"We think the global (and overall European) outlook remains robust."
That’s the word from Goldman Sachs’ Erik Nielson this weekend, who also observes that he was "Possibly deluded by the wonderful vibrancy of California." Deluded indeed seems to be an excellent choice of words with a new report out showing that California leads the nation in a local government pension crisis that has a $3.5Tn hole to fill and will not be sufficient to pay benefits through 2020 along with 5 other states while another 20 states will run out of funding by 2025. Is Nielson just saying anything to herd more suckers into the market by telling the sidelined cash that it’s safe to go back in the water or is he cleverly employing an SEP Field to bamboozle the public?
An SEP (Somebody Else’s Problem) Field s an effect that causes people to ignore matters which are generally important to a group but may not seem specifically important to the individual. As Douglas Adams put it:
An SEP is something we can’t see, or don’t see, or our brain doesn’t let us see, because we think that it’s somebody else’s problem… The brain just edits it out, it’s like a blind spot. If you look at it directly you won’t see it unless you know precisely what it is. Your only hope is to catch it by surprise out of the corner of your eye. It relies on people’s natural predisposition not to see anything they don’t want to, were not expecting, or can’t explain.
SEP’s are commonly used by politicians to justify ridiculous policies like kicking crises down the road, ignoring pension and other unfunded obligations (that’s going to be your children’s problem), massive deficits (grandchildren’s problem), unemployment (lazy people’s problem), global warming (someone living south of you’s problem) and, of course unfair tax policies (poor people’s problem). They are also used by analysts, CEOs, their lobbyists and journalists (especially TV ones) to distract the "beautiful sheeple" from focusing on what’s really happening.
Not at all our problem is the price of vegetables in China and that’s a good thing for us because they have risen 20% in 30 days. Officially, China’s inflation rate was 4.4% in October but even that is expected to jump 14% to 5% in November. "Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, RBS’s emerging markets chief. The Communist Party learned from Tiananmen in 1989 how surging prices can seed dissent. "Inflation is a redistributive mechanism in favour of the few that can protect living standards, against the large majority who cannot. The political leadership cannot, will not, take risks in that regard," said Mr Ash.
Oh no! Mr. Ash accidentally said something that is true – quick, hide the children! Inflation protects the rich by screwing the poor?!? Well, I am just shocked to hear that, aren’t you? Certainly The Bernanke doesn’t know about this or he would never put so much effort into devaluing the dollar while making $9Tn worth of near zero-interest loans to his banker buddies, would he? The Bernanke was on 60 Minutes last night and he said he is "100 percent" confident that, when necessary, the central banks can control inflation and reverse accommodative monetary policy. No, I’m not kidding – he actually said that! I know, what a friggin’ tool…
In The Bernank’s defense, I think he meant to say that inflation is AT 100% when you look at things like Oil, which has risen from $45 in April of 2009 back to $90 a barrel in 2010 despite an additional 5M people losing their jobs and an additional 2M people losing their homes. I went into the BS oil numbers in This Weekend’s Post, where we also discussed Natural Gas (up 100%), Health Care (up 20%) and the Manipulation of the Silver Market (up 150%), which is a must read for all speculators. I also discussed my outlook for the rest of the year while Stock World Weekly did a fine job of looking at The Bernank’s continued POMOs – which have been driving much of the market action in the past few weeks.
The Fed continues to have POMO Fever this week but it’s a milder case, with "just" $20Bn worth of FREE MONEY to be handed out this week, although the schedule ends on Thursday so it’s possible the next schedule begins on Friday with another $10Bn so let’s not count Ben out just yet. If you want to watch The Bernanke debase, defraud, distract, deflect and prevaricate – check out his performance here but, frankly, I’d rather wait for the cartoon bears to give us their take on this nonsense. I do love the fact, though, in part 2, that the Chairman of the Federal Reserve said he realized that unemployment was still a problem just last week, when he spoke to people in his old home town and they told him people are, in fact, still unemployed – that man REALLY needs to get out more!
Also cheer-leading the markets this weekend was Bloomberg, who did all but call the bears (market bears, not cartoon ones) losers, who missed the market rally while worrying about silly things like "falling home sales, record European budget deficits and the debasement of the U.S. dollar." That’s not just a direct quote – that’s how they LEAD off the article! As Bloomberg points out, the Bulls were looking like losers in July but they "were vindicated by the rebound that added $2.6 trillion in value." I think that is just brilliant logic – especially in light of the fact that net cash inflows to the market have been less than $100Bn in 2010 so we are getting a fantastic 26:1 leverage of market value increase for every dollar that is actually put into the market – what can possibly go wrong with that model?
This isn’t sour grapes, we were the contrarians at the bottom on June 26th, when we jumped in full blast with a 20-stock Buy List for Members and we liked the market so much on July 7th that we added "9 Fabulous Dow Plays Plus a Chip Shot" which was followed on July 26th with a still very bullish "Turning $10K to $50K by Jan 21st" virtual Portfolio (up 160% so far). By our August 26th virtual portfolio, we had gotten a bit less bullish and went with "Defending Your Virtual Portfolio with Dividends" but we decided we could do better and, on September 3rd we went with what became a wildly successful "September’s Dozen," which we kept in play until we decided to cash out at what we thought was a top a month later when we switched bearish for the first time with "October’s Overbought Eight." Because THOSE trades ended up being a mixed bag and because we still thought the market was overbought – we pretty much spent the month of November in cash, only just recently restarting the $10K to $50K Virtual Portfolio on November 27th to see if we can catch a wave and double up again to hit our $50K goal.
So we are not Bloomberg’s angry bears (or even the much more popular "angry birds") here, just sideline observers waiting for all the BS posturing to end but – if you do have your money in the market – don’t you think you should consider the very coincidental onslaught of positive spin that is being applied to the markets and, even more importantly – shouldn’t you be concerned about the LACK of real effect it’s having? The Bernank went on national television to tell you how great things are, Goldman Sachs put out a weekend memo saying "don’t worry, be happy," Bloomberg has a special article telling you what a sucker you were if you missed the rally and Cramer is foaming at the mouth telling you to BUYBUYBUY anything that isn’t nailed down. Still, we are not breaking Aprils highs yet. That has me concerned…
Nothing is "safe" until the EU resolves it’s Ireland issue and that is subject to an Irish vote tomorrow. As we discussed in Member Chat this weekend, the passage is far from certain and, even if it is passed, the government is going to be thrown out on their asses very shortly and the new government will likely run on the promise of overturning the decision and telling the EU to shove it. Already this morning, Germany’s Chancellor Merkel has said she sees on need for an increase of the size of the current financial safety net – quite the opposite of the rumors that boosted the markets (and dumped the dollar last week). Before that even happened, Moody’s downgraded Hungary by two notches with a negative outlook (to junk) on "fiscal-sustainability concerns."
Copper is testing $4 this morning and that’s got to be exciting to JPM, who bought "50-80%" of the LME’s copper supply for $1.5Bn and sent spot copper pricing back to it’s 2008 pre-crash highs. Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.
Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble." No folks, this is not manipulation. Technically, this is a legitimate action that can be undertaken by an investment bank, that borrows billions of dollar from the Federal Reserve for free, uses it to corner the global copper market, driving the price up over 33% and then sets up an ETF so they can sell their supply off to suckers investors at top dollar while pointing to the recent run-up, THAT THEY CAUSED, in the prospectus as evidence of copper’s strong recent performance.
So you’ll have to excuse us if we sit out this "rally" just a little bit longer.
The market is already falling! Lets extend protection of the grizzly bear!!
datuu
Manchester by the Sea… you bet !. As soon as I unload my Lake Tahoe property, I will look for the replacement. My realtor e-mailed me a couple of weeks ago, and said they have three very interested people, and that they were hopeful of getting an offer. Nothing yet though. Nevada real estate is really depressed. down about 50%.
I would be very interested in seeing the ultra etf info… you can e-mail me at 1234gel@gmail.com. Much appreciated !
shadowfax,
Why do you need all the power for your PC just to trading stocks and options?? A 3.0g cpu with 2gb memory will do the job(I got 2.8g and 1.5gb memory which works fine for me) and it will save you a lot money. That’s a very power gaming machine.
Phil & all
check this out:–enjoy!!
http://www.youtube.com/watch?v=jllJ-HeErjU&feature=player_embedded
Phil & all–warning–the language in the above you tube post is a bit crude
Tchayipov, Lflan, edro00/options lambada, weekly play,
The plays looks interested, let’s try it this week.
Phil: Great AXP play today with Jan 12 35/40 bull call, selling 35 puts. Risk graphed it out.. beautiful reward/risk. Thanks.
As a California State employee, I want to disclose I have a horse in this race.
When I looked at that report, I saw calculations beyond me. But as a former academic, I know careers ( including the authors of this chicken-little deal) are made on Important! results.
As far as here and now, real dollars, it seems to my relatively inexpert view that Calpers ( California State Pension fund) is certainly better off that Social Security because WE ACTUALLY HAS SOME MONEY IN THE FUND.(220 Billion)
Look at their website, we’ve got about 220 Billion, now, in stocks a so forth.
The payout per year to current retirees is, very roughly, 10 Billion.
Oh my god, if payouts DOUBLE ( demographics) they’d be out of money in ten years!
The sky is falling!!
Except..Umm… us drones in California ARE PUTTING IN FROM OUR PAYCHECKS somewhere in the neighborhood of 10 Billion a year. They just DOUBLED our paycheck contribution (what they take from our paychecks).
I’m not an MBA in finance, but Social Security has — ZERO– for a fund?
My rough guestimate overview is therefore:
Current Holdings: 220 Bn
Yearly Payout : 10 Bn
Yearly PAID IN by US: 10 Billion
THAT sounds like a "underfunded disaster"?
If I’m wrong, tell me in English– with simple arithmetic.
Otherwise, looks again like The technique of the rich:
1) Declare a crisis
2) Issue their demands.
I’m not an MBA in Finance
Cramer: No Reason to Drop Chipotle
Enjoy!
NY Jets – Ouch!
Jew
Takes me a year of trading …
What amount of capital is required for that kind of dough per day?
Happy to travel, shine your shoes, make coffee ( but that’s all), if you teach me how and if it does not reduce your return ??
That’s for JRW
Guys / LAMBADA
how I understood, idea behind this strategy that ATM options when only couple of days left behaive differently: they have very high Gamma, so as soon as one of them became IN THE MONEY Delta increase very fast and approching 1 (start moving like the stock), when your short options ( week longer and still OUT OF THE MONEY) are behaiving quite normaly.
I think we can improve this strategy a little:(just an idea) need to calculate average daily range, and as soon as stock moved lets say 0.8 of ADR can close half of position and let other have to run with some mental stop.
the biggest disadvantage for this strategy looks like is very high margin, but just for one day I think it is still interesting.
By the way, at least one time per month we can play it little bit longer: when you have weekly and week after that monthly options are exp.
Let’s try it and excange our observations and ideas
I think for now we have only two candidates: GOOG and AAPL – because of high volatility and the smallest distance (by percentage) between strikes
Good morning!
This is the strangest dollar chart I’ve ever seen – it’s been jerking up and down so fast it made double images on the chart!
So let’s just say things in Europe are still up in the air as of 3am!
Europe may be trumped by MORE FREE MONEY from our Government as they extend the tax cuts for two more years (costs $830Bn) and that seems to have allowed unemployment benefits ($56Bn) to be extended as well. This will all be paid for by killing some rich people and charging them the new 35% rate on estate taxes – I hear they will be assigning random numbers for this process beginning in January… So there you go, it worked – holding the unemployed hostage got the Republicans everything they wanted and, of course, now they can run on the same issue of the tax cuts expiring in 2012 which is their favorite issue anyway.
Meanwhile, Germany’s rejection of raising the rescue fund has strengthened the Euro, which is up to 1.335 at the moment (3:30).
Ireland is expected to pass it’s budget according to Rupert’s paper. The Irish are not raising corporate taxes off their EU-low 12.5% level and are instead taxing people who make up to $25,000 20%, where before they were exempt. It’s a brave, new World…
Ireland’s unemployment is (officially) 13.5% and the government is cutting back services severely too. We’ll see if this thing blows up down the road regardless:
So bailouts for the rich costing the people who do pay taxes an additional $500Bn a year to cover it and adding another 4% to our deficit to GDP ratio (close to that -15% line) – oh yes, this is all BRILLIANT!
Overall, it looks like we’re going to have another up move in the markets unless Ireland surprises people with a rejection so let’s crank up the tunes and PARTY like it’s 1999!
NFLX/Shadow – Someone is going to pay. I know I have to pay if my downloading bandwidth goes over so I’m sure NFLX pays something now for fatter pipes but whether they pay 1M times more than me for using 1M times more bandwidth is doubtful. On the other end, it’s the same issue for the users. I just downloaded a one-hour show and it was 500Meg compressed, not terrible but if dozens of people on a block are doing it that can chew up a lot of bandwidth fast. The bottom line is you cannot sign up for a system that downloads a Terabyte a day and not pay for the bandwidth somewhere, which means NFLX’s pricing model is false and it’s value comparisons to alternative systems is false and therefore their profit expectations are false too. Not to mention the ridiculous prices they are paying for shows – that also can’t be a sustainable model.
Bandwidth/Rein – On the whole, you are all just competing for an unnatural resource. Not much different than rushing out west to stake your claims only with a bit less gunfighting over the access. What NFLX should do is pair up with SIRI and use their satellites to download video on demand. That would take the access providers out of the loop entirely and likely improve performance for most people. You should go talk to them about that.
Nice plane JRW but where do you park it? Also, does it come in red?
NFLX/Arnie – Hmm, if they can only get 480 resolution I can’t see it being a big hit with the HD crowd.
Thinkback/Edro – That’s useful, thanks!
Thanks RJ, good article.
Desks/Red – I think they are just buying the indexes as you can see all the stocks moving more or less in lock-step sometimes but, of course, they also take advantage of imbalances like buying AAPL to goose the Nasdaq as AAPL is now 20% of the Nasdaq so why bother with anything else?
Reading/Flips – This is just the stuff I think is important. Probably about 1/4 of what I read. Of course the summary stuff is mostly from Seeking Alpha’s market currents during the day – I’m not reading every single article and writing the summaries but I do filter and order the summaries that I think are worth looking at. Also, since I’m pretty focused on this stuff, I’ll read an article in the WSJ or Bloomberg and kind of skip a paragraph when I see it’s just the standard explanations of this or that – you’ll notice a lot of redundancy in the media so I can read a dozen articles on the same subject and probably only find 20 or 30 truly unique paragraphs to read.
White Castle/Pstas – Oh that is sad! I wasn’t even happy when they added chicken.
Dip/Datuu – Does nobody read our actual posts? That was up last week. But thanks, it’s exactly the kind of thing I do love.
I think that sums it up very nicely Lump! The same thing is happening in Europe. As I’ve said before, Bill Gross et al. cause a crisis, buy up bonds at very high returns and then force the governments (same in CA) to "fix" the crisis by overbacking the security, which makes them very, very safe and makes Gross’ high-return bonds much more valuable – all subsidized by the taxpayers. No one stopped Pimpco when they had $100Bn or $200Bn or $500Bn and now they have over $1Tn on their way to $2Tn – will they ever be stopped or will we just hand them the keys to the planet one day?
CMG/Praiz – Well I hope Cramer is right on that one.
Jets/Pstas – That was just pathetic! Sanchez fell apart. Even worse, Woodhead tore them apart (former Jet).
Great project idea Tcha good week to test is as we’re pretty volatile.
OK, almost 5:30 and we’re up about 1% in the futures – we’ll have to see if it lasts. FTSE and DAX up 1%, CAC up 2%!
WikiLeaks Assange was arrested in UK on the Intepol warrant!
Phil,
I’m sitting on the DIA 110P. Does it pay to hold them or will they erode quickly since there is only a couple of weeks left?
Good Morning! I hope 2012 is an election we can look forward to, starting with a challenge and hopefully a runoff election for the democratic nomination for President…..
I have an idea for "jellyfish of the year" Chris Van Hollen, assistant to Nancy Pelosi and lead tax negotiator for the dems…..
Have a great day trading, everyone! 🙂