Archive for 2018

Is The Pain Over? Buybacks Set To Soar As 48% Of S&P Exits “Blackout Window”

Courtesy of Zero Hedge

On Friday, JPMorgan strategist John Normand revealed a striking statistic contextualizing the recent global risk-asset selloff: only on two prior occasions – the 1970s stagflation and the global financial crisis – have so many asset classes had negative returns in one year, and almost never has every market – including the Nasdaq, commodities and US Leveraged Loans – underperformed the trade weighted USD as is the case in 2018:

"the percentage of asset classes that has generated positive returns this year is only 20%, a share that has never been so low outside of 1970s stagflation episodes and the Global Financial Crisis."

According to JPMorgan there are three likely explanations for this "misery":

  • the global economy and US earnings have reached a major turning point;
  • the Fed is committing its habitual policy mistake by overtightening; and
  • after the pre-Lehman experience with complacency, markets are so paranoid they will overreact late-cycle to even minor changes in fundamentals.

Not surprisingly, JPMorgan – whose strategists have been encouraging the bank's clients to keep buying the dip, even as Morgan Stanley recently showed that in 2018 for the first time in 13 years the "BTFD" strategy has generated negative returns…

…remained optimistic and as we discussed yesterday, suggested that the market, which has become "paranoid" after failing to spot the 2008 financial crisis, is overreacting by pricing in a major economic, and market, inflection point well ahead of time.

If complacency is one of the words most associated with the pre-Lehman years – even Queen Elizabeth asked publicly afterwards, "Why did no one see this coming?” – then paranoia may be the one most tied to what remains of this cycle. The second-longest expansion in post-war history and the slowest Fed tightening cycle in three decades has given investors plenty of time to build exposures, but also to study the anatomy of turning points and to contemplate the exit constraints from lower market liquidity.

As a result, Normand – who is "not yet willing to run the year of tracking error implied by holding broadly defensive exposure until the…
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In Desperation Move, IBM Buys Red Hat For $34 Billion In Largest Ever Acquisition

Courtesy of Zero Hedge

In what can only be described as a desperation move, IBM announced that it would acquire Linux distributor Red Hat for a whopping $34 billion, its biggest purchase ever, as the company scrambles to catch up to the competition and boost its flagging cloud sales. Still hurting from its Q3 earnings, which sent its stock tumbling to the lowest level since 2010 after Wall Street was disappointed by yet another quarter of declining revenue…

… IBM will pay $190 for the Raleigh, NC-based Red Hat, a 63% premium to the company's stock price, which closed at $116.68 on Friday, and down 3% on the year.

In the statement, IBM CEO Ginni Rometty said that "the acquisition of Red Hat is a game-changer. It changes everything about the cloud market," but what the acquisition really means is that the company has thrown in the towel on organic growth (or lack thereof) and years of accounting gimmicks and attempts to paint lipstick on a pig with the help of ever lower tax rates and pro forma addbacks, and instead will now "kitchen sink" its endless income statement troubles and non-GAAP adjustments in the form of massive purchase accounting tricks for the next several years.

While Rometty has been pushing hard to transition the 107-year-old company into modern business such as the cloud, AI and security software, the company's recent improvements had been largely from IBM’s legacy mainframe business, rather than its so-called strategic imperatives. Meanwhile, revenues have continued the shrink and after a brief rebound, sales dipped once again this quarter, after an unprecedented period of 22 consecutive declines starting in 2012, when Rometty took over as CEO.

While some of the decline has been from divestitures, most is from declining sales in existing hardware, software and services offerings, as the company has struggled to compete with younger technology companies.

The good news for IBM is that the Red Hat purchase, the largest in the company's history, will give IBM an immediate cloud revenue boost growth as well as a suite of proven software products to sell through its global sales force. “We…
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The “Rental Affordability Crisis” Explained In Three Charts 

Courtesy of Zero Hedge

Four years ago, the United States Department of Housing and Urban Development (HUD) warned of "the worst rental affordability crisis ever," citing data that:

"About half of renters spend more than 30% of their income on rent, up from 18% a decade ago, according to newly released research by Harvard's Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent."

This is a significant problem for US consumers, and especially millennials, because as we have noted repeatedly over the past year, and a new report confirms, "rent increases continue to outpace workers' wage growth, meaning the situation is getting worse."

In the second quarter of 2017, median asking rents jumped 5% from $864 to $910. In the first half of 2018, they have remained at levels crushing the American worker.

While the surge in median asking rents has triggered an affordability crisis, new data now shows just how much a person must make per month to afford rent. 

According to HowMuch.Net, an American should budget 25% to 30% of monthly income for rent, but as shown by the New Deal Democrat, workers are budgeting about 50% more of their salaries than a decade earlier. The report specifically looked at the nation’s capital, where a person must make approximately $8,500 per month to afford rent.

In California, the state with the largest housing bubble, the monthly income to afford rent is roughly $8,300, followed by Hawaii at $7,800 and New York at $7,220.

In contrast, the Rust Belt and the Southeastern region of the United States, one needs to make only $3,500 per month to afford rent.

“Based on the rule of applying no more than one-third of income to housing, people living in the Northeast must earn at least twice as much as those living in the South just to afford rent for what each market considers an average home,” HowMuch.net’s Raul Amoros told MarketWatch.

Which, however, is not to say that owning a house is a viable alternative…
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Canada Secretly Collected Banking Information From 500,000 Canadians Without Their Knowledge

Courtesy of ZeroHedge. View original post here.

As it turns out, Silicon Valley tech giants aren't the only institutions surreptitiously collecting massive troves of sensitive data from unsuspecting consumers. On Friday, Canada's the Global Times published a report exposing a recently launched data collection program adopted by StatCan, the Canadian government's economic research agency, that the agency introduced to help it collect more accurate data about consumers' spending habits. The agency has asked Canada's nine largest banks to turn over all the transaction records and sensitive identifying financial information (including customer's social insurance numbers) for 500,000 randomly selected Canadians. The agency will collect and crunch this data as part of its statistical research and then, at the end of the year, it will produce a new list of 500,000 Canadians, and perform all of the same operations with their data.

Statcan

After being called out by Global News, the agency explained that the data would be anonymized shortly after being compiled (meaning that all identifying information, like consumers' SINs, would be removed).

"Canadians should know we are not accessing all of the payments data for all Canadians. It’s a small sample relative to the total number of households," he said. "Our access to this data is permitted through both the Privacy Act and the Statistics Act."

But that's not exactly true. The fact that it didn't publicly disclose the plan has left some Canadians feeling uneasy. Given that Canada has a population of roughly 20 million people, the likelihood that any one individuals' information will be collected. To be sure, the agency said in a letter to Canada's privacy commissioner that the data would only be used for statistics purposes. But a former privacy regulator who spoke with GN said she was "shocked" to learn of the program.

Ontario’s former privacy commissioner, Ann Cavoukian, said she was shocked by the initiative and said the ability for a government agency to build a massive database of personal banking information raises serious privacy concerns.

"Most people would be surprised and devastated if they thought all of their financial information and bills and activity were being accessed in identifiable form by Statistics Canada or any branch of government," she said. "Medical and financial


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Brutally Honest: Facebook Removes, Then Restores, Images From Yemen

Courtesy of ZeroHedge. View original post here.

Authored by Mike Shedlock via MishTalk,

A couple of questions describe the problem with censorship: Who controls the censors? What biases do they have?

Please consider Photo of a Starving Girl in Yemen Prompts Facebook to Remove Posts of Article.

For a few hours after The New York Times published an article about conflict and hunger in Yemen, Facebook temporarily removed posts from readers who had tried to share the report on the social platform.

At issue was a photograph of a starving child.

The article included several images of emaciated children. Some were crying. Some were listless. One, a 7-year-old girl named Amal, was shown gazing to the side, with flesh so paper-thin that her collarbone and rib cage were plainly visible. Tens of thousands of readers shared the article on Facebook, but some got a message notifying them that the post was not in line with Facebook’s community standards.

Facebook had addressed the issue by Friday night.

“As our community standards explain, we don’t allow nude images of children on Facebook, but we know this is an important image of global significance,” a spokeswoman said in an emailed statement. “We’re restoring the posts we removed on this basis.”

It took Facebook a few hours to realize it made a mistake in removing brutally honest images of the effects of the civil war in Yemen.

The images expose the blatant hypocrisy of the US in backing the corrupt Saudi Arabia regime in its war in Yemen.

This was not a nude image. It is not a “community standards” image. Nor was there any doubt about the authenticity of the image.

Any censor can judge “community standards” however they want, but Facebook is an international phenom, not Podunk USA.

Facebook could have and should have said “we f*ed up yet again” but never expect that.

Rather than rejecting that image, Facebook should have promoted it.

Instead, we had temporary censorship. Next time it might not be temporary.





Drowning In Student Loans? Move To Maine! 

Courtesy of ZeroHedge. View original post here.

In a bid to attract new residents, Maine has the ultimate incentive for those drowning in student loans; move there and they’ll help pay them off

The catch? You have to make enough money to pay taxes - unless you’re a STEM major! 

The Educational Opportunity Tax Credit program was originally established in 2008 as a retention tool targeting young professionals living in Maine, which allowed them to use their student loan payments as tax credits. 

Thanks to a labor shortage, however, the program’s pitch evolved to lure qualified employees to the state

When you move to Maine, the money you spend toward paying your student loan debt each year is subtracted from your state income taxes.

For instance, if you pay $1,800 toward your loan and owe the state $2,000 in taxes, you’ll only end up paying Maine $200. -CNN

“Over time, the employer community spoke out loud and clear that even if 100% of college graduates in Maine chose to stay here and work, that still (wouldn’t) fulfill our workforce need,” Nate Wildes, engagement director for “Live + Work in Maine,” told CNN

“We need to import people,” Wildes said. “We need to attract people from other states for our workforce”

STEM majors, meanwhile, who specialized in Science, Technology, Engineering and Math, may even receive money back from Maine

STEM majors — who study science, technology, engineering and math — could even get a check back from the government — if their loan payoff amount outweighs their taxes. Non-STEM majors fall under a non-refundable tax credit program, which means they’d owe $0 in state taxes under the same scenario. -CNN

STEM major Matthew Glatz graduated with a bachelor’s degree from the University of Southern Maine with $60,000 in student loan debt, according to CNN. He signed up for the tax credit program after graduation and has been able to launch his own catering and food truck company, SaltBox Cafe

“It’s fantastic,” Glatz said of the program. “Maine is a great place to live and work, and any incentive you have to show people that and make them realize that is a benefit.”

Maine needs to attract workers

One of the main reasons Maine needs to attract workers is due to demographics; it’s the state with the oldest population in…
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Hedge Fund CIO: “Today, The Chinese Are Trapped… And The Box Keeps Shrinking”

Courtesy of ZeroHedge. View original post here.

Submitted by Eric Peters, CIO Of One River Asset Management

V-Day

“America built the global trading system, but we don’t really need it,” said the strategist. “We defend it, but we don’t require it.” For all the free-trade talk, the US is the most closed of all major economies. “When you include Canada and Mexico – basically vassal states – you could cut off trade with every other country and America would run just fine.” Plus we haven’t even started fracking south of the border. “We built the trading system to support our allies during the Cold War. We subsidized them for so long we forgot why we were doing it. But the war is over.”

“The US pays for the security that underpins world trade,” continued the strategist. “And we provide the excess demand that allows the world’s mercantilists to function.” No large nation/block is willing to run a current account deficit like we do. “The Bushes and Clintons kept it going. Obama too. They kept the Cold War alive. And it was great for Wall Street, multi-nationals, their executives.” But it wasn’t great for most workers. “The rearrangement we see today was inevitable. It just needed a leader strong-willed enough to defy the establishment.”

“Neither Democrats nor Republican leaders wanted this change,” explained the strategist. “But almost overnight, voters have woken to the notion that China is not our friend. It’s a strategic rival.” This genie will not return to the bottle. “Neoliberalists assured us that welcoming China in the WTO would yield a win-win.” It certainly helped them get rich. “A strong China is not really a win for the US. It’s not a win for Vietnam either.” Or anyone within 1,000 miles of Beijing. “This change is generational. And the impact on China will be terminal.”

Dead Presidents

“Read McKinley’s speeches, they were very interesting,” said our President. So I did. “He talked about how we won’t allow the outsider to come in and take our wealth from us without having to pay,” continued Trump. The 38%-50% McKinley Tariff passed in 1890, before William became President in 1897. McKinley introduced the term “reciprocal trade” and as President, threatened additional tariffs to lower foreign barriers. The economy flourished in his 1st term. He won a 2nd, warmed up to more open trade, then got shot.
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Morgan Stanley: There’s A Good Chance Everyone Is Wrong About The Midterms

Courtesy of ZeroHedge. View original post here.

From Michael Zezas, Morgan Stanley's Chief US Public Policy & Municipal Strategist

Here’s a tip for election night, from my left brain to yours: There’s a better chance than you think that the elections, and the market reaction, won’t go the way you expect.

If you’re like me, you’ve been thinking about the US midterm elections for months…at least. And if you’re like me, you’ve noticed that polls, betting markets, and model-based probabilities have been stable in pointing to a single outcome as most likely: Democrats take the House, Republicans keep the Senate. And if you’re like me, you’ve probably translated that stability into overconfidence that this will be the outcome.

So let’s engage our left brains for a minute and think this through, with the help of some statistics. I’m not arguing that the polls could be wrong. Rather, I’m reminding you that polls have a margin of error. Keeping that in mind, you’re less likely to think the 2016 polls were ‘wrong’. After all, Hillary Clinton won the popular vote by 2%, less than expected but well within the margin of error. Furthermore, the error does not have partisan bias – while Trump outperformed polls in key states in 2016, remember that in 2012 Obama outperformed the polls.

The point is, when polls indicate relatively close races, of which there are many in this Congressional cycle, uncertainty is high. For that reason and many more that we’ve discussed, we think the poll-based models, rather than polls alone, do a good job of assigning probabilities to different outcomes. Sadly, we humans don’t do as good a job of interpreting them.

This brings us to the problem for investors. The most likely outcome – Democrat House, Republican Senate – has been carrying a probability of about 60-65% and results in legislative gridlock, hence status quo on policies that influence markets (fiscal stimulus, regulation, and trade). The results that take these policies in meaningfully different directions make up the other 35-40% – with meaningful chances that either Republicans hold both houses or that Democrats sweep. Said differently, there’s a significant chance that voters choose an outcome that shifts US policy from the status quo.


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How US policy in Honduras set the stage for today’s migration

 

How US policy in Honduras set the stage for today's migration

Image 20161028 15783 1sdu06z.jpg?ixlib=rb 1.1

U.S. Marines in Honduras in July 2016. Wikimedia Commons

Courtesy of Joseph Nevins, Vassar College

Hondurans fleeing poverty and violence – who make up most of the participants of a “caravan” estimated at between 7,000 and 8,000 people – are slowly moving through Mexico in the hope of reaching the United States and receiving refuge.

President Trump has responded by characterizing the caravan as, among other unflattering things, “an onslaught” and “an assault” on the United States. Trump’s statements, which do not accurately characterize the makeup and motivations of the migrants, have pushed many media outlets to rebut his false claims.

The mainstream narrative of such movements of people often reduces the causes of migration to factors unfolding in migrants’ home countries. In reality, migration is often a manifestation of a profoundly unequal and exploitative relationship between countries from which people emigrate and countries of destination.

As I have learned through many years of research on immigration and border policing, the history of relations between Honduras and the United States is a prime example of these dynamics. Understanding this is vital to making immigration policy more effective and ethical.

U.S. roots of Honduran emigration

I first visited Honduras in 1987 to do research. As I walked around the city of Comayagua, many thought that I, a white male with short hair in his early 20’s, was a U.S. soldier. This was because hundreds of U.S. soldiers were stationed at the nearby Palmerola Air Base at the time. Until shortly before my arrival, many of them would frequent Comayagua, particularly its “red zone” of female sex workers.

U.S. military presence in Honduras and the roots of Honduran migration to the United States are closely linked. It began in the late 1890s, when U.S.-based banana companies first became active there. As historian Walter LaFeber writes in “Inevitable Revolutions: The United States in Central America,” American companies “built railroads, established their own banking systems, and bribed government officials at a dizzying pace.” As a result, the Caribbean coast “became a foreign-controlled enclave that systematically swung the whole of…
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Is The Pain Over: Buybacks Set To Soar As 48% Of S&P Exits “Blackout Window”

Courtesy of ZeroHedge. View original post here.

On Friday, JPMorgan strategist John Normand revealed a striking statistic contextualizing the recent global risk-asset selloff: only on two prior occasions – the 1970s stagflation and the global financial crisis – have so many asset classes had negative returns in one year, and almost never has every market – including the Nasdaq, commodities and US Leveraged Loans – underperformed the trade weighted USD as is the case in 2018:

"the percentage of asset classes that has generated positive returns this year is only 20%, a share that has never been so low outside of 1970s stagflation episodes and the Global Financial Crisis."

According to JPMorgan there are three likely explanations for this "misery":

  • the global economy and US earnings have reached a major turning point;
  • the Fed is committing its habitual policy mistake by overtightening; and
  • after the pre-Lehman experience with complacency, markets are so paranoid they will overreact late-cycle to even minor changes in fundamentals.

Not surprisingly, JPMorgan – whose strategists have been encouraging the bank's clients to keep buying the dip, even as Morgan Stanley recently showed that in 2018 for the first time in 13 years the "BTFD" strategy has generated negative returns…

…remained optimistic and as we discussed yesterday, suggested that the market, which has become "paranoid" after failing to spot the 2008 financial crisis, is overreacting by pricing in a major economic, and market, inflection point well ahead of time.

If complacency is one of the words most associated with the pre-Lehman years – even Queen Elizabeth asked publicly afterwards, "Why did no one see this coming?” – then paranoia may be the one most tied to what remains of this cycle. The second-longest expansion in post-war history and the slowest Fed tightening cycle in three decades has given investors plenty of time to build exposures, but also to study the anatomy of turning points and to contemplate the exit constraints from lower market liquidity.

As a result, Normand – who is "not yet willing to run the year of tracking error implied by…
continue reading





 
 
 

ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

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

...

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Mapping The Market

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

By Jean-Luc

Maybe we should simply try him for treason right now:

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

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

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

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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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.

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