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| | | Japan | | | There haven’t been any economic reports lately so the news flow has been a little slow. Of course, the US is speeding to its “fiscal cliff” and without more ECB outright lies and political chicanery, Greece would have defaulted Tuesday.
The only surprising news out recently came from the land of the rising sun: Japan. After 9 or 10 of its own central bank manipulations, which truly is QEternity, Japan is back in recession again (or will be soon). Surely #11 will do the trick.
The Financial Times said the following about Japan… Japan’s economy shrank an annualised 3.5 per cent between July and September, the steepest decline since the earthquake-hit first quarter of 2011, as exporters suffered big falls in shipments to key markets such as China and Europe.
Prime Minister Yoshihiko Noda described the gross domestic product figures as “severe”, while Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”.
In a speech on Monday, Masaaki Shirakawa, Bank of Japan governor, said there was “no question that the [central bank] should exert every effort to enhance its easing effects as much as possible”. He said domestic demand was “unlikely to increase at a pace that will outperform the weakness in exports”.
The Japanese government’s monthly survey of “economy watchers” – which includes barbers, hoteliers, car dealers and others who deal with consumers – has recorded six falls in a row since April. Last month the index stood at a level little better than that of April 2011, in the immediate aftermath of the quake.
Japanese manufacturers from Nissan to Shiseido have reported steep falls in sales of their products in China, following a wave of demonstrations against Tokyo’s nationalisation of some of the islands in mid-September.
Japan’s top seven automakers have cut their projections for Chinese sales by a fifth, for the fiscal year to March, according to calculations by the Nikkei newspaper.
As the FT reports, Japan’s economic problems are mainly due to China and Europe. But wait, I thought that Europe was “fixed” and if so, how could this possibly affect Japan like this?
Just like the Keynesian madness hasn’t fixed Japan over the last TWENTY-TWO years, it hasn’t “fixed” Europe or the US, and the coming QE11 from the BOJ will do nothing. Issuing Scooby-Doo band aids to stop a bleeding-out gaping chest wound, like the central banking/political remedies of the past multiple decades just won’t work, yet they keep slapping Scooby-Doo on the problem.
These countries need fresh thinking or a massive economic reset button is about to be pressed. | | Trade well and follow the trend, not the so-called “experts.” | | Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | | | | | | | | | |  | | | | is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. | | | | | |  | | | | Congratulations to Ken Smith
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| | | | NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial. | | | |  | | |  | | | | Volatility Commentary | | | Estimating Breakeven Price Levels on a Calendar Spread. In our classroom, we usually look to purchase a Calendar Spread (selling the near month option and buying a further out option with the same strike) when we identify significant difference in the relative implied volatility levels.
We would look to sell the near month option at high implied volatility level and buy the further out option with lower implied volatility level. Should implied volatility levels converge towards their normal relationship, we can analyze the expect profits of that spread. This expected profit is known as "Edge".
Say we purchase a calendar spread with 0.30 edge. If the calendar spread is delta neutral but has a gamma of -.10, then we can estimate that should the stock price fluctuate greater than $2 in either direction, the delta risk of the calendar spread could potentially cancel out the 0.30 in expected profits (spread could lose 0.10 for the first $1 move then lose 0.20 the second $1 move; 0.30 Edge, -0.30 expected loss from delta risk). This is one way to use delta and gamma to conduct what-if scenarios and calculate breakeven stock price levels of being long a Calendar Spread with Edge.
| | |  | | | | Currency Spotlight | | | | For some investors, gold is a currency, an inflation hedge and a safe haven trade. While gold is not actively used in day to day purchases, it is one of the preferred asset classes to put ones money into. Some buy gold to hedge against global inflation concerns that come from the several unlimited QE programs that central banks are using to help support their struggling economies. As Europe’s debt crisis intensifies and fiscal cliff looms, gold has appreciated. As gold strengthens, its bullish trend remains intact and is on target for its twelfth year of gains as skepticism grows for fiat currencies.
The typical gold trading strategy is to buy on weakness and avoid any opportunities that might see a major correction in the U.S. dollar. The main risk event that could derail gold’s rally is the resolution of the fiscal cliff. If we see an agreement between democrats and republicans, investors might see a strong exodus of gold positions. This however, is not very likely.
The precious metal also weakened this week as India, the world’s biggest gold consumer, is away on Diwali holiday. With a poor monsoon season, India’s crops are delayed another month, prompting several to hold off on purchasing any gold.
Gold mining giant, Barrick Gold’s CEO, Jaime Sokalsky told Bloomberg Businessweek that despite $8billion spent on exploration last year, gold is being discovered at a lower rate. Further supply shortages and central bank/global demand appear to support for higher gold prices. As it becomes harder to find large deposits and high grades of the yellow metal, gold is just another financial crisis or risk event away from recapturing new record highs.
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|  | | | | Watch List | | | Well after the light volume trading day yesterday, the market took off at the open and went on a nice rally. The real question here is why did the market make such a strong rally? Again its the "buy on rumor, sell on news" theory. In essence it was supposed leaked info about how the Republicans will cave and conform to the Democrats on this Fiscal Cliff issue. The truth is it was a false report(even though it looks like the Republicans WILL conform to the Democrats demands) that came out and what it did was trigger either institutional trading or it turned on the "machines". What I am referring to is these HFT(high frequency trading) programs that can just start trading off headlines. this is the world we are dealing with now. That the liquidity in the market now is 40-50% all HFT's instead of retail traders. Once these machines stopped the market adjusted and went sideways, right until the close where it just drifted back down to where it was right before the huge influx of volume came in.
We shall see what the rest of the week holds. Now that I know the market is willing to turn on a dime on any bit of news, I would sit here and be ready for strong reversals to take place at any time. Normally you can kind of predict market behavior, but you can not predict when HFT's gone wild. Enjoy the ride while you can folks....Open Position: CHKP Stocks to Watch: AAPL AMZN PCLN BAC C FOSL NFLX HD LOW | | |  | | | | Futures Data | | | ES 1383.50 / 1372.00 POC… 1379.75 YM 12828 / 12740 NQ 2581.00 / 2563.50
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