This week in Barrons - 10-18-09

This Week in Barrons – 10-18-09:

Thoughts:
This week the NABE (National Association of Business Economics) came out and declared that the recession is over. Forty-four (44) of the "best" economists told the NABE that we have weathered the storm and things are moving along quite well. Now I tend to think that things are getting worse – not better. The most recent Business Roundtable Survey showed that 49% of all CEO's expect their sales to be flat or down in the coming 6 months – 79% of all CEO's surveyed expect their capital spending to be flat or down in the coming 6 months – and 87% of all CEO's expect to do no hiring in the coming 6 months. Delinquencies among U.S. commercial mortgage-backed securities surged to a record amount of 3.64% in September, vs. just 0.54% one year ago. Every 13 seconds, there's another new foreclosure filing somewhere in America – more than 6,600 foreclosure filings a day. Yep – there have been roughly 2 million foreclosures so far and our Assistant Secretary of Treasury, Michael Barr, saying that another 6 million families will face foreclosure over the next three years. Hummm – sounds like the recession is over to me!

Even the Government’s own doctored and painted non-farm payroll reports show that we are still losing 250,000 to 400K jobs a month. In the past, employment was a lagging indicator – people would get laid off – they would cut back spending, and as the number of unemployed rose, they would simply hunker down. Uncle Sam would then push a stimulus in the form of tax cuts and/or lower interest rates. Businesses would start to recover and even people that were still unemployed would "feel better" about things – and they would begin to whip out the credit card and start spending again. Even the unemployed felt safe doing it because the businesses were returning to growth, they'd be hiring and felt good about being re-employed soon. What most people don't understand is that because of that "feel good about the future" emotion, the unemployed were using credit to continue spending, which ultimately led to the businesses actually doing better. As the business did better, they hired more people and "bingo" the recovery was in. So, it was always the fact that consumer buying, based on credit, is what ultimately got the businesses expanding, and then ultimately hiring again. In this case - that option is gone. There is no longer a house to refinance – because the home equity lines of credit have been shut down. The credit card agencies have reduced the public's outstanding credit available. Lending standards have risen – so the jobless are NOT going to increase spending. So this time there is NO credit, and businesses have cut back so hard for the past 2 years, capacity utilization is at record low levels. That means that business can increase output many times over, just by expanding the workweek of the people already there. Without the consumer going into hock on credit to buy products and services, business cannot expand. Therefore, without credit, joblessness is a current indicator – and without hiring there is no recovery.

Okay, so where is the NABE getting the idea that the recession is “over"? Please understand – these are the same economists that didn’t see any problems in the first place. Consider that these same 44 economists didn't see the single largest financial disaster of the last 80 years coming, and when the recession hit – they said it wasn't going to be a problem, it was nothing to worry about – and now they say that it's over. It scares me to think that “they” pushed this entire economy down just so they could get their own agenda's pushed forward, and that's why America is reeling in it's second ever “depression".

Yet this week, amid much fanfare, we busted over DOW 10,000. Was it because of a robust economy? Was it because Intel's revenues fell 8% on top of last year’s fall? Nope – it was because Uncle Sam is keeping the market up – and the marketing being up is the only thing keeping the “commoners” from revolting. So enjoy the game while it lasts. Just know that without the $ Trillions in funny money, without interest rates at virtually zero, without "mark to fantasy" accounting, without cost cutting, the market would be at 5,000, not 10,000 – and yes – we will get there.

The Market:
This week they managed to squeak us up and over 10K – for a bit. Yes they missed on Friday, but only by 5 points. We said last week that they'd pull out the stops and try and keep the market moving higher and they have. It really doesn't matter if it's a house built of cards or not, up is up, and we like tagging along with it. But, how long can they keep this going?
Just try and get your arms around the fact that the market doesn't belong "way up here" and that it's being pushed there. If you understand that, you've won half the battle. Now there are a handful of ways this can play out. We could see the market move up, pause, move up, pause and keep on going to January. Or, we could see the market put in a big "last ditch push" and then after half the earnings are out, see us roll over for a good pull down. One thing is certain, 2008 wasn't friendly to a lot of hedge funds and mutual funds – and they didn’t get their yearend bonuses. These same hedge funds want that bonus, and they'll probably let it all hang out in hopes of achieving it.

Unfortunately, the market does not exist to make you fat dumb and happy into your golden years. The market exists just like a casino exists, so the owners of the market, and the main contributors to it - make money. Since we are talking big money here, billions upon billions of dollars per day, the market has evolved to the point where it is impeccable at confusing, confounding and taking the money from the most people at any one time. Years ago we worked on corporate balance sheets, P/E's, price to book and all the standard fundamentals that one might think actually count for something. Then we learned an important lesson. We make our money by trying to figure out how the market would make the most amount of money at any one time. If it's by going higher, and pulling in more people and burning those that went short, up it will indeed go. If the market will rake in more money by rolling over and burning the longs, and punishing the latest people into any rally, then down it will go. Unfortunately – that doesn’t do much for fundamentals – but that’s the way we’ve been trading for a while now. However, if they let the market roll over right now, all the people that were going to sell out if the DOW ever reached 10K again, would be smart. If it just continues to pause, move up, pause, move up, then every "dip" buyer would continue to be rewarded, and the market rarely likes to show it's patterns so easily. So, I'm thinking it inches up a bit more here – because those who say they'd sell at 10K will watch and decide to stay in. Those that didn't think it could ever surpass 10K will say "wow this must be real, we just passed 10K, I gotta get in". And all of those that sold short over the last two weeks would have to cover or lose big time. Then, just about when everyone is totally on board that the market is destined for 11K, they pull the plug and ALL those people get spanked.

But wait it gets even better. Let's suppose we do hit 10,400ish or so. Let's say then they do pull the plug and we lose 700 points or so, causing everyone to scramble, sell out, go short, etc. What would be better than once again reversing and pushing straight up into year end, frying all those that just "got out?" It's almost too perfect - yet I wouldn't be a bit surprised if this is the way it pans out.

Just remain nimble and let’s see how this plays out. We're going to continue to "lean long" but keep our hands near the sell button.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- we’re holding PTEN – with a hard stop 26.06

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 10-11-09

This Week in Barrons – 10-11-09:

Thoughts:
Not a day has ever gone down in history where it wasn't "different" than before.
Yet despite the fact that things are always different, history does tend to play little tricks on us by mimicking things that have taken place in the past and running them again, almost like a product that's been out for 50 years, and gets a new box saying "new and improved". Steve Forbes wrote me last week – with this little gem: “Over the years - there have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Professor Peter Bernholz (Professor Emeritus of Economics - University of Basel, Switzerland) analyzed the 12 largest episodes of hyperinflation - all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government's deficit exceed 40% of its expenditures. According to the current Office of Management and Budget (OMB) projections, the US will run deficits equal to 43.3% and 39.9% of expenditures in 2009 and 2010, respectively. To put it simply, roughly 40% of what our government is spending has to be borrowed.
Has the US reached the critical tipping point. The qualitative perceptions of fiscal and monetary policies are impossible to control once confidence is lost. In fact, recent price action in metals, the dollar and commodities suggests that the market is already anticipating the future."

All we’re hearing now is that Ben Bernake was a student of the Great Depression, and knows how to avert another one. To which I say "hogwash". We’ve handed out billions: (a) for cash for clunkers, (b) to save the very banks that drove us into our current situation, (c ) in unemployment benefits, (d) in the form of first time homebuyers tax credits, and (e) for more war. Yet reality is telling us: (a) 49% of all CEO's expect their sales to be flat or down in the coming 6 months, (b) 79% of all CEO's surveyed expect their capital spending to be flat or down in the coming 6 months, and (c ) 87% of all CEO's expect to do no hiring in the coming 6 months. We just saw 550K more initial jobless claims last week, and 263K people lost their jobs in September, and here are the CEO's saying that they will NOT be hiring anyone for 6 months? Is THIS what a recovery looks like?

U.S. apartment vacancies rose to 7.8%, a 23-year high, and if they can't rent apartments, are they really going to be selling more houses? Office rents fell 8.5% year over year in Q3, the biggest drop since 1995. The decline came as renters ‘gave back’ 19,600,000 square feet to landlords; YTD they've given back 64 Million square feet - the highest negative absorption rate on record. The office vacancy rate of 16.5% is a five-year high. With more job losses still predicted, don’t you think we’re going to shed more office space. Who called a bottom in housing – and is THIS what a recovery looks like?

Internet advertising in the United States slipped 5 percent in the second quarter as the recession extended the first slump in online marketing since 2002.

But let’s look at our buddy Goldman Sachs – and what happens if CIT goes bankrupt. And remember Jim Cramer told you to dive into CIT when it was still over $2 (it’s a lot less now!) A CIT failure would benefit Goldman to the tune of $1B in cash. A CIT failure would hurt small business, hurt the taxpayer, certainly hurt the shareholders – but who would win – ahh Goldman Sachs – and potentially someone who has a lot of Goldman Sachs shares (Jim Cramer!)

GOLD – well the other day "rumors" spread that Saudi Arabia was in talks with Japan, Russia, China, France and several other countries to try and sell oil in a different currency than dollars. That smacked the dollar hard and sent gold on a huge run, ending around 1050 an ounce. Now, are the Saudi's and OPEC trying to get out of dollars? Of course, the entire WORLD wants out of dollars because dollars are being de-valued. But if they stampede the gates, everyone will try and get out at the same time and crash the whole financial system. Once again Gold proved that it’s true purpose is ‘money’. As the dollar falls – gold will continue to rise over the next several years. Now realize that the major cartels, the Central Banks and money centers are short a ton of gold and right now they're in panic mode. If they can't beat gold back down, there's going to be major fireworks. The COMEX could actually fall as "fails to deliver" take over the floor. In other words we're about to witness a street fight over the value of the metal. I predict that gold still wins – but it won't be a straight shot, and we could see gold under 1K again.

The Market:
Monday went as we figured it would, although it did close higher than we thought. We called for a gap open, a fade to red and a push back to green which we got. But I was thinking something like a gain of maybe 50 points, not the 100+ we got. Tuesday the market absolutely roared out of the gate and in no time at all was up 160. Then during the afternoon session, it looked like they might lose control as we were up only 75. But the "powers that be" came in and bought up everything, and we closed up very strongly. Wednesday was a grind that ended essentially flat. And then Alcoa hit - sales in North America fell 25%, sales in Europe fell 25%, BUT sales in China rose 15% - which according to Alcoa solves all their problems. Yes – they "beat the estimates" but they had to do it on revenues that fell 34%. Once again we see currency exchanges, and finely tuned accounting being the reason for such "BTE" (better than expected) results.

The rest of the week was a reaction to Alcoa – and was grand and we’re beginning to flirt the DOW busting over 10K. With the flood of earnings really starting next week, there's a pretty good chance that a lot of the darlings will really run into their release. We seeing that with IBM, and AMZN, we saw it in the material sector and the coals. As much as it doesn't make a lot of "fundamental" sense, leaning long is probably going to be the right way to go.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- we’re looking at a lot à AEM over 72, GG over 43, RGLD over 50, MFN as it crossed the 10.20 area, NAK it crosses the 7.75/8.00 area, SLW which I loved over 13.13, SSRI over 24 should run nicely, PAAS over 25.50 could be a very nice breakout move, OIH gets over 120.00 all hell could break loose, watch RIG for a move over 87.00, DO over 98.00 would put it in an interesting area, PTEN crossing over 16.00 makes an interesting trade
- I grabbed some ANR @ 36.14
- I also bought some MEE @ 29.11

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 10-04-09

This Week in Barrons – 10-04-09:

Thoughts:
I hope that I'm smart enough to know that when a ship is sinking, I want to be real close to the life raft. We are beginning to look more and more like a ship in trouble – while the captains are telling the passengers that everything is fine. I’m worried that we’re evolving into a Nanny State - where people have given up virtually all their true freedoms in return for a false sense of security. And how are we doing: (a) our Nation is bankrupt, (b) we are the worlds single biggest debtor nation that's ever existed, (c ) our manufacturing base has been completely dismantled, (d) we import more than we export, (e) and by most accounts our population is broke. Now is that because of, or in spite of all our social engineering, laws, rules, restrictions, and political correctness?

We have relied on the Government for so much, we are now relying on Government to plug the hole and get us back on course – and I don’t believe that this is possible. The real Titanic simply made a fatal mistake and slammed into an iceberg – by accident. America (the Titanic) has been sunk on purpose. All that’s left now is to keep convincing everyone that ‘things are fine and will be fixed in a jiffy’ – and then loot every person of their personal wealth before the ship settles to the bottom. Ask yourself what kind of recovery is this where: credit still contracts, housing still falls, defaults soar, sales plunge, revenues drop, banks still fail, the FDIC goes broke, and jobs are still lost?
- Oct. 2 (Bloomberg) -- The number of U.S. lenders that can't collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery
- Consumer loan delinquencies struck record highs in Q2, ABA says, citing the "cumulative effect of the longest recession since the Depression."
- Foreclosures jumped 16% in Q2, while hit 8.5% of all mortgages.

Now despite 550,000 people signing up for first time initial jobless claims on Thursday, and knowing that 263,000 more people lost their jobs in September, CNBC along with Obama and his administration continue to tell us the recovery is "in" and it's all blue sky from here. What about the fact that the "hours worked" fell to the lowest number EVER recorded? What about the fact that capacity utilization is at the lowest levels ever recorded? What about the fact that employers "could" take their part time crews and turn them on full time, and we'd really have no reason to hire another real full time employee for approximately 3 years?

My bottom line is that we are going to see spectacular changes. The economy will limp along on life support as they toss trillions of made out of thin air dollars at it – which won’t work. Eventually it all fails and we get the true depression we should have had already and worked out of. They can't stop the stimulus or the economy grinds to a halt instantly. We are destined to a world of dollar devaluing, corporate bail outs, less and less jobs, more foreclosures, more falling home values.

So, what do you do – I always get back to gold and silver. I'm here to say that MILLIONS of foreclosures are still coming at us, and as unemployment continues to rise, housing will continue to fall. I expect housing to fall another 30%. We’re already devaluing the dollar – and at some point it will no longer be the world’s reserve currency.

The Market:
Last Wednesday the market hit an intra day high of about 9937 - since then we've fallen back a bit, hitting an intra day low of 9378 – a loss of about 560 points in 8 trading days. The charts are telling us that the NDX, or the technology heavyweights, is forming a pattern that historically has seen a massive smackdown following it – so let’s put that into the "we're heading much lower camp". Then we have another influence: quite a few traders didn't catch much of this whole March thru September move and are rabid to get in. All they wanted was a pull back so they could get cheaper entries and some of them are on the move already. The third prong on this fork is that: "Consumer confidence will rise with the gradual rise of the equity markets" - is a quote from Ben Bernanke himself months ago. How did he know the equity markets would rise? Simple – hs’s allowed the banks to take TARP money, and stimulus money and ramp the markets higher. So, we have the 800 lb gorilla - with limitless funds, to buy futures, and stocks, at any time - knowing that housing is in the toilet, knowing jobs are nowhere and going nowhere fast, they are manipulating the last "thing" they can manipulate that keeps the masses from bearing down on them.

We've all been looking for a big pulldown. Once we got up and over my first DOW target of 9600, we entered a surreal time. We know the stimulus will be there for as far as the eye can see. We also know that the Chinese don't like us much any more, and most of the major economies are looking for a way "out" of dollar denominated assets.

Well, we've already lost 560 points – with some of that being post window dressing selling. We have people desperate to make money, especially if they were in the market during the 2008 crash and missed this run up. We have the FED willing and ready to push more money into the Goldmans, and JPM's of the investing world – and all of that would seem to add up to another run higher coming - yes?

I think we have a bit more work to do on the flat line first. The beginning of the week will be lumpy, bumpy, murky and cloudy. We should open green and then erase that and go red, and then go green as they all jockey for position. Tuesday into Wednesday might be just as jerky. But, by Wed night, into Thursday if they want the market to run up, that's when I'd suspect the firepower would start. We are currently "out" of the market in our trading accounts, just waiting for confirmation of going long or short.


TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena


Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 09-27-09

This Week in Barrons – 09-27-09:

Thoughts:
Allow me to change the pace a little bit – and talk about one of the aspects of ‘trading’ that could help all of us going forward. As a backdrop: the economic reports continue to show incredible weakness, no matter how well everyone tries to spin them: (a) we saw the durable goods number plunge and the July number revised lower, (b) we saw housing sales slow, and the median price of those homes dip some 12%, (c ) we saw another half a million people need to sign up for first time unemployment benefits, and (d) we saw Congress approve extending unemployment benefits another 13 weeks (making it a total of 92 weeks of unemployment – almost 2 years!).

Factually the US is broke beyond repair – and is no longer a viable corporation. We have approximately $75 TRILLION worth of liabilities (Medicaid, Social security, tuition loans, FHA, Fannie, Freddie, etc) – and even if you raised the tax burden to 100% of all incomes – we would still be woefully short of what is needed. 95% of this debt all came after Richard Nixon removed the dollar from the gold standard, making our currency backed by simply the "full faith" of the US Government – allowing the FED to print money like madmen and to satisfy all the projects our Government pledges. As we speak we are looking at trillion dollar deficits for as far as the eye can see, and frankly those will rise even higher. The only way that I see of combating this is to slowly ‘devalue’ the U.S. dollar. The U.S. could ‘devalue’ its currency - making its outstanding debts more palatable. Here's how that works: if you allow your currency to fall in value, you are repaying debts with cheaper dollars. For example - if a dollar was to be instantly worth 50% less tomorrow, your salary would have to "double" to remain the same. So if you have a 100K dollar debt and were making 40K dollars a year, now you'd still have that 100K dollar debt, but your pay would rise to 80K a year. Now – as a backdrop to this – the dollar has been falling since 2001! But it is like ‘boiling the frog’ – do it slowly – and no one notices – do it quickly and all ‘heck’ breaks loose. The U.S. could also raise interest rates – which would temporarily halt the slide in our currency, but that would instantly bring lending to a halt. The housing that is selling will stop selling. The commercial loans that are being made will cease. It will be the final nail in our economy's coffin – so that won’t happen.

However, as the dollar becomes worth less and less, things that are "real" such as commodities get more expensive – this IS INFLATION. This is why oil is up in the $60 to $70 range despite all the developed nations using less of it. This is why food is up, energy is up, and gold is up to $1000 an ounce.

The bottom line is that the dollar is going to be removed as the global reserve currency and the transition is in effect as we speak. Already the IMF (International Monetary Fund) has begun to issue it's own brand of SDR's (Special Drawing Rights). This is what they are going to use as currency between nations that don't want dollar exposure, until they settle on the new Global reserve currency. And it appears that China is going to demand that their currency is (at minimum) a part of a basket of currencies and probably with some form of tie to a metal backing (gold). Just know that this is all taking place in the background of the UN, the G20, the IMF and all the central banks.

Now, builders and lenders are beginning to dust off an old pitch - "0" down, 100% mortgages. And what happens when these same mortgage fail (as before) - we, the taxpayers, get to bail them out yet again. But the only reason this will happen now is because they know that as they devalue the dollar, it all gets paid back with much cheaper dollars. The question is, will it really help the true economy? NO. In no time in history can I find that devaluing a currency is a good way to promote stability and recovery. Sometimes there's a short-term boost as your exports grow, but in the longer haul the inflationary effects weigh more heavily and then interest rates climb, effectively killing the economy. We will NOT break the mold – so stay long gold, stay long silver!

Market Tutorial: First rule – Wall Street is designed to ‘take’ your money – and if you don’t to deal with that on their terms, you're going to go home broke. Wall Street is not there to help you retire and get rich – it’s there to take every last penny you have and toss you in the dumpster. Wall Street does that by confounding, and confusing as many people as possible at any one time. Which means that each day you need to ask yourself: “What would the market do, to confound, confuse and take the maximum amount of money from people?"? If the answer is: “Go Up” chances are awfully good you're going to go up that day and vice versa. When you can’t answer that question (and most of the time we can’t) then (like the rest of us) you will spend a large amount or your trading time doing nothing – PATIENCE is a VIRTUE in trading. Let the market come to you. From 6600 to 8000 on the DOW everyone cried – “it’s just a bounce.” When it went to 9k their cries got louder. At 9600 people are ANGRY that they missed the biggest run-up in 70 years and want ‘desperately’ to get back in. My lesson for today is: Do Not Push Trades – But Let the Market Come to You! You do not need to, nor should you be trading every day. Sure missed opportunities stink, but there WILL BE ANOTHER. Wait on the ‘bull or bear’ to form – and then strike. Don’t EVER Push a Trade.

The Market:
Earnings reporting season is just about to get started. This market has run for months on ‘hope and air’ – while a significant percentage of people are hoping to sell out around 10K – while Trillions of $’s more stimulus is waiting to be released – while Unemployment is still a disaster – while Fund Managers that didn't own the market are trying to get in, while etc. We’re coming to an interesting “no mans land” where virtually anything could happen. Earlier this week, the DOW hit 9937, just shy of taking a swipe at DOW 10K, but we rolled over a bit. We are in no hurry to try and go short, not with the very, heavy hand of Ben Bernanke and lurking in the background. Ben and the PPT can move this market 200 points in a day by firing off well-placed futures trades. After a run up of this size, one may have thought that a pretty good sized pull back might have been in order – yet the way we ended Wed/Thur/Friday (down 80, down 30, down 40) – nothing was dramatic or scary. That gives us the thought that they still don't want to roll us over yet. My guess is that the first half of the week is ‘weak’, and then by Thursday (the new month and quarter) they will try and work the market higher ahead of the big deluge of earnings reports. One thing is quite certain, any company that disappoints (such as RIMM in the short-term) is simply going to be slaughtered. If enough of the early reporting companies can pull off an earnings miracle and deliver “Happy Talk”, the market very well make that last big "blast higher" that sends us over 10K for a bit. But, if we don't see enough of them making the grade, there's probably a good chance the market will use those bad reports for the excuse to send us lower in a hurry.

Be careful out there and Don't Push Trades. There are too many forces acting on the market to have anything considering a real "market feel", and when things are like that, we like to be sitting in cash waiting for the next development, either up or down.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- AMZN is a darling – and should move up when the market heals
- UYM we've played many times – and a move over 30.40 brings me in.
- DBB is interesting if it gets over 19.
- JOYG over 50 is a very interesting position.
- BUCY over 36.30 brings me in
- CHNG is a China play on Natural Gas – I see accumulation there – a move over 13.35 and we’re in.
- PDC is a U.S. play on Nat Gas - a move over 7 is good
- AGT is a small (speculative) gold play – a move over 0.65 pulls me in
- FMCN a move over 11.00 could be very rewarding.

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 09-20-09

This Week in Barrons – 09-20-09:

Thoughts:
"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."- Irwin A. Schiff

Now, I have been a raging gold bull since June of 2000. Gold was in the pits. Britain was selling it left and right, and it was left for dead for the previous ten years. But we had a pretty good idea that rampant money printing (as the "American Miracle" was exposed to be nothing more than the unbridled use of massive credit and debt) would make gold an ever more valuable commodity. Because for 5,000 years, when all else went wrong, gold was found to be the only true "money".

All along the way (when gold was under $300), the ‘chart slaves’ kept exposing that the rise in gold wouldn’t last, the charts showed tops, and Fibonacci reversals, etc. Then we got the ‘chart slaves’ in line with the ‘gold haters’ in line with the ‘currency slaves’, who (in concert) told us that the dollar would go up, and gold would get slaughtered. Well – the dollar has continued to rise and gold has continued to rise.

A month ago we recommended GDX (as basket of gold miners). One of my friends wrote me (nervous) that he had found a chart technician telling people why the GDX was going to go 35, then 34 and then to 30 from it's current price of 37.50. The trouble with charts is that they cannot accurately reflect – data fraud – manipulation – and government subsidies accurately within the chart itself. Honestly, how can a chart tell you how many Chinese might buy gold once their Government removed the rules against personal ownership? In fact – why would Goldman spend millions to develop a high frequency trading platform and if charts could do it? Lastly – to further throw the ‘chartists’ off – the banks are using the stimulus money to play the market. Fund managers that didn't get in on the run up are desperate to get in at almost any cost because their bosses have a gun pointed at their heads saying "We’d better post gains this quarter!" and they are buying. So of course this begs the question: Is Ben Bernanke right? Are we out of the recession – like he said this week?

In my mind, being out of the recession means:
- People are being hired - yet we continue to lose a quarter million jobs each month
- People are keeping their homes and improving them – yet we just found out that another 300,000 foreclosures happened in August.
- If we were out of a recession - capacity utilization would be growing to "normal" rates – yet we are just a few ticks from the worst measurements since records began.
- If we were out of a recession - retail sales would be growing, yet they have been disappointing.
- Oh well – The Market’s UP!

Of course the market’s up – Ben engineered it to be up. Never forget his remark – when the market was down and the economic news was horrid – Ben said: “Consumer Confidence will rise with the gradual rise of equities". How did he know equities would rise? Simple, he gave banks money to play with. He’s using his executive "emergency" powers to buy stocks, and futures. He’s orchestrated a media blitz about green shoots and the recession ending.

The question is of course, how far does it go? Well if you believe that the job of the market is to confound, confuse and confiscate the most amount of money from the most amount of people – then it’s easy to see that while the market was crashing and people were panicking, and selling with both hands - they'd engineer a massive rally that punished all those people for selling out, and burning the shorts. So why did I pick 9600 as the "first stop?" Simple. There was some resistance at 9250, and I figured that if we got there, every chart slave would start screaming about a "head and shoulders" pattern on the DOW and how we would be doomed to roll over and test the lows. So the market would power up and through that, completely embarrassing all those chart heads, and even slightly exceeding the next resistance at 9500 – as it has.

But now:
- We have lots and lots more people desperate to get back in.
- Our leaders are telling us the recession is over.
- The retail investor is flocking back to the market in waves.
- And the market is patiently waiting to yank the rug on these late-comers to the party. Once it has decided that it has drawn in enough people, and Once enough shorts have covered and gone long, and Once it is convinced that most people think it's got further to go, the market will fall and fall hard.

When is that? I think it will happen when everyone begins to load up for a year-end rally. Now, will it happen in early October, or later – great question? A lot of people might get nervous about coming through Sept with no selling and back away in early October, which would of course make the market continue higher. Then if they came back in, in mid month, a major shakeout in later would be "perfect". So as you can see, the first 3,000 points were fairly easy to call. The next month will be increasingly more difficult.

The Market:
We had another positive week. We are in 8 positions, and all of them are higher – which has me incredibly nervous. And each time it appears that the market is ready for a “smack in the face” - the people who have missed the rally rush in and buy the dip.

I’d like to recommend that you take a look at one of my favorite plays à Silver – SLW. I like it over 12 – and on Wednesday it went to 13.25. I really like it on a pull-back because silver is going to go along for the ride with gold.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG – natural gas space - @ 12.30 (sold remainder – up over 50%)
- TIE – commodities metals - @ 9.02 (hard stop @ 10.02)
- NBR – commodities oil space - @ 19.84 (stop @ 20.29)
- KWK – commodities coal space - @ 13.52 (stop @ 13.20)
- SLW – commodities metals - $12.50

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barons - 09-13-2009

This Week in Barrons – 09-13-09:

Thoughts:
This could be the Crime of the Century. It will be much larger than the Brinks robbery and the Manhattan Jewel heist combined. There will be no action footage on the evening news – nor will anyone realize it until years after it’s been completed. So what is this crime? It is the complete and utter raping and looting of the (non-super rich) American. The BANKERS have taken the American labor force, her resources, her productivity, her freedoms, her ambitions and finally her money. Senator Durbin said it best: “The Bankers now run the place.” This is coming from an elected official who is now admitting that he no longer has his hand on the ‘rudder’ but the ‘bankers’ do!
- People are feeling better - The preliminary September reading of the Michigan Consumer Sentiment index came in well above consensus (67.5) at 70.2. The reading in August was 65.7.
- Foreclosure filings topped 300K for the sixth month in a row, says RealtyTrac – up 18% from Aug. 2008.
- Unemployment is hovering at 9.7%
- RealtyTrac expects foreclosures to rise for another year – and that is not counting the shadow inventory of some 600k to 900k homes that have been kept off of the foreclosure markets so banks don't have to carry them as REO (real estate owned) that will come to market.
- That is NOT counting the "Pick A Pay" loans that are going to reset at the end of this year, or the Option adjustable-rate mortgages – both are estimated to an by 63 percent on average. These higher rates will likely push many of the already-strained loan recipients over the brink.
- That is NOT counting that between now and Dec 30, some 1 million people will exhaust their unemployment benefits. For hundreds of thousands of them, that unemployment was the only way they could make partial payments on their home.
- Our point – the media is telling us that housing has bottomed – and the fact is – it’s got 25% or more to go.

Also:
- The median income level fell 3.6% to $50,300, while the poverty rate increased to 13.2% from 12.5% - and naturally the number of people without health insurance increased. I really don’t care how inexpensive Obama makes health insurance - people with no job cannot buy it
- Corporate debt defaults have risen to 12.2% of companies, a number last touched in 1991, and is expected to rise to 13.2% in the fourth quarter.
- Corporate insiders are selling their stock rather than buying it at a rate of 30 to 1.

Countries are beginning to buy gold for their own reserves and encouraging individuals to buy gold as a "storehouse of value". With the dollar reaching new lows each day, gold is looking more and more attractive to people all over the world. AND on September 18th Tim Geithner has said that the Government will repeal the 3 trillion dollar backstop they provided to the money market industry. This will force people out of money markets – into Treasuries - keeping the interest rates low – and this should insure a ‘windfall’ for our friends the BANKERS!

The Market:
So far the market has put in 5 up days, and then on Friday it paused, giving back just 22 points. That's pretty amazing considering the true state of the economy, but always remember that the market and the economy are two completely different animals. Over the long term they do tend to coincide, but in short term time brackets, they are distinctly different beasts.

How long can we go up? Honestly, I we need to get the bulk of the lifting done before earnings start coming out in Late September and early October. That way everyone can blame poor earnings as the excuse for why the market is plunging. So I think the market holds up and even moves higher over the short term – and that should drag in the September worry warts, and then when satisfied – it will roll over and catch the longs. And, the shorts have slowly been capitulating, tossing in the towel. And yet there's no lack of people that don't buy this whole market – that are selling out and trying to find other places to put their money. So, many are starting to finally catch on to the idea that gold, silver and commodities might be the place to be if.

As you all know I've been a raging gold bull since 2000 – and I think we have a date with 1,500 per ounce and potentially more in the not to distant future. If the metal itself isn’t appealing – consider the GLD or the miners ETF.

I’m pretty confident that the Government, the Fed and Wall Street, are going to do their best to keep this rally going for a bit longer. If your playing stocks, keep your lot sizes small, and do NOT for any reason "invest for the long term" - that's suicide. Take ATPG for example – we bought in @ 12.30 – sold half @ 18.37 (52% gain in 5 days) and may sell the rest this week.

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG @ 12.30 (sold half @ 18.25)
- VRSN @ 22.02 (hard stop at 22.05)

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com

This Week in Barrons - 09-07-09

This Week in Barrons – 09-07-09:

Thoughts:
Sadly – as I pen this shortened letter on Labor day – I find LABOR is the one element that is missing from the American landscape.
- Friday’s Jobs Report said that only 216K people lost their jobs in August
- Friday’s Jobs Report said "unemployment rate" has climbed to 9.7%.
- The DAY BEFORE - 576,000 people signed for first time unemployment benefits.
- CURRENTLY 6.25 MILLION people are getting unemployment benefits weekly
- According to the BLS (Bureau of Labor Statistics) the ‘teenage’ unemployment rate is at 25.5%, its highest level since the BLS began keeping track of such data in 1948
- The U-6 (the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons) is 16.8% (according to the BLS)

Yet the market is happy because we ONLY lost 216k jobs – down from 700k+ jobs a couple months ago. But math skills are not our country’s forte any more. Currently:
- 78% of adults can NOT explain how to compute the interest paid on a loan.
- 71% of adults can NOT calculate miles per gallon on a trip.
- And 58% of adults can NOT calculate a 10% tip for a lunch bill.

My point is that we are living the "end game" of 45 years of ‘dumbing down’ the population – in order that the Bankers can actually run the show. The issue now is that the Bankers are losing control of the very ‘mess’ that they’ve created:
- Bankruptcy filings by U.S. consumers rose 24 percent in August compared with a year earlier and could reach 1.4 million this year
- WASHINGTON (Reuters) - More than 35 million Americans received food stamps in June, up 22 percent from June 2008 and a new record as the country continued to grapple with the worst recession since the Great Depression of the 1930s
- The second-quarter commercial mortgage default rate more than doubled from a year ago.
- Societe Generale strategist Albert Edwards warns stock markets, intoxicated by the mild recovery, are missing the big picture: "Firm evidence is emerging that the global economy is sliding towards a full-blown deflationary episode once this recovery falters..."
- CEO compensation at 20 banks that received emergency aid was 37% HIGHER than the average of CEOs at S&P 500 companies. In short, pay packages at banks "remain at levels completely disconnected from any real underlying value that executives may offer”

So, on this Labor Day - buy gold on any dip, accumulate silver, and keep your expenses down.

The Market:
September is historically the worst month of the year for the stock market. Over the past years (although everyone instantly things of October as being the "crash month") very few realized it was actually September that had the worst returns.

On the other hand – if the market's true "job" is to extract money from as many people as possible, is it just going to roll over and let everyone that went short, or pulled out get rewarded? It is possible, that a much better scenario is for this market to actually move higher in September, and then as everyone went from being short, to being fully long again, THEN roll over.

How long can we go up? If I'm right, I would think that they would need to get the bulk of the lifting done before earnings start coming out in Late Sept or early October. That way they could use poor earnings as the excuse for why the market is plunging. So it's my guess that the market holds up and even moves higher over the short term. Hang in there, as I said a week ago, the next few weeks could be the most interesting of the whole year!

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- We sold our NGD (a gold miner) for 27% profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- Also look at ATPG. A while ago we mentioned that it was looking good on a cross over 10 and it did that in grand fashion. Friday it challenged 12 and wiggled through. I like idea of it being a natural gas company, because Natural Gas has been beaten to death and at "some point" it's going to move up. Granted it probably won't be until October, but I think being a bit early isn't a horrible idea. It crossed 12, and then roared higher. If you like the idea and the chart, I think it's safe up to about 12.30 as a buy in. Natural Gas itself could easily fall another 50 cents before it firms. Let's call ATPG a longer term hold, and we'll give it a fairly wide birth before our stop-out - ATPG at 12.08 (stop at 10.80)

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/