4.6 C
New York
Wednesday, March 29, 2023


Wednesday: Wiping Out All of 2011’s Gains!

S&P 1,260.  That's the line we need to hold.

That's where we started the Year on January 3rd and we finished that day at 1,271, beginning a fine tradition of making almost all of our gains on the first day of the month, continuing a very disturbing (and very fake) year-long trend that I am calling "sell the next day (of the month) and go away." (chart by Bespoke).

Notice that this trend became very disturbing at the same time Uncle Ben announced his fabulous QE2 plan that showered money on his fellow Banksters according to a nice, predictable schedule that allowed them to lever up their investments to inflate stocks and commodities, trapping index fund investors (especially the working poor who make monthly contributions to IRA and 401K accounts in a nice, predictable and controllable fashion).  It's a simple plan, index fund managers get your pension money at the end of the month, they are required to buy baskets of stocks to balance their funds and that action can be manipulated by clever bankers who jack up the prices and then sell into the fake demand they created – effectively stealing tens of Billions each month out of the paychecks of working Americans.  Just another one of those great crimes they commit where they steal a little bit of money from everyone, every day.  

Speaking of robbing from the rich to give to the poor (see "The Dooh Nibor Economy"), it's time we said happy 10th anniversary to the Bush/Obama tax cuts that have, as Barry Ritholtz put it: "driven the balanced budget he inherited from President Clinton deep into the red."  So deep in the red, in fact, that even now Congress is still debating about extending the $14.5Tn deficit that the Congressional Budget Office says will double over the next 10 years if these cuts remain in place.  

That's right, those same tax cuts that are "off the table" in negotiations in Congress are, other than war spending, the sole cause of our nation's deficit.  This country does not have a spending problem, it has a collecting problem!  As Mike Konczal, a research fellow at the Roosevelt Institute, noted: "It's not like this has unleashed a wave of productivity, or better incentives, or increased work output. It's mostly just rich people got a lot more money."

According to Citizens for Tax Justice, in 2013 the tax cuts would give the richest 1 percent of West Virginians $30,000 a family (see chart above for all states). The bottom three-fifths would get less than $400. With high unemployment and a budget fight in Congress, Republicans want to extend the tax cuts again, arguing they would trickle down to working people.  Republicans say Medicare and Medicaid should be cut to pay for the deficits and extending the tax cuts. Konczal says that, in spite of the rhetoric, that won't put people to work:

It's textbook economics. That was a lot of the logic in 1937, when we caused a second wave of the Great Depression.

There is no lack of effort here on behalf of the working class.  Since 1973, productivity is up 100% but the MEDIAN (not average) income for American Workers has fallen by 5% over that same period.  Workers are, in fact, working twice as hard for less wages.  CEO pay during that same time-frame, has gone up 1,000%, with the average CEO earning 250 times as much money as the average production worker in his own company.  Out of 310 Million people in this country just 135M of us have jobs yet we only consider 13.9M (of the people "in the labor force") to be unemployed and we are only paying benefits to 4M of those people.  The rest are "discouraged workers," who don't count as they took to long to find jobs so we have written them off according to schedule.  

Why does this matter today?  Because yesterday, the head of the Federal Reserve reiterated his stance yesterday that he feels that falling wages and falling housing prices offset "transitory" inflation (what those unemployed people need to pay for food and energy) and allow him to proceed as if inflation is somebody else's problem as it's certainly not his and not a problem for anyone he hangs out with in his top 1% bubble life.  

What does Bernanke care about?  Well, like any good Bankster, he only cares about whether or not the bottom 99% have more blood to give to the top: "Developments in the labor market will be of particular importance in setting the course for household spending…  As is often the case, the ability and willingness of households to spend will be an important determinant of the pace at which the economy expands in coming quarters…  Increases in household wealth–largely reflecting gains in equity values–and lower debt burdens have also increased consumers’ willingness to spend."

A full one half of Bernanke's speech was spent deflecting the blame for higher commodity prices away from Fed action.  Not the "I'm sorry, we made a mistake" of Fisher's CNBC appearance in the morning – quite the opposite!  Ben was like a 5-year old standing in front of a TV with a cracked screen holding a baseball bat saying "the dog did it" or his sister, or ghosts or those evil emerging markets (blaming brown and yellow people for our problems is always popular in America).  Even worse than the denial is the Fed's criteria for measuring future inflation – it will only be inflation if prices go UP MORE from here.  If prices simply STAY this high, Ben is already telling us he will consider that a victory.  Listen to the master:

Besides the prospect of more-stable commodity prices, two other factors suggest that inflation is likely to return to more subdued levels in the medium term. First, the still-substantial slack in U.S. labor and product markets should continue to have a moderating effect on inflationary pressures. Notably, because of the weak demand for labor, wage increases have not kept pace with productivity gains. Thus the level of unit labor costs in the business sector is lower than it was before the recession. Given the large share of labor costs in the production costs of most firms (typically, a share far larger than that of raw materials costs), subdued unit labor costs should remain a restraining influence on inflation.

Another argument that has been made is that low interest rates have pushed up commodity prices by reducing the cost of holding inventories, thus boosting commodity demand, or by encouraging speculators to push commodity futures prices above their fundamental levels. In either case, if such forces were driving commodity prices materially and persistently higher, we should see corresponding increases in commodity inventories, as higher prices curtailed consumption and boosted production relative to their fundamental levels. In fact, inventories of most commodities have not shown sizable increases over the past year as prices rose; indeed, increases in prices have often been associated with lower rather than higher levels of inventories, likely reflecting strong demand or weak supply that tends to put pressure on available stocks.

That second paragraph is DEEPLY disturbing as it indicates the Chairman of the US Federal Reserve either doesn't understand the mechanism of commodity speculation (in which churning speculative contracts drive prices higher EVEN as actual demand DECREASES) OR he is just a lying son of a bitch who is willing to f*ck the bottom 99% of the World over to advance the agenda of his masters.  We report, you decide…  

 Speaking of our Corporate Masters and our Government's unwillingness to tax the top 1%, thereby impoverishing the bottom 90%, destroying the American way of life and plunging our nation on an unsustainable path to fiscal ruin that will make Greece look responsible…  Have you seen the Citizens for Tax Justice Report?  

They analyzed the taxes of a dozen corporations:  GE, AEP, DD, VZ, BA, WFC, FDX, HON, IBM, YHOO, UTX and XOM and it turns out that, over the past 3 tax years, those 12 companies earned $171Bn of pre-tax profits and, in total, paid NEGATIVE $2.5Bn in taxes.  That's right, WE GAVE THEM $2.5Bn!  In fact, if it wasn't for XOM and HON actually paying $3.7Bn over 3 years (on $25Bn in profits), then the other 10 would have been paid $6.2Bn by those of us who do pay taxes to thank them for making an additional 146Bn tax-free Dollars while using our roads, our water, our sewers and our power grid and our transportation network – benefiting from our military protection and the hiring of workers who were educated in our school systems at the taxpayer's expense.  

At the 35% rate us mortals pay, that's $60Bn that was not paid in taxes on the Federal level (we need another study to figure out how much they are screwing the states over for) by just 12 of the Fortune 500 who, in total, earned over $2Tn in 2010 and paid less than $200Bn in taxes (10%) with that missing $500Bn accounting for 1/3 of our total deficit.  

This is not even getting into the depreciation scam, which is another MASSIVE tax break taken by Big Business that is even larger than the tax avoidance scam we are discussing in this study.  XOM alone booked $39Bn of "losses" from depreciation in those same 3 years, allowing them to avoid another $16.7Bn in taxes, which is more money than 1M American workers collect in ANNUAL unemployment – if the workers can even afford the gas to go pick up their checks, that is…

OK, I got that out of my system – now back to work!  

We have the Fed's Beige Book today (2pm) and that's probably not going to look pretty but that doesn't stop them from running yesterday's playbook again and driving the futures back up (off a terrible drop last night – still down from yesterday's close) even as they let the Dollar drift higher (74.25) so they have room to pound it back down and goose the markets to make things look pretty for the retail schmucks while the Big Boys run for the exits.  Also moving the markets this morning will be an OPEC output decision (any moment) where an increase in supply is expected and an oil inventory report at 10:30 that should show a draw-down as imports were curtailed by a pipeline outage in Canada – but that won't stop them from spinning it as "proof" of demand in the face of high prices on CNBC.  

We had another fabulous day shorting oil from $99 to $98 twice yesterday AFTER my call to short at $99.60 in the morning which hit our $98.50 target for a $1.10 gain.  So that's a total of $3.10 in speculator punishment we doled out yesterday for another $1.038Bn for anyone who was able to short all 335,000 contracts (I'm still waiting for the $3Bn I need to cover the margin!).  We had a little fun last night and this morning scalping quarters in Member Chat and our last bet was UP from the $98.25 mark as we felt an increase in OPEC supply was already baked in and up was more likely than down.  Oil should head higher into inventories and then we will be very happy to short it again at around $100 or whatever they manage to take it to on the expected draw in crude stockpiles.  

We can thank B-B-B-Bennie and the Fed for setting up a boost in oil (and it costs Americans alone $1.5Bn per penny increase in the price of gas) – as I mentioned above, he spent half his speech discussing energy prices, declaring them transitory and "not his fault" anyway and laying out the case for demand driving prices and not the Trillions of Dollars of speculative contracts that are being bought by the same IBanks he is funneling Trillions of Dollars of loans to.  Gasoline was $2.92 (wholesale) before Ben's speech and it shot up to $2.98 after so that's $10Bn out of our collective pockets already.  Now OPEC gets to disappoint us this morning by not increasing supplies adequately to squash speculation and we should be back over $3 and the bottom 99% are right back on the road to bankruptcy, where they will lose their homes to the Banksters – MISSION ACCOMPLISHED!  

According to Corelogic, 38% of the people who took second mortgages in America are underwater on their homes with an average debt of $83,000.  $2.69 TRILLION in second mortgages are out there so we're talking about over $1Tn worth of loans that SHOULD be written down by US banks if they were marking to market so thank goodness we completely ignore basic accounting rules in this country or things would look bad, right?  

Overall, the CoreLogic report found that the percentage of underwater homeowners declined slightly in the first quarter. About 10.9 million Americans who borrowed to buy their homes, or 22.7% of all homeowners with a mortgage nationwide, were underwater in the first quarter, down from 11.1 million, or 23.1%, in the fourth quarter of 2010.  The modest decline wasn't a sign of an improving market. Rather, the change reflected completed foreclosures, which reduced the total number of homeowners in the market, CoreLogic said.

Needless to say, we'll be looking for opportunities to short into this morning's rally, hopefully we can sell oil at $100.60 again – that's our magic number and we'll see if we can stick the speculators for another Billion.  

After all, it's only US Dollars!



Notify of
Inline Feedbacks
View all comments

 Amatta:  I understand that most investment professionals, unless you’re in a high-zoot fund, can’t assure you more than 6% and most can’t produce even that sum consistently, taking into account down markets which one clearly must.  The big banks are completely useless, for example.
But if you work at it, you might find a manager that does consistently better — Ttere are undoubtedly quite a few that can do 12% per annum, I should think. I use one that does; he has, unfortunately, quite a high minimum investment.  He has averaged over 22% per annum since 1993, calculated right up to the present date – http://www.bestinver.com.  And it is not a 2%/20% hedge fund with a long lockup, just a very talented investment manager.   Shop around, don’t despair.
And let’s face it — you wouldn’t try resetting your broken leg, why would you experiment with your net worth playing Joe Trader if you haven’t spent a few thousand hours practicing?  And as for Phil’s counsel that you shouldn’t be doing this at all, he has been doing this long enough to probably have that right.

 This is the link to an interview with the head of Bestinver, it gives a clear idea of what a long-term approach really means to a good investment manager — it’s not just "buy and hold forever", which Buffett seems to preach. http://www.bestinver.com/pdf/opinion_gestores_en/1_The%20European%20Valueinvestor_01-12-2007_At%20the%20very%20top%20of%20European%20Value%20Investors..pdf

Thanks for the excellent explication and for placing your comments regarding possible lower  levels in context.   Yup, we are an impatient lot – especially for insight and hopefully a measure of investing acumen.

Phil–just read your "where I stand at the moment"—tx so much, really put things in perspective—

Phil/GMCR, Unfortunately I have 8 June $60 calls sold for $5.23, now $16. Would you roll 16 Sept $75 calls for $8?

"Where I stand at the moment"—Where might I find this? Thanks.

Just read this provided by jakester from above (thank you jakester). Is it possible for the Fed to be wiped out as suggested in this article? Can’t they just print their way out of debt?
“Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out.”

Thank you scottmi.

Debt and more debt……
Interesting and scary charts. Visually we are f’ked!
So Phil, how long can we extend and pretend before it all collapses and or something else occurs? These stories get repeated over and over, yet, when you listen to our glorious politicians we only hear half the story (either too much spending or not enough taxes). This problem is going to take a concerted effort by all to:  1. Curb spending 2. PAY FOR WHAT WE DID 3. Be responsible citizens.  If not we are doomed.
Not trying to get you on your soapbox, but I am really concerned about where we are heading.

Amatta – I dont get any pleasure from your failure, I wish you the best and truly hope your portfolio recovers. THat being said, all the members here are being WAY too nice! Picture me as your friend who doesnt sugar coat things who will tell you when you f#ck up…. THIS IS YOUR DAMN FAULT!!!! YOU DONT LISTEN!!!  Much like we could count on goober making obnoxious comments DAILY, we can count on you having a borderline breakdown almost DAILY with some position "Phil recommended". Phil inevitably looks back at his comments and finds that you only did half of his play or waited until your position was down 80% when he had stops set at losing 10-20%. A fool and his money are easily parted (or something like that) and if you continue down this path you will have NO retirement nest egg.
I dont understand why are you on this site… You pay Phil good $$$ to give you great advice which you never follow and then complain about your monetary losses from not following Phil’s advice….Think about it. We like you (unlike goober lol) and want you to stay… However,  if youre not following the advice, or dont understand the advice given well enough to follow it in its entirety then what’s the friggin point!? Do yourself a favor and stop doing BOTH DAY AND SWING TRADES. Maybe put 50% of your $ into WMT, KO, AGNC, GLW, CSCO, XOM, etc and write covered calls against your shares. Collect the dividedends as well as making money off the calls. About 1-2x a year Phil puts out a buy list. Usually solid companies at cheaper prices which also pay good dividends. My advice would be to close out all your trades and wait for that buylist.   Good companies which pay decent dividends &  will still be around if we have another massive crash…. Almost everytime he does these lists 95% of the positions seem to be up 10%+ 1-4months after he posts them.. This letter is probably a waste of time though. If youre paying Phil a decent chunk of change to advise you and not following his advice then what makes me think you’d listen to me!  I must be crazy !!!

sorry, sometimes I’m very busy during trading hrs I don’t have time to read all posts,
if you have corn position it is time to adjust it from Put side:
because puts for corn futures have low vol. , distance between shorts and longs is not big, so what should you do:
move your long puts up with ration 6 / 4 with zero debit (I mean price of 4 higher strike puts should be the same as a price of original 6)
now you have to move some of your shorts higher (one or two strikes away from your longs) but not 4 shorts yet, try to have total put position zero debit or with some small credit 
if every thing fine your shorts should loose value faster than longs (making money for you) you will continue roll your shorts higher one by one
the same you should do with your calls (except moving longs, because vol. for calls originally higher than puts, distance between longs and shorts is much better than for puts)
so for calls, as soon as you see that value for shorts much less than value of longs you start moving one by one your short calls closer to your longs
only advice: dont do it very often, market going up and down pretty fast and we still have lots of time till exp. try avaluate your position ones per week or two

I was down big time with this strategy on oil position after they moved from 114 to 95, but after lots of adjustments and rolls I got almost everything back (lots of stress), at least I lost less than I made for that period from my corn and wheat positions

send me all your positions (including how much you pay for them and your buying power) and we think together how to get out from this sh*t

It is great to see that you are willing to help Ammata. It is a tribute to Phil that so many here are willing to help fellow members regardless of their level of expertise.

1 3 4 5

Stay Connected


Latest Articles

Would love your thoughts, please comment.x