This Week in Barrons – 11-29-2015:
Dear President Obama:
There was at least ONE record set on this year’s Black Friday, and that was the processing of 185,000 weapons background checks on a single day. And just this week we were reminded why – people are scared. We were vividly reminded of the horror that can be created, when 2 people (armed with AR 15's) went into a company function and killed 14 people. Companies are asking the question: “Are we next”? And as our economy slides further downward, and the economic dislocations become larger than in the 2008 melt down, I think that there will be more of these ‘outbursts’. Gun shops are selling 4 TIMES more weapons than last year. J.Q. Public is ‘talking with his wallet’ that no amount of militarized police, or ‘warm and fuzzy’ talk is going to stop bad people from doing bad things.
President Obama you continue to say that we are the only country that has these problems, when factually the world suffers more than we do. For example:
- France (in 2015) has suffered more casualties from mass public shootings than the U.S. has suffered during your entire presidency - (508 to 424 – and that includes Wednesday’s San Bernardino massacre).
- Norway, Anders Behring Breivik used a gun to kill 67 people and wound 110 others – with still others being killed by bombs that Breivik detonated.
- Of the TOP 4 worst school shootings, 3 have occurred in Europe with Germany having 2 of them.
- And in 2004, Beslan, North Ossetia-Alania, Russia was the scene of a terror attack where 32 armed men invaded a grade school – capturing over 1000 hostages, and killing 386 people over the 3-day event.
President Obama, between 2007 and 2011 (outside of Iraq, Afghanistan and the U.S.) there were an average of 6,282 terrorist attacks per year with more than 27,000 people (on average) being killed, injured or kidnapped. As the years go on I fear that we will dissolve into more social unrest, with even more staged events, and that the 185k Black Friday figure will continue to grow exponentially. This is NOT a U.S. issue, but rather a global issue. What will it take for us to put our politics aside and take a real first step?
I’m sorry to say, the economic news this week wasn’t exactly wonderful:
- The Index of Purchasing Managers was supposed to report a 50.5 level – and instead came in at a 48.6 level – with new orders falling once again.
- The ISM Manufacturing Index fell to its worst level since 2009.
- The CEO Economic Outlook dropped back to its 2012 level.
- And the Swiss 10-year bond is now yielding an insane NEGATIVE 0.41%.
However, there was good news out of China this week. Their currency (the Chinese Yuan) was admitted to the International Monetary Fund’s (IMF’s) Special Drawing Rights (SDR). This is a strategic basket of global currencies that are combined to form a global ‘elite’ currency. It gives China the measure of respect and prestige that they deserve, and forces all of the big currency players to take them seriously. But, it doesn’t end there.
Our global plan continues to try and draw Russia into the world’s hot spots and see what kind of weapons they bring to the party. The more missiles and electronic jamming devices they employ in Syria (for example), the more we get to learn about their latest technology. Meanwhile, China is building Islands in the South Sea for the purpose of expanding their navy and corresponding naval bases. Throughout history, war has been the solution for virtually every major economic calamity. Bankers love it because they get to finance both sides. Elitists love it because they can hide in the shadows, and not get blamed for causing the war (which they did).
So China's inclusion into the IMF’s SDR is not just about accepting the world’s second largest economy into the ‘Big Boys Club’, but rather another dagger in the heart of the U.S. dollar. If I’m right, not too far into the future we will hear about China wishing to back their Yuan with a percentage of GOLD. At that point the world will need to make a decision: Do the major players want U.S. Dollars that are backed by nothing more than the ‘full faith of our Government’, or will they want the Chinese Yuan that is backed by gold? Naturally, the Yuan will soar, causing large pension and insurance funds to sell U.S. Dollars, Euros, Yen and British Pounds – in order to increase their stake in the Chinese Yuan. And other nations will then react by increasing their gold holdings in order to prevent any further erosion of their own currencies.
Also this week, ahead of Mario Draghi's ECB statement, funds ‘bought the rumor’ that he would do a lot more QE and slash deposit rates to record levels. However, his official announcement wasn't nearly as big of an event as all had anticipated – so all those ‘buying’ funds instantly ‘sold the news’. And by the time Thursday was over, we had lost over 300 DOW points.
But on Friday we received two bits of news. First the Non-Farm Payrolls report told us that (on the surface) the U.S. had created 218k jobs last month. Of course what was hidden behind that 218k number, was the creation of 311k ‘part-time’ jobs which (therefore) caused the ELIMINATION of 93k full-time positions. I guess none of the news agencies had the backbone or the moral obligation to report that. Secondly, Mario Draghi came out on Friday and basically said: “Hey, don't fret over what I just said on Thursday, I'm really going to dump all the QE necessary to drive inflation up to 2% - and I'm going to do it quickly." Those two elements combined for a positive 370 DOW point and 42 S&P point up day.
So what happens now? We have a FED meeting on the 15th and 16th, and their decision on rates (going higher) will be delivered on the 16th. Therefore, we only have 7 trading days before we hear what the FED will do. Will the markets remain brave into that day, and try and move over their various resistance levels at 2094, 2103 and then at 2116? I tend to think that in the beginning of the week we will give back some of Friday's gains. I think we fade back from 2092 to 2080 on the S&P, then firm up, trade sideways for a bit, and then finally try and attack those same 2094, 2103 and 2116 levels.
I would like to:
- Add to the UVXY trade below because volatility should increase going into the FED meeting on the 16th.
- Look at an Iron Condor on Apple (AAPL) either the Dec5, 105/110 to 125/130 for $0.62 or the Jan 100/105 to 125/130 for $0.86.
- Look at an Iron Condor on Caterpillar (CAT). I think it has found a temporary floor with earnings due out at the end of January. Either sell the Jan 60/62.5 to 75/77.5 Iron Condor for $0.52 or the Jan 55/60 to 77.5/82.5 Iron Condor for $0.31.
- Finally look at Harley Davidson (HOG). With earnings on Jan 28th, there is a rumor of a potential ‘leveraged buyout’ which could cause some upside movement in the stock. I think their present 2.6% dividend yield and their 12 P/E will keep a floor on the stock. I would look to sell the 42.5 / 45 Put Credit Spread for $0.29, or (if you like the rumor) then sell the 45 / 47.5 Put Credit Spread for $0.96.
- Long various mining stocks: (AG, AUY, EGO, GFI, IAG, and FFMGF),
- Long the FANGs (Facebook, Amazon, NetFlix and Google),
- Long AMZN, December, Broken-Wing Butterfly (690 / 700 / 705),
- Long REN @ $0.56 – currently $0.91
- Sold the SPY, Dec4, Iron Condor (190 / 195 to 216 / 218),
- Sold the IYR, Dec, Call Credit Spread (-76 / +77),
- Sold the UVYX Dec, Put Credit Spread (-22 / +21), and
- Sold the XRT Dec, Call Credit Spread (-42.5 / 45).
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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Until next week – be safe.