This is from a good article in USNews by the author of Currency Wars which sums it up nicely and applies to all CBs and their pet Banksters: http://bit.ly/JfxbKV
What he does not explain is that J.P. Morgan's "earnings" are actually not earnings but are a form of theft from savers, retirees, and others pursuant to the Federal Reserve's zero interest rate policy.
The Fed has engineered a massive wealth transfer from everyday Americans to large banks. They do this by holding interest rates near zero. Savers get nothing for their hard earned savings. However, banks get free money because they pay almost no interest. Banks then invest the money in Treasury notes and earn the difference. The Fed permits this to rebuild the capital of the banks. The Fed doesn't mind hurting everyday Americans if they can prop up bank capital.
They are now trading below book value but the sector is very out of favor and it will be a long, long time before they come back (and bankruptcy is a possibility in between). We still like them and added today but just be aware of the risks - it's a speculative play at best.
Thanks Subtilisin - We haven't even put in a Buy List for Members yet on the Twice in a Lifetime list as we're not sure we have a bottom (or a top to the VIX) - at the moment, it's just a Watch List with very few we are pulling the trigger on so far and, even then, we're only at a 1x entry in our scales.
As I said above (and all week) - it's 1,360 or bust on the S&P for the week and, so far, it's looking very much like a bust and only Facebook can save us...
That's the point. They are doing a great and highly coincidental job of flushing people out ahead of what is likely to be the biggest IPO of all time. Scam or not, it's very likely FB will set off a buying frenzy in the space and we finish the week off with a bang. If that doesn't happen – I will be very, very bearish but from what I'm hearing and the way they are extending the offer and raising the price – it's way oversubscribed. Also, we have to consider that people are cashing out 1-5% of their holdings to raise cash for FB on Friday – sure it's moronic, but that's what people do.
This morning's note to Members (just the end):
So it's the usual madness this morning and still – there really is nowhere to put your money except Dollars, US Equities and TBills.
We will need a few disaster hedges because, if Facebook does fail – disaster will be a completely inadequate description of what is going to happen next week.
Of course FB could do well but the hyenas could succeed in taking down AAPL and the Nas anyway or possibly JPM could fail and wreck the Global markets or Greece could exit the EU and rip a $500Bn loss through the Financial sector anyway…
Remember the good old days when we used to only worry about Iran closing the Strait of Hormuz? What every happened to those wacky kids anyway?
It is very frustrating when you hear little positives and jackasses like that take the floor (although I see his comments have been removed, which does warm my heart!).
As to TEO - didn't I warn you that Argentina was dangerous because of the connections to Spain? If not, my bad...
CHK is killing everyone and, you know what? So was BP at $26.50 and so was BA at $30 in 2009 and AAPL at $85 - sometimes you have to put your foot down but you can be the greatest trader in the World and, if you don't know how to manage your portfolio - you're still going to get in trouble.
Take the time to learn good Portfolio Management Techniques (something we teach our Members and there are articles about it in our Education Section that may be available for free).
ANR is in the same trouble as all commodities. With nat gas this cheap, there's no reason for anyone who can possibly burn gas to burn coal. Construction is still in the dumps and ships aren't being built and China's electric demand is falling with their economy so coal demand is in the tank and won't recover soon.
The only coal company we like is BTU and we don't like them much at the moment either but we are willing to buy and hold at this level ($25) for the very long-term.
You should be careful though as you're not too diversified betting CHK and ANR at the same time.
By the way, a nice trick for CHK is - let's say you bought it for $18 and you are a dumb-ass who doesn't hedge or cover or enter by selling puts and now CHK is $14. You can sell the stock ($14) and sell the 2014 $10 puts for $3.30 and buy the 2014 $10/20 bull call spread for $4 and that means you are left in the $10 spread that's $4 in the money for net .70 so all CHK has to do is flatline at $14 and you make $3.30 back but you free up $13.30 in cash (using some margin for the short puts) and you get all of the upside to $20 with a max profit of $9.30 less the $4 you lost in the first place is still a respectable $5.30 if CHK gets back to $20, which is way better than you'd do with your $18 basis.
Meanwhile, your worst case to the downside is CHK is put to you at net $10.70, which is 23% lower than it is now so - FOR FREE - you are getting 23% of additional downside protection, drastically lowering your break-even and taking 90% of your cash off the table.
THIS is why people subscribe to Philstockworld - we teach you how to do this stuff!
ROFL! Are you seriously the same bigbaboon57 that said on April 25th, first quoting my statement: http://bit.ly/Jg4xIH
"How can we expect the markets to react when Uncle Ben tells us we're not getting our fix today? They will howl and they will scream and they will have a little tantrum and that's how we're going to play it this morning - taking the opportunity to add to our bearish bets - assuming they survive into the bell. "
And then YOU said:
Well, this was certainly a WRONG call on your part. Ben didn't announce a fix for the markets today, and yet they continued strong into the end. Why don't you write an article with regards to this wrong call on your part and how your "bearish bets" worked out into the end of the day? Oh, I know, when the markets finally correct again, you'll come on and claim all your "bearish bets" paid off big.
ROFL!!!!
That was what 500 Dow points ago? God bless you, man - we need the counterparties but how about get your head out of your ass and listen to someone's opinion other than your own once in a while and maybe you'll learn something.
Thrill A Minute Thursday: Will The Bernanke Bounce Hold? [View article]
I wouldn't want to make a short-term guess but we're very comfortable with the value down here, especially as we're hedging them down to below $4 so I hope the guys buying at $6 were correct - we only need them to hold $5 to make good money.
Will We Hold It Wednesday: S&P 1,360 Edition [View article]
We're bullish at the moment.
Yesterday's post never got submitted as I was in Vegas and having a busy day. Of course it was up at http://bit.ly/uOBG0H - along with many other fine posts from our great contributors!
In fact, if you ever want to check out what non-SA authors have to say, Phil's Favorites is a free section of our site where we try to pick the people who are making the most sense each day.
Thank GDP It's Friday: Reality Check? [View article]
My note to Members on the currency action this afternoon:
78.73! Yen down to 80.39 and EUR/CHF still $1.201. It's amazing. All a fund has to do is keep dumping Francs, which is not very expensive as they already told you they'd support $1.20 so you can sell them in bulk and won't lose more than a penny. That then keep the SNB buying Euros – which no single fund could afford to support on their own and the Euros cause the Dollar to fall and that's how you can lose maybe $10M dumping $1Bn worth of Swiss Francs and cause the World's 2nd largest currency to move up 1% in a day while the World's largest currency drops 1% where either move can turn another Billion into $1.2Bn easy.
Switzerland sparked fears of a new currency war on Tuesday after it pegged the Swiss franc against the euro in an attempt to protect its economy from the European debt crisis.
The Swiss National Bank in effect devalued the franc, pledging to buy "unlimited quantities" of foreign currencies to force down its value. The SNB warned that it would no longer allow one Swiss franc to be worth more than €0.83 – equivalent to SFr1.20 to the euro – having watched the two currencies move closer to parity as Switzerland became a "safe haven" from the ravages of the eurozone crisis.
Monday Morning's Miraculous Movement Masks Momentum [View article]
OK Nick, last two freebies and, fortunately for you, both of these questions were asked during Member Chat today so here's my answers to each:
10:23 AM:
CHK down 6.66%!
Chesapeake Energy (CHK) fell about 6% in early trading afterReuters published a story indicating that CEO Aubrey McClendon has been taking out loans to finance stakes in Chesapeake’s wells and then using those same stakes as collateral for more loans.
The arrangement hasn’t been reported to Chesapeake shareholders, although the company and the CEO argue that they don’t need to be because they are personal investments. McClendon has the right to take stakes up to 2.5% in Chesapeake’s wells.
That said, experts interviewed by Reuters say that the deals could raise conflicts of interest that compromise McClendon’s duty to shareholders.
Nothing I'd bail over. Reminds me of Lampbert crashing SHLD ahead of his buy-back. It's shades of potential impropriety that can be "cleared up" and allow McClendon to come out smelling like a rose once he's upped his stake in the company by a sufficient percentage.
So, I do like selling the CHK May $18 puts for $1.30 and buying the May $15/18 bull call spread for $2 for net .70 on the $3 spread that's $2.65 in the money. Let's do 3 of those in the $25KP.
======================...
2:58 pm:
CHK/Craig – I think it will pass but it may take some time. I do suspect it's a game to chase all the retailers out of the stock so the company can buy back or maybe do some sweetheart sell-out at a price shareholders would never have agreed to otherwise.
======================...
9:54 am:
GNW/Ink – I like them long-term but insurance companies are essentially CONSERVATIVE bond investors and bond returns suck unless you want to invest in the PIIGs. They bottomed out at $1.75 in 2009 and I'd hang back and hope for another liquidity crunch (two words that don't seem right together) and then we can go hog wild on the sector. If the markets recover, and they get back over $7.50 – I'll like them then too but not as much as I would LOVE them at $2 or less.
======================...
As to the IPO - sure, it was priced in, now it is being priced out. Also note the REASON the IPO is off - GNW suffered a huge set-back on loans they made in Australian real-estate. That's not a good, conservative use of funds - that's more like exactly the kind of nonsense that tanked insurance companies in 2008.
Monday Morning's Miraculous Movement Masks Momentum [View article]
TEO/Nick - Wasn't one of my picks but they are a good, solid company with a nice dividend (6.6%), although that dividend is erratic and has only been paid for the past 2 years (always check Yahoo Finance or some other dividend site to verify the quality of the dividends you see: http://yhoo.it/HLBcQD ).
What's going on with them at the moment is Cramer is badmouthing Argentina in retaliation for the YPF takeover. That situation has NOTHING to do with TEO BUT it is possible that the same logic (rules to keep capital in the country) could be used to restrict TEO dividend payments.
Overall, I'd be wary of betting Argentina in the first place as Spain (if they go down) will take a lot of Latin America with them as there are so many interconnected loans.
As with any stock in this environment, you should look at how far they crashed in 2009 and make sure you have a plan for what you would do if it happens again.
If you are not comfortable doubling down at $8 and having 2,000 shares with an average around $13 and waiting for the market to come back over time (and I would be loving these guys at $8, even if Argentina is rioting) - I would not look at these guys as a keeper if they can't hold the line at $14 because there is little support below there.
The worst thing about high-dividend stocks is they tend to have crappy options. In general, I'd rather sell options for income than rely on a dividend.
Monday Morning's Miraculous Movement Masks Momentum [View article]
Thanks TS but I don't want people to trade with me - we teach people how to trade on their own, including explaining things like Game Theory and applying sound portfolio management techniques to the randomness of it all. As we like to say at PSW - "Hope is NOT a strategy!"
Monday Morning's Miraculous Movement Masks Momentum [View article]
Thanks Clinger!
Frankly it's a slow day. 8-)
I did want to take the opportunity to come on and chat with some SA readers for a change but this guy was the only one commenting.
I'm used to a couple of hundred comments a day in Member Chat and today it's like watching paint dry with just 82 comments as we cashed out our AAPL Portfolio last week and our other active portfolios are all just waiting for this silly run-up to run out of gas.
Most days I don't even have time to read over here.
Which Way Wednesday: Hurts So Good [View article]
What he does not explain is that J.P. Morgan's "earnings" are actually not earnings but are a form of theft from savers, retirees, and others pursuant to the Federal Reserve's zero interest rate policy.
The Fed has engineered a massive wealth transfer from everyday Americans to large banks. They do this by holding interest rates near zero. Savers get nothing for their hard earned savings. However, banks get free money because they pay almost no interest. Banks then invest the money in Treasury notes and earn the difference. The Fed permits this to rebuild the capital of the banks. The Fed doesn't mind hurting everyday Americans if they can prop up bank capital.
Which Way Wednesday: Hurts So Good [View article]
Which Way Wednesday: Hurts So Good [View article]
As I said above (and all week) - it's 1,360 or bust on the S&P for the week and, so far, it's looking very much like a bust and only Facebook can save us...
Which Way Wednesday: Hurts So Good [View article]
That's the point. They are doing a great and highly coincidental job of flushing people out ahead of what is likely to be the biggest IPO of all time. Scam or not, it's very likely FB will set off a buying frenzy in the space and we finish the week off with a bang. If that doesn't happen – I will be very, very bearish but from what I'm hearing and the way they are extending the offer and raising the price – it's way oversubscribed. Also, we have to consider that people are cashing out 1-5% of their holdings to raise cash for FB on Friday – sure it's moronic, but that's what people do.
This morning's note to Members (just the end):
So it's the usual madness this morning and still – there really is nowhere to put your money except Dollars, US Equities and TBills.
We will need a few disaster hedges because, if Facebook does fail – disaster will be a completely inadequate description of what is going to happen next week.
Of course FB could do well but the hyenas could succeed in taking down AAPL and the Nas anyway or possibly JPM could fail and wreck the Global markets or Greece could exit the EU and rip a $500Bn loss through the Financial sector anyway…
Remember the good old days when we used to only worry about Iran closing the Strait of Hormuz? What every happened to those wacky kids anyway?
Which Way Wednesday: Hurts So Good [View article]
It is very frustrating when you hear little positives and jackasses like that take the floor (although I see his comments have been removed, which does warm my heart!).
As to TEO - didn't I warn you that Argentina was dangerous because of the connections to Spain? If not, my bad...
CHK is killing everyone and, you know what? So was BP at $26.50 and so was BA at $30 in 2009 and AAPL at $85 - sometimes you have to put your foot down but you can be the greatest trader in the World and, if you don't know how to manage your portfolio - you're still going to get in trouble.
Take the time to learn good Portfolio Management Techniques (something we teach our Members and there are articles about it in our Education Section that may be available for free).
ANR is in the same trouble as all commodities. With nat gas this cheap, there's no reason for anyone who can possibly burn gas to burn coal. Construction is still in the dumps and ships aren't being built and China's electric demand is falling with their economy so coal demand is in the tank and won't recover soon.
The only coal company we like is BTU and we don't like them much at the moment either but we are willing to buy and hold at this level ($25) for the very long-term.
You should be careful though as you're not too diversified betting CHK and ANR at the same time.
By the way, a nice trick for CHK is - let's say you bought it for $18 and you are a dumb-ass who doesn't hedge or cover or enter by selling puts and now CHK is $14. You can sell the stock ($14) and sell the 2014 $10 puts for $3.30 and buy the 2014 $10/20 bull call spread for $4 and that means you are left in the $10 spread that's $4 in the money for net .70 so all CHK has to do is flatline at $14 and you make $3.30 back but you free up $13.30 in cash (using some margin for the short puts) and you get all of the upside to $20 with a max profit of $9.30 less the $4 you lost in the first place is still a respectable $5.30 if CHK gets back to $20, which is way better than you'd do with your $18 basis.
Meanwhile, your worst case to the downside is CHK is put to you at net $10.70, which is 23% lower than it is now so - FOR FREE - you are getting 23% of additional downside protection, drastically lowering your break-even and taking 90% of your cash off the table.
THIS is why people subscribe to Philstockworld - we teach you how to do this stuff!
Which Way Wednesday: Hurts So Good [View article]
"How can we expect the markets to react when Uncle Ben tells us we're not getting our fix today? They will howl and they will scream and they will have a little tantrum and that's how we're going to play it this morning - taking the opportunity to add to our bearish bets - assuming they survive into the bell. "
And then YOU said:
Well, this was certainly a WRONG call on your part. Ben didn't announce a fix for the markets today, and yet they continued strong into the end. Why don't you write an article with regards to this wrong call on your part and how your "bearish bets" worked out into the end of the day? Oh, I know, when the markets finally correct again, you'll come on and claim all your "bearish bets" paid off big.
ROFL!!!!
That was what 500 Dow points ago? God bless you, man - we need the counterparties but how about get your head out of your ass and listen to someone's opinion other than your own once in a while and maybe you'll learn something.
Thrill A Minute Thursday: Will The Bernanke Bounce Hold? [View article]
Will We Hold It Wednesday: S&P 1,360 Edition [View article]
Yesterday's post never got submitted as I was in Vegas and having a busy day. Of course it was up at http://bit.ly/uOBG0H - along with many other fine posts from our great contributors!
In fact, if you ever want to check out what non-SA authors have to say, Phil's Favorites is a free section of our site where we try to pick the people who are making the most sense each day.
http://bit.ly/LevzxN
8-)
Thank GDP It's Friday: Reality Check? [View article]
78.73! Yen down to 80.39 and EUR/CHF still $1.201. It's amazing. All a fund has to do is keep dumping Francs, which is not very expensive as they already told you they'd support $1.20 so you can sell them in bulk and won't lose more than a penny. That then keep the SNB buying Euros – which no single fund could afford to support on their own and the Euros cause the Dollar to fall and that's how you can lose maybe $10M dumping $1Bn worth of Swiss Francs and cause the World's 2nd largest currency to move up 1% in a day while the World's largest currency drops 1% where either move can turn another Billion into $1.2Bn easy.
Thank GDP It's Friday: Reality Check? [View article]
http://bit.ly/IhifLx
Switzerland sparked fears of a new currency war on Tuesday after it pegged the Swiss franc against the euro in an attempt to protect its economy from the European debt crisis.
The Swiss National Bank in effect devalued the franc, pledging to buy "unlimited quantities" of foreign currencies to force down its value. The SNB warned that it would no longer allow one Swiss franc to be worth more than €0.83 – equivalent to SFr1.20 to the euro – having watched the two currencies move closer to parity as Switzerland became a "safe haven" from the ravages of the eurozone crisis.
Monday Morning's Miraculous Movement Masks Momentum [View article]
10:23 AM:
CHK down 6.66%!
Chesapeake Energy (CHK) fell about 6% in early trading afterReuters published a story indicating that CEO Aubrey McClendon has been taking out loans to finance stakes in Chesapeake’s wells and then using those same stakes as collateral for more loans.
The arrangement hasn’t been reported to Chesapeake shareholders, although the company and the CEO argue that they don’t need to be because they are personal investments. McClendon has the right to take stakes up to 2.5% in Chesapeake’s wells.
That said, experts interviewed by Reuters say that the deals could raise conflicts of interest that compromise McClendon’s duty to shareholders.
Nothing I'd bail over. Reminds me of Lampbert crashing SHLD ahead of his buy-back. It's shades of potential impropriety that can be "cleared up" and allow McClendon to come out smelling like a rose once he's upped his stake in the company by a sufficient percentage.
So, I do like selling the CHK May $18 puts for $1.30 and buying the May $15/18 bull call spread for $2 for net .70 on the $3 spread that's $2.65 in the money. Let's do 3 of those in the $25KP.
======================...
2:58 pm:
CHK/Craig – I think it will pass but it may take some time. I do suspect it's a game to chase all the retailers out of the stock so the company can buy back or maybe do some sweetheart sell-out at a price shareholders would never have agreed to otherwise.
======================...
9:54 am:
GNW/Ink – I like them long-term but insurance companies are essentially CONSERVATIVE bond investors and bond returns suck unless you want to invest in the PIIGs. They bottomed out at $1.75 in 2009 and I'd hang back and hope for another liquidity crunch (two words that don't seem right together) and then we can go hog wild on the sector. If the markets recover, and they get back over $7.50 – I'll like them then too but not as much as I would LOVE them at $2 or less.
======================...
As to the IPO - sure, it was priced in, now it is being priced out. Also note the REASON the IPO is off - GNW suffered a huge set-back on loans they made in Australian real-estate. That's not a good, conservative use of funds - that's more like exactly the kind of nonsense that tanked insurance companies in 2008.
Monday Morning's Miraculous Movement Masks Momentum [View article]
What's going on with them at the moment is Cramer is badmouthing Argentina in retaliation for the YPF takeover. That situation has NOTHING to do with TEO BUT it is possible that the same logic (rules to keep capital in the country) could be used to restrict TEO dividend payments.
Overall, I'd be wary of betting Argentina in the first place as Spain (if they go down) will take a lot of Latin America with them as there are so many interconnected loans.
As with any stock in this environment, you should look at how far they crashed in 2009 and make sure you have a plan for what you would do if it happens again.
If you are not comfortable doubling down at $8 and having 2,000 shares with an average around $13 and waiting for the market to come back over time (and I would be loving these guys at $8, even if Argentina is rioting) - I would not look at these guys as a keeper if they can't hold the line at $14 because there is little support below there.
The worst thing about high-dividend stocks is they tend to have crappy options. In general, I'd rather sell options for income than rely on a dividend.
Monday Morning's Miraculous Movement Masks Momentum [View article]
Monday Morning's Miraculous Movement Masks Momentum [View article]
Frankly it's a slow day. 8-)
I did want to take the opportunity to come on and chat with some SA readers for a change but this guy was the only one commenting.
I'm used to a couple of hundred comments a day in Member Chat and today it's like watching paint dry with just 82 comments as we cashed out our AAPL Portfolio last week and our other active portfolios are all just waiting for this silly run-up to run out of gas.
Most days I don't even have time to read over here.
Monday Morning's Miraculous Movement Masks Momentum [View article]