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Super Tuesday Committee Failure – So What?

The Super-Committee is dead

Long live the Debt!  In case you are voting in the next election – here are 12 people to get rid of.  Much as I may blame one party over another for this failure, they all deserve what's coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation's business anymore.  

In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID.  Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all."   As I can tell you from raising my own children to be good citizens:  

The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."

Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer's area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks."  Tied with Daily show viewers for best informed were NPR supporters but, sadly, only 21% of Americans get their news from NPR and only 18% from the Daily Show while 64% list Fox News as one of their frequent news sources.  

In another study, World Public Opinion, a project managed by the Program on International Policy Attitudes at the University of Maryland, conducted a survey of American voters that shows that Fox News viewers are significantly more misinformed than consumers of news from other sources. What’s more, the study shows that greater exposure to Fox News increases misinformation.

So the more you watch, the less you know. Or to be precise, the more you think you know that is actually false. This study corroborates a previous PIPA study that focused on the Iraq war with similar results. And there was an NBC/Wall Street Journal poll that demonstrated the break with reality on the part of Fox viewers with regard to health care. The body of evidence that Fox News is nothing but a propaganda machine dedicated to lies is growing by the day.

In eight of the nine questions below, Fox News placed first in the percentage of those who were misinformed (they placed second in the question on TARP). That’s a pretty high batting average for journalistic fraud. Here is a list of what Fox News viewers believe that just aint so:

  • 91 percent believe the stimulus legislation lost jobs
  • 72 percent believe the health reform law will increase the deficit
  • 72 percent believe the economy is getting worse
  • 60 percent believe climate change is not occurring
  • 49 percent believe income taxes have gone up
  • 63 percent believe the stimulus legislation did not include any tax cuts
  • 56 percent believe Obama initiated the GM/Chrysler bailout
  • 38 percent believe that most Republicans opposed TARP
  • 63 percent believe Obama was not born in the U.S. (or that it is unclear)

The conclusion is inescapable. Fox News is deliberately misinforming its viewers and it is doing so for a reason. Every issue above is one in which the Republican Party had a vested interest. The GOP benefited from the ignorance that Fox News helped to proliferate. The results were apparent in the 2010 elections as voters based their decisions on demonstrably false information fed to them by Fox News. 

OK, sorry Fox viewers, I will stop now but the reason I think it is important to point this out is that, if Fox is misinforming you about the political situation in this country – what makes you think you aren't being misinformed economically as well?  Ah, now you see my point (if you haven't been watching so much Fox that your brain has melted, of course) – not only does Conservative media warp your view of political reality and cause you to make poor voting decisions but that same misguided view of the World could also be causing you to make poor investing decisions as well – now do you care?  

What you BELIEVE about the economy, our Government, China, Europe, Congress, the jobs situation, taxation, etc. etc. matters A LOT in forming, not only your investing decisions but the decisions you make while you hold a trade – whether to stick with a position or panic out – for example.  

If you are not getting the best information from your news sources – then how can you expect your investing decisions to be accurate? Is it a mere coincidence that investors have lost Trillions of Dollars since Rupert Murdoch took over the Wall Street Journal?  My lawyers say I should conclude that maybe it is but – I'll report, you decide…

I always tell Members it is very important to spend at least 25% of your time reading sources that totally disagree with you (and, for most of our Members, articles like this fill their quota!).  Following my own advice, I end up watching a lot of Fox myself but, thankfully, because I also watch and read other sources – I can clearly see it for the BS it is.  Sadly, the same "quality" of information has been creeping into the WSJ as well – yet it is still the premier source of Financial Information in the World.  That's what Murdoch got for his $5Bn – CREDIBILITY.  It is interesting to note though, that NWS has already written off half of that goodwill after just 4 years – founded in 1889, that's a lot of credibility to burn through in just 4 years!  

I would never say don't read the WSJ – in fact, it's great to have both Fox News and the Journal to refer to because the investors who do use those sources (and haven't lost all their money yet) are EXTREMELY non-critical as a group and pretty much just react to whatever they are told by their "trusted" sources.  Much as the same way we watch Cramer so we can see where he is herding his sheeple so we can bet against them at the top

By all means use these "valuable" "news" sources – but PLEASE recognize them for what they are.    

Cutting through the noise and finding the true value of stocks, bonds, commodities etc. should be the ONLY concern of investors – not whether or not their political agenda is "winning" at any given time.  Right now, we should all be concerned about the deteriorating Global Economic Outlook, highlighted by this morning's 20% drop in the US Q3 GDP Estimate (2nd), now 2%, down from 2.5% 

Leaving the MSM behind – rather than focus on the drop, let's focus on the up 2%.  Our economy, all $16,000,0000,000,0000 of it, is 2% bigger ($320Bn) than it was last year.  "Wait a minute," a non-Fox viewer may say "doesn't that mean that, on average, Corporate America is doing BETTER this year?"

Now, you would need an NPR viewer to figure this out but the fact that our GDP is UP 2% and the S&P is flat – means that if you have companies that are underperforming the S&P and don't have particular special problems like MS (down 51%), THC (down 35%), GNW (down 55%), BK (down 40%), BTU (down 45%), WFR (down 62%), CNX (down 23%), JNPR (down 41%), SCHW (down 36%), AA (down 40%), GS (down 46%) and WHR (down 45%) – then perhaps there are some investing opportunities to be had here.  

WHR is a nice one, for example.  At $48.49, they are down over $30 since last Thanksgiving but, as far as I know, people still like to wash and dry their clothes using machines – it's not a fad!  WHR's sales have been steady for the past 3 years but their profits have improved substantially, dropping their p/e to 8 based on expected 2012 earnings of $6.32 per share.  You know, it's one thing to bet WHR isn't worth 15x earnings or 10x earnings but 8x is getting kind of silly, don't you think?  

Not only that, but we can hedge our entry into WHR further to cover an even bigger dip.  The company pays a $2 per share dividend, so we don't want to miss that but we can take advantage of the high VIX by selling the 2013 $45 calls for $10.20 and the 2014 $40 puts for $8.50 for a net entry of $29.79/34.90 so, if called away at $45, you make a 50% net profit PLUS the $2 dividend or, if WHR hits 2014 under $40, you run the risk of owning 2x your initial entry at net $34.90, which is 30% below the current price. 

Obviously, if you think WHR will go lower than $34.90 (and we can assume the S&P will drop a good 20% along with it to around 950 or lower) – then why would you be buying stocks in the first place?   But, if you were browsing the gun rack at WMT and didn't have the urge to buy a gross of automatic rounds to defend you bunker – then constructing trades like this with some of your sidelined cash could be a very wise move.  

When we combine hedged entries like this with additional hedges, like the EDZ spreads we took in Member Chat recently or the Dow spreads we'll be taking today if we can't hold 11,500 (our line for shorting the Futures, along with oil (/CL) at $97.50).  On the whole, we were bullish into yesterday's close because I felt that the GDP would be more or less in-line and, even if it isn't – we have the Fed Minutes later and the tea leaves should be able to be interpreted as bullish BECAUSE of the weak GDP report.  

The Fed MUST act – the consequences of not acting could be watching things go so bad that action will no longer be effective – that would not be rational and, in the end, most people act rationally, even politicians – well, other than Republicans, of course, but we don't blame them – they've been watching Fox….

 

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 Wow, seriously, what gives? 1167? 682?

Watched part of Mitt and the Seven Dwarves. Perry and Cain make Ron Paul look positively sane. Newt quite barmy with occasional flashes of lucidity. Bachman quite mad. Romney and Huntsman the only ones who are seriously running. Probably all except Paul will attack Iran on inauguration day.

 FU China!!!

 If market goes down hard tomorrow, I’m taking bullish positions.  McClellan will be very low at that point.

Phil,
 
3 am trade tonight?  What do you say…should I set my alarm?

 NF**X
I sense that you have some very interesting points of view that might indeed be thought provoking. However, perhaps it’s me, but I find most of your comments particularly difficult to quickly comprehend.
In the vein of constructive criticism might I suggest that perhaps you express some of your comments in point form rather than in the narrative?

 From FT’s Market Live transcript 11/22/2011:
 
"Some recent reading has got me thinking as to whether the US and UK central banks
were actively complicit in an aggressive re-distributive policy benefiting the very rich.
Indeed, it has been amazing how little political backlash there has been against the
stagnation of ordinary people’s earnings in the US and UK. Did central banks, in creating
housing bubbles, help distract middle class attention from this re-distributive policy by
allowing them to keep consuming via equity extraction? The emergence of extreme
inequality might never otherwise have been tolerated by the electorate.
And now the bubbles have burst, along with central banks’ credibility, what now?
 
“…[T]he extreme levels of social stress we predicted two years ago in the west (Japan’s high levels of equality served its society well during its lost decade) will result in unelected central bankers playing a key role in how this crisis plays out. The valid fear of social disintegration will, we think, increase the pressures on the central banks to print and print and print. And where they do not, as still seems possible in the eurozone, do not be surprised if total social disintegration and default emerge as the ultimate end game.

Not to sound like a conspiracy nut but, today’s trading was awfully strange and I said earlier that it looked like a setup for the big boys to get out.

kustomz
November 22nd, 2011 at 4:03 pm | PermalinkIgnore this user
you can say that again, they suppressed volatility stepped all over the $ which makes me think the boys are setting up for a downturn. Just check out the dive in AUD/USD at the close what a farce of a market when a few can control the outcome.

 Friend of mine who works at a small firm said some HUGE sell orders crossed his desk today

euro –Jim Rogers says Greece and Italy should stay IN the euro. And he’s wearing a damn nice jacket, too..!

msf65 / DCTH – Pharmboy is on vacation but he’s mostly given up on DCTH for the near term, see here.

Good morning Phil,
Pls could you post the link to your reasoning for TASR being stock of the decade whenever convenient?
Regards

In reference to the Republican "debates" some quotes from the movie Quiz Show.
 
Dan Enright: How much do they pay instructors up at Columbia?
Charles Van Doren: Eighty-six dollars a week.
Enright: Do you have any idea how much Bozo the Clown makes?
Van Doren: Well… we, we can’t all be Bozo the Clown.
 
==
 
Herbie Stemple: Don’t do this to me, it’s humiliating.
Enright: For seventy grand, Herb, you can afford to be humiliated.
 
==
 
Dick Goodwin: I thought we were gonna get television. The truth is… television is gonna get us.
 

That Ms Bachmann is  a real Foxy lady.  Very attractive. 

?????JPM, BAC, HBC, LYG, BCS, CS?????.
 
Not Goldman Sucks?  Why are we not suirprised?

Peter D/SPX short strangles:
 
Yes. It’s been good. Actually, I’ve done well in Oct and Nov option months. In general, I’m selling less premium than before and scalping profits when they reach 70% of max. Selling less obviously gives you more rolling options on the side that’s under attack. There’s been lots of profit taking as the market gyrates.
 
Put verticals: When a put vertical has lost, say $1.00 of its original $1.50 value, I’ll isolate the short put of the vertical, and if I capture 70% of the value of the short put (i.e., its mkt value at the point it becomes naked), it generally pays for the $1.00 loss.
 
I want to cover these new short puts. So I’m often going more than one round of put verticals in a month when the verticals aren’t going into the money. I find you need less verticals per short put as you get closer to op ex, because impending op ex means value of short puts won’t fall as far. In other words, $10 of put vertical insurance buys more as you get closer to op ex.
 
I’ve also just started an experiment In IB. Given my gravitating to selling less premium at any time, I’m hoping the IB margin rules prove workable.

Phil: You’re dead on, that’s exactly what happened. There never was any real equity to be mortgaged out. The average price U.S. homes had appreciated at the rate of inflation for decades, reflecting only the rise in materials costs, since the U. S. has lots of land. But after eliminating lending standards and touting second mortgages, which not only paid off 2nd mortgages but sprouted vacation homes, new cars, boats and even private aircraft (I was in CA at the time, so no wonder) the wholesale destruction of any real homeowner equity was complete. By 2001 I was living abroad, CA house sold, and totally missed the repeal of bankruptcy protection. It is very sad, as that law was intended to prevent virtual slavery and to put the onus of stupid lending equally onto presumably savvy lenders. An abomination.

well newt either killed himself or made an strategic decsion to enliven his campaign knowing that his party dies with the like of norquist and the elders..next thing is understanding higer taxes is th eonly way to lower spending…let’s stay tuned//we have all these asshats in the gop and the AIC asshat in chief..so th eway it looks to me its going to be an asshat no matter what..i see a third party evolving here ..asshats..heres to an asshatocracy!! just rebranding what we all ready have

Phil,
"Big Chart – At least we have that NYSE to watch tomorrow, sitting right on that -10% line and, of course, the RUT just a point below it (funny how that works out).  Keep in mind that if they fail and the Nas and S&P blow that 5% line, then we can predict with pretty high confidence that the Dow will fall to 11,000 or lower and there’s big money to be made on the DIA puts if that happens so be alert and ready for that kind of action if we stay weak!  the DIA puts if that happens so be alert and ready for that kind of action if we stay weak! "
I have call spreads in SPY as it seems very oversold. Also IWM seems to be breaking down (long term trend)

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