This Week in Barrons - 4-27-2014

This Week in Barrons – 4-27-2014

“We Mustn’t Panic – We Mustn’t Panic – ARGH!!!!”…Chicken Run (the movie)

Everyday I get the simple pleasure of seeing CNBC parade cheerleaders across my TV screen knowing that not one of them:

-    Forecast the housing bubble,

-       Forecast the credit bubble,

-       Forecast the great 2008 crash,

-       But are quite content telling me how wonderful things are and how everything’s coming up roses.

What I find even more interesting, is that the people that DID predict these bubbles are viewed as being ‘off limits’ to the network.  You see, in 1983 (before CNBC), 90% of all of our news was delivered by 50 companies.  By the year 2000, just 8 companies controlled 90% of the major media, and by mid-2012 it was down to 6.  These six companies are: Disney, GE, NewsCorp, Viacom, Time Warner and CBS.  Together these 6 companies own over 90% of everything we read, watch and listen to.  I understand that the purpose of CNBC is not to inform and educate, but rather to make stocks look attractive at all times, to make the economy appear fine, and to deliver more revenue to advertisers.  The good news is that people are waking up to CNBC’s agenda, as their viewership has plunged dramatically for the past several years.

Unlike CNBC, some of the brightest investing minds on the planet all seem to agree that we're on a rocket ride to oblivion.  People like: Jim Rogers, Richard Russell, Victor Sperandio, James Turk, Grant Williams, Peter Schiff, Egon von Greyerz, Jean-Marie Eveillard, and dozens of others running trillion dollar pension and market funds have declared the system – defunct.  These people receive no acknowledgment or airplay.

As the old adage suggests: ‘Somebody's gotta be wrong.  Who’s it gonna be?’  Is it the folks at CNBC, that didn't see the housing – credit – or mortgage bubbles, and see no inflation, and only see great earnings?  Or is it the professionals from the trenches that have made fortunes understanding reality?  My money is on the professionals. 

As I'm typing this, tensions are really beginning to escalate in the Ukraine.  The U.S. wants to bring Russia to its knees using our central bank monopoly on global credit and banking, while at the same time putting on a show of military force.  Some outlets think that this is just a smoke screen to purposely drag Russia into a prolonged war, because that will lead us out of our economic paralysis.  I truly hope that isn’t the case.  The issue with this particular altercation is that we’re not dealing with sand dwelling nomads in caves.  We're dealing with Russia – a country larger than ours, and equally equipped with nuclear weapons.  Do we really want to put the decision of ‘pushing the button’ in the hands of a ‘stressed-out’ War General with a death wish?

I'm of the opinion that if we end up going to war over this – it’s as a result of our criminal banksters.  It won’t be because we are in a position of power, or our desire to take over Russia.  It will be because the ‘powers that be’ understand that our systems are all horribly broken, cannot be repaired by any conventional means, and need a war to blame it on.  That way instead of the criminal banksters saying: "I’m sorry for our money printing and our trillions of dollars in derivatives", they can say: "I’m sorry, we were fixing things, and then the U.S. got us into a war that led us into bankruptcy.”

I think the overall message here is that the most brilliant investors of all time say the monetary system is broken, and needs to be reset.  Assuming a war with Russia can be avoided, the result will be a strong alliance between Russia, China, Brazil, and India.  Some seem to think that China won't try and crush the U.S. economically because we buy all of their stuff.  Honestly, that WAS true until our economy got to the point where:

-       The average family does not have $2,000 to get through an emergency,

-       Before student debt topped a trillion dollars,

-       Before wages stagnated for 15 years while inflation roared, and

-       Before entry level jobs went from $15/hr. to minimum wage.

In late May, I expect to hear of a huge energy deal between Russia and the China.  I expect a broad expansion of ‘free trade’ in gold backed Yuan between Brazil, Russia, India and China.  Factually, Japan is working closely with Russia to develop the gas fields on the northern islands.  Also, Russia has a plan in place to forgive billions in North Korean war debt in return for safe passage of a gas line through the country to South Korea and the fees it will generate for North Korea.  These nations and others are working around the U.S.’s petro dollar fiasco.  It very much reminds of boiling a frog – it’s a slow process but death is none-the-less eminent.

Many of the things that keep the biggest and brightest of the investing world concerned don’t make it to your local news.  With 90% of Americans only having a half-dozen news outlets – we are all incredibly vulnerable.  I continue to remember the scene from the movie Chicken Run – where the head chicken says three times: “We mustn’t panic.  We mustn’t panic. We mustn’t panic.” And then proceeds to run around like the proverbial ‘chicken with her head cut off.’  Factually: almost 70% of the companies that have reported earnings thus far – (if not for buying back their own stock) – would have missed their projections on both the top and bottom lines.  That is an unheard of percentage and one where ‘panic’ may be the word of the day.

The Market:

Once again the market has come to one of those crossroads where everything points to a decline.

-       The crisis in the Ukraine could easily balloon into something truly ugly.

-       The earnings reports coming out of corporations are poor.  Now, I realize that the markets move because of the FED and the carry trade, but it’s becoming more and more difficult for the analysts to convince people to buy stocks that are trading at over 100 times forward earnings.  After all – didn’t we see that movie in 1999?

-       Lastly, the market is back within spitting distance of its all-time highs, and that's a pretty hefty bar to leap over when you're attempting it with no volume, and lousy earnings.

So if nothing happens in the Ukraine (between now and Monday morning), do the animal spirits come in on Monday and push us higher?  It is indeed possible.  But realize that right now, instead of several hundred stocks moving higher, the market has become increasingly narrow.  Therefore, on market ‘up days’ only a very few stocks are currently dragging the entire market indexes higher.  Corporate ‘Insiders’ are still selling at a furious pace.  And, the housing numbers out last week were just horrific.

But again I warn you; I’ve seen this movie before.  The FED has pulled a rabbit out its hat many times.  So, even though we are once again perched for a slide, we could see our FED use the 50-day moving average on the S&P for support, and just trade us sideways as they attempt yet another in a long string of pushes for glory.

Another issue to consider is the old adage: “Sell in May and go away."  While it sounds like a gag, it is not.  The market traditionally does its best work between September and April, and often its worst work in the summer.  The FED could just run out of bullets for this summer, and let things drift for a couple months.

And then what about the FED's tapering?  All it would take is for Lady Yellen to say they've decided to halt the taper process, and we would set a new high that same day.  If Lady Yellen came out and said that they had replaced the QE program with something else to jam money into the system and keep rates low, we would see DOW 18K by year-end.

For now, I would use the ‘technicals’ as your guide.  The XLF (the banking ETF) has already dipped below its 50-day moving average, which is bad.  Markets can’t go anywhere without the financial sector, so if the XLF can’t get back above 21.90 – be careful.  Secondly, while the 50-day on the S&P (SPY) isn't as important as it was years ago, it's still a psychological level and if we fail that, it could cause more selling.

With the trouble in the Ukraine, energy has responded well for me.  I have listed many of my favorites below.  But overall, we're in a touchy area where caution is warranted.  

Tips:

TLT continues to be the magic elixir that the market badly needs.  TLT is a ‘bond market’ ETF (Exchange Traded Fund) that when the market goes up – trades sideways, and when the market goes down – trades nicely higher.  Mannkind Pharmaceuticals (MNKD) remains in our portfolio paying 2% per week on it’s covered call options.  That is to say: you can purchase a share of MNKD for $6.20 today – and sell the $6.50 call options paying you 13 cents per week.  The energy sector continues to ramp higher, and I’ve listed some of my ‘lower priced’ holdings in the sector below.  I continue to believe that the precious metal miners are a very under-valued sector – and therefore continue to play the DUST / NUGT combination.  I like TLT, Gold and energy – and am awaiting a pullback on the NASDAQ. 

My current short-term holds are:

-       MNKD – in @ $6.35 – (currently $6.20 – w/ 2+% per week yield on the $6.50 covered call option),

-       TLT – in @ $106.22 – (currently $111.99),

-       USO (Oil) – in @ $37.19 - (currently $36.61),

-       BXE (Oil) – in @ $9.11 – (currently $9.47),

-       FPP (Oil) – in @ $5.32 – (currently $5.48),

-       HK (Energy) – in @ $5.25 – (currently $5.43),

-       LSCC (Tech) – in @ $7.85 – (currently $8.73),

-       LSG (Gold) – in @ $0.78 – (currently $0.79),

-       NGLS (Nat Gas) – in @ 60.11 – (currently $58.30),

-       PFIE (Energy) – in @ $4.47 – (currently $4.53),

-       POZN (Pharma.) – in @ $8.68 – (currently $9.13),

-       PTIE (Pain Tmt.) – in @ $5.34 – (currently $5.70),

-       RFMD (Tech) – in @ $7.96 – (currently $7.99),

-       SIL (Silver) – in at 24.51 - (currently 12.54) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 125.67) – no stop ($1,304 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 18.98) – no stop ($19.77 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 - 4-20-2014

This Week in Barrons – 4-20-2014

The best place to hide something is right in plain sight.

Sometimes the easiest way to hide something is to put it out there – in plain sight.  Recently, a study was done to examine people’s perceptions as they were walking.  The subjects were asked to walk down a sidewalk and report any unusual findings.  The sidewalk was of regular size.  Along one side of the sidewalk was a brick wall, with the other side being open to the street.  All the people had to do was stroll along the walk, and report anything they may find unusual.  One by one the test subjects walked the sidewalk, and virtually every one of them found the quarter that the testers had placed on the sidewalk itself.   Not one single person noticed any of the $10 bills that were taped to the brick wall – exactly 7 feet off the ground.  Not one person.  Everyone looked "down" and found the 25 cents, while no one looked up to find $10.  The real prize (that was worth 40 TIMES what they found) was hidden – right there in plain sight.

In my line of work, sometimes the most glaring evidence is hidden from us in plain sight.  For example, this week we all paid our taxes, but studies tell me that less than one percent of us know: Why we have taxes?  Enter Beardsley Ruml – an American statistician, economist, philanthropist, planner, adviser to President Herbert Hoover, director and chairman of the New York Federal Reserve Bank, active in the Bretton Woods Conference (that established the international monetary system), and was paramount in planning the ‘New Deal’.

In 1945 Mr. Ruml made a famous speech to the American Banking Association (ABA), saying that since the end of the gold standard, “Taxes for Revenue are Obsolete”.  The real purposes of taxes were:
-       To "stabilize the purchasing power of the dollar",
-       To "express public policy in the distribution of wealth and of income, in subsidizing or in penalizing various industries and economic groups", and
-       To "isolate and assess directly the costs of certain national benefits, such as highways and social security.”

Obviously the two issues I wish to highlight are: (a) the RE-distribution of wealth and income, and (b) to subsidize or PENALIZE various industries and economic groups.   This was almost 70 years ago, and to this day the facts are hidden very well – in plain sight.

Another example:  A small (but not insignificant) group of individuals have been screaming that the stock ‘market is rigged’ for almost as long as the market has existed.  Most have been laughed at, called kooks, conspiracy nuts, right wing whackos, and generally discarded.  Then Michael Lewis writes a book about High Frequency Trading (HFT), and suddenly ‘the market is rigged’ is on everyone's lips.  This same market, has been right in front of our faces for years – explained, detailed, and deciphered – yet ignored.

Of course it’s not just the stock market and taxes that are rigged:
-       Interest rates are rigged.  People hear about LIBOR and (since it seems so exotic) they shrug their shoulders swearing that it doesn’t really affect them.  Honestly, not too many years ago you could put $100,000 in the bank and make $7,000 a year in interest.  Now you make ZERO.
-       Energy markets are rigged.  They see J.P. Morgan get slapped with billions in fines for energy market tampering, and they’re not connecting the dots as to how gasoline has doubled in price over the past 5 years while demand (since 2004) has fallen like a rock.
-       Corporate accounting is rigged.  Corporate reporting standards have lapsed so much that corporations are no longer required to abide by GAAP (Generally Accepted Accounting Principles) regulations when reporting their financial numbers.
-       Gold is rigged.  On Tuesday at 8:30am the gold market recorded a ‘fake’ sale of $500 million in futures – causing gold to fall $30 in a single hour.
-       Our own FED is telling us that there is NO inflation; meanwhile the price of food (alone) has increased 19% in the past 4 months (since January of 2014).

I think that the angst most people feel around tax day isn't that they detest paying the taxes, but they abhor how their tax dollars are being spent.  Our own government hides the facts in plain sight, counting on no one being able to see them. 

A couple of thoughts (for Easter):
-       Look up – more than down,
-       Think and Listen – more than talk, and
-       Reach-out and Act on your own conclusions.

Happy Easter to everyone. 

The Market...

We had a 4-day virtual ‘lift off’ that took the DOW from a low of 16,028 on Monday, to a close of 16,409 on Thursday.  We seem to have run back to the 16,460 area of resistance.  On April 9 we closed at 16,437 before falling in 3 days to 16,028.  On March 10 we closed at 16,418 before plunging to 16,046.  Naturally the question is, do we fall again, or do we power up and set our sights on the double top at the 16,600 area?

If you've noticed one thing in the past couple of years it's the fact that this market is very tough to short.  The reason is clear.  Every time we set up for a fade, the FED cuts that fade short after a very quick 2 - 4% dip, and then blasts it right back up.  I'm actually tired of writing how we get these perfect ‘correction’ set-ups, only to see the FED short circuit the correction and push us higher.  So, while the single biggest stock gains come during downtrends (because they’re so fast and violent), I really haven’t been ‘short’ since the 2008 crash.

In the past 2 weeks, Ms. Yellen (before Congress) stated that QE would end by the fall of 2014, and about 6 months later interest rates would rise.  The markets went down violently on her words.  This week Ms. Yellen came out and reversed herself, saying that because the labor market is so soft, the FED will need to keep rates low for an extended period.  The markets soared back up on her words.  Unfortunately, the markets are NOT moving on economic fundamentals, but rather moving on whether the FED will continue to fill the punch bowl.  In many ways this more resembles a ‘drug addiction’ than ‘investing’.  As long as our dealer can provide us with the stuff we’re good, but as soon as the dealer cuts us off – we go into withdrawal.

I said it before and I’ll say it again:  IF the FED stops tapering, or (worse) reverses their taper and does more QE – we’re headed toward DOW 18,000 and higher.  It won't matter if the economy grinds to an absolute halt and goes into a full-scale depression.  With that in mind, I have no choice but to continue to find the ‘long side’ opportunities.  It feels wrong (almost ‘dirty’), but the fact is that the markets are convinced that the FED will always support them, and therefore a dip is just another buying opportunity.

We all know that this will end badly.  A chink in the armor could be the NASDAQ.  It’s still in a downtrend.  I’m looking for the NASDAQ buying to stop on Monday, and to continue it’s downtrend – potentially bringing weakness into the S&P and the DOW over the next week or so.

The facts are: of the companies that have reported thus far, 67% of them have MISSED their top line / revenue estimates.  And these ‘estimates’ have already been lowered.  These same companies are beating on the bottom line by not hiring, doing stock buy-backs, and by manipulating their accounting.  Companies can easily ‘adjust’ their earnings per share, but they can't ‘adjust’ their revenues.  Combine that with the fact that just last week beef, pork, shrimp, soybeans and soy meal all hit RECORD high prices.  Combine that with the steady climb back towards $4 per gallon gasoline and stagnant wages.  What you have is a market that does not reflect our true underlying economy.

I'm still leaning slightly long on the DOW, but I’m beginning to nibble on shorting the rallies on the NASDAQ.  Honestly – none of this feels right.  It feels like I’m missing something – that’s right there in plain sight.

Tips:

The $500M ‘fake short’ in Gold surprised me (as it did most people) last week.  Our position in TLT also took a hit last week – presumably on the belief that the dispute in the Ukraine would be settled over this weekend.  I’m still holding my position in (MNKD), for it’s 2% weekly yield on the call options.  MNKD is currently selling for $6.25 / share – with the $6.50 call options paying you 13 cents per week.  The energy sector has been nothing short of ‘on fire’ as of late, with our USO positions soaring for nice gains indeed.  I also opened some positions in smaller stocks that I think have a good chance of doubling (or more) over the next 12 to 18 months.  Those stocks are listed below, and a couple that I’m still following are:  PFIE, LSCC, VNTR and FPP.  This week I see TLT and Gold as being buyable, and potentially the NASDAQ as being a nice short candidate – topping off on Monday. 

My current short-term holds are:

-       MNKD – in @ $6.35 – (currently $6.25)

-       USO (Oil) – in @ $37.19 - (currently $37.68),

-       BXE (Oil) – in @ $9.11 – (currently $9.16),

-       LSG (Gold) – in @ $0.78 – (currently $0.75),

-       NGLS (Nat Gas) – in @ 60.11 – (currently $61.33),

-       POZN (Pharma) – in @ $8.68 – (currently $8.70),

-       PTIE (Pain Tmt) – in @ $5.34 – (currently $5.38),

-       RFMC (Tech) – in @ $7.96 – (currently $7.87),

-       SIL (Silver) – in at 24.51 - (currently 12.33) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 124.74) – no stop ($1,295 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 18.88) – no stop ($19.67 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>