RF's Financial News

RF's Financial News

Sunday, April 24, 2011

This week in Barrons - 4-24-11

This Week in Barons – 4–24-11:

Hunting for the Next Batch of Easter Eggs:

Happy Easter! In this case an Easter Egg means a good thing – something that you get rewarded for when you find it.

Before we start – a good friend recommended that I watch the documentary: “The Inside Job” http://www.sonyclassics.com/insidejob/ I will pass along the strong recommendation to all of you as well.

And if you wish to really dampen your Easter spirits – Steve Forbes writes: “Watch this: http://www.youtube.com/embed/VtVbUmcQSuk. The very scope of these numbers point to an impossible task. So, what's to become of the financial markets, US and otherwise? It's not IF, just when? And, what is the outcome of the fallout?”

The market soared this week – was it due to:
A – great earnings = NOPE.
B – initial jobless claims rising to over 400K new people looking for work = NOPE!
C – the Ben Bernanke coming out and saying: “We may be forced to reconsider our stance on QE3” = BINGO!

About a month ago I said that the Fed would start talking about the need to end Quantitative Easing (QE). I also said that QE would NOT end – that they would just tell everyone that it's ending and then continue it under a different name. Sure enough with Monday’s ‘bogus’ downgrade of the US debt situation, everyone is now talking about how we shouldn’t be too quick to end QE, and maybe we need to continue the programs. So gold, silver, food, and oil all go higher, and the dollar continues to fall.

On Tuesday the oil producing countries CUT production because there is a GLUT of oil sloshing around the world, and they’re running out of places to store it. Running the numbers, I actually believe the oil producers. And what this tells me is that The Ben Bernanke pushed the price of gasoline to $4 so the Banksters could make billions off the trade. So we’re paying 100% more than we should be paying for gasoline, and I guess that makes me feel better about paying 30% more for food – yes? Oh yeah - steel prices are rising between 16 and 18% - so automobile prices will be going up as well.

The Market:
The DOW ended the week at 12,505 – closing over its old resistance level of 12,400, and the S&P closed above the 1,333 level. So this would have to be called a breakout period. In my opinion, we are headed for DOW 12,700. What can stop this market?
- Earthquakes that level nuclear plants and cause radiation poisoning of our oceans = NOPE!
- $110 oil and $4 gasoline = NOPE!
- McDonald’s talking about food inflation = NOPE.
- Market participation being at it’s lowest level since stock ownership began = NOPE.
- How about the dollar being driven lower daily = NOPE!

So (using a religious metaphor) like Easter, does this market just continue to rise? And where do we find the next batch of Easter Eggs? Honestly – I don’t know just yet. Unlike any time in our history where the markets were at least relatively "free and open" - this one is far from it. We have The Ben Bernanke designing policies around moving stocks higher. Sure – there has been back room manipulation ever since the creation of the "Presidents Working Group On Capital Markets" – but never has it been (a) so big, (b) so up-front and in-your-face, and (c) so well funded. So this market will go up until “they” want it to come down, OR until a stampede of trillions of dollars worth of stock owners want out and it overpowers the billions The Ben Bernanke is injecting. When is that?

We have seen gold hit all time new highs, and silver hit 46, just a couple dollars shy of an all time high. Both of these are still showing strength, and as long as The Ben Bernanke is willing to pump billions into the "economy", the value of the dollar will continue to fall, and gold and silver will continue higher. To quote David Tepper: "Sometimes it really is that easy"!

About every other day, The Ben Bernanke hands over $2 - $8 billion to Wall Street banks, to purchase Treasuries. Those Wall Street Banks are then free to go play cowboy in the market. If they were ever to decide not to buy stocks for a few weeks, we'd plunge 2,500 points. So, the only thing to do that makes sense is to continue to "lean long". We are currently carrying 10 long positions in our short term account, and when we get substantial profits in them we sell half, take the proceeds and buy more gold and silver – because the money that I’m making on the trading side – is being offset by the inflation that's eating us alive. If you make 10% on the trading side – but lose the 10% due to ‘food or energy’ increases - you haven't gained anything. However, if you keep your money in gold and silver, they will rise and outpace inflation. Once again: “Sometimes, it’s really that simple.”

Considering that we "broke out" Thursday, we "should" move higher on Monday and Tuesday – and then stumble on Wednesday. We're still in earnings season, which means on any day, someone's earnings news can toss us around a bit, and we never like to hold any stock over its reporting period.

The debate over the debt ceiling is still going on, but there will be a deal! Because no one knows just how bad things could get if we default, they won't take the chance, and the congress will reach a deal. So, that news will probably push the market higher once again. I think we're going to try to attack DOW 12,700, and maybe that might just end up being the "end" of this insane run up.

In any event, I plan on enjoying the day with my family. It's a great day to huddle up and remember what is really important.

Our long holds looking like: SLV, NG, AAU, DNN, AVL, SLW and USSIF.

In our short-term holds:
- We still believe in Silver and purchased more SLW and SLV this week.
- I’m trying to be more diligent on Twitter – I am ☺
- In fact I’m going to (over the next couple of months) release an iPhone APP – showing my actual trades / advice videos / etc. – stay tuned for that!

In the past week SLW has been in the news. We added to our SLW position at 45 a couple weeks ago. It did it's job and soared to 47 in a couple days. Unfortunately it fell back – but really due to the CEO stepping down – and he’s being replaced by a ‘more than competent’ insider. I am keeping an eye on this – and it’s the stock price that will determine if we stay in SLW or go.

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

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