ALL VIEWS ARE STRICTLY MY OWN AND ARE NOT REPRESENTATIVE OF ANY COMPANIES I MAY BE ASSOCIATED WITH If you have any questions/comments with anything I write or my views, do not hesitate to ask, or oppose. After all life is a free market.
Today most markets…almost all markets were closed….but maybe one of the most important trading days of the year. March non-farm payrolls came in at 120K, (ie added 120K jobs in March), Street expected 205K. BIG MISS. Big enough for apple to lose some points next week……
With the market selling off slightly these past few weeks, this will for sure take it down some more going to next week. There was a 45 minute time frame to trade from 8:30-9:15 where equity futures were open, in that time Dow futures down over 100, S&P down over 10…..rumors of QE3 already on the Street, even though the Fed released its minutes from its meeting over a month ago saying it has no intention of doing so unless economy takes a big hit, ie stock market drops around 15-20%........never underestimate wall St.….maybe no more 4 years for Obama?
Well time to get the holidays on
Chag Sameach to all, next year hope to be trading in Jerusalem…….
The markets have been acting very interesting these past couple days. It finally seems that Greece had “solved “all its issues (or at least for a couple years…..fine….couple of months) and the market doesn’t budge; actually gives up some of its gains.
Through my conversations with other traders, we all want the same thing….VOLATILITY. (Options trading works great with volatile markets...)
Why volatility? Because Bulls and Bears make money. (Bull, a trader who believes market will be increasing, Bear, trader who thinks market will decrease.) At the end of the day all traders want is volatility. Volatility gives you the opportunity to move in and out of a trade and fast, hopefully for a profit (Investors don’t want volatility, they like steady growth)
Word on the Street is that Bernanke and his boys at the FED wants to do some more easing ( the Obama administration would like this as well), they want the market to steamroll through the election year so 401K’s look good, everyone’s happy, and they keep their jobs. However there is ZERO justification for more easing right now. Im not saying the economy is great, but all the last couple Fed interventions led to higher commodity prices (think energy and food). Interest rates (what bank charges you to lend/what you earn when you deposit in a bank) are at RECORD LOWS. Money is flowing freely. If you’re not making money off of interest from the bank you go to the stock market or other risky asset classes, inflating their true value, forming a bubble. Think Dot Com bubble in early 2000’s and real estate bubble fro 2006-2008
Another thing you should all be aware of is the price of Gasoline and OIL. Gasoline is at record high prices for this time of year. Seasonally it increases during the summer months….As for oil…..it’s now at $106 a barrel, that is not a healthy amount, that will slow down growth., Don’t be fooled the economy RUNS on oil, prices are too high to grow. High oil and gasoline prices make everything cost more…because input costs, such as shipping, increase for everything. This is why high gasoline prices are considered one of the greatest taxes placed on consumers…
Be back soon………….
PLEASE DON’T HESITATE TO REACH OUT TO ME WITH COMMENTS?QUESTIONS/ARGUMENTS
These past few days have been recovery days on wall st. Volume on the NYSE (NY Stock Exchange) on Monday, first trading day after the Giants win, was the lowest non-holiday trading day volume in over a decade with the markets ending slightly lower. (zerohedge) Barring any radical events transpiring with the Greek summits involving bond holder agreements the markets should trade in a very narrow range. Everyone is expecting a quiet week…but you never know, things have the potential to get interesting as the Greek talks have been pushed off until Wednesday.
On a very high level, the Greek talks deal with restructuring their sovereign debt; ie bond payments/interest rates. Current interest rates are unsustainable, the current 2 year Greek Bond’s yield is trading well north of 170%, a similar US Govt Bond is at .25%. At these rates, Greece will be unable to pay back their creditors,( banks, citizens, hedge funds). Original agreements between the bondholders and Greece (EU/IMF) had creditors taking around a 50% haircut, but those numbers have now increase to around 70%. Some hedge funds are unwilling to take a big haircut (less than face value of current bonds). Hedge funds will hold out for the best deal possible, as a creditor SHOULD, There is wide speculation that they don’t really care about a Greece default, because they have protected themselves with Credit Default Swaps. CDS pay par value (usually) in an event of a default for the face of the bond by the issuers of the CDS. March 20th, Greece has a $14.5 Billion Euro (18 Bill USD) bond payment due, and its widely speculated they will be unable to pay in full on their commitment.
A couple very interesting things have transpired today, that I’m sure went widely unreported. This morning gold was trading at a low around $1715 an oz, but then Ben Bernanke spoke and the price of gold closed shy of 1750 an oz. Bernanke’s policies since the financial crisis have been to provide unlimited liquidity, print more money and keep interest rates at record lows; great ways to bring inflation. And inflation’s behavior is similar to that of a drunk girl, it cannot be kept under control.
Our current economic situation is very strange. Some economic indicators come in well above Wall Street expectations, but yet there are some reports that conditions are worst they have been in years, or have ever been. The Baltic Dry Index, a measure of commodity shipping costs, has crashed; going form11,500 in 2008, to 4,500 in early 2010 to 800 presently. There has been no demand to ships goods. Glencore, a top commodity (trading) firm in the country, (I played them a few weeks ago in a corporate basketball game) was able to hire a commodity ship at zero cost and had the operators of the ship, Global Maritime Investments, Ltd. pay $2,000 a day towards the fuel costs for the first 60 days of the charter. This is what happens when overcapacity meets flat-to low demand. Low Demand due to recession???
Until next time…………where I will touch upon the history of the Futures Market
More than just money....
There were some significant economic figures that were released today, but if that is why you are reading this blog I suggest you read elsewhere. I am not here to discuss dry topics, ie economic indicators, at least not right now, I’m writing to express my views on the economy/markets and will try to intertwine it with society and everyday life. Today is one of those days…….
Today, I read about the death of a two year old child. When she was just one, she was diagnosed with a bone marrow disease and subsequently underwent a bone marrow transplant on August 30 2011. She passed away today after fighting for her life for the past several months.
With all this backlash of banker/traders pay in the media, (thank you OBAMA) reading a story of a little girl losing her life, should make one look at themselves and determine if what they are doing is meaningful. Is pursuing a trading career or another career in finance (besides I banking, those guys really are crooks) or any other path, a noble and honest living? Does it bring value to society? Obama and his crew think not. I beg to differ.
Money isn’t everything, and it doesn’t buy happiness, (I don’t think I could have honestly said that several months, ago) don’t get me wrong it does buy a hell of a lot of fun. What money does buy is the cure to cancer, the cure to alzheimer’s, the cure to autism and other diseases that have a direct or indirect impact on everyone one of our lives.. Money can do an infinite amount of good, and yes it can also corrupt, cause people to cheat, lie and steal, but if money is put to good use it can be the best of things.
The FED (Federal Reserve, is America’s central banking system in charge of the monetary system in US and arguably the world) recently decided that they wish to pursue a 2% inflation target. That means if you are to invest your money, you need to have returns greater than 2% to not lose any value. If you hold on to cash and do not invest you lose 2% value every year very year. Your kid's $10k college fund will buy him far fewer beers when he ships off to Binghamton in the Fall.
I’m aggressively looking for some opportunities in the market place. I feel the market is overbought right now and is due for a correction at some point. All you ladies out there think of a correction as your favorite pair of shoes on sale. Why buy today at full price, when in the coming weeks it will drop by 5-10%?? Of course there is not guarantee there will be a “sale”, but the market has been steamrolling ahead.
I will touch upon a Greek default in the next few days when all these “European Summits” come to an end.
So put your money to good use….after all it will be worth less and less each year, that’s a GOLDen rule.
Please feel free to comment/oppose to anything I write.
The CaseShiller Home Price print came in this morning at 138.49. This is an awful report, but having newly found my optimistic spirit good things can come from it; maybe not good things…..but opportunities. The CaseShiller "tracks the value of residential real estate in 20 metropolitan regions across the United States." It tells you if your house has gone up/down in value or if it’s worth anything; as of lately most houses are worhtless.
Although I am not an economist, don't have a PHD, and do not work at a bank; this came as no surprise to me, (a capitalistic son of a gun) nor anyone who doesn't have their head up their ass. Anyone who owns a home/pays a mortgage knows very well the value of their house, and it is not what it was back in 2006 (aside from the very few housing markets that avoided the boom, and the bust). Roughly more than a quarter, yes over 25% of homeowner are underwater on their mortgage, ie they owe more on their mortgage than what their house is worth. (Zillow’s Third Quarter Real Estate Market Reports)
Why am I writing about housing? Good question, because housing historically leads the economy (out of recession). But if housing prices are lower, how are we going to get out of the recession?
If I knew that, I wouldn't be wasting my time writing a blog. Id be living out my dream teaching either history or math, maybe business ethics, but like I said I'm a capitalistic bastard......do we have ethics??
My thoughts, and strictly my own, not the firm I work for (disclaimer) are as follows, the Fed has shown its willingness to give the economy a boost ;QE1, QE2, Operation Twist (and Shout). And with a combination of decreasing housing prices and oil creeping over 100 dollars a barrel spells recession (oils 50 day Moving Average just shy of $100 barrel) I think the fed will act. There has been wide spread rumors, thank you Bill Gross of PIMCO, of some new actions by the fed through the purchasing mortgage backed security over the next few months. I agree with Gross, and think the fed will step in but SHOULDN’T.
Here is where my optimism comes in. By now many of you have heard about my BAC 6 March call (Bank of America, strike 6, expiration March), which was one of the hottest topics on twitter (seriously).
I am a trader NOT an investor, I look for the quick buck. My rational behind my BAC call was simple. You are buying a pile of horse S@&t and hoping it will turn to Gold, courtesy of the Fed. And that's precisely what happened.
The options traded for .35$ an option as of 12/21, which is when I told my lawyer buddies to buy. They have since hit a high of $1.57 as of 1/24. Returning 349% return in a month. In lay mans terms, my buddy bought 15 options for roughly 500 bucks (1 option .35 cents*100{denomination of option contracts}*15) are now worth over 2,000$ using today’s prices.
HAVEN'T LOST MY TOUCH
In the coming months, there will be plenty of these opportunities and I will do my best to find them. I appreciate if everyone can spread the word......HES BACK……with an optimistic spirit…….
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