This Week in Barrons – 4-7-2013
“It’s
just a Job.”… Muhammad Ali
I
remember when Muhammad Ali said: “It’s just a job. Grass grows, birds fly, waves pound the
sand. I beat people up.” Well, on Friday we received the monthly JOBS
report, and everyone was expecting that our economy had created 200,000 jobs in
the month of March. When the number turned
out to be 88,000 – everyone was shocked.
But wait – it gets worse – the real number was ‘negative.’ You see the Bureau of Labor and Statistics
(BLS) has a “Birth/Death’ model, which (in it’s basic form) says that for every
‘X’ amount of people that lose their job, some lesser amount go out and open
their own business and hire. There are
no tax returns, receipts, forms or real proof of this – just empirical guessing. In March they said that the ‘Birth/Death’
model created 92k jobs. So, if we take
away the ‘Birth/Death’ numbers (92k) from our 88K job creation number – our real
job creation for March was actually a negative 4,000 jobs. [For those who may wish to follow this number
– go to: www.bls.gov - and in the top right
there's a search box – type in ‘birth death’ – it will deliver you a page of
links – go to the first one that says ‘CES Net Birth/Death Model’ – and that
will give you the ‘birth/death’ adjustments.]
The
report also revealed that 663,000 people had dropped out of the workforce in
March, bringing the total to 90 Million Americans who are no longer even
looking for work. This was the biggest
monthly increase in people dropping out of the labor force since January 2012. Adding insult to injury, the labor force participation
rate plunged to 63.3% - its lowest level since 1979. Therefore, the jobs report wasn't just poor;
it wasn't just a hiccup; it is a horror show, and a continuing nightmare. Oh – least I forget – the permanent disability
roles soared to record highs as we added another 83,000 last month. This brings U6 unemployment to slightly over
14%.
Moving
on, I have told you (on occasion) that Obama and his henchmen are drooling over
your IRA and 401K accounts. They want
them and are going to find a way to get them.
President Obama's budget (to be
released next week), will ask Congress to limit how much wealthy individuals
can keep in IRA’s and other retirement accounts. A senior official said that the proposal would save the government over $9B
over a decade, while also bringing more fairness to the tax code. This official continued: “Wealthy taxpayers can currently accumulate
many millions of dollars in these accounts, substantially more than is needed
to fund reasonable levels of retirement saving.
Under the plan, a taxpayer's tax-preferred retirement account, like an
IRA, could not finance more than $205,000 per year of retirement.” So the plan is to limit how much we
can all put away for our retirement. Really? So if you currently spend $240k a year in
your retirement, the new plan won’t allow you to have that much in an IRA. The thinking will start off by going after the
rich, but it will be a very short time before the dollar amount line gets
redrawn on what is acceptable for retirement. It’s all sounding a little bit like Cyprus to
me.
Many
of you have written about gold and silver, and let me address those two
precious metals in particular. I always
start by asking: Are the things that pushed gold to $1,900/ounce, and Silver to
almost $50/ounce, still valid? Gold and
Silver basically just "sit there", and keep your wealth safe. For example:
in 1920 you could buy a nicely made suit for an ounce of gold, and the
same is true today. Let’s examine a
couple headlines because I think the same things that impacted us then – impact
us now:
-
(Reuters) N. Korea is both volatile and dangerous. Hagel cites growing threat from nukes. The standoff with South Korea escalates as
North shuts border. China voices serious
concern.
-
(NY Times) Oil tanker operator Frontline (FRO) says it is rejecting some
cargoes as excess vessel supply continues to drive down charter rates. Rates for the industry’s biggest ships have
plunged 75% year over year. In fact an
average run today from Saudi Arabia to Japan looses $3,012/day.
-
(NY Times) Sub-Prime lending has returned to the auto business with a passion. In 2012 (according to Standard & Poor’s),
lenders sold $18.5 billion in securities backed by subprime auto loans, compared
with $11.75 billion in 2011. The pace
has continued so far this year according to Deutsche Bank AG.
-
(Reuters) The Obama administration is engaged in a broad push to make
more home loans available to people with weaker credit. This is an effort that officials say will
help power the economic recovery, but skeptics say could open the door to the
risky lending practices that caused the housing crash in the first place.
-
(CNNMoney.com) November 26, 2008 -- Gasoline prices
declined for the 70th straight day, falling below the $1.87 per gallon mark,
according to a national survey of credit card swipes at gasoline stations $1.87? In 2013 I'm paying $3.89 here in Pittsburgh. That's an increase of 108% in 5 years!
(Reuters) Thanks
largely to the U.S. Federal Reserve; Jeffrey Nelson was able to put up a
shotgun as down payment on a car. Money
was tight last year for the school-bus driver and neighborhood constable in
Jasper, Alabama, a town of 14,000 people. One of his cars had already been repossessed,
and medical bills were piling up. And
though Nelson's credit history was an unhappy one, local car dealer Maloy
Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Sub-Prime
lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray
2007 Suzuki Grand Vitara. All the
Nelsons had to do was to cover the $1,000 down payment. For most of that amount, Maloy accepted
Jeffrey's 12-gauge Mossberg & Sons shotgun, valued at about $700. In the ensuing months, Nelson and his wife
divorced, he moved into a mobile home, and (unable to cover mounting debts) he
filed for personal bankruptcy. His
ex-wife, who assumed responsibility for the $324-a-month car payment, said that
she would probably file for bankruptcy in a couple of months. When they got the Exeter loan, Jeffrey, 44
years old, was happy "someone took a chance on us." Now, he sees it as a contributor to his
financial downfall.
Okay,
so if we all agree that the main reasons for the gold and silver rise are still
in effect, why on earth are gold and silver not increasing in value? The banksters know the "real deal",
and all across the world central banks are buying up gold. China has been very active, and judging by the
way the BRIC countries just shrugged off using the dollar for trade between
them, the days of the US dollar being the world reserve currency are indeed limited.
So at the central bank level, they are
in gold and silver accumulation mode. But
if they are buying gold, why would they send their minions out to mock it, disrespect
it and push its price down?
-
#1 – With the price lower, they can buy more. But that’s the ‘easy reason’ to figure out.
-
#2 – Gold has always been the safe haven and inflation
fighter. It definitely doesn’t look good
when you're bailing out Cyprus by stealing customer deposits if gold and silver
are soaring. Don't forget the reason
they're pushing the stock market higher is "perception of wealth". People see the markets rise and
"think" that the economy is doing well. If they can get people thinking that "if
" things were really bad gold would have gone higher, they have won the
psychological game.
-
#3 – Over the past few years, to keep the gold price from
increasing, the very central bankers that have been accumulating gold, have
also been ‘leasing’ the gold to the bullion banks that sell it into the various
markets. As we look around the globe we
see that no less than ALL of the recognized Central banks have forward leased
between 25 and 35% of their gold. They
“lease it” / “rent it” to bullion banks. Because it's not sold, they get to keep it on
the balance sheets despite it physically not being there. So the bullion banks rent it from the Central
banks, and they in turn SELL it in order to meet demand. Because most buyers do NOT take physical
delivery of the asset(s), this leveraging effect keeps the price down on the
gold and silver itself.
Now
you may ask the question: "If the
central banks have rented it out, and the bullion banks have sold it into the
market, isn't keeping the gold on the balance sheet as an asset a Ponzi
scheme?" Yes – it is. As long as there's no tremendous rush by any
one Central Bank to get their "leased" gold back, then it goes on and
on. But what happens if the Central bank
of Venezuela says "I want our gold back." Uh Oh. Now there's a problem. Because some portion of
that reserve currency gold has been leased out. Now the calls have to go out to the bullion
bank "get the gold back". Well
they can't just "get it back" – they need to take the next round of
leased gold from some other country and satisfy the Venezuelans demands for the
physical metal. Okay, problem averted. But what happens when Germany demands their
gold to come home? And Switzerland? And New Zealand? The result (thus far) is that Germany has
allowed the world 7 years to deliver it – because the gold isn't there. And if Germany said: "No, we want it now."
Gold would soar to $2,500 overnight.
The
way gold is dealt with by the Central bank is basically the same as any
fractional banking. They only keep a
"fraction" of the deposit on hand the rest is loaned out. All is fine until everyone wants their gold
back at the same time. I tend to think
that every day we get closer and closer to a gold panic. Right now, the Central bankers are being
"gentlemanly" with each other and giving ample time for the bullion
banks to get their act together and raise the physical metals. But it is my guess that as all these insane printing
schemes are found to be death spirals, Europe and the US and Japan and other
places go into hyperinflation, and gold will push higher. Also, if any one of the major Central bank
Countries panics and demands their gold back immediately, there's going to be a
"gold war" for possession. At
that point the price of gold will increase dramatically. Keep an eye on China. They want their currency to be either the new
global reserve, or at least a major part of it, and they’ve got a lot of gold
to back it.
So,
is gold and silver done? I don’t think
so. It is depressing to see how well the
Central banks have managed to cap its price.
My guess is that when the dust settles, gold will be well over $2,500,
and silver between $70 and $100. So in
my mind, gold and silver are still worth holding.
The
Market:
I
have run out of superlatives to use for this market. Words like: resilient, strong, controlled, manipulated,
and bankster driven. I am my own worst
enemy, because I try and use logic and reason to understand things. A common logical argument that I often have
with myself goes like this: "If the economy is a fraud, and
companies are increasing earnings per share by either tricky accounting schemes
and/or buying back shares – then how are stocks going up? Stocks are supposed to go up because of
organic growth, sales, and revenues, coupled with a good cost structure. Then this market should be
shorted". But then the other argument says: “Markets go up because there are more buyers
than sellers. Buy the darn market you
idiot. Bernanke's only got ONE thing he
can point to if he leaves his position next year, and that is the stock market.
He can't create jobs. He can't create growth. He can print money. And money will find its way to the market. He will not let it roll over." I continually realize that Bernanke Bucks are
going to trump everything for a while. Logic,
reasoning, and fundamentals are currently worthless.
Heading
into Friday's jobs report, we had the perfect set up for a market correction. And when a market is trading at 14,500 a
correction is more like 800 points. Coming
into Friday we had no less than 5 horrid economic reports behind us. The economy is creaking and groaning, and a
poor jobs report should have pushed it over the correction edge. We dipped 171 points after the open, but by
the close were down a measly 40 points.
So
despite the market being perfectly set up for a pull back, they've papered it
over. They defended the S&P support at 1540, and by the close both
the Financials and the Russell small caps had both managed to get back up and
over their 50-day averages. While I'm
fully aware of why Bernanke won't let a major market "crash" occur,
I'm really surprised they won't let a normal every day correction take place. All we can do is hold our nose and take
positions. Yeah, it stinks like 5-day old
fish, and that's why we hold our nose. Everyone
on the planet is now pretty much aware that this market isn't acting normally
and is piling in until the market implodes. That implosion could be Monday, or next
February – and is solely dependent upon The Ben Bernanke and his Banksters.
We're
heading into earnings season. Earnings
will be made to LOOK good – but they won’t BE good. Will the market use that as the excuse to
sell? Ever since the market ignored the
PMI, the ISM, the bad housing sales, and the lousy jobs numbers – I don’t know
exactly what to think. I’m currently
leaning long, but I am worried that the light that I’m seeing in the tunnel –
is not the end of the tunnel, but rather that of an oncoming train.
Tips:
Last week I sold out of both COST and SNDK for a $2/share
profit, and am sitting with one position.
For next week, like my friend DS – I’m looking for a re-entry point for
LNG (a natural gas play).
My
current short-term holds are performing nicely (with gold and silver still
lagging):
-
NUAN – in 19.10 (currently 20.48) – stop at
entry,
-
SIL – in at 24.51 (currently 17.19) – no stop
yet
-
GLD (ETF for Gold) – in at 158.28, (currently
153.00) – no stop ($1,575.40 per physical ounce), AND
-
SLV (ETF for Silver) – in at 28.3 (currently 26.43)
– no stop ($27.20 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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