This Week in Barrons – 1-10-10:
Thoughts – “I Pity da Fool” (Mr. T … B.A. Baracus from ‘The A-Team’)
Murdock: Looks like we're going to crash.'
Face: No, what's *really* going to happen?
Murdock: Looks like we're going to crash and die.
I was first notified of the Governments Plunge Patrol Team ( the PPT – officially known as the ‘President’s Working Group on Financial Markets) back in early, 1995. I found this to be the answer to a lot of questions I had that just could NOT be answered in logical fashion. The Group was built in 1988 to: give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence.” And on this group is: (1) the Secretary of the Treasury, (2) the Chairman of the Board of Governors of the Federal Reserve System, (3) the Chairman of the Securities and Exchange Commission, (4) the Chairman of the Commodity Futures Trading Commission, and The Secretary of the Treasury shall be the Chairman of the Working Group. And ‘supposedly’ the law states that this group can only give ‘recommendations’ – however in 1989 Robert Heller stated: “instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole." In 1997 Alan Greenspan stated: “We have the responsibility to prevent major financial market disruptions through development and enforcement of prudent regulatory standards and, if necessary in rare circumstance, through direct intervention in market events." And Ben Bernanke himself said in 2009: “consumer confidence will rise with the gradual rise of the equity market.”
B.A. Baracus: I pity da fool who goes out tryin' to take over da world, then runs home cryin' to his momma.
It has been my position that the Presidents Working Group is VERY active in the day-to-day manipulations of many markets, from stocks, to metals. And think who is on this group: The Treasury Secretary - Timmy Geithner – who on Thursday instructed AIG to remove documentation from e-mails showing how much Uncle Sam was going to be paying for toxic assets – former Goldman Sachs. Then we have the head of the SEC - the group that couldn't figure out Bernie Madoff, and were no-where to be found when banks were selling toxic assets to the world. The head of Commodities Exchanges – a place where (to this day) 4 major institutional banks can be short more silver than is produced in the whole world, despite it being illegal. Well, it seems that others have been thinking about the PPT: “The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks”, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market. “The Federal Reserve or the Treasury could have easily manipulated the stock market by purchasing $60 to $70 billion worth of futures of the S&P 500 on a monthly basis.” How many times in the past have we said: There simply was no way the market could do what it was doing without being "manipulated".
B.A. Baracus: They're closin'. They got us! We're almost out of gas.
Hannibal: Now, why did you pick a truck with no gas?
B.A. Baracus: 'Cause I liked the paint job.
Well, let's look at Friday's Jobs Report – it appears that some 85K jobs were lost in December – really – just 85K? There are two major employment reports, the Governments non-farm payroll, and the "household" survey. Well, when you use the ‘Household Survey’ report – it says we lost 589,000 jobs in December! But wait – it gets better – approximately 600K people "fell off" the unemployment rolls, which is why the unemployment rate stayed at 10%. How did 600k ‘fall off’ the unemployment roles – well – they just gave up looking for a job, and if you are no longer looking for a job, you are no longer considered unemployed – which would have naturally driven that 10% figure much higher.
Now onto The Market:
Face: In no time, he'll be running around like a Mexican Jack Rabbit - one that just got out of therapy.
We're entering a new year, with some huge gains from 2009 – and all some people need is a reason to ‘exit’ this market. Well Friday’s Jobs Report provided that reason. The jobs report was horrible, but the market didn't crash – it didn't even dip. The market ended the day ‘green’ on a day when job losses mounted, the unemployment level rose, and frankly there were no "green shoots" in the number. The spin was: If the numbers stink, Bernanke and the FED cannot raise rates, the stimulus money will continue, low rates will continue and the party can continue.
Hannibal: B.A., there's an old saying - The best defense is a good offense.
B.A. Baracus: You got that wrong, man. A good offense is the best defense.
Now we face earnings season. You're going to see creative accounting reach new levels of absurdity, and it will all be designed to make things sound rosy. UPS on Friday increased their guidance – and also cut 1,800 jobs! So it’s our guess that they move us higher this next week.
Lean long and keep a finger near the sell button.
Our Current holds are:
2000 PTEN at 18.03 Hard stop at 18.05
2000 WFR at 14.19 Hard stop at 14.20
2000 CRS at 28.40 Hard stop at 28.45
2000 STEC at 17.64 hard stop at 18.49
2000 UYM at 33.59, Hard stop at 34.40
2000 CLR at 40.56, HARD STOP AT 43.80
CY over 11.45
ATPG over 20.60
BRCM over 32.25
ADTN over 24.00
NVDA over 19.00
CAT over 60.02
DRIV over 28.00
GGB over 18.00
SLW over 17.35
CLD over 16.55
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.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.