RF's Financial News

RF's Financial News

Sunday, September 27, 2015

This Week in Barrons - 9-27-2015

This Week in Barrons – 9-27-2015:

Thoughts:



Does the punishment really fit the crime?


GM vs VW (and the rest of the world):

Remember when GM put cars on the road that they KNEW had faulty ignition switches.  The ignition switch only cost $1 to fix, but if it failed could turn your car off causing: no power, no airbags, no brakes, etc.  GM knew that they had a problem, but they kept selling cars, and did not institute a recall.  The confirmed deaths range from 129 to over 300.  The bottom line is that people died in cars produced with a KNOWN defect.  Clarence Ditlow (Exec. Dir. for the Center for Auto Safety) said: "GM killed over 100 people by knowingly putting a defective ignition switch into over 1 million vehicles.  Yet no one from GM went to jail, or was even charged with criminal homicide.  GM (since 1966) has paid millions of dollars to keep criminal penalties out of the Vehicle Safety Act.  Today, GM officials walk off scot-free while their customers are 6 feet under."  The GM fine was $900M, no criminal penalty, and a promise to do better next time.

On Monday, Fortune magazine reported that Thomas Lund (one of the highest ranking former officials of Fannie Mae) settled charges brought by the SEC back in 2011 that he helped deceive Fannie Mae’s shareholders in the run-up to the financial crisis.  The suit claimed that Mr. Lund, who was the head of Fannie's single-family division, helped hide more than $100B of subprime exposure from Fannie's shareholders – allowing it to continue to back more and more risky loans.  According to the prosecution, “Thanks to Mr. Lund's chicanery, the bubble in mortgage finance caught investors unaware.  This resulted in losses of at least $8 Trillion in the U.S. stock market alone.”  Arguably, in September 2008, this brought the entire financial industry (and the world economy) to the edge of collapse – not to mention millions of people losing their homes.  Mr. Lund's penalty for his role: a mere $10,000.  What's more, the penalty will not be considered a fine, but rather a "gift to the U.S. government."  And let’s not forget that the government had to bail out Fannie and still controls it.

So, GM killed people – and received a $900M fine and a slap on the wrist.  Fannie Mae defrauded umpteen thousands of people out of their homes, ruined their lives, and helped create the greatest financial meltdown in 75 years – and received a $10K dollar fine and a slap on the wrist.

Now enter Volkswagen.  VW is one of the largest automakers on earth.   The U.S. would like to fine VW $18B for knowingly allowing the car’s software to say that it was producing less carbon emissions than it actually was.  They did not kill anyone.  They did not swindle nations out of trillions of dollars.  They openly lied about their carbon amounts, and for that will be ‘darn near’ bankrupt.  Why is the U.S. pouncing on VW so hard?  First, the ‘powers that be’ (including the Pope) have been pushing the danger of global warming on us for more than 15 years.  According to them, global warming is the single biggest threat of all time, and they stand fully ready to regulate, tax, and make us conform to the carbon credit market.  Secondly, the U.S. expects all nations to do as we tell them without question, and if they don't – bad things will happen to them: Libya, Saddam, Syria, Russia, etc.

The U.S. has been having an issue with certain aspects of Germany for a long time: from NSA spying to asking us to return their gold.  Germany was vocal about not liking our Russian sanctions, and was opposed to the QE programs of the ECU.  And VW had plans to build a massive all-electric car plant in China.  They were going to spend 22B Euro's in China, making 15 different, electric car models – cheaper, faster, better and rechargable faster than the Tesla.  Do you really think that the U.S. was going to miss an opportunity to shut down the expansion of a Chinese/German business?

I also find it interesting that the VW news broke just two days after the ‘Russia Insider’ newspaper declared that Germany was ditching its ‘Anti-Putin’ campaign and welcomed Russia’s help in Syria to end the war, and with the refugee issue.  Now don't get me wrong, VW did indeed lie and break the rules.  However, does the $18B punishment really fit the crime?


The Market:

On Thursday evening, Janet Yellen gave a speech at the University of Massachusetts where she (at the end of her talk) almost appeared to have suffered a stroke.  I was hoping that this was an inflection moment, and she would have an epiphany – look into the crowd and say: “Forget all the crap I just said. We're stealing your money, giving it to the banksters, and there's nothing you can do about it."  I would have actually applauded a move so bold, but unfortunately it didn't happen.

Instead, she spoke as if the most recent FOMC ‘no rate hike’ decision didn’t happen.  This message was designed to tell the stock market that this next rate hike would be a ‘one and done’, and any return to ‘normalization’ was off the table.  She then said: “The lowest the FOMC can feasibly push the real federal funds rate is essentially the negative value of the inflation rate.  As a result, the Federal Reserve has less room to ease monetary policy when inflation is very low.  This limitation is a potentially serious problem because severe downturns such as the Great Recession may require pushing real interest rates far below zero for an extended period to restore full employment at a satisfactory pace."  So, she’s going to raise rates IF she doesn’t have to push rates NEGATIVE to save the world?

Now, there were other big headline items this week:
-       Chinese President Xi visited the White house.  It’s interesting when the worlds biggest debtor comes face-to-face with the worlds biggest lender.
-       Presumably to prevent a government shutdown, Speaker Boehner announced his resignation.
-       The UN appointed Saudi Arabia to head their human rights council.  Saudi Arabia (the nation with the most beheadings) celebrated their new status by announcing the crucifixion of a teen because he mocked the king.
-       And then there’s the biotech slime-ball that increased the price of his drug from $13 a pill to over $700 a pill.  Given he’s an X-Jim Cramer student and an X-Hedge Fund manager, I’m guessing he made a small fortune shorting the biotech sector this week.

Bottom line?  The wheels are close to coming off.  Ten major markets are effectively crashing.  World alliances are changing.  Since 2008, the nations of the world have cut their interest rates over 550 times.  Events are coming at us fast and furious: from China's market melting down to the commodity implosion, from the transport sector declining to the shipping rates collapsing.  So please be careful out there.

For those of you looking to ‘short the market’ via ETF’s – consider the following:
-       The S&P short is the SH.  The SDS double shorts it, and the SPXU is the triple short.
-       The financial sector triple short is FAZ.
-       The RWM shorts the small caps.  The TZA triple shorts them.
-       The PSQ shorts the NASDAQ.  The QID is the double short, and the SQQ is the triple short.


TIPS:

-       INDU 16,314: We could be getting ready for a bounce up to the 16,600 – 16,800 range again
-       NDX 4221: A strong move this week into 4,300 could trigger a follow-thru to 4,400 next week.  Apple could be a catalyst for this move by releasing any early iPhone sales numbers.
-       SPX 1931:  Watch the 1960 level to see if we can rally into that zone.  The VIX rallied into the close so all bets are off for Monday morning.
-       RUT 1122:  The Russell has been under-performing the rest of the market and that remains a concern.  We need to see some real broad based strength in this index, and a solid move to 1160.
-       The Biotechs (on Friday) had their largest decline in the past 7 years.
-       Hedge funds are the ‘shortest’ they’ve been in the past 4 years.
-       Because we’re coming into earnings season, I think the chance of going up exceeds that of any additional downward pressure.

Recommendations:
-       SPY – Sell an Iron Condor – Nov @ 166 / 168 to 207 / 209,
-       REN – Long-term buy on this small oil stock priced @ $0.50,
-       OAS – Long-term buy on this small oil stock priced @ $11,
-       If we lose 1913 on the S&P, I'll start scaling into some SDS.  The first level of support on the S&P would be at 1913.  Below that it would be 1867 and then 1800.  On the upside, if the S&P gets over 1995, we’ll be headed for 2033.
-       If the DXD gets over 24.14, it will be time to start shorting the DOW.
-       If the FAZ gets over 13.40, it will be time to start shorting the financials.

I’m currently light – but did begin some buying this week:
-       ADBE – SOLD – Iron Condor – Oct @ 75 / 77.5 to 90 / 92.5,
-       GOOGL – BUY – Call Debit Spread – Oct @ 705 / 715, 
o   BUY – Call Debit Spread – Oct @ 650 / 660,
o   BUY – Call Debit Spread – Oct @ 680 / 690,
-       LL – SOLD – Iron Condor – Oct @ 12 / 13 to 18 / 19,
-       NFLX – BUY – Calls – Oct @ 100,
o   BUY – Calls – Oct @ 105,
o   BUY – Calls – Oct @ 110,
o   BUY – Calls – Oct @ 120,
-       RUT – BUY – Butterfly – Nov @ 1080 / 1160 / 1230,
-       SPX:
o   SOLD – Iron Condor – Oct1 @ 1915 / 1920 to 2005 / 2010,
o   SOLD – Iron Condor – Oct2 @ 1850 / 1855 to 2015 / 2020,
o   SOLD – Iron Condor – Oct2 @ 1895 / 1900 to 2060 / 2065,
o   SOLD – Iron Condor – Oct @ 1894 / 1900 to 2025 / 2030,
o   SOLD – Iron Condor – Oct4 @ 1800 / 1805 to 2050 / 2055,
o   SOLD – Iron Condor – Oct4 @ 1825 / 1830 to 2070 / 2075,
o   SOLD – Iron Condor – Oct4 @ 1880 / 1885 to 2120 / 2125,
o   SOLD – Iron Condor – Oct5 @ 1860 / 1865 to 2090 / 2095,
o   SOLD – Iron Condor – Oct5 @ 1780 / 1785 to 2070 / 2075,   
o   SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.


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!

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

<http://rfcfinancialnews.blogspot.com>

Sunday, September 20, 2015

This Week in Barrons - 9-20-2015

This Week in Barrons – 9-20-2015:



Thoughts:












“Recent global economic developments may restrain activity, and are likely to put further downward pressure on inflation.”


Dear Ms. Yellen:

With that single sentence you said: ‘We are not going to raise rates, regardless of how great we tell you the U.S. economy is’.  And what I heard was: ‘The economic data that you’re releasing is solely there to make me feel good’.  In reality, your actions clearly tell me that the economy it is NOT as great as you have lead me to believe.

Yes Ms. Yellen, both you and the President have thrown strong U.S. economic data in my face for years: GDP improving 2.3%, U3 Unemployment 5.1%, and 0% Inflation.  This has led me to believe that the U.S. economy was roaring back, and stronger than ever.  Your marketing plan worked like a charm.  But now you’re telling me: ‘April Fools – this economy isn’t even strong enough to raise interest rates by a measly 0.25%’.

So I am to assume that if you removed ALL of the FED’s monetary accommodation (including your ongoing bond and MBS buying and let rates float) that our economy would go right down the toilet – yes?  So the fundamental reality is that your monetary policy and your direct participation in the financial markets (coupled with allowing leverage to expand) are the primary factors improving the economic data.  And by removing those elements, this economy suddenly stinks like 5-day old fish.

Ms. Yellen, I think your press conference was one of the purest examples of outright lying and deception I've seen in a long time.  The good news is that the world was watching.  I think you and the rest of the FED have lost every ounce of credibility you may have had, and were exposed as public shills to the stock market.  All of the press corps left that room with the same feeling: ‘Janet Yellen has been lying to us for months’.  You had your shot, and you took a pass.

All of this new talk about raising rates in October or December is now just pure speculation – just what you claimed you were trying to avoid via FED  ‘transparency’.  In fact, one of your members actually predicts that in the next year interest rates will go ‘negative’.  So we have gone from raising rates to: negative rates, more QE, bail-in's, forced Treasury note buying, and retirement account seizures – all in the blink of an eye.  The Bank of International Settlements (to which you belong), reported this week that ‘you engineered the bubble, and therefore you will also engineer the upcoming crash.’

I can hear your next speech now.  You should start with: “Come with me if you want to live.”  You should end with: “I’ll be back.”  And what I will remember is: “Hasta la vista, baby.”


The Market:

We are experiencing the death of an era.  We’ve seen the rise of China's manufacturing economy, and a tech era that took us from dial up Internet connections to fiber optics to cars that drive themselves.  Not to be outdone, we’ve seen the world’s central banks create money and contort monetary policy in order to smooth-out business cycles.  Even our business leaders were successful in convincing gullible Americans that off-shoring and sending manufacturing to China, Vietnam, Mexico, and Pakistan was good for us because they could do the labor and we would be the brains.

Now that we’re seeing the world dipping into recession (Canada was the latest to report 2 negative GDP quarters in a row), we are shouldered with too many resources, factories, and people.  Banks are shackled with too much toxic paper, and over $70 TRILLION worth of questionable derivatives. 

Factually:
-       The OECD cut its 2015 global growth forecast to 3%.  It expects Chinese growth to slow from 7.4% in 2014 to 6.7% in 2015.
-       Inflation across the Eurozone weakened to 0.1% in August.
-       Standard & Poor’s lowered its credit rating on Japan.
-       Hewlett Packard is laying-off 30,000 workers, and offshoring more of it’s engineering.
-       FedEx (after missing earnings estimates) announced that it will be raising its rates by 5% in January.
-       The Empire State Manufacturing Index posted its lowest reading since 2009.
-       Retail sales (excluding autos) were well below estimates last month.
-       Industrial production fell worse than expected – with auto parts seeing their largest drop since 2011.
-       But the news that woke me up was GE’s Jeff Immelt (the ‘Chair’ of President Obama's Council on Jobs and Competitiveness) announced that GE will begin shipping more jobs overseas.

As you can tell by now, the world is running on empty.  Everywhere you look, economies are either failing, or being propped up by life support.  I don't for a minute think that this is some kind of ‘buy on the hip’ philosophy.  This is a structural change we're facing, total exhaustion, a period that has ‘run its course’.  I tend to think that we're staring down the barrel of a long, protracted economic fade, and that no matter what they throw at it, it has to find its equilibrium – and that will be a painful process.

Until our FED comes out with their next scheme to try and prop up our economy – the ‘top’ is in.  We are starting to move sideways and down.  Yes, we will bounce, but then we will fade away again – each time a bit lower.  

How can I be sure?  Because Ms. Yellen didn’t raise rates.  She didn't even continue the propaganda that the ‘U.S. alone is strong enough to begin rate normalization’.  Now, when people look at the Empire State Manufacturing Report coming in at MINUS 15, or the Philly Fed reporting a MINUS 6, they will start to understand that the recovery is indeed nothing more than illusion.  I suggest that investors will be more critical of company earnings, and begin to question some of the abject fraud erroneously labeled as ‘aggressive accounting procedures’.  Investors were okay with the fraud as long as the FED was on board.  Now, they won't be so inclined.

Volatility will ‘rule the roost’.  Banksters want asset prices rising so they can create even more toxic derivatives using fictionalized assets as collateral.  Investors are beginning to fear that the FED can't make it happen any more.  The upcoming ‘tug-of-war’ will be impressive to say the least.  I think it's prudent to learn about inverse ETF's, going short, and how to purchase put options – if you haven't done so already!


TIPS:

In terms of Indexes:
-       DOW - 16,385:  We broke thru and closed below our 16,400 support level – so I’m showing 16,200 as the floor for the coming week.  Once bond yields rise in the fall – the equity markets will again be the place for capital – but next week is still touch-n-go.
-       NDX – 4,827:  We’re at short-term support, with 4,200 as a broader low support area.  This index is extremely volatile so expect action.
-       SPX – 1,958:  We are returning to the days of a high volatility range bound market between 1,920 and 2,000.
-       RUT – 1,163:  Of all of the indices, the Russell is the measure for the broadest flow of capital.  The Russell looks relatively STRONG compared to the other indices, and actually long-term bullish.  A drop to 1,160 is possible and then a run higher to the end of the week.

Recommendations:
-       Goldman Sachs (GS): SOLD SEPT $192.5 / 195 Call Credit Spread
-       American Express (AXP): SELL Call Credit Spread
-       Tesla (TSLA): SOLD 237.5 / 240 Put Credit Spread
-       Amazon (AMZN):  SELL Put Credit Spread
-       REN – Long-term buy on this small oil stock priced @ $0.50
-       OAS – Long-term buy on this small oil stock priced @ $11

I’m currently a little light – but holding:
-       RUT – SOLD – Iron Condor – Oct 1090 / 1100 to 1250 / 1260,
-       SPX:
o   SOLD – Iron Condor – Oct1 @ 1895 / 1900 to 2055 / 2060,
o   SOLD – Iron Condor – Oct1 @ 1905 / 1910 to 2055 / 2060,
o   SOLD – Iron Condor – Oct1 @ 1915 / 1920 to 2170 / 2175,
o   SOLD – Iron Condor – Oct1 @ 1925 / 1930 to 2170 / 2175, 
o   SOLD – Iron Condor – Oct2 @ 1850 / 1855 to 2060 / 2065,
o   SOLD – Iron Condor – Oct2 @ 1895 / 1900 to 2060 / 2065,
o   SOLD – Iron Condor – Oct4 @ 1825 / 1830 to 2070 / 2075,
o   SOLD – Iron Condor – Oct4 @ 1880 / 1885 to 2120 / 2125,
o   SOLD – Iron Condor – Oct5 @ 1860 / 1865 to 2200 / 2205,
o   SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.


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!

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

<http://rfcfinancialnews.blogspot.com>