Sunday, April 29, 2012
This Week in Barrons – 4-29-2012 Banc of Obama? So what’s changed? As I look up from the cheap seats, I see a landscape that includes a racial issue in Florida, an economy in trouble, a jobs and housing situation that isn’t moving in the right direction – and then elements like this: - The Department of Labor is poised to put the finishing touches on a rule that would apply child-labor laws to children working on family farms, prohibiting them from performing a list of jobs on their own family’s land. Under the rules, children under 18 could no longer work "in the storing, marketing and transporting of farm product raw materials." Can anyone really tell me what good comes out of this? Farms lose a worker, kids lose the ability to learn responsibility – and all we’re doing is extending the "big brother nanny state". Given we produce more food per acre than anywhere on the planet, did that happen as a result of rules like this? - In New York, the major banquet halls that host fantastic weddings, and bah mitzvahs and conferences often end up with tons of food that they were giving it to the homeless. Recently the mayor swept in with his food Nazi's and put a halt to that under the guise of what if someone got sick? So now the homeless are only allowed to get state approved food from state approved food banks, and the leftover food goes to garbage dumps. - President Obama recently said: "America's source of economic strength has been her historical embrace of collective action, wealth redistribution, and government policies that have protected workers from the ravages of the wealthy. Prosperity grows outward from the middle class, it never trickles down from the success of the wealthy." Really? This is the class warfare mongering that I find it detestable. America was built on a lot of things, but redistributing wealth is not one of them. Telling poorer folks that their situation is all because the "evil rich man" put them there is disgusting. The unfortunate part for the President is that wealth must first be produced before it can be redistributed. Redistribution always creates disincentives that result in less wealth being created, and ALL the societies that have attempted to create wealth through redistribution have failed miserably. When you send out hundreds of thousands of newsletters, you can bet you get a good amount of "feedback". One of the most common themes I continue to get is: "I've lost the America I knew and loved". I'm awfully concerned. The Market: All we needed was a wink and a nod from Bernanke and the next thing you know we are about to threaten the near term highs. As soon as The Ben Bernanke said he had all manner of tools at his disposal to make sure the economy doesn't fail, the market started going UP. Of course it shouldn't be going up and one day it’s going to come down very hard, but until it does, we have “The Bernanke Put". We are fast approaching another one of those "could be" days. Back on April 4th the S&P topped out at 1,422, the DOW hit 13,297 (which was it's second attempt to bust over 13,300), and then the bottom fell out with both indexes pulling down very hard. With the DOW at 13,133, and the S&P at 1,403 – are we going to be challenging those levels again soon? If we get up and over those two highs, then it's pretty much blue sky ahead and we could be in for quite a bullish treat. But there are a lot of issues here. Everyone with a functioning brain cell knows it's “The Ben Bernanke’s Bucks” doing the work. Yes he said he's willing to continue pumping in the bucks and frankly he has no choice. But each day: - The volume on the NYSE sags. - We see more and more companies doing buy backs to boost their share prices higher. - And we hear of more and more people extracting money from their mutual funds. Then we have Apple (AAPL), after shedding a ton of points, they did great on earnings and jumped over $50 in a day. But now Apple is fading as the market is going higher. When the single most successful stock on the board can't continue up with the rest of the market, you need to be wary. In other words, this market rally is really thin. It's being pushed and prodded higher, but when you look at a chart, it's a sideways mess of a chop. While I think it's possible we challenge the upper end again, I'm not so sure we're going to get past it. In fact, I feel like a bit of a sideways slide is in order for at least the beginning of the week. One of the key things we watch is the XLF - which is the Exchange Traded Fund (ETF) for the financials. If it can clear $16.00, we are going to speed higher, but if it breaks under $14.90 we're on our way lower in a hurry. Currently it is in the middle, ending Friday at $15.50. Why is the XLF so special? Well, the way The Ben Bernanke has this market rigged, each day – the participating banks get billions of dollars to do their "Operation Twist" buying and selling. These participating banks get a very large commission for doing this, and they use these commissions to buy up stocks in other banks first, then in the broader market second. So, as long as the "financials" are still holding up, you have to consider the trend as stable. When the biggest of the big boys either push the financials significantly higher, or pull out and they fall – that’s really the key for knowing where you should be (long or short). Again, with the XLF in the middle – we personally haven't gone to cash, but we haven't loaded the boat in our trading accounts either. Slow and steady is the game right now. I think on Monday, they will "try" to get us going, but it will sputter out we will be left digesting last week’s big gains. But eventually, The Ben Bernanke has no choice but to announce his latest gimmick that will replace “Operation Twist” when it runs it's course in June. When that happens we will rally from that day into the election; however, between now and ‘that day’ – be on guard. Another major situation is coming to pass in June. Because of the sanctions barring Iran from using the SWIFT system to settle their oil sales, India has agreed to buy Iranian oil in Gold. Now, that is pretty big news in and of itself, because we are seeing more and more countries looking to use anything but the depreciating US dollar. But wait – because of more sanctions imposed by the NDAA back in December, it seems that China will not be "allowed" to buy Iranian oil in conventional "yuan to dollar" terms starting in June. Now China has accumulated hundreds of billions of US dollars, and they have Gold. If they are forced to buy Iranian oil in Gold, they are going to go all out to dispose of dollars and buy up more Gold. This could a catalyst that jumpstarts the next leg higher in gold and pushes it over $2,000 an ounce. So, June is becoming a pivotal month on a lot of fronts! Tips: Currently, I’m really sitting in very little other than my old stand-buys of Gold and Silver: - EROC at 9.43 (currently = 9.42) stop at 9.22 - TJX at 42.01 (currently = 42.48) stop at 41.40 - AXP at 59.09 (currently = 60.17) stop at entry - HD in at 50 (currently = 51.92) – stop at 51 - GLD (ETF for Gold) – in at 158.28, (currently 161.63) – no stop, AND - SLV (ETF for Silver) – in at 28.3 (currently 30.36) – 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.