Archive for November, 2010

As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar?

Gonzalo Lira believes the Eurozone is heading for a crash, and that "anyone saying otherwise is either stoned, works in Brussels, or hasn’t checked the European bond market action lately." As a consequence, the "smart money" starts thinking about what’s going to happen after the euro-crisis-climax — what’s going to happen to the dollar? Here’s Gonzalo Lira’s analysis. – Ilene 

As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar?

Courtesy of Gonzalo Lira

The Eurozone is heading for a crash—anyone saying otherwise is either stoned, works in Brussels, or hasn’t checked the European bond market action lately: All hell is breaking loose there.

The Euro: 
A famed, flightless bird, now extinct.

And if, as I have argued here, the Irish Parliament decides not to pass the austerity budget next December 7—that is, decides not to take the European Central Bank bailout—then hell is going to break out in Europe just in time for Christmas: Satan and Santa Claus just might be squaring off on the Rue Belliard before year’s end.

Therefore, the smart money starts thinking about what’s going to happenafter the euro-crisis-climax happens.

In other words, what’s going to happen to the dollar, once the euro goes the way of the dodo.

First, we have to understand how we got here, in order to figure out what’s going to happen next.

The Banana Republics of Europe

In the 1970’s and ‘80’s, various Latin American republics foolishly pegged their currency to the U.S. dollar.

It worked like a charm—at first. At first, all these small-fry countries took advantage of the fixed currency exchange rate to get indebted in dollars, and go off on a big-time shopping spree.

It all ended in tears, of course, when the bill came due. Chile, Argentina, Perú, Uruguay, at various times they…
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Debt Bubble Chronicles: And Heeeeere’s the European “Lehman Event”

Courtesy of Phoenix Capital Research

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Earlier this year, I noted that the European debt crisis was mimicking the US’s 2008 banking crisis almost to a T. Greece was the “Bear Stearns” issue: a minor player that was swallowed up in the drive to maintain the appearance of stability.

 

Then came the $1 trillion bailout, the equivalent of the Fannie/ Freddie “blank check”: a massive sum of money thrown at a problem meant to convey the illusion that the powers that be have everything under control and that systemic risk is non-existent.

 

During the time of my first article, I stated that all we needed now was a “Lehman event” the event which proves beyond all doubt that contagion is occurring and that the entire system is at risk.

 

Well, it looks like we’re about to get it.

 

The ink on the Ireland bailout is not even dry and already Portugal, Italy, and Spain are crumbling. The market is no longer buying the “it’s only this particular country’s problem” jibe. The notion of systemic risk is finally beginning to dawn on investors. And as 2008 proved, once panic hits, it hits in a BIG way.

 

Indeed, as ZeroHedge recently noted, the yield on the latest Ireland bailout involved interest rates for the country at 6.7%, a full 1.5% higher that the interest demanded of Greek debt. In other words, the IMF and EU view Ireland’s bailout as more risky than that of Greece.

 

Does Ireland look worse than Greece to you?

 

Country

GDP

Deficit/GDP


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US Mint Sells Record 4.2 Million American Eagle Silver Coins In November

Courtesy of Tyler Durden

In what is becoming a very sad development, the more money (pardon, monetary base) Bernanke prints, the more silver coins Americans buy. According to the US Mint, November sales of silver just hit 4.16 million ounces or coins, an all time record, since the introduction of the coin in 1986, and that does not even include the last day of the month. The number is roughly a 30% increase to the 3.15 million one-ounce Eagles sold in October, and well above the previous 2010 record of 3.6 million sold in May. So far in 2010, the mint has sold 32.8 million ounces of silver, higher than the previous full year record of 29 million coins set in 2009.

More from Reuters:

“The underlying, basic reasons for the silver market’s rise are really gold-oriented, but the speculative element of silver continues to be a big driver,” said Bill O’Neill, partner of New Jersey-based commodities firm LOGIC Advisors.

O’Neill said that a well established retail coin-dealer network helped increase sales of the silver Eagles. He called silver a “speculative playground” and does not recommend trading it due to high volatility.

Silver, gold and platinum group metals have benefited from the fiscal crises in Greece, Ireland that could also spread to other European nations, lingering worries about economic growth and inflation concerns.

Oddly, the scramble for precious metals was not mimicked in a surge for gold, which sold “only” 103k ounces,  including 99.5 one ounce coins. And to point out an error in the Reuters’ article math, the June sales were not 452,000 ounces but coins, while the actual ounce equivalent sold was 151,500 ounces. So far the most active month in US mint gold coin purchases was May when 190k one ounce gold coins were sold.

We can merely speculate that the Krieger/Kaiser plan of bankrupting JPMorgan through a popular scramble for physical is if not working, then certainly getting ever more supporters.





JP Morgan Options Player Portends Near-Term Rebound in Shares

Today’s tickers: JPM, UPS, GM, SNDK, FO & SVU

JPM - JPMorgan Chase & Co. – One options strategist expecting a near-term turnaround in JPMorgan’s shares purchased a call spread in the December contract today. Shares of the financial services firm are currently down 0.75% to stand at $37.62 in the final hour of the trading session. It looks like the investor picked up 7,000 calls at the December $38 strike at a premium of $0.80 each, and sold the same number of calls at the higher December $40 strike for a premium of $0.22 apiece. Net premium paid to initiate the bullish spread amounts to $0.58 per contract, thus positioning the trader to make money should shares in JPMorgan climb 2.55% to surpass the effective breakeven price of $38.58 by December expiration day. The call-spreader stands prepared to accumulate maximum potential profits of $1.42 per contract if shares rally 6.3% over the current price of $37.62 to trade above $40.00 by expiration day in the final month of the year.

UPS - United Parcel Service, Inc. – Bullish options traders are scooping up in- and out-of-the-money call options on UPS this afternoon. Shares of the package delivery services provider increased as much as 0.80% today to hit an intraday- and new 52-week high of $70.44. The stock is currently up 0.40% to arrive at $70.15 as of 1:50 pm. More than 25,700 option contracts have changed hands on UPS thus far today, with more than 4.25 calls exchanged on the stock for each single put contract that has traded. Near-term bulls purchased more than 1,400 now in-the-money calls at the December $70 strike for an average premium of $1.16 each. Optimists looked up to the higher December $72.5 strike where more than 13,000 calls changed hands versus previously existing open…
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QE2: Beware the Perils of its Success

Courtesy of Vitaliy Katsenelson

FYI: I’ll be traveling to NYC with my wife next week to support my upcoming Little Book. (I’ll be on CNBC’s Fast Money on Monday).  We are going to be in NYC only for a few days, but I wanted to meet my friends and my growing number of readers.  So here is my solution –  please join me for the NY  version of Cheap Talk  on Wednesday Dec 8th at the Madison Club Lounge at The Roosevelt Hotel from 2-4pm.  We had Cheap Talk get together in Omaha two years in a row, it was a lot of fun.  If you want me to sign your copy of the Little Book, I’ll bring a pen.   Here is my latest article, it discusses QE2.  It took me three weekends to write it. Hope you enjoy it.  - Vitaliy

 

QE2: Beware the Perils of its Success

Over the next eight months the Federal Reserve will conduct QE2 – quantitative easing, the sequel.  It will buy $600 billion worth of US long-term bonds in the open market, close to 7% of all Treasury securities in public hands, or about the amount the debt that the federal government will issue over that time period.

The Fed has already taken short-term rates down to zero, pushing income-seeking investors and savers to higher-yielding (lower-rated) and higher-duration (riskier) bonds.   Now, with the magic of QE2, the Fed wants to drive long-term rates down to unseen levels and push all Treasury investors (short or long) towards higher-risk assets – junk bonds, real estate, stocks, and commodities.

The Fed also hopes (that is all it can do at this point) that low interest rates will nudge businesses to invest and to hire. That’s unlikely.  The value of any asset is the present value of its future cash flow.   As my favorite philosopher Yogi Berra (allegedly) said – “In theory there is no difference between theory and practice. In practice there is.”

In theory lower interest rates decrease the rate that businesses use to discount future cash flows – making future cash flows more valuable today – and the Fed is betting on that.  In practice, however, the fickle source of lowered interest rates is not lost on businesses.  Rising debt on government and…
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Portuguese PM Response To Downgrade: “We Dot Not Need Any Help”

Courtesy of Tyler Durden

Of course, he will need not only help, but a bailout, in one week when his bonds are trading a 10%+. In the meantime, let the comedy continue.





RANsquawk Market Wrap Up – Stocks, Bonds, FX etc. – 30/11/10

Courtesy of RANSquawk Video





S&P Places Portugal On Watch Negative, May Cut A- Rating

Courtesy of Tyler Durden

This is getting ridonculous: “On Nov. 30, 2010, Standard & Poor’s Ratings Services placed its ‘A-’ long-term and ‘A-2′ short-term foreign and local currency sovereign credit ratings on the Republic of Portugal on CreditWatch with negative implications. The transfer and convertibility assessment remains ‘AAA’.” The only that matters: what does Dagong say. Our clown rating agencies are way overdue for retirement watch imminent. If the market is totally retarded, we guess the EURUSD may be whacked on this news.

Portugal ‘A-/A-2′ Ratings Placed On Watch Negative On Uncertainty Regarding The Effects Of The Proposed EU Treaty Change

Overview

    * Standard & Poor’s is assessing the proposed EU treaty changes regarding the seniority of private-sector creditors.
    * We are placing our ‘A-’ long-term and ‘A-2′ short-term ratings on Portugal on CreditWatch with negative implications.

Rating Action

On Nov. 30, 2010, Standard & Poor’s Ratings Services placed its ‘A-’ long-term and ‘A-2′ short-term foreign and local currency sovereign credit ratings on the Republic of Portugal on CreditWatch with negative implications. The transfer and convertibility assessment remains ‘AAA’. 

Rationale

The CreditWatch placement reflects our view of increased risks to the government’s creditworthiness. These risks stem from uncertainty about the government’s possible recourse to official funding and the consequences that obtaining such funding could have for the position of private-sector creditors vis-à-vis official creditors after 2013.

In 2011, Portugal’s minority government is set to implement an ambitious fiscal austerity program with an emphasis on reducing expenditures. However, we see the government as having made little progress on any growth-enhancing reforms to offset the fiscal drag from these scheduled 2011 budgetary cuts. In particular, we believe that policies the government has pursued have done little to boost labor flexibility and productivity. As a consequence of the Portuguese economy’s structural rigidities and the volatile external conditions, we project that the economy will contract by at least 2% in 2011 in real terms. The downward revision to our growth projection also reflects the fact that Portugal has not reduced its large external current account deficit during 2010.

In addition to what we view as the economy’s weak growth prospects, the large stock of Portuguese debt that non-residents hold (54% of GDP) has increased the government’s vulnerability to rising real interest rates. This contributes to the country’s large gross external financing needs and, we believe, raises the likelihood…
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China Approves Fund That Will Invest In Foreign Gold ETFs, Opening Avenue For Millions Of Mainland Investors

Courtesy of Tyler Durden

And here is the catalyst: China has approved a fund that will invest in gold exchange-traded funds outside the country, opening the door to mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation. Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund. Next stop: gold much higher as the bubble mania is really unleased in such ETFs as GLD, UGL and PHYS.

More from Dow Jones:

Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund.

“Over the longer term it should be another factor to add to gold’s support,” said Carlos Sanchez, associate director of research with CPM Group in New York.

The move is a step in the development of the financial market in China, the world’s second largest gold consumer behind India, and the No. 1 producer of the metal. It comes on the heels of an August move to increase the number of commercial banks allowed to import and export gold, broadening the domestic market beyond the five largest commercial banks.

Chinese gold imports have been climbing as the nation’s central bank started to build gold reserves in recent years and domestic interest in gold investment grew. China’s gold lobby has long pressured the government to raise its gold holdings.

A first of its kind for mainland China, the fund brings Chinese buying power to an increasingly popular way for participants to invest in gold.

Then again, China may not need to come to the US for this. They may just stay with their own completely fraudulent exchanges, where ETFs will be backed not even by paper gold, but literally by paper:

“I wouldn’t be surprised to see China come up with an ETF themselves for gold,” Sanchez said.

The investor-led gold buying--which has also sent futures to a record $1,424.30 earlier this month and boosted shares of gold miners--comes as participants are betting gold will hold its value more strongly than other holdings like the U.S. dollar or dollar- based investments.

And so talk of a gold bubble may finally resume. Of course, it will first require that…
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S&P Relishes In Its Irrelevance, Says “At The Current Time, France Deserves Its AAA Rating”

Courtesy of Tyler Durden

The escalating series of simply tragicomic news out of Europe continues. Per Reuters, “France deserves its “AAA” credit rating at the current time, the president of Standard & Poor’s credit agency told a French business daily on Tuesday. “At the current time, France deserves its AAA rating,” newspaper Les Echos quoted Deven Sharma as saying in an advance edition due for publication on Wednesday.” As we suggested earlier, France will not be downgraded by Moody’s before 2014. That means S&P will last until  France is rebranded the German Vassal Kingdom of Gaul before it notches the country even one rating lower.





 
 
 

Phil's Favorites

Ray Dalio Is Kinda, Sorta, Really Wrong, Part 2

 

Ray Dalio Is Kinda, Sorta, Really Wrong, Part 2

Courtesy of John Mauldin, Thoughts from the Frontline

Last week we started a mini-series in the form of an open letter responding to a series of essays by Ray Dalio, the founder of Bridgewater Associates. I wrote that he was kinda, sorta wrong in Why and How Capitalism Needs to Be Reformed, Parts 1 and 2 but really, really wrong in ...



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Zero Hedge

Hong Kong Rocked By Biggest March Yet After Extradition Bill Pulled; Millions Demand Lam Resign

Courtesy of ZeroHedge. View original post here.

Despite City Executive Carrie Lam's major concession to the protest movement - that is, the (not really) 'indefinite' suspension of the extradition bill that catalyzed the protests - a planned protest march went ahead as scheduled on Sunday, marking the second consecutive Sunday of street protests in Hong Kong.

...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

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

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Kimble Charting Solutions

Gold Bugs Index Attempting 8-Year Breakout, Says Joe Friday

Courtesy of Chris Kimble.

Are Gold Bugs fans about to receive positive news they haven’t had in years? Possible!

This chart looks at the Gold Bugs Index (HUI) on a weekly basis over a couple of decades. The index has spent the majority of the past 20-year inside of rising channel (1).

The index hit the top of the channel in 2011, where it peaked and started creating a series of lower highs for the past 8-years, which has formed line (2).

The index is now kissing the underside of falling resistance and the underside the 2016/2017 lows at (3).

Joe Friday Just The Fa...



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Insider Scoop

Wedbush: Apple's Stock Could Gain $20-$25 From US-China Trade Deal

Courtesy of Benzinga.

The Sino-American trade dispute and near-term developments could prove to be a "major swing factor" for Apple Inc. (NASDAQ: AAPL), according to Wedbush.

The Analyst

Daniel Ives maintained an Outperform rating on Apple with an unchanged $235 pric...



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Chart School

Silver Review

Courtesy of Read the Ticker.

The folks in the federal reserve will debase the US dollar currency to an extreme degree silver will finally lift off the floor.. 

Note: Readers should re watch the silver back screen news video, here.

The following video looks at price action and Wyckoff logic.

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Chart in video

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If gold moves, silver wi...

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Digital Currencies

Cryptos Are Crashing As Asia Opens, Bitcoin Back Below $8k

Courtesy of ZeroHedge. View original post here.

Having survived the day's bloodbath in US tech stocks, cryptos are crashing in the early Asian session, apparently playing catch-down to the day's de-risking.

While no catalyst is immediately evident, there are some reports noting 13 large global banks are preparing to launch digital versions of major global currencies next year, though we suspect this drop was more algorithmic that fundamental-driven.

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

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

Are you ready to retire?  

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

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

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



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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