This week in Barrons - 6-6-2010

This Week in Barrons – 6-6-10:

Jobs – Jobs – Jobs … What Jobs?
Remember all the analysts telling us how great the jobs report was going to be – well on Friday we added 430,000 jobs – BUT:
- Not so fast - Uncle Sam admitted that 411K of the 430K were Census workers. Those are Part time jobs that will go away starting in June and will be completely gone in September. That leaves 19k jobs created.
- Not so fast - 31K of those jobs came from "Temporary Services".
- And not so fast (it even gets better) – 215,000 jobs were ‘fictionally’ created with the ‘birth/deal’ model – these are the unemployed that decide to start their own business – they’re really fictional jobs – and year after year when the government ‘must’ do their "estimat” we find out that these ‘birth/death’ jobs never exist – last year they REMOVED a million jobs off the ledger.

So why did the market fall 323 DOW points on Friday – because we LOST 227,000 JOBS! And – if those census workers are going away over the next 4 months – that means we’ll at least be LOSING 103,000 jobs each month due those Census worker hires – just at the start!

BUT Wait a second – it gets better … (thanks to thank Jacob H for this tidbit):
- President Obama last week signed an order halting work on 33 exploratory wells in the deepwater Gulf of Mexico. This means that roughly 33 floating drilling rigs – typically leased for hundreds of thousands of dollars per day – will be idled for six months or longer. These 33 gulf wells were inspected immediately after the Deepwater Horizon blowout (per Interior Secretary Ken Salazar); and in those inspections, “only minor problems were found on a couple of rigs”. But ‘shut em all down’ became the political thing to do – so follow me on this one.
- At $250,000 to $500,000 per day, per rig – this results in roughly $8,250,000 to $16,500,000 per day in costs for idle rigs – and secondarily this also impacts supply boats – 2 boats per rig with day rates of $15,000/day per boat - $30,000/day for 33 rigs – nearly $1 million/day – not counting other impacts to other supplies and related support services (i.e. welders, divers, caterers, transportation, etc.)
- JOBS – each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for 2 2-week shifts. Each exploration job supports 4 other jobs; therefore, 800 to 1400 jobs per idle rig platform a reasonable total of 50,000 JOBS are going to be lost. Wages for those jobs average $1,804/weekly; potential for lost wages is between $165 to $330 million/month for all 33 platforms.
- Secondarily - many offshore workers live in Louisiana. The state is going to see a decrease in income taxes and sales taxes that would normally be paid by those employees.

So, despite TRILLIONS of dollars in stimulus, all the programs designed to spur spending, all the FASB mis-regulations – the U.S. economy cannot produce JOBS. With no JOBS, and with millions on "emergency extended benefits", foreclosures soaring, bankruptcies soaring, commercial real estate crashing - people around the globe are finally getting the view that the U.S. may be a pseudo-safe haven – but it’s the best of a very bad lot.
- 08:20 AM May 26 saw 133,459 U.S. bankruptcy petitions, the second-highest daily level since 2005 and a 10% rise from the year before.
- During the months of March and April stock funds experienced steady inflows - in the week ending May 26, U.S.-focused funds saw outflows of $13.4B (and $3.9B from international funds), the biggest outflows since March 11, 2009

Now what’s important here is the timing. The week ending May 26 saw the market put in it's lowest reading in over a year – now where was the market on April 23rd (one month earlier) – it stood at 11,200. So the market sucked in the amateurs (who were completely brainwashed into thinking – get in or miss the party) – and when the market was convinced that it had pulled in enough suckers, it rolled over and crashed – and people SOLD. Now – the previous largest outflow was March of 2009 – and what happened in March of 2009 – the market hit lows not seen since the 90’s. So doing the math – the masses bought at the highs of ’07 (DOW 14,000) – held thru the plunge ‘08, and into ’09 – and then - when they couldn't take it any more they sold enmasse and stampeded for the exits. Remember when we said – when the amateurs rejoin the market (when Cramer was screaming ‘buy-buy-buy’) – it’s really time to sell – because the majority of people are now going to ‘buy high and sell low’. Because as we wrote in February of 2009 – “the one thing that the market usually does, almost better than anyone and anything, is punish the maximum amount of people.” At the time we suggested to people to take $5,000 – buy 1,000 shares of FAS @ 2.64 per share (it went to $40 per share) – and we ask that you take the remaining funds and purchase Apple (APPL), Google (GOOG), IBM and the DIA’s. Google’s stock doubled, Apple’s went from 84 to 270 – you get the picture.

I bring all of this up for one reason – to show you that the market is designed to take your money, unless of course you know the game and know how to play it. Our economy is crumbling, Europe's a disaster, China's having growing pains, and the entire world is deleveraging (trying it's best not to spiral into the toilet) while paying down debt. Frankly we are IN a depression right now, but all the social programs, the welfare, the food stamps have softened it: the 99+ weeks of unemployment, etc. But I still believe it gets worse – and if you base your investing on what you hear out of the major media - I'm afraid you're going to pay a very dear price.

Now – you can bet going forward – we’re going to hear about WAR more often. These are desperate times in a lot of countries, and if war will keep our/their economies afloat – then war is what we will get. That's probably going to be Iran, if not Iran and North Korea at the same time. Please be prepared.

The Market:
I previously said we were going to see DOW 9,000 this summer – and after Friday’s 300-point plunge we are in the 9000's already. But I am confident we have a lot more downside to come. It won't come smoothly, as the FED will instruct it's member banks to manipulate the market with all it's got, but it certainly will come. Reading the above - it looks like I made myself out to be some form of market genius (and that’s not the case). A few weeks back we shorted the market and went long the VXX – and felt pretty good in covering - taking gains on both – in fear of a snap back rally – where we would reload our ‘short positions’. Well that snapback rally was so herky-jerky, we never got a chance to reload the short wagon. Oh well, we'll have more shots at it for sure going forward, and short side gains come much faster than long side gains.

But what next? I can make the case for a very nasty Monday, and an all out sell fest, or a "bounce" of some magnitude. If we don't get ANY bad news out of Europe this weekend and things are relatively calm, "they" will try and rescue the market early this week from the plunge. We're only 70 points away from DOW 10K, and "they" will use that level as some form of psychological platform to keep the masses content. But that said, ANY more bad news, whether it be a statement out of Hungary about possible default, or some form of contagion to another country and we could easily shed several hundred more points quickly. So, being cautious here makes a whole lot of sense.

In my opinion, the path of least resistance is going to be "down" for a while, then as earnings start coming out, they'll use them as "more proof" that the economy is great (like they used JOBS - which was proven wrong) and we'll get some wicked bounces. If you are a long-term investor, I'd be awfully cautious, and for you short term traders, enjoy the volatility!

Tips:
Let’s assess where we are – mostly in metals:

- GG at $43, IAG at $17, SLW at $18, SSRI at $20, GDXJ at $27, GLD at $115.86, NG at $6.64 and PHYS at $11.65

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - 5-30-10

This Week in Barrons – 5-30-10:

Whistling Past the GraveYard...
Each day we are confronted with some form of bad news – whether it’s concerning the oil slick in the gulf, the bombing of people in Afghanistan, the increased tensions in Iraq, the sinking of a South Korean ship by a North Korean missile, or the debt problems of Italy, Portugal, Spain, Ireland, the U.K., and yes – the U.S. Yet there is always a large portion of news that simply doesn't make it to the nightly headlines. I find it fascinating that the average person knows quite a bit about the basics of what's going on in Greece yet doesn't know that 777 banks (here in the U.S.) are on the "critical list" and that we seem to see 1 to 5 go bankrupt each week. Just the other day - local ‘news’ guy remarked about the incredible fall in mortgage agreements – and how that coincided with the expiration of the $8,000 tax credit - but experts don't believe it's cause for alarm. Huh? The minute "Uncle Sugar" stops giving out free money, mortgage applications crash...yet that's not reason for alarm? And what about ‘strategic defaults’ – I heard from another friend in Arizona just this week à “because the house is no longer worth what we paid for it, let’s stop paying our mortgage because it will be a while before they kick us out – and when they do – we’ll RENT a better place for less money anyway.”

But understand that the glut of foreclosed homes is getting so large – that banks are allowing ‘squatters’. The rationale goes something like this: “If we kick them out, the house will deteriorate - thieves will take the appliances and the copper pipes – we’ll have to hire a property manager to cut the grass, etc. And if I allow "squatters" to just live there rent free - at least the house should be marketable some day in the future.” Do you hear a lot about this on your nightly news? I didn't think so. Imagine if that got out about ‘squatters’ – and how that would spiral out of control?

Now – if you take anything from this weeks ‘rant’ it’s the following:
A USA TODAY analysis of government data finds: Paychecks from private businesses shrank to their smallest share of personal income in U.S. history during the first quarter of this year. At the same time, government-provided benefits - from Social Security, unemployment insurance, food stamps and other programs - rose to a record high during the first three months of 2010! That means that ‘paychecks’ are being ‘replaced’ by government programs in a very big way! Not only is it a reflection on Obama’s “robust recovery” – but it’s also a reflection on how the government is attempting to win over voters – and continue thru the next election! Couple this with 17.6% unemployment (U6), a $13 Trillion deficit (putting the U.S. in the ranks of Argentina for backwards economies), and unemployment benefits being extended past 99 weeks – ugh à “What Recovery?”

Finally – this weeks’ Jobs Report is going to be crucial to the health of the market. To that end – the government needs to show a dramatic increase in job creation in order to sustain any kind of belief in the system. After all – we’ve lost 8 million jobs in the past few years – only to be replaced by a census work ‘up-tick’. Ah – but more and more news is leaking about these census workers. One census worker – last week – Naomi Cohn – told the Washington Post that
she was hired and fired a number of times by Census. Each time she was fired – she was hired back. It seems by doing this – Census is able to report the creation of a new job to the Labor Department. Here's a note from another Census worker -- this one from Manhattan: "I am on my fourth rehire with the 2010 Census. I have been hired, trained for a week, given a few hours of work, then laid off. So my unemployed self now counts for four new jobs.”

So no matter what the jobs report or any of the other cheerleaders tell you, you cannot square up a sound and growing economy with a fact that paychecks make up less income to the U.S. than any other time in our history, and handouts are at record highs. We’re in a recession – soft depression - but it's not all that evident to people because of food stamps, 99 weeks of unemployment, strategic defaults, banks allowing deadbeats to live in their homes. However, the hard depression still lies ahead.

The Market:
In percentage terms – we just put in the worst May since 1940. We shorted the bulk of the fall, caught some nice dollars on the bounce, and then "got flat". Now of course – where is the market going from here? In the somewhat longer term it's going "down' – I think we will visit DOW 9000 this summer. But in the short-term - they are doing what they can to rally a bounce. We have the jobs report coming up and the bulls will be trying to tell us how great it's going to be. If they get enough momentum, they could bounce us for another 300 - 400 points to the upside. But in the end, somewhere in June or the beginning of July – I think we’ll be looking at DOW 9000.

With that in mind, we are looking to load up on the "dark side" - meaning shorts and inverse ETFs when the time is right. We usually try and time our addition of such trades to coincide with a market bounce, but that's not always possible. So, for the next few days we'll be watching the reaction to the jobs run up, and the ultimate results. Whether we get a big bounce or not, the fact is that we'll be very light on the upside, and heavier on the downside. Why? Because (as you have seen) the market can fall a whole lot faster than it can rise. So, we'll be light on any bounce and heavier on the pullback.

Please let me wish a very Happy Memorial Day Weekend to everyone. I should have talked about Memorial Day and it's meaning, but let's just say I’m old enough to understand and to have been touched by it’s meaning and memory.

Tips:
Let’s assess where we are - selling the DIA Short and the VXX as well we still have:
- GG at $43
- IAG at $17
- SLW at $18
- SSRI at $20
- GDXJ at $27
- GLD at $115.86
- NG at $6.64
- PHYS at $11.65

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - 5-23-10

This Week in Barrons – 5-23-10:

Oh What a Tangled Web we Weave...
I saw a movie the other evening – The Jones’s – about all of our desires to ‘keep up with the Jones’s – buying stuff we don’t need and only want because someone else has it. This thinking causes a trend in buying, and when the ‘herd mentality’ hits on a national level, the movement can be overwhelming. This is the groundwork for forming "bubbles". The issue with ‘bubbles’ is that they give hope – and when the hope is taken away, the ability to ‘like’ often goes with it. Fast-forward to last week, and even though I have been preaching to get out of the market – go to cash or gold – for months – many still had ‘hope’ that the market would keep rising. Well – reality hit this week. Germany's 'Mrs. Merkel’ declared that the $1 Trillion bail out simply "buys time" – and unless all of the European member countries cut their deficits and spending there are going to be problems – because there is NO money. The US has pledged $23.4 Trillion in stimulus, not a penny of which do we have. The US and now Europe are going to start ‘printing’ their way to glory. This is really going to get interesting, because the printing of money has now lost all manner of credibility – it’s entered the ‘bubble zone’, and before it pops, I suspect we are going to see and hear some incredible things.

But the one thing that is NOT a bubble is gold. And yes gold fell last week by $80 – which beats the DOW falling by $1,200 by a long shot. The reason gold pulled back has little to do with demand. Dealers all across Europe are "out" of gold coins as people try and get out of the Euro before it goes to zero. Gold pulled down, because there was a ton of ‘shorts’ that needed to get gold under $1,200 or face extinction. Now those contracts will expire Tuesday, and the pressure will be off and I suspect gold will come back.

Factually:
- 4 more banks were closed last Friday – bringing the total to 74 – virtually one for every business day of the year.
- Tax collections in states are below last year’s numbers, increasing pressure on budgets – California in particular – tax receipts are 26.4% ($3.6B) less than last year.
- Mortgage applications dropped last week by 27% (week over week) to levels not seen since 1997
- Goldman Sachs: Remember the report that showed Goldman Sachs trading desks not having a losing day in the first quarter of 2010. Well, if you were a client of Goldman – and followed their trading advice – you have been losing money! 7 of the Goldman’s 9 "Recommended Top Trades for 2010" have been losing money for investors who adopted Goldman’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent on Tuesday. Clients who used the tips lost 14% buying the Polish zloty versus the Japanese yen, 9.4% buying Chinese stocks in Hong Kong and 9.8% trading the British pound against the New Zealand dollar.
- Finally - be fearful of a war in Iran – more next week.

The Market:
On Friday we sold our position in the VXX and covered our short sale on the DIA’s – so that was a good week! And after falling for 1,200 points we put in a bounce on Friday – slightly larger than I was expecting. The "German Agreement" was used as an excuse for the bounce – and if we don’t get any more bad news out of Europe this weekend, I suspect we should add to our gains early this week.

Now – if you listen to CNBC – the market just served you the perfect buying opportunity and you should buy-buy-buy your way to glory. Remember the heard mentality – is there money to be made on the long side – sure – for a trade – but it’s my guess it's my guess we are on a stair case ride to a lower market – thinking around DOW 9,000 sometime this summer.

If we do get a couple more “up” days in the market – I would suggest people sell into it – and I personally will be looking at some tech and materials to play with for the bounce, but I won't marry them. This is short-term hold stuff, looking to pick up a few quick dollars. And then I think we'll be able to load up some new shorts, and look for the next leg down. If you're a long only player – please be careful as the world is slowly falling apart, and it won't be graceful.

Tips:
Let’s assess where we are - we dove back into some more metals, after selling some, and selling the DIA Short and the VXX as well:
- Sold some GG, IAG, SLW, SSRI, GDWJ, and VXX (up over $16 per share) and Sold the DIA short (up over $10 per share)
- Still have: GG at $43
- IAG at $17
- SLW at $18
- SSRI at $20
- GDXJ at $27
- GLD at $115.86
- NG at $6.64
- PHYS at $11.65

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - 5-16-10

This Week in Barrons – 5-16-10:

Kick the Can on Down the Road...
I've never been one to run with crowds – but President Obama’s latest Supreme Court pick is fascinating. It’s not her lack of experience on the bench, or even her lack of deeply thought out papers, but rather that she’s a 2005 member of the Research Advisory Council of the Goldman Sachs Global Markets Institute – yes – she worked for Goldman Sachs – the very Goldman that’s on the hot seat for fraud and manipulation. Now, the ONLY way to really begin to rescue the U.S. from its economic fate is to Audit the Fed, expose it and transform it – how do you think she will vote on that?

After years of telling you how Gold and silver are so very manipulated, we find that J.P. Morgan is finally a target of a silver probe. Federal officials have launched dual criminal and civil investigations into whether JPMorgan (JPM) acted improperly to depress the price of silver. Sources say the CFTC is handling the civil charges and the Justice Department's Antitrust Division is overseeing the criminal probe.

But surely things have changed in investment banking – yes? Well, the 14 largest investment banks posted a combined $78.8B in Q1 revenues, marking the best numbers in three years and falling just 1% short of the record. Goldman itself made money EVERY DAY the market was open – EVERY DAY – I dare say that no one is that good!

Meanwhile – back at the ranch – applications to purchase a home fell 9.5% since the U.S. stopped giving out the $8,000 dollar tax bonuses for people to buy a home. And, according to Fitch ratings, the default rate for commercial real estate loans packaged within mortgage-backed securities hit 8% in Q1 of this year, up from 6.6% in December. There have now been $31 billion of commercial mortgage-backed securities (CMBS) defaults over the last 39 months. And finally, Moody’s – the rating agency for many assets - may face SEC action. In its quarterly report, released late Friday, Moody's disclosed it received a notice from the SEC in March, and may face enforcement action for misleading regulators in a 2007 license application to remain an officially recognized credit-rating firm. The SEC's allegations that Moody's failed to adhere to the policies listed in its application is just the latest setback for Moody's, which has dealt with heavy criticism over its failure to properly rate mortgage-related securities. But the most interesting part of this is: the DAY the notice arrived (before public disclosure) – Moody’s CEO sold 100,000 shares of Moody’s stock and Berkshire Hathaway (Warren Buffet) sold 678,000 shares and another 300,000 shares of Moody’s stock shortly after – naturally both transactions were ‘BEFORE’ the stock tanked.

Right Now – in the U.S.:
- Right Now - 40 Million people are on Food Stamps (1 out of every 8 – back in the 30’s when there no food stamps – this meant that 1 out of every8 people would have been in a bread line!).
- Right Now – we’ve had the biggest April budget deficit – EVER.
- Right Now – approximately 8 Million people are receiving some form of unemployment benefit.
- Right Now – 7 Million homes are in foreclosure (with many more to come)
- Right Now – 40 states are technically “insolvent”
- Right Now – we’re in a DEPRESSION.
- Right Now – as you watch the events in Greece – realize that’s the U.S. – except that we have the monetary printing press to the world (for a little while longer).

Now, if you’re in Europe – because you just gave the OK to print more money to bail out Greece – chances are pretty good that you’re going to see the Euro come under some pressure. And if you live in the European Union – you know that since the ECB doesn’t have an income stream to produce loans, then all you can figure is: 1) your European currency (Euro) is going to be worth less, 2) you’re going to need to implement a new tax so that individual members of the EU can pay for all of this, and 3) ‘honestly’ I’d better get out of the Euro! Now, the smart money knows this, and as all the currencies race each other to the "bottom" before the full swap into a global currency takes place, Gold and Silver (along with other commodities) will continue higher and higher in price – because it’s the only thing that’s REAL. Given that gold and silver have been doing very well lately - the media will tell you that it’s a ‘flight to quality’, when in reality it’s investors around the world realizing that the U.S. and Europe will now be printing themselves to hyperinflation. Meaning – if you hold Dollars or Euros - and they need to print more of them to survive, well – that means what you are currently holding will be losing value and will be worth less.

Okay, so we're in a depression, our dollars worth crap, the Euro's going to get crushed, and they’re lying to us about the economic recovery – so onto:

The Market.
Triple digit moves dominate the market: up 150, down 160, up 170, down 120 – pure technicians will tell you that major periods of major volatility are “marking periods” – these “marking periods” mark times when the market is often ready to make dramatic course changes. About a month ago all the fund managers were basically "out of cash" – meaning they were all fully invested and, and therefore didn't have much more ammo in order to move the market higher. Yet instead of falling (which is the normal course of events when funds are maxed out), we continued higher – until “the powers that be” pulled the rug. Greece was the EXCUSE the market fell – NOT the reason the market fell. Everyone knew Greece was broke - Goldman Sachs even helped them go broke! The goal here was to ‘suck in’ as many ‘amateur’ investors as possible until it was time to ‘fleece the sheep.’ Whether we call it run away computer systems or Greece – understand – we ‘fleeced the sheep’ – again! And last week, investors withdrew (approx) $4 billion from equity mutual funds in the week ending Wednesday – which would make it the largest drawdown since the rally began last March of 2009. Now the "Flash Crash" may have been an impetus – but with equity fund’s ‘cash supplies’ at, or near, an all time low – our bet is that these same funds will have to sell stocks in order to pay clients for further draw-downs?

My guess is that the bear market bounce of March ‘09 to April ‘10 is OVER. And, it won't fall gracefully, it's going to be a real mess...falling 600, bouncing 700, falling 900 and so on. The end result will be a stair step downward that lasts a long, long time. There will be periods where we just trade sideways – others when we bounce and still others when we plunge. But the overall "net-net" will be a lower market.

I do think that if we don't get any bad news out of Europe this weekend - they will stage one of their classic "the world is wonderful" bounces on Monday that might go as far as into Wed morning, but I think that if it happens, it's time to really load the short boat. In the mean time we're sitting with some shorts and some gold and silver stocks that are doing very nicely. Be careful out there folks, it's going to be a very rocky ride for a long time.

Tips:
Let’s assess where we are - we dove back into some metals – commodities and we are currently:
- Long: GG at $43
- IAG at $17
- SLW at $18
- SSRI at $20
- GDXJ at $27
- VXX is up over $10 per share
- DIA short is up over $6 per share

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - 5-9-10

This Week in Barrons – 5-9-10:

How did you think it was going to end?
Remember Thursday – it started at 2:20 pm – DOW down 286 – and in a matter of minutes the DOW was down by 986 points. I actually tried covering my DIA short between down 400 and down 900 – but no luck! Well – here’s my version of what happened: The market was weak, and from noon on the wall of worry kept growing about the contagion in Europe. Greece's population is telling the world "we are NOT paying the world back, we are NOT working any more, and we do NOT care". So, if Greece is ultimately going to default (and it will) the rest of Europe is saying: "Why are we going to give them money – because we'll never get back? What about Spain and Portugal? This isn’t good – let’s rethink things". So the markets were sliding and then the ‘machines’ took over. All those high frequency, dark pool algorithms that didn't know how to deal with market forces that were outside the normal parameters, started going firing off. It was a "black swan" event. And once the first big programs fired, dozens of others fired. Computers at the 40 biggest institutions, which can request one million quotes per second, started making trades on their own, and it spiraled out of control. Some stocks, like ACN (which was at $40), printed "one penny" in the span of ten seconds. Tens of thousands of "stop loss" orders had been taken out. Tens of billions of dollars worth of stock had been sold – at very low values – and thousands of retail investors will (once again) lose their money. Consider all the John Q. Public’s that got into the market at 11K and a week later they're staring at DOW 9,800 only to end at 10,500. They listened to Cramer – and once again they’re underwater - Wall Street raped them – again!

70% of a days volume is traded by dark pools and algorithms. Well – what happens when machines see an event that they weren't programmed for? But the real story here is that the world is waking up to the fact that the WORLD is broke. It's a lot like re-arranging the chairs on the deck of the Titanic – sure it looks better, but you're still going to sink.

What else happened last week – that JOBS report – that said we created 290K jobs for the month of April. Let’s dissect that report. 66,000 of the 290K jobs are Census workers – who’s jobs will leave in August. So, that brings us down to 224k jobs. Then there’s the government’s "Birth/Death" that says for X amount of people laid-off, some of them will go out and start businesses and hire people. So in April the government GUESSED that 188,000 jobs were created via the ‘birth/death’ model. Therefore, removing the 188K ‘make believe’ jobs - what you have left is 36K jobs being created. That is NOT a booming economy? Also the unemployment rate ROSE to 9.9% - the workweek FELL – AND the total number of “under employed” ROSE to over 17.6 million.

How about the headline that Wayne brought to my attention this week: Freddie Mac (FRE) asked for an additional $10.6B from the government yesterday, after reporting a first quarter loss of $8B. New accounting rules led to a decrease in total equity of $11.7B, creating a net worth deficit of $10.5B as of March 31. Freddie warned that it will still need billions of dollars in additional federal aid because the housing market remains fragile. Factually, Freddie Mac has lost $82 billion over the last ten quarters.

And – did you happen to notice what happened to Gold this week – it went up considerably. Gold is the only real stability we have. We can't trust our banks – they fail weekly (4 more failed over the weekend – 68 for the year). We can't trust the Sovereign debts - they're insolvent. We can't trust our money - they simply print more of it. Gold has been the best performing asset for 10 years now and will continue to be - as the world melts down.

Jim Cramer said Thursday evening: “This gives us a chance to get in at a better price than we should be able to - on the Dow 12,000 freeway." I wish we had the economy behind us to support these stock levels, and remarks like these. On May 11th – the IMF along with other ‘big wigs’ is going to sit down and discuss the global currency and debt situation. One of the things they will be talking about is the more widespread use of SDRs (special drawing rights) and Gold. It seems that there is a small faction of people now from other governments that are beginning to think that maybe some monetary link to gold makes a whole lot of sense. If we hear anything from this meeting about SDRs being loosely pegged to gold, watch out - gold could gain $200 in a day.

The Market:
Last week a lot of damage took place – from Monday’s high at 11,177 down to Friday’s close at 10,377. What’s next? Well a few things are going to happen. Someone's going to announce some form of reinforcement bail out for Greece, which just sets up Spain, Italy, Portugal and Ireland.

There are two distinctly different ways this will play out. If The Street really thinks the news is good, they are going to try and rally us big time Monday through Wed – potentially 500+ points. But if they don't come out with something believable, we're going to have a very red Monday, followed by a massive positive bounce Tuesday and Wed.

So whether the bounce comes right at the open, or after we shed another 400 points it is going to come and it will be fast and furious. Are they going to drive us up and onto Jim Cramer's 12K Freeway? I think not – and I would advise selling into this rally. And as soon as I'm convinced the big bounce is over, I'm going to go net-net short all manner of things. The average retail investor should be looking to get out of this market on whatever big bounce we get because I don't think it can stick. It won't take long after they bail out Greece that the next nation blows up. We're going to go through this for a LONG time – so we should start the long enduring "stair step" lower, sometime next week or the following week.

Tips:

Let’s assess where we are - we dove back into some metals – commodities last week and are currently:
- Long: GG at $43
- IAG at $17
- SLW at $18
- SSRI at $20
- VXX is up over $10 per share
- DIA short is up over $6 per share

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - May 2nd, 2010

This Week in Barrons – 5-2-10:

The Truth Shall Set You Free...
There is an old saying - "there are 3 sides to every story". Well, unfortunately there’s only 1 truth. There are multiple spins, avoidances, exaggerations – but there’s only 1 truth.

Goldman apparently hid the fact that they didn't want billions in toxic sludge on their books when the housing market was destined to blow up, so they tarted it up, and sold it to any investor they could con into believing it was a "good investment". Recently, internal emails have surfaced where in European office members were telling GS top brass that many of their clients were shocked and outraged when they actually figured out how lousy the ingredients of the investment were and they feel “Mis-Represented”.

How about the phrase: "Deficits don't Matter?" If that’s true – then why on earth are people raising a fuss over Greece? And if debt isn’t a problem, who cares about Spain, Portugal, Italy, Ireland, the UK, Japan, the US for that matter? So statements like: "Deficits don't Matter" is not the truth. Let’s look at a couple un-truths that happened just this week:
- Morgan Stanley was fined over metals trading. The Commodity Futures Trading Commission (CFTC) assessed $39M of fines on Morgan Stanley (MS) for breaching rules in the precious metals and oil markets.
- Federal prosecutors have opened a criminal probe into whether Goldman Sachs (GS) or its employees committed securities fraud connected to mortgage trading. Meanwhile, sources said Goldman may soon settle its fraud case with the SEC. The SEC has an "unlimited supply of ammunition" in the form of e-mails and records it could release, and Goldman doesn't want those documents aired in public.
- A Judge ruled this week that Goldman Sachs (GS), Citigroup (C) and several other high-profile banks will have to defend themselves against allegations that they conspired to rig bids for municipal investment contracts and derivatives. Fifteen California cities and counties brought the suit against the banks.

How about the largest un-truth of all: “The Housing Market has bottomed!” According to Morgan Stanley - strategic mortgage defaults have risen to 12% of all mortgage defaults, with borrowers more likely to stop paying their mortgages (and divert spending elsewhere) the higher their credit scores and the larger their loans. So with retail sales are soaring – let’s do a little math here. Last week we learned that 7 million homes are now delinquent. So with about a million of those being “strategic” where people are saying: "to heck with paying $2,000 a month on this house, I'm going to just live here until they kick us out and in the mean time I'm buying an iPad, and a new TV". So that’s billions of dollars that are being diverted from paying mortgages (the single largest living expense) to being spent elsewhere – like clothes and other retail sales items. Well who pays for the house – well eventually we do. The banks will eventually foreclose and be forced out of business - taken over by the FDIC (which is bankrupt now and will need a bail out) – and that bailout money comes from you and me.

Lastly – (Bloomberg, April 29th) - Since the U.S. recession began in December 2007, Congress has extended the length of unemployment benefits for the jobless three times – which is the limit. The line of 99 weeks is the quiet limit – and a mark that hundreds of thousands of Americans have already reached – and in coming months - the number of those who will receive their final government check is projected to top 1 million. Do you think those without unemployment benefits will be able to pay their mortgage?

So we have 18 separate countries in the ‘extended’ Europe that are insolvent for the most part. We have the worlds most "well known" banking institution getting fraud investigations and potentially criminal investigations. We have Morgan Stanley getting fined for "breeching the rules" in the commodity game. We have retail sales being spurred by "strategic" mortgage defaults (fraud). There is no recovery, there is simply "free money" from Uncle Sam.

The Market:
Now if you wondered why gold and silver started to move this week – the truth is that the world is slowly coming to grips with the truth. Friday the market dipped – it should have crashed – and having it end at the DOW 11,008 – tells me that a lot of people wanted to hold this ‘psychological level’ before the weekend. And it appears that the deal with Greece will be approved – so Greece will live on, only to default in the future instead of now.

So the question becomes: If they rescue Greece, does the market just resume its climb looking at DOW 11,700+ or do we see them rush in, push us back up to the recent high of 11,258, only to make a triple top and we roll back down? Obviously the jury's out, but I'm in the camp that we’re going to push the triple top and roll back down – but potentially for a slightly different reason. A few weeks back I talked of shorting the market, buying inverse ETF’s – well one element of notice lately – is the large influx of "amateur" investors starting to flood into the market. History shows that when the "sheep" finally figure it's time to get in, the big boys are more than happy to sell overpriced stocks to them, and get short for the fleecing of the sheep. Honestly – when “Joe Sixpack” is rushing the gates to get in, 99% or the time your best bet is to "get out".

Tips:

Let’s assess where we are - we dove back into some metals – commodities last week and are currently:
- Long: GG at $43
- IAG at $17
- SLW at $18
- And SSRI at $20
- I’m also thinking about diving back into VXX – which is a much longer term play.

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

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 - 4-25-10

This Week in Barrons – 4-25-10:

Our Thoughts – What is really going on inside those Black Trading Boxes?

A lot has changed in the last 12 years – making this a market controlled not by mass collective wisdom, but by computers, mathematical equations, dark pools, and black ‘trading’ boxes.

In the fourth quarter: total US corporate profits rose 30.6% year-over-year, a huge swing from the -25.1% trend a year ago. But almost the entire story was in the financial sector, where profits have soared an unprecedented 240%. Financial sector profits have accounted for 85% of the overall increase in corporate earnings. Total non-financial earnings are up a grand total of 5.2% year-over-year. Now is 5.2% overall growth, enough to justify where this market is? NO. And how are the banks doing it: (a) they’re keeping two sets of books – one real and one “mark to model”, and (b) the Fed allows them to borrow from the Fed at 0.50% and then loan back to the Government at 4% - and you’ve heard me go on about the rest of this list countless times.

But let’s look at yesterday’s action in the market for an example. The market opened weak – and we had a fairly sharp pull down loosing 105 DOW points quickly. As we got closer and closer to DOW 11K, you could feel the ‘defense’ – and then suddenly program trades / ‘black boxes’ kicked in and we were off to the races. Now, considering that black box trading now accounts for over 70% of all trades made, this is significant. What is Black Box Trading? It is very large computer algorithms - designed to buy up baskets of stocks when any of 10 to 500 parameters are met. The parameters vary from price levels, to interest rates, to volume levels, etc. When the computers sense these parameters, they automatically go out and buy up what ever has been programmed into them – normally very large baskets of stocks. Because many of these algorithms are based upon ‘other activity’ – you can potentially see where a couple dominos falling – could influence the entire group fairly easily. This is why a relatively small amount of cash tossed into the futures, can move stocks so extremely. The black boxes see the futures buying, figure out that they are going to go up, and correspondingly go out and buy their own baskets of stocks, pushing the market even higher. It's literally the tail wagging the dog. Before the widespread use of these incredibly powerful black boxes you could NOT have intra-day pops of 100 points on NO news – but today it controls 70% of the trading volume and therefore is the force behind our every day movement. This is why it doesn’t really matter what the underlying economy is doing – but rather where the major players wish to push the market.

For me, I’ll need to see a couple closes over DOW 11,200 to get me to toss in the towel and say "okay, we’re going to go even higher", or I’ll have to see two closes under DOW 11K, to tell me "okay, reality may have set in".

Factually: Employers took 1,628 mass layoff actions in March that resulted in the separation of 150,864 workers as measured by new filings for unemployment insurance benefits during the month. Each mass layoff action involved at least 50 people from a single employer. The interesting part here is that this number is an INCREASE of 58 (mass layoff actions) over the previous month. So ‘factually’ things are NOT improving in the job market.

Factually: What about GM paying back the TARP? Senator Charles Grassley of Iowa joins a chorus questioning GM's loan repayment, saying it's an "elaborate TARP money shuffle" rather than the sign of health in the company. In a letter to Treasury Secretary - Tim Geithner, Senator Grassley said that the source of the funds for the $4.7 billion repayment is not GM earnings, but rather a Treasury escrow account – and they literally borrowed from “Peter to pay Paul”. Sen. Grassley wrote that GM's early repayment of the federal loan is aimed at diverting attention from another uncomfortable issue – the big break the car company would get on a proposed tax to recoup TARP losses. GM is expected to generate some of the biggest losses in the TARP program, but it won't have to pay any money under the so-called TARP tax the Obama administration wants to impose on large financial institutions. Treasury and GM officials don't dispute these facts. But where was CNBC in telling us the entire story?

Factually: Food Stamp use has risen 22.4% in ONE year.

Factually: Just Friday night, 7 more banks were closed (bringing the total to 57 for the year). These seven banks will cost the FDIC $973.9M.

Factually: Call me old fashioned but I still can’t figure out how borrowing more money gets you out of debt?

Now onto the market:
Always remember: “the market can remain irrational longer than you can remain solvent!” Either I'm about to be made to look silly, or we are in that last hurrah.
On Friday, the market stumbled after the open and went red. Then the black boxes fired off and in a matter of minutes we went from 11,105 to 11,184 – and closed at 11,204 – breaking over their 200 day moving average. One of two things will happen here – either we just continue higher and higher in the face of all the ills and remain "irrational" or we roll over. I am still in the camp that says we're topping. We have seen the market advance for 8 weeks, seeing stocks fully priced and over-valued, and the market (by just about any metric) is overbought.

I’m hearing more and more traders talk about one last hurrah – a ‘blow off top’ kind of day. If that’s the case – we should see them rush in on Monday, and take us up – and that may flow into Tuesday and Wednesday. And then potentially we see the unexpected pull down – a reversal and drop of 100+ points – and that could be the first stair step lower.

Don’t get me wrong – I’ve lived this movie before in 1999 - where the market simply "melted up" on nothing but hot air. It could do it here, especially with the amount of fraud, manipulation and Fed money they are playing with. Everyone knows the scam, everyone knows it's not sustainable. The question is only "when does the music stop?" Then again I could be all wet and next week we could be talking about what stocks to buy when the DOW is at 12,500 and rising.

Tips:

Let’s assess where we are:
- I am long ODP at $8.40 – and will sell it on Monday as they release earnings on Tuesday
- I’m also long NTRI at $18.47.
- I’m short the DIA’s at $110.94 and I'm going to sit with these underwater for a bit here. Yes that's suicide in a manipulated market, but I'm willing to take that gamble and risk a few bucks
- I’m into the VXX at $19.81 – which is a much longer term play.

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.

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