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Blackstone backs ex-TPG-Axon executive’s new fund with seed investment: sources

Blackstone backs ex-TPG-Axon executive’s new fund with seed investment: sources

Svea Herbst-Bayliss

BOSTON (Reuters) – Blackstone Group has written the first check from its latest seeding fund, sources familiar with the matter said this week, committing $100 million in start-up capital to a new hedge fund run by a former TPG-Axon executive.

Blackstone is looking to use cash from its $1.5 billion Strategic Alliance Fund III, the first seeding fund it has raised since 2011, to bet new players can succeed in an industry that has struggled with years of investor withdrawals and sluggish returns.

The New York-based investor, one of the world’s biggest alternative asset managers, funded Keita Arisawa’s Hong Kong-based Seiga Asset Management earlier this month, the people said. The hedge fund, launched earlier in 2017, plans to make bets on Asian stocks.

A spokeswoman for Blackstone declined to comment as did Seiga’s chief operating officer Irene Law.

Fund III raised money from well-heeled investors like pension funds and endowments. The $1.5 billion compares with $2.4 billion raised in 2011 by Blackstone for Fund II and $1.1 billion raised for Fund I a decade ago.

Blackstone’s seeders take a 15 percent to 25 percent cut of the hedge fund’s business, people familiar with the terms said.

Blackstone Alternative Asset Management, run by Tom Hill, as a unit invests some $73 billion in hedge funds through direct investments, the seeding funds and other means.

The average hedge fund’s roughly 3 percent return last year fell far short of a 10 percent gain in the U.S. stock market, and investors pulled $111 billion in assets from the $3 trillion hedge fund industry, eVestment data showed.

Money has come back this year, according to eVestment, with investors preferring smaller funds and niche investments like bets on Asian markets, industry analysts have said.

Commitments of start-up capital from Blackstone, which has placed bets on industry stars like Daniel Loeb’s Third Point and Steven A. Cohen’s SAC Capital Advisors, before the government shut the hedge fund down amid insider trading charges, often prompt other investors to follow.

Now Blackstone plans to write checks to as many as 14 other managers in addition to Arisawa, the people familiar with the matter said.

Competition to be part of Blackstone’s stable is fierce. For Fund I, Blackstone executives reviewed some 250 applications before selecting eight managers, including Doug Silverman and Alexander Klabin’s Senator Group as well as Mick McGuire’s Marcato Capital Management, people familiar with the process said.

Blackstone is not alone in the seeding business, with rivals like Paloma Partners, Protégé Partners and Reservoir Capital Group also making start-up investments in newcomers.

To be sure, not all Blackstone seedlings go on to success. John Wu’s Sureview Capital as well as Mark Black’s Raveneur Investment Group, which received start-up capital from Fund II in 2014, have both shut down.

But for hedge funds just starting out, partnering with someone like Blackstone can provide the help needed to get their businesses up and running.

Some seeders have offered help in the form of tips on how to structure funds, finding real estate and acting as a sounding board on strategies, fund managers have said.

Arisawa ran Asian operations for Dinakar Singh’s TPG-Axon from Hong Kong and left last year when Singh pulled back operations to New York, closing both his Tokyo and Hong Kong offices. Before arriving at TPG-Axon roughly a decade ago, Arisawa worked at Goldman Sachs.

Reporting by Svea Herbst-Bayliss; Editing by Meredith Mazzilli

Published at Wed, 19 Jul 2017 20:39:03 +0000

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Health Carrier Stocks Need to Hold These Levels

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Health Carrier Stocks Need to Hold These Levels

By Alan Farley | July 19, 2017 — 11:39 AM EDT

Dow component UnitedHealth Group Incorporated (UNH) shook off selling pressure following strong second quarter earnings results, undermined by the collapse of the Senate’s healthcare reform bill. Sector players do not seem to mind the growing uncertainty, expecting that any solution will benefit their bottom lines given the business-friendly Trump administration. However, UnitedHealth Group is better positioned than its rivals, pulling out of Affordable Care Act (ACA) coverage well before the current crisis.

Those rivals sold off on Tuesday, posting limited losses, and have bounced into mid-week. It is a perfect time to review the technicals on these market-leading instruments in light of recent threats to let the ACA system collapse in the coming months. It’s tough to visualize how top industry players can sustain high profit levels if those threats become reality, raising the odds for long-term topping patterns that will demand timely exits from trading and investment accounts. (See also: 5 Things You Need to Know About Obamacare.)

UnitedHealth Group stock rallied above the 2005 high at $64.61 in 2013 and began a powerful trend advance that is now entering its fifth year. A 19-month rising wedge pattern generated a late 2016 breakout, intensifying the rally’s trajectory into the third quarter of 2017. The stock has added more than 30 points since that time, solidifying its position as the fourth strongest component in the Dow Jones Industrial Average.

The uptrend has exceeded logical and harmonic price targets, tripling since the 2013 breakout. This is a two-edged sword for sidelined market players because price action has not carved a major pullback since the fourth quarter of 2016, generating extremely overbought technical readings could trap late-to-the-party shareholders. Even so, a reversal should generate red flags before selling momentum escalates, with the first bearish signal going off when a decline reaches the mid-$170s. (For more, see: UnitedHealth Beats on Q2 Earnings, Guides Up for 2017.)

Aetna Inc. (AET) shares topped out at $60 in December 2007 and sold off to the mid-teens during the 2008 economic collapse. The stock completed a round trip into the prior decade’s high in 2013 and broke out, entering a healthy uptrend that stalled at $134.40 in June 2015. A broad correction followed, dropping the stock into multiple support tests in the lower $90s, ahead of a strong recovery wave that completed a cup and handle breakout in May 2017.

That buying impulse generates a measured move target near $170, while Aetna stock is currently trading just above $150, offering plenty of upside if bullish technical patterns hold up. However, the stock is overbought and in need of a multi-week pullback, while on-balance volume (OBV) is flashing a bearish divergence because it is situated well below the 2015 and 2016 highs. Even so, the technical tone will remain bullish as long as the stock holds the 50-day exponential moving average (EMA), which is now rising toward $150. (See also: Aetna Settles on New York for New Headquarters in 2018.)

Anthem, Inc (ANTM) stock broke out with its rivals in 2013, entering a strong uptrend that topped out at $173.59 in 2015. It posted a series of lower lows into the fourth quarter of 2016, bottoming out at a two-year low near $115. The subsequent bounce reached 2015 resistance in March 2017, ahead of an April breakout that has added about 17 points. The stock sold off within two points of the 50-day EMA in Tuesday’s downturn.

This health carrier is performing poorly compared with its rivals, trading much closer to support at the 50-day EMA, which marks the dividing line between the uptrend and an intermediate correction. In addition, OBV for Anthem looks even worse than that of Aetna, slumping near lows from 2016, when the stock was trading nearly 70 points lower. This red flag could signal an impending reversal, but shareholders can hang tough until support in the $180s breaks down. (For more, see: Watching for Buying Signals Near Trendline Support.)

The Bottom Line

Health carriers are holding close to multi-year highs despite the threat of a collapsing ACA system. Even so, technical cracks are starting to appear, telling informed shareholders to pay close attention to price action at intermediate support levels in the coming weeks. (For additional reading, check out: Top 3 Healthcare Stocks for 2017.)

(Why?)

Published at Wed, 19 Jul 2017 15:39:00 +0000

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Banks overtake tech stocks as top overweight sector: BAML poll

Banks overtake tech stocks as top overweight sector: BAML poll

Claire Milhench

LONDON (Reuters) – Banks overtook tech stocks as the most overweight global sector in July, according to a copy of Bank of America Merrill Lynch’s fund manager poll seen by Reuters, with ‘long Nasdaq’ deemed the most crowded trade for the third straight month.

The survey, which polled 207 asset managers with $586 billion under management, was carried out between July 7 and 13, and showed investors rotating out of technology stocks, which 68 percent of poll participants said were “expensive”.

Since the 2009 market lows, tech stocks have been the most overweight sector in portfolios 80 percent of the time, but investors have grown uneasy about the valuations.

The tech-heavy Nasdaq Composite was again picked as the “most crowded” trade, with 38 percent of poll respondents nominating this, the same as last month.

The Nasdaq sold off sharply in June, losing almost 2 percent in the final week, but has rebounded since and is trading back near its previous highs.

Cash levels fell to 4.9 percent from last month’s 5 percent, but remain above the 4.5 percent 10-year average.

Some 25 percent of investors who are holding higher cash levels are doing so because of their bearish views on markets, the poll indicated. Expectations that global growth would accelerate fell to 38 percent in July, down from 62 percent in January.

Investors were also concerned about a crash in global bond markets, with 28 percent choosing this as their top tail risk, just ahead of a policy mistake by the U.S. Federal Reserve or European Central Bank, chosen by 27 percent.

Last week, Fed chair Janet Yellen indicated that U.S. rate hikes could be gradual, and weak inflation data on Friday appeared to sharply reduce the chances of a third rate rise this year.

Meanwhile, the European Central Bank (ECB) is keen to keep its asset purchases open-ended rather than setting a potentially distant date on which bond-buying will stop, to retain flexibility in case the outlook sours.

BAML said the ECB was the most likely central bank to spark a global “risk off” trade, with euro zone exposure high relative to BAML’s global fund manager survey history.

Reporting by Claire Milhench; Editing by Kevin Liffey

(Why?)

Published at Tue, 18 Jul 2017 14:05:18 +0000

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Fidelity shows how unicorns hurt performance at popular funds

Fidelity shows how unicorns hurt performance at popular funds

BOSTON (Reuters) – Fidelity’s bets on unicorn companies, the rare private firm or startup that grows in value to at least $1 billion, put a dent in the stellar performance of some of the company’s most popular mutual funds during the first half of 2017.

Fidelity disclosed this week, for example, how content-sharing company Pinterest Inc had an outsize impact on the portfolio performance of Contrafund, its most popular stock fund. It was one of the first times a company that had not yet done an initial public offering (IPO) made a Fidelity fund’s quarterly list of largest contributors and detractors to benchmark performance, Fidelity spokeswoman Nicole Goodnow said.

Pre-IPO investments can amplify a fund’s relative performance because they are not included in a comparison benchmark index. And the valuations attached to them by Fidelity and other mutual fund companies have far outpaced the stock market.

Fidelity’s $114 billion Contrafund disclosed that its small stake in Pinterest shaved 9 basis points off the fund’s relative return versus the S&P 500 Index.

Contrafund’s Series E stake in Pinterest was valued at $473.3 million in the first quarter. But at the end of May, that value was marked down by 17 percent, Fidelity disclosures showed.

But Pinterest was tied with TJX Companies Inc as Contrafund’s largest detractor in the second quarter, even though the pre-IPO company accounted for only 0.34 percent of the fund’s net assets.

Contrafund, which is run by star Fidelity portfolio manager Will Danoff, posted a total second-quarter return of 6.09 percent in the second quarter, easily beating the 3.09 percent total return on the S&P 500 Index.

The fund’s year-to-date return of 19.84 percent is better than 75 percent of U.S. large-cap growth mutual funds, according to Morningstar Inc data.

Fidelity’s valuation of Contrafund’s Series E stake in Pinterest has more than doubled since an initial investment of $159.4 million in October 2013, compared to Nasdaq’s 62 percent rise.

While Pinterest is a relative pipsqueak in the massive Contrafund portfolio, other Fidelity managers have made tech unicorns some of their largest holdings.

At the end of May, ride-hailing company Uber was a top 20 stock in Fidelity’s $22 billion Blue Chip Growth Fund. The fund’s Series D stake in Uber was valued at $251.5 million, or 1.14 percent of net assets.

Portfolio manager Sonu Kalra’s Uber stake is bigger than his bet on Starbucks Corp ($202 million) and Bank of America Corp ($157 million).

In the first quarter, Uber was among the fund’s largest detractors, shaving 12 basis points off the fund’s relative return. Only Qualcomm Inc and Lululemon Athletica Inc detracted more.

Reporting By Tim McLaughlin; Editing by Tom Brown

Published at Tue, 18 Jul 2017 23:17:38 +0000

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Budgeting Basics – Introduction

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Budgeting Basics – Introduction

By Amy Fontinelle | Updated July 15, 2017 — 6:00 AM EDT

What is budgeting? Basically, it’s making sure that you’re spending less than you’re bringing in and planning for both the short- and long-term.

Unfortunately, many people think of budgeting as depriving themselves and they avoid it like they do a diet. However, just as a diet is really just a program for eating, budgeting is just a program for spending. If you are hitting a mental roadblock when you hear the word “budget,” just call it by a different name, such as “personal financial planning.” That’s what budgeting is, after all. It’s a proactive approach – rather than a reactive approach – to managing your money.

Budgeting is an important component of financial success. It’s not difficult to implement, and it’s not just for people with limited funds. Budgeting makes it easier for people with incomes and expenses of all sizes to make conscious decisions about how they’d prefer to allocate their money. It can also help people save for retirement, emergencies, a new car or just about anything. For many people, having a solid budget in place, knowing how much money they have and knowing exactly where that money is going makes it easier to sleep at night. (For more on saving for retirement, see our Retirement Planning tutorial; Canadians, see the Registered Retirement Savings Plan (RRSP) tutorial.)

This budgeting tutorial will teach you everything from setting up a budget to updating it as your circumstances change, as well as getting back on track if you go off your budget. Whether you’re a college undergrad, retiree or somewhere in between, if you’re looking for a way to manage your money better and improve your financial situation, then this tutorial is for you.

What Is Budgeting?

Published at Sat, 15 Jul 2017 10:00:00 +0000

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Evaluating Yourself as a Trader

 

Evaluating Yourself as a Trader

Very quickly, evaluate yourself on the following criteria:

1)  Innovation – Researching new sources of edge in your trading, drawing upon different inputs; learning new strategies and markets; finding new opportunities; learning from your experience and the experience of others.

2)  Flexibility – Ability to find opportunity in different market conditions, different markets, and different time frames; ability to move from being aggressive to being patient and back again; ability to trade different strategies and different sides of markets.

3)  Self-Improvement – Always assessing what you could do better and making steady improvements; following through on goals with concrete plans and actions; keeping yourself in peak performance condition.

If I had to identify one flaw affecting struggling traders, it would be stasis.  The static trader does not innovate; is too fixed in doing one thing; and has no consistent process for improvement.  Most important, struggling traders aren’t following Elon Musk’s advice and questioning themselves.  

Show me what traders are working on outside of market hours, and I will show you the odds of their future success.  A passion for trading in the absence of a passion for innovation and improvement is a sure path to losing money.

 

Published at Sat, 15 Jul 2017 12:30:00 +0000

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8 Great Ideas for Your Summer Staycation

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8 Great Ideas for Your Summer Staycation

By Jean Folger | Updated July 15, 2017 — 6:00 AM EDT

As the kids finish school and the weather heats up, many people are getting excited about long-awaited summer vacations. Summer vacations are a time to relax, unwind and spend some quality time with loved ones. Big vacations, however, do require quite a bit of planning and, of course, can end up costing some serious cash, especially with a whole family in tow.

If you haven’t gotten around to making summer vacation plans, or it’s just not in the cards this year, you might be the perfect candidate for a summer staycation. (A staycation can be just as enjoyable as a vacation, and can enrich your life for the whole year. Check out Affordable Staycation Ideas for Families.)

A staycation is like a vacation, only you spend it at home. Instead of spending lots of money on airfare and expensive hotels, you can take advantage of the attractions your area has to offer that you never get a chance to enjoy. This includes your house – when was the last time you relaxed at home? A few ground rules will help ensure you have a successful staycation:

  • Put it on the calendar with a start date and an end date – so everyone knows when you’re on staycation.
  • Get a visitor’s guide. Check out your local Chamber of Commerce’s website or stop by for a visitor’s guide. You might be surprised to find great activities that you didn’t know about. (Keep the kids out of your hair and wallet by saving on summer camps, sports leagues, day trips and more. Learn how in Budget-Friendly Summer Fun.)
  • Limit the chores. Plan ahead and try to get as many chores out of the way so that you don’t spend your staycation doing laundry and mopping the floor.
  • Write it down. Your staycation doesn’t have to be scripted, but it is helpful to write down the things you want to do, and then have fun crossing the activities off the list.

Whether you live in a bustling city or off the beaten path, you should be able to find plenty of activities to keep you busy. To get you started, here are eight great ideas for your summer staycation.

1. Get Out

Outside, that is. National parks, state parks, county parks, metro parks and nature centers all provide a place to run around and enjoy nature. As an added bonus, many are free. You can easily spend a day hiking, swimming and picnicking in your local park. Visit http://www.nps.gov/ to find a national park or http://www.stateparks.com/ to find a state park.

2. Stay In

A rainy day during your staycation is a terrific opportunity to visit a local museum or two. Art museums, aquariums, planetariums, science museums and natural history museums can be enjoyable and interesting. You can search for museums at the American Association of Museum’s website at http://www.aam-us.org/ (click “Museum Resources” tab”); or search the Association of Zoos & Aquariums’ website at http://www.aza.org/.

3. Get Active

Take advantage of the local swimming pool, tennis courts, golf course or skating rink. Go for a bike ride, a walk, or try a new sport. Dust off the old baseball mitts, soccer balls and Frisbees and have fun.

4. Get Festive

Summertime is usually ripe with festivals in one form or another. Your local newspaper or Chamber of Commerce can keep you up to date with goings on. In addition to daytime festivals, many locales host free music nights during the summer months.

5. Learn Something New

Have you always wanted to learn how to throw pottery or paint with watercolors? How about cooking Cuban food or home-brewing beer? Your local recreation department or community college probably has a great choice of classes to get you started. Many of them will be one-day introductory classes that won’t require a huge investment.

6. Be Pampered

With all the money you’re saving on your staycation, you just might be entitled to a trip to the local spa for a massage and facial. Most spas do require advance reservations, and many offer specials and packages so be sure to ask. Try http://www.spafinder.com/ to find a spa in your area.

7. Tell Ghost Stories

Pitch the tent and build a small fire – in your back yard. Camping in the backyard is a fun and easy way to camp. You can chase fireflies, sing songs, look at the stars and roast marshmallows (or make s’mores: roast a marshmallow until golden brown, place between two graham crackers with a piece of chocolate and squeeze together).

8. Splurge

Is there a fancy restaurant you’ve wanted to try? Have you wondered what it would be like to hire a personal chef for a delicious meal at home (try http://www.personalchef.com/ and click on “Find a Personal Chef”)? A staycation is a wonderful opportunity to splurge on something you wouldn’t normally spend the money on, without feeling guilty.

When the Going Gets Tough, the Tough Stay Put

A staycation can be just as much fun as a regular vacation. Often it can be more rewarding than a vacation simply because there is no travel stress and it costs less money. Being under less stress, and not spending so much money, can allow for more relaxation while creating quality time for you and your family. A staycation might be just the vacation you need. Don’t forget to send postcards.

Still want to get away? Don’t miss 7 Ways to Save on Summer Getaways.(Why?)

Published at Sat, 15 Jul 2017 10:00:00 +0000

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Budgeting Basics

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By tpsdave from PixabayBudgeting Basics

What is budgeting? Basically, it’s making sure that you’re spending less than you’re bringing in and planning for both the short- and long-term.

Unfortunately, many people think of budgeting as depriving themselves and they avoid it like they do a diet. However, just as a diet is really just a program for eating, budgeting is just a program for spending. If you are hitting a mental roadblock when you hear the word “budget,” just call it by a different name, such as “personal financial planning.” That’s what budgeting is, after all. It’s a proactive approach – rather than a reactive approach – to managing your money.

Budgeting is an important component of financial success. It’s not difficult to implement, and it’s not just for people with limited funds. Budgeting makes it easier for people with incomes and expenses of all sizes to make conscious decisions about how they’d prefer to allocate their money. It can also help people save for retirement, emergencies, a new car or just about anything. For many people, having a solid budget in place, knowing how much money they have and knowing exactly where that money is going makes it easier to sleep at night. (For more on saving for retirement, see our Retirement Planning tutorial; Canadians, see the Registered Retirement Savings Plan (RRSP) tutorial.)

This budgeting tutorial will teach you everything from setting up a budget to updating it as your circumstances change, as well as getting back on track if you go off your budget. Whether you’re a college undergrad, retiree or somewhere in between, if you’re looking for a way to manage your money better and improve your financial situation, then this tutorial is for you.

What Is Budgeting?

(Why?)

Published at Sat, 15 Jul 2017 10:00:00 +0000

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Putting the Silver Crash Under a Lens

 

Putting the Silver Crash Under a Lens


On Thursday, July 6, in the late afternoon (as reckoned in Arizona), the price of silver crashed. The move was very brief, but very intense. The price hit a low under $14.40 before recovering to around $15.80 which is about 20 cents lower than where it started.

Buyers of silver are rejoicing. They can now get more money (silver, like gold, is money) in exchange for their dollars than before. However, as we see from the reactions in the community, there were few buyers.

Cries of woe are heard everywhere. Those who are crying are sellers, including those who say they don’t plan to sell but who really want a high price in case they change their mind by Monday morning.

If you want to see what it looks like when everyone is thinking of buying, look at the bitcoin market when there is a price drop. The enthusiasm is palpable. Everyone is gloating about buying the dips, with faith unbroken that the cryptocurrency is on its way to shoot past $10,000 if not $1,000,000.

Gold and silver are the opposite. For now. And perhaps that is a sign that here is a good opportunity. Blood in the streets, as the expression goes.

The purpose of this article is to look deeply into the trading action at the time of the crash. First, here is a graph showing the bid and offer prices for about 50 seconds. The horizontal axis shows time, but it is ticks rather than seconds or milliseconds. So, for example, it does not show the 10-second period when CME halted the exchange.

For most of this time period, there is an orderly market as seen in the tight bid-offer spread, though even from the start we observe that on price drops the bid drops more. That becomes extreme where the bid hits $14.10 (which occurs right after the halt). From that point onwards, we see a very wide bid-offer spread. The bid looks to be held low deliberately, around $14.33, while the offer is moving around as buyers begin lifting it.

Let’s address the wide spread. The banks have been under assault for their trading practices. Among other things, they are blamed for having proprietary positions, for “leaking” information during the Fixing, for having a too-large position, etc. The net result is to push the compliance department into prominence. No longer can the bank act when the market offers a profitable opportunity for arbitrage.

Arbitrage causes spreads to tighten, as part of the process of making money.

But before a bank may arbitrage something, they must weigh their proposed trade against the new regulations. And of course, always they must be aware of the optics. It does them no good to make a perfectly legal trade that will bring resentment, more regulatory scrutiny, and possibly litigation.

For example, what is the difference between a “prop” (proprietary) trade, and ordinary market-maker arbitrage? Don’t bother trying to answer this question. Unless you are a commodities lawyer who is intimately familiar with the regulations as they existed on July 6, and also familiar with the current interpretations of the regulators, you cannot answer. Regulations can make distinctions between two maddeningly similar actions, or even identical actions in confusingly similar contexts. On one side of the distinction lies your right to earn a profit. On the other side is regulatory action, penalties, brand damage, and possibly an extended visit to prison.

With such large differences in outcomes, based on such fine lines between actions, you can bet that the banks are backing away from trades they would otherwise take. They are becoming more conservative and making less money. And leaving the market less efficient, more costly to do business in, and more volatile.

In this light, we submit for your consideration the fact that after 23:06:50 the banks were leaving 10 to 12 cents per ounce on the table. That is an attractive profit for a market maker, and it takes a powerful force to keep them from wanting to earn it.

Ironically, the net result of all this pressure on the banks is the opposite of what the gold and silver community wants. It does not cause the price to rise. Instead, it contributes to two other phenomena. One is higher volatility. Crashes like this occur when the stack of bids is thin. That is precisely what happens when banks are under pressure to stand back.

Two is rising costs. The bid-offer spread is the cost of a round-trip. It is one measure of the friction in the market. This cost affects traders, producers, and consumers of metal. Silver has long been the most hoardable commodity for workers to set aside part of their weekly wages, because its spread is the narrowest for the quantities involved. These regulations are undermining silver for this use.

A word on the thin market. Unlike the June 26 crash on (which we wrote about), this one occurred when Europe was asleep and the US was mostly offline. Markets were open in Sydney, and perhaps a few early risers in Asia (7am in China). However, in a liquid market, there would be little impact to such selling even then. Indeed we see in gold, the price drop was $5—hardly worth writing an article about.

Regulations imposed on prop trading, insider trading, position limits, asset reservation, and other aspects of running a market making operation drive down liquidity. Whether this move was triggered by stop-loss orders or something nefarious, we do not know (we can only say that we see no reason why governments or central banks would care about the price of silver).

Here is a chart of what happened in the one minute after 11:06pm GMT, millisecond (1/1000th of a second) by millisecond, showing volume-weighted average price overlaid on number of contracts traded.

At this time scale, we can see there are upticks. Yes even in a crash like this one, there are upticks.

To reiterate what we said in our last forensic analysis of a crash, in a free market there would be no such thing as gold or silver. The futures market is for goods that are produced seasonally, but consumed throughout the year. It is a market for warehousing.

There would be an interest-rate market for gold, i.e. a bond market. A gold futures market is a bizarre creature, created by the artificial environment of irredeemable currencies and laws that force everyone to use them.

In that context, a futures market for gold makes sense in a way. It is a way to bet on the price action, to generate profits in dollars. Like all other derivatives markets, the gold futures market offers leverage so that traders can maximize profits even when price moves are small.

Of course, big leveraged positions mean big risk. That is why they must set tight stop-loss orders. This is one possible explanation for the crash. Initial selling triggered stop orders, and those triggered others, and with a thin stack of bids, whoosh.

And it is also the basis (no pun intended) of our basis analysis. We like to see how much these leveraged bettors are moving the price.

This brings us to the unique Monetary Metals analysis. If the price of spot is falling relative to futures, then we know there was selling of spot. If the price of futures is falling relative to spot, then we know there was selling of futures.

This spread, future price – spot price, is called the basis.

Below is a chart of the silver price overlaid with the September silver basis from 10pm to midnight GMT.

No question, we see selling of futures. Whether these are stop-loss orders or something else, we don’t have the data to say. What is certain is that the basis drops twice. First, just prior to 22:40 when the price is rising. There is some buying of metal here. But then that buying fades and is replaced by buying of futures, thus the basis recovers and rises about 5bps above its initial level.

Then the basis drops, starting just prior to the price drop. So the first bit of selling of futures appears as a drop in the futures price relative to spot, though price does not move much initially. Then the thin bid is pierced, and the price goes over the edge of the cliff.

The basis begins rising, going more +30bps over its starting point. This is a frenzy of buying—of paper (futures).

Other than that brief blip up in price from around $15.88 to $16.10, this episode was not about physical metal.

By Keith Weiner


Keith Weiner

Keith Weiner
keithweiner.posterous.com/

Keith Weiner

Keith Weiner is CEO of Monetary Metals, a precious metals fund company in
Scottsdale, Arizona. He is a leading authority in the areas of gold, money,
and credit and has made important contributions to the development of trading
techniques founded upon the analysis of bid-ask spreads. He is founder of DiamondWare,
a software company sold to Nortel in 2008, and he currently serves as president
of the Gold Standard Institute USA.

Weiner attended university at Rensselaer Polytechnic Institute, and earned
his PhD at the New Austrian School of Economics. He blogs about gold and the
dollar, and his articles appear on Zero Hedge, Kitco, and other leading sites.
As a leading authority and advocate for rational monetary policy, he has appeared
on financial television, The Peter Schiff Show and as a speaker at FreedomFest.
He lives with his wife near Phoenix, Arizona.

Copyright © 2012-2017 Keith Weiner

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Published at Wed, 12 Jul 2017 08:44:07 +0000

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IBM Lags in Artificial Intelligence: Jefferies

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IBM Lags in Artificial Intelligence: Jefferies

By Donna Fuscaldo | July 12, 2017 — 5:16 PM EDT

At a time when all sorts of technology companies are getting accolades for their artificial intelligence prowess, International Business Machines Corp. (IBM) is apparently struggling, leading Wall Street investment firm Jefferies to lower its price target on the stock.

Citing checks that show a slow AI adoption rate, Jefferies analyst James Kisner cut his price target on Big Blue to $125 from $135 a share, implying the stock could fall more than 18%. In a research note to clients, the analyst called IBM “outgunned” in the war for AI talent and argued that it’s a problem that will only get worse. (See also: The Other Side of IBM’s Watson AI Solution.)

What’s Up With Watson?

“Our checks suggest that IBM’s Watson platform remains one of the most complete cognitive platforms available in the marketplace today. However, many new engagements require significant consulting work to gather and curate data, making some organizations balk at engaging with IBM,” wrote the analyst in the research report covered by 24/7 Wall Street.

What’s more, the analyst said that with a lot of companies making significant investments in AI and a slew of startups splashing on the scene, IBM is having a hard time luring top talent to the company. Kisner poured over job listings and found that Amazon.com Inc. (AMZN) has 10 times more for AI professionals than IBM. It doesn’t help that businesses have lots of AI options, which is why the company reduced the pricing for Watson Conversations by 70% last October, the analyst argued. (See also: How Much Money Would You Have if You Followed Buffett into IBM?)

Watson + Einstein

While Jefferies thinks IBM is behind when it comes to AI, that doesn’t mean the company hasn’t been making strides to grow that side of the business. In March it announced a strategic deal with Salesforce.com (CRM) to jointly provide AI services and data analytics offerings that help businesses make faster and smarter decisions. Watson is a cognitive system capable of learning from earlier interactions, garnering knowledge and value over time, and thinking like a human. It works by combining AI and advanced analytical software for analysis of various forms of data, thereby providing optimal responses based on reasoning and interacting like a “question-answering” machine.

Salesforce Einstein is the core AI technology that powers the Salesforce CRM platform by using data mining and machine learningalgorithms. It aims to proactively spot trends across sales, services and marketing systems. The system is designed to forecast behavior that could spot up-sale prospects and opportunities, or identify crisis situations in advance. Under the deal, IBM’s Watson and Salesforce’s Einstein will be integrated to offer intelligent customer engagement across various functions like sales, service, marketing and e-commerce.

Published at Wed, 12 Jul 2017 21:16:00 +0000

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Preparing for THE Bottom – Gold to Silver Ratio

Preparing for THE Bottom – Gold to Silver Ratio

By: Przemyslaw Radomski | Tue, Jul 11, 2017


In the first part of the Preparing for THE Bottom series, we emphasized the need to be sure to stay alert and focused in the precious metals market, even though it may not appear all that interesting. We argued that preparing for the big moves in gold that are likely to be seen later this year should prove extremely worth one’s while. In the second part of the series, we discussed when, approximately, one can expect the key bottom in gold to form (reminder: this winter appears a likely target).

In today’s issue, we would like to feature one of the signs that are likely to confirm that the final bottom is indeed in. The thing that a relatively small number of investors follow (mostly those who have been interested in the sector for some time) are the intra-market ratios. One of the most important ones is the gold to silver ratio and to be honest, it’s no wonder that this ratio is so important – after all, gold and silver are the parts of the precious metals sector that practically everyone recognizes.

Due to both metals’ popularity and the fact that different types of investors tend to focus on them (gold is more popular among institutions and, generally, big investors, while silver is particularly desired by smaller, individual investors), their relative performance can tell us quite a lot about the situation in the sector. This includes helping to detect and confirming the major turning points in gold and silver.

Let’s take a closer look at the ratio (charts courtesy of http://stockcharts.com and macrotrends.net).

The first thing that comes to mind while looking at the above chart is that the tops in the ratio usually correspond to bottoms in the precious metals market – silver tends to underperform gold to a big extent in the final part of the decline. The mid-2003 spike in the ratio doesn’t directly confirm this rule (there was a local bottom at that time, though), but the 2008 spike, 2011 bottom and the 2016 spike certainly do. So, while it is not inevitable, it seems likely that the major bottom in the precious metals will be accompanied by a big upward spike in the gold to silver ratio i.e. silver’s extreme underperformance.

Having said the above, let’s move to the current trend. Despite the decline in 2016, the main direction in which the ratio is heading is still up. We marked the borders of the rising trend channel with blue lines and the ratio is still closer to the lower line than the upper one – meaning that the upside potential remains intact.

If the ratio is to continue to move higher (it’s likely, because an uptrend is intact as long as there is no confirmed breakdown below it), then we can expect the upper border of the trend channel to be reached (or breached – more on that in just a moment) before the top is in. If this is to be seen in 6 months or so (as we indicated in our previous article in this series), then we can expect the ratio to move to about 94.

This target is additionally supported by Fibonacci extensions based on the 2016 bottom, 2016 top and the 2015 top. The Fibonacci extensions work similarly to the Fibonacci retracements – they differ, because the latter provide targets between the levels that were already reached, while the former are usually used to provide targets outside of the previous trading range. In this case, we get another confirmation of 94 as an upside target.

One might ask that if the above is the case, then why didn’t we draw the target area around the 94 level, but between 94 and 100. There are two good reasons for it.

The first reason is visible on the above chart. Namely, history tends to repeat itself to a considerable extent, and during the previous steady uptrend (the 2008 lack-of-liquidity-driven spike was far from being steady) at the beginning of this century, the gold to silver ratio moved temporarily above the upper border of the trend channel (marked with dashed lines) and formed a top above it. Consequently, the upper border of the current rising trend channel may not stop the rally in the following months. Instead, a breakout above it might indicate that the key top in the ratio and the key bottom in the precious metals market are just around the corner.

The second reason for a higher target is visible on the chart below that includes even more data than the previous one.

The tops that you saw on the previous chart appear to be the key long-term tops, but in reality, the key long-term tops are at / closer to the 100 level, while the ones from this century are not as important. Surely, they all are important long-term tops, however, we need to keep in mind that the strongest resistance will not be provided by the 2003 or 2008 tops, but by the 100 level.

Moreover, please note that round numbers tend to be important support and resistance levels as they tend to attract more attention (for instance, gold breaking below $1,000 will definitely get more attention than a breakdown below $1,032) – it would be difficult to find a rounder number for the ratio to reach than the 100 level.

Additionally, if the final bottom in the precious metals market was not reached in late 2015 / early 2016, because too many investors were still bullish at that time, then perhaps the extreme that the gold to silver ratio reached at that time was not extreme enough. The next resistance above the 2015 / 2016 tops is provided by the very long-term tops at or a little below 100.

So, should one ignore everything else and wait with the purchases until the gold to silver ratio spikes to 100? Of course not. That’s just one of the tools that one can use in order to determine the optimal entry prices. On a side note, please note that we wrote “optimal” instead of “final” lows. The reason is that it is not 100% certain that a bottom is in at a specified price (it can only be certain when one looks at the past prices after a longer while), so while it may be tempting to wait for the perfect target to be reached, it might be more prudent to place the buy order above the target price to greatly increase the chance of filling it at all – however, these details go beyond the topic of this essay.

When the ratio approaches its target area, all other signals will become more important – for instance gold reaching important support levels without the same action in silver or mining stocks – but with the gold to silver ratio at exactly 100 or only a bit below it and a couple other confirmations, it might be wise to invest at least partially in the entire trio (gold, silver and miners), as the confirmations would make gold’s reaching its target much more important for the entire sector than it would be without the confirmations. In other words, the gold to silver ratio serves as yet another tool in the investors’ arsenal that can help to determine whether or not the final bottom is in or at hand. It’s not a crystal ball, but one of the things one needs to keep in mind when investing capital in this promising sector.

Summing up, the gold to silver ratio can provide us with an important confirmation that the final bottom in the precious metals is indeed in and while it seems that the bottom is still ahead of us, it doesn’t mean that it’s a good idea to delay preparing yourself to take advantage of this epic buying opportunity.

By Przemyslaw Radomski


Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading
Website – SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who
takes advantage of the emotionality on the markets, and invites you to do
the same.

His company, Sunshine Profits, publishes analytical software that anyone can
use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem
that may never be solved, PR has changed the world of trading and investing
by enabling individuals to get easy access to the level of analysis that
was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are
results of time, thorough research and testing on PR’s own capital.

PR believes that the greatest potential is currently in the precious metals
sector. For that reason it is his main point of interest to help you make
the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for
professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level
of accuracy that was once only available to closed-door institutions. It
provides free trial access to its best investment tools (including lists
of best
gold stocks
and best
silver stocks
), proprietary gold & silver
indicators
, buy & sell signals, weekly newsletter, and more. Seeing
is believing.

Disclaimer: All essays, research and information found above represent
analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates
only. As such, it may prove wrong and be a subject to change without notice.
Opinions and analyses were based on data available to authors of respective
essays at the time of writing. Although the information provided above is
based on careful research and sources that are believed to be accurate, Przemyslaw
Radomski, CFA and his associates do not guarantee the accuracy or thoroughness
of the data or information reported. The opinions published above are neither
an offer nor a recommendation to purchase or sell any securities. Mr. Radomski
is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s,
CFA reports you fully agree that he will not be held responsible or liable
for any decisions you make regarding any information provided in these reports.
Investing, trading and speculation in any financial markets may involve high
risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates
as well as members of their families may have a short or long position in
any securities, including those mentioned in any of the reports or essays,
and may make additional purchases and/or sales of those securities without
notice.

Copyright © 2009-2017 Przemyslaw Radomski, CFA

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

Published at Tue, 11 Jul 2017 12:02:54 +0000

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PayPal Stock Could Break Out to All-Time Highs

 

PayPal Stock Could Break Out to All-Time Highs

Shares of PayPal Holdings, Inc. (PYPL​) jumped more than 2.5% in early trading as the stock looks to break out to fresh all-time highs. Bernstein upgraded the stock to Outperform with a $61.00 price target, while KeyBanc initiated coverage with an Overweight rating and $60.00 price target. With the stock trading at around $55.00, these analyst price targets represent premiums of 9% to 10% over the current market price.

During the first quarter, PayPal reported revenue that increased 17.3% to $2.98 billion – beating consensus estimates by $40 million – while earnings per share of 44 cents beat consensus estimates by three cents. In addition to reporting results that surpassed the market’s expectations, the company’s long-term prospects remain bullish, but there have been some concerns over margin pressure from partnerships and growing competition. (See also: PayPal Could Add to Gains Ahead of Earnings.)

Technical chart showing the year-to-date performance of PayPal Holdings, Inc. (PYPL) stock

From a technical standpoint, the stock is poised to break out from an ascending triangle chart pattern to fresh highs. The key level to watch is the prior high and R1 resistance at $55.60 that form the top of the chart pattern. The relative strength index (RSI) stands at a moderate 61.21 despite the strong uptrend, while the moving average convergence divergence (MACD) could see a bullish crossover in the near term.

Traders should watch for a breakout to R2 resistance at $57.25 or for more consolidation between trendline resistance at $55.60 and the pivot point at $53.21. If a breakout occurs, traders should watch for some consolidation above the new trendline support before a further trend higher, since the stock is already starting to approach overbought levels. A breakdown from the pivot point could mean a fall to the 50-day moving average at $51.68. (For additional reading, check out: How Safe Is Venmo, and Why Is It Free?)

Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Mon, 10 Jul 2017 16:45:00 +0000

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Premarket: 6 things to know before the bell

 

Premarket: 6 things to know before the bell

  @AlannaPetroff

premarket stocks trading futures
Click chart for in-depth premarket data.

1. The all-important jobs report: American investors are feeling positive after the latest employment report from the Bureau of Labor Statistics.

Employers created a robust 222,000 jobs in June, making this the 81st consecutive month of employment gains in the country.

The unemployment rate ticked up to 4.4%, which is still considered low by historical standards.

Economists surveyed by CNNMoney had predicted the economy created 172,000 jobs in June.

2. Watching the G20 summit: The G20 kicks off on Friday in Hamburg, Germany. The gathering of world leaders from 20 major economies is going to be closely watched, especially as President Trump is meeting with Russian President Vladimir Putin for the first time.

Differences over trade and climate change between Trump and other leaders could make for a tense meeting.

3. Stocks to watch — Tesla, Samsung:Tesla(TSLA) continues to capture traders’ attention as it announced a big battery deal in Australia. Tesla stock is down 20% since hitting an all-time high in June.

Samsung(SSNLF) launches its Samsung Galaxy FE on Friday in South Korea. The smartphone is a cheaper, refurbished version of the Galaxy Note 7, a fire-prone model that sparked a global recall.

Samsung also announced its earnings guidance for the second quarter. It expects sales will hit 60 trillion Korean won ($52 billion) while operating profit will come in at around 14 trillion Korean won ($12 billion).

Shares in the tech firm closed the day with a 0.4% loss.

4. Global market overview: There’s been a fair bit of negativity in European and Asian markets on Thursday. But the gloomy mood is lifting a bit following the release of better-than-expected U.S. job numbers.

U.S. stock futures are set for a positive open.

On Thursday, the Dow Jones industrial average, S&P 500 and Nasdaq experienced falls of between 0.7% and 1%.

5. Big business Brexit meeting: Top British executives are meeting Friday with the U.K.’s top Brexit official, David Davis. They’ll be pressuring him to tread carefully with Brexit negotiations to protect business interests and jobs.

The Confederation of British Industry (CBI) issued a statement Thursday calling for the U.K. to remain in Europe’s unified market while the country is transitioning out of the EU.

6. Coming this week:

Friday — Bureau of Labor Statistics releases June jobs report at 8:30 a.m.; G20 leaders meet in Hamburg, Germany

Published at Fri, 07 Jul 2017 09:41:13 +0000

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Reaching the Next Level of Trading Performance

 

Reaching the Next Level of Trading Performance

Einstein observed that we cannot solve our problems with the same level of thinking that created them.  In other words, problems exist in our deficiencies of perspective.  Once we reach a next level of perception, thought, and analysis, problems can give way to solutions.  An important contribution of mentors and coaches is to introduce us to next levels of thinking.  If we are locked into our old modes of perception and thought, we will be locked into our level of performance.

On Wednesday, July 19th, I’ll be speaking at Stock Twits’ second ever Futures Forum in New York City.  We’ll be meeting at Slattery’s Midtown Pub and enjoying food and drink–and I’ll be presenting key ideas regarding getting to the next levels of trading performance. (Registration information for that free event can be found here).

One very important idea is that almost always we are already performing at that next level of performance on some occasions.  It is when we are at our best that we can clearly perceive our next level of development.  That is what we are ready for.  That is what we are already capable of.  At times, we are closer to our goals; at times we are more distant.  When we clearly identify what we’re doing when we are nearer to our ideas, we start to piece together a roadmap for getting to our next level.

What are you doing well now and how are you doing those things?

Those are some of the most important questions in trading psychology.  Our next level of thinking is the thinking we’re doing when we’re performing at our best.

 
Further Reading:  Building Self-Efficacy

 

Published at Sun, 09 Jul 2017 13:16:00 +0000

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Tech’s market leadership over? Not so fast

 

Tech’s market leadership over? Not so fast

By Lewis Krauskopf| NEW YORK

Technology shares surrendered their leadership in the U.S. stock market over the past month, but the fast-growing group may soon resume its outperformance and maneuver back into pole position.

Upcoming earnings reports for the technology sector .SPLRCT, whose profits are expected to outpace the overall S&P 500 .SPX for the 11th consecutive quarter, could lure back investors who have been concerned about expensive valuations and that too many people may have piled into the big names.

The sector has slumped 4 percent since the first week of June, while financials .SPSY have climbed more than 5 percent and healthcare .SPXHC has gained 3 percent. This has prompted speculation that investors may have been cashing out their tech profits to move into those groups.

“Technology has taken a rest, but it’s going to heat up again, and I see tech returning to favor the second half of the year,” said portfolio manager J. Bryant Evans of Cozad Asset Management in Champaign, Illinois.

For the first five months of 2017, tech was the talk of the stock market, far outperforming the other 10 major S&P 500 sectors and sparking the Nasdaq Composite .IXIC to its strongest first half since 2009.

“I think of (tech’s recent swoon) as profit-taking rather than driven by change in the fundamental factors,” said John Praveen, managing director of Prudential International Investments Advisers in Newark, New Jersey. “The fundamentals are still positive for the sector.”

On Friday, the tech sector ended a volatile week by rising 1.3 percent, topping all other sectors and a 0.6 percent rise for the S&P 500.

Analysts estimate tech’s second-quarter earnings rose 11.2 percent, with semiconductor companies accounting for much of the gain, according to Thomson Reuters I/B/E/S. The increase tops the estimated 7.9 percent rise for the overall S&P 500 and is well above every sector except for energy .SPNY, whose performance will be skewed because of negative year-earlier results.

“The tech sector has the highest growth expectations and only moderate uncertainty,” Morgan Stanley equity strategists said in a research note.

Given tech’s outsized position – 22 percent of the market value of the S&P 500 – the sector’s growth is critical to overall U.S. corporate profit gains.

For the second quarter, tech profit growth alone is expected to account for nearly 28 percent of the S&P 500’s overall increase in earnings, or nearly half if energy were excluded.

“In an economy that still seems to have some growing pains, consistent growth is worth paying up for,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Tech’s second-quarter revenue growth is projected at 7.2 percent, faster than 4.6 percent for S&P 500 companies overall, according to Thomson Reuters I/B/E/S.

There is “growth on the top line, which is more important at this point in the cycle, than in the bottom line only,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. This earnings season, she will focus on companies’ comments about sales activity.

Valuations for the sector also may not be so expensive. Tech is trading at 18.1 times earnings estimates for the next 12 months, just above 17.8 times for the overall market.

That difference is even smaller when compared with the premium tech has held over the past 15 years, following the dot-com bubble. Over that time, its average P/E has been 17.2 times versus 14.7 times for the S&P 500.

Another factor in tech’s favor: The dollar’s .DXY 6.1 percent decline this year against a basket of major currencies.

S&P 500 tech companies generate 60 percent of revenue from outside the United States, compared with 40 percent for companies in the entire index. A stronger dollar makes foreign sales less valuable when they are translated back into the U.S. currency for reporting purposes.

Despite these positive factors, other sectors may end up besting tech.

Healthcare’s year-to-date performance has nearly kept pace, and a resolution of the legislation moving through Congress could draw investors who have been wary about political uncertainty hovering over the sector.

A pickup in the economy and inflation could favor groups like industrials .SPLRCI, energy and financials, which tend to perform better in such times.

Clues will come starting on July 14, when a big batch of bank reports kicks off the heart of the earnings season.

In tech, Microsoft Corp (MSFT.O) and International Business Machines Corp (IBM.N) report the following week, while Alphabet Inc (GOOGL.O), Facebook Inc (FB.O) and Intel Corp (INTC.O) are among the companies that will follow later in the month.

 

(Editing by Lisa Von Ahn and James Dalgleish)

Published at Fri, 07 Jul 2017 20:37:29 +0000

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Schedule for Week of July 9, 2017

by TechPhotoGal from Pixabay

Schedule for Week of July 9, 2017

by Bill McBride on 7/08/2017 08:11:00 AM

The key economic reports this week are June Retail Sales and the Consumer Price Index (CPI).

For manufacturing, June industrial production will be released this week.

Also Fed Chair Janet Yellen will present the Semiannual Monetary Policy Report to the Congress.

—– Monday, July 10th —–

10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $14.6 billion increase in credit.

—– Tuesday, July 11th —–

6:00 AM ET: NFIB Small Business Optimism Index for June.Job Openings and Labor Turnover Survey 10:00 AM: Job Openings and Labor Turnover Survey for May from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in April to 6.044 million from 5.785 million in March.

The number of job openings (yellow) were up 7% year-over-year, and Quits were up 4% year-over-year.

—– Wednesday, July 12th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.10:00 AM: Testimony from Fed Chair Janet L. Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

—– Thursday, July 13th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 245 thousand initial claims, down from 248 thousand the previous week.8:30 AM: The Producer Price Index for June from the BLS. The consensus is for no change in PPI, and a 0.2% increase in core PPI.

10:00 AM: Testimony from Fed Chair Janet L. Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

—– Friday, July 14th —–

Retail Sales 8:30 AM ET: Retail sales for June will be released.  The consensus is for a 0.1% increase in retail sales.This graph shows retail sales since 1992 through May 2017.

8:30 AM: The Consumer Price Index for June from the BLS. The consensus is for a 0.1% increase in CPI, and a 0.2% increase in core CPI.

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for June.

This graph shows industrial production since 1967.

The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 76.8%.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for May.  The consensus is for a 0.3% increase in inventories.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for July). The consensus is for a reading of 95.1, unchanged from 95.1 in June.

Published at Sat, 08 Jul 2017 12:11:00 +0000

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PepsiCo Stock Could Trap Complacent Shareholders

Photo

PepsiCo Stock Could Trap Complacent Shareholders

By Alan Farley | July 7, 2017 — 11:49 AM EDT

Big tech may attract the majority of headlines, but a small group of high-yielding but slow-moving equities have generated equally impressive gains in recent years. PepsiCo, Inc. (PEP) sits at the top of this winner’s list, posting a long series of new highs while paying annual dividends that now average around 2.75%. However, given months of outstanding performance, the July 11 earnings report should be watched closely for signs of weakness that undermine the bullish narrative.

It may be useful to compare PepsiCo’s long-term price action with that of arch rival and Dow component The Coca-Cola Company (KO), which remains stuck below the historic high posted nearly 20 years ago. Coca-Cola pays a slightly higher 2.90% dividend while trading similar total share volume after adjustment for PepsiCo’s higher stock price, telling informed market players that the best strategy is to stick with the obvious winner. (See also: The Top Beverage Stock Picks Right Now: Credit Suisse.)

However, all financial instruments are two-sided animals in which long-term rallies inevitably give way to equally persistent pullbacks, corrections and shakeouts. With that in mind, the dramatic rally since PepsiCo stock bottomed out at $98.50 in December 2016 has reached multi-year resistance that could signal a decline lasting through the balance of 2017 while causing the stock to relinquish 15% to 20% of its total value.

PEP Long-Term Chart (1993 – 2017)

Sleepy price action in the first half of the 1980s gave way to a powerful uptrend that continued into the 1993 peak at $21.82. The stock paused at that resistance level for more than two years, ahead of a breakout that eased into a shallow rising channel in 1996. Price action held within those narrow boundaries into the new millennium, lifting to $53.50 in the first half of 2002.

PepsiCo stock sold off to channel support a few months later and returned to resistance in 2004, breaking out and continuing to gain ground in a low-volatility pattern that rarely challenged new support levels. That uptick finally ended at $79.79 in January 2008, giving way to a mild decline that accelerated during the economic collapse. Selling pressure finally eased in March 2009 at a five-year low in the mid-$40s, ahead of a modest recovery wave that stalled in 2011 in the low $70s. (For more, see: How Does PepsiCo Make Money?)

It took another two years for the stock to complete a round trip into the 2008 high, ahead of a 2013 breakout that tracked a rising channel in place since 2011 (red lines). That pattern continues to control price action more than five years later, with a single quickly repealed violation in August 2015. Ominously for long-term bulls, the rally wave that started at channel support in December 2016 has now reversed at channel resistance.

PEP Short-Term Chart (2014 – 2017)

A 2014 rally wave peaked at $100 in December, generating a decline that posted a fat finger reversal during the August 2015 mini flash crash. Three lows since that time have carved fresh support within a rising channel that has now triggered four reversals at resistance. As we know from the stock’s long-term history, this particular pattern can persist for many years, telling informed market players to take defensive action now that resistance has been reached once again. (See also: Pepsi, Coke Have Limited Upside; Dr. Pepper and Cott Undervalued: BMO.)

The stock built a four-week rectangle at channel resistance into July and broke down, but support at the 50-day exponential moving average (EMA) near $115 has stalled the decline. A breakdown at this level will add reliability to a bearish prediction that sets a target at channel support, now located near $105. Prior reversals have averaged five to seven months, setting the stage for weak relative performance into the end of 2017.

The Bottom Line

PepsiCo has emerged as a high-yield market leader, posting a long series of new highs while maintaining a healthy annual dividend. However, the rally that started in December 2016 may have run its course, with high odds for a pullback that eventually finds its way down to support near $105. (For additional reading, check out: Pepsi Has ‘Fallen Victim to Media Hype’ as Soda Sales Dwindle: Analyst.)

Published at Fri, 07 Jul 2017 15:49:00 +0000

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Behavioral Techniques for Mastering Your Trading Psychology: Relaxation

 

Image result for habits quotes

Behavioral Techniques for Mastering Your Trading Psychology: Relaxation

A recent blog post outlined the process of diagnosing the problems that may be leading to drawdowns and poor performance.  This post will be part of a series for the forthcoming trading psychology online encyclopedia on the specific approaches and techniques for addressing those problems when psychology is at their root.  
 
Behavioral approaches to the change process involve skills building and especially the formation of new, constructive habit patterns.  When we engage in behavioral methods, we are literally teaching ourselves new action patterns: replacing problem patterns with new, effective ones.
 
The first behavioral method that I have found to be helpful for trading problems is relaxation training. In relaxation training, you teach yourself skills to calm both mind and body.  My favorite relaxation exercise is to listen to absorbing music–I find instrumental music preferable to music with lyrics–while controlling the rate and depth of your breathing.  You perform this exercise seated in a comfortable position and in a quiet environment, free of distraction.  While focusing on the music, you breathe deeply and slowly from the diaphragm, but not in a strained or exaggerated way.  If you notice your mind wander, you simply refocus on the music, perhaps following a melody line or beat from a specific instrument.  During this time, you stay very still and make your breathing increasingly deep and slow.
 
It usually takes 15+ minutes for beginners to get themselves “in the zone” with the deep breathing and focus.  As you practice (mornings and evenings are great times for practice), you will find yourself quicker and quicker at entering the calm, focused mode.  It’s not unusual for a trader experienced in relaxation methods to completely center themselves with just a few deep breaths.  My experience is that the longer the relaxation session, the deeper the state you can enter.  Sticking with the exercise for 30+ minutes can induce a very focused and clear state of awareness.
 
A variant of this relaxation method is known as “progressive muscle relaxation.”  In this method, you start at one end of your body (your toes, for example) and–while listening to music and slowing and deepening your breathing–you slowly tense and relax those muscles.  So you might curl your toes gradually and tightly and slowly release them.  Once you’ve done that, you work your way up the body, lifting and releasing your feet, then tightening and releasing your calf muscles, etc.  Eventually you work your way to your head and tensing and relaxing your brow and forehead.  All of this typically takes 15+ minutes.
 
The progressive muscle relaxation works for two reasons.  It calms and focuses you, but it also turns your conscious awareness to your body and away from day-to-day and trading stresses.  This “gearshift”–the alteration of your state of consciousness–is common to all the major approaches to counseling and psychotherapy.  It’s a very important principle: to change a behavior, you first have to shift your state.  Learning a new skill in a new state accelerates the process of internalizing that skill.
 
The key to success with relaxation methods is practice, practice, practice.  It’s like any skill: mastery comes from repetition.
 
Relaxation methods are valuable as preventive tools.  You can practice getting “in the zone” before you start trading and during breaks in the trading day to ensure that you avoid overconfidence, frustration, and discouragement.  It is difficult to get worked up if mind and body are greatly slowed down.  Doing the muscle relaxation midday is a great way to get into your body and return to markets in a fresh state.
 
Relaxation methods are also valuable tools when you catch yourself overtrading or anxious and avoiding opportunities.  By temporarily pulling back from the screens, you can center yourself relatively quickly and return to markets far more calm and focused.  I often find myself regulating my breathing during trading, thereby sustaining the state practiced in the relaxation exercises.
 
Relaxation techniques are a first building block for other, more detailed behavioral skills and so they’re a great place to start your skills building.  For more detail on relaxation and other behavioral methods, you can check out the behavioral chapter in The Daily Trading Coach.  In the next post in this series, I will illustrate how relaxation methods can be combined with self-hypnotic suggestion for targeted behavioral change.

Published at Sat, 01 Jul 2017 15:40:00 +0000

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What Is Making Money Now In Financial Markets

 

What Is Making Money Now In Financial Markets

I recently wrote on the topic of how trading has sharply moved in an evidence-based direction.  That has enormous implications for trading process.  Specifically, it means that traders are spending the bulk of their time researching opportunities in markets, not staring at screens and putting on trades.  The successful trader is looking less and less like an intuitive market wizard and more and more like an insightful, disciplined researcher.

Read carefully the recent blog post from The Mathematical Investor describing which hedge funds are outperforming the others–and outperforming the markets.  It’s a relative handful of funds that are performing very well and gaining assets.  These funds have several significant advantages:

*  They utilize high frequency algorithms to place trades and manage positions, making trade management a profit center, but also freeing up traders’ time from the tasks of execution.  In many situations, it is far more time and cost-effective to systematize execution than to hire a small army of discretionary execution traders.

*  They have the capability of ferreting signals from large, complex data sets, allowing them to generate edges in trading not available to casual inspection and intuitive processing. 

*  They have the bandwidth to develop many models in many markets, creating highly diversified sources of returns and more reliable revenue streams.

These advantages are conferred by superior processing power (supercomputers); superior programming capabilities (capacity to store and access data and automate processes); superior data sets (more information and more unique information); and superior mathematical expertise (better ways to transform and analyze large data sets without overfitting).

The point that The Mathematical Investor is making is not that quant trading is superior to discretionary trading.  It’s that mathematically sophisticated trading/investing has been superior to everything else, including lower-level quant that attempts to systematize discretionary insights by applying basic statistics and modeling methods.

In that sense, trading is looking a lot like weather forecasting.  Forecasting was once a wholly discretionary activity based upon the reading of cloud patterns and the feel of the air.  Later, it became possible to quantify such variables as wind speed, air pressure, and humidity and use this information to understand weather patterns and make forecasts.  At present, computer models capture the complexities of interacting weather systems to make forecasts that would be impossible to an individual forecaster looking at a thermometer and barometer.  

Where I am seeing the greatest success of individual traders is in niche strategies and markets, where inefficiencies are most likely to be present.  Many of these exist in strategies and markets where there is limited liquidity and hence limited participation of sophisticated funds.  An example would be certain commodities and companies, where detailed knowledge of the market and industry can still confer an edge in trading.  This is akin to a small business person finding a niche in a community he or she knows well, thus performing well in spite of the presence of large retail firms.  Specialization, uniqueness, and detailed product knowledge are likely to outperform generalist trading strategies as sophisticated market participants continue to claim the most liquid sources of alpha.

Further Reading:  Becoming an Evidence-Based Trader

Published at Tue, 04 Jul 2017 14:15:00 +0000

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Tesla shares dive 7 percent; still above analysts’ target price

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Tesla shares dive 7 percent; still above analysts’ target price

Tesla Inc shares slid more than 7 percent on Wednesday, their biggest percentage decline in more than a year, on poorer-than-expected delivery numbers, yet the luxury electric carmaker’s stock price remained above analysts’ median target.

Silicon Valley-based Tesla overtook General Motors in April to become the U.S. carmaker with the largest market capitalization.

On Wednesday, its shares fell 7.2 percent to $327.09, its lowest in more than a month. Its biggest daily percentage fall since June 22, 2016, followed a 2.5 percent decline on Monday, when first-half deliveries of Tesla electric sedans and SUVs came in the lower end of its forecast.

Tesla said a “severe shortfall” of new battery packs had constrained vehicle manufacturing, and said second-half deliveries of the Model S sedan and Model X sports utility vehicle should exceed those of the first half.

“We see Tesla shares as an over-valued show-me story that has traded as a concept stock given the dislocation between share price performance and our/consensus estimates,” analysts at Cowen and Company said in a note.

Even after the sharp losses, Tesla shares remained up about 53 percent this year.

Even after the two-day slide, the stock remained about 7 percent above the median price target of $309.50. Less than 20 S&P 500 Index constituents can top that.

On average, S&P 500 stocks trade between 7 percent and 9 percent below the Street’s target, according to Thomson Reuters data.

While Tesla has been trading above the median target price for months, that margin mushroomed in June with the stock trading as much as 25 percent above the median target.

Some 14 of the 21 analysts who cover Tesla have a sell or hold rating on the shares.

Zhejiang Geely Holding Group-owned Volvo said all car models it launches after 2019 will be electric or hybrids, making it the first major traditional automaker to set a date for phasing out vehicles powered solely by the internal combustion engine.

While the Volvo announcement could be seen as validation for Tesla CEO Elon Musk’s vision, it also highlights the intense competition Tesla is likely to face, Barclays analyst Brian Johnson said in a research note.

On Wednesday, Goldman Sachs cut its six-month price target on Tesla to $180 from $190. Andrew Left of short seller Citron Research told CNBC in a phone interview that he thinks that is fair in the short term.

(Reporting by Saqib Iqbal Ahmed in New York and Parikshit Mishra in Bengaluru; editing by David Gregorio)

 

Published at Wed, 05 Jul 2017 22:49:24 +0000

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