This Week in Barrons – 6-21-2015:
Is this raccoon grabbing a quick ride, or is the gator taking his lunch to work?
Dear Ms. Yellen:
In our lives, I think we are constantly deciding whether we are the raccoon or the alligator. Are we just grabbing a quick ride like the raccoon? Or are we the alligator and simply taking our lunch to work? I remember President Nixon – one of the best at speaking like the raccoon, but acting like the alligator:
- He spoke like an anti-Semite, but ‘in fact’ saved Israel.
- He constantly made racist remarks, yet de-segregated the public schools in the South.
- He acted like a conservative, but signed more social welfare legislation than any president except for LBJ and FDR.
I think of Nixon as an alligator, and John Mitchell (his attorney general) said it best: “Watch what we do, not what we say.”
I bring this up Ms. Yellen because in last week’s news conference following your FOMC decision, you said that the economy was performing WELL – but then you proceeded to:
- Lower your GDP forecast for 2015 from 2.0% to 1.8% - after you already lowered it from 2.7% in March,
- Reiterate that there would be 2 – 0.25% rate increases in 2015, but then lower your 2016 rate forecast from 1.875% to 1.625%, and finally
- Reiterate that it would only be appropriate to raise rates when you see further improvement in the labor market, and you’re reasonably confident that inflation will move back to the 2% long-term target.
Bottom line, doesn’t that mean that our economy is going from bad to worse, and you probably won’t raise rates at all? And like the raccoon, you’re just hoping to just grab a ‘free ride’ until the next big event comes along?
And could that next big event be a war? We all know that nothing turns an economy around like a war. I’m listening to the U.S. ‘claim’ that Russia is becoming more aggressive in the Ukraine, but I’m watching us send additional heavy military and Air Force jets into the region. Who’s being the aggressor here? And if Eastern Ukraine (backed by the U.S. and NATO) were to successfully take back Western Ukraine, not only would tens of thousands of Ukrainians die – but wouldn’t Putin would be forced to protect his borders and build more missiles? In a world where every individual economy is going in the toilet, isn’t the phrase “Give Peace a Chance" needed more than ever? Unfortunately history has shown that it's times like these, when banksters have instigated wars to boost their individual economies. Today seems no different. So (in this case) I’m betting on the individual economies being the raccoons – just grabbing a quick ride. While the banksters are the real alligators – just taking their lunch to work.
The market this week:
- Fell hard on Monday – touching an intra-day low at 2072,
- Bounced on Tuesday,
- Added to its gains on Wednesday,
- Went ‘bananas’ on Thursday – with the DOW up over 200 points, and
- Rolled back over on Friday – losing over 100 DOW points.
What we saw this week was the market’s version of a ‘Hail Mary’ pass. The market was perched on the edge of a cliff. If 2072 didn't hold on the S&P, we were going down to 2050 (the 200-day moving average) in a hurry. The ONLY time the S&P has traded down to its 200-day moving average since November of 2012 was a short period in October of 2013 – which scared the hell out of everyone. But time after time (when this market has gotten close to rolling over) the FED and Central banks around the world have bought stocks, pumped money, and did all manner of things to save the day. This time they did more of the same. But added in some ‘fake’ rumors on Greece, bullish talk by various talking heads, and of course more stalling from Ms. Yellen and other banksters on interest rates.
Historically, next week is generally a bad week for the markets. And as Friday’s fade and last minute collapse into the close suggests, we could see more ‘follow-thru’ to the downside on Monday. But this coming week could rely as much on Greece as it does on past history. If a ‘kick the can’ solution is found, then we could be in rally mode. But if the Greek banks are forced to close to prevent a ‘run’, and there is no hint of any deal – we are indeed heading much lower. In fact, many of the weekend headlines are about 'Monday bringing Salvation or Ruin’ to Greece. Considering that this market is based upon perception rather than fundamentals, it will be Greek news that helps to steer the markets next week.
The bigger picture (however) is much cloudier. Let’s suppose Greece is ‘saved’ (again) and our markets rally - why? Greece is only important (a) to remain a NATO country, and (b) to keep other failed states like Italy, Spain, and Ireland from leaving the Euro along side it. In other words, if the EU/IMF spend umpteen billion euros to keep Greece in the Eurozone, all they have accomplished is keeping together an alliance of bankrupt nations. That’s hardly a success, and certainly not a reason for U.S. stocks to rally.
However, the world is waking up to our markets being in a massive bubble. Presidential candidates Donald Trump and Ron Paul talk about it daily. Even a few mainstream media outlets have questioned why the markets are so high. Maybe they all saw Caterpillar's latest financial report? Caterpillar (for 30 straight months) has seen declining retail sales. If there was a ‘global recovery’ in place, don’t you think that just once in 2.5 years Caterpillar would have an experienced a sales up-tick?
Be careful this week, because it could be absolutely news driven, and news can turn on a dime in any direction. If you're trading, take profits quickly as we're still in a pattern where dips are bought and rips are sold.
On Friday, the Chinese markets experienced a huge (6%) downward spike. And going into Friday’s close, the XLF (the Exchange Traded Fund (ETF) that tracks the financials) suddenly moved 1.6% lower. Therefore, China could take some of the attention away from Greece this week. I’m still looking for bonds to continue their rally, and for the XLF to continue their downward momentum (at least early in the week). Often the tone of the overall market is dictated by the financials; however, there has been continued strength in healthcare (XLV) and especially the bio-techs (IBB). With banks (XLF) and energy (XLE) having issues, and healthcare (XLV) and bio-techs (IBB) setting the pace higher – look for the S&P (SPX) to remain ‘range bound’ – hanging around that 2100 area. 2100 has been a natural magnet for the SPX all year, and I’m looking for that to continue into next month.
- COST, CBI and JNJ are fundamentally set to the upside.
- VRX, QRVO, TTWO, and AMAZN are all poised ‘technically’ to move higher.
- I continue to sell Iron Condors (40 to 90 days out) on the SPX around the 2100 level.
I’m currently holding:
- AGU (Agrium) – SOLD the July 97.5 / 100 Put Credit Spread,
- DPZ (Domino’s Pizza) – SOLD the July Iron Condor 95 / 100 to 125 / 130,
- FEYE (FireEye) – BOUGHT – June4 53.5 / 55 / 56 Broken Wing Butterfly,
o SOLD – 49 / 51 Put Credit Spread,
- IWM – SOLD the August 112 / 114 to 132 / 134 Iron Condor,
- - KR (Kroger) – SOLD a July 70 / 72.5 Put Credit Spread,
- - RH (Restoration Hardware) – BOUGHT a July / August $95 Calendar,
- - RUT – SOLD the August 1140 / 1150 to 1330 / 1340 Iron Condor,
o BOUGHT the July 1180 / 1250 / 1310 Butterfly
- - SPX:
o SOLD – Iron Condor – July2 @ 2005 / 2010 to 2180 / 2185,
o SOLD – Iron Condor – July2 @ 1985 / 1990 to 2190 / 2195,
o SOLD – Iron Condor – July2 @ 1985 / 1990 to 2160 / 2165,
o SOLD – Iron Condor – July @ 1990 / 1995 to 2180 / 2185,
o SOLD – Iron Condor – July4 @ 1860 / 1870 to 2235 / 2245,
o SOLD – Iron Condor – July4 @ 1940 / 1945 to 2175 / 2180,
o SOLD – Iron Condor – July4 @ 1955 / 1960 to 2185 / 2190,
o SOLD – Iron Condor – July4 @ 1955 / 1960 to 2175 / 2180,
o SOLD – Iron Condor – July5 @ 1870 / 1880 to 2230 / 2240,
o SOLD – Iron Condor – July5 @ 1925 / 1930 to 2195 / 2200,
o SOLD – Iron Condor – July5 @ 1935 / 1940 to 2195 / 2200,
o SOLD – Iron Condor – July5 @ 1925 / 1930 to 2185 / 2190,
o SOLD – Iron Condor – Aug1 @ 1935 / 1940 to 2225 / 2230,
o SOLD – Iron Condor – Aug2 @ 1920 / 1925 to 2230 / 2235,
o SOLD – Iron Condor – Aug @ 1840 / 1850 to 2250 / 2260,
o SOLD – Iron Condor – Aug @ 1885 / 1890 to 2180 / 2185,
o SOLD – Iron Condor – Aug4 @ 1895 / 1900 to 2195 / 2200,
o SOLD – Iron Condor – Aug4 @ 1895 / 1900 to 2240 / 2245,
o SOLD – Iron Condor – Sept1 @ 1880 / 1885 to 2215 / 2220.
To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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: <firstname.lastname@example.org> 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 <>.
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:
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://>
Until next week – be safe.