This Week in Barrons – 5-19-2013
Mr. Collins – I just don’t know...
Mr. Sam Collins – a technical market analyst for 45 years writes: “Never in my over 45 years in the investment business have I seen such a lack of enthusiasm for one of the biggest, boldest bull markets in history. Even the major institutions talk down the potential for higher prices.”
- Maybe people aren't very enthusiastic about this market because the last two market bubble crashes took all of their money?
- Maybe they remember the late 90's where every analyst would come on CNBC and tell us stocks could only go up, until (of course) the didn’t in March of 2000?
- Maybe people got tired of Bank manipulations concerning housing, and they bought a house for $500k in 2006 that was $79k in 2002 because the experts told them that real estate can only go up, until (of course) it didn’t in 2007?
- Or just maybe it's because CNBC has folks like Henry Blodget on, pushing stocks 24/7, and you find out that people like Mr. Blodget have either been fined, or have admitted financial misconduct. In 2002, New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Mr. Blodget gave his actual assessments about stocks which conflicted with what he was publicly publishing. In 2003, the U.S. Securities and Exchange Commission charged Mr. Blodget with civil securities fraud. Mr. Blodget agreed to a permanent ban from the securities industry and paid a $2 million fine plus a $2 million disgorgement.
- But it gets better, Mr. Blodget (on CNBC on Friday) was interviewing Charley Rangel. Mr. Rangel (a member/chair of the House Ways and Means Committee) has been charged 5 times for Ethics violations, and has been tax delinquent for over 3 years.
So maybe, Mr. Collins, people aren't racing toward stocks because on any given day we have a guy who paid $4 million to the SEC to keep his story quiet, interviewing a powerful crook who happens to be the U.S. Representative for New York's 13th congressional district on the most well known Financial Station. (I can't make this stuff up!) And maybe, Mr. Collins, we should all just believe The Ben Bernanke when he says:
- (2/15/2006) "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."
- (2/15/2007) "Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low."
- (3/28/2007) "At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."
- (1/10/2008) "The Federal Reserve is not currently forecasting a recession." AND
(When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) "The Federal Reserve will not monetize the debt.”
The Ben Bernanke is a very smart man, but pardon me if I don’t believe him when he says: (a) we’re not in an asset bubble, (b) there is no inflation, and (c) the economy is looking pretty good (when we hit an all time high for food stamp delivery last month). Or maybe I should just Google: “Goldman Sachs Fines” and see (on the first page alone):
- Goldman Sachs fined $16 million for pay-to-play scheme...
- Mistakenly Released Documents Reveal Goldman Sachs Back-Stabbed Investors...
- Goldman Sachs to Pay Record $550 Million to Settle SEC Charges...
- Goldman Fined for Failing to Block Trader's $8.3 Billion Bet...
- Goldman Sachs among banks fined over lobbyist payments…
- U.K. regulator fines Goldman $31m...
- Goldman Sachs FINED $27 Million By U.K. Agency - Huffington Post
So, Mr. Collins, (short of visiting a Chicago politicians meeting) can you find a more criminal group to recommend? But you are right about one thing, not everyone is agog at this market run up. Anyone with a functioning brain is not very excited about this recent market bubble because it isn’t based upon growth or earnings or opportunity. A stock that misses earnings, warns for the future, and lowers guidance is NOT a reason for that stock to go higher. Every bubble meets its pin. Tech hit it. Housing hit it. Credit hit it. I get really scared when I hear The Ben Bernanke say: "No fear, there's no bubble and if there was, I can let the air out slowly."
Every person that I talk to (who has been in the business longer than 10 years, and doesn’t have an agenda to push) believes that we have entered the end game. Thus far, in 2013, if you would have invested in the market on a Monday and sold on a Tuesday you would have accumulated over 70% of the market’s gains. There has not been a ‘down Tuesday’ in 2013. Is it ‘normal’ that Tuesdays and Fridays account for over 90% of the market gains in an entire year?
As long as The Ben Bernanke, the ECB and Japan are willing to print – then money will end up in the markets. A recent art auction at Christie’s broke all-time records. Real estate (in certain areas) is commanding all-time highs. The rich would rather get something for their dollars than watch them inflate away. The stock market makes an all-time high, virtually every day – with a 40-point drop being viewed as a "horrible correction".
But while prices of food, medical, education, and clothing are rising considerably – elements like lumber (which is used to build all the houses) are crashing. Iron Ore is down 20% and in a bear market. Oil is sloshing around everywhere, as there's no demand. And gold and silver (the two best metals to offset currency devaluations) are falling.
I’ve seen this movie before. I continue to lean long into the market, taking profits as I go. I am just about to make another purchase of physical gold and silver. My guess is that since the ‘safety stocks’ (that pay big dividends) have been played out, the materials and cyclicals will become popular. If I’m right, names like CLF, JOY, UYM, and BAS should move. I'm getting ready to push the ‘buy’ button on the miners – specifically the GDX and GDXJ. The latest attack on gold and silver has pushed the miners to a point where they're bordering on ridiculously cheap. When this particular attack is complete, I'm buying both. I said a while ago that if gold dropped into the high 1,200's and silver to 22, I would be a buyer of the physical metals for delivery. Gold is getting there and silver is already in the high 22's.
This summer, the market needs the financials to pull it higher. Goldman Sachs (GS) and JP Morgan (JPM) are setting up for breakouts. JPM’s breakout is around 50.45 with GS is around 157.00. If both break through those levels and hold them for 2 days – we will NOT see a ‘Sell in May and Go Away’, but rather a market that will drift higher through the summer. Right now GS (on Friday) hit 158.27, and JPM hit 52.48. Watch over the next two days to see if they can hold those levels. So for this rally to really continue, JPM and GS need to hold their breakout levels. If they fail, it could be the "one thing" they use for a correction.
We made some trades this week. We sold out of SLB +$0.25, ANF + $1.25, CAT +$1.50, and TJX +$1.50.
My current short-term holds are currently:
- GS – in at 157.00 (currently 158.27) – stop at entry
- UA – in at 60.19 (currently 62.34) – stop at entry
- SBUX – in at 60.70 (currently 64.13) – stop at 63.00
- NSC – in at 77.03 (currently 80.10) – stop at 78.25
- SIL – in at 24.51 (currently 12.84) – no stop yet
- GLD (ETF for Gold) – in at 158.28, (currently 131.46) – no stop ($1,364.90 per physical ounce), AND
- SLV (ETF for Silver) – in at 28.3 (currently 21.46) – no stop ($22.34 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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