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Thursday, August 18, 2022

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Just Another Manic Monday – $1.25Tn ESM Edition

Another week, another $1.25Tn.

That's the way the Global Markets function these days as RUMOR has it that Germany will now bow to International pressure and allow the "permanent" ESM Fund to be" temporarily" doubled from to $1.25Tn extending the due to expire EFSF and combining with the existing ESM.  That then, in theory, will prompt the IMF to put in $1Tn of their own (40% US money!) as Christine Lagarde has said she would not advocate increasing IMF resources to help reinforce the euro zone firewall unless EU countries act convincingly first.

This "great" news sent to the Euro and the Pound up half a point this morning and turned the EU markets from down 0.5% to up 0.5% as Europe, once again, is "fixed."  It also "fixed" oil prices, which were in danger of slipping back below $106 this morning but now back at $107 and that's still not enough because the S&P says if Russia can't get oil up to $120 a barrel, there is no way they can balance their budget this year and each $20 below that mark will cost Russia a notch of credit ratings.

On the other hand, according to the IEA's Chief Economist, if Russia gets their $120 oil – it's the rest of the World that will plunge into a Global recession.  The IEA estimates that the EU will spend a record $502Bn this year on net imports of oil, up from $472Bn in 2011.  That represents 2.8 per cent of the bloc’s gross domestic product, whereas between 2000 and 2010 it was spending on average 1.7 per cent of GDP on oil imports.  The US will spend $426Bn on imports (2.7%), Japan $198Bn (3.6%) and China $251Bn (4.1%) while India is spending 5.9% of their GDP just on imported oil.  The IEA notes that every recession in industrialized nations since WWII have been preceded by spiking oil prices.  

That has not stopped Bernanke, this morning, from giving a speech where he once again hints at additional Fed easing and that has rammed our futures up (8:30) to the day's highs but pretty much exactly where I predicted they would be when I set shorting targets in this morning's Member Chat at 7:10, when I said

Dollar rallied back to 80 and now is back to 79.67.  The rally didn't drop the indexes but the drop back from 80 to here shot us up like a rocket in the past 90 mins.  There's stimulus news from Europe but it's the same thing repackaged again – I can't see this move up lasting if that's all they have.  S&P (/ES) 1,400 makes a good shorting line as does Dow (/YM) 13,100, Nas (/NQ) 2,750 and RUT (/TF) 835 BUT– above those lines – we're going to have to be bullish.  

Bernanke's "conclusion" in his speech has this rally fuel to help goose the markets into the end of the first Quarter on Friday: "Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies. I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well."  As Paul Simon says:

He’s a one trick pony
One trick is all that horse can do
He does one trick only
It’s the principal source of his revenue
 
He’s a one trick pony
He either fails or he succeeds
He gives his testimony
Then he relaxes in the weeds
He’s got one trick to last a lifetime 
But that’s all a pony needs     

Or, as 1020 pointed out in Member Chat this morning, Ben's "Gotta have more cowbell!"  Bernanke's comments did the trick and the Dollar plunged back to 79.25 for the first time since early March, when the Dow first rocketed to 13,250.  So we have cheap Dollars boosting US Industrial Exporters and cheap Yen boosting Japanese Industrial Exporters and that means we're all counting on the EU to buy all our stuff – what can possibly go wrong with this plan?

Actually, my bearish theory is the Dollar will hold 79.25 and bounce back as the unfolding crises in Spain, Italy and Portugal make it seem like $1.25Tn is going to be a drop in the European bucket and Chinese news continues to disappoint as well and THAT'S why we're bearish on my target lines!

Still, we have to expect $1.25Tn from the EU and another $1Tn from the IMF and another $1Tn from the Fed (all rumors, of course) to give us a nice run-up into Friday's end of quarter window dressing.  After that – who cares – it's 4 days from now and you know investors don't look that far into the future…  

Pundit scoresSpeaking of people who can't see the future, CXO Advisory's "Guru Grades Page" tracked the accuracy of many famous stock analysts and scored them based on the accuracy of their predictions and, not surprisingly, they are not, on the whole, any more accurate than flipping a coin.  As I commented to Members on the subject:  

Gurus – About what you'd expect, no better than just guessing.  This is why the only sure bet in the markets is to BE THE HOUSE – Sell premium to suckers who think they are going to be smarter than the markets.  These guys are the best of the best and only 4 are better than 50% (and not much better).  Some, like Abby Cohen are so bad they make great contrary indicators and she's the SENIOR US INVESTMENT STRATEGIST AT GOLDMAN SACHS!!!  It's a total joke folks – the only danger is if you take these people seriously…

There's a reason our mission statement at Philstockworld.com is "High Finance for Real People – Fun and Profits" – if you don't learn to have fun with the markets, they can be endlessly frustrating and you certainly don't have to take the markets seriously to make a profit – no more so than you do a roulette wheel or the roll of dice on a craps table – there are no "secrets" other than the one that our friends Steve Wynn and Shelly Adelson know all too well:  

BE THE HOUSE!  

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Yesterday Spain was broken and the next day it's fixed! Because Spain is bigger and more important than Greece? Turn on the presses!

Oil Lines

R3 – 107.44
R2 – 107.24
R1 – 106.95
PP – 106.75
S1 – 106.46
S2 – 106.26
S3 – 105.97

Good Morning!
 
I think Bernanke just said:  WE NEED MORE COWBELL!
 
http://www.youtube.com/watch?v=_Mie9hhQTUM
 
🙂

stjean / BATS
(from Friday)
I'm sure you've read the fresh news over the weekend that it was primarily a software problem, if I understand correctly. Probably aggravated by some HFT, but mostly the software change they made so they could add their own Symbol was totally fubared, and totally creamed them Friday. I think they claim they've fixed it, but the IPO is off for now.
 
http://www.bloomberg.com/news/2012-03-26/bats-ceo-blaming-code-in-ipo-stirs-concern-on-market-complexity.html?cmpid=msnmoney
 
See Phil, I'm learning……

PHIL, if you were FORCED with a gun to your head  to buy TNA or TZA TODAY, if they were within .5% of Friday, shares only, no options, strictly buying long shares, and being willing to sell the shares any time in the next two weeks, which would you take?
 
Serious question.

BATS / Newbie – Indeed Newbie and the irony didn't get lost!

What's another $400,000,000,000.
In for a penny, in for a pound….er……Euro.

stjean
Yeah, a little levity and "man bites dog"  like that once in a while is kinda cool……

Once again, kicking the can down the road…

http://ftalphaville.ft.com/blog/2012/03/26/936741/whats-behind-door-2/

 

In other words, a temporarily-combined EFSF and ESM means a total new net lending capacity of €740bn until June 30, 2013. After which point, the firewall reverts to being only the ESM, which only has a lending capacity of €500bn. Which is, many would say, not enough.

The neat thing about this option is that it would — the European Commission figures, at least — be enough to lure the IMF and G20 to contribute.  And it will not require a parliamentary vote in eurozone member countries, because it will not be changing the ESM capital stock, as authorised under the ESM Treaty. […]

The current ESM is big enough to handle small countries, but not Spain. I expect Madrid eventually to apply for a programme, specifically to deal with the debt overhang of the Spanish financial sector. But even a minimally enlarged version of the ESM will not be big enough.

PP for today:

TNA
Just placed Limit Buy for TNA at $59.28
 
off to bed now

Pain in Spain
 
Billionaire British financier Sir Michael Jagger today expressed frustration with the ongoing Euro debacle:
 
Angie, Angie
When will those clouds all disappear?

 
Here we go, good trading everyone!
 

FAS running up again….

FU CMG PCLN!!!!

26k volume pumping cmg to all-time highs
 
100k volume did it for PCLN

FAS and VXX are causing all the damage again!

Volume has dried up in less than 30 minutes

Phil – i messed up. (surprise) I have been gradually moving $ from etrade to TOS. Entered & exited one spread and all went well then following a Pharm recommendation i thought i chose to buy a CLDX Aug 3 call and sell the 4. Then over the next few days watched CLDX from ETr. When one day i opened TOS to see how i was doing i found that i had sold the 3 and bought the 4! Hasn't been a disaster but i'm wondering what creative solutions there might be. My loss so far is $15 plus costs.
Maybe btc the 3 and sto the 5?

Good Morning!      stj…..AAPL portfolio numbers don't compute……April 600 calls (50)  sold at 21.50, now 18.35 yields  profit of  3.15  times 50 times 100 = $15,750.    Did I get that right?  

Correct lflan, I was using the wrong column for the number of contracts!

stjeanluc…..Just in case you don't realize it, I continue to greatly appreciate your input here.  Not only your work with the portfolios, but I find many of your posts to be of exceptional value, and well worth my giving them some attention.    lflan

That guy talking about carriers vs AAPL is saying what we have been saying for a while – carriers subsidies make up a large portion of AAPL margin. He is saying that phones like the iPhone cost them $400 per user on subsidies and that the subsidies are now more money than their CAPEX expenses! His point was that the carriers don't like it much when they don't hold the cards… We'll see what happens, but when you look at Sprint for example, they have sunk so much money into the iPhone that I can't see them getting that money back when customer loyalty in the wireless world is only as good as the next deal!

Good Morning All – Okay, so the Dow moved up another 30 points on a housing miss spun into a "the spring buying season looks good" statement?  okay…

holy crap… look at vxx!  What is going on with that????
I bought a few December calls last week.  Should I double down on those already?

Thanks lflan – I know that I don't post many trades here, but there are so many stories out there that have great impact on the markets!

Fake…Fake…Fake
 
It doesn't matter though.

stjean – I concur with Iflan. Your posts and spreadsheet updates are truly appreciated.

The threat of Iran seems to be the major driver behind the oil prices:

http://condoroptions.com/2012/03/25/is-the-threat-of-airstrikes-against-iran-driving-oil-options-prices-higher/

Think of this as an estimate of how richly or cheaply priced options on crude oil are, relative to the actual historical volatility of the asset. Any ratio above 1.00 indicates that option buyers were willing to pay a premium above the value of the volatility subsequently exhibited by crude oil futures. As you can see, the ratio is usually greater than one. When oil prices dropped precipitously in 2008 and oil volatility exploded higher, option buyers made out quite well (the ratio dipped towards 0.75); otherwise, it has generally paid to be a net seller. Notice that the 50-period moving average of this ratio has been above 1.50 since December, which means that oil option premiums have been very rich compared to the volatility of the underlying.

stjean – as iflan said, thanks for all that you do…much appreciated

Phil – You mention ocean power as an "old project" of yours.
 
Do you have an opinion on OPTT?
 
Thanks

AAPL down?
People selling AAPL to buy PCLN?

Some interesting earnings this week:

Tomorrow LEN should give us another picture of the housing market. MOS on Wednesday is part of the ag business. And Thursday, we get BBY (in the 25KP) and RIMM which is always entertaining!

jabobesat/AAPL, Chinese people returned (a lot) iPads to Apple stores.

Apparently the middle-man does win all the time – even better than the bank!

http://abnormalreturns.com/retail-forex-follies/

 

In our forthcoming book we talk about why foreign exchange trading is for most retail traders a losing proposition. In case you doubt this proposition you need only read this Heard on the Streetpiece by John Jannarone.  Case in point, FXCM Holdings ($FXCM). The article notes that on average 70% of the  company’s customers are losers each quarter.

Why do so many FXCM clients, and clients of other retail forex brokers have such a hard time becoming profitable? The one-two punch of leverage and high trading costs. Jannarone writes:

FXCM says it collected $98 in trading revenue per million dollars traded in 2011. Those fees could mount quickly. In the example of an account with $20,000, levered 50 to 1, each trade costs about half a percentage point of the customer’s equity. The average active account made 2.7 trades per day last year.

If your account is getting hit 1.35% in trading costs per day (2.7 * 0.5%) you have to do some pretty nifty trading to make up for it. Apparently not many do. Take heed what Josh BrownThe Reformed Broker says about retail forex trading, “Just don’t do it.”

AAPL: return line in New York Apple store, news link(don't read the words – it's in Chinese), just look the pic.
http://www.worldjournal.com/view/full_news/18004184/article-%E6%96%B0iPad%E6%B0%B4%E8%B2%A8%E8%B7%8C%E5%83%B9-%E5%BC%95%E7%99%BC%E9%80%80%E8%B2%A8%E6%BD%AE?instance=instant

bobhu,
 
So the story is about bulk returns?  Tried to read it thru a translate program…  As you can see, hard to follow:
Mr. Meng revealed that Hong Kong and the United States sold the same day, the Hong Kong Bank account for enough geographical advantage, the freight cost, a week earlier than the shipping from the U.S. arrive sellers hands, so that the new iPad parallel on sale in mainland China, prices have fallen fall further, and now the wifi 16G version of the lowest market price has fallen below 3800 yuan. However, the purchase price including tax will be 550 yuan, equivalent to nearly 3500 yuan, plus delivery costs, "did not have to make".

Phil, GS said this was a generational time to buy stocks and they should know what the central banks around the world are going to do, print baby, print, maybe forever. Which means stocks will continue to go up until the magic inflation genie gets out, and then stocks will go up more.
Look at whats happened since 2009. Printing has done wonders for the market and if this is true, the sky's the limit.

DOW
How low is it? 20 milliom shares in 15 minutes, 20 more in 1 hr 45 min = 11 million per hour!

peedlew99/AAPL, Before this new iPad lunch, Hong Kong always few weeks late to sale Apple's new products(Iphone 4, 4s, ipad 1 and 2).  Based on past experience, the “middle man” knew there were always huge ChineseI(in China) demand on the new Apple products, the "middle man" had ordered their group(in US) to buy as many as iPads they can get(online and store).  But this time US and Hong Kong set the same day to sell iPad and Honk Kong get enough inventory to satisfy their customers.  So, the price in for New iPad was drop a lot in grey market at China(to 3800 yuan), the basic iPad after tax is about 3500 yuan in US.  There is NO profit after shipped to China(if custom find it, they will charge you another 1000 yuan).  So, all the Chinese bought online and in stores are returned their inventory. 
 
Hope this clear the air.

Income Increase/Phil
 
And that yearly $80 increase is gone from the difference of filling your tank up for a month today than a year ago.

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