Archive for 2012

John Taylor On Poor Policy And This Recovery’s Broken ‘Plucking’ Model

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

It feels different this time. It also ‘looks’ different this time in that our ‘recovery’ just is not bouncing back from its Friedman-ite ‘plucked’ level to rise phoenix-like back to Potential GDP – as it is ‘supposed’ to. In an excellent two-part animated series, Stanford’s John ‘Rule’ Taylor and Russ Roberts discuss this recovery’s differences along many variables including GDP trend reversion, percent of the population that is working and, economic growth overall. They then go on to discuss potential reasons for this sluggish recovery; the ongoing slump in construction employment, the effect of housing prices on saving and spending decisions by households, and this recovery’s having been preceded by a financial crisis. Taylor rejects these arguments, arguing instead that the sluggish recovery can be explained by poor economic policy decisions made by the Bush and the Obama administrations. Simple, clear, 20 minutes of Sunday evening preparation for the week.

 

The Numbers Game: Part 1 – The Economic Recovery (It’s Different This Time)

1) What is potential GDP? (0:52)
2) The economy never catches back up to trend (2:38)
3) The 1981 recession (3:16)
4) Is there a correct or potential level of GDP? (4:45)
5) A look at past recoveries (6:13)
6) Friedman and the Plucking Model (8:10)
7) A look at real growth rates in recoveries (8:59)
8) Employment and the recovery (10:20)

 

LINKS TO DATA & PAPERS REFERENCED -

1. 2008-09 and 1981-1982 Recession & Recovery Charts:
Real GDP (GDPC1) downloaded from FRED 7/13/12, taken from BEA.gov – http://research.stlouisfed.org/fred2/series/GDPC1/
Potential GDP (GDPPOT) downloaded from FRED 7/13/12, taken from CBO.gov – http://research.stlouisfed.org/fred2/series/GDPPOT/

 

2. 1907-08 and 1893-94 Recession & Recovery Charts:
GDP data from NBER, compiled by Nathan Balke and Robert Gordon with adjustments by John Taylor for comparability with earlier charts -http://www.nber.org/data/abc/ Potential GDP calculations by John Taylor using a Hodrick-Prescott trend.

 

3. The Plucking Model Working Paper:
The “Plucking Model” of Business Fluctuations Revisited by Milton Friedman Working Papers in Economics, E-88-48 — Hoover Institution, Stanford University
http://hoohila.stanford.edu/workingpapers/getWorkingPaper.php?filename=E-88-4…

 

4. Growth Rate of Real GDP Chart:
Growth Rate calculated from Real GDP (GDPC1) downloaded from FRED 7/13/12, taken from BEA.gov –


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ECB’s Weidmann On Gold: “Money Is A Social Convention”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

A few weeks ago we noted Bundesbank president and ECB governing council member Jens Weidmann’s analogy between the Faustian bargain offered by a money-printing Mephistopheles in Goethe’s classic prose and today’s ubiquitous oh-so-tempting short-term solution to everyone’s pain. His full speech (below), while a little dramatic, should indeed strike fear into many with its clarity. The financial power of a central bank is unlimited in principle; it does not have to acquire beforehand the money it lends or uses for payments. Many believe Goethe was portraying the modern economy with its creation of paper money as a continuation of alchemy by other means. While traditional alchemists attempted to turn lead into gold, in the modern economy, paper was made into money. Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too  – or even nightmarish. Of course, Weidmann concludes, it is important that central bankers, who are in charge of a public good – in this case, stable money – bolster public confidence by explaining their policies. The best protection against temptation in monetary policy is an enlightened and stability-oriented society [and Gold!].

 

 

Jens Weidmann; Speech at the 18th colloquium of the Institute for Bank-Historical Research (IBF) in Frankfurt

The caption for today’s event is “Paper money – Public finances – Inflation.  Did Goethe hit upon a core problem of monetary policy?

Money and money creation

I wish to begin with a question which appears trivial at first glance but which, as experience has shown, is particularly difficult. What is money exactly? A succinct response from an economist would be: Money is what money does.

As money is defined by its functions, various instruments are fundamentally capable of acting as money, as long as they can be used as a medium of exchange, medium of payment and store of value.

Shells were previously used as money in some countries, for example, as were furs, salt or pearls. Livestock could also serve as money – the Latin word for cattle is “pecus” from which the word “pecunia”, meaning money, is derived.

Concrete objects have served as money for most of human history; we may…
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Out Of The ‘Liquidity Trap’ Frying Pan And Into The ‘Liquidity Lure’ Fire

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Via Citi’s Credit Strategy team

“Liquidity trap” was a term coined by John Maynard Keynes in the aftermath of the Great Depression. He argued that when yields are low enough, expanding money supply won’t stimulate growth because bonds and cash are already near-equivalents when bonds pay (almost) no interest. Some would say that it is a pretty apt description of the state of play these days.

However, most economists today would contend that monetary policy doesn’t just impact the economy through interest rates, but also through other several channels, one of which is asset prices.

To our minds, there is very little doubt that central banks have played an absolutely crucial role in propping up asset prices in recent years. We’ll leave the debate about the link between asset prices and growth for another day, but we do believe that in so doing they have prevented a much faster and more vicious deleveraging process.

Just look at Figure 2 below, which compares the 3-month change in liquidity provided by the central banks with the 3-month change in global equity markets. We could have used credit spreads instead and it would have made very little difference. Every time the central banks have injected liquidity, markets have responded, although recently most of the response has been preemptive.

 

Why have markets responded so resolutely when growth hasn’t?

The answer, we think, is that in their attempts to free markets from the liquidity trap, central banks are ensnaring markets in what we’ll call a “liquidity lure”. That lure is three pronged:

  1. By lowering rates to zero (and potentially promising to keep them there), central banks are forcing money out of money markets and deposits into riskier assets for higher returns. In corporate credit, the corollary has been almost continuous inflows since late 2008.
  2. Through balance sheet expansion – that is buying assets or funding them for a long period of time without rehypothecating them (lending them out) – the central bank is shrinking the universe of investable assets in the market. The red line in Figure 3 below, which shows the net issuance of securities in Europe on a rolling 12-month basis after the effect of long-term ECB repo operations, clearly illustrates the point.
  3. Lastly, through the signalling value. By sending an implicit


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Investor Sentiment: In a Vacuum

Courtesy of ZeroHedge. View original post here.

Submitted by thetechnicaltake.

Investors who have put their faith in Ben Bernanke have no one left to turn to. The SP500 is down only 3% or so from its QE3 highs, but in the recent past, a 3% drop was certainly enough for the cheerleading bulls to start calling for more Federal Reserve intervention in hopes that these central bankers would come to the rescue yet again. This recent 3% drop has the bulls attention, but there are no calls for Bernanke to do more because the Fed can’t do anything more as they already are “all in” with QE3 to infinity. It’s like we are in a vacuum, and the silence is palpable as the bulls hope that the announcement of QE3 hasn’t become a bull trap. As stated several weeks ago, QE3 was a game changer. The openendedness of the liquidity operation certainly was new, but the real game changer was that speculating on Fed intervention was no longer going to prop up the markets. With the Fed “all in”, there is no more speculation. The failed breakout following the QE3 announcement should be concerning to the bulls.





S&P Futures Are Testing Draghi’s Dream

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

EURUSD meandered for the first few hours this afternoon but as Asia opens EUR (and AUD) weakness, USD strength and risk-off has come to pass. While not earth-shatteringly devastating, S&P 500 futures are trading down 5 points (8 points from opening high this evening) – their lowest in a month – and testing critical support from the Draghi ‘believe’ speech spike. AUD weakness is especially notable after opening rather strong (swing from a 0.3% gain to a 0.3% loss now against the USD). Treasuries are still waking up (down 1bps).

S&P futures leaking…

 

and EURUSD testing down to 1.2900 again…

 

Charts: Bloomberg





About QEternity’s Mortgage-Based Housing Boost?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

We know its ‘early’ and we should not be judging yet another QE-book by its front-running cover; but the following three charts might give all those hopeful that this time its different some pause for thought on the Fed’s actions being anything other than by the banks, for the banks, and of the banks. With refi activity’s burst fading, retail mortgage rates having not budged, residential delinquencies rising once again, and average ‘approved mortgage loan’ FICO score at 750, it would seem the Fed could throw another cajillion dollars at the banks and reserves would just inflate further (along with everything we eat, use, and need), leaving the economy muddling through at best.

 

Since QEternity was announced, retail mortgage rates have dropped a mere 12bps to 3.39% while wholesale rates are down 30bps (and considerably more at one point)…

 

and while there was an immediate knee-jerk reaction to refi (no doubt driven by a massive marketing push from the servicers), it is now fading…

 

Is it any wonder it is fading… Average accepted mortgage loan FICO Scores are 750…

 

and Resi Delinquencies are rising once again…

 

 

In a nutshell: – QEternity is FOR the ‘banks’; As far as the ‘people’, those who can (refi) have, those who can’t won’t!

Charts: JPMorgan and Bloomberg





I will never forget the name “Gavyn Davies!”

Courtesy of ZeroHedge. View original post here.

Submitted by lemetropole.

Today, at LemetropoleCafe.com, I was honored to post an article titled “Will central banks cancel government debt?” by Gavin Davies .

Goldman “Hannibal Lecter” Sachs used to be the visible ringleader of The Gold Cartel. They have since disappeared from the gold price suppression scheme totally, at least as far as this eye can see.

But, from my perspective back way back when, referring to Goldman Sachs as “Hannibal Lecter” was being kind. They were relentless in their manipulation of the gold price encouraging the foolhardy, politically connected gold companies such as Barrick and AngloGold to hedge their forward gold sales.

How did that work out? Don McConvey, their hedging director, took a bullet for the team and was fired.

Barrick and AngloGold ended up taking something like $18 billion in futures losses when they decided to cover their Gold Cartel induced hedges. Nice, eh? Back then, not long after GATA was formed, we fumed at the stupidity and Gold Cartel complicity of these donkey brained hedges. GATA was mocked by the gold establishment forces for challenging the elites and their motives. BUT WE WERE SO RIGHT AND CONTINUE TO BE THAT RIGHT, even though The Gold Cartel and the US Government, have conspired to hire different hit men to carry out their nefarious operations as time goes by.

Back to England’s Gavyn Davies and what I wrote in July of 1999 about Goldman Sachs and him…

GATA harbors no personal ill will towards Goldman Sachs, but the firm’s name has surfaced not only in London but also everywhere GATA turns in our own investigation about the manipulation of the gold market. So consider this about Goldman Sachs:

*Former Treasury Secretary Robert Rubin, is a former Goldman Sachs CEO.

*Former N.Y. Fed Governor, Ed Corrigan is a senior partner at Goldman Sachs

*London based senior partner, Gavyn Davies, is Goldman Sach’s international economist and has close ties to Tony Blair. Davies wife, Susan Nye, is chancellor of the exchequer’s office manager.

*Dr Sushil Wadhwani, former Director of Equity Strategy at Goldman Sachs International (1991-95), sits on the Bank of England’s Monetary Policy Committee. The committee’s duties include determining the Bank’s objectives and strategy, ensuring the effective discharge of the Bank’s functions and ensuring the most efficient use of the Bank’s resources.

*Jon Corzine former Goldman…
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Guest Post: Can Government Create Opportunity?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by James E. Miller of the Ludwig von Mises Institute of Canada,

Last year, the Boston branch of the Federal Reserve put out a working paper which contained detailed data on the declining trend of economic mobility in the United States.  According to the paper, the percentage of Americans who reside in the lowest income quintile and move up either to the middle quintile or higher has been in decline over the past three decades.  This statistic should be alarming as it is indicative of stagnation within an economy that supposedly fosters the entrepreneurial spirit.  Without the opportunity to create and deliver things which enhance the lives of others, society as a whole ends up being denied the work of the most constructive members. To some, it has meant that government at all levels is doing an inadequate job in addressing what appears to be a growing divide between the haves and have-nots.  Calls for higher taxes to pay for programs and schemes of redistribution which would enable the less-fortunate in following their ambitions usually follow.

It is standard fare for pro-government advocates to defend the notion that the state exists to create opportunities for the people.  In first presidential debate between U.S. President Barack Obama and challenger Mitt Romney, Obama articulated his belief that the federal government should “create ladders of opportunity” as well as “create frameworks where the American people can succeed.”  The president is not alone as economist and leading voice of progressivism Paul Krugman expressed his dismay in his New York Times column over Washington’s failure to create “equal opportunity.”

Conventional examples of government-created opportunities include cheap college loans, public education, small business loans, land grants for universities, housing for those on low-income, and an array of infrastructure projects meant to facilitate transportation.  Proponents of these measures see them as a necessary springboard for social mobility; that without these resources, the downtrodden would forever remain in a state of destitution.

The problem with this assertion is that the ability to lift one’s self up by their proverbial bootstraps is only ever hampered by the state.  The various efforts to create “opportunity” by lawmakers necessarily mean less opportunity created in the non-government sector.  Nothing government has a hand in ever comes for free.  Unlike the private sector…
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Did Central Bankers Kill The Single-Name CDS Market (For Now)?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The fact that the major credit indices have had to resort to ‘imaginary credit’ in order to generate an actionable market is perhaps the final nail in the coffin of the single-name CDS market in this cycle. An artificially low spread environment, forced their by massive technical flows thanks to central-bankers’ financial repression has removed a natural buyer- and seller- from the market – reducing liquidity; and combined with Dodd-Frank and more regulation (higher capital reqs), dealers are also forced to delever risk books (reducing liquidity). But, there is one glaring reason why the single-name CDS market is dying; extremely high correlation. As Barclays notes, in a market where investors’ ears are, more than ever, finely tuned to the statements of politicians and central banks and the tail outcomes for the market, it makes sense for correlation to be high – at this stage, there should be little distinction between individual names – trading the level of systemic risk premia is the focus. And sure enough, index (systemic) volumes is rising as single-name (idiosyncratic risk) trading volumes and exposures are fading fast.

 

Via Barclays:

CDS trading volumes have increased for indices and dropped for single names. We relate this to the current market environment, with an intense focus on political/central bank headlines and high correlation between individual names. We expect index volumes to remain high (absolute and relative to single-names) as long as political headlines drive the market.

 

 

Trading volumes in sovereign CDS remain stable. Levels in recent quarters have been very stable, and sovereign is the only section of single-name CDS that has seen an increased level of trading compared with Q1 11, unsurprising given the backdrop of the sovereign crisis in Europe.

 

Trading volumes in single-name corporate and financial CDS are trending lower. Financial CDS trading volumes remained stable until Q1 this year, dropped into Q2 and stayed broadly unchanged over Q3. Trading volumes in corporate CDS have actually been fairly stable over the past four quarters, having experienced a large drop heading into Q4 11.

 

 

Index trading volumes remain high. In particular, trading volumes in corporate CDS indices (iTraxx Main/Crossover/HiVol) have stayed at a very high level; even higher than the reference level of Q1


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Fiat Currency and the Emerging Police State

Courtesy of John Rubino.

Our transition from more-or-less free country to police state is accelerating. The NSA’s Utah data mining facility, ever-tighter restrictions on offshore accounts, the Internet “kill switch”, the Patriot Act’s many assaults on the Bill of Rights, the militarization of local police, the spread of drones for domestic surveillance; each has a role in the high-tech updating of a very old idea: that the state is paramount and the individual a slave to public order and national power.

But why is this happening now, rather than in 1950 or 2050? The answer is that we’re reaping the whirlwind that always accompanies fiat currency. We created a central bank in 1913 and freed it from the constraint of gold in 1971. Give the government or the big banks the power to create money out of thin air and you eventually get a dictatorship. “Eventually” just happens to be now.

Laissez Faire Books’ Wendy McElroy covers some of the theory behind this idea in a recent review:

Paper Money = Despotism
“Fiat” is money with no intrinsic value beyond whatever an issuing government is able to enforce. When it enjoys a monopoly as currency, fiat inevitably turns the free market functions of money inside out. Instead of being a store of value, the currency becomes a point of plunder through monetary policies such as quantitative easing. Instead of greasing society as a medium of exchange, the currency acts as a powerful tool of social control. The second harm is far less frequently discussed than inflation, but it is devastating. The personal freedoms that we know as “civil liberties” rest upon sound money.

In his classic book The Theory of Money and Credit (1912), the Austrian economist Ludwig von Mises argues, “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically, it belongs in the same class with political constitutions and bills of rights.”

A key reason Mises viewed sound money as a necessary protection of civil liberties is that it reins in the growth of government. When a government prints money without the restraint of competing currencies — even if the restraining “competition” is a gold standard — runaway bureaucracy results. Wars are


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ValueWalk

#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

Cars.com 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 ...

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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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Biotech

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 www.shutterstock.com

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

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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.

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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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