This Week in Barrons - 1-13-13

This Week in Barrons – 1-13-2013

Gun Wars

The President has selected Joe Biden to form a task force charged with doing something substantial about gun violence in this country.  That has spawned vocal discourse from everyone including: Piers Morgan calling us lunatics for not outlawing guns, to a recent Marine writing to Maxine Waters: "I will not be disarmed".  I am afraid that this could really blossom into something ugly.  The lines are being drawn in the sand.  I personally know of folks that haven't so much as broken a speed limit, yet they will lie under oath if someone asks if they have firearms in the home.  That is how dramatic this situation has become.

In terms of Constitutional rights, in many scholarly opinions – the 2^nd Amendment of the Constitution has nothing to do with hunting rifles, or being able to defend your home.  It is written to allow a populace to defend themselves against a Government run amok.  The scholars then connect the dots and say this gives the American people the right to be armed as well as your Government’s troops.  The argument then goes: “Let’s not get carried away, how about just allowing the American people to be armed as well as the drug cartels.”  And the end result of both of these arguments is that automatic, assault rifles like the AR-15 and 30 round magazine clip should be available for purchase by John Q. Public.

One item that everyone brings up is that there is too much violence, and if we got rid of assault rifles the violence would go away.  Factually, according to the FBI in 2011 there were:

-       1,694 murders by ‘cutting instruments’ such as knives,

-       1,659 murders by ‘blunt objects’ such as clubs and hammers,

-       728 murders by ‘personal weapons’ such as fists, hands and feet, and

-       323 murders by ‘rifles’ (including automatic, assault, etc.). 

BUT, in 2011 there were 6,220 murders committed by hand guns!  Ouch.

I think it’s the hypocrisy that bothers me more than anything else.  The politicians pushing for gun control all have either gun permits to carry, or armed guards for their family.  I was watching NBC’s Meet the Press (hosted by David Gregory) interviewing the President of the NRA (disparaging guns, and how people don't need them), yet in a discourse we find that David sends his children to a school that’s guarded daily by a dozen armed guards. 

Many of us look to other countries and notice that they have much stricter gun control laws and their violent crime rates are much lower than ours.  Unfortunately, no country on earth has had a history of gun ownership like the US.  England as early as the 30's was banning as many guns as possible, while the U.S. was encouraging gun ownership.  Back in 1996, after a horrible mass shooting, the Australian Government decided to do one of the biggest "forced buy backs" of all time.  Rifles, shotguns, handguns of all shapes and sizes were to be turned into the police for a "fair price".  There were 681,000 guns turned in – about as many as are registered in Newark, NJ alone.  The magnitude of the U.S. problem is almost a factor of 1,000 higher.  Estimates are that a program like the Australian ‘forced buy back’ (if declared in the U.S.), would draw in approximately 50 Million guns.  That would leave approximately 250 Million still in circulation.  At this point it’s truly the magnitude of the problem that is tough to get anyone’s arms around.   

We (the U.S.) have a 200+ year history of gun ownership, and over 300 million guns in circulation.  So (on average) there are as many guns in circulation as there are people.  Some of these guns are in the hands of lunatic psychopaths, and many in the hands of local gangs and drug dealers.  Unfortunately I don’t see a way to legislate this into anything more than: (a) increasing background checks, and (b) closing the current purchasing loopholes that exist with gun shows.   

 
You can't legislate morality, so politicians go for the symptoms like guns for the dramatic effect.  Transforming America is going to take a lot more time and a change in mind-set, and potentially will not go well for a lot of traditional Americans.

The Market....

So far, the market is doing what I figured it would do – slowly, creeping up to challenge the recent "highs".

The S&P has already gotten over the 1470 level and has its eyes set on 1475. The DOW is just 140 points from challenging the triple top high at the 13,600 level.  My suspicion for months has been that if we got a fiscal cliff deal, we'd be challenging these highs.  Well, we got a form of a deal, and sure enough we're challenging the highs.

I had purchased some SPY contracts several weeks back in anticipation of this very move.  I got in at the 141 level, and saw the SPY close out Friday at 147 and change.  That's an impressive move for a basket of stocks in a matter of weeks, but I’m thinking that there is more to come.  Again, I’m looking for the S&P to challenge 1475 and the DOW to challenge 13,640.  I tend to think that the first attempt at going over these levels gets pushed back, and we see a 2 or 3 % pull back before they quickly try again.  But yes, at some point I feel we break free and run to challenge the all time highs.

So, the feeling here has been "lean long" and take some profits along the way. This past week we sold our stakes in: Goldman Sachs (in at 128 – out at 136),  and RGR, SWHC, NTFX, LNKD, CLF, AUY all for nice profits.  We even dove in and out of TRIP (during the week) for a nice profit as well.  FYI - my yardstick is 8%.  Meaning, that if you can make 8% on a trade, I often cash in half and leave the remaining half in play.

The chart below shows our deficits far outpacing our revenues.  Fair warning, this is setting up for one heck of a fight in Congress over Fiscal Cliff Part 2.

In any event, I’m still remaining confident.  I’m currently carrying some HD, MS, (see below) and I think there is a bit more upside to this market before the resistances start to show some force.  That said, I will not be afraid to take profits and then reload on any pushdown.

Tips:

My current short-term holds are:

-       HD – in at 61.53 (currently 63.62) – stop at 61.60

-       MS in at 18.50 (currently 20.12) – stop at 19.00

-       SPY in at 141.97 (currently 147.10) – stop at 143.00

-       SIL – in at 24.51 (currently 22.41) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 160.80) – no stop ($1,660.00 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 29.45) – no stop ($30.37 per physical ounce).

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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