Archive for 2012

Why Isn’t Illinois A Bigger Story Than Greece?

Courtesy of John Rubino.

As the Greek default (and it is a default no matter what they end up calling it) is finalized this week, the consensus seems to be that failure to reach a deal would cause a global financial apocalypse.
 
That may be true. And if it is, why aren’t we more worried about Illinois? It’s more or less the same size as Greece, its finances are in the same generally catastrophic shape, and its leaders are just as feckless and dishonest. It owes tens of billions of dollars to various investors and stakeholders and will clearly have to stiff many of them at some point. The following article captures the “failed state” dilemma perfectly:

Dripping with red ink: Will anyone fix Illinois’ budget mess?

The question isn’t whether Illinois’ finances are in dreadful shape, it’s how to fix the problem. Or perhaps more accurately, will legislators have the political will to fix it when they return to Springfield for their spring session?

Even though the legislature and Gov. Pat Quinn last year imposed a temporary 67 percent state income tax increase, Quinn’s office expects to have a $500 million budget deficit this year.

Quinn is calling for a 9 percent cut in most areas of state government, except education and health care. But even with cuts at that level, the state would have a projected $800 million budget deficit for fiscal 2015, the year when most of the tax hike expires.

Quinn’s budget spokesman, Kelly Kraft, said the state’s fiscal situation is not pretty.

“These projections clearly demonstrate that action must be taken to control not only Medicaid costs but also (pension) costs, or all other areas of government will continue to be squeezed,” Kraft said.

Looking at the bigger picture, the state has a backlog of about $8.5 billion in unpaid bills and owes about $27 billion in outstanding bonds. And then there’s the roughly $80 billion owed to the state’s public employee pension funds.

Now, legislative leaders and Quinn are floating ideas to cut the two areas that account for the biggest chunks of the state budget — pension contributions and Medicaid.

In the proposed $33.7 billion budget for fiscal 2013, the state’s pension payment will be $5.3 billion, and Medicaid will cost taxpayers about $7 billion.

Proposals include reducing the benefits or the eligibility for Medicaid.


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Guest Post: Looking Back On A Century Of The Fed’s BS

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Thomas Gresham of Gresham’s Law,

After almost a century of the centrally planned dollar we’re delighted to present a timeline of the most amusingly disturbing speeches delivered by the Federal Reserve & Co.





The CDS Market And Anti-Trust Considerations

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The CDS index market remains one of the most liquid sources of hedges and positioning available (despite occasional waxing and waning in volumes) and is often used by us as indications of relative flows and sophisticated investor risk appetite. However, as Kamakura Corporation has so diligently quantified, the broad CDS market (specifically including single-names) remains massively concentrated. This concentration, evidenced by the Honolulu-based credit guru’s findings that three institutions: JPMorgan Chase, Bank of America, and Citibank
National Association, have market shares in excess of 19% each
has shown little to no reduction (i.e. the market remains as closed as ever) and they warn that this dramatically increases the probability of collusion and monopoly pricing power. We have long argued that the CDS market is valuable (and outright bans are non-sensical and will end badly) as it offers a more liquid (than bonds) market to express a view or more simply hedge efficiently. However, we do feel strongly that CDS should be exchange traded (more straightforward than ever given standardization, electronic trading increases, and clearing) and perhaps Kamakura’s work here will be enough to force regulators and the DoJ to finally turn over the rock (as they did in Libor and Muni markets) and do what should have been done in late 2008 when the banks had little to no chips to bargain with on keeping their high margin CDS trading desks in house (though the exchanges would also obviously have to step up to the plate unlike in 2008).

 

Kamakura Corp. – The Credit Default Swap Market and Anti-Trust Considerations

Donald van Deventer __ 1/19/2012 3:22 AM

This is the seventh in a series of blogs on trading volume and the degree of competitiveness in the credit derivatives market. In this post, we use credit derivatives data from the Office of the Comptroller of the Currency from June 30, 1998 to September 30, 2011 to measure the degree of concentration among commercial bank dealers in the credit derivatives market.  We conclude that the credit derivatives market is very highly concentrated, which increases the probability of collusion and monopoly pricing power.

The first six blogs in our series on trading volume in the credit default swap market focused on the share of dealer-dealer trading, trading volume in all 1,090 reference names reported…
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Happy Chinese New Year!

Courtesy of www.econmatters.com.

 

Year of The Dragon Opens In Beijing

Please click here to read more articles at EconMatters.





Investor Sentiment: Is This the End of the Road for the Rally?

Courtesy of ZeroHedge. View original post here.

Submitted by thetechnicaltake.

The “dumb money” indicator has become extremely bullish (bear signal), and this is what one would expect with rising prices. The higher prices go the more bulls that are recruited. But is it the end of the road for the rally? Not necessarily so. In 1995, 2003, 2009, and Q4 2010/Q1 2011 we saw the phenomenon that I have dubbed “it takes bulls to make a bull market”. It is a market characterized by rising prices and excessive bullishness. In the case of 1995, 2003, 2009, the excessive bullishness and multi-month rally seem to be warranted as the markets were bouncing back from steep losses or a prolong period of consolidation (1995). The Q4 2010/ Q1 2011 version of this phenomenon was a QE2 induced feeding frenzy. With investors taking their cues from the Federal Reserve and European Central Bank, the current market environment resembles Q4 2010/ Q1 2011. For now, we need to respect this dynamic as we could be witnessing another melt up. The bulls have the ball in their court and are on the cusp of turning this recent price move into a multi-month barn burner.





KuNG Hei: GaME BoY/FaT BoY…FaT CHoi!

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

KING HORNEY THE NEWT

.

NEWTZILLA 2012
.

THE EMPEROR AT CHARLESTON

 

.
THE ASS-ASS-INBy Aristarchan

 

MAD MAD MAD NEWT WORLD

Shut up and drive you big Morman!

.
IMMORTAL NEWT

“The secret to perpetual youth is arrested development.”--Alfred North Whitehead

.

SUPER MARIO ESF
.

 

CHINESE FINANCE ZODIAC





Q&A On The Greek Restructuring, And Why It’s All For Nothing

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Lots of questions, and unfortunately, answers, from Credit Suisse in this Q&A on the Greek default/restructuring, much of it already covered previously, but the only one that matters is this: “Would the restructuring make the Greek situation sustainable? No. Sorry, but no is the answer. Even with full repudiation of the Greek debt, the situation would not be sustainable. In that event, the deficit would move to the primary balance, 5-6% last year. Not sustainable. And the current account deficit would be in the high single digits. Not sustainable either.” So you’re telling me there’s a chance?

Q&A on the Greek debt restructuring

The IIF and Greece are approaching agreement on the Greek PSI, according to latest reports. We believe collective action clauses will be used to force a high participation rate, which means that credit default swaps will be triggered, but also that the ECB could be forced to take a loss. We look at the implications.

When?

20 March is the deadline.

The next major debt repayment Greece faces is a €14.5bn bond redemption on 20 March. In all likelihood, the Greek government will not have the cash to repay the bond, which means this is in effect the deadline for restructuring the country’s debt.

There are two scenarios in which talks could nonetheless carry on after that date. First, if our above hypothesis is wrong and Greece does in fact have the cash to repay the maturing bond – we doubt this is the case. Second, if Greece receives external support from the IMF and/or other European countries. This would be akin to the Fund and/or European states bailing out investors – again, we doubt this will happen.

So, if the debt is not restructured before 20 March, Greece is very likely to default.

Is Greece on an IMF programme?

No, it is not.

The IMF adjustment programme launched in April 2010 was formally terminated in December 2011 with the payment of an €8bn tranche. Greece is therefore no longer under an IMF programme at present. A second programme will commence after Greece’s debt has been restructured. One key reason for the timing is that two-thirds of the money from the first IMF bailout was used to repay existing bonds maturing; only one-third was actually…
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Weighing the Week Ahead: The State of the Union, Bernanke, Earnings

Courtesy of Doug Short.

Normally the State of the Union Address would be the focal point for the week’s events. In a general sense this is still true, but our focus in this weekly series is much narrower: What will influence markets?

This SOTU speech is unlikely to have a big market effect. The political lines have been drawn. We can all hope for initiatives that will generate some compromise, but I am not hopeful. I expect themes related to the major national problems — housing and jobs.

My forecast last week was that by Thursday we would all be talking about earnings. I expect earnings to dominate the story this week as well.

I’ll take this up further in the conclusion, but first let us do our regular review of the week’s news and data.

Background on “Weighing the Week Ahead”

There are many good sources for a comprehensive weekly review. My mission is different. I single out what will be most important in the coming week. My theme for the week is what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.

Unlike my other articles at “A Dash” I am not trying to develop a focused, logical argument with supporting data on a single theme. I am sharing conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am trying to put the news in context.

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

Last Week’s Data

In last week’s report I observed that there was a change in tone. We saw more of the same this week. In the absence of specific bad news from Europe, the market “wants to move higher.” All of a sudden there is more attention paid to specific stock news, and a general upward trend. I’ll consider this important development further in the conclusion.

The Good

There was some very good news this week.

  • Initial


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BP May Move On Cove Energy

Courtesy of Benzinga.

BP (NYSE: BP), Europe’s second-largest oil company, is reportedly considering a takeover offer for U.K.-based Cove Energy PLC, the company that recently discovered natural gas off the coast of Mozambique. The news was originally reported by the Sunday Times of London, which did not identify sources.

Cove put itself up for sale after the Mozambique gas discovery and India’s Gail and ONGC have been rumored to be potential suitors for the company. A sale of Cove could fetch $1.2 billion, the Financial Times recently reported.

BP has done business in Mozambique since the 1920s and has the second-largest presence there of any major oil company, according to the company’s Web site. The British oil giant says it has 150 staffers in the African nation.


For more Benzinga, visit Benzinga Professional Service, Value Investor, and Stocks Under $5.





Hours Ahead Of Monday’s Euro FinMin Meeting There Is No Greek Deal; IIF “Remains Hopeful”

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

But wait, we thought Greece and the ECB had an upper hand? Wouldn’t they exercise said upper hand by now, considering its now 9pm in Greece on a Sunday, the day before the critical European finmin meeting by which point the Greek deal was supposed to be in place?

From Reuters:

Greece’s private creditors are working closely with Athens on a debt swap deal, their chief negotiator said on Sunday, adding that he was confident a deal could be reached.

 

“We are at a crossroads and I remain quite hopefull,” International Institute of Finance chief Charles Dallara told Antenna TV on Sunday.

 

Greece and its private creditors are converging towards a deal but many details are still unresolved, sources close to the negotiations said during the weekend. Much of the attention will now turn to a meeting of euro zone finance ministers on Monday, and to how EU states and the IMF view the progress in the debt swap talks.

Much of the attention will now turn to a meeting of euro zone finance ministers on Monday, and to whether EU states and the IMF consider that the deal that is being put together by Athens and bankers does put Greece’s debt back on a sustainable track. One key question will be whether the deal attracts a big enough participation rate.

 

“We are working together with the Greek government, European and global leaders and we can mobilise very very high participation,” Dallara said.

Too bad hold out hedge funds with a blocking stake can’t pay their LPs with hope. In the meantime, the EURUSD is not happy to start the Sunday session.





 
 
 

Zero Hedge

Trump's $50 Billion Farm Deal Is Fantasy After Trade War Market Shifts

Courtesy of ZeroHedge View original post here.

Industry insiders have told South China Morning Post (SCMP) that President Trump's alleged $50 billion agriculture deal with China is merely a fantasy, used to stimulate his Farm Belt supporters ahead of an election year, and even used as a communication tool to drive the stock market to new highs. Still, the likelihood of it actually happening is very low.

SCMP notes that China has never confirmed the $50 to ...



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Phil's Favorites

What is an oligarch?

 

What is an oligarch?

Boris Yeltsin shakes hands with Russia’s most powerful businessmen in Moscow. AP Photo

Courtesy of Joel Samuels, University of South Carolina

With the impeachment hearings for President Donald Trump under way, several American diplomats and ...



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The Technical Traders

When Oil Collapses Below $40 What Happens? PART III

Courtesy of Technical Traders

This, the final section of this multi-part research article, will continue our exploration of the consequences that may result from our ADL predictive modeling system’s suggestion that Oil may continue to fall to levels below $40 over the next few months. 

In Part I and ...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

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

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Insider Scoop

Glass House Group Appoints Graham Farrar As President

Courtesy of Benzinga

Glass House Group, a California-based cannabis and hemp company, earlier this week appointed Graham Farrar as president.

In his new role, Graham will oversee the company’s short and long-term business strategies, budgets and operations, and report up to Glass House Group CEO Kyle Kazan.

A long-time entrepreneur and an original team member of both Sonos (NASDAQ: SONO...



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Chart School

Dow Jones cycle update and are we there yet?

Courtesy of Read the Ticker

Today the Dow and the SP500 are making new all time highs. However all long and strong bull markets end on a new all time high. Today no one knows how many new all time highs are to go, maybe 1 or 100+ more to go, who knows! So are we there yet?

readtheticker.com combine market tools from Richard Wyckoff, Jim Hurst and William Gann to understand and forecast price action. In concept terms (in order), demand and supply, market cycles, and time to price analysis. 

Cycle are excellent to understand the wider picture, after all markets do not move in a straight line and bear markets do follow bull markets. 



CHART 1: The Dow Jones Industrial average with the 900 period cycle.

A) Red Cycle:...

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Digital Currencies

Is Bitcoin a Macro Asset?

 

Is Bitcoin a Macro Asset?

Courtesy of 

As part of Coindesk’s popup podcast series centered around today’s Invest conference, I answered a few questions for Nolan Bauerly about Bitcoin from a wealth management perspective. I decided in December of 2017 that investing directly into crypto currencies was unnecessary and not a good use of a portfolio’s allocation slots. I remain in this posture today but I am openminded about how this may change in the future.

You can listen to this short exchange below:

...



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Kimble Charting Solutions

Silver Testing This Support For The First Time In 8-Years!

Courtesy of Chris Kimble

Its been a good while since Silver bulls could say that it is testing support. Well, this week that can be said! Will this support test hold? Silver Bulls sure hope so!

This chart looks at Silver Futures over the past 10-years. Silver has spent the majority of the past 8-years inside of the pink shaded falling channel, as it has created lower highs and lower lows.

Silver broke above the top of this falling channel around 90-days ago at (1). It quickly rallied over 15%, before creating a large bearish reversal pattern, around 5-weeks after the bre...



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Lee's Free Thinking

Today's Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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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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