This Week in Barrons – 12-13-2015:
“Did I fire 5 shots, or did I fire 6? Do you feel lucky?”…Clint Eastwood as ‘Dirty Harry’
Dear Ms. Yellen:
Clint Eastwood’s line from the movie Dirty Harry relied upon the individual at the other end of the gun being a confused amateur and not totally aware of his surroundings. That’s exactly how you’re treating the up-and-coming FED rate hike decision on December 18th, 2015. Depending upon how you count them: QE1, QE2, QE3, Cash-for-Clunkers, Operation Twist (oops – was that QE3?), I actually lost count of how many monetary injections the FED has architected. So I’m not sure whether you’ve fired 5, 6 or 10 shots.
But Ms. Yellen, if your goal was to: economically confuse J.Q. Public, create un-payable debts, and lower our standard of living – you have succeeded. In fact, this is just too darn perfect to be considered a series of accidents or bad decisions. Honestly, I don’t believe that good people could screw THIS many things up THIS badly.
I remember a 1983 piece by Charley Reese called: “The 545 People Responsible for America’s Woes.” Some excerpts follow:
- One hundred senators, 435 congressmen, one president and nine Supreme Court justices = 545 human beings (picked from over 300 million) are directly, legally, morally and individually responsible for the problems that plague this country.
- Politicians are the only people in the world who create problems, and then campaign against them.
- Have you ever wondered why, if both the Democrats and the Republicans are against deficits – we have deficits? Have you ever wondered why, if all the politicians are against inflation and high taxes – we have inflation and high taxes?
- After all:
o We don't propose a federal budget – the President does.
o We don't vote on appropriations – the House of Representatives does.
o We don't write the tax code or set fiscal policy – the Congress does.
o We don't control monetary policy – the Federal Reserve Bank does.
- These same 545 human beings spend much of their energy convincing you and I that what they did – is NOT THEIR FAULT.
- - It seems inconceivable to me that a nation of over 300 million cannot replace 545 people who stand ‘factually’ convicted of incompetence and irresponsibility.
- - I cannot think of a single problem (from an unfair tax code to defense overruns) that is not directly traceable back to those 545 people.
- - Therefore, it must follow that what exists is what they want to exist. If the tax code is unfair, it's because they want it to be unfair. If the budget is in the red, it's because they want it in to be the red.
- - There are no unsolvable government problems. Do not let these 545 people CON you into believing that ‘the economy’, ‘inflation’ or ‘politics’ are preventing them from executing their oath of office.
Ms. Yellen, Charley is as right today as he was in 1983. You do not take the most successful nation, with the strongest economy, with the highest morals, and turn it into the mess we are in now – BY ACCIDENT. You couldn't string that many accidents together. You’re fortunate that on July 2, 2013, Congress repealed the Smith Mundt Act.
What is the Smith Mundt Act? The Smith Mundt Act was put in place to make it illegal for the U.S. Government to use coordinated propaganda to influence people over the airwaves. After WWII, propaganda was being actively broadcast around the world. The Smith Mundt Act made it illegal for our Government to turn its massive propaganda machine against its own citizens. Unfortunately it was repealed on July 2nd, 2013, and from that moment on the U.S. Government has the legal right to produce PROPAGANDA and spread it through any arm of the media.
So Ms. Yellen, without the Smith Mundt Act to protect me, I don’t know whether you’ve fired 5 or 6 shots. And just like Dirty Harry, aren’t you simply taking advantage of J.Q. Public being financially unaware and confused? If I were a betting man, I think the next bullet that you will be firing is a ‘rate hike’ bullet on December 18th, 2015.
When the FED raises interest rates by 25 basis points on Wednesday, it will be a strategy employed to quiet Congress, the markets, and the media. It is designed to sell some confidence about the economy and to boost economic moral. It also gives the FED room to cut again when needed. The markets currently sit precariously back at support levels, awaiting the FED. But even with the upcoming meeting, this past week’s market activity was ‘odd’ at best.
On Friday futures were in the toilet heading into the open, and we closed down 309 DOW points and 39 S&P points. Why did that happen?
- Europe was weak on Thursday night.
- Oil was plunging.
- High Yield credit was falling.
- Another hedge fund stopped paying out redemptions.
- And the Chinese devalued their currency.
But, I think that the big culprit was tax selling by some big funds, coupled with portfolio adjustments surrounding Wednesday’s interest rate hike. While I expected the rate increase in September and they punted – I don't think they will punt this time. The argument for ‘no hike’ is that the FED should not be raising rates going into weakening economic data. And that’s a fine analysis if you’re talking about honest people actually trying to fix an economy. The FED (however) is nothing of the sort. The FED knows that it can't save the middle or lower class, so it’s simply trying to save the system. The FED is not our friend, and is not there to create jobs or bolster our currency. The FED is there to further a banking agenda.
The common thinking is that this will be a ‘one-and-done’ rate increase. I (for one) disagree. If they increase rates, the dollar will strengthen, and that’s certainly bad for exports. But the FED doesn’t care about exports, jobs, or the middle class. The FED cares about the carry trade, the financiers – the money people. It is those people that can do very well playing currency games with a strong dollar positioned against the Euro and the Yen.
But for the FED to initiate a rate hike campaign as the economy fades – means that something pretty big is coming. I don't know what, but I do know that this FED will NOT take the blame for a recession. So if they're putting on the brave face and hiking rates – they must know that something significant is right around the corner.
There are many strange things that can happen between now and the end of the year. The market could get pretty volatile, it could put on a brave face and soar higher, or both. I can assure you one thing; it will NOT be a time of calm.
DOW INDU (17,265): This index has been rattling around with some significant volatility. We will test 17,200 next week. The upside stall area is just above 17,800. I don’t think we see a breakout in either direction until after the FOMC meeting.
NASDAQ NDX (4,537): We did have a ‘gap-fill’ moment down to 4,500 before we bounced back in mid-November. Since then we have been in the 4600 to 4700 range. A drop to 4500 will certainly happen, and I suspect the index will stay in the 4,400 to 4,500 range until after the FOMC meeting.
S&P SPX (2,012): Much like the Dow Jones we saw this index bottom out in mid-November, rally back, and pretty much stick in the 2040 to 2100 range. We are testing the 2000 range, again and could see a drop back to the recent lows of 1950 and potentially 1900. We must wait for the Fed’s FOMC meeting to determine if we are going to sell-off or rally above 2100 into year-end.
RUT (1,124): The Russell (RUT) continues to be the best measure of order flow. The Russell has been in a bear market since June, and finally bottomed out in late September. Since then we have not been able to rally back to the June 1280-1290 highs. The Russell index will be the tell-tale sign for the market heading into year-end.
I am looking for:
- Google (GOOGL) (@ 750.42) to test the 733 level,
- Amazon (AMZN) (@ 640.15) to possibly test the 600 level,
- SPX (@ 2,012) to test the 1950 and then the 1900 level,
- NDX (@ 4,538) to test 4500 and then the 4400 level,
- TLT (bond ETF) currently is experiencing the largest short interest in its history. Either a lot of people are going to be right, or there will be a huge short-covering rally in TLT following the FED decision on Wednesday.
- Long various mining stocks: (AG, AUY, EGO, GFI, IAG, and FFMGF),
- Long REN @ $0.56
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.