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Turnaround Tuesday - Greece is Fixed (again)
Courtesy of Phil of Phil's Stock World
Well until next quarter, at least, when we can begin the "crisis" cycle all over again. As it stands, after much hand wringing yesterday, Greece will get the $11Bn it needs to fund itself for another 3 months. Yes, as I noted yesterday, this is not a typo - Greece needed $11Bn and the global markets gave up $1Tn in value because we weren't sure if they were going to get it on Monday morning.
To meet its budget goals in a declining economy, Greece is being pressure to cut 100,000 public jobs by 2015. With just 11M people in Greece, cutting 100,000 jobs is like asking the US Government to cut 3M jobs - isn't that insane? And by insane, of course, I mean - isn't that the Republican platform? Yes, nothing says "economic recovery" like firing 3M people in this topsy-turvry World.
We expected this, of course, and we got very bullish with our picks yesterday morning and were handsomely rewarded into the close and hope to be even more handsomely rewarded this morning as QE FEVER once again takes over the nation (see November's "POMO Fever" article to review the scam).
Interestingly, my main suggestion for playing QE2 last year was: "We can bet on inflation with our gold plays with potentials for 923%, 309%, 3,900%, 567%, 276% and 46%." Gold was "only" $1,300 last November and I was still enthusiastic about it at the time. Yesterday we shorted it with the GLD Nov $180/174 bear put spread at $3.30, selling $193 calls for $3 for a net $0.30 trade that bets gold won't hold $2,000 through Thanksgiving.
Also different this year is that we are betting against TLT (also in yesterday's main post) and we got fabulous prices for our short play yesterday as TLT ran all the way up to our goal at $115. As we got a nice sell-off at the open, my morning Alert to Members had trade ideas to go long on Oil Futures (/CL) off the $85 line (now $87, up $2,000 per contract) and we sold some DIA Oct $111 puts for $3.10 in the Income Portfolio, which are already down to $2.70 (up 13%) - simply following our rule of ALWAYS selling into the initial excitement.
At 10:08 we got aggressive with a TNA Oct $41/45 bull call spread at $2, selling the $29 puts for $1.70 for a net .30 spread with 1,233% upside potential if TNA finishes over $45 in 30 days. DIA 9/30 $115.75 calls were bought at $1.05 in the $25KP and those shot up to $1.35 (up 28% in a day) but we decided to be greedy and hold them overnight. HOV got attractive again for a long-term play at $1.23, USO was the subject of a complex and very aggressive spread as they hit $33, AAPL caught our attention on the sell-off and we played them long-term bullish to $500 in 2013 and then we went for TNA again as it was still sexy at 12:14 pm.
We haven't been this bullish since way back to last Monday, when we also got very aggressive into the sell-off but that was 500 points ago so yesterday was a bit riskier and based less on our chart range and more on the fundamentals - which I maintain are not as bad as we have been led to believe by the MSM, who are controlled by the Banksters who compete with us to bid for equities and want nothing more than to get you to walk away from the auction or, even better - to put your equities up for auction and increase the supply, lowering the price for those few of us who are buying.
Turning a minor incident like Greek debt into a World-shaking economic crisis is BRILLIANT! It's as if a used car salesman convinces you that your lost cigarette lighter will force him to knock 30% off the Blue Book on your trade in. You may think you would never fall for that but what do you think you are falling for when you sell your stocks at 30% off the top because Greece may or may not get a $11Bn loan in a $60,000Bn Global Economy (0.18%). That's right about the equivalent of losing the cigarette lighter in your car....
Above is the interlinked debt chart we are used to seeing in the media. The media are controlled, of course, by Big Business and their Financiers and they are all buyers of other businesses. Big Businesses want low borrowing rates to run their businesses and to wipe out their competition, who they ultimately crush or buy out at the lowest possible price. They love a good crisis as they gain market share and get Government to dismantle regulations while labor costs are driven lower and lower as the jobs pool collapses. Financials love it too because the get FREE MONEY from the Government (actually from we, the People in the form of never-ending debt) AND they get to collect massive fees from all the M&A work.
So of course it is in the interest of the MSM to blow this crisis as out of proportion as possible. Even now, at 8:20, on CNBC, Mark Grant and the Gloom and Doom crew are advising their retail sheeple to dump out of equities and buy bonds. Before you do that, however, perhaps we should take a look at the same chart as adjusted by the ESCP Europe Business School in a study that simply cross-cancelled the debt obligations from Nation to Nation - to cut through some of the noise that is present in the standard debt views:
Notice anything different? 64% of the debt is reduced through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%. Even Ireland's debt is reduced from 130% of GDP to just 20% and Frances debt disappears entirely. This is why France is Germany's partner in STRENGTH in the EU. Unlike the American media, who are quick to stereotype and denigrate the French, the people who actually understand the economics of the EU do see the French in a very good position. This is why Americans don't get the relationship between Sarkozy and Merkel - they are grossly misinformed as to what the underlying economics of the situation are.
I don't fault American investors, they have been trained from birth to accept whatever propaganda is broadcast to them through the little boxes they watch all day. Orwell thought the government would have to pass laws to force people to put monitors in every room in the house that are kept on all day - telling people how to think. The reality of America is that the people are so addicted to what was once properly known as the "idiot box" that they feel the need to have TV on their phones - that's very sad...
Of course, the same way we can't take the MSM for granted, we can't just go by one study and decide there is no debt crisis. As pointed out by Lisa Pollack in the Financial Times, "Even if one were to focus on sovereign debt, could the magic compression wand be waved in order to reduce the burden? There are many, many issues one could raise, so let’s just look at a few niggles" citing: Fungibility, Agreeability, Desireability and Opacity - all factors one has to consider before simply cancelling out one debt for another. Still, somewhere between 100% and 36% lies the real debt levels and they quite simply ARE NOT AS BAD AS YOU THINK.
Unfortunately, what you (Investors) think is what drives the markets and the worst thing a fundamental investor can do is get so confident in a conclusion that they are willing to bet against the stampeding mob because that mob will trample you long before you get to be proven right! That's why we continue to ratchet up our technical levels and every day we expect to see signs of strength or we will be happy to commit more of our sidelined cash to the bear side. Our bearish covers yesterday were gold and TLT - for reasons I out lined in the morning post. We also have many, many bear spreads that are neutrally covered by bullish offsets which hedge us for a small break below our -10% lines on the Big Chart.
As I mentioned last week - we are not going to be "bullish" until we break over the rising green channels so, every day, our expectations are raised. At the same time, we're not going to be panicked out of positions by moves down that remain inside the channel UNLESS we make a low again without first making a new high. This is a very dangerous spot because the Nasdaq may top out here and head down before the other indexes get a chance to complete their up cycle so what we NEED to see today and tomorrow is the Nasdaq breaking clearly over the green line and holding it - which would be sort of an invitation for the other indexes to come and join it.
Weakness in the broader (and harder to manipulate) Russell and NYSE is a huge concern. At the moment, we are playing the Russell bullish as a lagger and the the Nasdaq bearish as a leader. We're watching the Dollar on the 77.50 line and over is bearish and under is bullish - what can be simpler than that?
It's going to be a bumpy ride into tomorrow's Fed announcement so let's be careful out there.
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I'm very glad that there is a contrary view around here. I don't really agree with you, but now we have two opposing views as guest posters here. The battle for selling investing advice is on!
I apreciate the technical breakdowns of trades, but at the end of the day, I can tech talk my way to profits in hindsight too.
I'm usually right behind Phil.. but this seems a little off.
The political impetus is to let Greece go, and the size of default while small on it's own, totally miconstrues the leveraged products that hinge on the underlying... Just like saying, hey it doesn't matter if a bunch of people in the US default on their mortgages, because it's only an X Billion dollar loss.... but then add the CDS, CDOs, and loss of collateral associated on (still good) deals, and the thing gets nasty fast..
By the way if Apple makes it to 500 I may just short it for kicks. And I love Apple.
So, all of these government workers that are to be laid off - are they now eligible for some form of relief (i.e. unemployment in US)?
That'll surely help the bottom line! Why not just reduce their pay and still find some type of productive work for them?
Suppose Canadians hold a trillion dollars in US government debt. And suppose US citizens hold a trillion dollars in Canadian government debt. By your reasoning, the net debt of both governments is zero, and everything is fine.
But I think that what really matters is whether a government can service its debt, and not who the money is owed to. It is somewhat better if a government's debt is held by its own citizens because then they would be less likely to panic and suddenly dump the debt.
The tagline for Phil's Stock World is "High Finance for Real People." Phil is sniffing way too much of his own stuff. That debt cancellation chart (second one) must exists somewhere in a parallel universe . . .
It's turn around Tuesday. Zorba loves turn around Tuesday, but Zorba's
girlfriend hates it. Now where can she be hiding?
Look behind you. This time you might be the victim. LOL LOL
The sun'll come out Tomorrow Bet your bottom dollar That tomorrow There'll be sun! Just thinkin' about Tomorrow Clears away the cobwebs, And the sorrow 'Til there's none! When I'm stuck a day That's gray, And lonely, I just stick out my chin And Grin, And Say, Oh The sun'll come out Tomorrow So ya gotta hang on 'Til tomorrow Come what may Tomorrow! Tomorrow! I love ya Tomorrow! You're always A day A way!
http://youtu.be/pc2psB_CHco
Sam, have another Sam:
http://www.samueladams.com/age-gate.aspx?ReturnUrl=%2findex.aspx
The sun'll come out Tomorrow Bet your bottom dollar That tomorrow There'll be sun! Just thinkin' about Tomorrow Clears away the cobwebs, And the sorrow 'Til there's none! When I'm stuck a day That's gray, And lonely, I just stick out my chin And Grin, And Say, Oh The sun'll come out Tomorrow So ya gotta hang on 'Til tomorrow Come what may Tomorrow! Tomorrow! I love ya Tomorrow! You're always A day A way!
http://youtu.be/pc2psB_CHco
Absolute rubbish.
Its Jethro Bodine math. Naught naught ÷ naught = 14.58% Maybe we need Jed Clampet's oil money.
Let's see - one hard Repug bash as if the Repugs want to fire as many folks as possible (not!), one out of five indices mashed on solid resistance line with the other four mid span with a southern byass, and a cooked up debt chart trying to sell me that the Euro debt trap is really just a figment our our imaginations. Sorry Phil, not sold. But my crystal ball totally sucks, so I'm not betting either way right now 'till my chart tells me more.
You know what Im going to copy your positions on to my note page thing on my computer and check you out in a couple months this should be interesting.
So this is the time to buy stocks eh? You might be right for a short term bump maybe even 3-6months but I doubt it. Stocks are part ownership in a company and companies are entities that make things or sell things. Someone has to buy those things.
How do we buy them when we are all swimming in debt, with no jobs and living on food stamps?
I mean I get that this is a zombie market to some extent but even this zombie market is going to implode at some point because of the FUNDAMENTALS OF THE ECONOMY YOU MORON.
To hell with the fundamentals of the companies that doesnt mean shit if none of us have any money to buy anything hahahahahaha.
EPIC LOGIC FAIL
You sir are destined for some serious pain.
I stand to be corrected and to apologise if I am in fact incorrect , but the diagram showing the cross cancellation of debt obligations between nations has a fatal flaw. The flaw in my view neglects to recognize that whilst you can net off debt between nations, you cannot make the actual debt of individuals, firms etc disappear nor can you improve teh quality of the security.
For example, if a German bank has lent $100 to a French home owner and the French bank has lent $100 to a German homeowner, the diagram is correct in saying that the cross cancellation of debt leads to zero debt between nations. In reality however the poor old home owners still owe the dough and the poor old banks still own mortgages to sub-prime real estate.
Am I wrong?
The real issue here is that by government orchestrated debt swaps, the french home owner and the german home owner will owe debts to their own country banks. That will unravel the uncertainty of the current bank construct. Secondly, those banks which have too much bad debt on their books with LOCAL owners will then be obliged to WRITE OFF some of that debt and be RECAPITALISED by their own government central banks.
This will then send strong signals to the market that each national economy will unravel its OWN debts with its own debtors and creditors, thereby diminishing the CONTAGION SYSTEMIC risk; which is the MAIN issue today feared by markets. Merkel's 2008 dictat that ALL bank debts be handled by national central banks and NOT through ECB/EFSF mecanisms will then become truly operational.
As for government intervention to clean out bad banks balance sheets we have had the example of US and UK interventions since the 2008 proving that these banks are now better capitalised than their EU counterparts. So the EU will have to follow suit.
THAT IS THE MAIN ISSUE THAT NETTING COULD RESOLVE AT EU LEVEL. BUT DO THE NATIONAL GOVERNMENTS HAVE THE WILL TO DO IT? I DOUBT IT, ESPECIALLY THE UK GOVERNMENT, WHO IS RUN BY THE CITY! They Lose big on this operation and will prefer kicking the can...for irrational and suicidal short term reasons : Bank bonuses etc.
Once this unravelling has occurred, the ECB/EFSF mecanism to save RESIDUAL debts in INSOLVENT economies like the PIGS COULD become more manageable with the support of the richer vibrant EU core economies, whose liquidity/debt/bank capital structure have been remodeled after/during the netting operation.
Your correct, not to mention the levereging of the 100 dollars on the banks books.
Greece is being pressured to cut 100,000 public jobs by 2015... it's like asking the US Govt to cut 3M jobs - isn't that insane? ...nothing says "economic recovery" like firing 3M people in this topsy-turvry World.
No it's not "insane" Phils Stock World. It's totally sane. Because the world is topsy turvy because the unproductive parasites (politicians and parasite businesses) are at the top of the food chain eating everyone elses cake
There's NOTHING BETTER for the economy and its speedy revival than sacking Govt staff, lessening the burden of parasites living off the private sector. Sack EVERY Govt employee and then you'll see a recovery
The ever longer unemployment cues in the West are precisely equal to the destruction of productive wealth by the parasite institution that is Govt ...don't believe me, well you've got massive amounts of history (USSR, Eastern Europe, China, North Korea etc) to read up on on how Govt intervention and expansion kills the economy. Try understanding your history using your own brain, not academics re-writing of history, Mr Lazy Slacker
Kill Govt, let the private sector flourish... nothing in history works better
The volume of the proposed sackings in a basically dead job market is both social, political and economic suicide. I would prefer to see the government reduce public sector wages by a percentage that would equate to the sacking of 100,000 people. The pain is thus shared and an incentive is created for all public sector employees to find better employment rather than just the ones who are sacked.
Interesting analysis in the latest GEAB report. Not sure I agree with all but it does provide a somewhat different perspective:
http://m.leap2020.eu/GEAB-N-57-is-available-Global-systemic-crisis-Fourth-quarter-2011-Implosive-fusion-of-global-financial-assets_a7640.html
Yes this is great, France is great ! Boy I really needed to hear that. I am going to buy Soc Gen and BNP tomorrow !! Back up the truck !! And also i will load up on French govt debt...
caution : France's future vis a vis EUroland integration depends on 2012 may election results, as pointed out by the article. Sarkozy is a US hegemony system supporter who is scared of German pre-eminence in Euroland. Its shortsighted, and the other side, the social democrats, are more attuned to EUroland construct in the traditional sixty year time line.
Besides, french banking sector woes are far from over...and recapitalisation, as in USA and UK in 2008/2009, inevitable.
Off Topic. but worth the time.
http://www.youtube.com/watch?v=dyvbI6Eq-qA
OCCUPY-WALL-STREET-PROTESTERS-ARRESTS( Sept 20, 2011) Spread This Video Please.
New York's Finest! if thats the best new york has to offer maybe we should not be so concerned with making sure it's safe? maybe a trade with Canada? or outright sale? "We the People" are willing to finance the entire purchase costs!
Guys, please, realise PONZI's CANNOT last forever. There comes an ending.
The more it is prolonged, the more painful is the implosion.
Take care!
Canceling debt is not like paying debt...Germany loaner A is owed $1 by Italy debtor B and Germany debtor C owes Italy loaner D...yes they cancel out [evaporate] and yes the two debtors are happy as they didn't pay anything but did either loaner get their $1 back?...constitutes 100% default to "cancel out debt" between countries unless all the debtors and loaners are the same entities...
Sorry I didn't read your post and I posted much the same thing after you. Glad to see that I am not the only one thinking in practical terms.
Nice tech talk Phil. BTFD Bitchez...
Watch yourself Phil, the 'Malcontents' get fired up around here if anyone makes bullish calls on stocks!
nice "tech talk"? seriously?? please tell me what "technicals" you are using as a basis for being long and unhedged here, i'm all ears. please be specific.
netting out debt is a non-starter to anyone with half a brain cell, plenty of others in this thread have already articulated the reasons that it's complete and utter bullshit, i'll leave it as an excercise for you to see if you can figure it out for yourself.
i hope you're long since the start of this latest bullshit rally and have taken some profit at least. i closed some iwm calls last wednesday, opened long iwm puts into friday's close and covered on monday's gap down. put a long straddle atm on iwm at today's close. don't be a fag like iq 145 and jump on spy unhedged just as it's crashing into massive resistance, you can make plenty of money without being a moronic momo-chasing bulltard like that fucknut.
I play the directional ETF game but basically with my gambling money based on chart analysis. I am scaling real money into what I perceive to be mispriced equities (primarily large cap with strong balance sheets) due to the risk on/off mentality and high correlations. Divi's are important in my strategy, but not essential. I am looking more at balance sheets than charts here. Big names, a couple are DOW components. Have not bought anything in a week until today. Today I bought some BTU. I am moving real money out of .gov and cash and DCA into what I perceive to be mispriced solid large caps. These are not "short term" trades BTW hence the scaling in. I went way liquid before the correction and believe the bottom is in and it is time to BTFD. IQ and I both disclosed long positions a week ago on the last big down day if I am not mistaken, as we both took heat from the PM crowd. I am in Phils camp regarding the solid upward trend lines that have developed across the board. Any major breakout of this range could affect my strategy, but the greece thing is overblown, CB's got our back long, and earnings are solid. I have some small caps in mind if the rally has legs. May the force be with you lol
Edit: On the netting out debt thing, I have no clue WTF they are talking about. If I am not mistaken investors, banks and the like hold the debt, not sovereigns holding other sovereigns debts. Phil talks a tight game on options but I kind of overlooked that shite. I put it in the disinformation bin along with half the stuff I come across around here.
BTW, the double dip thing ain't happening IMO. I know of some great IPO's if the market doesn't puke and they are consumer discretionary and are going great guns. Check Edgar filings if you are into that sort of thing.
I really can't say much more on that, but I think this rally has legs.
.
How can you listen to someone who supports ideology? I thought both the repubs and demos were in the same boat. How can you criticize one without the other?
Phil was, and most likely still is, hunkered down firmly in the Obama camp. He didn't have the foresight 3 years ago, I can't trust that he has gained any since then.
If all this Euro debt cancels out for the big boys, why not get on with it, cancel it out, write off the rest and get on with life. Is that completely unreasonable?
they can't. if you wipe the 'assets' (servicable debt) off the books then all the balance sheet gimicks come to be impossible to mend and the house of cards comes crashing down. when you play a game in fantasyland with fictional placeholders, it all goes poof into thin air from where it came from in the light of reality...
Just noticed that the 2011 Eurozone kinda resembles a circa 1940 German occupation map.
Now substitute a band of tyrant bankers for one tyrant leader.
If history repeats, look for Japan to join the Eurozone soon...
Greece just solved its debt problem and acquired massive liquidity!
Check this out-->>http://www.zougla.gr/page.ashx?pid=2&aid=383198&cid=4
that's true greek and I feel like a trojan lost in transalation.
Fascinating stuff King Minos. Do you think they will allow it to happen? On top of that you might like to add what germany owes the Greeks of yesteryear who died never receiving compensation for the Nazi theft and atrocities of WWII. Unfortunately, compensation payments are rarely made and received by those who were the perpetrators and the victims.
There is a problem with your thesis of course. If the debt of these countries was held by the other European countries then yes they could just "net" out. But it's not. It's held by the banks and therein lies the problem.
Set up a central clearing house. All loans receivable by the banks repaid immediately by the clearing house. Funds come from enforcing immediate repayment of all loans payable by the banks, with a discount for early payment.
Shortfall covered by a ....... Bank levy!
Hey this person actually makes sense; what are they doing on Zero Hedge? Are all the faithfull still going short? I'm up 12,000 dollars on my S&PLong; should I apologiize? Maybe I should go to confession; Father I have sinned, I made money off the fools who think a bearish inter-net blog is something to trade off of". Oh well.
arrogant prick
cut it out IQ. nobody around here is against you making money.
hold it until friday tough guy, since this friday is going to close higher than last, right?? Put your $$$ (if you actually have any) where your cocksucker is faggot.
The first to die are always the ones seeking the greatest glory.
You may have looked great for a very short time and all eyes were on you, but it doesn't matter because you're dead. The smart man notices the machine gun hiding on the second floor and goes the other way.
There are thermonuclear warheads aimed at the US equity market, the problem is we just don't know when the button will be pushed.
adr= adrenaline pump to Doctor Strangelove level. You must have Stanley Kubrick's genes...and wicked sense of humor!
Are these real 'thermonuclear warheads' or 'figment of adr's imagination nuclear warheads', or metaphorical 'nuclear warheads'?
If metaphorical, what sectors are the warheads aimed at? How many megatons are these warheads? Will we live beyond the hypothetical warheads detonation? Who manufactured these warheads?
We have questions man, you can't just leave us hanging in suspense after breaking earth shattering news like this.