This Week in Barrons - 10-27-2013

This Week in Barrons – 10-27-2013
 

Now You See Me … Now You Don’t!

I remember the summer movie: “Now You See Me” all too well.  However, most people miss the daily magic that is being performed by our equity markets and by our economic reporting systems.  In fact on Tuesday, we watched a transformation of the jobs report – that was as astounding as any girl turning into a tiger.

One of the biggest headaches for Obama (and for Obamacare) is that companies have decided that if they're going to go bankrupt giving mandated health care to full-time employees, they will simply only hire part-timers, and also reduce their regular staff from 40 to 29 hours.

According to Obama and Mark Zandi (the CNBC jobs report ‘talking head’), if corporations were shifting to part-time workers – it would show up in the data.  Over and over we have heard from Mr. Zandi that the data doesn’t reflect this shift – despite corporate headline after headline talking about either cutting healthcare or cutting their people to part time.  However, on Tuesday the CNBC producers made a mistake and had on (as a guest) Bob Funk from Express Employment Professionals.  Mr. Funk was also the past head of the Kanas City Fed.  Honestly, he simply ripped Mark Zandi apart.  But, he did it in such a calm, soothing manner that Mr. Zandi didn't even realize he had just been ‘given the business’.  Bob Funk said:  "I don't know where the Bureau of Labor & Statistics (BLS) is getting their numbers, or why the part timers aren't showing up in their data – because here (in the real world) we're seeing part-time employment up 123%.  Years ago, companies (hiring through us) hired 60% for full-time and 40% for part-time workers.  Today, it's exactly reversed.  40% are looking for full-time employees, and 60% are looking for part-time.  Obamacare is indeed affecting business and jobs."

It was fun to watch Mr. Funk gently (and with class) correct Mr. Zandi.  However, the real ‘magic’ didn't come from Zandi being schooled on TV, that was simply a preliminary act.  The Grand Illusion came from the unveiling of the BLS’s Jobs Report.  Although the ‘Monthly Non-Farm Payroll Report’ came out ‘inline with estimates’ with a gain of 148,000 jobs, it was the ‘Household Survey’ that produced the most outrageous illusion.  According to BLS’s September Household Survey, a record 595,000 people were rotated OUT of part-time and into full-time work, PLUS an additional 133,000 full-time jobs were created.

This makes virtually no sense.  Last month corporate CEOs were worried about:

-       The Fed beginning to taper,

-       The Debt Ceiling approaching and whether we would go over the cliff, and

-       The Government shut down.

And now you’re asking me to believe that those same CEO’s – were so ‘full of love’, that they let almost 600,000 employees go from a less than 29 hour work-week to a 40 hour and above work-week.  And, they did that in the month directly preceding the launch of the Obamacare web site.  Pull my finger.  In times like these I always remember the quote from Joseph Stalin: “It isn't important who votes.  What is important is who counts the votes.”

Honestly, Obamacare promotes part-time low paying jobs.  The BLS can hide some of the data, but real people like Mr. Bob Funk know the actual results.  Full-time work (with benefits) is becoming harder and harder to find.  Currently only 10% of our post-graduate degree candidates are finding full-time employment.  But part-time service jobs are indeed plentiful.  Obama told us that he wanted to "Fundamentally change America", and he's certainly doing that!

The Market...

Dare I say the word…bubble?  This market is beginning to look like a true 1999 bubble, and we all know that bubbles – POP. 

Every day I am forced to listen to ‘talking heads’ on financial TV tell me why this time it’s different; and why the market isn't being driven solely by Benji bucks.  They talk about our underlying economic strength.  To which, I simply point to the sell off that occurred when there was simply a ‘hint’ of QE taper – and that’s where the conversation normally ends.

Imagine being an investment analyst at a major company.  It's your job to dig into company internals, management, cost controls, expenses, sales, procurement, supply chains, supplier pricing, and more.  It may take you months to put together a thorough review of the company – before presenting your findings to the J. Q. Public.  The bottom line is: in this environment, the analyst can’t say: “The company is garbage, but it is going to go up because the Fed's printing money like crazy."  The analyst would be terminated on the spot.  So analysts across the board are being forced to find reasons why companies (that should otherwise be going down in value) – are instead – going up (in value).

Okay, so the market continues to move higher on extremely low volume.  How long can this go on?  It can go as far as the Fed’s $85 billion a month of buying will take it.  I know that's an odd way of saying things, but it is true.  There's a certain amount of economic activity and market levity that $85 billion a month will buy.  When we get to that point, the market will stagnate until they produce more QE money.  I don't know where that level is, but considering the current volume of buying and selling – there are very few players remaining with the cash to make things happen.

The SPY is the Exchange Traded Fund (ETF) that reflects the performance of the S&P Index.  For 2012, the SPY traded an average of 22 million shares an hour, or approximately 143 million shares a day.  Last Thursday (for example) we traded 73 million shares – half the average volume of last year.  So as you can see, there is NOT the same level of market participation out there this year – as there was last year.

I have heard the rumor that The Ben Bernanke could announce a surprise taper this week, and I’ve dismissed it out of hand.  Heading into a sub par quarter, with the Holidays fast approaching – it would be suicide for the Fed to pull a fast one.  It's my guess (that except for a couple 2-3% pull backs now and again) we're just going to keep slowly levitating into the yearend.

It doesn’t make sense, and no, it won’t end well.  But ‘the powers that be’ created this monster and it has to play out.  We continue to lean long.  Yes, we continue to be concerned.  We have not had a ‘normal’ 10% correction for over 520 days.  But, there’s no reason we can’t make it to 600 days.  After all, it’s just Benji Bucks anyway.

In the very short term, the SPY has a bit of a challenge directly ahead of it.  It tried to get over 1760 Friday, but came up slightly short.  If the market can't get over 1760 on Monday, we could see a small fade to start the week.

Tips:

This week I tweeted about a couple stocks that I liked – they included: SNDK over 70, PNRA over 155, and ANR over 7 – but realize that ANR reports earnings on Oct 31.  We sold CERN, CIEN, HES, LRCX, and WRN – all for nice profits.

My current short-term holds are:

-       JOY – in at 55.03 (currently 58.09) – stop at entry,

-       SBUX – in at 77.50 (currently 79.96) – stop at 78,

-       SIL – in at 24.51 (currently 13.67) – no stop

-       GLD (ETF for Gold) – in at 158.28, (currently 130.54) – no stop ($1,352.40 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 22.60) – no stop ($21.87 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, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 10-20-2013

This Week in Barrons – 10-20-2013
 

China’s Overthrow of the U.S. … it’s an ‘Inside Job’.

A couple of weeks ago, we talked about how the attacks on Gold have had a ‘dual mandate’.

-       The first reason that the Central banks ‘beat down’ the price of gold was to help remove the concept of the ‘flight to safety’, which is historically common when a currency is being devalued.  As much as everyone tells me that Gold is an old barbarous relic, the fact is – for hundreds of years, people flocked away from paper money every time that paper money was looking weak.  So, to keep people from rushing into gold instead of dollars, they reduce the price of gold, hoping to make it unattractive.  They also slander gold, and get Goldman to come out and say it's going lower – because no one wants to rush into something that is falling.

-       But the second reason (in my opinion) is the more important one.  Our new economic bosses, the Chinese, have expressed their extreme displeasure over the fact that they hold over $1 Trillion worth of U.S. paper, and each day that paper is worth less and less as the Fed QE’s us into oblivion.  Everyone from Wall Street bankers to the Fed know that if China wanted to implode us, all they would have to do is sell their T-Bills ‘wholesale’ and the U.S. would be the proverbial ‘dead duck’.  So here we are – the ‘Big Kids on the Block’ – and China could crush us like a bug without firing a single shot.  Therefore, in order to calm the Chinese, we are giving the Chinese the ability to use large portions of their dollar denominated holdings to buy (with every gold attack) less-expensive gold.  

These gold attacks normally come in the middle of the night, when massive sales of paper gold hit the market.  I saw it again 10 days ago.  In a very ‘thin’ overnight session, someone (no name or account number given) came out and decided to dump 800,000 ounces (over $1B) of gold onto the market in a single shot.  Just think about that for a moment.  If you needed to sell $1B worth of gold, and you knew that selling that much gold in one sitting would kill the price – would you do it?  Of course not, you would sell it a little at a time in order to maintain its value, and your selling price.  But, (in this case) the reason they're selling 800K ounces in one shot IS to purposefully drive the price lower.  The price fell (just as intended), and was followed the next day by more selling.  

Almost as a victory lap, the Chinese are becoming more and more boisterous concerning the absurdity of the U.S. Government.  Just days ago, the Chinese outlet Xinhua came out with a scathing article, and the first line of the piece was: "U.S. fiscal failure warrants a De-Americanized World".  The piece went on to say: “a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.  As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtual daily routines in Iraq, years after Washington claimed it had liberated its people from tyrannical rule.  Such alarming days, when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.  What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States."

Well there it is, in black and white.  The Chinese want to be included in the new world reserve currency.  The Chinese want it, demand it, and own enough U.S. paper to get it.

The attacks on gold are not because the economy is good, and no one wants gold any longer.  The attacks on gold are because China wants to buy it at a discount.  When the Chinese think they have enough gold, they will declare to the world that the U.S. dollar reserve must end immediately, and be replaced with a wider, broader basket of currencies in which their Yuan (Chinese currency) is a major player.

But, can’t the price of gold keep going lower (virtually) forever?  No, it can't, because there’s only so much physical gold lying around.  While the supply of ‘paper gold’ is unlimited (just like dollar bills), the supply of physical gold is not.  In the past year I have seen the gold warehouses drawn down to very low levels.  When the notices go out that NO more contracts can be settled with physical gold delivery, that is when the panic will set in, and NO amount of funny paper manipulation will stop the surge in gold.  That is to say, when the available supply is sitting in Asia's vaults, the scramble to get the remaining inventory of gold will be an incredible sight.  

Factually: all nations want economic stability and ONLY a gold-backed reserve is going to do that.  But even with ‘percent based’ gold backing, the price of gold will have to be adjusted to equate to the money supply.  With this adjustment, Jim Rickards (an esteemed economic problem solver) estimates that the price of gold will move to between $5,000 and $7,000 an ounce.  And that is why I continue to buy gold and silver (which will soar in sympathy with gold).  

Remember the market adage: ‘The market can remain irrational, longer than you can stay solvent.’  Patience is on your side on this one.

The Market:

The equity markets certainly did not want to hear anything about a pull back last week. The markets received the excuse they needed to push themselves higher when Congress ‘struck their deal’.  On Friday, we witnessed the Nasdaq making a 13-year high, and the S&P pushing to an all-time high.

The irony (of course) is that we are setting these highs at the very time the Federal Reserve is so worried about the economy that they can't even ‘taper’ off their money printing stimulus.  Why is it that we need our Fed to print gobs of money, when the stock market is telling us that things are ‘better than good’?  Oh yes, the stock market is no longer a reflection of the economy.  This week the market isn’t even much of a reflection of corporate earnings – considering the way they torture the accounting to virtually ‘create’ earnings out of thin air.  Therefore, if the fundamentals are basically useless, then the only thing that matters is free money from the Fed, and the desires of the Wall Street banks.  We’ve seen that the new Fed Chair, Ms. Janet Yellen, is ‘all in’ on the idea of using excessive money printing to create jobs.   Forgetting the fact that it didn’t work in 2009, 2010, 2011, 2012, or in 2013.  Her answer is that they just didn't print enough money!

My point is that there's no real barrier for stopping the market from putting on an absurdly strong run for the remainder of the year.  There's no reason why the market can’t exceed 16,000, 17,000 or even 20,000.  And here are some reasons:

-       The true state of the economy doesn't matter.

-       Corporate earnings are ‘basically’ what they say they are (because GAAP (Generally Accepted Accounting Principles) is no longer a viable guide).

-       And the Fed is willing to "Do the Draghi" meaning do what ever it takes to create inflation.

Then nothing is stopping the market from putting on a show that equals the insanity of the Japanese stock market of the 80's?

Factually, (in the technical, big picture) there is a pattern growing over the past decade called ‘the Jaws of Death’, or ‘the Megaphone’.  Each and every major market crash in U.S. history has been preceded by this chart pattern.  It is my guess that whatever blow off top this market puts in over the next several months, it could very well fulfill the pattern and start us on the big decent.

If we do NOT get a big, year-end rush higher, it is only because ‘the powers that be’ don't want one – not because they lack the backing of the Fed to do it.  I think we are still on track for it, but I just didn’t count on them starting it last week.  We are already at all-time highs on the S&P, and we have got 2.5 months to go until the New Year.  Are they going to run us that far – for that long?  My guess last week was that we would end the week with the market up nicely so that we could go into the weekend with the political hacks talking on the news shows about how wonderful things are.  That happened, but what about this week?

I think that we weaken this week, and see some form of pull-down.  The idea of ‘too much, too fast’ comes to mind, and a bit of cooling off is certainly warranted.  So I think it is still possible that we get a couple weeks of sub par action, maybe some sideways and down.  That would set us up for a nice ‘perk-up’ in November, and an all out sprint to the finish line in December.

Tips:

This week I tweeted a list of stocks that I’d be interested in if they exceeded certain thresholds.  The list that I published follows, with their current prices in parenthesis: VLO > 37.20 (39.00), CERN > 55 (55.77), DDD > 56 (56.96), SNDK > 63.40 (68.62), WWW > 60 (57.52), FDX > 116 (125.83), HCA > 47 (48.83), INVN > 20.50 (21.16), AKAM > 53.20 (52.15), MMM > 122 (122.91), FCX > 34.50 (35.00), WLT > 16 (15.20), and HES > 81.40 (84.06).  As you can see, with the S&P setting an all-time high, they all virtually exceeded their respective thresholds except for AKAM and WLT.

My current short-term holds are:

-       CIEN – in at 26 (currently 26.99) – stop at entry,

-       CERN – in at $55 (currently 57.77) – stop at entry,

-       HES – in at $81.40 (currently 84.06) – stop at entry,

-       LRCX – in at 52.49 (currently 53.79) – stop at entry,

-       WNR – in at 31.51 (currently 33.74) – stop at entry,

-       SBUX – in at 77.50 (currently 79.45) – stop at entry,

-       SIL – in at 24.51 (currently 12.92) – no stop

-       GLD (ETF for Gold) – in at 158.28, (currently 126.87) – no stop ($1,314 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 21.10) – no stop ($21.87 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, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 10-13-2013

This Week in Barrons – 10-13-2013
 

“This is going to hurt me, a lot more than it hurts you” … NOT!

I continue to be mildly amused at the absolute disaster that is indeed the launch of the Obamacare website.  I naturally assume that when you’re solving a problem – that you tell me exists for millions of people – you will be ready to serve ‘millions of people’ when they come knocking at your website’s door.  I guess ‘Preventative Medicine’ (to the U.S. Government) means ‘Preventing’ as many people as possible from accessing the ‘Medicine.’

You've all heard the horror stories of people trying for hours and hours only to see a message that says: ‘Please Wait’ or ‘Site Temporarily Down’.  In virtually any private sector situation, this would be a failure of colossal scope, but according to the President himself, it is a smashing success.  The goverment’s rationale was that so many people were looking forward to Obamacare – demand was so much greater than anticipated – that the website was swamped.  Mr. President – please remember - we are all ‘forced’ (by penalty of the IRS) to purchase insurance.  Secondly, because we're being ‘forced’ to purchase insurance, people are naturally curious to see what they are being offered.  I cannot believe that this ‘boondoggle’ has been 3 years in the making.  We created the largest example of socialism our Country has ever seen – and it doesn’t last an hour before it crashes.  If our government can't run a website, how are they going to link all this to the IRS and set standards based on our incomes? 

From the small sampling of people that have written me, it doesn't look good for the middle aged, reasonably healthy person that may have an existing health insurance policy.  From what people are telling me, the premiums are significantly higher under Obamacare.  For those with an existing condition, or the abject poor, it's great.  So like the perfect socialist program, it is taking money from people that are in good shape (and already paying a relatively decent premium), and giving it to the un-insured, the under-insured, and the people that have had a bad situation in their lives.  Personally, I just spent 90 minutes trying to complete my personal and family profile on www.healthcare.gov - basically getting thru names, addresses, DOB and social security numbers – only to have the site crash.  So I was prepared to give you numbers first hand – but alas – Obamacare can’t give me a price.  But don’t give up hope – as I’m now one of those that is going on 24 hours with a ‘Please Wait – do not close this window’ showing on my computer.  But hey, it potentially needs more time to calculate my particular insurance situation!

Whenever our government frustrates me (such as this), I’m reminded of a writing by Rabbi Pruzansky that he penned on November 7, 2012 concerning the election.  While I'm not Jewish, and don't know this man, I’ve enjoyed his writings considering 70% of the Jewish community voted for Obama.

“The most charitable way of explaining the election results of 2012 is that Americans voted for the status quo - for the incumbent President and for a divided Congress. They must enjoy gridlock, partisanship, incompetence, economic stagnation and avoidance of responsibility. And fewer people voted.  Romney did not lose because of the effects of Hurricane Sandy that devastated this area, nor did he lose because he ran a poor campaign, nor did he lose because the Republicans could have chosen better candidates, nor did he lose because Obama benefited from a slight uptick in the economy due to the business cycle.  Romney lost because he didn't get enough votes to win.  Romney lost because the conservative virtues - the traditional American virtues - of liberty, hard work, free enterprise, private initiative and aspirations to moral greatness - no longer inspire or animate a majority of the electorate.

The simplest reason why Romney lost was because it is impossible to compete against free stuff.  Every businessman knows this; that is why the "loss leader" or the giveaway is such a powerful marketing tool. Obama's America is one in which free stuff is given away: the adults among the 47,000,000 on food stamps clearly recognized for whom they should vote, and so they did, by the tens of millions; those who - courtesy of Obama - receive two full years of unemployment benefits (which, of course, both disincentivizes looking for work and also motivates people to work off the books while collecting their windfall) surely know for whom to vote; so too those who anticipate "free" health care, who expect the government to pay their mortgages, who look for the government to give them jobs. The lure of free stuff is irresistible.

The defining moment of the whole campaign was the revelation (by the amoral Obama team) of the secretly-recorded video in which Romney acknowledged the difficulty of winning an election in which ‘47% of the people’ start off against him because they pay no taxes and just receive money – ‘free stuff’ - from the government. Almost half of the population has no skin in the game - they don't care about high taxes, promoting business, or creating jobs, nor do they care that the money for their free stuff is being borrowed from their children and from the Chinese. They just want the free stuff that comes their way at someone else's expense. In the end, that 47% leaves very little margin for error for any Republican, and does not bode well for the future.

That suggests the second reason why Romney lost: the inescapable conclusion that, as Winston Churchill stated so tartly, ‘the best argument against democracy is a five-minute conversation with the average voter.’  Voters - a clear majority - are easily swayed by emotion and raw populism.  Said another way, too many people vote with their hearts and not their heads.  That is why Obama did not have to produce a second term agenda, or even defend his first-term record.  During his 1956 presidential campaign, a woman called out to Adlai Stevenson: ‘Senator, you have the vote of every thinking person!’ Stevenson called back: ‘That's not enough, madam, we need a majority!’ Truer words were never spoken.

The takers outnumber the givers, and that will only increase in years to come.  The ‘Occupy’ riots across this country in the last two years were mere dress rehearsals for what lies ahead - years of unrest sparked by the increasing discontent of the unsuccessful who want to seize the fruits and the bounty of the successful, and do not appreciate the slow pace of redistribution.  If this election proves one thing, it is that the Old America is gone. And, sad for the world, it is not coming back.”

The Market:

Coming into Wednesday of this week, the DOW had fallen 900 points in just a couple weeks.  A couple reasons for that were:

-       We had to unwind all the bets placed on The Ben Bernanke’s tapering (and then he didn’t) – so we had a bit of buy the rumor, sell the news,

-       Then we headed right into the Government shut down,

-       And now (of course) we are approaching the debt ceiling. 

But all of this week’s action doesn’t change our overall feeling of the market.  Despite wiping out some big support levels, and despite the massive profit taking we saw in the former leadership stocks, we feel this is temporary.  After all, we have seen this movie before:

-       On May 1^st, 2013 the DOW was at 15,500, and six weeks later it had fallen to 14,580.

-       Then it rocketed back up and by Aug 1, we were at 15,650, but then everyone got nervous over the taper, and just a month later – we were back down to 14,760 again.  

-       Then we ran up in September and hit 15,750 for an all time high, and we’ve come back down in the last couple weeks to 14,780.  There have been 5 months of 1,000-point swings both up and down.

My point is that on this particular pull down, when we get the news that they've struck a deal, upped the debt level and are holding hands again in Washington – I suspect that we will run back up into year-end and potentially exceed the all time highs.  Granted, a lot of things have changed lately, and ‘yes’ earnings are beginning to stink – as the economy has clearly slowed down.  There could be a possibility that they don't take us back up to the all-time highs, but with Janet Yellen being potentially appointed as the new Fed chief, I think she will be welcomed in with a roar into the year-end.

As you know, I was the one saying that The Ben Bernanke would NOT taper.  And I'm the one saying that the next move out of the FED will be more QE, not less.  Yes, you’ve read that correctly – not only will there be NO taper, Ms. Yellen is going to increase the amount of the stimulus.  Just this week Ms. Yellen mentioned that "more has to be done to strengthen the economy".  That’s does not sound like a ‘tapering’ remark to me.

Now I'd love to tell you that all you have to do is jump into the market and take this ride.  But, even though that sounds like the right choice, you may wish to be cautious for just a bit longer.  Why?  Well, the bulk of the first day’s move was short covering.  Those that shorted the market on the idea of a log-jam, had to cover when word started spreading that a deal was getting close – hence the large 300+ point pop.  

History shows us that after a couple big ‘V’ reversal up-days, the market often fades back and tests the break out level again.  If the break out level holds, the market then goes on a real run.  So with that in mind, as much as we want to participate, we do need to be aware of the fact that this particular jump could indeed be ‘too much too quick’. 

On another note, we did have yet another attack on gold and silver this past week.   While this letter is already too long to include much about that, I will devote next week’s letter to just what is going on behind the scenes.  Even truly knowledgeable market people such as Art Cashin are beginning to question if there's some form of ‘conspiracy’ going on.

For this week, don't be surprised if we fade off a bit, even if a deal is struck, as (for the most part) it has been priced in.  And (as ‘nuts’ as it sounds) we’re probably going to see all new highs, while the actual economy slumps deeper into this depression.  But before we get there, we're going to have to endure these bumps and lumps.  We could still go lower here, as the support levels (for the most part) have been taken out.  But after this correction, I still think we will power back up into year-end.

Tips:

Thanks to Steve Forbes for bringing my attention to the following excerpt spoken by the Chinese Premier Li Keqiang last Thursday.  The Premier told U.S. Secretary of State John Kerry: “To China, the issue of the American debt ceiling [is of] great attention”.  The Premier went on to say that American powers are by no means as free to act irresponsibly and independently as before.  The Chinese (in fact) hold U.S. assets amounting to about $2 trillion.  The Chinese Vice Finance Minister Zhu Guangyao asked the Americans to “ensure the safety of Chinese investments.  In the event that the U.S. debt limit may not increase, the Americans would FIRST have to service their debt obligations to the holders of existing government bonds.  The U.S. is in a debt vortex, and might as well be run by a bunch of monkeys.  Nobody in their right mind would run a country as they are today in all of Western society.  Why does the U.S. borrow and pay interest, when they have ZERO intention of ever repaying the principal?”

The words and actions of both Chinese Premier Li Keqiang and Vice Finance Minister Zhu Guangyao clearly illustrate that the US (in their minds) has lost its independent sovereignty when it has to rely upon foreign adversaries for its survival.  For example: How can the U.S. even think of invading Syria – when both Russia and China (to whom we owe over $2.5 Trillion in U.S. assets) oppose the idea? 

Remember (a while back) when I spoke of the U.S. government seizing U.S. pensions.  Well, that idea is again gaining momentum.  One particular scenario counts on insurance companies not being able to produce guaranteed returns, and potentially defaulting on their obligations to their annuity holders.  The Feds will then step in, secure and pay the annuities; however, the accounts will no longer belong to the insurance companies – but rather Uncle Sam.  These assets will then be used to redeem the bonds that China, Japan and Russia hold. This will solve the problem of foreign debt holders, and US independence shall be restored – (naturally) at the expense of all of those pension holders.

This week’s tip on selling out of the money calls is surrounding AMD.  AMD is currently selling for $3.83 – and the $4 covered calls are selling for around 10 cents – producing a weekly ‘call gain’ of over 2.5% (over 100% annually).  If you own some AMD – you could sell the $4 weekly call option (expiring on Friday, Oct 18) – and collect the $0.10 per share.  If the option expires worthless – that’s over a 100% annual return, and if you’re ‘called out’ the return is even greater.  “Rinse ‘n Repeat” with many of the weekly options stocks – some with more promising futures than AMD such as: PRLB, SSYS, and DDD.

I did ‘finally’ get stopped out of Facebook this week – but not before a 100% gain.  I also bought some CIEN this week along with WNR, and LRCX.

There are several stocks that still look like they'll make a nice move once this mess is behind us:  SanDisk (SNDK) over 63.45, Texas Instruments (TXN) over 41.10, and Starbucks (SBUX) over 77.50 – to name a few.  Some others that I'm looking at are for entry points are: DDD, AKAM, WWW, and BYD.

My current short-term holds are:

-       CIEN – in at 26.00 (currently 26.34) – stop at entry,

-       LRCX – in at 52.49 (currently 52.70) – stop at entry,

-       WNR – in at 31.51 (currently 31.84) – stop at entry

-       SIL – in at 24.51 (currently 12.14) – no stop

-       GLD (ETF for Gold) – in at 158.28, (currently 122.69) – no stop ($1,268 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 20.53) – no stop ($21.21 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, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>