This week in Barrons - 09-27-09

This Week in Barrons – 09-27-09:

Thoughts:
Allow me to change the pace a little bit – and talk about one of the aspects of ‘trading’ that could help all of us going forward. As a backdrop: the economic reports continue to show incredible weakness, no matter how well everyone tries to spin them: (a) we saw the durable goods number plunge and the July number revised lower, (b) we saw housing sales slow, and the median price of those homes dip some 12%, (c ) we saw another half a million people need to sign up for first time unemployment benefits, and (d) we saw Congress approve extending unemployment benefits another 13 weeks (making it a total of 92 weeks of unemployment – almost 2 years!).

Factually the US is broke beyond repair – and is no longer a viable corporation. We have approximately $75 TRILLION worth of liabilities (Medicaid, Social security, tuition loans, FHA, Fannie, Freddie, etc) – and even if you raised the tax burden to 100% of all incomes – we would still be woefully short of what is needed. 95% of this debt all came after Richard Nixon removed the dollar from the gold standard, making our currency backed by simply the "full faith" of the US Government – allowing the FED to print money like madmen and to satisfy all the projects our Government pledges. As we speak we are looking at trillion dollar deficits for as far as the eye can see, and frankly those will rise even higher. The only way that I see of combating this is to slowly ‘devalue’ the U.S. dollar. The U.S. could ‘devalue’ its currency - making its outstanding debts more palatable. Here's how that works: if you allow your currency to fall in value, you are repaying debts with cheaper dollars. For example - if a dollar was to be instantly worth 50% less tomorrow, your salary would have to "double" to remain the same. So if you have a 100K dollar debt and were making 40K dollars a year, now you'd still have that 100K dollar debt, but your pay would rise to 80K a year. Now – as a backdrop to this – the dollar has been falling since 2001! But it is like ‘boiling the frog’ – do it slowly – and no one notices – do it quickly and all ‘heck’ breaks loose. The U.S. could also raise interest rates – which would temporarily halt the slide in our currency, but that would instantly bring lending to a halt. The housing that is selling will stop selling. The commercial loans that are being made will cease. It will be the final nail in our economy's coffin – so that won’t happen.

However, as the dollar becomes worth less and less, things that are "real" such as commodities get more expensive – this IS INFLATION. This is why oil is up in the $60 to $70 range despite all the developed nations using less of it. This is why food is up, energy is up, and gold is up to $1000 an ounce.

The bottom line is that the dollar is going to be removed as the global reserve currency and the transition is in effect as we speak. Already the IMF (International Monetary Fund) has begun to issue it's own brand of SDR's (Special Drawing Rights). This is what they are going to use as currency between nations that don't want dollar exposure, until they settle on the new Global reserve currency. And it appears that China is going to demand that their currency is (at minimum) a part of a basket of currencies and probably with some form of tie to a metal backing (gold). Just know that this is all taking place in the background of the UN, the G20, the IMF and all the central banks.

Now, builders and lenders are beginning to dust off an old pitch - "0" down, 100% mortgages. And what happens when these same mortgage fail (as before) - we, the taxpayers, get to bail them out yet again. But the only reason this will happen now is because they know that as they devalue the dollar, it all gets paid back with much cheaper dollars. The question is, will it really help the true economy? NO. In no time in history can I find that devaluing a currency is a good way to promote stability and recovery. Sometimes there's a short-term boost as your exports grow, but in the longer haul the inflationary effects weigh more heavily and then interest rates climb, effectively killing the economy. We will NOT break the mold – so stay long gold, stay long silver!

Market Tutorial: First rule – Wall Street is designed to ‘take’ your money – and if you don’t to deal with that on their terms, you're going to go home broke. Wall Street is not there to help you retire and get rich – it’s there to take every last penny you have and toss you in the dumpster. Wall Street does that by confounding, and confusing as many people as possible at any one time. Which means that each day you need to ask yourself: “What would the market do, to confound, confuse and take the maximum amount of money from people?"? If the answer is: “Go Up” chances are awfully good you're going to go up that day and vice versa. When you can’t answer that question (and most of the time we can’t) then (like the rest of us) you will spend a large amount or your trading time doing nothing – PATIENCE is a VIRTUE in trading. Let the market come to you. From 6600 to 8000 on the DOW everyone cried – “it’s just a bounce.” When it went to 9k their cries got louder. At 9600 people are ANGRY that they missed the biggest run-up in 70 years and want ‘desperately’ to get back in. My lesson for today is: Do Not Push Trades – But Let the Market Come to You! You do not need to, nor should you be trading every day. Sure missed opportunities stink, but there WILL BE ANOTHER. Wait on the ‘bull or bear’ to form – and then strike. Don’t EVER Push a Trade.

The Market:
Earnings reporting season is just about to get started. This market has run for months on ‘hope and air’ – while a significant percentage of people are hoping to sell out around 10K – while Trillions of $’s more stimulus is waiting to be released – while Unemployment is still a disaster – while Fund Managers that didn't own the market are trying to get in, while etc. We’re coming to an interesting “no mans land” where virtually anything could happen. Earlier this week, the DOW hit 9937, just shy of taking a swipe at DOW 10K, but we rolled over a bit. We are in no hurry to try and go short, not with the very, heavy hand of Ben Bernanke and lurking in the background. Ben and the PPT can move this market 200 points in a day by firing off well-placed futures trades. After a run up of this size, one may have thought that a pretty good sized pull back might have been in order – yet the way we ended Wed/Thur/Friday (down 80, down 30, down 40) – nothing was dramatic or scary. That gives us the thought that they still don't want to roll us over yet. My guess is that the first half of the week is ‘weak’, and then by Thursday (the new month and quarter) they will try and work the market higher ahead of the big deluge of earnings reports. One thing is quite certain, any company that disappoints (such as RIMM in the short-term) is simply going to be slaughtered. If enough of the early reporting companies can pull off an earnings miracle and deliver “Happy Talk”, the market very well make that last big "blast higher" that sends us over 10K for a bit. But, if we don't see enough of them making the grade, there's probably a good chance the market will use those bad reports for the excuse to send us lower in a hurry.

Be careful out there and Don't Push Trades. There are too many forces acting on the market to have anything considering a real "market feel", and when things are like that, we like to be sitting in cash waiting for the next development, either up or down.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- AMZN is a darling – and should move up when the market heals
- UYM we've played many times – and a move over 30.40 brings me in.
- DBB is interesting if it gets over 19.
- JOYG over 50 is a very interesting position.
- BUCY over 36.30 brings me in
- CHNG is a China play on Natural Gas – I see accumulation there – a move over 13.35 and we’re in.
- PDC is a U.S. play on Nat Gas - a move over 7 is good
- AGT is a small (speculative) gold play – a move over 0.65 pulls me in
- FMCN a move over 11.00 could be very rewarding.

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

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 09-20-09

This Week in Barrons – 09-20-09:

Thoughts:
"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."- Irwin A. Schiff

Now, I have been a raging gold bull since June of 2000. Gold was in the pits. Britain was selling it left and right, and it was left for dead for the previous ten years. But we had a pretty good idea that rampant money printing (as the "American Miracle" was exposed to be nothing more than the unbridled use of massive credit and debt) would make gold an ever more valuable commodity. Because for 5,000 years, when all else went wrong, gold was found to be the only true "money".

All along the way (when gold was under $300), the ‘chart slaves’ kept exposing that the rise in gold wouldn’t last, the charts showed tops, and Fibonacci reversals, etc. Then we got the ‘chart slaves’ in line with the ‘gold haters’ in line with the ‘currency slaves’, who (in concert) told us that the dollar would go up, and gold would get slaughtered. Well – the dollar has continued to rise and gold has continued to rise.

A month ago we recommended GDX (as basket of gold miners). One of my friends wrote me (nervous) that he had found a chart technician telling people why the GDX was going to go 35, then 34 and then to 30 from it's current price of 37.50. The trouble with charts is that they cannot accurately reflect – data fraud – manipulation – and government subsidies accurately within the chart itself. Honestly, how can a chart tell you how many Chinese might buy gold once their Government removed the rules against personal ownership? In fact – why would Goldman spend millions to develop a high frequency trading platform and if charts could do it? Lastly – to further throw the ‘chartists’ off – the banks are using the stimulus money to play the market. Fund managers that didn't get in on the run up are desperate to get in at almost any cost because their bosses have a gun pointed at their heads saying "We’d better post gains this quarter!" and they are buying. So of course this begs the question: Is Ben Bernanke right? Are we out of the recession – like he said this week?

In my mind, being out of the recession means:
- People are being hired - yet we continue to lose a quarter million jobs each month
- People are keeping their homes and improving them – yet we just found out that another 300,000 foreclosures happened in August.
- If we were out of a recession - capacity utilization would be growing to "normal" rates – yet we are just a few ticks from the worst measurements since records began.
- If we were out of a recession - retail sales would be growing, yet they have been disappointing.
- Oh well – The Market’s UP!

Of course the market’s up – Ben engineered it to be up. Never forget his remark – when the market was down and the economic news was horrid – Ben said: “Consumer Confidence will rise with the gradual rise of equities". How did he know equities would rise? Simple, he gave banks money to play with. He’s using his executive "emergency" powers to buy stocks, and futures. He’s orchestrated a media blitz about green shoots and the recession ending.

The question is of course, how far does it go? Well if you believe that the job of the market is to confound, confuse and confiscate the most amount of money from the most amount of people – then it’s easy to see that while the market was crashing and people were panicking, and selling with both hands - they'd engineer a massive rally that punished all those people for selling out, and burning the shorts. So why did I pick 9600 as the "first stop?" Simple. There was some resistance at 9250, and I figured that if we got there, every chart slave would start screaming about a "head and shoulders" pattern on the DOW and how we would be doomed to roll over and test the lows. So the market would power up and through that, completely embarrassing all those chart heads, and even slightly exceeding the next resistance at 9500 – as it has.

But now:
- We have lots and lots more people desperate to get back in.
- Our leaders are telling us the recession is over.
- The retail investor is flocking back to the market in waves.
- And the market is patiently waiting to yank the rug on these late-comers to the party. Once it has decided that it has drawn in enough people, and Once enough shorts have covered and gone long, and Once it is convinced that most people think it's got further to go, the market will fall and fall hard.

When is that? I think it will happen when everyone begins to load up for a year-end rally. Now, will it happen in early October, or later – great question? A lot of people might get nervous about coming through Sept with no selling and back away in early October, which would of course make the market continue higher. Then if they came back in, in mid month, a major shakeout in later would be "perfect". So as you can see, the first 3,000 points were fairly easy to call. The next month will be increasingly more difficult.

The Market:
We had another positive week. We are in 8 positions, and all of them are higher – which has me incredibly nervous. And each time it appears that the market is ready for a “smack in the face” - the people who have missed the rally rush in and buy the dip.

I’d like to recommend that you take a look at one of my favorite plays à Silver – SLW. I like it over 12 – and on Wednesday it went to 13.25. I really like it on a pull-back because silver is going to go along for the ride with gold.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG – natural gas space - @ 12.30 (sold remainder – up over 50%)
- TIE – commodities metals - @ 9.02 (hard stop @ 10.02)
- NBR – commodities oil space - @ 19.84 (stop @ 20.29)
- KWK – commodities coal space - @ 13.52 (stop @ 13.20)
- SLW – commodities metals - $12.50

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

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barons - 09-13-2009

This Week in Barrons – 09-13-09:

Thoughts:
This could be the Crime of the Century. It will be much larger than the Brinks robbery and the Manhattan Jewel heist combined. There will be no action footage on the evening news – nor will anyone realize it until years after it’s been completed. So what is this crime? It is the complete and utter raping and looting of the (non-super rich) American. The BANKERS have taken the American labor force, her resources, her productivity, her freedoms, her ambitions and finally her money. Senator Durbin said it best: “The Bankers now run the place.” This is coming from an elected official who is now admitting that he no longer has his hand on the ‘rudder’ but the ‘bankers’ do!
- People are feeling better - The preliminary September reading of the Michigan Consumer Sentiment index came in well above consensus (67.5) at 70.2. The reading in August was 65.7.
- Foreclosure filings topped 300K for the sixth month in a row, says RealtyTrac – up 18% from Aug. 2008.
- Unemployment is hovering at 9.7%
- RealtyTrac expects foreclosures to rise for another year – and that is not counting the shadow inventory of some 600k to 900k homes that have been kept off of the foreclosure markets so banks don't have to carry them as REO (real estate owned) that will come to market.
- That is NOT counting the "Pick A Pay" loans that are going to reset at the end of this year, or the Option adjustable-rate mortgages – both are estimated to an by 63 percent on average. These higher rates will likely push many of the already-strained loan recipients over the brink.
- That is NOT counting that between now and Dec 30, some 1 million people will exhaust their unemployment benefits. For hundreds of thousands of them, that unemployment was the only way they could make partial payments on their home.
- Our point – the media is telling us that housing has bottomed – and the fact is – it’s got 25% or more to go.

Also:
- The median income level fell 3.6% to $50,300, while the poverty rate increased to 13.2% from 12.5% - and naturally the number of people without health insurance increased. I really don’t care how inexpensive Obama makes health insurance - people with no job cannot buy it
- Corporate debt defaults have risen to 12.2% of companies, a number last touched in 1991, and is expected to rise to 13.2% in the fourth quarter.
- Corporate insiders are selling their stock rather than buying it at a rate of 30 to 1.

Countries are beginning to buy gold for their own reserves and encouraging individuals to buy gold as a "storehouse of value". With the dollar reaching new lows each day, gold is looking more and more attractive to people all over the world. AND on September 18th Tim Geithner has said that the Government will repeal the 3 trillion dollar backstop they provided to the money market industry. This will force people out of money markets – into Treasuries - keeping the interest rates low – and this should insure a ‘windfall’ for our friends the BANKERS!

The Market:
So far the market has put in 5 up days, and then on Friday it paused, giving back just 22 points. That's pretty amazing considering the true state of the economy, but always remember that the market and the economy are two completely different animals. Over the long term they do tend to coincide, but in short term time brackets, they are distinctly different beasts.

How long can we go up? Honestly, I we need to get the bulk of the lifting done before earnings start coming out in Late September and early October. That way everyone can blame poor earnings as the excuse for why the market is plunging. So I think the market holds up and even moves higher over the short term – and that should drag in the September worry warts, and then when satisfied – it will roll over and catch the longs. And, the shorts have slowly been capitulating, tossing in the towel. And yet there's no lack of people that don't buy this whole market – that are selling out and trying to find other places to put their money. So, many are starting to finally catch on to the idea that gold, silver and commodities might be the place to be if.

As you all know I've been a raging gold bull since 2000 – and I think we have a date with 1,500 per ounce and potentially more in the not to distant future. If the metal itself isn’t appealing – consider the GLD or the miners ETF.

I’m pretty confident that the Government, the Fed and Wall Street, are going to do their best to keep this rally going for a bit longer. If your playing stocks, keep your lot sizes small, and do NOT for any reason "invest for the long term" - that's suicide. Take ATPG for example – we bought in @ 12.30 – sold half @ 18.37 (52% gain in 5 days) and may sell the rest this week.

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG @ 12.30 (sold half @ 18.25)
- VRSN @ 22.02 (hard stop at 22.05)

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com

This Week in Barrons - 09-07-09

This Week in Barrons – 09-07-09:

Thoughts:
Sadly – as I pen this shortened letter on Labor day – I find LABOR is the one element that is missing from the American landscape.
- Friday’s Jobs Report said that only 216K people lost their jobs in August
- Friday’s Jobs Report said "unemployment rate" has climbed to 9.7%.
- The DAY BEFORE - 576,000 people signed for first time unemployment benefits.
- CURRENTLY 6.25 MILLION people are getting unemployment benefits weekly
- According to the BLS (Bureau of Labor Statistics) the ‘teenage’ unemployment rate is at 25.5%, its highest level since the BLS began keeping track of such data in 1948
- The U-6 (the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons) is 16.8% (according to the BLS)

Yet the market is happy because we ONLY lost 216k jobs – down from 700k+ jobs a couple months ago. But math skills are not our country’s forte any more. Currently:
- 78% of adults can NOT explain how to compute the interest paid on a loan.
- 71% of adults can NOT calculate miles per gallon on a trip.
- And 58% of adults can NOT calculate a 10% tip for a lunch bill.

My point is that we are living the "end game" of 45 years of ‘dumbing down’ the population – in order that the Bankers can actually run the show. The issue now is that the Bankers are losing control of the very ‘mess’ that they’ve created:
- Bankruptcy filings by U.S. consumers rose 24 percent in August compared with a year earlier and could reach 1.4 million this year
- WASHINGTON (Reuters) - More than 35 million Americans received food stamps in June, up 22 percent from June 2008 and a new record as the country continued to grapple with the worst recession since the Great Depression of the 1930s
- The second-quarter commercial mortgage default rate more than doubled from a year ago.
- Societe Generale strategist Albert Edwards warns stock markets, intoxicated by the mild recovery, are missing the big picture: "Firm evidence is emerging that the global economy is sliding towards a full-blown deflationary episode once this recovery falters..."
- CEO compensation at 20 banks that received emergency aid was 37% HIGHER than the average of CEOs at S&P 500 companies. In short, pay packages at banks "remain at levels completely disconnected from any real underlying value that executives may offer”

So, on this Labor Day - buy gold on any dip, accumulate silver, and keep your expenses down.

The Market:
September is historically the worst month of the year for the stock market. Over the past years (although everyone instantly things of October as being the "crash month") very few realized it was actually September that had the worst returns.

On the other hand – if the market's true "job" is to extract money from as many people as possible, is it just going to roll over and let everyone that went short, or pulled out get rewarded? It is possible, that a much better scenario is for this market to actually move higher in September, and then as everyone went from being short, to being fully long again, THEN roll over.

How long can we go up? If I'm right, I would think that they would need to get the bulk of the lifting done before earnings start coming out in Late Sept or early October. That way they could use poor earnings as the excuse for why the market is plunging. So it's my guess that the market holds up and even moves higher over the short term. Hang in there, as I said a week ago, the next few weeks could be the most interesting of the whole year!

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- We sold our NGD (a gold miner) for 27% profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- Also look at ATPG. A while ago we mentioned that it was looking good on a cross over 10 and it did that in grand fashion. Friday it challenged 12 and wiggled through. I like idea of it being a natural gas company, because Natural Gas has been beaten to death and at "some point" it's going to move up. Granted it probably won't be until October, but I think being a bit early isn't a horrible idea. It crossed 12, and then roared higher. If you like the idea and the chart, I think it's safe up to about 12.30 as a buy in. Natural Gas itself could easily fall another 50 cents before it firms. Let's call ATPG a longer term hold, and we'll give it a fairly wide birth before our stop-out - ATPG at 12.08 (stop at 10.80)

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

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/