RF's Financial News

RF's Financial News

Sunday, December 12, 2010

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!

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

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