This Week in Barrons - 12-25-11

This Week in Barons: 12-25-11:

‘I Heard the Bells (of the Cash Register) on Christmas Day…’

Wall Street loves Santa Claus, but Santa has been very elusive this year. The Ben Bernanke, knowing that he's going to have to juice Europe to keep them from collapse, has been stubborn about giving away free money. So, let's just examine why we gained those 300+ points this past week. Not long ago the ECB (European Central Bank), with help from our Federal Reserve, told the Euro region that they'd lend banks all the money they need, at about 1%, for the next 3 years. Now everyone knew that a lot of European banks needed this kind of infusion, and we thought that about 250 banks would come calling. Well, when the lending window opened and 523 banks lined up to borrow $645 Billion we were all taken by surprise and the markets rejoiced. But why would the markets be so happy to see all those banks needing so much help? Well, what’s really needed is that Spain, Italy and the other PIIGS be able to sell bonds, so they don't go broke. And because of their legal charter, the ECB cannot directly lend to countries. So what better than to have the banks borrow all the money, and then have the BANKS lend to the countries by buying up all the sovereign bonds. That way the banks get income, and the countries get their badly needed liquidity. Now, my guess is that ‘NONE’ of this was a loan but rather it was all ‘free money’. This effort saved the banks, and it might just kick the sovereign debt problem down the road a bit. It might let the banks be a little bit more footloose with lending, since they know that if they lend out the money they got at 1% for say 5%, they'll make a sweet profit, and if no one pays them back – what the heck the FED will give them more.

Anyway – as we stroll around the world – not much has changed – we see:
- The Bank of Japan lowering its outlook for the economy for the second month in a row, saying that the pick-up in activity has paused, and that there are spillover risks from the U.S. and the Eurozone. Data released earlier showed Japan's exports fell 4.5% in November from a year earlier, the second consecutive month of declines.
- Gas costs have risen dramatically for consumers. Although pump prices have been falling, consumers have spent more money than ever on gasoline this year. Based on recent demand trends, consumers will have spent $481B on gas in 2011 vs. $389B last year. Therefore, each U.S. household will have spent an average of $4,155 on gasoline, 8.4% of an average family's annual income.
- The November Existing Home Sales shows contract failures at an alarming rate. 33% of National Association of Realtor members report seeing a cancellation caused by a declined mortgage application contract last month, compared to only 9% a year ago.


The Market:
The market had that huge up day this week. The right people were told that the ECB was going to push half a trillion dollars into the Euro zone. We gapped open in the morning – so that the only people that could take advantage of the entire move were Senators, and naturally Goldman Sachs. The rest of the week was spent verifying that we could stay at these levels for at least the short term. I think they'll add a bit more to the pot early this week, then it might tail off some. We should get a "January effect" heading into the new year, where pension and fund managers dump their new year money into the best performers of the previous year, looking to get a nice fat first quarter gain.

I'm going to wrap this up with a holiday wish – and truly wish you all the very best. Merry Christmas to all – and to ALL a Good Night!

Tips:
2011 was an interesting year indeed. I always like to review and compare our results with others – mostly in order to learn. It appears that we’re going to end up the year up around 24%. The famed John Paulson is off a wicked 30% as we close out the year. The major difference here is that Paulson buys and holds for months at a time, and this year our timeframe was often days. In any event it's not going to get easier in 2012. The over riding debt issues remain. The European crisis is still there, not to mention: North Korea, Iran, and the Presidential race. There will be no shortage of volatility in 2012.

This week we bought the SPY which is the proxy for the S&P 500. We also purchased United Healthcare (UNH), J.C. Penny (JCP) and a handful of others (see below), which are doing well for us considering we bought them this past week. But there's going to be some others to consider as we move into the year-end and January.

So right now we’re holding:
- UNH at 50 (currently 51.35),
- SPY at 124.08 (currently 126.59),
- EP at 25.72 (currently 26.01),
- SE at 30.20 (currently 30.87),
- JCP at 34.05 (currently 35.67),
- HEK at 6.51 (currently 6.95),
- GLD at 159.49, now @ 156.19 - AND
- SLV at 28, now @ 28.30

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

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 - 12-18-11

This Week in Barons: 12-18-11:

‘Twas the Week Before Christmas – and We’re Up 23% on the Year…

For the most part Europe is "Closed", and that seems to have left a vacuum of topics to chat about – yes? Hardly. Believe me when I say, things are not rosy here in the U.S. as Morgan Stanley just announced 1,600 job cuts. The leading business school candidates are now seeking employment outside the banking sector. And leading Hedge Funds owned by such notables as Paulson and Tilson are down hard for the year. Part of the reason gold took such a wicked pounding last week, was that Paulson sold millions of shares (rumored 11M) of the GLD to raise cash for all the people that wanted out of his fund. Why, because his fund is down 28% for the year! Whitney Tilson is down 25% for the year, and hundreds of hedge funds are rumored to be in the process of closing. Fortunately, our trading account is still up over 23% for the year, which is not spectacular (by our measure), but certainly not as bad as some of these "Headline Stars". One of the benefits of being a "small player" is that you can be nimble. And with a market that has seen more up and down chop this year than any year in history – the investors that couldn't be 'nimble" got killed.

The ONLY thing I'm willing to be invested in long term is gold, silver and a few related mining stocks. Until this global train wreck is complete, I don't trust anything in the market. For example: look at MF Global. Even if you owned NOTHING, and your money was sitting in CASH in the fund, the crooks stole it – invested it in Europe – and now they can’t find it!

Currently, we own a significant amount of gold, and a decent amount of silver. Some will ask: “When do you stop buying?” My self-imposed "top" for gold is going to be in the $2,000 to $2,200 range. When gold gets to that $2,200 level I will stop purchasing gold and continue to purchase silver. In many respects, silver is a better supply and demand story than gold. I believe that in the years to come, silver will see $80 to $100 dollars an ounce. So at $30 currently – silver has a real chance of rising 200%, vs gold @ $2,000 can’t give me those kinds of returns. The other question is: “When do I sell?” My answer is always the same: “When you need money.” Gold and silver are nothing more than savings accounts, but instead of putting in dollars, you put in metal coins. So when it’s time for college, or a house, or retirement you tap into your savings account. The other "time" we will be selling is when the end game of our US dollar is complete and we have either: crashed, been replaced by something new, OR defaulted. In other words, gold is the insurance policy against all the ills we see. And when the world presses the ‘reset’ button – we will want to be able to buy those new dollars.

People also ask: “What about the mining stocks?” Well, the mining stocks are indeed more risky. The miners dig the precious metals out of the ground. If you have good product coming out, and you can keep your costs of extraction low, then you are making a fortune. A lot of the miners are operating on costs that made them a profit with gold at $700, so imagine how much they're making with gold at $1,600? Yet as stocks go – they’ve truly stunk out loud – why? (1) Unstable foreign governments make mining the precious metals harder each year. (2) Environmental pushbacks against mining get tougher year in and year out. And (3) the over riding reason is that when markets are in a panic, they look at the miners as "stocks" first and a back door to the metal second. So when the market is plunging for 1,000 points nobody sits and says: "I should keep the miners because they have the gold!" No, they dump them and ask questions later. There are 13 "significant mining" stocks that pay dividends. Yet the single highest return is from NEM at about $1.40 annually (which is 2.3%), and then comes FCX at just $1.00 annually, (2.7%). Now, if those miners were paying 5% or 6% - then people would hesitate to dump them, their shares would soar and even a market melt down wouldn't kill them. Therefore, the miners will continue to be volatile and relatively driven by the overall market. I do think that as a whole they've been sold off too much and the GDXJ appears to be a nice buy, but the fact is I still only “trade” the miners and not "invest" in them for the long haul.

Having said that, if you had invested $10,000 in the basket of the 13 big miners that pay dividends in the year 2000 (AEM, AU, ABX, BVN, FCX, GG, GFI, HMY, KGC, NEM and RGLD) – you would now have an investment worth $94,000 – a 22% annualized return. However, you would have had to sit through a period from late 2007 to mid 2008 where their value crashed from $96,000 to just $34,980 along with the rest of the market.

In terms of the U.S. economy: in years gone by you would let an economy go through the death throes, default, and have investors run in and pick up the good stuff, toss out the bad stuff and "start over". But things are different now. The world is intertwined like never before, and we are all witness to a global reset. If it was "just" Europe, or “just” the UK, or “just” the US – that was bankrupt we'd be ok. But it's everyone from Japan, to most of Europe, to the UK including Ireland, and the US that are mired in crushing debt, and slowing economies – all caused by the global housing bubble. And even China is facing something they will not admit – their economy is on the ropes.

It's my opinion that we're in a slow motion train wreck. And between now and the ‘global reset’ we're completely dependent on The Ben Bernanke's printing press. If he prints a few trillion, the markets soar, and countries function. If he doesn't print enough, the markets fall, and America implodes. I believe we're going to see the DOW below 6,600 in our future. I believe the world will mire in a dark depression for a few years. The “when” is a little fuzzy because countries can keep playing "kick the can" by printing more money. But like all games, scams, and schemes, they come to an end when the system can no longer support them. My guess is that point is in late 2012 and into 2013.

So, if/when the Fed does another round of mega stimulus to save Europe and the US, we will get a giant pop out of it – possibly propelling us up and into the DOW 15,000 range. But then it would be lights out, because there could be no more mega stimulus, due to inflation being greater than 15%. If we don’t get the mega stimulus, then things continue to break down – a little here and there – with ultimately the big swoon coming in. In either case having some gold and silver lying around should get you through it all just fine.

The Market:
It's the last call – 9 trading days left until the end of the year. Everyone’s trying to drum up some excitement and get the market higher, but it's a massive struggle. Without The Ben Bernanke’s money, there is more money flowing out of stock funds than into them. On Friday we didn't hold the early gains, but we ended the day statistically flat. I suspect they're going to try and move us up Monday thru Wednesday, and then get flat on Thursday and Friday.

One thing we will have to worry about is the tax selling that's going on behind the scenes. Hedge funds will be dumping things that can create a tax advantage against their winners, and sometimes that gets a bit too "out of hand". Then of course what we often see is the "January Effect". The “January Effect” is when the pension funds come into the New Year with fresh deposits, looking to jump into last year’s winners. That gives the first quarter a good shot at looking decent. Now, factually over 70% of the time the “January Effect” has worked in moving the market higher.

We'll be trying to lean on the long side into the week, but we are definitely going to have to take profits quickly. Although it's possible we could roll over and fall from here, it would be fairly unusual in a historical sense. I tend to think we have one more shot at higher, and then we're going to see some roll over pain. Then with a bit of luck, we'll use the “January Effect” to ride that home.

Tips:
For those of you following me on Twitter – we sold out of the banks last week, MS, BAC and Goldman Sachs (GS) – with a nice profit – and are fairly slim right now.

Currently we have:
- GLD at 159.49 – now at 155.49,
- SLV at 28.00 – now at 28.85, (bought more last week).

A shout out to Jim T for noticing that the Divergence between (lower) Labor Compensation and (higher) Corporate Profits is at its highest point in over 40 years. Think that’s leading to any discontent?

A shout out to John for pointing out the chart breakdown in the Gold sector – and the easiest path going forward for the market could be ‘down’ – especially after the early part of January. Absent printing, the deflationary risk will cause The FED to add liquidity to make up for the contraction in the private sector and that will ignite the next phase in the gold run. This could (however) take a couple of quarters – but could be just in time for the November election.

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

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 - 12-11-11

This Week in Barons: 12-11-11:

The Euro – Arranging the Deck Chairs on the Titanic
Many people think that the European Union was some form of agreement to get all the countries able to do commerce more easily, instead of having 17 different types of currency and 17 different interest rates. And at 50,000 feet that sales pitch sounds very much believable. But what if their founding was really all about safety. In the U.S. we’ve never been invaded by Hitler, seen millions die in trenches, and before that had England, Spain and France lobbing musket and cannon balls at each other. After centuries of war Europeans wanted an ever-lasting peace. The difficulty here is taking 17 "cultures", and melding them into one interest rate/one currency/one work ideal. For example: Germany is full of hard working people, enormous exports, tremendous precision and quality. While Greece is socialist to the extent that people vacation more than work, exporting very little, and living off the government. Time has proven that these two cannot function under one economic rule. As one can imagine the German people are none too fond of having to adjust their work lives, and their savings habits to bail out the ‘Club Med’ folks. But, there is indeed a plot to figure out this nightmare, and to do so we need to go back to 2008 in the U.S. to figure it out.

In 2008, the U.S. had a housing "Ponzi scheme" the likes of which the world has never seen: from politicians that had plans to get every person in a house, to greedy bankers that sold fraudulent mortgage backed securities (MBS's) around the world, to a credit explosion that ‘financially’ interconnected everyone.
So, while the politicians played to the masses of people with declining wages, and created the "bubble", you know that behind the scenes The Ben Bernanke, Paulson, Geithner and the rest of the Goldman Sachs alumni said: "Don't worry about it. Make the loans; take in the fees. It won't be evident for several years that it's a massive nightmare. Then package all of it up, and make more fees selling the Mortgage Backed Securities to all the pension funds around the world. You'll take in more billions in fees". And then someone asked: "But what happens when they're all found to be junk?" To which the reply had to be, "That's not a problem – the U.S. Federal Reserve will make sure all the major banking institutions that buy this stuff, will be made whole". Then they asked: “Can we really make Europe whole?” The answer: “Legally no, but in reality – you bet!” The rest is history and for the longest time I was wondering why none of the European Banks were screaming lawsuit? Well recently (via the Freedom of Information act, along with several lawsuits from Bloomberg) we found that the Federal Reserve had lent/given European institutions some $16 TRILLION. And when Congress asked The Ben Bernanke, where's the money? He replied. "I don't know". The same response John Corzine gave last week when asked about the missing $1.2B from MF Global!

Okay, now we fast-forward to Greece going under, and 5 other countries very close indeed to declaring insolvency. Now the ECB of Europe is often thought of as Europe's Central bank and in some function it is. But the ECB is legally not allowed to lend to any Government. And all totaled – countries needed over $6 TRILLION to stop the bleeding. Who has $6 TRILLION – enter Timothy Geithner from the U.S. But one of the caveats of this lender (and one of the articles of the ESM) is that a "Committee" of 8 Government regulators, and 17 "Board Members" be formed. These 25 people will have TOTAL control of all the member countries budgets, austerity rules, margins, rates, ratios - you name it. Now where it gets interesting is that the heads of ALL of these banks, and Governments are Goldman Sachs employees, advisors, or X-Goldman Alumni! Just a coincidence? I think not!

So here is how I think this will all play out. The ECB will stand firm against lending to the individual countries and randomly printing money. The insolvent countries need that money desperately, and will be forced to join the ESM (controlling ‘board’ etc.). When everyone is then "under the umbrella" of central command, the money will flow. But if it’s illegal for the ECB to lend money, where’s the money coming from? The money will come from the U.S. Federal Reserve. They will do what they perfected in the housing bubble years, which is to get money, attach fees to it, and lend, lend, and lend to all the sovereigns. And they’ll funnel it through Goldman to ‘Get Er Done’! So the bankers are in line to make ‘Billions’ providing the money those countries need. And who’s on the hook for it: The U.S. taxpayer!

The Market:
Because of Europe, our market has been an up and down mess. Without the huge "bazooka" of money, the bankers don't get all those great fees, nor do they get to go speculate in the markets and drive prices higher. But the bazooka is coming, they just have to get it all set up. When everyone is "on board", the money will indeed flow. Because the money spigot isn't currently on full blast, the market has had a hard time driving itself higher – for example: up days still come on lower volume than the down days. Too many fund managers, desperate for performance want with all their might to just buy-buy-buy, but they still worry that something in Europe will beat them up again. They've been through it too many times. But I tend to think that they're going to try one more time to push this market over the resistance line of DOW 12,200. If it makes it (and I believe it will) we should have one last hurrah run that takes us close to Christmas and nearly challenging the 12,600 level.

Now (don't get me wrong), we don't deserve a rally. Just this week, Cargill a huge private company with it's roots in lots of businesses, said that sales were slowing quickly. DuPont, Corning and the chip sector all warned that they wouldn’t make their yearly numbers. The true economic news is terrible. This week we heard that initial jobless claims fell to 381K. Well, those are "seasonally adjusted" numbers, and without the adjustment the initial claims soared by 120K to over 500K. But yet again, fundamentals mean nothing, because it’s all about free money. The Fund Managers "need" a decent market for year-end bonuses, and they don't have much time left to make it happen. So, if we get through 12,200 and close above that for 2 sessions, it's my guess we run wild for a while.
Oh, one last note, when the money spigot is opened for Europe, both gold and silver will make their next move higher.

Tips:
For those of you following me on Twitter – you know that I purchased more Gold and Silver last week.

Currently we have:
- GLD at 159.49 – now at 166.55, (bought more last week),
- SLV at 28.00 – now at 31.37, (bought more last week),
- MS (Morgan Stanley) at 15.08 – now at 16.4 – my sell stop is 15.5
- BAC (Bank of America) at 5.31 – now at 5.75 – my sell stop is 5.31
- GS (Goldman Sachs) at 92.1 – now at 101.70 – my sell stop is 96
- MGN (Mines Management) at 2.33 – now at 2.47 – my sell stop is 2.40

With the U.S. backstopping Europe, it means we will be printing more money. That means inflation, and that means Gold will rise both on the idea of an inflation hedge, and as an alternative currency. Silver will rise on the inflation hedge, and the ever-continuing global demand for it both as an investment and for industry. Frankly they're both seriously in play and will be until the Fat lady sings – and she’s not even in the dressing room!

We’re still looking at the junior minors, but the only one we pulled the trigger on as of yet is MGN.

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

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 - 12-4-11

This Week in Barons: 12–4-11:

“Deception is indeed nothing else but a lie reduced to practice”… Robert Southey.

Although Greed has been with us since the beginning of time, never in history has it been able to flourish as well as in the digital age. When greed pushes the envelope and becomes fraud, manipulation, and outright theft – that’s when we’ve crossed the line. This week we learned that Former Goldman head, former MF Global head, and former Treasury Secretary - Henry Paulson told certain hedge fund managers of the situations that would come about for Fannie and Freddie – giving them an obvious competitive and ‘insider’ advantage. Then of course we have John Corzine, who took over MF Global and somehow ended up stealing about $1.5 billion dollars from investors without so much as an SEC eyebrow being raised, or even an investigation. When you're that connected at the top, you live by different rules. So let’s examine a list of recent Goldman Alumni:
- Henry Paulson
- Tim Geithner
- Neil Kashkari
- Robert Rubin
- Joshua B. Bolten, a former Goldman executive, was President Bush's chief of staff
- Stephen Friedman, a former chairman of Goldman, was chairman of the New York Fed.
- Edward M. Liddy, a Goldman director, in charge of A.I.G
- Dan Jester, a former strategic officer for Goldman who has been involved in most of Treasury's recent initiatives, especially the government takeover of the mortgage giants Fannie Mae and Freddie Mac
- Steve Shafran, friend of Mr. Paulson in the 1990’s while working in Goldman's private equity business in Asia. Initially focused on student loan problems, Mr. Shafran quickly became involved in Treasury's initiative to guarantee money market funds, among other things
- Mario Monte, a Goldman Senior Advisor – now the Italian Prime Minister
- Peter Sutherland, Director of Goldman International – now the former Ireland Attorney General
- Mario Draghi, Senior Director of Goldman International – now the new head of the European Central Bank
- Lucas Papadamos, X-Goldman Advisor – now Greece’s Prime Minister
- Otmar Isseng, Goldman Advisor – now Board member of the ECB and Bundesbanc

I don’t think I need to go on. So which government around the globe does Goldman Sachs not influence? So this week (out of the clear blue) our Federal Reserve announced that it was going to join up with a handful of Central Banks and supply the European bankers with all the money they need to continue to function. The excuse is always the same, “If they allow the banks to fail the whole system would fall.” In reality they could systematically take over the worst banks, default the bond owners, sell off the good assets to stronger banks, and move on to the next one. One by one they could clean up the system that way. But the point here is that the “Bankster” Brotherhood is stronger than the Mafia. They protect each other, and the unwritten rule is that no major bank suffers! This latest Fed Announcement will NOT solve the European issue, just as much as printing more money will NOT get us all out of debt. But, by giving the backstop to the European banks, it let's hedge funds, mutual fund managers and everyone else toss money at the market, because there's no longer any fear of waking up tomorrow to find out that another "Lehman" had occurred. And that is why we had the 500-point up day. Unfortunately, this does nothing for the taxpayer; it does nothing to resolve the debt issues; it does nothing to strengthen the economy; and it causes inflation.

Greed has reached astronomical levels. Here in the "digital" age, news moves in micro-seconds - adapt to it or give your investments to a Goldman trader!

If you’re in the market for a laugh – here’s this submitted by JT: http://www.youtube.com/watch?v=bdob6QRLRJU&feature=player_embedded

The Market:
We had a hunch that there would be some form of plan in place before Dec 7th, when most of Europe will start to shut down for the holidays. So we purchased those 1 week Call Options on the S&P last week – and when the news hit that the Fed was going to backstop the world – we were nicely rewarded.

Our first inclination was to try and grab some banks. We took Goldman Sachs (GS) at 92, it ran to 102 in two days. We grabbed some of that insolvent Banc of America, and it ran up as well. Also, knowing that the Feds announcement really meant "let’s start up the printing presses", we thought that the materials would run so we took ANR (Alpha Natural Resources) at 21, and it’s now around 25.

So the real question is: Will this last? My thinking is that YES it will. It won't be a straight line and there will be news blurbs that smack us around a bit, but overall I think the market ends the year higher than it is now – strictly because of GREED.

The average fund manager is nursing over 100 stocks in his portfolio, but the whole darned thing is down 1% on the year. You have everyone screaming for “Alpha” – meaning positive returns! You have people calling and asking why you are DOWN for the year? Now it's December, and you have a month to try and make some money or miss a bonus, and possibly get fired. So you’ll look at the Fed Announcement and figure that the "really bad risk" is gone, and I think that you’re going to go “All In".

A lot of fund managers are now looking to "chase performance", and their greed and their desire to have a job come January might push them to take all the risk they can. Naturally the Fed wants the market up, because everyone including Ron Paul is talking about how the Fed is an illegal band of ‘Bankster’ Brothers and should be disbanded. So the market being up may get the critics off their backs temporarily. Then we have the whole Obama thing. This is the last Christmas before he either gets re-elected or booted out of office. Don't you think people would feel better about the man if the stock market rallied into the Holidays?

So, we have:
- December being a historically strong period for the market,
- The fear of European bank default being removed,
- Fund Managers desperate for performance,
- A Fed that would enjoy a rising market, and
- A White House trying to preach how great they've been - that could also use a higher market.

That's a lot of firepower that "suggests" that yes this should keep going. Honestly, if everything was going to align for a year end run – this is about the best alignment we're going to get. We're leaning long, and heartened by the fact that after the 500-point up day we didn't give half of it back – and we didn't rally again. We just "hovered" and digested that gain. That's a pretty good sign that they're willing to hold us up. So, we've made some great money already, and we think there's more to come.

Tips:
Remember – we did gamble on the December SPY Calls early last week and were rewarded handsomely! For those of you following me on Twitter – you know that we have somewhat of a full basket right now:

We have:
- GLD at 157.49 – now at 169.85, (I’ll be buying even more this week),
- SLV at 28.00 – now at 31.73, (still buying),
- MS (Morgan Stanley) at 15.08 – now at 15.52
- X (U.S. Steel) at 27.87 - flat
- RVBD (Riverbed Tech) at 26 - flat
- BAC (Bank of America) at 5.31 – now at 5.64
- GS (Goldman Sachs) at 92.1 – now at 97.20
- ANR (Alpha Natural Resources) at 21.25 – now at 24.05

What about Silver and Gold? If there is one thing the Fed announcement makes clear is that they're going to print dollars. That means inflation, and that means Gold will rise both on the idea of an inflation hedge, and as an alternative currency. Silver will rise on the inflation hedge, and the ever-continuing global demand for it both as an investment and for industry. Frankly they're both seriously in play and will be until the Fat lady sings – and she’s not even in the dressing room!

With that in mind, we're beginning to look at the mining stocks again. A few months back we made some awfully nice returns in them, and it's looking like several are setting up to do it again. One in particular that is interesting that DS brought up is: MGN – at its current price of $2.33 – be careful – but it’s definitely in the hunt.

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

Please be safe out there!

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