Archive for 2010

Lunch With the Treasury Secretary

Courtesy of madhedgefundtrader

When I wake up at 4:30 am each morning to check the overnight markets and review the opening salvo of incoming emails, I often have trouble focusing my eyes in my groggy state. So I had to blink twice when the first message in my inbox politely inquired if I had time to meet the Secretary of the Treasury in Palo Alto for lunch that day, apologizing for the short notice.

Tim Geithner was in San Francisco for a day to meet with a small group of venture capitalists and other business leaders. It was a short stop in his way to the G-20 meeting on finance ministers in Seoul, South Korea. I can’t say who else was invited. Suffice it to say that I was the only one without an NYSE or NASDAQ listing.

When I greeted lithe, athletic, but diminutive Treasury Secretary, I could see the six secret service agents in the room visibly tense up. At 6’4” I towered over him, but he shook my hand firmly. At 49, he is one of the youngest Treasury Secretaries on record. He is also the first one who surfs, so I if he had stowed his board on Air Force One so he could shoot “Steamer Lane” in nearby Santa Cruz after the meeting. He laughed, confessing that he rode the waves in a less than adequate fashion.

Geithner succinctly laid out the administration’s position on a wide range of financial and economic issues. The economy is now healing, has been growing for 18 months, but conditions were still very tough, especially if you were in construction, real estate, or small banks. Private sector investment grew of 20% in H1, but then slowed down to 10% in H2. Exports are strong.

The economy is undergoing some difficult, but necessary changes. The crisis was caused by excessive debt levels, the adjustment of which is now mostly behind us. The savings rate has soared from below 0% before the crisis to 4%-6% today. The debt burden is falling. Still, further measures are required.

Geithner thrilled his audience by proposing a permanent investment tax credit for domestic R & D. On top of that, he wants to add a one year tax credit for capital investment. It was music to the ears of those present, who were primarily engaged in the business of…
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An Interactive Look At America’s Poor

Courtesy of Tyler Durden

Presumably based on only partially fudged BLS data…


Poverty is defined as making less than $10,991 for a household of one, $14,051 for two and so forth.

Courtesy of MintLife.



Courtesy of The Pragmatic Capitalist 

By Annaly Capital Management

We attended a conference this week hosted by Grant’s Interest Rate Observer, which is always a mix of long and short investment ideas and bullish and bearish macroeconomic observations. This one was no different, although if any one theme could be gleaned from it, that theme would be frustration at the way in which policymakers approach the global system of currencies and foreign exchange. The quote that resonated like cold water in the face was by Frank Byrd of Fielder Research & Management, who reminded the assembled, “We have never been here before—a global regime of fiat currencies at zero bound interest rates.”

As we listened we referred back to our blog post from last Friday, which examined the insurance value of gold in an inflationary world. The facts on the ground are that the dollar seems to be losing its purchasing power as the market prices in the prospect of large-scale asset purchases by the Federal Reserve. All other things being equal, if the capacity of an economy (like the US) or the supply of a commodity (like gold) doesn’t change, but the number of dollars expands, the prices in that economy or that commodity will rise in dollar terms. Hence the rise in gold, copper, and equities, all of which we usually look at priced in dollars. Below we chart these assets in both dollars and euros during their impressive September/October rallies, as inflation expectations rose and the value of the dollar fell.

Gold is actually down in euro terms.

The celebrated and historic rally in equities has been erased.

Doctor Copper’s seeming bullish prognostication of future growth is also flattened.

The dollar-based price movements that we’ve seen in these assets since the beginning of September has been less about expected future real economic growth than it has been about compensating investors for the potential future inflation from a flood of newly printed dollars. What will happen to the prices of risk assets if this expected future inflation doesn’t materialize to bring up the nominal price level is an interesting question to consider. 



Two businessmen kneeling on pavement, grabbing paper blowing in wind

Courtesy of Comstock Partners

(H/t Pragcap) 

The current market rally is not based on a self-sustained typical economic recovery, but on blind faith that the Fed can pull out a magic wand and cure everything with another round of quantitative easing (QE2).  As we pointed out last week, this a desperate attempt by the Fed to try non-conventional means to get the economy going again after a massive dose of conventional measures resulted in failure.  The members of the FOMC know this, but with further fiscal measures off the table, they are aware that they are the only game in town.  The Fed’s acknowledgement that the economy is in trouble is again highlighted by the latest Beige Book released yesterday.  The following are some excerpts from the report:

“National economic activity continued to rise, albeit at a modest pace..consumer spending was steady to up slightly, but consumers remained price-sensitive, and purchases were mostly limited to necessities and non-discretionary items..Housing markets remained weak..Most reports suggested overall home sales were sluggish or declining..Home inventories were elevated or rising..Conditions in the commercial real estate market were subdued, and construction was expected to remain weak.Reports suggested that rental rates continued to decline for most commercial property types..industry contacts appeared to believe that the commercial real estate and construction sectors would remain weak for some time..Hiring remained limited, with many firms reluctant to add to permanent payrolls, given economic softness..Future capital spending plans appeared to be limited”

So there you have an outline of the anemic economic picture in the Fed’s own words.  To be sure, they indicated some strong points as well.   But the weakness in consumer spending, housing, capital expenditures, commercial real estate and employment pretty much accounts for some 85% of the overall economy.

In addition some of the major problems that worried the market earlier have not really gone away.  The sovereign debt problems of the weaker EU nations have been papered over without being solved and are still lingering just beneath the surface.  The looming currency wars that were shoved down the road by the recent G-20 meeting are also a major threat to the global economy.

Furthermore the Chinese housing bubble previously highlighted by bearish investor Jim Chanos and others has now appeared on the front page of the New York Times.  A new district of the city of Ordos,…
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Here Is How Wal Mart Is Squeezing Every Last Ounce Of Decaffeinated Inflation

Courtesy of Tyler Durden

Some interesting insights on how even Wal-Mart is doing its best to mask inflation by penny pinching here, there and soon, everywhere. Below is an example of 20% inflation in the span of a few weeks, which will most certainly not be captured in government statistics of food inflation. Additionally, with cotton just opening 470 ticks higher and 30 away from limit up, we hope readers took our advice from a month ago.

Courtesy of Survival Blog

Carlos in the U.P. wrote: “I noted with interest that the Wal-Mart I shop at had cleared the shelves of “Great Value” brand coffee in 39 oz cans for about 2 weeks. Today the new can appeared, with the following differences: 1.) Can is now 33.9 oz, down from 39 oz. Also conspicuously missing is the conversion of 2lb, 7oz therefore no comparison in pounds is easily made. 2.) Price for this smaller can is up from $9.88 to $10.48, by my rustic math an approximate 20% increase! 3.) Contents of can are no longer ‘Premium Columbian’ Decaffeinated. Now labeled ’100% Classic Decaf’”

Unfortunately, we were unable to recreate a similar product SKU on Walmart’s online catalog, although having seen comparable price masking gimmicks at local stores and for far more egregious inflation adjustments, we are confident this is not an isolated ploy to pass on surging input prices. We invite readers to share comparable stories of under the radar price pass throughs to the sheeple slaughterhouse (before and after pictures are welcome). We will compile all the responses and maybe even start a Zero Hedge inflation Crowdsourced Price Index, a/k/a a real CPI.

h/t Kyle

Guest Post: Was The Chinese Government Behind The Stock Rally?

Courtesy of Tyler Durden

Submitted by Yong Liu

Was The Chinese Government Behind the Stock Rally? (pdf)


Attachment Size
Beijing Behind the Rally.pdf 82.85 KB

As Expected, Goldman FX Closes EURCHF At Loss To Clients, Profit To Zero Hedge Readers

Courtesy of Tyler Durden

On the 19th of October, we told readers that Goldman is pitching a short EURCHF trade; and that, as a result, it is time to go long. Back then we said: “Like every other time Goldman says to do something, the prudent thing to do is the opposite. Of course, this means more weakness for gold, as the Swiss Franc is simply the safest equivalent of gold in the monetary realm. Oh well – if better cost bases are to be had, than so be it.” We were pretty much spot on, as usual, vis-a-vis our evaluation of Goldman involvement (and gold has indeed presented a better cost basis). Since then, the EURCHF has ploughed straight up, and gold has plunged. Just relased: Goldman has closed the EURCHF trade, after the 1.36 limit was hit. End result to clients – loss of 1.4%. End result to those who took our slightly jaded view on things: profit of 1.4%. We also suggest readers take profit on our “profit” limit being hit.

From Goldman:

Last week we recommended short EUR/CHF positions based on the idea that risk aversion in the Eurozone could rise again in light of intensifying French strikes and also because long-dated implied EUR/CHF volatility suggests unwinding risks of legacy carry trades persist. However, we chose a relatively tight stop, which has been triggered on Friday and we therefore close this trade idea for potential loss of 1.4%.

And here is how the EURCHF fared since the 19th:

Weekly Recap, And Upcoming Calendar – Here Are The Main Events To Look For

Courtesy of Tyler Durden

Week in Review – Markets on a Soul Searching Mood

After a number of weeks of equity strength, USD weakness and US rate declines, the market paused it’s correlated asset price shifts to do some soul-searching ahead of significant events. The G20 finance ministers meeting this weekend was a source of uncertainty as markets observed the increasing tension for FX appreciation against the USD across the world and the heavy intervention from local policy makers to offset that risk.

Markets also tried to digest the impact of the surprising Chinese rate hike. In addition, the debate about how much QE is priced already has heated up as the market tries to forecast the Fed’s actions in early November. And finally, it is worth pointing out that all this debate is taking place against the backdrop of heavy positioning especially in short dollar trades.

Against all these sources of uncertainty, macro data continued to send some positive signals. European business surveys continued to surprise on the upside, Chinese data was in line with expectations, and even the Philly Fed came only slightly short of consensus expectations.

All in all, markets remained broadly range bound but price action became increasingly choppy throughout the week. The USD strengthened slightly on a trade weighted basis, stocks drifted higher and yields rose slightly.

Week Ahead – More on QE2, Asian FX and Business Surveys

Following the weekend’s meeting by the G20 finance ministers the markets will likely come to realize that the immediate impact on current trends in FX will be limited. It is therefore likely that attention will shift back to data once again and on the likely course of action by the Fed.

On the data front, we have a heavy data week in the US with GDP, Chicago PMI, durable goods and consumer confidence. Overall and on balance we are less positive than consensus albeit by a smaller number.

Potentially hawkish comments from central bank meetings in Poland and Sweden could be catalysts for FX appreciation.

Finally, data out of Europe includes another German employment report and a UK GDP. We expect both to show further improvements.

Monday Oct 25

US Existing Home Sales (Sep):We anticipate a positive print, slightly above consensus (GS: +6.0% mom, consensus: 4.1%, last +7.6%)

Hungary Monetary Policy Meeting:We are in line with consensus in expecting no change in Hungary’s monetary…
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California Cut 37,000 Government Jobs in September; Much More to Come

California Cut 37,000 Government Jobs in September; Much More to Come

Businessman Leaping into Swimming Pool

Courtesy of Mish

The LA Times reports Government job cuts ravage California

Weighed down by a struggling economy, government agencies in California shed 37,300 workers last month — more jobs than were lost in the private sector — as cities and counties made their biggest payroll cutbacks since at least 1990.

What’s more, analysts see more job cuts ahead as California faces an estimated $10-billion shortfall in the state budget that the next governor must address. Cities and counties, meanwhile, are still struggling with tepid sales and property tax revenue.

Cities across the state have taken stringent measures to balance their budgets, said Eva Spiegel, a spokeswoman with the League of California Cities.

Oakland laid off 80 police officers and delayed pothole repairs. Fullerton laid off 14 police officers and three firefighters, cut library hours and closed restrooms at several parks. Oceanside laid off 28 police officers and three firefighters, closed a swimming pool and a recreation center and eliminated the city Bookmobile.

Overall, the state’s unemployment rate remained stuck at 12.4%, one of the highest in the nation. The state lost a net 63,600 jobs in September. Local governments shed 32,400 jobs, according to the monthly report from the state Employment Development Department released Friday.

Taxable sales plummeted 18.5% in California from 2006 to 2009 and are expected to remain relatively flat this year, according to the National University System Institute for Policy Research in La Jolla.

The National League of Cities reported this month that cities across the country were making their sharpest cuts in at least a quarter of a century. Nearly 80% of city finance officers in a survey reported laying off staff, and 87% said their cities were worse off financially this year than last year.

Taxable Sales Down 18%

Those last two paragraphs are the key to understanding one of the things I have been saying, that there is no recovery in sales.

Every month, when retail sales numbers come out, I question them. Here is my article from October 15: Retail Sales Rise More Than Forecast; Once Again I Ask "Really?"

Retail sales may be at their best point in the year, but sales are certainly not within 3% of the all time high [as government data shows]. If they were, tax revenue collection would

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Weekly Contrarian COT Index and Retail Positioning Analysis

Courtesy of Pivotfarm

The Commitment of Traders Report is created by the CFTC – The Commodity Futures Trading Commission and is published weekly every Friday. This body gathers and publishes the open futures positions on all publicly traded US futures contracts as well as the corresponding options. The data consists of 3 main categories.

Commercial Traders – These are the bigger players in the markets, the smart money and consist of large firms that actually use the commodity being traded, includes companies like…BP in the Oil and Gas Market, Nestle in the Cocoa and Sugar market. The main function of these traders is to hedge the price of the commodity that they trade in.

Large Speculators – These consist primarily of commodity fund traders and are mainly trend following. The position sizes of these traders tends to be in tandem with the movement of price.

Small Speculators – The little guys, individual traders and small firms, these are the traders that tend to be wrong in the market at the tops and bottoms of markets.

How do we use this data? We believe that the COT Index offers a good indication of market sentiment and future direction. The key is to follow the smart money (Commercial) and trade against the other 2 groups when they are at an extreme. Extremes in the data are figures below 30.00 and above 70.00. The ideal situation for a short position is a low reading in the Commercial COT and high readings in the Large and Small trader numbers. For example the Commercial COT Index reads 5.97, this means that the net commercial position is strongly biased to the short side. The Large and Retail (our main contrarian focus) are reading 97.70 and 100.00 respectively, meaning they are the most long side biased they have been in the last 6 months. For traders this means that their focus should be on short side trades, the goal is to follow the commercial traders when the other 2 groups at opposite extremes.  This is the ideal alignment of the groups for optimum success.

This weeks COT Index Review

e-mini S&P 500: Last week the S&P made close to 6 month highs and the COT report for the week was just as bullish Commercial trader are now the most long they have been…
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.


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Phil's Favorites

A 2019 Earnings Recession?


A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...

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D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...

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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...

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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ... more from Insider

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...

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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 failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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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

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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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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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:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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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.

Market Shadows >>