Friday, January 30, 2009

Friday's CNBC Effect Explained; Reverse Your Psychology

Good Friday! POTC was not impressed with AMZN's earnings, yet it is market mechanics you must respect/understand in the short run (courtesy of the masses in the media). We believe AMZN was shorted more into this report due to the talking heads on Dylan Ratigan's Fast Money program, who by consensus agreed AMZN would fall after earnings. Although they all confessed to their Amazonian mistake, the pain caused to short accounts ahead of the weekend is not dissipating. The CNBC effect is real, so let us explain how to profit from it...
The fact CNBC is the dominant place most flock to creates the "it can be your best friend or worst enemy" type scenario. IF you continue to trade on their recommendations, your losses will be exacerbated. The increased one-sided volume causes greater stress (especially post earnings release). IF you're part of the trusting greenhorn herd, trouble lurks. POTC urges forward thinkers to use more reverse psychology when listening to cable tv talking heads. Newton's Third Law of Motion states, "for every action there is an equal and opposite reaction", so IF you continue to act on popular advice, you will lose more money than the ones who fade the initial moves and establish positions in the opposite direction. The CNBC effect should be well understood and taken advantage of; forward thinkers must learn to profit from it. In AMZN's case today, Fast Money's influence is contributing to the short covering rally (in the face of a down market mind you!). We believe maximum pain could set in soon, perhaps by Monday or Tuesday morning, so please be patient until the entire herd is thinned out in the $62+ range.
IF AMZN doesn't offer us the opportunity to short/buy puts above $62, we'll be happy to wait and locate a new spring to quench our polydipsia for profits. Patience is one of the most important arrows you should have in your trading quiver. Patience eventually leads to better timing, and timing is something most never grasp. Part of POTC’s fifth Commandment of Trading states "never force trades," since forcing trades is an impatient behavior that rarely results in a good nights sleep. The Psychology of the Call team hopes this reverse psychology email was of interest and somewhat educational. Although we watch CNBC and respect some of its talking heads a great deal, the 11 Commandments remind us of the critical roles both science and art play in making money. We wish you and yours another healthy & wealthy weekend. With humility we ask you to help spread the blog address to any person you feel would be interested in our efforts. Let CNBC's talking heads be your pawns, you remain King! Now for some music relief courtesy of youtube:

Breakdown of 2009 Stimulus/Spending Bill

Although the Bill is Being Criticized by Most Elephants, Forward Thinkers Have a Chance to Identify the Areas/Projects that may Start a Fire Under Specific Stocks; Notice that Energy, Agriculture, and Defense Look to be the Biggest Beneficiaries. IF you Have a lot of Time, and Enjoy Researching, Click the 'PDF File' for a More In Depth Breakdown. Please Feel Free to Send Us an Email with Specific Stocks You Think will Rise Due to this Mother of All Spending Packages. Enjoy:

Thursday, January 29, 2009

Thursday's Late Trading Alert

Hello to all, We believe the market will sell off more tomorrow morning after XOM reports earnings before open & Gross Domestic Product (GDP) hits us at 8:30ET. We would WAIT patiently until we see S/P between 825-830 and/or TLT close that gap at $99.37 before entering long positions Friday. We are still bullish short term due to the oversold financials, anemic price of oil, and the developing story regarding the titanic stimulus package. Tomorrow morning's sell off will offer forward thinkers an excellent entry point to go swing long into the weekend! POTC believes the weekend will bring good news regarding the "bad bank" plan from the Obama economic team, so financials & s/p futures could be in the green on open come Monday. We respect this traders' market, knowing it will kill most big bears & little bulls before it's done, you must be very quick and nimble (whether long or short). Always take profits and cut losses to a minimum. The market will be around tomorrow, next week, and next month. Thanks for visiting the Island Where Forward Thinkers Evolve; the entire Psychology of the Call team wishes you a fun filled Super Bowl weekend. Now Mrs. Faith Hill on the NFL:

Wednesday, January 28, 2009

Psychological Financial Fusion:

Stimulus Gets Zero Elephant Support from House of Representatives; POTC Now Predicts a Choppy Market At Best Until President Obama Announces Some Concessions; President Lincoln's Birthday (Thurs. Feb 12th) May Bring a Whole New Rally for a Number of Patriotic Reasons; POTC Predicts the Senate Vote Will Break Down Entirely Differently than Now Being Reported; President Obama May Still Bend a Little to the Elephants Side as He Looks to be an Impressive First Term President and Perhaps a Stronger More Dominant Second Term Leader; President Obama Must Step on Some Donkey's Toes and Announces He Will Not Repeal the Bush Tax Cuts Before They Expire in 2 Years; POTC Feels the New Administration Would be Walking a Dangerous Tight Rope IF It Were To Pass an $800,000,000,000+ Spending Package Without Support From at Least twenty Elephants; Pres Obama has his work cut out, yet we believe he will succeed; the Negative Sentiment May Change by Pres Lincoln's Birthday (caution to all forward-thinkers). WASHINGTON (Dow Jones)--The U.S. House of Representatives voted Wednesday evening to approve a roughly $819 billion economic recovery package, the largest-ever federal government attempt to kickstart the moribund American economy. -The Democrats relied on their considerable majority to force the legislation through, with not a single Republican vote in support of the package. -In the end, the vote was 244-188. -Despite a personal appeal from President Barack Obama to Republicans and Democrats to join together, the vote was on a strictly partisan basis. Obama traveled to Capitol Hill this week to meet with House and Senate Republicans, but with the former group at least, his persuasive attempts fell on deaf ears. -In a statement, Obama said he was grateful that the House moved quickly to pass the stimulus plan. -"The plan now moves to the Senate, and I hope that we can continue to strengthen this plan before it gets to my desk," said Obama. "But what we can't do is drag our feet or allow the same partisan differences to get in our way. We must move swiftly and boldly to put Americans back to work, and that is exactly what this plan begins to do." -The estimated cost of the package was reduced to $816 billion from its original estimate of $825 billion, and then $3 billion were added on the House floor to increase funding for public transit systems. -The bill includes $544 billion in new spending, with investments in infrastructure repairs; significant increases in grants to states to help them deal with the deteriorating economy; and financial assistance to lower-income individuals most affected by the recession. -There are roughly $275 billion in tax relief measures for both individuals and businesses, the highlight of which is a $500 tax credit for most working Americans. -"We have crafted a comprehensive package that will provide benefits to every sector of our economy, targeting tax relief to middle America, poor America and businesses that can create new jobs," said Rep. Charles Rangel, D-N.Y., the chairman of the House Ways and Means Committee. -House Minority Whip Eric Cantor, R-Va., said the outcome of the vote reflected Republican frustrations over not being genuinely consulted on the makeup of the stimulus package. -"He's the one that came to town and said he's going to change the way this process works," Cantor said of Obama. "I think this country is sick and tired when they look and see $1 trillion thrown around like this, and set on to the backs of our children and our grandchildren." -Republicans consider the true cost of the stimulus package to be around $1 trillion, once the federal government's interest cost is factored in. -Attention will now turn to the Senate, where Democrats may have to make at least a gesture toward the Republican minority to win sufficient support to pass it. -Senate Majority Leader Harry Reid, D-Nev., said he anticipated the legislation would be come up on the Senate floor Monday, with votes on amendments to begin on Tuesday. -There remain considerable differences between the House and the Senate versions of the legislation, mainly on the tax provisions. -The most noticeable of these differences is that the Senate included a $70 billion annual patch to the Alternative Minimum Tax to ensure that middle-class Americans wouldn't be inadvertently caught up by the measure. -Congress must pass this each year as the AMT hasn't kept up with inflation. House lawmakers have opposed including it in the stimulus bill, arguing that it isn't truly stimulative. -Senate Republicans are trying to construct a housing package they will try to add to the stimulus bill when it comes up for debate there possibly as soon as the end of the week. This would include a hefty homebuyer credit and a government-subsidized 4% discounted mortgage rate. Republicans are also proposing a measure to allow U.S. multinationals to bring taxes earned from their foreign operations onshore at a discounted income tax rate. -It is unclear whether any of these initiatives will be successful at this stage. Assuming all Senate Democrats were to cast a vote in favor of the stimulus plan, the majority would only need the support of two Republicans in order to be able to pass the bill. -In the House, Republicans tried to alter the package, introducing a substitute which involved primarily tax cuts rather than new spending. The only spending measure included in it was an extension to unemployment insurance benefits already in the Democratic plan. -But the alternative was easily defeated by the Democrats, as was a separate attempt to strip out much of the spending in their plan. -Obama spoke this week about setting politics aside and urged lawmakers of both parties to get behind the recovery plan. -He called the stimulus plan "one leg" of his administration's efforts to steady the U.S. economy. -Regardless of their no votes Wednesday, House Republicans made clear they would be willing to continue talking to the Obama administration over inclusion to the plan of items like a possible extension of tax relief to small business owners. -Once the Senate completes its work on its version of the bill, lawmakers from both parties and chambers will gather to iron out their differences. It is likely that if Obama wants to enforce any changes to the package, it could occur then. -Both the White House and lawmakers have said they hope to finalize the package so the president can sign it before the congressional recess in mid-February. -Reid reiterated that goal on Wednesday, saying he hoped the Senate would conclude its consideration of the package by the end of next week. This would give House and Senate lawmakers a week to negotiate the final terms of the legislation. -By Corey Boles and Patrick Yoest, Dow Jones Newswires; 202-862-6601; (END) Dow Jones Newswires January 28, 2009 19:03 ET (00:03 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 07 03 PM EST 01-28-09

Send in the Secondarys

Wednesday afternoon greetings to all! After this wonderful rally in equities, please do not lose focus on the capital structure of your holding that just hiccupped, because a secondary offering may send your shares spiraling down the barrel, again... You should to do a quick analysis of the capital structure/balance sheet of every company you own. IF you identify the stock(s) that are in greater need of liquidity/cash (which could be said for most companies today), then you need to take profits or else suffer the consequences of being diluted.
When a company needs liquidity, it can issue more shares at a specific price on a specific future date, therefore called a secondary or follow-on offering. This strategy is... ---------------------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Wednesday Morning's Psychology

Greetings to all,
The Psychology of the Call team’s abrupt change to bullish is playing out: congratulations to those who took appropriate action. IF the S&P can muster a close above 859, our short term bullish thesis would be 70% in tact; but IF the index were to close above 867 today, then we would not hesitate to hold most long positions even into Thursday's weekly unemployment numbers.
The circumstances behind this move are 90% psychological, related to...
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Tuesday, January 27, 2009

President Obama's Financial Team is Moving at the Speed of Light; POTC's Conviction of S&P 900 By Week's End is Extremely Strong

"The Obama administration is close to deciding on a plan to set up a so-called "bad bank" to buy bad or illiquid assets from banks, CNBC reported Tuesday, citing banking industry sources. The initiative could be announced as early as next week. -The plan would use a model pricing mechanism to value the assets, taking into account the government's ability to hold the assets, perhaps to maturity. The government may end up paying more than market price for the assets but would get common equity from banks if the securities are bought for less than the assets are shown to be worth on the banks' books. It was unknown how the government would pay for the assets." -Web site: -Dow Jones Newswires; 201-938-5500 (END) Dow Jones Newswires January 27, 2009 17:15 ET (22:15 GMT) Copyright (c) 2009 Dow Jones & Company, Inc. 05 15 PM EST 01-27-09
We believe the Chicago Mercantile Exchange Group (CME) will Benefit from the new Administration's Policies; The Rampant Pessimism & Doom & Gloom Argument may well be Baked Into Current Prices (especially financials); What IF President Obama's team doesn't Over Reach and Over Regulate? The Pendulum could Swing and Ruin Short Portfolios. Here's a chart of CME, a stock we feel is completely oversold:

Forward Thinking Contrarians Take Note, an Improvement is Overdue, Market Bounce Predicted

NEW YORK (Dow Jones)--The perilous state of the U.S. economy sent U.S. consumer confidence levels to fresh depths in January. - The Conference Board reported Tuesday its January consumer confidence index fell to a historic low for the survey, at a reading of 37.7, from the revised 38.6 seen in December. Economists had expected a modest rebound, and had predicted the January index would come in at 39.0. - "It appears consumers have begun the New Year with the same degree of pessimism that they exhibited in the final months of 2008," said Lynn Franco, who leads the private research group's Consumer Research Center. "Consumers remain quite pessimistic about the state of the economy and about their earnings," she said, adding, "we can't say that the worst of times are behind us." - Consumer confidence measures are not terribly influential to Federal Reserve officials, who are meeting this week to deliberate on monetary policy in a gathering that's expected to bring no change from the central bank's current stance. - But even so, the funk consumers have been mired in is indicative of the economy's broader problems. - Rising unemployment, unending troubles on Wall Street, falling home prices, and a government response to the crisis that's been halting and thus far unclear in its impact, have all weighed on the nation's economic psyche. Worries are driving consumers to cut back on all sorts of spending, which in turn is deepening the recession and complicating efforts to engineer a recovery. - Steve Wood of Insight Economics noted that "confidence remains deeply mired in recessionary territory, resulting in big declines in real consumer spending." - The Conference Board found little that was positive in its survey of households. The present situation index for January fell to 29.9 from December's revised 30.2, while the expectations index declined to 43.0, from the prior month's 44.2. - In the report, consumers became more downbeat about the state of the economy, with those calling business conditions as bad rising to 47.9% of the survey from 45.8% in December, while those calling conditions "good" came in at 6.4%, from 7.7% the month before. - The Conference Board found a slightly more upbeat view on hiring, with those calling jobs "hard to get" moving down to 41.1% of respondents, from 41.5% in December. Those who deemed jobs as "plentiful" were 7.2% of the survey, from 6.5% who had that view a month ago. - The Conference Board's findings are based on a mail-in survey of 5,000 households. The cut off for responses was Jan. 21. - Some economists noted the report's findings about consumers' future plans for car purchases suggest better days may lie ahead for the very troubled auto sector. Abiel Reinhart of JPMorgan Chase told clients the Conference Board report and other data "provide some hope that vehicle sales could stabilize or improve in the months ahead." -By Michael S. Derby, Dow Jones Newswires; 201-938-4192; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 27, 2009 11:44 ET (16:44 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 11 44 AM EST 01-27-09

Spreads Are Starting To Behave

CHICAGO (Dow Jones)--Interest rate spreads must come back to historic levels before stability returns to CME Group Inc.'s (CME) interest rate futures complex, and there are indications this may be happening, a senior executive said Tuesday. - Moderation in key interest rates is also critical to the stabilization of the overall global economy, according to Rick Redding, managing director of products and services for CME. - There are signs of progress in recent days, Redding said, as the spread between the federal funds rate and the London interbank offered rate have reached 90 to 95 basis points, down from around 450 basis points in the aftermath of the Lehman Brothers bankruptcy filing last fall. - A basis point is one-one hundredth of a percentage point. - Redding also noted that deals are now getting done in the corporate debt market, another hopeful signal. - "We're not willing to say we see stability yet, but these are the first signs we've seen," Redding said, speaking at the Citi Investment Research 2009 Financial Services Conference. - Trading in CME's interest rate futures products, accounting for about 60% of CME volume and a major driver of the exchange's growth in the past, fell 12% in 2008. - Overall CME volume rose 4% in 2008, as gains in equity index, foreign exchange and commodity products helped offset the decline in interest rate futures trading. - Redding said it was the first year in CME's history that interest rate futures trading declined while overall volume increased. - CME shares were up at $171.80 Tuesday morning, after closing at $166.58 Monday. -By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 27, 2009 09:42 ET (14:42 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 09 42 AM EST 01-27-09

Monday, January 26, 2009

Financial Regulations on the Way; POTC Welcomes Higher Quality Oversight that Won't Kill Off Risk Takers

Financial Regulations on the Way; POTC Welcomes Higher Quality Oversight that Won't Kill Off Risk Takers; Risk Takers Provide the Oil of Liquidity for Free Capital Markets to Continue their Evolutionary Cycles Washington (Dow Jones)--The chairman of the U.S. Senate subcommittee that oversees the securities industry plans to call Tuesday for a "structural reform" of the U.S. regulatory system to include greater controls over credit derivatives and hedge funds, as well as more aggressive SEC enforcement powers, according to portions of a speech to be delivered in Washington. --"Now is the perfect opportunity to reform completely and effectively the problems that have been identified in all these areas, from the structure of our regulation, to SEC's shortcomings, regulatory arbitrage, and risk management," Sen. Jack Reed, D-RI, will say in a speech to the Council of Institutional Investors in Washington D.C. Reed's office released an excerpt of the speech Monday evening. --Reed, as a senior member of the Senate Banking Committee, is likely to play an influential role in congressional efforts to draft a dramatic rethinking of the U.S. regulatory system. President Barack Obama, aided by newly confirmed Treasury Secretary Timothy Geithner, is expected to move quickly to overhaul regulation of the financial markets in the wake of the turmoil over the last year and the collapse of top U.S. financial institutions. --Reed plans to focus a portion of his criticism on the SEC's oversight of the securities industry, describing enforcement staff as "handcuffed" by limited resources and policies put in place by former Chairman Christopher Cox. --"This has had a chilling effect on attorneys in Enforcement and this policy must end with the new leadership," Reed says in the released remarks. --The key is significantly increasing the resources available to the embattled SEC, Reed says. One way to achieve this, he will suggest, may be to increase the fees on securities transactions to previous levels in order to pay for more aggressive enforcement. --The oversight regime Reed envisions would include giving regulators the ability to peer into markets for complex financial instruments and investment vehicles that have thus far been untouched. This includes unregulated products such as credit derivatives, more transparency in dark pools of liquidity and other complicated markets, as well as new regulation of hedge funds and other lightly regulated financial institutions. --"We need to ensure that supervisors have the right information they need identify systemic risks as they build," Reed will say in the speech. --Beyond securities firms, Reed suggests that the current regulatory system for banks has resulted in regulatory arbitrage, where banks seek out the most lenient regulator. He singles out the Office of Thrift Supervision, expressing skepticism for the separate bank and thrift charters and questioning the need for the thrift regulator. --"The OTS has underperformed in too many areas and has at times been too lenient with those it supervises," Reed will say. --Additionally, he will express support for giving investors greater say on executive compensation and enacting new "clawback" laws so that executives can be forced to give back compensation based on ephemeral profits. --The compensation of executives - which has often been determined without shareholder input - has misaligned incentives for managing risks, with a focus on the short term," Reed will say. --In a possible split from other top Democrats, Reed also plans to question whether the Federal Reserve is the best choice to oversee systemic risks. Some policymakers have suggested the central bank would have the best expertise of the current regulators to act as an umbrella agency maintaining market stability. --"We need to ask hard questions about whether our central bank should be handling monetary policy, regulatory oversight, and consumer protection issues," he says in the excerpt. - By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 26, 2009 23:15 ET (04:15 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 11 15 PM EST 01-26-09

Obama's Geopolitical Psychology is Highly Impressive; POTC Senses a Super Positive Overnight Sea change Toward the US; S&P Could Break 900 by Weekend

WASHINGTON (AFP)--U.S. President Barack Obama on Monday said that the United States would offer arch-foe Iran an extended hand of diplomacy if the Islamic Republic's leaders "unclenched their fist." --Obama said he would in the next few months lay out a general framework of policy towards Tehran in an interview with Dubai-based Al-Arabiya satellite television network, a week after his historic swearing-in as president. --"As I said in my inauguration speech, if countries like Iran are willing to unclench their fist, they will find an extended hand from us." --"It is very important for us to make sure that we are using all the tools of U.S. power, including diplomacy, in our relationship with Iran," Obama said. --Earlier, Susan Rice, the new U.S. ambassador to the United Nations made her debut and pledged vigorous" and "direct" nuclear diplomacy with Iran but warned of increased pressure if Tehran refuses to halt uranium enrichment. --"We will look at what is necessary and appropriate with respect to maintaining pressure toward that goal of ending Iran's nuclear program," she added. --"Dialogue and diplomacy must go hand in hand with a very firm message from the United States and the international community that Iran needs to meet its obligations as defined by the Security Council and its continued refusal to do so will only cause pressure to increase." --The five permanent members of the Security Council - U.K., China, France, Russia and the United States -- plus Germany have offered Tehran economic and energy incentives in exchange for halting its uranium enrichment program, which the West sees as a cover to acquire a nuclear weapons capability. --But Tehran is pressing on with sensitive nuclear fuel work, insisting that its nuclear program is peaceful and solely geared toward electricity generation. --The Security Council has already adopted four resolutions - three of which included sanctions - requiring Iran to suspend uranium enrichment. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 26, 2009 22:44 ET (03:44 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 10 44 PM EST 01-26-09

Friedman's One Million Dollar Nibble is Interesting

Stephen Friedman, a director of Goldman Sachs Group Inc. (GS), on Monday reported the purchase of $1 million in company shares. --Friedman, who joined the bank in 1966, bought 15,300 shares for about $66.61 each, according to a filing with the Securities and Exchange Commission. --This is Friedman's second recent purchase of Goldman stock. In December, he paid about $3 million for 37,300 shares, another filing shows. --With his latest purchases, Friedman directly owns 98,600 Goldman shares, worth about $7.3 million at Monday's closing price of $74.20. -By David J. Reynolds; Dow Jones Newswires; 202-862-1342; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 26, 2009 17:36 ET (22:36 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 05 36 PM EST 01-26-09

Looking Into the Federal Reserve's Mind

WASHINGTON (Dow Jones)--Six weeks after stunning world financial markets by slashing interest rates to near zero, Federal Reserve officials are expected to dial back the drama this week with rates on hold. --Still, Fed watchers will eye the accompanying policy statement at the conclusion of the two-day meeting on Wednesday for any updates on the Fed's myriad lending programs. Of special interest will be an idea officials have repeatedly floated, about buying longer-maturity Treasury securities in a bid to improve conditions in credit markets. --In the Dec. 16 policy statement, the Federal Open Market Committee said it was "evaluating the potential benefits of purchasing longer-term Treasury securities." Fed Chairman Ben Bernanke had said something similar in a speech two weeks before that meeting, and has repeated it since. --But putting it in the statement binds the Fed to that idea, and Fed watchers will scrutinize each word to gauge if such a plan is closer to being executed, especially with Treasury yields on the rise in recent days. --"There is a risk, when you say something so many times, it becomes read not as a contingency plan, but as a commitment," said Vincent Reinhart, former head of the Fed's monetary affairs division who is now with the American Enterprise Institute. "They're pretty close" to that on Treasury purchases, he said. --As Michael Feroli, economist at JPMorgan Chase notes, the Fed faces risks with both repetition and omission. If they repeat what they said six weeks ago, "it'd be like, hey how long do you have to study it?" he said. --Meanwhile, "if they don't mention (buying) Treasurys at all, the market's going to sell off massively," Feroli said, since investors might assume the idea is off the table. --A big argument for largely sticking to the notion of studying the idea is that Bernanke's semiannual monetary policy testimony to Congress is coming up in a few weeks. That's a better venue to go into the specifics of such a plan than a few words of an FOMC statement. --"Part of the meeting dynamics is a temptation to say, 'Well, Mr. Chairman, you can say this more fully in your testimony,'" Reinhart said. --Last month, the Fed surprised Wall Street by cutting the target fed funds rate for interbank lending from 1% to a range near zero. The Fed also said that the weak economy was "likely to warrant exceptionally low levels of the federal funds rate for some time." Fed watchers took that to mean that rates will stay near zero perhaps into 2010. --So with rate changes off the table, officials are left with the Fed's burgeoning balance sheet to boost the economy. Last month, the Fed devoted considerable space in its policy statement to its balance sheet, including a $500 billion mortgage-backed securities program that began in January and an asset-backed one due to begin next month. --"The Fed might, in the context of an upcreep in Treasury and mortgage rates, want to place particular emphasis on its plan to purchase mortgage securities and possibly Treasury securities," said Miller Tabak strategist Tony Crescenzi. --Meanwhile, economists expect few changes to the Fed's assessment of the economy. In its Dec. 16 statement, the Fed said that "available data indicate that consumer spending, business investment, and industrial production have declined" while "the outlook for economic activity has weakened further." Little has changed since then, except that the contraction in first-quarter gross domestic product will likely be even more pronounced than had been expected by economists a few weeks ago. --However, if officials want to jawbone market interest rates down a bit without committing to a massive new Treasury purchase program, they could tweak their language on inflation to show more concern about outright price declines, known as deflation, or at least the risk of inflation being too low for their comfort. --Last month, officials said they expect inflation "to moderate further in coming quarters." But the minutes of that meeting, released three weeks later, signaled more concern. "Some members," the minutes said, "saw significant risks that inflation could decline and persist for a time at uncomfortably low levels." --Earlier this month the government reported that consumer prices inched up just 0.1% in 2008, the smallest calendar-year increase since the 1950s. --"I think they'll avoid the word deflation, but they have good reason to express concern about further unwelcome disinflation," Reinhart said. (Brian Blackstone is a special writer at Dow Jones Newswires who covers the economy and the Federal Reserve. He may be reached at 202-828-3397 or (TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 26, 2009 12:39 ET (17:39 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 12 39 PM EST 01-26-09

Good Monday Morning

Good Monday, Although we’re happy to see today's blip up in equity prices, we don’t believe the market will close up for the week. The largest NY Manhattan office REIT, SLG Realty Corp (SLG) reports after market today and is whispered to beat the estimate by 2 pennies, so $1.34 is what to look for. Even so, we don’t see any positive forward-looking talk from the executives on the conference call, which takes place Tuesday, at 2:00ET: Also, Exxon Mobile Corp. (XOM) reports Friday before market open, and we...
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Sunday, January 25, 2009

The Obama Administration's Policies May Provide A Blast For Your Portfolio

From coast to coast, border to border, a late Sunday greeting to all!
The Psychology of the Call team (POTC) believes the new administration's energy policies will be more rounded and inclusive than most partisans believe. Whether you agree with the donkeys' green global warming alarm or with the contention that the U.S. could use an infrastructure face lift, POTC has identified a stock that could be dynamite for your portfolio: tick-tock, tick-tock.. KA-B@*#!
For President Obama to win that all important second term he cannot afford to do a 180 on big oil & gas...
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Friday, January 23, 2009

POTC's Option Strategy for February

Buy 2 or 20 contracts of "XOM" FEB $70 PUTS at $1.11 & Buy 3 or 30 contracts of "BP" $45 CALLS at $.70
POTC will keep you updated as this trade evolves. We added the quantity of contracts to remind you the importance of being balanced with this sector paired trade.

President Obama's Intellect is Beginning to Shine Through, POTC Strongly Believes the Chinese are Manipulating their Currency, Big Praise

BEIJING (AFP)--China denied Friday that it was manipulating its currency, reacting to a statement by U.S. President Barack Obama's Treasury secretary-designate Timothy Geithner. --"The Chinese government has never used so-called currency manipulation to gain benefits in its international trade," the Chinese commerce ministry said in a statement faxed to AFP late Friday. --"Directing unsubstantiated criticism at China on the exchange rate issue will only help U.S. protectionism and will not help towards a real solution to the issue," said the statement. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 23, 2009 10:37 ET (15:37 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 10 37 AM EST 01-23-09

POTC Predicts Microsoft will Buy Yahoo

Good Friday,
After combing through Google's terrific earnings, we see Microsoft (MSFT) buying Yahoo (YHOO) in a more friendly/easier buyout now that CEO Chang has stepped aside.
POTC predicts MSFT will bid approximately $22B - $23B, so around $16/share.
We recommend either going long YHOO shares from $10 - $12 with sell stops at $8 - $9 (depending on where you buy in), and or buying the March $13 Call options at $.90/contract.
Although we are pessimistic in our sentiment on the overall market, especially until we get some clarification on how harsh the regulations from the Obama team will be; we continue to find values in a scattered number of individual situations which are not directly correlated to the dreaded financial sector.
A great weekend is wished to all, from the entire Psychology of the Call team.

Thursday, January 22, 2009

Posting Update

In an October 19th Piece, We Predicted Warren Buffet's & Dennis Gartman's Allocation Mistake in being Over Weight Banks

Capitalism Counting on China; POTC Sees Global Financial Markets Collapsing in '09

LONDON (AFP)--The U.K. government said Thursday that building its relationship with China was now a "major priority", adding that it could help the rest of the world tackle the fallout from the credit crunch. --In the first government document to spell out a new strategy for dealing with Beijing, the government said Chinese policies were "enormously significant" for London's approach to issues including the economy. --But the government warned it would be "candid" with Beijing on human rights and Prime Minister Gordon Brown urged China to make progress on the issue and on developing the rule of law as it goes through huge social change. --The government said China's increasing power - it is now the third-biggest economy in the world - made it a "vital" partner in restoring world economic stability as countries try to drag themselves out of the global financial downturn. --Foreign Secretary David Miliband launched the document Thursday in Manchester, northwest England, just over a week before Chinese Premier Wen Jiabao is due to visit the U.J.. Brown said in the foreword: "The emergence of China as a global economic and political force is one of the most significant developments of our time. --"We must work together if we are to deal with the major challenges we face. --"I am convinced that Britain, Europe and the rest of the world can benefit from China's rise - provided we get our response right. --"Cooperation with China is vital to reduce poverty, to resolve conflict, and to develop an effective framework to address climate change. To achieve all of this we need China and China needs the rest of the world." --Miliband told BBC radio that, while China had a fast-growing economy, "they don't want to repeat the mistakes that we made in the 20th century when we built up our economy". --He added: "I think we can work very closely with them on (the) climate change issue." Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 22, 2009 12:35 ET (17:35 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 12 35 PM EST 01-22-09

Wednesday, January 21, 2009

POTC Predicts Chinese Economy Will Stumble Badly in '09

BEIJING (Dow Jones)--China's economy grew 6.8% in the fourth quarter, the lowest quarterly growth rate in seven years, as demand weakened and domestic manufacturing and investment activity slowed amid the worsening global financial crisis. --Government data issued Thursday also showed inflation continued to fall in December, adding to concerns about the possibility of deflation, and likely prompting Beijing to step up its efforts to boost economic growth back to 8%, generally considered the minimum rate needed to create sufficient jobs and allay social unrest. --Sherman Chan, an economist at Moody's, said earlier this week China's central bank could cut interest rates again by Saturday to boost business and household sentiment before the week-long Chinese New Year celebration that starts Sunday. --Growth in China's gross domestic product during the October-December period was sharply down from the 9.0% expansion in the third quarter, the National Bureau of Statistics data showed. --But it was mostly in line with the median 6.9% forecast of 13 economists surveyed earlier by Dow Jones Newswires. It was the lowest growth rate since the 6.6% in the fourth quarter of 2001, according to economists' estimates. --The slowing growth rate comes despite Beijing's launch in November of a CNY4 trillion infrastructure-led investment plan through 2010 and five lending rate cuts totaling 216 basis points since the middle of September. --China's economy, which overtook Germany's as the world's third biggest in 2007, grew 9.0% in 2008, slowing from the previous year's 13% expansion and snapping six consecutive years of accelerating growth. China's GDP totaled CNY30.067 trillion last year, government data showed. --"The international financial crisis is deepening and spreading with continuing negative impact on the domestic economy," the statistics bureau said in a statement on economic data for the fourth quarter and 2008. --It said that China would continue to "effectively implement the policies and measures of promoting growth and stimulating domestic demand." --For the full year, value-added industrial production rose 12.9%. December figures weren't immediately available. --Fixed-asset investment growth in urban areas for all of 2008 grew 26.1%, slowing from January-November's rate of 26.8%. --National FAI, which includes urban and rural areas and is issued only at the end of each quarter, rose 25.5% in 2008, marking a slowdown from January-September's 27.0% rise, but up from 2007's 24.8% increase. --Consumer inflation eased for the eighth straight month in December to an over two-year low, while the producer price index declined for the first time since late 2002. --China's consumer price index last month rose 1.2% from a year earlier, while the PPI fell 1.1%. For 2008, CPI rose 5.9%, compared with 2007's 4.8% rise, and PPI rose 6.9%, about double the 3.1% gain in the previous year. -By China bureau, Dow Jones Newswires; 8610 6588-5848; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 21, 2009 21:21 ET (02:21 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 09 21 PM EST 01-21-09

Tuesday, January 20, 2009

Non-Partisan Patriotic Paradox on the Horizon

The Psychology of the Call (POTC) team congratulates Barack Obama, our 44th President. We watched the historic inauguration and are at a lack for words and feelings to describe the moments. Perhaps a patriotic paradox unfolded to the cheers of billions of people around the world. President Obama faces tremendous financial and geo political challenges, yet his rare intellect should help him better maneuver through the debris; more so than some of his beaten and out of touch competition. The $700B stimulus package was green lighted by Senator McCain and President Obama, yet Governor Sarah Palin opposed it. Facts are facts: how can a fiscally conservative thinker not see the damage caused by the stimulus package? The financial sector has received a huge amount of money that was supposed to alleviate the mortgage, credit, and banking problems, but this hasn’t happened. Does anyone agree this is NOT a liquidity problem but more a breakdown of trust and psychology? The stimulus was passed under a Republican administration and herein lies the paradox of the nightmarish mess we're in... We are proud of President Obama's inauguration speech especially where he included the word "patriotism" and his mention of "not giving in to terror", ironically a George Bush theme. Yet we’re disappointed by his failure to address the future of Wall Street, a Street that seems to be a doomed, dead end, one way road in need of more than an infrastructure face lift. The United States cannot afford to lose private banking and Wall Street. IF President Obama's administration over reaches and over regulates this sector the consequences will be uglier than anything imaginable so far. IF this administration nationalizes the banking industry the end of capitalism will be paved and the end of this great nation will be near. IF President Obama is to become a great president, he must revive positive psychology on Wall Street even though the Street has committed gigantic business mistakes recently. President Obama must not go down the path toward nationalizing banking. A great leader cannot be partisan and condemn the foundation of our capitalistic society (banking); he must embrace it and breathe life into it again. We hope President Obama's administration makes smarter business decisions than the prior party of elephants who exacerbated this paradox of 100+ year old free markets getting bailed out. IF President Obama's administration goes down the partisan road, POTC predicts only 500 U.S. stocks will be traded within 3 years of when these regulations take hold. 500 U.S. stocks would mean approximately 4,500 equities wiped from the exchanges, a sure means to Depression and overnight socialism. POTC hopes President Obama will be non-partisan and open minded toward regulating the banking sector, then we'll all be witness to the rainbow on the horizon. The Psychology of the Call team thanks you for letting us be ourselves again; we refuse to apologize for our views, as we are Americans first. Please come back soon as our 2009 ambitions will bring you a more well-rounded financial portal. The Island Where Forward Thinkers Evolve will survive regardless of what the new administration legislates; we want every reader to take advantage of the drastic changes ahead through ultrashort ETFs mentioned in our Friday piece, as well as being parked in cash more than EVER before. Enjoy the red, white and blue dreams still ahead of us:

Friday, January 16, 2009

Friday's Forward-Thinking Strategy

Winterous Greetings to All! Next week's economic calendar is extremely thin. From January 19th through 23rd there is actually only one day with data and that occurs on Thursday! The 44th Presidential Inauguration is Tuesday, January 20th: We congratulate President-elect Obama on his against-all-odds victory, yet we are not entirely sold on his change rhetoric until we better understand his policies in regards to regulating the financial sector. As fiscally conservative thinkers, we stand for less government regulation and lower taxes in our still capitalistic society. We've blogged numerous times about the sad fact all five U.S. Investment Banks went down in 2008. With the absence of that leverage from lower Manhattan, our hope for a sustained market recovery of S&P above 1,000 in 2009 is less than 20%. Thursday brings us Housing Starts for the month of December, and Initial Claims for Unemployment for week ending 1/17, both at 8:30AM ET. At 11:00AM ET Crude Inventories for week ending 1/16 will be announced. As forward-thinkers, we recommend our readers to go to a overweight cash or a 15% short position through various ETF funds (SMN, FXP, SRS, EEV). IF you must be long equities here, we remind again of the sell stop limits you should incorporate into your 2009 strategy. Without either mental or electronically triggered stops, you carry the risk of falling in love and that buy & hold behavior may knock you out of the market. Staying in this game means making decisions from at least week to week, so most of our readers will never allow their portfolios to rust and just fade away. The Psychology of the Call team hopes this email reached you in good health & good spirits. Speaking of not allowing your holdings to 'rust', we leave you with this music video relief, compliments of Youtube:

Thursday, January 15, 2009

Fed Forcing the Long End of the Curve Down

"Fed Forcing the Long End of the Curve Down; Consequences of Unemployment Rising Through 9% in '09 Would Nulify this Juggling Act as Good Money Burns; Extreme caution to Equity Longs Until the Market is Free From this kind of Gov't Manipulation" NEW YORK (Dow Jones)--The U.S. Federal Reserve more than doubled its buying of mortgage bonds guaranteed by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae in the second week of its program to support the housing market. The central bank bought $23.4 billion of the bonds in the week ended Jan. 14, after purchasing $10.213 billion in the previous week, it reported Thursday. It has pledged to buy $500 billion, or more, of these bonds in the first half of the year, with the goal of pushing down mortgage rates. The bulk of the Fed's purchases was of mortgage bonds guaranteed by Freddie Mac. It bought $15.83 billion of its bonds, after buying $6.899 billion last week. The bank bought $5.63 billion of Fannie Mae bonds, following a purchase of $2.864 billion in the previous week. It also bought $1.95 billion of Ginnie Mae bonds. Last week, that figure was $450 million. The Fed's program is one of many it is juggling as it expands its role in the financial markets. Like last week, much of its buying was concentrated in the 30-year 4%, 4.5% and 5% coupons, according to Fed data. "The Fed is the only significant buyer of low coupons right now," said Walt Schmidt of FTN Financial. The current coupon or that closest to par is the mortgage bond with a primary mortgage rate of 4% on its 30-year loans. Typically, lenders add additional charges and fees to this primary rate to come up with the final mortgage rate homeowners pay. There was little reaction to the data on Thursday, Schmidt said. Risk premiums on agency mortgage-bond securities were wider by two to three basis points versus Treasurys. Average risk premiums on the outstanding mortgage bonds are quoted at 200 basis points versus a close of 194 basis points on Wednesday. -By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 15, 2009 15:56 ET (20:56 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 03 56 PM EST 01-15-09

Wednesday, January 14, 2009

Fed's Plosser Bewildered, Guessing at '09 Recovery"

NEWARK, Del. (Dow Jones)--The pace and strength of a U.S. economic recovery are hard to predict, Federal Reserve Bank of Philadelphia President Charles Plosser said Wednesday. -- "Every quarter of '09 will not be as bad or as ugly as the fourth quarter of '08," although it's hard to say how quickly the economy will turn around once the bottom is reached, Plosser said during a panel discussion at the University of Delaware. "We're all guessing," he added. -- Plosser, reiterating comments in a speech earlier, said he expects positive growth in the second half, although "it may not be very much." -- "Finding a bottom to the housing crisis is critical to almost everything that happens, in my perspective. I think we're getting close, but a lot of us thought two years ago we were getting close," Plosser said. -- In his earlier speech, Plosser said he doesn't expect to see a turnaround until the second half. He said he expects the last quarter of 2008 to book a relatively sharp decline and said total growth for the current year "is likely to be well below 2%, after negative growth in 2008." -- Plosser said the current recession is likely to be the longest since World War II, although the downturn is unlikely to replicate the sort of job losses seen in the past. -- "I do not expect the unemployment rate to stray into double digits during this recession," even as any sort of moderation on that front is unlikely to arrive soon, he said. -By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires January 14, 2009 11:10 ET (16:10 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 11 10 AM EST 01-14-09

Monday, January 12, 2009

Focusing In on '09 while Dealing with the Scars of '08

Welcome back to Psychology of the Call as we provide our first 2009 insights! Allow us to begin with sincere greetings to all subscribers! May the New Year shower greater health, wisdom and wealth upon you, your friends and loved ones. With all due respect to the outgoing Vice President, it’s apparent that Dick Cheney & his team did not add the Psychology of the Call blogspot to their favorites list in 2008. Here's a quote from V.P. Cheney's live interview on Thursday, Jan. 8th: "No one saw Financial Crisis Coming." Our readers were tipped off to the problems in the U.S. banking sector several weeks before Bear Stearns concussed the markets on that bloody St. Patrick's Day of March 17, 2008. You can verify the facts by clicking on the link below. Our post of 28 February, 2008 cited an insider at Goldman Sachs (GS) reporting on trouble brewing on Wall Street, upcoming lay-offs, and the legitimacy of what was left of the subprime market. The financial problems were black and white to us, our sources, and anyone reading in February of 2008. POTC even recommended shorting some investment banks, most notably buying puts on (GS) very early in the downward spiral. Here's how POTC called Morgan Stanley, five days ahead of Bear Stearns collapse (Morgan Stanley shares were trading just short of $40 before coming down to single digits a few months later): Regarding the "foundational crack" in the banking sector, POTC warned three weeks ahead of Bear Stearns demise, "it'll take a lot more than carpenters to fix it." Ironically, although we called for an infrastructure plan several times in '08, we don’t see it as a panacea now like some in the media would have you believe. POTC is NOT calling a bottom in equity prices or a top in bonds, FAR FROM IT. The massive infrastructure plan announced by President-elect Obama's administration in recent days will take several years to pass through to consumer wallets. Stabilizing the fundamental and psychological deterioration will take many years, not quarters like the monolithic bullish talking heads believe. Even as the infrastructure money begins to flow into the hands of citizens, do you not feel more people will mimic recent bank behavior and hoard cash? We do. That scar from '08 will take more than an infrastructure plan and carpenters to fix. The extinction of all five U.S. investment banks means their ability to inflate asset prices up to 40X is no more, NOT a good thing as far as we're concerned. Leveraging power of 30X or 40X facilitated U.S. prosperity and incredible market liquidity for the past century, so forcing maximum leverage down to a federal mandate of 10X means cutting credit to consumers and businesses on a massive scale. The tide of public opinion has turned against Wall Street at a time when liquidity is needed. This paradox must be broken in order for the markets to begin breathing on their own again. A cyclical/temporary infrastructure plan will never come near the positive effects Wall Street had on financing for well over 100 years: forward thinkers take note. The death of investment banks is NOT a good thing for the financial markets from a liquidity/financing perspective going forward. For the most part (excluding acquisitions or ultrashort funds), anyone who goes long and holds equities will be disappointed come December 31, 2009, as POTC sees great turmoil ahead in commercial real estate. (This topic will be addressed in the coming weeks; you may consider buying SRS, our favorite buy as of January, '09; buy target $55-$60, sell stop at $40-$45 with profit target of $100.) The fact mortgage rates and energy prices have eased doesn't mean the wound of '08 will heal without leaving a lasting scar, or re-open and begin bleeding again ... Could some other left field event jar our markets in 2009; of course it could. After most felt the terror of 9/11/2001 marked a bottom, then came the accounting scandals from Enron in June of 2002. Do you recall that one-two combination? Most talking heads calling "bottom, bottom, bottom" in early 2002 were caught off guard and ended up losing fortunes. Bottoms are never formed as a result of the things we already know, but usually print after events the public never saw coming. POTC has stressed before that when a bottom sets in, it means most individuals have thrown in the towel and at least a year of boredom (sideways markets) occurs. We feel 2008-2009 could be similar to the disastrous years of 2001-2002, but in reverse order in terms of events. Despicable terror destroyed the two World Trade Centers in 2001, shaking the confidence of every consumer and investor to extreme lows, yet the equity market didn’t make a technical low until after fundamental accounting scandals were revealed at Enron, Arthur Andersen, WorldCom, and others in 2002 and beyond. So 2002 was a lot worse than 2001. Even IF you were to argue '08 fundamental lows have been reached in certain individual stocks and sectors, you cannot go all in after looking back at 2001-2002. IF some horrific terror event(s) unfolded inside U.S. borders in '09, then equity prices would shrug off all fundamental factors. IF the Obama administration were confronted with some terror event, just as happened to Bush the first year into his administration on September 11, 2001, the S&P index would slide through the old lows of 720 in a flash, and perhaps as low as 400 in an ultimate climactic capitulation. Understand it took 1 year and one month for the S&P to ultimately bottom below 800 after 9/11/2001. Here's a chart that shows 10/10/2002 marked the bottom: IF you take the previous lows in October 2008 and add one year and one month that takes us to November of 2009. POTC believes these are good reasons to follow the 11 Commandments, but especially #2. Strongly consider being overweight cash until a meaningful breakout of S&P above 1,000 occurs, but we do NOT see it happening in 2009. Making money in the market involves being very nimble, quick, and open minded. It also calls for a multi-pronged strategy. Maintaining a 15% short position in your portfolio with ETFs like SRS makes good sense in 2009. What looks cheap today can be expensive tomorrow, yet many investors and traders fall in love with their holding(s) as the investment(s) trend much lower or much higher. We have been guilty of that sort of stinkin' thinkin' of holding onto losers and winners before, shame on us and shame on anyone who doesn't set sell stop limits or take profits! (Hats off to Fast Money's Jeff Macke, who often admits to being stopped out of a falling stock. Please use that strategy with every long position you have in 2009. Don't fall in love with any of your holdings… stocks & options are only paper instruments, with NO emotions/feelings.) Until an individual admits, accepts, and employs the short sale component into his/her investing repertoire, that individual will be let down more often than one who has evolved and understands the significance of that fundamental arrow. Best of the best in 2009! Thanks for your motivational emails since the last time we stepped foot on the Island Where Forward Thinkers Evolve (esp. Tommy S.) May your New Year voyage be safe from the churn of the stormy seas; now for some music video relief, compliments of Youtube: