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Wall of Worry Wednesday – Insurmountable or Time to Climb?

Isn't this fun?

On Monday we drew our 50% retracement lines for the Dow (13,000), S&P (1,395), Nasdaq (3,075) NYSE (8,050) and Russell (815) as well as the other global indices that we expected to be tested this week but I cautioned:

"How many times will the bulls be sucked in by the same empty promises?  How many times will they reach into their pockets and BUYBUYBUY the snake oil valuations sold by the Reverend James Cramer?

Now I don't mean to pick on Cramer but it is truly incredible how many times people begin a conversations with me by saying "Cramer says.."  Yesterday Cramer said to ignore the experts and their annoying FACTS and just BUYBUYBUY:  “No one from the Fed said anything today, yet the market roared, so I imagine these people are stumped beyond belief,” Cramer said. “It must be so troubling for them to rationalize this rally.”  

JEFF GUNDLACH'S EPIC PRESENTATION: 'To QE3 Or Not To QE3, That Is The Question'See, Cramer is just a great summary of everything that is wrong with investing these days.  What a ridiculous over-simplification to act as if the Fed has to say something every day to move the markets – the complete and utter ignorance/disregard of World events is truly stunning on Cramer's show, CNBC and pretty much all of the MSM who won't tell you anything that can't be reduced to a Twitable sound-byte.

On the right, we have the anti-Cramer – a thoughtful presentation by Morningstar's Fixed Asset Manager of the Decade, Jeff Gundlach, who is the only bond fund manager to win the Standard & Poor’s/BusinessWeek Excellence in Fund Management five years in a row.  I urge you to run through Jeff's presentation as it contains a fantastic series of charts that gives a well-balanced view of the global macros.   One very notable chart was this one, showing the divergence between stocks and commodities as Operation Twist has had no stimulative effect on demand:  

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undefinedThat's not a healthy-looking divergence, is it?  While the bulls are betting that commodities will catch up to the hyper-inflated stock prices, we've been betting the hyper-inflated stock prices will eventually run into the demand reality that is already tanking the commodity markets.  

As we noted in Member Chat this morning, the Central Banks are pumping free money into the banks (that will eventually become a burden on the bottom 99% taxpayers and their children and their children's children…), who are not lending it to boost the economies but are turning around (or "twisting") to buy Sovereign Bonds that the top 1% have been stuck with.  

Aside from the feeding frenzy by our local Banksters at the expense of the Fed, Spanish and Italian banks have used LTRO and EFSF funds to load up on over $600Bn worth of Government debt – debt that may well be defaulted on in the same way Greece just did.  It's nothing more than a stealth bailout of the top 1%, who are cashing in their bonds at top dollar and moving back to cash ahead of the next market collapse.  

Even the bankers to Europe's Top 1% in Germany and France are CUTTING their holdings in the same bonds by 50% as the bad-debt burden is transferred to the debtor nations, who will later be blamed for making these bad investments as the situation that is clearly visible now will, in the future, be used to justify even harsher austerity measures for their poor neighbors.  

“The more banks stop cross-border lending, the more the ECB steps in to do the financing,” said Guntram Wolff, deputy director of Bruegel, a Brussels-based research institute. “So the exposure of the core countries to the periphery is shifting from the private to the public sector.”

Corruption DemotivatorWhat a scam!  A great example of the Dooh Nibor Economy, where the Global Kleptocracy continues to run policies in their puppet Governments that rob from the poor and give to the rich.  While French and German banks lost money on Greece’s restructuring last month, a delay of more than a year allowed a similar shift of risk to the public sector. When the exchange took place, the debt relief was capped at 59 Billion Euros because fewer bonds were held by the private sector, including banks outside the country. If Greece had defaulted in 2010, the reduction could have been as much as 232 Billion Euros.  

This amazing Global Ponzi scheme is bound to end badly – the only question is when?  The bull case (see Cramer) is that the Fed and other Central Baniksters are placing a floor under the market so you "can't lose" – no matter what idiotic valuation you pay for stocks (Gundlach believes 8-10 is the proper p/e for the S&P 500 – now 15).  Essentially, people buying the market under this premise are no different than people who invested with Bernie Madoff, knowing it was a scam but not caring as long as they got their 20% returns – it works until it doesn't.    

This is a discussion I have with our Conservative friends all the time – it DOES matter where you get your money from.  We (the top 1%) are currently extracting our wealth and income from the bottom 99% at a record pace.  

The gap between the rich and the poor in America has never been wider and AMERICA can't, CAN NOT, recover if our survival plan is to get what we can and put it into our 3M lifeboats while letting the other 297M people go down with the ship.  The austerity actions being taken now are essentially a justification of theft along the logical lines of "well, those 297M people are going to die anyway so robbing them isn't REALLY a crime, is it?"  

According to Romney and the rest of the GOP, it is MUCH more important that we preserve his comfort and his lifestyle than to waste our time helping those who are unable to help themselves.  This is the same attitude the Germans are developing regarding their poor European cousins – why should we save you from collapse if it might cause us discomfort?  

The more the Corporate Media manages to convince the top 10% (no one else matters) that the bottom 90% are unsaveable or "not worth" saving – the more they are able to justify greater and greater abuses heaped upon those down below.  Dehumanization of the enemy is an essential part of a propaganda war and make no mistake about it – class warfare is a war and it's not a war that the poor are waging against the rich (despite what their PR machine would have you believe) – it's a war that the rich have been waging against the poor for 40 years now.  

This is the way things work people – I apologize for the Micheal Moore clip, I know that he is considered to be the great Satan and most of you have been brain-washed to feel sick at the mere mention of his name or the sound of his voice because he….  er….  well, because he did whatever horrible things that you think you know have maybe been insinuated about him by the MSM, right?  That's good enough for us because WE'RE REAL AMERICANS, right?  

Government DemotivatorReal Americans don't put up with agitators, unless those agitators are from the Tea Party or unless they are anti-tax agitators or unless they want to reduce (not COMPLETELY destroy) our Government because, as we all know, Government is the problem and private enterprise is the solution!  

Of course, in this upcoming election we have 242 House Republicans that should be re-elected – it's the 190 Democratic bums that need to be thrown out and THEN you'll see some real action.  The Republicans have been hamstrung so far by their 32% advantage in Congressional seats and now we have an historic opportunity to extend the reign of a Congress that only managed to pass 80 Laws out of 945 votes taken (with 5,970 resolutions killed on the floor) in 2011 – a record that may only be broken by the same team in 2012 as they are 0 for 89 votes with 627 bills killed in Committee in the first quarter of this year – go team!!! 

These people are destroying our country folks.  Do you really believe the World's largest economy can afford to do NOTHING for 2 years?  Is this going to be the winning strategy we reward – hamstring a sitting President, let the country run straight downhill and then run for re-election on the premise that, as long as you approve of the guy the people elect to be in charge – you might be willing to play ball.  This is not politics – it's extortion!  

Let's contemplate that while we wait PATIENTLY for the markets to correct.  The point in going over these Global and Political macros is to get you to step back from the day to day BS that the MSM likes to keep you focused on and contemplate the bigger picture.  We discussed many of our recent short plays in yesterday's post and there was no change in yesterday's Member Chat as we took advantage of that very silly move up to add back some short positions after Monday's profit taking.  

Now that we've completed our 50% retrace of the month's drop, we'll be happy to take quick bear losses and go longer if we can accomplish 3 of 5 of our 50% lines (see above) but clearly we'll be exercising a HEALTHY degree of skepticism against any short-term market moves.  

Early this morning, we took advantage of the morning pop to short the oil Futures (/CL) at $104.50 and we're just testing $104 now at 9am – so the Egg McMuffins are paid for and we're ready to start our trading day!  

Kleptocracy by WilliamBanzi7.  

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Phil

 
Wall of worry……what wall of worry???
 
I bumped into a broker yesterday who couldn't have been more positive on everything from the market to the economy to Europe to just about everything we talked about.  I was thinking, damn, everything is fixed…..BUY BUY BUY.
 
What a freakin joke.  These are the same guys that are convincing everyone from Johnny lunchbox to Grandma Jones into taking their life savings and dumping it in the market.
 
On a different note, I heard a interesting comment on the radio yesterday.  Not sure if it's true but I'll repeat it because it's probably true……..the guy said something to the effect of………"regardless of how much you pay in taxes this year……….it was spent 13 years ago"…….if you think about that long enough……it will give you one of those ice cream brain freezes.

USO 1.10 and it turns!

wheeeeeeeeeeee on oil!

1/2 out of USO – Wheeeeeeee!

That talk about who is going to get to $1000 first – AAPL or GOOG might be missing one candidate. ISRG is just a juggernaut right now. They are up 600% in less than 3 years with no sigh of slowing down… And the threshold for competition seems higher to me than for PCLN, CMG or even AAPL. We are not talking about cell phones and burritos here. 

Didn't the IMF just raise the EU's GDP?  Unreal!

ARNA/j – I am down on the whole weight loss sector from 18 mo ago b'c I believe the sentiment in Gov't is….lose weight by exercise and diet, not pill popping.  Plain vanilla now, as the cards have been shown, and insurance can give a big FU to the makers of pills that they deem a lifestyle rather than a necessity.  If things were really good in the area, why is VVUS still around?  OREX?  Why hasn't the Japanese picked up ARNA for a song and a dance?  My company was bought for a higher multiple than ARNA, and our drug is unproven.  Sure, it could go to 12 on the approval, but it could go to 50c on rejection.  At $3, you should have sold 1/2 at least.  I have been burned too many times on these little companies by going all in and not taking some off the table, one of our golden rules here at PSW.

 

ABT/stj – that is DEPO's premise, and pharma loves to do it for big drugs.  The technologies are changing for drugs that once had horrible absorption in human, and we are seeing the fruits of that labor.  But biotechs are leading the charge to new and more exciting drugs for hard to treat diseases. 

 

DEPO is a well run company, that needs some backing of a TEVA or other generic maker.  That is why I was betting on them, and getting taken out for their technology more so than their 'wash, rince, repeat' methodology…

 

Oh, and bye bye oil. 

exec – I was also talking with a parent of my son's friend who manages money for wealthy clients.  They are going into much more conservative things….e.g., bonds….big difference on one who is active in their money managing and just a sales pitch for the brokers….

Wow, Andrew Keene asks who goes out of business first – BBY, CHK or FSLR. Where is the love?

DMND not feeling the love today – down 2.5%

I vote BBY.  Hated them and RIMM for over a year.

And oil seems to have found a footing at $103. I have S1 at 103.3 so that might be a resistance line if they try pushing it up again.

RIMM / Rustle – RIMM is good example of what happens to complacent companies…

From Technical Indicator (McHugh's):

Stocks rose sharply Tuesday, April 17th. The powerful down thrust last week followed by a powerful up thrust this week is typical price behavior for a sideways triangle pattern. These patterns are typically wave fours or b's. In this case, we believe it is large degree wave 4. The only question we have at this time is whether this pattern will be large or tight (small). If it is going to be large, then the rally this week is completing the middle wave b-up of a three wave a-down, b-up, c-down move for the first leg of this triangle, wave a down. If this triangle is going to be tight, or small, then its first of five waves, a-down, finished last week, and its wave b-up is close to finishing today.

 

Our key trend-finder indicators work very well for all scenarios except sideways triangles that are fairly small. That appears to be the case at this time. We got new buy signals tonight in our short-term and intermediate term indicators, including the Secondary Trend Indicator, however, just as they got whipsawed from last week's sell signals, the new buy signals could/should get whipsawed again as this sideways triangle wave 4 works through completion.

 

If a small sideways triangle is occurring, the upside target for the Industrials is 13,200ish and for the S&P 500 is 1,405ish over the next few days. Then prices should fall hard to bottom boundaries of this triangle, 12,825 in the Industrials and 1,375 in the S&P 500. If the larger sideways triangle if occurring for large degree wave 4, then prices could top at any time and anywhere from 13,121 to 13,200 in the Industrials and anywhere in the range from 1,390 to 1,405 in the S&P 500. Once topping, the Industrials should decline to a downside target of 12,500 to 12,650ish and the S&P 500 should decline to 1,340 to 1,360ish levels.

 

  • UK FTSE -0.4%
  • German DAX -1.0%
  • French CAC -1.6%
  • Spain IBEX -4.0%
  • Portugal PSI -1.0%
  • Italy MIB -2.4%

It's looking increasingly like the biggest impediment to recovery in Europe is the ECB with an assist from the Bundesbank:

http://www.theatlantic.com/business/archive/2012/04/spain-is-doomed-why-austerity-is-destroying-europe/256032/

 

If you're persuaded by my opening analogy, you can see why lenders are so concerned about growth. It's why they don't actually like austerity. But just today, the Bundesbank — Germany's national central bank, and the real power behind the ECB — came out and told countries not to worry about growth. Telling a country in a debt crisis like Spain not to worry about growth is like telling man in debt to not worry about finding a job. The most polite way to characterize this advice is "delusional."
 
To crib from Keynes, Europe's policymakers have blundered in the control of a delicate machine, the workings of which they do not understand. They're not evil. But they're almost certainly wrong. Rather than consider the possibility that the economy might work differently than they think, they have settled on a simple message: The beatings will continue. Unfortunately, morale will continue to not improve. Eventually, you have to think leaders in Europe's beat-up countries will begin to wonder if life might be better outside the euro zone. Hopefully, the ECB will come to its senses first.

With friends like the ECB, Spain, Portugal, Italy and Greece don't need enemies…

So, ARNA May 2.5/3.5 BCS went for 19c.  Tell me that they are not baking in failure  Stock is on the lower BB.  That is my play for the FDA.

Who needs Cheney in the White House – Halliburton is up over 100% since that pinko commie Obama was elected. To think of all these CEOs that are going to vote against their economic interest in November!

ARNA / Pharm – Would you sell any puts with this BCS? Or too dangerous in case of negative FDA outcome?

Pharmboy – What is your opinion of Adam Feuerstein?

jabo — after buying overpriced electronics, apple users need cheap travel. 8)

DMND — diamond fails to deliver data is coming back down to earth (http://failstodeliver.com/default2.aspx) so there is a chance it can bottom now. I suspect $20 as a nice round number without new developments.

dpast – maybe on somethink like VRTX where the whole thing can be done with one put – July 32s.

 

Diamond – I read him b'c of his following.  I think he is no better than anyone else, although I personally think he has too much influence.  I have no idea what background he has, but I like Hammer and Gekko better.  All have cut back on their writing, as have I, b'c there is not as much out there right now for reporting.  Many of the good companies are in mid-stage trials, so the run ups have been done.  YMI still has lots'o'room though.  Buying more in there for that matter.

 

WFR – what they givith, they take awayith…..back to where it began.


 
Taxes prepared by IRS.
Unfortunately there is ideal world of journalist articles and reality of evolution of governmental organizations.
In Israel they've adopted this approach many years ago. And it was fine. But as time passed it evolved. And now if you don't agree with IRS calculations, you have real burden to prove your case. And you have to fight. THEY (IRS) assume that if you dispute – you are trying to cheat. They often reject your tax forms and it's almost impossible to resolve it without personal visit to IRS office.
Any organization given power to initiate filled form, starts assuming that they are correct by default.
We often dream about ideal solutions and get unintended side-effects way too often

Somebody giving FCX some love.

CRIS is making a nice run at $5.  Now, over it and hold it.  Then we can get to $7.

Taxes / Lol – It's true that in some cases, it might be a problem. But for the people who file with the -EZ form and only report regular income, it would be easy for the IRS to access all the relevant information without any problems given the fact that it's already file by the employers.

Small business owners (like me) would be hard pressed to do the same though… But helping 30% of the population could be step forward. Going to a simpler tax code would obviously be a better solution, but I would be willing to bet that the tax code would not stay simple very long as armies of lobbyist would be itching to add pages to the code… 

rainman
People who buy Apple products have to travel to every bean barn to find others to listen about expensive products while eating overpriced tacos. And the momos go to the moon!

AVEO has fallen since our entry.  My allocation is down about 25%.  I am DD on the stock and selling the 12.5 July puts, which is where our puts are sold as well.  I am not DD on the puts, yet.

Oh, and I read on the bioboards that AVEO is HIRING!

Volume off a cliff, very easy to trigger the buy bots..

Kustomz
How low is the volume, the question is also is oil and AAPL are down and the dollar is in no signal land?

It's amazing that people are looking towards tomorrow's auction for Spain.  Realization is even if it goes well, it doesn't change anything.  They are in a financial mess right now and if the yields on this one particular auction are .3% better, it changes nothing and probably means the EU found a secretive way to buy them to keep panic from spreading.

Shadow, I pay close attention to the futures, you can see them trying to trigger or testing to gauge interest. From what I see it looks like they are playing possum. They want to send the markets higher, my gut is telling me we should be lower. Difficult to choose direction here..sitting in cash waiting for the signal. They may be looking to pump into 2:30 since its been sideways since 12…

Phil Please set my thinking straight on AGNC holding stock and sold the Jan13c for .86 trading today at .90 Stock trading at 30.50 so we still have .40 of extr value. The div to be paid is 1.25 obviously .35 more than the premium of .90.
However ex div day was 3/5/12 so why is the stock still going up and way would some one call the Jan 30 caller if he would not participate on the div in the first place??? thanks

Phil,  we currently have some CHK in the IRA Portfolio.  What do you think about this current scandal.  Are they conveniently leaking this story to drive the stock price lower before Natural Gas spikes back up?  Or, is this a sign of Corrupt CEO and we are in for another ENRON moment?

Newspapers must really be hurting.  I pay $1 a week for the NY Daily News and just locked in another year for the same rate.  Six papers plus the Sunday for $1, how can you beat that price?

CMG reports earnings today (I think) and I was wondering what we are doing with our 370 put we rolled into?

And magazine subscriptions I get completely free, Newsweek, Forbes, Business Week, Maxim, Car And Driver, Details, GQ and Men's Health.  How long before all publications stop printing and everything is Android or IPAD based?

cmg is tomorrow after the close, I believe

cmg
 
Q1 earnings are expected to be announced after market hours on April 19, 2012Estimates: 2.08 | 1.932 | 1.74 (High | Mean | Low)

kustomz
Without opening a futures trading account I can't get anything but delayed action Please keep us up on them the best I get is when Phil says numbers that are off and I assume he has quoted futures.
 
ANYONE
Have an in to watching futures real time for free?

Frankfurter Allgemeine Zeitung:

    Germany's leading economic institutes said the European Central Bank's response to the region's debt crisis jeopardizes its independence, citing a yet unpublished report. "The independence and credibility of the ECB is at stake," the institutes will say in their biannual report to be published tomorrow. "There's a danger that monetary policy won't be able to free itself from the predicament it has entered," the institutes said.

lol – Great comment on taxes/Israel.  It is, as you say, in the nature of bureaucracies to assume their default position to be correct, and to put the burden of proof on the taxpayer, who must fight the very bureaucracy his taxes fund from a vastly inferior financial base.  It doesn't take much imagination to see where that would have to end.

stjeanluc – What is your take on the 2012 French Presidential Election?
 
Douglas Kass: "One big short term headwind is if Hollande defeats Sarkozy – it could upset the EU debt program."

Lol, Jabobeast, I definitely think you'd know better than I!

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