Archive for March, 2013

Mario Darghi’s Headfake is Wearing Off

Courtesy of ZeroHedge. View original post here.

Submitted by Phoenix Capital Research.

 

The EU Crisis went into overdrive in the spring of 2012 when the Spanish banking system as a whole nearly collapsed. Having pumped €1 trillion into EU banks via its LTRO 1 and LTRO 2 programs in December 2011 and February 2012, the European Central Bank found itself facing a problem far greater than Greece (Spain’s banking system is over €3.7 trillion assets in size, compared to Greece’s  €338 billion) and on the verge of losing control of the entire system.

 

To understand why this happened, you first need to understand that European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).

 

When you are leveraged at these levels you only need the assets you invest in to fall 4% before you’ve wiped out all of your underlying capital (€26 * 0.04 = €1.04). At that point you are total insolvent.

 

In the case of Spain, Spanish banks were leveraged at 20 to 1 with most of their borrowed money invested in Spanish sovereign bonds. At these leverage levels Spanish Sovereign bonds only needed to fall 5% to render the Spanish banks insolvent. And in the spring of 2012, Spanish bonds were plummeting.

 

At this point, ECB President Mario Draghi had to do something to make Spanish bonds rally. He couldn’t simply start buying them because Germany had stated time and again it was against the open monetization of bonds. And the ECB cannot do anything without Germany’s support if it wants to keep the EU whole.

 

So Mario Draghi delivered the mother of all head fakes, first hinting at providing unlimited bond buying for EU sovereign bonds in June 2012, before officially stating that this would be the ECB’s policy is September 2012.

 

Note very carefully that Draghi didn’t actually buy any bonds. He simply stated that he would if he had to and if countries formally requested a bailout (handing over control of their finances to the ECB and Germany in the process).

 

The promise worked, effectively putting a floor beneath EU sovereign bonds. Investors, now convinced that the ECB would buy if it had to, began to buy Spanish debt again. Spanish…
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New Cyprus Business Model: 20% Fee To Move Millions Offshore

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

After being told that the Cypriot business model was broken, the ever-resilient people of this ‘storm in a teacup’ island have, by all appearances, taken up their entrepreneurial sickles to make hay while the Troika sun shines. As the FT reports, the hunt is on for many Cypriot bank account holders to find ways to circumnavigate the new Draconian capital controls – and get their money off the island. It seems that this ‘need’ is being addressed by friendly ‘unidentified’ locals who are willing to help transfer money across the border (since there is a EUR3,000 limit) for a mere 20% upfront fee. “There are some dubious capital outflows out of Cyprus as we speak,” one senior Eurozone official noted, “and… not only Russians.” At least three people have been stopped attempting to cross the border with more than EUR 200,000 in cash on their person – their money was confiscated.

 

Via The FT,

The hunt is on for many Cypriots to find ways to circumnavigate the new Draconian capital controls and get their money off the island.

 

At least three people have attempted to flee the island in recent weeks with more than €200,000 in cash on their person, according to official sources. The money was in all cases confiscated and the people questioned by the authorities.

 

 

Sergei Tyulenev, a Russian businessman, says he received a call on Thursday – the day the capital controls were implemented – from Cypriots he did not wish to identify offering to help him move what he implied was more than €1m out of a collapsing local bank.

 

The move would have seen his money transferred from the now-failed Laiki Bank, where deposits over €100,000 are likely to see substantial write-offs, to Hellenic Bank, a comparatively healthy Cypriot subsidiary of a Greek bank.

 

There was a catch though, on top of the illegality of the move. “They said I had to pay €200,000 up front. I refused,” said Mr Tyulenev, speaking from Limassol, a town dubbed “Limassolgrad” for its high proportion of Russian residents.

 

The Financial Times has seen no official reports of illegal financial dealings at the banks. Those calling Mr Tyulenev may not have been able


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Weimar vs USA: The Fall Of The Second Empire Of Debt

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While being distracted by the developments of this insolvent European sovereign or that, coupled with increasingly prevalent episodes of deposit confiscation, is all the rage these days, the fundamental problems summarized by these three simple words, too much debt, remain. And as has been explained over and over, while confiscation of wealth merely shuffles the various dollar (and euro) signs on the table with the spoils going to the wealthiest, there is no resolution of the underlying problems plaguing a world that has tens of trillions of excess debt.

As is by now is well-known, there are two ways out of such a conundrum: default, or inflating the debt away. What is also well-known is that as long as the US preserves legacy reserve currency status even by the tiniest of threads, inflation through debt deluge-funded money creation will always be chosen outcome. Just as was the case in Germany in the 1920s. In fact, as the following video shows, the parallels between where the US is now, and where Weimar Germany were just before everything took a turn for the parabolic, are a few too many for comfort. The only major difference so far is that in Weimar, the creation of massive rampant inflation was what economists would call, “successful.”

Source: Visionvictory





Guest Post: Preparing for Inflationary Times

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Jeff Clark of Casey Research,

"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader

The CPI, in our view, does not accurately measure inflation, which accounts for some of the discrepancy our reader is pointing out. However, the proper definition of inflation is "an increase in the quantity of money," which we've had in spades. We've not experienced the concomitant increase in prices, which is what we're addressing in this article.

It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit. Economics 101 says this should lead to higher inflation – yet official Consumer Price Index (CPI) levels remain benign.

It's this unexpected development that led a reader to pen the above quote. Is the inflation argument dead? If so, does that mean gold's big run is over? It's a timely question since the current selloff in gold is largely attributed to low inflation expectations.

This is the first installment in our in-depth series of examining the next big catalysts for the gold price. This month we're looking at inflation. While a low CPI may be puzzling in the midst of massive, global currency abuse, there are three realities about inflation that convince us it's not only coming, but will catch an unsuspecting citizenry off guard.

Let's take a look at why we're convinced inflation will be one of the next big catalysts for the gold price…

Reality #1: History shows that high levels of debt and deficit spending eventually lead to inflation.

This statement makes sense on the face of it, but seminal research has been done that confirms it. A country simply cannot escape high inflation when carrying oversized debt levels and/or running massive deficits. Sooner or later, these sins catch up to you, regardless of what the current thinking may be.

Debt. The first of these historical studies is detailed in the book, This Time Is Different by Carmen Reinhart and Kenneth Rogoff, who've extensively researched the…
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Personal Consumption Expenditures: Price Index Update

Courtesy of Doug Short.

The March Personal Income and Outlays report for February was published Friday by the Bureau of Economic Analysis. The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed’s preferred indicator for gauging inflation.

The latest Headline PCE price index year-over-year (YoY) rate of 1.32% is an increase from last month’s adjusted 1.25%. The Core PCE index of 1.26% is decrease from the previous month’s adjusted 1.34%.

On the chart below I’ve highlighted 2 to 2.5 percent range. Two percent has generally been understood to be the Fed’s target for core inflation. However, the December 12 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place.

 

 

I’ve calculated the index data to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But PCE is a key measure of inflation for the Federal Reserve, and the price increase in oil and gasoline, although now well off their interim highs, puts consumer behavior in the spotlight.

For a long-term perspective, here are the same two metrics spanning five decades.

 


Note: I use the data from Table 9 in the full release and tables available here.

 

 

 

 





Two Measures of Inflation: New Update

Courtesy of Doug Short.

Note from dshort: I’ve updated the accompanying charts with the latest Personal Consumption Expenditures price index from the Bureau of Economic Analysis, released on Friday. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison with the Consumer Price Index.


The BEA’s Personal Consumption Expenditures Chain-type Price Index for February shows core inflation below the Federal Reserve’s 2% long-term target at 1.26%. The Core Consumer Price Index, also data through January, is significantly higher at 2.00%. The Fed is on record as using PCE as its primary inflation gauge:

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances.
[Source] Note: Bolding added by me.

Elsewhere the Fed stresses the importance of longer-term inflation patterns, the likelihood of persistence and the importance of “core” inflation (less food and energy). Why the emphasis on core? Here is an excerpt from one of the Fed FAQs.

Finally, policymakers examine a variety of “core” inflation measures to help identify inflation


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Currency Wars For Dummies

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

When it comes to global currency warfare, one can read countless books (all of which professing to be the definitive reference guide for a process that started in the… 1930s), or one can fast forward, save lots of time, skip all the repetitive verbiage and simply observe the following charts which summarize the key things “one needs to know” about the dead-end that the globalized monetary system has found itself in since 2008, when the entire world decided that the only way to “fix” all of the world’s problems is simply to print a countless amount of paper money.

What Is A Currency War?

 

What’s Actually Strong/Weak?

 

 

Who Uses What Currency Tools? (click image for full-size legible chart)

 

And Just How Big Are The Interventions?

 

Not all currencies can depreciate at the same time. At least one currency has to appreciate if all others depreciate. But everyone is trying it – as global rates have the lowest standard deviation on record (i.e. everyone is lowering rates and keeping them there).

 

On a global scale, competitive devaluations are therefore impossible and may even pose a risk of escalation towards protectionism.

 

Maintaining a non-cooperative equilibrium is a challenging exercise. Not only will every individual partly have to constantly monitor what everyone else is doing, but in addition, there is a constant risk of escalation into protectionist policies. Trade disputes are already on the rise. The number of WTO dispute cases in 2012 was the highest in 10 years.

Finally, the extensive use of macro prudential policies and capital controls as observed in recent years poses the longer-term risk of misallocation of resources.

 

Source: Goldman Sachs





Guest Post: How Big Is The ‘Bailout’ Of Cyprus (Hint: Trick Question)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Authored by Antonis Polemitis and Andreas Kitsios, originally posted at Cyprus.com,

Most publications talk about the 10B or 17B Cyprus bailout.   Let’s take a pop quiz on the right answer:

(a) 17B Euros (89% of GDP)

(b) 10B Euros (52% of GDP)

(c) 2.5B Euros (13% of GDP)

(d) -3.0B Euros (-15% of GDP)

(e) -7.5B Euros (-39% of GDP)

Now let’s work through the answers, in steps:

 

(a)  The 17B figure was calculated assuming the bailout would provide 7B for the banks.    The final number provided not a single Euro for the banks who were asked, against the approach taken in the last 147 banking crises worldwide tracked by the IMF, to find the whole 7B out of their depositor base.   So, part (a) is wrong.


(b) The remaining 10B is described as a bailout of the government.  Of this 10B however, 7.5B is being used to refinance maturing debt.

This debt, I would guess, is mostly at this point beneficially held by ECB.   This is just an assumption, but we know that 75% of it was held domestically, largely by the banks.   This was probably the first collateral pledged by the banks via the ELA, so ultimately if the Central Bank and the government default it will ultimately fall on the ECB’s balance sheet.   The 25% is probably traded internationally and, again outside of Cyprus hands.

So, the 7.5B is being lent to Cyprus in order to be paid right back to Europe.   That is not charity, that is ‘hiding their embarrassing losses until later when someone else is in office’.    If moral hazard requires clueless Cypriot retail depositors to pay for their banks’ decision to lend to the insolvent Greek government, then presumably it also applies to the financial wizards at ECB that lent to the insolvent Laiki, despite having full access to their financial information.

That leaves 2.5B of fresh financing for the government which I will concede is new money, though until we see the Memorandum and the terms under which we receive this money, I am not too excited about it.    Cyprus could raise this amount domestically so long as it did not have to do it overnight (which it does…
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Is Fukushima Radiation Causing the Epidemic of Dead and Starving Sea Lions In California?

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

Painting by Jonathan Raddatz

 

Associated Press reports:

At island rookeries off the Southern California coast, 45 percent of the pups born in June have died, said Sharon Melin, a wildlife biologist for the National Marine Fisheries Service based in Seattle. Normally, less than one-third of the pups would die.

 

It’s gotten so bad in the past two weeks that the National Oceanic and Atmospheric Administration declared an “unusual mortality event.” That will allow more scientists to join the search for the cause, Melin said.

 

***

 

Even the pups that are making it are markedly underweight ….

 

***

 

Rescuers have had to leave the worst of them in an effort to save the strongest ones, she said.

 

***

 

Routine testing of seafood is being done by state and federal agencies  and consumer safety experts are working with NOAA to find the problem.”No link has been established at this time between these sea lion strandings and any potential seafood safety issues,” NOAA said in a statement.

Given that the FDA has refused to test seafood for radiation, we’re not that confident that the government is looking that hard to see if Fukushima fallout is the cause.

Reuters notes:

From the beginning of this year through last Sunday, 948 sea lion pups came ashore in Santa Barbara, Ventura, Los Angeles, Orange and San Diego counties, according to figures from NOAA.

 

“There really isn’t an oceanographic explanation for what we’re seeing,” Melin said. “We’re looking at disease as a possibility and also at the food supply, and it could be some combination.”

CNN reports:

This is an unprecedented crisis for the species in this state says the Pacific Marine Mammal Center.

 

***

 

“So we are seeing exponentially higher numbers” [Keith Matassa, who runs the Pacific Marine Mammal Center in Laguna Beach said].

 

***

When you say off the charts, this is what you’re talking about.

CBS News reported last week:


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How Cyprus Exposed The Fundamental Flaw Of Fractional Reserve Banking

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

In the past week much has been written about the emerging distinction between the Cypriot Euro and the currency of the Eurozone proper, even though the two are (or were) identical. The argument goes that all €’s are equal, but those that are found elsewhere than on the doomed island in the eastern Mediterranean are more equal than the Cypriot euros, or something along those lines. This of course, while superficially right, is woefully inaccurate as it misses the core of the problem, which is a distinction between electronic currency and hard, tangible banknotes. Which is why the capital controls imposed in Cyprus do little to limit the distribution and dissemination of electronic payments within the confines of the island (when it comes to payments leaving the island to other jurisdictions it is a different matter entirely), and are focused exclusively at limiting the procurement and allowance of paper banknotes in the hands of Cypriots (hence the limits on ATM and bank branch withdrawals, as well as the hard limit on currency exiting the island).

In other words, what the Cyprus fiasco should have taught those lucky enough to be in a net equity position vis-a-vis wealth (i.e., have cash savings greater than debts) is that suddenly a €100 banknote is worth far more than €100 in the bank, especially if the €100 is over the insured €100,000 limit, and especially in a time of ZIRP when said €100 collects no interest but is certainly an impairable liability if and when the bank goes tits up.

Said otherwise, there is now a very distinct premium to the value of hard cash over electronic cash.

And while this is true for Euros, it is just as true for US Dollars, Mexican Pesos, Iranial Rials and all other currencies in a fiat regime.

Which brings us to the crux of the issue, namely fractional reserve banking, or a system in which one currency unit in hard fiat currency can be redeposited with the bank that created it (as a reminder in a fiat system currency is created at the commercial bank level: as the Fed itself has made quite clear, “The actual process of money creation takes place primarily in banks”) to be lent out and re-re-deposited an (un)limited number of times,…
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Phil's Favorites

The dysfunctional debt ceiling and why we should kill it: 5 questions answered

 

The dysfunctional debt ceiling and why we should kill it: 5 questions answered

Treasury Secretary Mnuchin is taking ‘extraordinary measures’ to avoid busting the debt ceiling. AP Photo/Jose Luis Magana

Courtesy of Steven Pressman, Colorado State University

Editor’s note: The U.S. government maxed out its national credit card in March and has been moving money around ever since to avoid running out of cash. Very soon the Treasury Department ...



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Zero Hedge

This Is Where The Next Recession Will Start: An Epidemiological Study

By Nicholas Colas of DataTrek

(Published at ZeroHedge)

US recessions are like epidemics: they all begin somewhere, and the “tell” is state-level unemployment data. For example, the end of the 2000 dot com bubble hit Connecticut and Massachusetts first – two hubs for the financials services industry with lots of affluent investors to boot. The end of the 2000s housing boom predictably impacted Florida and Nevada before the rest of the country. This time around, the data shows the manufacturing-heavy states of Michigan, Ohio and Indiana are most at risk. No wonder “Dr. Fed” wants to inoculate the region with lower interest rates.

When medical professionals study epidemics, they look for the source of the ou...



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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Kimble Charting Solutions

Silver ETF (SLV) Testing Dual Breakout Resistance

Courtesy of Chris Kimble.

Silver (NYSEARCA: SLV) has been in a bit of a slumber when compared to the price action for Gold (NYSEARCA: GLD).

Precious metals bulls hope that this about to change, as bullish action from Silver is necessary to confirm any bull market / move in metals.

Today’s chart takes a closer look at the Silver ETF (SLV) on a weekly basis. As you can see, Silver is up 5 percent this week alone.

This is good news for metals bulls. But this rally isn’t confirming a breakout just yet.

As you can see in the chart below, SLV has been trading between support (1) ...



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Insider Scoop

Analysts Weigh In On Netflix's Rocky Quarter

Courtesy of Benzinga.

Netflix, Inc. (NASDAQ: NFLX) reported second-quarter results highlighted by an uncharacteristic decline in U.S. subscribers while international subscriber adds missed expectations. Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Mor...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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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

Excerpt:

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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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.

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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