RF's Financial News

RF's Financial News

Saturday, October 30, 2010

This week in Barrons - 10.31.10

This Week in Barons – 10–31-10:

Buy the “Rumor” – Sell the “News”:
Happy Halloween to all of you. Trick or Treat – well this is truly one of the reasons I'm comfortable holding my gold and silver. It isn't just "money" it's the alternative to Government. When people completely mistrust their Government, they look to alternative ways to protect themselves and gold fits the bill. By the way, there was another interesting "blurb" concerning silver manipulation this week:

The Commodity Futures Trading Commission (CFTC) urged action on their silver probe. At a CFTC hearing, commissioner Bart Chilton pressured the agency to take action in its high-profile, two-year-old investigation of the silver market. Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices, and he believes there have been violations of CFTC rules that deserve to be prosecuted. Though Chilton declined to name specific offenders, sources said that the agency began to look into allegations earlier this year that JPMorgan (JPM), one of the largest silver traders, was involved in manipulative trading. CFTC Chairman Gary Gensler declined to comment on the silver investigation or Mr. Chilton's comments.

But wait, there's so much more we can ask. As you know, we've been helping to expose the gold and silver market fraud and manipulations for years. In the past year, the heat has been turned up, as it went public that Andrew Mcguire, a lone silver trader had called out the SEC and CFTC to watch the manipulation in "live time". He showed them what would happen, and it happened. So far there's been all sorts of "investigations" but no action. Now we hear that the lawsuit, being represented by Labaton, Sucharow has the ability to really expose JPM and HSBC as the true market manipulators we have said that they were. What happens if indeed one of the new guns in this election, actually has the backbone to stand up for what's right and helps those proceedings go properly, and exposes it to the American people? Do you think it would be a wake up call? Do you think people would listen to a politician exposing another area of high level corruption and the exact steps he's going to take to eliminate it? I think it would open some eyes. If there was a new Republican, or Democrat, that came in with guns blazing and decided to show America how things are really done here, he'd be my hero. Wouldn't it be a great “Trick” and a “Treat” if someone actually did the right thing and exposed the back room ponzi schemes! I feel Americans from both sides of the aisle would support him.

The Market:
For the past several sessions, the "market" has decided to take a wait and see approach to the elections and the upcoming announcements from Ben Bernanke about how much more quantitative easing he's willing to do. After running up for week after week, the market has remained in an incredibly tight range, ending the days "flat" almost to the point of unnatural. Now of course the big question is "what's next? I can make a case for the concept that we are about to see a major league rug pull coming. If the elections show a big sweep by the Republicans – some say that's good, and some say that’s bad – but the bottom line is that this is already been priced in. And what about Quantitative Easing by Bernanke – well once again, some measure of that expectation is already baked in the cake.

One of the oldest adages about the market is that it "buys the rumors and sells the news". Well the rumors are that the Republicans take a new majority of the House, and gain in the Senate. The rumors are that Bernanke is going to announce $100 Billion worth of more treasury buying. So, if both of them come to pass, what's to keep the market moving higher? The market is sitting just below 11,200 (a hefty resistance level) – but if it got here via interventions, what's to stop it from going even higher? Nothing – but I do have my suspicions, that banks are using their free money to bid the market higher and lure in John Q. Public - to put more money in the pot – and behind the scenes (via "dark pool" trading platforms) they're amassing huge short positions.

Here's how this scam works. When banks get their free money from the FED they go into the market and buy stocks. As John Q. Public sees the market go up – he fears not making any money – and at some point the amateur investor finally takes the plunge and puts his money back in the market. The market continues to rise for a bit and then "whammo" – the rug gets yanked. But it works both ways for ‘banksters’ – as they put their free money into the market - they take ownership of stocks and drive the price higher. So when John Q. Public shows up – the banks sell their higher stocks to Mr. Public for a tidy profit. The more sinister side of all of this is that big institutions now use platforms called "dark pools" to trade. It’s a way large institutions can hide what they're doing from the normal exchanges. In a "Dark Pool" their trades do not show on the tape. So, while on the open exchanges we see them buying, we don't know what they're doing on the other side of the pool. It's my guess they're building up a substantial short position. One of the reasons we can point to that belief is that this week the ratio of Insiders that are Selling their own stock, versus Buying it just hit an all time new RECORD of 3,777 to 1. The very insiders that are posting rosy earnings reports and telling us fairy tales about business going forward - are trying to get out faster and harder than at any time in recorded history. Since the insiders at big corporations are often tied closely to the very investment banks that can utilize dark pools, wouldn't it make sense that they are working together for their common good? The insiders cash out by selling their stocks with massive gains to John Q. Public, spurred on by knowledge that business isn't that great, and their banker buddies are probably telling them that the end is near. We just don't know the level from which they're willing to fleece the sheep. Maybe it's at 11,200, maybe it's at 11,700 or maybe they take it all the way back to 14K – but we feel that when the rug pull comes – it’s going to be violent.

The combination of the elections and the Central banks maneuvers, will be awful interesting to watch unfold this week. It's my guess this week has the ability to be one of the more volatile weeks we've seen this year. How will the bond pits, currency markets, and the stock markets react? Will gold set another new high? And when will Bernanke announce $100 Billion a month in Treasury buys? We’ll know a lot more by Wednesday evening – bring some popcorn!

Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – 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)
CBOE at 24.02
JCI at 33.00
MDT at 34.05
NGD at 6.90
ABX at 48.15

We still like the metals and are looking at buying some SIVR, SIL, and SGOL. Think about NEM over 65 and look at Freeport McMoRan (FCX). What scares me – is Jim Cramer also likes these picks ☺.

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

No comments:

Post a Comment