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Wednesday, June 7, 2023



Meaningless Monday – Rethinking that Round Earth Idea

What if the World is flat?

It sure looks flat.  You have to go to space to see that it's round, even in an airplane it looks pretty flat, doesn't it?  Well, fiat currencies are like that too.   We talk about Quantitative Easing as if the World is flat because Americans (who are trained to be self-centered to the point of Xenophobia from birth) don't think of their connections to other counties on this planet.  To understand the American investor is to look at this map and understand that it is not a joke

So investors in the US discuss Quantitative Easing as if we can simply devalue the dollar and every other country on Earth has no choice but to bend over and accept our worthless currency because they are lucky we even bother to trade with them.  To most American's, it's still 1950 and we just won the war and Europe better kiss our ass and the rest of the World better fear us or they're NEXT.  That pretty much sums up our next 50 years of diplomacy, doesn't it?  

That is the mindset that now permeates investors attitudes towards our currency which is, in fact, the World's Reserve Currency.  What does it mean to be the World's Reserve Currency?  Well, nothing more than the fact that it is held in significant quantities by governments and institutions as part of their exchange reserves.  That is what our government and the Fed are now taking advantage of by printing Trillions of additional dollars and devaluing our currency, which is currently 62% of the World's reserve holdings, although that is down from 71% in 1999 and 64% in 2008.  

That's the problem the rest of the World faces as we race to devalue our own currency – they simply can't replace it fast enough to stop us.  The only real alternative to the dollar is the Euro, which makes up 27.3% of the World's reserves, next is the Pound at 4.3%, followed by the Yen at 3%.  Let's say, for argument's sake, there is an even $100Tn in the World.  That means $62.2Tn of it is the US Dollar and $3Tn is the Japanese Yen.  No matter how irresponsible you think the US is being with it's currency – you simply can't buy enough Yen to replace them.  There are only $27.3Tn in Euros (and they don't look like a good bet, do they?) and $4.3Tn in Pounds.  What has been happening?  Well between 2008 and 2009 $1.9Tn was moved out of the Dollar (3%) and $900Bn went into the Euro (3.4%), $300Bn into the Pound (7.5%), the Yen LOST $100Bn (3.2%) and "Other" currencies picked up $800Bn (36%)!

A 36% increase in "Other" currencies, which flew from 2.2% of global reserves to 3.1%.  Others are Rupees and Yuan/Renminbi and even Rubles as well as Aussie Dollars and Canadian Loonies but the sum total of ALL those currencies is just 3% of Global Reserves.  It is tremendously destabilizing to those countries to have their currencies go up in value as it makes them all less competitive as exporters.  That is the goal of the US at the moment – to create a monetary sink-hole of such mass and gravity that it begins to actually suck global trade dollars in – instead of spitting endless amounts of them out, as has been the norm for the past few decades.

Can creating a black currency hole really save our country, or do we risk being sucked in as well?  Clearly the "Greenspan Model" we've been running has been nothing but destructive for America as we have exported 10% of our labor demand to China, who have accumulated $2.5 TRILLION dollars of our currency reserves while we have run up $9Tn of debt since Al Gore lost his election bid in 2000, despite getting the majority of the popular vote.

Why bring up Gore?  Well it was Gore who wanted to protect both jobs and our "lock box" but that lock box was raided and our Social Security SURPLUS was used to fund a decade of runaway Government spending that has gotten so extreme that we now need to borrow over $100Bn a month just to keep the lights on in this country.  $100Bn is more than the ENTIRE GDP of all but 67 countries on this planet and that's what we need EVERY MONTH to keep up the pace of our spending.  Annually, our $1.2Tn deficit is the ENTIRE GDP of all but 14 countries on Earth (about Canada or Spain's entire GDP).  

Our monetary black hole has already sucked up all the money on Earth and that's why 72.1% of our Treasuries are now sold to ourselves – we've pushed the rest of the World past their limits and $4Tn of our debt has been dumped on the Social Security Trust since the "lock box" was raided and now we are devaluing our currency at a rate of 1.5% PER MONTH in order to keep up the illusion of solvency but we're really not fooling anyone BUT OURSELVES! 

It's US we owe the money to.  Sure China has $2.5Tn of our debt and other countries have perhaps $8Tn more but the other $30Tn in the world are held by Americans and the Government's insane scheme to devalue our currency by 10% in order to borrow 10% more money is costing us $3Tn for every $1.5Tn we borrow.  That's CRAZY!  

Of course crazy isn't just our current policy – it seems to be what the voters aspire to as well.  Unlike Europe, we do not have serious policy discussions about taxation and Government spending – instead we have two parties that totally disagree with each other on every issue other than maintaining the status quo which is destroying our nation day by day.  

The MSM is no better, with nothing but polarizing opinions as if the whole World is right or left with no room in the middle for rational thought.  On Friday, I called Newt Gingrich an idiot and my patriotism was subsequently questioned – that's the way politics are played in America these days – the way they were played under Joe McCarthy in the 50s… 

Unfortunately, the lunatics have clearly taken over this asylum and we continue to create dollars at the pace of about a dozen Bahamas per month.  That's right, the entire annual GDP of the Bahamas is $9.3Bn and we drop 12 times that in debt load on a monthly basis, going 144 Bahamas deeper into debt every year!  Our debt and deficit is now so massive, that we need to measure it in terms of the GDP of other nations because 1,500,000,000,000 is fairly inadequate to grasp the scope of our deficit spending.  Suffice to say that it's more money than exists unattached on the planet Earth so, in order to go further into debt – we have to create more money.  

As I mentioned, because other countries aren't as stupid as we imagine, we need to create 3 dollars in order to borrow 1.  That gives us $1 more debt (out of 10) and $2 less value to our remaining pile.  How long can that go on?  One reason our currency creation is so inefficient is because the people we are giving the money to, the Banks, aren't willing to invest it in America either.  They have their own debt holes to fill and most of the money we give them goes into a derivatives ($200Tn and rising) juggling scheme that makes them look solvent and masks their very, very questionable asset bases.  

The banks take the money the Fed is dumping on them and speculate in commodities and foreign currencies and THEN they buy some TBills in order to keep the treadmill running.  This forces asset bubbles in things like gold and oil but they too are a complete illusion because it's only the idiots with dollars that are buying them – the rest of the World stopped chasing shiny metals in June but the flat-Earthers in the US just didn't seem to get the message.  Here's gold priced in Euros, which is DOWN 8% in 3 months!

Our stock markets, of course, look just even worse – down 10% to the Euro in the last 3 months, but that won't stop the MSM from engaging in the Grand Dellusion that they are feeding to the voters this month – that everything is somehow going according to plan (what plan?) and happy days are just around the corner – as long as Americans can keep pretending the World is not round at all but a neat little square with our great nation on top and in the center.  

Well, there's a lot to be said for getting out while you're on top – or at least while there are still enough people fooled into believing you are on top.  As the Joker says in the "what plan?" link above – Nobody panics when things go according to plan, EVEN WHEN THE PLAN IS HORRIFYING!

That's what we have now, a horrifying plan to prop up the US Economy based on the belief that the US is the center of the universe and that the rest of the World will be fooled by our fiscal nonsense.  As you can see from the gold chart and the S&P chart – we stopped fooling them a long time ago.  What will happen when we can no longer fool ourselves?  

For my take on the markets today, see the weekend's Member Chat but, as indicated above – it's a meaningless semi-holiday in America – a day the bulls can only pray will be quiet, because all my charting indicates that real activity is very likely to come to the downside this week.  



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The QE2 hype is pumping the markets but now the hype is to good to be true. QE will not solve any real problems and I think Ben knows that because QE1 didn’t do anything other than put off the bank problem and send stocks up. The market may react tomorrow and if we go down it will be fast and ugly. The shorts are still not taking the sqeeze.

aryeh – / VECO $36 is for new entry.  $32 is for existing to roll into. 

The market is definitely a challenge… think I will take the afternoon off – on my way to San Jose !

OK, so I will not sell into Chinese based stock run-up .  Does this hold for other Chinese sectors as well? Or is just the solar energy group?

I am quite bearish in my portfolio waiting for that market correction (I am short AAPL 280, AMZN 155, NFLX 150, GOOG130, QQQQ 50, SPX 1160 and GLD 128 some in Oct some in Nov). My AAPL and GOOG shorts were from pre PSW. Just in case the correction does not pan out in the next few weeks what do you recommend. Should I roll out the positions to January or do some bullish hedging. Thanks..

Phil – somebody buying SVU (which I brought up last week) and now RICK and FEED.   How would you play RICK here?

jvest/Phil–how does one hedge in an IRA using DIA, QID,SDS,FAZ without having to do a buy/write or just buying the DIA puts or the SDS calls  etc? sorry if it is a basic question that I should already know, also maybe I am using the wrong lingo in trying to explain the positions–would love to go into more detail after hours

JRW- puts- Thanks- I am also still holding and actually rolled them up into the stick on Friday so I could enjoy a bit more pain.
Again, curious- given your charts,etc.- what was it that triggered the put purchase on Friday? A particular indicator or level broken or just pulling a Phil and "putting your foot down"?  

i noticed that SLB hasn’t done much despite the contract in Eurasia announcement last week–what are your thoughts on that? also i have some info on buying/selling/storing allocated positions in metals in switzerland if you are interested–

Well, that’s interesting.  Now JRW’s color gone (before all the comment boxes were inside JRWs gold).   Must be my browser having trouble with Gold!


The FDA is now the new ‘No’.  JAZZ rejected as well.  Shares are UP 5%.  Really does not affect them much, b’c it is already prescribed off label.

 QE2 – i think the fed realizes from the action in the past several weeks that they will (unintentionally?) push up commodity prices such that consumer goods price increases will outweigh the positive effects that monetary easing would otherwise have on the economy. I think we will see some rhetoric in the coming days/weeks designed to try and remove this premium from the commodity markets. They are walking a very fine line, and i think they know it. 

I posted this to you last week, but it sounds like you were traveling.

October 7th, 2010 at 12:53 am | Permalink  
datuu, what was the name of the book on international asset protection, and author? I worked for several years to establish an offshore trust several years ago. Tens of thousands and a lot of time and I came up with nothing that really functioned the way I had hoped. Thanks.

gel – do you? Dionne Warwick – Do You Know the Way to San Jose ?  Wonderful voice, Ah, those days……

TBT crashing, not looking good for bond tradeing tomorrow. What if QE isn’t giant now, not good for markets, CNBC is touting great earnings to come while the rest say not so good and what happened last quarter when they were good? QE is already backed in so almost anything will cause disappointment.

Savi – earlier you said you can do buy/writes and short puts. I assume that means you can sell calls against stocks you own, and you can sell naked puts as long as you have enough cash on hand to cover any assignment. Is that correct?

jvest-yes that is correct

Savi – that’s normal for a non-margin account. You can still do all the buy/writes and hedges that Phil recommends, you just won’t have as much leverage with the naked puts as the margin accounts have. One way to combat this is to buy far-out-of-money puts to protect your naked put sales (so if you sell for example a $30 put, you buy a $20 put along with it).

 I created  a trading blog this weekend. Its a chart site with a few charts I like and plenty of links to charting and trading sites. I follow a lot of traders on Stocktwits. Check it out. 
If you have a trade idea or a list of stocks you`re watching, go to the SUBMIT button at the bottom of the page and you can post to the site. You can post photos or video, text or links. I have to moderate it for it to be published, but I`ll check it during the day if it turns out there`s any interest. 
I find this  PSW  community is extremely diversified with many interests: different hobbies, businesses, cooking, houses overseas, travel,  their homes, their families, cars…etc etc. Got something you love to talk about or pictures to share? … post it and we can get to know each other better..
Only rules…..NO POLITICS!!!… a friendly site….no aggressive, insulting posts, and keep the heavy macro economic discussions or philosophical debates on PSW. If you`ve  got something you want to share, go ahead. Maybe you`re a poet or an artist, maybe a cook or a beer connoisseur.  Give it a shot. My e-mail is there if you have troubles posting.  Its a work in progress so be patient. Most of the posts will open up if you click them.

 WYNN is just crazy.   August revenues up 21.1% by Strip casinos over year ago…without baccarat, they would have been up 6.2%.  Most people know where that baccarat money is coming from and, along with Macau and Singapore properties, the big money is expecting a super-blowout in earnings from WYNN and LVS.   Living in Las Vegas, I think August (which is normally a very slow month) is a blip and that strip casinos are a very long way from recovering.  Visitors increased 3.5% from last year, while hotel occupancy is 82%, up .6%, at room rates that are up 4%.  These modest numbers are relative to last summer, which was simply horrendous for LV businesses.  There has been no move to hire more people due to better business prospects, so this action seems quite overdone.   Maybe WYNN and LVS are becoming a currency play….a way to recover our money back from the Chinese at the tables, in  their currency brought back into cheaper dollars!  Way to go, Stevie and Shelly!  Lucky 8’s!
By the way, I loaded up on short WYNN OCT 110 Calls at .46…..not quite Lucky 8’s, but we’ll see on Friday!

Phil….I think you may have missed your true calling…writing for John Stewart and the Daily Show. 
Question……what about Bull Put Spreads instead of Bull Call?  I know you have a good reason for always using Bull Calls.
Thanks a million for everything!

 JRW – What do you make of this? Big headfake before the push, or are we headed back to where we started? 


I’m just thinking that a lot of things could go wrong by the middle of November; and if I’m wrong, I lose 1/2 and that’s not a lot of money.

Could you help me properly hedge the positions I have on DNDN?
(10 contracts) Jan ’11 $40 calls (in at 5.87) / now $5.10
(10 contracts) Jan ’12 $40 calls (in at 13.22)/IRA now $10.90
(10 contracts) Jan ’12 $100 calls (in at 2.52) / now .53
500 shares bought at $36.62/ now $39.90
In the near term, we should have a good idea by November what the CMS’s agenda is. If they are trying to limit the coverage of Provenge, I think the stock price will be range-bound  between $40-$50 until the issues are settled. If not, the stock could go to the mid 50’s by next summer and increase further upon completion of new plants and increased production. I am happy with the 20 $40 calls and 500 shares for the long term. Need to salvage the $100 ’12 calls. Any advice would be appreciated. Thank you.

 Hi Phil – I got this question in another comment section, which you may not see:   

"Phil, I am quite bearish in my portfolio waiting for that market correction (I am short AAPL 280, AMZN 155, NFLX 150, GOOG130, QQQQ 50, SPX 1160 and GLD 128 some in Oct some in Nov). My AAPL and GOOG shorts were from pre PSW. Just in case the correction does not pan out in the next few weeks what do you recommend. Should I roll out the positions to January or do some bullish hedging. Thanks.."

Thanks ben1be. I will stopping by….  🙂

Sorry for posting twice. Traveling home from NY in car reception not great.

Anyone else wondering if the bot is going to have to buy everything like last Friday to keep up over 11,000?  People hitting the exits a little early maybe….
Thanks Phil, took the profits on the SSO as my bearish bets have all moved out to Nov & Jan.  Appreciate the input.  Also, took profits in a few other verticals that were well in the money, but who’s underlying could be vulnerable to wild market movement….ie BRCM Jan 31-34 spread, took my 30% and walked.

jvest–but on the SDS QID DIA  hedges you normally do not buy the stock right?–it is most always a bull/call spread and not a buy/write–so I cannot do the bull/call in the IRA but can the buy/write
but  buying the far otm puts to protect the naked puts is brilliant – never thought of that
you know what they say about little knowledge is dangerous….in my case it might be cataclysmic
Tx so much for taking the time, you are a real sport—Tx again

 That was interesting – we lost 11k, 2400, and 1165 on no volume….

 PCLN max pain is 290. I hope they hit it.

I twist and turn it but do not get to 5.49. some one nows how Phil get to this number thks
RICK/Terra – Yeah I like them.  $7.32 for the stock and you can sell the  May $5s for $2.50 and the $7.50 puts for $1.35 and that’s net $3.47/5.49, which is plenty of upside and discount for 8 months

Well, in AH trading…right back to where we started from…..

"Meaningless Mondays" indeed

What stock(s), coming into this earnings the next 2 weeks, do you think are overbought and the street is expecting a number they cannot obtain?  I know you feel the overall market is overbought, but do you have any specific candidates for this earnings season.

Pharm / ALXA – should i dump my remaining position or hold?  I hold stock outright.  thanks. 

Yodi/Rick Terra: getting to $5.49 :
$7.32 for original purchase of the stock less$3.85 for selling May  $5 calls and $7.50 puts gets you to net $3.47. Since you sold $7.50 puts, if they are "put to you" at $7.50 strike price, your net result is first buy at $3.47 plus second buy at $7.50 which averages out to $5.49

HI Phil what is the SSO play last week for 1000% up side, I am net short right now, would like to add these hedge if we do not get a correction soon, thx

Phil–have to hold 401K  at Fidelity  and  can do buy/write and straddles –and also sell puts  
I can change the IRA rollover to TOS as I assume they allow  verticals  in the IRA? Fidelity prohibits this in any retirement acct
Most of my big losses PRE PSW are due to no hedging– just to clarify to hedge in the 401k  I will have to buy, per your example,  TZA stock and then sell call and put–am I correct?


Hi Phil :  On EPD, I sold Mar. $33/ $37 bull call spread paired with Mar. $34 puts for  $1.49 net.which ius now net $3.35. Stock now at $ 41.31. Thinking of rolling to Mar. $36/ $40 bull call spread with sale of Mar. $ 38 P for net of $1.75 on $4 spread. I’m comfotable EPD will hold $40 price thru Mar. What say you? Thank you. 

Hi, Savi,
TOS is well received on this board.
I’d recommend that you open an account there.  Contact scott at thinkorswim dot com, and mention your membership at PSW.  He should give you discounts on commissions.  Then, transfer your account over to TOS.

ben1be … good luck w/ the blog site !
I will check it out …

cwan120-Tx–I will talk to Scott at TOS

OK, CRIS writeup is up and active.

ALXA/terr – I think you can safely exit stage left. 

I have 50 BMY  $25 October calls that I am considering exercising on expiry, then executing a 1/2011 Bull Put Spread, 26/30, combined with selling the 1/2011 $26..00 Calls.
At today’s numbers, would provide a credit of $4.54 on the sale of the calls and put spread, net into the stock, $23.17.
IF BMY trades at $27.00 at expiration in January I would net $19,000 if I close the position or depending on the January price of BMY I may repeat the trade.  This appears to be a 16+% yield (without one fourth of the 4.71% dividend) over 90 days, and if done over 4 quarters, could be nearly a  68.7% gain.
Any thoughts would be appreciated.
And thanks for the PCLN call sale suggestion.

nice site… who needs politics with all that interesting stuff.  Question.. Is that timber framing done with white antique oak.  I am currently building a house with an entire antique barn from Pennsylvania, that is being recycled into finish material for the interior.

QE2 debate rages on…..Why QE2 will be either a small or massive failure….and this chart is the grand-daddy of them all.  I have been harping on the velocity of money and how it is not moving in the right direction.  Now I have my proof.

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