Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end. The word "derivatives" sounds complicated and technical, but understanding them is really not that hard. A derivative is essentially a fancy way of saying that a bet has been made. Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before. Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion. Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion. The danger to the global financial system posed by derivatives is so great that Warren Buffet once called them "financial weapons of mass destruction". For now, the financial powers that be are trying to keep the casino rolling, but it is inevitable that at some point this entire mess is going to come crashing down. When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system.
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Friday, October 21, 2011
The stocks and commodities are acting like they are confident in the euro's coming to a solution this weekend, lets hope so, but to stay on the safe side I would take profits as we are at the top of this range and maybe hedge a little, why leave it to chance. The US dollar is down big today especially against the Yen to a level not seen since post WWI. Looks like people think QE3 is on the way, which would be great for everything except the dollar of course.
Morning Update
U.S. stock futures are up strongly this morning as euro- area leaders intensified negotiations to boost the region’s rescue funds before meeting in Brussels this weekend to discuss how to end the debt crisis.
The Euro's will meet twice next week to discuss their response to the debt crisis, including a plan to deploy $1.3 trillion. Talks speeded up on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending.
The SPX looks terrible on a technical basis price below the down sloping 150 and 200dma, and the MACD also at the top of its range. We also have this volatile wedge range if you will and price is near the high end of that range with 1240 being the high. I think getting long right here is a mistake, and very risky because you don't know what Europe will do over the weekend. If things go badly we could be at 1100 very quickly, in about two days or so.
The Euro's will meet twice next week to discuss their response to the debt crisis, including a plan to deploy $1.3 trillion. Talks speeded up on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending.
This is a tenuous and fluid situation and one that's very difficult to trade in. I had some emails yesterday regarding how to make money from the coming crisis and I will put something together over the weekend but that my be too late to take advantage if the talks fail. I'll just tell you what I'm doing. Using the bear ETF's you can short the banks (SKF or FAZ), Short the euro (EUO), short small and large caps (TZA, and BGZ) and shrot commodities (SMN) but i am only putting in about 15%, and rest in cash and if the stuff hits the fan you can pile on. If they find a temporary cure through printing then the physical metals will gain on that, so this is more or less a hedge against the gold and silver (ZSL DZZ).
The SPX looks terrible on a technical basis price below the down sloping 150 and 200dma, and the MACD also at the top of its range. We also have this volatile wedge range if you will and price is near the high end of that range with 1240 being the high. I think getting long right here is a mistake, and very risky because you don't know what Europe will do over the weekend. If things go badly we could be at 1100 very quickly, in about two days or so.
It will be interesting to see the COT reports to see what the commercial banks are doing in terms of positioning. They had gone bearish on the dollar and bullish on the euro and you see that spike and now there may be a bull flag forming and this is contrary to what I wrote yesterday. Very confusing market. Banking index is clearly showing the financial system is in trouble usually rising wedge in a long term down trend sucks new money in and rips your gut out, the problem with them is that they are so difficult to time. Just look at summer of 08 this pattern feel very familiar.
I took this from Dan Norcini's website, take a look at this informative article. It shows you how important the QE is for stocks:
Have a good weekend everyone.
Thursday, October 20, 2011
Please keep the name calling to a minimum
I am not a sage or a guru, I also can't see into the future, NO CRYSTAL BALL.
I knew I'd get some flack but wow.
It's just information if you think its BS carry on as before, remember this is not a paid site, I don't make money from page views. Was just trying to be helpful.
European Banking System In Peril
Dear family, friends and loyal readers,
As you all know I am a physician by education and training and not a financial expert. By nature I am a risk taker and more often than not its lead me into lots of trouble in the past. But this is a risk I couldn't chance. Not informing all of you what I believe will happen in the next few days..
I subscribe to a financial adviser, i'm not going to advertise for him so I am omitting his name on purpose. He is predicting the end of European banking system as we know it (within the next couple of days). He feels that this will have a vast effect on the US banking system and more than likely folks will be lining up to get their money out before the door close. He is advising and I am telling my family and friends to take out enough money for food and survival needs for the next three months. I KNOW THIS SOUNDS CRAZY. I HAVE NOT LOST MY MIND. Below is an unauthorized excerpt from his post this morning.
"It has to be said that up until now we - and most of the rest of the world - have blithely assumed that, confronted with catastrophe, European leaders will overcome their differences and solve Europe's problems by printing up a few trillion euros to paper over the cracks, US style, and keep the show on the road for a year or two longer, but it is now becoming increasingly apparent that the scale of the problems is so gargantuan that there may be no credible or workable solution. The sad fact of the matter is that the bungling, discordant self-serving buffoons who run Europe may well have left it too late. If Europe should fail - and the markets look set to pass judgement on it next week, after a weekend of crucial meetings, then the consequences will be unthinkable, yet think about them we must.
if Europe should fail this is what we can expect to happen - European banks will crash and burn and take down major US banks, which are already walking wounded basket cases anyway. We are likely to see a lengthy unscheduled "bank holiday" - banks will slam their doors and if your money is still inside their vaults then you are out of luck.
As you all know I am a physician by education and training and not a financial expert. By nature I am a risk taker and more often than not its lead me into lots of trouble in the past. But this is a risk I couldn't chance. Not informing all of you what I believe will happen in the next few days..
I subscribe to a financial adviser, i'm not going to advertise for him so I am omitting his name on purpose. He is predicting the end of European banking system as we know it (within the next couple of days). He feels that this will have a vast effect on the US banking system and more than likely folks will be lining up to get their money out before the door close. He is advising and I am telling my family and friends to take out enough money for food and survival needs for the next three months. I KNOW THIS SOUNDS CRAZY. I HAVE NOT LOST MY MIND. Below is an unauthorized excerpt from his post this morning.
"It has to be said that up until now we - and most of the rest of the world - have blithely assumed that, confronted with catastrophe, European leaders will overcome their differences and solve Europe's problems by printing up a few trillion euros to paper over the cracks, US style, and keep the show on the road for a year or two longer, but it is now becoming increasingly apparent that the scale of the problems is so gargantuan that there may be no credible or workable solution. The sad fact of the matter is that the bungling, discordant self-serving buffoons who run Europe may well have left it too late. If Europe should fail - and the markets look set to pass judgement on it next week, after a weekend of crucial meetings, then the consequences will be unthinkable, yet think about them we must.
if Europe should fail this is what we can expect to happen - European banks will crash and burn and take down major US banks, which are already walking wounded basket cases anyway. We are likely to see a lengthy unscheduled "bank holiday" - banks will slam their doors and if your money is still inside their vaults then you are out of luck.
Major disruptions in supply and distribution of food and fuel in particular will trigger general panic, and riots and mob violence will spread rapidly - what we have seen on TV happening in Greece will suddenly happen on the streets of the US and many other countries. Stockmarkets will crash in a manner that will make 2008 seem like a "walk in the park". Virtually every asset class and investment will crater - especially commodities, stocks and Real Estate. The euro will be vaporized. The tidal wave of funds liberated by this mass panic are going to have to go somewhere and normally we would expect them to go into the US dollar and Treasuries, but with US banks failing even this cannot be relied upon. The one surefire investment category that will shine - provided that is that the markets or brokerage houses etc involved with these transactions don't themselves fail - is "misfortune securities", meaning bear ETFs and Puts".
The gravity of this crisis is such that we are not simply talking about protecting investments and making opportunistic gains out of the mayhem that will ensue, if Europe should fail, we are talking survival issues as well, as due to the interconnected nature of the global economy things could become very ugly, very fast across a broad front. If you want to learn what life is like when banks suddenly slam their doors, then you should read up on the Argentinian crisis of the early noughties. The middle class suddenly found themselves disconnected from their savings, and as many of them lost their jobs at about the same time, they became instantly destitute, and forced to swap their possessions for food. Crime soared and people who had been used to living relatively cushy lives suddenly found themselves living on the edge in a law-of-the jungle nightmare. If Europe should fail this is what may quickly become reality not just in Europe but in the acutely fragile and vulnerable US and many other other countries as well. Other undesirable consequences will be unemployment rising to incredible unprecedented levels, so that students leaving college will have almost ZERO chance of finding work. The travel industry, much of which is non-essential, will be devastated with airlines slashing flights and going bust and hotels suffering extremely low occupancy rates.
With things rapidly coming to a head in Europe, this catastrophic chain of events could be set in motion as early as next week. So stop and think about this for a moment - WHAT WILL YOU DO, AND WHAT SITUATION WILL YOU FIND YOURSELF IN, IF BANKS SLAM THEIR DOORS WITHIN THE NEXT COUPLE OF WEEKS? - are you starting to see what I am driving at? Good, then here is what you do. You go down to the bank either today (Thursday) or tomorrow - we have the luxury of another day - and draw out a stash of cash - sufficient to keep you and your family in food and essentials for at least a month and preferably more like 3 months. When you stroll into the bank it will feel surreal, everything will appear normal and people will be standing in short lines and chatting and smiling etc, and you may find yourself thinking "That Maund's lost it - he's completely off his rocker", but if the danger I have described should become reality then you are going to be mighty glad you visited the bank this week, instead of turning up in a couple of weeks to find the doors shut and a huge crowd of desperate people outside hurling rocks at the windows. If this danger does not become reality, and there is a miracle solution to Europe's problems and everything returns to "normal", then you have lost nothing and you can stroll down to the bank again and pay the funds back into your account in a few weeks time, once you are convinced it is safe to do so. No-one will think you are crazy because of course you don't have to tell anyone why you are drawing out the money.
As collapsing banks are going to be the trigger for the economic meltdown and market bloodbath, if Europe should fail, it is logical for us to first consider bear ETFs in the financial sector and Puts in bank stocks as our first line economic defense and also opportunity. Let's start by reviewing the latest chart for the US bank stocks, the Philadelphia Bank Index.
If nothing happens, and i hope it doesn't then you really don't lose anything and you can call me all the names you like. I hope and pray with all my heart that something can be done on a massive scale to avert this, but they are too divided and too short sighted, the bickering never ends.
THIS IS NOT A FEAR BLOG, I AM NOT SELLING YOU ANYTHING
If you believe in God, please pray this doesn't happen a lot of people will be hurt, no one wants blood in the streets.
The gravity of this crisis is such that we are not simply talking about protecting investments and making opportunistic gains out of the mayhem that will ensue, if Europe should fail, we are talking survival issues as well, as due to the interconnected nature of the global economy things could become very ugly, very fast across a broad front. If you want to learn what life is like when banks suddenly slam their doors, then you should read up on the Argentinian crisis of the early noughties. The middle class suddenly found themselves disconnected from their savings, and as many of them lost their jobs at about the same time, they became instantly destitute, and forced to swap their possessions for food. Crime soared and people who had been used to living relatively cushy lives suddenly found themselves living on the edge in a law-of-the jungle nightmare. If Europe should fail this is what may quickly become reality not just in Europe but in the acutely fragile and vulnerable US and many other other countries as well. Other undesirable consequences will be unemployment rising to incredible unprecedented levels, so that students leaving college will have almost ZERO chance of finding work. The travel industry, much of which is non-essential, will be devastated with airlines slashing flights and going bust and hotels suffering extremely low occupancy rates.
With things rapidly coming to a head in Europe, this catastrophic chain of events could be set in motion as early as next week. So stop and think about this for a moment - WHAT WILL YOU DO, AND WHAT SITUATION WILL YOU FIND YOURSELF IN, IF BANKS SLAM THEIR DOORS WITHIN THE NEXT COUPLE OF WEEKS? - are you starting to see what I am driving at? Good, then here is what you do. You go down to the bank either today (Thursday) or tomorrow - we have the luxury of another day - and draw out a stash of cash - sufficient to keep you and your family in food and essentials for at least a month and preferably more like 3 months. When you stroll into the bank it will feel surreal, everything will appear normal and people will be standing in short lines and chatting and smiling etc, and you may find yourself thinking "That Maund's lost it - he's completely off his rocker", but if the danger I have described should become reality then you are going to be mighty glad you visited the bank this week, instead of turning up in a couple of weeks to find the doors shut and a huge crowd of desperate people outside hurling rocks at the windows. If this danger does not become reality, and there is a miracle solution to Europe's problems and everything returns to "normal", then you have lost nothing and you can stroll down to the bank again and pay the funds back into your account in a few weeks time, once you are convinced it is safe to do so. No-one will think you are crazy because of course you don't have to tell anyone why you are drawing out the money.
As collapsing banks are going to be the trigger for the economic meltdown and market bloodbath, if Europe should fail, it is logical for us to first consider bear ETFs in the financial sector and Puts in bank stocks as our first line economic defense and also opportunity. Let's start by reviewing the latest chart for the US bank stocks, the Philadelphia Bank Index.
If nothing happens, and i hope it doesn't then you really don't lose anything and you can call me all the names you like. I hope and pray with all my heart that something can be done on a massive scale to avert this, but they are too divided and too short sighted, the bickering never ends.
THIS IS NOT A FEAR BLOG, I AM NOT SELLING YOU ANYTHING
If you believe in God, please pray this doesn't happen a lot of people will be hurt, no one wants blood in the streets.
Wednesday, October 19, 2011
Decision Day for Silver
Silver is down 50 cents this morning, Gold is down slightly and the DXY is down.36 most likely on the news that European banks are going to sell assets to raise capital and therefore they won't need money from the central banks. This story is a bit odd because if all banks are selling at the same time then who is going to be buying. Makes no sense to me! But two trillion will come in and this is just noise that should be bought. Any weakness is a gift.
On to the silver chart i'm using the SLV only as proxy, don't own. You see the bear wedge/pennant looks ugly, I was hoping with the shorts at lows and with dollar sliding we'd get a break to the upside this week. Yesterday, we had a nice reversal this morning am a bit disappointed in the 50cent move lower, so now the question is do we test the lows of yesterday and finally break above the resistance line or do we breakdown and go to support at 28. I think the odds favor a down move with a quick reversal. I think there is three dollar downside risk with 8 dollar upside, so good risk reward for entry. I still do think we will be above 50 dollars on Silver but we won't get there based on the already strong fundamentals, we need news. With gold trading above 1600, Silver should be at a 100/oz but I am not going to cry about why it isnt there, I promised I wouldnt.
Sideways consolidation as the market waits for QE or no QE so either we either continue the up trend or the consolidation resolves to the downside, as there is no fundamental reason for the house of cards to go down (SPX), i say that sarcastically. QE will wash away all the dirty laundry and up up and a way we go. Watch that 10000 level. Mc O is overbought and Mc SI is in the middle of its range.
On a personal note, I haven't been writing much because I am going through a divorce and was moving and settling in these past few days and now that I am more organized I should be able to write fairly regularly. Thank you for the kind emails, I will be responding to them shortly.
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