Weakening Wednesday – Can Yellen Save the Day?
by phil - May 7th, 2014 8:31 am
All of last week, I kept saying the market was only hitting highs because it was being manipulated that way and, by Friday we'd had enough and took our ill-gotten gains off the table once again. This week, it's obvious we're in trouble – but it's a lot harder to sell your stocks when they're already in trouble, isn't it?
It's a very hard discipline to take winners off the table but you should scale out of posiitons on the way up the same way you should scale into them on the way down (and the Strategy Section at Philstockworld has a great article about scaling – also lots of additional commentary in chat below the article).
There's nothing wrong with being in cash. Yesterday, from 1pm until 2:30, we had on of our Live Futures Trading Workshops (replay available here) and our 4 trades made $360 by the close (4pm) for a very nice $100+ per hour salary for just trading a few contracts. Our trade idea from yesterday's morning post (which you can get delivered to you pre-market, every day by SUBSCRIBING HERE) was to short the Nikkei (/NKD) at 14,350 and this morning we hit 14,050 – good for a $1,500 PER CONTRACT profit!
That's one of the things you can do with cash. We also have fun making earnings plays, like the FSLR trade we added to our Short-Term Portfolio yesterday. That trade idea was:
I think it's worth a try at selling 5 July $75 calls for $3 ($1,500) and buying, to cover, 4 Jan $77.50/85 bull call spreads at $2 ($800) for a net credit of $700 – let's do a set of those in the STP.
If FSLR is under $75 (it's about $69 after earnings), we pocket $700 PLUS whatever value remains on the January bull call spread (probably about half). That's against zero cash outlay ($700 credit, in fact) and possibly we'll just take quick money off the table…
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America’s Jobs Losses are Permanent
by ilene - October 29th, 2010 2:23 pm
America’s Jobs Losses are Permanent
Courtesy of PAUL CRAIG ROBERTS, originally published at CounterPunch
Now that a few Democrats and the remnants of the AFL-CIO are waking up to the destructive impact of jobs offshoring on the US economy and millions of American lives, globalism’s advocates have resurrected Dartmouth economist Matthew Slaughter’s discredited finding of several years ago that jobs offshoring by US corporations increases employment and wages in the US.
At the time I exposed Slaughter’s mistakes, but economists dependent on corporate largess understood that it was more profitable to drink Slaughter’s kool-aid than to tell the truth. Recently the US Chamber of Commerce rolled out Slaughter’s false argument as a weapon against House Democrats Sandy Levin and Tim Ryan, and the Wall Street Journal had Bill Clinton’s Defense Secretary, William S. Cohen, regurgitate Slaughter’s claim on its op-ed page on October 12.
I sent a letter to the Wall Street Journal, but the editors were not interested in what a former associate editor and columnist for the paper and President Reagan’s Assistant Secretary of the Treasury for Economic Policy had to say. The facade of lies has to be maintained at all costs. There can be no questioning that globalism is good for us.
Cohen told the Journal’s readers that “the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities.” I bet Buffalo “and other American cities” would like to know where these jobs are. Maybe Slaughter, Cohen, and the Chamber of Commerce can tell them.
Last May I was in St. Louis and was struck by block after block of deserted and boarded up homes, deserted factories and office buildings, even vacant downtown storefronts.
Detroit is trying to shrink itself by 40 square miles. On October 25, 60 Minutes had a program on unemployment in Silicon Valley, where formerly high-earning professionals have been out of work for two years and today cannot even find part-time $9 an hour jobs at Target.
The claim that jobs offshoring by US corporations increases domestic employment in the US is one of the greatest hoaxes ever perpetrated. As I demonstrated in my syndicated column at the time and again in my book, How The Economy Was Lost (2010), Slaughter reached his erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting…
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75 Ways That The Government And The Financial Elite Will Be Sucking Even More Of The Life Blood Out Of The American People In 2011
by ilene - October 22nd, 2010 7:53 pm
75 Ways That The Government And The Financial Elite Will Be Sucking Even More Of The Life Blood Out Of The American People In 2011
Courtesy of Michael Snyder at Economic Collapse
The American people are experiencing financial death by a thousand cuts and most of them don’t even realize it. The U.S. government, state governments, local governments and the financial elite are draining us financially in dozens upon dozens of different ways, and yet we have become so programmed to accept it that it just seems normal to us. 2011 is rapidly approaching, and a whole slate of federal taxes is scheduled to go up, state taxes are being increased from coast to coast, local governments are finding new and creative ways to stick it to us and the financial elite are becoming more predatory than ever.
Meanwhile, the incomes of many average Americans are actually going down. According to the Census Bureau’s annual survey of income and poverty in the United States, of the 52 largest metro areas in the nation, only the city of San Antonio did not see a decline in median household income during 2009. Tens of millions of Americans are flat broke and they are getting pissed off. According to a new poll conducted by CNBC, 92 percent of Americans believe that the U.S. economy is either "fair" or "poor". The American people desperately want someone to fix the economy, but instead our "leaders" are trying to come up with new and creative ways to drain even more money out of us.
In no particular order, the following are 75 ways that the U.S. government, state governments, local governments and the financial elite will be sucking even more of the life blood out of the American people in 2011….
#1 State governments across the U.S. are raising fees and taxes in so many different ways it is staggering. A reader named Richard recently sent me an email in which he described the shock that he experienced when he recently received his license plate renewal notice in the mail….
I just got a license plate renewal notice from the Oregon Department of Motor Vehicles. When I opened the envelope and saw the amount of the renewal, I was shocked. The amount seemed much higher than usual.
I have a computerized record of all my financial transactions over the last many years. I looked up previous DMV license plate renewals and I saw
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How Brazil Can Defend Against Financialization
by ilene - September 23rd, 2010 9:40 pm
How Brazil Can Defend Against Financialization
and Keep Its Economic Surplus for Itself
Courtesy of Michael Hudson
CDES Conference, Brasilia, September 17, 2010
I would like to place this seminar’s topic, ‘Global Governance,’in the context of global control, which is what ‘governance’ is mainly about. The word (from Latin gubernari, cognate to the Greek root kyber) means ‘steering’. The question is, toward what goal is the world economy steering?
That obviously depends on who is doing the steering. It almost always has been the most powerful nations that organize the world in ways that transfer income and property to themselves. From the Roman Empire through modern Europe such transfers took mainly the form of military seizure and tribute. The Norman conquerors endowed themselves as a landed aristocracy extracting rent from the populace, as did the Nordic conquerors of France and other countries. Europe later took resources by colonial conquest, increasingly via local client oligarchies.
The post-1945 mode of global integration has outlived its early promise. It has become exploitative rather than supportive of capital investment, public infrastructure and living standards.
In the sphere of trade, countries need to rebuild their self-sufficiency in food grains and other basic needs. In the financial sphere, the ability of banks to create credit (loans) at almost no cost on their computer keyboards has led North America and Europe to become debt ridden, and now seeks to move into Brazil and other BRIC countries by financing buyouts or lending against their natural resources, real estate, basic infrastructure and industry. Speculators, arbitrageurs and financial institutions using “free money” see these economies as easy pickings. But by obliging countries to defend themselves financially, their predatory credit creation is ending the era of free capital movements.
Does Brazil really need inflows of foreign credit for domestic spending when it can create this at home? Foreign lending ends up in its central bank, which invests its reserves in US Treasury and Euro bonds that yield low returns and whose international value is likely to decline against the BRIC currencies. So accepting credit and buyout “capital inflows” from the North provides a “free lunch” for key-currency issuers of dollars and Euros, but does not help local economies much.
The natural history of debt and financialization
Today, financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still…
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America’s Lost Decade – Another One in Progress Now
by ilene - September 19th, 2010 1:48 pm
America’s Lost Decade – Another One in Progress Now
Courtesy of Mish
The US used to point the finger at Japan’s "Lost Decade" saying "It won’t happen here." But it did. Median wages are nearly 5% lower in real terms than in 2000, the poverty rate is at a 15 year high, and the S&P 500 is about 20% lower than it was a decade ago.
Pleased consider the Wall Street Journal article Lost Decade for Family Income
The downturn that some have dubbed the "Great Recession" has trimmed the typical household’s income significantly, new Census data show, following years of stagnant wage growth that made the past decade the worst for American families in at least half a century.
The bureau’s annual snapshot of American living standards also found that the fraction of Americans living in poverty rose sharply to 14.3% from 13.2% in 2008—the highest since 1994. Some 43.6 million Americans were living below the official poverty threshold, but the measure doesn’t fully capture the panoply of government antipoverty measures.
The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%.
Lost Decade Lowlights
- Americans living in poverty rose sharply to 14.3% from 13.2% in 2008
- Poverty level is the highest since 1994
- 43.6 million Americans are living below the official poverty threshold
- Inflation-adjusted income of the median household fell 4.8% between 2000 and 2009
- The number of 25-to-34-year-olds living with their parents rose 8.4% to 5.5 million in 2010 from 2008
- Child poverty rose to 23.8% for kids under six in 2009, compared to 21.3% a year earlier
Census Bureau Charts
Here are a few select charts from Income, Poverty, and Health Insurance Coverage in the United States: 2009, Issued September 2010.
click on any chart for sharper image
Real Incomes 1967 to 2009
Poverty Rates 1959 to 2009
In general, the chart shows the "War on Poverty" was a failure regardless of what political party was in office. The odd pair of Clinton and Nixon did the best, while Carter and George W. Bush the worst. Reagan and George H. Bush both had roller coasters ending about where they started, while Ford essentially experienced a flatline.
Since the…
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WHY IS DEFLATION BAD?
by ilene - August 3rd, 2010 5:19 pm
WHY IS DEFLATION BAD?
Courtesy of The Pragmatic Capitalist
There’s a pretty standard line from the Austrian economics crowd that deflation isn’t such a bad thing – that it is good for prices to adjust lower and for natural market forces to take control. The truth, however, is that there is very little that is good about deflation. It is destructive economically and psychologically. It can literally destroy economies if it persists. This morning Paul Krugman answered the inevitable question: what makes deflation so bad?
“There are actually three different reasons to worry about deflation, two on the demand side and one on the supply side.
So first of all: when people expect falling prices, they become less willing to spend, and in particular less willing to borrow. After all, when prices are falling, just sitting on cash becomes an investment with a positive real yield – Japanese bank deposits are a really good deal compared with those in America — and anyone considering borrowing, even for a productive investment, has to take account of the fact that the loan will have to repaid in dollars that are worth more than the dollars you borrowed. If the economy is doing well, all this can be offset by just keeping interest rates low; but if the economy isn’t doing well, even a zero rate may not be low enough to achieve full employment.
And when that happens, the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed. That’s the deflationary trap we keep worrying about.
A second effect: even aside from expectations of future deflation, falling prices worsen the position of debtors, by increasing the real burden of their debts. Now, you might think this is a zero-sum affair, since creditors experience a corresponding gain. But as Irving Fisher pointed out long ago (pdf), debtors are likely to be forced to cut their spending when their debt burden rises, while creditors aren’t likely to increase their spending by the same amount. So deflation exerts a depressing effect on spending by raising debt burdens – which, as Fisher also points out, can lead to another kind of vicious circle, in which depressed spending because of rising real debt leads to further deflation.
[...]
Finally, in a deflationary economy, wages as well as prices often have to fall –
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Naked Capitalism and My Scary Minsky Model
by ilene - July 28th, 2010 10:23 pm
Naked Capitalism and My Scary Minsky Model
Courtesy of Steve Keen at Debtwatch
I met with Yves Smith of Naked Capitalism on the weekend, at a superb Japanese restaurant that only New York locals could find (and I’ll keep its location quiet for their benefit–too much publicity could spoil a spectacular thing). Yves was kind enough to post details of my latest academic paper at her site in a post she entitled “Steve Keen’s scary Minsky model“.
Yves found the model scary, not because it revealed anything about the economy that she didn’t already know, but because it so easily reproduced the Ponzi features of the economy she knows so well.
I have yet to attempt to fit the model to data–and given its nonlinearity, that won’t be easy–but its qualitative behavior is very close to what we’ve experienced. As in the real world, a series of booms and busts give the superficial appearance of an economy entering a “Great Moderation”–just before it collapses.
The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.
Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.
There are 4 behavioural functions in the model that mimic the behaviour of the major private actors in the economy–workers, capitalists and bankers. Workers wage rises are related to the level of employment and the rate of inflation; capitalists investment and debt repayment plans are related to the rate of profit; and the willingness of banks to lend is also a function of the rate of profit.…
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Labor Fights Back
by ilene - July 20th, 2010 7:40 pm
Labor Fights Back
Courtesy of SHAMUS COOKE writing at CounterPunch
If the U.S. economy eventually recovers and current trends continue, U.S. workers won’t be celebrating in the streets. The corporate establishment has made it clear that a “strong recovery” depends on U.S. workers making “great sacrifices” in the areas of wages, health care, pensions, and more ominously, reductions in so-called “entitlement programs” — Social Security, Medicare, and other social services.
These plans have been discussed at length in corporate think tanks for years, and only recently has the mainstream media begun a coordinated attack to convince American workers of the “necessity” of adopting these policies. The New York Times speaks for the corporate establishment as a whole when it writes:
“American workers are overpaid, relative to equally productive employees elsewhere doing the same work [China for example]. If the global economy is to get into balance, that gap must close.”
and:
“The recession shows that many workers are paid more than they’re worth…The global wage gap has been narrowing [because U.S. workers’ wages are shrinking], but recent labor market statistics in the United States suggest the adjustment has not gone far enough.”
The New York Times solution? “Both moderate inflation to cut real wages [!] and a further drop in the dollar’s real trade-weighted value [monetary inflation to shrink wages] might be acceptable.” (November 11, 2009).
The Atlantic magazine, agrees:
“So how do we keep wages high in the U.S.? We don’t…U.S. workers cannot ultimately continue to have higher wages relative to those in other nations [China, India, etc.] who compete in the same industries.”
President Obama speaks less bluntly about the wage subject for political purposes, but he wholeheartedly agrees with the above opinions, especially when he repeatedly said:
“We must lay a new foundation for growth and prosperity, where we consume less [as a result of lower wages] at home and send more exports abroad.”
So how will Obama implement his economic vision that inspired Wall Street to give him millions during his Presidential campaign? Much of the work is happening automatically, due to the Great Recession. Bloomberg news reports:
“More than half of U.S. workers were either unemployed or experienced reductions in hours or wages since the recession began in December 2007… The worst economic slump since the 1930s has affected 55 percent of
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UK Roundup: Average Salaries Drop; IMF Downgrades Forecast; Pension Plans Forced to Address Liabilities; Home Prices Drop
by ilene - July 12th, 2010 3:29 am
UK Roundup: Average Salaries Drop; IMF Downgrades Forecast; Pension Plans Forced to Address Liabilities; Home Prices Drop
Courtesy of Mish
Things look pretty grim for the UK judging from a series of articles by the Daily Mail. Let’s take a look.
Average Salaries Drop
Workers pay the penalty for recession as average annual salary drops £2,600 in just SIX months
The average annual salary has dropped by more than £2,600 in the last six months, it emerged today.
New figures reveal employers are still exercising caution, with wages falling across the board from £28,207 to £25,543 – a difference of £2,664.
Salaries in the financial sector appear to have suffered the most – those offered at the point of entry have dropped by almost £12,000.
The figures show that where young bankers could have expected to start on £52,174.43 six months ago, they will probably earn closer to £30,127.60 now.
Will wage deflation morph into outright deflation? Why not?
Property Prices Drop
House prices fall for third month in a row – but Bank keeps rates on hold… again
Property prices fell for the third month in a row during June as the housing market recovery showed further signs of faltering.
The average cost of a home dropped by 0.6 per cent during the month, following a 0.5 per cent slide in May and a 0.1 per cent decline in April, according to Halifax.
The figures, which follow a raft of recent gloomy data on the housing market, will further stoke speculation that the house price recovery is running out of steam.
This is not even a start of what is going to happen. Canada, Australia, the UK, and China all have property bubbles that are about to burst wide open.
New Pension Rules
Brussels threatens final salary pension as EU plans to force firms to cover liabilities
Final salary pension schemes in the private sector could be wiped out by controversial rules drawn up by Europe.
Under new proposals published yesterday, firms will be forced to plough even more money into schemes to cover future liabilities.
They will also have to invest more in the ultra-safe bonds and gilts markets, rather than shares and equities, which carry a greater risk but can give a better return.
The collapse of final salary pension schemes in the last decade has been partly due to the British
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Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails
by ilene - July 7th, 2010 2:55 am
Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails
In his latest post, John Hussman takes a well deserved swipe at illegal Fed operations, Geithner, Bernanke, and Keynesian stimulus.
Please consider a few snips from Implications of a Likely Economic Downturn.
…. With regard to "stimulus" plans, my difficulty with last year’s policies is not so much an aversion to government spending as it is a rebuke of the notion that government spending is by its nature stimulative or beneficial to the economy. The issue is how this real value is used. Is it used to advance socially useful outcomes which private individuals, through some failure of coordination, could not achieve? Or is it used to defend bondholders, industries, and institutions with which the policymakers are most closely aligned?
The Keynesian view is that government spending is simply a monolithic letter "G." Keynes cared little about the productivity or lack thereof to which public resources were devoted, even writing " If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… there need be no more unemployment." The only difference between Keynes and Tim Geithner is evidently that Geithner prefers to place the bottles a bit closer to Wall Street.
…Meanwhile, I continue to believe that both Bernanke and Geithner’s hands should be tied quickly. If we have learned anything over the past 18 months, it is clear that these bureaucrats can misallocate an enormous quantity of public resources with mind-numbing speed. The diversion of public resources to the bondholders of failing financials – to precisely the worst stewards of capital in society – is not stimulative, but ruthless. A second economic downturn should encourage the repudiation of the policies that Bernanke and Geithner pursued during the first.
Basic ethical principle dictates that policy makers should not burden ordinary Americans to pay the losses that well-informed bondholders voluntarily took when they lent money to failing institutions. From my perspective, it is urgent to recognize that Fannie Mae and Freddie Mac obligations are not legally obligations of the U.S. government, that its backing was always at best implicit, and that even the Treasury’s distressingly generous 3-year promise
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site