Bill Cara’s Morning Call
All quiet on the western front, at least so far in the early morning; to the east, not so quiet. In fact, in China today the Shanghai Exchange B-share index sank -4.75% and the Shenzhen Exchange B-share index plunged -7.34%. The Shanghai Composite was down -3.45% and Japan’s Nikkei 225 dropped -1.01%. On the Hong Kong Exchange, the Bank of China dropped -3.95%. Can you feel the anxiety?
It seems that the Chinese monetary authorities are not as happy as the Fed in Washington with the collapse in the currency and excessive speculation that has resulted from economic bail-out money provided by governments for a different intended purpose.
http://finance.yahoo.com/news/Banks-weigh-on-world-markets-apf-295643216...
China may now in fact be ready to take action. If true, the market Bulls had better consider the consequences because the toreros cannot be beaten. The matador has arrived, and at some point the Bull will die. It always does.
At 10:00am this morning, the U.S. Consumer Confidence index for November will be reported by the Conference Board. October’s index, you might recall, was a mess.
http://fidweek.econoday.com/byshoweventfull.asp?fid=438258&cust=mam&year...
The Conference Board's consumer confidence index for October fell more than 5-1/2 points to 47.7 in October. The assessment of current conditions was alarming, at 20.7 for a nearly 2-1/2 point decline and the lowest reading yet of the cycle. The big concern was jobs. The expectations component also fell, down 8 points to 65.7. The drop in expectations was led by a fall in the proportion expecting higher income in coming months and by a larger share seeing a decrease in income.
After the October index dropped so much, reported on Oct 27, the equity market dropped and hit a cycle low the following couple days.
Beware a crisis of confidence building because, other than speculative increases in equity market prices, there is no substantial reason to believe that consumer confidence has been restored in the past four weeks. Even with the DJIA up from 9712.73 on Oct 30 to the 10450.95 close yesterday, which is a gain of +7.60% in just 16 trading sessions, market volume has fallen off a cliff. For example, on Oct 30, the DJIA 30 traded 6.51 billion shares, while yesterday there was just 3.83 bn. On Friday the volume was just 3.75 bn. The majority of that was computer generated.
Computers can buy; computers can sell. All they are doing at this point is following the lead of the monetary authorities. Today, the Chinese monetary authorities have spoken loud and clear. America faces a crisis of debt, and don’t forget which country is holding the bulk of that debt. The Peoples Bank of China does not want to see a lower US Dollar because it is pressuring the Yuan, and bringing with it inflation and speculation. So, today they are making noises in the East…
Have a great day.
CTA Trading Desk Report
With volume on the Big Board dipping below 1 billion for the second consecutive session, the market spent the day running in place (S&P -0.05%) as traders began closing positions, realizing the next couple days will be a real yawner.
While everything on the surface seems peachy keen, big traders are beginning to fear Fed-induced liquidity (via artificially low interest rates) is sowing the seeds for the next future financial debacle. That could cause traders to take profits and sit on the sidelines.
Last week Fed members were out in force, vigorously denying their policies were forcing people to take undue risk that would foster the creation of another bubble. The central bank must be a lender of last resort they argued, making money available to large commercial banks, so they could lend money to businesses to get the economy rolling. That was the pitch. But reading between the lines means they too are concerned that the individual investor, dissatisfied with pathetic money market rates, is now turning to the financial market in search of a satisfactory rate of return on their capital.
Leaving your money in the bank means earning a negative rate of return as the cost of many basic necessities (gas, food, insurance, medical costs, etc.) are rising significantly above the stated inflation rate.
Mom & Pop are not the only people driving markets higher; the advisors they hire to handle their investment decisions are being persuaded to chase performance, buying stocks simply because equities have been advancing. As long as stocks go up, I guess this type of behavior gets rewarded, but what happens when the inevitable market down-draft resurfaces? Well, with fundamentals shaky at best, money managers have no intellectual conviction to hold on to or increase positions once prices start cascading lower. All long-only managers must think they will be able to jam through the doorway at the same time; however, anyone remember how the portfolio insurance strategy of 1985 thru 1987 -- selling futures to offset long stock exposure -- turned out?
Lots of chatter about the seasonally favorable November 1 to May 1 time period. Certainly this has historically been a good time to be fully invested; however this year the “sell in May and go away” tactic would have been a huge drag on that performance, and recently the time-tested strategy to be long during the five days encompassing the end and beginning of each month has also been a big loser. In our view, seasonal patterns are tendencies to be aware of, not something to solely generate investment decisions.
Same levels need to be watched here: S&P 1120 on the upside, and 1080 on the downside.
Have a great evening.
Comments
Obama Jintao Press Conference in Beijing
http://www.youtube.com/watch?v=NxYSduRES1o
Funny how SNL,john Stewart, Rolling Stone all get it.... but the bought and paid for media does not.
Data to watch
Market-influencing numbers today:
08:30 Preliminary Q3 GDP q/q (last 3.5%), Q3 GDP Price Index (last 0.8%), Q3 Personal Consumption (last 3.4%), Q3 Core PCE q/q (last 1.4%)
09:00 Sept S&P/CS Home Price Index (last 146), Sept S&P/CS Composite-20 (last -11.32%)
10:00 Oct Consumer Confidence (last 47.7), Oct Richmond Fed Manufacturing (last 7), Q3 House Price Index q/q (last -0.7%), Sept House Price Index m/m (last -0.3%)
13:00 Treasury's 5-year note auction
14:00 FOMC minutes
Trader Tax studies
Has anyone seen any studies on the ramifications of proposed trader taxes?
It would obviously affect the volume dynamics of HFT trading, and increase the volatility I would think it would whack hard almost all mutual funds (read retirement plans), and at a minimum raise costs on the insurance industry (looking forward to an increase in my car insurance premiums...not)
I just haven't seen any analysis on it.
How now small Dow?
"Even with the DJIA up from 9712.73 on Oct 30 to the 10450.95 close yesterday, which is a gain of +7.60% in just 16 trading sessions, market volume has fallen off a cliff."
Yet we will continue to hear how the market has "come so far" this year. Most people seem unaware that if your stock dropped 30% in 12 months and has come back 25%YTD they are not simply down 5%.
I sold the Vanguard Total Stock ETF (VTI) on 10-15-09 @ 55.60. Yesterday it closed @ 55.69.
For MSM and so many people the Dow's 30 stocks (which have been shuffled many times) remain a yard stick. Amazing!
GDP - +2.8% in line with consensus
Prior
Real GDP - Q/Q change - SAAR 3.5 %
GDP price index - Q/Q change - SAAR 0.8 %
Consensus
Real GDP - Q/Q change - SAAR 2.8 %
GDP price index - Q/Q change - SAAR 0.8 %
Consensus Range l
Real GDP - Q/Q change - SAAR 2.5 % to 3.4 %
GDP price index - Q/Q change - SAAR 0.8 % to 0.8 %
Actual
Real GDP - Q/Q change - SAAR 2.8 %
GDP price index - Q/Q change - SAAR 0.5 %
Highlights
The recovery is not as strong as hoped, based on the latest Commerce Department revision to third quarter GDP. Economic growth was revised downward to an annualized 2.8 percent from the initial estimate of 3.5 percent. The market consensus had expected a 2.8 percent figure for the new estimate. Nonetheless, the third quarter boost is still the first positive number for GDP since a 1.5 percent gain in the second quarter of 2008. The third quarter increase, however, appears to have ended the recession which faded with a 0.7 percent dip in the second quarter.
Turning to inflation, the GDPI price index was nudged down to a 0.5 percent annualized pace and compares to the initial estimate of 0.8 percent and the median forecast of 0.8 percent.
While the GDP revision provides interesting numbers to digest ahead of equity markets open, traders will be wary as there are plenty of other indicators that could move markets today-Redbook, S&P Case-Shiller Home Price Index, consumer confidence, FHFA House Price Index, and this afternoon, FOMC minutes. It's way too early to run out and pick up the turkey and cranberry sauce.
Cara 100 Ratings Changes
Good morning.
New Coverage:
ATVI - Wells Fargo Initiates with an Outperform
ERTS - Wells Fargo Initiates with a Market Perform
GSK - Leerink Swann Initiates with a Market Perform
ICSC-Goldman Store Sales
Released on 11/24/2009 7:45:00 AM For wk11/21, 2009
Prior Actual
Store Sales - W/W change -0.1 % 0 %
Store Sales - Y/Y 2.4 % 3.3 %
Highlights
Easy year-over-year comparisons look to make for strong mid-single-digit gains for November same-store sales, according to ICSC-Goldman. The week-to-week pace in the Nov. 21 week was unchanged but not the year-on-year pace which rose nearly 1 full percentage point to plus 3.3 percent for the best reading in more than two years. The report sees this rate increasing in the Nov. 30 week, predicting strong sales on what it calls "Bargain" Friday and also strong sales on the following Saturday. But year-on-year comparisons are not what the financial markets move on. It's month-on-month that counts. Redbook, up at 8:55 ET, does offer a November-to-October measure.
Corporate Profits
Released on 11/24/2009 8:30:00 AM For Q3:09
Prior Actual
After-tax Profits - Y/Y change -19.2 % -7.2 %
Definition
Corporate profits, as reported by the Bureau of Economic Analysis (BEA), are summarized briefly as the income of organizations treated as corporations in the national income and product accounts. The BEA reports several measures of profits. Profits from current production (corporate profits with inventory valuation and capital consumption adjustment), are also known as operating or "economic" profits. Capital consumption adjustment deals with the differences in depreciation allowances used for accounting and income tax purposes. Inventory valuation adjustment (IVA) deals with the difference in measuring the cost of inventory replacement. Book profits amount to operating profits subtracting out inventory valuation and capital consumption adjustments. After tax profits are book profits after taxes are subtracted. The Econoday reports will focus on after tax profits reported by the BEA, since these are the most relevant.
U.S. Economy Expanded at a 2.8% Annual Rate in Third Quarter
By Timothy R. Homan
Nov. 24 (Bloomberg) -- The U.S. economy expanded at a 2.8 percent annual rate in the third quarter, less than the government reported last month, reflecting a smaller gain in consumer spending and a bigger trade deficit.
The increase in gross domestic product from July through September reported today by the Commerce Department in Washington compares with a 3.5 percent gain previously estimated. Corporate profits climbed by the most in five years.
Smaller increases in spending show the U.S. was dependent on government stimulus programs to help dig the world’s largest economy out of its worst recession since the 1930s. Growing profits lifted purchases of equipment and software, indicating investment by companies such as Verizon Communications Inc. will help make up for smaller gains in household purchases as unemployment mounts.
“We expect profits to continue climbing this quarter as GDP rises further,” Joseph Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “This will add momentum to the recovery by motivating firms to expand and hire again early next year.”
The pace of growth matched the median forecast of 78 economists in a Bloomberg survey. Estimates ranged from gains of 2.4 percent to 3.5 percent.
The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947.
Upcoming Revision
The GDP report is the second for the quarter and will be revised in December as more information becomes available.
Consumer spending, which accounts for about 70 percent of the economy, rose at a 2.9 percent pace, less than forecast, following a 0.9 percent decrease in the prior quarter. Spending added 2.1 percentage points to GDP. Purchases were forecast to climb 3.2 percent, according to the survey median.
“The recovery did not begin as strongly as first thought,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “The evidence is still positive and continues to point to a nascent recovery, but the feeble strength of spending in the recovery clearly suggests that strong policy support will be needed for some period of time.”
Much of the boost last quarter was provided by the administration’s auto-incentive program known as “cash for clunkers,” which offered buyers payments of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan, which ended in August, boosted sales by about 700,000 vehicles, according to the Transportation Department.
Profits Grow
Third-quarter corporate profits, reported for the first time today, increased 11 percent, the biggest gain since the first three months of 2004.
Productivity gains are boosting company earnings as payrolls are reduced. Labor costs fell at a 5.2 percent rate last quarter, capping the biggest 12-month drop since records began in 1948, Labor Department figures showed earlier this month. Productivity, a measure of employee output per hour, surged 9.5 percent in the third quarter, the fastest pace in six years.
The economy has lost 7.3 million jobs since the recession began in December 2007. Payroll cuts peaked at 741,000 in January. The economy lost 190,000 jobs in October.
The unemployment rate last month reached a 26-year high of 10.2 percent, up from 7.6 percent from when President Barack Obama took office in January.
Unemployment Forecast
Economists surveyed by Bloomberg this month forecast the jobless rate will remain above 10 percent through the first half of next year.
The Fed’s preferred inflation gauge, increased less than forecast. The measure, which is tied to consumer spending and strips out food and energy costs, rose at a 1.3 percent annual pace following a 2 percent increase in the prior quarter.
Trade subtracted 0.8 percentage point from third-quarter GDP. The gap between exports and imports climbed to $358 billion at an annual pace.
Today’s report showed purchases of equipment and software increased at a 2.3 percent pace, more than the Commerce Department estimated last month.
Verizon, the second-largest U.S. phone company, has committed to spending $23 billion through next year on high- definition television and Web service. The New York-based company last month reported third-quarter profits that topped analysts’ estimates.
Leaner Inventories
Inventories dropped at a $133.4 billion annual pace, more than first estimated. The decrease was still smaller than the record $160.2 billion decrease in the second quarter. Leaner stockpiles set the stage for recovery in production.
The improving economy, cost-cutting and higher productivity have helped companies from Saks Inc. to Campbell Soup Co. turn a profit. The world’s largest soup-maker said yesterday that first- quarter profit climbed 17 percent.
“Increased productivity in our supply chain” contributed to profits, Douglas R. Conant, president and chief executive officer of Campbell, said in a statement.
The economy will likely expand at a 3 percent annual rate from October through December, the median forecast in a survey earlier this month showed. GDP will grow 2.6 percent next year and 3 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades.
MORE COUNTERPARTY PLEASE
ALOHA!!
Picking up bits and pieces here and there, using the US Treasury Daily Statement as a monetary theory basis, even though it is flawed accounting as my own Senator has reported back to me in his letter dated Nov 16th, regarding the ever expanding UNCLASSIFIED line item.
Now SEE thats what I don't get about his explanation. If indeed that UNCLASSIFIED line item is a "clearinghouse" of sorts for benefit checks etc as Senator Akaka explains then why does that number continue to expand every day? For instance at the end of FY 2009 the UNCLASSIFIED line item number ended at $547BIL USD. As of Friday, Nov 20th for FY 2010 the UNCLASSIFIED line item number is at $65BIL USD and growing every day. What exactly is being "cleared" in a clearinghouse that never "clears"? My eyes tell me the answer is NOTHING! So to me the UNCLASSIFIED line item is just yet another "blackhole" for ever rising outlays that not even my own Senator knows what dwells within and he sits on the Senate Banking Committee. The same Committee that will be grilling Bernanke on his "reappointment" soon. More of the usual MONEY MONOPOLY rewards for failure. That, by the way, is a trait of a MONOPOLY not a free market, where failure is continually rewarded until collapse. More and more my indicators point to the only "RESET BUTTON" left is "collapse" ... "default"!
Now I am seeing bit by bit more tell-tale signs of the mainstream media mentioning some of my usual fare ... "marketable" US DEBT. Here is an instance from the NY Times, that will sound very familiar to my REVENUE BREAKDOWN readers over the past 30 weekly issues.
"Treasury officials estimate that about 36 percent of the government’s marketable debt — about $1.6 trillion — is coming due in the months ahead."
There it is a reference to the US Treasury Daily Statement, "marketable". What is the opposite of "marketable"? Hummmm ... now that is where the GARGANTUAN liabilities lie in the "non-marketable" IOUs to the American people. As of last Friday that is now at $6.7TRIL USD. So as I see it the "marketable" US DEBT is being used to leverage the "non-marketable" US DEBT at a rate of 6 times, actually the numbers show 5.9 times. If you think of non-marketable being all the "promises and guarantees" that the US Congress has been using to keep the TWO PARTY MONOPOLY in power then you better see where "true loyalties" lie.
Even Tyler Durden sees what I have been seeing as to the true reason interest rates are so low and will have to be kept low for as long as the MONEY MONOPOLY has the power to do so ...
As the assets on the US balance sheet become increasingly long-dated, courtesy of QE, and locking in record low rates, US liabilities in turn have shortened their duration to a record level. Almost $3 trillion in US debt will have to be rolled by the end of 2010.
But how does the US Treasury pay for existing debt payments? They issue NEW DEBT, as I have said many times this is exactly why US INCOME TAX does not matter any more and why I say it is only prudent to eliminate US INCOME TAX, it is simply irrelevant due to exponential debt expansion. Total US tax revenues only cover 3% of total US DEBT and total US OUTLAYS based on end of year FY 2009. Total US DEBT plus total US OUTLAYS came to $59.1TRIL USD in FY 2009. Total "NET"(revenues minus refunds)US TAX REVENUES for FY 2009 came to $1.55TRIL USD. So in reality $1.55TRIL is only 2.7% of $59.1TRIL. Now what would happen to the share prices of XOM or MSFT or GOOG if only 2.7% of their revenues covered their overhead and debt? What would happen to you and I if 2.7% of our income covered our overhead and debt? Yeah ... two letters come to mind ... B and K! In 1835 the US Treasury revenues covered all outlays 100%, that's called ZERO DEBT! It is now down to 2.7%, which almost matches whats left of the the US Dollar's purchasing power roughly 4%. I don't know about you but that's the reason I don't vote the TWO PARTY MONOPOLY into power any more. I try not to reward fiscal incompetence and fraud.
Keep in mind the US Treasury has to roll over some $5TRIL worth of US DEBT next year. Will they want to roll it over at 1% or 8%? That's a hard one to figure out! NOT!!
So in reality where is the monetary "safe haven"? Is it in a debt derivative? Or is it in a "liability free/debt free" derivative? Hummmm???
Re: Obama Jintao Press Conference in Beijing
I go with suspicious (the in-bedded, literally, media) bordering on ridiculous myself...you go with who you want...I am sending out wedding invitations soon as it appears there will be a marriage, oh wait, there may be a divorce! Oh well, HB&B tried to save their relationship with the American republic, but the world threw cold water on it.
Economic Data
I know the GDP revision was bad, but the other reports out today (Case Shiller, Retail Sales, etc) were actually pretty good. I would still be cautious going crazy on the short side. However, with the action in Asia, I think the chance for a nasty selloff is rising. I'll be looking to hedge my long positions today with some SPY puts.
Redbook
Released on 11/24/2009 8:55:00 AM For wk11/21, 2009
Prior Actual
Store Sales Y/Y change 2.0 % 2.8 %
Highlights
Retail sales are very strong this month, up 2.8 percent in the Nov. 21 week vs. the year-ago week, according to Redbook's same-store sales tally. In a month-to-month look, Redbook sees big gains for November, at 4.8 percent compared to October. The report said seasonal goods are in demand. This time next week, Redbook, together with rival ICSC-Goldman, will be posting results for the big Black Friday weekend.
S&P Case-Shiller HPI
Released on 11/24/2009 9:00:00 AM For Sep, 2009
Prior Actual
S&P/Case-Shiller Composite 10 157.93 158.61
S&P/Case-Shiller Composite 20 146.00 146.51
Highlights
Home prices continue to improve according to Case-Shiller data. The report's index for the top 10 cities rose 0.4 percent in September, on the low side of what is a long strong string of improvement. Year-on-year rates continue to improve, now down to single digit contraction at minus 8.5 percent for the 10 index. A look at the quarter-to-quarter rate shows steady improvement, at plus 3.1 percent for both the third and second quarters. Improvement is especially evident in the West and Florida, high flying areas hit hardest by the housing downturn. This report, noted for its vigorous methodology, continues to contrast with price data in the existing home sales report where contraction, though slowing a bit, is still underway. New home sales data for October will be posted tomorrow. Prices in this report did show improvement in September.
JPM Chase Credit Card letter. higher APR or close card
i wanted to make sure you all knew, when a cc co. gives you the option of A) staying but at a higher variable rate or B) closing your account, you can choose to stay at the current rates and pay off the card (choice B), as long as you decide to opt out of the higher rates by the deadline.
The card basically becomes null, but you pay off your balance as you would prior. For me I will likely do this as I transfered a small balance to an attractive zero pct 12 month and will pay it off over 3-4 months.
I will have to simply get a better credit card moving forward or just go without one. But i find it convenient to at least have 1 card for emergencies.
As an aside, i asked why they are jacking up rates. They said the cost of running a credit card company has risen and they need all the help they can get. I replied "Wasn't my tax payer bailout enough?" She then said, "we didnt get bail out funds"
"Excuse me? did i hear you right? you are JP Morgan Chase no?"
"Oh but we returned that money"
this system is going to come crashing down very very hard. As I would have suspected that consumer credit retraction had already peaked. But it looks like it hasnt.
Don't forget to go Black Friday shopping! In the spirit of, I will be selling un-used items/coats/trinkets on ebay, vs consuming.
CDS COUNTERPARTY RISK
ALOHA !!
Consider who will pay out these CDS bets. In the case of AIG it was the US Taxpayer who ended paying off JP Morgan and Goldman Sachs winning bets!
Now there is clearly growing CDS risk on Sovereign Debt.
The mounting level of debt in the industrialized world is prompting a growing number of investors to use the derivatives market to bet on the chance of rich governments defaulting on bonds. The volume of activity in sovereign credit default swaps – which measure the cost to insure against bond defaults – linked to the US, UK and Japan have doubled in the past year because of concerns about their public finances.
Gary Jenkins, head of fixed income research at Evolution, said: "The biggest single risk hanging over the bond markets is the rapid rise in public debt in the industrialized world. "If we get to a point where the market thinks the levels of debt are unsustainable, then we will see an almighty sell-off in the government bond markets, with yields soaring. Governments need to take action to cut deficits and debt." Fitch Solutions, the data arm of the Fitch Group, said that there is almost as much uncertainty in the CDS market about the outlook for the developed economies and their bond markets as there is for emerging economies.
With "yields soaring" ... Does that mean "safe haven"? When your credit card rates go up does that mean the bank considers you a "safe haven"!
As I scan the data on CDS Sovereign bets I see that only three countries have actually seen bets against their "default" drop compared to a year ago. Those countries are Russia, Brazil and Ukraine. Compared to 2006 numbers only Russia and Indonesia show less CDS risk betting in terms of gross notional CDS volumes. Don't try to use "fundamentals" when it comes to assessing CDS "bets" though. Perhaps the reasoning is that Russia is technically already BK, so why beat a dead horse, as there would be few willing to take the other side of that bet. Like betting that my 81 year old Mother could outrun an NFL wide receiver. I will bet on the NFL guy! But just my luck on the day of the race he is locked up in jail!
Cara 100 Update
Downgrades:
DELL - to Market Perform @ First Global
SAP - to Underperform @ Wedbush Morgan
PT Raised:
WMT - numbers increased at UBS. Shares of WMT now seen reaching $64. Estimates also raised, to reflect improving fundamentals and better expense management. Buy rating.
Other Stocks of Possible Interest:
NEM - PT Raised from $50 to $65 @ Credit Suisse. Outperform
Re: JPM Chase Credit Card letter. higher APR or close card
ALOHA !!
NYU posted - "The card basically becomes null, but you pay off your balance as you would prior."
I can think of no better way to create a crap load of "jingle mail" credit card style than doing what JPM and others are doing. If you can't have credit then why pay the balance, especially if you are unemployed or under-employed? I predict credit card delinquencies at record rates based on this new policy.
I personally would not use a credit card, just a debit card in protest. See what that does to JPM revenues!
NYU you should have asked the phone lady when JPM intends to pay off the $134BIL "tax payer backed loan"(outside TARP)from the Bear Stearns deal ... She would not have her cozy job if it were not for US Taxpayer bailouts. JPM and GS certainly qualify for the GREEK version of the ALL TIME HUBRIS AWARD! There is growing bank rage by the nano-second ... Multiple your negative experience 100 million times!
el mas chingon
dont front,
i just sold out of half my gold miners position yesterday before market close,
bought some GTU (gold bullion play) and will look to reload the remaining cash position on any pull backs which may or may not come.
i have a disturbing feeling that gold is looking ripe for a quick and sudden down surge. though ive had this since $980 gold. go figure!
mostly long, but building a bullion and partial cash position in case of a downdraft.
my key is a sudden spike at the open followed by a grind lower the rest of the session all on average volume.
good luck.
Re: JPM Chase Credit Card letter. higher APR or close card
Its really a mess. 99% of my spending happens on debit as well.
The sad part is many consumers will just ignore the mail and be switched over to the higher rates.
China Market Strategy
The Credit Suisse China Desk is maintaining an OVERWEIGHT rating, and has reported today as follows:
• Of the 80 largest China stocks listed in Hong Kong, 25 are trading at share prices 33% below their peaks in 2007 - the peak of the immense bubble. Stocks with good secular growth story generally trade at very demanding valuations.
• An increasing number of investors are focusing on tier-two stocks, with cheap valuation and decent earnings growth in the next one-two years.
• We screened China stocks for the following criteria and came up with 13 names: 1) rated OUTPERFORM by CS analysts, 2) with 2010E P/E lower than 12x, and 3) with simple average EPS growth in 2010 and 2011 higher than 15%, and no EPS decline (expected) in either year.
• Among these 13 stocks, Peak Sports, Shanshui Cement, Perfect World, China Construction Bank and KWG are rated as the top picks by the relevant analysts in their sectors.
It’s hard to disagree with anything here except that China’s central bank today has issued a warning against speculating in the market. They will force a clamp-down on loans for trading. That move, should they follow through, would likely strengthen the Yuan and U.S. Dollar, all of which would take the bloom off the rose for a couple months.
As you know, timing is everything. Just 100 minutes before the close today, the Shanghai index was up; but then the central bank had a lot to say and the index closed down -3.5% a few minutes later. Listen up people.
IWM Puts
Bought $63 Jan Puts on IWM at $4.81 average. I want downside protection and this index has been the weakest so I figured why not start there?
Consumer Confidence - 49.5 vs 47 consensus
Released on 11/24/2009 10:00:00 AM For November, 2009
Consumer Confidence - Level
Prior 47.7
Consensus 47.0
Consensus Range 44.0 to 47.0
Actual 49.5
Market Consensus Before Announcement
The Conference Board's consumer confidence index for October fell more than 5-1/2 points to 47.7 in October. The assessment of current conditions was alarming, at 20.7 for a nearly 2-1/2 point decline and the lowest reading yet of the cycle. The big concern was jobs. The expectations component also fell, down 8 points to 65.7. The drop in expectations was led by a fall in the proportion expecting higher income in coming months and by a larger share seeing a decrease in income.
Did it ever happen before?
10:00:49 AM
FDIC Deposit fund had negative $8.2B balance in Q3
Re: MORE COUNTERPARTY PLEASE
Ah ha, go on, go on, what are you trying to say? I don't buy for a second that our government would mislead us. Especially, since they just want us to have wealth and such...it will be a sad day when they think they can get away with something as obvious as misrepresenting facts to the public. Finally how can you irresponsibly say things like our government is dishonest, why John M. Keynes would disagree or at least his image handlers would suggest this...invested interest want to know were are you getting your facts anyway; sounds like your just making this stuff up! How can you have the audacity to bite the hand that feeds you when you know many people are hungry and wait for nanny to feed them...Good stuff all and all!
Music to my ears, but
Today’s report showed purchases of equipment and software increased at a 2.3 percent pace, more than the Commerce Department estimated last month.
I wonder if we should always take the GDP seriously? Part of me wants to think not, but what signals do the inside circle use to make long term investments?
edit: Salesforce.com is showing relative strength...this is to me a company to watch in the IT space...just my opinion however.
Re: Did it ever happen before?
Found answer: not since 1992:
US) FDIC Q3 Troubled Bank List: 552 v 416 q/q; highest amount since 1993
- Total assets of problem institutions $346B v $300B q/q
- Deposit insurance fund -$8.2B v $10.4B q/q; first negative balance since 1992
Re: Did it ever happen before?
Prob a non-event. Market seemed to do quite well after that happened in 92.
Re: Did it ever happen before?
Prob a non-event. Market seemed to do quite well after that happened in 92.
Those jokers at CNBC are at it again....
In their latest commercial, Dennis K. asks Steve G. " Will we see Dow 11,000 before years end ? "... Then Steve is shown answering " I do believe we will see the mid-eleven-hundreds " (obviously his answer to the S&P forecast, not the Dow )... They never quit....
Re: Did it ever happen before?
Maybe we can be happy that the market doesn't care, but that doesn't make it a "non-event."
Re: JPM Chase Credit Card letter. higher APR or close card
Anecdotal of course, but, I have the luxury of not paying them one single dime, used to be a penny, back. I have put down my foot. Will they feel my effects? I think not, but I can't help but feel there are others who are reasoning the same way "they stole my money, honey, I will just take it back, what are they going to do?"
S&P on the banks.
"Most global banks are still unsafe, warns S&P.
Every single bank in Japan, the US, Germany, Spain, and Italy included in S&P's list of 45 global lenders fails the 8pc safety level under the agency's risk-adjusted capital (RAC) ratio. Most fall woefully short. "
http://tinyurl.com/yjuy38u
Good to see that Cara100 member HSBC is rated as the safest of the Global banks.
Edit: justed added this link of the Government Risk Index ,a quote from the link being
"CDS spreads on Japan, the US and the UK have risen by over 40% since October 1, according to CDR"
http://tinyurl.com/yfu2cfh
All this is in stark contrast to what FEtv and their guests espouse day in day out.
Uh-oh spaghetti-o's. Obama approval rating below 50
all time low.
http://bit.ly/66zuM4
http://bit.ly/5CmnGN
Re: China Market Strategy
Bill, thanks so much...this is very good news for me personally...the big boys are swinging freely in the wind, as in come on Tracy, get a clue!
edit: also, this was very timely and relevant.
edit,edit: FD: purchased 100 more shares of UUP...hope she(old habit)takes of soon...I feel the risk/reward is good, if not my stop, which I hope turns into a trailing stop,will help protect my capital. I hear protecting capital is wise. To be a risk taker or not, that used to be the question.
Re: Uh-oh spaghetti-o's. Obama approval rating below 50
Proof of concept Bill!
The Chart Pattern trader videos
Thanks NYUGrad for posting the links yesterday.
His TA is very sound and consistent with what I know about TA.
However, if he is such a successful trader, why he keeps asking for donations?
I'm a born skeptic but still...
Re: The Chart Pattern trader videos
TANSTAAFL
Re: The Chart Pattern trader videos
First off, I can only hope to be as good technical analyst one day, although it gives me a head ache. Don't get me wrong, I feel it is very important and am making good progress although the steel plate in my head...joking only!
Second, I too wondered why this guy is constantly, or so it seems, asking for a contribution...what skeptic would not run with that. I wonder if his business model or his skill set sets, sorry for that play on words, him up for disappointment when dealing with human nature. I recognize that human nature can be beautiful and quixotic in character.
DBV, Currency ETF Analysis
Our fellow Caraista Seamus has written a great article on the DBV currency ETF, "An ETF For The New Carry-Trade, Analysis". He dissected DBV upside down.
This ETF is likely not what you think it is. It is leveraged 2:1 or 1.66:1 (!) and keeps rebalancing the currencies in its basket depending on the current interest rates of each country, which is a neat idea. Here it is: http://shockedinvestor.blogspot.com/2009/11/dbv-et...
Re: The Chart Pattern trader videos
This is the very reason I don't blindly listen to anyone. It's just a tool among many in the box.
Don't Be Shocked
If we go green today. The market looks very strong still. Jobless claims out tomorrow and there is no reason to get overly bearish.
Re: Don't Be Shocked
My shorts would love the red perhaps, but my longs agree with you because they see business doing what business does. Curious, what are you basing your take on? Thanks in advance, if you find the time.
Re: Don't Be Shocked
TN - Honestly, I'm split right down the middle and my positions are that way as well. I can't seem to get a good take on things lately so I've been trying to sit on my hands. If I had to bet I would say the downside has more strength over the next couple of months when I look at the divergences going on in the markets, but the low volume makes it easy for the bulls (Fed).
I do see some nice small caps making some good moves so I might put some money to work in those.
Re: DBV, Currency ETF Analysis
Nice article by Seamus.
Also want to note that the charts of rates by central banks are from http://tradingeconomics.com/.
A really nice site for world data as just discovered. Thanks.
Re: Don't Be Shocked
They had a trader that pushed small caps this morning on CNBC and now Rick is pushing commodities, along with Gartman and gold. Truthfully, I don't watch it nearly like I used to...less painful and screeching too. I guess I like playing with fire myself regarding small caps, but have been lucky so far, emphasis lucky. I hope, there is that word, that the scenario you refer to and I think back a while too, does unfold so that I can increase my confidence or at least gain some grounded experience...this crap that passes for price discovery is troubling to be kind.
Re: Don't Be Shocked
I still think people are way too bearish on the markets and our economy for it to surprise to the downside. I just don't see a crash coming. We have already had that. There are very few people who actually believe in this rebound and I think it's foolish to think the markets can't go higher because they know everything is bad. Profits have been surprisingly strong and all of the equity issuances by the banks has helped out far more than people think. Things to me seem a lot more normal than what we have seen over the past 2 years, which means to me that it's going to be harder to make money.
People look at the 0% return on shorter bonds and automatically assume risks are rising. Well, look at when the yields started crashing again. It coincides with when the markets found out that the Fed doesn't plan on raising rates any time soon. I'm convinced that the banks are being forced to hoard Treasurys to show that they have liquid risk-averse assets on their books. So I wouldn't read into what is going on with Treasurys too much.
If a crash happens then it happens. But I will keep a little bit in my account as a hedge just in case. I still doubt this outcome though.
Re: Don't Be Shocked
At the same time I'm watching some troubling price action in Japan and can't help but think it will have some affect on the U.S. markets. Japan structurally is worse off so again I don't think it makes sense to put too much emphasis on it.
As you can see, I'm finding it to be a very confusing time. Prices keep going up, yet the financials, small caps, and semis are not performing well. At the same time the large cap defensive stocks are doing well yet so too are tech and materials. So what gives? I can't really answer that right now and anyone that implies they understand is not telling the truth. If you're short you're losing money. If you're long there is a chance you have been losing money lately (unless you're 100% in WMT and PG and XOM and POT). I think it makes sense to stay in cash until you can figure it out. I currently have about 80% of my accounts in cash and am only day trading and making small, risk-averse moves.
Re: Don't Be Shocked
I have often wondered about the bond situation...your take sounds as sound as any. It does make sense empirically and otherwise, not that I am wearing a forensic hat, that the spread is enticing for them and the Fed is jawboning them being careful not to spill a drop of their precious liquid assets.
Lets hope, :->, we are correct. You are definitely zeroed in and thanks for sharing.
bcon gets doe grant
...
Re: Don't Be Shocked
One other thing - regarding the underperformance of the Russell 2000...I think it's all because of the dollar. The big caps have outperformed small caps I think because people are seeing that the falling dollar is better for companies with international operations. A lot of the companies in the Russell 2000 have an international presence but not nearly as much as the S&P 500. So while the dollar continues to have pressure on it, so too will IWM relative to SPY, in my opinion, until there is evidence that the economy is rebounding quickly.
Re: Don't Be Shocked
Thanks...another misconception bites the dust!
I am grabbing me some food...be back later...thanks again.
Re: Economic Data
Perhaps enough people have come to realize the government data are all so skewed as to be meaningless that even the "less bad" or those "beating analysts expectations" cannot move markets in any way.
Perhaps those who tinker with reality will eventually understand that "reality" rules after all.
Shanghai Composite
I was looking at the overseas markets and noticed that the Shanghai Composite dropped 4.5% intra day...that's quite a drop. Granted it's up so much this year and its still in a clear up trend, but it gives you an idea of how volatile the overseas markets are...
coming close
to a smoothing transition on trend lines... I was waiting for the 9 range, but things may change.. ener
“a good man who could tell a knife from a fork was hard to find”
WSJ had an article this morning regarding the government plan to set compensation for companies like AIG.
No, I’m not mentioning this to debate the good and/or evil of the G bailing out AIG. It is what it is and that’s where we are today.
However, when I continually read or hear talk, of HB&B or AIG or whomever, about they’re very worried about “an exodus of talent” by their people (those who brought us the financial crisis in the first place) and they can’t be replaced, will go to the competition, etc. etc., I think of that little nugget Alan Abelson (Barrons) noted in his November 16th column on AIG bonuses:
“But the honey pot wasn't restricted to the command corps. A kitchen assistant got $7,700; a filing clerk, $700. Even in the midst of a horrendous recession and widespread joblessness, a good man who could tell a knife from a fork was hard to find. Don't misunderstand us, please: We think the kitchen helper and filing clerk deserved every dollar they got. Too bad we can't say the same about their titular superiors.”
Re: “a good man who could tell a knife from a fork was hard ...
I think HB&B pays all its staff well, to ensure there is no discontent or dissent from within, and no whistle blowers.
FED MINUTES - Fed sees slow recovery holding jobless rate high
Some worry about whether the economy could recover without government aid
WASHINGTON (MarketWatch) -- Federal Reserve officials believe the recovery is going to expand at a slow rate while unemployment will continue to remain high, according to the minutes of their closed-door Nov. 3 and Nov 4 meeting released Tuesday.
The Fed forecast that the U.S. unemployment rate could stay elevated in 2010 in the range of 9.3% to 9.7% and would only drop modestly to 8.6% in 2011, according to the summary of the latest meetings. The unemployment rate hit 10.2% in November, a 26-year high. The Fed forecast in June that the unemployment rate could hit a range of 9.5% to 9.8% in 2010 and 8.8% in 2011 in a slightly more negative projection.
Federal Reserve officials held a wide variety of opinions about the economic outlook and the central bank's policies at the November meeting.
At the end of its meetings, the Fed decided to keep interest rates at record lows. As expected, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. The votes for these policy actions were unanimous.
Most members forecast that the unemployment rate would remain quite elevated over the next couple of years while the level of inflation remained below the central bank's objective levels.
Participants agreed that the economy will continue to recover in subsequent quarters. However, some members of the committee expressed concern about the ability of the economy to generate a self-sustaining recovery without government support.
According to the summary, members noted that it was not clear how much of the recent improvement in the housing sector, consumer spending and general economic conditions reflected the effects of temporary fiscal programs to help the auto and housing sectors.
Some members said they view the improvements as "tentative," noting that the pending termination of a temporary tax credit for first-time homebuyers, increasing foreclosures and the winding down of a Federal Reserve mortgage-backed purchase program, could dampen the recovery.
The Fed is in the midst of purchasing $1.25 trillion in mortgage-backed securities and $175 billion in so-called agency debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which finance mortgage purchases.
Members discussed the possibility that the recovery could resemble the past two recoveries, which they characterized as having a slow pace of hiring for a time even after aggregate demand picked up.
Mortgage-backed security purchases
One of the key government support programs is set to be completed at the end of the first quarter of 2010. All members of the Fed reaffirmed the central bank's September decision to extend its purchases of mortgage-backed securities and asset-backed securities into the first quarter of 2010 to "smooth" them out and avoid any sudden end that might jolt markets."
So far, the agency has settled its purchases of roughly $847 billion in mortgage-backed securities, already more than two-thirds of its intended goal, according to a Federal Reserve statistical release on Thursday.
Members also reiterated their intention to gradually slow the pace of the purchases. They also agreed to evaluate the timing and overall amounts of purchases "in light of the evolving economic outlook and financial market conditions.
The Fed decided in its meeting to drop the total amount of purchases of agency debt to $175 billion from $200 billion.
2009 unemployment estimate
The FOMC estimated that the unemployment rate for 2009 would reach 10.1% -- less than the actual 10.2% unemployment rate recorded in November. Michael Feroli, an analyst at J.P. Morgan Chase Bank, noted that the Fed's open market committee did not have October payroll report at the time of their meeting to discuss these economic projections
Idiots are back at it
(US) House Democrats are drafting a 0.25% tax on financial transactions, aiming to raise $150B/year - thehill.com
- Under a bill being drafted by Democratic Reps. Peter DeFazio (Ore.) and Ed Perlmutter (Colo.), the sale and purchase of financial instruments such as stocks, options, derivatives and futures would face a 0.25% tax.
- The bill, a copy of which was obtained by The Hill, is titled the "Let Wall Street Pay for the Restoration of Main Street Act of 2009."
- Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a job creation reserve to support new jobs.
***Insight: A Tobin tax is the suggested tax on all trade of currency across borders. Named after the economist James Tobin, the tax is intended to put a penalty on short-term speculation in currencies. The original tax rate he proposed was 1%, which was subsequently lowered to between 0.1% and 0.25%
VIX teetering in $20s
Will we see it go back to $9.xx soon?
http://tinyurl.com/ygbk88s
Re: coming close
Dow and SP are green now.
It's so easy for HB&Bs to pull market up: borrow money from government at no cost to short dollar and buy gold.
trades for today
It looks like $USD constantly gets dumped as soon as it rises a little off the 75 support level. It is dangerously close to 75 once again now. As Collin Twigs does note, a break of 75 (which used to be a support for so long) would quickly take $USD down to 74, probably overnight, and so I probably won't be able to get out of my ultrashorts. In a preparation for this takedown in $USD, I a little while ago I sold at $9 the shares of SRS I acquired at $8.50 by selling $9 puts on it a month ago.
Also, PNP.TO hit a sell limit order earlier today at $1.99 for 2000 shares I purchased at $1.74 a month ago. I still have 2000 more shares I purchased at that price, which I will sell, oh, say, at $2.24.
Re: Idiots are back at it
And what if a trader records a Loss on a trade... will he/she still be taxed ? Jack-asses.. I have lost all faith in intelligent, thought driven decisions on the part of Congress.....The beginning of the end..
Re: Idiots are back at it
As it stands - yes, it's a tax on the overall value of the transaction, regardless of the outcome.
The past week of trading oddly reminds me of the beginning
of the Feb., March, and April period of 2008.....
Re: Idiots are back at it
Brutal! I suppose that means it is 0.5% total (way in an way out) and taken upfront when the transaction is done?
Re: Idiots are back at it
Original idea was to tax the closing side of transaction - in order to encourage buying and holding while discourage selling. What form it takes in perverted brains of imbeciles - who knows.
Re: Idiots are back at it
You are toooooooooo kind in your portrait...these guys/gals have hearts so cold they believe Santa should be taxed because there are too many oddly shaped snow flakes...now isn't that a shame and just in time for thanksgiving.
U$D triangles formations.
I've been watching U$D forming a triangle for a few days already. Almost complete and only a few days to go for a break out (I don't know the direction, but more likely down).
I just realized there is a beautiful symmetrical triangle formation on the 15 min charts:
http://futuresource.quote.com/charts/charts.jsp?s=DX%201!&o=&a=V%3A15&z=800x550&d=medium&b=CANDLE&st=
This one is almost complete and should break out in several hours, probably by the end of the day tonight. The U$D sits on a support line, so if a significant brake down, this may be the direction for the big triangle, or a false brake down. I hate no knowing for sure.
Re: Idiots are back at it
Well, they think just opposite - they are all warm and fuzzy, they are against mean-spirited Wall Street and all for the little guys. Look again at the tile: "Let Wall Street Pay for the Restoration of Main Street Act of 2009." And look again at the intention as stated: "Half of the $150 billion in tax revenue would go toward reducing the deficit, while the other half would be deposited in a job creation reserve to support new jobs." That's how they sell it, and considering the prevailing mood in masses that are told it's all Wall Street's fault - what is there to prevent this thing from going through? Well, aside from that antiquated thing, what do you call it... oh, common sense... feel hopeful?
Re: Idiots are back at it
Don't many countries have the stock stamp duty tax? UK and China came to mind.
Re: Idiots are back at it
No.
Lots of weakness
XLB, REITS (large cap, medium cap, small cap-except isolated), solar too.
Anyone care to comment on these, if there is rhyme or reason.
News flash(CNBC)...market going up for non-fundamental reasons
LOL, are they sure of that?
Karen says: It is so much more profitable to produce gold now...does anyone see, Dr Cosa, a problem with that obvious misrepresentation?
Happy trading till we meet again.
Re: Idiots are back at it
They are talking above $100K or above per (single?) transaction.
Sounds like it won't affect the average retail trader.
http://www.bloomberg.com/apps/news?pid=20601103&si...
Re: Idiots are back at it
Vad,
I have stated this before: Peter DeFazio (Ore.) and Ed Perlmutter (Colo.) are definitely IQ challenged if they think a trading tax will do anything other than destroy the US capital market. Have they seen the volumes this week? Well, put on a tax and those volumes will be 10% of that and you can kiss goodbye to NYSE and NASDAQ because we will only be trading other markets. That is not a threat; it's an economic reality. These people in Congress had better get clued in soon.
Re: Idiots are back at it
Yes we do pay 0.5 % stamp duty in the UK on each purchase with the exception of ETFs.
Obama's buddy Gordon Brown is pushing for taxing the bankers as he put it.
"At the St Andrews G20 meeting this weekend, Gordon Brown had shocked the City and taken other G20 countries by surprise when he said that he wanted to tax bankers every time they made a trade."
link is from 9 november 09 :-
http://tinyurl.com/y9m9y82
Re: Idiots are back at it
navid... unfortunately it will, in oh so many ways. Let me list just a few.
- do not assume all retail traders deal in small lots and/or cheap stocks. $100K as a limit for the tax to kick in is a relief but not as significant that the whole thing could be dismissed;
- what about all the funds of all the kinds that manage this or that kind of public money? They do trade in and out, and they are responsible for a lot of volume. Either that volume gets pulled or people pay the tex. None of these outcomes is good for anyone involved.
- the most horrifying thing is precedent and floodgate opening. Once this thing goes through in principle, what is to prevent further tweaking as we go along, every time they need more money (and we know they will)? Every time they decide they want to curb that dreaded speculation that suddenly became a root of all evil, in this or that vehicle, what is to prevent them from changing conditions for this particular vehicle? More government intervention please, by people who have no appreciation for the free market mechanism whatsoever and envision their own power over it as the only acceptable solution...
(EDIT) Then there is this notion that you, owner of your money, will be penalized if you decide to exercise risk control. They, rulemakers, know better than you do what you should do with your money - buy and hold. That's their opinion, and they will punish you for attempt to manage your own money in your own way. If you bought in and decided that conditions changed in a month, week, day or hour - you are going to be punished for that. For managing your own money as you see fit. Because they know better, you see.
This is Soviet Union all over again. Ask me how I know.
Re: Idiots are back at it
- Absolutely, it will be incrementally expanded to include everyone and more transactions.
- I am sure that setting up the bureacracy will be costly (or even if not) and expanded fees from HB&B will be placed on everyone
Re: Idiots are back at it
Bill, they've already said that such a tax would have to be coordinated world-wide among nations.
And we refer to it as a stamp tax or transaction tax. It's a sales tax. By the way, here's the latest iteration of the document on which I've been working to send to my legislators. Take it if it helps: And sorry, I can't get the columns to line up. I've attached the document if you want to see the layout of the grid.
Many individuals, myself included, have been making their living from trading since technology advances in computers and networking in the mid 1990’s democratized money management to allow individuals to control their own financial destiny. The trader tax threatens this accomplishment. Quite simply put…it will put most of us in the unemployment lines overnight.
Of course, many will say, “Good riddance. Of what value to society is there in what you do?” Without getting into the technical dynamics of markets where short-term traders are a vital part of the overall market eco-system, I’ll make the argument quite simple: We pay taxes.
You don’t last long as a trader if you don’t make money, therefore if you make money you pay taxes. In this country over 47% of the working age population pays no taxes, and that number is growing. Therefore, independent traders contribute more to society on a financial basis than almost 1/2 of the working age population. I’d say that’s value to society. You pass this tax, we’re unemployed and potentially on government assistance shortly after.
Please, don’t confuse Main Street traders with Wall Street. We make a good living, but nothing compared to the money center firms. We are discretionary in that we use what we see and what we know to make trades. We don’t have a supercomputer hooked up transacting millions of shares a minute. I well understand the ire directed at Wall Street, and rightly so, but they are far from the only individual, groups and organizations (real estate agents, appraisers, mortgage companies, politicians who took sweetheart loan deals, etc.) that had a hand in this debacle, one that has its roots in the early years of the last century and within the institution in which you work.
Remember, if this tax passes all transactions in pension funds, 401k plans, IRAs and any other retirement related plan will either pay the tax or face increased costs, reducing their returns and the effect of compounding-which is not to be underestimated. You will, at a minimum, take .5% off their yearly return in good years and bad. If you want to get a sense of what this will cause, look at this website listing of all the mutual funds out there and at the column header titled “turnover.” This term represents the rate of annual turnover in the funds holdings (transactions) compared to an average. Then think how many of you or your friends might have money in these funds in savings outside of their pensions and 401k:
http://bwnt.businessweek.com/mutual_fund/index.asp...
As a personal touch so you can understand what damage this could cause, let me tell you my situation: I am almost 50 years old. This is what I do. This is what I know. If you were to wipe me out what would I do then? I make a reasonably good living, but nothing extravagant by any means. I make less than you on average. I care for my elderly father and my nephew-which, by the way is another benefit I provide society. Instead of depending on welfare for the money I need to take care of my family, I live off the money I make from trading in a small condo in suburban Massachusetts.
You call this speculation, but the money I don’t trade, that was kept in longer-term investments like mutual funds and stocks, suffered much the same debacle as others both in 2007 and in 2000-that’s what long-term investing gets you so I don’t do it anymore. So, what you call speculation, I call prudent money management, especially because I’ve developed the skills to do so. Now you want to pass a tax that will penalize my decision process on what is good for my money,forcing me back into financial bondage and take my livelihood away? And then, at almost 50 years old, what do I do with skills you’ve rendered useless? Apply for welfare?
Unfortunately, although your efforts may be well intentioned, they always end up being good solutions politically, but rarely good solutions operationally. This current debacle began with the debasement of lending standards in an effort to spread home ownership to those with lower credit worthiness and financial means-a great political solution. Unfortunately, the mechanics ended up opening the doors to universal lending standards debasement that have brought us to the brink of financial, and perhaps, societal collapse-a terrible operational solution.
The Mechanics of the tax: The following are examples based on numbers discussed. I’ll use the .25% tax described by Mr. Defazio. The percentage of the tax is actually misleading. Because it is on each transaction, an individual must incur the tax twice, once when he buys and once when he sells. Therefore, the tax is actually .5% of the average of the buy price and sell price for an individual.
Share Tax
Stock Buy $ 50.30 $ 0.12575
Stock Sell $ 50.70 $ 0.12675
Comm./ ecn fees $ 0.03
total tax
gross profit/loss $ 0.37 $ 0.25250
net profit/loss $ 0.11750
tax rate 0.25%
The previous exhibit is an example of a very good day trade. The current profit would be $.37/share. If the tax were implemented the profit would drop to $.12/share or less than 1/3 the current profit, a 67% reduction, which will reduce taxable income by 67%. In the following example, the trade breaks even:
Share Tax
Stock Buy $ 50.30 $ 0.12575
Stock Sell $ 50.30 $ 0.12575
Comm./ ecn fees $ 0.03
total tax
gross profit/loss $ (0.03) $ 0.25150
net profit/loss $ (0.28150)
tax rate 0.25%
Actually, not really, because I still have to pay commissions and ecn fees as well as the tax, so instead of losing $.03, I lose $.28, or a 900% increase in losses, for my father and nephew also. So, you’ll cut my income by a minimum of 67%. Thank you.
As you can see, what before the tax would be a good trade, actually becomes unprofitable at this share price level. What makes it more difficult: whereas the commission and ecn fees are fixed, the tax would be a percentage of the security price, which would further increase the burden of calculating profitable entries and exits on trades (actually, it would make it almost impossible in the short time frames in which I work), which is a benefit to the Wall Street firms that want to control our money.
I need to make 30% on a $300,000 account per year to make $90,000, which is good, but not great, especially living in a high-cost state like Massachusetts, and you want to increase the tax by 67%. You’ll kill me financially, not to mention, make it much more difficult to trade in general. Now there is some talk about limiting the tax to transactions over $100,000. I would need to produce a near 100% return on these transaction limits as opposed to the 30% on my account, and since you probably wouldn’t index the amount for that fake inflation rate in government statistics, the burden would only grow. You’re killing me again. And again, at almost 50 years old, what am I supposed to do next when my own government puts me out of business.
Now, about all this money you’re going to raise with the tax. If the HFT (High Frequency Trading) proportion is the 40% of market activity they claim, then you will wipe this out (in its current incarnation) overnight with such a tax. Their goes 40% of the transaction volume, how much of your revenue goes with it? That leaves behind all the mutual funds and retirement related products everyday people own, and investments outside of their tax deferred accounts, this tax will hit that hard. This will also drive up the costs of trading beyond just the tax. All you have to do is look at all the prices that have been raised in the stores recently. Because there are less goods sold, prices have to rise to compensate and cover fixed costs of running the operations. The number of market transactions drop, the costs will rise on all transactions including on retirement accounts.
EDIT: You know what's worse...I know they could give a rats-derriere about me and my opinion. We're just pimples on the ass of an elephant to elected officials.
Re: UK stamp tax
Here is good overview:
http://www.lowtax.net/lowtax/html/offon/uk/uk_gota...
Note that there is no CFD trading in USA. And if nothing else do read this:
"Stamp duty was introduced in Holland in 1624, when the need for a new form of tax resulted in the idea of requiring stamped paper for legal documents. It was first levied in England in 1694, and although stamping was initially confined to documents processed by the legal profession, in the eighteenth century, the rationale behind imposing stamp duties changed, and they became a means of controlling undesirable activities such as gambling and newspaper reading (!)"
Re: The Idiots Are Back At It
I know politicians are capable of just about anything, but if you assume that politicians are generally paid off, (and I do), why would GS let them pass this?
This is neither a cynical nor a rhetorical question.
Re: Idiots are back at it
nemo,
Thanks for your analysis. I don't have time to check the math, but I will say that if you turned over your capital once per year, there would be a big hit to your annual Total Return performance, but if you trade once a week you would be quickly put out of business.
Securities are not real estate, which is held for many years. Securities are merely prices. We trade prices, and in doing so we take large capital risks, but at the end of the day the market does serve as a price discovery mechanism, and the best traders can make a living at it, and pay large taxes on that income. But we couldn't/wouldn't trade in a no-win situation, and this tax would be a loser on every score.
If it is really true that "they've already said that such a tax would have to be coordinated world-wide among nations", then I am not so concerned because (i) all politicians in all countries are clearly not as dim-witted as these U.S. tax advocates appear to be, and (ii) there will always be countries that refuse to go along with such nonsense and the capital of the world will flow there, and if there is a dynamic market that continues in the U.S. -- although I don't see how -- then that market would be used for price discovery purposes for the offshore traders. Then I have no doubt the U.S. authorities would step into those foreign nations and deem the transactions took place in America if at least one side was executed by an American, and they would impose the trader tax "in absentia".
But I truly believe that none of this will happen because there are too many governments in the world that are prudently managed to permit it. Capital would flow to those markets, and HB&B would be following along.
Re: Idiots are back at it
Nemo Great write up and I totally agree, although being from Canada I haven't been following this US bill that closely, at the present time.
" It's like a sales tax " Well not quite, a sales tax is normally collected from the buy by the seller and submitted to the gov. In this case the gov will collect from both parties, the seller and the buyer will each be responsible for submitting 0.25% for a total of 0.5%. Thats just the first half, the second half of the round trip trade will generate another 0.5% for the gov. So they are looking a more like 1% for each total round trip transaction.
I also agree the accountants as usual have extrapolated the current trading volumes and assumed they will continue unchanged. Thus they are seeing huge revenues from this, what they fail to understand is that the future volume will not be on the same trend line.
Not so quiet on the eastern front
Just in from Asia:
Bill, Good morning from Asia
Asian news wires point to possible currency controls in Korea, Thailand, Indonesia, to head off speculation in local markets
Could be major reason why Asian markets sold off massively yesterday despite Wall St.
Countries are no longer tolerating the USD continued weakness.
"Gold is rising on more than dollar weakness"
[From GATA tonight] In his commentary tonight, Agoracom.com market analyst Peter Grandich notes that something besides dollar weakness must be driving gold up, since the dollar index is virtually unchanged for the last month while gold has risen more than $100. Grandich also urges financial support for GATA's work. His commentary is headlined "Gold and Stock Market Comment" and you can find it at Agoracom here:
http://grandich.agoracom.com/2009/11/gold-and-stoc...
I do support GATA, and hope you do as well.
No More Gold Krugerrand Coins
More evidence of physical gold shortages...
Tens of millions of Krugerrands have been struck since they were introduced in 1967. They are not rare. If demand for physical gold is so strong (and the World Gold Council last week reported that global third quarter demand was 15 percent higher than the second quarter) that they are no longer available, we could quickly see a domino effect where other gold and silver bullion-priced products also become sold out.
We may see some temporary price dips this week as the gold and silver options expire. However, I fear that there is little time to lock in physical precious metals at reasonable premiums for quick delivery.
http://tinyurl.com/yeter25
Re: The Idiots../...politicians
alberio,
this is the case where I really hope GS does possess this power :) God's work, anyone?
Look... this idea is being floated by this group for quite a while, and always was viewed as some fringe lunacy. The moment right now however is incredibly conducive for this to have a chance: there is an anger against Wall Street; there is a huge need in money and something's gotta give; they are about to unleash another increase in war effort and talk about "war tax" on, umm, who else - "rich"; there is unemployment, deficit, healthcare... all stars aligned for this to have a chance.
I still want to believe common sense wins. I simply run out of continents to immigrate, this communism thingy spreads like computer virus... what's next, Antarctica?
That'll be my last post on topic, I need to clear my head for tomorrow's trading and return to my normal sardonic-fatalistic-existentialistic-self-deprecatingly-humoristic state of mind.
Re: The Idiots../...politicians
I actually think GS will be in favor of this and may even be behind the movement. Who do you think it will hurt the most and drive them out of business? The small traders, financial advisers, small trading shops and the majority of retail investors. So who will you have to go to? You guessed it----GS, JPM and maybe one or two others. Make them bigger is the mantra of the government. Its just plain sick.
What Price Will Make Bears become Bullish?
I wonder what price level that will be...I'm guessing 1,200 on the S&P 500. I still think there is too much bearishness out there. I'm not saying its going there but I'm just thinking of sentiment and how this is now pretty much the reversal of last year.
Happy Thanksgiving Interest Rates!
If you are in the market for a mortgage, we are locking 30 year fixed terms near 4.5% today. Thanks in part to the 4.5 Fannie Mae Mortgage Backed Securities rising .31pbs to end at 2.35 close.
Rate alert advice: "Today Treasury auctions $42B of 5 yr notes. With the dollar declining, foreign investors are grabbing all they can carry in US debt, not because they believe the US has a handle on the exploding deficits but because of the dollar slump and the universal belief the Fed will not think about tightening monetary policy for most of 2010."
On the other foot...mortgage backed securities bonds could land in a little heap about the time the First Time Buyer and Move Up Buyer Tax Credits end on April 30th. Just in time for Spring?
I wonder what price SP500 must hit
to make the bulls go all in.
Re: I wonder what price SP500 must hit
Its a question I think we should ponder. Kind of like the final thrust higher to get bears to say it's a bull market and capitulate...
Re: The Idiots../...politicians
Bigmother, yes it will hurt traders etc. but think how much capital GS is putting to work everyday in order to clear their $100MM profit/day, then multiply that number by .5% everyday. The number would be staggering. The amount of money they might take up from the little guy would only be a pimple on the elephant. So no, they would not be favor of this.
Re: Idiots are back at it
ALOHA !!
Simply stated even $150BIL is virtually nothing in terms of the rate of Debt and total outlays combined. For FY 2009 total "net" tax revenues of $1.55TRIL USD only covers 2.7% of total US DEBT and all US Treasury outlays. What's another $150BIL going to get you 2.9%? I already pointed that out yesterday. Once again the book PLANNED CHAOS by Ludwig Von Mises comes into play here.
“Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other.” – Ludwig Von Mises from his book PLANNED CHAOS (1947).
When trading volume drops then there will be layoffs across the US financial world. When a job is lost there is a DOUBLE BARREL effect. One ... the US Treasury loses those tax revenues. Two ... the US Treasury must pay Unemployment, Food Stamps, Welfare and a myriad of other government social nets, which I term "anti-riot" benefits. I won't even get into how foreigners will view US markets. My trading on any US markets has virtually dropped to ZERO! I am on the ASX and TSX only, mainly the ASX. If I am lucky I will trade maybe 20-30 executions (buy or sell) per year.
I find none of this surprising and in fact following the script of desperate Empires looking for ever possible way to extract the wealth out of its citizens in order to remain in power. When you vote a TWO PARTY POLITICAL MONOPOLY into power every chance you get then that action ensures the MONOPOLY will act like a MONOPOLY with nothing to loose.
Many years ago I posted here that I had quit contributing to retirement and instead used those funds to pay down current debt and buy hard assets instead. One of the reasons I mentioned for doing that was that I feared as the US Congress became more and more desperate that they would attack all wealth via taxation. That is what they are doing. I have already recorded in my weekly REVENUE BREAKDOWN that capital gains will be increasing from 50% to 100% more in some tax brackets, but short term capital gains will be taxed up close to 40% at 39% starting in 2011.
I have already posted that if you add up all current US, State, County and City taxes the average American is already being taxed at a 54.4% rate. When you vote the TWO PARTY POLITICAL MONOPOLY into power you vote to be "owned". You no longer exist in a "company town" but a "company Nation" where government owns you.
This brings me to my next most favorite Mises quote.
"Government is essentially the negation of Liberty."
Taxation has nothing to do with Freedom and Liberty for all. This is the failure of Democracy.
Every one of my weekly REVENUE BREAKDOWN articles start out with two links. One is the link to the US DEBT CLOCK and the other is this one ...
LINK: http://www.youtube.com/watch?v=j7M-7LkvcVw
Re: I wonder what price SP500 must hit
If you want to see what a bull market actually looks like, look at prices and volumes in gold, silver, and PM equities. Ever since Sep 1 when apparently someone fired a gun to start the race, volumes tripled, and prices have moved steadily upwards. GDX is a decent proxy for the industry. Average volumes in July and Aug were around 3-5M shares, and average volumes after that have been perhaps 15M.
I think rather than looking for some price level to announce to us that "the bull has arrived" we should probably just watch the tape and see what the volume in the market is saying. Once we see volume spike in a similar manner, we will know the bull has arrived. Until then, we are in a "melt up" which given the lack of fundamental interest (evidenced by the low volume) is a very dangerous situation to be long in.
America can't dance!
Donny Osmond is the new billion dollar Oprah replacement... Confirmed a couple minutes ago on Dancing with the Stars.
That show had zero to do with Dance, but everything to do with phoniness in America.
Sound familiar?
is PM intervention dead?
I am beginning to think that intervention in the PM markets might just be dead for now. Check me on this one:
Effective intervention requires that the sell-side interest provide more selling firepower than the buy-side can absorb, with other potential buyers staying on the sidelines.
However, after a quick re-reading of the history of default by seriously in-debt nations, central banks of the creditor nations are now realizing that gold is a less risky option than debtor nation fiat money. Presto - more buyers enter the market. India's recent 200 ton purchase is such an example. Short term rates at close to 0% also encourage holding of gold.
And even if creditor nations aren't currently PM buyers, simply having them as potential buyers emboldens current buy-side gold traders and concerns the interventionists. It's that "confidence" thing again that Kaimu keeps talking about. Imagine being a US interventionist and realizing that China could provide a bid for all US gold with a small fraction of its US dollar reserves. They're looking to diversify, for sure. All that gold would do nicely.
A historical example of this is when France started exchanging its dollars for gold back in the late 1960s, eventually forcing Nixon to shut the gold window. History was to prove France right - that gold acquired at $35 per ounce looks like a pretty good deal right now.
What really happened on September 1 to kick off the recent PM bull market?
REWARDING FAILURE
ALOHA !!
I suggest people here go read the article entitled REWARDING FAILURE at the Cunning Realist website. I would post it here but it is rather lengthy.
LINK: http://cunningrealist.blogspot.com/
This guy gets the US FED and he comes down hard on Bernanke and really makes a brilliant and iron clad case for not re-appointing him. If Bernanke does get re-appointed then MONOPOLY RULES!
According to the Cunning Realist many US Senate staffers read his blog. In knowing that he has communicated a list of 15 questions that should be asked at Bernanke's confirmation. I would be interested to see how many of those questions were actually put to Bernanke and what his response was.
I especially love the questions that throw the "output gap" right back into Bernanke's lap! Then of course the gold questions would probably elicit "barbarous relic" rumblings! But could Bernanke use the old "gold pays no interest" con with FED FUNDS at 0.25%?
Re: is PM intervention dead?
davefairtex,
Re: "What really happened on September 1 to kick off the recent PM bull market?"
Check the record. That was the weekend that Barrack Obama conceded to HB&B to re-appoint Ben Bernanke to head the Fed, and all that went with that, including the beefing up of the FOMC trading fund. The $USD hit a high of almost 79 that week, and then Helicopter Bernanke showed up to work with his new mandate.
The Americans refer to their system as transparent. It is anything but! The 99.9% of us not on the inside just have to wait a couple months to track the market back to the news to see what really was going on behind closed doors.
Pathetic, isn't it?
Re: Idiots are back at it
Kaimu,
That youtube "Overview of America: is something I've seen before in defining our 'republic' and in fact stumping against 'democracy' or as they define mob rule. It is no surprise the John Birch Society paid for this. They produce powerful communication tools to sway us to conservate legal rule of law. BTW, JBS are the guys calling Global Warming a fraud!
Re: Idiots are back at it
ALOHA !!
Yes, but I do not agree that any of the other systems of government can stand the test of time better than a Republic, which is "limited government". To me this video explains our plight no matter where its origins are.
I learned a long time ago in a simple statement from AA ... "Take what you want and leave the rest". I am no JBS supporter just as I am no Obama supporter, however I do support some of Obama's ideas and I have posted here about that. I loved his idea to get rid of what he termed "middleman banks" from the student loan system. I applaud that! I applaud a Republic over a Democracy. I support the strict adherence to the US CONSTITUTION and the BILL OF RIGHTS and the US DECLARATION OF INDEPENDENCE, which exalts individual Freedom. I admire our Founding Fathers many ideas and visions of government, yet I own no slaves! I could care less about JBS.
Re: Idiots are back at it
ALOHA !!
Oops ... ah yes ... Global Warming ... another tool for mass taxation on a global scale. How much must our taxes rise to cure Global Warming? Ah yes, and not by coincidence it is an "emergency" as well!
PRIVATE PLACEMENTS
ALOHA !!
Private Placements(PP) bypass trader taxes. I have accumulated many shares of companies I want to own on longer terms using PPs, which also carry warrants. Then to sell large blocks you are on the Presidents List and can transfer ownership internally where trades never see any exchange. I see shares of many ASX listed companies trade internally via PPs and transfers. Suddenly form 3B is issued and investor X has increased his "substantial holding" from 7% to 10% by 3mil shares yet there is no shares traded and no share price movement either up or down.
Re: I wonder what price SP500 must hit
Dave and Team,
I am conflicted too. The indices seem toppy but are still bulling ahead, slowly. Team has been on the right side of the trend, so far.
I am a recent subscriber to a new service that agrees with Team for the intermediate and long term. Algorithm says go until proved otherwise. Stop for intermediate is SPX 1058 and target is an 18% gain. Shorter term is also bullish but changes frequently. The trend is your friend!
Re: I wonder what price SP500 must hit
From my view momentum on SPX has slowed (weekly MACD shows me this) but certainly not stopped. One could say that about the fall in USD as well - slowed, but not stopped. If the buck falls below 75 with any authority, I suspect the trend upwards will resume once again.
But to call this a bull market in absence of bull market volumes I think is not correct.
What's the difference between prices moving higher without volume, and prices moving higher with volume? From what I understand, it means that a few big players deciding to leave the field will result in major price declines, since there is no real fundamental interest in owning these shares other than as momentum plays.
It means that chasing prices here is risky.
Re: Idiots are back at it
Hope you guys are following recent "climategate" debacle... corruption, data manipulation, subjugation of peer review process, castigation of dissent, big money, big politics, big time fraud...all nicely documented over the past 12 years or so in the eloquent words of the perpetrators. And, of course, no mainstream media coverage. Ah well, it is everything in spades that is wrong with our institutions. Reality must never, ever get in the way of agenda and policy.
Hoping everyone is healthy and prosperous.
India to buy remaining IMF gold
Must be a bad idea to hold onto physical gold if its for sale. lol
and there goes the buck
Down through support to 74.75. Recent low was 74.70 - if the buck behaves true to form, it should fall through support to 74.50, popping the stock market, gold, and the commodities, and then rebound, whipsawing everyone counting on the breakdown.
Re: Idiots are back at it
Loannetter,
I am no fan of The John Birch Society. I attended 10 weeks of their meetings back in 1963 and was completely turned off. However, the global warming issue has been so blatantly one-sided (not a scientific trait) those with differing views have been squelched.
I find the following interesting. True? I don't know, but I have been convinced that the internet has at least as much danger as benefit. The Nazis would love to have had it. The Soviets would like to have controlled it.
-----------------
http://globaleconomicanalysis.blogspot.com/
The Global Warming Religion - A Modern Day Crusade: Do You select The Cause or Does the Cause Select You?
Re: Idiots are back at it
Kaimu, I was not inferring YOU supported JBS and yes the message is more powerful than the messenger! I just like to keep an eye on which messengers are using which messages --ironic as that may seem. Unfortunately our limited government has not limited (regulated) some of their own toys while putting massive limits on our own.
Grym, we both know how powerful media manipulation is. Is it also prematurely melting glaciers? Unfortunately we will never know the unbiased truth!
Re: and there goes the buck
Yes, U$D broke out from both 15 min and daily triangles last night, just like I thought it would.
Looks like you hint it's a false breakout. It seems real to me as I don't see a false down breakout in the last several months. Every down breakout was for real.
The only weird thing is equities are weak today for this significant U$D selloff (cannot say the same thing about gold).
Is another leg up in equities and gold starting now? As much as it looks unlikely by TA, it actually should according the the U$D action today.
Happy Holiday!
Jack
UXG
I know UXG has been mentioned on this blog many times. It seems to be lagging other gold stocks. Any opinions on it? I have been accumulating UXG. I am guessing any positive news would cause a nice run.
I mentioned KBX (a silver miner) on this blog in the past. They are an exploration company. They released some positive drill results on Nov. 18 and the stock has been on a tear ever since. It has gone from .65 to $1.65 in two weeks.
I am hoping for something similar with UXG as it appears to be setting up a 6 month base between $2.75 and $3.25.
I have also been accumulating NAK (PM exploration) between $6.5 and $7.5 when the RSI drops down around 30 to 40. It it breaks $8 it looks like its next resistance is $10. It has also been range bound between $6.5 and $7.5 for the past 6 months.