This Week in Barrons - 12-29-2013

This Week in Barrons – 12-29-2013

“When I was 35 – It was a very good year…”  Frank Sinatra

We're about to close the doors on another calendar year, and what a year it was.  In 2013 we learned:

-       President Obama imposed a healthcare plan that doesn't have a snowball's chance of ever working the way it was sold.  FYI - I’m not sure that that’s bad.

-       The Fukashima, Japan disaster is considerably worse than we were told.

-       The people of Cyprus are amazing.  Their banks stole a portion every citizen’s investment funds, went bankrupt and kept operating by stealing a portion of every citizen’s deposits.

-       Detroit can legally declare bankruptcy.

-       Poison gas was used in the Middle East, and we apparently (by all accounts) came quite close to WW III.

-       Lance Armstrong doped his way to glory, and finally admitted it in front of Oprah.

-       Bill Gates (with $72 B) is once again the richest man in the world.

-       With the help of Fed money – our stock market gained 28% in one year.

-       Gold and silver (on paper) can sink to yearly lows – while physical demand for the precious metals has never been higher.

-       China said publically that the Dollar stinks.

-       And the IMF (International Monetary Fund) told the world that a new reserve currency is probable.

2 quotes I remember from 2013:

1.    “Just ask for all of your money back every two years to make sure the firm is legitimate.  If people had done that with me, I would have been caught sooner.” …Bernard Madoff in an interview on June 5, 2013.

2.    “I responded in what I thought was the most truthful, or least untruthful manner, by saying no.”  …Director of National Intelligence – Mr. James Clapper – on NBC News when asked about a March 12^th hearing.  A hearing where he denied (lied) that the National Security Agency was collecting data on hundreds of millions of Americans!

As I think about New Year’s ‘Financial’ Resolutions – here are some that come to mind:

-       Reduce my Cable TV bill.  54.8 million households currently pay for cable TV, down 3.3% from 2012.  ‘Cutting the cord’ (transitioning from traditional cable TV to low-cost services such as Amazon, Hulu and Netflix) is a movement which is truly taking hold.  I’m going to use my Internet connection more – to stream movies, and blocks of shows directly to my TV.

-       Reduce my Landline phone service:  40% of U.S. homes had ONLY wireless phones during the first half of 2013.  Ditching the landline allows households to shed a monthly bill, but doesn’t restrict them to just cellphones.  Using Wi-Fi, I will still have Skype and FaceTime – both of which are free.

-       Eliminate my DVD and Blu-ray Players:  Sales of DVD and Blu-ray players totaled 21.3 million in 2012, down 20.1% from a year prior.  Streaming shows and movies from Internet-based subscription services like Amazon, Hulu and Netflix is clearly the solution of choice.

-       Reduce my Hotel bills:  The average daily rate at a U.S. hotel is up 4.1% this year to: $110.59/night.  Services such as ‘Airbnb’ and ‘Vacation Rentals by Owner’ allow consumers to choose from an assortment of homes and apartments to stay in (when the owner is out of town) – at far reduced rates, and offer more space for the money.

-       Eliminate 2-year phone contracts:  The issue with any phone contract is how it handles the swapping of physical devices without incurring a fee.  Mobile users are beginning to: just purchase the phone ‘outright’ through Wal-Mart, Best Buy, or on-line, and then decide on their monthly service plan separately.

-       Eliminate the Digital camera:  11.5 million digital cameras were sold this year in the U.S., down 44% from 2012.  Consumers who want high-quality photos are opting for the larger, DSLR (digital single-lens reflex) camera.  Others understand that it’s the timing of the photo – often more than the quality – and are sticking to one device (their smartphone), which also takes pretty good pictures.

I’d like to express my sincere thanks to all of my friends that contribute and help me write this weekly blog.  My only goal is to attempt to separate reality from fantasy, and to hopefully get all of us thinking about things differently.  Have a Happy New Years holiday, and I'll talk to you again in 2014.

The Market:

With only two trading days left in the year, the market has held up nicely into year-end.  It has been a big year for the market as it has pushed higher in the face of fairly lack luster economic performance.  It is hard to ignore the fact that just 7 trading sessions ago (on Dec 18), the DOW put in a ‘low of the day’ of 15,808.  On Friday, December 27^th, we ended with the DOW at 16,478.  That is virtually 7 – 100-point days strung together.  That is a pretty hefty end-of-year run.

That said, the market is looking tired.  With the 10-year Bond now flirting above 3%, we could see a pause before ringing in the New Year.  For all the bravado about how ‘interest rates rise in a good economy’, I think the last thing we really need to see right now are higher interest rates.

January brings with it a couple of issues that we'll need to consider.  While ‘animal spirits’ want to push things even higher, there's no doubt that some amount of ‘profit taking’ will take place after the first of the year.  

In next week’s edition – we will include our ‘Tax Loss Selling / Profit Taking’ picks for all to review.  I’ll be releasing them via Twitter (on a daily basis) as well.  Hopefully we can make even more money in the New Year and together we can learn how to keep more of what we’ve got. 

Happy New Year!

Tips:

-       UNG:  This week I sold out of the remainder of my UNG position – including the April calls – for an additional 40+% profit.  The underlying ‘natural gas’ commodity had turned decidedly bearish; therefore, it was time to exit. 

-       USO and UCO (oil ETF):  Oil remains strong – and USO (the oil ETF), and UCO (a leveraged oil ETF) still look very strong.  Look at the March and April (in the money) CALL contracts as a place to invest.

-       FXY (Japanese currency ETF):  The Japanese stock market continues to rise and along with that comes the Japanese Yen continuing to fall.  March and April FXY – PUT contracts continue to do well.

-       XHB (the housing sector ETF) continues to do well – up over 40% for the month.

-       The entire 3D printing sector is continuing to run well.  Not only the name players of DDD and SSYS, but look at XONE (a Pittsburgh based company) that is just beginning to do well.

My current short-term holds are:

-       USO – April 2014 $37 Calls – in at $0.74 (currently $0.75) – room to run,

-       FXY – March 2014 $97 Puts – in at $3.76 (currently $4.70) – room to run,

-       XHB – Mar 2014 $33 Calls – in at $0.85 (currently $1.31) – room to run,

-       AKAM – in at 47.08 (currently 47.10) – stop at entry,

-       DDD – in at 82.60 (currently 90.76) – stop at 89.25,

-       SIL – in at 24.51 (currently 11.15) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 117.15) – no stop ($1,212 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 19.29) – no stop ($20.01 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there!

I'd like to recommend a website - http://www.simpleroptions.com    It's an excellent resource and 'honestly' - I've been following them for over 6 months and they're more right than they are wrong with their predictions, and that's a rarity in this climate.  Please check them out on my recommendation.

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 - 12-22-2013

This Week in Barrons – 12-22-2013

It’s been just ‘one of those’ years…

This has been one of (if not ‘THE’) strangest investing years I've ever seen.  The average investor’s 401k is up approximately 24%, and they are feeling pretty good about the year.  By ‘going with the flow’ the average investor has enjoyed one of the best years in history.  Michael Snyder compiled a list of statistics from 2013 that are too crazy to believe:

-       The rate of U.S. home ownership has fallen for the eighth consecutive year.

-       102 million working age Americans do not have a job.

-       40% of our workforce makes less than $20,000 a year.

-       40% of all workers are making less than what a full-time minimum wage worker made in 1968 (adjusted for inflation).

-       Food stamp participation has grown from 17 million in 2000, to more than 47 million in 2013.

-       In 5 years, the U.S. Debt to GDP (Gross Domestic Product) ratio has increased over 44%.

-       The U.S. median household income has fallen every year, for the past 5 years.

-       Total global debt levels are 30% higher than they were back during the financial crisis of 2008.

-       And perhaps the most meaningful statistic of all:  Only 7% of all non-farm workers in the United States are self-employed / entrepreneurs.  That is the lowest percentage on record.  If you’re asking our small businesses to grow us out of this recession – we need to figure out how to teach them: ‘sales’, ‘team-building’, ‘decision-making’ and ‘cash flow’.

Steve Forbes reminded me that Mr. Elon Musk was recently named ‘Person of the Year’ – and high-lighted an interview that he did: http://money.cnn.com/2013/11/21/leadership/steve-jobs-elon-musk.pr.fortune/index.html

For me a couple elements stood out:

-       Much of Mr. Musk’s clarity of vision comes from the basic laws of physics – he calls them the ‘first principles of reasoning’.  He talks of boiling things down to their fundamental truths and reasoning up from there – as opposed to reasoning by analogy.  “Most of our life is spent reasoning by analogy – which basically means copying what other people do with a slight variation.  An example of ‘reasoning by analogy’ would be: Someone in 1900 thinking that the way to provide faster transportation would be to breed stronger horses.  Unfortunately, that is NOT how the world changes.”

-       Mr. Musk used his ‘first principles of reasoning’ theory to launch SpaceX – long before he had a rocket design.  Without looking at what NASA had created and pondering how to tweak it, he started with the laws of physics.  To lift ‘X’ pounds into orbit would take ‘Y’ amount of fuel and necessitate raw materials costing ‘Z’.  By adding ‘Y’ and ‘Z’ together, the result was barely 1% of what NASA spent per launch.  Total cost never dwarfs raw materials costs like that.  Therefore a smart design and manufacturing process should be able to produce a rocket that would cost orders of magnitude less.  He gambled a huge chunk of his personal net worth on SpaceX, long before there was even a design on the table.  It was the clarity of the underlying physics that gave him the confidence that innovation was there for the taking.

-       With Tesla, Mr. Musk was convinced that the electric car was essential if humanity was to have a shot at a sustainable-energy future.  That conviction led him (in the midst of the bleak market crash of 2008), to personally gamble his last dollars to keep the company alive, and give the Model S a chance to see the light of day.

-       “Conviction doesn’t necessarily mean certainty”.  In fact Mr. Musk said:  “I thought the likeliest outcome was failure."

Let Mr. Elon Musk act as a reminder to all future entrepreneurs:

-       Dream big, and don’t allow your main focus to be on making money.

-       Embrace and expose yourself to the world's most inspiring designs and designers.

-       Make things as simple as you can – and no simpler.

-       Play with radical, future possibilities – and keep playing until you find something really big that you believe in.

‘Tis the season for good friends, joy and relaxation.  I often try and find a few moments on Christmas day to reflect upon all the gifts I have been given – throughout the year.  I hope you and your family enjoy your day as much as I will.  Peace on Earth – good will toward man.  Take Care.

The Market:

On Friday the DOW closed at 16,221.  That was light years higher than after the incredible tech run of the late 90's, and higher than the housing bubble of 2007.  Yet the facts that underlie our real economy are so completely horrific, that logic says ‘We can't be this high.’  Unfortunately logic doesn't have bankers running printing presses.

We had every reason to believe that if The Ben Bernanke actually started to ‘taper QE’ that would spell the end of the market's rise to glory.  But what he did was simply put out headline fodder.  We found out last week that the Fed really isn't tapering anything, and in fact promised to keep rates at zero even if the last 6.5% threshold of unemployment was met.  We learned that the Fed is reinvesting the interest back into bond and mortgage purchases; therefore, the ‘pre-taper’ figure was closer to $95 Billion a month in purchases – making the $10 Billion a month taper a moot point.

This week the Ben Bernanke promised that zero interest rates would be here for years to come.  Does that mean we will have another year of no pullbacks, no corrections and ever-higher markets?  It just might.  The market may very well ignore the horrible facts of our economy and just jam stocks higher.

Companies have taken advantage of these low interest rates by taking out loans.  And with the newly borrowed money they have bought back their own stock and increased dividends – thereby driving stock prices higher.  By March of 2013, companies had announced over $1 Trillion worth of buy backs.  The way this works:

-       Companies borrow money (at near zero interest rates) and buy back their stock.

-       That reduces the total amount of company shares outstanding and increases earnings per share.

-       The increased earnings per share – increases demand for the stock, and the stock price rises.

-       That is why this market goes on to record highs, despite seeing the highest amount of earnings warnings/misses in a quarter - EVER. 

This market has gone further than I thought they could take it; therefore, I need to reassess.  I do think we are in for a year-end Santa Claus rally and January effect.  This week we should hold steady and eek out some more gains.  

With the stock market up 23% year-to-date, will the money managers ‘lock in their gains’ and sell before the end of the year?  I don’t think so.  If they sell now, they will need to pay taxes in April of 2014.  But if they go into January and accumulate any year-end run, they can sell later in January and have a full 15 more months before they would have to pay the tax burden.  Thus, we are probably clear to run to year-end and into the New Year.  After that, I would start to be concerned.

So with that in mind, it is my thinking that we are going to levitate into year-end as Santa pays a visit to Wall Street.  I think you can pick up some stocks and take a ‘winners lap’ into the start of the New Year.  Keep your eyes on financials and technology, as both should do well.  

Tips:

This week I sold some UNG December $18 calls (the natural gas ETF) for over 100% profit.  With this type of ETF it’s important to examine the underlying commodity.  In this case, natural gas has run from $4.10 to $4.40 – and if it continues to run to $4.90 – the corresponding April calls could turn into a 1,000% profit generator.  Therefore, it’s not too late to purchase some April, $22 calls in UNG.

The same is true of USO (the oil ETF).  As the underlying price of oil continues to rise – future dated ‘CALL’ contracts are the place to be. 

With the ‘taper’, the US dollar continues to rise against the Japanese Yen – and therefore the FXY (the ETF that tracks the Japanese currency) – continues to fall.  Future dated PUT contracts make the most sense here.

Lastly, I’m beginning to dip my toe into XHB – the housing index.  As you see below, I’m using future dated CALL contracts to make that dive.

My current short-term holds are:

-       UNG – April 2014 $22 Calls – in at $0.62 (currently $1.67) – more room to run,

-       UNG – Jan $19 Calls – in at $2.20 (currently $2.84) – more room to run,

-       USO – April 2014 $37 Calls – in at $0.74 (currently $0.76) – moving higher,

-       FXY – March 2014 $97 Puts – in at $3.76 (currently $4.10) – we’re ‘tapering’ – they’re not,

-       XHB – Mar 2014 $33 Calls – in at $0.85 (currently $1.01) – more room to run,

-       AKAM – in at 47.08 (currently 47.70) – stop at entry,

-       DDD – in at 82.60 (currently 86.99) – stop at 84.25,

-       DD – in at 62.26 (currently 62.88) – stop at entry,

-       SIL – in at 24.51 (currently 10.60) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 115.90) – no stop ($1,203 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 18.64) – no stop ($19.41 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there!

I'd like to recommend a website - http://www.simpleroptions.com    It's an excellent resource and 'honestly' - I've been following them for over 6 months and they're more right than they are wrong on their predictions, and that's a rarity in this climate.  Please check them out on my recommendation.

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>