Thrilling Thursday – US Companies Create 1.4M Jobs! (Overseas)
by Phil - December 30th, 2010 8:28 am
US Corporations are hiring – they are just not hiring you!
The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute’s senior international economist. "There’s a huge difference between what is good for American companies versus what is good for the American economy," says Scott.
American jobs have been moving overseas for more than two decades. In recent years, though, those jobs have become more sophisticated — think semiconductors and software, not toys and clothes. And now many of the products being made overseas aren’t coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil. Coca-Cola CEO Muhtar Kent often points out that a billion consumers will enter the middle class during the coming decade, mostly in Africa, China and India. He is aggressively targeting those markets. Of Coke’s 93,000 global employees, less than 13 percent were in the U.S. in 2009, down from 19 percent five years ago. (see my interview with Kent here).
We’re anticipating the usual 400,000 jobs lost for the week at 8:30 this morning and I sure didn’t see too many "Help Wanted" signs at the malls this year, or anywhere else now that I think about it. We also have the Chicago PMI at 9:45, Pending Home Sales at 10:00, Natural Gas Inventories at 10:30 followed by both Oil Inventories at 11 along with the Kansas City Fed’s Manufacturing Index. Later today (3pm) we get the very inflationary USDA Agriculture Prices where we can short FCOJ like this as the panic that drove prices up this week seems a bit overdone.
Of course, I’ve been saying the entire commodity rally is overdone as I don’t see how firing 1.4M Americans who made $35,000 and replacing them with 1.4M Chinese workers who make $2,500 means the price of oil should go up. Only the fact that the US Government is going deeper and deeper into debt to help those 1.4M laid off Americans buy their next tank of gas is keeping demand level – without that support, buses would be MUCH more popular in the US, as they already are in China…
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DiggWednesday Chart Watch – The International Perspective
by Phil - December 29th, 2010 7:56 am
So, how are we doing?
I liked David Fry’s tweet (is that the right word – I feel so old when I don’t know this stuff!) yesterday which said: "SPY volume again pathetic at 55M shares. What’s there to write about today? Seems many investors still stuck on planes that aren’t moving." Dave was smart enough to take the day off – me, not so much. We did pick up another .20 with up the DIA Weekly $114 calls at 10:41 in Member Chat for $1.60and those were done at 1:05 for $1.80 as the market looked too risky to me. That was kind of silly as we do know that low volume is the bulls best friend but we’re trying to get back to cash each day on quick trades – especially on calls that expire on Friday!
As you can see from the Euro chart (click to enlarge), I’m not ready to give up on my bearish premise, which is essentially that Europe may be in worse shape than the US and the Dollar and – IF the EU runs into crisis – then the Dollar looks RELATIVELY better and, despite all of Timmy and The Bernank’s best efforts to destroy it – a strong dollar will pretty much undermine everybody’s bullish premise since the only real bullish premise people have is that our worthless currency will drive people into equities and commodities since Treasury and the Fed will artificially keep bond rates so low as to make them unpalatable alternatives.
Even Glenview’s Larry Robbins, who I thought would perhaps have an original thought in his Dow 20,000 premise, does not. The man entrusted with $4.8Bn of other people’s money predicts that p/e multiples will expand by, get this, 45% by the end of 2013 – rocketing the Dow to 20,000 despite just 5% annual earnings growth. Larry Robbins thinks those investing in 10-year treasuries aren’t doing so for the paltry return. They’re in it to front run the Fed and make a quick buck at the expense of the taxpayers. Once this trade is over, Robbins says, they have nowhere to go except the high quality equities in the stock market.
Read into any bull premise and you’ll find inflation at the heart of it. The Global Economy is not really improving but the numbers are looking up because it costs more money to do everything. Now,…
Wednesday’s Worry – ETF Madness hits $1,000,000,000,000
by Phil - December 22nd, 2010 7:46 am
A Trillion Dollars – Muhaha!
After adding $209Bn (26.3%) in total assets so far this year, the US ETF industry has passed the Trillion Dollar mark led by $31Bn of inflows into fixed income ETFs, of all things as well as $29Bn of inflows into emerging markets, and $21Bn into domestic. Recent outflows have knocked commodity ETFs down to $11.4Bn, miles down from last year’s $32.6Bn inflow – rats leaving a sinking ship, perhaps? That would be very bad news for the firm that bought up 90% of the LME copper supply recently. Do ETF traders really know something or are they a lagging indicator?
“There is little doubt that money chases performance, so the bedrock for significant (ETF asset) growth is clearly a continuing move higher for risk assets,” said Nicholas Colas, chief market strategist at ConvergEx Group. He added that growth for ETF assets would essentially be a “tug of war” between hedge funds and retail investors. “As retail investors grow more confident in a continued rally in risk assets, they will shift capital from cash to equity ETFs,” said Mr Colas, who described growth for equity focused hedge funds as the “other side of the growth coin” for ETFs.
Mr Colas noted that hedge funds tended to use ETFs on the short side which was negative for asset growth. He said that as hedge funds expanded their equity trading books, a growing portion would come from from ETF short sales. “This will come through as ‘supply’, dampening demand for new shares.” Barry Ritholtz ponders the end game of the ETF madness and concludes that soon there will be more ETFs than ever:
There is growing speculation surrounding what is believed to be the next breakthrough product in the ETF marketplace: Single stock tracking ETFs. Unlike their index-based cousins, these new single stock trackers would, as the name implies, track only a single stock, trade at exactly the same price as the stock to which they’re linked and consequently eliminate the need for single stock ownership. A top executive with a money management firm who is familiar with his company’s plans to launch such a product and was granted anonymity so he could speak freely, put it this way: “Think about the prospect of, say, a GE tracking ETF — an investor could capture over 99% of the movement of GE
…
ETF News Update:Korea, Ireland, and Quiet on The Western Front (SPY, DIA, UUP, TLT)
by ilene - December 20th, 2010 7:44 pm
Courtesy of John Nyaradi
Sabres were rattling on the Korean Penninsula today while Europe’s troubles percolated on the back burner and U.S. markets meandered in lighter than average pre-Christmas volume.
South Korea conducted its drills in spite of dire North Korean warnings but the ripples of the conflict spread across the region as the Shanghai Composite (SSEC) dropped -1.4%, bringing its decline from early November perilously close to the -10% marker for an official “correction.”
On the other side of the world, Europe continued struggling with its debt problems as Moody’s downgraded Anglo Irish Bank to junk status and Portugal and Greece continue attracting the negative attention of the ratings agencies. In France, the cost of insuring debt rose to record highs while the Euro declined over concerns of the ongoing banking stress in the Union.
At home, all was quiet on the Western Front as the dollar (UUP) gained, the long bond(TLT) declined and the Dow (DIA) slipped into the red while the S&P 500 (SPY) remaisn near two year highs.
On the technical side of market analysis, we remain in a sideways consolidation, unable to break higher while finding solid support just below current levels. Momentum continues to wane and the action in China could have bearish implications as the Shanghai Composite is being seen by more and more analysts as a leading indicator as that country’s global economic clout continues to grow.
At Wall Street Sector Selector, we remain in the “Yellow Flag” mode, expecting choppy to lower prices ahead.
Disclosure: Wall Street Sector Selector trades a wide variety of widely traded exchange traded funds and positions can change at any time.
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Post Mortem for the World’s Reserve Currency
by ilene - December 15th, 2010 2:34 pm
This is a thoughtful analysis by Mike Whitney showing what a financial mess we’re in – the proverbial rock and a hard place scenario. – Ilene
Post Mortem for the World’s Reserve Currency
Courtesy of MIKE WHITNEY, originally published at CounterPunch and Global Research
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Paul Volcker is worried about the future of the dollar and for good reason. The Fed has initiated a program (Quantitative Easing) that presages an end to Bretton Woods 2 and replaces it with different system altogether. Naturally, that’s made trading partners pretty nervous. Despite the unfairness of the present system--where export-dependent countries recycle capital to US markets to sustain demand—most nations would rather stick with the "devil they know", then venture into the unknown. But US allies weren’t consulted on the matter. The Fed unilaterally decided that the only way to fight deflation and high unemployment in the US, was by weakening the dollar and making US exports more competitive. Hence QE2.
But that means that the US will be battling for the same export market as everyone else, which will inevitably shrink global demand for goods and services. This is a major change in the Fed’s policy and there’s a good chance it will backfire. Here’s the deal: If US markets no longer provide sufficient demand for foreign exports, then there will be less incentive to trade in dollars. Thus, QE poses a real threat to the dollar’s position as the world’s reserve currency.
Here’s what Volcker said: “The growing sense around much of the world is that we have lost both relative economic strength and more important, we have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate…..The question is whether the exceptional role of the dollar can be maintained."
This is a good summary of the problems facing the dollar. Notice that Volcker did not invoke the doomsday scenario that one hears so often on the Internet, that China, which has more than $1 trillion in US Treasuries and dollar-backed assets, will one day pull the plug on the USA and send the dollar plunging. While that’s technically possible, it’s not going to happen. China has no intention of crashing the dollar and thrusting its own economy into a long-term slump. In fact, China has…
Wednesday Worries – Ireland “Fixed” – Who’s Next?
by Phil - December 8th, 2010 8:28 am
So many things are pissing me off today.
I got my political outrage out of the way in my earlier post: "Thanks for the Gas Money, Mr. President," so we don’t need to talk about that again. Ireland, as of 7:45, has not actually voted to accept the EU’s deal, which will pull $20,000 per Irish family directly from national pension funds to pay for the speculative mistakes of Irish Banks. Additionally, the Irish people are being asked to borrow another $75,000 per family from the EU at about 6% interest, also to pay for the speculative mistakes made by the Irish Banks. While this may seem insane – it’s only a drop in the bucket compared to what Americans are spending to bail out our own speculators so why shouldn’t they join the club?
At least Ireland gets to vote for their obligations, we have a Federal Reserve System where a single man, known as "The Bernank" is able to spend what is now heading towards $3.5Tn of OUR MONEY to bail out his banking buddies. That’s $31,818 per American family spent over two years IN ADDITION to the stuff I complained about Obama and our spineless Government spending in the last post.
As I said, things are pissing me off today! I should be in a better mood – we had a fabulous day trading in Member Chat yesterday. In yesterday’s post, I closed with "One last stab at making some bearish profits for us (see Morning Alert)" and you can click on that Alert, which was posted on Seeking Alpha and check out our trade ideas for the $10,000 to $50,000 virtual Portfolio which included (at 7:22 am yesterday) QID Jan $10 calls, which opened at $1.80 and finished at $2 (up 11%), DIA Dec $114 puts, which opened at .80 and finished at $1.33 (up 66%), XRT Jan $44 puts, which opened at .35 and finished at .55 (up 57%), USO Jan $36 puts, which opened at .66 and finished at .90 (up 36%), PCLN weekly $400 puts, which opened at $50 and finished at $1.40 (up 180%) and NFLX Jan $155 puts, which opened at $1.70 and finished at $2.30 (up 35%) but should look much better this morning, where we will exit.
Of course I featured the idea to short NFLX last …
Flip, Flop Friday – This Week It’s Europe!
by Phil - November 26th, 2010 8:11 am
Ah, you guys fall for it every time, don’t you?
They take it up for BS reason, they take it down for BS reasons and, somehow, they get you to commit to some thing or another that goes the wrong way within a day or two. And you guys wonder why I like cash… You can’t leave anything on the table in this market! Today’s reason du jure for the markets pulling back is Europe again and, as we laid out for you weeks ago – it’s now on to Portugal as the next "crisis" in the making.
It looks like almost all of Wednesday’s gains will be wiped out by the time we open but let’s keep in mind all this EU nonsense is nothing but hyena attacks as most of these countries are not in that bad shape overall – certainly no worse than we are (maybe we’re next!). Anyone can be next. If you want to attack a country, you can attack any country where you can get traction on rumors that POTENTIAL bank losses exceed GDP – that’s a banking failure.
Once you get just a small amount of people to believe the banks may fail, then the rates start going up (and big investors can give them a little push artificially, of course, to get the ball rolling). Once the banks have to borrow at higher rates, then they need more capital reserves and then you can scream that they were lying about their capital requirements and call for "investigations" and that will convince more people they are hiding something and then the rates go higher and they need more capital and the bears can then parade on TV saying that they knew all along and that the banks are insolvent and they can EXTRAPOLATE that, at the rate things are going – the whole country will be bust in X amount of time…
You can do this to anyone, anytime. Only if we stop the speculators from profiting from this game will it ever end. The reason that there are no runs on banks in China and Russia isn’t because their banks are more solid – I’ll bet there are Chinese banks who have nothing but a fortune cookie in their vault – but the difference is in Russia or China they will cut your head off if you…
Flip, Flop and Friday – Options Expiration Spectacular!
by Phil - November 19th, 2010 8:25 am
I don’t care if I die
Don’t ever leave me
don’t ever say goodbye
Things were going according to plan (even though the plan was horrifying) and everyone was happy but then Uncle Ben had to screw it up this morning when "The Bernank," speaking in Germany, indicated that the Fed would pull the plug on QE2 if they thought inflation would rise higher than "2 percent or a bit less."
WHA-WHA-WHAT? Keep in mind that WE are the only country on the planet Earth that is still pretending inflation is under 2% and he’s making this speech in China, where inflation is 4.4% so what do you think happened?
Of course, if you can answer that, you are smarter than the Wall Street Journal (but then again, who isn’t when it’s being run by people like Roger Ailes, who just said of National Public Radio: "They are, of course, Nazis. They have a kind of Nazi attitude. They are the left wing of Nazism.") who went with the headline: "Dollar Sinks Despite Chines Rate Rise" because they clearly do not understand the workings of International Monetary Policy, which I would find disturbing if the Wall Street Journal were a trusted source of financial information and not just a right-wing mouthpiece. As our friend Jon Stewart so aptly pointed out last night, there’s a pretty large disconnect between Conservatives and reality these days and it should be no surprise to any of us that this carries over to their trading positions.
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| George Soros Plans to Overthrow America | ||||
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Fortunately, PSW readers are well aware that any indication by The Bernank that the…
The Federal Reserve And The Pathology of Power
by ilene - November 18th, 2010 10:50 am
Courtesy of Charles Hugh Smith, Of Two Minds
The Federal Reserve and the Pathology of Power
The Federal Reserve is an example not just of run-of-the-mill hubris but of the far more profound Pathology of Power.
The rule of law has been supplanted in the U.S. by self-serving propaganda campaigns serving State and financial Elites: this is the Pathology of Power. The Federal Reserve is an instructive example because it is so blatant.
Despite the dearth of evidence that goosing the stock market actually generates a "wealth effect" which "trickles down" from the top 10% who own the vast majority of equities to the bottom 90%, the Fed has waged a ceaseless propaganda campaign claiming this policy goal is now essential for the nation’s well-being.
As Ben Bernanke recently made clear: "Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending (that) will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."
No mention of its positive effect on Wall Street; cui bono (to whose benefit?) indeed. To better understand the pathology of power, we should turn first to Pathology Of Power by Norman Cousins, published in 1988.
Cousins was particularly concerned with the National Security State, a.k.a. the military-industrial complex, which at that point in U.S. history was engaged in a Cold War with the mighty Soviet Empire.
In a classic case of structural decay and destabilization (including failed coups), the Soviet Empire dissolved in December 1991. Nonetheless, Cousins’ description of the pathology of power is an uncannily accurate account of the Fed and all the Central State fiefdoms.
"Connected to the tendency of power to corrupt are yet other tendencies that emerge from the pages of the historians:
1. The tendency of power to drive intelligence underground;
2. The tendency of power to become a theology, admitting no other gods before it;
3. The tendency of power to distort and damage the traditions and institutions it was designed to protect;
4. The tendency of power to create a language of its own, making other forms of communication incoherent and irrelevant;
5. The tendency of power to set the stage for its own use.
In broader terms, we might add: the tendency of power to manifest hubris, arrogance, bullying and the substitution of…
Thrilling Thursday – The Luck of the Irish
by Phil - November 18th, 2010 8:03 am
Yawn!
Yes, YAWN I say to a 1% bounce! I mean REALLY people, have we taught you nothing following our 5% Rule? This is a very basic part of it, you get a 20% reversal off of 5% moves and that is called a WEAK BOUNCE. Don’t blame me, I don’t make the rules… Oh wait, actually I did make this one. Anyway, don’t blame me, this is just a rule based on how the system works so let’s not get too excited about what basically amounts to physics.
It could have been Ireland (which we were expecting) or it could have been JPM bashing the dollar (they did) or it could have been Buffett saying "All is well" in the NYTimes (gotta get the liberal into the market too!) – it could have been anything but SOMETHING was going to give us a dead cat bounce.
Note the Nov 2nd levels on the chart. Here, if it helps I’ll do an impression of a TV analyst: "It is truly amazing to see how resilient our markets are making such a strong recovery and we project…" Oh, excuse me, I made myself sick… Come on people, we’re back to our Nov 2nd highs (if that) and, if we pull back to the "year to date" view, the song "I’m Always Chasing Rainbows" springs to mind (the Alice Cooper version):
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So pretty, isn’t it? Maybe this time it will be different. I’m not saying we CAN’T go up – with the Fed pumping in cash at an annualized rate of $1.8Bn it would be pathetic if we DON’T go up but I am very skeptical until we do break over those April highs and hold them as a firm floor. I was skeptical about Monday’s bounce (from 11,200 on the Dow to 11,275 and from 1,200 on the S&P to 1,207) and that served us quite well so give me the benefit of the doubt on this one before you all go off chasing this rally. We have a weekend coming up (lots of things could go wrong) and then a short week into a holiday which just so happens to be the holiday after which we expected the market to fall off a cliff if it continues to follow April’s Beta 3 pattern (see Monday’s…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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