RF's Financial News

RF's Financial News

Sunday, October 3, 2010

This Week in Barrons - 10-3-10

This Week in Barons – 10–3-10:

This Market has a Heart of Gold!
We're rushing headlong to an economic currency devaluation dilemma – if not, why would everyone be begging for QE2 (Quantitative Easing 2 = Government prints (and gives away) more and more money!)? A couple facts:
- “The dollar is one step nearer to a crisis and devaluation may be inevitable”, former People's Bank of China advisor Yu Yongding says. "Such a huge amount of debt is terrible. The situation will be worsening day by day. I think we are one step nearer to a U.S. dollar crisis." Now, China holds almost a trillion dollars worth of dollar denominated debt – so the idea of the US devaluing it's currency lowers their holdings values considerably. But the man is right, the amount is terrible, the situation does get worse day by day, and we are very near a dollar crisis.
- The Richmond FED Manufacturing Survey went from 11 last month to -2 this month (above 0 shows growth). With shipments going from 11 to -4, new orders going from 10 to 0, and jobs going from 12 to -3. The Chicago FED is showing an index of -1.4. AND to put icing on the cake: The Dallas FED Manufacturing Survey went from -13.5 to -17.7. So we’re declining all across the country!
- Pimco’s Bill Gross says: “Get used to a world of lower-than-average returns, as the most likely consequence of stimulative government policies will be a declining dollar and a lower standard of living."
- Consumer Confidence fell from 53.2 to 48.5 with the “Present Situation” going from 24.9 to 23.1, and “Expectations” going from 72 to 65.4. The statement from the Consumer Confidence Board came out as: "September's pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook.”

In the meantime, my favorite trade of all time, GOLD, has quietly been hitting new highs day after day (approx $1,320/oz). The best part is that the run didn't even start yet. As I see it, the world will continue to have currency wars, as they devalue the dollar. And as the Fed goes bankrupt buying Treasuries, Gold will continue to move upward, and one day will reach bubble velocity. Frankly I can't wait. One of our readers sent me pictures of a new ATM machine - coming to the U.S. – that automatically allows depositors to exchange dollars for Gold!

It's not too late. Gold could take a 5% hit on any particular week – and I’d personally buy more when that happens. Simply accounting for inflation, compared to the 1980 gold high of $800 – gold would currently have to be $2200 an ounce. We'll see even more inflation than that in the next two years as they debase our currency (hold onto your Gold!).

The Market:
On Tuesday:
- Ireland blew up (debt troubles and riots)
- The Regional Fed reports crashed.
- There were lowered mortgage applications.
- Mutual Funds saw an even greater withdrawals.
- Capital and Insider selling was at a ratio of 260 to 1.
- AND the market ended UP 40 points!

But, this past week was window dressing for the end of the quarter. Funds that stayed long are going to want to put on "window dressing" for their portfolio's – so even if they didn't own AAPL or NFLX, or AMZN - they're buying them now, so that it looks like they were smart. We’ve owned RIG now for about ten days and it's up a cool 10 dollars a share for us (18% in ten days – we’ll take it.)

But here comes danger – big time! Friday is the all mighty jobs report. I really think this will be one of the most interesting ones of the year. Why – well we know it has to stink. The weekly initial jobless claims are still at 450K, with more layoffs being announced in the thousands. The hiring we’re hearing about is "temporary" and for "Christmas". Unless they twist the entire system – this report should stink. Then what? Well, after the "best September" in 70 years – do we just keep roaring into October? Maybe, but the rubber band sure feels stretched.

Our guess is that we move up a bit more, despite the jobs report. Then, out of the blue a flash "rug pull" will hit, and drop us really quickly. Then for the year end they'll manufacture one more run before it's "lights out". Let's see how that all plays out.

Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)

If the market continues to have legs – you may want to look at: MMM over 88, ANR over 43 and CAT over 80.

I’m really looking at the miners – because with the recent run up in the metals – their earnings could be a real up-side surprise – look at: ABX over 48, NEM over 65, and NGD over 6.90

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

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