This Week in Barrons – 11-3-2013
Our Kids Are Socialists Now
After spending a week speaking and listening to virtually all of the global entrepreneurial thought leaders – hearing of their trials and tribulations – excuse me if I’m not as bullish on entrepreneurship. Once you get past all the hype concerning ‘small business’ being the jobs engine of the future, and how many more people today are taking entrepreneurship courses in high school and in college than ever before – you get to the cold hard reality that: Due to governmental ‘red tape’ it’s darn near impossible to start a business from scratch right now.
First off – think about the ‘branding message’ any small business must create in order to tell people what they do. And add to that, the new level of ‘political correctness’ that must be achieved. I remember when location, religion and ethnicity were all ‘fair-game’ and often something to be proud of – not anymore! Today, the smallest imagined perception of ‘incorrectness’ elicits ‘outrage and rebellion.’ OK, if we’re teaching our small businesses to all look and act the ‘same’ – what has all of this ‘sameness’ produced?
- Race relations are at the lowest level that I can remember.
- ‘Hate crimes’ are setting records in cities across the U.S.
- And suicide is the #1 killer of current teens today!
In the world of entrepreneurship, it’s these ‘differences’ that take a small business to the next level. Yet, pointing out those differences (in today’s ‘politically correct’ climate) could brand you with the vilest of names. Socialism means everyone is the same in every way including: economic status, social status, color, beliefs, and message.
Secondly – think of the regulations and hoops that our small businesses are required to jump through. The environmental extremists have pushed more people out of work than any other single item. Thousands of companies every month can no longer afford the red tape and excessive compliance – so they either move outside the U.S. or close-up shop. We (socialistically) have engineered the way to reduce America from a ‘manufacturing’ powerhouse to a ‘service’ economy.
Finally – just look at the numbers. In 2012, the U.S. small (for profit) business employment rate increased by 0.1%. Yes, for the entire year our ‘for profit’ small business community was basically flat = no job growth. And to add insult to injury, in 2012 the small (for profit) business revenue decreased by 1.2%. Therefore, our small (for profit) business community may have added a few jobs – but overall they made significantly less money. On the other hand, the small (non-profit) employment community grew quite handsomely across the board, bringing Sokolowski and Geller from John’s Hopkins University to conclude: “Non-profits have been holding the fort for much of the rest of the economy, creating jobs at a time when other components have been shedding jobs.” Currently, one out of every ten workers (outside the government) works for a non-profit. That number is projected to keep rising with 44% of non-profits intending to create new positions throughout the coming months.
So the new growth engine of choice is the Non-profit Organization – often termed a 501c3. Therefore, I need to change the way I’m viewing trends and data – because creating and growing a non-profit business is very different than a ‘for profit’ entity. As much as we talk about ‘wealth-creation’ in terms of the stock market – if you’re next JOB is with a non-profit – you had better polish/develop a new skill set in the months ahead.
The question then becomes: If you don’t like the non-profit path – what can you do about it? I think that answer depends upon your age. If you're under 30, you need to fight the good fight, get involved with your local election process, and try your best to get people in office that stand for the right things. If you are between 30 and 60, then your pocketbooks will drive the results for the next 20 years, but realize it will be a long and often tedious journey. And honestly, if you’re over 60, I would suggest that you continue doing what you can to enjoy what you've created, work on your health, and live life to the fullest. Spend your time ‘teaching’ people what they need to do to right the ship in their life times, because Socialist children grow up to be angry adults, and that’s not a good thing!
This market is incredibly overbought, but that is no surprise. However, every time I suggest a consolidation (pull-back) is coming, and one starts, the market has reversed and turned it into a ‘boom’ event. While in historical terms a pullback of 10% was considered a true correction, in the ‘new normal’ (of the last 600 days) 2% to 3% dips are the norm, with the occasional drop of 5% being a ‘major correction’. Therefore, I suspect one of the quick 2% to 3% dips is probably coming due, but I really don't see any serious selling on the horizon.
Thursday was the last day of the month, and at the end of the session, some managers sold stock and locked in profits. Friday was the first day of the new month and that (as usual) brought in new cash that the managers deployed and up we went. Usually this buying lasts a couple days into a new month, and then we often see a bit of weakness creep in. I could easily see an up day on Monday, and then as the week wears on, a bit of a slide. But again, as much as this market is built on hype and hope and deserves a real correction, I don't suspect we'll get one any time soon.
The Banksters had their Federal Reserve 'mouthpiece" out telling everyone that it is possible that there could be a ‘taper’ in December, and that statement caused the raid on the precious metals. They actually need to increase stimulus and I believe they will. However, if they come out and tell the public that there's no risk of a ‘taper’, and there is a chance that they will increase QE, the market could very well jump 1,000 points in a single day. So, the Fed Heads are trying to manage the stock market's rise. That is why the very minute the Fed put out its statement saying they were going to hold QE steady, Jon Hilsenrath put out a 700-word explanation of their decision and hinted that a December taper might be on the table. Mr. Hilsenrath was appointed to make sure the market didn't go crazy. How do you put out a 700 word article just moments after an announcement? Easy, the Fed tells you what to say in advance of the statement.
Okay, if Mr. Hilsenrath is the ‘verbal market tamer’ (aka the person appointed to try and keep too much froth out of the market), what happens if he fails? Well, the Fed could try a small taper of $5 to $10 Billion, and the market would suffer a major decline. The market would get nervous as hell that QE was ending, and the froth would indeed disappear. Therefore, the ONLY way we'll ever see a taper is if the market gets really, stupidly crazy – making unsustainable incredible gains. In that case the Fed may toss out a tiny taper just to slow the train down.
But, because they know they really need ‘more’ stimulus, at some point they would have to retract that and the market would roar higher anyway. Thus, just keeping the taper talk ‘the same’ and trying to ‘talk the market down’ is what they'll do. With that in mind, we should still be on track to end this year at fresh new all-time highs. After all, Wall Street wants to cap off this year with a Merry Christmas, and I think they're going to get it.
A couple shout outs – one to RP for his JPM article on their silver manipulation: Ted Butler: JP Morgan's Perfect Silver Manipulation Cannot Last…
And one to JLA for his article on Bank of America thinking that: “Gold looks scary Good!”: http://finance.yahoo.com/blogs/talking-numbers/gold-looks-scary-good-bank-america-merrill-lynch-194835583.html
Looking around I am watching:
- The coal producers ... ACI and WLT - both look good – WLT may be a little over extended … but certainly worth watching,
- The 3D printer space … SSYS / DDD / PRLB / XONE all worth a look,
- The Solar companies like CSIQ are doing well, and
- Watch X (a steel producer) if it can break over $26.00
One of the more confused reactions lately has been the rise in energy stocks at the same time as crude oil and gasoline are failing. I’ve read a million reasons why, but in the end, crude always guides energy stocks, and now we’re finally seeing reality take hold in the case of Chevron. Chevron (CVX) just confessed that Q3 net income fell 6%, and they missed estimates by 4.5% with weak refining results offsetting higher oil and gas production. In a nutshell: traders are finally figuring out that you can’t make money producing more product than a weakened economy can absorb.
Gold and silver have been beaten down as I imagined they would be when the Fed told us there would be no tapering of QE. If Gold and silver had jumped on that announcement, it would look bad for the Central bankers, so they engineered some selling for the event. I would suggest that we're going to see a pretty good bounce this week, and SLV and GLD should make for decent trading vehicles for the bounce. You may consider buying call options on either one, just don’t overstay your welcome if indeed we do get that bounce.
My current short-term holds are:
- CLF – in at 25.53 (currently 27.38) – stop at entry
- SIL – in at 24.51 (currently 12.50) – no stop
- GLD (ETF for Gold) – in at 158.28, (currently 127.10) – no stop ($1,313.10 per physical ounce), AND
- SLV (ETF for Silver) – in at 28.3 (currently 21.08) – no stop ($21.80 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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