This Week in Barrons - 3-25-2012

This Week in Barons: 3-15-12:

Goldman Goes Super-Bull (Huh?)

Goldman Sachs (the undisputed king of banking criminality) came out this week and said that it's time for everyone to dump bonds and buy stocks because equities are going to rise for the next TWO years. Now, let me get this straight. The market has been on a tear for the last 3 months (up some 30% since November), and AFTER such a move (a move that in a "normal" market might take a year), Goldman is telling us to “pile into stocks!" There must be something wrong with this picture – yes? But honestly, this week, Goldman had their head of equities on CNBC, and he was so bullish it was mind blowing. This gentleman made his mark by coining the term "BRICS" for the resource countries, and during the big market run up of 2007, he was a hero. He also said that the BRICS are going to do well, but other new emerging markets will trump them and the “world is going to have an orgy of growth.” He said that US equities will benefit, and we could see a run unlike anything we've ever seen. In the report itself, Goldman expects global growth from 2010-19 to be the fastest of any decade between 1980 and 2050! Really? Didn't Greece just dissolve? Isn't Germany wobbling under the weight of carrying the EU? Aren’t Spain, Portugal, and Ireland (and probably the UK) in the dustbin of insolvency? Isn't China slowing, despite building cities with no inhabitants? Isn't the US struggling with high unemployment and falling housing? Where is the record growth going to come from – Afghanistan, Iran, and Pakistan?

Factually:
- This week housing applications fell 7.4% for a 6-week slide. Refinancing’s fell 9.2%. In the housing starts column, the only things being built were multi-family units.
- COAL is also weak. The manufacturers are seeing non-existent markets for spot and near-term coal as utilities continue to wrestle with unexpected generational declines. (Which means the demand for energy is dropping.) So how does that ‘square’ with a bustling, growing economy?
- Also, this week oil consumption DECLINED to 1995 levels.

Then Goldman’s Chief Economic Strategist, Jan Hatzius, who is German, gave an interview to Handelsblatt, and his views were 180 degrees apart from Goldman’s Equities Strategist. To quote Mr. Hatzius: “I do not see a strong comeback in the U.S. We expect a further decline in home prices by three to four percent and no stabilization until 2013. The surplus is still large. And I expect more QE in the first half, because the mid-life extension program of the Fed - also known as "Operation Twist" - is expiring. So it makes the most sense to launch another QE as the successor program around the mid-point of 2012.”

So one GS employee says the world is going to explode in growth, while another says we're mired in a mess and need QE. Meanwhile the real facts show our economies are puking. Either GS is completely lying to us, or the fact-based news about housing, oil, energy and employment are wrong. My guess is that no matter what kind of runs and drops we get in the near term, the big damage is coming shortly after the New Year. Long about the time the next President is sworn in, and all the ills we point to are found to be festering with no solutions.

By the way, I don't believe GS (Goldman Sachs) for a second, but I do believe in one GS (Gold and Silver). Many have asked why gold and silver seem to be "stuck". I think that one of two things will happen in the foreseeable future. (1) We will have full out deflation, meaning a crash, and gold does well in a crash. Or (2) we will have rampant inflation that touches on hyperinflation and gold does well during those times. Gold hit my 2011 target and surpassed it by a bit. I called for a total top at 2,400 and I think it still gets there. But this entire current ‘chop’ is just Gold and Silver responding to manipulations by various central banks.

The Market...
Mr. Corzine – you should be ashamed. Jon S. Corzine – MF Global’s Chief Executive Officer – who previously testified that he did not know where all the money went? Well, Friday after the market closed – there appears to be proof that not only did he KNOW where the money went – he ORDERED it! According to Bloomberg: “Jon S. Corzine, MF Global Holding Ltd.'s chief executive officer, gave "direct instructions" to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage's JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Edith O'Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was "Per JC's direct instructions," according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News.”

In terms of the market, everyone knows that at some point QE3 or some form of new alternative will be coming from the Fed. Operation Twist ends in June, but they really can't let it end. Operation Twist was the latest game the Fed played to keep interest rates low, but market forces have been inching rates up. The Fed can’t let rates rise because that would cripple both the housing and banking industries. Therefore, a new twist on QE must be coming around June. Because each one of these Fed schemes ends up giving banks money to play with, the market has continued to rise. And of course Obama and the Fed both want a higher market as some form of evidence the economy is healing.

This week we did get a "mini" correction. From the market high of 13,298, it put in a low of 13,002 during the intra day on Friday. Round it off to a 300-point swing from high to low. It feels like we could lose another several hundred points, but with The Ben Bernanke lurking - we could open Monday and fall 150, Tuesday fall another 100 and on Wednesday The Ben Bernanke could talk about conjuring up a plan to replace The Twist and we would gain 350.

They put in a green day Friday, but it didn't recapture 1400 on the S&P, which isn't a great sign. The indicators suggest a bit more selling, and therefore we have cut our short term trading account down to almost nothing. If they get the S&P back over 1400, chances are good we've seen all the selling we're going to see.

There will be more stimulus, and the market will run higher when it hits. It could run right on up into the election, but I have a sneaking suspicion that right about now is the perfect time for them to toss in the correction. They could let the market fall 8%, and that way when the stimulus hits – the market is free to run.

I'm quite neutral right here and now.

Tips:

I’ll beginning this segment with a quote I heard from a candidate – Mitt Romney. (I’m not a Romney supporter – I just liked the quote ☺ ). Gov. Romney was asked a question at a recent rally: “So you are all about freedom and happiness, well you know what would make me happy – more Free Stuff!” I actually couldn’t believe what I heard. Gov. Romney’s response was: “Hey, if you're looking for more Free Stuff, Vote for the Other Guy".

We’re currently holding:
- ANR – in at 15.88 (currently 16.14) – stop at entry,
- GLD (ETF for Gold) – in at 159.49, (currently 161.31) – no stop, AND
- SLV (ETF for Silver) – in at 28 (currently 31.32) – no stop.

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 - 3-18-12

This Week in Barons: 3-18-12:

Let’s Pull Back the Curtain, and See Who's REALLY in Charge?

I know I sometimes complain about people that call a “Christmas Tree” a “Holiday Tree.” And I complain about the school in the northeast that didn't want to offend anyone with St. Patrick’s Day, so they changed it to Happy Green Day. And while incidents like these drive me crazy, there are real questions brewing as to Who’s Driving our Country’s Ship?

Leon Panetta is our Defense Secretary under Obama. While his background shows he was in charge of the CIA, he really does NOT have a military background. As you know, the Middle East is a powder keg, with the Iran vs Israel tensions – along with all of the religious factions that always seem to be warring with each other. When asked about our possible involvement in Syria, Mr. Panetta said that he'd “go to the UN to seek legal authority for any military strike on Syria, and would come to Congress and inform them.” Now that caused Congress’s jaw to drop (and my own) – as to why Obama would seek the approval of the UN to go into Syria versus the U.S. Congress. When asked that very question, Mr. Panetta didn’t waver and cited a UN agreement document that President Truman signed in 1945, called the United Nations Participation Act. In it, there's language that says the US President doesn't need Congress to get involved in military operations the UN deems allowable or necessary. This stinks! It’s really just like General Smedley said so many years ago, "War is a racket, with untold profits for the right people. Power and money, it's a big time combination and no silly piece of paper is going to stand in the way of either.” Unfortunately, it's no longer “Holiday Trees” and "Happy Green Day", we have escalated to the reality that we’re allowing the governing body of the UN to decide when OUR soldiers are going to war.

So I posed the question: Who's Really in Charge? You may have thought that it was the people who lived in the US, and who would come together to try and make logical decisions. Yet more and more we see the voice of the people simply slammed shut. Appointed officials that were NOT voted in, get to make huge decisions that affect YOUR life. And it’s the little decisions that – when left unchecked – cause a domino effect on the 7 Billion (rest of us). It’s not just 5 guys in a smoky, back room. It’s not just Wall Street or The Fed. I am forever reminded of a line – delivered by Hal Holbrook – from that movie: All The President’s Men: “When in doubt, follow the money!”

The Market:
The market’s going up – what’s the problem? The problem is that it shouldn’t be (but it is) so don’t fight the tape! Our only question is: “How far can it go without a correction?” The market was set-up for a big correction a while back, and they punched it through a resistance level on low volume, effectively setting a new level of support and muting the correction.  Right now we're sort of in "no man’s land". But there’s something brewing out there and it could be nothing – or it could be something indeed.

There is a Greek CDS (Credit Default Swap) auction on Monday. Now, in the past two weeks we have seen the head of Goldman Sachs European derivatives department quit and complain about GS. We have had the head of the CME (Chicago Mercantile Exchange) "retire" and interestingly back away from being a Clearing-House in Europe. Could these moves mean that they see a lot more trouble coming out of this auction than anyone really expects? I don't know, but it's something to consider. Think about it for a moment, we had Greece default – which has cost many tens of billions of dollars and yet the situation is not solved. Now we have the Greek CDS auctions, which although confusing to many are nothing more than "bets" that were made that Greece wouldn't blow up. And now that it has, the underlying paper isn't worth what it was – so they’re going to auction it off to see what it’s really worth. To quote one head of a sovereign CDS trading firm: “The Greek auction will be an experiment because there's never been a default with such a large amount of bonds outstanding, and it's the first time we're going to see open interest to buy or sell bonds of that size."

So my point is simply this, some high level folks that would have been directly involved in this have left. Some people fear something of a domino effect out of this and frankly that "could" happen. There's nothing really to prevent it. Therefore, I have had reason to worry about the latest gains in the stock market because of this. And, it’s not uncommon for the market to "build headroom" so that when bad news hits and the market falls, it doesn't take out major support levels. This could be what we’ve been seeing for the past weeks as we’ve crossed up and over the S&P and DOW resistance levels. Again, I don't know, but I tend to think there is a smoldering fire out there somewhere. Therefore I’m wondering if early next week we’re being set up for a smack down. I'm hoping not because we've been leaning long into this run up and I don't want to give back those profits.

Now what if we get past the auction and everything goes without issue, do we just keep climbing or do we ‘sell the news’? I can see many reasons for the market to slide, and only one for it to continue higher. Unfortunately the "higher" option comes from bogus economic reports, Banksters using Bernanke money to inflate the market, and Obama smiling about how great things are. We have more technical and fundamental reasons to be seeing a falling market. But we have a President who wants to point to a rising market as proof he's doing a good job. That means there is stimulus behind the curtain that we are not even aware of. Honestly, that is a tough war to predict the outcome of!

Please keep your eyes and ears open for news on Monday about the Greek auction, it could be market moving.

Tips:
We’re currently holding:
- ANF – in at 50 (currently 52.47) – stop at entry,
- CTXS – in at 76 (currently 78.20) – stop at entry
- GLD (ETF for Gold) – in at 159.49, (currently 161.05) – no stop, AND
- SLV (ETF for Silver) – in at 28 (currently 3169) – no stop.

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 - 3-11-12

This Week in
Barons: 3-11-12:
It’s Official - Greece Defaults!

The big news on Friday afternoon was that the ISDA declared Greece's bond payment structure a "credit event" which will indeed trigger Credit Default Swaps – which will then trigger (for the first time in a long time) a sovereign nation (Greece) that has finally declared itself in default (basically bankrupt!) Now, (1) How bad is this for the overall global financial picture, and (2) How bad is this concerning our stock market?

Let’s take a step back a minute. The two main reasons for the unification of Europe were: (1) If the nations could stop ‘fighting’ between each other, they would make for a powerful, centralized economic force. And (2) this model could then be used for a "One World Government Model" - that the socialist elites have been dreaming about for decades. But it was doomed from the start. Remember Greece could not get into the EU due to their Debt to GDP ratio. They enlisted the help of the most corrupt and sinister banksters on the planet (Goldman Sachs) – who proceeded to hide transactions, rename loans as assets, and did virtually anything (for a fee) to get Greece into the EU. But what Goldman couldn’t do is change the Club Med attitude of the Greeks, and then explain to the Germans (who out-produce the entire bloc) how both citizen groups get equal benefits from the EU! But Greece joined the EU and then “the big
event” hit – namely the Housing Bubble. The Housing Bubble was not a US invention. Spain, Portugal, Ireland and Greece were seeing housing prices increase by 40% per year. Why – because Central Banks the world over wanted growth. They opened the money spigots and relaxed the rules. Fake ratings and robo signings were not just a US behavior, it was global. So you have a group of countries cobbled together under fraud and corruption, include a global housing bubble, and when that bubble finally met its pin – down goes everything.

Now – how bad is this for the global financial picture. Well, the single best thing that Europe could do is to take the medicine, dissolve the union, go back to sovereign states and let the defaults happen. An example of this is Iceland taking its medicine 3 years ago, putting the crooks-banksters in JAIL, and Iceland just received another credit UPGRADE. But the US won't do that, and Europe certainly won't do that. So watch out for news from Spain, Portugal and Ireland. And with China sending more goods to Europe than the US, the global economy will indeed suffer. With Europe in recession, and its members going belly up, trade will be reduced. FYI, we just saw Brazil lower interest rates to try and keep their economy humming after demand for resources slowed. The world will suffer the effects of austerity. At some point it will become something of a downward spiral. Central Banks the world over will cut rates, and "expand their balance sheets" (print money) which will distort things even more. But as an "overall" it’s worthy to note that the world will be slowing.

And what effect is Greece going to have on our markets? Well, our economy is built on stimulus, fake interest rates, bailouts, and false economic reports. Some US banks will have exposure to the very Credit Default Swaps (CDS's) that the ISDA said must be paid. But even if our US institutions are effected, The Ben Bernanke will simply wink and nod, give the institution money, and give
the CEO a $40 million dollar bonus.

Just know that the market is going up for one reason – there are more buyers than sellers. And when the buyer is your own government with printed money – well that’s (to quote Terry Bradshaw): “Tough to beat!” This is the Obama election market, and if you happen to be a Democrat with a big liking for your socialist king, you’re in luck!

The Market:
We have been flirting with DOW 13K and the S&P 1371 for two weeks. There have been several attempts to get up and over it, but it wouldn't stick. I’ve been looking at a host of indicators from yearly cycles, to turn dates, to stochastics and they are all pointing to a market pull-down. On Tuesday we had a 90% down day causing the DOW to lose some 200+ points. But on Wednesday and Thursday they came in to drive us up some 80 points per day. Friday, despite the Greek news, they held us positive for the close, but the S&P ended at 1370 and the DOW ended at 12,922! Both of these are still slightly below the 1371 and 13k breakout levels. It’s absolutely possible that the Greek news will push the market into the correction we need. FYI - has anyone noticed the tidal wave of insider selling that we are seeing lately? I have a feeling that they will use the Greek default as the "excuse" for the market to backpedal.

But all that said, if the DOW gets over 13K, the S&P gets over 1371 and holds for a few days, chances are good the printing presses are running red hot and we're just going to ignore Greece and continue higher.

Now let’s talk briefly about the Employment Report that came out on Friday. It showed that we gained 227k jobs (vs the 206k that were expected) and the unemployment rate remained at 8.3%! Now, Obama can’t point to housing – so he’s going to try and point to jobs. Factually, if you take out the Birth/Death "adjustment" we only gained 135k jobs. But we remain mired in the longest jobs recession since the Great Depression. It's been 49 months since the US hit peak employment in January 2008. And with nonfarm payrolls still 5.33M below their old high, the jobs slump will continue for several more years. The previous jobs recession record was 47 months, and it came when the unemployment rate had only climbed to 6.3%. The real ‘rub’ comes from the Gallop report that was released. According to Gallup measurements, the unemployment rate rose to 9.1% in February from 8.6% previously (without seasonal adjustments), while
underemployment (combining unemployed with those working part-time but wanting full-time work) rose to 19.1%. Their assessment: "Regardless of what the government reports, (these) measures show a substantial deterioration since mid-January."

Now we all need to realize that in the long run, we're going to have another big stock market crash. It will resemble the crash from the Dot Coms in 2000, and the Housing Bubble crash. This "Printing Bubble" will burst, and when it does it's going to be a doozy – with the DOW ending below 6k. We might see a correction of 5 to 10% due to Greece start this week, but I think this correction will come back and the market will run higher into the election. But sometime between November and March 2013, I expect a long, protracted bear
market to hit that will erase all the gains that we've made. If we get a nice pull down here I’d be a buyer. If we don't (and we just keep
inching up), I'll continue to nibble around the edges and take it as it comes, but you won't find me "holding and hoping".

Tips:
On Friday morning we put out (via Twitter) a couple stocks that I was looking to buy. ANF was at 49.50 and I said that I like it if it could break over 50. I never put out a play that's already “in the area". Each play that I recommend is at a price that it has yet to attain. We entered it into our trading platform, and we automatically purchased shares as it crossed 50. Currently it’s up 1.04 per share. We won’t hold it below the entry price, and we will continue to increase the stops – just in case we get another 200 point down day as we did on Tuesday.

We were shaken out of most of our positions last week mostly due to the 200-point pullback. We kept our stops in place, and therefore captured the gains that we already had.

We’re currently holding:
- ANF – in at 50 (currently 51.04) – stop at entry,
- SLW – in at 34.80 (currently 35.85) – stop at entry,
- GLD (ETF for Gold) – in at 159.49, (currently 166.40) – no stop, AND
- SLV (ETF for Silver) – in at 28 (currently 33.25) – no stop.

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 - 3-3-2012

This Week in Barons: 3-3-12:

I’ve seen the Enemy, and they are us!
One of the few ‘good’ things about a war is that you know who your enemy is. Unfortunately, in today’s economic war zone, we could be our own worst enemy.

“The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, the buck stops here. Instead, Washington is shifting the burden of bad choices today, onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better!” … Senator Barack H. Obama, March 2006

So what happens now? I'd love to sit here and tell you all that the economic numbers you hear are real, and that we're digging out from under this mess, but I cannot. I don’t see anyway we can go back to anything that resembles "normal" unless we change back to the way we were.

Factually:
- AIG could escape paying taxes for as long as a decade because of the way the Treasury unilaterally bent the tax code during AIG's bailout. This rule twisting could deprive the government of tens of billions of dollars while boosting bonuses for AIG employees.
- The use of food stamps rose 0.5% in December, with a record 46.514M Americans now receiving the aid for a total government outlay of $6.22B per month.
- China has sharply cut the share of its foreign reserves held in dollars $3.2T to a decade low of 54% as of June 2011, from 65% in 2010, and 74% in 2006.
- According to Bloomberg: 75% of US equity trades are now done through Dark Pools.
- 28% of all US homes had near-negative equity (or below) in Dec, 2011.
- In housing: Atlanta, Cleveland, Detroit, and Las Vegas all have average home prices that still sit below their 2000 levels.
- In housing: the Case-Shiller indices for the nation, the 20-city composite, and the 10-city composite are all close to their lowest readings ever.
- In housing: during Q4 of 2011, 24% of homes sold in the U.S. were in some stage of foreclosure. The average price of a foreclosure-related sale was 29% below the average price of a non-foreclosure sale. The situation is not expected to improve this year with a backlog of 4M homes in foreclosure.

The enemy of America is not overseas. The enemy of America’s Economic recovery lurks right here inside her borders. To quote Senator Barak Obama: “America has a debt problem and a failure of leadership. Americans deserve better!”


The Market.
The struggle continues. There are those (Obama, The Ben Bernanke, the Bankers) that need this market to go up. And there are those that are scared to death of it and have left the market completely. You see, as the stock market is surging many investors just don't care. Individual investors have pulled $8.3B out of U.S. stock funds YTD, and have placed almost $10.6B into bond funds. “If the individual investors decide to dive back into the market, they have a lot of dry powder to drive the market higher” says S&P's Sam Stovall. “But, it will be difficult for the rally to continue much longer if they don't.”

Greece’s nightmare continues, as this week another 800 European banks lined up to absorb another $650B the ECB gave out – which was naturally given from our very own Fed.

Now, an interesting development this week, was that the Swiss and the Israeli's have decided that the US stock market seems like a great place to park their money. “The Bank of Israel will begin to pilot a program to invest a portion of its foreign currency reserves in U.S. equities. The investment (which in the initial phase will amount to 2 percent of the $77B reserves) will be made through UBS AG and BlackRock Inc.”, said Yossi Saadon a Bank of Israel spokesman. “At a later stage, the investment is expected to increase to 10 percent of the reserves.” In Switzerland, (at the end Q3, 2011) a number of central banks have started investing about 9 percent of their foreign-exchange reserves in US Equities. “The investment will be made in equity index trackers, and among stocks like Apple.” Really, we are so desperate to keep this market rally going, that we are allowing other nations to buy stock on our exchange. Now, if these nations lose money – does our Fed guarantee them against losses as well?

Every day the market hovers near breakout levels, desperate to get over S&P 1371, and DOW 13,000. My issue comes with the numbers that are coming out of this administration. Just this week the manufacturing numbers show that we built more ‘stuff’ than in either the Internet boom (1999 - 2000) or in the Credit Boom (2003 – 2007). Can someone please pull my finger? I'm torn over that. See, if you print another $15T and hand it to Goldman Sachs and J.P. Morgan - there's no doubt they can purchase enough stock to get us to DOW 20K. But expecting me to believe that we are manufacturing more stuff than in the two previous boom periods – please?

Here’s a video:
http://www.youtube.com/watch?v=BQZbOY5Q3ZU&feature=player_embedded
of a very proper gentlemen that is attempting to describe that he’s found $15T that no one can account for. Maybe this is the babbling of a deranged man. But begin to combine this with a few months ago the $6T in ‘fake’ US bonds that were seized in Switzerland. There are obviously some very strange things going on in the world as the US, UK, and Europe go through their death throes. Yet the market continues to hold up.

I see a lot of technical indications telling me that we're on the cusp of a correction, but (unfortunately) no technical chart can tell me what happens if by a wink and a nod, the Fed gives banks free money to put into index funds.

We've been leaning long, and it has been working, but it has been scary. Things feel fake and strained. There's no volume and the "Dark Pool" trading that Bloomberg reported on, is fast and furious. I've said for ten days now that we have to hurdle 1371 on the S&P and hold it for a few days to confirm a breakout. The market has not been able to do that. And, I said that this is the perfect time for a correction if one's about to hit. Yet each day we just "sit here" moving up and down around that level.

The Russell 2000 looks like it's in the first stages of rolling over. It was 83.30 just the other day, and Friday it got a bounce to save itself just above 80.00. If it loses 80, it could be the anchor that finally pulls the S&P and DOW into correction territory. Add remember, the Ben Bernanke did NOT talk of any more QE, therefore the index's are struggling, and the small caps are starting to fade. If the fade is going to happen, it's going to happen soon. On the other hand of course, if they magically find some wink money and some fake news reports - we could soar.

This Friday is this month’s Non-Farm Payroll report. Everyone expects that it's going to be less than last months "stellar" report, but if it’s really bad, that could be the straw that breaks the camel’s back and drives this market down.

Tips:
We sold some of our positions last week mostly due to our belief of not holding any stocks over their earnings announcement(s). We continue to keep our stops tight. On the dip, we did purchase additional GLD, and SLV last week as well.

We’re currently holding:
- SNDK SanDisk – in at 49.17 (currently 50.91) – stop at entry,
- NE Noble Energy – in at 40.02 (currently 40.31) – stop at 39.50,
- MUR Murphy Oil Co – in at 62.00 (currently 62.26) – stop at entry
- BHP BHP Billiton – in at 75.85 (currently 75.93) – stop at entry,
- ADBE Adobe Corp – in at 30.00 (currently 33.730) – stop at 32.50,
- SPY (ETF for S&P) – in at 131.16 (currently 137.37) – stop at 135.50,
- GLD (ETF for Gold) – in at 159.49, (currently 165.90) – no stop, AND
- SLV (ETF for Silver) – in at 28 (currently 33.65) – no stop.

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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R.F. Culbertson