RF's Financial News

RF's Financial News

Sunday, October 4, 2009

This week in Barrons - 10-04-09

This Week in Barrons – 10-04-09:

I hope that I'm smart enough to know that when a ship is sinking, I want to be real close to the life raft. We are beginning to look more and more like a ship in trouble – while the captains are telling the passengers that everything is fine. I’m worried that we’re evolving into a Nanny State - where people have given up virtually all their true freedoms in return for a false sense of security. And how are we doing: (a) our Nation is bankrupt, (b) we are the worlds single biggest debtor nation that's ever existed, (c ) our manufacturing base has been completely dismantled, (d) we import more than we export, (e) and by most accounts our population is broke. Now is that because of, or in spite of all our social engineering, laws, rules, restrictions, and political correctness?

We have relied on the Government for so much, we are now relying on Government to plug the hole and get us back on course – and I don’t believe that this is possible. The real Titanic simply made a fatal mistake and slammed into an iceberg – by accident. America (the Titanic) has been sunk on purpose. All that’s left now is to keep convincing everyone that ‘things are fine and will be fixed in a jiffy’ – and then loot every person of their personal wealth before the ship settles to the bottom. Ask yourself what kind of recovery is this where: credit still contracts, housing still falls, defaults soar, sales plunge, revenues drop, banks still fail, the FDIC goes broke, and jobs are still lost?
- Oct. 2 (Bloomberg) -- The number of U.S. lenders that can't collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery
- Consumer loan delinquencies struck record highs in Q2, ABA says, citing the "cumulative effect of the longest recession since the Depression."
- Foreclosures jumped 16% in Q2, while hit 8.5% of all mortgages.

Now despite 550,000 people signing up for first time initial jobless claims on Thursday, and knowing that 263,000 more people lost their jobs in September, CNBC along with Obama and his administration continue to tell us the recovery is "in" and it's all blue sky from here. What about the fact that the "hours worked" fell to the lowest number EVER recorded? What about the fact that capacity utilization is at the lowest levels ever recorded? What about the fact that employers "could" take their part time crews and turn them on full time, and we'd really have no reason to hire another real full time employee for approximately 3 years?

My bottom line is that we are going to see spectacular changes. The economy will limp along on life support as they toss trillions of made out of thin air dollars at it – which won’t work. Eventually it all fails and we get the true depression we should have had already and worked out of. They can't stop the stimulus or the economy grinds to a halt instantly. We are destined to a world of dollar devaluing, corporate bail outs, less and less jobs, more foreclosures, more falling home values.

So, what do you do – I always get back to gold and silver. I'm here to say that MILLIONS of foreclosures are still coming at us, and as unemployment continues to rise, housing will continue to fall. I expect housing to fall another 30%. We’re already devaluing the dollar – and at some point it will no longer be the world’s reserve currency.

The Market:
Last Wednesday the market hit an intra day high of about 9937 - since then we've fallen back a bit, hitting an intra day low of 9378 – a loss of about 560 points in 8 trading days. The charts are telling us that the NDX, or the technology heavyweights, is forming a pattern that historically has seen a massive smackdown following it – so let’s put that into the "we're heading much lower camp". Then we have another influence: quite a few traders didn't catch much of this whole March thru September move and are rabid to get in. All they wanted was a pull back so they could get cheaper entries and some of them are on the move already. The third prong on this fork is that: "Consumer confidence will rise with the gradual rise of the equity markets" - is a quote from Ben Bernanke himself months ago. How did he know the equity markets would rise? Simple – hs’s allowed the banks to take TARP money, and stimulus money and ramp the markets higher. So, we have the 800 lb gorilla - with limitless funds, to buy futures, and stocks, at any time - knowing that housing is in the toilet, knowing jobs are nowhere and going nowhere fast, they are manipulating the last "thing" they can manipulate that keeps the masses from bearing down on them.

We've all been looking for a big pulldown. Once we got up and over my first DOW target of 9600, we entered a surreal time. We know the stimulus will be there for as far as the eye can see. We also know that the Chinese don't like us much any more, and most of the major economies are looking for a way "out" of dollar denominated assets.

Well, we've already lost 560 points – with some of that being post window dressing selling. We have people desperate to make money, especially if they were in the market during the 2008 crash and missed this run up. We have the FED willing and ready to push more money into the Goldmans, and JPM's of the investing world – and all of that would seem to add up to another run higher coming - yes?

I think we have a bit more work to do on the flat line first. The beginning of the week will be lumpy, bumpy, murky and cloudy. We should open green and then erase that and go red, and then go green as they all jockey for position. Tuesday into Wednesday might be just as jerky. But, by Wed night, into Thursday if they want the market to run up, that's when I'd suspect the firepower would start. We are currently "out" of the market in our trading accounts, just waiting for confirmation of going long or short.

- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena

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

Until next week – be safe.

R.F. Culbertson

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