Archive for 2018

“Worst Case Scenario” Looms As Chinese Overwhelmingly Ready To Boycott US Goods In Trade War

Courtesy of Zero Hedge

Despite soaring trade policy uncertainty and a collapsing yuan, "the equity market has largely looked through the marginal risk from tariffs", according to Goldman's David Kostin who recently wrote:

No clear relationship exists between reliance on imports from China and recent industry performance. Among at-risk industries, Computer & Electronic Products, which include Semiconductors, have lagged the Russell 3000, while Electrical Equipment stocks have outperformed. As our Tech Hardware and Retail analysts have noted, trade headlines may overstate fundamental risk, as companies have many tools at their disposal to minimize margin pressures. Some firms may be able to switch to other suppliers, while others will pass through costs. A basket of TMT stocks with high imported COGS has also shrugged off the risk from tariffs, matching the broader Info Tech sector’s 12% rally since March.

However, Kostin cautions that this may be a mistake, however not due to the quantitative aspects of the trade war, namely the downstream impact of tariffs, but the qualitative, and thus much more ambiguous, implications. 

In other words, it's not tariffs that investors should be worried about: as the Goldman strategist writes, "a greater risk lies in potential government intervention" and lists the following examples:

Geopolitical tension can manifest itself in ways beyond tariffs. As precedent, China publicly encouraged consumer boycotts that led to a plunge in Japanese auto sales (in 2012) and South Korean products (in 2017). Last week, China issued a temporary injunction on some of Micron’s (MU) chip sales due to alleged patent infringement. The stock fell by 6%. MU downplayed the impact on sales and the share price has since recovered.

So there we have it, instead of a 10% tariff on all US imports being the so-called "worst case scenario," Goldman is warning that a much bigger problem for the US economy (and markets) is if the Chinese begin to boycott US goods, period.

Which is why the news today, via The Financial Times, that a new survey finds that a majority of Chinese consumers would be prepared to boycott US goods in the event of a trade war with Washington.

The survey found that 54 per cent of 2,000 respondents in

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“It’s Our Version Of The GFC”: Aussies Face Looming ‘Interest-Only’ Crisis

Courtesy of ZeroHedge. View original post here.

Authored by Caitlin Fitzsimmons & Nicole Pedersen-McKinnon via The Sydney Morning Herald,

Australia’s version of the sub-prime crisis that ushered in the global financial crisis could be looming, with a significant number of the 1.5 million households with interest-only loans likely to struggle with higher repayments, experts warn.

Martin North, the principal at consultancy Digital Finance Analytics, said interest-only loans account for about $700 billion of the $1.7 trillion in Australian mortgage lending and it was “our version of the GFC”.

“My view is we’re in somewhat similar territory to where the US was in 2006 before the GFC,” Mr North said.

Craig Morgan, managing director of Independent Mortgage Planners, said one in five people who took a loan two or three years ago would not qualify for the same loan now, because of the crackdown on lending by the regulator and ongoing fallout from the Royal Commission into financial services.

“In the last six months lenders have had this lightbulb moment of what ‘responsible lending’ means,” Mr Morgan said.

Should we brace for a financial storm?

One of the triggers for the GFC was rising defaults from over-leveraged borrowers who were unable to refinance when their honeymoon rates ended. However, the sub-prime lending in the United States before the GFC included large mortgages being given to people without jobs or on minimum wage.

“This is absolutely not ‘sub-prime’ in the US definition but there were people [in Australia] who were being encouraged to get very big loans on the fact that principal & interest was impossible to service but they could service interest-only,” Mr North said.

“We also know that some interest-only loans were not investors but they are actually first-home buyers encouraged to go in at the top of the market.”

The Reserve Bank has previously warned $500 billion in interest-only loans are set to expire in the next four years, causing a significant jump in repayments of 30-40 per cent when borrowers are forced to start paying back the principal.

The banks pushed interest-only home loans – where the borrower pays interest
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BOJ Offers To Buy Unlimited JGBs After Yields Surge, USDJPY Tumbles

Courtesy of ZeroHedge. View original post here.

Update: as some expected, moments after the rout in JGBs this morning in Japan, the BOJ announced it would hold its first Fixed-Rate operation since February, offering to buy an unlimited amount of 10Y JGBs at 0.11%.


While JGBs have regained some of their losses…

… there has barely been a move in the USDJPY which is already back to where it was before the announcement.

* * *

In a delayed reaction from a Friday evening report by Japan's JIJI, since confirmed by Reuters, that the BOJ is considering a shift in policy to potentially push 10Y yield wider, and which as we reported on Friday sent JGB futures sliding, the Monday opening of JGBs has been a shock to the system, sending the 10Y yield on Japanese government bonds surging to 0.80%, the highest since February.

Meanwhile, the USDJPY which just last week hit 113, has continued to slide and is now back under 111, catching countless traders who had positioned for further Yen weakness offside – the most recent CFTC COT report showed that short yen positioning was the dominant view last week – and forcing a sharp short squeezes.

For those who missed it, according to media reports last Friday, the BOJ is set to launch a full-scale investigation to mitigate the side effects of its yield-curve control policy on bank profitability and government bond trading, which we said suggests that the BOJ may seek to "kink" the curve to the left of the 10Y in hopes of achieving a "beautiful steepening" to roughly paraphrase Ray Dalio.

Like in Europe where between NIRP and QE the yield curve has been so flat has been hurting bank profitability (with some bank, most notably Deutsche Bank complaining vocally about the ECB's policies) similar concerns have spread in Japan where both banks and pension funds have…
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What Hollywood gets right and wrong about hacking


What Hollywood gets right and wrong about hacking

File 20180718 142435 176mlrj.jpg?ixlib=rb 1.1

Gone phishin’.

Courtesy of Catherine Flick, De Montfort University

Spoiler warnings for Mr. Robot, Arrow and Blackhat

Technology is everywhere we look, so it’s no surprise that the films and TV we enjoy are similarly obsessed. That’s not to say they manage to get it right when it comes to portraying tech accurately however – and one of their worst areas is computer hacking.

I’ve been a Linux system administrator in and out of industry for 20 years. That means I ensure all kinds of internet services such as email, websites and news systems run smoothly, and preferably don’t get hacked. My current job is to research the ethics and social impact of technology, so I love seeing anything tech-related come up in pop culture.

The operating system that only seems to exist in movies (let’s call it “MovieOS”) is fascinating – the constant beeping, the clicking with every key pressed, the impossibly long progress bars, the helpful warning alerts, not to mention the ability to zoom in forever on digital images without losing clarity.

But it’s the hacking scenes that get me. Every single time.

Expectations versus reality

Hacking is most often portrayed as a frantic exercise, with fast-paced music to raise the tension while boxes flash up on screen. In one episode of the fantasy series Arrow however, the protagonists are able to continue “hacking” despite not being able to see their screens, and eventually this ridiculous hack-war turns into a tennis match with both hackers sending power surges back and forth until the antagonist’s computer is blown up.

It’s pretty far-fetched but hacking as a means of destruction isn’t fictional and it has been portrayed better in the tech drama series Mr. Robot. In one episode, the protagonist Elliot uses a planted device to upload software onto back-up energy storage devices owned by the shadowy corporation, ECorp. This software is then used to trigger explosions – entirely reasonable as these gadgets usually use lead acid batteries which can emit explosive hydrogen gas when overcharged.

Most of the time though, MovieOS capabilities don’t accurately reflect…
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Morgan Stanley: “It’s Not Your Imagination, Large Moves Are Becoming More Common In The Market”

Courtesy of ZeroHedge. View original post here.

Exactly two months ago, Goldman joined the relatively small group of voices warning that the next big market "event" (politically correct way of saying crash) could be one resulting not from excess leverage but lack of liquidity, driven by "phantom liquidity" provided by HFTs and algo traders which tend to withdraw during times of market stress, as well as central banks which have soaked up a substantial amount of the freely-traded securities in the market.

Specifically Goldman warned that "the rising frequency of “flash crashes” across many major markets may be an important early warning sign that something is not quite right with the current state of trading liquidity."

These warning signs plus the rapid growth of high-frequency trading (HFT) and its near-total dominance in many of the largest and most widely traded markets prompt us to more carefully consider the possibility (not necessarily the probability) that the long expansion accompanied by relatively low market volatility may have helped disguise an under-appreciated rise in “market fragility.”

To be sure, the topic of rising market fragility is anything but new to regular readers, and we have been covering it extensively over the past two years, although Goldman's growing concern by what was painfully obvious to many traders gives hope that one day the Fed too may be able to grasp just how its actions have broken the market, although that realization will sadly take place just moments before a market-wide flash crash send the S&P plummeting, resulting in a market that could be indefinitely halted.

Fast forward to today, when Morgan Stanley has joined the chorus of "liquidity watchers."

In a note from Morgan Stanley strategist Andrew Sheets, he writes that whereas 2017 was remarkable – "despite low levels of volatility that made the bar for a large move relatively low, few occurred" – 2018 has been very different in that "large moves relative to expectations are becoming more common" even though it may – still – not feel that way, with volatility still low and US equities back near local highs. "And that's exactly why it's so interesting."

First, what…
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USDJPY Crumbles, Japanese Bond Yields Jump On Fears Of BOJ Policy Shift

Courtesy of ZeroHedge. View original post here.

In a delayed reaction from a Friday evening report by Japan's JIJI, since confirmed by Reuters, that the BOJ is considering a shift in policy to potentially push 10Y yield wider, and which as we reported on Friday sent JGB futures sliding, the Monday opening of JGBs has been a shock to the system, sending the 10Y yield on Japanese government bonds surging to 0.80%, the highest since February.

Meanwhile, the USDJPY which just last week hit 113, has continued to slide and is now back under 111, catching countless traders who had positioned for further Yen weakness offside – the most recent CFTC COT report showed that short yen positioning was the dominant view last week – and forcing a sharp short squeezes.

For those who missed it, according to media reports last Friday, the BOJ is set to launch a full-scale investigation to mitigate the side effects of its yield-curve control policy on bank profitability and government bond trading, which we said suggests that the BOJ may seek to "kink" the curve to the left of the 10Y in hopes of achieving a "beautiful steepening" to roughly paraphrase Ray Dalio.

Like in Europe where between NIRP and QE the yield curve has been so flat has been hurting bank profitability (with some bank, most notably Deutsche Bank complaining vocally about the ECB's policies) similar concerns have spread in Japan where both banks and pension funds have been agitating for at least some yield curve steepening to increase NIM and support bank profitability.

But even beyond the immediate threat of a rejiggering of the BOJ's Yield Curve Control, which now appears will push 10Y yield above the 0% target, another factor that is likely playing a key role is the ongoing decline in BOJ bond purchases, which both the bond and FX markets have so far been sternly ignoring.

boj mon

So will buyers step in? Absent a statement from Kuroda, the answer is probably not because as Bloomberg's Mark Cranfield writes "in theory, considering that 10-year yields are near zero, the downside is almost limitless."…
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Egon Von Greyerz: “Risk Is Going Up Exponentially… It’s Unmeasurable”

Courtesy of ZeroHedge. View original post here.

Via Greg Hunter’s,

Financial and precious metals expert Egon von Greyerz (EvG) vaults gold for clients at two secret locations on two continents. He says his wealthy clients have at least 20% of their net worth in physical gold and silver. Some have much more. Why so much physical metal? EvG says it is because of record risk in the world today.

EvG explains,

“There is only 0.5% of all world financial assets held in physical gold. So, this is a very small group, but it is still a lot of money. Of course, the majority doesn’t believe this because if they did, all the other markets would collapse. The particular people that are concerned about risk that we deal with, and they are not concerned in a minor way… look at all the asset classes, whether you take the stock markets, bond markets or property markets, they are all in the most massive bubbles fueled by exponential growth in credit. Global credit has tripled since 1999 to today. Global debt went from $80 trillion to $240 trillion. When debt triples, it doesn’t mean that risk triples. Risk goes up exponentially. Then you add to that all the off-balance sheet items and unfunded liabilities. The derivatives are at least $1.5 quadrillion…

Officially, it is reported $600 billion, but it is probably $1.5 quadrillion… So, you are talking about risk that no one understands, and no one can measure. Most of it is in paper or air, if you will. It’s like a balloon, and when you pop that balloon, you will find it is mostly air. This means asset values will implode, and so will debt.”

How bad is this going to get? EvG says,

“I think stock markets and bond markets will go down by at least 75%, and I would say it could be up to 95% or more. A lot of companies will disappear. I am not saying the world is going to end. You must remember, in 1929 risk and debt was nowhere near where what it is today and certainly not globally either.

This is a global problem, and not just in the U.S.

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Liquidity Crisis: Tesla Asks Suppliers For “Cash Back”

Courtesy of ZeroHedge. View original post here.

Throughout the past few months, as Elon Musk has been lurching from one PR fiasco to the next (having a meltdown on the Q1 earnings call, calling a Thai sub rescuer a pedophile , being exposed as a donor to a key GOP PAC), amid an exodus of key Tesla executives

… during which time the Tesla CEO has been far more obsessed with tweeting than "sleeping on the factory floor"…

… and which has – so far – culminated with an article in which for the first time, a journalist dared call Musk "a total fraud", investors have been increasingly concerned that Musk's erratic behavior has been the result of a mounting liquidity crisis for the company which currently is burning roughly $12 million per day

… even as Tesla's debt grows and grows and grows.

Well, those concerns are about to get far more acute following a WSJ report that the company, seemingly facing a liquidity crunch, has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal which the WSJ notes "reflects the auto maker’s urgency to sustain operations during a critical production period."

Which is especially odd in light of Musk's vows that Tesla will "at least be profitable in Q3 and Q4."

But we digress.

According to a memo seen by The Wall Street Journal that was sent to a supplier last week, Tesla said it is asking its suppliers for cash back to, drumroll, help it become profitable, as if that is somehow the priority of the company's suppliers.

And we are not talking about a few cents here and there: Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016.

But wait, it gets better: the memo which was sent by a global supply manager (who will probably be fired shortly), described the request…
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No Change; Breakouts Hold for Large Caps and Techs – Small Caps Struggle

Courtesy of Declan.

Friday didn’t bring a change in markets as the S&P, Nasdaq and Nasdaq 100 held their breakouts while the S&P struggled to negate its double top.

The S&P lost a little ground but remains well above breakout support. The biggest loss was seen in relative performance but only because the index has suffered an extended period of relative decline and had only begun to reverse that.

The Nasdaq also held its breakout but has less wiggle room to defend support. There was a ‘sell’ trigger in On-Balance-Volume but not enough to suggest bears have control. Relative performance is still good if a little weaker than it was in June; maybe some extended double top but don’t jump the gun just yet.

The Nasdaq 100 also triggered a ‘sell’ in On-Balance-Volume but other technicals are good and relative performance is still gaining against Small Caps.

Feeding into Nasdaq and Nasdaq 100 performance is the Semiconductor Index. This is still siding with bears (if only just) with 1,380 and 50-day MA key resistance. This is still a short play even if the Nasdaq and Nasdaq 100 are still playing to breakouts.

The Russell 2000 is the one index which isn’t enjoying the same performance as Tech and Large Caps. If the latter index is mounting a double top then the current rally from last week can’t go any further. Shorts can enter on 1,696 with a stop above 1,710 and a target of 1,610.  Technicals are all in the green (bullish) with the exception of the recent sharp loss in relative performance (bearish).

In terms of the longer term charts I’m looking at the relationship between Transports and the Dow Jones Industrials Average. The lack of performance from Transports is somewhat problematic as the ratio shifts sideways in a consolidation pattern.  A secular bull market will require leadership from Transports and this index has struggled to participate in the gains of lead indices.…
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3 Urban Legends of Bitcoin Debunked

Courtesy of ZeroHedge. View original post here.

Authored by Kenny Li via,

When I started my first company in the cloud computing space in 2011, much of it was similar to what I see in cryptocurrency today. It’s a seemingly complicated subject that has terms and acronyms that the average person can’t wrap his or her head around, which leads to confusion and misrepresentation. As a result, manipulation and deception thrive on both ends of the spectrum, creating both fear and admiration for this enigmatic topic; at the end of the day, misinformation wins.

Attempt to explain cloud computing or blockchain, and many will realize it’s about as complicated as explaining how the processors in their iPhone generate the display on the screen? – ?but therein lies the trick to understanding. With the iPhone, you don’t need to learn the intricacies of semiconductors, ALUs, or binary representations of strings to understand that it provides you value (if you’re actually curious, this explainer video is a good place to start, and then read But How Do It Know). You know that you can take or make calls, send or receive photos, and connect to the Internet to use social media, among other things.

The inside of iPhones? – ?most of the space is used to just hold battery power!

The same is said about anything, from aspirin to sleep to Bitcoin; in fact, scientists can’t fully explain why we sleep. But that doesn’t stop you from trying to get eight hours, right? The value you receive from services, objects, or even your own body, can be understood and utilized without needing to fully understanding the underlying mechanisms that enable it. Don’t get me wrong?—?I’m not saying that you shouldn’t take the plunge and educate yourself on the technical intricacies if you want to?—?blockchain is a great technology that solves problems that decentralized systems have faced in the past such as trustless consensus.

At the end of the day, though, the value that Bitcoin brings to the table is its potential to replace the current digital currency system with a more efficient and democratized methodology built for a global economy. Yes, replacing. Digital
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.


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Phil's Favorites

A 2019 Earnings Recession?


A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...

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D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...

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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...

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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ... more from Insider

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...

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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 failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

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


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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Swing trading portfolio - week of September 11th, 2017

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


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Free eBook - "My Top Strategies for 2017"



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

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

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

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

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>