Archive for 2011

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The EEM/EFA Indicator and the S&P 500

Courtesy of Doug Short

Last week I shared an indicator from Chris Kimble — a chart that divides the iShares Emerging Markets Index (EEM) by the iShares MSCI EAFE Index (EFA), which is a surrogate for developed markets excluding the U.S. and Canada. The indicator, Chris suggested, is flashing a warning signal.

I’ve received a number of emails asking more specifically about the relevance of this indicator for the U.S. markets. Below is my Stockcharts.com EEM/EFA chart with the S&P 500 in the background. The timeframe is from the inception of the EEM/EFA data in 2003. I’ve included the 200- and 50-day moving averages to help clarify the indicator trends.

What conclusions can we draw? Chris’s original post was essentially a “heads up” warning that global trends could be on the threshold of change. The data series doesn’t extend back very far, but the S&P 500 overlay suggests that the caution alert also applies to the U.S. market.





Another Immune Company Play – Immunomedics

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Cancer is a class of diseases in which a group of cells display uncontrolled growth.  Some cancers invade or intrude upon adjacent tissues, then destroy that tissue/organ, and then spread (metastasize) to other locations in the body via lymph or blood.  These three malignant properties of cancers differentiate them from benign tumors, which do not invade or metastasize.  All of these diseases suggest that there will be a need for personalized therapy, as even within a specific type of cancer, there is wide heterogeneity in clinicopathological features.  For instance, leukemia, lymphoma, myeloma, etc are all lymphoproliferative disorders (where lymphocytes are produced in excess) affect one or more different biological pathways that play a role in lymphomagenesis (the development of B cells and T cells).  Over the past year, on focal point of our  investment virtual portfolio has been smaller companies researching and developing treatments for cancer (CRIS, ARIA, ARRY, SPPI, IMGN).  The next small company with some very interesting prospects in the pipeline is Immunomedics.

Figure 1.  Cancer Prevalence.

In our recent past, monoclonal antibodies (mAbs) were discussed in the context of a mid-tiered pharma, BIIB and smaller biotech, Immunogen (IMGN).  These companies will not be rehashed, but to re-emphasize that mAb and biologics are one of the hottest areas in in biotech.  Small molecules have are not the favorites for now (especially in cancer), and that is most likely due to early stage trials, lack of efficacy, or more likely – patent protection, as biologics/mAbs are harder to show equivolance….and thus have the potential to generate cash for years to come. 

(IMMU) based in New Jersey, is primarily focused on the development of mAb-based products for the targeted treatment of cancer, autoimmune and other diseases.  The company has a number of advanced mAbs that can be used either alone in unlabeled or “naked” form, or conjugated with radioactive isotopes, chemotherapeutics or toxins, in each case to create highly targeted agents (think Inmunogen, but different 'targets').  The company has built a pipeline of therapeutic product candidates that utilize several different mechanisms of action discussed below.  The company also owns a stake in IBC Pharmaceuticals, Inc., which is developing a novel Dock-and-Lock (DNL) methodology. …
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Rubber Hits An All Time High As Last R-Bubble Approaches Escape Velocity; Rubber Curve In Backwardation

Courtesy of Tyler Durden

Now that the Rare Earth bubble has come and gone (and may well come back again depending on how much China wants to stretch its political muscle), the Rice bubble is in progress, and may see prices going back to the $24 range we saw last in 2008 when net CBOT non-commercial spec contracts were approaching the 8k levels, the last R-bubble prediction is coming true. Back in October, Zero Hedge said the next bubble are the 3Rs -Rare earths, Rice and Rubber. Lo and behold, rubber just hit an all time high on the Tocom, after returning 30% YTD. And far more importantly to those who care about such things, the rubber forward curve is in backwardation. No need to explain what that means.

Below is the 63% return since we predicted Rubber’s imminent entry into bubble territory, in all its glory:

And the forward curve: the JRUN11 (July) is at ¥511, while the ^JRU is at ¥523.





“Get Ready For Margin Collapse” Goes Mainstream

Courtesy of Tyler Durden

First it was “Get Ready For Higher Food Prices” going mainstream… Now, logically following, it is “Get Ready For Margin Collapse.” As Zero Hedge has long been warning, the one immediate consequence of surging commodity prices as a result of endless liquidity, is a collapse in corporate margins. Now, about 6 months after we first broached the topic, it has finally hit the mainstream media. The WSJ highlights what is so obvious, it is no wonder no sellside “strategist” is willing to touch the topic with a ten foot pole: “This earnings season has seen a much-welcomed return to revenue growth, giving investors another reason to push stocks to two-year highs. But beneath the surface lurks a fresh worry: For many companies, the cost of raw materials is rising at a faster pace than revenue. Blame it on soaring prices of everything from cotton to copper and corn. That has squeezed profit margins more markedly than many analysts anticipated—and is serving as a worrying sign for future earnings.” But yes, aside from the painfully obvious collapse in margins, and thus plunge in net income (sorry, companies can’t fire their skeleton crew workers any further) which will mean 2011 S&P 500 EPS will come far, far lower than prevailing consensus, everything is fine.. and don’t forget to BTFD.

The WSJ - about half a year behind the curve:

rocter & Gamble, Ford Motor  and Kraft Foods are among dozens of companies that reported lower profit margins for the fourth quarter of 2010 compared with the third quarter. Their stocks were punished by investors, even as the companies’ profit and revenue exceeded analyst forecasts. The cool reception stood in contrast to the general optimism among investors that has helped the Dow Jones Industrial Average to gain about 6% this year.

About three-quarters of the companies in the Standard & Poor’s 500-stock index have reported their earnings so far. Some 25% of those companies have posted lower margins in the latest quarter, according to Morgan Stanley. S&P says operating margins for S&P 500 companies in the latest quarter have come in at 8.69%, down from margins of 8.95% for the S&P 500 in the third quarter.

Stunningly, the computers doing all the trading are shocked, shocked, to find out there have been…
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I Smell a VAT & (tax) Holiday Fun

Courtesy of Bruce Krasting

I Smell a VAT!

On 2/2 I wrote about a bill proposed by Congressman Kevin Brady (R,Tx). The bill would make the deduction of state sales taxes a permanent part of the tax code. As of today one can deduct sales taxes but the law allowing this expires in two years.

What I found interesting was that the (current) deductibility of local property and state income taxes (“PI”) was not included in Brady’s’s bill. The suggestion to me was that as soon as the sales tax issue had been made permanent, deductions for the other SALT taxes would be eliminated. I didn’t think that the bill had a snowballs chance in hell given that it would have opened the door to higher net taxes via lower deductions. (stealth) This bill would have been very damaging to the big Blue states of CA, Il and NY.

Well, I’m wrong again. Senator Maria Cantwell (D. Wa) has introduced S.24:

To amend the Internal Revenue Code of 1986 to permanently extend the election to deduct State and local sales taxes. Be it enacted by the Senate and House of Representatives of the  United States of America in Congress assembled,

Cantwell’s Bill has the support of other big Democrats including, Reid, Nelson, plus some senate republicans; Ensign and Alexander.

With that cast of characters this bill is going to pass. Deductibility of state sales taxes is going to be made permanent. What might this mean?


I think this is the first step towards eliminating the other critical deductions of income and property tax. That would be an absolute disaster for the big Blues. They all have high property taxes as well as big income taxes. States like Texas with no income tax but big sales taxes would win big. (What is Harry Reid thinking of??)

Should this happen it will change the way states generate income. Sales taxes will rise in every state to take advantage of the permanent deduction and the loss of deductibility of other SALT taxes. I doubt that this will be offset by any reductions in PI. Net-net the blues lose, which is the point of this.

I think this legislative maneuvering is leading


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Guest Post: Democracy And Its Contradictions

Courtesy of Tyler Durden

The next in a continuing series (most recently: Evil and the State).

Submitted by Free Radical

Democracy and Its Contradictions

Democracy, as Churchill said, “is the worst form of government except for all those other forms that have been tried from time to time,” the assumption being that because the state is the only conceivable form of government (and therefore necessary for civil society to exist), the democratic state is the best state, even if it is merely the best among bad ones. This flies in the face, of course, of the godlike esteem in which democracy is held around the world, both by those who are ruled by such states and by those who yearn to be. Democracy, after all, is based on “the proposition that the legitimacy of all political power arises from, and only from, the consent of the governed, the peoplei  – the assumption being that the democratic state embodies this noble proposition. 

The problem, however, is that while the people’s consent in a democratic state is supposedly expressed through the right to vote – through the so-called “ballot” – consent has little if anything to do with the process:

Doubtless the most miserable of men, under the most oppressive government in the world, if allowed the ballot, would use it, if they could see any chance of thereby meliorating their condition.  But it would not, therefore, be a legitimate inference that the government itself, that crushes them, was one which they had voluntarily set up, or even consented to.

What does it mean, in other words, to vote within the confines of that which one had no vote in creating and when those confines, therefore, cannot legitimately – i.e., in a morally justifiable manner – rule over one? Even assuming that those confines are minimal (though none are, of course, even if they were so conceivedii), what moral authority or obligation can such confines have?  What authority or obligation, that is, can political constitutions have?

The answer, simply put, is none.  The United States Constitution, for example,

… has no authority or obligation at all, unless as a contract between man and man. And it does not so much as even purport to be a contract between persons now existing. It purports,


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The S&P 500 and DAX Are Way Outperforming the Plummeting Hang Seng and Bombay

Courtesy of Doug Short

How much longer will this last?

Here is the latest weekend snapshot of seven major world indexes. For the second consecutive week, the S&P 500 and DAX ended at new interim highs. In fact all the markets saw gains except the Bombay SENSEX, which is now 15.6% off its all-time high set last November, and the Hang Seng Index, which lost 5.42% from its previous weekly close on Wednesday, February 2 (the HSI was closed for Lunar New Year on the 3rd and 4th). The Shanghai Composite remains in the cellar, 18.55% off its interim high, even though it has gained 5.6% since its interim low on January 25.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500 and Bombay SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Bombay, Hang Seng) is readily apparent. However the pattern has been in reversal over the past few months.






Who the REAL Taxpayers Are & Why Income Inequality Isn’t Nearly As Much of a Problem As Critics Claim

Courtesy of Stone Street Advisors

(Originally published at Stone Street Advisors)

I’m sick & tired of politicians, pundits, and "average joe’s" invoking the term "Taxpayer" in their mostly uninformed rhetoric.  You know what I’m talking about: "The Taxpayers are angry about bank bailouts," or better, things like "The Banksters are getting rich at the expense of The Taxpayers."  First of all, 40% of Americans pay ZERO Federal Income Tax (some even get net subsidies!), so right off the bat, almost half of Americans need to seriously shut their traps & do a little research before whining about fairness of U.S. Tax (etc) policy.  The half and mis-truths propagated by The Ignorati don’t stop there, though.  Not even close…

The top 25% of earners pay almost 87% of Federal Income Tax!  And that was in 2007, I doubt that number has gotten any smaller in subsequent years.  Put this another way, the lower 75% of earners only pay less than 14% of Federal Income Taxes even though they account for ~31% of income.  Those in the top 1%, by comparison, earn ~23% of income but pay over 40% of Federal Income Taxes, an increase in the tax burden on the top 1% of 57% over the past 20 years.

The top 0.1% accounts for half of the money earned by the top 1%, i.e. the VERY rich are and have been getting richer faster than the merely wealthy, who themselves are getting more wealthy, faster, than those in the top 10 and 25%’s.  Income’s at the top are increasing faster than those on lower income rungs of the income ladder(and this is just looking at the top 25%!)  This is not necessarily a surprise, though, considering the shifts in the U.S. Economy and labor force adjustments (or lack thereof).

Is it "fair" that the top 0.1% of earners pay over 20% of the taxes?  Is it fair that the 75% of filers making less than $32,095 (the lowest income in the top 25% in 2007) a year only pay 14% of taxes, yet are disproportionally the recipients of Government aid programs?  I think the answer to both is probably far closer to "no" rather than "yes."

For example, wouldn’t it make more sense to decreases taxes on "the poor" so they would be able to keep more of their $ rather than giving it to…
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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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ValueWalk

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

Cars.com 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 ...

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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 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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Biotech

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 www.shutterstock.com

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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OpTrader

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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Promotions

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.

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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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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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