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Post by jeffolie on Jul 3, 2015 7:11:30 GMT -6
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Post by jeffolie on Jun 28, 2015 5:27:19 GMT -6
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Post by jeffolie on Jun 26, 2015 16:25:03 GMT -6
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Post by jeffolie on Jun 26, 2015 14:47:54 GMT -6
The Last Time This Happened, The Bull Market Ended 6/26/2015 In a somewhat stunning reality check for the new normal, companies in the S&P 500 have started paying out more money to shareholders than they produce in operating earnings. The last time spending on buybacks-plus-dividends exceeded operating profit was Q2 2007... that did not end well... www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/06-overflow/20150626_buybacks_0.jpgAs Bloomberg reports, S&P 500 companies spent $144.1 billion on share repurchases and paid out $93.6 billion of dividends. The total equaled 104.1 percent of profit, up from 95.1 percent in last year’s fourth quarter. The increase reflects a reliance on repurchases to spur earnings-per-share growth, according to Howard Silverblatt, a New York-based senior index analyst at S&P Dow Jones. “They’re getting a lot more pressure to do buybacks,” Silverblatt said yesterday in an interview. “It’s almost an entitlement program from an investor standpoint.” Repurchases will probably stay at current levels through year-end as many companies buy shares to offset expiring options, he added. With the marginal cost of capital on the rise, however, one wonders just how long compensation-desparate CEOs are forced to admit that the short-term benefits of debt-funded buybacks are outweighed by the medium-term releveraging (which is at record highs) and cash flow crush that ensues. www.zerohedge.com/news/2015-06-26/last-time-happened-bull-market-ended
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Post by jeffolie on Jun 24, 2015 16:53:57 GMT -6
June 24, 2015 Largest Share of Households Is Wireless-Only In the last half of 2014, Americans crossed a threshold. The plurality of households now has only cell phones, surpassing for the first time the percentage with both cell and landline phones. In July-December 2014, fully 45.4 percent of households were wireless-only and 42.7 percent had both landline and cell phones. Only 8.4 percent of households are landline only and another 3.2 percent have no telephone. By age of householder, these are the wireless-only households... Wireless-only households, July-December 2014 Total households: 45.4% Aged 18 to 24: 58.0% Aged 25 to 29: 69.2% Aged 30 to 34: 67.4% Aged 35 to 44: 53.7% Aged 45 to 64: 36.8% Aged 65-plus: 17.1% Source: National Center for Health Statistics, Wireless Substitution: Early Release of Estimates from the National Health Interview Survey, July-December 2014 demomemo.blogspot.com/
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Post by jeffolie on Jun 22, 2015 15:29:23 GMT -6
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Post by jeffolie on Jun 22, 2015 15:24:46 GMT -6
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Post by jeffolie on Jun 22, 2015 15:11:15 GMT -6
June 22, 2015 Money For Children and Grandchildren Older Americans give a lot of money to their children and grandchildren—enough to "be considered a major expenditure category," according to an Employee Benefit Research Institute study. In the study, EBRI researcher Sudipto Banerjee examines cash transfers made by older householders to children and grandchildren during their lifetime rather than after death. The data come from the longitudinal Health and Retirement Study, which tracks a representative sample of householders aged 50 or older. Cash transfers are defined as "giving money, helping pay bills, or covering specific types of costs such as those for medical care or insurance, schooling, down payment for a home, rent, etc. The financial help can be considered support, a gift or a loan." The results... •Many provide financial help. The 51 percent majority of householders aged 50 to 64 in 2010 had transferred cash to children or grandchildren during the past two years. Although the share of older householders who did so declined with advancing age, even among those aged 85 or older a substantial 28 percent had transferred cash. •Thousands of dollars are provided. The average cash transfer ranged from a low of $4,787 for householders aged 85-plus to a high of $8,350 for 50-to-64-year-olds. •The affluent give more. Among 50-to-64-year-olds, the percentage who gave ranged from a low of 31 percent for those in the lowest income quartile (average amount provided = $7,419) to a high of 70 percent for those in the highest income quartile (average amount provided = $27,378). "Transfers are actually a significant expense when compared with other items in a household budget," concludes Banerjee, "though they are not traditionally thought of as a budget item." The report examines trends in cash transfers from 1998 to 2010 and also looks at the much less common transfer of cash from younger to older family members. Source: Employee Benefit Research Institute, Intra-Family Cash Transfers in Older American Households demomemo.blogspot.com/
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Post by jeffolie on Jun 21, 2015 15:08:40 GMT -6
Financial Sense Newshour just spoke with noted technician Tom McClellan for our weekend podcast. He's predicting a major market top this August and bear market into early 2016. Here are his comments and charts (full audio interview available on iTunes and the Newshour page this Saturday): Tom McClellan: "The signs of a dry up in liquidity are growing. I mentioned the advance-decline line that made its top back on April 24th and it hasn't been able to exceed that even though the price indices are chopping sideways and in some cases even making higher highs but that's not a good piece of news. That says that liquidity is starting to dry up and the longer that that divergence takes place and goes on, the more significant the message will be. I do think that we have a chance to make a higher price high into July...but ideally I want to be out of everything around the first week of August and looking to make money by harvesting some of the losses that we are going to see in Q3 and Q4." Jim Puplava: "And this is based on liquidity drying up? What about the fact that even coming out of this FOMC meeting the consensus now is that they will go in September. So does this coincide with, let's say, the first rate hike?" Tom McClellan: "It could. I think it will happen regardless of what the Fed does. I think the Fed can dampen it a little bit but there are forces that are greater than the Fed that are gathering here and so the Fed is not going to be the driver of it." Jim Puplava: "Let's talk about another chart you sent me, which is the eurodollar commercial positions [see below]. Explain that for our listeners and what you think this chart means?" eurodollar commercials Tom McClellan: "Well, it's a little bit of an exotic indicator but it's probably my favorite because it gives us the answers a year ahead of time. What I'm doing is I'm looking at the commitment of traders report that's published each week by the commodity futures trading commission (CFTC) and they give a report on what all of the futures contracts that they track and who's holding them: either the commercial traders, which is the big money; the non-commercial, which is kind of the hedge funds; and then the non-reportables, which is people with very small positions that are not even worth having reported individually. The commercials are the smart money so when you look at what the commercials are doing as a group in eurodollar futures—that's an interest rate product, not a currency product—that tells you what the stock market is going to do a year later. The stock market tends to follow those same dance steps almost literally. It got into a little bit of trouble back in 2013 when those traders weren't anticipating the stimulus of QE3 and it didn't work back then but it's generally been working almost perfectly since about 1997 [see chart below]. It correctly forecasted the 2008 decline. It correctly forecasted the bear market in 2002 and 2003. It correctly forecasted most of the big up-move that we've had off the 2009 bottom and now it's telling us that we have a top due in early August and a big decline into early 2016. It's a scary looking chart. It's a scary looking prospect. I don't know exactly what the news is that's going to be crafted to explain why we're going to have a bear market at the end of this year but I can see it coming." eurodollar futures market top Jim Puplava: "So from what you're saying, the market is now in the final stages of a topping process heading into a bear market? Would that be your view?" Tom McClellan: "Yes, that's fair and we're seeing typical signs of a top—prices are getting very quiet. If you look at indications of price movement such as average daily range or standard deviation—in other words, how volatile is the movement of prices on a day-to-day basis—it's just gotten very quiet. There's just no one expecting anything bad so there just saying, 'Why bother, I'll trade tomorrow.' It's just gotten very quiet and that's a normal sign of a top... Ideally, that top is due in early August but tops are funny in the way they can be constructed so I wouldn't put all my money on that the market is going to follow the script exactly. That's why it's good to have a plan for what's supposed to happen and then you also look at what actually is happening and when those two match up you can bet big and bet confidently....but right now it's tracking well for a top in early August and then a big ugly decline the latter half of this year." www.financialsense.com/contributors/tom-mcclellan/stock-market-peak-august-2016-bear-market
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Post by jeffolie on Jun 21, 2015 9:47:00 GMT -6
ei.marketwatch.com//Multimedia/2015/06/18/Photos/ZH/MW-DO383_Rent06_20150618100212_ZH.jpg?uuid=a5d134e0-15c2-11e5-9307-c34c8d913ea9WASHINGTON (MarketWatch)—Landlords keep cranking up rents, with annual increases far outpacing price growth elsewhere in the economy, according to data released Thursday. Rents in May were up 3.5% from a year earlier, while a gauge for overall consumer prices showed no growth, the U.S. Labor Department reported. Rent and other shelter costs make up a substantial chunk of a consumer’s budget, and pulled up expenses over the past year. Offsetting that inflation, prices for gasoline and other energy plunged in the past 12 months. Meanwhile, prices for food rose 1.6% over the year through May, while clothing costs dropped 1.5%. Annual inflation for rents has been running faster than overall consumer-price growth for three years. Many U.S. families are unwilling or unable to buy a home, plunging homeownership to the lowest rate in a quarter of a century and giving landlords pricing power. California has several markets with particularly fast rent growth, such as Oakland, Sacramento, San Jose, San Francisco and Riverside, according to Axiometrics, a Dallas-based firm that specializes in apartment and student-housing analysis. Several other areas with relatively speedy rent growth are Portland, Denver and Seattle. These cities all have an apartment-occupancy rate above the national average. Rising rents are squeezing already-strapped individuals and families. “Not a single county in the United States has enough affordable housing for all its extremely low-income renters,” according to a new report from the Urban Institute, a Washington-based think tank. Developers, seeing an opportunity, have ramped up their plans to construct apartments. But it will take time for units to become available, and, meanwhile, landlords will be able to keep rents high. The good news for renters and workers generally is that there are signs that wage growth is starting to pick up, as Federal Reserve Chairwoman Janet Yellen noted Wednesday. A stronger labor market that pumps up workers’ income should help apartment dwellers afford higher rent costs. An economy that consistently adds a healthy numbers of jobs each month should also help more families afford to buy a home, easing some apartment demand and cutting upward pressure on rent prices. www.marketwatch.com/story/rent-inflation-shows-no-signs-of-letting-up-2015-06-18?link=MW_home_latest_news
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Post by jeffolie on Jun 20, 2015 14:43:19 GMT -6
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Post by jeffolie on Jun 20, 2015 6:01:16 GMT -6
5 Foods That Make You Dumber Eat This, Not That! June 18, 2015 It sounds like the plot of a cable TV movie: scientists tamper with the nation’s food supply, and unleash a new kind of product that literally shrinks people’s brains and makes everyone dumber. Except it’s not fiction, it’s fact—and this week the U.S. government finally took action. Several decades ago, scientists discovered that if they injected vegetable oil with hydrogen, it would turn solid—and stay that way, even at room temperature. Unfortunately, these new forms of fat—called trans fat—also tend to turn solid once they’re inside your body, where they jam up your arteries, including those in your brain. In studies, those with the most trans fat in their blood have significantly worse cognitive performance—and physically smaller brains!—than those with less trans fats. And a new study says trans fats may impair memory, too. Shrunken brains and clogged arteries are just part of the reason why the FDA just now finally moved to ban trans-fats, deeming them “not generally recognized as safe.” But trans fats aren’t the only foods that can contribute to overall mental decline and the corresponding rise of Real Housewives. The editors at Eat This, Not That! magazine have identified some additional dietary changes you can take today to protect your delicate dendrites and keep your brain young and sharp for life. Get smart about what you’re eating–and banish these dumb and dumber foods. Dumbest Food #1 Microwave Popcorn If you thought the movie you were watching was terrifying, you probably haven’t taken a very close look at your popcorn, especially the microwaveable kind. Many major brands line their bags with perfluorooctanoic acid (PFOA), the same stuff found in teflon pots and pans; some studies have linked it to infertility, weight gain, and impaired learning. Speaking of learning trouble, butter-flavored popcorns are almost always laced with diacetyl (DA), a chemical that has been found to break down the layer of cells that protects our brain. And some brands, like Pop Secret, still have trans fats—up to 5 grams! Now that’s some scary stuff! Eat This Instead: Air pop kernels or make your own microwavable popcorn. Here’s how: Add your favorite popping kernels to a small paper lunch bag, fold the top down a few times. Then, zap it in the microwave until you hear only a few pops every five seconds. Challenged in the kitchen? We’re also big fans of Quinn Popcorn. It’s one of the only microwavable popcorns that’s free of chemicals and won’t wreak havoc on your belly. And keep your waistline toned and tight—in record time—with these essential 7 Best Foods for Rapid Weight Loss! Dumbest Food #2 Sodas with BVO Europe and Japan have already banned the toxic flame retardant brominated vegetable oil (BVO) from their bubbly beverages, but it’s still going strong in certain North American soda products (specifically, the citrus-flavored ones). Originally created to make plastics flame-retardant, BVO has since been used to keep the flavoring in fizzy beverages from separating from the rest of the drink. While small levels of BVO aren’t harmful on their own, it can build up in our systems and eventually cause hormone imbalances, skin breakouts, memory loss, and nerve disorders. There is good news, though. As of May 2014 Coca-Cola and PepsiCo had both announced that they were working to remove BVO from their products, but they can still be found in Dr. Pepper/Seven Up, Inc. products like Squirt, Sun Drop, and Sunkist Peach and Fruit Punch flavors. Drink This Instead: Tea—at least, certain types of tea—can rev up your body’s ability to melt fat as quickly and easily as turning a stove from low to high. Find out which ones—and melt up to 10 pounds in one week— with our brand new weight-loss plan, The 7-Day Flat-Belly Tea Cleanse! Dumbest Food #3 Tuna The American Heart Association recommends eating fatty fish—such as tuna—at least two times a week. Stick to their recommendation and you’ll be doing your heart and brain a favor. Put it on the menu too often, however, and you could do more harm than good. Why? Bigeye, ahi, albacore and yellowfin tuna are all high in mercury, and consuming too much of the heavy metal can cause cognitive decline. To stay safe, incorporate other types of fish into your diet like anchovies, wild salmon, or trout, which boast many of the same brain-boosting benefits but don’t carry the risk of excess mercury exposure. Eat This Instead: Wild Salmon. DHA—a type of omega-3 fatty acid found in fattier fish like salmon—can improve the time it takes to recall a memory. Researchers tested DHA supplements on a group of 176 adults who had low levels of omega-3s in their diets. (Most of us do, by the way.) Just 1.16 grams of DHA—about what you’d find in a 3 ½ ounce serving of salmon—made a measurable difference. In far fishier news, read our Eat This, Not That! special report that affects your whole family: How Tilapia is Worse Than Bacon! Dumbest Food #4 Soy Sauce Using a little bit of soy on your sushi may not seem like a big deal, but one tablespoon of the stuff has nearly 40 percent of the day’s recommended salt intake! What’s salty food got to do with your inability to focus? A lot, actually. According to a 2014 Neurology study, hypertension, often brought up on eating too many salt and sodium-packed foods—like soy sauce—can restrict blood to the brain and negatively impair focus, organizational skills and memory. High salt intake can also cause electrolyte imbalance and mild dehydration, which can make it difficult to keep your head in the game. Eat This Instead: When ordering Japanese, opt for low-sodium soy sauce or eel sauce (which tastes a lot like teriyaki) and keep the serving size small. Making this simple swap can cut your sodium intake in half, keeping your focus laser-sharp. And now that you know what foods to avoid, get the flat tummy you’ve always wanted with another essential report: 14 Ways to Lose Your Belly in 14 Days! Dumbest Food #5 Muffins It may taste great with your afternoon cup of joe, but the average muffin carries a third of the day’s saturated fat and 74 grams of carbs—most of which are refined. Besides adding some serious pounds to your frame if you indulge in the pastry fairly regularly, it can zap your focus and lead to cognitive issues later down the road, too. A Physiology & Behavior study found that consuming saturated fats and refined carbohydrates is associated with the development of Alzheimer’s Disease and can negatively impact cognitive function, too. Eat This Instead: Trade your muffin for some oatmeal. The steady flow of energy you’ll get from the complex carbohydrates and fiber will help you get through your work in no time at all—and you’ll lose weight, too. www.yahoo.com/health/5-foods-that-make-you-dumber-121836169638.html
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Post by jeffolie on Jun 20, 2015 5:16:03 GMT -6
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Post by jeffolie on Jun 14, 2015 14:23:00 GMT -6
One thing we do know: Wages and salaries — which account for most of the income of most Americans — have been rising slowly. Median weekly earnings are up 1.5% in the past year, according to a separate report from the Bureau of Labor Statistics, which exactly matches the increase in prices over that time. In other words, the median worker didn’t get a raise this past year. ei.marketwatch.com//Multimedia/2015/06/11/Photos/MG/MW-DN936_wages__20150611161921_MG.jpg?uuid=32dfcee2-1077-11e5-b99a-ce59a1c5ace1 The share of national income going to workers has been falling lately. A smaller share of the nation’s total income has been going to wages and salaries, and more to profits and income from assets owned. From the 1970s through the early 2000s, workers received around 65% of national income in compensation, but after the financial crisis their share fell to below 61%. In the latest quarter, the share going to workers rose to 62%, still far below the long-term average. It may not sound like much, but the difference between 62% and 65% amounts to $460 billion a year that workers aren’t getting, or about $3,000 per worker. Imagine how great consumers’ finances would be if they were getting paid $3,000 more each year. www.marketwatch.com/story/the-number-that-makes-us-bullish-on-america-99-trillion-2015-06-12?page=2
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Post by jeffolie on Jun 14, 2015 7:50:09 GMT -6
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Post by jeffolie on Jun 14, 2015 7:45:44 GMT -6
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Post by jeffolie on Jun 13, 2015 15:49:22 GMT -6
"However, it is critical for consumers to understand that if they take a long-term loan, they need to keep the car longer or could face negative equity should they choose to trade it in after only a few years." The average amount financed for a new vehicle also hit a record high of $28,711 in the first three months of the year, up from $27,612 a year earlier. The average monthly payment for new vehicles also rose to $485 in the quarter ended March 31 from $474 a year earlier. But as long as the credit is flowing freely at low interest rates, consumers, lenders and automakers are happy. The industry reports May U.S. car and truck sales Tuesday, and some forecasters expect the annual rate to exceed 17 million units, a level not seen since the height of the housing bubble a decade ago. Experian also reported that leasing continues to rise, hitting a record of 31.5% of all new-vehicle transactions in the first quarter of this year, up from 30.2% a year earlier. Leasing enables many consumers to drive away with a more expensive vehicle while keeping their monthly payment within their budgets. However, the resurgence of leasing will have an effect in the next few years because an increasing number of vehicles coming to auction at the end of leases will drive down used-vehicle prices. That means that the value that people who own vehicles get upon trade-in will drop, requiring them to borrow more, possibly at higher interest rates, or settle for a less expensive car. www.usatoday.com/story/money/cars/2015/06/01/new-car-loans-term-length/28303991/
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Post by jeffolie on Jun 13, 2015 15:21:32 GMT -6
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Post by jeffolie on Jun 13, 2015 15:08:51 GMT -6
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Post by jeffolie on Jun 13, 2015 14:30:41 GMT -6
Mayor Eric Garcetti is expected to sign into law Saturday a measure that raises the minimum wage in Los Angeles to $15 per hour by 2020 for hundreds of thousands of workers. With the mayor’s signature, the city, with 3.8 million residents, would become the biggest in the country with a $15 minimum wage ordinance, though the first increase to $10.50 per hour is not set to take place until July 2016. Garcetti is scheduled to hold a signing ceremony at Martin Luther King Jr. Park, where he officially announced last Labor Day that he wanted to raise the minimum wage to $13.25 per hour. Garcetti said last week that with the City Council’s adoption of the ordinance, “the minimum wage will no longer be a poverty wage in Los Angeles. The council voted 12-1 Wednesday to give final approval to the wage hike ordinance, with Councilman Mitchell Englander casting the dissenting vote. Under the ordinance, the city minimum wage will increase to $10.50 per hour in July 2016 for businesses with 26 or more employees, with a one-year delay for smaller businesses. By 2016, the state minimum wage will have risen to $10 per hour. The wage will then go up to $12 an hour by July 2017, $13.25 per hour by July 2018, $14.25 per hour by July 2019 and ultimately to $15 by July 2020. Businesses with 25 or fewer employees will start raising their wages one year later and have until 2021 to reach the $15-an-hour mark. Once the wage reaches $15 per hour for both small and large employers, the ordinance calls for the minimum wage in 2022 to continue increasing based on the cost of living. City officials are still considering possible amendments to the wage law, such as a proposed exemption from the $15 minimum wage for workers covered under collective bargaining agreements. Labor leaders who led the campaign to raise the minimum wage are pushing for inclusion of the exemption from the wage for their own union members. They say the provision is a “standard” part of wage laws in many other cities, including San Francisco, Oakland, San Jose and San Diego, and contend the provision is aimed at respecting existing collective bargaining agreements, as well as giving employers and workers wiggle room to reach the best labor agreement for both sides. However, business leaders who had opposed the wage increase say the same people who wanted the minimum wage hike in Los Angeles now want to their own union members to be given a “sub-minimum” wage. They pointed to Seattle’s $15 minimum wage law, which does not have an exemption for unionized workers. The council may also consider a motion by Councilman Mitch O’Farrell that calls for an exemption for employers with 50 or fewer workers “that provide their employees benefit packages that are equal to or exceed the citywide minimum wage.” The City Council is also expected to consider including a requirement for employers to provide paid leave to workers, and a provision that would require employers to pass service charges on to the employee who performs the task. Homeboy Industries, a group that runs transitional employment programs, is also urging the City Council to give it a reprieve from the city wage over the 18-month duration of its program. Members of the council are also looking for more clarity on what constitutes an employee in Los Angeles. The ordinance defines an employee as someone who works at least two hours within Los Angeles city limits, which means businesses located outside the city could potentially be paying the higher wages for hours their employees work within Los Angeles. — City News Service mynewsla.com/government/2015/06/13/garcetti-to-sign-15-minimum-wage-into-law-saturday/?google_editors_picks=true
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Post by jeffolie on Jun 13, 2015 14:25:20 GMT -6
People Are Taking Longer Car Loans Than Ever 6/08/15 Longer loans have been a trend for a while in car buying, but the averages are getting longer and longer. In the first few months of 2015, the average term of car loans reached 67 months for new cars, 62 months for used cars. A longer loan term does allow for a lower monthly payment, but the length of the commitment is cause for concern. There are certain buyers who might not have the financial stability to pay off that loan over such long period. Or, when they sell the car, it won’t cover the remainder of the loan and they’ll be stuck paying off a car that they no longer have. There haven’t actually been the same sub-prime worries that we previously had, but it should be at the very back of some minds as these loans are issued. jalopnik.com/people-are-taking-longer-car-loans-than-ever-1709768194?google_editors_picks=true
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Post by jeffolie on Jun 8, 2015 15:08:30 GMT -6
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Post by jeffolie on Jun 8, 2015 14:51:36 GMT -6
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Post by jeffolie on Jun 8, 2015 5:41:34 GMT -6
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Post by jeffolie on Jun 6, 2015 15:27:09 GMT -6
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Post by jeffolie on Jun 6, 2015 14:18:15 GMT -6
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Post by jeffolie on Jun 6, 2015 7:42:24 GMT -6
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Post by jeffolie on Jun 5, 2015 16:36:07 GMT -6
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Post by jeffolie on Jun 4, 2015 7:06:50 GMT -6
Friday Is Judgment Day In Crude Oil's Financial Cold War Jun. 4, 2015 Summary •On Friday, June 5th, OPEC will meet in Vienna, Austria for the first of two annual meetings to debate increasing, decreasing, or maintaining its current production target of 30 mbpd. •To date, OPEC has pursued a policy of promoting short-term weakness in oil by standing firm in its outputs to pressure US producers and regain market share when prices rebound. •This article highlights the current state of the US vs. OPEC financial Cold War and projects the outcome of Friday's meeting in this context and its impact on oil prices. •My investment strategy going forwards with both entry and exit targets is discussed in detail. On Friday, June 5, the Organization for Petroleum Exporting Nations (OPEC) will meet in Vienna, Austria for the first of two yearly meetings to debate the state of the global oil market and decide whether to raise, lower, or keep production targets for member countries unchanged at 30 million barrels per day. For the past year, OPEC has been playing a dangerous game of chicken with the West - a financial Cold War of sorts - by eschewing its traditional practice of reducing output to bolster prices and instead has stayed firm at its 30 million barrel per day production quota. Many believe that the organization is instead looking beyond short-term weakness in global prices and is interested in supporting long-term strength and a return to relevance for the cartel by allowing low prices and ample supply to drive shale producers out of business. This article discusses the effectiveness of this strategy to date, the current state of OPEC versus the global and domestic markets, and the implications of OPEC's Friday decision. Some will argue that Friday's meeting is a non-event as several OPEC representatives have already seemingly divulged the probable outcome of the meeting. Even if this is true and is not part of some stratagem, the wording of the meeting minutes and any apparent dissent will provide significant clues to an assessment of OPEC's strategy to-date and its longer-term goals. And despite the fact that OPEC has not changed production quotas for several years, that hasn't stopped crude oil volatility from surging immediately following meetings ..... I believe that crude oil is now being attacked on 3 fronts. First the US dollar appears to have bottomed following its May decline, which should act to place a price ceiling on the commodity, supply/demand notwithstanding. Second, suspect data or not, domestic production continues to set weekly records, despite a 60% reduction in the rig count. Finally, for all the reasons discussed in this article, I expect OPEC will continue a policy of encouraging a global oil glut with increased imports, further exacerbating the current domestic oversupply. As a result, I remain bearish short and medium term on oil with a price target under $55/barrel. I currently have a short United States Oil Fund (USO) position from $20.40 worth 20% of my portfolio along with a small short Market Vectors Russia ETF Trust (NYSEARCA:RSX) worth about 5% of my portfolio with a cost basis of $19.30 in order to gain short oil and global equity exposure. And while I do not expect OPEC to give the bulls any ammunition to make a run, it is my policy not to gamble by trading event stories given how unpredictably investors respond to them, even if one has a good idea of the news itself. As a result, I will plan to hold both of my current positions through the announcement. Should OPEC flame the bearish sentiment, I may consider getting more aggressive and adding a small short position in the 2x leveraged ProShares Ultra Bloomberg Crude Oil ETF (NYSEARCA:UCO) or the VelocityShares 3x Long Crude Oil ETF (NYSEARCA:UWTI). My medium-term price target is $50-$55, at which point I will unwind my RSX position first, followed by any leveraged positions that I may open, and USO last as oil approaches $50. My criteria to throw in the towel and close my short positions at a loss include a sustained (>3 week) drop in production of >250,000 barrels per day, a decline in the US rig count under 600 rigs, or a shift in the international supply/demand surplus. In conclusion, the OPEC policy of maintaining a global supply glut has been effective in re-establishing its market share in terms of rig count, but not production. If it wishes to achieve the latter, a prolonged period of depressed prices is necessary to reduce US oil production. As a result, I expect the cartel to announce on Friday that it will be maintaining its current output at 30 million barrels per day - although observed production has been 0.5-1.0 million barrels higher - to maintain a global supply surplus of nearly 2 million barrels per day. Because its production does not count towards the output target, OPEC member Iraq could increase production even further - barring interference from geopolitical issues - to put further pressure on supply. As a result, I maintain a short-medium term bearishness and will continue to hold my short USO and RSX positions going forward. This article is not intended to argue either for or against the strategies of US shale producers or OPEC. OPEC naturally wants higher prices but is willing to bide its time to ensure that when these higher prices arrive, its fading influence is re-established. It is only good business sense - and probably much appreciated by worldwide oil consumers benefiting from cheaper prices. US producers, on the other hand, have developed increasingly efficient drilling practices and are hoping to wait out OPEC, whose members are rapidly burning through their own cash reserves. There is something to be said about pushing for US independence from foreign oil, but, if the cost of such freedom is an increase in the price of oil, I wonder whether it is worth it. I am not here to debate the ethics of either policy and only intend to highlight both in order for you, the reader, to make the best-informed investment decision that you can. seekingalpha.com/article/3235276-friday-is-judgment-day-in-crude-oils-financial-cold-war?ifp=0
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Post by jeffolie on Jun 4, 2015 6:52:42 GMT -6
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