RF's Financial News

RF's Financial News

Sunday, May 27, 2012

This Week in Barrons - 5-27-2012

This Week in Barrons – 5-27-2012 Happy Memorial Day? Memorial Day is the day we have chosen to remember those who have fallen. It was formerly Decoration Day, as it originated after the American Civil War to commemorate the fallen Union soldiers of the Civil War. By the turn of the century, Memorial Day had been extended to honor all Americans who have died in all wars. I have always had a soft spot for Memorial Day as my father and father-in-law were WWII veterans, who have seen their share of horrors. I guess I could follow the usual plot and talk about patriotism, love it or leave it, and all the normal adages applied to the day, but I'm not going to do that. Today we are engaged in many wars, most of them undeclared. They are not wars between countries or dictators, but rather for your freedoms, your property, and your way of life. All while I was watching the movie “Hunger Games” I was thinking: I wonder how many people know about “Agenda 21?” Agenda 21 is a comprehensive plan of action to be taken globally, nationally and locally by organizations of the United Nations System, Governments, and Major Groups in every area in which humans impact the environment. More than 178 Governments at the United Nations Conference in June of 1992 adopted Agenda 21. Agenda 21 says we should live in cities like compounds, and all rural areas should be returned to nature. Agenda 21 says that you have no rights to personal property because it belongs to everyone. Agenda 21 wants "biospheres" all around the country where you may NOT trespass. Combine that with the fact that the U.S. is currently building the biggest data center the earth has ever seen. The National Security Agency will use it to watch for "terror". The Utah Data Center’s purpose is to intercept, decipher, analyze, and store vast swaths of the world's communications. Flowing through its servers will be all forms of communication, including the complete contents of private emails, cell phone calls, Google searches, as well as personal data trails on parking receipts, travel itineraries, bookstore purchases, and other digital "pocket litter." It is, in some measure, the realization of the "Total Information Awareness" program created during the first term of the Bush administration – an effort that was killed by Congress in 2003 after it caused an outcry over its potential for invading Americans' privacy. On this weekend we are celebrating the fine folks that fought to give us freedoms. Yet I worry that in the past 20 years we have lost many of them. Yes it's Memorial Day and my thoughts will be with those who've served, but a nagging presence in my head tells me that the freedoms they fought for are all turning to smoke and mirrors. The Market... The old adage of "Sell in May and go away" is in full effect, but for a much bigger reason. With Greece about to exit the Euro, With a noticeable slowdown in China, with the UK as broke as the PIIGS nations, and with the US loaded with so much debt it's impossible to ever repay it – sometimes the reality of it all rises to the surface like an oil slick. The reality is – without the ever-increasing printing of fake dollars, the Euro cannot survive, and the US economy can not expand. In June, three upcoming events must be monitored closely: the Greek elections, the next Fed meeting, and a Supreme Court ruling on President Obama’s health care law. Although we can’t predict the outcomes, the decisions could add to or ease anxiety in the financial markets, and the economy. The Greek elections are on June 17th, and ordinarily, what happens in Greece has little impact on the US. The Greek economy accounts for less than 3% of euro-area economies and an even smaller percentage of the US economy. Yet, on June 17, Greece will vote on its future in the euro area and the ramifications could be global. SB points out – that even if Greece elects a government that will keep the country in the euro, the situation won’t be resolved. However, it would provide the new government with the public support to meet its previously agreed to fiscal targets, and the ability to negotiate less stringent terms and some financial support for growth-oriented measures. This would, at least, reduce the downside risk to other economies in Europe and across the globe. Secondly, the Federal Open Market Committee (FOMC) meeting (scheduled for June 19 and 20) is expected to address major monetary policy issues. Policymakers must decide whether to end the Fed’s “Operation Twist” program, which was launched in September 2011 to extend the average maturity of its portfolio securities. The Fed may also consider starting another round of quantitative easing (QE3), via a further expansion of its balance sheet. Finally, by the end of its current session in late June, the Supreme Court is scheduled to rule on the constitutionality of the Patient Protection and Affordable Care Act – which was signed into law by President Obama in 2010. The law requires all people to have minimal healthcare coverage in what is known as the “individual mandate”, and penalizes people who aren’t insured. The law also includes several tax law changes – affecting those earning over $200,000 per year. Honestly, Obama’s healthcare law is widely seen as the administration’s biggest domestic legislative achievement over the past four years. A ruling in its favor would augment President Obama’s credibility and could add momentum to the administration’s ability to tackle fiscal issues. On the other hand, if the individual mandate is ruled unconstitutional, the pendulum may swing toward other approaches to healthcare reform and provide momentum to opponents seeking to address future fiscal deficits by scaling back the size of government. In our view, financial markets are often driven more by the direction of change than by actual legislation or resolution of a problem. In this respect, a Greek vote to stay in the euro could be a positive catalyst for the US economy, even though the outlook for Greece and the European economy would not materially change. A “No” vote would deal a huge blow to the European economy and the impact on the US economy and financial markets would be substantial. On the Supreme Court healthcare decision, the markets will be guided by the ruling, as it could set the stage for the framing of future legislation on deficit reduction that will undoubtedly take place after the November elections. I went on record a few weeks back saying that the market was about to do a sideways and down slide. My reason wasn't because it was "May", my reason was simply that “Operation Twist” would expire in June. If they stop that form of QE, then there's a chance rates will increase, and the Fed's beloved member banks cannot afford that – nor can the economy, which can't sell houses at 3.8% let alone 6%. So, I figured the market would sag until they came out and declared some form of new stimulus. So far that hasn't happened. They have hinted that "additional accommodation" may be necessary, but for now they are holding the line on no new QE. I could have this all wrong, and The Fed does nothing. But for The Fed to do nothing would be an almost explicit statement that they "want" the world to crash. Hey, maybe they do? Maybe that's part of the UN’s Agenda 21 as well? In any event, the market is (once again) highly oversold. I haven't seen any horrible news come across the wires from Europe, so if we get past Monday with no significant nightmares, there is a good chance we see the market bounce into month end and into June. But if we do bounce, I suggest it is nothing more than a “dead cat bounce”, and we'll slide sideways and down again. The market needs The Ben Bernanke to print. If and when he comes out with his new plan, then the market will stage a very powerful rally, taking us right back to the old highs. Until then, it's hard to imagine. Tips: We continued picking betting on minors as well as a new recommendation from DS – Synacor (SYNC). Currently I’m holding: - GDXJ at 19.50 (currently 20.03) – stop at entry - GDX at 41.72 (currently 44.96) – stop at entry - EXK at 7.96 (currently 8.95) – stop at entry - SYNC at 10.18 (currently 11.12) – stop at entry - GLD (ETF for Gold) – in at 158.28, (currently 153.18) – no stop, AND - SLV (ETF for Silver) – in at 28.3 (currently 27.69) – 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

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