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
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