This Week in Barrons – 10-2-2016:
“Our economy is hitting the brakes, and there is a direct correlation between heavy trucking activity and economic growth”… Diane Swonk
I’m presently at the ATA trucking show where Diane Swonk will be speaking later today, and as much as I want to talk about Thursday’s market meltdown surrounding Deutsche Bank, I first need to touch on our own Presidential (media) race because of its market impact.
1. At the last debate, Hillary (in order to ‘stop the bleeding’ of her own polling numbers) attempted to reinforce how nasty Donald Trump is toward women. It seems that after winning the 1996 Miss Universe pageant, Ms. Alicia Machado began gaining weight. Hillary (on camera) accused Donald of ‘fat shaming’ her, and this was still further evidence of his being a misogynist pig. Factually however, CNN itself reported on January 29, 1997- Web posted at: 4:15 p.m. EST - Correspondent Jeanne Moos - NEW YORK (CNN) – When Alicia Machado of Venezuela was named Miss Universe nine months ago, no one could accuse her of being the size of the universe. But as her universe expanded, so did she, putting on nearly 60 pounds. Rumors also surfaced that she might be forced to give up her Miss Universe crown. But Trump, as co-owner of rights to the pageant (along with CBS), said he would never let that happen. CNN then held a small news conference on the issue, and (well) you can decide for yourself: http://www.cnn.com/videos/politics/2016/09/27/donald-trump-alicia-machado-1997-3.cnn. My point is simply that we’ve seen this movie before, as our election draws near – Hillary is going to panic, will stop at nothing, and therefore expect more shenanigans.
2. Included in the media frenzy are elements such as Michael Savage’s radio show (The Savage Nation – broadcast across 400 Westwood One radio stations nationwide / 20m listeners) was mysteriously silenced on Monday when he was comparing Hillary's fragile health to those actions associated with someone suffering from Parkinson's disease.
3. But into this election the media has introduced another issue that is actually more sinister – an example of which is The Baltimore Gazette: http://baltimoregazette.com/ - “Baltimore's oldest news source and one of the longest running daily newspapers published in the United States. With a focus on local content, the Gazette thrives to maintain a non-partisan newsroom making our content the most reliable source available in print and across the web.” The issue is that the real Baltimore Gazette went out of business over one hundred years ago. The site is FAKE. It’s a site put up strictly for election manipulation. Another one is: The Boston Tribune: http://thebostontribune.com/.
My point here is that all of you have the ability to search out the truth, and prepare yourselves as necessary. This Presidential fight is getting deeper, wider and nastier than anyone we’ve ever seen. Criminal? Sure. But then what isn't in America 2016?
What a wild ride this week. On Tuesday the market celebrated what many thought was a Hillary win on Monday night, and gained 130 DOW points. There was no fundamental economic reason for the ramp, simply what was perceived as ‘stability’ associated with a Clinton win.
Then on Thursday we fell 190 DOW points, on reports that high frequency traders and 10 Hedge funds were withdrawing excess cash from Deutsche Bank (DB). They feel the bank is darned near insolvent, and with the U.S. seeking a $14B fine for mortgage fraud in the 2008 meltdown, they could fail. So the panic hit, and everyone sold stocks.
On Friday, things started out calmer with the market hugging the flat line for hours. Then out of the blue it started roaring higher on word that the U.S. was willing to drop the DB fine to $5B instead of $14B. So all the panic subsided, everyone felt that DB would be fine again and up we went.
The truth is that DB is indeed basically insolvent; however, so are most of our institutional banks. They're simply propped up. The feeling is that Germany would never let it simply fail, and that they would print as much money as needed to keep it afloat. I agree that Germany won’t admit defeat and let DB crash, because it is tied to so many other major banks. With DB’s connection to the third party derivative marketplace, the crash of DB would bring down the entire global banking network. But that doesn't mean DB is healthy, nor that the world’s systems are healthy. It simply means that they'll conjure up any means via band aids, bailing wire and zip ties to keep things creaking along. This is NOT a picture of health.
So on Friday we regained the Thursday loss on the S&P. On Thursday the S&P opened at 2168 and fell like a rock. Friday we ended the day at 2168. Therefore, the S&P recovered to exactly where the market opened before the plunge. Guess where the 50 day moving average is – 2168.
Everything is broken:
- Germany's largest bank is truly insolvent yet the market rejoiced that it was not about to go ‘bust’ just yet.
- The FED (this past week) paraded no fewer than 15 individuals spewing insanity about interest rate hikes, and how they continue to be cautious of the ramifications.
- Earnings Season is about to start, and most feel that earnings are going to continue their year-over-year downward slide (see chart).
- The most recent revisions for Gross Domestic Product (GDP) came in at a less than stellar 1.4% growth rate for the first half of 2016 (see chart below). "This makes us very nervous for the third quarter," said Paul Ashworth, chief U.S. economist at Capital Economics in New York.
- Oil bounced because OPEC has supposedly agreed to limit oil production (starting in November) to 32m barrels/day. The news is coming from ‘sources’ – probably the same ones that floated that balloon in the past. It remains to be seen if any of these nations are really going to cut anything. I find it amusing lately how rumors, sources and deals just happen to take place at times where the fundamentals of the market stink, our FED looks to be beyond hope, and Hillary’s approval ratings begin to fade.
- And, the election is continuing to drive people crazy.
Keep an eye on the levels.
- For a rally to break out we 1st need a close over 2168, then one over 2175, and finally a close over 2180 to really think they're going to achieve the momentum they need for another all-time high.
- Until those levels fall, we're still trapped in the sideways range.
- On the downside, if we ever lose 2140 again, we will immediately test 2120 (probably the same day) and if 2120 doesn't hold – look out below.
Be careful out there because all heck is breaking loose! Trade this market, don't marry it. There is NO fundamental reason for the market to rise other than more funny-money being printed and injected into the system. And while that does make stocks rise or at least hold on – it’s NOT a sound reason to buy. And once we get past election day – all bets are off. Next stop on the upside is about 2180, but it’s never been as dangerous as it is right now. Take care folks and be safe out there.
One thing I’m watching is TSLA:
- TSLA is in a weekly squeeze to the ‘downside’, and after the early mutual fund cash comes into the market on Monday and Tuesday, I plan on selling a Call Spread or shorting TSLA.
- I’m also nibbling on AG, AUY, CDE, FCX, FFMGF, FSM, HL, NGD, PAAS, PGLC and SAND – knowing that they could have a little more downside until moving higher.
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 <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.