Saturday, May 25th, 2013

iBC Newsbot 3000

*List news by publisher » ', this, event, '150px')">In Syria's shadow, Iraq violence presents new test for U.S.
  (3 hours ago via Reuters)

    ', this, event, '150px')">USEC to Shut Uranium-Enrichment Plant in Kentucky
  (34 mins ago via The New York Times)

WDM Market Grows 10 Percent
  (15 mins ago via Light Reading)

    ', this, event, '150px')">New Computer Attacks Come From Iran, Officials Say
  (11 mins ago via The New York Times)

MEF Launches CloudEthernet
  (5 mins ago via Light Reading)

Cogeco Expands HD VoD Coverage
  (2 mins ago via Light Reading)

\"For New Mexico, we recognize a war on the poor when we see it\"

(h/t Sense On Cents)

    ', this, event, '150px')">Jack Lew's Triple Whammy - IRS Ignorance, Corzine Corruption, And The 'War On The Poor'
  (36 mins ago via ZeroHedge)

', this, event, '150px')">Durable goods orders point to factory resilience
  (42 mins ago via Reuters)

', this, event, '150px')">Judge rules against 'America's toughest sheriff' in racial profiling lawsuit
  (54 mins ago via Reuters)

', this, event, '150px')">Truck crash caused Washington state bridge collapse: officials
  (57 mins ago via Reuters)

', this, event, '150px')">Syria opposition seeks to unify as momentum for talks builds
  (1 hour ago via Reuters)

OilPrice.com,

Exxon Mobil hasn\'t asked federal regulatory authorities to restart the Pegasus oil pipeline, which burst open in a neighborhood in Mayflower, Ark. In March, a 22-foot rupture in the pipeline spilled about 5,000 barrels of diluted Canadian crude oil into an area of marshland, though the company said it\'s been effectively cleaning the area with long-term remediation in mind. Policymakers on both sides of the Canadian crude oil debate have focused on issues ranging from emissions to economic stimulus. If pipelines like Keystone XL have any chance of approval, perhaps pipeline integrity should be the focal point of real policy debates.

Exxon said it was still looking into what caused a 22-foot gash to appear in the wall of its 65-year-old Pegasus oil pipeline. Arkansas Attorney General Dustin McDaniel said his office was pouring over 12,500 pages of information sent to his office by Exxon. Those documents were related to maintenance, inspection and safety of the 850-mile oil pipeline. Exxon, for its part, said it was combing over data taken from inside the pipeline itself in an effort to figure out what happened before the spill. That inspection, a spokesman said, could take at least another month.

Exxon already removed the damaged section and replaced it with new pipe. About a month after the Arkansas incident, about a barrel of oil leaked from the same pipeline about 200 miles north of Mayflower. The \"wait and see\" reaction to the Pegasus spill, and potentially the delay in the restart, may be part of Exxon\'s evaluation of the debate over the Keystone XL pipeline. Last week, a measure dubbed the Northern Route Approval Act passed through a Republican-led committee on its way to the full House. The bill would leave the fate of Keystone Xl in the hands of policymakers, who may have a vested interest in seeing that the project gets built.

Rep. Jerrold Nadler, D-N.Y., cast his vote against the Northern Route Approval Act. He expressed frustration that lawmakers were moving the debate away from renewable energy and focusing more on how best to circumvent normal review processes. Last year, the White House passed new laws that would stiffen the penalties for pipeline safety violations and mandate more inspections. That decision followed a 1,000-barrel spill in the Yellowstone River and a 20,000-barrel spill in Michigan. Lawmakers debating Keystone XL, however, have pressed for few additional assurances for pipeline integrity.

Canadian Prime Minister Stephen Harper told the Council on Foreign Relations last week the \"real\" environmental issue with oil from Canada was whether it traveled through a pipeline or by rail. One of the \"real\" issues has to do with emissions. Upstream, emissions work out to be \"almost nothing globally,\" the prime minister said. Downstream, it\'s more likely that a train will derail than a pipeline will burst open, he said.

Talking points over pipelines are focused on economic and energy security interests on one side of the argument versus emissions and cleanup on the other. Given the legacy of pipeline spills since the Keystone XL debate began more than four years ago, the \"real\" issue may be the lack of debate over just why so many of these pipelines have burst open in the first place.

    ', this, event, '150px')">Guest Post: Are Pipeline Spills A Foregone Conclusion?
  (1 hour ago via ZeroHedge)

    ', this, event, '150px')">Mike Darnell, a Reality Show Creator, Is Leaving Fox
  (1 hour ago via The New York Times)

', this, event, '150px')">IRS exempt unit faulted for group scrutiny in past
  (2 hours ago via MarketWatch)

    ', this, event, '150px')">Business Briefing | Legal News: Ex-Chief Convicted of Trying to Defraud Bank
  (2 hours ago via The New York Times)

    ', this, event, '150px')">Business Briefing | Company News: Fatburger to Sell Beef Patties in Walmarts
  (2 hours ago via The New York Times)

    ', this, event, '150px')">Business Briefing | Legal News: Ista to Pay $33 Million for Illegal Drug Promotion
  (2 hours ago via The New York Times)

Bloomberg notes. We covered two Japan ETFs this week, EWJ and DXJ. Notably, DXJ was the best performing ETF in 2013 until this week. DXJ is interesting as it has a short-hedged position on the yen which benefits U.S. holders. EWJ is also popular but with the yen in sharp decline, it really hasn\'t benefitted U.S. holders as much.

Volume trailed off and bulls were free to ramp stocks into the close. Breadth per the WSJ was mostly negative.

You can follow our pithy comments on twitter facebook.

NYMO

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

NYSI

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

VIX

The VIX is a widely used measure of market risk and is often referred to as the \"investor fear gauge\". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

SPY 5 MINUTE

.SPX WEEKLY

INDU WEEKLY

RUT WEEKLY

QQQ WEEKLY

XLF WEEKLY

XLB WEEKLY

XLP WEEKLY

XLI WEEKLY

IYT WEEKLY

IYR WEEKLY

TLT WEEKLY

FXE WEEKLY

FXY WEEKLY

FXA WEEKLY

GLD WEEKLY

SLV WEEKLY

GDX WEEKLY

JJC WEEKLY

DBC WEEKLY

USO WEEKLY

UNG WEEKLY

UUP WEEKLY

EFA WEEKLY

IEV WEEKLY

EEM WEEKLY

EWJ WEEKLY

EWZ WEEKLY

RSX WEEKLY

EPI WEEKLY

FXI WEEKLY

EWA WEEKLY

...

', this, event, '150px')">Stick Save To Close The Week
(2 hours ago via ZeroHedge)

Q2: Where might a surprise appear in inflation trends?A2: Inflation tends to jump unexpectedly when a combination of monetary easing and significant fiscal expansion coincides with some sort of supply shock.

Q3: What transmission channel is the BoJ envisioning for achieving its inflation target?A3: Since the interest rate and credit channels are unlikely to recover anytime soon, the BoJ will have to depend largely on more accommodative financial conditions via higher share prices and a weaker yen.

Q4: What other monetary policy actions are expected?A4: We think the BoJ will likely be compelled to ease again in 2H FY13 (most likely in October), consisting mainly of increased purchasing of ETFs as the most feasible risk asset.

Q5: How do we describe the government?s fiscal policy stance for 2013-14?A5: Assuming no additional fiscal measures, fiscal policy will shift from a markedly expansionary stance relative to other developed nations in 2013 to an abrupt contractionary stance next year.

Q6: What is the likelihood of a return to a public-spending-driven economic recovery?A6: If the economy is underpinned by strong overseas demand (robust exports), as in the Koizumi era, it would reduce the chances of a major fiscal expansion or resulting economic rebound fueled by public works.

Q7: Is government debt sustainable?A7: This will depend on growth initiatives. If the government continues to depend unduly on QQE without a proper growth strategy (sluggish potential growth), the possibility of a ?sell-Japan? scenario would reemerge over the long term.

Q8: How has the government?s growth strategy progressed?A8: There has been no notable progress yet. Momentum for growth initiatives may pick up depending on the Upper House election results, but key measures such as a corporate tax cut and easing of job dismissal regulations could take considerable time.

Q9: Are Japanese stocks overvalued?A9: Japanese stocks are superficially rich as measured by valuations such as P/E. However, we believe share prices have further upside as long as excess liquidity continues to curb the ERP.

Q10: What will be necessary to ensure a more sustained rise in share prices?A10: A more sustained rise in the liquidity-driven stock market will require a return of surplus funds to shareholders when real interest rates fall into negative territory, a cut in corporate tax rates, and higher financial leverage.

Q11: How has the structure of JGB markets changed since the launch of QQE?A11: The post-QQE risk profile of JGB markets has changed dramatically from ?low carry, low volatility and high liquidity (high Sharpe ratio)? to ?low carry, high volatility and low liquidity (low Sharpe ratio).?

Q12: Will QQE trigger significant portfolio rebalancing by financial institutions?A12: Banks will reduce their JGB holdings substantially in 2013-14. Still, their considerably higher risk tolerance levels compared with the VaR shock of 2003 should act as a buffer for JGB markets.

Q13: Will the yen?s decline accelerate? What is the risk of reversal to yen appreciation?A13: The fall in the yen?s value could hasten if a further BoJ easing coincides with a reduction by the Fed in its QE. However, from a supply/demand perspective, purchasing of Japanese shares by overseas investors should offset the effect of portfolio rebalancing by domestic investors, suggesting that the pace of yen depreciation should slow.

Q14: What political developments can be expected after the Upper House election?A14: If the LDP secures a majority in the Upper House, the government will have control of both houses for the first time in six years, setting the stage for a long, stable administration. The political stability could be the driving force for growth initiatives.

Q15: What are the best- and worst-case scenarios for Abenomics?A15: The best-case scenario is the LDP wins a large majority in the Upper House election and more momentum for growth initiatives, along with QQE to ease near-term deflationary pressure. The worst case would be a retreat in growth initiatives and prolonged overdependence on QQE.

Whether the markets go for a buy-Japan or sell-Japan scenario will depend in good part on the results of important policy and political events in the next three months. Of particular note are: 1) BoJ Monetary Policy Meetings; 2) the Council on Economic and Fiscal Policy?s Basic Stance for Economic and Fiscal Management, scheduled for release in June, and the outline of growth initiatives by the Industrial Competitiveness Council and Council for Regulatory Reform; and 3) the Upper House election (as well as the Tokyo Metropolitan Assembly election, a prelude for the national poll).

Source: Barclays

    ', this, event, '150px')">Abenomics 101 - The 15 Most Frequently Asked Questions
  (2 hours ago via ZeroHedge)

U.S. Firm's Monitoring Gear Seen Aiding Syria
  (2 hours ago via WSJ)

', this, event, '150px')">Violence spreads outside Swedish capital but violence abates
  (2 hours ago via Reuters)

', this, event, '150px')">Market Snapshot: Bears cite performance chasing as stocks rise
  (2 hours ago via MarketWatch)

An equilibrium model of the African HIV/AIDS epidemic
  (2 hours ago via VoxEU)

    ', this, event, '150px')">Off the Charts: S.&P. Has More Than Doubled Under Obama
  (2 hours ago via The New York Times)

    ', this, event, '150px')">A Program to Combat Food Contamination
  (2 hours ago via The New York Times)

By Jennifer Saba REUTERS - News Corp (NWSA.O) said on Friday it will write down the value of its Australian and U.S. publishing assets by up to $1.4 billion, as the company prepares to split its business ...

', this, event, '150px')">News Corp to take charge of up to $1.4 billion this quarter
  (2 hours ago via Yahoo! Finance)

    ', this, event, '150px')">DealBook: Why Did Citigroup Try to Overturn an Overhaul?
  (2 hours ago via The New York Times)

    ', this, event, '150px')">Growth in Options Trading Helps Brokers but Not Small Investors
  (3 hours ago via The New York Times)

Shake-Up Hits Sino-Aussie Law Firm
  (3 hours ago via WSJ)

BLOX Jumps 15%: Bulls Cheer ?Demand Pull,? ?Point of Control?
  (3 hours ago via Tech Trader Weekly (Barrons.com))

Hulu Suitors Line Up
  (3 hours ago via WSJ)

Sovereign Man blog,

Years ago as a young intelligence officer, I served a stint in Saudi Arabia running a team of counter-terrorism analysts and agents.

We used to have regular ?threat working groups,? a fancy way of saying we would get together at the US Embassy for meetings with the embassy staff, local NSA operators, and CIA operatives working in the country under official cover.

The tone of the meetings was always the same ? looking at various reports and figuring out which intelligence was credible.

It seemed like every week we would hear about some terrorist with a suitcase-sized bomb, and the bureaucrats would dive into a lively debate about whether or not to evacuate the Americans.

One day, I remember, my friend who was the senior ranking non-commissioned officer interrupted and said, ?What about the Swedes??

Silence. You could have heard a pin drop.

An embassy official looked at him, puzzled. ?Sergeant??

?What about the Swedes? Do we evacuate the Swedes too??

The embassy staff looked at each other, shrugged a bit, ?Oh sure, sure, we?ll coordinate with Washington on that.? And the discussion continued.

?What about the Saudis??

Silence again. And then he really made his point. ?It?s not just about Americans, you know. Their blood is worth something too.?

I?ll never forget it. It was formative for me. But for the government bureaucrats, it was as if he were speaking Greek. They just didn?t understand the concept.

It?s so commonplace? and one of the more unfortunate aspects of humanity. We group ourselves, defining each other by irrelevant things like nationality or the color of our passports.

The modern nation state has only served to reinforce this purpose. The flag waving and bombastic patriotism drive a sentiment that other peoples are less important? that their lives are worth less than our lives? as if we?re not all human beings.

To give you a harsh example, former British Prime Minister David Lloyd George was a vocal opponent of Geneva Convention restrictions to prevent British planes from bombing certain civilian targets.

He had a long history of this, having dropped 97 tonnes of bombs and fired 183,861 rounds on Iraqi civilians in a 1920 revolt against British occupation.

According to his wife in later memoirs, George opposed any such restrictions because he wanted to ?reserve the right. . . to bomb niggers!?

Though such language is intellectually appalling today, very little has changed in this sentiment: our lives are worth more than other people?s.

President Obama really drove this point home in a speech yesterday which passionately defended US drone strikes? something the White House calls ?necessary, legal, and just.?

Now, it?s possible that I?ve seen a more intellectually disingenuous speech in my life. But I really can?t remember when.

As the President stated, the drone strikes are ?effective? and have ?saved lives.?

So says the Nobel Peace Prize recipient. But I imagine there are a number of dead civilians who would take issue with his assertion if they could.

By ?saved lives,? he obviously meant ?American lives?. Of course, we?ll never know since they don?t release any information and we?re all just supposed to take the government?s word without question.

I don?t. Having once been inside the machine, I know that there is zero certainty in the intelligence business... which makes the whole calculus morally reprehensible.

My dictionary defines the word sociopath as ?a person with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience.?

I think the shoe fits. At a minimum, this policy? this strategy? is sociopathic. It demonstrates a lack of conscience for the value of innocent life overseas and is another massive moral stain on the politicians who lord over the Land of the Free.

', this, event, '150px')">One Experience That Really Shaped My Thinking
(3 hours ago via ZeroHedge)

satellite images of lavish palaces and empty land owned by the Sunni monarchy.

The images, which circulated in PDF form after the government blocked Google Earth, spurred growing unrest about the lack of affordable housing. In 2011 this unrest broke out into large nonviolent protests as part of the Arab Spring.

Following a brutal and largely ignored crackdown on protests, however, the housing crisis has only gotten worse.

Around 54,000 requests for government housing were still pending action as of March 2013, up from 46,000 in March 2011. That\'s a lot of angry people waiting to rise up again against the U.S.-friendly regime.

As for those satellite images, new surveillance confirms that things are as bad as ever. We have included new satellite images along with slides from the anonymous PDF that set off protests in the first place.

Bahrain is a tiny island in the Gulf ? approximately one fifth the size of Rhode Island ? with a population of 1.3 million. It gets crowded.

Satellite image from 2013.

What makes things really bad is that most of that population (primarily Shias) is packed into one corner of the island, while huge tracts of land owned by the (Sunni) monarchy are empty but for a few palaces.

Satellite image from 2013.

Social unrest started building in 2006, when satellite images along with comments from anonymous activists started getting passed around.

Slide from viral 2006 presentation on inequality in Bahrain.

See the rest of the story at Business Insider

Please follow Business Insider on Twitter and Facebook.

', this, event, '150px')">Satellite Pictures Show A Revolution Waiting To Happen In Bahrain
  (3 hours ago via Clusterstock)

', this, event, '150px')">Top Ten: MarketWatch?s top 10 stories, May 20-24
  (3 hours ago via MarketWatch)

Pricey Beef Puts Heat On U.S. Grilling Season
  (3 hours ago via WSJ)

Two days ago we suggested that \"they better pray there is no short squeeze.\" Today, following the just released latest CFTC Commitment of Traders data which showed that the Comex gold short position grew once again to a new all time high of 79,416 shorts, all prayers are now off. If we may be so bold as to we suggest, the time has come to upgrade to the sacrificial slaughtering of at least a lamb on the altar of Saint Ben, because even the tiniest hint of a forced cover will now result in the biggest rip your face off levered short squeeze seen in the history of the yellow metal. Maybe throw in an ink cartridge or two for good measure...

Short positions in gold have risen 25% in the last 3 weeks

Chart: Bloomberg

    ', this, event, '150px')">Forget Prayer, It's Lamb Slaughter Time: A Rational Man's Response To All Time High Gold Shorts
  (3 hours ago via ZeroHedge)

Why Did Citigroup Try to Overturn an Overhaul?
  (3 hours ago via DealBook (NYT))

new report by the Century Foundation.

At the most selective schools in the country,* 70 percent of students come from the wealthiest quarter of U.S. families.

Just 14 percent come from the poorest half.

And while these statistics date back to 2006, I think it\'s safe to say they haven\'t changed greatly in the last few years.

If you think higher education should be a ladder for upward mobility, then you should regard these numbers as a disgrace. As we\'ve written before at The Atlantic, elite colleges do a consistently poor job recruiting the intelligent but low-income high school students who could benefit most from a top-notch education. Part of their problem, as Josh Freedman explained for us recently, is that it\'s expensive. Low-income undergrads need financial aid, and many institutions either don\'t have the resources, or would simply prefer to deploy them elsewhere. Others have the money and are willing to use it, but aren\'t sufficiently aggressive about reaching out to a population of students who often don\'t realize they have the academic skills to attend a great school or that aid would cover most of their expenses.

But it\'s certainly not as if there aren\'t enough smart, poor students to fill up classrooms. As economists Caroline Hoxby and Christopher Avery have shown, about 39 percent of America\'s high-achieving students are from the country\'s poorest 50 percent of students. These are teenagers who manage an A- average in school and finish among the 10 percent of SAT or ACT takers. Most of them never even apply to a selective college, which would include schools ranging from the \"very competitive\" category to the \"most competitive\" category.

If the wealthiest schools in the country wanted more economic diversity, they could have it.

*There are roughly 80 schools in the \"most competitive\" category, which is based on Barron\'s rankings. Here\'s a list of the institutions via the New York Times.

Please follow Business Insider on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">America's Top Colleges Have A Rich-Kid Problem
(3 hours ago via Clusterstock)

chasing higher yields. Anyone that has a hand in the housing business, especially in the grind it out rental business understands that it is no hands off endeavor. This is why it is surprising to see how much money is now being funneled into the market by brand new small time investors, especially in places like California. You know things are getting frothy when new money is willing to chase the rental business.

Investing big in Southern California

I saw this interesting post over on Redfin:

?We are a working couple first time buyers in La California. We have 300K$ down and were preapproved for 900K loan.

We never owned property before so we are seeking expertise advice and answers to these questions

1. We were wondering about what people who have gone this route have to say or give advice on that.

2. Is this the right way to go?

3. As we understand how important location can be, we are debating whether we buy it in Burbank N Hollywood Sherman oaks, La near USC or West Hollywood? Investment wise what would make the most sense?

4. Also for maximizing investments and cash flow what?s best 2, 3, 4 units or more is best?

5. What things do we look for when we go see the apartment?

6. What questions should we ask the seller?

7. What to look for in the surrounding? Besides school public transportation and safety obviously?

Any comment and/or advice is greatly appreciated!?

Think about what is being asked here. A first time buyer is looking to dive into a $900,000 investment property (almost $1 million) and has many questions that are basic for most investors even considering a $100,000 investment. So let us just pick a place in Burbank that fits the $900,000 mark:

283 N Florence St

Burbank, CA 91505

# of Units 4 Units

Beds 4 Bed

Sq Ft

Lot Size 7,379 Sq Ft Lot

Year Built 1947

The above place is a 4-unit property. The place is listed at $895,000. From the income sheet we find that the property will produce a gross income of $41,580 with expenses of $5,633. The expense amount is incredibly low in my estimation. From practical experience by the time all is said in done with taxes, insurance, vacancies, repairs, and just the operation of a mulit-unit you are likely to get a net operating income of something close to 50 percent of your gross income. Even with that said, the rents here are essentially $3,465 per month (or $866 per unit).

Let us assume this investor goes with this property. In more expensive areas of California investors are now buying to flip whereas in lower cost areas like the Inland Empire, more are buying to rent. From the initial notes, this potential buyer will put down $300,000 for the $900,000 property. Let us be generous and say that everything goes well and they manage a 60 percent NOI on their first year (meaning they kept expenses at 40 percent*). What is the cap rate here?

$24,948 / $900,000 = 2.77 percent

*Mortgage payments and depreciation are not considered operating expenses so that does not impact NOI

Keep in mind the above assumes a very optimistic scenario. In the end, this investor is going to be putting $900,000 at play for a 2.77 percent rate of return and they will be working for that money. If not, they?ll certainly be paying someone for that rate of return and this will cut into the overall rate.

Keep in mind we still need to factor the actual $600,000 mortgage payment. It looks like they were pre-approved and with everything said and done, the APR on this thing will likely get close to 4 percent on an investment property. So here is the principal and interest:

PI: $600,000 loan at 4% = $2,864 per month

The place is only producing $3,465 gross per month! Not factoring anything outside of principal and interest, which is big for a multi-unit, you are looking at a gross minus PI amount of $601. Bwahahahaha! What is amazing is they tried to sell this place for $1,000,000 last year:

Any seasoned investor looking at this is probably shaking their heads. Even the press now understands exactly what is happening:

?(Reuters) Home prices have been rising since last year, helped by investor demand and tighter inventory. The top five states with the biggest gains in prices were Nevada, California, Arizona, Idaho and Oregon.?

Helped? The market is being driven by this. In SoCal 35 percent of all purchases last month came from the all cash crowd. The only reason you would buy a place like this example is if you believed in solid appreciation. This is what many of the flippers are doing. Buying a place, fixing it up, and selling it into the current momentum for a quick profit. The fact that people are considering diving into the current game in LA and OC for rental cash flows boggles the mind, especially new investors looking to put down $300,000 on a $900,000 property that will throw off a yield lower than you can get in regular bonds.

Saving $300,000 is no small task. I\'m curious as to what the perspective would be on buying a place like this?

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble?s Blog to get updated housing commentary, analysis, and information.

    ', this, event, '150px')">The last to the party: Investors and flippers competing for small amount of inventory.
  (4 hours ago via ZeroHedge)

News Corp. sets spinoff terms
  (4 hours ago via Yahoo! Finance)

', this, event, '150px')">Stocks to Watch: Stocks to watch: Tiffany, United Natural Foods
  (4 hours ago via MarketWatch)

Turkey Moves to Curb Alcohol Sales
  (4 hours ago via WSJ)

OilPrice.com,

You can see it clear as day in their hedging strategies...

Natural gas producers are increasingly bearish on prices for their sector.

The numbers tell the tale. Canadian gas producers surveyed for the Oil and Gas Investments Bulletin hedged AECO-sold production at $5.27 in 2011. Hedge prices have dropped steadily for gas sold since?to $4.27 in 2012, and to $3.29 for currently-hedged production in 2013.

Why the falling hedge price? Because it made sense ? Natural gas prices fell steadily from the beginning of 2010 through to early 2012. Faced with two years of declines, producers looked to stave off further price risk by forward-selling (hedging) their output.

So what has happened since the second quarter of 2012?

Gas prices have been rising. The monthly average AECO (the Canadian benchmark price out of Edmonton AB) price is up 110% over the last year. NYMEX gas has gained 95%.

Producers, however, have not responded with the same confidence. Despite stellar gains in the gas price, firms continue to hedge at low levels. In fact, for the first time in years, hedges appear to be working against producers?forcing them to sell gas at prices below market value.

Here\'s what one junior gas producer says about their hedging strategy...

?We?re actually thinking of unwinding some of our gas hedges now?at least in part,? says Heather Christie-Burns, President and COO of Angle Energy (NGL-TSX). ?Our hedge book for natural gas is in a loss position right now, for what our strip pricing was then.? She adds that Angle does not have any hedging on for 2014.

So, could a rising commodity price and continued bearishness from industry insiders be a recipe for investor profits?

Hedging: A Good Idea... at the Wrong Time?

To see what hedge books tell us about the direction of the natural gas market, I surveyed nine major, Canadian-focused gas producers and their hedges. (This is information that investors can find buried in the back of annual financial statements for most companies).

What we can confirm from these hedge books is that hedges are now starting to work against producers.

As mentioned above, in 2011 my surveyed producers hedged AECO gas at an average of $5.27. During that year, AECO spot had a monthly average of $3.48. Hedging paid off.

Same in 2012. During that year, producers hedged at an average $4.27, while AECO prices averaged $2.28.

But with prices rising through most of the past year, hedgers are now close to underwater. The average AECO hedge for 2013 is $3.29. But AECO prices have averaged $3.01 through to the end of April?a razor-thin discount to hedged prices. In fact, prices for April averaged $3.28?right at the strike price for the average hedge.

Producers that hedge on the NYMEX?indexing their sale price to Henry Hub rather than AECO?have seen a similar pattern.

NYMEX hedgers locked in an average $5.97 in 2011?nearly a 50% premium to the average Henry Hub spot of $4.00 that year.

In 2012, the average hedge of $5.40 was almost double the $2.75 average hub price.

But the differential has now narrowed. NYMEX hedges for 2013 average $4.19, while the spot Henry Hub price through the first quarter of the year ran at $3.49.

As the chart below shows, NYMEX hedges are fairing a little better than AECO hedges in maintaining a premium?but the gap is closing fast.

Optimism or Pessimism: A Look at What\'s Ahead

The really interesting part: Despite the doubling of gas prices over the past year, producers are continuing to hedge year-out production at relatively low prices.

The average AECO hedge price for 2014 is $3.80?just 15% higher than the $3.29 producers hedged at in 2013.

For NYMEX production, the hedging outlook is even less optimistic. NYMEX hedges for 2014 average $4.38. That?s barely above the $4.19 average for 2013.

These low-price hedges are looking like an increasingly risky bet. If prices rise just a little, producers will be losing money on the forward sales that previously improved their bottom line.

Despite this risk, gas companies are continuing to hedge aggressively. Look at the historical pattern. In 2011?when AECO prices were holding in the $3 to $3.50 range?AECO-hedged producers grew more optimistic. Only two of them, Pengrowth (TGF-TSX) and Penn West (PWT-TSX), hedged AECO production in the next year, 2012. Others tried to maintain exposure to spot prices, believing things could improve.

Of course, 2012 turned out to see a cliff-dive in the AECO price, to below $2.00.

That spooked producers. To the point where, even though we?re back at the same +$3 prices we saw in 2011, gas players are continuing to hedge heavily. Where only two companies hedged at these levels before, six firms are hedged for 2013 and three companies are already hedged for 2014?at the low prices mentioned above.

This looks like a classic case of the ?know it best, love it least? syndrome, meaning this could be a buying opportunity?at least for the right companies.

What It All Means for Investors

With more firms hedging, investors looking for upside from rising gas prices need to be careful about where they put their money?especially today. With hedging activity rising the last few years, good deals in the hedge market are getting hard to find.

You can see this in the spread. In 2011, average AECO hedges for our surveyed companies ranged from a low of $3.81 (Angle Energy, NGL-TSX) to a high of $6.43 (Enerplus, ERF-TSX). That?s quite a difference in prices and profits!

But today elevated prices are hard to come by. 2013 hedges have a tight spread, ranging from $3.09 (Crew Energy, CR-TSX) to a high of just $3.37 (Baytex Energy, BTE-TSX).

If you?re hedged today, you?re getting a mediocre price for your gas. Plain and simple.

The good news for investors betting on a rising gas price is that not all companies are hedging the same volumes.

Companies like EnCana (ECA-TSX) and ARC Resources (ARX-TSX) are hedging as much or more gas next year. While firms like Crew Energy and Enerplus appear to be keeping significant volumes uncommitted for now?perhaps looking for price appreciation.

Angle Energy is our sole surveyed producer that has not hedged any output for 2014.

?I don?t think NYMEX natural gas prices are going to rock over $5/mcf, but it could touch $5,? says Christie-Burns. ?There is a ceiling, there?s a lot of coal. But good hedges by the majors have allowed a lot of activity over the last two years, and now they aren?t making money on them. They can?t redeploy hedging gains back into more drilling like the last couple years.

?That bodes well for 2014?we think there?s upside for 2014.?

That reminds me of commodity guru Don Coxe, who said opportunities come in sectors where ?those who know it best, love it least.?

The quote fits today?s natural gas sector to a T.

    ', this, event, '150px')">Guest Post: What 9 Company Hedge Books Are Revealing About The Natural Gas Market
  (4 hours ago via ZeroHedge)

    ', this, event, '150px')">British Village Protests Plan for Shale Gas Drilling
  (4 hours ago via The New York Times)

    ', this, event, '150px')">Orders for Durable Goods Rose 3.3 Percent in April
  (5 hours ago via The New York Times)

preferred computer space looked like three years ago, the times have changed. Behold Ben Bernanke\'s new and improved PC desktop...

(h/t @Not_Jim_Cramer)

', this, event, '150px')">Presenting Ben Bernanke's Desktop - Redux
(5 hours ago via ZeroHedge)

Continue reading »

Follow Dealbreaker on Twitter or become a fan on Facebook. ', this, event, '150px')">Write-Offs: 05.24.13
(5 hours ago via Dealbreaker)

SeaWorld Entertainment?s Antarctica: Empire of the Penguin attraction, opening today at the company?s namesake theme park in Orlando, features 50-foot glaciers, 2,500 glass icicles and up-close encounters with 230 penguins, dusted daily with 6,000 pounds of snow. ?It is the coolest attraction in the world,? President and Chief Executive Officer Jim Atchison said in an…

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: Antarctica, Blackstone, Empire of the Penguin, SeaWorld, Stephen Schwarzman, Stephen Schwarzman: a friend to the penguins

', this, event, '150px')">Penguins Living In Palatial Digs Have Stepen Schwarzman To Thank
(5 hours ago via Dealbreaker)

The Eurozone?s Economy May Surprise on the Upside
(5 hours ago via The Pragmatic Capitalist)

Mohamed El-Erian\'s Six Rules For Running Your Portfolio (The Reformed Broker)

PIMCO\'S CEO Mohamed El-Erian spoke at the PIMCO 2013 NYC Investment Summit New York. El-Erian gave his rules on how investors should run their portfolio. Josh Brown sums it up.

1. \"Protect yourself against the haircuts that come from not-strong balance sheets, weak income statements and bad management.\"

2. \"Don\'t give up all of your liquidity just to be \'in.\'\"

3. Manage your risks. Just diversifying is not good enough.

4. \" Be reasonable about your return expectations.\"

5. \"Beware backward-looking labels.\" There was a time when peripheral European countries were considered to have interest rate risk, not credit risk because they were developed countries, while emerging countries like Brazil and China were seen to have credit risk. This no longer holds true.

6. \"Be Resilient and Agile. The world is changing.\"

Why Brian Belski Is Sticking With S&P 500 1,575 (BMO Capital Markets)

The recent stock market rally has seen analysts hiking up their S&P 500 targets. Brian Belski at BMO Capital Markets however is sticking with 1,575. Here\'s why: \"Over the past 12 months, we have gone from defending our bullish stance with price targets at one point well above both market levels and consensus expectations to reconciling near-term caution. To be frank, we believe forecasts should be defined by analysis and process. And yes, we enjoy rising stock prices. However, we believe too many investors are currently expecting higher stock prices tomorrow just because they were higher today. As such, our model is telling us that stocks are well ahead of both fundamentals and macros. Therefore, the inputs of our model need to markedly improve for us to change our conclusions.\"

Gold Has Never Stayed Below The \'Stairway To Hell\' For Very Long (Citi)

Despite the blow to gold prices this year, Citi\'s Tom Fitzpatrick writes that on a \"medium-to-long-term basis\" he is very bullish on the precious metal. And this he says is because of fundamentals.

\"As can be seen from the chart [below], Gold has never stayed below that “stairway to hell” for very long,\" he wrote referring to the statutory debt limit. \"Given that the debt limit number is going to continue higher, a re-emergence of Gold strength looks inevitable. A lot of “considered opinion” suggests that by the end of the present electoral term (end of 2016 when new presidential elections take place), that the US debt limit will be at around $22 trillion USD.\"

How To Help Clients Ride Out Market Volatility (The Wall Street Journal)

During times of tremendous market volatility many investors panic and sell low. Dan Crimmins of Crimmins Wealth Management told the Wall Street Journal that he had a two-part plan to help clients learn to understand and accept risk. First, he went over their investment policy statements to help the clients \"understand how their investments will help them meet their goals,\" according to the WSJ. Second, he took them through a \"fire drill\". To do this he showed them how long typical bear markets run, how much the market falls. \"I wanted to make them understand that this is very normal,\" he told the WSJ.

AIG Owned Advisor Group Announces Lay-Offs (Investment News)

Broker-dealer Advisor Group announced lay offs this week that affected under 5% of its workforce. Advisor Group is operated by AIG and has four broker-dealers, namely, Arizona-based SagePoint Financial, New York-based Royal Alliance, Georgia-based FSC Securities Corporation, and Minnesota-based Woodbury Financial Services. Most of the layoffs are reported to have come from Woodbury Financial Services.

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">El-Erian's 6 Rules On Running Your Portfolio
(5 hours ago via Clusterstock)

In 2013, the new sheriff offers citizens a different kind of Fed Speak. Chairman Ben Bernanke has been remarkably straightforward with his plan to print dollars to buy U.S. sovereign debt. Not unlike his European counterpart\'s infamous promise to do whatever it takes to protect the euro, Bernanke\'s Fed will purchase government bonds until unemployment reaches 6.5%.

In spite of an infinitely more direct approach, Bernanke has explained that the Fed reserves the right to increase or decrease the pace of bond purchases. More recently, there has even been speculation that the Fed would stop printing money sooner and/or change the unemployment target to 7.0%. It follows that, in the quest to be more transparent, Fed Speak is as maddening as ever. Investors do not know what the Fed will actually do because they themselves reserve the right to change on the fly. (The positive spin for the right to change one\'s mind is called, \"flexibility.\") ...

Click to view a price quote on PKW. Click to research the Financial Services industry. ', this, event, '150px')">Newest Fed Speak Suggests Web ETFs
(5 hours ago via TheStreet.com)

The Economic Collapse blog,

What is going to happen when the greatest economic bubble in the history of the world pops? The mainstream media never talks about that. They are much too busy covering the latest dogfights in Washington and what Justin Bieber has been up to. And most Americans seem to think that if the Dow keeps setting new all-time highs that everything must be okay. Sadly, that is not the case at all.

Right now, the U.S. economy is exhibiting all of the classic symptoms of a bubble economy. You can see this when you step back and take a longer-term view of things. Over the past decade, we have added more than 10 trillion dollars to the national debt. But most Americans have shown very little concern as the balance on our national credit card has soared from 6 trillion dollars to nearly 17 trillion dollars.

Meanwhile, Wall Street has been transformed into the biggest casino on the planet, and much of the new money that the Federal Reserve has been recklessly printing up has gone into stocks. But the Dow does not keep setting new records because the underlying economic fundamentals are good. Rather, the reckless euphoria that we are seeing in the financial markets right now reminds me very much of 1929. Margin debt is absolutely soaring, and every time that happens a crash rapidly follows.

But this time when a crash happens it could very well be unlike anything that we have ever seen before. The top 25 U.S. banks have more than 212 trillion dollars of exposure to derivatives combined, and when that house of cards comes crashing down there is no way that anyone will be able to prop it back up. After all, U.S. GDP for an entire year is only a bit more than 15 trillion dollars.

But most Americans are only focused on the short-term because the mainstream media is only focused on the short-term. Things are good this week and things were good last week, so there is nothing to worry about, right?

Unfortunately, economic reality is not going to change even if all of us try to ignore it. Those that are willing to take an honest look at what is coming down the road are very troubled. For example, Bill Gross of PIMCO says that his firm sees \"bubbles everywhere\"...

We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions.

And unfortunately, it is not just the United States that has a bubble economy. In fact, the gigantic financial bubble over in Japan may burst before our own financial bubble does. The following is from a recent article by Graham Summers...

First and foremost, Japan is the second largest bond market in the world. If Japan?s sovereign bonds continue to fall, pushing rates higher, then there has been a tectonic shift in the global financial system. Remember the impact that Greece had on asset prices? Greece?s bond market is less than 3% of Japan?s in size.

For multiple decades, Japanese bonds have been considered ?risk free.? As a result of this, investors have been willing to lend money to Japan at extremely low rates. This has allowed Japan?s economy, the second largest in the world, to putter along marginally.

So if Japanese bonds begin to implode, this means that:

1) The second largest bond market in the world is entering a bear market (along with commensurate liquidations and redemptions by institutional investors around the globe).

2) The second largest economy in the world will collapse (along with the impact on global exports).

Both of these are truly epic problems for the financial system.

And of course the entire global financial system is a giant bundle of debt, risk and leverage at this point. We have never seen anything like this in world history. When you step back and take a good, hard look at the numbers, they truly are staggering. The following statistics are from one of my previous articles entitled \"Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers\"...

-$70,000,000,000,000 - The approximate size of total world GDP.

-$190,000,000,000,000 - The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.

-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.

-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.

The financial meltdown that happened back in 2008 should have been a wake up call for the nations of the world. They should have corrected the mistakes that happened so that nothing like that would ever happen again. Unfortunately, nothing was fixed. Instead, our politicians and the central bankers became obsessed with reinflating the system. They piled up even more debt, recklessly printed tons of money and kicked the can down the road for a few years. In the process, they made our long-term problems even worse. The following is a recent quote from John Williams of shadowstats.com...

The economic and systemic solvency crises of the last eight years continue. There never was an actual recovery following the economic downturn that began in 2006 and collapsed into 2008 and 2009. What followed was a protracted period of business stagnation that began to turn down anew in second- and third-quarter 2012. The official recovery seen in GDP has been a statistical illusion generated by the use of understated inflation in calculating key economic series (see Public Comment on Inflation). Nonetheless, given the nature of official reporting, the renewed downturn likely will gain recognition as the second-dip in a double- or multiple-dip recession.

What continues to unfold in the systemic and economic crises is just an ongoing part of the 2008 turmoil. All the extraordinary actions and interventions bought a little time, but they did not resolve the various crises. That the crises continue can be seen in deteriorating economic activity and in the panicked actions by the Federal Reserve, where it proactively is monetizing U.S. Treasury debt at a pace suggestive of a Treasury that is unable to borrow otherwise.

And there are already lots of signs that the next economic downturn is rapidly approaching.

For example, corporate revenues are falling at Wal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.

Would revenues at Wal-Mart be falling if the economy was getting better?

U.S. jobless claims hit a six week high last week. We aren\'t in the danger zone yet, but once they hit 400,000 that will be a major red flag.

And even though we are still in the \"good times\" relatively speaking, the federal government is already talking about tightening welfare programs. In fact, there are proposals in Congress right now to make significant cuts to the food stamp program.

If food stamps and other welfare programs get cut, that is going to make a lot of people very, very angry. And that anger and frustration will get even worse when the next economic downturn strikes and millions of people start losing their jobs and their homes.

What we are witnessing right now is the calm before the storm. Let us hope that it lasts for as long as possible so that we can have more time to prepare.

Unfortunately, this bubble of false hope will not last forever. At some point it will end, and then the pain will begin.

    ', this, event, '150px')">America's Bubble Economy Is Going To Become An Economic Black Hole
  (5 hours ago via ZeroHedge)

', this, event, '150px')">NewsWatch: Marathons: Less healthy than hamburgers?
  (5 hours ago via MarketWatch)

Continue reading »

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: Amanda Renteria, be careful what you wish for, CFTC, Gary Gensler

', this, event, '150px')">The Final Days of Gary Gensler
(5 hours ago via Dealbreaker)

RSOL Falls 5% on $9.3M Placement in Volatile Solar Week
(5 hours ago via Tech Trader Weekly (Barrons.com))

Last night, P&G unexpectedly announced that current CEO Bob McDonald was retiring, and that his predecessor, A.G. Lafley, would replace him.

Though the company\'s CFO said the decision was just about Robert McDonald deciding to retire (at 59) and that there won\'t be any dramatic strategic shifts, there\'s a reason activist investor Bill Ackman pushed for a change.

Ackman argued at a presentation at the Ira Sohn Conference, that the company was \"vastly under-earning\" due to an inability to win in emerging markets, a poor organizational structure, marketing problems, and bloated overhead.

Lafley, an in-house legend who increased company value by $100 billion during his past tenure, has his work cut out for him.

We spoke to Lafley a few months ago after the release of his book, \"Playing To Win,\" about why some executives and companies fail at strategy.

He argues that business fail when they don\'t make difficult choices about where and how they can win particular markets and put the full weight of the business behind them.

P&G\'s current restructuring and cost cutting program is not going quick enough for investors. During his time at P&G, Lafley cut more jobs than any previous CEO, sold off the company\'s hugely valuable food brands, and carried out a $57 billion acquisition of Gillette. With Lafley, strategy isn\'t about small choices.

Here are some of his key insights:

On when things go wrong

\"When we made mistakes, when we had our failures, when we weren\'t delivering results that we were capable, almost there was almost always one of two problems. Either we had lost our connection with our consumer and what they wanted, needed, and valued, or our strategy needed to be changed because something had changed in the marketplace and we hadn\'t responded.\"

Companies go halfway and don\'t fully develop a strategy

\"This is probably most common at Fortune 500 companies. They do part of the strategy job, but they don\'t do the whole thing. What do I mean by that? They have a vision or a mission, they might go out and do industry, company and competitor analysis, they might even put together an annual plan and budget. Those are parts of strategy, or they\'re the output of strategy but they\'re not strategy.\"

So what\'s the solution? According to Lafley, it\'s about making difficult and specific choices, and putting the entire weight of a business behind them.

\"Strategy is five choices,\" Lafley said. \"What is winning; where am I going to play to win; how am I going to win where I play; where are my core competencies that are going to enable me to win where I play; and what management systems and measures are going to help me execute my strategies?\"

Making tough decisions is essential

\"A lot of human beings, don\'t like to make choices. Choices are difficult, we want to keep our options open, choices involve taking risks, and not only risk to the business but personal risk. So I think there\'s this sort of human resistance to making choices, and choices are the core of strategy.\"

People don\'t like thinking strategy, and focus on execution

\"The second thing that goes on is I think that some people, maybe too many people ust don\'t like thinking strategy. They think that they know what their product and service is, they think that it\'s all about execution. \'If I execute better than the next guy, I\'m going to win.\' But the problem is that execution without the direction of a strategy is all over the place. You might win occasionally but you\'re probably not going to win consistently, reliably or sustainably.\"

When you need to, cut even successful brands

\"One of the toughest choices we had to make was to abandon and eventually divest all of our food and beverage businesses, Lafley said. \"We divested 7 or 8 billion dollars worth of leading food and beverage brands, the Folgers coffee brand, number one in America and Canada, the Pringles chips brand number 2 to Frito-Lay, the Jif peanut butter brand, the Crisco brand, number one.\"

They did it because though they were profitable businesses, they weren\'t ones Lafley saw as winners in the long term, or where the business could continue to grow and win.

\"We chose for good strategic reasons to abandon and get out of those businesses so we could invest our resources,\" Lafley said, \"primarily our people but also our cash, in businesses like home care, personal care, beauty care and health care, all of which looked strategically more attractive.\"

All of the above questions played a role in the decision to divest; these were areas in which P&G could win, Lafley said. \"They were demographically more attractive, they were structurally more attractive, lower capital, higher margin, and frankly they were better fit with our core competencies, deep understanding of consumers, the creation of known brands, and innovation.\"

Please follow War Room on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">HARD CHOICES: Why Returning CEO AG Lafley Could Save Procter & Gamble (PG)
  (5 hours ago via Clusterstock)

Bausch & Lomb Unit to Pay $33.5 Million on Conspiracy, Kickback Charges
  (5 hours ago via WSJ)

', this, event, '150px')">iShares: Two Reasons Not to Panic After Japan ETF Sell-Off
  (5 hours ago via ETF Trends)

$1.1 billion, stock now down 3% Goldman hikes S&P PT to 1750 by year end Foreign banks have plenty of cash (thanks to the Fed) HLF makes it difficult for shorts Tuesday makes it 19-19 for the DOW Market reacts to Bernanke publically refuting tapering nonsense BOJ will be adding ETF’s to their portfolio, states economy has picked up (despite a few minor details) Weekly initial claims in-line with expectations Average new home prices soar, unfortunately real income does not Ultimate liquidity provider: The Fed has purchased 30% of all outstanding 10yr equivalents Durable Goods Orders beat expectations – but the trend is not your friend

Negatives

Apple meets the “Fairness Doctorine”, as offshore cash gets scrutinized (incidentally, as ZH reported on in detail last year) Despite the jacked up S&P price target, Goldman’s leading indicators speed toward contraction Target misses Q1 significantly, YoY Revenue down $199MM, YoY EPS down $.27 What bubble? Fed finally admits asset bubble is present, and as we’ve stated on numerous occasions, it’s the flow not stock that matters BOJ’s experiment helps unsettle global markets, however, they have asked everyone not to panic Chinese economy enters contraction – don’t sweat it Hedge Funds have started to reduce long Nikkei positions Student loan delinquency continues to climb Architectural Billings plunge most in 5 years

Additional

Cohen’s SAC considers closing Mark Grant truthiness: A reversal will come Oklahoma endures devastating Tornado ***Europe opens $80 trillion shadow banking Pandora’s box

(h/t @ZH_Crown)

', this, event, '150px')">The Week That Was: May 20th - May 24th 2013
(5 hours ago via ZeroHedge)

The two mortgage giants together are known as the government-sponsored enterprises, or GSEs, and were taken under government conservatorship in September 2008. Also see: Ralph Nader, Wounded Shareholder of Fannie Mae Freddie Mac >> ...

Click to view a price quote on FNMA. Click to research the Real Estate industry. ', this, event, '150px')">Fannie and Freddie Ride Again: Financial Winners
(6 hours ago via TheStreet.com)

SYLD. ', this, event, '150px')">3 Reasons to Like the New Cambria ETF
(6 hours ago via TheStreet.com)

The cash S&P ramped into the close but failed to get into the green - another dead cat bounce - with no support from JPY carry

but futures went full retard after the cash close...

Utilities (and REITs) were the hardest hit sector this week - over-owned and yieldy (I guess we know where Mrs.Watanabe was buying?)...

The most-shorted names did not plunge in the last two days suggesting this is a much more broad-based weakness providing little ammo for a short squeeze ramp...

Gold and Silver ended the week green...

FX markets were dominated by the JPY movements...

Charts: Bloomberg and Capital Context

    ', this, event, '150px')">Dead Cat Bounce Deja Vu Ends 2nd-Worst Week Of The Year For Stocks
  (6 hours ago via ZeroHedge)

Abercrombie & Fitch Posts Loss, Lower Sales
  (6 hours ago via WSJ)

Energy ETFs: Ride the Wave
  (6 hours ago via ETF Trends)

By Ronald Grover and Greg Roumeliotis LOS ANGELES/NEW YORK (Reuters) - Yahoo Inc (YHOO.O) has submitted a formal proposal to buy Hulu, joining a growing list of bidders for the video service owned by News ...

', this, event, '150px')">Yahoo joins growing list of bidders for Hulu: sources
(6 hours ago via Yahoo! M&A)

durable goods orders report that blew past expectations. In April, total orders jumped by 3.3%, beating expectations for a 1.5% gain. This was largely driven by a rebound in commercial aircraft orders. However, nondefense capital goods orders excluding aircraft — or core capex — climbed by 1.3%, crushing expectations for a modest 0.5% increase. Core capex is a key measure of business investment. This was welcome news, especially in the wake of a lot of disappointing data earlier this month. \"Stronger core durable goods orders suggest that the order pipeline that will drive future investment and inventory growth continues to improve, helping to fuel the transition out of the current soft patch,\" wrote TD Securities\' Gennadiy Goldberg. But the report wasn\'t all good news. \"To calculate GDP, economists look at shipments for non-defense capital good and exclude aircraft,\" noted Brown Brothers Harriman\'s Marc Chandler. \"This component fell 1.5% after a 0.5% gain in March.\" Don\'t Miss: The Incredible Story Of America\'s Boom, Crash, And Comeback In 99 Maps >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">STOCKS CLOSE DOWN FOR 3RD STRAIGHT DAY: Here's What You Need To Know (DIA, SPY, QQQ)
(6 hours ago via Clusterstock)

Week in Review: Wall St. Finding Washington a Friendlier Place
(6 hours ago via DealBook (NYT))

What Do You Do When Your Kid Inherits Money?

As far as trust funds go, it’s no Hilton fortune. My mom claims she could have negotiated for a much larger settlement, but she chose an amount that meant my sister and I could do what we love but still be motivated to earn money. (For the record, that was a really smart move.)

However, that was the extent of her financial education. In our household, budgets were not discussed: Money showed up, and we spent it. My mom seemed to take pleasure in cultivating two young women with a taste for fine dining and expensive clothes.

Then, when I turned 21, I was handed a shit ton of money. Here’s something to consider if you ever want to do the same for your kids. (When you’re done laughing, I’ll continue.) The prefrontal cortex, which helps you make responsible decisions, isn’t fully developed until you’re 25. So I wasn’t really capable of making the best decisions concerning my money. I didn’t even get a financial adviser to go along with it, just my mom’s advice to “Always pay off your credit card bill every month.” Well. That was easy.

First, I took a summer in Europe and brought along a little guide to shopping. Whenever I was bored, I took off for a new boutique. I had enough sense to back out of the stores selling $4,000 gowns. But I racked up about $15,000 on my new card in three months. Then I paid it off by selling some stocks. No big deal. When I missed my flight home, I just bought a new ticket.

Being a trust fund baby felt like a core part of my identity. You couldn’t understand me without understanding that—but I didn’t want people to know.

Managing My Money

I researched heavily before taking over my investment account. I was petrified (and still am) of making a stupid mistake that could decimate it.

When the market tanked in 2008, a year after the documents had been signed giving me control, I took the lazy route and left my investments as is. An excellent decision, it turns out.

After college I moved to New York City, land of a thousand trust fund babies. As I searched for apartments, I pulled a rent number out of my butt, without ever looking at my supposed budget. “$1,400 seems reasonable, right, Mom?” She agreed. Finding a job took some time, but I was more bored than panicky.

In fact, I was the cliché everyone loves to hate. I spent my days eating organic eggs benedict at the local café, doing The New York Times crossword puzzle, then traipsing off to afternoon yoga. I fell into a group of friends who, like me, had outside financial resources (read: rich parents). We spent our money on shopping, ski trips, all-night parties with $50 entry and drugs. I could blow $350 in a weekend on coke, ecstasy and alcohol.

I felt like I was being reasonable. I enjoyed dressing well, but felt good about not buying the quilted Chanel bag I coveted. I would do weird things like walk 30 minutes downtown to avoid paying subway fare, then blow $250 on a purse when I got there. I donated lavishly to charity. One time I wired $6,000 to Thailand to help out a former tour guide who was in a financial scrape.

I did finally land a job I loved, and worked hard at it. I still partied, but I had the sense to keep my partying to the weekends, showing up on time and never coked up or drunk.

Leading a Double Life

Still, I felt guilty. There were clues, of course, that I had something unusual going on in my bank account. Editorial assistants are notoriously low-paid (which is probably why it attracts so many entitled white girls). At work one day, I kicked off my shoes and a coworker sang, “Caroline is wearing Prada sandals!” “They were on sale,” I retorted. (True, but they were still $350.) I felt like I was secretly being judged.

When friends embarked on apartment hunts, they’d email and ask how much mine cost, leaving me no choice but to break the news that, no, they couldn’t afford something in my neighborhood. The few vacation days I had I spent in Europe and the Caribbean. After dating a guy for a month, I would invariably blurt out, “I’m a trust fund baby!” I was sure he’d figured it out already.

Being a trust fund baby felt like a core part of my identity, like my sexual orientation or being a writer. You just couldn’t understand me fully without understanding that—but I still didn’t want people to know. When I told close friends, I did it in the hushed tones of an ex-convict. Every time she got jealous, my very best friend told me, she’d remind herself that my dad was dead and hers was alive.

My sister had blown through her account on one and a half graduate degrees and five career starts. But she gave me excellent advice: Don’t pay for other people’s stuff. It can ruin a friendship. So when a friend would say she couldn’t afford dinner and just wanted to drink some wine at the apartment, I bit my tongue and agreed.

A Double-Edged Sword

I was spending $1,000 more per month than I was taking in, but it didn’t register; my investments were appreciating as the stock market recovered. I wanted to live within my means, to “live like a normal 25-year-old,” but when I wanted to buy something, I couldn’t tell myself no.

There were never any consequences. I could pay off any credit card bill with a click of a button. I knew that I wanted to keep my trust fund intact, but for what? I didn’t want to buy a home yet. I could start a business, but doing what? The only thing I really wanted to do was enjoy my life while I was still young and cute.

But I was also besieged by self-doubt. Would I be a better person if I had to struggle? Would I actually go out and get freelance assignments (instead of partying on the weekends) if I needed them to pay the bills? Should I just donate it all to charity?

Every time I had a hard day at work, I would think, “I could just quit. It doesn’t matter.” What saved me was my inherent love of writing, and the recognition that quitting would make me an insufferable brat that even I wouldn’t want to live with.

Having that money sitting there gave me license to do anything. I would always be able to bail myself out of jail, pay off a hospital bill, hire a fancy lawyer. The only thing stopping me was a sense of propriety and concern for my reputation.

Hitting (Spiritual) Bottom

Still, I knew this couldn’t be the point of life. I started to study Buddhism, with its emphasis on non-attachment to worldly things. I read nonfiction books, which told me that strong relationship bonds, not money, were the best predictor of happiness. And I discovered that there is a peculiar emptiness that comes with leaving a snobby boutique loaded down with $1,500 worth of clothes and nowhere to wear them.

Then, one day, I woke up. Literally.

I was staring at the ceiling in my apartment, remembering the fight I’d had the night before with my friend (something about her offering coke to my straight-edge sister and me complaining about it to a mutual friend). She’d stomped out and left me at the club, alone, as the lights came on. My heart was still racing from too many uppers, and suddenly I was having a panic attack. I was sobbing, barely able to breathe. I felt hollow. Were these real friends? Was this real life? Money, I realized, had bought me a well-lined, suffocating nest.

It was my 25th birthday when I realized the rules applied to me too. By that I meant the rules of personal finance, like budgets and savings accounts, but also the rules of life, like choosing good friends and treating your body well. Money, I had discovered, was not a magic bullet. Working hard, a little bit of self-denial and being nice just might be.

A Fresh Start

Slowly, I started to change. I moved into an apartment with ugly brown carpeting in a boring neighborhood with a nice roommate. I started an emergency savings account, so I would stop selling off stocks to fund my whims. I made new friends who were struggling to make ends meet on their meager salaries. And I enthusiastically embraced $5 tacos for my 25th birthday dinner. I stopped doing coke.

Shopping … well, it’s still a little bit of a problem. I’m working on it.

Am I happier? I think so. I haven’t had another panic attack. I get satisfaction from watching my emergency savings rise. And I adore my friends, especially since they keep me grounded. Case in point: I’ve learned to love a summer stay-cation.

I’m also grateful for the huge safety net I have beneath me. Let me repeat that: I am so outrageously grateful for the fact that I will never end up homeless, that I can afford to have a job I love, that I don’t have student loans. Money buys me freedom from stress and worry.

But it’s true what they say: Money doesn’t buy happiness. It’s just a tool. If I use it wisely, I can inch closer to the life I want: an apartment of my own in the big city, a byline in a respected magazine and a tight-knit group of friends. As I found out—thankfully early on—it can also be a dangerous vehicle for self-destruction.

So there you go, that’s the whole, unvarnished truth. Have at me in the comments.

*The name of the contributor has been changed to protect her identity and her financial accounts.

Love reading other people’s financial tales? Check out more great LearnVest-exclusive personal stories.

Please follow Your Money on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">Yep ?? I Am A Trust Fund Baby And I Did Nothing To Earn It
(6 hours ago via Clusterstock)

WSJ is no different: it is animated (check) it has lots of pretty colors (check), and it is quite informative because it remembers that in addition to public sector debt, there is a thing called the private sector (sadly it avoids shadow debt: perhaps someone good at making 3D animated charts should take a stab?) and succeeds in incorporating everything in one cool animation.

Yet why it may be most memorable, or not as the case may be, is that it is merely the latest chart in a seemingly infinite series which are just not big enough to fit Japan. Perhaps it is time to make a chart of all the charts that need to be bigger to show the true Japanese state of affirs.

That, or in reverence to the sadist joke, pardon \"experiment\" (as Jens Weidmann would say) that is Abenomics, we can finally start making bigger charts.

Interactive global debt dynamics chart after the jump:

', this, event, '150px')">Yet Another Debt Chart That Is Not Big Enough To Fit Japan
(6 hours ago via ZeroHedge)

Continue reading »

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: Argentina, Kenneth Dart, the Vladimir Putin playbook

', this, event, '150px')">Argentina Just Realized That One Of Its Default Holdouts Owns A Factory In Buenos Aires
  (7 hours ago via Dealbreaker)

', this, event, '150px')">John Shinal's Tech Investor: Can Marissa Mayer leave those crazy kids alone?
  (7 hours ago via MarketWatch)

', this, event, '150px')">WisdomTree: With Japan Market Sell-Off, Focus on the Fundamentals
  (7 hours ago via ETF Trends)

', this, event, '150px')">Personal Finance Daily: Ben Bernanke is daring us to buy stocks
  (7 hours ago via MarketWatch)

Continue reading »

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: CBOE, Citadel, options exchanges

', this, event, '150px')">Citadel Would Like The Fees It Wrongly Paid Back
  (7 hours ago via Dealbreaker)

Why Tumblr Won't Move Yahoo's Needle
  (7 hours ago via WSJ)

    ', this, event, '150px')">Common Sense: A Corporate Giant?s Missing Support for Gay Rights
  (7 hours ago via The New York Times)

The Rich Actually Are Different
  (7 hours ago via ZeroHedge)

GE. Click to research the Industrial industry. ', this, event, '150px')">Small Businesses Need Disaster Recovery Plans
  (7 hours ago via TheStreet.com)

CNN Money reports.

Better Place was a proponent of battery swapping technology, which involves replacing an electric car\'s depleted battery, rather than charging it.

Saving that kind of time would be a huge boon for the electric vehicle industry, which is hamstrung by battery technology that keeps charge times long, range limited, and prices high.

Better Place, founded in 2007 by Israeli entrepreneur Shai Agassi, proved in 2010 it could swap out and replace a battery in under 60 seconds, far faster than even the best EV charging times.

According to the New York Times, Agassi, a former top executive at SAP, raised over $800 million in private capital from investors including HSBC, General Electric, and Morgan Stanley. It built a small network of stations in Denmark and Israel.

But between 2010 and February 2013, it posted $477 million in cumulative losses. That month, it announced it would close its operations in North America and Australia, and continue working in Israel and Denmark.

That move could not save it, however, and the electric vehicle market did not expand at the pace the company had expected, according to CNN Money.

\"The company was not well-served by having things it thought would happen over a decade happen within a year,\" a source told CNN. \"Ultimately the idea was always based around scale, and it just didn\'t build it fast enough or well enough.\"

This news comes as Tesla Motors — riding high after becoming profitable and paying off its loan from the Department of Energy — plans to announce news about its Supercharger network, where its customers can charge their car batteries halfway in 30 minutes, for free.

There is speculation that Tesla will announce a battery swapping scheme, which seems less likely now, given the expected failure of the company that had gone the furthest in making the technology a reality.

Please follow Getting There on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">Another Electric Car Company Is Going Bankrupt
(7 hours ago via Clusterstock)

It’s a Friday, it’s a Friday before a holiday weekend, it’s a Friday before a holiday weekend and the day after Dealbreaker Trivia. If you were expecting much from us, our condolences! Still, we’re not totally without compassion for those of you who’ve got some time to kill before being unchained from your desks and…

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: pop quizzes, trivia

', this, event, '150px')">How Well Do You Know Cliff Asness? Dealbreaker Trivia: Home Edition
  (7 hours ago via Dealbreaker)

    ', this, event, '150px')">News Corporation Board Approves Split of Company
  (7 hours ago via The New York Times)

I can’t find the quote but I recently read someone arguing that you should never worry about anything you see on the news. By definition, the argument goes, horrible things that make the news are newsworthy, and they are newsworthy because they are rare, and so the odds of you dying in a terrorist attack,…

Follow Dealbreaker on Twitter or become a fan on Facebook.

Tags: business standards, cdos, Derivatives, Goldman Sachs

', this, event, '150px')">From Now On Goldman Will Only Sell A Product To Clients If Some Goldman Partners Understand It
(7 hours ago via Dealbreaker)

News Corp. OKs poison pill, buyback before split
(7 hours ago via Yahoo! Finance)

We have been on the low-inflation side of that debate for years. We have supported the argument that there is a huge overhang of surplus capacity in the global labor force and that inflation is not a problem when labor income is flat, falling, or not rising robustly. This coincides with a wounded credit multiplier and a damaged financial credit system, conditions that have existed for the last five years. They are gradually improving, but only gradually. They are conditions that cause deflationary pressures.

Will we have deflation? We are not certain. The forces at work globally that could bring on deflation are being blunted by the huge quantitative easing (QE) being undertaken by most major central banks.

Let\'s take a quick look at the US. All important measures of inflation in the US are on downward trends. Many thanks to Credit Suisse\'s Neal Soss and Jay Feldman for a recap of the data in their research note of May 17. They report Core CPI, Cleveland Fed Median CPI, Cleveland Fed Trimmed Mean CPI, Core PCE, and Dallas Fed Trimmed Mean PCE. All are trending downward, as measured on a year-over-year basis, and those trends are accelerating. Commodities are also on downward price trends. So are the more esoteric inflation measures like market-based indices and chained indices.

In the case of the Core PCE, which is believed to be the Federal Reserve\'s preferred measure, the rate of inflation measured year-over-year is approaching one percent. Remember that the Fed\'s threshold for any change in monetary policy is two percent. And Fed communications have suggested that a rate of 2.5 percent would be the threshold for any action taken to alter QE for the purpose of improving the employment statistics. So we are a full point and half away from that threshold, and the trend is in the opposite direction.

The Fed\'s stated unemployment threshold is 6.5 percent on the traditional headline unemployment rate (U-3). The Fed has also talked about other elements in the employment statistics, suggesting that the U-3 unemployment rate is not the only target measure for restoring the US to a more robust recovery. The charts and graphs that we have posted on our website and released in speeches present the employment statistics in a variety of ways that may be useful.

Other measures, such as the U-6 broad-based unemployment rate, Beveridge Curve analysis, and the disaggregation of employment data, all point to a very large underutilized labor force in the US. The same seems to be true for most of the rest of the world.

Our conclusion is that inflation is not a problem now and is not likely to become a problem soon. In fact, if certain indicators of inflation continue to head downward, they could trigger a reaction by the Fed because the risk of deflation will be perceived to be rising.

Is deflation a threat today? The answer seems to be no. More likely, we are in a period in which the rate of inflation will be too low to be a problem and will gradually turn higher over several years as additional stimulative policies unfold worldwide.

Meanwhile, low inflation is a very healthy environment for the stock market. It means that inflation distortions in reports of earnings are nearly nonexistent. That implies that the quality of earnings reports is very high, since they do not contain the distortions that occur in accounting systems when inflation is high.

Higher-quality earnings justify higher price/earnings multiples and higher stock prices. There is a consistent linkage between very low inflation and very strong asset pricing. This is particularly so when interest rates are very low and likely to stay low for a very long time.

We remain bullish. Inflation statistics support that outlook. They also support a gradual change in the outlook for bonds. Eventually, bond yields will be higher, maybe much higher, but the process is a gradual one. That means some tactical hedging in bond portfolios is appropriate. Panic selling of bonds is not.

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

', this, event, '150px')">KOTOK: This Low Inflation Environment Is Fantastic For Stocks
  (7 hours ago via Clusterstock)

', this, event, '150px')">S&P 500 ETF Snaps Four-Week Rally After Goldman Sachs? Bullish Call
  (7 hours ago via ETF Trends)

S&P 500 ETF Snaps Four-Week Rally After Goldman Sachs? Bullish Call
  (7 hours ago via Yahoo! Finance)

Click to view a price quote on GLD. Click to research the Financial Services industry. ', this, event, '150px')">Quick Take: The Gold Trade, May 24
  (7 hours ago via TheStreet.com)

', this, event, '150px')">Mark Hulbert: How to pick post-stock-split winners
  (7 hours ago via MarketWatch)

European lenders unloved amid growth fears
  (7 hours ago via The Financial Times)

we saw in US durable goods orders - there is simply no \'decoupling\', it is a lead-lag inter-linked global economy.

(h/t Sean Corrigan of Diapason Commodities)

    ', this, event, '150px')">The Economic Engine Of Europe Is Beginning To Sputter
  (7 hours ago via ZeroHedge)

Sands Names Deloitte as Auditor
  (7 hours ago via WSJ)

    ', this, event, '150px')">Your Money: Aging Parents and Children Should Talk About Finances
  (7 hours ago via The New York Times)

Mexican Billionaire Wants Probe of Activists
  (7 hours ago via WSJ)

Why Waze is a hot takeover target
  (7 hours ago via CNN Money)

Click to view a price quote on SPY. Click to research the Financial Services industry. ', this, event, '150px')">Must-Read Book List for Options Traders
(7 hours ago via TheStreet.com)

USEC to End Uranium Enrichment at Kentucky Plan
(8 hours ago via WSJ)

But sentiment is a fickle beast, and when investors grow nervous about an ever-rising market, they can quickly move back into \"risk-off\" mode, leading to considerable distress for the recent market winners.

>>5 Stocks Poised for Breakouts ...

Click to view a price quote on AMD. Click to research the Electronics industry. ', this, event, '150px')">4 Big Stocks Ripe for a Sharp Pullback
  (8 hours ago via TheStreet.com)

Google Pushes Into Emerging Markets
  (8 hours ago via WSJ)

', this, event, '150px')">Schumer urges look at security in Sprint deal
  (8 hours ago via Yahoo! M&A)

', this, event, '150px')">10 things: 10 things cats won?t tell you
  (8 hours ago via MarketWatch)

iBC Newsbot 3000

Blog Archives