RF's Financial News

RF's Financial News

Saturday, March 27, 2010

This week in Barrons - 03-28-10

This Week in Barrons – 3-28-10:

Our Thoughts:

"We can't expect the American People to jump from Capitalism to Communism, but we can assist their elected leaders in giving them small doses of Socialism, until they awaken one day to find that they have Communism." … Nikita Khrushchev
It only seems fitting that this week we pushed Obama-care on the American people who soundly rejected it.

A question came in from a reader: “When do you think the Fed will STOP supporting the market. Couldn’t they keep supporting it for the next several years until the economy truly picks-up?”

Great question. In my view - the market is trying to take the most money from the most people at any one time. So, with that in mind, the market will usually move in the opposite direction of the bulk of the people. In fact on CNBC on Thursday an NYSE floor-person said: "When the public finally comes in, that's exactly when you should be selling because they always come in at the top. The public normally buys at the very top and sells at the very bottom."

Now the Fed and Government want the market up to give the illusion that the economy is working and things are getting better. Wall Street wants the market up so that it pulls in money that’s on the sidelines and what is currently in Treasuries. The U.S. would also like the market up so that people don't launch even more "tea parties" and demonstrations concerning the way American has been squandered. However, once the entire agenda is in place – both elements are prepared to ‘pull the plug’ because laws will be in place that will make people even more dependant upon the Government’s programs – and playing a ‘short market’ is meant for the pros rather than the amateurs.

The market is being propped up in order to inspire confidence and keep the population from popular revolt while they jam spending, healthcare, bail-outs, etc down our throats. But, there comes a point in every market rally, when the collective "risk aversion" of so many people, stops them from participating in any more buying. Then, there comes another moment when they decide that they should "sell" before the market rolls over and takes their money. Can Wall Street and Uncle Sam, hold off the forces of millions of people trying to take money "out" versus putting it in? Currently money has been coming out of the market, volumes are incredibly low, gains are painfully slow and always on the heels of futures buying via the Fed. I believe the coming market fall could be very interesting, and you could see a massively fast and brutal plunge.

However, do we know WHEN it's not in their interest to continue to keep the market up – NO! When you have ‘floor traders’ saying that the “market isn’t free” – it’s at that point that technicals, VIX readings, moving averages, earnings, foreclosures, and bankruptcies – they all don’t matter any longer. The market has been burning a huge amount of short sellers and put buyers for the better part of several months now; however, the participation rates are low, funds are running on air - having expended their cash, and we are seeing the world back away from American financial assets. If we make it past 11,150, then all bets are off – but I’m still looking for one last feeding frenzy that pushes us up and over 11,000 or so, before the wheels came off.

The Market:

President Obama's fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation's economic output by 2020, the Congressional Budget Office reported Thursday.

Did you know there's never been a successful economy on earth with debt levels like this? The market itself has been climbing a wall of worry, spurred on by Fed money – and I tend to think we're near the end of it. Monday the market came back a bit, but was very sluggish and actually red during the day. Tuesday was sluggish. Wednesday just barely got us out of red and into green, same with Thursday. Friday we were up 65 and want all the way down to red on news of a possible North Korea sinking of a South Korean vessel.

This market has ignored: Greece, Italy, Ireland, Latvia, Dubai, earthquakes, foreclosures, bank failures, and healthcare. In short, the market has really started to get choppy – up 117 at noon and closing up 5 – which usually spells a change in the wind and – we could be AT or just a couple of weeks away from the ultimate high. We are still leaning long, but taking profits quickly. At some point we'll list all the shorts, puts and ETF's we'll be using to make a fortune when the market falls.

My guess is that we come into this week and see one last concerted push higher. We have a Holiday week ahead of us, which usually means lower than normal volumes, and low volumes mean easy manipulation. But next week we have the “Non-Farm Payroll Report” – simply termed “The Jobs Report” - that is due out on Friday. So, if it's poor, we potentially come into Monday April 5, looking at a rapidly weakening market. And, if it's strong because of the 160K census workers the government hired, then Monday April 5th could potentially be a big up day, which potentially spells the end. In either event, I think that between today and say April 7th, 8th or 9th we will experience the "top" of the long run since last March. I know that's a bold statement, and I could end up eating crow – but that’s my thinking as of now.


We’re left only holding JCI and NETL on the long side. We have JCI at 32.79 with a hard stop at 32.90, and NETL at 30.00 with a hard stop at 29.74. I’m not going to hold JCI into a losing position. GLW almost broke 20, but backed away – because I was gun shy about holding it over the weekend.

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.

Until next week – be safe.

R.F. Culbertson

Sunday, March 21, 2010

This week in Barrons -3-21-10

This Week in Barrons – 3-21-10:

Our Thoughts:
According to a new report, ninety percent of all paper money in this country has traces of cocaine. Talk about your stimulus money! On the bright side, at least U.S. currency is worth something again.

I am currently travelling – therefore this Barrons will be shorter than most – thanks for understanding.

Do we all remember the gent who strapped some explosives into his underwear and made a feeble attempt to blow up an airplane. Did we forget that (a) he had an "accomplice" that helped him get on the plane, and (b) he had no passport but managed to get on this international flight? Can’t we fix the process before jumping into buying more ‘stuff’?

On Monday we got the "Dodd" bill concerning financial market regulations. In the bill there is: (a) no mention of the ratings agencies that gave those toxic assets a AAA rating, (b) the Fed gets even more power to oversee itself, (c ) no mention of the SEC who repeatedly ignored 4 different warnings about Bernie Madoff, (d) nothing about Goldman, Citi or J.P. Morgan OR ‘Too Big to Fail’, (e) but it does put tighter regulations on the small town regional banks – what problem are we solving again?

Toyota launched a big PR campaign to reassure customers that they’re standing beside their vehicles... because that's the only safe place to stand.
And then there is China. For some reason people still think we have some form of power over China. In fact one CNBC talking-head suggested we should "exert our influence" on them. What influence? China owns more dollars than we do, and they don't carry any debt on them. The Chinese military is nuclear and is bigger than our own. China is our biggest creditor, and if China were to halt exports to the US, Wal-Mart would have 4 items left to sell. We bought their products because we don't have our own. China bought our Treasuries because it was nothing more than a "loan" that allowed Americans to buy more Chinese stuff. We received stuff, and China received a trillion dollars of reserves and became the manufacturing capital of the world.

Moving to the market:
Monday was a picture perfect day of just how manipulated the market has become, and how complacent people have become about it. We opened flat, and stayed down about 30 DOW points until we heard Dodd's speech about his regulation bill, and then we magically turned green. Tuesday we found out from Ben Bernanke that “low rates will be sustained for the foreseeable future.” Larry Levin (on the Chicago trading floor) summed up what’s really happening to a CNBC reporter: “Yes, the market is being supported by the Government and each time something bad hits, whether it's Greece or what have you, they come in and support the market. Whether you like it or not, until that stops this market goes up.” That is how we get to 52 week highs while:
- the Empire state manufacturing index fell
- housing permits fell
- housing sales fell
- and additional banks were closed (making 30 this year)

Remember Ben Bernanke’s statement in March, 2009 - "Consumer confidence will increase with the gradual rise of equities" – do you think he saw this coming?

The latest Toyota Prius bumper sticker reads: "I'd like to brake for animals, I just can't."
I am in danger of having one of my predictions go south. I said that we’d see the market try and take out the recent highs, but probably come up short. Well, this week they pushed through the old DOW highs. If they take us to DOW 11,500 or more I'll be really wrong, and all we can do is ponder when this all does collapse. But for right now, I am going to continue to stand firm – and think that we are in the last days of the big run up, and we are in a mild form of "blow off top" right now.

It will be easy to see over this coming week if I'm right or wrong. If we are up and over 11K and still going, I am wrong. But if we gain a bit more and then see drop outs, my old prediction will have been correct. Yes we're at new highs, yet the volume stinks. This is a Fed driven move, and it's going to be interesting to see if they can sustain it.

The Senate voted against a plan to send a $250 check to 57 million elderly people. In the end, senators decided NOT to give the elderly money, because you know, they're just going to spend it on drugs.

I kept my stops fairly tight during the week – and on Friday was stopped out of all the short term holds that we had put out there. It’s truly not my style to day or ‘weekly’ trade stocks – but rather I prefer longer-term positions. Unfortunately you can’t fight the tape – so you take what the market will give you. Having said that … my stops are there only for ‘downward’ actions. That is to say: if I purchase XYZ at $20 and my opening stop would potentially be $19.50’ish – but once it started moving upward to say $21.00 – I’d adjust my stop to say $20.50 – strictly using the ‘tight stop’ to prevent us from losing our gains.

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.

Until next week – be safe.

R.F. Culbertson

Saturday, March 13, 2010

This week in Barrons - 3-14-2010

This Week in Barrons – 3-14-10:

Our Thoughts:
Age is strictly a case of mind over matter. If you don't mind, it doesn't matter … Jack Benny

From a paper called: “Gold and Economic Freedom": “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. Therefore, gold and economic freedom are inseparable. -Alan Greenspan.

- Last month the government ran up the largest monthly deficit in history totaling $220.9 billion, 14 percent higher than the previous record set in February of last year.
- The Obama administration is projecting that the deficit for the 2010 budget year will hit an all-time high of $1.56 trillion, surpassing last year's $1.4 trillion total.
- The Obama administration is forecasting that the deficit will remain above $1 trillion in 2011, giving the country 3 straight years of $1 trillion-plus deficits.

Now isn't that interesting? Alan Greenspan said that without gold you can't be economically free, AND that asset determines the amount of credit a country can support. So we have NO gold standard, and we’re running the biggest deficits in the HISTORY of our nation – even Alan Greenspan realized that this would end badly. Our nation is bankrupt – our banks keep two sets of books – our infrastructure is crumbling – our people are either under-employed and/or un-employed – our states can’t make budget – our deficits are in the trillions, not to mention the $80 trillion that we are going to owe for all of our programs – What on Earth do we do about it?

I don't deserve this award, but I have arthritis and I don't deserve that either … Jack Benny
Well – we can appoint Ms. Janet Yellen as Fed Co-Chair because she believes in “keeping the monetary presses running and dealing with the inflation later". If someone could logically explain to me how we get out of the multitude of messes we are in, I'd gladly sell my gold and silver and go on with life a happy camper. Now – having said that – Jim Taylor wrote me with a fascinating paper which I’d like to take the time to share next week – thanks Jim!

The Market:
The more people I meet – the more people are trying to get OUT of this market at these levels than get IN. Did you know:
- 7,000 Baby Boomers are day are retiring – and for the next 15 years that number is going increase, as the biggest wave of our money making population goes from their earning days to their sustaining days.
- Which means – not only have the baby boomers been responsible for all the economic and financial gains we've seen over the last 20 years, BUT more of them are going to need to take money OUT of the market versus putting money IN.
- 51% of the Baby Boomers are not prepared retire – and have less than $50,000 in savings

If you add up the ponzi scheme economy, with the demographics, you come away with something a whole lot less rosy than Wall Street is telling you. It’s true that in the short term, they can use the President’s Working Group to manipulate the market, and they can also use mark to model instead of mark to market.

BUT what about this news blurb: “07:48 AM The White House turns to short sales to help stem the foreclosure crisis, allowing delinquent borrowers to sell their homes for less than the amount owed and forcing banks to forgive the difference. To speed the process, the government will hand out cash to both mortgage servicers and homeowners.” Just so I clear on this – a zillion people got conned into the idea that houses only go up, so they decided to "get in" while they could. During 2004 to 2006 people 4 to 5 TIMES what a house was worth – and started the greatest real-estate orgy of all time. Most couldn't afford it, but figured "Hey it only goes up, so what's the risk?" Let me suggest – IF you were smart enough to hunt down an outfit that would allow you to buy a home you could not afford, and smart enough to know how to lie on the application – you were probably smart enough to know that your rate would reset higher and you were NOT going to able to AFFORD IT when that happened. Notice the words “Forcing banks to forgive the difference". As the banks go ahead and “forgive billions” between what the house is now worth and what they paid, doesn't that mean billions just "vanish?" And doesn’t that mean that more banks will declare ‘bankruptcy’? And isn't the FDIC basically bankrupt? So, who's going to make up the difference? Oh, that would be you and me...again.

It's not so much knowing when to speak, but rather knowing when to pause … Jack Benny
With all that in mind, the only question is: How far can it go before the wheels fall off? We know their intent is to keep pushing so much stimulus that the people get a false sense of security and actually re-elect Congress in November. I said quite a while back that the market would run up and try and challenge the old highs at 10723, but would probably fall short, stalling out at the 10600 level. Well, we’re here and are we building a new base to push up through the old high and run to 11,500? I still don't think so. We could push thru the old highs – people rush in – and then we sell and the late-comers get crushed.

Honestly – the mutual funds don’t have enough money to keep buying. The public isn’t jumping in to buy the market. Which just leaves Bernanke and his henchmen – and I’m not sure that there’s that much left?

We have been leaning long the market, but at some point in the not too distant future, we'll be buying puts and shorting stocks. But until we roll over and it's proven to me the bear market bounce has ended, we'll be leaning long but keeping our finger near the sell button.

I’m still holding:
CLF at 61.77 - hard stop at 62.50
NTRI at 16.47 - hard stop at 17.00
VDSI at 8.51 - hard stop at 8.60
FSYS at 30.09 – hard stop at 32.00
DRIV at 28.17 – hard stop at 28.65
SPY at 109.55 – hard stop at 114.29

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.

Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.

R.F. Culbertson

Saturday, March 6, 2010

This week in Barrons - 3-7-10

This Week in Barrons – 3-7-10:

Our Thoughts:
A man's only as old as the woman he feels … Groucho Marx

A Stroll Down Bizarro Lane
On Friday:
- Did we really just lose another 36k people from the payrolls last month? What the Initial Jobless Report failed to mention was that the enrollment in the "special emergency" programs that extend benefits rose by over 240,000. Where are those rose colored glasses when I need them?
- WASHINGTON - A new congressional report released Friday says the United States' long-term fiscal woes are even worse than predicted by President Barack Obama's grim budget submission last month. The nonpartisan Congressional Budget Office predicts that Obama's budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That's $1.2 trillion more than predicted by the administration. The agency says its future-year predictions of tax revenues are more pessimistic than the administration's.
- We ended the session with the DOW up 122 points and crossing over the 10,500 line, but once again we have this announce called reality:
- CHARLOTTE, N.C. (AP) -- Regulators on Friday shut banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession.

Alimony is like buying hay for a dead horse … Groucho Marx
As I was driving to Chicago to see my son at Northwestern Univ a little while ago – I couldn’t help but notice warehouse after empty warehouse, all of them with "For Sale" signs on them. Hotels with graffiti’d walls – potentially 250 rooms – no windows, no beds – it reminded me of pictures of burned out buildings in Berlin in WWII.

Behind every successful man is a woman, behind her is his wife … Groucho Marx
On Friday:
- New Jersey Transit Plans 25% Fare Increase to Cope With Expanding Deficit
- Oil rises to near $81
- Unemployment Rate Including Discouraged Workers Rose To 16.8%
- Wall Street Journal - Employment of Adult Males at Record Low
- On CNBC - Someone came on and said: “Hey, somebody's going to bail Greece out, it's no big deal". No big deal – a monetary union made up of different cultures, most of them broke and making believe they can just move forward like nothing's wrong – it’s a BIG DEAL!

I ran across someone who just purchased a $50,000 automobile – and I asked how he was going to pay for that – what I heard back was interesting – “I stopped paying my mortgage about a year ago. The house is worth half of what I paid for it, so I told the bank you keep it - but I'll stay here and maintain it for you until you kick me out. That was 14 months ago and I haven't heard a word. So, instead of paying $1,500 a month on my house, I pay $700 a month for my car."

Getting older is no problem. You just have to live long enough … Groucho Marx
There is no question we are deep into a deleveraging situation, a credit crunch, an impending commercial real estate crash, and much more. Looking at global stock market patterns, and the debt to GDP ratios in foreign lands, this isn't going to be a "US only" disaster. I tend to think we'll be living through a synchronized global melt down in the next 1 - 3 years time. China is still putting up Cities that house a million people, but no one lives there. Japan is in a slowdown. Europe is trying to get Germany to pay for everything and they aren't willing to, and Sovereign debt is the next international shoe to drop.

Have faith in Gold, Silver and related "shares". Only Gold and silver have the ability to withstand such monetary disasters.

The Market:
The DOW hit 10,566 – good work – so what’s next? A month of so ago I suggested that the market would make a mad dash higher, but it would come up short of the 10,723 high and then roll over. Is it possible we just punch through and make all new highs here? Sure it's possible, this market is getting juiced by Uncle Sam on a daily basis – who has deep and unlimited pockets.

I don't care to belong to a club that accepts people like me as members … Groucho Marx
But we're going to remain stubborn and suggest that even if/when we hit the highs, we struggle there, and pull down. Even if we exceeded the high by a hundred points or so, I'd be hard pressed to think it could hold up there. We know employment is rotten, we know banks are insolvent, we know that without Uncle Sam spending $24 Trillion, we'd be mired in the grand depression right now. The illusion of recovery is just that, an illusion. If we do take out the highs and just roll on up to 11K, I won't be surprised. I will just have under estimated the amount of money they are willing to spend to make it happen. In other words, as the world’s investors continue to pull money OUT of the markets, "someone" is making up the difference – and that someone is Uncle Sam. As Larry Levine said from the Chicago trading floor, "for 9 months all the market gains came in the overnight session". Consider that for a minute. You buy XYZ at 25.00 at noon. But by 4 pm it's at 24.60, so you sell it. The next day it opens at 25.75. There's the gain – in after hours – and who’s playing there – institutions and Uncle Sam. I have to figure that we might be looking at a shorting opportunity soon.

In the mean time we've been long several positions and they've done very well for us:
  • AAPL at 215.56 - hard stop at 216.50
  • DIA at 105.11 - hard Stop at 105..15
  • FCX at 77.11 - hard stop at 78.89
  • SPY at 109.55 - hard stop at 112.98
  • CLNE at 18.33 - hard stop 18.60

In the mean time, "lean long, but keep your finger near the sell button".

In the very near future – I’m going to start making my stock moves public under Twitter – so feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

Until next week – be safe.

R.F. Culbertson