Archive for 2011

How will they will prop up stocks after QE? An answer?

Courtesy of Bruce Krasting

Bernanke has told us at least a half-dozen times that the primary objective of QE is to jack up stock prices. Let’s give the man his due. It has worked. Rising equities and an improving economy are now synonymous. Daily doses of QE through POMO purchases are creating liquidity. Some of that loose money finds its way to equities. 

The problem with QE is that some of that money is also going to unwanted places. And it is a factor in rising inflation around the world. While it is correct to say that the Fed can’t be blamed for everything, it is also correct to say that ZIRP and QE are adding to the problem.

For that reason alone (there are many other good reasons) QE will end this summer. When the connection between the Fed’s easy money and rising global food prices is made in the NY Times (it will be) QE will die. 

If that should be the case one would have to expect that a drop in demand for equities (and other things) is going to have to occur at some point this year. It could be as early away as four months (the last month of QE will be of no significance). This creates a problem for policy makers. They can’t let stocks find their own level. After all, it is now proven that we need stocks going up for the economy to expand, it must work the other way round. Right? 

I think that there is a solution to this problem. Give the S&P 100 a bunch of money and an excuse to do share buybacks. Something like that just might happen. It is a development that is most certainly worth watching for if you have an eye on the tape.

This headline tells the story:

The NY Times had a story on this last year:

If you have a day with nothing to do read this (61 page) report titled:

The conclusion of the report regarding the 2004 tax holiday for US corporations:

Estimates indicate that a $1 increase in repatriations was associated with a $0.60-$0.92 increase in payouts to shareholders.

The pieces are on the table. The US…
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The Unsustainable Meets the Irresistible

Courtesy of John Mauldin at Thoughts from the Frontline 

This week’s letter is a result of two lengthy conversations I had today, which have me in a reflective mode. Plus, I finished the last, final edits of my book, all of which is causing me to mull over the unsustainability of the US fiscal situation. There is a true Endgame here, and it may happen before we are ready.

The first conversation was with Kyle Bass, Richard Howard, and Peter Mauthe, over lunch (more on Peter, who has come to work with me, below). Kyle is the head of Hayman Advisors, a very successful macro hedge fund based here in Dallas. Then I recorded a Conversation with David Rosenberg and Lacy Hunt, which is one of the best we have ever done. Subscribers will be very happy. The new Conversation with George Friedman is now online, too. You can learn more about Conversations with John Mauldin at .  And please comment on this and future letters in the readers’ forums of my new website. Now, to this week’s letter. My goal is to make this one a little shorter than normal. We’ll see how I do.

The Unsustainable Meets the Irresistible

Kyle, Lacy, and David are typically pushed into the bearish category, but (not surprisingly to me) their forecast for the next few quarters is rather strong. None of us would be surprised by a high-3% number for GDP this quarter, and 4% is not out of the question. And we all see GDP tailing off as the year winds down. Inventory builds begin to slow, and in 2012 the 2% payroll holiday goes away. Plus, as I have written and David has noted, the pressure on state and local spending is getting larger with every passing day.

State and local spending is the second biggest component of the economy. The chart below, from David’s letter this week, gives us a visual image of just how large it is. Note…
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America Appears To Be Trapped in a Massive Coverup of Control Fraud and Corruption

Courtesy of Jesse’s Americain Cafe

I think most readers with an economics background would be familiar with a liquidity trap, which is a situation where monetary policy is unable to stimulate an economy suffering a non-cyclical credit contraction, either through lowering interest rates or increasing the money supply because expectations of adverse events (e.g., exogenous deflationary factors, insufficient aggregate demand, or civil or international war) make persons with liquid assets unwilling to invest.

America is caught in a confidence or credibility trap, in which the changes, investigations, and reforms necessary to restore trust to an economy or market are rendered unlikely because doing so would expose a pervasive corruption that the principals fear would destroy any remaining trust.  It could  also endanger the careers of politicians and business people who may have permitted and even appeared to facilitate the control fraud that caused the financial crisis in the first place.  Personal risk trumps public stewardship.

The fraudulent activity is covered up and therefore continues or appears to continue, crowding out most productive business investment and activity which cannot possibly hope to compete with the highly profitable fraudulent activity under such opaque and uncertain circumstances.  Informed market participants are unwilling to invest their liquid assets in a system which they suspect is riddled with accounting fraud, insider trading, and regulatory weaknesses, except of course in a few situations and somewhat ironically in some existing frauds, such as a bubble in equity valuations for example, which they think they understand.

geithner, bernankeThe American government is indeed acting as if it is involved in a massive coverup of a control fraud and corruption that could perhaps be the worst in its history.  I think many people who are looking at this know in their hearts that all is not well, that there is something not quite right in the current situation.  How else can we explain such massive and widespread financial fraud, with so few meaningful indictments, or even ongoing investigations with credible disclosures?  And the worst perpetrators appear to be dictating the remedies and reforms to the system for this government sponsored recovery.

Hank, Tim, and Ben alluded to the consequences of the discovery and uncontrolled disclosure of this fraud, and it frightened the Congress so badly that they immediately gave up and signed over 700 billion dollars, and many billions more, to facilitate the coverup of this under the guise of recovery and stabilization.  I would like to imagine that those in charge are attempting to prevent a panic while they…
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Tavaokoli: No Need to Qualify – This IS a Massive Cover-up of a Control Fraud

Courtesy of Jesse’s Americain Cafe

Hard to top this for straight talk and right to the heart of the matter from someone who knows the financial markets, and especially derivatives, better than most.

From this afternoon’s mailbag:

"Loved your commentary: ‘The American government is acting as if it is involved in a massive cover-up of a control fraud and corruption that could perhaps be the worst in its history.’

There’s no need to qualify. The government is involved in a massive cover-up of control fraud and corruption, and it is the worst in U.S. history. 

We let the servants quietly steal from the wine cellar and larder (for more than a century), and after discovering that no one would check their behavior—in fact, we handed the keys to our consumables to all the servants and let them bribe the overseers—they have watered down all the wine, and they backed up the truck to the larder and replaced most of the food with jars of peanut butter.

The bad guys have won, it’s almost too late to find our food and wine (5 year statute of limitations for securities fraud). As you rightly point out, those who speak up like William K. Black are marginalized.

Perhaps the most positive thing one can do at this point is try to stay on top of the anomalies created by this mess and try to preserve and increase wealth for the few that will listen."

Janet Tavakoli


Seven Men, Nine Days, One New Monetary Cartel, Pt. 2

Courtesy of Phoenix Capital Research

Thus, on a wintery day in November 1910, seven men retreated to JP Morgan’s private Jekyll Island resort to plan a system of banking that would address all of these problems, while simultaneously expanding their power and influence over the US banking system.

G. Edward Griffin, in The Creature From Jekyll Island, puts their primary goals as the following: 

1)    To stop the growing influence of smaller banks and increase the Anglo-American banking giants’ grip on the US financial system

2)    To shift US banking to a more “loan heavy” structure thereby expanding the monetary base more dramatically (making money more “elastic”)

3)    To pool all national banks reserves and set nation-wide standards for loans to reserves ratios, thereby minimizing the risks of bank runs and failure

4)    To establish a means of shifting the losses from bank failures away from the banks and onto the public

And finally…

5)    To develop a PR campaign that would result in the US populace accepting the implementation of a full-scale private banking cartel

I do not have time to detail the precise proceedings of the meetings these men held over their nine day stay at Jekyll Island, nor is there room to explain precisely how they infiltrated the US political system and managed to introduce a banking plan that was written by Frank Vanderlip and Benjamin Strong (who represented the Rockefeller and Morgan families, respectively) as if it were a bill produced by members of Congress. 

However, a brief overview is as follows:

Initially Senator Aldrich proposed something quite similar to the Bank of England, in which there would be one single large bank. However, the Rockefeller interests (who had ample experience with the US populace’s reaction to monopolies) thought this would be too much for Americans to stomach. Instead, they proposed the creation of 12 regional banks largely to maintain the illusion that the Fed would be a union, not a single central bank.

This is where the expertise of Paul Warburg, who had the most experience with…
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Al-Jazeera Releases “The Palestine Papers”: Thousands Of Documents Detailing A Decade Of Secret Israeli Palestinian Negotiations

Courtesy of Tyler Durden

Al-Jazeera has released thousands of previously classified documents which due to their content will likely bring the already sensitive situation in the Middle East to a boil once again. While the document progenitor could well be Wikileaks, the TV network refuses to disclose the source: “Because of the sensitive nature of these documents, Al Jazeera will not reveal the source(s) or detail how they came into our possession. We have taken great care over an extended period of time to assure ourselves of their authenticity.” As for what is contained: “The material is voluminous and detailed; it provides an unprecedented look inside the continuing negotiations involving high-level American, Israeli, and Palestinian Authority officials.” Apparently, the disclosure is so sensitive that the ISP of the Palestinian authority has just blocked the Aljazeera site containing the early releases. We look forward to reading the documents as they are released between January 23 and 26. Judging by the prompt retaliation they will be worth the read: according to the Palestinian Authority, Al-Jazeera has just declared was on Palestinians, which intuitively makes little sense.

From Al-Jazeera:

Over the last several months, Al Jazeera has been given unhindered access to the largest-ever leak of confidential documents related to the Israeli-Palestinian conflict. There are nearly 1,700 files, thousands of pages of diplomatic correspondence detailing the inner workings of the Israeli-Palestinian peace process. These documents – memos, e-mails, maps, minutes from private meetings, accounts of high level exchanges, strategy papers and even power point presentations – date from 1999 to 2010.

The material is voluminous and detailed; it provides an unprecedented look inside the continuing negotiations involving high-level American, Israeli, and Palestinian Authority officials.

Al Jazeera will release the documents between January 23-26th, 2011. They will reveal new details about:

    * the Palestinian Authority’s willingness to concede illegal Israeli settlements in East Jerusalem, and to be “creative” about the status of the Haram al-Sharif/Temple Mount;
    * the compromises the Palestinian Authority was prepared to make on refugees and the right of return;
    * details of the PA’s security cooperation with Israel;
    * and private exchanges between Palestinian and American negotiators in late 2009, when the Goldstone Report was being discussed at the United Nations.

Because of the sensitive nature of these documents, Al Jazeera will not reveal the source(s)

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Stock World Weekly

Here’s the newest: Stock World Weekly Newsletter. Comments welcome! – Ilene 

Jobs Cartoon

Archives here. 

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Can You Hear the Waterfall? (DIA, SPY, FXI, NYSE)

Courtesy of John Nyaradi

 One of the most intriguing aspects of financial writing is the various colorful aphorisms that abound in this business.  We enjoy comments like “the trend is your friend,” and we hope to “let our winners run” while we watch “bulls and bears” struggle for control of the hearts and minds of the markets.

 One of my favorites and I think the one most applicable for today is the concept of the “waterfall” or the “waterfall decline.”  It’s certainly a visual image and on that can clearly be seen on charts like the recent Shanghai Composite that we’ll take a look at in a moment. 

 With each passing day, the probability of a waterfall decline in U.S. markets becomes more likely.

 This week a well known and widely read financial website, Seeking Alpha, made some significant changes to their leader board/opinion leaders, and with more than 4,000 contributors on the site, I’m pleased and honored to report that I am currently ranked #4 in the Today’s Market category. 

I can highly recommend Seeking Alpha as a top source of up to the minute financial information and analysis.  It’s easy and free to join their more than 600,000 current members and I would be honored to welcome you to my group of readers. 

On My Radar 

On a technical basis, the markets remain overstretched and ripe for a correction, while fundamentally, we saw selling on good news and earnings that are “good” now suddenly don’t appear to be “good enough.”  By many analysts’ measurement, the market is overvalued by as much as 50-60% with one of my favorites, Tobin’s Q, developed by Nobel Prize Winner, James Tobin, currently indicating an overvaluation of 63% (Doug Short)

chart courtesy of 

In this chart of the S&P 500, we can see that we’re still in a definite uptrend with prices above the 20, 50 and 200 day moving averages, however, RSI is in the oversold, “red zone,” and MACD has recently switched to a “sell” signal.

chart courtesy of 

Looking at the chart of the Shanghai Composite, we see it in the red and black candlesticks with the overlay of the S&P 500 in black bars.  It’s easy to see how the two have been closely correlated until just early December and the “waterfall declines last April and more recently since November in the…
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“Bond Recoveries Or Chocolate”: Ivory Coast Issues Ultimatum With Cocoa Export Ban, As Chocolate Prices Set To Surge Monday

Courtesy of Tyler Durden

When a week ago we observed the Onionesque reality of life in the Ivory Coast, where deposed president Gbagbo is threatening to wipe out bondholders of $2.3 billion in debt (Corporate Ticker: NUTZ) unless he becomes formally recognized, we made the following bold prediction: “we are sure that Blythe Masters and her team were recently in Yamoussoukro discussing the most effective way to corner the cocoa market (paper Cocoa ETF?), thus getting the price of the sweet powder up by a few trillion percent (in exchange for a nice 25% of all upside going to Jamie Dimon’s firm of course).” Sure enough, when it comes to our track record of macabre predictions we continue to be near 100%. The FT has just reported that Alassane Ouattara, Laurent Gbagbo’s opponent in the presidential election (and the man formally acknowledged by the UN as the country’s president) has just imposed a one-month export ban of cocoa, ostensibly in an attempt to oust Laurent Gbagbo. In other words, the international community has to choose: bond recoveries or chocolate. That said, we are certain that it is none other than noted commodity market cornering expert JPM that can claim league table advisory credit for what according to the FT will be a 10% jump in the price of cocoa on opening Monday. The immediate retaliation by Gbagbo will most certainly be to force a technical default on the country’s bonds which are already in their grace period, and start a localized mini liquidity (and solvency) crisis in Africa… As if the developed world did not have enough of those as is. And in the meantime, we sense a great disturbance in the inflationary Force, as if millions of fatty voices suddenly cried out in terror, and were suddenly silenced. Prepare for the next round of food inflation worldwide.

From the FT:

Cocoa is the main source of income for the government of Ivory Coast and any stoppage in exports would cut the funding Mr Gbagbo relies on to pay loyal civil servants and the military. Diplomats believe he needs about $150m a month.

Any reduction in supply is likely to push the price of the commodity used in chocolate towards a 33-year high because Ivory Coast accounts for about 40 per cent of global cocoa exports. The cocoa market closed

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“Buy A Gun” Google Queries Hit All Time High, And Other Off The Grid Economic Indicators

Courtesy of Tyler Durden

In lieu of a credible macroeconomic data reporting infrastructure in America, increasingly more people are forced to resort to secondary trend indicators, most of which have zero economic “credibility” within the mainstream, yet which provide just as good a perspective of what may be happening behind the scenes in this once great country. A good example was a recent Gallup poll, which contrary to all expectations based on a now completley irrelvant and thoroughly discredited ADP number, which led some br(j)okers such as the Barclays Insane Predictions Team to speculate a 580,000 NFP number was in the books, indicated that the jobless situation barely improved in December. Sure enough, this was promptly confirmed by the January 7 NFP number. And so, in looking for a variety of other “off the grid” economic indicators we read a recent report by Nicholas Colas, which proves to us that we are not the only ‘nerdy’ entity out there increasingly searching for metrics that have some rooting in reality, and not in the FASB-BLS-Census Bureau joint ventured never-never land. And while we recreate the key points from the report, the one item that should be highlighted is that, as we have suspected for a while, the social undertow of fear, skepticism and anger is coming to a boil, as Google queries of the “Buy A Gun” search querry have just hit an all time high. How much of this is due to the recent events from Tucson, AZ is unclear. What is clear is that the trend is most certainly not your friend (unless you are of course the CEO of Smith and Wesson).

We’ll leave the interpretation of this chart to our very erudite politicians.

As for other must read observations on the topic of derivative economic indicators, we present Nicholas Colas’ must read latest: “Off The Grid” Economic Indicators – Q410 Edition

There are a lot of economic indicators out there, and we pay attention to all of them because government decision makers have told us they shape economic policy. But there’s a wealth of independently developed economic and statistical data available as well, and much of it provides much-needed color on the real state of the U.S. economy. Our collection of anecdotal datapoints, which we have dubbed the “Off The Grid” indicators, paint a more nuanced picture of a slow
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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...

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Phil's Favorites

This Is The One Chart Every Trader Should Have "Taped To Their Screen"

Courtesy of Zero Hedge

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

As Nomura&...

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The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...

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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...

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Digital Currencies

Transparency and privacy: Empowering people through blockchain


Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...

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Insider Scoop Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ... more from Insider

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 chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 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.

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