Archive for 2015

China Floats QE Trial Balloon, PBoC May Launch LTROs

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

A little over a month ago we suggested that QE in China may take the form of local government debt purchases by the PBoC. As a reminder, China is allowing local governments to refinance a portion of their ~17 trillion yuan debt pile by swapping it for lower yielding bonds. As a percentage of GDP, local government debt has grown to 35% and because a sizeable amount was accumulated off balance sheet via shadow banking channels, it carries relatively high interest rates.

The pilot program will allow for the refinancing of around 1 trillion of that debt, a move which could save local governments some 50 billion yuan in interest payments. As a reminder, here’s what the local government debt picture looks like in China:

The problem with the scheme however, is that the banks who purchase the newly issued local government bonds will have that much less cash to lend at a time when the central bank is keen to keep liquidity flowing and as we’ve seen over the past several months, several factors are conspiring to undercut or otherwise limit the effectiveness of interest rate and RRR cuts. Essentially, China is caught between a peg to the strong dollar, decelerating economic growth, and capital outflows, meaning that devaluation to bolster flagging exports risks aggravating capital flight while not devaluing gets more costly by the quarter. It’s this currency conundrum that has led us to predict that in the end, China will resort to QE. 

Given the new refinancing progam, it seemed logical to suggest that if China wanted to integrate QE into its current efforts to assist local governments with their debt load, the central bank could simply buy the local government debt. Here’s what we said last month: “It seems as though one way to address the issue would be for the PBoC to simply purchase a portion of the local debt pile and we wonder if indeed this will ultimately be the form that QE will take in China.” As the WSJ reports, China may do just that, although the program, should it become a reality, will still be one step away from outright QE:

China’s central bank is considering taking a page from Europe’s financial-crisis handbook to free up more credit as growth in the world’s second-largest


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Swing trading portfolio – week of April 20th, 2015

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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America’s Pension Problem

Mish special guested on Gordon T. Long's Market Research and Analytics in a recording called "Mish Shedock Talks: America's Pension Problems," presented below, courtesy of Gordon T. Long. 

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com

 

MISH SHEDLOCK TALKS

AMERICA'S PENSION PROBLEM

Published 04-18-15

Mish Shedlock talks about the magnitude of the mounting Pension Problem in America and uses his home state of Illinois as a prime example. According to a State Budget Solutions, last year’s state unfunded pensions reached an all-time high of $4.7 trillion. This funding gap state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans' funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.

ILLINOIS' PENDING PENSION CRISIS

"Illinois Pension's in general are 39% funded! This is after this massive rally we have had since 2009 in financial assets. Some of the worst ones are only about 20% funded. I think the Teacher's Pension Plan is about that and the General Assembly and Judicial Pension Plan are also on the bottom."

"Various cities in Illinois have problems, Chicago being one of them. The City of Chicago has a huge pension crisis right now. We have things in Illinois like "Home Rule Taxes" where cities can levy their own taxes in addition to the state. That is why we have varying sales tax that range anywhere from 6% to 10%, depending on locality."

"I believe Chicago is Bankrupt!"

"I have been working with the Illinois Policy Institute. There are a number of cities in Illinois (I am not going to name them), but…
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This is NOT Fair!

Courtesy of ZeroHedge. View original post here.

Submitted by Capitalist Exploits.

By Chris at www.CapitalistExploits.at

Looking back on my own childhood I reckon raising kids must have been a piece of cake. Parents let their kids wander off to the nearest state school where justice was swift and harsh. Caning was all the rage and I certainly got my fair share. It was all pretty fair. You screw up, you get caned. Easy enough to understand.

Parents seeking a “better education” for their spawn looked outside of state schools. In private schools they found this wonderful thing called boarding schools where you don’t even have to raise your own kids. The process was simple. Look around for the boarding school furthest from home, ship Johnny off with some simple advice, “try not to get sodomized too much and see you in the holidays.”

School was for the most part pretty fair, unless you were being sodomized.

The concept of fairness is ingrained in human nature. I still recall my sister lining up glasses on the table with juice in them. Fizzy juice was a luxury in our house growing up, used only on special occasions and meted out with military precision. No way were you going to get less than your sibling. The juice in each cup had to be EXACT!

Juice

One slight inch higher on one cup meant a re-balancing and re-pouring was required. This could easily take 20 minutes! I remember measuring with a ruler.

Ah, fairness…

This doesn’t go away as an adult. In fact, it gets stronger. Now I get mad when I see unfair situations and one example can be found in financing start-ups.

Stacking notes

A purely hypothetical entrepreneur comes to you with a deal. It is a standard convertible note which, for the purposes of this example, is a $500,000 convertible note with a 20% discount and a $5M cap. You sign up for the deal but then the company realises that they have way more interest from investors than they had thought and they further realise that they need more money than originally thought. “No problem,” they say, “we’ll just put more money on this cap and raise it to a $8M cap”. Six months later they raise another tranche of capital on the same note but now at a $10M…
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The Chilling Thing Blackstone Said about the Oil Bust

Courtesy of ZeroHedge. View original post here.

Submitted by testosteronepit.

Wolf Richter   www.wolfstreet.com   www.amazon.com/author/wolfrichter

Regardless of how troubled oil and gas companies are, “if the assets are good, someone will own them,” explained David Foley, senior managing director of Blackstone Energy Partners.

He expected companies to buckle under the load of junk debt and kick off a long series of bankruptcies and assets sales at rock-bottom prices. The question was when.

That was in February. Private equity firms – the “smart money” – have been out in force for months, raising tens of billions of dollars, with the promise to their investors that they would pick up assets of all kinds on the cheap. They’ve been circling like vultures, waiting to swoop down and pick the best morsels off the carcasses soon to be strewn about the oil patch.

“The timing of having that capital available now really couldn’t be better,” Blackstone CEO Steve Schwarzman said at the time. He expected that it would take one-and-a-half years before oil and gas companies would be completely drained of cash and would get into serious trouble. But some of the service companies could run out of money and topple “very, very quickly,” he said. Over the next couple of years, there would be “all kinds of shakeouts.”

PE firms expected valuations to plunge much further as assets would hit the auction block. And so Blackstone president Tony James said that his people were “scrambling” to invest over $10 billion. They were all singing from the same page.

And PE firms continued raising money for their energy funds. A week ago, EnCap Investments in Houston closed its Energy Capital Fund X after having raised $6.5 billion. It had been “significantly oversubscribed,” the firm said; investors are clamoring for this sort of bottom-picking action by the smart money.

Blackstone, Carlyle Group, Apollo, and KKR together have raised about $30 billion for energy investments, according to Bloomberg. Walburg Pincus, Riverstone, and many others – they all have been raising billions of dollars each. The piles in dry powder grow by the day.

This is the “smart money.” The oil bust had wiped tens of billions of dollars from their energy portfolios, including KKR’s disastrous investment in Samson Resources. Someday, they’re going to get this right. That’s the idea.

Then something unexpected happened. Other investors were despairing with negative…
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American Justice? FBI Lab Overstated 95% Of Forensic Hair Matches (Including 32 Death Sentences)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The Justice Department and FBI have formally acknowledged that nearly every examiner in an elite FBI forensic unit gave flawed testimony in almost all trials in which they offered evidence against criminal defendants over more than a two-decade period before 2000.

Of 28 examiners with the FBI Laboratory’s microscopic hair comparison unit, 26 overstated forensic matches in ways that favored prosecutors in more than 95 percent of the 268 trials reviewed so far, according to the National Association of Criminal Defense Lawyers (NACDL) and the Innocence Project, which are assisting the government with the country’s largest post-conviction review of questioned forensic evidence.

The cases include those of 32 defendants sentenced to death. Of those, 14 have been executed or died in prison.

“These findings are appalling and chilling in their indictment of our criminal justice system, not only for potentially innocent defendants who have been wrongly imprisoned and even executed, but for prosecutors who have relied on fabricated and false evidence despite their intentions to faithfully enforce the law,” Blumenthal said.

– From the Washington Post article: FBI Overstated Forensic Hair Matches in Nearly All Trials efore 2000

The American justice system is broken. Completely and totally broken. This has been one of the key themes here at Liberty Blitzkrieg since inception, and I’ve come to realize that the death of the rule of law is the single most important issue facing our society at this time.

This site has focused on the increased use of selective prosecution in these United States. If you are poor, disenfranchised, or a dissident, the full force of the law will rain down on your skull like a thousand tons of bricks. We have seen this repeatedly in cases such as the South Carolina man who was fined $525 and fired from his job when he failed to pay for a $0.89 soda refill. We saw it in the case of Aaron Swartz, the child prodigy was driven to suicide by overly aggressive and ambitious feds. Finally, we saw it in the case of Barrett Brown, who was threatened with over a century in jail for essentially exposing the criminality of certain very rich and/or powerful individuals.

On the other side of the fence, we see that anyone associated with the power structure can do whatever they…
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Chinese Stocks Pump’n'Dump After RRR Cut, Retrace Friday’s Crash

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

After crashing 6-7% on Friday (depending on which Chinese stock index you prefer) – all after the cash markets closed in China – thanks to today’s major RRR cut, China stock futures are up 7% from Friday’s US session close. However, while futures have recovered all those losses, the Shanghai Composite cash index is trading modestly lower from its Friday cash close levels (we suspect a little disappointingly to some) after recovering the entire loss from post-China-close Friday.

Futures ripped back…

Just looking at the cash Shanghai Composite index – you’d never know it crashed… but it’s fading back lower again now…

We suspect this is not the exuberance many had expected…

Charts: Bloomberg





Vapor Capital Asset Mismanagement LP: Jon Corzine Planning Hedge Fund Launch

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Shortly after Jon Corzine not only destroyed MF Global but “vaporized” $1.6 billion in supposedly segregated client funds which were illegally commingled with operating cash, Jon Corzine had a brief encounter with the legal system including several kangaroo court sessions in Congress, which ultimately led to absolutely nothing for two simple reasons.

Reason #1:

And Reason #2:

In fact, Jon Corzine’s quiet disappearance into the shadows was apparently only punctuated by one new notable entry in the Urban Dictionary for the term “Corzined

… but not before rumors emerged that Corzine, whose dream has always been to run his own capital, would start a hedge fund. In August 2012 we wrote that “after 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.” And algos… And glitches… And faulty software installs… And some junior person who has long since left the company…  and, and, and, lots and lots of passive voice… Because in the Banana republic of the crave, no bundles can ever go to jail, no matter how heinous the crime, which is not to say other places are better: in Thailand you shoot your secretary in the stomach during dinner with an Uzi and you don’t even pay a $600 fine. But at least it puts things in perspective. So what is next in store for this former man of power? “Mr. Corzine, in a bid to rebuild his image and engage his passion for trading, is weighing whether to start a hedge fund, according to people with knowledge of his plans. He is currently trading with his family’s wealth. If he is successful as a hedge fund manager, it would be the latest career comeback for a man who was ousted from both the top seat at Goldman Sachs and the New Jersey governor’s mansion.” So will Jon will be buying Italian bonds? We don’t know. Ask him yourself.”

However, this led absolutely nowhere, leading many to speculate that Corzine was just waiting for a correction before reentering the asset mismanagement business.

Well, nearly three years later of manipulated, artificially propped up markets floating on $22…
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Bond/Utility Divergence Flashes Warning Sign For S&P 500

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Dana Lyons,

Given their relatively high yields, utility stocks have long been thought of as proxies, or at least competition, for bonds. And while that relationship is often overplayed (utility stocks are first and foremost, stocks), there is some credence to the notion. Since 1970, there is a 26% positive correlation in 2-month returns between 10-Year Treasuries and the Dow Jones Utility Average (DJUA). Although that’s not a hugely positive correlation, contrasted against the 10-Year vs. S&P 500 correlation which is slightly negative over that time, you can see there appears to be some influence from bonds on the behavior of utilities.

For that reason, while the two markets can go in opposite directions at times, it is fairly rare to see them diverge to the extent that they have recently. While bonds are at 2-month highs, utility stocks have actually lost ground over the past 2 months. As of a few days ago, the DJUA was actually down more than 5% over the previous 2 months. That wide of a divergence has only been triggered on roughly 5% of all rolling 2-month periods since 1970. Adding the qualifier that the S&P 500 is also trading within 5% of its 52-week high, the scenario is even more rare, having occurred on just 87 days (or 0.7% of the time) since 1970. (More on the S&P 500 below.)

image

What hath this divergence wrought in the past. Well, as far as the forward returns in both the 10-Year Treasuries and utilities are concerned…not much. Consider the change in 10-Year Yields following such divergences (i.e., Treasuries up over past 2 months, utilities down over 5% and the S&P 500 within 5% of its 52-week high).

image

It was common to see some reversion over the subsequent months as bonds gave up some of their gains and yields crept a bit higher. However, after 3 months, the performance of bonds was not too different than normal. And with utilities, we see the same thing.

image

Utility stocks did not persist in their negative divergence, instead scoring slightly above-average gains across all time frames. However, again the returns were not too different than normal.

Now for the S&P 500. We introduced the…
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Rise In Traveling Hookers, Depressed Gambling, Booze Sales Bode Poorly For US Economy

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Retail sales rounded out their worst 3-month run since Lehman last month and even as April’s print showed the biggest sequential rise in nearly a year, sales still missed expectations affording us the opportunity to point out yet another “since Lehman” moment as retail sales haven’t missed for four consecutive months since the end of 2008. This really shouldn’t come as a surprise to those who are paying attention because as we’re fond of pointing out, America’s “non-supervisory” employees (who make up more than three quarters of the workforce) are suffering from declining wage growth and with wage growth now an almost perfect predictor of consumer spending, one would expect retail sales to take a hit. 

Of course this trend doesn’t just affect the Best Buys and Gaps of the world, it also takes its toll on hookers, liquor stores, drug dealers, and casinos and when sex, drugs, and gambling aren’t selling you can go ahead and kiss your “recovery” hopes goodbye. 

With that in mind we present the following chart which shows that Andrew Zatlin’s Vice Index nearly printed in contraction territory in March and at 100, the index is dangerously close to indicating that America’s spending on “the fun stuff” (to quote Zatlin) looks set to fall. 

Here’s some color from Zatlin:

Vice spending leads the way, both in terms of inclination and ability to spend. If luxury good spending is sensitive to shifts in the economic winds, vice is even more so. One thing that sets it apart from other types of consumer spending (besides being frequently illegal) is that it’s typically a cash-based transaction. You can’t buy pot with a credit card (not yet anyhow). Another distinguishing factor is that vices are not cheap. A prostitute costs almost two days of after-tax wages. Gambling in Vegas is potentially more. The consumer’s stack of money has to be a certain height before they can get on that ride. The vice economy lives and dies according to cash flow; by how much money is burning a hole in the consumer’s pocket…

The Moneyball Economics Vice Index is the first index that quantifies these forms of spending. It has been shown to accurately lead consumer spending by at least two months. Right now, it is showing evidence of


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Phil's Favorites

Brexit identities: how Leave versus Remain replaced Conservative versus Labour affiliations of British voters

 

Brexit identities: how Leave versus Remain replaced Conservative versus Labour affiliations of British voters

Courtesy of Geoffrey Evans, University of Oxford and Florian Schaffner, University of Oxford

British politics was relatively stable in the post-war decades, and voters’ strong party loyalties were influenced by their place in society. More recently, there has been a marked decline in the number of people identifying with a political party, and in the strength of that attachment.

Now, our new research for a repor...



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Zero Hedge

Stocks Jump On Kudlow Denial: "There Is No Cancellation. None. Zero."

Courtesy of ZeroHedge. View original post here.

"There are no cancellations. None. Zero. Let's put that to rest."

Hours after a headline from the FT about the US cancelling a round of trade talks with two senior Chinese ministers send stocks reeling to their lows of the day, the administration has dispatched Larry Kudlow (who apparently had to wait until 20 mins before the close thanks to CNBC's wall-to-wall Davos coverage) to jawbone the markets back into the green by...



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Kimble Charting Solutions

S&P and Crude both testing key breakout levels!

Courtesy of Chris Kimble.

The correlation between Crude Oil and the S&P 500 has been rather high over the last 100-days, as each looks to have peaked at the same time around the 1st of October at (1).

After peaking together in October, Crude fell over 40% and the S&P nearly declined 20%, with both bottoming on Christmas Eve at each (2).

Both have experienced counter-trend rallies since the lows, as Crude is up 23% and the S&P 13%.

These rallies have both testing dual resist...



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Insider Scoop

Cowen Suits Up With Nike, Looks To Outperform

Courtesy of Benzinga.

Related NKE Consumer Discretionary Q4 Earnings: U.S. Consumer Appears Strong Amid Heightened Global Uncertainty Golf Equipmen...

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Chart School

Weekly Market Recap Jan 20, 2019

Courtesy of Blain.

After entering the week quite overbought, indexes took a small retreat Monday before hurling back upwards.  This is typical of the “V” shaped moves up after any significant selloff, we’ve seen most of the past decade and watching them unfurl is quite amazing actually.  Thought maybe this time would be “different” but not so much.  So two week’s ago we asked “Has the Fed solved all the market’s problem in 1 speech?” – and thus far the market has answered resoundingly yes.  The word of the year thus far in 2019 is “patience” as that simple insert into a speech change the whole complexion of everything.

China has also been busy stimulating; on Tuesday:

An announcement from the People’s Bank of China that ...



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ValueWalk

Everyone Else Is Selling Stocks, So Is It Time To Buy?

By Michelle Jones. Originally published at ValueWalk.

After a difficult few trading days in the beginning of the year, U.S. stocks are bouncing back with meaningful gains on Monday following Friday’s strong rally. The S&P 500, Dow Jones Industrial Average and Nasdaq 100 were all up by more than half a percent by midday. It looks like investors could be taking advantage of the end-of-the-year declines, but is this a wise time to be buying?

Trying to time the bottom of the market will almost always be a fool’s errand, but one firm suggests equities could have much farther to fall before they hit bottom in 2019.

...



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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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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

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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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:

 

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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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