This week in Barrons - 12-26-10 (abbreviated)

This Week in Barons – 12–26-10:

Twas the Day After Christmas – and All thru the House:

This will be an abbreviated letter – due to the holiday. But wow – it’s holidays like Christmas that allow you to appreciate friends and family – thanks to all for a great holiday! But our ‘beat’ is ‘The Street’ and tomorrow the lunacy will begin again. We’re going to hear about more European downgrades, and more tensions in Korea. But often we use this week to reflect and see what’s worked and what hasn’t. We make a bad trade now and then (it happens ☺ ) and the key is to cut them off and move into something that's going in the proper direction. So how did we do this year? Well our trading account is up 40.4% on the year! We were bolstered by thinking that Obama and Bernanke would destroy our currency, and hence allowed to get into materials and metals very early SLW at $3 – ending the year at $39.

In fact – here’s a quote from last year’s newsletter – January 4th, 2010 – “As the dollar continues to crumble – and we think it will – ‘stuff’ becomes more expensive, and the world needs ‘stuff’. While it's true that in the short term they might leave the material guys for something more sexy, the fact is that the dollar will fall again, and when it does, the materials and metals should go higher once again. We can't ever ignore them.”

But we also had Amazon at $120 and it hit $183, Apple at $267 and it hit $323, and Salesforce at $75 that just hit $150. Now did we get all of those gains – absolutely not – why – because we generally get out of a stock a bit ‘before’ the top. Investing is a discipline and ‘in my world’ there’s no problem taking profits.

It’s been a good year – and next week’s letter will have my thoughts and predictions for 2011!


The Market:

Okay one week left and it’s not "common" for them to do a rug pull during the last week between Christmas and New Years, but it's not unheard of either so we need to continue to be cautious. We didn’t do much last week – again due to the holidays and potentially won’t do a whole lot this week either – again same reason. This market is being propped up on very low volumes, and I don't want to get trapped. It's my guess we limp sideways into the year end. Unlike last week where the market closed for Friday, this is going to be a full week.

Tips:
Let’s review our holdings:

We really don’t have anything in the short term holds account – and it may be doubtful that we do much at all this week as well (honestly).

This past week we were stopped out of EXK with a loss - ugh. It is possible the materials guys come roaring back – naturally we’ll have to watch the dollar, but it's sure possible.

Our Long Term Holds look like:
SLV at 25.81
NG at 6.825
AAU at 3.02
DNN at 2.71
AVARF at 4.00
USSIF at 0.61

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 - 12-19-10

This Week in Barons – 12–19-10:

Remember the Day!
December 25th is right around the corner. It’s a truly magical day. It’s a day when the world puts down their weapons and for one day we have ‘Peace on Earth – Good Will Toward Men’. Yes it’s a truly magical day!

But unfortunately – we know the end is coming:
- The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress.
- U.S. Postal Service workers who handle letters addressed to Santa at the North Pole say more letters ask for basics – coats, socks and shoes – than ask for extras: dolls, video games and computers.
- 6 more small banks on Friday – bringing the total to 157 closed this year.
- Payrolls decreased in 28 U.S. states and the unemployment rate climbed in 21.
- This week marked the 32nd consecutive outflow from domestic equity mutual funds – equaling $2.7 billion versus $1.7 billion last year.

This week Moody's Investors Service warned this week that it may downgrade Spanish government debt, citing the country's refinancing needs next year and the strain of recapitalizing its debt-strapped banks. Moody's said a downgrade could be triggered by "Spain's vulnerability to funding stress given its high refinancing needs in 2011," a problem that "has recently been amplified by fragile market confidence.” Spain's debt problem could worsen "should the cost of bank recapitalization prove to be higher than expected," Moody's said in a press release, adding that there are concerns whether Spain can achieve the needed "sustainable and structural improvement." Europe is a disaster. There are destructive riots raging in Greece, in Italy they're protesting; in Ireland the ECB is shoveling money as fast as Bernanke is over here. No matter where you look except for Russia, China, India, Brazil things aren't going so well.

But not to fear, this week we learned that consumer prices went up a mere 0.1%. The Empire state manufacturing report came in, and it went from -11 last month to +10 this month. The only reason we're seeing economic activity is because Ben Bernanke has expanded the Fed's balance sheet to record levels. Perhaps Ben understands that after spending $2.5 Trillion in stimulus - the best he could get was a sub par rebound. But the tug of war is brewing. Wall Street wants to do it's regularly scheduled “rug pull” to fleece the American investor – but Ben’s giving Wall Street money to support prices so that people "feel wealthy" as their stocks go up. It's an interesting tug of war for sure.

But remember: EVERY single dollar in circulation came into being as a DEBT. Meaning the U.S. says that it needs dollars – so the U.S. asks the Treasury to print some money – well if the Treasury doesn’t have it (which they don’t) they go to the Fed (Mr. Bernanke) and ask for it – and Ben naturally says YES – but it comes with an interest payment (say 3%) due to the FED in ‘real dollars’. Now there comes a point when just the interest on all the money we've borrowed from the Fed, is bigger than we can pay and still keep things moving along. That day is here – because all the interest due the Fed is now our 5th biggest expenditure right behind defense. In 2009, we the people paid $383 Billion in interest to the Fed, and this year will be more. That's 11% of our entire U.S. budget that is going toward paying the Federal Reserve interest on money it didn't have and printed out of thin air.

Also notice that in the face of all the Fed's efforts to keep interest rates down – they are indeed rising. Now - are they rising because of the imagined economic strength, or are they rising as people around the globe flee the dollar and rates have to rise in order to attract buyers? My feeling is that the world does not want dollars any more. Russia has agreed to use the Chinese currency in trades between the two nations. As this continues and expands, two things will happen. Silver and gold will be looked to as a safety haven against fiat currency, and interest rates will continue to rise - not in a straight line of course. The Fed will step up its efforts - but in the long run – it’s inevitable. How do you think real estate will fare if rates go to 6% when they couldn't sell them at 3.95%? In September home prices fell in 18 of the 20 metro areas tracked by Standard & Poor's Case-Shiller composite home price index – which was worse than August. "There is a large supply of houses on the market," says David Blitzer, chair of the index committee at Standard & Poor's. "And further, hidden supply due to delinquent mortgages, pending foreclosures or vacant homes." The top 5 urban areas of decline are:
- Cleveland where prices dropped a scary 3% in September alone.
- Minneapolis, where home prices have retreated for three straight months, most recently declining by 2.1% in the month of September.
- Portland, where housing prices fell by 1.9% in September.
- Dallas, where the town's football team isn't the only thing sinking this fall. Home prices fell 1.6% in September after sliding 1.2% in August.
- And Phoenix, where the residential real estate market in Phoenix has cause for concern, trending downward by 1.5% in September and 1.3% in August.

The Market:
The market is putting in a top – there’s no question about its intentions. But the Fed, buying Treasuries from Wall Street banks, and paying them billions in premium, is countering the mutual fund redemptions and hedge fund scale backs. Those banks are then using the new money to gamble in the market, and keep it higher than it would normally be.

The big question is: Can the Fed's billions offset the exodus from all the funds? I truly don't know the answer to that and frankly I don't think anyone does. We have never seen this before. Right now we've got all manner of "technicals" screaming "TOP". From the over the top bullishness, to the daily, weekly and monthly stochastics to the buying/selling pressure, to the volume, to the
"Hindenburg Omen (HO)." For those not acquainted with the term, the Hindenburg Omen is a series of technical observations that has occurred ahead of every major "crash" in the last 50 years. Now there is a catch - although no crash has ever occurred that wasn't preceded by an HO – but we have had HO moments that didn't develop into anything. In other words a Hindenburg is not a perfect predictor – and can be observed yet the market remains flat or even goes higher. The bottom line is that, Hindenburg Omens are indeed something to take notice of, but not necessarily to panic over. It does however support the theory that we are nearing a major top. For weeks now I've been suggesting that we are working on a top in the market, and that it's going to be a significant top. This latest omen simply augments that outlook.

We are still above the November 4 closing high of 11,444, which means you can consider the market still being in something of a "breakout", but it's a pained and strained move. On Friday because of the options expiration day, I thought that in order for the market to impart the most pain on the most people, the most likely thing it could do for the day was to trade sideways, and we'd probably end the day flat to slightly red – we did!

So this is it - the week ahead of Christmas. Does the market have one more shot left in it? Will Bernanke double down on a POMO buy and give his Wall Street buddies a bunch of new billions to push the market up with? Or do we simply burn out here, hobbling and trading sideways until year-end? My guess is that we trade sideways – but the ‘darling stocks’ such as DECK on Friday can still push higher toward the New Year!

Be careful out there folks, it's getting extremely choppy. I "think" they're going to get us a bit higher, but right now I'm calling almost 50/50.


Tips:
Let’s review our holdings:

This week we were stopped out of FCX, GG, SLW and SSIR – all with very nice gains indeed. Investing is a discipline – we set our stops – and when a stock hits them – we sell. Now it’s possible the materials guys come roaring back – naturally we’ll have to watch the dollar, but it's sure possible. Right now I’m not seeing anything jump out at me as a screaming buy for Monday.

Our Long Term Holds look like:
SLV at 25.81 - up 10%
NG at 6.825 - up 90%
AAU at 3.02 - up 44%
DNN at 2.71 - up 21%
AVARF at 4.00 – flat even
EXK at 7.40 - down 7%
USSIF at 0.61 – spec play (penny stock) down 6%

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 - 12-12-10

This Week in Barons – 12–12-10:

Silver and Gold...Don't Panic Please
TV will give you many reasons why gold just hit the 1400 level – potentially none as on target as they need to be. We started pounding the table on Gold in the Spring of 2000, and here’s a quote from that newsletter: “Now that Gold is at $425, many are asking if it's too late to get in – NO it’s NOT too late. I'm beginning to see big cracks in the housing bubble we're in. When this housing bubble finally does pop, we are going to witness carnage that few can imagine. I am firmly convinced it will be so big, with so much fall-out, our entire financial system will be on the brink of collapse. Please don’t laugh. I know – housing just goes up forever – trust me – soon you'll find it does not, and since it's the only industry we have in this country any more, when it blows up - everyone goes down including banks, lenders and mortgage originators.”

The interesting part of that little "forecast" is that Gold is just $100 away from that 5-year-old prediction of $1500 – and the real reason it's going up is STILL in place. China and India are buying like mad. Russia is increasing production. Because whether it's the Euro, the Yen, or the Dollar, the world now knows that Fiat money (paper money that's backed by nothing) is junk. This week Li Daokui – an advisor to the People’s Republic of China said: “the U.S. is in worse fiscal shape than Europe. The dollar and treasuries are safe as long as Europe remains the focus, perhaps for another 6 to 12 months.”

Well guess what - Europe is on the brink of collapse. The ECB finally had to give in and offer up their trillions to keep the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) from defaulting. Germany has the weight of the whole darn Zone on their shoulders. Yet Li Daokui, the advisor to the biggest bank in China says we're in worse shape because of debts, and obligations we simply CANNOT EVER repay. Just two weeks ago the Russians and the Chinese decided not to trade in dollars any more, it's Rubles and Yuan for them. Gold is NOT going higher because of inflation. Gold is NOT going higher as some "flight to safety". Gold is going higher because all around the globe people are scrambling to get OUT of dollars, and INTO real money.

Will that change? Not with Bernanke telling America that QE2 is NOT the end of the printing, and that we're dangerously close to another recession (Don’t tell Ben - but we're still in one)! That simply means that he has no choice – stop the printing presses and we plunge into a 1930’s style depression - keep it going and we hyper inflate. Sounds like a ‘rock’ and a ‘hard-place’ to me!

Silver on the other hand is a bit more complicated. Silver will hit $50 per ounce – then $75 and eventually $100. Silver has been one of the most manipulated metals on earth. Right now silver demand outstrips supply and we’ve created a true ‘shortage’ of the metal. The number one reason that our Government doesn't have any big silver reserves, is the Silver lobby got them to sell all of the reserves in order to keep the silver prices down for the companies that need it for electronics, medicine, photography, space, etc. To add insult to injury, J. P. Morgan and a handful of the big players have been naked shorting Silver forever. But as Gold got up and over $1,000 an ounce, a lot of people found they couldn't even afford Gold, but with Silver at $18 – that was a metal that they could afford. The US Mint's data showed its American Eagle silver coins sales set a record above 4 million ounces in November alone. So, Silver hit $30 and pulled back a few bucks – it’s ultimate destination is much, much higher. Imagine what happens if just ONE of the 25+ lawsuits that have been filed against the big banks for manipulating silver prices "Wins?"

Gold and Silver are not done finished up until we get a sound currency. Since I don't see any sound currencies coming our way soon, bet with gold and silver.

The Market:
Currently 42.9 million people collected food stamps last month, up 1.2% from the prior month and 16.2% higher than the same time a year ago, according to the U.S. Department of Agriculture. Wow – that’s some recovery!

This week there was a sector rotation into tech. There has been a lot of sector rotations lately, from financials, into materials, into tech, back to metals, etc. I expect more of that, and the speed of rotation to quicken. AND we just had the single biggest Bond sell off since Lehman Bros imploded. All across the globe, Governments are seeing their borrowing costs rise. So, is the 30 year bull market in bonds running out of time, and it's about to roll over? That is a very important question! Interest rates are going up for one of two reasons. One is that everyone thinks the stimulus, and QE2 is going to work, and the economy is going to mend, and all is going to be perfect. The other reason is that Washington is digging a deeper and deeper hole, and the entire world is tired of us blowing up our currency, and printing all this money. Which one do you think it is?

QE is supposed to keep rates LOW because the Fed actually buying treasuries! But for "some" reason investors are saying: "You want me to buy your bonds? Pay more interest". We could be working on a massive, major top in the stock market. When that top finally emerges, and if investors DO NOT run to the "safety" of bonds – this will be something to see!

Tips:
Let’s review our holdings:

In our short term holds (holding for a few days to a few weeks – all bought within the last week) we have been stopped out of all of them – all gains except one loss – and yes – I hate to lose ☺. So time to work on a fresh batch next week.

NUAN over 18.50 looks very interesting
VRSN over 35.60 looks interesting
XLNX over 29.40 would work
VZ is working a triple top at 33.50, I'll take a stab if it breaks up and over.
AKAM on a move over 55.00 could set it free.
RIG over 71.70 could pull me in

It is possible the materials guys come roaring back – naturally we’ll have to watch the dollar, but it's sure possible.

Our Long Term Holds look like:
SSRI at 20.02
SLW at 18.31
SLV at 25.81
GG at 42.04
NG at 6.825
AAU at 3.02
DNN at 2.71
FCX at 105.30
AVARF at 4.00

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 - 12-05-10

This Week in Barons – 12–05-10:

It’s a Wonderful Life

Personal thanks for all of you (especially Jacob) that wrote in hi-liting the following website – which ‘in cartoon form’ really makes fun of what Ben Bernanke and J.P. Morgan have been doing with silver these past years – if you have a minute – please give it a look!
http://www.zerohedge.com/article/goldman-sack-blows-whistle-jp-morgue-silver-manipulation-scheme

What's going on out there? Well in the economic world, it just doesn't ever fail to amaze me. Bernanke caught holy hell from the rest of the world when he announced QE2, because everyone who owns dollars are now upset that the value of those dollars is falling daily. So, what's he saying now - in a taping for an upcoming 60 minutes show, he says the $600 Billion he announced is just a guideline and substantially more QE (money printing) could be coming. He says jobs are still a real mess and the economy faces a stall out – DUH! Well Ben – when you pump $14 Trillion into a $14 Trillion economy, "something" has to happen. So absolutely we see areas of economic activity. But what happened to the jobs report on Friday? Everyone was expecting a jobs gain of about 150,000 and we got a measly 39K. That took a lot of wind out of a lot of people’s sails!

But What If: What if the jobs report actually was better than that and they jiggered with it to be poor? I know a lot of you are thinking that I lost my marbles, but follow me here. We did have anecdotal evidence that the jobs report would be "pretty good" – and here in lies the problem. Jobs are supposedly the last component we need to see the economy finally mend itself. If the jobs report was good, how could Bernanke justify more and more QE? For months on end he's justified printing money like a mad man because it will eventually help the jobs situation. Foreign nations went along with it to some extent, waiting for the jobs to show up. Now if they did - wouldn't it stand to reason he'd have to stop his QE (printing of money) and all of the POMO operations?

I am really starting to believe that they pulled the jobs number down on purpose, because it’s the only acceptable reason Ben has for printing money – the lack of jobs. And if jobs recover to the point where at least we're treading water – Ben’s only excuse for QE is gone. But he can't stop QE, because his member banks are BROKE. He knows that with huge amount of foreclosed homes hitting the market – and more and more of them becoming ‘non-performing assets’ – this will destroy his member Banks – and they all need more reserves. He knows that the only way to keep the money flowing to save his banking buddies is ever more QE.

So I think they jiggered the jobs report – and I even have "some" proof. Looking at the Birth/Death model – the BLS actually "took jobs OUT" of the overall number this month. That hasn't happened in years – normally the B/D model injects anywhere from 10K to 200K jobs per month into the number, to make things look better. But this month they subtracted 8K jobs out of the total. Was that a coincidence? I'm not saying the number would have been tremendous, but it I suspect it would have been pretty darned good, considering the Holiday hiring. But the bottom line is still the same – continue printing – inflation is roaring. This week, cotton was up, Gold went over $1400, Silver hit $30, and Oil is over $87. There is no way to hide it - inflation at the raw material level, is soaring and it is either going to squeeze margins, or get passed on – and in time it will all get passed on.

Over in Europe, after trying to hold off the ECB has joined into the buying of toxic bonds to keep Ireland afloat. This will indeed continue, as Germany is more than tired of supporting the whole Club Med show, and if continued to be pressed, will back out of the Euro. So, now the whole of Europe is engaged in printing money out of thin air. Meanwhile, China, India, Russia and a handful of other "bright" countries are buying gold in ever-increasing amounts – because they see the writing on the wall – we have entered the age of Latin American style monetization. At what point does the entire fiat currency experiment give up the ghost in one last earth trembling gasp? I don't know - but it's evident that a lot of bright people are taking the steps to protect themselves with precious metals – and I can think of no better place to be.

The Market:
The market fought off the lousy jobs report, and ended the day Friday with a 19-point gain. The momentum is so strong, the printing of free money so large, and the greed on Wall Street so enormous - they cannot help themselves. So here we have a conundrum. The market is and has been moving higher on the enormous printing and distribution of dollars from the Federal Reserve - into the member banks via the POMO operations. This is no longer a secret and just about everyone from Bernanke to Obama has admitted that they've been "getting the stock market higher". Naturally the question we all have to ask is this - How long can it go? I really don't know. Never in the last 40 years have officials come out and basically admitted they are behind getting stocks higher, because they want people to feel better about not having jobs, and getting some "wealth effect". It's a Ponzi scheme of epic proportions. We simply don’t know when it will end – but for now all we can do is lean long, buy stocks in areas that the market adores, or in tangible item type stuff like materials and metals.

One of the big question marks is still - what about the tax thing? Once again this weekend the talks in the Senate have bogged down as the politicians try and play out their version of "Let's Make a Deal!". The Republicans are holding firm on tax cuts, the Dem's are holding firm on having the "rich" pay more - and each is trying to get something for giving in a little. Now, if they extend the tax cuts the market will go higher into the year-end. If they don't, people will sell stocks in December, so they pay the lesser tax rates, and how much effect this tax selling will have in the face of Bernanke injecting money into the market is undetermined.

One thing for sure, we are very close to the 11,450 high we hit in early November. If we get past that in a meaningful way, there's not much to stop this market until about 11,650 - 11,700. So if they get us past those recent highs, we're going to make some quick gains. As we approach that 11,450 level, I do expect some volatility, some chop – but once past – there’s no clearer buy signal than a few hundred points coming our way. Remember, extend the cuts = we soar higher - cuts expire = we'll pout for sure.

Tips:
Let’s review our holdings:

In our short term holds (holding for a few days to a few weeks – all bought within the last week) we have:
CAT at 85.15, is now 89.38 – 5% in four days.
GRS at 7.08 is now 7.79 – 10.3% in two days.
NVLS at 31.32 is now 32.21 – 3% in two days.
SLV at 27.31 is now 28.59 – 5% in 3 days.
SU at 36.01, is now 36.09 – let’s call it even.

Those of you who have been following us for a while – know that our Long term Holds are:
SSRI at 20.02 is now 27.99 – up 39%
GG at 42.04 is now 47.07 – up 12%
SLW at 18.31 is now 39.31 – up 114%
NG at 6.825 is now 14.92 – up 118%
AAU at 3.02 is now 4.43 – up 47%
DNN at 2.71 is now 3.33 – up 23%
FCX at 105.30 is now 108.95 – up 3%
SLV at 25.81 is now 28.6 – up 11%

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