This week in Barrons - 12-27-09

This Week in Barrons – 12-27-09:
Thoughts – I truly wish it was a Merry Christmas for all…

I'm writing this as I review real estate offerings in various coastal areas in Florida and notice that the prices are beginning their second leg of a decent (with more to come in my opinion). I’m struck by the lack of traffic at the malls, and the amazing amount of small business that aren't there any more. I’m listening to every talking head on CNBC telling me that the next two years will be years of increased merger and acquisition (M&A) activity – and them thinking that this is a ‘good thing’. What if the majority of ‘sellers’ are selling because they “HAVE TO” and not because they “CAN”? Doesn’t all of this tell you that your ability to actually ‘GET’ the price that you think you should be getting for your widget, your house, or your business is eroding very, very quickly – and this increased M&A activity could be an act of ‘survival’ and not one of ‘growth and prosperity.’

A couple facts to take us into the New Year:
- 10%+ unemployment is draining states' unemployment-compensation funds so fast that 40 state programs could go broke within two years, and will need $90B in loans to keep issuing benefit checks
- And while continuing unemployment claims dropped by 127K to under 5.1M, emergency unemployment compensation (for people who have exhausted regular benefits) rose by 142K to 4.4M, up from just 1.5M a year ago - a sign that people who have lost their jobs are having an especially hard time finding new ones.
- And remember: Stocks FALL MUCH FASTER than they rise!

Remember that last point – because there will come a time in the very near future that we will recommend shorting the market, or buying “Puts”.

For those reading this that are afraid of going short – let me describe the elements of a short sale:
- A short sale simply means that if the stock goes DOWN you will make money.
- You start by “borrowing” say 500 shares of XYZ from your broker – and sell it on the open market for say $50 per share (this is all done electronically) – you place a "sell short" order for 500 shares of XYZ at market. In a matter of moments you will have sold XYZ. For selling it, your account will take in the proceeds – 500 shares at $50 = $25,000.
- Now you sit and wait, and in a matter of a month, XYZ is now 40 dollars a share. You decide that it probably won't go lower, and you want to "cover your short". All you do is "BUY" 500 shares of XYZ at market. The moment you do, the brokerage will get back the 500 shares you borrowed from them and it's all a done deal.
- The transaction is finished - but look at what happened: You sold 500 shares at $50 = and took in $25,000. Then you bought 500 shares a month later to close out your short – but at $40 = so you spent $20,000. The difference of $5,000 is yours to keep.

It's our opinion that there's going to be a tremendous shorting opportunity coming at us in 2010. With headlines like this: "The number of borrowers that fell behind on their mortgages - including the most creditworthy - rose in Q3. And the percentage of current and performing mortgages dropped for the sixth consecutive quarter. Those that fell behind on their prime mortgage payments more-than doubled to 3.6% from a year ago. Such troubles could mount as banks and thrifts remain unable to match modifications with the number of struggling borrowers who need help.” You don’t have to be a rocket scientist to know that things are actually getting worse not better, and one day the market will align itself with that reality. That means stocks will fall, and the people that get rich off it will be the ones that understand shorts and buying puts.

Moving to the market itself:
So, they ran us sideways and up into Christmas, the next question is, what about New Years week? My guess is that we'll be pretty flat, with certain individual stocks moving up on their own merits – but a wholesale sell off, is sort of off the table, because who's going to want to pay the tax penalty of selling now, when they can sell in January if they want, and push the tax burden out to 2011?

For weeks AMAT has been playing around in the 12 - 14 area with 14 acting like a brick wall. It simply got repelled each time it got there. But with Thursday's close "at" 14.00 – if AMAT were to climb up and over 14.15 – I would consider that a pretty good buy in area, and AMAT could reward us.

The commodity plays are still acting well as are some of the technology plays. We thought that if CTXS ever got over 40.00 it would probably be a runner and tack on a few bucks – and sure enough it 40, we hopped in and it hit a high of 42.34. Not bad work in two days – and I think it's got some more in it.

As you appreciate your holidays, I hope you have a wonderful time with family and friends. Potentially you can find a way to give something to someone who needs it. They will appreciate it, and it will give you something positive in return – I guarantee it.

Have a joyous and prosperous New Year!

TIPS:
We sold our SPY’s and our CY’s for a handsome profit – so we’re sitting with:
CTXS at 40.04 Hard Stop at 40.44
ANR at 40.04 Stop at 43.45
CLR at 40.56 Stop at 41.90
AMAT over 40.15

That said, we're looking at DRIV, CLD, WFR, STEC, CIEN and a couple others.
We were tempted to sell some ANR (as it opened at the 46 level), but I resisted – it’s hard to "sit tight" when you're looking at 5 dollars per share in gains!

We will be buying the GDXJ’s / and SGOL’s – but wait until gold settles a bit here – also we’ll be looking at the Silvers … PAAS / SLW – etc.
And we have about 70% of our money at work in the 401k’s – the rest in cash.

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 - 12-20-09

This Week in Barrons – 12-20-09:
Thoughts – “If You Can’t Say Something Nice About Someone…”

I assume at this point – “If you can’t say something nice about someone – don’t say Anything At All” must be what all the talking heads are practicing right before the holidays. On Tuesday morning, James Paulson, of Wells Management. (a $3B fund) was convinced that by April, 2010 the consumer was going to be swinging for the fences and this recovery will be much stronger than anyone believes. And Mr. Paulson tells us that the weak dollar is going to be good for our manufacturers because we can export more goods. Now Factually: (a) Capital One's credit-card debt that the company doesn't believe it will be able to collect - rose to 9.6% in November from 9.04% in October, while 30-day delinquencies rose to 5.87% from 5.72%. Mr. Paulson – if the consumer is so strong – why can’t he pay off his credit cards? (b) Only 24% of companies are giving holiday bonuses this year, down from 42% a year ago. Mr. Paulson – if everyone is going to be rolling in it in 4 months – why not celebrate a little early? (c ) Well the Empire State manufacturing index fell back substantially, and the orders component also showed a slowing declining to 16.6 from November’s 34.57. Could it be Mr. Paulson that the only real activity we saw was the rebuilding of inventory for the Holiday shopping season and without that stimulus, they wouldn't need to produce anything?

Honestly, when you push trillions of anything into one side of a pipe, "something" has to come out the other side. When you push trillions of dollars into the economy, two things come out the other side. One is a jump in economic activity, and this produces a ripple effect. The people that receive the money first, rush to spend it, which creates a ripple around the immediate area of commerce. Then those people spend their new-found money in their local economy creating a second ripple. But somewhere along the third ring of ripples, people see the money coming and ‘increase their prices' a bit to take advantage of the wave of money coming. That is the second part of what always happens when fiat money is printed and pushed into the system. Unfortunately by the time the money reaches the outer rings of ripples, the money has no effect, increased prices at all levels ‘eat up’ the advantage of having more of it. Now Factually: the Producer Price Index rose 1.8 percent in November. The index less food and energy rose 0.5 percent in November. So, taken annually, that’s 6% inflation at the core. Isn't 6% inflation a bit of a problem considering our T bills are paying eseential 0%? It means that for every dollar you put in the bank, you're losing 5.5% a year – wow – so save enough like that and you'll be bankrupt in no time.

That is why you always need more and more and more stimulus to have the same desired level of economic increase, and that is why it’s ultimately doomed. So I truly understand Mr. Paulson not telling you the truth. He can’t tell you the truth or you'd take your money out of his fund and go buy gold and silver and the poor man would have no job. There's not much work for a fund manager with no fund, so it's in HIS best interest to keep telling you that the promised land is just around the next corner. Heck, just this week the Financial Accounting Standard Board (FASB = the group that sets the rules on our accounting guidelines) declared that banks should be able to "decouple" from those ‘Generally Accepted Accounting Principals’ and be allowed to use more flexibility in reporting their worth. So Banks should be allowed to have 2 sets of books – one set for investors and another to tell the truth. Shouldn't the guy who's going to buy 10K shares of a banking institution really know what things are really worth? The Chairman of FASB doesn't think so – he finds it too annoying. And finally – this week we learned that the IRS was going to let Citibank off the hook for some $38 Billion in taxes, so that it would be easier for them to repay the TARP and therefore keep their stock price high. Frankly the way things are shaping up, it looks to me like they will throw the kitchen sink at this market in order to keep it at least flat through the end of the year.

The Market:
As we come to the end of 2009, it's been a VERY good year for us. There's little doubt that some of the biggest gains of all next year will be in shorting stocks. I'm already half through a list of stocks and ETF's I am going to be shorting ( and buying puts against) and I truly believe that if you've never done any shorting or buying of put options, you better learn quick, or you're going to miss a tremendous opportunity. In the meantime, we've witnessed a market that is trying to "hold up" while slowly the big funds (that did well this year) have been pulling back, locking in their gains. The market appears tired – and just wants to survive the balance of the year. The chart guys will tell you that the market has developed some very ugly patterns in the past few months, patterns that suggest a massive downward movement. I'm not a "chart slave" but I think it’s indeed coming and just a matter of when.

Will there be a "January effect" this year? If so how long will it go? If not, when does the real selling start? These are all great questions, and of course no one but Bernanke knows the answer. Our guess is that we remain fairly flat till year end, experience some form of New years run up, and then the wheels start coming off – my guess is around March, 2010.

In the meantime, Let me wish you all the Happiest of Holidays.

TIPS:
We have SPY from 109.30 Stop at 111.11
We have CY at 10.0 Stop at 10.35
We have ANR at 40.04 Stop at 41.75
We have CLR at 40.56 Stop at 40.60
We will be buying the GDXJ’s / and SGOL’s – but wait until gold settles a bit here – also we’ll be looking at the Silvers … PAAS / SLW – etc.
And we have about 70% of our money at work in the 401k’s – the rest in cash.

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 - 12-13-09

This Week in Barrons – 12-13-09:
Thoughts – Young Frankenstein – “It’s Alive”

While in Chicago, picking up my son from Northwestern Univ – we were fortunate enough to get tickets to see “Young Frankenstein” starring a friend of ours – Mr. Roger Bart. Great show – Roger’s amazing – but there’s a running gag in the show on how Dr. Frankenstein’s last name is being mispronounced that rings true to our economy: “Not Frankenstein – but Fronk-en-stine.” It reminded me of the Obama administration telling us that we only lost 11k jobs in November – and then finding that the TrimTabs’ employment analysis, which uses daily income tax deposits to compute employment growth, estimated that the US economy shed 255,000 jobs in November. How are we to reconcile both of these elements? And then there are the national chain store sales - which fell 5.2% in the first week of December. And then the government reported that only 474K applied for first time unemployment benefits - unfortunately this number was closer to 665,000 – but which do you think plays better to the Christmas audience?

I used to believe in only two certainties in life – death and taxes. Let’s add a third one to that – you can turn on CNBC and guaranteed you will always hear how great the economy is, and that it's a great time to buy stocks, no matter how horrid the global economy is doing. It’s just like Dr. Frankenstein saying “It’s Alive”. Does our President and our Secretary of Treasury really believe we can SPEND our way out of a recession? That’s a lot like drinking your way out of alcoholism – yes? Then we find that Tim Geithner is going to extend the TARP program right up through October of 2010 – now if we were truly “Alive” would we really need to do that? Then the FDIC released figures showing that the amount of loans outstanding in the nation's banks fell $210.4 billion in the third quarter of 2009. That is the largest quarterly decline since the FDIC began tracking loans in 1984.” If the banks and executives really believed that our economy was “Alive” they would be granting and asking for more loans, not less.

A couple hundred nations met in Copenhagen this week – to talk about regulating CO2 emissions, and increasing energy efficiency. Now what didn't get much airplay was a paper that was circulated that moved the bulk of the program from the U.N. to the World Bank! Now who would have guessed that something as sweeping as carbon footprints, monitoring of your energy use, and forcing 3rd world countries to shoulder more of the cost than the big boys, would now be in the hands of Bankers! Well – remember when we told you so ☺. Allow me to make this very clear, bringing the control of the world’s CO2 emissions under the World Bank are moving us one step closer to a centralized economy controlled by a single group of people. Factually back in the 70’s – during the oil embargos – we only imported about 14% of our energy – today we import over 60%. We have enough coal, oil and natural gas to be completely energy independent. Just this week the EPA declared "greenhouse gasses" as being dangerous to humans – so just in case Obama can't get his ‘Cap and Trade’ bill through Congress, the EPA now has the ability shut you down. It's because of things like this, I am so able to make long range predictions about our economy. And there are very few things that survive well during a long drawn out soft depression – those elements are gold, silver and food.

The Market:
Many of our long-term readers have made fortunes investing in the metals and commodities. In 2001 – we wrote that the US Dollar’s days were numbered – and that shorting the dollar, and purchasing gold were excellent long-term investments. I still think that the gold and silver trend have a long way to go, the short dollar trade also has a way to go – however the dollar is going to bounce at times. I don’t think that the final leg of gold or silver will mature for approximately 18 more months or so. But you should begin to purchase a few ten ounce bars of silver for $200 bucks each, you'll be doing "something" to help preserve your wealth.

In the short term, we all know that the market is only where it's at because it's being "supported". The only question is, how long will they support it – tomorrow, Christmas or March? This isn't about fundamentals, earnings, the economy – it’s simply about deception. Things are NOT “Alive” and even in the play you find that it doesn’t much matter HOW you pronounce “Frankenstein” – the government needs this market up to convince everyone that things are getting better. With Obama's approval rating plummeting day-by-day, with layoffs continuing, he actually “Needs” Wall Street to help his image with people.

What seems most likely is that they hold the market up into year-end and beyond. But given the market’s main job is to take as much money from people as possible – it would be like Mr. Market to roll over and dash all those hopes. So we have a war between Obama and his henchman Bernake, versus the market. The market would love to take a plunge and beat up the end of the year bulls, while Benanke is using Fed money to feed TARP money to banks to speculate and keep things up. For the short term it "appears" like the tag team of Bernanke and Obama will be able to go the distance. But just know that the plunge is lurking, warming up, building pressure.

We've been trying to lean long into the market, but this late in the game we also keep our finger near the sell button. We take profits quickly and if necessary we stop out quickly. I just don't believe you can let it all hang out, not after the magnitude of the run we've had. Our "advise" is that you too should lean long, but be very cautious. Pick your spots, and take your profits.

TIPS:
We have SPY from 109.30 Stop at 110.39
We have CY at 10.0 Stop at 10.30
We have ANR at 40.04 Stop at 39.70
We will be buying the GDXJ’s / and SGOL’s – but wait until gold settles a bit here – also we’ll be looking at the Silvers … PAAS / SLW – etc.
And we have about 70% of our money at work in the 401k’s – the rest in cash.

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 - 12-06-09

This Week in Barrons – 12-06-09:
Thoughts – Mr. Mark Twain

Mark Twain: “It isn't the sum you get, it's how much you can buy with it.” Gold ended the week near the 1,200 an ounce figure – and for the past 2 years I’ve heard every ‘guru’ tell us why gold is “baloney, no good, and barbaric.” And the fact is – they’ve ALL been wrong – terribly wrong. The fact is our country is bankrupt, our currency is being dismantled on purpose, and the world’s governments have had enough of the US’s fiat printing press money. Now the real question is: are all the guru’s really that blind, or were they "told" to dismiss it? Of course the answer is that they were “told” to dismiss it. Consider that 90% of all the "funds" you can buy into are long only. Most 401K's don't allow shorting or even have inverse ETF's where you can go short. So, if you're a "long only" fund manager is there ever a time when you're going to tell people to sell – heck NO – because you would have nothing to manage. So it's "ALWAYS" the best time to buy stocks – yes? Well the same thing happens with gold. When you purchase gold it just “sits there.” Wall Street can’t use it for derivative games, for credit swaps, and at the FED level it gets in the way of their bogus printed money. But here it is – at $1,200 per ounce. Now it will pull in – everything does – but gold still has a date with higher prices and that can’t be stopped. “Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it” – Mark Twain

Mark Twain: “If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a man and a dog.” Potentially the more interesting part of gold: is SILVER. The gains in silver could easily outstrip gold (in percentage terms) over the next several years. At $18 an ounce, you can buy 100 ounces for under $2,000. Now, some will say that silver is not as respected as gold – and that’s true enough. Some will say it's not really as good as gold at being money, and that’s false. And some will say that it’s already peaked, and that is also false. Silver was money BEFORE gold and has lasted longer as coined money than gold did (we still had silver in our coins in the 60's while gold was gone long before that). As far as "money" silver has been legal tender forever, while gold was actually outlawed as being legal tender by our own Government. Silver is in short supply, and each year we need more of it – and as the dollar becomes more worthless, it will price higher just because of the inflation factor. I have no reason to believe that silver cannot make $50 dollars in the short term, and $75 in several years. Gold has a date with a smack down, and it could be brutal. It’s like Mark Twain said: “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” Gold could fall $150 per ounce if the dollar jumps on the world stage, and all that would do is give me a chance to buy more. As far as silver goes, I think it's in its infancy, and that a 100% gain is not that far off. Remember, where the metals go, so go the miners. You might want to take a few bucks and buy a small basket of good ones, because they could soar more than you think. “You can tell German wine from vinegar by the label, and denial ain't just a river in Egypt.” – Mark Twain.

The Market:
Mark Twain: “Get the facts first. You can distort them later.” To some extend – the unemployment report on Friday showed that all the people that could be cut – have been cut. You still need someone to open the door each morning. Factually, the number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million . Among the marginally attached, there were 861,000 discouraged workers in November, up from 608,000 a year earlier. The bottom line is simply that the employment number was baloney. Everyone knows it, even the most uppity of the talking heads suggested that "there could be some revisions" to this. But the push goes on, as they try and keep the markets elevated. Friday was very interesting, in the morning the averages roared higher on the bogus jobs number, but then reversed and went negative by some 40 points, only to reverse again and end the day mildly green. Some would say the amateurs rushed in and the professionals sold stock to them. Is it possible that Friday morning was some form of short term top? I believe it's possible, but you risk wading in dangerous water when you try picking tops in this market.

I wouldn't look to go long a whole lot of stuff until this market clears that 10,500 level and holds it. Then they could use that as the springboard for the last Christmas rush. But until that level is taken out, shorts will be bolder, chart players looking at "wave C" patterns will pull in, and funds that had a very profitable year might just want to lock in those gains and go play polo somewhere. Remember: “A lie can travel half way around the world while the truth is just putting on its shoes” – Mark Twain.

TIPS:
We have HL at 4.51, with a hard stop at 6.49.
We have SPY at 108.84, with a hard stop at 110.1.
We have NEM at 52.72 with a hard stop at 52.20 – over 55 buy more.
We have POT at 117.79 with a stop at 118.45
We will be buying the GDXJ’s / and SGOL’s – but wait until gold settles a bit here – also we’ll be looking at the Silvers … PAAS / SLW – etc.
And we have about 70% of our money at work in the 401k’s – the rest in cash.

Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.

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