RF's Financial News

RF's Financial News

Sunday, September 4, 2016

This Week in Barrons: 9-4-2016

This Week in Barrons – 9-4-2016:


“Say it loud, and say it often”… LaQuan Lunford

Thoughts:
I’m convinced that if you say something loud enough and often enough – people will believe it.  People love a good story.  Remember Paul Revere (during his midnight ride) signaling by lantern ‘one if by land’ and ‘two if by sea’?  Truth be told, that story didn't happen.  Actually, Paul was with two friends and the British captured them all.  But Mr. Prescott (a local doctor) escaped, made it to Concord and warned everyone.  I’m trying not to further burst your bubble – BUT also:
-       Napoleon was NOT short,
-       Einstein did NOT fail math as a kid,
-       Bats are NOT blind,
-       Lemmings do NOT commit suicide by hurling themselves off cliffs, and
-       Lightening can strike twice, 3, or even 4 times in the same place.

It’s often the STORY that matters, and a story that really upsets me concerns inflation.  The dictionary defines inflation as: “1) an increase in the money supply, 2) a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.”  For some reason, our FED is convinced that inflation does NOT exist, and that it IS a requirement for a strong economy.  First, inflation is roaring.  We've seen huge increases in the money supply, and there is certainly no shortage of credit when every furniture store is offering no money down, and no payments for 2 years.  As for rising prices, if you eat, buy electricity, go to college, see a doctor, enjoy a movie, take a taxi, repair a car, buy insurance – you know that prices are rising.  Yet the FED tells us that inflation is lower than their 2% target rate. Why?

Moreover, the FED is forever warning us of ‘deflation’ – falling prices.  Now, I personally LOVE falling prices, and have never heard someone say: “I’m waiting for that product to go UP in price before I buy it”.  The free market system also seems to like lower prices because they have made Wal-Mart (the leader in low prices) the largest employer in the world.  But our FED is convinced that if you know prices are going to fall, you will WAIT to buy that appliance, car, or dress.  And consumers waiting to purchase will cause a recession and then a depression.  I’m wondering if that is just a STORY that they’ve been telling each other so long that they have started to believe it themselves?  After all, people don't delay their purchases FOREVER waiting on lower prices.  This is the ‘dot com’, instant gratification era.  Lower prices cause us to act NOW instead of later.  With electronics, I can assure you that prices will fall year over year, but people continue to camp out on sidewalks just to get the newest iPhone.

The FED itself has said in it’s own writings: “The only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-34). We find virtually no evidence of such a link in any other period. ... What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

Our own FED tells us that deflation will send our economy into a death spiral, but their research suggests nothing of the sort.  If falling prices don't kill economies, then why is our FED so rabid about the 2% per year inflation mantra?  The answer is that it gives them the ultimate freedom in their decision-making.  Think about it, 2% per YEAR is a LOT of money in a $17T dollar economy.  If our FED did NOT need inflation, then where would the justification for creating those tens of billions of dollars go?  Maybe then everyone would start asking: Why is the country broke?  Why aren't there any real jobs?  Where's all the money going?  Why don't we have a balanced budget?

The facts are that inflation is running around 8%, we really don't need any inflation at all, and deflation isn't the kiss of death – it just allows consumers to get more value for their dollar.  History shows us that lower prices (except for real estate) cause more buying and more investment for expansion.  The inflation story is just that, a story from our unelected and unaccountable Federal Reserve.

Enjoy your Holiday weekend.  Eat too much, drink just enough, and spend some quality time talking to those that really matter to you.


The Market:
Factually, this week brought us empirical evidence that the world is slowing:
-       The 7th largest shipping company in the WORLD (South Korea’s Hanjin Shipping Company) declared bankruptcy and its assets were frozen.  After almost $1B in additional financial assistance, the company’s creditors called it quits.  The court will determine wither Hanjin should be liquidated or given a chance to restructure.  In the meantime, approximately 540,000 containers have become stranded in ports around the world just in time for retailers gearing up for the Holiday season.
-       Thanks to SF for reporting that rail freight volume has dropped almost 6% from a year ago, and that 2015’s volume even plunged 13.4% from 2014.  Unfortunately 2014’s rail volume dropped 5.8% from 2013, giving 2016 the excellent chance to set a low in rail freight volume for the decade.
-       SF also reported that automation could be the great global jobs equalizer.  As China automates it’s manufacturing plants (replacing humans with computers and robots) its cost structure will approach that of the U.S. – effectively killing the ‘cheap’ labor component associated with offshore manufacturing.  Therefore, more manufacturing many come back onto our shores.  But the blue-collar jobs associated with it are never to return.  In fact the future of any low education jobs (or even those with a vo-tech background) are in great jeopardy.
-       Wal-Mart announced that it was laying-off 7,000 people.
-       Caterpillar said that it was laying-off 2,000 more in Europe.
-       Factory Orders and Corporate Earnings fell in August, and have fallen every month since 2014.
-       Productivity fell (just above recessionary numbers) to an annual rate of 0.6% this past quarter.
-       The Shiller 10-year Price to Earnings ratio is 26.9 – making it comparable to 1999 levels, and definitely NOT levels for risk-taking.
-       The Swiss National Bank (SNB) now owns more publically traded shares in Facebook than Mark Zuckerberg (the owner and founder of Facebook).
-       Bank of America reported that the ‘smart-money’ continued to be net SELLERS of U.S. stocks for the eighth consecutive week.
-       Our mainstream news must have forgotten to report that Deutsche Bank (DB) defaulted on its ability to deliver physical gold.  Our Central Bankers did not want this making the news because it would have sent the price of gold skyrocketing and DB into default.
-       The U.S. Government’s Non-Farm Payrolls (Jobs) Report was one that only a mother could love.  After hoping that 180k new jobs were created in August, we found out that only 151k were created.  We also found out that 2/3rds of those jobs (106k) were fake jobs – created mathematically – so we really only created 45k jobs in August.

With all that news, you would have thought the market was down 300 points on the week, but instead the market was up on the week – proving that nothing matters but Central Bankster intervention.  The capital markets are the ONLY thing keeping the wheels on our global economy, and our Central Banksters are desperate to keep them rolling.

How long this charade goes on is anyone's guess.  On July 14th we opened the day at 2157 and punched over 2160.  Since that time, we've bounced between 2157 and 2190.  On Thursday morning we re-touched the 2157 number, only to see a ‘magic levitation’ take place and push us all the way up to 2170.  Friday we gapped higher out of the box and ended the day at 2179.

I would expect to see our markets try and assault 2190.  However, the previous agenda was to make new highs.  Interestingly, since August 15th, it seems the game has changed.  Our Central Banksters seem to not be as concerned with new highs as they are just keeping the markets from rolling over and dying.   They're okay with ‘sideways’.

September is often a cruel month.  If normal market forces were in charge, I would be telling you that a wise move would be to sell-out and go short.  But this isn't a normal market, and I don't know exactly what the Central Banksters are willing to do.  So use the 2157 and 2190 levels as your guide to trading.  If we close a few days over 2190, then we should go even higher.  If we lose 2157 on a closing basis for a few days, then I could see 2120 coming quickly.

The next 100 days are going to be very interesting.  Will Trump win?  Will Hillary finally admit to being ill, or could she be removed from running over the latest FBI dump?  Will someone along the Russian/Ukrainian border make a mistake and start a war?  Will a major bank finally admit it is broke beyond repair?  Will someone screw up in the 3 way chess match going on in Syria?  Maybe none of the above will occur, but it sure feels like something big is brewing.


TIPS:
Some likely trades this week:
-       Don’t fight the FED = buy September Options in Facebook (FB):
o   Buy the 124 / 130 Call Debit Spread,
o   Buy the 128 / 130 / 132 Call Butterfly,
o   Sell the 126 / 124 Put Credit Spread, and
o   Sell the 122 / 118 Put Credit Spread
-       Gold this week (GLD):
o   One morning this past week someone (with very deep pockets) sold $5B worth of paper gold on the exchange.  No person would do this because it destroys the price (which it did).  But Central Banksters can do it because they want people NOT to buy gold and instead - put their money in negative interest rate accounts.
o   Deutsche Bank analysts came out and said that gold should be trading around $1,700/oz.
-       The metals have lived through a normal pullback in the past week and I continue to like: AG, AUY, CDE, FCX, FFMGF, FSM, HL, NGD, PAAS, PGLC and SAND.

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:
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>

Sunday, August 28, 2016

This Week in Barrons - 8-28-2016

This Week in Barrons – 8-28-2016:


“If your government believes that the best way to eradicate trillions of dollars of debt is to spend trillions more — you might live in a nation that was founded by geniuses, but is run by idiots”… Jeff Foxworthy 

Ms. Yellen:
I listened to your economic talk this week, and I think Jeff Foxworthy is right – “We are living in a nation founded by geniuses but run by idiots.”  For example, you actually said:
“We are 70% confident that Fed Funds will be between 0% and 4.5% at the end of 2018, and 30% confident that they will be outside that range.”
o   So interest rates will be between 0% and 4.5%, unless they’re not?
-       “Our members agree to indicate that they would continue to closely monitor global economic and financial developments." 
o   Isn’t that their job?
-       "The Committee will wait to take another step in removing accommodation until the data on economic activity provided a greater level of confidence that economic growth was strong enough to withstand a possible downward shock to demand." 
o   HUH?

Ms. Yellen, as hard as I try to understand what you said, I’m struggling to figure out where I am on the ‘genius to idiot scale’ – after all:
-       I MUST show my ID to board an airplane, cash a check, buy liquor, or check out a library book – but NOT to vote for the President of the U.S?
-       The harder I work – the more taxes I pay, and the more government regulation and intrusion I get.  However if I didn’t work, I would be rewarded with Food Stamps, WIC checks, Medicaid benefits, subsidized housing, and free cell phones.
-       It seems that your (the government’s) plan for getting people back to work is to provide non-working people 99 weeks of unemployment checks without any requirement of them to prove that they were seeking gainful employment.
-       It seems that your (the government’s) plan for savers and faithful mortgage payers living on a budget and denying themselves the newest big-screen TVs and gadgets, is to have the government forgive the debts of those who overspent on homes, time-shares, wall-sized TV and cars?
-       I’m wondering how you (the government) rationalize stripping me of my Constitutional right to privacy under the guise of making me feel more ‘safe and secure’.  

Yes Ms. Yellen, we are truly living in a nation that was founded by geniuses but run by idiots.  Chris Wiles more accurately translated your talk on Friday as the following:
Nothing catastrophic has happened yet, so we (the FED) have decided to continue screwing responsible savers with interest rates that are at 5,000 year lows so that:
-       This dangerous asset bubble can persist,
-       The federal government can continue indebting future generations,
-       And commercial banks can continue making tons of money,
-       Because we are shit scared that even the tiniest 0.25% increase in interest rates will completely derail this totally fragile economy,
-       And that would be really bad for Barack Obama and Hillary Clinton.”

Finally, according to the Bank of America, the Central Banks now own $25T worth of financial assets.  That’s more than the entire GDP of the U.S. and Japan combined.  Ms. Yellen, what if you and the other Central Banks are NOT buying all of this stock and corporate paper to prop up the stock markets, but rather buying it for a coordinated takeover?  Could this be the way that the governments take control of the companies?

I only know of 3 ways that the future unfolds.  One is that the major nations agree on a total ‘Bretton Woods’ style reset with debts getting annulled and currencies getting devalued.  Another is that a big ‘event’ (war) changes things.  And choice #3 is that the Central Banks coordinate and continue to buy up everything – and (in the end) the surviving nation state owns everything.

None of these are wonderful choices, but we’re in too deep to ‘work this off’.  Something quite major has to happen.  Ms. Yellen, I think you’re desperately pushing for the ‘event’.  And we are one mistake away from a hot war with another nuclear nation.  But if you can't get the ‘event’, I think you'll keep buying up anything that isn't nailed down until you work out (with China) a true global monetary reset.  Otherwise, if we don’t get the reset or the ‘event’, then it’s estimated that in 10 years you (the governments) will own controlling interest in everything – and living proof of a world conceived by geniuses, and run by idiots.


The Market....
























-       2nd quarter after-tax corporate profits fell by 2.4% rate, inventories fell by $12.4B, but consumer spending jumped by 4.4%.
-       2nd quarter earnings per share of S&P 500 companies were 18% lower than 2 years ago.
-       Last month, subprime auto delinquencies increased 17%, and net losses soared by over 28%.
-       Last month total revenue at publically traded corporations continued to decline, after reaching a peak in 2014.
-       2 years ago, the S&P 500’s price to earnings ratio was below 19, and today it sits over 25.
-       Annual GDP (Gross Domestic Product) came in at an anemic 1.1%.

The Clinton’s recently released their 2015 tax return (as SF reminded me).  Inside it we found out that Hillary and Bill Clinton donated over 96% of their charitable contributions back to themselves in the form of The Clinton Foundation.  https://www.facebook.com/RTAmerica/videos/vb.137767151365/10153703671361366/?type=3&theater   By giving these large sums of money to The Clinton Foundation, they not only kept the cash, but also received a large, legal tax deduction for doing it.  What is extraordinary is that Hillary and Bill Clinton created their wealth by giving speeches and selling ‘access’ to various wealthy individuals.  They have not created one product or one job.  Not one.  Amazingly, they have been able to keep virtually all of their wealth by creating a foundation (The Clinton Foundation), and making ‘charitable donations’ to their own foundation – again creating no products or jobs.  Until this point, I would have thought that this behavior was strictly available in Russia and other 3rd world (dictatorship focused) countries.  By allowing this behavior to thrive, we are showing the world that we are “truly a world that was founded by geniuses, but being run by idiots.”

In terms of the soaring automobile loan delinquencies, we’ve seen the movie where consumer spending soars – while government spending, business spending, and GDP are all pulling back significantly.  Currently we’re selling cars to anyone that can breath and come into a showroom, and (here’s a shocker) many of them can’t pay.  In 2006 and 2007, we did the same thing with houses only to find that in 2008 we had a full-blown financial crisis on our hands where Lehman Bros. got assassinated, and Paulson begged for a bank bail out.  That’s when we found out that the investment banks were betting against the very same mortgage backed securities that they were selling as ‘prime’ – because in reality they knew they were horse manure.  Welcome to round two.

Portugal, Spain, Italy and Greece are all in trouble.  For example, Portuguese sovereign bond yields spiked earlier this month after the DBRS ratings agency warned on the country's credit rating, citing high debt levels and strains to the banking sector.  If DBRS were to actually rate Portugal's sovereign bonds below investment grade (versus just warning them), it would have made Portuguese debt ineligible for purchase by the European Central Bank through its main stimulus program.  And given Portugal's budget deficit of 4.4% of GDP (far above the 2.7% target agreed to by the EU), a realistic rating by DBRS would have collapsed the Portuguese economy.  The EU even opted against fining Portugal, but urged them to get their deficit below the 3% GDP threshold.  Similar situations exist in Spain, Italy and Greece.

On Friday our S&P market faded right down and closed at 2169.  For 14 straight sessions we were in an ‘S&P box’ with a floor of 2175 and a high of 2190.  On Thursday we lost the bottom of the box, closing at 2172.  And on Friday, we couldn't reclaim it – closing at 2169.  This could mean several things, one is that the box has expanded, and they're going to try and keep us in a range of 2160 to 2190.  Or secondly, it could mean that there is enough softness in the box to allow us to retreat to 2152, and then to 2120.

We are heading into September, which is typically a rough month.  As funds continue to withdraw money (last month another $6B left equity funds), the Central Banks will determine where they are willing to let the market settle.  If they do a coordinated buy, we'll be back to 2190 in no time.  If they don't, we'll fade in stair step fashion.  But consider this headline: Illinois Warns Of Crippling Tax Hikes, Devastating Impact if Largest Pension Fund Admits Reality”.

Things are pretty messy no matter where you look, and stocks are already at nosebleed levels.  The ONLY way this market continues to make new highs is if the Swiss, the Japanese, the ECB and the FED continue to buy stocks.  But it almost feels like the Central Banks are out of the ‘New All-Time High’ game and into the ‘Let’s Just Keep It Steady’ game.  This week I’m going to sit on my hands until I see that 2160 is going to hold, and I’ll be only lured into taking some long trades if we get back over 2175.

Bottom line – globally, we’re in a unique situation.  We have markets that belong thousands of points lower, but Central Banks are propping them up because of all the counter-party derivatives that have been written against the markets.  If the markets collapse – then the economies collapse with them.  Jeff you’re absolutely right: “We’re truly living in a world that was founded by geniuses, but being run by idiots.”


TIPS:
Some likely trades this week:
-       In terms of higher: NFLX for a run into 100, LULU for a run into earnings, TLT, HD and INTC should also run higher,
-       In terms of moving lower: Whole Foods (WFM) should flush down into 27, with CMG and DIS moving lower next week.
-       The metals have lived through a normal pullback in the past week and I continue to like: AG, AUY, CDE, FCX, FFMGF, FSM, HL, NGD, PAAS, PGLC and SAND.

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:
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>