Welcome to The Santarelli Exchange!

Hello folks and welcome to The Santarelli Exchange! I am Dave Santarelli and look forward to helping you with your educational and trading goals and I am making it my mission to helping you become a better trader and investor with the use of this site and its services!


I have worked nonstop the past 42 days working 18 hour days building this website and perfecting it to not only include my trades but to also focus more on educational content I see traders struggling with along with this section here for market news and articles I feel are important to traders, investors and those looking for a firm education on the markets.

The way I have setup this site is to include the Market News/Articles, the Trade Feed where all trades will be posted in a very organized manner to show the type of trade, the legs, expiration dates, entry date along with an area to give information on the trade. Once a trade is made members will get an automatic email and text alert when a trade is entered or exited. An Education Tab which if you click on will give you topics that I will pick a section and add content to throughout the week. A Video tab where members can find a lot of information on a variety of topics which I will also add to as members give me certain topics they would like me to go over. Also I have included a live chatroom for members to discuss anything they wish to talk to each other about for those who are in the chatroom. The Portfolio tab will have ALL closed positions and the gain/loss associated with that trade. I also have many members who ask me for further help with education and 1 on 1 mentoring so I have included a tab called 1 on 1 Mentoring where for $1,000 this would include 40 hours of private tutoring/mentoring during 1 month where I will take the time and make sure members have a firm understanding of options, how they work, how they are traded, different techniques and strategies used to trade them and will also go over my personal method of how I pick stocks to trade and how I find the best trade to associate with that stock. This comes out to a small fee of just $25 dollars per hour for a private, 1 on 1 service.


If you see things you think would be an added benefit to the site or maybe change things around just let me know!


I look forward to continue providing a service of great stock picks and plays and to help educate my members on the market and ways of becoming a successful trader through my extensive knowledge and experience I have acquired throughout a decade of trading. If there is anyone in here who would also like normal stock plays I would be happy to post trade ideas if you just give me a heads-up that that is what you are looking for.

Welcome to The Santarelli Exchange and our new website/service where we will strive to help you become a better trader/investor! Happy Trading!

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The Santarelli Exchange (TSE) Has implemented a NEW Trade Alert system! Members LOVE IT!

Here is a link to view our word document of our new Trade Alert System. If you have ANY questions, please feel free to hit the contact us button and send us a message and we would be glad to respond back to you!

New Trade Alert System

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Trading Shares of Stock VS Trading Stock Options with example

Here i a link for a word document on trading shares of stock vs trading stock options. Also have a video being made that will be posted to our homepage.


Shares of stock vs stock options example

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Banks can be your best investments over next 12 to 24 months with interest rates still on the rise as banks make profits without having to lift a finger with higher rates

Best Bank Stocks to Own as the Fed Hikes

Interest Rates


It looks all but certain that the Federal Reserve will raise short-term interest rates when it concludes its two-day meeting on March 15. Bank stocks are traditional beneficiaries of higher interest rates, but they have already rallied sharply since the presidential election in November because investors are giddy about potential corporate tax cuts and financial deregulation. If the central bank does indeed hike short-term rates at its next meeting, are there any bank stocks with more upside to come?

Plenty, says analyst Richard X. Bove of Rafferty Capital Markets. Due to safeguards put in place during the Great Recession, banks are sitting on big piles of cash that are earning very low returns. “In the last 10 years, the government has forced them to raise their cash and securities, so if you get an increase in rates they see a jump in interest income,” Bove says. “And there’s no cost against that. It’s a simple increase in revenue.”

Kiplinger is forecasting three quarter-point rate hikes in 2017. If that holds true, the Fed’s target on the federal-funds rate, the rate banks charge each other for overnight loans and a key influencer of other interest rates, would rise to a range of 1.25% to 1.5% by the end of the year. As rates rise, banks, which have heaps of assets already on the books, will prosper without management having to lift a finger. Here are three bank stocks that are especially well positioned to benefit from Fed rate hikes. (Prices and data as of March 10.)

Bank of America (BAC, $25.31)

All of the big national banks should get a lift from rising interest rates, but Bank of America stands out. By the bank’s own estimates, a one-percentage-point rise in short- and long-term rates would increase its net interest income — the difference between how much it earns in interest on loans and how much interest it pays on deposits — by $3.4 billion a year. That’s real money even for a bank the size of Bank of America. It has a market value (share price multiplied by number of shares outstanding) of $254 billion and reported net interest income of $10.3 billion in the fourth quarter.

Analysts also like the tailwind Bank of America is getting from expense reductions. “We believe that BAC shareholders will continue to benefit from owning BAC as the Fed increases rates and BAC management executes on the company’s cost saving program,” says Brian Kleinhanzl of Keefe Bruyette & Woods.

Kleinhanzl has a rating of “outperform” (buy, essentially) on the stock based on the expectation of two additional Fed rate hikes per year in 2017 and 2018. The stock has a dividend yield of 1.1% based on the last four quarters of earnings, which helps sweeten potential returns.

JPMorgan Chase (JPM, $91.28)

After Bank of America, Bove says JPMorgan Chase is best positioned to take advantage of higher interest rates. “They have something like $600 billion in assets that would see an increased return when interest rates go up,” the analyst says. And even in the unlikely event that there are no rate increases this year, JPMorgan still expects the Fed’s quarter-point hike from December to boost net interest income by approximately $3 billion in 2017. Net interest income totaled about $46 billion last year.

Credit Suisse analyst Susan Roth Katzke has an “outperform” rating on the stock, thanks to above average and improving return on equity, driven in part by higher rates. Return on equity is a key measure of a bank’s profitability that shows how much income it generates on each dollar of shareholder equity.

UBS Global Research rates JPMorgan shares at “buy,” noting that the bank is “well positioned to benefit from higher interest rates, moderately faster economic growth, and, possibly, better capital markets.” The nation’s largest bank by assets has a market value of $326 billion and offers investors a dividend yield of 2.1%.

Northern Trust (NTRS, $89.30)

Northern Trust is something of a “quasi” bank, Bove says. As a financial holding company, it offers services such as wealth management, private banking and custodial and administrative services for institutions. Nevertheless, it’s positioned for much higher returns as rates go up.

The duration of the company’s bond portfolio is a bit longer than a year, Bove notes. That’s a short period of time in the world of fixed income and suggests a one percentage point rise in interest rates would only lower the value of its bond portfolio by 1% or so. As rates rise, Northern Trust can quickly replace mature debt with newer bonds carrying higher interest payments. Bove notes that as of Dec. 31, the company had $942 billion in assets under management and $8.5 trillion in assets under custody and administration.

In addition to higher interest income, Northern Trust gets a lift from a rising stock market. “If the equity markets go up, they see a big jump in revenues because they charge based on assets under management or custody and there’s no cost against it,” Bove says. When stronger economic growth is in the forecast, as it is today, interest rates and stock prices can rise at the same time. The bank has a market value of $20 billion and a dividend yield of 1.7%.


By DAN BURROWS, Contributing Writer 
March 14, 2017



Buying some LEAP calls or call spreads for January 2019 expiration can have some massive returns as bank stocks rise as revenue increases without banks having to lift a finger as fed raises rates which in turn means great profits for banks resulting in shares of banks continuing to rise. Simple patience and discipline can payoff huge for investors who have the patience and discipline to buy and manage these positions carefully. For example, looking at the BAC January 18th, 2019 you can buy the 27.00 strike calls for 2.10 OR you can buy the 27.00/30.00 debit vertical call spread for about .88 ($88) per contract. Your max return on this spread is difference between the 2 strikes 27.00 – 30.00 which is 3.00 minus the premium paid .88 for a max net gain of 2.12 ($212) per contract, which is a 240% max net return! For example, a $5,000 investment would be worth over $17,000 IF BAC shares are 30.00/share or higher at January 18th, 2019 expiration. Not a bad return if you have the patience to hold and manage a position for a little over a year and 3 months.

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Market Volatility Has Vanished Around the World

As Wall Street’s ‘fear gauge’ nears all-time lows, one commonly used measure shows Asian equities near their least volatile this century

The calm that has descended on U.S. financial markets is stretching around the world.

Based on one commonly used measure, Asian equities are near their least volatile this century—a byproduct of improving corporate earnings, stabilizing economic growth and the diminishing impact of geopolitical events on markets.

In the U.S., Wall Street’s “fear gauge” is near all-time lows, and in Europe, volatility has also largely subsided.

“This is a global dynamic,” said Michael Parker, head of strategy, Asia-Pacific at Bernstein Research in Hong Kong. “You see low volatility everywhere.”

By contrast, sharp gyrations in Chinese markets early last year caused a spike in volatility around the globe.

Bouncing BackMSCI Asia ex-Japan stock indexTHE WALL STREET JOURNALSource: FactSetNote:
2000’02’04’06’08’10’12’14’160100200300400500600700800900Sept. 27, 2006×451.41

In Asia, Mr. Parker cites the MSCI Asia ex-Japan stock index, a broad measure of regional performance—weighted most heavily to China, South Korea, Taiwan, Hong Kong and India—that has risen 19% this year. The index’s 90-day realized volatility, a measure of historical moves over that period, has fallen to 8.2%, near its lowest since at least 2000, according to Mr. Parker, and down by nearly half from a year ago. Only in summer 2014 was this volatility gauge lower.

Realized volatility is a measure of how much share prices move around. At this percentage, it shows that the market has moved by about 0.5% a day on average over the measured time frame.

It’s Quiet Here, TooA measure of volatility in the MSCI Asia ex-Japan stock indexTHE WALL STREET JOURNALSource: Bernstein Research

Another sign of calm is the lack of major daily declines: Since January 2016, the index has fallen more than 3% in one day just once. By comparison, in the prior two bull markets—September 2001-October 2007 and March 2009-May 2011—there were 3% daily declines on average every two to three months.

Few and Far BetweenAverage number of days between 3% declines during bull markets since 2000THE WALL STREET JOURNALSource: Bernstein Research
Sept. ’01 to Oct. ’07March ’09 to May ’11Jan ’16 to present050100150200250300350400

Mr. Parker reckons that investors haven’t had to contend with as many “binary events,” such as China’s surprise devaluation of August 2015, which sent shock waves through global markets. Signs of healthier consumer demand and strengthening industrial profits regionally have helped bolster equities. “Broad fears around China imploding and capital fleeing have abated,” he said.

Global index provider MSCI is expected to decide this week whether to include China’s domestically traded A-shares in its indexes. In prior years, MSCI said mainland stocks weren’t accessible or transparent enough to warrant inclusion. A different decision this time would increase the China exposure of the many global investors who invest based on MSCI indexes.

Low volatility has swept across asset classes globally. In the U.S., the CBOE Volatility Index, or VIX, closed Friday at 10.38, near its lowest level since 1993. The VSTOXX index of eurozone equity volatility, a European variation of the VIX, was also near a record low.

For now, few see any reason for the low volatility to end.

Investors will likely continue to watch China closely, analysts at Goldman Sachs said in a note last week. Policy makers there have recently been trying to tamp down leverage in the country’s financial system, and any “over-tightening…could exacerbate the mild growth slowdown so far,” Goldman said.

As for U.S. prospects, the Federal Reserve’s failure to raise rates as fast as it earlier forecast has made investors skeptical about the pace of increases it forecasts now. That could leave markets open to “hawkish surprises” later this year if U.S. growth doesn’t disappoint, Goldman said.

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5 things to know about the Dow’s attempt to rally to 20,000 and beyond

It’s growing louder — and maybe even kind of annoying.

No, not that Christmas tune that drives you crazy, but rather the buzz around the Dow DJIA, +0.11%  potentially rising to 20,000.

The stock gauge finished last week only 243 points below the 20K mark, and it isn’t looking like it will give up much ground on Monday. The Dow Jones Industrial Average was trading slightly higher around midday.

Here are five points that Dow watchers are making as the blue-chip barometer nears another big round number.

Others see few impediments to rising to 20,000 and beyond.

The only thing that could derail the stock market’s rally is a massive change in sentiment, wrote Brad McMillan, Commonwealth Financial Network’s chief financial officer, in a blog post titled “Dow 20,000 in sight.” And such a shift in mood doesn’t look likely, given that economic reports keep coming in better than expected, he argued.

“With the very real prospect of corporate tax reform, it’s possible that earnings might come in even better than the current economic fundamentals would suggest, due to lower tax rates,” he said.

“Valuations might end up looking lower than they now seem, leaving more room for market gains.”

Bulls also point out that European stocks SXXP, -0.46%are breaking out as well this month, and some are already talking about Dow 50K.

2. Fastest 1,000-point gain ever? If the Dow closes above 20,000 on Monday afternoon, the index will have scored its fastest-ever advance from a thousand-point milestone to another.

The benchmark first closed above 19,000 on Nov. 22, and Monday is its 13th trading day since that achievement.

Thus far, the fastest 1,000-point rally came during the jump to 11,000 from 10,000. That happened in early 1999 over 24 trading sessions, as a recent MarketWatch story noted.

So even if the Dow can’t top 20,000 for 10 sessions, it still would score its speediest 1,000-point gain. Of course, as the gauge has climbed higher over the years, the percentage change associated with any 1,000-point move has become smaller.

3. Problems at big round numbers: The Dow has struggled with big milestones such as the 100 mark, the 1000 level and even 10,000. A recent Wall Street Journal column made that point.

The Dow first hit 100 in 1906, but didn’t trade convincingly above that level until the mid-1920s.

The blue-chip average first touched 1,000 intraday in 1966, but didn’t close above that mark until 1972, the column said. And the Dow first crossed above 10,000 in 1999, but only began to really live above that milestone in 2010.

4. The Goldman Sachs Industrial Average? Goldman Sachs GS, -1.64%  and other financial stocks XLF, -0.87%  have been key leaders in the “Trump rally” that began after Election Day.

It’s a similar story when looking at the year to date. The chart below shows how Goldman has contributed more to the 30-stock Dow’s 2016 climb than any other component. The graphic comes from Barron’s cover story over the weekend — titled “Get ready for Dow 20,000.”

Can financials keep leading the way higher? Bulls can argue the sector still has room to run, given that it’s trading well below its peak hit before the financial crisis.

But bears maintain that buying of banking stocks has reached panic proportions, suggesting a trend reversal over the next couple of weeks.

5. Bears aren’t throwing in the towel: The stock market’s doubters aren’t calling it quits just because another big round number is looming.

If everything is so bullish, why are bank insiders dumping their shares at a record pace? That was the question posed by Wolf Street’s Wolf Richter in a blog post on Friday.

Financial newsletter writer Harry Dent — known for his often-spectacular misses in forecasting — is getting attention this month for predicting the Dow could plunge by 17,000 points. Not tumble to the 17,000 level, but lose more than half its value.

Tune him out? Investors should consider giving a fair hearing to even Dent’s extreme views, according to a recent MarketWatch column by Chuck Jaffe.




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Walmart Black Friday: Black Friday Could Be Huge for Walmart Stock

Black Friday Boosting WMT Stock’s Appeal?
Black Friday is a big deal for Wal-Mart Stores, Inc.’s (NYSE:WMT) shoppers. But rather than looking for the best deals from the retailer, let’s take a look at what Black Friday could mean for Walmart stock.

The Thanksgiving-Black Friday weekend is a typical time of year for retailers to make a killing, and Walmart wouldn’t miss this opportunity. Last year, shoppers lined up outside Walmart stores waiting for them to open. By early morning on Friday, Walmart reported that it had already sold “enough movies to watch for close to 3,000 years.” (Source: “Black Friday Winners And Losers: How Amazon, Walmart, Apple And More Fared,” Forbes, November 30, 2015.)

However, a one-time sales boost might not be enough to get investors excited about Walmart stock these days. When consumers are moving from physical stores to online channels, WMT stock does not sound nearly as exciting as the names in the e-commerce segment.

The thing is, though, that things could be different this time around.

I have no doubt that on this Black Friday, shoppers will flock to Walmart’s stores, just like in previous years. However, I reckon that the biggest boost could come from the retail giant’s e-commerce segment.

You see, the company had a major overhaul in its online marketplaces, which means it’s a lot more prepared for an event like this. In just the past three months alone, its e-commerce marketplace, Walmart.com, has added eight-million stock-keeping units (SKUs). (Source: “Third Quarter Fiscal Year 2017 Earnings Call,” Wal-Mart Stores, Inc, November 17, 2016.)

As a matter of fact, e-commerce has become a big growth driver at the retail giant. In the third quarter of the company’s fiscal 2017, which ended October 28, 2016, e-commerce sales surged 20.6% year-over-year on a constant currency basis. Excluding its Yihaodian e-commerce business in China, Walmart’s gross merchandise volume (GMV) increased 28.6% under constant currency. (Source: “Walmart Reports Q3 FY17 EPS of $0.98,” Wal-Mart Stores, Inc, November 17, 2016.)

According to Doug McMillion, Walmart’s president and chief executive officer, “E-commerce contributed 50 basis points to our Q3 Walmart U.S. comp, which is our largest contribution yet.” (Source: Wal-Mart Stores, Inc, November 17, 2016, op cit.)

For the quarter, Walmart’s total revenue increased 2.5% year-over-year to $120.3 billion. Comp sales at Walmart U.S. increased by 1.2%, driven by a traffic increase of 0.7%.

And don’t forget that Walmart recently completed the acquisition of Jet.com, Inc. and now has its co-founder, Marc Lore, leading the company’s e-commerce segment. Jet.com is a great fit for Walmart because the companies share the same value: Walmart is known for its “everyday low prices,” while Jet.com uses its “realtime pricing algorithm” to offer better value than its competitors.

Note that last year, more consumers shopped online than at stores over the Black Friday weekend. According to a survey by Prosper Insights & Analytics, some 103-million Americans shopped online over last year’s Black Friday weekend, slightly more than the 102 million who went out to stores. (Source: “NRF’s Thanksgiving Weekend 2015 consumer survey data,” National Retail Federation, last accessed November 22, 2016.)

If the trend continues to this year, Walmart should be better prepared to reap the rewards.

The Bottom Line on Walmart Stock
Black Friday is no doubt a big event for retailers. However, Walmart stock investors should keep in mind that the company’s scale is different from its competitors. In its previous fiscal year, Walmart generated $482.0 billion of sales; that’s more than the sales of Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST), and Amazon.com, Inc. (NASDAQ:AMZN) combined.

The idea is that Walmart is deeply entrenched in the retail industry. WMT stock commands more than $200.0 billion of market cap. No matter how big an event Black Friday turns out to be, it’s probably not going to cause Walmart stock to shoot through the roof.

Rather, the company’s potential success this weekend could convince investors that it’s not falling behind in the e-commerce boom. And that would make WMT stock even more appealing as a dividend stock. At the end of the day, what really makes Walmart stock special is that the company has increased its annual cash dividend every single year since 1974. A solid e-commerce segment could make sure that this track record continues.

By Jing Pan, B.Sc, MA

Walmart Black Friday: Black Friday Could Be Huge for Walmart Stock

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How an OPEC output deal could catapult U.S. producers back to stardom

Oil prices are likely to climb if members of the Organization of the Petroleum Exporting Countries agree next week to curb crude production, but upside will be limited if the resulting rally give U.S. producers incentive to ramp up output once again.

And President-elect Donald Trump’s energy policy plans could intensify OPEC’s worries over loss of market share and eventually make it even easier for the U.S. to ramp up output in response to higher prices.

“News of the potential agreement could still lend decent support to oil prices in the short term outlook,” said Fawad Razaqzada, technical analyst at Forex.com. But “those potential price gains will likely be capped in the medium term by expectations of a renewed rise in oil production in the U.S.”

Oil prices have seen volatility as the 14-member group of major oil producers debates how to complete a plan announced in late September to limit output at 32.5 million to 33 million barrels a day.

OPEC is expected to hash out the final details at its official meeting in Vienna on Nov. 30. Its members have been gathering behind closed doors ahead of that to discuss the plan.

“It really depends on the actual agreement, but the price should move into the mid-$50s and possibly as high as $60,” assuming a deal to cut output is reached, said James Williams, energy economist at WTRG Economics.

Futures prices for West Texas Intermediate crude CLF7, +0.15% settled at $48.03 a barrel on the New York Mercantile Exchange on Tuesday. They’re up about 30% year to date, but well below the peak seen in 2014 above $100.

The Trump effect
Traders have been weighing the potential impact the Trump administration will have on the energy sector, as his plan to ease federal restrictions on oil drilling would benefit some in the oil industry, but likely further add supply to an already glutted market over time—weighing on prices.

In a video posted on YouTube, Trump pledged to “cancel job-killing restrictions on the production of American energy,” including shale.

“Trump’s policies will have an impact but they will not be immediate,” said Williams. “This year the greatest influence by far will be if OPEC’s actions result in higher prices.”

Still, the impact of Trump’s policies in the oil market may become evident in the second half of next year, he said.

That impact is likely to be first seen in the Bakken in North Dakota “as it would accelerate the completion of the North Dakota Access pipeline,” said Williams. “The lower transportation cost means producers there will receive more for the oil they pump and encourage them to complete more wells.”

Trump’s energy policies would also eventually lead to more drilling on federal lands, which was delayed during the Obama administration, Williams said.

U.S. oil production was already a factor in OPEC’s decision against cutting output in late 2014, even as prices had plummeted. The group, instead, choose to defend its share of the oil market from non-OPEC producers, particularly the U.S. shale industry.

With Trump aiming for U.S. energy independence, OPEC could revert to protecting its market share, instead of working to temper the global supply overhang that’s dragged prices down by more than half from their peak in mid-2014.

Several years of $100 oil had contributed to the rate of development and improvements in shale technology, said Williams. Now oil prices “north of $70-$75 once again will threaten OPEC’s market share.”

So “an OPEC deal will eventually help the U.S. become the real star producer,” he said. That claim to fame belongs to Russia, the world’s biggest oil producer, with Saudi Arabia being the largest producer in OPEC.

“A good [oil] price will spur the completions of uncompleted wells and there are about 5,000 of them,” Williams said. Still, “no matter what Trump’s plan is, it will be months before it impacts production.”

Wait and see
To be sure, OPEC’s plan is also far from a done deal.

Expectations that OPEC would reach a final agreement were starting to grow. Then on Tuesday, Reuters reported that the group will wait until the official meeting to debate a plan to production by members by 4% to 4.5%, excluding Libya and Nigeria. The news report also said that Iran and Iraq raised certain conditions for their participation in the agreement.

To reach a final deal, the group will have to collectively agree to ease back production, which the International Energy Agency estimated at 33.83 million barrels a day in October.

“Rationally, the group should be able to reach agreement to cut its oil production in 2017, even if it is only a watered-down version of what was contemplated in late September in Algiers,” analysts at Credit Suisse, led by Jan Stuart, said in a Tuesday note.

“However, we think it is at least possible that key members not only fail to find common ground, but break off talks and resume a drive for market share all over again,” they said.

OPEC would have to set individual member quotas. That will be a challenge since some members, particularly Iran, which wants to boost output to pre-sanctions levels, and Iraq, which is fighting Islamic State, have said they want to be exempted from production cuts.

The political battle between Iran and Saudi Arabia is “about power as much as economics and therefore hard to predict,” said Vic Sperandeo, president and chief executive officer of EAM Partners, which is known for the Trader Vic Index, a long-short algorithm that has a commodities focus. “Most likely, any agreement will try to look positive, but will have very limited production cuts.”

He expects OPEC to “lower production a bit just for show,” and that could create an “initial up move,” but prices would then resume a move lower.

Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies, singled out two scenarios. “Either they agree on each country producing optimally from its own perspective, and they will present it as if it is a collective agreement…or they will try to agree on something substantive and fail,” he said.

In both cases, he expects to see only a “negligible effect” on prices as “oil markets are getting a little wiser to OPEC’s ineffectiveness and window-dressing.”

Still, Al-Ubaydli, does see a downside price risk. “Trump is likely to enact policies that decrease U.S. oil imports,” he said. And a rise in shale oil production means that “prices above $60 a barrel are unlikely.”

That said, “Trump’s policies will have an effect once their precise details are confirmed,” said Al-Ubaydli. “Everyone is holding their breath.”




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How Trump’s latest potential hires could send the stock market ‘through the roof’ Critical information for the U.S. trading day

Critical information for the U.S. trading day

Mike Pence dusted himself off from his “Hamilton” outing long enough to confirm on Sunday that Mitt Romney is a top candidate to serve as Donald Trump’s secretary of state. If Jim Cramer has it right, handing that title over to Mr. 47% could give the stock market a nice pop.

Why? Because it just might mean Trump is more savvy about foreign policy than some/many people might think.

For traders looking to scalp profits by timing Trump appointments — good luck with that — CNBC’s human bullhorn shared this tip: “A name-brand, Wall Street-friendly Treasury secretary, on top of tabbing Romney for state, would send this market through the roof … that is, if there even is a roof.”

As it stands now, Trump is likely to choose between investment banker Steven Mnuchin and Texas Rep. Jeb Hensarling for the Treasury — though he apparently still has a thing for the idea of Jamie Dimon.

Meanwhile, “fake” has definitely emerged as a buzzword in recent days. “Fake news” on Facebook FB, +1.26% supposedly helped seal Hillary Clinton’s fate in the election, and the “fake economy,” at least according to our call of the day, could do the same for the stock market (see more below).

But if the inevitable reckoning is in the offing, you wouldn’t know it from the mostly upbeat pre-Thanksgiving holiday mood that seems to be settling over markets.

Key market gauges
Futures on the Dow YMZ6, +0.07% and the S&P ESZ6, +0.21% are up a bit this morning, but they aren’t straying too far from break-even territory. Crude CLZ6, +2.08% is also higher, and so is gold GCZ6, +0.58% . The Nikkei NIK, +0.77% rallied nicely, but otherwise no big moves in Asian markets ADOW, +0.63% . Europe SXXP, +0.13% has been choppy early.

Last week, blue chips managed to eke out some minimal gains, while the Nasdaq COMP, -0.23% knocked out a solid 1.6% rally. Techs still have a ways to go considering the stock market’s SPX, -0.24% post-Election Day advance has pulled the Dow DJIA, -0.19% up 2.9% in total, compared with a 2.5% rise for the Nasdaq. Read:Market Snapshot.

The call
Forget “fake news,” it’s the “fake economy” investors should be worried about, says Graham Summers, chief market strategist at Phoenix Capital Research.

“President Obama at one point claimed that those who questioned the strength of the recovery were ‘peddling fiction,’” he wrote. “It’s an interesting claim given the entire recovery, at least post 2010, has been built on fake economic data to perpetuate a fake narrative of growth.”

From there, Summers went on to cast doubt on employment, GDP and government spending figures, to come up with this question: “So what happens to the fake stock market when it finally adjusts the economic realities?”

The chart
Barron’s used the chart below to help back its case for issuing 100-year bonds.

“Given the incoming administration’s ambitious plans, and the nation’s already high debt,” Randall Forsyth wrote for Barron’s cover story, “the president-elect might ask: What would Hamilton do?”

And in answering the question, he argues, Hamilton might say: “Take advantage by issuing Treasury bonds now — and for the longest term possible.”

This chart, Barron’s says, clearly supports the move that countries like Ireland and Mexico have already made. Read:The case for taming federal debt by issuing 100-year bonds

“Given that the odds today favor higher rather than lower interest rates, now would be the time to nail down historically low borrowing costs,” Forsyth wrote. “You would think someone like the billionaire president-elect, who calls himself ‘the King of Debt,’ would want to do what he can to minimize his borrowing costs.”

The quote
“I nudged my kids and reminded them, that’s what freedom sounds like” — Vice President-elect Mike Pence, responding to a question about the boos he heard from the crowd when he showed up at Hamilton on Friday night.

The stat
1.67 million — That’s how much Hillary Clinton beat Donald Trump by in the popular vote, according to the latest tally. Of note, that’s more than triple the popular-vote margin Al Gore had over George W. Bush back in 2000.

The economy
Considering Thanksgiving will cut things short, there’s still plenty of data to digest this week. We’ll get a tandem of reports from the housing sector on Tuesday and Wednesday. As for today, the Chicago Fed National Activity Index for October hits at 8:30 a.m. Eastern Time.

Random reads
What exactly are people ordering at cocktail bars?

Still firmly on track to be the greatest of all time.

Presidential hopeful Kanye West endears himself again.

Those photos of Trump and Japan PM Abe are problematic, and not just because of Ivanka.

And for those of you who just can’t stomach what America’s going to look like under a Trump presidency, pack your bags for “The Bubble”


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The Biggest Post-Trump Winner So Far? DryShips Is Up 1600%

DryShips Inc. (NASDAQ:DRYS) is having a week for the ages, seeing its shares surge an almost inconceivable amount following last week’s election results.

What’s behind this obscure shipping stock’s massive 1600% (yes, that’s sixteen-hundred percent) surge? It’s a confluence of a few factors.

Firstly, DRYS is working off of a very low starting share price. The stock has actually completed not one, not two, but three giant reverse splits this year in order to buoy its rapidly declining stock price. These moves include 1-for-25, 1-for-4, and 1-for-15 splits since mid-March.

If not for those splits, DRYS shares would be trading around 5 cents per share right now.

The next factor working on DRYS’ favor is the most obvious one: Donald Trump was elected president. Trump has made no secret of his plans to renegotiate trade agreements and try to spur more economic activity. A popular economic gauge, the Baltic Dry Index, has surged 25% in response, and most cargo shipping companies are getting a big bump as a result (although none as big as DRYS).

The final catalyst for DRYS’ price explosion is its ongoing debt negotiations with creditors. The company is precariously close to bankruptcy (as its big year-to-date price decline indicates), and has reached a make-or-break point. From the Motley Fool:

[The] company is actively working with lenders to restructure its bank credit facilities. Three of them have matured, and the company has yet to make final balloon payments, instead suspending principal and interest payments to preserve liquidity. However, the company has been actively selling off vessels to pay down its revolving credit facilities. For example, at the end of October, it announced the sale of five vessels for $29.4 million. Given the steps it is taking to address its credit facilities, there’s some growing optimism in the market that DryShips can restructure in a way other than going through bankruptcy.
So based upon Trump’s surprise win, and expectations for rising trade and higher shipping activity, investors are betting that DRYS can avoid bankruptcy and return its balance sheet to some semblance of normalcy.

I wouldn’t hold my breath for that. Investors should avoid this sinking ship at all costs.

DryShips shares were up $37.13 (+86.63%) to $79.99 in Tuesday afternoon trading. Year-to-date, however, DRYS is still down nearly 72%.

The Biggest Post-Trump Winner So Far? DryShips Is Up 1600%

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Trump stock-market rally reflects expectations for new era of fiscal stimulus

Republican lawmakers have spent the past eight years bashing President Barack Obama as fiscally irresponsible, but investors are now betting that Donald Trump could run much bigger budget deficits than Democratic rival Hillary Clinton had planned.

Those bets might underestimate potential political pitfalls, but expectations expansionary fiscal policy will boost economic growth and boost inflation are part of the reason stocks quickly recovered from the swoon that sent futures sharply lower as a surprise Trump victory in the presidential election became apparent late Tuesday night. And it is also part of the reason why Treasury bonds sold off sharply, sending yields soaring.

“What traders saw was a far more expansive fiscal policy than what they had imagined under Hillary Clinton,” wrote Thierry Albert Wizman, global interest-rates and currencies strategist at Macquarie. ”Moreover, with the Republican sweep of the House and Senate, the prospect that President Trump will actually enact low tax/high-spending policies (a fiscal expansion) was seen to have gotten credible and valid.”

Many Republican lawmakers, including House Speaker Paul Ryan, would likely be reluctant to significantly expand the deficit, however, which could ultimately limit the scope of fiscal measures, analysts said.

While details remain scarce, investors are looking for Trump to follow through on spending pledges when it comes to upgrading the nation’s infrastructure.

“We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it,” Trump said early Wednesday.

Infrastructure stocks have performed well this year as both Clinton and Trump pledged to boost spending on dilapidated roads, bridges and other items, but appeared to top in the summer.

The victory by Trump, whose plans, while more vague, were larger, should be a “strong rebound candidate” in the next few months, wrote analysts at Pavilion in Montreal. The largest infrastructure exchange-traded fund, the iShares Global Infrastructure ETF IGF, -1.35% remains up 6.4% year to date, but shed 3.2% on Wednesday.

With Republican lawmakers likely to want to rein in public debt, the Trump administration is expected to work with the states to use public-private partnerships to fund much of the infrastructure spending, which would likely help support large construction groups and real-estate investment trusts that are already active in the sector, the Pavilion analysts said.

Trump also has criticized the automatic military-spending cuts that were enacted under budget sequestration in 2011. Presumably, Trump will move to reverse the trend given his support for expanding military capabilities across the board, the Pavilion analysts said, which means most domestic-focused names in aerospace and defense should benefit. The SPDR S&P Aerospace and Defense ETF XAR, +1.44% is up 8.6% this week and 17.4% year to date.

Tax cuts
Tax cuts are high on Trump’s agenda, including calls for sweeping reductions in personal income-tax rates and slashing the corporate income-tax rate to 15% from 25%. Reduced revenues could be partly offset by a cap on itemized deductions and other measures.

The tax measures will have the biggest impact on the deficit and debt levels under the Trump plan. The Committee for a Responsible Federal Budget estimates the Trump proposals would reduce revenues by $5.8 trillion over a decade. Overall, Trump’s measures are forecast by the group to add $5.3 trillion to the deficit over 10 years, versus the $200 billion rise that was expected over the same period under the Clinton plan.

With the deficit implications, it’s “no wonder that the bond market rioted” on Wednesday, wrote Wizman.

The yield on the 10-year Treasury note TMUBMUSD10Y, +0.00% saw its biggest surge in three years Wednesday to trade above 2% for the first time since January. Yields rise as bond prices fall.

While still very low by historical standards, the yield continued to rise Thursday, “driven by the prospect that expansive fiscal policy — in the face of near full-employment — will only drive inflation higher, and prompt a Fed response eventually,” Wizman said.

A “more sanguine” interpretation of the yield move is that stronger economic growth would warrant a higher level of interest rates, said Albert Brenner, director of asset allocation at People’s United Wealth Management, in an interview.

Brenner and others also pointed to the possibility that Congress would seek to at least partly reduce the revenue hit from tax measures by instituting a tax holiday on repatriation of profits held overseas by U.S.-based corporations.

The holiday would see corporations encouraged, or perhaps even required, to bring back profits, which would be taxed at a lower rate, providing a near-term revenue windfall.

Meet the deficit hawks
That’s unlikely to be enough, however, to prevent wider deficits and a bigger debt pile. The deficit shrunk from $1.4 trillion in 2009 to $588 billion in fiscal 2016, while public debt has topped $19 trillion. It will be interesting to see how Republican lawmakers, including tea party conservatives, react.

In October 2014, every Republican senator voted against suspending the debt ceiling. At the time, Republicans were in the minority in the upper chamber. Republicans are now in the majority.

Trump’s proposals would require either a huge increase in the debt ceiling, a repeal of the law or its continued suspension, noted Ian Shepherdson, chief economist at Pantheon Economics, in a Thursday note.

“We just don’t know at this point how the competing interests within the Republican Party will be reconciled,” he said, “though we’re guessing that the prospect of enormous tax cuts will persuade many previously resistant lawmakers to revise their principles.”

Article is from Market Watch By:

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Oil Prices Edge Up as Hopes Shift to OPEC’s November Meeting

Oil prices edged up Wednesday, supported by potential production caps by OPEC in November and ahead of a possible decline in U.S. stock levels.

The November contract for global crude benchmark Brent was up 0.78% at $46.33 while its U.S. counterpart West Texas Intermediate gained 0.58% to hit $44.94.

The likelihood of an agreement on production cuts or a freeze being reached between members of the Organization of the Petroleum Exporting Countries when they sit down in Algiers on Wednesday has faded, but hopes have risen that an agreement can be reached at an official meeting in November. Increased optimism around the cartel came after Saudi Arabia offered to trim production by 500,000 barrels a day.
Some analysts remain skeptical, however.

Germany’s Commerzbank said in a note that current output from OPEC is already high enough to mean that the global surplus of crude wouldn’t fall as forecast in 2017. It added that any additional production from individual members would further exacerbate the issue.

“It is easy to forget that Nigeria and Libya also want to be allowed to step up their output, which is likely to account for over 1 million barrels a day,” the note said.

Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. ENLARGE
Saudi Oil Minister Khalid al-Falih at the 15th International Energy Forum in Algiers on Tuesday. PHOTO: ZUMA PRESS
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Other analysts believe Saudi Arabia’s offer to trim production by 500,000 barrels a day would be woefully inadequate, with Olivier Jakob from Switzerland-based Petromatrix going as far to brand the offer a “trick.”

“A meaningful OPEC deal requires Saudi Arabia to cut by at least 1 million barrels a day and not just by its usual summer-to-winter seasonal variation, but we see no signs that this is about to happen,” Mr. Jakob said in a note.

Traders are also awaiting the weekly U.S. inventory data due later Wednesday. Analysts surveyed by The Wall Street Journal expect the Energy Information Administration to report domestic crude stockpiles rose last week.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week ended Sept. 23 showed a 752,000-barrel drop in crude supplies, a 3.7-million-barrel decrease in gasoline stocks and a 343,000-barrel decline in distillate inventories, according to a market participant.

Nymex reformulated gasoline blendstock for October—the benchmark gasoline contract—rose 137 points to $1.4074 a gallon, while October diesel traded at $1.4125, 26 points higher.

ICE gasoil for October changed hands at $413.50 a metric ton, up $3.50 from Tuesday’s settlement.




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Hedge-fund manager warns of biggest market correction since 2008

Hedge-fund manager Robert Citrone, whose Discovery Capital Management firm oversees about $12.4 billion, offered his clients a grim assessment of what’s to come in the stock market, according to a note obtained by Bloomberg

We believe we are in the midst of the market correction we have been expecting. It will likely persist over the next 3-4 months and be the largest correction since the 2008 crisis.

Robert Citrone

He did say in the note, however, that the coming retreat will be a “healthy adjustment from overvalued market levels, which are primarily a result of exceptionally easy monetary policies.”

Citrone, as Bloomberg points out, is one of many hedge-fund managers given the nickname “Tiger cub” after working at Julian Robertson’s Tiger Management.


By MarketWatch


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As housing reignites, even bust towns are booming again

The poster children of the housing bust are back.

Last week, Realtor.com released its August “Hotness Index,” ranking metro areas on how many days a listing in that area stays on the market, as well as how many web page views it receives.

(News Corp, which owns MarketWatch, publisher of this article, also owns Realtor.com, the listing website of the National Association of Realtors.)

Studding August’s top ten are names familiar from the housing bubble and the municipal distress that resulted when it burst: Vallejo and Stockton, two California cities that filed for Chapter 9 bankruptcy, as well as Modesto, Sacramento, and Fresno, which had hard times of their own.

Rank Market Median days on market
1 Vallejo-Fairfield, CA 37
2 Dallas-Fort Worth-Arlington, TX 41
3 Denver-Aurora-Lakewood, CO 36
4 San Francisco-Oakland-Hayward, CA 33
5 Stockton-Lodi, CA 38
6 San Diego-Carlsbad, CA 43
7 Columbus, OH 46
8 Waco, TX 47
9 Detroit-Warren-Dearborn, MI 46
10 Sacramento-Roseville-Arden-Arcade, CA 45
11 Fort Wayne, IN 48
12 Yuba City, CA 47
13 Modesto, CA 40
14 San Jose-Sunnyvale-Santa Clara, CA 33
15 Fresno, CA 47
16 Colorado Springs, CO 44
17 Santa Cruz-Watsonville, CA 48
18 Kennewick-Richland, WA 40
19 Santa Rosa, CA 51
20 Nashville-Davidson-Murfreesboro-Franklin, TN 39
A decade ago, California’s “Central Valley” was the epitome of “drive until you qualify,” a run-up of demand for housing at the outermost point from a job hub where homes become affordable.

Real estate markets there are benefiting once again from the booming job market in San Francisco and San Jose, where prices are notching new record highs. Prices in Vallejo, Stockton, Fresno, Sacramento and Modesto sank by about two-thirds, nearly double the national average, and are still well below the peaks they set during the bubble.

But the hard-luck cases swelled, and then burst, because of overbuilding, said Jonathan Smoke, chief economist for Realtor.com. “We were building homes that if not for speculation, no one would occupy.”

In fact, Smoke said, “We have the opposite problem now.” Housing starts rose to the second-highest rate since the recession in July,

While there’s always the risk of an economic downturn that wipes out jobs and then hits the housing market, Smoke said, “I don’t think there’s a significant fear that the Silicon Valley/Bay Area is likely to see job losses. It’s more that they can’t keep the pace of growth going because of the lack of housing.”

Smoke calls secondary metro areas near major hubs “spillover” cities. It’s a phenomenon that’s seen beyond California, in places like Providence, Rhode Island, and Portland, Maine, as Boston becomes pricey.

There’s another signal that outsize demand isn’t inflating a bubble this time around, Smoke said. Beyond cyclical job losses, a major factor that weighs on local housing markets is when the population shrinks over a long period of time, like in Detroit. But places like Columbus, which had been losing population for years, are re-appearing on Realtor.com’s index of hottest metros. “They’re not losing young people now,” he said.

In August, Columbus hit number-seven on the hotness list. Not far behind it, at number-nine, was Detroit. In fact, several other metros that have struggled, from Harrisburg, Pennsylvania, to Central Falls, Rhode Island, are all improving in terms of “hotness” compared to a year ago, Smoke said.




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10 charts show why market may be ripe for a correction

As the U.S. stock market rallies to fresh record highs every few days, most investors will be hard-pressed to find incentives to sell out of the market. Yet, Bank of America Merrill Lynch has decided to take on the role of Wall Street’s Debbie Downer, warning of an impending correction. CLICK LINK AT BOTTOM TO SEE PICTURES OF CHARTS.

Savita Subramanian, equity and quantitative strategist at Bank of America, has been the consistent voice of caution this year even as the S&P 500 SPX, -0.14% is poised for a six-month winning streak — the longest since 2013. On Tuesday, she cited 10 reasons why she believes the market is ripe for a selloff, framing her bearish outlook in a series of charts.

1. Valuation: As of end of July, the S&P 500 was overvalued pretty much on all fronts, according to Subramanian. “U.S. stocks look expensive versus history on most metrics,” she said.

Bank of America
2. Positioning: A decline in short-interest-to-float ratio suggests that sentiment is increasingly bullish, which some view as a contrarian indicator.

Bank of America
3. Fiscal stimulus: Expectations of fiscal support for the economy is hovering at levels not seen since the height of the Great Recession, but Subramanian believes investors betting on additional fiscal stimulus will be disappointed.

Bank of America
4. Economic surprises: The incidences of economic data beating on the upside have started to wane, which is expected to drag on market sentiment

Bank of America
5. Corporates: Earnings are not expected to recover anytime soon, while sales growth remains subdued, slipping to a three-year low. Many analysts believe the stock market will not be able to sustain its upside momentum if earnings do not recover.

Bank of America
6. China: Concerns about the world’s second-largest economy have abated amid signs of stability, but the country’s manufacturing sector has started to contract again, prompting worries of further economic slowdown.

Bank of America
7. Leverage: Debt at S&P 500 companies is rising, while creditors have been tightening their lending standards for the fourth consecutive quarter.

Bank of America
8. Elections: Political uncertainties are expected to mount ahead of the November presidential election and dampen corporate investment, a key engine for economic growth.

Bank of America
9. The Federal Reserve: The market may not be reading the Fed accurately. “BofAML interest rate forecasts imply a far more aggressive pace of Fed tightening than is currently priced into the market,” said Subramanian. The CME Group’s FedWatch tool, which tracks Wall Street’s expectations for a Fed interest-rate hike, indicated that the market was pricing in a 24% probability of a rate increase in September, and a 44.1% probability in December.

Bank of America
10. September slump: History is working against the market. September is typically the weakest month of the year; since 1928, the S&P 500 has dropped in September 56% of the time.




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With Games gone, hard reality sets in for Brazil

Until now, people in Brazil had something to look forward to.

Despite deep recession, a presidential impeachment, and a corruption scandal ensnaring the political and corporate elite, the Olympics in Rio de Janeiro shone on the horizon like a sliver of light from a sunnier era, when Brazil appeared to have its act together.

But that was extinguished with the Olympic flame at Sunday’s rainy closing ceremony. Now, Latin America’s largest country, its dreams shattered, once again finds itself falling far short of its economic and political potential.

“There is nothing left to disguise the hard reality that we now face,” says Roberto Romano, a philosopher, author and commentator on Brazilian society. “This grandiose idea that many believed in until recently has nothing to support it anymore.”

The idea was that Brazil, after nearly a decade of economic growth that lifted more than 30 million people out of poverty, was finally punching its weight. The Olympics and the 2014 World Cup, which Brazil also hosted, were meant to showcase its arrival on the world stage.

Instead, Brazil’s economy, and the popular leftist government that presided over its boom years, began to unravel, as if on cue for the big events. The spectacles played out in spite of the economy and politics, not because of them.

For sure, the Games had their fair share of hiccups, from green water in the diving pool to a camera that plunged from a broken guide wire, to an international scandal that erupted over an American swimmer’s lies about an armed holdup.

And questions will linger for years about alleged corruption in contracts for infrastructure and venue construction, not to mention the ultimate price tag for the Games, expected to exceed the already inflated official figure of at least $12 billion.

Still, the Olympics unfolded as many Brazilians had expected: the sports went smoothly and the logistical and security problems, allayed by public holidays to reduce traffic and a massive deployment of 85,000 police and soldiers, were not exceptional for a chaotic metropolis of more than 12 million people.


With the Games over, Brazilians are asking “what now?”

“The Olympics were fun, but it was a sideshow,” said Flavio Mattos, a 37-year-old fitness instructor from Rio, after watching Brazil lose to Spain in water polo on Saturday. “We now have real problems to fix.”

Consider the state of the government.

Brazil’s Senate this week starts an impeachment trial of President Dilma Rousseff, who was suspended in May because of irregularities in the government budget.

Both she and her predecessor Luiz Inácio Lula da Silva, who is credited by most working-class Brazilians with their gains before the boom fizzled, are under investigation for allegedly obstructing justice in a massive corruption scandal centering on the state-run oil company.

The economy, once the envy of a developed world wracked by the global financial crisis, is slogging through its worst downturn since the Great Depression. Some indicators suggest a feeble recovery has begun, but others, like a jobless rate that recently climbed past 11 percent, point to continued hard times.

Public finances are unsustainable, a hangover from spending increases during the good times when Brazil’s devil-may-care approach led it, among other excesses, to secure the rights to host the world’s two biggest sports events back to back.

The government’s budget deficit this year, like last, is expected to equal about 10 percent of economic output, up from about 3 percent in 2013.

“We are looking into an abyss,” says Samuel Pessoa, director of the Center for Economic Growth at the Getulio Vargas Foundation, a business school and research institute, who calculates that Brazil’s economy will have shrunk by as much as 10 percent between 2015 and the end of next year.

He and other economists say the government will go broke without reining in spending on salaries, pensions and social security costs.

“It will be really difficult to attract investment and spur growth when the national treasury is on an explosive trajectory,” Pessoa says.

Interim President Michel Temer has vowed to tackle those problems, boosting Brazilian stocks and the currency which has rallied recently against the dollar after hitting an all-time low last year.

But after backtracking on some reforms, including a bill to limit spending by states, many economists and business people question whether the new government will make much difference.

For everyday Brazilians, the uncertainty is troubling.

“We have to be cautious about everything,” says Renato Araujo, a 45-year-old technology consultant and father of two in Rio. “It’s hard to plan much for the long term.”

Without any Olympics or World Cups or other distractions on the horizon, the long term could feel like an eternity.

“The curtain has come down,” says Roberto DaMatta, an anthropologist and prominent columnist for O Globo, a Rio de Janeiro daily. “Reality is going to have to set in.”

By Paulo Prada | RIO DE JANEIRO


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Olympic Stocks’ Brief Moment of Glory Shares of Brazilian companies seen as Olympic Games beneficiaries are soaring, but new research suggests they may soon come back down to earth

The Games just began in Rio de Janeiro, but Brazilian stocks have been sprinting for much of the year. The Bovespa index has risen 33% so far.

Some stocks that could be beneficiaries have run even faster. Mall operator Multiplan Empreendimentos Imobiliários, which should benefit from Olympic crowds, is up 71% while shares of Localiza Rent A Car, are up 69%. Brazilian airline GOL Linhas Aéreas Inteligente is up 117%.

But the stock-market experience of countries that have hosted earlier Olympics suggest the gains could be short-lived based on research from University of California, Berkeley accounting professor Patricia Dechow, with colleagues Alastair Lawrence and Mei Luo of Tsinghua University.
They examined stock-market performance in the run-up to both the 2008 Beijing and the 2012 London Summer Games. Back then, when the overall market was trending higher, the shares of companies expected to benefit from the Olympics rose more. And even though the underlying companies were in disparate businesses, these “Olympic stocks” tended to move with one another and were more in step with the ups and downs of the overall market. That higher degree of correlation indicates investors lumped them together. It is a behavioral hallmark of stocks driven more by sentiment than fundamentals.
The sense, says Ms. Dechow, is that when the overall market is doing well, they latch onto Olympic stocks as a good thing to buy without stopping to think that any Olympics-related benefit might already be baked into the prices. They tend to get overvalued when the market is moving higher, as it has been in Brazil.

But once the Games are over, the Olympic stocks go back to just being stocks again. Anyone tasting the thrill of victory in Brazil’s stock market could soon be feeling the agony of defeat.


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HUGE week of gains for us on The Santarelli Exchange website! 100-300% GAINS in 2 days!

Started off this week with an alert to my members on Monday I felt the selloff was over and sent an email and text alert to all members with research I did on the best stocks to invest in for a rebound. Tuesday morning we entered into several call option and call spread option positions. That very day we had gains by the closing bell. The next day which was wednesday we seen our first 100%+ gains of the week took some profits from selling partial positions and re-entering new trades with our profits, thursday our positions were up nearly 300% and new positions we made the previous day up 100%. I sent out an alert Thursday I was closing positions and locking in massive gains on every single one of our trades… they ALL made over 100%-300%+ gains. Friday we started off with 2 day trades on calls for PCLN and BAC and they both each made over 65% gains in just 1 hour and we locked in gains. From this point we had 9 trades and all 9 trades made at least 100% gains!! The end of the day ended with our first losing trade of the week with a PCLN put spread that was up over 35% within the first 15 minutes but unfortunately did not lock in gains and it went on to be our 1 and only losing trade of the week.


Members contacted me all week amazed by the gains they seen in their portfolio and could not believe their eyes! Here is a few members that went on and posted their results and reviews in a FB group. compliment Also pictures of our positions with their actual % gain! FB calls up over 200% WednesdayGreat Gains as of WednesdayDAY TRADE 5DAY TRADES 2 Join our team now and signup!

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Stocks Rebound, but Brexit Jitters Linger

Two of the best days for stocks this year began to undo two of the worst, putting major U.S. indexes back into the black for 2016.

The rebound comes as investors shake off their initial panic over the U.K.’s decision last week to leave the European Union and try to sort out the consequences of the vote.

But still-strong demand for the safety of government bonds and currencies like the yen shows that markets are far from sounding the all-clear.

“The volatility out of Europe makes us worried, but so far the real economic impact is difficult to gauge,” said Mike Baele, senior portfolio manager at U.S. Bank Wealth Management, which oversees $133 billion in assets.

Traders work on the floor of the New York Stock Exchange on Wednesday. ENLARGE
Traders work on the floor of the New York Stock Exchange on Wednesday. PHOTO: REUTERS
The Dow Jones Industrial Average advanced 284.96 points, or 1.6%, Wednesday to 17694.68, and the S&P 500 index rose 34.68 points, or 1.7%, to 2070.77.

The Dow has rallied 3.2% over the past two sessions, its biggest such gain since February, while the Stoxx Europe 600 also notched its biggest two-day gain since February. Neither index has recovered all the ground lost in the first two days after Thursday’s U.K. vote.
The Dow is still down 1.8% since Thursday, while the Stoxx Europe 600 is down 5.7%. In Japan, the Nikkei Stock Average’s post-Brexit losses stand at 4.1%.

London’s FTSE 100 index, whose multinational firms benefit from a weaker pound, has recovered all of its declines.

The rapid rebound prompted some traders and analysts to question whether the rally was sustainable given that fundamental questions remain about the health of the global economy and the direction of central-bank policy.

“People are returning to the same sort of complacency that we saw leading up to Friday of last week,” said Jason Thomas, chief investment officer of Savos Investments, a division of financial-services firm AssetMark, Inc.




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After Brexit Carnage, Should You Rejigger Your Investment Portfolio?


The unexpected happened Thursday night when the United Kingdom, in a historic outcome, voted to end its more than four decades of membership in the European Union. The decision caught Wall Street by surprise, sending global investors for a wild ride during Friday’s trading session as the markets looked to re-price risk.

With portfolios ravaged, investors might be tempted to ditch their positions in the market, liquidating their assets to cash. But market strategists say the best game plan depends on time horizon, risk appetite, and how much stomach-churning volatility an investor can withstand.

There are only two questions Paul Christopher’s clients have on a day like this: What does Brexit fundamentally mean for the rest of Europe, and will it have spillover effect to the U.S.?

“We’re getting used to the shock of the vote and in the wake of the surprise. But does it change anything fundamentally about the market? No,” said Christopher, head global market strategist at Wells Fargo (WFC) Investment Institute.

Despite the unexpected outcome of the U.K.’s vote, Christopher said there are no significant changes to the recommendations he made going into the event, which moved clients to a cautious approach, expecting gradual improvement in the economy going through the remainder of the year. He recommends being slightly overweight U.S. stocks and bonds, taking profits off bond positioning and reallocating that cash to sectors positioned for U.S. growth. Among those he likes: industrials, consumer discretionary, information technology, and health care.

“This is not a Lehman moment that will lead to a global crisis or recession, but when the global economy is fragile, it causes us to be defensive in portfolio positioning.”

– Ed Campbell, Prudential-Owned QMA

“We don’t expect [Brexit] to amount to a global economic shock, but one that is limited to the U.K.,” he explained. “There are still opportunities for companies to earn, as we expected, for the rest of the year. As a result, this looks like a good rebalancing opportunity. A lot of our clients woke up with bond portfolios ahead and stocks a bit behind. It’s a good chance to reallocate in an environment where economic fundamentals still remain.”

Ed Campbell, managing director and portfolio manager at QMA, a multi-asset class investment manager owned by Prudential Financial (PRU), agreed that a global recession is unlikely but risks have risen thanks to the macro shock Brexit delivered to the market.

He said a big factor in determining the size of the fallout globally will be the response that comes from policymakers in the coming days and weeks. He expects the Bank of England to cut interest rates and re-start a quantitative-easing program, more easing from the Bank of Japan and the European Central Bank – both of which have already cut rates into negative territory — and a freeze on rate hikes from the Federal Reserve, likely through the rest of the year.

“Brexit results make us more defensive on the margin,” he said. “This is not a Lehman moment that will lead to a global crisis or recession, but when the global economy is fragile, it causes us to be defensive in portfolio positioning.”

Campbell cautioned investors who may want to rush to the exit doors, saying those with money in the market should be careful not to panic. Rather, he advised waiting for further commentary from G7 leaders and central bankers about firm plans for the path of monetary policy aimed at keeping adequate amounts of liquidity in the market during a particularly uncertain time.

Still, for investors who can’t keep their fingers off the sell buttons, Christopher had some ideas.

“It’s going to be expensive to add back a dollar-sterling or dollar-euro hedge, don’t look to hedge currencies, but think about [investing in] quality names, well-run companies, those that have made it through shocks like this before and will go down the least and rebound the most,” he said.

To his point, the British pound dropped nearly 8% in Friday trading after hitting its lowest level since 1985 overnight. Meanwhile, the euro helped to further strengthen the U.S. dollar as it slid 2.29% against the greenback.

Still, Chris Gaffney, president of EverBank World Markets, said he recommends reducing exposure to Europe – regardless of a long or short-term time horizon.

“If you haven’t done it yet, get in there and pare your exposure to the European markets, even at this level,” he said. “There are more uncertainty and headwinds to come in the EU. Drawdown your exposure to European equities and increase exposure to move into some of the safe havens.”

He recommends gold, which saw significant gains of more than 4% in Friday’s session, U.S. 10-year Treasury bonds, which have seen yields plunge and prices rise as traders seek the safety of government debt.

“That a good place to move right now, and I think after this initial U.S. selloff, U.S. equities will be cheaper,” he said.


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The More It Hurts, the More You Make: Investing After Brexit

The Wall Street Journal

Investors hate uncertainty, but they despise surprise. And the ability to withstand the shock of surprise is what separates great investors from everyone else.

The Vanguard FTSE Europe ETF, which tracks a broad index of European stocks, toppled 11.3% this Friday on the shock of the British vote to exit the European Union. That was the worst one-day return in the fund’s history, according to FactSet, surpassing even the 11% horror show of Oct. 15, 2008.

Now imagine that every day for the past month, one out of every 31 voters in Britain had been randomly selected to cast a ballot and that the results were tabulated daily as the voting progressed. Had the decision to leave the European Union filtered out over the course of a month instead in a single day, the financial markets would likely have gone down just as badly—but not with such horrifying suddenness.

And, over the full sweep of the past month, the fund has lost 10%—a severe decline, but still only the eighth-worst monthly fall in the fund’s history. Such a result isn’t nearly as frightening as a one-day drop of the same magnitude.

“The astonishing volatility we all felt [on Friday] would barely have been noticeable if had unfolded over a longer horizon,” says Elroy Dimson, a finance professor at Cambridge Judge Business School in the U.K. who is a leading authority on long-term investment returns.

Surprise makes action feel even more urgent than usual, but that is an illusion.

“Certainly we’re entering a period of heightened volatility, and that will persist for a while,” says Andrew Ang, a managing director at BlackRock, the world’s largest asset manager.

“One thing we have learned is that you don’t rush in all at once when things get cheap,” says David Herro, lead manager of the $25.5 billion Oakmark International Fund. “It takes a while for these things to get digested.”

Furthermore, even an alarming short-term drop has surprisingly little effect on long-term valuations. The 22% plunge in the S&P 500 on Oct. 19, 1987, for example, only cut the valuation of U.S. stocks from approximately 20 times earnings to about 17 times.

According to StarCapital Research, an investment firm in Oberursel, Germany, the stock market of every country in Europe except Ireland and Denmark was already cheaper than the U.S. at the end of last month, when measured as an average of 10-year, inflation-adjusted earnings. Now they are a bit deeper in the bargain bin.

But they have been cheap for years. European stocks have lost an average of 0.4% annually over the past decade, according to financial-data provider MSCI.Yes, for a decade—and that was before Friday’s carnage. Over the same 10-year period U.S. stocks have averaged a 5.5% gain annually.

It is starting to feel as if investing in Europe will never pay off.

But investors should remember that there is a perverse correlation between economic growth and stock-market returns. Research by Prof. Dimson and his colleagues Paul Marsh and Mike Staunton of London Business School has shown that, in the long run, countries with the fastest economic growth tend to have the lowest stock-market returns, and vice versa.

That’s because investors overpay for optimism and underpay for the value that pessimism creates.

“Just uttering the words ‘When will this pay off?’ should tell you that it will, and fairly soon,” says William Bernstein, an investment manager at Efficient Frontier Advisors in Eastford, Conn. “You don’t get bargain prices anywhere without the presence of really bad news.”

“For those who are willing to be active investors and have the horizon to take a long-term view, times like these present an opportunity,” says Prof. Dimson. “But you have to be quite brave and you have to be willing to lose a lot of money.”

Above all, surprises like this past week’s shock are a reminder of the importance of knowing what kind of investor you are.

In a speech he gave in 1963, the great financial analyst Benjamin Graham said: “In my nearly fifty years of experience in Wall Street I’ve found that I know less and less about what the stock market is going to do but I know more and more about what investors ought to do.”

If you bought European stocks earlier this year and now are doubting your own sanity, you aren’t nearly as brave as you thought you were. What you ought to do is become more conservative.

If, however, you are extremely patient and you have a high tolerance for pain, what you ought to do is buy more. The worse the news out of Europe gets, the more you should buy.

Write to Jason Zweig at intelligentinvestor@wsj.com, and follow him on Twitter at @jasonzweigwsj.



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