Posts Tagged ‘revenue’

CORPORATE AMERICA REMAINS STRONG

CORPORATE AMERICA REMAINS STRONG

Courtesy of The Pragmatic Capitalist 

If there has been one undeniably bullish trend in the last 18 months it has been the strong earnings picture.  I have given the sell side analysts a fairly hard time over the course of the last year, but the strength in earnings has shocked me and my estimates tend to be quite a bit tougher than the consensus.  I expected the slowdown in mid-year growth to hit the top line harder than it has, but the international diversity of U.S. firms has helped  maintain healthy revenue growth at a time when companies have been incredibly vigilant about cost cuts.  U.S. companies have masterfully weaved through this recession in an effort to protect their profits and the results have been impressive.  With 90% of the S&P reporting in the Q3 earnings season the numbers are very strong:

  • 72% of companies have topped EPS estimates.
  • 60% have topped revenue estimates
  • Just 19% missed EPS estimates.
  • Sales are up 9.8% year over year.
  • EPS growth is 32% year over yar

Of course, the cost cuts have come at a cost as millions of Americans remain out of work.  Thus far domestic revenues have not sustained a level that has resulted in a substantial pick-up in hiring.  But corporations have made up for the less than stellar top line growth by boosting margins.  Margins are currently approaching their 2007 peaks, but likely have some room for expansion. It will be interesting to see how QE2 and the impact of rising input costs influences this picture.  At first blush, the impact does not appear to be widespread, however, we’ll have a better understanding of the Q4 earnings picture in the coming months when pre-announcements begin.  For now, the margin story is intact.  At risk, of course, is the labor force in the case that margins begin to turn.  For now it looks like the combination of strong international sales and weak domestic sales will be enough to help labor markets slowly continue to heal.  In a fluid and low visibility environment, however, this could change given the numerous exogenous risks.

(Figure 1)

The revenue story has been better than expected, however, is far from v-shaped.  Revenues per share remain well off their all-time highs despite a strong rebound in bottom line growth.  Quarter over quarter revenues per…
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California Approaches “Fiscal Meltdown”; Schwarzenegger Declares Fiscal Emergency; Fort Worth Texas Ponders Scrapping Defined Benefit Pension Plans

California Approaches "Fiscal Meltdown"; Schwarzenegger Declares Fiscal Emergency; Fort Worth Texas Ponders Scrapping Defined Benefit Pension Plans

California is broke Courtesy of Mish 

Governor Schwarzenegger has once again furloughed workers, declaring California is in a fiscal emergency. Excuse me for asking but when has California ever not been in a state of fiscal emergency?

Bloomberg reports Schwarzenegger Orders Furloughs Amid California Budget Impasse

California Governor Arnold Schwarzenegger ordered more than 150,000 state workers to take three days of mandatory unpaid time off to conserve cash.

The executive order, effective Aug. 1, stipulates that the furloughs will end when a budget for the fiscal year that began July 1 is enacted, the governor’s press secretary, Aaron McLear, said in an e-mail. It comes after government workers endured furloughs over almost 12 months that ended June 30.

California began its fiscal year without a spending plan after Schwarzenegger and Democrats remained deadlocked over how to fill a $19.1 billion deficit. Controller John Chiang has warned he may again need to issue IOUs to pay bills if the impasse continues into September.

“Every day of delay brings California closer to a fiscal meltdown,” Schwarzenegger said in a statement today. “Our cash situation leaves me no choice but to once again furlough state workers until the Legislature produces a budget I can sign.”

Fiscal Emergency California Style

The Business Spectator reports California state of fiscal emergency: Schwarzenegger

California Governor Arnold Schwarzenegger declared a state of emergency over the state’s finances yesterday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $US19 billion ($A21.3 billion) shortfall.

The deficit is 22 per cent of the $US85 billion general fund budget the governor signed last July for the fiscal year that ended in June, highlighting how the steep drop in California’s revenue due to recession, the housing slump, financial market turmoil and high unemployment have slashed its all-important personal income tax collection.

In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state’s cash to pay its debt, and for essential services.

California’s budget is five weeks overdue, joining New York among big states with spending plans yet to be approved, and Schwarzenegger and top lawmakers are at an impasse over how to balance the state’s books.


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Here Is Your Economy: Everyone’s Slowing Down, But Apple Is Completely Going Nuts

Here Is Your Economy: Everyone’s Slowing Down, But Apple Is Completely Going Nuts

Courtesy of Joe Weisenthal at Clusterstock 

Well, the after-hours news paints a pretty-much perfect view of the economy. Most earnings continue to disappoint a little: Yahoo, VMWare, etc., all are basically ho-hum.

The exception: Apple, which is going completely bezerk, and is up 3.7% after hours, after killing it on revenues.

Apple’s strong performance is enough to bring the whole market up, but not because it represents anything other than the fact that the company is killing it.


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Arizona Sells Supreme Court Building in 20 Year $300 Million Leaseback Deal for 3 Month’s School Aid

Arizona Sells Supreme Court Building in 20 Year $300 Million Leaseback Deal for 3 Month’s School Aid

supreme court of arizona Courtesy of Mish 

Going into long term debt to pay short-term operating expenses is fiscally unsound. Going into debt for 20 years for 3 months operating expenses is beyond the absurd. Nonetheless, that is exactly what Arizona did.

Inquiring minds are reading Arizona Sells Supreme Court Building in $300 Million Bond Deal.

Arizona, which sold state prisons and offices to raise cash six months ago, plans to borrow $300 million by marketing its Supreme Court building and about a dozen more properties through leaseback bonds starting today.

Investors will hold ownership of the court building in Phoenix, the fifth-largest U.S. city, and the Arizona Schools for the Deaf and the Blind in Tucson for as much as 20 years, with the securities maturing serially from 2012 through 2029, according to offering documents. Lease payments will back the debt, known as certificates of participation.

Arizona, whose foreclosure rate last year was ranked second-highest after Nevada by RealtyTrac Inc., will use the sale to pay for three months of school aid. The state raised $709 million for education payments when it sold and then leased back nine properties to investors in January.

“From an investor point of view, this is great,” state Treasurer Dean Martin, 35, said in an interview. “The state has to have buildings to operate and we’re the largest employer in Arizona.”

Wrong Point of View

Who gives a rat’s ass if "This is great From an investor point of view"?

Here’s what Arizona taxpayers need to decide: "Is this great from ataxpayer point of view?"

Obviously it is not. Just as with other states, this is more kicking the can down the road action in a bury your head in the sand mentality.

Arizona politicians need to accept reality: This economy is going to be weak for a decade thanks in part to refusal of politicians to address fiscal issues, union salaries, and union pensions now.

The problem is not lack of revenue, the problem is state spending gone rampant, with political hacks lacking the discipline to do anything about it. I do not care how favorable the interest rate or other terms are, going into debt for 20 years to get 3 months operating expenses is simply insane.

Mike "Mish" Shedlock


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Six Impossible Things

Six Impossible Things

Opening Night Of FIDM Exhibit For Walt Disney Studios Alice In Wonderland

Courtesy of John Mauldin 

Six Impossible Things 
Delta Force 
Reduce your Deficits! 
Pity the Greeks 
Should the US Bail Out European Banks? 
Italy at Last!

Alice laughed. "There’s no use trying," she said" One can’t believe impossible things."

"I daresay you haven’t had much practice," said the Queen. "When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast."

- From Through the Looking Glass by Lewis Carroll

Economists and policy makers seem to want to believe impossible things in regards to the current debt crisis percolating throughout the world. And believing in them, they are adopting policies that will result in, well, tragedy. Today we address what passes for wisdom among the political crowd and see where we are headed, especially in Europe.

I am reminded of the great line from the movie, The Princess Bride. Vizzini is the short bad guy who is trying to get away from Westley and every thing he attempts does not work. Westley just keeps on coming. At each failed attempt, Vizzini mutters, "Inconceivable." Finally, Vizzini has just cut the rope and The Dread Pirate Roberts (Westley) is still climbing up the cliff.

Vizzini: HE DIDN’T FALL? INCONCEIVABLE.

Inigo Montoya: You keep using that word. I do not think it means what you think it means.

European leaders keep telling us that the break-up of the eurozone is inconceivable. I do not think they know what that word really means. Let’s see if I can explain the problem so that even a politician can understand.

But first, and quickly. We have transcribed the speeches from my recent 7th Annual Strategic Investment Conference I put on with my US partners Altegris Investments. To say they were awesome is somewhat of an understatement. If you have registered for my free accredited investment letter, you should already have gotten a link or will get one soon to the speeches. David Rosenberg, Dr. Lacy Hunt, Paul McCulley, Niall Ferguson, Jon Sundt, Jason Cummins, Gary Shilling and your humble analyst. That is a world class line-up.

If you are an accredited investor (basically $1.5 million net worth) and have not yet signed up for my letter, then go to www.accreditedinvestor.ws and do so now. One…
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Here Kitty-Kitty (CAT)

Here Kitty-Kitty (CAT)

Staring Cat

Courtesy of Karl Denninger at The Market Ticker 

You have to have a rather odd view of "improving" to deal with the report given here as "reflecting economic improvement":

Caterpillar Inc. reported a profit in the first quarter, citing improved economic conditions, particularly in emerging markets, as the heavy machinery maker also raised its forecast for the year.

Ok, so we should have seen a beat on both revenue and earnings, right?  Remember, the first quarter of 2009 was the depth of the recession – the bottom – if you believe the headlines.

So what did we get?

For the first quarter, Caterpillar reported a profit of $233 million, or 36 cents a share, compared with a prior-year loss of $112 million, or 19 cents. Excluding items such as tax charges related to new health-care legislation and prior-year restructuring impacts, per-share earnings rose to 50 cents from 39 cents.

That’s good!  A profit .vs. a loss; exactly what one would expect.  How were revenues? 

Revenue dropped 11% to $8.24 billion.

Analysts polled by Thomson Reuters had forecast earnings of 39 cents a share on $8.84 billion in revenue.

Uhhhhhhhh….. wait a second.

Economic recovery eh?

Machinery sales were down 1% from a year ago – but I thought a year ago was the depths of the recession and we have been recovering since?  So how do we get a negative year-over-year comparison?

Worse, in North America (that’s here!) machinery sales were down 15% with dealer inventories half of year ago levels.  That is, not only is heavy equipment not selling, dealers don’t think it will be in the near future either.  So how did we get big increases?  Asia, up 40%.  Yep, that matters, and it’s what drove the results.

Engine sales were even worse, off 28%, and even in Asia they were down, in that case 15%.

The street is cheering this report on the back of everyone and their brother pumping the company (most especially the fools on CNBS) but the facts are what they are.  With no revenue increases you can argue for improving profit due to firing huge numbers of people all you want, but the top-line, particularly in America, is horribly bad and does not point to any sort of turn-around in construction equipment sales of any sort, nor any improvement in over-the-road trucks and other engine markets (such as marine.)

Disclosure: No position 


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THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

Courtesy of The Pragmatic Capitalist

Investors who are wondering why stocks haven’t rallied this earnings season need look no further than the actual data.  This earnings season is shaping up to be truly spectacular in terms of expectations, but a look under the hood shows that earnings are less than spectacular.  While bottom line growth continues to be robust, the top line growth continues to come in weak (although better than expected).   Not surprisingly, this is in-line with what we have been seeing in segments of the real economy (see “No Recovery On Main Street” for more info).

Earnings season is over half way over and the analysts have never been more wrong.  Thus far, 74% firms have exceeded expectations while just 19% have fallen shy of expectations.  Of course, it’s not unusual for firms to outperform the analysts expectations, but this ratio of 6:1 is practically unheard of.  Zacks investment research notes that the average earnings season sees a ratio of 3:1 which means this earnings season is twice as good as those of the past.  Not only that, but firms are also beating by a much wider margin than normal.  On average, firms beat by 3%, but are beating by 7.5% this earnings season.

Of the firms reporting 72% have outperformed in terms of operating income while only 43% of them have reported earnings that were higher than the same quarter last year.  On the top line, 64% of firms have outperformed this quarter’s revenue estimates while just 27% of firms are reporting higher revenues than the same quarter a year ago.   Margins are coming in at 7.8% vs the 15 year average of 6.6%.  This shows that margin expansion and cost cutting is leading to much of the bottom line growth.

The discrepancy between expectations and reality is nowhere more apparent than it has been in our expectation ratio.  The ratio clearly shows the schism between actual earnings and analysts expectations.  The ratio was essentially flat this week versus last week’s reading, but continues to display a very wide margin between analysts estimates and the underlying income statement components of the ratio.  We would expect the ratio to narrow in the coming quarters as analysts ratchet up their estimates and narrow the divide.  (See here for more on


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Best Buy (BBY) Results Out

Best Buy (BBY) Results Out 

best buyCourtesy of Karl Denninger at The Market Ticker


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BIZARRO MARKET

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BIZARRO MARKET

earnings, cokeCourtesy of The Pragmatic Capitalist

CNBC, Bloomberg, Yahoo Finance, etc are all reporting that companies reported “better than expected” earnings this morning. Let’s take a look at these great earnings:

Coke – $8.27B in revenues vs estimates of $8.66B.   A $400MM MISS.

Caterpillar – $7.98B in revenues vs estimates of $8.86B.    Nearly a $1B MISS.

DuPont – $7B in revenues vs estimates of $7.15B.  A $150MM MISS.

United Technologies – $13.2B vs estimates of $13.92B.  A $700MM MISS.

I can’t ever remember a market where investors turned such a blind eye to top line growth.  It’s truly astonishing.  These are phenomenally bad revenue figures.  There is just no two ways around it.  This trend of rising stock prices on poor underlying earnings cannot and will not last.

Photo: "Coke float," a type of ice cream soda, made with Coca-Cola and vanilla ice cream, by Ginny at Wikipedia.

 


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California impasse ends as Schwarzenegger reaches agreement

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California impasse ends as Schwarzenegger reaches agreement

Arnold Schwarzenegger, CaliforniaCourtesy of Edward Harrison at Credit Writedowns

This came in overnight via the FT.  Most of the shortfall in revenue is made up through spending cuts.  Below are the relevant paragraphs:

The agreement involves cutting nearly $6bn from schools and community colleges and close to $3bn from the state’s university system, although Mr Schwarzenegger said education cuts would be fully “refunded”.

An additional $1.3bn will be cut from Medi-Cal, the health programme for low earners and the poor.

CalWorks, the state’s welfare-to-work programme – and the target of much criticism from Mr Schwarzenegger – will have its funding cut by $528m, while Healthy Families, a programme that provides health insurance for 930,000 low-income children, will be cut by $124m.

The state’s in-home support services programme for the frail and disabled will also have its funding slashed. Mr Schwarzenegger has maintained that the system is a hot-bed of fraud abuses and won approval to begin fingerprinting care-givers and recipients of aid.

Another contentious part of the agreement will clear the way for oil drilling to resume off the coast of Santa Barbara. The prospect of drilling in the area has attracted a lot of criticism and is likely to be fiercely contested by local residents and environmental campaigners.

I should also mention some thoughts from Tim Fernholz via Brad DeLong on why the Federal Government has not given states more money.  He claims it was moderate Senators in Congress who explicitly took out state aid from the February stimulus package.  He writes:

Robert Samuelson, typically known for butchering economics in his column, takes a break today in order to butcher political science. He says the stimulus isn’t working because it is composed of the wrong programs, and he blames President Obama specifically for not including things like fiscal aid to states…. But if Samuelson were to remember what actually happened last February, or even do some superficial research, he’d realize that it was the moderate members of the Senate, led by Sens. Ben Nelson and Susan Collins, who stripped out much of the state funding…. [T]hese senators never did get around to telling anyone the economic logic of their proposal…. So Samuelson will never criticize moderate


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Phil's Favorites

Josh is still bullish, would you buy Airbnb IPO, Dow 30k takes, Tesla added to SPX

 

Josh is still bullish, would you buy Airbnb IPO, Dow 30k takes, Tesla added to SPX

Courtesy of The Reformed Broker

 

 

On an all new edition of What Are Your Thoughts, Michael Batnick and Josh Brown tackle all the biggest topics on Wall Street this week, including:

  • Some notable IPOs are headed our way this December – Wish, Affirm, Roblox, DoorDash and, of course, Airbnb – which would you buy?
  • Dow 30,000 – should round numbers be viewed as important for investors?
  • It might be the biggest merger of the year and almost no one is even familiar with the target company!
  • Tesla is being added to the S&P 500, officially, so why you ...


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ValueWalk

Does the Cleveland Fed's Systemic Risk Indicator Predict Stress?

By Jacob Wolinsky. Originally published at ValueWalk.

Cleveland Fed’s Systemic Risk Indicator is Reliable, Timely, and Valid When Predicting Stress

The Cleveland Fed’s systemic risk indicator (SRI) was developed in response to the financial crisis of 2007-2009 in the hope that it could provide regulators with advance warning of conditions that might warrant a corrective response.

Q3 2020 hedge fund letters, conferences and more

In this ...



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Politics

Socialism is a trigger word on social media - but real discussion is going on amid the screaming

 

Socialism is a trigger word on social media – but real discussion is going on amid the screaming

‘Tug-of-words’ posts debating the merits of socialism versus capitalism are all over social media platforms. pxfuel

Courtesy of Robert Kozinets, USC Annenberg School for Communication and Journalism

The word “socialism” has become a trigger word in U.S. politics, with both positive and negative perceptions of it split alo...



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Zero Hedge

Owner Of NYC Bar Arrested Days After Declaring "Autonomous Zone" To Dodge Pandemic Restrictions

Courtesy of ZeroHedge View original post here.

The co-owner of a bar on Staten Island which declared itself an 'autonomous zone' after its liquor license was yanked over COVID-19 lockdown violations was arrested and perp-walked out of the business in handcuffs on Tuesday night.

Photo via ABC7NY

A...



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Kimble Charting Solutions

Are Commodity Prices About To Let The Good Times Roll?

Courtesy of Chris Kimble

Commodities have traded “heavy” for the past decade, as bond yields remain low and inflationary forces remain under wraps. But this trend could be up-ended as we head into 2021.

Today’s chart 2-pack looks at long-term “monthly” charts of the Thomson Reuters Equal Weight Commodity Index and the 10-Year US Treasury Bond Yield.

Over the past decades, Commodities and Yields have shown weakness. The Commodity Index has managed ...



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Biotech/COVID-19

Rapid COVID-19 tests can be useful - but there are far too few to put a dent in the pandemic

 

Rapid COVID-19 tests can be useful – but there are far too few to put a dent in the pandemic

Rapid tests for COVID-19 are easy to administer and give fast results. AP Photo/Julio Cortez, File

Courtesy of Bonnie LaFleur, University of Arizona and Katherine Ellingson, University of Ari...



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Digital Currencies

Five Reasons Why Bitcoin is Going Up

 

Five Reasons Why Bitcoin is Going Up

Courtesy of 

Call it the “Respectability Rally”…

A few reasons for Bitcoin’s return to the record highs. It’s about $18,500 as of this writing, matching the previous highs from 2017’s original explosion.

Reason one: It’s going up because it’s going up. Don’t scoff, this is the reason most things in the markets happen and then the explanations are called for afterwards. I’m in financial television, I have literally watched this process occur in real-time. The more something moves in a given direction, the more peop...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Friday, 12 June 2020, 08:06:43 PM

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


Comment: Interesting (2)



Date Found: Saturday, 13 June 2020, 12:27:02 AM

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


Comment: Recession Forecasts Time Frame



Date Found: Monday, 15 June 2020, 11:07:52 PM

...

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Mapping The Market

COVID-19 Forces More Than Half of Asset Management Firms to Accelerate Adoption of Digital Marketing Technology

By Jacob Wolinsky. Originally published at ValueWalk.

There is no doubt that the use of technology to support client engagement initiatives brings both opportunities and threats but this has been brought into sharp focus this year with the COVID-19 pandemic.

The crisis has brought to the fore the need for firms to enable flexibility in client engagement – the expectation that providers will communicate to clients on their terms, at their speed and frequency and on their preferred channels, is now a given. This is even more critical when clients are experiencing unparalleled anxiety from both market conditions and their own personal circumstances.

...

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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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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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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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