This
Week in Barrons – 2-16-2014
“Somethin’s coming – Somethin’…” … West Side
Story
This week something happened that
was quite remarkable. Despite Janet
Yellen telling Congress that the Fed was going to continue its tapering, the
market gave her a big pass because she said: "If the data were to turn
unfavorable, then of course there would be reason to pause the taper.”
Okay, so what's that mean? When the Fed first tapered, did the data really
suggest a good strong recovery? NO.
-
Mortgage
applications were crashing,
-
Housing
sales were falling like a rock,
-
An unimaginable
amount of people were opting out of the job market,
-
And Obama-care
was causing countless issues.
Then in January, when the Fed
tapered again – did the data suggest a good strong recovery? NO.
-
Jobs
data was still horrible,
-
The
market was still falling,
-
Retail
sales showed a decrease of 0.4%,
-
Companies
were reporting sketchy (at best) earnings,
-
And
many economists were warning of slowing GDP growth,
-
Barclays
announced that they were cutting 12,000 workers,
-
And
U.S. Initial Jobless claims increased yet again.
Why is the Fed tapering when the
economy is just barely limping along?
Why is the Fed saying they will need
to see more declining data to end tapering, when we've had gobs of this kind of
data and they're explaining it away with ‘the weather’?
My only answer to these questions is
either: a ‘global reset’ is coming, or the Fed will soon announce yet another
program that will allow it to push more money into the economy. Let’s explore the first one, because it’s the
one that makes the most sense.
The IMF World bank knows that
there's too much debt in too many countries for it to ever be repaid. Lately,
global currency fluctuations have been so extreme and so rapid; it is often
impossible to carry on continuous trade. No matter where I look, the evidence suggests
that something must be done. I think
there is a plan afoot to replace the U.S. dollar as the global reserve
currency. But more than that, plans are
being made for a complete rebalancing of every country’s debts versus their
‘worth’ in natural resources, precious metals (gold and silver), output per
capita, productivity, demographics, etc.
The following quotes are from ‘China Daily’:
-
“The World Bank's former chief economist wants
to replace the US dollar with a single global super-currency, saying it will
create a more stable global financial system.”
-
And Justin Yifu Lin told Bruegel (a Brussels-based,
policy research think tank): "The dominance of the greenback is the root
cause of global financial and economic crises,"
So the first thing to consider is
that China is becoming very vocal about wanting to rid the world of U.S.
supremacy. This is no idle threat as China
is scheduled to outpace the U.S. economically in just a few short years. At
that point, we will all need to respect the tremendous amount of gold and
silver that China and other Asian nations have amassed.
In the not so distant future, there could
be an announcement of a global currency reset where:
-
Debts
will be discharged and equated to different values.
-
Countries
will be valued and ranked based on real tangible assets. The countries that are the richest (in real,
tangible elements – not ‘fiat’ money) will carry more weight. This ‘weighting’ explains why China has been
ridding itself of dollars and buying up tangibles such as: gold, silver, oil,
land, farms, buildings, and businesses.
-
SDR's (special
drawing rights) will be constructed that will allow distribution of real assets
between countries (in order to facilitate trade).
-
AND the
U.S. dollar will no longer be the global reserve currency – the new SDR will.
This explains why the Fed started to
taper in the first place, and answers why they continue to taper in light of
all of the bad economic data. If the
wheels are in motion to launch this SDR – then there's no longer any reason to
prop up a failed economy. For the past
20 years, every time the economy has shown that it needed to contract and go
through a healthy recession and regroup, the Fed has rushed to the rescue with
tons of free money. The single biggest
example of this was during the 2008 meltdown. When QE-1 ended and things got weak, the Fed
came out with QE-2. When QE-2 ended and
things got weak, the Fed came in with ‘The Twist’. When that expired, the Fed rushed in with QE-3.
But now, after all this printing, and with the economy still soggy – they are
REMOVING the stimulus. If the Fed
doesn’t halt the tapering by this summer, then something MAJOR has changed, or they
are going to announce another program that allows them to jam more money into
the system.
If/When we have a global currency
reset, here are a couple thoughts:
-
What
happens to our money? Is the ‘old’ $100K
now worth $200K or $50K?
-
What
happens to prices, and the value of land, homes, and businesses?
-
What
about interest rates? (Will they be higher to service all the debt?)
-
What
about gold? Will these new SDR's be
backed by gold? Indirectly yes. The countries with the most gold (and other
redeemable assets) will have their currencies carry a higher weighting in the
composition of the SDR. For the past 3
years, Gold has been manipulated lower to facilitate China getting rid of
dollars and amassing gold. When everyone is satisfied that the Chinese have
the proper amount of gold that gives their currency the proper weight in the global
SDR, then gold will no longer be manipulated lower.
The good news is that I believe we
exit this ‘global currency reset’ with something better than what we have now. The Fed must be tired of creating booms and saving
us from the busts. The world is telling us
to stop spending more than we take in.
And we’re all tired of the U.S. Government pushing for more control over
our lives. Maybe, a good, old-fashioned
economic shake-up will get people to focus on what the hell happened to our
country, and how to get it back. And that
would be a breath of fresh air.
The Market:
After January’s long market plunge,
the market has roared back within ‘spitting distance’ of it’s old highs. So do we break through and make new highs, or
do the old highs act as resistance and we fall back?
A couple weeks ago we suggested that
the market would put in a big bounce, come up shy of the new highs, and roll
back over. We're now in the range of ‘coming
up shy’.
Will I be surprised if they punch
through the old highs? Yes I will. It is one thing for the banksters to want to
keep the market running, but it’s very different for them to pull it off.
While I will be surprised to see
them punch us through those old highs, one thing that I constantly remind
myself is that we’re living through some very odd times. Times where all of the old rules are out the
window. Last week, CNBC reported how
great our economy was doing, and that all we needed was just one more piece of
BAD DATA and the Fed would cancel the taper.
One day, good news will again be good news, we just don’t know whether
that will be tomorrow, or after we gain another 10,000 DOW points.
Did I profit by this bounce? Absolutely.
But (at this instant) I have a fair amount of cash and am ready for a
market pullback. I think that this week
the market’s run stalls. We then do a
bit of sideways up and down chop, and finally fade lower. The other way that this could play out
is: (a) they push us up over the old highs,
(b) which drag in the remaining ‘doubters’, and (c) as soon as everyone's all in
– the rug-pull comes. Only time will
tell.
So, I’m feeling that it’s time to
play defense until it’s clear that we've either broken over the highs
forcefully, or have entered a period of fading. I don't want to get caught on the wrong side.
Tips:
I cashed out of Tesla (TSLA), FireEye (FEYE),
Nividia (NVDA) and REGN last week – with gains of over 200%, 200%, 50% and 30%
respectively. It was a great week. And in the entire portfolio, we’re up over
13% and it’s only mid-way thru February.
Currently, the S&P’s have broken over 1,826 and
are sitting at 1,839.
-
Gold and silver are
UP.
-
The Stock markets
are UP.
-
The Japanese Yen is
UP.
-
Treasuries are UP.
-
Commodities are
UP.
-
In a nutshell – all
of this is IMPOSSIBLE. Treasures and the
stock market should not both be UP together.
The Yen and the stock market should not both be UP together. Gold and the stock market should not both be
UP together.
At this point, I still like the metals here as a
hedge: Gold (GLD), Silver (SLV), and especially the physical metals. Gold has gone over it’s moving average, and
has appeared to put in a bottom, with silver following nicely. I’m also playing the miners through NUGT (a
3X ETF) and SLW – both doing nicely. FEYE,
SSYS, PRLB and DDD are coming back to life.
I still like: BIIB, INCY, NFLX, with my favorite set-up being QIHU.
My
current short-term holds are:
-
QIHU – in @ $91.20 - (currently $99.25)
-
NUGT – in @ $35.25 – (currently $50.29)
-
SLW – in @ $20.25 – (currently $25.38)
-
USO
– in @ $34.51 - (currently $35.91)
-
FXY
– in @ at $96.47 - (currently $95.93)
-
SIL – in at 24.51 - (currently 14.96) – no
stop,
-
GLD (ETF for Gold) – in at 158.28, (currently
127.31) – no stop ($1,319 per physical ounce), AND
-
SLV (ETF for Silver) – in at 28.3 (currently 20.73)
– no stop ($21.50 per physical ounce).
To
follow me on Twitter and get my daily thoughts and trades – my handle is:
taylorpamm.
Please
be safe out there!
I'd like to recommend a website - http://www.simpleroptions.com It's an excellent
resource and 'honestly' - I've been following them for over 6 months and
they're more right than they are wrong with their predictions, and that's a
rarity in this climate. Please check
them out on my recommendation.
Disclaimer:
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: <rfc@culbertsons.com> 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.
R.F. Culbertson
<http://rfcfinancialnews.blogspot.com>
