RF's Financial News

RF's Financial News

Sunday, March 6, 2016

This Week in Barrons - 3-6-2016

This Week in Barrons – 3-6-2016:

Thoughts:

















"Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves." … Norm Franz


Dear Ms. Yellen:

Ms. Yellen, I’m beginning to share the opinion voiced by S.F. this week that our society is becoming desensitized to our debt levels.  The level of ‘free stuff’ that our government is handing out has become obscene:
-       Total U.S. Debt                                             = $47.4 Trillion
-       Total # of U.S. Tax Payers                        = 119 Million
-       Total Due from EVERY Tax Payer            = $396,230
-       Average Tax Payer Annual Wage             = $52,000 / yr.
o   To payback debt, GIVE all wages to Gov’t for 7.6 years

-       Tot. U.S. Workers under Social Security             = 163 Million
-       Tot. Due from EVERY S.S. Recipient                  = $290,404
-       Average Social Security Income                         = $14,160 / yr.
o   To payback debt, FORFEIT all S.S. benefits for 20.5 years

So, in order to get our country back on track and out of debt – all we need to do is to have everyone work for FREE for the next 8 years, OR have everyone give back all of their Social Security benefits for the next 21 years.  Is any candidate (Billary or ‘The Donald’) making these suggestions?

Combine those facts with some other ‘tid bits’:
-       Due to our lack of manufacturing, U.S. productivity (after rising a paltry 0.7% in 2015) contracted in Q4 of 2016 at a 2.2% annual rate.
-       Moody’s announced that global corporate defaults would increase by more than 30% in 2016 – reaching their highest level since 2009.
-       Between 2007 and 2014, 7 deaths and 98 serious injuries were directly related to Black Friday sales.  What does that say about our society when 7 people were trampled to death trying to buy a TV?
-       A recent YouGov survey found that 43% of respondents under the age of 30 had a favorable view of Socialism, and only 32% had a favorable view of Capitalism.
-       Bill Clinton (by being impeached, disbarred, and found in contempt of court while President) accumulated the worst record of determined malfeasance of any President in history.  Meanwhile, his wife is a ‘shoe in’ for the Democratic nomination for that same office.
-       The Bavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.
-       Almost 100 Million Americans have DROPPED OUT of the workforce.
-       Jimmy Rogers predicts an upcoming recession with 100% certainty.
-       And Kim Jong Un orders his nukes ‘ready to go’.

The only thing that seems to be behaving according to plan is gold.  3 weeks ago I penned a piece titled: “Gold … are we there yet?”  I asked the question whether we had enough evidence (after a 5 year hiatus) to show that gold and silver are ready to go up?  I talked about:
-       Central Bank buying that never decreased,
-       Sovereign buying that never let up,
-       And the draw down in physical inventory (especially in silver) that was approaching critical levels. 
The conclusion was: By combining the tightness in the physical market with the increased dangers of global financial panic, the metals and miners should be ready to make their move higher.

3 months before that, I outlined a ‘Vegas’ strategy (using stock and options) of how to 50X your money over the next 5 years in gold – using one stock in particular ‘First Majestic Silver Corp’ (AG).  Since writing that:
-       The miners have been soaring,
-       The ‘Vegas’ play on AG is rolling along nicely,
-       And just on Friday: BlackRock Inc. suspended the issuance of new shares in their $8B iShares Gold Trust – citing a surge in demand for gold.  It seems that due to high demand for physical gold, Blackrock doesn't have enough registered gold to continue issuing new ETF shares.  And why is gold going crazy?  I can think of a dozen reasons – but the one that NOBODY will talk about is NEGATIVE interest rates.

Why would anyone place their money in a bank in Japan, Sweden, Denmark, the ECB, Switzerland, etc. – just to PAY the bank interest on their own money?  Why not turn those worthless paper currencies into Gold.  Gold (which pays no interest) is currently offering a better return than CASH in the bank.  Honestly, when a financial system becomes so perverted that it starts hyping NEGATIVE interest rates (something history has never seen) – the allure of gold and silver are going to be pretty compelling.

Ms. Yellen: we are saddled with debts that can never be repaid, a currency nobody wants, and a culture where only ‘desperation, fear and hand-outs’ survive.  My simple advice for all of us to buy Gold!


The Market:

Beijing China said on Monday it expects to lay-off 1.8 million workers (15% of the workforce) in the coal and steel industries as part of an ongoing effort to reduce industrial overcapacity.  Can you imagine laying-off 2 million people?  The world is so stagnant that China is idling 2 million people in the energy and steel businesses.  Call me crazy, but that doesn't signal global strength to me.  In the U.S.:
-       The Chicago PMI crashed to 47.4 (lower than anyone's estimates) – with the labor portion reporting numbers at 2009 levels.
-       Pending home sales dropped to a 2-year low.
-       And the Dallas Fed Report came out with a reading of MINUS 31 – telling everyone that we are IN a recession.

















With that as a backdrop, the market continued its 3rd week moving higher – right after saving itself from falling over the edge of the cliff.  It has been quite a run, and every sector has participated.  In fact, a company like Caterpillar (CAT) that has seen 38 straight months of falling sales, has gained 20 points in three weeks.  Why – because a ‘rising tide lifts all boats’.

The question is – how far can this rally go? 
1.    On Friday the Non-Farm Payroll (Jobs) Report was created.  While small business closures have exceeded openings for 13 consecutive months, the report still suggested that we created 242,000 jobs.  Of course the ‘fictional’ birth/death model created 129,000 ‘phantom’ jobs.  And if you examine the tax records, you’ll find that we actually created only about 75,000 jobs.  But despite the totally bogus number, Wall Street used it as the perfect reason for stocks to make gains once again.
2.    Beyond the jobs report, Wall Street is looking toward Mario Draghi from the ECB to make good on his promise.  Mr. Draghi said (a while back) that he would “do whatever it takes” to get the European economy moving again.  Many are hoping and praying that he blankets the planet in freshly printed Euro's.  But thus far, the G20 has failed to unleash a coordinated global printing attack, and China’s future plans do not include any massive interventions either.  Maybe Draghi disappoints this coming week?
3.    Finally, the market was incredibly positioned to the short side.  Many attribute this ‘short squeeze’ for most of the 200 S&P points that we’ve gained over the past 3 weeks.  And while most of the shorted stocks have gone higher, the ETF baskets haven't seen the same level of buying interest.  If the EFT baskets start pushing to the upside, then this market could push up and challenge the all time highs set last May.

On Friday there were many stocks trying to break out – that didn’t hold their breakouts.  Friday was also the first day in a while that the market did not close on the high of the day.  In fact, if not for a late day push, we were just an hour away from closing red.

I think we're at the end of the run.  We've come a long way in a short period, and if nothing else, a pause should be in the cards.  After all, ‘the powers that be’ know that the wheels are beginning to fall off this illusion of an economy, and they are desperate to push the ‘crash’ out past the election.  One of the most accurate indicators of an ‘overbought’ condition (one where the market has run up too high) is called the McClellan Oscillator.  When it gets into extremes (either up or down) it signals that a reversal is imminent.  Well it's currently at overbought levels that have rarely been seen.  So if we add up the McClellan Oscillator, with the lousy economic data, and the failure for the G20 and China to ‘go crazy’ – it leads me to believe that we might be looking at a pullback. 


TIPS:

I am:
-       Long various mining stocks: AG, AUY, EGO, GFI, IAG, and FFMGF,
-       Long an oil supplier: REN @ $0.56,
-       Long GLD – Mar – Call Debit Spread – 115 / 120,
-       Long NKE – Mar – Call – 67.5,
-       Sold RUT – Mar – Call Credit Spread – 1100 / 1105,
-       Sold SPX – Mar – Call Credit Spread – 2025 / 2030,
-       Long SPX – 1925 – March / + April Calendar spread,
-       Long SPX – 2025 – March / + April Calendar spread,
-       Sold TEX – Apr – Put Credit Spread – 19 / 20, and
-       Long TSN – Mar / Apr – 62.5 Calendar

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:
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