This Week in Barrons - 10-30-11

This Week in Barons: 10–30-11:

Making Giant Dollars on Fraud

This past week we bought and sold NTES for a $6 per share gain, sold the SPY’s for a $20 gain, Silver (SLV) is sitting on a $6 gain, Gold (GLD) is sitting on a $12 gain, and we purchased Amazon (AMZN) for $208.50 on Friday and it ended the day at $217. I am not saying this to pound my chest or to gain more twitter followers – but rather to tell you that the market is NOT running up on fundamentals. The market is running up on the "new paradigm" which is all FRAUD all the time. You really can’t believe that Merkel and Sarkozy just solved all of Europe’s problems. Nothing is solved; it's simply pushed off a few months. Soon we'll hear about Ireland wanting to discharge 50% of its debt, and then we'll hear more horror stories out of Italy. And then the German people (who have created the biggest economy in Europe) are going to revolt against the Merkel régime.

According to a recent survey, about one-third of small business owners polled by Gallup say they are concerned about going “Out Of Business.” And approximately one-third said that they might need to lay off workers. The biggest small business problem is complying with government regulations, followed closely by falling consumer confidence in the economy, and lack of consumer demand.

The market is running up on many "things" but none of them have anything to do with sound fundamentals. Unemployment continues higher – as on Friday Whirlpool announced that they are seeing "recession-like demand" and are closing a plant in Michigan, laying-off 5,000 people. Housing is a massive disaster, and Uncle Sam is working on literally "nationalizing" the whole lot of foreclosed houses. Healthcare has risen by another 8% this year, and projected to rise by at least 6% again next year.

The Market:
So if nothing has fundamentally changed – then why is the market moving up?
- The European summit absorbed the risk of a Greek default by punting the ball 6 months into the future – which relieved us of the burden of waking to a Greek disaster.
- The fall months of October, November and December are historically the best months of the year for the stock market.
- Almost 40% of all the hedge funds are "behind" the market, and to stave off redemptions, they will have to "get in the game" quickly (by making big bets) or risk losing investors.
- But if a fund loses an investor, the investor usually goes to another fund that has been doing well (normally a fund that has been buying heavily.) As "heavily buying” funds get more and more money, they will continue to buy heavily, and this becomes a viscous circle.
- Then we have the Federal Reserve and the "Plunge Protection Team" – officially known as the "Presidents Working Group on Capital Markets". Their job is to keep the market from plunging – because it instills consumer confidence when markets rise. This "wealth effect" is very real. When the stock market is rising, people feel better and spend more money. One firm recently compiled the data going back 30 years, and found that a rising market (especially around an important holiday) boosts spending by 16% over the same holiday in a sagging or flat market.

So, in total you have:
- 1 - A "Deal" in Europe that solves nothing, but does give them more time to make more plans.
- 2 - Almost half of Wall Street desperate to make some money, so they can get their bonuses.
- 3 - A Government, and a Federal Reserve that desperately want the market higher so that consumers (who should be saving) spend that additional 16%.
- 4 - Beaten down hedge funds, getting redemption calls daily - that "need" to “risk it all” and go for broke.
- 5 - And the very real possibility of another huge stimulus project out of our Fed.

All that has caused a market to run from 10,400 to 12,200 in 3 weeks. The run was not caused by fundamentals or improving economies, but simply by “animal spirits.” Now – does it continue? I think it does.

There is no resistance until 12,400 and then again at 12,724. We've gotten over the 200-day moving average. So, although we won't get there in a straight line (and currently we're tremendously "overbought") all the obstacles have been removed for a gallop higher. What makes sense to me right here is some back-filling. As people pile in because they're afraid that they have now missed the boat, Wall Street will oblige them by taking their money. But after a brief downtrend, I'd imagine the market would turn around and drive us higher again. Because we're carrying 6 long positions in our short-term account, and 5 of them are insanely profitable, I won't be shy about cashing out on a pull back and then re-entering on the way back up.

Tips:
These desperate funds are going to seek all the “alpha” they can get in a short period of time. That means they'll pile into the LEADERS that should be safe for them and give them a return. Think leaders like: Apple (AAPL), Amazon (AMZN), Caterpillar (CAT), and Deckers (DECK). Currently the market is extended, and is overdue for a pause. But when it perks up again, the leadership stocks will continue to lead. The funds that need the dramatic returns won’t take chances with regular companies – so look at Priceline (PCLN). Also consider the technology ETF the XLK. Although it's not a rocket, the Holiday season is a big tech time and if Apple or Priceline are too expensive, then take a peek at the XLK.

In the short-term holdings account I’m carrying:
- SPY at 108.54 – now at 128.23,
- AMZN at 208.50 – now at 217.20,
- GLD at 157.49 – now at 169.25,
- SLV at 28.00 – now at 34.37,
- CLF at 66.55 – now at 72.83, and
- CMI at 100.06 – now at 102.61.

I did take a lot of profits last week – but there’s still some more there to be taken. I’ll hold them for a bit longer just to see. If things roll over (as I think we’re over-bought right now) I'll cash out and play some short side using HDGE.

Please be safe out there!

To follow me on twitter and get my daily thoughts – my handle is: “taylorpamm”.

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-23-11

This Week in Barons: 10–23-11:

Your Single Best Investment

People forever ask – What’s your single Best Investment? Was it in stocks, bonds, gold, silver, or real estate? My answer has been the same for over 20 years – None of the above! It’s been in Education! The single best investment you can make is in educating yourself and/or the people around you. You are witnessing a global economic implosion that will eclipse the 2008 debacle, and things are just beginning to fray at the seams. People are becoming outspoken. Consider the “Occupy Wall Street” crowd. Right now they are a fairly peaceful group, but just this weekend 139 of them were arrested in Chicago. Consider what’s going on in Greece. On Friday we watched fires being set, petro bombs being tossed, and cars being overturned. Things are becoming desperate, and there's still no real way out. Heck, crime in certain areas of New York City is up 250%. Therefore, instead of arguing whether things are going to disintegrate into some re-enactment of “Mad Max”, let's think about what I consider to be the most important thing you can be doing right this minute. Educate yourself on your ‘options’, because that is going to be a very valuable skill as this economic train wreck continues. Most importantly – Don’t be an ‘easy mark.’

Factually:
- U.S. Underemployment has reached 17+ percent = 26 Million people
- Misery Index (inflation + underemployment) = 5+ and 17+ = OVER 22%
- Bank of America Corp. was hit by a credit downgrade and is moving all of its derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, so that if those derivatives fail (which they will) – the FDIC and we (the U.S. people) will be responsible for keeping them solvent!
- Pete M reminded us of a line from the Carter – Reagan debate: “We have inflation because the American people are living too well," says Jimmy Carter. “We have high inflation and high unemployment because the government is living too well," responded Ronald Reagan.

Wealth creation is a long and arduous process. Understand that it’s a discipline as much as it is a vision. In many cases it’s like ‘watching paint dry’ – but if you understand and listen to what is going on around you – you can then avoid the areas that are the most volatile. The world is upside down, and the economic unrest is making things worse.

The Market:
I said last Sunday that this past week would be one of the most important weeks of the entire year, and thus far that's proven to be true. The market was battling within a trading range of between 1125 and 1225 on the S&P. As we would approach the highs of the range, we would regularly bounce off of them and plunged down to the 1125 support level. For 3 days in a row, the market attacked that 1225 high and got repelled. Then on Friday it pushed up and broke over and out of that range, closing at 1238. There was much joy on the set of CNBC, and everyone was giddy with excitement. Is the market now set to run to the next S&P level of resistance at 1260? Is it finally time to pile in and ride the big wave?

I'd love to tell you YES, but I can’t. Why - because you need to consider the reason the market moved up in the first place. The market isn't moving on earnings or fundamentals. The market is moving on the hope that Europe has a plan to ‘carpet bomb’ it's members with Trillions of Euro's in order to bail out the banks and sovereign funds that are bankrupt. Unfortunately there us no such plan. We are going to hear about that plan on Wednesday of this coming week. Now, do I think that upcoming plan will encompasses several Trillion dollars, and solve all the immediate problems? Sorry, I don’t believe that we will. They've been “kicking the can” down the road now for months – making plans to make plans; therefore I am just not convinced that they are going to pull this off.

Do you know why Timothy Geithner has been travelling around Europe, begging and pleading for them to "get er done?" Because Timothy knows that some "very bad" things have been happening. In the past couple of months, U.S. money market funds have pulled approximately $400 Billion out of Europe. And with that much money leaving the European Banks and Investment Houses, it creates more debt problems for the Euro Zone. But because JPM, Citibank, Goldman Sachs, and many others have CDS’s (credit default swaps) written against these banks and sovereigns; when they go – we go because our financial houses do not have that kind of guaranteed money either! Timothy also knows that he can not get more bail out money out of Congress; therefore he’s seeing his friendly banks going ‘kaput’ – and hence his heavy travel schedule!

Will the International Monetary Fund (the IMF) come to Europe’s rescue? Will the German people allow their economy to be wrecked, so they can bail out the Greeks that still want to retire at age 50 with 100% pay? Is France strong enough to truly prop-up Spain? Are there really enough printing presses in the world to paper over the nightmare that Europe has become?

We rallied up and over a very important breakout level, and momentum could push this higher Monday and Tuesday. But will Wednesday’s Plan truly be enough? Currently I have my doubts.

We are "leaning long" into this rally, but I'm not ashamed to say that it's got me a bit scared. There is absolutely NO volume on these up days. On Friday when the S&P market got "up and over" that 1230 level we only traded 3 Billion, 765 Million shares. When the market was crashing on October 3rd – we traded over 5 Billion shares. When it was crashing back on August 8th – we traded 7 Billion, 491 million shares. I’m not inspired when there is huge volume on the big ‘roll-over’ days – and mediocre volume when we push over resistance level that was attacked 4 times.

I don't think we get a grand plan out of Europe, and I don't think they can pull it off if we get it. But, how our market deals with that has yet to be seen. With the lack of break out volume, I won't even be surprised if we sink back on Monday. However, pure momentum should keep us up, but I also tend to think that ammunition is running scarce about now. Mutual Funds are still losing money via redemptions. The bottom line is that if Europe doesn't come up with something substantial, I can easily make the case that we're going to plunge and plunge hard by the end of the week. It's something we have to all be aware of and be prepared for.

Tips:
In the short-term holdings account I’m carrying:
- SPY at 108.54 – now at 124.20,
- NTES at 42.43 – now at 45.60,
- GLD at 157.49 – now at 159.90,
- SLV at 28.00 – now at 30.46.

I did take some profits last week – but there’s still some more there to be taken. I’ll hold them for a bit longer just to see. If on the other hand things roll over, I'll cash out and play some short side using HDGE.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-15-11

This Week in Barons: 10–15-11:

This Seat is ‘OCCUPY-d’

Remember the 70’s – when "Enough was Enough!" I’m sensing the same energy in the Occupy Wall Street movement. What's it about? Is it really a Socialist movement inspired by the Unions? Is it some radical movement started by an underground network of revolutionists? Or is it as Jim Rickards suggests: “In America, we generally go about our private business and rely on elected officials and appointed bureaucrats to take care of the government. When protest arises, it's a sign that government is not doing its job, or not doing it in a way that serves the people. Elections are fine for gradual change, but sometimes immediate change is called for when government fails the people utterly and repeatedly in important ways. Such is the case with the Occupy Wall Street movement and its "Occupy" variations in cities around the world. Governments have failed to stop the concentration of wealth, the concentration of financial power, the proliferation of derivatives and the metastasizing of systemic risk facilitated by unethical, self-absorbed and shortsighted bankers. So the people respond.”

Now you can laugh at or disparage the demonstrators all you want. You can single out the fringe and think it's un-representative of the whole. But that won't change the fact that this demonstration has touched a nerve. A rag-tag group is standing up where the government, regulators, media and business elites have rolled-over and played dead. Thus far, this has been a peaceful uprising. But history shows us that there is a very good chance of escalation. Armed clashes are NOT out of the realm of possibility. Martial law in various cities is NOT out of the question. But perception is tricky stuff. No one knows where this all goes. My hope is that some of the younger freshmen politicians listen to the gripes, and start to make the changes that we know need to be made. Most “Occupy” protestors would be happy to go home if they could see some true government leadership. We are witness to an uprising that's not bound by territory or border. We're seeing a global spread of voices that are tired of being the ox that shoulders the burden for the elite.

The Market:
In terms of the market, we are at the biggest moment of the year. From the lows just 9 trading days ago, we've run from 10,404 on Oct 4 to 11,644 on Friday's close. Couple that ‘inflection point’ with Bill Pimco’s apology this week: “The simple fact is that our portfolio at midyear was positioned for what we call a “New Normal” developed world economy – 2% real growth and 2% inflation. We have now revised our internal growth forecast for developed economies to be 0% over the coming several quarters and our new portfolio more accurately reflects this posture.” WOW – 0% growth ahead! A recession is two quarters of negative growth – and negative growth is just one click away from zero – yes?

Followed by Pimco’s CEO Mohamed El-Erian – when ask about the global economy responded: “I’m between concerned and scared. We are watching three distinct, yet inter-related forces: poor economic growth, excessive contractual liabilities, and disappointing policy responses. The result is that western economies are getting trapped by the lethal combination of an unemployment crisis, a debt crisis, and mounting fragilities in the banking sector. The longer this persists, the greater the risk that even the healthiest parts of the global economy will get dragged into a prolonged period of economic and financial stagnation.”

I said last week that we would probably move up to challenge the resistances on the S&P at between 1220 - 1230. Well, Friday we ended the day at 1224. The question is: Do we blast through it, or does the air come out? On October 4 people were in a panic. We had every chance at really witnessing a crash that took us down to DOW 9K. I think that The Ben Bernanke called his Euro buddies and got the rumor started that changed the whole scene. The rumor of course was that the European Leaders had a plan to make a plan. The market reversed course in the last trading hour of that day, going from being down over 100 to being up over 200. From that day onward it simply marched straight up. However, the volume has consistently fallen each day as we've gone up. Mutual funds continue to show Billion dollar outflows – again! The economic news has been mediocre at best. So, I can indeed say that on one hand this has been a manufactured head fake rally, with the goal being to create "headroom" – just in case we received declining earnings and/or got more nasty European news.

And on the other hand, J. Q. Public is still scared. He's been pulling money out of his 401K to survive. The market’s ‘Talking Heads’ have repeatedly told everyone that we're range-bound and that when we get to the top of the range (where we are) you should sell out, as we'll sink back down. So, what happens if we push up and over 1230? Pushing over 1230 will ignite a frenzy of algorithms that will fire off a lot of orders, and will have J. Q. Public screaming to their fund managers to "buy-buy-buy!" So, we could see an enormous move higher that compounds on itself, and runs us up to the 1275 level in no time.

But don’t forget that this is all ‘supposedly’ because Sarkozy and Merkle have devised a plan to make a plan. The Plan is supposed to be released on or before Nov 4th. What if the plan is not good enough? What if it's not big enough? What if they find $4 Trillion? My point is, you can make the case that we roll over, you can make the case that manipulation wins out and we push over and soar for another two weeks. But no matter what happens, we have another big situation coming when they announce the "Plan".

Currently I’m thinking that no one expects the market to make it past this resistance, so it probably will, and we will spurt higher for a bit. If we get past 1230, all the shorts are going to cover in a panic, and we would see a fast pop to the upside. It could then build on itself and continue to roar as more and more figure the train is leaving the station. But be careful because it could be the last "hurrah", and it could roll over violently just after achieving new recent highs, crushing those that covered their shorts.

Tips:
I’m currently carrying a lot of short term long positions:
- SPY at 108.54 – now at 122.57,
- NTES at 42.43 – now at 45.46,
- RVBD at 22.17 – now 23.41,
- RHT at 46.03 – now at 47.44,
- RMBS at 16.04 – now at 16.61,
- GDXJ at 29.01 – now at 31.04,
- GLD at 157.49 – now at 163.40,
- SLV at 28.00 – now at 31.34.

There's a lot of profit sitting there for the taking, but we could see the market head fake everyone and push even higher, so I'll hold them for a bit longer just to see. If on the other hand things roll over, I'll cash out and play some short side using HDGE.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-9-11

This Week in Barons: 10–9-11:

“As for Steve Jobs in Heaven – the ‘Pearly Gates’ are probably more of a ‘Brushed Aluminum’ and let’s NOT call them ‘Gates’”! … Paula Poundstone

Steve Jobs passed this week and I read a marvelous piece by Firas Raouf of Openview Partners on his passing and I’d like to quote one line: “Thank you for making it possible for my 80-year-old mom to start interacting with the world online. Until we bought her an iPad last year, my mom had never used a computer, had never texted, emailed or IM’ed. Had never read anything online, and only had the phone as her way of interacting with her children and globally dispersed friends and family. Because of your vision of building tech products with intuitive and delightful user experiences, my mom was able to make the leap online with pretty much no training or pain. Thank you!” I certainly share Firas’ thoughts, and my wishes and prayers go out to Mrs. Jobs and family. He certainly made a difference, and will be missed!

Shifting gears – BET founder Robert Johnson on the "FOX News Sunday" program said: "I didn't go into business to create a public policy success for either party, Republican or Democrat. I went in business to create jobs, to create opportunity, and to create value for myself and my investors. And that's what the President should be praising, not demagoguing us simply because Warren Buffet says he pays taxes more than his secretary. Mr. Buffet should pay his secretary more and then she will pay more."

I was always taught, if you're playing poker and you haven't figured out by the third hand who the ‘stooge’ is – it’s YOU! That's sort of how I feel about how we’re being played about now. We all see "Occupy Wall St" folks protesting, and many of them don't have a clue what or why they're protesting. As a society we were ‘sold’ on an idea that:
- We could be a consumption society;
- We could consume ourselves to wealth;
- We could be a "service" society instead of a manufacturing society;
- Debts don't matter;
- We don't need a currency pegged to gold;
- Letting ‘banksters’ run free was a good idea;
- Giving houses to people with no way to pay for them was a good thing;
- The rich were evil;
- And competition might hurt ‘Little Johnny's’ self esteem!

The other day President Obama was interviewed and he said: "No! People are not better off than they were 3 years ago"! That's probably the only honest thing I've heard come out of his mouth in 3 years.

Factually:
- The Bank of Italy Deputy Governor sees a genuine risk of global recession, and calls for global monetary standards to safeguard savings.
- The U.S. Bank exposure to the Euro crisis may total = $640B!
- Wells Fargo may face a $8.79B cost for soured 2nd liens.
- Spain's credit rating was cut 2 levels on the spread of debt crisis.
- The housing bust is the worst since the great depression!
- Italy's credit rating was cut to A+ and Spain's to AA-, describing the outlook for both as negative.
- U.S. needs to generate 261,200 jobs per month to return to pre-depression employment by end of Obama’s second term.
- Consumer credit has contracted the most since May 1998.
- Portugal's credit ratings may soon be cut to junk!

My fear is that the U.S. cannot return to the glory it once had, when the things that made us great are now against the law.

The Market...

So, just how bad was the 3rd quarter? It was ugly! Hedge funds (in equities) lost on average 9.5%. Mutual funds saw massive outflows again. People are scared and rightfully so. For many years it was very fashionable to be a "contrarian" investor. You know the old adage: “Buy when there's blood in the streets. Sell when everyone else is clamoring to get in.” Thus you can make the point that this should be the greatest time to buy stocks we've seen in 80 years. People are scared, pulling out, the VIX (volatility index) is high, the economy's a mess, and the politicians are at each other’s throats. Could it get any better for the contrarian?
- Since the April highs we’ve seen the DOW fall from 12,800 to 10,400.
- We've seen unprecedented volatility.
- We've seen Europe continue to erode, now to the point where we're about to see our first outright defaults.

The problem with "Buying when there's blood in the street" is that they never tell you how deep the ‘blood’ is supposed to be before you buy. Is it deep enough when Greece defaults? How about when Spain rolls over? What about when the U.S. banks (that may have $640 Billion worth of exposure to Europe) take hits? It’s been several years since:
- TARP,
- The roll-outs of the stimulus plans,
- "Cash for Clunkers" and the 1st Time Housing Program,
- The reworked re-financing program,
- QE1, and then QE2,
- 9.1% unemployment (which is actually 16.4%),
- Falling housing, Higher national debts, No savings, and More senseless regulations!

Although the market is NOT the economy, and often goes in the opposite direction for prolonged periods, it usually does square up at some point. Supposedly the world is so smart that the market will start to rise 9 months ahead of an economic pickup. Then as the market runs and runs, the economy usually starts moving higher and higher, and then slowly the market will roll over and drop (while the economy still seems strong) and then finally the economy follows the market lower again. Over and over this has been the cycle.

So, for the market to start moving significantly higher from here, the worldly wizards would have to be thinking that 9 months out there's going to be a nice pick up in activity. If so – just where is the economy going to get the "oomph" from to fix itself in 9 months? It's been my premise that until The Ben Bernanke comes out with a true monetary stimulus plan, the market will be soft. And to that end, since June 1st the DOW has continuously made lower highs! That is not a pattern of strength. This week kicks off earnings season and CNBC is going to be foaming at the mouth as company after company announces they beat estimates by a penny. Yet how are they going to do it – layoffs! Layoffs have risen 117% percent this summer. So companies are making earnings (yet again) by cutting jobs, accounting tricks, and currency swaps.

Technically speaking – if the DOW can't get up and over 11,239 (which is the 50 day moving average) and put in a few solid closes, we have to imagine that we’re moving lower! I still think we go nowhere but sideways and down until The Ben Bernanke caves in and puts a $ Trillion more in the bankers hands. If the DOW were to hold up over the 50-day average, they could use the "great earnings" to try and power us up to the 11,600 level, where the next real fight will take place.

The economy has no reason to improve in 6 to 9 months; thus except for wide range ‘mood’ swings the equity market has no reason to improve and start a bull run. The risk is defined to the downside for now. But if The Ben Bernanke releases a huge stimulus, then we will indeed roar higher, kicking the can further down the road – but until then we're in danger, and short-term trades are the only game in town.

For Monday the action will be dictated by which rumor comes out of Europe over the weekend. Then (on Tuesday) earnings start with Alcoa. From there on out, sectors will be cheered or jeered depending on what the companies say, which will cause our insane market fluctuations to continue. Some have written in asking if my prediction of DOW 6,000 is still inline. Absolutely. I can't say when, but we could be on our way there right now. However, we do know The Ben Bernanke will come up with a spare $ Trillion to try and abort that. And we also know that the stimulus will wear off and we'll sink again, and the cycle will continue. This could go on until 2013 – but at some point we will sink back to those 2008 lows.

Am I still in love with gold and silver? Yes on both counts. I don't care how either of them behaves in the short term. I'm looking at them for the 2013 time slot. As Europe defaults, as currencies get kicked around, as economies slow – I don’t think people are going to be fast to "rush back" to fiat currencies. Some will want the metals and I’m in that camp.

Tips:
This week I sold my DIA put options for over $6, and since we purchased them for $2.80 we are very happy about that!

In my short-term holds I have DOG, and SH (that are inverse ETF’s focused on the market going lower). I also have GLD and SLV. As I looked out across earnings season - this week I purchased some miners: FCX at 34.53 and some GDXJ at 29.01.

As this market continues it’s sideways and down movement – look at HDGE – a very nice ETF you can use to play the downside. It has moved from $20 in May to being closer to $30 right now!

This market is NOT for the weak of heart.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-2-11

This Week in Barons: 10–2-11:

Laughing at our mistakes can lengthen our own life; however, laughing at someone else’s can shorten it! … Cullen Hightower

In a grim final speech as Kansas City Fed President, Thomas Hoenig said that he expects U.S. economic growth to lag behind historical norms for generations, and that Fed policy has done more harm than good: "When you encourage consumption by inhibiting your interest rates from rising to their equilibrium level, you will in fact buy problems, and we have in fact bought problems."

Wow, now there's something you will rarely hear – a Fed head telling us that we're going to be slugging it out for years on end and that their path was a mistake. But of course - he's retiring and no longer a part of the decision process at the Fed, and therefore no more backlash from The Ben Bernanke. Thomas Hoenig realizes that this recession, this debt load, this nightmare cannot be fixed using monetary policy. But meanwhile, the US economy has been slowly and deliberately eroded by inflation, falling wages, lower paying jobs, and more ridiculous regulations. Can we fix the economy – of course – but it would mean short term pain for some, because it would mean disbanding hundreds of government programs that hinder real growth, and then we’d have to take control of our money back from the Banksters. Remember when we had the single greatest economy on earth. If a child was failing in school, he was held back and made to study. Today the reading scores for high school seniors have hit the lowest level ever recorded. If we compare various elements over the past 20 years or so:

Ex #1: Johnny and Mark get into a fistfight after school.
20 Yrs Ago: A crowd gathers. Mark wins. Johnny and Mark shake hands and end up buddies.
Now: Police called. Johnny and Mark are charged with assault, and both are expelled even though Johnny started it.

Ex #2: Jeffrey ‘fidgets’ in class, and disrupts other students.
20 Yrs Ago: Jeffrey sent to the Principal, given a paddling, returns to class, stays still and doesn’t disrupt class again.
Now: Jeffrey given drugs, and the school gets extra money because Jeffrey has a disability.

Ex #3: Billy breaks his neighbor’s car window – Dad paddles Billy.
20 Yrs Ago: Billy is more careful next time, grows up normally, goes to college, and becomes a successful businessman.
Now: Billy's dad is arrested for child abuse. Billy is remanded to foster care and joins a gang.

Ex #4: Mark gets a headache and takes some aspirin at school.
20 Yrs Ago: Mark offers an aspirin to someone who also has a headache at school.
Now: Police called, and Mark is expelled from school for drug violations.

Ex #5: Pedro fails high school English.
20 Yrs Ago: Pedro goes to summer school, passes English, and goes to college.
Now: ACLU files class action lawsuit against the school system and the English teacher. English is banned from the core curriculum. Pedro ends up unemployed because he cannot speak English.

Ex #6: Johnny takes leftover firecrackers and blows up a red ant bed.
20 Yrs Ago: Ants die.
Now: Johnny charged with domestic terrorism. Johnny's Dad goes on a terror watch list and is never allowed to fly again.

Ex #7: Johnny falls while running during recess and scrapes his knee. He is found crying by his teacher, who hugs and comforts him.
20 Yrs Ago: In a short time, Johnny feels better and goes on playing.
Now: Mary is accused of being a sexual predator and loses her job.

Many of the companies that you buy stock in were first created in someone's kitchen, basement or garage. Because they were so good they grew, necessitating a move into a true factory, employing thousands. Now, you’d be arrested because that ‘garage’ would have to acquire "commercial" business permits that do little more than dissuade innovation. But no politician is going to stand up and tell the American public that to be great again, we need to go back and disband the EPA! Since the EPA showed up – we have lost over 50 Million high-paying jobs. Honestly, if TARP didn’t create jobs, and if QE1 and QE2 didn’t create jobs – why do we really think that pushing trillions more stimulus into the economy will have any effect?

The Market:
It’s been another roller coaster week. We saw the market gain 300 points on Tuesday, only to lose more than half. We saw the market up 117 Wednesday, only to end the day down by 179 points. We saw Thursday gain us 255 points by mid day, and tumble all the way down to DOW -41 by 3PM, and then rally all the way back to + 143 points end of day. Welcome to the world of high frequency trading.

So will the market roar higher or roll over? I can honestly make both cases, but here's something to consider. As you can figure out, all the schemes they're cooking up in Europe are 1 - not working, and 2 - probably not able to be implemented. So, we could be facing a Greek default any day. And if that were to happen, I suspect the immediate reaction would not be a good one.

I'm hearing that Germany has already begun printing Deutsche Marks. I can't confirm that, but there are more rumors swirling around Germany announcing that they want out of this ‘Euro’ thing. What happens if that announcement is made? A cascade of crazy things (and none of them are good) will happen – at least in the short term. But on the other hand, we could very likely see The Ben Bernanke come out of left field with a whole new round of stimulus on any particular day. So, with all those plates spinning in the air, to make any real predictions right now is silly. I feel the market wants to fade off and fade off hard, but if a few trillion in stimulus were announced they'd start to ignore all bad news and push us higher, because they can.

I've been carrying some short positions all week, and although there were times when they were not profitable, we ended the week in positive territory. I tend to think that we'll see more downside until The Ben Bernanke comes out with some form of stimulus pump. The issue of course is that it will happen after hours, and we'll gap up 300 points that day.

The bottom line is that we're mired in a horrible situation that really cannot be resolved without pain of some form. Therefore, you need to remain pretty cautious. One thing I feel strongly about is that whatever the course of action that they try, it's going to involve printing money, money that the world doesn't need to have pushed onto it. Gold and silver will naturally react to the upside. The recent bear raids on Gold and silver frightened a lot of folks, but for me, it was simply a buying opportunity at discount prices. ‘The Talking Heads’ say that the gold run is finished, but they said the same thing with gold at $500, $750 and $1,000. While funds have lost investors 28% this year - Gold is up on the year!

Tips:
This week I purchased more DOG, SH, GLD, SLV, and purchased more physical gold and silver as well.

I have DOG, SH, GLD, SLV in my short term holds, along with some Oct DIA 110 put options at 2.80 per share.

I am not going to put a stop on these, and still looking to add to physical metals on their down days. This trade isn't for the weak of heart.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson