This week in Barrons - 11-28-10

This Week in Barons – 11–28-10:

Thanksgiving – Can’t we have one every month?
Steve Forbes writes me this week saying: “We still don't have any degree of certainty where the bottom of this housing market is. Why? Because the long term business model for the US still has not resolved how to put people back to work. The key is jobs. Remember, someone needs to have a job for over 2 years in order to become eligible for a FHA, Fannie or Freddy mortgage assistance. Potentially 2+ Million homes have remained outside of foreclosure specifically due to the extended unemployment benefits, which are likely to be stonewalled in Congress this term. Steve brought up some numbers: After $2.3 Trillion in stimulus for the entire 310 Million in U.S. Population → that’s $730,000 per person. Do we all feel $730,000 richer this year vs 2 years ago?

Factually:
- Sales of new single-family homes fell 8.1% in October
- Single family homes declined by 23.9% in the West, 20.4% in the Midwest and by 12.1% in the Northeast. In the South sales increased 3.1%.
- And to add insult to injury - the median price of a sold home fell a record 14%, hitting $194,900 in October, the lowest level since 2003.
- The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter.
- FYI – if you haven’t seen this video – and need a little something to get your heart started – and really angry at our government – well try this on for size: http://www.youtube.com/user/fiercefreeleancer

I tend to think what really has a lot of the global market spooked is the news that Russia and China are tired of the US dollar problems, and have decided to trade between the two countries using their own currencies and NOT trading via U.S. dollars. That’s a major development – as for years we've been saying that the US dollar is doomed and will NOT be the world reserve currency going forward. Now, just because the dollar index rises – remember - with Ireland, Portugal, Spain and the rest of the great Euro experiment falling apart, the Euro will indeed fall against other currencies, including the dollar – so the dollar can "appear" strong, while at the same time losing most of it's value because everything is relative! So the race to the currency bottom has indeed begun.

As the time for New Years Resolutions looms ahead – 5 years from now:
- I do not believe the U.S. Dollar will be the global reserve.
- I do not believe the Euro will be intact.
- I do believe a new "global currency" will be floated, backed with a gold percentage.

The Market:
By socializing the private losses of banks, the nation states of Europe are all sequentially falling one after another. Ireland, Portugal and soon Spain will indeed get all manner of freebie money out of the ECB, but it is truly "Game Over". The Germans want no part of bailing out a failed Ireland, when Ireland won't even increase their corporate tax rates to just "HALF" of what Germany charges. So rightfully the Germans are saying – “we didn’t break it – and if you won't help yourself, we aren’t helping you fix it!” Stay long precious metals.

This week initial jobless claims came in at 407K, which was well below the 435K that was expected, but don't forget it is "Holiday Skewed". This week we also had “Black Friday”, and CNBC is trying to convince us that since the malls are packed, the market should rise because it shows people are willing to spend money. Frankly with the prices I saw in various stores this weekend, I think revenue will be less this year than last due to massive price cuts.

So the manufactured US stock rally has run into some big snags that even Billions of Fed money is having a problem overcoming. The Fed is desperately trying to push the market higher into Christmas so people spend money, but the global events have even this Ponzi scheme in danger. And just the other day, Bernanke came out and lowered the outlook for GDP and employment. I'm thinking we can still trade sideways and up to the Christmas season. However, it’s clear – the market wants to ‘sell off’ while Bernanke and the White House want it "up", and that’s why we fall 100 points one day, and gain back 130 the next.

In the short term I think we’re going to see some weakness, and that could snowball. If the market loses DOW 11K, we'll rocket slide down to 10,700 in very short order. If I'm right, we'll see the market come down and test the 50 day moving average again, but it should hold. Then I think the next push up will run us somewhere just shy of the 11,400 level we saw in early November. That will be our "seasonal push", and frankly, when it ends, we should seriously consider some wholesale shorts and puts. And because the Black Friday sales seemed to be "okay" they might try and hype us right out of the box on Monday, but, we need to be careful with that. The key is that 11K line. So far they've rescued that for every close – have that fail we’ll see them regroup at the 10,700 level in very short order before trying to send us higher.

I hope you enjoyed your weekend, and I always wonder why we can’t have Thanksgiving every month!

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY (big pop this week) – DNN – and VXX

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

Here are some we’re watching:
I still like TJX over 46.50
PAY over 36.00
AEM over 80
ANR over 52.00
PCZ over 16.50
FFIV over 130 and again over 132.00
AMZN, which I liked the other day over 165.70, again over 170.00 too.

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

This week in Barrons - 11-21-10

This Week in Barons – 11–21-10:

Thanksgiving – It’s such an Easy Message
Thanksgiving is my favorite Holiday of the year - partially because it’s my birthday, but mostly because all of us have so much to be thankful for – and to set aside one day to say “Thanks” seems like the least we can do. I had the pleasure yesterday of helping my 15 year old thru a physical therapy work-out, talking to my son at NorthWestern’s football game in Wrigley Field, and helping my wife re-do our dining room – and then it hit me – in over 90% of the world – none of that would be possible. So allow me to wish all of you the best – and hope you get to share some good food, drink and bonding with those who you really love – because that’s the #1 investment in all of our lives.

This week, as Gold was being systematically taken down, so we sold our position in GLD and GDXJ for over a 20% gains. As much as I think Gold and silver are going to go higher in the long run, when you're facing those kinds of profits, on a short term trade, sometimes it's best to just take those dollars home and redeploy them later. In some others the runs have been spectacular – SLW for over 100% and NG up over 139% for us – and for those we also have stops (points where we will sell) and we’ll share those at the end of this letter. Why don’t we just hold these stocks? Well currently there are 4 major lawsuits and a class action suit that have been launched concerning silver manipulation. The Gold manipulation is almost as ugly – yet to this day banks are still piling on illegal naked shorts. This week we found out:
- Mortgage applications fell 14% - along with building permits and new home starts
- 30 year fixed rate mortgages jumped to a 4-month high of 4.34% - higher yields on 10-year treasury bonds are creating ripples in the mortgage markets – the exact opposite of what the Fed expected from QE2
- The rise in cotton prices has been 'terrifying' and could force U.S. retailers like Gap (GPS), J.C. Penney (JCP) and Wal-Mart (WMT) to pay their Chinese suppliers as much as 30% more for clothes. The price hikes will be passed along to consumers.
- The Empire State manufacturing report came in at Minus 11 (saying that manufacturing is shrinking)

Today I was reading a Drudge report on two young kids who had their ‘cupcake’ stand closed down due to an elder (in the town) calling the police because of their failure to have a permit. Does anyone out there really believe that in America we ENCOURAGE entrepreneurship? Every time I hear Obama speak on job growth coming from small business I have to laugh – because who’s going to tell all of those Washington Agencies to ‘call off the dogs?’ Want to get people back to work – eliminate about 90% of the EPA's rules, eliminate the 7 years of "environmental impact" studies they require, eliminate the political correctness and replace it with common sense. Gee – I’m really looking forward to flying to visit relatives this Thanksgiving – but not nearly as much as I’m looking forward to having TSA agents ‘feel my junk’ and oogle people with x-ray specs.

The Market:
I would guess that the single biggest question on people's minds right now is - Are we going to rally into the year-end or not? I think the answer is yes. I think we'll consolidate here a bit (as they have defended the 11K level) and then see one last charge higher into year-end. However and I think we need to remember the “January Effect” – that is to say – if the market does well in January, it does well for the year. Well – I do not think we're going to get a ‘favorable’ January effect. Here’s my thinking: If you sell your stocks now, you'll be paying taxes on them in April, 2011. If you can wait until January, 2011 to sell – you’ll be paying those taxes in April, 2012. I have a feeling a lot of people are going to need cash in January, and so it’s possible we run up higher into year-end, and then sell off fairly substantially in January.

Since Ben Bernanke put himself on record as saying: "higher stock prices will contribute to the wealth effect", there can be no question that the Fed manipulation we talk of so often is not only true, but happening daily. With that in mind there are two consequences: One is that by having the member banks push the market higher, we are seeing valuations start to attain nosebleed levels. The second consequence of QE2 is that materials and "commodities" are going higher and higher - resulting in price inflation. While Bernanke floods the system with more printed money - it has to go somewhere. One place it's going is banking reserves - because frankly a lot of them are still insolvent if they had to actually account for their holdings via any semblance of GAAP. The other place the money is going is into the stock and commodity market. With Government POMO operations continuing right on through December, with people's hesitancy to sell and pay taxes now, with the Fed leaning into the market, and with the momentum leaning higher - I have to think we can lean long into year end. But after that it's got a great chance to be a nasty place, and we'll certainly be looking to go short.

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY – DNN – and VXX

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

Here are some we’re watching:
In solids: JOYG over 76.55, ANR over 50, MEE over 50, CLF over 71, BTU over 60
In tech: ATHR over 34, IBM over 145.6, AAPL over 310, CRUS over 14, STC over 15 (may see 16.50 quickly)
In retail: AMZN over 165.7, TJX over 46.5
The rest: GS over 170, and PAAS over 38 would all be interesting to me.

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

This week in Barrons - 11-14-10

This Week in Barons – 11–14-10:

Something Wicked this way Comes?
After 36 hours in Seoul, South Korea - the leaders of the G-20 (talking about whose fault it is that America’s gone broke again) achieved a spectacular breakthrough late in the day, when crazed mediators from Britain, France, and Germany, persuaded the G-2 to call the whole thing off and go home. Presidents Obama and Hu quickly agreed to go home and blamed the whole impasse on the Irish and Greek governments for not living within their means and surrendering to German and French demands to slaughter their bondholders. Naturally no Irish or Greek representatives were present. While everyone bolted for the airport, President Obama remembered just how bad things are at home and headed off to visit Japan instead, one of the few industrialized G-20 nations with an outlook even worse than America’s. Before the next summit the IMF was chartered to study the currency wars and suggest a solution = Stay long precious metals. After this G-20 meeting:
- America is still living far beyond its means and setting out to trash its currency in the expectation this will somehow reduce unemployment,
- Europe is still heading towards a Club Med situation,
- China is still racking up a massive dollar surplus and has a domestic property bubble that could burst at any time,
- And Japan is aging its way towards a domestic crisis.

In other Asian news, China’s latest 5-year plan is intended to convert China from the world’s manufacturer to the world’s consumer. If that were to happen and 1.3 billion people start consuming like Americans (all on credit) we are heading for the boom of all booms, and then a massive credit bust. Happily it’s unlikely to happen. The world would quickly price scarce limited basic resources too high for the transition to occur. Even so, China has served notice that we are in for a decade of change ahead, starting in the next 5 years. Another reason to = Stay long precious metals.

I do tend to believe that there are baseline drawings that we can look at and make presumptions:
- One – it’s no secret that there are more people on this earth every day – all needing food, clothing and shelter. So we must think about the "commodities" as something important to our future.
- Two – the real detective work comes in the form of deciphering what is easily replaceable, and what is not. For instance, wheat - when the weather is good, the world produces more than enough – oil on the other hand can not be easily reproduced.

So are “stocks" at a generational low, and is this the buying opportunity of a lifetime like so many pundits suggest? In the here and now, a lot of the world is in an economic mess of biblical proportions. The US is broke, while Ireland, Spain, Portugal, Italy, and about 14 others from the Euro zone throughout emerging markets are bloated and debt ridden. And as much as I write about the doom and gloom, chances are pretty good that on the other side of what ever it is – we should climb back out and see a more stable economic picture emerge.

But here are some headlines:
- Our Q3 housing report shows accelerating declines in home values and a record 23.2% of mortgages underwater.
- As municipalities across the country pay billions to big banks to get out from under interest-rate swaps – the termination payments are coming at the worst possible time, as the recession has left states and cities facing huge budget gaps.

The number one issue right now is our currency. Bernanke is out to devalue it and the world knows it. I love the classic quote: "It might be OUR currency, but it’s YOUR problem". What do you do if you're China and you have well over a $Trillion in reserves that are related to or directly in dollar assets? Each new dollar Bernanke prints, lowers the value of the dollars in your vault.

I have said over the years that the dollar is doomed, and it will be replaced as the global reserve. I don't think the structure for the replacement is known just yet but it's in the works – and it will eventually need to be tied to a gold standard.

Gold and silver were beat-up this week. It's been long overdue, people became complacent – please use it as a buying opportunity – I am. Until economic sanity comes back and something new hits the stage – I’ll stick with precious metals – they’ve worked for 10 years – and I really can't see why they won't work for at least 4 more.

The Market:
On Friday and this week the market ended “red.” We've peeled off almost 500 DOW points in just a week. The general feeling was that Bernanke would unleash QE2, the market would love every dollar of it, and we'd soar higher. But this week the atmosphere changed - not only are most of the sane people in America upset over this next round of stimulus, but the rest of the world is angry at us too. So in Case #1: since expectations were probably running at 90% that we'd get QE2 and that the market would rally on it – the market decided to simply take everyone's money that hopped aboard for the ride higher. Then after fleecing the sheep it will turn back North and hit fresh new highs. Case #2 is that something more long term has hit. The global pressures, the backlash against QE2, the insiders selling in droves, the record bank closings, and a hundred other things have finally added up to the point where "stocks are expensive and need to be sold.” The problem with Case #2 is that this is not new – it’s been around for months. And as much as “something wicked this way comes”, and as much as I believe the market should be considerably lower – it begs the question – Where will $600B POMO dollars go if not into stocks? Honestly – if you're a big time banker, and because of a sweetheart deal between you and the Federal Reserve, what on earth do you do with all that money you’re raking in from selling Treasuries to the Fed other than buy stocks? The existing POMO program – is schedule to buy $7–9B on 11.16, $5B on 11.16, $4–6B on 11.17, $7-9B on 11.18, $6-8B on 11.19, $1-2B on the 22nd – and this continues for all of November and December. So if the money doesn’t go into stocks – where does it go – and I don’t have a good answer to that!

So I think it’s Case #1 – the garden variety fleecing of the short-term sheep, and they'll step back in and run this puppy back up with all their Fed POMO money. I think we'll know by Wednesday evening just what we have here. If the selling continues Monday and Tuesday, and we don't get a classic "Wednesday reversal" we'll have to consider the idea that something bigger is going on and look at some short side ideas. Be careful out there!

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – NGD – ABX – FCX individual gold miners
GLD – pegged to the price of Gold itself
SLW – SSRI – SLV - silver miners and indexes
AUY – specific miner
VXX – volatility index (for the long haul)
DNN bought at 2.75
CBOE – JCI – MDT all stopped out for a slight gain
PHYS – Sold for not going up fast enough

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

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

This week in Barrons - 11-06-10

This Week in Barons – 11–07-10:

2012 Could Bring a Very Different Day of Reckoning:
Ben Bernanke once said: "consumer confidence will rise with the gradual rise of stock prices". Ben could only say that – because he had the ability to MAKE the stocks go up. When Ben said this - the DOW was at 7k – and sure enough – as strange as it sounded – as home sales hit historic lows – as retail sales went down – as foreclosures hit record highs – as joblessness continued to rise – the market just kept going up! And yes – "the market can stay irrational, longer than you can stay solvent". But we’re talking thousands of points within the biggest recession since the Great Depression. It’s not so impressive to me that he knew what to do – after all he’s a student of the ‘depression’ scenario – but how did he set up the system to ‘quickly’ to make this happen? And Ben’s last weeks quote in the Washington Post hit it on the head: "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." So 2 years AFTER he muttered those previous words – he comes out and says almost the same thing again - but this time credits his manipulations for making it work.

OK – so this week Bernanke un-leased yet another $600 Billion of fantasy money that we don't have – and what happened - Gold went up $41, Silver hit a new recent high – and other countries - Germany, China, Brazil, Russia and a host of other nations lashed out against Bernanke’s policies. Hey – who can blame them? If I held a ton of US dollars I’d be upset as well if (in an instant) they became worth less! Here’s an excerpt from the German finance minister: "With all due respect, U.S. policy is clueless." Wolfgang Schaeuble believes there is no shortage of liquidity: "To say let's pump more into the market is not going to solve their problems.” China in turn said: “The unbridled printing of dollars is the biggest risk to the global economy. As long as the world exercises no restraint in issuing global currencies such as the dollar, then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament.”

Did you catch the word ‘inevitable’? As Bernanke continues on his College day thesis that pushing money out of helicopters is the solution to all problems – more and more of our moral friends are turning into our financial enemies. And what about this little gem that Obama and Bernanke were not going to tell us: “The cost of Fannie, Freddie bailout might hit $685B. Initially projected two years ago to cost taxpayers $200B, the tab so far is $134B, but a slowdown in the housing market might lift that total to $280B. Creating the companies to take the place of the two fallen mortgage giants will likely cost taxpayers another $400B in capital.” - an expensive repair job for U.S. taxpayers.

The jobs report came on out Friday – and on the surface it told us that 151K jobs were created. I couldn’t believe it so I did some digging. 61K of those jobs were created from the ‘birth/death’ model – so those are not real. 7K more manufacturing jobs were lost - but wait it gets worse. The labor participation rate is at its lowest point since 1984, at 64.5%. If we were to assume a ‘normal’ participation rate of 66% - that means 3.5 Million people have dropped off the employment rolls – and have quit looking for work. Adding this number back into even ‘their unemployment number’ would increase the unemployment rate to 11.6%.

Where the heck did 3.5M people go? One day they were out there looking for work and the next day, "poof" they're gone. With a sweep of the mighty pen, people active in the job market fell to a 26 year low, with 3.5M are unaccounted for.

So there you have it - Bernanke’s going to continue to print money, the rest of the world hates our guts and will embark on their own form of protectionism – to think that this ends well is naïve! I’m trading the market gains and investing in gold and silver like crazy – but frankly – I think that a major league disruption is lurking and it's going to hit by 2012 – maybe those ‘old Mayans’ were onto something!

The Market:
It’ Up! That's all you need to know. If someone asks you: "What's the market doing lately?" just say: “It’s UP!” On Thursday we learned that 450,000 people had to apply for first time unemployment benefits – but the market went up! For two years we've averaged 450K initial jobless claims per week – and there has been NO private sector job growth.

We went long FCX on Thursday morning – by noon on Friday (one day later) it was up $7 per share (7% in one day). We also bought SVM on Thursday morning at $10.58 – and on Friday it was $12.35 (16% in a day)!

My ‘gut’ has screamed for two weeks that we are topping out – but the market marches higher. We are in a momentum driven, Fed induced dream, and it is no longer going to use regular methods to tell us when it ends. In any event here's the deal: If someone says "stay long this market, it's going up-up-up" - and it does, it's not because he's a genius, it's because the Fed and Wall Street want it up more. Likewise if a well-respected trader/investor says "be cautious this market is very over-extended" and yet it goes up - don't give him grief. There is not ONE SOUL that really knows when this will end except Ben Bernanke and the boys of international banking. Only the clan of elites (doing their behind the scenes magic) knows when the rug pull will come.

We have to keep leaning into this market, because it keeps going up despite any semblance of reality, but I refuse to swing for the fences. I am buying smaller positions and keeping my stops tight. Watch the dollar - when it weakens load the boat with stock. When the dollar bounces - sell out. Nothing could be easier actually, it's really that simple – and completely insane.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – NGD – ABX – FCX individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – SLV - 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

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL. Jim Cramer now wants 20% of your portfolio in metals – wow pretty insightful!

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