RF's Financial News

RF's Financial News

Sunday, June 21, 2009

This week in Barrons - 6.21.09

This Week in Barrons – 06_21_09:

First – Happy Father’s Day to all the Dad’s out there!

This week we got to listen to Tim Geithner tell Congress why new regulations were necessary concerning financial issues and the Federal Reserve will basically be the "Overseer" of the entire world’s financial system. Now if you really think that this has anything to do with ‘regulations’ – please don’t drink the Kool Aid – but rather has everything to do with Power! Lack of regulation didn't cause the current problems. There were more than enough regulations in place to keep the bankers from going berserk and partying like drunken sailors. But, some of the toughest regulations were thrown in the toilet by the very (bought and paid for) Congressional seat warmers that are now screaming for more regulations.

Lack of regulation didn't cause the problem; however, removing and not enforcing the regulations that were on the books was a big part of it. Another big part is fraud, decent and manipulation. What about the unsustainable levels of economic activity that Alan Greenspan created? What about derivatives? Are we honestly to believe that letting loose over $600 trillion in derivatives around the world – none of it subject to anything more than a couple people sharing a handshake and a bourbon wasn't going to end badly? Yet the FED didn't stop it, they promoted it as "spreading risk" and creating a more stable financial situation. So we wish to give this same group MORE oversight and MORE power!

The very FED that sits in charge of our monetary policy aided and abetted the single largest economic disaster we've seen in 75 years. The very crew that was in charge of sitting in leadership roles as they aligned the stars for a colossal economic meltdown, now say they are ready and willing to fix it all. They have the know-how. This has absolutely nothing to do with tougher regulations and getting back to basics, this is a power grab. And to appease the masses they have concocted a "sweeping plan to regulate the financial industry". To the Average Joe in the Street, that sounds pretty good, I'm sure he figures that this is what's necessary.

But recently Ron Paul (that ‘other guy’ running for President of the U.S.) introduced a bill to audit the FED. It's HR1207 and now has 225 co sponsors. When the Government was created, it states that ONLY the Government would have the ability to "make money". The FED is a Private banking concern. In fact, so private we cannot audit their books, can't sit in on their meetings. Mr. Obama himself can not see their records. Yet these hand selected Genius's make our monetary policy, set our rates and basically "print money into existence" which instantly becomes a debt for you and me. So, Ron Paul says "lets take a look at the books. Let's see where their money goes. Let's see how much they really have on hand, and what their concepts are for regulating money supply. They've ruined the value of the dollar, and basically raped America for some 96 years now. It's time for the public to know who and what goes on here."
This is monumental in scope and I suggest everyone call/write their representatives and senators (the Senate bill is S604) and ask how they stand on this bill – and why or why not!

Many of you have written and ask whether we can sustain our current level of returns throughout the year (over 30%). Well Jessie Livermore is oft thought of as one of the greatest traders of the last generation. But trading is all about style and mental discipline. First: I'm a firm believer that you can't fight the tape. In other words, don't look for longs in a sinking market. We want to go long when the market is moving higher, and step off or go short when the overall market is moody and falling. Second: What we like to do is find a stock that has good potential (a real reason to move higher) and then align buying that stock when the overall market seems like it wants to romp higher. Third: Another thing we like to do is "selling halfs". Meaning say we purchase 2,000 shares of ABC @ $12 one day – and 2 days later to moves to $13.50 We sell ‘half’ – leaving only 1,000 shares in play and if it goes to 20 – great – we win – if it goes below our stop (which is potentially $12 or $13) – we still end with a overall profit. Fourth: We do NOT trade ‘everyday’! Finally: I’m more fond of ‘put’ options than shorting outright.

The Market:
Speaking of the market, what's going on in the here and now? Well, Monday and Tuesday the market sold off and Wednesday they tried for a reversal day but couldn't muster it. So, Thursday comes along and with it some economic news. 1) Continuing claims for unemployment fell by 148K, bringing the level off "record" highs to "just” 6.8 million. 2) The Philly Fed report wasn't as bad as expected. 3) The Leading indicators hit and it rose a bit – and by we were up by 80 points. Factually – the Philly FED ‘general business conditions report went from a MINUS 22.6 from a MINUS 24.4. And Factually – initial jobless claims actually ROSE on the week – while 148k came off the continuing claims report (do you think some of those 148k actually ‘ran out’ of benefits and that’s why they came ‘off’ the claims roles?). The Conference Board came out and said that ‘Seven of it’s Seven’ lagging economic indicators ALL FELL – none advanced. But again – let’s not let facts get in the way of good emotion.

My feeling is that I don't think the current rally is over and that higher prices are coming later in the summer. But in the very near term, I'm concerned about a good-sized drop. I'm going to play very cautiously here this week and maybe into next. But there's a pretty good chance that not doing much in the near term will prove to be a decent idea. I could easily be proven wrong and we could continue higher, because the power of the PPT (Plunge Patrol Team) has been enormous lately. But we could roll over for a bit – and if we do – we’ll lock in some more gains and wait to buy back in. It's not time yet to short for any length of time.
It's just our "guess" that they need to shake up a few more complacent people before we climb that wall of worry again.

- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re about to go back into SLW (silver)
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o SLW, NGD and GDX
o All commodities GSG if over $32
o AES (a utility stock) looks buyable over $10.80
o CHINA was once interesting at $80 – for speculation money – it’s now at $1.66 – so CHINA >$1.80 may be interesting.

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson

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