Archive for 2012

Guest Post: Be Optimistic (And Wrong) About The Chinese Economy

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Zarathustra of Also Sprach Analyst,

When China started tightening policy to fight inflation, almost no one thought that it would slow the economy to what China is in right now.

When China started imposing ever more aggressive real estate prices curb, some people believed that that it would not make home prices drop (because there are many people in China, and urbanisation, etc), and even less believed that it would slow the economy to what China is in right now.

When China started to slow down more than most thought, almost no one thought that it could be a big problem, while some thought that the slowdown was “engineered” to fight inflation.  Because it was an intentional slowdown, not many people believed that it could get much worse.

After China’s shadow banking sector started blowing up, there is a bloke call Andy Rothman from CLSA who said there are “no shadow banks” in China.

After the slowdown “intentionally engineered by the government and the central bank” became consistently worse than expected probably since the start of 2012, consensus calls for recovery of growth in the next quarter.  They call the same thing every quarter since then, because there is “much room for policy easing”, “much room to manoeuvre”, “can cut rates”, “can cut RRR”, “can use US$3.2 trillion FX reserve”, etc.

After Wen Jiabao announced this year’s growth target at 7.5% in real term, most thought that China has never not exceeded the growth target, so GDP growth will most probably be above 8%, said the consensus.

Many have been denying emphatically the possibility of a hard landing.  Some like Qu Hongbin of HSBC even wrote that there is “no risk of a hard landing”.

So now, what do we have?

FT wrote that even 7.5% growth target looks “ambitious” to some.

On the whole, except that the real estate market is holding up better than we thought it could (yes, we did get that wrong, although we are not changing our view), the economy has been doing quite consistently poorer than the consensus, and occasionally even worse than what we thought to a point that at one point we thought we were not bearish enough, even as pessimists. 

Although real estate market is…
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In The Aftermath of the Greek Blue Light Precedent: Belize Demands Half Off on Its Debt… Or Else

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

"Greece set a precedent for 'Here's what you're going to get, take it or leave it'" is how the WSJ summarizes an analyst's 'shocked' thoughts on the growing game of 'call my bluff' being played among beggars being choosers. Belize, a Central American nation with an economy the size of Pine Bluff, Arkansas, is surprise surprise running out of money to pay its debts and is insisting that creditors forgive 45% of what they are owed – OR allow it to delay any debt payments for 15 years (yes, seriously, read that again) – leaving a default on the country's $543.8mm almost inevitable.

Three things stand out to us: 1) the nation's government simply posted a note on its website that it would be 'skipping a payment' as opposed to telling creditors directly; 2) none other than 'Long GGBs are the slam-dunk trade-of-the-year' Greylock Capital are "mystified" that yet another trade has gone pear-shaped adding that they are "sure every country could benefit from not paying their debt but this isn't the way to do it!"; and 3) this would be one of the worst restructuring terms ever as the "Greek effect" could inspire other countries to pursue restructurings on more favorable terms – especially given that: "Even if you don't need a restructuring you can force one upon bondholders because it's so hard to recover money from a sovereign who won't pay,"

From the WSJ:

Prime Minister Dean Barrow in a March television interview said the global 2029 bonds, issued by a different administration, had come at too high a price.

The bond's interest rate rises over the course of its life, reaching 8.5% for the August payment, from 4.25% in 2007, when several loans were consolidated into a single bond.

…[preventing] the current government from using "our recurring revenue to do more for the people, to push employment and to push job creation,"

… triggered a sharp selloff in Belize's bonds, driving yields higher. The yield peaked at 30.2% after the restructuring proposal earlier this month, from 16% at the start of the year. The bond yielded 26.3% on Friday.

Roberto Sanchez-Dahl, an emerging-market portfolio manager with Federated Investors, said…

"We thought that the probability of the government being bond friendly was going to

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The Growing Threat Of Soybean-Inspired Social Unrest In China

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Two weeks ago we explained why the drought-inspired soaring price of Soybeans  – specifically from the US – would notably influence global central-planners’ actions – and more specifically the Chinese (given its high impact on food price inflation). Food prices remain elevated and the PBoC is undertaking Reverse Repos – the exact opposite of an RRR-driven easing program so many expected. However, there is a further, deeper, and more troubling consequence than ‘simple’ inflationary arguments – that of social unrest. Confirming our insight, the LA Times points out,

Soybean oil is the most important edible oil in China with more than two-thirds of cooking oil consumed in China coming from soybeans – and most of those soybeans are supplied by the US (more than half of US exports are to China and the US is China’s number 1 supplier). According to one official this “makes [China] vulnerable to the drought” and bound to the fortunes of farmers in the American heartland. The Chinese devote more than 20% of their income to food (three times more than Americans – according to the USDA).

This means the dramatic rise not just in grain prices, but in the up-stream prices of meat, eggs, and milk combined with the until-now newly affluent (un-dirt-poor) Chinese have grown transitorily-used to an “everything needs oil” attitude when spending and this price-jolt to newly entrenched tastes is why authorities are concerned about social stability; as IHS points out “Inflation has a long history of sparking discontent, so obviously it’s on the forefront of the Chinese leadership’s mind.”

German Court Reverses Anti-’Nazi-Era’ Military Restrictions

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Late on Friday, the BBC reported that the German military will in future be able to use its weapons on German streets in an extreme situation. This ruling, we hope purely a technicality – but clearly warranting some concern as to ‘why now?’ – by Germany’s Constitutional Court, reverses some of the severe restriction on military deployments that were set down in the German constitution after Nazi-era abuses. After WWII, the new constitution ruled that soldiers could not be deployed with guns at the ready on German soil – the court has now changed that (it seems on the basis of terrorist concerns – as opposed to widespread bank runs, populist revolts at bailout-back-downs, or Hollande/Monti/Draghi sending over some boys).

A Cacophony Of Discord, Defaults, And Visions Of Impossibility

Courtesy of ZeroHedge. View original post here.

Submitted by testosteronepit.

Wolf Richter

The Eurozone wasn’t supposed to be a house of cards. And as long as there was “confidence” that it would work, it worked: the financial markets offered cheap no-questions-asked loans to the most profligate governments, and even tiny countries like Cyprus were able to suck up and disperse in record time phenomenal amounts of money. The elites got immensely rich, and even other members of society were able to pick up some crumbs. But all that remains from this drunken frenzy are mountains of decomposing debt—and a cacophony of discord, shouting matches about defaults, and visions of impossibility. Former taboos are violated, sacred cows are slaughtered, and the euro has been tossed on the chopping block.

There was billionaire Frank Stronach who’d announced he’d start an anti-euro political party in Austria. While the European Union should guarantee peace and the free movement of goods, people, services, and capital, he said, it could only function “if every country has its own currency.” He called the ESM, the not yet existing bailout fund that is supposed to save the Eurozone but is still hung up in the German Constitutional Court, “insolvency procrastination.” And he exhorted Austrians to ditch the euro [read.... The Euro Revolt Spreads To Austria].

Austrian Foreign Minister Michael Spindelegger (ÖVP) would take the opposite tack. Worried about exports—half the jobs in Austria depended on them—he’d rather not get rid of the euro. Instead, “We need possibilities to kick someone out of the monetary union,” he said, particularly “countries that don’t stick to their commitments.” And he jabbed at Greece because it had lied about its numbers in order to be allowed into the Eurozone.

Alas, being able to kick a country out would require treaty changes, which would take five years, Spindelegger said. But he’d already started discussions with other foreign ministers. While many of them supported treaty changes, unanimity of all 27 EU countries would be required, he said, possibly aware of his illusions.

He immediately caught heat from stalwarts in the coalition government. Some called it “populist”—as opposed to elitist, perhaps. Chancellor Werner Faymann was worried about “the negative consequences of a breakup of the Eurozone”—even he used breakup of the Eurozone, a concept now as common as the currency itself, though for top politicians, it…
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Guest Post: Global Japan & the Problems With A Debt Jubilee

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by John Aziz of Azizonomics

Guest Post: Global Japan & the Problems With A Debt Jubilee

Bill Buckler critiques the notion of a debt jubilee:

The modern “debt jubilee” is characterised as “quantitative easing for the public”. It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government. Instead, it takes an arbitrary number, writes a check for that number, and deposits it in the bank account of every individual in the nation. Debtors must use the newly-created money to pay down or pay off debt. Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit.  


The major selling feature of this “method” is that it provides the only sure means out of what is called the global “deleveraging trap”. This is the trap which is said to have ensnared Japan more than two decades ago and which has now snapped shut on the whole world. And what is a “deleveraging trap”? It is simply the obligation assumed when one becomes a debtor. This is the necessity to repay the debt. There are only three ways in which a debt can be honestly repaid. It can be repaid with new wealth which the proceeds of the debt made it possible to create. It can be repaid by an excess of production over consumption on the part of the debtor. Or it can be repaid from already existing savings. If none of those methods are feasible, the debt cannot be repaid. It can be defaulted upon or the means of “payment” can be created out of thin air, but that does not “solve” the problem, it merely makes it worse.


The “deleveraging trap”, so called, is merely a rebellion against the fact that you can’t have your cake and eat it too. So is the genesis of the entire GFC. Debt can always be extinguished by means of an arbitrarily created means of payment. But calling that process QE or a Debt Jubilee doesn’t (or shouldn’t) mask its essence, which is simple and straightforward debt repudiation.


A “debt jubilee” is the latest attempt to make a silk purse out of a sow’s ear. It is the

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Allan’s Weekend Update

New Signals

VXX Hourly ————>SHORT (note – this is a very short term signal)


CME Daily—————–>LONG

KOG Daily—————–>LONG

(click on charts to enlarge)

The Big Picture


DJIA Weekly Trend Model


A common feature of these April-May TOP’s is that the LONG signals immediately following the TOP’s were all very profitable signals. The current Long signal is already profitable, but based on the past 4 years, this one should have a way to go before the next Sell signal. All major stock market indexes are now LONG in their Weekly models, with the exception of Value Line:


Value Line Weekly Index

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Bill Black: Unless we Fix the Perverse Incentives in our Economy, We are Rolling the Dice Every Day

PSW Members: Stock World Weekly is taking brief vacation but we will be back in September. In the meantime, please enjoy this article, courtesy of Jaime at Capitalism Without Failure, featuring Bill Black. ~ Ilene 

Bill Black: Unless we Fix the Perverse Incentives in our Economy, We are Rolling the Dice Every Day

Elites have not been prosecuted for the fraud they committed: None of the financial elites, who drove the crisis through massive fraud, has been pursued criminally. It was accounting fraud, which mathematically guarantees wealth to executives, and drives the companies into the ground (or to bailouts, in our case), that led us to crisis.

Bank Living Wills are useless: Bank Living Wills are absolutely useless and everybody knows they are useless. Nobody can predict how the next crisis will evolve and what markets will be like in those circumstances. The idea that we would be able to use these living wills is ridiculous.

Bank Living Wills do nothing to address Too Big To Fail banks: Bank Living Wills are being sold as a response to TBTF, which is even more ridiculous. We made the largest entities bigger even though they were already too big to jail and too big to manage. The obvious response to having systemically dangerous institutions is to shrink the TBTF banks.

One necessary response to TBTF is to shrink the banks: If we shrank the banks we would experience win, win, win, by:

  1. Dramatically reducing systemic risk.
  2. Making the banks much more efficient.
  3. Taking a step toward fighting crony capitalism and restoring free markets and functioning democracy.

Not only did we not ensure that systemically dangerous institutions were cut down to size, we actually allowed some of them to get bigger, to get more systemically dangerous, to become more TBTF.

TBTF has a massive implicit government subsidy: The TBTF have an enormous implicit subsidy. We know that in a crisis the creditors of systemically dangerous institutions will be paid in full. That means that those banks can borrow at a lower rate than everyone else. That is an implicit subsidy, which is unfair to everyone else in the marketplace.

Recurrent, intensifying crises will continue unless we address perverse incentives in our economy: We have recurrent, intensifying financial crises. They are becoming bigger by an order of magnitude each time.  The next collapse, unless we take steps to prevent it, will be larger and more destructive.

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ECB Capping Rates on PIIGS? Wait Till Traders Call Its Bluff

Courtesy of ZeroHedge. View original post here.

Submitted by EconMatters.


By EconMatters


The big buzz about the debt-embattled Euro Zone on an otherwise quiet Sunday came from German news magazine Der Spiegel that ECB is considering measures to cap the borrowing costs of the crisis-central PIIGS countries.  According to Bloomberg,

The European Central Bank is considering setting limits on yields of euro area sovereign debt by pledging unlimited bond purchases, Germany’s Spiegel magazine reported without saying where it obtained the information. The policy will be decided at the September meeting of the ECB’s governing council, Spiegel said.  

Earlier this month, U.S. Treasury Secretary Geithner has already put on the pressure saying “the eurozone must take steps including bringing down interest rates in the countries that are reforming.” 


With the PIIGS sovereign bond yields rising to unsustainable levels (See Chart Below), it is understandable why ECB resorts to this “big bazooka” plan partly making good on ECB President Draghi’s bold promise to do “whatever it takes” to save euro.  However, it also demonstrates how the Euro Zone seems to be at its wit’s end to effectively restore market confidence.




Instead of simply a problem of higher bond yield, central to this crisis is PIIGS nations have had years of excessive spending relative to revenues,  If these debt-problematic countries have control of their own currency, then they might be able to follow the debt restructuring model such as Argentine to slowly dig themselves out of the hole.  However, this is not the case for the Euro Zone.…
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Chart Of The Day: Americans At Or Below 125% Of The Poverty Level

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

From AP: "the number of Americans with incomes at or below 125 percent of the federal poverty level – the income limit for qualifying for legal aid – is expected to reach an all-time high of 66 million this year. A family of four earning 125 percent of the federal poverty level makes about $28,800 a year, government figures show." And visually…

As usual, if anyone expects these 66 million Americans (over 20% of the US population) to vote for someone who dares to even think about taking away any of the entitlements said tens of millions of people are used to, then by all means buy Las Vegas real estate.


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

This Is The One Chart Every Trader Should Have "Taped To Their Screen"

Courtesy of Zero Hedge

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

As Nomura&...

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The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...

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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...

Learn more About Phil >>

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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.

Market Shadows >>