Archive for 2012

Weighing the Week Ahead: Any Help from Housing?

Courtesy of Doug Short.

In a light week for economic data, we can expect more attention to elections both in Europe and the US.

Economic growth continues at weak, below trend levels just at the time the stimulus programs are wearing off. For some this implies that the next recession is just around the corner.

From another perspective the current economic growth has occurred in spite of a major drag from reductions in government programs (see Gene Epstein in this week’s Barron’s) and contraction in housing. If these two factors just got back to neutral, it would reduce the drag by two percent or so, revealing the true underlying strength of the private economy

Is there any hope from the housing sector? Even some stability?

I will have some ideas in the conclusion, but first let us review last week’s data.

Background on “Weighing the Week Ahead”

There are many good sources for a list of upcoming events. In contrast, I single out what will be most important in the coming week. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.

This is unlike my other articles at “A Dash” where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.

Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!

Last Week’s Data

Each week I break down events into good and bad. Often there is “ugly” and on rare occasion something really good. My working definition of “good” has two components:

  1. The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially — no politics.
  2. It is better than expectations.

The Good

The general economic data was a little better this week, while…
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Greek crisis deepens with no breakthrough in coalition talks

Greek crisis deepens with no breakthrough in coalition talks (via AFP)

Greek political party leaders emerged late Sunday from emergency cabinet talks with no breakthrough in sight, raising the prospect of new elections that could scupper reforms and force the country out of the eurozone. President Carolos Papoulias initially met for 90 minutes with the heads of the three…





Waving the White Flag

Waving the White Flag

Courtesy of John Mauldin 

A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.

- Douglas Adams, The Hitchhiker's Guide to the Galaxy

For quite some time in this letter I have been making the case that for the eurozone to survive, the European Central Bank would have to print more money than any of us can now imagine. That the sentiment among European leaders was that they were prepared for such a move was clear – except for Germany, which is haunted by fears of a return to the days of the Weimar Republic and hyperinflation.

When Germany agreed to a fixed monetary union and a European Central Bank, it was with the clear understanding that it would be run along the lines of the German central bank, the Bundesbank. The members of the Bundesbank and the German members of the ECB were most outspoken about the need for a conservative monetary policy that would keep a clamp on inflation.

However, as I have previously noted, the Bundesbank was a toothless tiger. Germany has two votes out of 23 on the ECB, and the loud drumbeat from most of Europe, which is experiencing the difficulty of austerity accompanied by too much debt, is for a far more accommodating ECB.

The simple fact is that Mario Draghi, the Italian president of the ECB, created €1 trillion euros to help fund European banks, which promptly turned around and bought their respective countrys' sovereign debt. Germany's Angela Merkel forced the Bundesbank to "play nice" and go along with what was seen as the only way to solve a growing banking crisis in Europe. Everyone breathed a sigh of relief, thinking that this at least bought a year during which things could be sorted out. But it turns out that a trillion euros just doesn't go as far as it used to. The "relief" lasted about a month. The last few weeks have presented yet another budding crisis, as least as large as the last one. Where to get the next trillion?

This week the German Bundesbank waved the white flag. The die is cast. For good or ill, Europe has embarked on a program that will require multiple trillions of euros of freshly minted money in order to maintain the eurozone. But the alternative, European…
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Has JPMorgan Already Unwound Its Losing Trade?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

On Thursday night, after it became clear that JPM has lost at least $2 billion on what is most likely an IG9 Index skew (Index less Intrinsics) trade gone horribly wrong, we first predicted (and promptly were piggybacked on by other various financial blogs) that based on various factors, there is about $3 billion more in the pain trade coming in JPM’s general direction, once IG9 blows out to catch up to a fair value not supported by JPM(artingale’s) infinitely backstopped prop desk. Sure enough, by closing on Friday, IG9 (and the entire IG curve), had blown out wider, by a whopping 10 basis points: one of the biggest intraday moves in nearly a year. In P&L terms, by close of Friday, all else equal, JPM had lost another $2-3 billion on the same trade it had lost over $2 billion since the beginning of April. We expect to hear confirmation of this shortly. Which however brings another question: has JPM closed out its losing trade, or is the entire move in the index (and to a far less extent in the intrinsics) due to hedge funds who have piggybacked on the “crush JPM” trade? The truth is we don’t know, and until we get the latest weekly DTCC data on CDS notional outstanding we won’t know. However, our gut feeling is that it would have been virtually impossible for JPM to lift every single offer in unwinding a $100+ billion notional position without sending the entire IG curve multiples wider. Which is why keep a close eye on the IG9 10 Year skew – this is where, as ZH first noted, the action is. If the skew soars, it is likely that the runaway train will keep going and going, until JPM issues a formal announcement that the firm is fully out of the trade, together with a final tally of its losses, which will probably be double the reported loss as of Thursday. At which point IG9/18 will see an epic ripfest as those short risk will scramble to cover.

As the chart below shows, as of Friday, the index was still 7 bps rich to intrinsic, however the spread collapsed by nearly 50% from the day before. If and when the skew goes positive, would be our all…
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What about that JP?

Courtesy of ZeroHedge. View original post here.

Submitted by RobertBrusca.

JPMorgan Chase this past week exhibited perfect timing; not for itself but for regulators trying to slip the noose of tighter regulation around its neck. The $2billion loss reported may be a loss that stemmed from exactly the kind of thing that the Fed has been trying to limit by constricting banks’ trading activities.

But with new revelations the plot thickens, or thins depending on what you believe…

JPMorgan’s huge loss is now rumored to be in the process of leading to three top-level departures. Interestingly ‘The Whale’ is not among them.

This loss is being portrayed as the result of hedging activities gone-bad in responses to risk-management stemming from the European debt crisis. And that might be the way it happened. Jaime Dimon is furious with his people for this mistake. Heads are rolling. This big public black eye will set him back as the mouth-piece for banks against heavier regulation.

But the real question is whether this loss was from actual hedging and was the result of an attempt to mitigate risk or whether it was from an attempt to profit from the debt crisis itself. By not firing The Whale up front the PR angle is that it was not a big trading loss, but something else. But, of course, JP is aware that it is being watched.

While The Whale is not being dispatched immediately he is rumored to on his way out too. But this time it is very much to JP’s advantage to portray this as a hedge gone wrong than as a bet gone wrong. But how do we know which it was and will anyone ever really find out?

When you are too big to fail you can take all kinds of risks because the sun always comes up in the morning for you. Was JP gaming its TBTF status or was it really a hedge gone wrong?

Was this a sub-zero hedge or an outright loss?

Inquiring minds want to know.





The IRA | It’s All About the Fraud: Madoff, MF Global & Antonin Scalia

Courtesy of ZeroHedge. View original post here.

Submitted by rcwhalen.

 

This is an everygreen post of last week’s IRA comment.  To read our new comment on JPMorgan, click here.  

Chris

The Institutional Risk Analyst
May 8, 2012
“It’s all for nothing if you don’t have freedom.”

 

William Wallace

 

In this issue of The Institutional Risk Analyst, we return to the Lehman Brothers, Madoff and MF Global bankruptcies to talk about how the largest banks have wired US bankruptcy laws to their own advantage. Specifically, the 2005 changes to the bankruptcy code, combined with the traditional American caution regarding pre-judgement restraint on the parties surrounding a bankruptcy, has provided American banks with a free pass to facilitate fraud with no accountability.

 

On May 17th, IRA co-founder Christopher Whalen is making a presentation to the economic advisory committee of FINRA entitled “Policy issues regards customer account protection and bankruptcy.” This edition of The IRA is meant as a background to that discussion, which unfortunately is closed to the public. In that regard, thanks to Max Keiser for the quotation from his kinsman William Wallace.

You may also read our earlier comment, “Should the Courts Appoint an Equitable Receiver for Bank of America?,” where we argue that the degree of obvious fraud present in the operations at BAC and Countrywide justifies the appointment of a federal receiver now to run the bank.

But before we jump into this discussion, we just have to take a moment to note that Ally Financial has apparently received the blessing of the US Treasury to file a bankruptcy for the ResCap real estate unit, according to Dakin Campbell at Bloomberg News. This is a profoundly bad idea, as we have noted in past issues of The IRA. The subsidiaries of bank holding companies cannot default, especially when the sub has its own bond holders with a different agenda than the parent company creditors. Hello! Read Gretchen Morgenson in the Sunday NY Times: “Mortgage Unit Troubles Ally Financial” 

Neither Secretary Geithner nor President Obama wants to deal with


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Complete Summary Of Next Week’s Global Events And Manic Bond Issuance

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Now that Europe is all the rage again, below we again summarize the key Euro-centric events through the end of the month, as well as all the sovereign bond auctions to look forward to (we use the term loosely). Finally, the squid summarizes the key events in the past week as well as the expected global catalysts in the next several days. Somehow we get the impression it will be all about the unexpected developments in the next 168 hours, especially with Spain, Italy, France and Germany coming front and center with a boatload of bond issuance as soon as 9 hours from now…

  • 14 May: Spain auction. Bills.
  • 14 May: Italy auction. Bonds.
  • 14-15 May: Eurogroup and ECOFIN finance ministers meetings.
  • 15 May: Greece auction. Bills.
  • 15 May: Flash Estimate EU and euro area GDP. Eurostat to publish preliminary estimates for Q1 2012 GDP.
  • 17 May: Spain auction. Bonds.
  • 22 May: Spain auction. Bills.
  • 25 May: German parliament vote on Eurozone ‘Fiscal Compact’. The Fiscal Compact to strengthen budgetary discipline within the euro area will require a two-thirds majority in both the Bundestag and the Bundesrat, the upper house. Until now, cooperation between the coalition parties and the opposition has been smooth, underlining the pro-Europe sentiment. The SPD and the Greens are insisting on taxation of the financial sector and a growth package in return for their support. The latter fits into the broader debate on a European level, including modification of structural funds or even new financing  instruments such as project bonds. However, we do not feel this will pose a risk to the Fiscal Compact being approved as the opposition has no interest in sending such a signal to the EU. Most probably the compact’s approval will be linked to i) deciding on a growth pact by the end of the year and ii) agreeing on a roadmap for introducing additional taxation on the financial sector, or at least give the go-ahead for national solutions (see article on German politics in Focus Europe on 23 March).
  • 28 May: Italy auction. Bonds.
  • 29 May: Italy auction. Bills.
  • 31 May: Irish referendum on Euro zone ‘Fiscal Compact’. A recent opinion poll put the support for the Fiscal Compact at 47% (down 2pp), the No vote at 35% (up 2pp) and 19% Don’t


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Massacre in Mexico deepens country’s violent image

Massacre in Mexico deepens country's violent image (via The Christian Science Monitor)

Forty-nine bodies have been dumped on a highway in northern Mexico – and by the time the world wakes up Monday morning, the harrowing image will have been beamed across the globe. Mexico's drug violence has been a public relations nightmare for President Felipe Calderon. The crime scenes inevitably…





Taiwan: The Democratic China

Courtesy of www.econmatters.com.

By EconMatters

In the 60 years since Chinese Nationalists retreated to Taiwan, the tiny island country has transformed itself quite differently from the mainland China.  Thanks to a series of financial and economic reform by the Nationalist Party (KMT), Taiwan got a head start on economic and democratic development, while Mao’s Cultural Revolution had left the Mainland in an over-a-decade-long developmental vacuum.

Never declared independence from China, Taiwan had enjoyed rapid industrialization and GDP growth that brought about Taiwan Miracle during the latter half of the 20th century, thus becoming one of the “Four Asian Tigers” alongside Singapore, South Korea and Hong Kong.  Since then, Taiwan (ROC – Republic of China) has evolved from a manufacturing-based economy into one that’s more technology and service oriented, while “Made in Taiwan” has been replaced by “Made in China” at WalMart.

When comparing living standards on the basis of GDP per person measured at purchasing-power parity (PPP), which adjusts for differences in the cost of living in each country, the latest data from IMF shows that  Taiwan already overtook Japan in 2010 (Hong Kong outranked Japan in 1997, and Singapore in 1993).  This is partly due to Japan’s high price levels, especially for housing and food, bringing down the country’s true standard of living, but also speaks volumes about Taiwan’s prosperity and affluence.



Chart Source: The Economist

Although Taiwan has racked up substantial deficits over the past three years post financial crisis, they are relatively small compared to the developed countries. The deficit totaled NT$409.5 billion, or 3.0% of GDP, in 2010, and an estimated NT$345.9 billion, or 2.5% of GDP, in 2011, according to Taiwan’s official data.  This year, the government has projected the deficit to fall to NT$230.8 billion, or 1.6% of GDP, in 2012.

WSJ noted that Mainland China buys about 41% of Taiwan’s exports. Roughly 70% of those exports are components for products made by Taiwanese-owned and operated factories that set up shops in China making finished products such as iPads or Nike shoes for the rest of…
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Three Dividend Stocks To Consider: $GRMN, $ELRC, $MGRC

Courtesy of Declan Fallon

Latest Motley Fool article covering Garmin, Electro Tent and McGrath Rentcorp is available here.





 
 
 

Phil's Favorites

Overpriced tech IPOs sell grand visions but aren't worth their valuations

 

Overpriced tech IPOs sell grand visions but aren't worth their valuations

rblfmr / Shutterstock.com

Courtesy of John Colley, Warwick Business School, University of Warwick

The year of the tech IPO is 2019. Uber went public on May 10 with a US$82.4 billion valuation. Fellow ride-sharing app Lyft floated in March with a U$24 billion valuation and Pinterest had a US$10 billion IPO in April...



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Zero Hedge

Futures Slides As Trade Tensions Escalate

Courtesy of ZeroHedge. View original post here.

S&P futures were lower on Wednesday as investors sought safety in bonds, the Japanese yen and Swiss franc in muted trade amid renewed worries over the U.S.-China spat after reports Washington is considering cutting off the flow of American technology to as many as five Chinese companies including Hangzhou Hikvision Digital Technology, the world's largest supplier of video surveillance products, expanding the US crackdown on China beyond Huawei to include world leaders in video surveillance. The dollar and 10Y yield were unchanged ahead of today's FOMC Minutes.

...



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Kimble Charting Solutions

Emerging Markets About To Submerge If 3-Year Support Breaks?

Courtesy of Chris Kimble.

Are Emerging Markets about to “Submerge” and head a good deal lower? What they do at (3) will go a long way in answering this question!

Emerging Markets ETF (EEM) has been lagging the broad market for the past 15-months. They hit their 50% retracement level of the last year’s highs and lows and falling resistance at (2) recently. The weakness of last has EEM trading below its 200-MA line.

EEM has spent the majority of the past 3-years inside of rising channel (1), which reflects that this trend remains up. The weakness of late has it testing the bo...



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Insider Scoop

Amgen To Buy Danish Collaborator Nuevolution For $167M

Courtesy of Benzinga.

Amgen, Inc. (NASDAQ: AMGN) took a logical step forward in buying a preclinical biotech it has been collaborating with since 2016. 

What Happened

Amgen announced Wednesday an agreement to buy Copenhagen-based Nuevolution for $167 million.

Th...



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Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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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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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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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.

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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