JPMorgan's Thomas Lee Raises 2011 S&P Target to 1,475 (Bloomberg)

Source: BloombergTV
JPMorgan's Chief U.S. Equity Strategist, Thomas Lee, raised his year-end (2011) target on the S&P to $1,475 from 1,425, and his 2012 EPS estimate to $105 from $102 (14.04 multiple = 1,475). During his interview on Bloomberg TV on May 2, 2011 (see below), Lee said to watch stocks relative to "tail assets" (ex. gold and oil) to prove that the move is real. He believes the death of Osama Bin Laden will help this correlation, since gold and oil are used as terrorism insurance (terror premium in the price).

"We should see relative performance of stocks versus what we call tail assets. In other words, if stocks begin to outperform gold; stocks versus oil; we know investors are starting to believe this."

On Treasury yields moving lower (10-year went from 3.77% to almost 3.25%).

"It just shows you the Treasury market is a lot more than just about QE, *because I think everyone was thinking Treasuries (yields?) would back up because of QE (*double check this). But, you know what? Maybe a lot of it is discounted. It is really hard to tell what the 10-year is telling us. I would just tell you, I'm worried if the 10-year is at 4.5 to 5.0%; that would really destroy the case for stocks."

Mr. Lee believes we are in a structural bull market. I thought we were in a cyclical bull market?

SPX 1475 2011 Target, 1,250 Low (FreeStockCharts)
"It's been a very tough market. Remember people have been kind of bearish on this; they've been wanting to sell every rally here and it's been hard to embrace this as a secular bull market" (does this mean the Dow won't hit Charles Nenner's target of 5,000 in 2013?)

A few weeks ago Lee said the S&P will not breach the 1,250 low this year. I embedded that video as well. If you look at the chart to your left, 1,475 looks possible if the S&P were to rise to the vertex point of the 2-year wedge. By the way, ever since the market bottomed in March 2009, Tom Lee's S&P targets have been spot on.

JP Morgan's Tom Lee: S&P Target 1,300, 14.5x 2011 $90 Earnings By Year End - June 15, 2010

JP Morgan's Thomas Lee on 2010: S&P Will Hit 1300, Cyclicals.. - December 16, 2009

JP Morgan's Lee Sees Recovery, S&P Target 1,100" - June 17, 2009

Jim Chanos: China's Economic Growth Path Is Unsustainable (CNBC)

Jim Chanos (Source: CNBC)
Famed short seller Jim Chanos, who runs the $6.7 billion hedge fund Kynikos Associates (went short Enron before it collapsed), was on CNBC yesterday. If you're a hyper-bull on China and "resource economies" (Brazil, Australia and Canada etc), you might want to take his view into consideration. Watch the video after the jump.

"Well, we have what we think is an unsustainable growth path for china. They are growing on the back of investment, and specifically real estate construction. So the consumer as a percent of China's economy is actually dropping, Maria. Net exports, are also dropping interestingly enough. All of the slack and then some is picked up by construction. Particularly and most concerning, high-rise construction of offices and condos in the tier one, tier two and tier three cities. Fixed asset investment including land, according to the Chinese, is now 70% of their economy. And to put that in perspective, the asian tigers in the mid-90s, that grew so fast and then blew up, had a number about half that. About 30% to 35%. So China has embarked on something almost unprecedented here."

Related blog post (4/25/2011): "China Has 64 Million Vacant Apartments, Shanghai Property Index Near Inflection Point (000006.SS Charts), Andy Xie On Inflation"

It's Time for Obama to Spook the Oil Markets - Guest Post

$5 by 5/30?
Oceandesetoiles - Flickr
Guest post by Llewellyn King for OilPrice.com

It's Time for Obama to Spook the Oil Markets

The fate of the Obama presidency hangs not on a birth certificate or the red ink on the federal budget but by the hose nozzle of your local gas station.

Electoral discontent is measured by the price of a gallon of gasoline. Heading past $4 toward $5, that is a lethal trajectory for President Barack Obama.

Enter the demagogues, especially the clown-in-a-business-suit, Donald Trump. Unfettered by the gravity that goes with facts, Trump says that he would fix the oil price - now around $110 a barrel - by facing down the producers, particularly the Organization of the Petroleum Exporting Countries (OPEC). He told an interviewer on television that he would call OPEC and tell them to pump more or face the consequences. The latter, he did not specify. War? Against whom?

In a compelling book by Leah McGrath Goodman, "The Asylum: The Renegades Who Highjacked the World's Oil Market," the author lays out the ugly fact that often - in fact, as often as not - the price of oil is set not in Vienna at the headquarters of OPEC, but in downtown Manhattan at the New York Mercantile Exchange (NYMEX).

Tens of thousands of future contracts are traded in nanoseconds at the NYMEX, and the price of oil is set. This price affects not only the price which will be paid when these contracts expire and delivery takes place, but also, according to Goodman, the all-important over-the-counter market, where sellers trade more directly with buyers without government oversight.

SEC Charges UBS With Bid-Rigging 100 Muni Bond Reinvestment Transactions, Pays $160 Million

Source: SEC.gov, UBS transactions pdf
Another investment bank gets charged with f'ng over municipalities! UBS is paying $160 million to settle bid-rigging charges that affected "at least 100 municipal bond reinvestment transactions in 36 states". Last year Bank of America paid federal and state authorities $137 million to settle bid rigging charges. Here is the SEC complaint v. UBS.


Source: http://www.sec.gov/news/press/2011/2011-105.htm (hat tip DealBreaker).

SEC Charges UBS with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds

FOR IMMEDIATE RELEASE
2011-105

UBS to Pay $160 Million to Settle Charges

Washington, D.C., May 4, 2011 — The Securities and Exchange Commission today charged UBS Financial Services Inc. (UBS) with fraudulently rigging at least 100 municipal bond reinvestment transactions in 36 states and generating millions of dollars in ill-gotten gains.

To settle the SEC’s charges, UBS has agreed to pay $47.2 million that will be returned to the affected municipalities. UBS and its affiliates also agreed to pay $113 million to settle parallel cases brought by other federal and state authorities.

When investors purchase municipal securities, the municipalities generally temporarily invest the proceeds of the sales in reinvestment products before the money is used for the intended purposes. Under relevant IRS regulations, the proceeds of tax-exempt municipal securities must generally be invested at fair market value. The most common way of establishing fair market value is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.

The SEC alleges that during the 2000 to 2004 time period, UBS’s fraudulent practices and misrepresentations undermined the competitive bidding process and affected the prices that municipalities paid for the reinvestment products being bid on by the provider of the products. Its fraudulent conduct at the time also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted. The business unit involved in the misconduct closed in 2008 and its employees are no longer with the company.

How Social Media Is Changing Investing (Milken Institute Panel)

I'm about to watch this right now. Social media is definitely changing the investment and trading game. This panel features @JonNajarian (OptionMonster) and @SellPuts (MerlinOne Trading Partners) who I follow daily on Twitter. It also features Scott Burns of Morningstar, Tom Lydon of ETF Trends and Chris Albinso of Panorama Capital. No rep from StockTwits? I've been on Twitter for over two years now and the wealth of actionable information is unbelievable. You have to filter through it though. Engaging in conversations and monitoring live streaming conversations on Twitter can both improve your analysis and gauge sentiment very well.

Conversation Between George Soros and Paul Volcker at Bretton Woods Conference (INET Video, 4/10/2011)

George Soros, Chairman of Soros Fund Management, and Paul Volcker, former Chairman of the Federal Reserve, had a conversation at INET's 2011 Bretton Woods Conference on April 10, 2011. Below I embedded the full video courtesy of the Institute for New Economic Thinking (ineteconomics.org). Soros did a speech on his theory of reflexivity at an INET conference last year in the UK.

Doug Kass Is Short SPDRs With Call Options As Hedge (CNBC 4/28/2011), SPY Chart Inflection Point

Doug Kass was on CNBC's Fast Money last week (4/28/2011) and said he was shorting SPDRs ($SPY) with out-of-the-money call options as a hedge. Is that what the out-of-the-money XLI June $40 calls were doing last week? Or was the action betting on a test of the 2007 high ($42) before June expiration (6/17/2011). 200,000 contracts were opened in two days. XLI is the industrials ETF.

With the recent rapid sell off in the U.S. Dollar, Kass mentioned that a currency problem was "one of the forces behind the 1987 crash". He believes high gas prices and depreciating home values are not helping the consumer.

If I remember correctly, Doug Kass was on Kudlow in late 2006 and early 2007 warning about a recession coming due to housing. I found a Kudlow and Company clip from 11/27/2006 featuring Doug Kass and embedded it below. He was in the same camp as Gary Shilling (see pt. 1) during that time period, and Shilling is also bearish today! Read: Gary Shilling – Five Things that can Derail the Recovery (Advisor Perspectives h/t PragCap). Are we repeating 2007?

SLV Puts Rally On Volatility; Testing Trend Line, 20DMA (SLV, VXSLV Charts)

SLV (StockCharts.com)
Silver continued its sell off on Monday and $SLV puts were loving the volatility. On April 25, 2011, a SLV October $41-$33 put spread caught my eye that traded 10,000 contracts on each strike. I'm not sure if it was a backspread or vertical debit spread, but a debit spread made sense as a six month hedge or trade imo.

From the snapshot of the option chain: 10,000 October $41 puts last traded at $3.00 and 10,000 October $33 puts last traded at $1.05. If it was a debit spread, the trader paid $1.95 to put on the trade. With decent timing, SLV volatility spiked on a sell off and the SLV Oct $41 put closed at $4.45 today. Not bad! SLV closed at $42.83. On another note, remember 100,000 July $25 puts traded a few weeks ago? Interesting trade.

The ETF is testing an important trend line and the 20 day moving average. If you look at the weekly chart there is a 2-year ascending channel that could catch SLV if it breaks down. Spot silver is currently trading at $44.83. See a live 24 hour chart of silver spot here. Check out SLV and VXSLV charts after the jump.

Silver Comex Futures Getting Knocked Down Again (5/2/2011)

Here we go again with silver. The Silver Comex July Future (SIN11) fell 12% at the low (48.19 to 42.20)! It is now down 8%. Remember spot silver lost 9% on April 25 after all of those puts traded? Clearly silver volatility was ready to erupt. I've been watching the silver ETF ($SLV) and will provide an update tomorrow. Below are charts of Spot Silver in $USD (intraday) and the Silver July 2011 Future (4 months and 1-year chart).

Overnight, the silver future pierced through its 20-day moving average and uptrend line from January, but was able to rally back above those levels. It is now testing 4/26-4/27 resistance. That was a bloody candle. Keep an eye on that trend line. As stated in my previous post, protecting against downside volatility made sense when looking at the chart. I provided links to articles on silver after the charts.

Osama Bin Laden Is Dead, Obama Addresses The Nation (Video/Text)

5/1/2011: President Obama is making a statement tonight at 10:30 eastern time. Osama Bin Laden has been killed and his body is in U.S. custody (President Obama). Read or watch Obama's statement after the jump via WhiteHouse.gov.

Seth Meyers, Obama White House Correspondents' Dinner Videos, And Obama's Birth Certificate

Watch Seth Meyers and President Obama speak at the 2011 White House Correspondents' Dinner. It was funny. I embedded CSPAN videos and Obama's long form birth certificate for your enjoyment.