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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Zero Hedge

Auto Shares Surge As Fiat, Renault Confirm Merger Talks

Courtesy of ZeroHedge. View original post here.

With President Trump in Japan for a state visit and most of Europe headed to the polls to vote in the quinquennial EU Parliamentary elections, there was enough news to keep market watchers occupied during what was supposed to be a quiet holiday weekend in the US. 

But on top of these political headlines, on Saturday afternoon, the news broke that Italian-American carmaker Fiat Chrysler had approached France's Renault with a merger proposal that would leave the shareholders of each carmaker with half of the combined company, in a tie-up that would create the world's third-largest au...

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Phil's Favorites

Trump and the problem with pardons


Trump and the problem with pardons

Courtesy of Andrew Bell, Indiana University

As a veteran, I was astonished by the recent news that President Trump may be considering pardons for U.S. military members accused or convicted of war crimes. But as a scholar who studies the U.S. military and combat ethics, I understand even more clearly the harmful long-term impact such pardons can have on the military.

My researc...

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Insider Scoop

Jefferies Sees 60-Percent Upside In Aphria Shares, Says Buy The Dip

Courtesy of Benzinga.

After a red-hot start to 2019, Canadian cannabis producer Aphria Inc (NYSE: APHA) has run out of steam, tumbling more than 31 percent in the past three months.

Despite the recent weakness, one Wall Street analyst said Friday that the stock has 30-percent upside potential. 

The Analyst

Jefferies analyst ... more from Insider

Kimble Charting Solutions

DAX (Germany) About To Send A Bearish Message To The S&P 500?

Courtesy of Chris Kimble.

Is the DAX index from Germany about to send a bearish message to stocks in Europe and the States? Sure could!

This chart looks at the DAX over the past 9-years. It’s spent the majority of the past 8-years inside of rising channel (1), creating a series of higher lows and higher highs.

It looks to have created a “Double Top” as it was kissing the underside of the rising channel last year at (2).

After creating the potential double top, the DAX index has continued to create a series of lower highs, while experiencing a bearish divergence with the S...

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Chart School

Brexit Joke - Cant be serious all the time

Courtesy of Read the Ticker.

Alistair Williams comedian nails it, thank god for good humour! Prime Minister May the negotiator. Not!

Alistair Williams Comedian youtube

This is a classic! ha!

Fundamentals are important, and so is market timing, here at we believe a combination of Gann Angles, ...

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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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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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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


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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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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