radical plans – but the fact that he goes out of his way to list them, and to place them on the agenda of the UK’s Independent Commission on Banking, means that we are not yet at the end of the debate about long-term reform of the banks.

 

***

 

Beyond the technicalities, the fact that a central banker in a G7 country is prepared to imagine such outcomes is itself significant.

Moreover, King wrote to Ben Dyson and stated:

You suggest that banks should be forced to conform to the underlying purpose of the 1844 Bank Reform Act. You might be aware that I have said publicly that I think ideas in this spirit – such as those advocated by John Kay – certainly merit serious consideration in the debate as to how we reform our financial system. I remain sympathetic to these views. But as I said in my previous letter, I do not want to prejudice the outcome of the Banking commission’s deliberations. Now the Commission has been set up, I think we


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FX Intervention Fright Night?

Courtesy of Tyler Durden

Whoooosh… or just another DXY flash crash? If this was indeed a BoJ intervention, it is the worst money spent by a central bank in the history of Keynesianism, with a half life of less than 30 minutes. Elsewhere, gold is predictably nearing its all time highs.





Did The EUR/USD Just Flash Crash?

Courtesy of derailedcapitalism

From DerailedCapitalism:

 

At 8PM EST tonight the EUR/USD cross sold off 80pips in seconds only to rebound 60pips. Is this another mini flash crash causing ripples through the fx markets with HFT’s going haywire? DXY spiked to 77.30. At what point are market regulators going to realize this gambling house is broken and there is no longer any creditability in capital markets?

EUR/USD

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DXY

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Iran Announces It Has Converted 15% Of Its $100 Billion+ In FX Reserves Into Gold

Courtesy of Tyler Durden

As of today, one of the world’s top oil exporters announced that has exchanged about $15 billion of its FX reserves into gold. Earlier, Iran announced that the country has converted about 15% of its foreign exchange reserves into gold, and “will not need to import the metal for the next ten years.” There is your mystery buyer to all that gold the IMF was selling in Q3… And since Ahmadinejad said that Iran’s total FX reserves exceed $100 billion, the amount of gold in stock held by Iran is more than $15 billion. Which is equivalent more than 345 tonnes at a closing price of about $1350. Which also means that the WGC’s official gold holdings are in dire need of an update, as Iran does not appear anywhere on the IMF’s listing of official gold holders, and with over 345 tonnes, it would make Iran a top 15 holder of the yellow metal.

From Bloomberg:

Iran has changed some 15 percent of its foreign exchange reserves into gold and will not need to import the metal for the next ten years, Mehr reported, citing Central Bank Governor Mahmoud Bahmani.

Iran’s gold reserves have “multiplied several times” in the past two years, Bahmani said in a report published late yesterday by the state-run news agency.

Bahmani gave no specific figures, only saying the country consumes 30 tons of gold a year and that the central bank will have “ample supplies for the next 10 years” even if it doesn’t increase its gold holdings further.

Iranian President Mahmoud Ahmadinejad said yesterday his country’s foreign exchange reserves exceed $100 billion.

 





A Look At Global Economic Events In The Upcoming Most Important Week Of The Year – All Aboard The QE2!

Courtesy of Tyler Durden

Week in review

Intense speculation over what the Fed will do and uncertainty over how much is priced kept markets trading in a relatively tight range through most of the week. European peripheral spreads have started widening again as sovereign concerns have started to re-surface. Reports late Friday afternoon that the Portuguese government has reached an agreement with the socialists on the 2011 budget should provide some relief to markets. Reports that the US Administration is considering extending middle income tax cuts permanently and higher income tax cuts temporarily may also provide some boost to sentiment.

Week Ahead

The macro calendar does not get any more packed than this. We kick off with the usual monthly global PMIs, in particular the China PMI and US ISM (slight moderation is expected for both, more details below). We get our final GLI reading as well, which is important to watch for confirmation of stabilizing momentum. The initial reading showed a positive uptick after four months of negative momentum.

The US mid-term elections is on Tuesday, followed by the all important FOMC meeting on Wednesday. Our US economists’ baseline view is for a program of about $500 bn in Treasury purchases, to be accomplished over a period of about six months, but it is quite possible that a program of similar implied size might instead be specified in terms of a monthly purchase rate. In either case, there should be a clear indication that the program could extend beyond the initial commitment. Ultimately, our US economists expect the cumulative easing to reach a possible $2trn..

We also have important central bank meetings on either side of the FOMC decision, with the latter weighing heavily on the individual response functions. The RBA meets the day before the FOMC and it is likely that they hold rates steady (although our Australia economists think they go ahead with a hike in December). BOE, ECB and BOJ are all scheduled to meet soon after the FOMC. The BoJ meeting was advanced to allow an earlier start of its asset purchases program. For the MPC, our UK economists do not expect an announcement of additional QE. Policymakers around the world will no doubt be closely watching the market reaction following the FOMC decision.

We end the week with the key non-farm payrolls release. We expect the headline at +50k and private sector…
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ZOMBIE HOUSEHOLDS

ZOMBIE HOUSEHOLDS

Courtesy of The Pragmatic Capitalist 

By Annaly Capital Management

Thursday’s third quarter GDP release provides a ton of fodder for the data dorks among us. There will be more to follow on this in the October monthly commentary, but today we’ll look at just one of the stand-out drivers of GDP in Q3: private residential investment. The chart below shows its astounding rebound, which added a full 0.53% to the 3.5% GDP number.

The percentage change becomes less impressive when viewed in the context of the dollar level of activity, but it also starts to look like the beginning stages of a typical recovery in housing. Compare the current reading to the previous bust in the late 1980s and subsequent boom that began in 1991. Are we in store for a similar road back to “normal”?

How comparable are the two situations, the early 1990s and the late 2000s? What happened in 1991 to help put in a bottom? First, mortgage rates came down from over 10% in 1990 to 7% by 1993. Second, household debt as a percentage of GDP was 60% in 1990. The ratio of household liabilities to disposable personal income was 85%. The respective levels of these metrics are now 95% and 130%, each at or very near all-time records of indebtedness. The tailwinds for the housing market were substantial in the early part of the previous decade: interest rates were coming down and borrowers had room to expand their debt loads. The official response during this crisis has been an attempt to artificially engineer the same tailwinds that existed naturally before. The Federal Reserve has purchased around $977 billion of agency MBS in an attempt to bring mortgage rates lower (despite already historically low rates). Tax credits have been created and expanded to incent already heavily-indebted households to take on more debt. So far, it’s worked!

low angle view of two young men and women coming down a buildings steps

We’ll close with a great quote from James Aitken, of Aitken Advisors, that sums up the situation perfectly:

“The primary difference between Japan and the United States at this point of their respective monetary malaises is that whereas Japan created a nation of zombie corporations, the United States is creating a nation of zombie households.”





Super Sectors By John Nyaradi

Courtesy of John Nyaradi

I don’t usually recommend books in a blog post but I make exceptions for exceptional books. John Nyaradi’s book “Super Sectors” just came out and I believe that it is a useful book for anyone wanting to really take advantage of rising industries and sectors. He includes a section in the book containing interviews with top advisers and industry experts (including yours truly) which adds a wealth of information that you won’t find in other books.

Buy the book here, enjoy! www.supersectors.net





Researchers Find the ‘Liberal Gene’

Researchers Find the ‘Liberal Gene’

By Jeremy A. Kaplan, FoxNews.com

Deoxyribonucleic Acid (Dna) Is A Nucleic Acid Usually In The Form Of A Double Helix That Contains The Genetic Instructions Specifying The Biological Development Of All Cellular Forms Of Life And Most Viruses. Dna Is A Long Polymer Of Nucleotides And Encodes The Sequence Of The Amino Acid Residues In Proteins Using The Genetic Code, A Triplet Code Of Nucleotides. Illus Dna Deoxyribonucleic Acid Biotech Research 523-153 Cmsp Custom Medical Stock Photo

Don’t hold liberals responsible for their opinion — they can’t help themselves.

A new study has concluded that ideology is not just a social thing; it’s built into the DNA, borne along by a gene called DRD4. Tagged "the liberal gene," DRD4 is the first specific bit of human DNA that predisposes people to certain political views, the study’s authors claim.

And the key to it all: Liberals are more open, said lead researcher James H. Fowler, a professor of both medical genetics and political science at the University of California, San Diego.

"The way openness is measured, it’s really about receptivity to different lifestyles, for example, or different norms or customs," he told FoxNews.com. "We hypothesize that individuals with a genetic predisposition toward seeking out new experiences [a measure of openness] will tend to be more liberal" — but only if they had a number of friends when growing up, Fowler cautioned.

This isn’t a typical gene association study," he said. "There’s a combination of genes and environment that matter."

Continue here >

Source: Friendships Moderate an Association between a Dopamine Gene Variant and Political Ideology

Jaime E. Settle,Christopher T. Dawes,Nicholas A. Christakis and James H. Fowler (2010).
The Journal of Politics, Volume 72, Issue 04, October 2010 pp 1189-1198
http://journals.cambridge.org/action/displayAbstract?aid=7909320





 
 
 

Zero Hedge

Belgian F-16 Pilot Ejects Before Fiery Crash, Gets Caught In High Voltage Power Lines

Courtesy of ZeroHedge View original post here.

A Belgian F-16 fighter jet crashed in Northwestern France on Thursday, leaving one of its pilots hanging by his parachute from high voltage electricity lines, according to the BBC

Both pilots had minor injuries after they ejected from the plane, which clipped the roof of a house and crashed in a field near Pluvinger. The pilot stuck in the 250,000 volt power lines was brought down after a two hour rescue operation by French emergency ser...



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Phil's Favorites

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Digital Currencies

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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The Technical Traders

Is A Price Revaluation Event About To Happen?

Courtesy of Technical Traders

Skilled technical traders must be aware that price is setting up for a breakout or breakdown event with recent Doji, Hammer
and other narrow range price bars.  These types of Japanese Candlestick patterns are warnings that price is coiling into
a tight range and the more we see them in a series, the more likely price is building up some type of explosive price breakout/breakdown move in the near future.  The ES (S&P 500 E-mini futures) chart is a perfect example of these types of price bars on the Daily chart (see below).

Tri-Star Tops, Three River Evening Star patterns, Hammers/Hangmen and Dojis are all very common near extreme price peaks and troughs.  The rea...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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Insider Scoop

10 Biggest Price Target Changes For Friday

Courtesy of Benzinga

  • Credit Suisse raised IHS Markit Ltd (NYSE: INFO) price target from $68 to $76. IHS Markit shares closed at $67.75 on Thursday.
  • Wedbush boosted Restoration Hardware Holdings, Inc (NYSE: RH) price target from $170 to $185. RH shares closed at $169.49 on Thursday.
  • Mizuho lifted Seagate Technology PLC (NASDAQ: STX) price target from $46 to $50. Seagate shares closed at $52.94 on Thursday.
  • UBS raised the price target for Weight Watchers Intern...


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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

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

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

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

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

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

We shall see. 

...

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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

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



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

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

Are you ready to retire?  

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

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

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



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Promotions

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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