RF's Financial News

RF's Financial News

Sunday, December 4, 2011

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.

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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