RF's Financial News

RF's Financial News

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>

Sunday, August 21, 2016

This Week in Barrons - 8-21-2016

This Week in Barrons – 8-21-2016:



















"A Day Of Reckoning Is Coming”… Carl Icahn


Thoughts:
I spent this past week in Mexico, talking to and meeting entrepreneurs, reading the foreign press, and viewing the U.S. from a slightly different angle.  The most discussed topic was our upcoming Presidential election.  Everyone from waiters to taxi drivers to college students had the same two questions:
-       Is Donald Trump insane?
-       Why are we ignoring Hillary Clinton’s scandals, and her health issues?

There were several ‘Day of Reckoning’ newspaper headlines that caught my eye:
-       Will NATO spark a U.S. vs. Russia War?
-       Will Syria pit the U.S. against China & Russia?
-       Will a South China Sea ‘test’ go awry, and a U.S. vs. China war erupt?

In fact, one of the students pointed out the ‘unfairness’ of the U.S. press by holding up a CNN headline: “Trump to use Heritage when vetting for the Supreme Court”.  Now unless you read the CNN article – it sounds like Donald Trump would use someone’s history, lineage, ethnicity and race when selecting them to serve on the Supreme Court – yes?  But by reading the article, you find out that Donald would consider applicants that have garnered good marks from the Heritage Foundation.  The Heritage Foundation (founded in 1973) is a research and educational think tank whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.  The student was NOT a supporter of Trump but rather wondering whether PR for his own small business should be more focused upon facts or upon gaining readership – because it’s clear to him that the U.S. favors the second choice.

Then someone asked about the world’s current financial experiment that includes low interest rates, negative yields on government debt, and quantitative easing.  They cited RIT Capital Partners Chairman Lord Rothschild latest quote: “We have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world.  It is impossible to predict the unintended consequences of very low interest rates, 30% of global government debt at negative yields, and quantitative easing on a massive scale.  U.S. stocks have grown threefold since 2008 - with investments growing and volatility remaining low.  However, the real economy didn't enjoy such a profit, as growth remains anemic, with weak demand, and deflation in many parts of the developed world.  Many risks remain including: Britain's vote to leave the EU, the U.S. Presidential election, China's slowing economy, and global terrorism – a consequence of the continuing conflict in the Middle East.”

In my answer, I pointed out that global interest rates (including America’s 0.5% rate) are now the lowest in 5,000 years virtually ruining all pension funds and savings accounts.  Sweden, Switzerland and Japan only turned to negative key lending rates as a mechanism for fighting deflation.  But a ‘Day of Reckoning’ is coming because to quote Chris Wiles: “You can ignore the math, you just can’t avoid it.”


The Market....
Factually last week:
-       Caterpillar’s retail sales (a global, economic barometer) suffered its 2nd biggest plunge since the 2008 financial crisis,
-       The Empire State FED reading was expected to show a +2.5 growth reading, but instead came in at -4.2 showing contraction,
-       Cisco is laying-off 14,000 people / 20% of its entire workforce,
-       Home Depot, Lowes, Staples and Target reported revenues and earnings that were disappointing.  Target also warned for the rest of the year, and said that Apple product sales were down 20%.
-       Mortgage applications fell,
-       Annual mutual fund redemptions are running at a record $168B pace, and
-       Corporate Insiders are SELLING (their stock) 19 TIMES faster than they are buying – a pace unheard of in recent history.  

If you look at a chart of any of the indices (SPX, IWM, XLF, etc.), the common denominator is that their stochastics are beginning to roll over, and on many of them the MACD (advance / decline line) is sliding lower.  If I had nothing else to go on, I’d swear that the markets would be heading lower.  But unfortunately our friendly Central Banksters do offer us another way on which to judge.  It’s simple.  If the Central Banksters decide to buy, all of the fundamentals and techno jargon is worthless - because stocks will simply go up.  Therein lies the issue.  We belong lower, but if our Central Banksters won't allow it – it won't happen. 

We learned this week that:
-       George Soros doubled down on the short side of the U.S. market.
-       Institutional investors are talking about an ‘unsustainable market’ and a ‘megaphone’ pattern that looks ripe for a market collapse.
-       Headlines like: "Markets Are Ripe for a Black Swan Event", and “Why most Hedge Funds will NOT Survive” are everywhere.

However, the market is holding up in the face of all this doom and gloom.  For the last 9 sessions the S&P has been trapped between 2175 and 2190 on a closing basis.  It’s been over 2 months and the market is still ignoring: BrExit, poor earnings, lousy economic reports, more money sitting in negative interest accounts, a rabid election process, and the sound of war drums around the globe.  Between the Central Banksters buying and corporate stock buy backs, stocks simply go up or hold their own.  And this begs the question: When does this stop?  OR Does it even have to stop?

I think that it does have to stop, but not because I’m against markets going up.  It is perfectly legitimate for markets to levitate when you have a growing economy, growing employment, growing incomes, growing earnings, etc.  That's exactly what markets should do, and they should reflect that growth with higher stock prices.  The problem however is our current, undeniable market abstraction.  Our market has gone up in the face of: FALLING earnings, FALLING incomes. Part-time jobs, INSANE healthcare costs, FALLING exports, and EXCESSIVE corporate valuations.

What would happen if the Swiss National Bank, the Japanese Pension Fund, and our Central Banksters stopped buying U.S. stocks?  How long would it be, before there would be no buyers for any stocks offered?  In my opinion the answer is ‘Not Long’, and if you remove those monster buyers, the DOW would be cut in half in less than a year.  So, the only thing between the DOW at 19,000 and the DOW at 8,000 is the Central Banksters that print money out of thin air, and buy with no regard to price, earnings or sales.  Can that go on forever?  At some point, the population would catch that stocks were ONLY going up.  Then the population would pile into stocks with ‘all they have’, and history shows us that is when our Central Banksters will sell, take profits, and trigger a market collapse.

Throughout history the elites have caused chaos, only to rush in and deliver the message that they are the only way out of the chaos. Create the problem, and then chose yourself to fix the problem.  If the Central Banksters ever decide to SELL some of their stock holdings, I can virtually guarantee chaos.  With that in mind, what if the game plan is to keep the market up and steady for Hillary, but if Trump wins have the Central Banksters crash the market, blaming his policies for the flight out of stocks?  We're in a very strange time.  A time where no one has ever seen:
-       Negative interest rates (unique),
-       Central Banksters buying stocks with printed money (unique), and
-       Stocks going up in the face of a global recession (unusual).

The way the market is ‘walking sideways’ instead of correcting tells me that there is more upside coming.  You'll want to participate, but please keep your position size small and take profits quickly.  As one high ranking General remarked the other day "We're just one mistake away from WWIII".  Lean long, but keep your finger near the sell button.


TIPS:
Some likely trades this week:
-       Looking toward EA, NXPI, QUOT and maybe AMD to the upside,
-       Looking at LRCX – it has 19% short interest (high), sitting at near 52-week highs, is a candidate for selling the October $18.50 or the January $18 straddle
-       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>