This Week in Barrons – 1-25-10:
Thoughts – “When I was a kid I used to pray every night for a new bicycle – then I realized that the Lord doesn't work that way so I stole the bike and asked Him to forgive me.” Andrew Dice Clay.
This week the biggest news in many years hit the wires. Obama challenging the banks – nope. Ben Bernanke potentially NOT being re-appointed to the FED – nope. The market falling 500+ DOW points in 3 days – nope. It was the Supreme Court’s 5 to 4 decision on Thursday to allow Corporations to spend any amount of money they please on the Politician of their choice – deciding that corporations are people and people are entitled to “free speech”. This decision could eliminate the last vestige of any integrity in our election system. It throws out over a century of restrictions imposed by Congress against corporations so that they could not influence the outcome of elections. Corporations have an unfair advantage over the small guy, over real people, in the amount of money they control.
What does this all mean? It means future Supreme Court Justices will be appointed by presidents who have been bought, purchased, and are controlled by corporations, and confirmed by U.S. senators who also have been purchased by corporations. It means Exxon Mobil, who earned $45 billion last year, can spend any amount of money they want on advertisements supporting a political candidate, and if they want a candidate elected – they have billions to spend on that candidate. How on earth could an honest man compete? It means candidates will cut deals with Google, Microsoft, General Electric, Exxon Mobile in order to get elected. It also means these same companies can place people in our government, who will pass and enforce legislation favorable to their special interests. Consider that there may be more wars because companies love getting giant military contracts, and there may be less labor rights because they just ‘get in the way’ of profitability.
Andrew Dice Clay: “I don't drink to get happy or to forget the pain, I drink to stop the voices in my head. The bad part about the voices in my head is that they stutter.”
So what about the Democrats losing Massachusetts: it was a true “rebellion” by the masses giving the message: "no more!" But what about Obama coming out strongly for his new financial reform at the banker level. Potentially you could dismiss this as politics – losing Massachusetts – striking out at Wall Street so that he looks good to the voters. But after looking at the transcripts of the speeches – I get the impression that Obama was personally wronged. In other words, what if when Congress bailed out the banks, Obama made one of those back door "deals" where the banks had to do something to make Obama look good when it was over – such as lower bonuses or understate profits. And let’s assume the banks did not keep up their end of the bargain. And now it’s Chicago Politics gone wild – it’s PAYBACK time. Heck, Ben Bernake is Wall Street’s best friend – giving them money when (and even if they don’t) need it – and now his appointment is clearly in jeopardy. So we fell 500+ points in 3 days – blasting thru 10,200 on the DOW as a level of support – because the idea of “Helicopter Ben” not giving out free money to Wall Street scared all the bankers – and honestly Wall Street could be saying to Obama: “Let's see how many people love you after we crash this market and take the 401K's down to next to nothing." Obama wants rules and regulations that would seriously crimp the bankers style, instead of going along with every agenda they have. Something's brewing folks, you can feel it, smell it, sense it. I smell a bit of warfare between Obama and his Banker elite handlers. And do I think that the ‘paper dollar’ can withstand the onslaught of all the ills we face right now – honestly – I’ll continue to trust gold.
Andrew Dice Clay: “It takes only one drink to get me drunk. The trouble is, I can't remember if it's the thirteenth or the fourteenth drink.”
Look how fast things can change. It was just 5 short trading sessions ago that the market was at 10,723, and the bullish crowd was preaching DOW 15,000. In just 5 sessions we've fallen 561 points – the single biggest pull down we've seen in a year. So, the market is in a funk, Washington is at war with Wally Street, our Political parties are coming apart at the seams, so what is an investor to do? Now, I truly believe that we will see DOW sub 5,000 between now and 2012, and even if this week was indeed the beginning of that monster slide, it's not going to be a straight line down. We are already short term "oversold" from last week’s carnage, and we should see a fairly meaningful bounce at the beginning of this coming week. And that will be the nature of the entire race to the bottom – we will have periods of free fall, punctuated with periods of wicked bounces. This will take a long time to play out.
My guess is that we will bounce, next week, but not terribly far. Friday night the founders of Google registered to sell 5 million shares each. Oh, and by the way, insiders in ALL areas of business have been bailing out of this market for a year. Just last week insiders bought $1million worth of shares and sold $419 million. If they thought their shares were going to go up, wouldn't those numbers have been reversed? If you're a trader, after some wild volatility on Monday, it's my guess you can go long for a day or two, but by Wednesday afternoon, the steam should come out and we roll lower again.
Andrew Dice Clay: “I don't want to achieve immortality through my work. I want to achieve it through not dying.”
I think it's time to start jotting down your longer-term short list. Remember, we can go short in two ways, literally selling shares short, or buying puts. The single best trade I’ve ever put on was being in long dated put options against the DOW and S&P during 90% of 2008. The returns were incredible. An example trade for you to consider: HOG is the symbol for "Harley Davidson". They just announced terrible earnings – and duh – who has $20k sitting around for a motorcycle? So I think HOG – currently selling around $24 – has a date with $10 in the not too distant future.
We sold out of everything except our 401K. We’re still buying hard gold and silver (but what else is new).
If you’re thinking long then:
REXX over 14 is still attractive
ORCL over 25.50 still looks good
CLNE over 19 would pull me in
FMCN over 18 would be interesting.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.