This Week in Barrons – 10-11-2015:
Dear Ms. Yellen:
One of my favorites lines from the movie ‘The Intern’ was: “We’ve created a society where girls become women, and men become boys.” So Ms. Yellen, from one ‘boy’ to another ‘woman’ can I ask you to: Grow a Pair – and stand up to your bankster buddies. By even suggesting negative interest rates tells me that you’ve given up on trying to cure this country’s economic woes. We went from an interest rate hike of 25 basis points, that would have cost the U.S. treasury an additional $500B in national debt servicing fees. To keeping rates at zero, that tells everyone their accumulated savings from all of their hard work is worth NOTHING. And now you’re thinking about charging people to store their own money in banks – just so your bankster friends can make a couple extra bucks.
I realize that Deutsche Bank just reported an $8B loss, and that Bank of America along with JP Morgan are set to report fairly substantial losses this quarter as well. And I understand that you would like to help out your friends by allowing them to charge interest on deposits. But do you remember rejecting that very same option during the darkest days of the financial crisis in 2009 and 2010?
Negative interest rates (just so we’re clear) would turn my $100 deposit into $98 over time by allowing the bank to charge me $2 in interest / storage fees on my own money. I know that two FED officials: William Dudley (President of the New York FED) and Narayana Kocherlakota (President of the Minneapolis FED) are out ‘talking up’ the negative interest rate idea. But Ben Bernake recently said: “We decided not to move to negative interest rates because the benefits are not that great, and it may have adverse effects on money market funds.”
But Ms. Yellen, it gets even better:
- When you changed the banking rules, you turned depositors into lenders. That means that the moment I deposit money into a bank – it is no longer my money, but rather yours.
- By depositing money into a bank, I am actually ‘lending’ money to that bank. And banks have NO fiduciary responsibilities to lenders. Therefore, the instant you put money into a bank – they have the capability to immediately invest those funds into high-risk assets in order to earn the spread and any gains from appreciation.
- Now the average J.Q. Public thinks that if the bank makes some bad decisions and goes under – at least the FIDC will save them.
- As you and I both know, that’s not exactly true. Since deposits are considered bank liabilities, when the FDIC takes over a bank it could very well convert a bank’s liabilities into bank stock. And bank stock can go down, if and when the bank goes down.
- The average J.Q. Public may even think that they are “FDIC insured.” Unfortunately, NOT in this situation. Depositors would be turned into shareholders of that bank, and (unfortunately) shareholders are NOT FDIC protected.
Ms. Yellen, are you really willing to risk the health of the U.S. economy just to help out your bankster friends – yet again?
- The most recent ISM (services) report showed the largest drop in ‘new orders’ since 2008, and that prices are indeed DEFLATIONARY.
- The latest Japanese orders fell by 6%, and German exports fell by 5%.
- The IMF cut its global growth forecast for the 4th time in 12 months.
- Adjusted for inflation, the average worker makes LESS than in 1985.
- Deutsche Bank announced an $8B 3rd quarter loss. That means Deutsche Bank, Adobe (a software company), Yum Brands (a restaurant company), and Monsanto (an agricultural company) will all miss earnings estimates by significant margins. This isn’t a good sign for the economy.
- Since 2009 companies have bought back over $2.4T in stock, and that has accounted for a 21% stock price increase. Prior to 2008, companies bought back less than $25B billion in shares per quarter. Today, companies are buying back stock at almost 6 TIMES that rate.
- In the Middle East, the U.S. wants Syria’s Prime Minister Assad out of power; therefore, we have been arming the rebels in order to take Assad down. However, Russia is friendly with Assad, and is taking out the rebels and ISIS along with them. This has caused Turkey, Saudi Arabia, Iran and China to get involved. It's only a matter of time until someone makes a mistake and either downs the wrong plane or hits the wrong group on the ground.
If you look inside the market, you will find some real carnage. For example: Micron Technologies was $35 in January and $14 two weeks ago. Caterpillar was $92 in January and $63 two weeks ago. And SanDisk was $99 in January and $49 two weeks ago. The big money rotated from these ‘sinking ships’ and into other ‘darlings’. That has kept the averages from showing the market’s true destruction. I tend to think that the big money is running out of places to hide. When the current ‘darlings’ roll over, the big money will simply sell out. I believe that the market top was set in May, and we are in a slow motion roll over.
This earnings season is shaping up to be a disaster. Everyone will blame China. But what they won’t say is that the world (including the U.S.) is drifting into a deeper recession. There are a lot of people’s lives, careers, and derivative positions depending on ever-rising asset prices. The ‘powers that be’ will toss the kitchen sink and garbage disposal at keeping stock prices higher. I tend to think they can't keep it up much longer.
- NFLX – NetFlix jumped from $106 last week to $113+ this week, and announced an increase in their price to new subscribers. NetFlix has earnings on Wednesday, and this $1 price increase will play nicely into its forward guidance. We also know that implied volatility will increase into earnings – so (knock-on-wood) we’re looking good into Wednesday’s earnings release.
- Watch the symbol FFMGF. It’s selling for 31 cents right now. Now I’m not a penny stock guy, but I like a bargain just like anyone else. This company funds and buys precious metal mines that are basically in bankruptcy. The metals have been held down artificially, and some day the manipulation will either end of it's own, or be overpowered by the demand for physical product. When the paper market finally loses control of the price of the metals, I think FFMGF will have a long way to rise, and this $0.31 stock could easily be a 10X gainer. FFMGF could easily be at $10 if the caps come off the metals, Gold goes to $2500/oz., and/or Silver comes back to $50/oz.
I’m still light – but buying more and more NFLX and AMZN heading into earnings:
- ADBE – SOLD – Iron Condor – Oct @ 75 / 77.5 to 90 / 92.5,
- AMZN – BUY – Calls – Oct4 +515 / -530 Call Debit Spread
- LL – SOLD – Iron Condor – Oct @ 12 / 13 to 18 / 19,
- NFLX – BUY – Calls – Oct @ 100, BUY – Calls – Oct @ 105, BUY – Calls – Oct @ 110, BUY – Calls – Oct @ 118, BUY – Calls – Oct @ 120,
- NKE – SOLD – Iron Condor – Oct 112 / 115 to 129 / 132,
- YHOO – SOLD – Call Credit Spread – Oct -32 / +35,
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!
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