RF's Financial News

RF's Financial News

Saturday, January 8, 2011

This week in Barrons - 1-09-11

This Week in Barons – 1–09-11:

I Swear to Tell the Truth, and Nothing but the Truth, so Help Me ____

I listened intently to the news last week – and it's wonderful thing that a homeless man with the great voice is going to get a second chance at life – but I also heard: "Today, the DOW was up 28 points and the increase in the ADP report showed a marked increase in jobs and the economy is on the recovery path."
1st Correction: The ADP report makes no distinction between someone that worked part time for one hour (during the Christmas holiday) or someone that worked a complete shift. Now what about the un-biased Gallup report that had the percentage of part-time workers wanting full-time work combined to raise the under-employment rate from 18.5% to 19.0% in December. Gallop’s measure of unemployment also rose to 9.6% - up from 9.3%.

Then I heard about the ‘increase in factory orders’ - where new orders for manufactured durable goods decreased – however new order for non-durable goods increased.
2nd Correction: Durable goods are 53% of factory orders and they declined 0.3%. Non-durable goods, mostly the stuff we need every day like food, oil, drugs, are 47% of Factory Orders, and they increased by 1.7%. BUT wait a minute – their sales increased in dollars – but sales volume actually decreased! Yes – that inflation that Ben Bernanke says doesn’t exist – well – it caused the increase in non-durable goods all by itself!

Then I heard Ben Bernanke tell congress that the Fed was not responsible for the rise in oil prices.
3rd Correction: The dollar is crumbling around the globe and causing the price of commodities to rise – including oil. The dollar devaluing actually prompted Guido Mantega, the Brazilian finance minister to say: "We're not going to allow our American friends to melt the dollar," who views the US government's move to pump $600bn into its economy as an unfair attempt to help U.S. exports.

Then Obama told people that his policies are creating jobs and creating wealth.
4th Correction: Consumer bankruptcies are climbing and have reached a 5-year high - rising 9% (to 1.53M filings) over 2009. And under a new census formula overall poverty is at 15.7% level (47.8M people) up from 14.3% in 2009. OOOPS, looks like we’re going in the wrong direction.

Then Ben Bernanke told Congress to not worry too much about municipal bonds – because “We’re not seeing extraordinary stress. And we have no expectation or intention to get involved in state and local finance."
5th Correction: Excuse me – states, cities and municipalities across the nation are cutting fire and police services. New York, New Jersey, Illinois, California are all broke – what does ‘stress mean’ to you Ben? To me – stress = bankruptcy.

And finally Ben Bernanke told Congress that “inflation is contained (including food and fuel) to less than 1%.”
6th Correction: I really don't know whether to laugh or cry. The United Nations itself told us last week that the price of food has hit historic highs (meaning most expensive ever). Oil is up from $50 to $90 (80%) in a year. Cotton, copper, metals, and virtually every commodity is at an all time high. What isn’t at an all time high – HOUSING! This week the World Bank issued its first bonds denominated in China’s yuan – and global companies and institutions such as the Asian Development Bank, McDonald's Corp and Caterpillar have all issued yuan bonds recently. Ben – the world is telling you that the US Dollar is doomed, and when the Euro dies, people will flee to the dollar, for a while, then ultimately back to gold and silver.

The rest of the world, most of whom have "stuff" that Americans and Europeans want, are getting awfully tired of the Dollar being devalued and are frankly very angry as we continue to ‘melt the dollar’. There is absolutely no way out of this. No politician is going to make the necessary cuts to reduce our debt. Bernanke won't quit until his precious banking cartel is completely whole again, and all of the losses are on the taxpayers back.

So: “I do swear to tell the truth – and nothing but the truth!”

The Market:
The market has been ‘saved by the Fed’ - time after time. For example on Friday, on the heels of that absolute trash jobs report, we were down 97 DOW points and looking at increasing volume on the downside – but then “like magic” - someone decided it was a grand time to place a focused, very large bet on futures and soon we were down just 20 points. Now, I don’t believe for an instant that the collective wisdom of millions of investors decided instantly that they needed stocks?

The question really is - Can Bernanke continue to save the day forever? I don’t think so. Right now all of the Government’s guns are pointed at the stock market, and are keeping it ‘up’ at all cost. The reason is – that way they can make believe they've fixed things and the gullible Americans will buy into it. Yet the pressure builds, like a pressure cooker with a bad relief valve. At some point this market blows up – I just don't know the time yet, because we've never had a period in time where the Federal Reserve admitted it's trying to keep the stock market up.

So, I lean long with smaller positions and stay agile. But there will come a day in the near future where our biggest returns will come from being short the market. So you will need to learn how to short or use options. In the near future we will be publishing some of our trading scenarios – thoughts and skills. I’m working on it – just making sure that my thoughts aren’t too big and bulky that the important issues get lost.

We still have most of our gold and silver stocks – with 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 and USSIF at 0.61

Lately we continued to lean long but with small positions. We bought some BIDU last week at 101.50, and it’s now 107. We also bought some N at 24, which hit 28 on Friday.

In terms of what’s looking attractive:
AKS – I might take it it moves over 17.30
ADI is still attractive on a move up and over that 38.6 level
And FWLT is back on our radar – and a move over 36.00 breaks a 2 year high – and that would be a good entry point.

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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