Chinese Carrier Killer

Source: The Associated Press
Author(s): Eric Talmadge
Original Post:
Chinese ‘carrier-killer’ missile raises concerns of Pacific power shift
Date: 08/05/2010

ABOARD THE USS GEORGE WASHINGTON — Nothing projects U.S. global air and sea power more vividly than supercarriers. Bristling with fighter jets that can reach deep into even landlocked trouble zones, America’s virtually invincible carrier fleet has long enforced its dominance of the high seas.

China may soon put an end to that.

U.S. naval planners are scrambling to deal with what analysts say is a game-changing weapon being developed by China — an unprecedented carrier-killing missile called the Dong Feng 21D that could be launched from land with enough accuracy to penetrate the defences of even the most advanced moving aircraft carrier at a distance of more than 1,500 kilometres (900 miles).

The USS George Washington supercarrier recently deployed off North Korea in a high-profile show of U.S. sea power. AP Tokyo News Editor Eric Talmadge was aboard the carrier, and filed this report.

Analysts say final testing of the missile could come as soon as the end of this year, though questions remain about how fast China will be able to perfect its accuracy to the level needed to threaten a moving carrier at sea.

The weapon, a version of which was displayed last year in a Chinese military parade, could revolutionize China’s role in the Pacific balance of power, seriously weakening Washington’s ability to intervene in any potential conflict over Taiwan or North Korea. It could also deny U.S. ships safe access to international waters near China’s 11,200-mile (18,000-kilometre) -long coastline.

While a nuclear bomb could theoretically sink a carrier, assuming its user was willing to raise the stakes to atomic levels, the conventionally-armed Dong Feng 21D’s uniqueness is in its ability to hit a powerfully defended moving target with pin-point precision.

The Chinese Defence Ministry did not immediately respond to the AP’s request for a comment.

Funded by annual double-digit increases in the defence budget for almost every year of the past two decades, the Chinese navy has become Asia’s largest and has expanded beyond its traditional mission of retaking Taiwan to push its sphere of influence deeper into the Pacific and protect vital maritime trade routes.

“The Navy has long had to fear carrier-killing capabilities,” said Patrick Cronin, senior director of the Asia-Pacific Security Program at the nonpartisan, Washington-based Center for a New American Security. “The emerging Chinese antiship missile capability, and in particular the DF 21D, represents the first post-Cold War capability that is both potentially capable of stopping our naval power projection and deliberately designed for that purpose.”

Setting the stage for a possible conflict, Beijing has grown increasingly vocal in its demands for the U.S. to stay away from the wide swaths of ocean — covering much of the Yellow, East and South China seas — where it claims exclusivity.

It strongly opposed plans to hold U.S.-South Korean war games in the Yellow Sea off the northeastern Chinese coast, saying the participation of the USS George Washington supercarrier, with its 1,092-foot (333-meter) flight deck and 6,250 personnel, would be a provocation because it put Beijing within striking range of U.S. F-18 warplanes.

The carrier instead took part in manoeuvers held farther away in the Sea of Japan.

U.S. officials deny Chinese pressure kept it away, and say they will not be told by Beijing where they can operate.

“We reserve the right to exercise in international waters anywhere in the world,” Rear Adm. Daniel Cloyd, who headed the U.S. side of the exercises, said aboard the carrier during the manoeuvrs, which ended last week.

But the new missile could undermine that policy.

“China can reach out and hit the U.S. well before the U.S. can get close enough to the mainland to hit back,” said Toshi Yoshihara, an associate professor at the U.S. Naval War College. He said U.S. ships have only twice been that vulnerable — against Japan in World War II and against Soviet bombers in the Cold War.

Carrier-killing missiles “could have an enduring psychological effect on U.S. policymakers,” he emailed to The AP. “It underscores more broadly that the U.S. Navy no longer rules the waves as it has since the end of World War II. The stark reality is that sea control cannot be taken for granted anymore.”

Yoshihara said the weapon is causing considerable consternation in Washington, though — with attention focused on land wars in Afghanistan and Iraq — its implications haven’t been widely discussed in public.

Analysts note that while much has been made of China’s efforts to ready a carrier fleet of its own, it would likely take decades to catch U.S. carrier crews’ level of expertise, training and experience.

But Beijing does not need to match the U.S. carrier for carrier. The Dong Feng 21D, smarter, and vastly cheaper, could successfully attack a U.S. carrier, or at least deter it from getting too close.

U.S. Defence Secretary Robert Gates warned of the threat in a speech last September at the Air Force Association Convention.

“When considering the military-modernization programs of countries like China, we should be concerned less with their potential ability to challenge the U.S. symmetrically — fighter to fighter or ship to ship — and more with their ability to disrupt our freedom of movement and narrow our strategic options,” he said.

Gates said China’s investments in cyber and anti-satellite warfare, anti-air and anti-ship weaponry, along with ballistic missiles, “could threaten America’s primary way to project power” through its forward air bases and carrier strike groups.

The Pentagon has been worried for years about China getting an anti-ship ballistic missile. The Pentagon considers such a missile an “anti-access,” weapon, meaning that it could deny others access to certain areas.

The Air Force’s top surveillance and intelligence officer, Lt. Gen. David Deptula, told reporters this week that China’s effort to increase anti-access capability is part of a worrisome trend.

He did not single out the DF 21D, but said: “While we might not fight the Chinese, we may end up in situations where we’ll certainly be opposing the equipment that they build and sell around the world.”

Questions remain over when — and if — China will perfect the technology; hitting a moving carrier is no mean feat, requiring state-of-the-art guidance systems, and some experts believe it will take China a decade or so to field a reliable threat. Others, however, say final tests of the missile could come in the next year or two.

Former Navy commander James Kraska, a professor of international law and sea power at the U.S. Naval War College, recently wrote a controversial article in the magazine Orbis outlining a hypothetical scenario set just five years from now in which a Deng Feng 21D missile with a penetrator warhead sinks the USS George Washington.

That would usher in a “new epoch of international order in which Beijing emerges to displace the United States.”

While China’s Defense Ministry never comments on new weapons before they become operational, the DF 21D — which would travel at 10 times the speed of sound and carry conventional payloads — has been much discussed by military buffs online.

A pseudonymous article posted on Xinhuanet, website of China’s official news agency, imagines the U.S. dispatching the George Washington to aid Taiwan against a Chinese attack.

The Chinese would respond with three salvos of DF 21D, the first of which would pierce the hull, start fires and shut down flight operations, the article says. The second would knock out its engines and be accompanied by air attacks. The third wave, the article says, would “send the George Washington to the bottom of the ocean.”

Comments on the article were mostly positive.

Pushback from the Market to Geithner III?

Originally posted 2009-03-24 17:59:49. Republished by Blog Post Promoter

Geithner III is intended to create “price discovery”. But when you backstop the “buyer” from any downside while at the same time financing said buyer, then the “value” or price discovered becomes artificially inflated. Perhaps this is precisely why the plan is designed this way. Nonetheless, the solution is in and we can get on with it.

Dick Alford told The IRA: “The structure as described in the press is nothing more than the Fed, FDIC and Treasury providing some asset managers with calls on the upside–max loss equal to 3% of assets? When was the Fed or the FDIC authorized to sell or give away call options? I suppose that they will try to sell this as a non-recourse loan, but it isn’t. It is an option… The investors would in effect be left with sub-market financing and ownership of much of the upside potential. The implied rates of return to the private side are staggering, especially given the absence of any downside risk.”

Perhaps the market is thinking ahead? Wow, really?  Let’s agree that subprime losses have peaked and are now in the rear-view mirror. That leaves residential losses, which are expected to peak this year. And next in line we have the real king of the jungle: commercial paper, which should see loss rates peak in 2010. In the case of the latter, if the administration can get this economy moving and credit markets open, perhaps these losses could be refinanced and pushed forward in the hopes that the economy will improve. Otherwise, this party is just getting started.

Just for fun, this is a great excerpt of Congresswoman Waters confronting Secretary Geithner in a deeply unfair match of intellectual wits:

Implied Dividends and Market Optimism

Originally posted 2009-05-13 10:21:46. Republished by Blog Post Promoter

Implied dividends of European stocks based off of dividend swaps on the DJ Eurostoxx 50 index, have jumped, indicating growing optimism about equity markets worldwide.

Implied dividends were at distressed levels near the end of Q’4 last year. The cause was a scramble by dealers to hedge their long dividend exposures. Worsening dividend forecasts combined in a perfect storm as natural counter parties willing to take on long exposures, hedge funds, were taken out on stretchers. Dealers are generally long dividends because of the equity structured products they sell, which tend to be bullish. However, dealers’ need to unload dividends as decreased dramatically due to positive performance in equity markets and a lack of negative earnings surprises.

There has been a re-rating of dividends as forced selling caused a dislocation between the performance of the equity markets and their corresponding dividend markets because dividends were more aggressively impacted. The recent alleviation of several outlier events, namely the forced selling of long dividend positions by market participants as well as less extreme market conditions, forced dealers and hedge funds that participate in this market to realize just how big a discount implied dividends were trading at versus underlying stock fundamentals. It didn’t take a PhD to realize implied dividends were compressed much more than they should have been. Because dividends have a delta to the underlying equity markets, implied dividends track their performance.

It appears dividends have returned to fundamental levels but there is still room for dividends to rally further, lacking some multi-sigma event on the horizon as any potential dividend upside remains coupled to a sustained rally in equity markets.

dividends, implied volatility, market optimism, proprietary trading, global macro, rising dividends, dividend yields, yields, DJ EuroStoxx, Eurostoxx, hedge funds, sigma, investment capitalist, prop trading, trading, stocks, t3live, t3 capital, t3, pej, pej hamidi

Strategy Update….

Originally posted 2009-01-22 12:55:00. Republished by Blog Post Promoter

After market euphoria turned into pre-market despair with MSFT spoiling the party. We made new lows but internals became bullish around lunch time.  Looking for successful test of 815 in S&P.  Bullish posture still stands, trade SKF for cash flow and hedging.

10 Chinese Stocks Headed Higher

Originally posted 2009-05-04 13:17:16. Republished by Blog Post Promoter

There are several good stocks coming up on my radar. So I’m going to provide a quick list of my top choices:

HMIN – Huge hotel chain throughout China.
NPD- Enormous retail drugstore chain throughout China. Excellent growth and margin ratios.
CPSL- Specialty Steel
HIMX- Specialty Chipmaker
ACTS- Semiconductor Manufacturer
SVA- Biotech with H1N1 “hype”
QXM- Mobile phone handset distributor and network developer.
LFC- China Life Insurer
ACH- Aluminum Company of China (ChinAlco)
SOHU- Online Portal with huge advertising growth

Some of these stocks have already started to move, so be careful and trade wisely.

Disclosures: ALL OF THE ABOVE are traded actively by the author.

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MarketWizard Worried About Market Health

The charts I’m going to show you are simple 1 year snapshots of primary Global Macro indicators, and paint a rather bleak picture for the very near term (Global Macro is a long-term discipline). I’m not a die hard technician, and prefer statistical evidence and other quantitative data sets backing up my thesis, not just a visual representation of supply & demand (yes I know the argument that everything is in the chart), but nothing replaces actual ear to the ground research, where information flow is crucial and coming from multiple sources including Hedge Fund managers, Brokers, Institutional Traders, Specialists, etc… In other words, the network I’ve built up over 15 years in this business. I actually got my Series 7 at 18 but after 2 years at Smith Barney, I went back to school for 2 years, then I went back to trading. Once a trader, always a trader. :mrgreen:

Here’s the point. The markets look sick on the back of some of the bleakest economic indicators we’ve seen since the Great Depression. Yes there are some optimists that see the cup as half full, and to counter them, there are the pessimists who see it as half empty.  I see it for what it is: completely dry. Not a drop left in the cup.

Why?  Take a look at the charts. Either the “flash crash” and recent major bear market top confirmations, which are undergoing retracements right now, are no reason to be worried; then there’s one thing you should definitely be worried about, and that is the debasing of not only the USD, but all major G8 currencies, as well as all currencies tied to the USD, which is half the world. Considering commodities are priced in USD’s, and you have some sort of mental block and are unable to short stocks, the long side of your MARKET-NEUTRAL portfolio should contain commodity stocks, although a global recession will kill demand, regardless of the value of the USD as nation after nation devalues to remain competitive with those tied to the US Dollar.

It’s like the days of Fiat Currencies are crashing down.  As the cycle turns, and factories close, and mergers that were done at the top are unwound or scaled back, unemployment will continue to rise.  The Bush Administration did a heck of a job destroying any last vestiges of worker’s union’s, which was one of his top policy objectives. So forget about any “cradles” to support those forced to go on welfare; the indigent, the transients, the homeless, basically, the poor.  I don’t personally agree with the concept of a “workers union” for this exact very reason. Union’s were built in the very early part of the 20th century, when workers needed rights, child labor was rampant and civil disobedience was not tolerated and countered with severe force, as if we were how Iran is today.

However, in the 21st century, labor mobility is a key factor in keeping those with specialized skills employed. Web sites with thousands upon thousands of jobs are available to the unemployed, with jobs all over the country, something that wasn’t available 100 years ago.  Labor mobility is the opposite of Labor Unions. But since the world has changed, Labor Unions have become nothing but a hindrance to productivity and an excuse for certain employees to abuse their union rights.  I recall living in Michigan and my neighbor above me was usually on strike from Chrysler. He loved it because he got to stay home and drink his Budweiser while collecting 98% of his pay!  No wonder our automotive industry was shattered. Have no doubt though, this same industry, without the ball and chains attached to it, will become the most prosperous industry in the world, powering employment in green energy, new construction, advanced labor, etc.  No more people trained to pull a lever all day long, but instead, those trained in sciences that make lasting contributions to civilization as a whole. With Labor Unions, I doubt even Craig’s List would get any hits.

I digress. Back to the present day and current market. When studied up close, one can see prices have leaped above widely used moving averages. Prices did this after confirming major tops and some even making new bear market lows!  So we know the smart money has been distributing stocks for a few years now, and in the process, creating the occasional rally that appears bullish to the laymen, like button pushing day trading robots who are going broke every day while their firms get richer and richer.  There are 4 phases to the stock market, and this is Stock Theory 101. If you don’t know those 4 cycles, get out now while you still have a chance. You’re a dead duck.

This is not a traders market. It’s not a stock pickers market. It’s not a market to invest long-term assets, it’s not a market with anywhere to hide. There is debasing going on, and unless you are sitting on something tangible, like blocks of gold and silver, then you will continue to see an erosion of wealth. Even when you are sitting in cash, you are slowly draining money away due to the ZIRP that’s been in effect forever now.

So without further adieu, I present to you the recent “event” that has all the day trading button pushers at the edge of their seats because prices have “gapped” above their 50-day Simple Moving Averages. The charts look entirely different when using Logarithmic scaling and Exponential or Weighted Moving averages, but the average person who invests via Scottrade, or Ameritrade, or eTrade doesn’t even have a clue what those terms mean. I’m going to link to the charts rather than post them because I’m not in the mood.

Macro Indicators

The reality is:  Gold is rising and the number of actual “deliveries” vs. rolling of contracts has exponentially increased in Chicago to unprecedented levels, and believe me, it’s expensive to take delivery of the gold rather than rolling the contract, plus storage, transportation, security, etc… So near term, buy companies with no overhead, that just collect royalties, like Royal Gold (RGLD) which just corrected 20% so now is the time to pick some up.

My favorite at the moment to buy and park is Chimera (CIM). They are running operating margins in excess of 80%. Their P.E. is below 6. And their yield? A fat 18% and trading for less than $4. You probably could get it for $3.50 if you’re patient. The smart play is to scale into the positi0n.  Start building it up. They are in the exact sweet spot of where you want to be as a company. Buying Residential Mortgage Backed Securities at huge discounts. They’re also gobbling up Residential Loans, real-estate related securities, and other asset-backed securities, again, at enormous discounts. If I had the money to back me, this is exactly what I would be doing right now. I would have my team combing through the pieces that make up each tranche of a CDO, ABS, RMBS, and even some CMBS.

Yields are falling and continue to fall as the Fed continues its quantitative easing operations in the market and has made it clear that their ZIRP will remain until the economy has substantially stabilized, a far cry from where we are now. The yield on government bonds can’t go to zero though because then the Chinese will look like fools for sterilizing their surpluses using zero return or negative return investments.

All the major indices, after making new lows for the year, have rallied back up to their downtrend lines, regardless of the fact that they are above their “50 day Simple Moving Average”.  But anything hopeful to cling to right?  Poor, poor fools.  The primary trend in developed economies is down. Showing promise are India and M.E.N.A. economies, especially after the World Cup being held in South Africa. Brazil is still too dependent on natural resource exports, so they’re in trouble too. As for Russia, forget it. They’ve gone back to the days of communism. There is no free market anymore in Russia.   China is still “on fire” according to the numbers, but one wonders “who’s buying all their output they’re reporting”?  Could they be manipulating the numbers? Will there be a major fallout there?  A Chinese bank went public recently, after ICBC went public last year. So there is demand for these stocks, could the demand be internal? In other words, could the party (Communist) be buying stocks for their own account?

Where does that leave us? It leaves us hoping for a major technological innovation, a world changing event, some sort of technology that will return optimism to the hearts and minds of all the Capitalists so they can finally tell the Socialists to shut-up, Capitalism works.  Perhaps if and when Obama re-directs the $100 billion+ per year our government is spending in Mesopotamia, for what, I don’t know; into domestic programs and fights not to be labeled as the “tax and spend party” by reminding the public using every channel available that the money is being diverted from the war, and not from new taxes, then we’ll see some real stimulus.  God help us if faith in the USD is lost. Unless the “brave New World Order” wants it that way, and is trying to introduce an international, single currency using SDR’s held by the IMF in the accounts of nations, and can be used as “money” between nation to nation.

I’d like to make an SDR withdrawal please.

Disclosures:  NONE

Prechter and His Dow 1000 Prediction

That’s all that it is, a prediction. Nothing to get all ruffled up about. Robert Prechter is highly intelligent, has written countless books, and is one of the foremost economists in the country.  An economist I can truly say I respect after reading several of his books. But this is one of those Nuriel Rubini types of attention grabbing headlines as a hedge in case the Dow hits 1000, he can take credit for it, just like Roubini took a swing for the fences when he said there will be a Credit Crisis that will cripple housing, as if that wasn’t already obvious by the time he mentioned it, but he became the face of the grim reaper. And recently, Mr. Roubini turned bullish. So might Prechter be taking over the grim reaper gown from Mr. Rubini? Stay tuned, while you work on your tan, not while you stare at your screen. There is one and only one thing you should be doing right now, and that’s NOT TRADING. Work on your tan, go to the beach, the pool, the sundeck, the Hamptons, whatever. Get the heck out of the office.  Unless you really prefer a shortened life.

But this Dow 1000 idea of his seems like Vanity to me. An attempt to grab some headlines. Sure the stimulus is wearing off, and the economy has not started growing enough to offset the stimulus loss, but Dow 1000?  Please.

Bear Market multiples have always bottomed in the single digits against the S&P 500. IF we were at a multiple of 8x, and that’s factoring in a Zero Interest Rate Policy (aka ZIRP), which makes it almost impossible to get to that level, then we would see Dow somewhere in the 4000 range.

Scratching that off the “reality” list of possibilities.

Let’s think outside the box. The $100+ billion per year we’re spending on the war is going to be re-directed towards stimulus packages conjured up by our tax & spend, or spend & tax Democrat’s, as is their duty and obligation, and we’re right back to Dow 6000.  So I’m not saying prepare for a cascade sell-off, although the quantitative data is HORRIBLE right now, there’s no volume to cause that, and a lack of volume causes markets to slowly sink.

It’s more likely we’ll get that September rally followed by an October Surprise that will reward those sitting on piles of cash to deploy.

Get that?  Some of you are hard of hearing, but can read.  Sit on cash and prepare to buy stocks A LOT CHEAPER than they are today.

**Disclosures:  Author is out of the stocks in entirety and is not even short the market, preferring the pool and Momosas.

Lightspeed, Anvil and Terra Nova

*IMPORTANT Point of Clarification: Lightspeed has not purchased Assent, but rather has licensed The Anvil platform, which will continue to be available to customers. The press release actually crossed the wire this morning and can be found on multiple news outlets, or you can read it below:

Lightspeed Financial Acquires Exclusive License to Operate Anvil Professional Trading Platform. Deal Strengthens Lightspeed’s Competitive Position in Active Trading Market

NEW YORK, June 22, 2010 – Lightspeed Financial, Inc., a leading provider of ultra low latency direct market access (DMA) trading technology, risk management solutions, and brokerage services for retail active traders, professional trading groups, hedge funds, and algorithmic “black box” firms, today announced that subject to the satisfaction of certain conditions it has acquired a perpetual license to the Anvil trading software currently available only through Assent LLC.  The licensing agreement is part of an ongoing effort by Lightspeed to fortify its position as the active trading industry’s premier operator and the leading acquirer of trading businesses. Terms of the transaction were not disclosed.

Assent made public in April its plans to exit the professional-trading business and discontinue operating the Anvil trading platform.

“We continue to grow our business organically at a steady pace while at the same time assessing the competitive landscape to identify strategic combination’s, which can help us capture an even greater share of market as we build an enduring company and establish Lightspeed as the preeminent home for professional traders,” said Stephen Ehrlich, Chief Executive Officer, Lightspeed Financial, Inc. “The license to operate Anvil was a perfect fit for Lightspeed.  It enhances our ability to offer professional trading clients ultra low latency market data and executions, a business we have been successfully servicing for years. This transaction is a validation of our leading position in the professional trading arena.”

The exclusive licensing deal for Anvil represents the fifth successful transaction that Lightspeed has made in the active trading space since its inception nearly four years ago and its third deal this year. Past transactions include the acquisitions of retail trading firms Schonfeld & Company, LLC, Integrity Trading Inc, NobleTrading, and Terra Nova Financial, LLC earlier this month.

Ehrlich noted that the licensing deal could, when effective, bring the total Lightspeed client base to more than 7,500 traders who could execute over 220 million equity shares per day with total client assets exceeding $1.35 billion.

About Lightspeed Financial, Inc.

Headquartered in New York City, Lightspeed Financial operates through three wholly-owned subsidiaries:

Lightspeed Trading, LLC operates as a fully disclosed introducing broker-dealer and FINRA and NFA member. The Company offers securities and direct access brokerage, trading and advanced order routing services to their clients utilizing Lightspeed’s software products.

Lightspeed Technologies, LLC serves as the Company’s technology development subsidiary. Lightspeed develops and operates Lightspeed Trader, Lightspeed’s Direct Market Access trading software application; Lightspeed Gateway, Lightspeed algorithmic trading offering; Lightspeed Risk, a real-time risk management application; and Lightspeed Admin, Middle Office Technology suite. Utilizing a number of proprietary technologies, Lightspeed offers these products and more to broker-dealers, institutional entities and professional traders.

Lightspeed Education, LLC delivers educational products to the Lightspeed Trading, LLC customer community. These products include third party educational tools, webinars and the Lightspeed Spotlight social community. www.lightspeed.com

Lightspeed Financial, Lightspeed Technologies, Lightspeed Trading, Lightspeed Education and the Lightspeed logo are trademarks or registered trademarks of Lightspeed Financial, Inc.

© 2010 Lightspeed Financial, Inc. All rights reserved.

Press Contact:

Mike Boccio

Sloane & Company

(212) 446-1867
**End of Press Release

Now, back to what I was saying, with one point of clarification, and that was the Assent/Anvil deal structure.  Assent is in fact being wound down apparently, but The Anvil platform lives on to see another day. That’s great news for traders and crowns Lightspeed as the industry’s “de facto” roll-up player. Quite an impressive feat for a small private company to be on a roll-up strategy of trading platforms and trading firms, which now allows it to reach over 7,500 traders and generate over 220 million shares per day.

Good news or bad, Lightspeed Financial has been implementing a roll-up strategy since their acquisition of Schonfeld, which gave them Lightspeed, which itself used to be eTrade’s proprietary trading platform which Schonfeld had purchased way back in the day. Not only has Lightspeed acquired Terra Nova Financial, which gives them the all mighty “Real Tick” platform, but they’ve also acquired a “perpetual license to The Anvil.”   Both Real Tick and The Anvil were pioneer software platforms in the early days of electronic trading, when it was still the wild west; and the the equivalent of today’s High Frequency Traders were SOES Bandits.

Being on the inside of this business gives one a certain “dial” into the street buzz, which let us scoop even the Press Release by about 3 or 4 days. Not bad for a tiny blog. (Even though we got one small piece of it wrong, there are parts of  the transaction which I won’t even disclose to you!)

With regards to myself and the firm I’m associated with,  anyone who wishes to use LightSpeed as a trading platform can do so for NO monthly fee. Instead, LightSpeed will assess a charge of .0006 cents per share for use of their software. It has always been one of the more expensive platforms, but if one learns all the capabilities of Lightspeed, including how to customize and optimize the built-in execution algorithms, and the powerful basket functionality and ease of modifying the layout, it’s well worth the added cost and if you are doing less than 400,000 shares per month, the additional charges are trivial. Even though they recently upgraded Lightspeed’s charting capabilities, I would say they’re still in the dark ages when it comes to analytics, but that’s possibly what makes it such a lightning fast platform.

The heavier the analytics, the heavier the installation package and therefore the slower your system will run.  I’ve always separated my charting from my trading, putting each on a different machine.  This allows me to use a lightning fast execution platform while also using a professional but heavy charting package like Metastock Pro with Quote Center by ThomsonReuters.  Don’t go for the eSignal version of MS Pro because their data sucks. Excuse my French but that’s really the best way I can describe eSignal. The worst charting platform ever invented, which I wish would just die a slow death and go away.

So, back to our little math problem, if you are doing 400,000 – 600,000 shares per month… it’s a judgment call. One platform over the other for almost the same monthly cost… Hmm, In this situation, I’d go with the superior platform, which is by far Lightspeed or Anvil. For a little extra, go for Real Tick. That little extra will be saved on the back end when you no longer have to pay for such a piece of trash like eSignal and their totally unreliable data and third rate technical analysis capabilities. You won’t even need a professional platform like Metastock because Real Tick’s charting capabilities are professional grade and I’ve always loved using it.

As long as you learn how to use any platform you chose like a pro without being a key pushing monkey (i.e. retail day trader perpetually gross positive while always net negative at the end of the month), you should be alright, even with a “P.o.S” like Sterling Pro, which I think to be the most inferior trading platform available today, and if it wasn’t for the fact that it’s the lowest cost option, and has access to the most execution outlets, and the API is easiest to write to, I wouldn’t trade a discretionary or market-neutral strategy involving baskets or otherwise on Sterling even if you put a gun to my head, that’s how much I hate it. But if you’re a black box quant and need an easy API and as many execution outlets lit up at the lowest cost possible, then Sterling it is, even though it pains me to admit that.

Above 600,000 shares per month and it stops making economic sense.  The added cost of .0006 cents per share for Lightspeed per share, or the monthly cost of Real Tick,  could eventually offset the superiority of these platforms over a generic platform like Sterling Trader (not sure of the added cost, if there will be any, for the use of The Anvil and how it will be structured: whether per share like Lightspeed or a flat monthly rate like Real Tick).

But stay tuned as our MarketWizard keeps you dialed into the market’s buzz, all the way from sunny Irvine, Ca. where the sun doesn’t stop shining and the girls only where their swimsuit tops while rollerblading the broadway at the beach, all day long, sometimes stopping in for a drink or two before taking off again, without even telling me her name, just handing me her number…

Let me know when you’re ready to make the switch to 20 cents per 1000 shares and 75% payouts and I’ll gladly make the introduction.  Just email me at the following address:    Pej   (at)   InvestmentCapitalist   (dot)  com  (pardon the weird spelling of the email but it prevents the spammers from picking up the address and flooding me with Viagra adds and cheap auto insurance loans offers)

Tails Tails Everywhere: A Look at the Carnage from “The Glitch”

Notwithstanding my annoyance at last week’s “technical glitch” that probably made a few people over a billion dollars, the problems it caused for my programs because of extremely large tails in many stocks is a bigger hindrance. The lows set on Thursday’s sudden cascade 1000 point sell-off, although we’re being told was caused by a “fat finger”, have short-circuited many of my models such that their output can’t really be trusted. I’m still tweaking them to compensate for the tails, but the spike above 40 in the Volatility Index plays a huge factor in the output of my models. The number of days the VIX stays above 40 is also a factor.

The strongest “sector” from a long-term macro perspective unbelievably is the Biotech Index. The chart below is monthly! Let’s keep an eye on the group for some short opportunities because the corrections are going to be hard and fast, but not for the faint of heart, or the prop guy with a tight stop-loss for the day.


Please click on image above for higher resolution chart

Is the CRB Index running its course, with an ongoing rally in the US Dollar and fires burning in Europe over severe austerity measures in countries used to Socialism? Or will the mighty Chinese economy pull us all through whatever is going on. The weekly chart of the CRB shows how it’s turning over after running into a myriad of moving averages as well as an important Fibonacci retracement level. Therefore, a good area to find short trades if we continue to fall and/or the US Dollar continues to surge, are commodity stocks.


Please click on image above for higher resolution chart

On that note, here’s one idea. BP and RIG both are in severe trouble. Technically, fundamentally, from a public relations standpoint, and the amount of damages they’ll have to pay is still unknown. But although they’re good candidates to short, at some point, both stocks will be extremely attractive buys. For now, the breakaway gaps in each suggest lower prices to come. However, at the moment, both are extremely oversold, so I would only short them if they break last week’s lows. Otherwise, let’s wait for a retracement and then we’ll hit the bid.

For now, the most important observation I’ve made thus far is that the most reliable indicators have been Fibonacci Retracement & Projection lines as well as specific moving averages. If you don’t know how to use Fib Retracements and Projections, tune in to my radio broadcasts on T3 Live, the internet’s most advanced stock research and advisory service. In these volatile times, you need guidance from the best traders on Wall St., who trade during the day, completely transparent, buying and selling in real time while talking on the radio explaining what’s happening. T3 Live has been on CNBC, Fox, MSNBC and mentioned in all the major financial publications. Check it out with a free trial here.

There really are a tremendous amount of both long and short trade opportunities out there. The problem? Gap after gap after gap!  It gets extremely frustrating for those that try to trade  the tape rather than a portfolio strategy.  Nonetheless, it’s just a matter of finding the market’s pulse and trading with it. Right now, to be 100% directional is suicide. One shouldn’t go beyond 80/20 during the day and 60/40 overnight. Here are some ideas on both sides. I’ll announce their entry, or trigger on the radio:

LONG

SHORT

AMZN, AAPL, AIG, AXP, AONE, ASIA AOB, BP,BIDU, RIG, CAAS,
BAX, EBAY, EMC, CSCO, DECK, CEPH CEO, CMED, CTRP, CYOU

The primary MACRO THEME for the month is going to be a rising Dollar with a flight to quality, the carry trade continues, bond markets know interest hikes are coming, probably after the streets of Europe stop burning. Short look at the commodity stocks vs. long the tech names. Once again, I’ll be on the radio with many more names on both long and short trades. It’s been a long time since the VIX has been above 40. Let’s hope it stays here for a few weeks at least.

Two-Third Retracement Lines Everywhere

Projected Retracement Marks:

Nasdaq:     1900

INDU:     200w SMA + 2/3.  Projected:  9500, 8400

Hang Seng Finance:     1)  29,500  2) 26,750 3)  25,000   4) 17,000

US Short Term Note Yields:  Pointing lower

GS:    Short term target $130. Ugly breakaway gap. Measures same standard deviation as the one above the primary downtrend line.

V:     Might be able to buy in low $80′s.

VNO:  One of the easiest “out of the park” home-run short sales. Too many reasons to list. Will discuss on radio during day.

X:     Defense is $53 or else $47.

XLNX:     Oppty. to buy in low to mid $20′s. Take it.

AMZN:    $115 or $105.

More later.

Disclaimer:  Author may or may not have positions in the above stocks throughout the course of the trading day. As of the writing of this blog post, author has no positions in any of the above stocks.

Stock Trading Ideas: Fri 04/10

LONG TRADE IDEAS

SHORT SALE IDEAS

NTES- 10 count right shoulder filled gap Heavy resistance 37.50. Leg into WEAKNESS OR GET CRUSHED. PCLN- Look at Monthly. 161.8% converges with secondary trendline perfectly. No support untio 173 then 144.
BX- trend high is 14.80; MA support @ 14.50 INCY SS @ 15.05 RISK .15
HMA- Oscillating on62.8% line BUY LIMIT 8.25/50 PRXL- May try to close gap at 24.40. T= 21.50 – 22
GS- Confirmed 9count. Buy Limit $178 RDN- Keep hitting her at 16.50 but this is gonna be a hard and long fall. DO NOT GET SHAKEN OUT
EMC – BUY LIMIT 18.15 SLXP- At 161.8% line and t/l. Support 30 then 26.
TSL- BUY BUY BUY

CSIQ- $24.50 OR B/O

SOHU- Short positions are being built by supporting stock on MA’s around 53. Try to sell strengt around 54 or < 53.05
CELG- 9 COUNT FIB FAN 2ND LINE STRONG CLOSES. WATCH CLOSELY RIMM- One more leg down to $60
TREE- BUY LIMIT 18.51 STD
UNH- BUY 31.50 – 31.06
USB- BUY LIMIT 26.78 or >27.20
CTRP- MONITOR FOR CONFIRMATION OF B/O @ 39
GLD: H&S breakout. N/L @ 111.35. Buy weakness
HAR- Pennant b/o to Fib Proj. Retracing now. Support

At 47.75 and 46.45

GENZ – HOLDING 51 FOR 2X BOTTOM.
HLIT – ASCENDING TRIANGLE B/O. BUY 1ST FAILURE.
GE- MONITOR FOR ENTRY ON PULLBACK TO 17.25
INT- BUY LIMIT 28.45/.50 2X BOTTOM CONSOLIDATION.
JAZZ- BUY LIMIT 11.20/.25
MFC – BUY LIMIT 19.50
MHS – 10 COUNT. T/L resisting. Buy Limit $63.85 WATCH
ATHR- At all time highs. Good trend. Weak close. Look for test of $35.
RF- Want to be a buyer at 7.60L
NVDA- AT LONGTER T/L. FLIRTING WITH B/D. MONITOR
CYXN FOR WACHOVIA. MAJOR B/O. BUY L 0.64
FIG- Watch for Dips. Working on 2x bottom.
SDTH- Actually holding breakout above 7. Buy Limit $7.21
PMI


An Epic Battle for Individual Eyeballs Starring: Google, Yahoo, Apple, MSN and Facebook

In the world of online media marketing, 2007 was the year of  “Behavioral Targeting” technology;  2010 will be the year when Facebook figured out how to monetize that technology before even Google, and perhaps why it may be worth more than Google now if it were a public company, not a private one.

Once Facebook opened up its marketing platform to developers and the widget was born as a cheap marketing and branding tool, entrepreneurial endeavors became accessible to all 6th grade level programmers . Then came the Apple iPhone and its gazillion applications.  The Facebook and Apple platforms enable anyone to create social applications which allow users to interact with their friends or a particular business. With many deep integration points, platform applications are effective ways for a business to leverage the social graph in ways unimagined until now. This bold move turned Facebook, and possibly the iPhone, into primary ‘storefront’ applications for business’s, allowing small companies to create a dynamic online presence for their customers. 

So when Microsoft threw out $240 million for a 1.6% stake, thereby valuing Facebook at $15 billion back in ’07, it was one of Bill Gates’ shrewdest investments, even though it took a while for the so-called experts to in fact ‘get it’. Not only did this keep Facebook out of the hands of Google, but more importantly, had Google swallowed up Facebook, it would have changed the dynamics of competition between Microsoft and Google so heavily in favor of Google that it could have forced Microsoft to accept defeat in search engine marketing sometime down the road.  

Earlier that year, when Google swallowed up DoubleClick for $3.1 billion in April, it also got a superb deal mainly because of the way Google has been able to integrate DoubleClick into its’ Adsense and Adwords platforms. Absolutely seamless, very easy to use, and a category killer for domain name parking. Why go through an intermediary to park your domain when you can go straight to the source and make more money? Most domains don’t even look parked these days. For example:  www.CureThis.com is a full web site parked by a company called DevHub! However, when Google parks a site, there are no bells and whistles, it’s quite obvious the site is parked. For example, take a look at www.ShopBestMortgage.com or www.FlashVirtual.com.  Both of these sites are parked with Google. However, even with the very simple look, many studies have shown that simplicity like that creates the greatest return. It’s just a matter of getting the site indexed and showing up on searches.  Even my nickname is parked at www.MarketWizard.us with an entirely different template. About five years ago, domain parking was for the uneducated masses trying to get lucky. Now it’s becoming a strategic asset.

In May of 2007, Microsoft’s $6 billion purchase of aQuantive for a massive 85% premium, and Yahoo’s “me too” buy of Right Media for $680 million, were both in response to Google’s acquisition of DoubleClick. It’s quite true those acquired by the latter two giants were players engaged in BT (Behavioral Targeting) since at least 2004, however, the marriage of a search platform with the largest banner ad serving network for publishers has blurred the line between service provider and competitor. The major online players appear to be declaring a head on war with the old school Madison Avenue companies, although WPP of London appears to be with the curve following their acquisition of 24/7 RealMedia in May of 2007, which seems to have worked out quite profitably for them, especially for clients that want a “one stop shop”. As the next evolution of the internet gets underway, the concept of “Long tail theoryis all of a sudden a part of every ad executive’s vocabulary.

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