Posts Tagged ‘RBS’

Frustrating Thursday – From .EUphoria to .DEspair

SPY 5 MINUTE.DE is Germany's web domain.

So I'm trademarking .DEspair to consolidate all the anti-EU statements coming out of Germany this week as the rhetoric reaches a crescendo and goes up from there.  .EU is, of course the EU domain and .EUphoria is where we will store all the glowing pro-EU rhetoric that makes the market rise (until someone in Germany says something).  

It's a typical case of .DE said, SH.Eu said and all the kiddies can do is hide in their room until Mommy and Daddy stop fighting.   

Things were getting silly enough on the plus side as we rallied for no reason at all that we added a very aggressive short position on the Russell using TZA.  My 3:07 comment in Member Chat was:  

Big RUT move makes TZA fairly cheap at $20 and the July $20/24 bull call spread is $1, which makes for a nice hedge and if the RUT pops, you can offset it with the July $18 puts, now .45, for $1 or better or, of course, there's always the TWIL List

We had no long plays to make yesterday as we added them all when the market was much lower (told you so!) and now it has moved to the top of the bottom of our range and we pick up a short – this is not rocket science, folks.  It's going to be a choppy, terrible market until either the EU saves us by tomorrow or we crash and burn horribly and my comment to Members in the Morning Alert at 10:24 was: 

We still need the Dollar to go lower and this morning it's zooming higher (82.80) and keeping us from a better move up on the indexes.  This will go on for the next few days with each syllable uttered by anyone of presumed authority in the EU so – if you can't stand the heat – stay in cash!  

FXE WEEKLYThe Dollar had worked it's way down to 82.50 into the close but now (8am) it's been jammed back to 82.90 as the Euro plunges back to $1.2426 on whatever silly thing someone just said.  Financials are dragging everyone down as they are DOOMED if the EU can't pull things together.

Financials are also hurting as the NY Times Dealbook Blog is reporting that JPM's Trading losses "may reach $9Bn."  I'm a little…
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Monday Market Momentum – Down is the New Up

FXY WEEKLY Thank goodness the US is closed! 

Europe is down a whopping 3.5% (so far) this morning, opening in free fall after Asia opened down about 2% on the average (but finishing at the day’s lows).  Gold flew up to $1,906 before calming down but oil is down to $84.82 at 6:45 am as the Dollar tests it’s highs of 75.15 on the Euro’s fall to $1.41 and the Pound testing $1.61.  Any thoughts that the BOJ was done manipulating the Yen are now officially out the window as the Dollar/Yen is STILL 76.80 (around 128.50 on FXY), the same place it’s been since August 8th! 

When the World’s 3rd largest economy is manipulating it’s currency on a daily basis, of course the Global markets are going to be thrown into chaos.  Every day the BOJ tries to debase their currency they must buy other currencies or foreign stocks or gold or silver or oil – ANYTHING BUT YEN to make the Yen less valuable as compared to another relative basis.  

Even so, it’s not working and Japan’s new finance minister said this morning that he will try to forge a consensus among the Group of Seven leading industrialized countries that "excessive yen rises" won’t benefit the world economy when finance officials meet in France later this week.  "I am hoping to see us develop a common view that excessive yen rises, as shown by facts and processes in the past, do not necessarily have a positive impact on the global economy," Mr. Azumi told reporters, referring to Friday’s planned meeting of G-7 finance ministers and central bank chiefs in Marseille, France.  "At this exchange rate, it is becoming impossible for crucial parts of Japan’s export industry to make profits," he said.

BCS WEEKLY Asian shares were already following US financials downhill on overblown fears of the FHFA lawsuit (see FHFA Friday).  I say overblown because the first bank sued, ING, already settled for .20 on the Dollar so banks are reacting as if they already lost $30Bn when it’s much more likely this will all get washed away for $6Bn, or about 2 day’s worth of profits (4%).  We’ve already seen the banking community write down over $1Tn in losses and survive to screw us over another day – do we really think this little wrist-slap will end them or is this just another example of retail suckers
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Yentervention Wednesday – Kan Baffles Bulls

Kaaaaaaannnnnn! 

As we discussed yesterday, it was meet the new boss, same as the old boss in Japan as Naoto Kan’s re-election sent the Yen to new highs as he was considered the least likely candidate to back intervention.  Well surprise, surprise this morning as Japan officially intervened in the FOREX markets and sent the Yen down a full 2.5% as they used their Yen to purchase an undisclosed basket of currencies.   

Since the Dollar is up today against both the Pound ($1.55) and the Euro ($1.29), we can assume the dollar is one of those currencies and demand for Dollars means upward pressure on rates so that should be the end of the TLT bounce for the moment.  Stock boys want bonds to die so the money can come this way and bond boys want you to fear the stock market so you will let them hold your money (and charge you fees) at ridiculously low rates of interest.  That’s they Yin and Yang of the markets. 

Investors were starting to doubt the government’s commitment to its pledge that it would take bold action,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. Kan and Noda in recent weeks repeatedly said that Japan was ready to take “bold” measures to stem the currency.  The Japanese government official said European and U.S. officials were informed of the move in an effort to avoid a negative reaction. It took a while to convince Europe because authorities there didn’t like the idea, the person said.

We’ll see if the stronger Dollar today puts pressure on commodities but we’re in pretty good shape as this rally, for a change, has not been led by commodities as the market is now flat to the August despite an 8% drop in oil prices (see USO on chart):

I often complain about rallies that are led by Financials and Commodities as those are things that suck money OUT of the economy and are not long-term drivers of growth.  The entire 2006-7 rally was this kind of rally and I bitched about it all the way up.  We also had housing back then, another type of commodity, but that’s so dead now it’s hardly worth mentioning, is it?  Actually housing is where we used a lot of commodities like lumber and copper etc.  33 months after the onset of the Great Recession, new home sales are still down 70% and non-residential construction is down 36% – that market is dead, dead, dead

We get housing starts next week but who really cares? …
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JPMorgan, RBS, Barclays Charge Fees on ‘Black Box’ Reverse Convertibles that Exceed Maximum Yields

JPMorgan, RBS, Barclays Charge Fees on ‘Black Box’ Reverse Convertibles that Exceed Maximum Yields

Courtesy of Mish 

a metal trunk

Bloomberg reports Fees Exceed Maximum Yields on ‘Black Box’ Reverse Convertibles.

Royal Bank of Scotland Group Plc, JPMorgan Chase & Co. and Barclays Plc are charging fees on some structured notes that equal or exceed the securities’ highest possible yield, as sales of the opaque products draw scrutiny from regulators.

On June 15, RBS gave brokers a 2.75 percent commission to sell a three-month reverse-convertible note with a 2.56 percent potential yield, according to a prospectus. Last month, JPMorgan charged 5.25 percent in fees and commissions on a three-month Citigroup Inc.-linked note that paid 5 percent interest, and Barclays offered brokers a 2 percent commission on a security paying 2 percent interest, according to other prospectuses.

Reverse convertibles generally pay higher interest rates than corporate bonds, with last month’s notes yielding an average of 15.7 percent per year, Bloomberg data show. Their risk lies in so-called down-and-in put options built into the products that allow banks to repay buyers with shares if an underlying stock declines a certain amount. Investors in RBS’s note could lose money if Alcoa Inc. drops by more than 25 percent.

Down-and-in put options aren’t traded on exchanges, making them difficult to value without a computer model. The customized contracts are privately negotiated by banks and their clients in the $615 trillion over-the-counter derivatives market, where trades and prices aren’t reported publicly.

Investors in JPMorgan’s reverse convertibles, which pay 5 percent interest over three months, are exposed to losses if Citigroup declines more than 20 percent. JPMorgan collected a 5.25 percent fee for selling $784,000 of the securities on May 25, according to the prospectus. Barclays’ $1 million offering on May 10 is linked to the stock of Apple Inc., with the option triggered if shares drop more than 25 percent.

Undisclosed costs, such as a profit for the issuer, are generally included in the notes’ sale price, according to Finra. It is “all but impossible” for investors to determine the size of these costs or “whether the reverse convertible represents a good deal,” Finra said on its website.

“It’s pretty easy to build in extra fees because retail investors aren’t in a position to price the embedded options,” said Janet Tavakoli, founder of Chicago-based consulting firm Tavakoli Structured Finance, in a


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Testy Tuesday – Dow 9,650, Berkshire $60 Edition!

Wheee, this is fun!

Just two weeks ago, on October 17th, I warned in the Weekly Wrap-Up that it was "Dow 10,000 or Bust" for the next week and we failed that one and last Wednesday we were looking to hold NYSE 6,900 and THAT failed too.  Now we enter into the second phase of our limbo game where the deep-voiced guy asks the question "how low can you go?" and we’ll be setting our next bar at our long-standing 9,650 target for the Dow,  which we are already hitting in pre-market trading.  If that fails, we’ll have to look down to S&P 1,000.  As you can see from Jesse’s Chart, we took a nice bounce off serious resistance yesterday but we’re just not feeling it yet, even though the market is now as technically oversold as it was in March

Yesterday was like a roller coaster and my first Alert to Members of the morning targeted 9,775 as the on/off line for our bullish/bearish posture on our DIA covers.  We whipped past that line right about 10 am as we got good reports from ISM, Pending Home Sales and Construction Spending but by 12:45 we had broken back down so I sent out an Alert calling to refocus back to 55% bearish by adding the DIA Jan $100 ($5) and Jan $102 puts ($6.20), already covered by the Nov $99 puts ($2.50). 

The reason we mess around with our covers is we don’t want to flip in and out of our option positions, which are generally either straight bearish or well-hedged long positions, is because options carry a relatively large bid/ask spread and cost you money every time you get in and out.  So, on the whole, we’d rather let our over-riding cover plays, like our DIA spread, adjust our stance as conditions change, making a single adjustment that keeps us balanced as we ride out the market waves. 

It’s been a couple of weeks since we had a good, old-fashioned stick save but we got a mother of one yesterday (as seen in Dave Fry’s chart) which was right on schedule as Kustomz bought it up in Member Chat at 3:09 and I agreed at 3:19 that "It does feel like a pre-stick move" and we grabbed VIX $25 puts at .85 to protect ourselves from a sudden surge in complacency.

By 3:33, my next comment to Members was: "The stick lives!" but…
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Jobless Thursday – REITs Turn Rotten

Look out below!

I warned yesterday that the end of the quarter may well mark the end of Goldman and their Gang of 12's Global pump job and what better way to pull the rug out from under the markets then for Goldman Sachs themselves to issue a report that warns that REIT valuation seem "stretched" and they are projecting "flat to down 15% returns next year" with concerns that they are "just beginning what could be a multi-year down-cycle."

Other headlined charts (and Zero-Hedge has the full scoop) are:

  • Still a long road ahead for a recovery in credit.
  • Cap rates to rise substantially.
  • Deleveraging process just beginning for the REIT sector
  • Despite pipeline reductions, development remains a risk

In other words, all the stuff I've been saying for for the last couple of months as they IYR has climbed 50% since July 15th is now the subject of a GS report on Oct 1st.  I was fine with the sector rising 20% (IYR $36) but the move to $46 was completely without merit and, as I noted in a post last week, we shorted it there and went very long on SRS (ultra-short on the IYR).  In fact, just yesterday, in the morning post, I discussed Friday's multiple plays on SRS.  We also have short positions on BXP and, of course, we're still overall short on the whole market as a correction in the real estate sector is not going to be an isolated incident.

Fortunately, at PSW, we don't have to wait for Goldman Sachs to tell us a sector is overvalued because we understand valuations and we practice sound fundamentals – something that is sorely lacking in the larger investing community.  There's a reason REITs usually trade at 10x multiples and it's the same reason commodity producers usually trade at 10x multiples as well – because the underlying commodity, whether it is land or oil or gold or copper, can fluctuate in price over time and will sometimes spike earnings up and sometimes spike them down so, on the whole, they are WORSE long-term investments than say AAPL, MCD, KO or PG, who tend to steadily grow their business over time and deserve stronger multiples.   

When the REITs were trading at 5x earnings in March, we were loading…
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Zero Hedge

Three Shot In Times Square Including Four-Year-Old Girl

Courtesy of ZeroHedge View original post here.

New York's Times Square was temporarily cordoned off on Saturday after at least three people were injured in a shooting, according to NBC News, citing police. The suspect, pictured below, was caught on camera.

Earlier today, 3 people were shot in @TimesSquareNYC, including a 4-year-old child.

Help your @NYPDDetectives identify the man pictured below — they want to talk him about the incident.

Call...



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Phil's Favorites

How big is this crypto boom?

 

How big is this crypto boom?

Courtesy of John Hempton, Bronte Capital

Google Trends doesn't predict stock market rallies, well somtimes it does. But more likely it is coincident with them, the suckers at the end of the boom being the biggest (yet) wave of retail buyers.

Here is a five year trend for the phrase "how to buy stocks" for the USA.

 

It has two peaks, one at the height of t...



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Digital Currencies

How big is this crypto boom?

 

How big is this crypto boom?

Courtesy of John Hempton, Bronte Capital

Google Trends doesn't predict stock market rallies, well somtimes it does. But more likely it is coincident with them, the suckers at the end of the boom being the biggest (yet) wave of retail buyers.

Here is a five year trend for the phrase "how to buy stocks" for the USA.

 

It has two peaks, one at the height of t...



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Biotech/COVID-19

India COVID crisis: four reasons it will derail the world economy

 

India COVID crisis: four reasons it will derail the world economy

India is the fifth largest economy in the world. Deepak Choudhary/Unsplash

Courtesy of Uma S Kambhampati, University of Reading

The second wave of the pandemic has struck India with a devastating impact. With over 300,000 new cases and 3,000 deaths across the country each day at present, the total number of deaths has just passed the 200,000 mark – that’s about one in 16 of all COVID deaths across the world....



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Chart School

Yellen can not stop the dollar decline

Courtesy of Read the Ticker

Printing money results in a lower currency, so long as the currency does not fall too fast.

Previous Post: US Dollar Forecast - Weakness

Here are the very strong fundamentals for a lower US dollar: 

(a) US inflation exploding.
(b) Massive US twin deficits.
(c) Better conditions in Europe.

However French election worries in 2022 Q1 and Q2 may provide US dollar strength (via European weakness) after Christmas, but this strength may come after a low in the DXY near $84.  

It looks like Yellen knows a down swing in the US dollar is near because ...

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Politics

If China's middle class continues to thrive and grow, what will it mean for the rest of the world?

 

If China's middle class continues to thrive and grow, what will it mean for the rest of the world?

Over the past few decades, hundreds of millions of Chinese citizens have become part of the middle class. AP Photo/Ng Han Guan

Courtesy of Amitrajeet A. Batabyal, Rochester Institute of Technology

China’s large and impressive accomplishments over the past four decades have spurred scholars and politicians to debate whether the decline of the West – including the ...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Kimble Charting Solutions

Will Historic Selloff In Treasury Bonds Turn Into Opportunity?

Courtesy of Chris Kimble

Long-dated treasury bonds have been crushed over the past year, sending ETFs like TLT (20+ Year US Treasury Bond ETF) spiraling over 20%.

Improving economy? Inflation concerns? Perhaps a combination of both… interest rates have risen sharply and thus bond prices have fallen in historic fashion.

Today’s chart looks at $TLT over the past 20 years. As you can see, the recent decline has truly been historic. $TLT’s price has swung from historically overbought highs to oversold lows.

At present, the long-dated bond ETF ($TLT) is trading 7.8% below its 200-...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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Promotions

Phil's Stock World's Weekly Webinar - March 10, 2021

Don't miss our latest weekly webinar! 

Join us at PSW for LIVE Webinars every Wednesday afternoon at 1:00 PM EST.

Phil's Stock World's Weekly Webinar – March 10, 2021

 

Major Topics:

00:00:01 - EIA Petroleum Status Report
00:04:42 - Crude Oil WTI
00:12:52 - COVID-19 Update
00:22:08 - Bonds and Borrowed Funds | S&P 500
00:45:28 - COVID-19 Vaccination
00:48:32 - Trading Techniques
00:50:34 - PBR
00:50:43 - LYG
00:50:48 - More Trading Techniques
00:52:59 - Chinese Hacks Microsoft's E...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.