This
Week in Barrons – 10-21-2012
“Many times the Questions are Complicated – the Answers are Simple.”
... Dr. Seuss
On
Monday night, there will be the last Presidential debate. But like all of these debates, the questions
will be hand picked soft balls. Just
once I’d like to hear someone in the audience stand up and ask the tough –
‘complicated’ questions:
1.
"Mr. President, with almost 11 million people living in
their homes without paying the mortgage and/or taxes – tell me why your
administration changed the banking regulations concerning foreclosures and bank
accounting, so that people could live in their homes – not paying their
mortgage – but rather purchase cars and iPads?”
2.
OR – “Mr. President, previous to your administration – when a
mortgage went 3 months late, a bank would start foreclosure proceedings because
the bank had to take the entire loan
value as a loss. Banks would then move
quickly to get that house back on the market, repackaged and sold – so as to
remove the loss from their books. Why
did your administration change the banking rules so that banks now only have to
count the missed payments as a loss,
and not the entire value?”
3.
OR – “Mr. President, your administration lowered the rules to
make it easier for people to be granted permanent disability. And last month, more people were granted
disability than actually got jobs? Is it
true that in order to reduce the unemployment rate, your administration no
longer counts the people on disability as unemployed?
4.
OR – “Mr. President, you stated in your last campaign that
you would "Fundamentally Change"
America. Did you mean change it from a
nation of rugged individuals, competing for the top, and being rewarded for it’s
efforts – into a European Union?"
5.
OR – “Mr. President, during your first term you have chosen
to concentrate your efforts on Obama-care (giving a majority of the people
something that they did not want) – rather than fixing the jobs and economic
problems in the middle class. Aren’t you
elected to give the people what THEY want?”
6.
OR – “Mr President, when you took office gasoline was less
than half of what it costs now. Yet
while your green companies are going bankrupt and costing us billions, you
continue to beat up on our proven methods of energy production such as coal, and
oil. Will you ever change your mind and
realize that if we cut the red tape we could again get gasoline down to a buck
a gallon, saving billions for the American people?"
In
my view, the economy (in the upcoming months) is going to go through a rough
patch. If Obama wins, our economy will
crash outright. If Romney wins, it will
contract to very unhealthy levels.
Therefore, I don’t think that there is anything either candidate can
truly do about our short-term economic outlook.
But I do believe that capitalism, entrepreneurship and significantly
less regulations will get us out of the coming recession/depression
faster. To quote Jack Welch: “If you can’t be right, at least be quick.”
The
Market:
Sometimes
I make predictions that come true. One
thing I mentioned a while back was: “Companies
have cut their staff to they bone, and accounted their books into fantasyland;
I’m wondering at what point do lower revenues equate to little or no
profits?” Well – the answer is
now. We’re in the middle of a war
between The Ben Bernanke's QE dollars,
and horrible earnings. We have seen some
our largest corporations miss earnings: Microsoft,
Google, IBM, McDonalds, GE, Federal Express, UPS, and Intel – to name a few. The
globe is racing toward a depression. Currently The Ben Bernanke is pushing about $80
billion a month to the banks in “Operation Twist” and "QE3". I’m wondering when the big buyers of stocks
(the BlackRocks, T. Row Prices, mutual funds, etc.) stop buying stocks because
they will view them as being over-priced, and having falling profits?
Right now every single investor is scratching their
head (confused) because Wall Street has taught them that the market goes up due
to strong fundamentals, increased profits, and growth. Investors are now seeing companies that have
gone higher and higher – tell us that they have no growth, no increased profits
and no strong fundamentals. Does every
individual investor sell? Well, individual
investors have removed $470B from mutual funds thus far. So how is the market within 220 points of a
4-year high – with so much money coming out of the market? The answer is Benji Bucks.
In the past if IBM and Google would have missed
earnings by as much as they did – we would be down a thousand or more DOW
points – not the couple hundred we saw on Friday. Could this snowball – absolutely – but what
we’re seeing is that with $80B coming IN
from The Ben Bernanke – is enough to temporarily offset the $470B (in total)
that is going OUT by investors.
I thought we would see horrible earnings and we
are. I still feel that Benji Bucks will support the market, and (at
some point) cause buyers to ignore earnings and warnings and move the market higher.
I also think that at some point next
year we are going to enter a monster bear market. It will be so powerful, that The Ben Bernanke
will have to pump close to $200B a month to stave off a depression. This experiment has never been tried before,
so nobody knows how this book will end.
On
Friday we closed the day below the 50-day moving average on the DOW. That is a problem in the short-term. I’m honestly surprised that the market didn’t
rally and bring us back over that level for Friday’s close. That is a
significant change from the last couple of times we dipped below the DOW 50-day
moving average. But the S&P 50-day
moving average is considerably more important, and it has held it’s 1,427
support level, as we closed at 1,433 on Friday. In a nutshell:
-
I am cautious investor with the DOW under 13,600.
-
If we close a couple days over DOW 13,6000 I would get very bullish.
-
If the S&P drops below the 1,427 level, I would get very
bearish.
Tips:
Thanks
to DS for this: The biggest upside
catalyst for gold is a massive re-evaluation by the Basel Committee of Bank
Supervision (BCBS). The BCBS sets the
international rules for banks. Currently
gold is rated as a Tier 3 asset. This
means banks can only carry 50% of its market value as capital. This could change in a few short months as it
is rumored that the Basel Committee is planning on turning gold into a Tier 1
asset so that it can be carried at 100% of its value. The more Tier 1 assets
that a bank has, the more money it can lend.
What nations would this impact, well let’s see who’s carrying the most
in gold reserves:
-
USA = Gold reserves: 8,133.5 tons
-
Germany = Gold reserves: 3,395.5 tons
-
Italy = Gold reserves: 2,451.8 tons
-
France = Gold reserves: 2,435.4 tons
-
China = Gold reserves: 1,054.1 tons
-
Switzerland = Gold reserves: 1,040.1 tons
-
Russia = Gold reserves: 936.7 tons
-
Japan = Gold reserves: 765.2 tons
-
Netherlands = Gold reserves: 612.5 tons
-
India = Gold reserves: 557.7 tons
Hmmmm
– imagine that!
This
week I purchased some: TCK, RIG, CLF, WYNN, and DE. I stopped out of: FDX for a $2 gain, DE for a $2 gain, and WYNN
for a $4 gain. I am still holding the
Silver stocks – breaking my discipline – as a hedge against inflation and our
currency. I temporarily removed my stops
on TCK, CLF and BRCM because the last 90 minutes of trading on Friday were
horrific!
My
current short-term holds are:
- TCK at 32.22 (currently
31.63) – no stop just yet
- RIG at 48.00 (currently
48.52) – stop at entry
- CLF at 44.66 (currently
44.10) – no stop just yet
-
BRCM at 33.52 (currently 33.34) – no stop just yet
-
SIL – in at 24.51 (currently 24.47) – no stop just yet
-
SLW – in at 38.50 (currently 39.02) – no stop just yet
-
GLD (ETF for Gold) – in at 158.28, (currently 166.67) – no
stop ($1,722.80 per physical ounce), AND
-
SLV (ETF for Silver) – in at 28.3 (currently 31.00) – no stop
($32.07 per physical ounce).
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: <http://rfcfinancialnews.blogspot.com>
.
Please write to <rfc@getabby.com> 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: http://www.youtube.com/watch?v=K2Z9I_6ciH0
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: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.
R.F. Culbertson
No comments:
Post a Comment