Archive for 2012

Weighing the Week Ahead: Bring on the (Economic) Evidence!

Courtesy of Doug Short.

In the short-term world of trading, your job is to anticipate the short-term behavior of others.

In the world of investing, your job is to take advantage of the short-term behavior of others.

Markets render a short-term verdict, but only professors believe them to be efficient. Warren Buffett famously notes (see here for more wisdom):

“I’d be a bum on the street with a tin cup if the markets were always efficient.” Fortune April 3, 1995

“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.” Berkshire Hathaway 2004 Chairman’s Letter

This is great advice, but difficult for most to follow. How can we tell when the market is inefficient and fearful. We need evidence! Should we bail out of the market? Should we buy puts (even at high prices) to protect our risk? Let us turn to another expert-- Perry Mason (actual historical ad — and many others — available here).

Let us take the advice of these two great iconic figures, seeking edge through evidence.

Since the recent European elections there has been a dramatic change in risk appetite. Ed Yardeni sees this as a switch for risk on/risk off.

“The big switch was flipped to the off position following the May 6 French and Greek elections, which could upend all the bailout deal and fiscal pacts worked out by European leaders over the past two years. Such an outcome could push Europe deeper into a recession and weaken global economic activity. In other words, Risk On tends to be associated with widespread confidence in the outlook for global economic growth, while Risk Off indicates widespread fears that the global economy will sputter.”

Investors need evidence! Is the pessimistic outlook warranted? This week will provide more data.

As usual, I will offer some ideas in the conclusion, but first let us do our regular review of last week’s news and 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…
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U.S.A. 2012: Is This What We’ve Become?

Courtesy of Charles Hugh Smith from Of Two Minds

U.S.A. 2012: Is This What We've Become?

Incentivize victimhood, fraudulent accounting of income/collateral and gaming the system, and guess what you get? A nation of liars and thieves.

Memorial Day is traditionally a day to speak of sacrifices made in combat. Like much of the rest of life in America, it has largely become artificial, a hurried "celebration" of frenzied Memorial Day marketing that is quickly forgotten the next day.

Instead of participating in this rote (and thus insincere) "thank you for your sacrifice" pantomime, perhaps we should ask what else has been sacrificed in America without our acknowledgement. Perhaps we should look at the sacrifices that need to be made but which are cast aside in our mad rush to secure "what we deserve."

The unvarnished reality is that most Americans have no idea what service members experienced in Iraq and Afghanistan, and they don't want to know. When 4,488 white crosses were erected on a hillside to remind us of all those who made the ultimate sacrifice in Iraq, people didn't like it, labeling it "unpatriotic."

That is not the real reason, of course; what is more patriotic than keeping those who served and sacrificed fresh in our awareness? One reason those 4,000 crosses make us uncomfortable is that they remind us of being conned by our civilian leadership into "wars of choice."

Another is that the reality of war and its long aftermath are not sufficiently "uplifting" for a brittle nation that prefers the distractions of "reality" TV to an acknowledgement of our problems and the sacrifices made and yet to be made.

Longtime readers know that one of my embedded concerns is the disconnect between the civilian populace and the U.S. Armed Forces. This disconnect starts with raw numbers: THANK YOU TO THE 0.45% of the population who served in the Global War on Terror (2001 to present).

Personnel are costly, not just in civilian life but in the Armed Forces, too, and so the Pentagon has "downsized" the Armed Forces to a smaller but more professional force. This reflects not just budgetary realities but the evolution of modern warfare.

But it's not just that fewer serve because fewer are needed; the number of civilians who want to know and want to acknowledge the experience of those who serve is dwindling everywhere, from Congress to…
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If Greece Was California…

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

For all its rhetoric, the current situation in the Eurozone should be very familiar to most Americans: after all it is merely a Federalist organization just missing one key feature: Federalism. At least for now. Whether Europe will succeed in reversing 20 centuries of nationalist pride, a multitude of languages, religions, cultures, histories, and superficial solidarity and friendliness covering generations of broad-based enmity, blood feuds and hatred, which is precisely what will be required (because the monetary union was merely half of the game) remains to be seen. It is likely that the stock market will force this resolution sooner than most expect. Then the question becomes: will Europe truly become the United States of Europe. And if so, what would the current Greek travails look like if they were transplanted to the state of California: another place which may soon be in dire need of a bailout. Luckily Jefferies’ David Zervos has performed just the thought experiment: “let’s assume the European monetary system structure was in place in the US. And then imagine that a US “member state” were to head towards a bankruptcy or a restructuring of its debts – for example California.” The results are below.

Separation of Bank and State

The Euro monetary system is flawed. It is a system that was cobbled together for political purposes; and sadly it was set up in such a way that each member state retained significant sovereign powers – most importantly the ability to exit the system and default on debts in times of stress. There is virtually NO federal power in the Union, as witnessed by the complete breakdown of the Maastrict and Lisbon treaties. In fact, what we are seeing today is that the structure of the monetary system is so poorly designed, it actually creates perverse fiscal linkages across member states that incentivize strategic default and exit. Our new leader of the Greek revolt – Mr CHEpras – has figured this one out. And in turn he is holding Angie hostage as we head into June 17th!

To better understand these flaws in the Eurosystem let’s assume the European monetary system structure was in place in the US. And then imagine that a US “member state” were to head towards a bankruptcy or a restructuring of its debts – for…
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Newedge Leaves Greek Stock Market, Will Only Execute Sell Orders

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Either the game of chicken in Europe has just hit and surpassed ludicrous speed, or French banks SocGen and Credit Agricole, both of which have some of the worst CT1/TA ratios in the known universe, and which are the JV participants of Newedge, have decided to formally pull the plug on Greece. As the FT reported moments ago, Newedge "has told clients that it will process only sell orders, and stop extending margin loans for existing positions in Greek securities, according to a memo obtained by the Financial Times."

A list of securities subject to the new restrictions include foreign-listed shares and American depositary receipts for Greek companies including Alpha Bank, Coca-Cola Hellenic Bottling and Paragon Shipping, a New York-listed shipowner that is headquartered in Greece.

“It is part of our ordinary risk practices to minimise our potential exposures proactively when we are concerned about potential issues,” the broker said.

Newedge – a joint venture of French banks Société Générale and Crédit Agricole – has Europe’s seventh largest hedge fund prime brokerage business, with more than $31bn in client assets, according to industry publication EuroHedge.

Its move is the latest evidence that the financial sector is preparing for a eurozone break-up, even as European officials debate the terms of the Greek bailout. A person familiar with the matter said Newedge wanted to avoid unpredictable risks in the event that Athens returned to the drachma as the national currency.

Add this to news over the weekend that Euler Hermes is "reviewing Greek export coverage." To wit – "In light of the recent developments, Euler Hermes will most probably have to switch to a more prudent approach, also in the interest of its customers,” spokeswoman Bettina Sattler said in an e-mailed response to questions. “The outcome of the new elections in June remains highly uncertain. Consequently, the situation is further deteriorating. The risk of Greece exiting the Eurozone has been revived." Translation: Greek foreign trade is about to be halted dead in its tracks.

And now, as per the Newedge hint, we have a concerted effort to crash the stock market too.

In other words, in addition to a bank run (because as has been widely reported already, Greek banks have seen billions in cash withdrawn in the past 3 weeks), in…
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World Markets Weekend Review: A Modest Improvement

Courtesy of Doug Short.

After two weeks of accelerating declines, five of the eight indexes on my world watch list posted gains for the past week, with the Western indexes filling the top four places. The S&P 500 was the strongest performer, up 1.74%. Of the four Asia-Pacific indexes, only the BSE Sensex finished the week in the green. The Hang Seng was the worst performer, down 1.26%, but that is a significant improvement over its savage declines of more than five percent for both of the two previous weeks.

The chart inset in the table below shows that six of the eight markets remain in bear territory — the traditional designation for a 20% decline from an interim high, and the FTSE 100 remains below the “correction” level (a decline of 10%). In contrast, last week the S&P 500 improved its lead in the race to set a new interim high.

As for YTD performance, here is a table showing the 2012 peak percentage gains, sorted in that order, and current YTD gains for the eight indexes. Despite last week’s gains for five of the eight, the gap between 2012 highs and the YTD performance clearly highlights the worldwide volatility in equities so far this year.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

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IT HaPPeNeD iN GReeCe!

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.


“It’s Capital – We Guarantee It!”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

From Bill Buckler, author of The Privateer

“It’s Capital – We Guarantee It!”

In any economy, “capital” is real wealth which has not been consumed. The production of new wealth is dependent on the supply of capital goods or factors of production – above all the tools essential to the task. A capitalist economy is impossible without a further form of capital – a medium of exchange or money. But money does not produce goods, it facilitates their exchange. Any money will do that, but SOUND money provides a still more important service. It allows for economic calculation. And without a reliable form of economic calculation, it is impossible to discover whether a given process of wealth production is viable or not. A SOUND money allows for the reliable calculation of profit or loss in any enterprise. By doing that, it acts to minimise the loss of real wealth by directing new capital into profitable uses and diverting it from uses which do not pay their way.

This is the only process by which any nation can become prosperous. It is entirely short-circuited when the common denominator in all economic calculations – money – is produced by edict and not by effort. It has long been known that it is impossible to “create” wealth out of thin air. It has long been held that money and wealth are synonymous. It is now a tenet of market faith that when it comes to creating money out of thin air – literally anything goes. The contradiction is as glaring as it is ignored.

Today, capital is taken to be a sum of money. This nominal amount is “guaranteed” by government edict and central bank power. The purchasing power of that money is also “guaranteed” by central banks to fall over time but only in carefully controlled annual increments. This is known as “inflation management”. Every central bank has its preferred rate of inflation. Every one of these rates bears no relationship whatsoever with the pace at which these same central banks are creating it out of thin air.

The economic – AND MARKET – distortions resulting from this practice have long since become incalculably huge. They have been fixed into economies everywhere. They must be corrected before any type of genuine wealth creation can once…
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Back to Mesopatamia

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner

Two terrific write ups from Boston Consulting (BC) are available entitled Stop Kicking the Can Down the Road and also Back to Mesopotamia.  The later goes right to the heart of what is necessary to reset the global economy. Taking each country and  applying a less sickly debt level equal to 180% of  GDP  they present the (my)  case.  Anything over 180% represents a serious debt overhang. It is only when one totals up all the enormous haircuts of wealth does one truly appreciate the problem. That is especially made true when the powers to be can’t even step up to the plate to write off and restructure a nation as far gone as Greece which in 2009 would have needed an overall haircut of $175 billion, almost all of it government debt.  Now it is much more. The problem of course is that Portugal and Ireland need big debt forgiveness in their household and corporate (banking) sectors which are far worse off than Greece’s.  I have no idea why they used 2009 debt levels as the numbers are much higher now, nearly 100% government debt in the case of the US. Still the first chart gives us a handicap of what is required and the second chart offers the update.

In order for Euro zone as a whole to get back to sustainable levels, about $8 trillion in debt needs to go. For the US it is $11.5 trillion.  They didn’t cover Japan, but you get the picture.  Interestingly BC suggests giving the haircuts primarily to the wealthy and banksters where the real money is.  Boa  ideia!  Without debt write offs there are only three other ways to deal with this, grow, but in the case of these countries growth only comes with huge commitments of government spending and debt which far offsets any stimulative benefit, and that has now backfired.  Next is save and payback,  also known as austerity, which is hard to get off the ground and takes years to execute. The last option is inflation, which I have railed about incessantly as an economy destroyer and distorter. Serious inflations diminish economic growth.

In kicking the can, BC discusses the current regime of financial repression, whereby interest rates are pinned will below GDP growth and inflation. They suggest (using 2009 data) that if the US could keep interest rates 3%…
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Complete European Calendar Of Events: May – July

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

There are still 3 weeks until the next so very critical Greek elections (which if we are correct, will have an outcome comparable to the first, and not result in the formation of a new government absent Diebold opening a Santorini office), meaning the power vacuum at the very top in Europe will persist, and while the market demands some clarity about something, anything, nothing is likely to be implemented by a Germany which is (rightfully, as unlike the US, Europe does not have the benefit of $16 trillion in inflation buffering shadow banking) concerned by runaway inflation if and when the global central banks announce the next latest and greatest global bailout, which this time will likely by in the $3-5 trillion ballpark. However, none of this will happen before the market plummets as Citi explained last weekend, and Europe has no choice but to act. Luckily, as the events calendar below from Deutsche Bank shows through the end of July there are more than enough events which can go horribly wrong, which ironically, is precisely what the market bulls need to happen for the central-planning regime to once be given the carte blanche to do what it usually does, and believe it can outsmart simple laws of Thermodynamics, regression to the mean, and all those other things central bankers believe they can simply overrule.


  • 28 May: Italy auction. Bonds.
  • 29 May: Italy auction. Bills.
  • 31 May: Irish referendum on Euro zone ?‘Fiscal Compact?’. A recent poll published in the Sunday Business Post showed a 6 point increase in support  for ?‘Yes?’ after the first week of formal campaigning by the government. The yes vote was up 6pp to 53% versus a month ago, the no vote down 4pp to 31% and don?’t know down 2pp to 16%. Excluding the ?‘don’t knows?’, Yes leads No 63% to 37%. An alternative poll published in the Irish Independent on 17 May similarly showed a 60% Yes vote when the ?‘don?’t know?’ contingent is excluded. However, in that poll the ?‘don?’t knows?’ represented 35% of the total. The average ?‘don?’t know?’ proportion in the opinions polls on the Fiscal Compact since the start of the year is 24%. The question is whether the ?‘don?’t knows?’ swing in favour of the ?‘No?’

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#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...

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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...

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Phil's Favorites

Divisive economics


Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...

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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...

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Digital Currencies

Transparency and privacy: Empowering people through blockchain


Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...

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Insider Scoop Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ... more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...

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Members' Corner

Why Trump Can't Learn


Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

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


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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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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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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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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