Archive for September, 2012

What If I Am Wrong About Europe?

Courtesy of Mish.

I have long stated the eurozone will breakup. Historically speaking, no currency union has ever survived in the absence of a political union.

Moreover, in It’s Just Impossible I noted

  1. The Bundesbank said there should be no banking union until there is a fiscal union.
  2. Angela Merkel said that there should be no fiscal union until there is political union.
  3. François Hollande said that there should be no political union until there is a banking union.
  4. The German supreme court will not allow a political union nor a fiscal union, nor a banking union without a German referendum.

Mathematically Speaking

Mathematically speaking, I also fail to see how the eurozone can stay intact.

Specifically, please consider point number nine of Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions

9. Disruptive European Politics

European politics will become much more difficult and disruptive. The historical precedents are clear. During a debt crisis the political system becomes fragmented and contentious. If the major parties don’t become radicalized, smaller radical parties will take away their votes.

Remember that the process of adjustment is a political one. We all know someone has to pay for the massive adjustment countries like Spain must make. The only interesting question is about who will be forced to take the brunt of the payment – workers in the form of unemployment, the middle classes in the form of confiscated savings, small businesses in the form of taxes, large businesses in the form of taxes and nationalization, foreigners, or creditors.

Deciding who pays is a political process, and because the stakes are so high it will be a very bitter process. This means, among other things, that politics will degenerate quickly, and of course if Europe doesn’t arrive at fiscal union in the next year or two, it probably never will. This conclusion is also the reason for my next prediction.

That prediction was made by Michael Pettis, and I am in complete agreement.

But what if I am wrong?

Can Politics Triumph Over Math and History?



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At Some Point the Hat Runs out of Rabbits

At Some Point the Hat Runs out of Rabbits; First Catalonia, Now Basque Separatists Call for Independent Country; El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

Courtesy of Mish.

Calls for the splintering of Spain have picked up steam. Euskal Herria Bildu (EHB, a left-wing, Basque nationalist party) has called for "A Great National Act" in Favor of Independence according to El Pais.

EH Bildu has called "a great national political act" in favor of the independence of the Basque Country for the next October 13 in the BEC Barakaldo (Bizkaia), announced its candidate for lehendakari, Laura Mintegi in an appearance before the media at EA headquarters in Bilbao.

Mintegi explained that the purpose of the meeting is to claim a free Basque state in Europe. The nationalist left has led in recent times to BEC, in a space with a capacity for 15,000 people, some of his most important acts to demonstrate their ability to mobilize. force.

The sovereignist coalition vindicate independence there to say "clearly and directly" to those "who do not want to hear, who kidnap our rights in the name of the Constitution imposed on us" you want "a free state in Europe."

Mintegi has defended "the pressing need to build a framework sovereign" in the Basque country that allows this community to have the tools to address their own economic, social and employment. "Only from the sovereignty we orient our policies towards true social justice," said the candidate.

In his view, "it is truly reckless remain at the expense of a corrupt system like Spanish, you're sacrificing the rights and freedoms of all the people to ensure the interests of a political and economic elite." With the "corrupt system" called on "break ties".

El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

According to El Economists, Catalan Separatists Not Quite at Absolute Majority.

About the option of independence for Catalonia, El País published a survey in which, in case of a referendum, 43% would vote for secession, compared with 41% who would decide against.

The complete data interpretation contrasted with other numbers registered in June, when only 21% of respondents said anti-secession and another 21% abstained. The current difference can be understood as a translation of abstention towards not to Catalan independence, which in June


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Swing trading portfolio – week of October 1st, 2012

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

Optrader 

Swing trading virtual portfolio

 

One trade virtual portfolio

 





Guest Post: Is China’s Communist Party Doomed?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Via Minxin Pei of The Diplomat,

Last Friday’s announcement in Beijing that the ruling Chinese Communist Party (CCP) will convene its 18th congress on November 8 has brought much relief to those concerned that political scandals and power struggle at the very top of the Chinese government have derailed the once-in-a-decade leadership transition.  Finally, the party’s top leaders seemed to have agreed on what to do with the disgraced former Chongqing party boss Bo Xilai (likely off to jail) and on whom to promote to the Politburo and its more powerful standing committee.

For all the obvious reasons, China’s ruling elites will do their best in the next few months to project an image of unity and self-confidence, and to convince the rest of the world that the next generation of leaders is capable of maintaining the party’s political monopoly.

That is, unfortunately, a tough sell.  Confidence in the party’s internal cohesion and leadership has already been shaken by the Bo affair, endemic corruption, stagnation of reform in the last decade, a slowing economy, deteriorating relations with neighbors and the United States, and growing social unrest.  The questions on many people’s minds these days are how long the party can hold on to its power and whether the party can manage a democratic transition to save itself.

These questions are by no means the products of idle minds.  By many measures, the party’s rule is about to enter a decade of systemic crisis.  Having governed China for 63 years, the party is approaching, within a decade, the recorded longevity of the world’s most durable one-party regimes — the former Communist Party of the Soviet Union (74 years), the Kuomintang – KMT (73), and the Revolutionary Institutional Party of Mexico – PRI (71).   Like a human being, an organization such as the CCP also ages.

In addition, China’s rapid economic development has thrust the country past what is commonly known as the “democratic transition zone” — a range of per capita income between $1000 and $6000 (in purchasing power parity, PPP).  Political scientists have observed that autocratic regimes face increasing odds of regime change as income rises.  Chances of maintaining autocracy decrease further once a country’s per capita income exceeds $6000 (PPP).  China’s has already reached
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Ahead Of Major October Redemptions, Spanish Treasury Cash Slides To Two Year Low

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

A month ago, when we first presented the dwindling Spanish treasury cash position, we wrote: “once the next Spanish State Liability update is posted, we wouldn’t be surprised to see this number plunge to a new post-Lehman low. Yet what is scariest is that all else equal (and it never is), at the current run rate Spain may well run out of cash by the end of the year even assuming it manages to conclude all its remaining auctions through year’s end without a glitch.” The August cash balance update was just released by the Banco de Espana, and there’s good news, unsurprising news and bad news.

The good news: the new number, which came at €19 billion (compared to July’s €23.2 billion) is not a now post-Lehman low. Yet. That number is still the €16.3 billion from August 2009.

The unsurprising news is that the August cash balance is the lowest it has been since August 2010, a time when Spanish banks were not openly insolvent, and when Spain did not openly need a bailout.

The bad news, is that as we expected last month, the burn rate, of over €4 billion per month, is one which still would mean that absent a major cash injection, Spain will run out of money by the end of the year.

Actually, there is even worse news: while in September, which is now over, there were no material cash needs that we know of (aside from the endless budget deficit), October is a very different story.

As we wrote in “The Chart Spain’s Mariano Rajoy Wishes Could Be Swept Under The Rug“, Spain has a major net cash outflow in the month that has just started, an outflow which unless some magical source of cash is promptly procured, then Rajoy will need a real bailout, as opposed to the faux ECB-mandated one, which buys the country some time to fund itself for a few more weeks, before that can kicking exercise too fades.

Here is what else we wrote:

As is quite obvious on the chart above, and explains Goldman’s urgency with a formal Spanish ECB activation request, the closer we get to October, the closer Spain gets to running out of cash. And in that particular case none of the currently implemented


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China Manufacturing Disappoints Expansion Expectation, Contracts for Second Month

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Following HSBC's PMI data, China's official Manufacturing PMI just printed well below economists' expectations and is now signaling contraction for the second month in a row. Critically the expectation was for a return to expansion at 50.1 but the data came at 49.8 – still marginally higher MoM. Most sub-indices improved modestly from August but of most interest was the fifth month-in-a-row that the employment index dropped. For all the iron-ore-recovery believers, the Inventories of Raw Materials index also jumped by its most in three months as Input Prices also surged for the second month in a row. So contraction confirmed, a CCP in 'leadership' turmoil, and a PBOC stymied by inflationary concerns and the need to push through structural reform.

 





Key Events In The Weeks Ahead

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The following is a comprehensive list of key events to watch over the next several weeks – events that could have very significant bearing on how the euro sovereign debt crisis evolves.

 

September:

End September: Moody’s due to conclude review of Spanish sovereign rating. Moody’s was planning to conclude its review by the end of September with “the size and terms of the banking support package, including the potential size of the government’s liability” being a key driver in the decision. As governments have not made progress fleshing out a direct recapitalisation facility — indeed, have created some ambiguity as to whether it will be non-recourse — there is a distinct risk that Moody’s decides to downgrade Spain. Moody’s currently rates Spain Baa3, the lowest investment grade rating. Also see article on Spain in this issue of Focus Europe.

 

28/29 September: EU Socialist Leaders Conference. In Brussels.

October:

1 October: September PMI manufacturing survey. Will provide a useful indicator of the situation in manufacturing in the last month of Q3 in ‘non-core’ countries like Italy and Spain. The flash estimate implies weakness in services rather than manufacturing.

 

2 October: Greece auction. Bills

 

2 October: Spain conference of regional heads of government. The fiscal negotiations between Madrid and regional governments and the call for early elections in Catalonia (see 25 November entry) have placed renewed market emphasis on the Spanish regions. The two items on the meeting’s agenda are the current economic situation and the future of the EU but reform of the current regional financing system is likely to be discussed.

 

3 October: September PMI services survey.

 

4 October: Spain auction. Bonds

 

4 October: ECB Governing Council meeting, followed by the interest rate announcement and press conference. Another occasion for the ECB to consider the stance on policy, both standard and nonstandard. We expect no rate changes as a refi cut would be hard sell to the Governing Council due to concerns about rising inflation expectations, above all in Germany, following likely OMT.

 

8 October: ESM Board of Governors meeting. Following the conditional approval of the ESM by the German Constitutional Court, Eurogroup President Juncker called the first meeting of the


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France Unveils A ‘Growth-Killer’ Budget For 2013

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Following closely on the heels of Spain’s budget and banking audit debacle, France prepares to unveil its budget (taxing business, bankers, and beer). The positive spin will be deafening as politicians are already proclaiming ‘realistic and ambitious’ growth targets as getting the country ‘back on the rails’. UnMondeLibre‘s Emmanuel Martin comments “How ironic? The French Presidential candidate who once campaigned with the slogan of ‘growth vs. austerity’ is now, as President, preparing to give the French the biggest taxation shock ever – a growth killer that is.” What matters is the type of path to fiscal responsibility, and, unfortunately, Mr Hollande chose ‘austerity with more taxes and no reform’. With France being a crucial player in the Euro-game, one wonders whether this might actually not mean the end of the Euro sooner.

 

Via Emmanuel Martin of Un Monde Libre,

France: A Growth-Killer Budget for 2013

How ironic. The French Presidential candidate who once campaigned with the slogan of “growth vs. austerity” is now, as President, preparing to give the French the biggest taxation shock ever – a growth killer that is.

France’s 2013 budget has been unveiled Friday and it is the “most important rigor effort in 30 years” according to… Mr. Hollande himself. Following his predecessor’s defense of the “golden rule”, the socialist President intends to reduce the deficit at 3% next year (vs. 4,5% in 2012) in order not to be “in the hand of markets”.

Of course market investors may be happy with the apparent “seriousness” of the socialist President. Of course Germany may be pleased to see that “Flamby” has finally come back to “reality” after his electoral pledges.

Except that reducing deficits is not the key to France’s problem per se: it depends on how the government performs it. Hence, behind the rhetoric of a “courageous, responsible” budget, or even a “budget of conquest”, the reality is that this budget is essentially based on tax increases (€24bn) – not spending cuts (€10bn). In a country with more than 56% of GDP in public spending and a public debt exploding at now nearly 90% of GDP,  a “responsible” government was expected to initiate a serious effort in terms of reforms to reduce the level of public spending first.

Yet, total tax pressure will rise
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3 Time Emmy Award Winning CNN Journalist: Mainstream Media Takes Money from FOREIGN Dictators to Run Flattering Propaganda

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

 Mainstream Media: Presstitutes for the Rich and PowerfulPainting by Anthony Freda: www.AnthonyFreda.com

If you’ve been paying attention, you know that the American media act as presstitutes for rich and powerful Americans.

But it turns out that the American media will turn “tricks” for foreign johns as well …

Specifically, three time Emmy award winning reporter Amber Lyon was until very recently a respected CNN reporter:

http://2.bp.blogspot.com/_3GTO3cgtl7c/TFjb9hU9OoI/AAAAAAAABJo/LZvSA59jGmQ/s1600/EyeTVSnapshot%5B7%5D.jpg 

Lyon was fired from CNN Lyon was fired from CNN after she refused to stop reporting on her first-hand experience of the systematic torture and murder of peaceful protesters by the government of Bahrain.

Lyon’s special report on Bahrain was scheduled to run on both CNN’s U.S. and international networks, but was pulled after only a limited showing due to pressure from the Bahrainis and their lobbyists.

At the same time that Lyon was risking her life to do on-the-ground reporting in Bahrain, another CNN journalist was filming a paid propaganda piece on how the Bahraini leaders are a bunch of friendly pro-democracy reformers.

That’s right … the Bahraini government paid CNN to do what was literally an infomercial for that brutal regime and pretend it was real journalism.

Lyon says that China and many other foreign, authoritarian regimes also pay CNN and other mainstream networks to run flattering propaganda pieces.

We are grateful for Ms. Lyon’s exposé of this revolting practice … especially because real reporting is treated as terrorism by the American government.





Big, Big Week Ahead for Stocks and ETFs

Courtesy of John Nyaradi.

 After a consolidation phase, U.S. stock market and ETFs face a huge week of market moving news ahead

Major Economic News Events Week of October 1, SPY, DIA, IWM, QQQAfter nearly three weeks of consolidation, stocks and ETFs have moved off overbought levels and consolidated between significant support and resistance levels.  Major news events lie ahead which are likely to trigger the next directional move in U.S. and global markets.

On My ETF Radar

Major market indexes gave up ground this week as doubts about the future of Europe and the effects of quantitative easing crept back into global financial markets.  Economic news was mixed, at best, and technical indicators showed signs of weakening.

S&P 500 Chart (SPY)

In the chart of the S&P 500 (NYSEARCA:SPY) we can see that the index is consolidating between 1420-1480 with significant support at 1400-1420.  The columns have switched from Xs to Os, indicating that supply is now in control of the S&P 500 (NYSEARCA:SPY) and, by proxy, the entire U.S. stock market.  However, the index remains well above the blue, bullish support line which is the demarcation line between bull and bear markets and the current “buy” signal has an upside price objective of 1550, some 7+% above today’s levels.

For September, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 2.7%, the S&P 500 (NYSEARCA:SPY) added 2.4%, the Nasdaq Composite (NYSEARCA:QQQ) climbed 1.6% and the Russell 2000 Index (NYSEARCA:IWM) added 3.1%.

Overall, major U.S. indexes are in a corrective/consolidation phase within the context of an ongoing bull market uptrend.

ETF News You Can Really Use

Economic News:

For the week, economic reports were mixed with consumer spending rising for August, along with consumer confidence.  Weekly jobless claims fell to 359,000, beating estimates and improving from last week’s 385,000.  Case/Shiller housing price report indicated that housing prices continue to improve as mortgage rates continue to fall to historically low levels.

On the negative side of the ledger, Europe continues to simmer with protests taking place in Spain and Greece.  European business and economic confidence indicators continue to fall and the Eurodollar (NYSEARCA:FXE) has fallen sharply since mid-September as the Mario Draghi induced high starts to wane.

But the biggest shockers in economic reports came from home as August Durable Goods Orders fell -13.2% from last month’s 3.3% and widely missing…
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Zero Hedge

Brexit: The Endgame?

Courtesy of ZeroHedge View original post here.

With parliament suspended and the UK's EU withdrawal process in enforced stasis, the next major stop on the Brexit road map is the EU summit in Brussels on 17 and 18 October. As we have become accustomed, no one knows what will happen now.

This flowchart though, based on analysis by The Independent's John Rentoul, runs through the most likely scenarios, starting first with the question of whether the meeting bears fruit in the form of a new Brexit deal.

...



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Phil's Favorites

Wall Street is ignoring the omens of recession - here's why

 

Wall Street is ignoring the omens of recession – here's why

Why is this man smiling? AP Photo/Richard Drew

Courtesy of Jay L. Zagorsky, Boston University

The world is on the brink of a recession, if all the breathless headlines are to be...



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Kimble Charting Solutions

Crude Oil Create A Panic Peak This Week?

Courtesy of Chris Kimble

Yesterday Crude Oil rallied nearly 15%. How often does Crude rally this much in a day? Not often!

How many times has Crude rallied nearly 15% in the past 20-years? Only one other time, which suggests that yesterdays move was a rare event.

This chart looks at Crude Oil on a weekly basis over the past 2-years. Last year Crude Oil created a bearish reversal pattern at the 2018 highs and a bullish reversal pattern at the 2018 lows.

Earlier this year, Crude created a bearish reversal pattern (bearish wick pattern), while testing its 61% retracement level of last years hig...



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The Technical Traders

VIX To Begin A New Uptrend and What it Means

Courtesy of Technical Traders

The news of the drone attack on Saudi Arabia over the weekend prompted a big upside move in Oil (over 10%) and a moderate downside rotation in the US major indexes/stock market.  Although prices had recovered slightly by the opening bell on Monday, September 16, the shock wave resulting from this disruption in oil supply is just now starting to play out.

The long term uncertainty in the markets, as well as the rotation in the US Dollar and other foreign currencies, could play a bigger role in the type of volatility and extend of the immediate price rotation that may result from this external news event.  Our VIX predictions and ADL predictive modeling system are suggesting volatility wi...



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Insider Scoop

3 Takeaways From SeaWorld CEO's Surprise Resignation

Courtesy of Benzinga

SeaWorld Entertainment Inc (NYSE: SEAS) announced Monday evening that Gustavo Antorcha resigned as CEO and board member due to a "difference of approach."

What Happened

Antorcha's resignation will be effective immediately and he will be replaced with CFO Marc ...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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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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