This week in Barrons - 12-19-10

This Week in Barons – 12–19-10:

Remember the Day!
December 25th is right around the corner. It’s a truly magical day. It’s a day when the world puts down their weapons and for one day we have ‘Peace on Earth – Good Will Toward Men’. Yes it’s a truly magical day!

But unfortunately – we know the end is coming:
- The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress.
- U.S. Postal Service workers who handle letters addressed to Santa at the North Pole say more letters ask for basics – coats, socks and shoes – than ask for extras: dolls, video games and computers.
- 6 more small banks on Friday – bringing the total to 157 closed this year.
- Payrolls decreased in 28 U.S. states and the unemployment rate climbed in 21.
- This week marked the 32nd consecutive outflow from domestic equity mutual funds – equaling $2.7 billion versus $1.7 billion last year.

This week Moody's Investors Service warned this week that it may downgrade Spanish government debt, citing the country's refinancing needs next year and the strain of recapitalizing its debt-strapped banks. Moody's said a downgrade could be triggered by "Spain's vulnerability to funding stress given its high refinancing needs in 2011," a problem that "has recently been amplified by fragile market confidence.” Spain's debt problem could worsen "should the cost of bank recapitalization prove to be higher than expected," Moody's said in a press release, adding that there are concerns whether Spain can achieve the needed "sustainable and structural improvement." Europe is a disaster. There are destructive riots raging in Greece, in Italy they're protesting; in Ireland the ECB is shoveling money as fast as Bernanke is over here. No matter where you look except for Russia, China, India, Brazil things aren't going so well.

But not to fear, this week we learned that consumer prices went up a mere 0.1%. The Empire state manufacturing report came in, and it went from -11 last month to +10 this month. The only reason we're seeing economic activity is because Ben Bernanke has expanded the Fed's balance sheet to record levels. Perhaps Ben understands that after spending $2.5 Trillion in stimulus - the best he could get was a sub par rebound. But the tug of war is brewing. Wall Street wants to do it's regularly scheduled “rug pull” to fleece the American investor – but Ben’s giving Wall Street money to support prices so that people "feel wealthy" as their stocks go up. It's an interesting tug of war for sure.

But remember: EVERY single dollar in circulation came into being as a DEBT. Meaning the U.S. says that it needs dollars – so the U.S. asks the Treasury to print some money – well if the Treasury doesn’t have it (which they don’t) they go to the Fed (Mr. Bernanke) and ask for it – and Ben naturally says YES – but it comes with an interest payment (say 3%) due to the FED in ‘real dollars’. Now there comes a point when just the interest on all the money we've borrowed from the Fed, is bigger than we can pay and still keep things moving along. That day is here – because all the interest due the Fed is now our 5th biggest expenditure right behind defense. In 2009, we the people paid $383 Billion in interest to the Fed, and this year will be more. That's 11% of our entire U.S. budget that is going toward paying the Federal Reserve interest on money it didn't have and printed out of thin air.

Also notice that in the face of all the Fed's efforts to keep interest rates down – they are indeed rising. Now - are they rising because of the imagined economic strength, or are they rising as people around the globe flee the dollar and rates have to rise in order to attract buyers? My feeling is that the world does not want dollars any more. Russia has agreed to use the Chinese currency in trades between the two nations. As this continues and expands, two things will happen. Silver and gold will be looked to as a safety haven against fiat currency, and interest rates will continue to rise - not in a straight line of course. The Fed will step up its efforts - but in the long run – it’s inevitable. How do you think real estate will fare if rates go to 6% when they couldn't sell them at 3.95%? In September home prices fell in 18 of the 20 metro areas tracked by Standard & Poor's Case-Shiller composite home price index – which was worse than August. "There is a large supply of houses on the market," says David Blitzer, chair of the index committee at Standard & Poor's. "And further, hidden supply due to delinquent mortgages, pending foreclosures or vacant homes." The top 5 urban areas of decline are:
- Cleveland where prices dropped a scary 3% in September alone.
- Minneapolis, where home prices have retreated for three straight months, most recently declining by 2.1% in the month of September.
- Portland, where housing prices fell by 1.9% in September.
- Dallas, where the town's football team isn't the only thing sinking this fall. Home prices fell 1.6% in September after sliding 1.2% in August.
- And Phoenix, where the residential real estate market in Phoenix has cause for concern, trending downward by 1.5% in September and 1.3% in August.

The Market:
The market is putting in a top – there’s no question about its intentions. But the Fed, buying Treasuries from Wall Street banks, and paying them billions in premium, is countering the mutual fund redemptions and hedge fund scale backs. Those banks are then using the new money to gamble in the market, and keep it higher than it would normally be.

The big question is: Can the Fed's billions offset the exodus from all the funds? I truly don't know the answer to that and frankly I don't think anyone does. We have never seen this before. Right now we've got all manner of "technicals" screaming "TOP". From the over the top bullishness, to the daily, weekly and monthly stochastics to the buying/selling pressure, to the volume, to the
"Hindenburg Omen (HO)." For those not acquainted with the term, the Hindenburg Omen is a series of technical observations that has occurred ahead of every major "crash" in the last 50 years. Now there is a catch - although no crash has ever occurred that wasn't preceded by an HO – but we have had HO moments that didn't develop into anything. In other words a Hindenburg is not a perfect predictor – and can be observed yet the market remains flat or even goes higher. The bottom line is that, Hindenburg Omens are indeed something to take notice of, but not necessarily to panic over. It does however support the theory that we are nearing a major top. For weeks now I've been suggesting that we are working on a top in the market, and that it's going to be a significant top. This latest omen simply augments that outlook.

We are still above the November 4 closing high of 11,444, which means you can consider the market still being in something of a "breakout", but it's a pained and strained move. On Friday because of the options expiration day, I thought that in order for the market to impart the most pain on the most people, the most likely thing it could do for the day was to trade sideways, and we'd probably end the day flat to slightly red – we did!

So this is it - the week ahead of Christmas. Does the market have one more shot left in it? Will Bernanke double down on a POMO buy and give his Wall Street buddies a bunch of new billions to push the market up with? Or do we simply burn out here, hobbling and trading sideways until year-end? My guess is that we trade sideways – but the ‘darling stocks’ such as DECK on Friday can still push higher toward the New Year!

Be careful out there folks, it's getting extremely choppy. I "think" they're going to get us a bit higher, but right now I'm calling almost 50/50.


Tips:
Let’s review our holdings:

This week we were stopped out of FCX, GG, SLW and SSIR – all with very nice gains indeed. Investing is a discipline – we set our stops – and when a stock hits them – we sell. Now it’s possible the materials guys come roaring back – naturally we’ll have to watch the dollar, but it's sure possible. Right now I’m not seeing anything jump out at me as a screaming buy for Monday.

Our Long Term Holds look like:
SLV at 25.81 - up 10%
NG at 6.825 - up 90%
AAU at 3.02 - up 44%
DNN at 2.71 - up 21%
AVARF at 4.00 – flat even
EXK at 7.40 - down 7%
USSIF at 0.61 – spec play (penny stock) down 6%

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 12-12-10

This Week in Barons – 12–12-10:

Silver and Gold...Don't Panic Please
TV will give you many reasons why gold just hit the 1400 level – potentially none as on target as they need to be. We started pounding the table on Gold in the Spring of 2000, and here’s a quote from that newsletter: “Now that Gold is at $425, many are asking if it's too late to get in – NO it’s NOT too late. I'm beginning to see big cracks in the housing bubble we're in. When this housing bubble finally does pop, we are going to witness carnage that few can imagine. I am firmly convinced it will be so big, with so much fall-out, our entire financial system will be on the brink of collapse. Please don’t laugh. I know – housing just goes up forever – trust me – soon you'll find it does not, and since it's the only industry we have in this country any more, when it blows up - everyone goes down including banks, lenders and mortgage originators.”

The interesting part of that little "forecast" is that Gold is just $100 away from that 5-year-old prediction of $1500 – and the real reason it's going up is STILL in place. China and India are buying like mad. Russia is increasing production. Because whether it's the Euro, the Yen, or the Dollar, the world now knows that Fiat money (paper money that's backed by nothing) is junk. This week Li Daokui – an advisor to the People’s Republic of China said: “the U.S. is in worse fiscal shape than Europe. The dollar and treasuries are safe as long as Europe remains the focus, perhaps for another 6 to 12 months.”

Well guess what - Europe is on the brink of collapse. The ECB finally had to give in and offer up their trillions to keep the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) from defaulting. Germany has the weight of the whole darn Zone on their shoulders. Yet Li Daokui, the advisor to the biggest bank in China says we're in worse shape because of debts, and obligations we simply CANNOT EVER repay. Just two weeks ago the Russians and the Chinese decided not to trade in dollars any more, it's Rubles and Yuan for them. Gold is NOT going higher because of inflation. Gold is NOT going higher as some "flight to safety". Gold is going higher because all around the globe people are scrambling to get OUT of dollars, and INTO real money.

Will that change? Not with Bernanke telling America that QE2 is NOT the end of the printing, and that we're dangerously close to another recession (Don’t tell Ben - but we're still in one)! That simply means that he has no choice – stop the printing presses and we plunge into a 1930’s style depression - keep it going and we hyper inflate. Sounds like a ‘rock’ and a ‘hard-place’ to me!

Silver on the other hand is a bit more complicated. Silver will hit $50 per ounce – then $75 and eventually $100. Silver has been one of the most manipulated metals on earth. Right now silver demand outstrips supply and we’ve created a true ‘shortage’ of the metal. The number one reason that our Government doesn't have any big silver reserves, is the Silver lobby got them to sell all of the reserves in order to keep the silver prices down for the companies that need it for electronics, medicine, photography, space, etc. To add insult to injury, J. P. Morgan and a handful of the big players have been naked shorting Silver forever. But as Gold got up and over $1,000 an ounce, a lot of people found they couldn't even afford Gold, but with Silver at $18 – that was a metal that they could afford. The US Mint's data showed its American Eagle silver coins sales set a record above 4 million ounces in November alone. So, Silver hit $30 and pulled back a few bucks – it’s ultimate destination is much, much higher. Imagine what happens if just ONE of the 25+ lawsuits that have been filed against the big banks for manipulating silver prices "Wins?"

Gold and Silver are not done finished up until we get a sound currency. Since I don't see any sound currencies coming our way soon, bet with gold and silver.

The Market:
Currently 42.9 million people collected food stamps last month, up 1.2% from the prior month and 16.2% higher than the same time a year ago, according to the U.S. Department of Agriculture. Wow – that’s some recovery!

This week there was a sector rotation into tech. There has been a lot of sector rotations lately, from financials, into materials, into tech, back to metals, etc. I expect more of that, and the speed of rotation to quicken. AND we just had the single biggest Bond sell off since Lehman Bros imploded. All across the globe, Governments are seeing their borrowing costs rise. So, is the 30 year bull market in bonds running out of time, and it's about to roll over? That is a very important question! Interest rates are going up for one of two reasons. One is that everyone thinks the stimulus, and QE2 is going to work, and the economy is going to mend, and all is going to be perfect. The other reason is that Washington is digging a deeper and deeper hole, and the entire world is tired of us blowing up our currency, and printing all this money. Which one do you think it is?

QE is supposed to keep rates LOW because the Fed actually buying treasuries! But for "some" reason investors are saying: "You want me to buy your bonds? Pay more interest". We could be working on a massive, major top in the stock market. When that top finally emerges, and if investors DO NOT run to the "safety" of bonds – this will be something to see!

Tips:
Let’s review our holdings:

In our short term holds (holding for a few days to a few weeks – all bought within the last week) we have been stopped out of all of them – all gains except one loss – and yes – I hate to lose ☺. So time to work on a fresh batch next week.

NUAN over 18.50 looks very interesting
VRSN over 35.60 looks interesting
XLNX over 29.40 would work
VZ is working a triple top at 33.50, I'll take a stab if it breaks up and over.
AKAM on a move over 55.00 could set it free.
RIG over 71.70 could pull me in

It is possible the materials guys come roaring back – naturally we’ll have to watch the dollar, but it's sure possible.

Our Long Term Holds look like:
SSRI at 20.02
SLW at 18.31
SLV at 25.81
GG at 42.04
NG at 6.825
AAU at 3.02
DNN at 2.71
FCX at 105.30
AVARF at 4.00

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 12-05-10

This Week in Barons – 12–05-10:

It’s a Wonderful Life

Personal thanks for all of you (especially Jacob) that wrote in hi-liting the following website – which ‘in cartoon form’ really makes fun of what Ben Bernanke and J.P. Morgan have been doing with silver these past years – if you have a minute – please give it a look!
http://www.zerohedge.com/article/goldman-sack-blows-whistle-jp-morgue-silver-manipulation-scheme

What's going on out there? Well in the economic world, it just doesn't ever fail to amaze me. Bernanke caught holy hell from the rest of the world when he announced QE2, because everyone who owns dollars are now upset that the value of those dollars is falling daily. So, what's he saying now - in a taping for an upcoming 60 minutes show, he says the $600 Billion he announced is just a guideline and substantially more QE (money printing) could be coming. He says jobs are still a real mess and the economy faces a stall out – DUH! Well Ben – when you pump $14 Trillion into a $14 Trillion economy, "something" has to happen. So absolutely we see areas of economic activity. But what happened to the jobs report on Friday? Everyone was expecting a jobs gain of about 150,000 and we got a measly 39K. That took a lot of wind out of a lot of people’s sails!

But What If: What if the jobs report actually was better than that and they jiggered with it to be poor? I know a lot of you are thinking that I lost my marbles, but follow me here. We did have anecdotal evidence that the jobs report would be "pretty good" – and here in lies the problem. Jobs are supposedly the last component we need to see the economy finally mend itself. If the jobs report was good, how could Bernanke justify more and more QE? For months on end he's justified printing money like a mad man because it will eventually help the jobs situation. Foreign nations went along with it to some extent, waiting for the jobs to show up. Now if they did - wouldn't it stand to reason he'd have to stop his QE (printing of money) and all of the POMO operations?

I am really starting to believe that they pulled the jobs number down on purpose, because it’s the only acceptable reason Ben has for printing money – the lack of jobs. And if jobs recover to the point where at least we're treading water – Ben’s only excuse for QE is gone. But he can't stop QE, because his member banks are BROKE. He knows that with huge amount of foreclosed homes hitting the market – and more and more of them becoming ‘non-performing assets’ – this will destroy his member Banks – and they all need more reserves. He knows that the only way to keep the money flowing to save his banking buddies is ever more QE.

So I think they jiggered the jobs report – and I even have "some" proof. Looking at the Birth/Death model – the BLS actually "took jobs OUT" of the overall number this month. That hasn't happened in years – normally the B/D model injects anywhere from 10K to 200K jobs per month into the number, to make things look better. But this month they subtracted 8K jobs out of the total. Was that a coincidence? I'm not saying the number would have been tremendous, but it I suspect it would have been pretty darned good, considering the Holiday hiring. But the bottom line is still the same – continue printing – inflation is roaring. This week, cotton was up, Gold went over $1400, Silver hit $30, and Oil is over $87. There is no way to hide it - inflation at the raw material level, is soaring and it is either going to squeeze margins, or get passed on – and in time it will all get passed on.

Over in Europe, after trying to hold off the ECB has joined into the buying of toxic bonds to keep Ireland afloat. This will indeed continue, as Germany is more than tired of supporting the whole Club Med show, and if continued to be pressed, will back out of the Euro. So, now the whole of Europe is engaged in printing money out of thin air. Meanwhile, China, India, Russia and a handful of other "bright" countries are buying gold in ever-increasing amounts – because they see the writing on the wall – we have entered the age of Latin American style monetization. At what point does the entire fiat currency experiment give up the ghost in one last earth trembling gasp? I don't know - but it's evident that a lot of bright people are taking the steps to protect themselves with precious metals – and I can think of no better place to be.

The Market:
The market fought off the lousy jobs report, and ended the day Friday with a 19-point gain. The momentum is so strong, the printing of free money so large, and the greed on Wall Street so enormous - they cannot help themselves. So here we have a conundrum. The market is and has been moving higher on the enormous printing and distribution of dollars from the Federal Reserve - into the member banks via the POMO operations. This is no longer a secret and just about everyone from Bernanke to Obama has admitted that they've been "getting the stock market higher". Naturally the question we all have to ask is this - How long can it go? I really don't know. Never in the last 40 years have officials come out and basically admitted they are behind getting stocks higher, because they want people to feel better about not having jobs, and getting some "wealth effect". It's a Ponzi scheme of epic proportions. We simply don’t know when it will end – but for now all we can do is lean long, buy stocks in areas that the market adores, or in tangible item type stuff like materials and metals.

One of the big question marks is still - what about the tax thing? Once again this weekend the talks in the Senate have bogged down as the politicians try and play out their version of "Let's Make a Deal!". The Republicans are holding firm on tax cuts, the Dem's are holding firm on having the "rich" pay more - and each is trying to get something for giving in a little. Now, if they extend the tax cuts the market will go higher into the year-end. If they don't, people will sell stocks in December, so they pay the lesser tax rates, and how much effect this tax selling will have in the face of Bernanke injecting money into the market is undetermined.

One thing for sure, we are very close to the 11,450 high we hit in early November. If we get past that in a meaningful way, there's not much to stop this market until about 11,650 - 11,700. So if they get us past those recent highs, we're going to make some quick gains. As we approach that 11,450 level, I do expect some volatility, some chop – but once past – there’s no clearer buy signal than a few hundred points coming our way. Remember, extend the cuts = we soar higher - cuts expire = we'll pout for sure.

Tips:
Let’s review our holdings:

In our short term holds (holding for a few days to a few weeks – all bought within the last week) we have:
CAT at 85.15, is now 89.38 – 5% in four days.
GRS at 7.08 is now 7.79 – 10.3% in two days.
NVLS at 31.32 is now 32.21 – 3% in two days.
SLV at 27.31 is now 28.59 – 5% in 3 days.
SU at 36.01, is now 36.09 – let’s call it even.

Those of you who have been following us for a while – know that our Long term Holds are:
SSRI at 20.02 is now 27.99 – up 39%
GG at 42.04 is now 47.07 – up 12%
SLW at 18.31 is now 39.31 – up 114%
NG at 6.825 is now 14.92 – up 118%
AAU at 3.02 is now 4.43 – up 47%
DNN at 2.71 is now 3.33 – up 23%
FCX at 105.30 is now 108.95 – up 3%
SLV at 25.81 is now 28.6 – up 11%

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 11-28-10

This Week in Barons – 11–28-10:

Thanksgiving – Can’t we have one every month?
Steve Forbes writes me this week saying: “We still don't have any degree of certainty where the bottom of this housing market is. Why? Because the long term business model for the US still has not resolved how to put people back to work. The key is jobs. Remember, someone needs to have a job for over 2 years in order to become eligible for a FHA, Fannie or Freddy mortgage assistance. Potentially 2+ Million homes have remained outside of foreclosure specifically due to the extended unemployment benefits, which are likely to be stonewalled in Congress this term. Steve brought up some numbers: After $2.3 Trillion in stimulus for the entire 310 Million in U.S. Population → that’s $730,000 per person. Do we all feel $730,000 richer this year vs 2 years ago?

Factually:
- Sales of new single-family homes fell 8.1% in October
- Single family homes declined by 23.9% in the West, 20.4% in the Midwest and by 12.1% in the Northeast. In the South sales increased 3.1%.
- And to add insult to injury - the median price of a sold home fell a record 14%, hitting $194,900 in October, the lowest level since 2003.
- The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter.
- FYI – if you haven’t seen this video – and need a little something to get your heart started – and really angry at our government – well try this on for size: http://www.youtube.com/user/fiercefreeleancer

I tend to think what really has a lot of the global market spooked is the news that Russia and China are tired of the US dollar problems, and have decided to trade between the two countries using their own currencies and NOT trading via U.S. dollars. That’s a major development – as for years we've been saying that the US dollar is doomed and will NOT be the world reserve currency going forward. Now, just because the dollar index rises – remember - with Ireland, Portugal, Spain and the rest of the great Euro experiment falling apart, the Euro will indeed fall against other currencies, including the dollar – so the dollar can "appear" strong, while at the same time losing most of it's value because everything is relative! So the race to the currency bottom has indeed begun.

As the time for New Years Resolutions looms ahead – 5 years from now:
- I do not believe the U.S. Dollar will be the global reserve.
- I do not believe the Euro will be intact.
- I do believe a new "global currency" will be floated, backed with a gold percentage.

The Market:
By socializing the private losses of banks, the nation states of Europe are all sequentially falling one after another. Ireland, Portugal and soon Spain will indeed get all manner of freebie money out of the ECB, but it is truly "Game Over". The Germans want no part of bailing out a failed Ireland, when Ireland won't even increase their corporate tax rates to just "HALF" of what Germany charges. So rightfully the Germans are saying – “we didn’t break it – and if you won't help yourself, we aren’t helping you fix it!” Stay long precious metals.

This week initial jobless claims came in at 407K, which was well below the 435K that was expected, but don't forget it is "Holiday Skewed". This week we also had “Black Friday”, and CNBC is trying to convince us that since the malls are packed, the market should rise because it shows people are willing to spend money. Frankly with the prices I saw in various stores this weekend, I think revenue will be less this year than last due to massive price cuts.

So the manufactured US stock rally has run into some big snags that even Billions of Fed money is having a problem overcoming. The Fed is desperately trying to push the market higher into Christmas so people spend money, but the global events have even this Ponzi scheme in danger. And just the other day, Bernanke came out and lowered the outlook for GDP and employment. I'm thinking we can still trade sideways and up to the Christmas season. However, it’s clear – the market wants to ‘sell off’ while Bernanke and the White House want it "up", and that’s why we fall 100 points one day, and gain back 130 the next.

In the short term I think we’re going to see some weakness, and that could snowball. If the market loses DOW 11K, we'll rocket slide down to 10,700 in very short order. If I'm right, we'll see the market come down and test the 50 day moving average again, but it should hold. Then I think the next push up will run us somewhere just shy of the 11,400 level we saw in early November. That will be our "seasonal push", and frankly, when it ends, we should seriously consider some wholesale shorts and puts. And because the Black Friday sales seemed to be "okay" they might try and hype us right out of the box on Monday, but, we need to be careful with that. The key is that 11K line. So far they've rescued that for every close – have that fail we’ll see them regroup at the 10,700 level in very short order before trying to send us higher.

I hope you enjoyed your weekend, and I always wonder why we can’t have Thanksgiving every month!

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY (big pop this week) – DNN – and VXX

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

Here are some we’re watching:
I still like TJX over 46.50
PAY over 36.00
AEM over 80
ANR over 52.00
PCZ over 16.50
FFIV over 130 and again over 132.00
AMZN, which I liked the other day over 165.70, again over 170.00 too.

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 11-21-10

This Week in Barons – 11–21-10:

Thanksgiving – It’s such an Easy Message
Thanksgiving is my favorite Holiday of the year - partially because it’s my birthday, but mostly because all of us have so much to be thankful for – and to set aside one day to say “Thanks” seems like the least we can do. I had the pleasure yesterday of helping my 15 year old thru a physical therapy work-out, talking to my son at NorthWestern’s football game in Wrigley Field, and helping my wife re-do our dining room – and then it hit me – in over 90% of the world – none of that would be possible. So allow me to wish all of you the best – and hope you get to share some good food, drink and bonding with those who you really love – because that’s the #1 investment in all of our lives.

This week, as Gold was being systematically taken down, so we sold our position in GLD and GDXJ for over a 20% gains. As much as I think Gold and silver are going to go higher in the long run, when you're facing those kinds of profits, on a short term trade, sometimes it's best to just take those dollars home and redeploy them later. In some others the runs have been spectacular – SLW for over 100% and NG up over 139% for us – and for those we also have stops (points where we will sell) and we’ll share those at the end of this letter. Why don’t we just hold these stocks? Well currently there are 4 major lawsuits and a class action suit that have been launched concerning silver manipulation. The Gold manipulation is almost as ugly – yet to this day banks are still piling on illegal naked shorts. This week we found out:
- Mortgage applications fell 14% - along with building permits and new home starts
- 30 year fixed rate mortgages jumped to a 4-month high of 4.34% - higher yields on 10-year treasury bonds are creating ripples in the mortgage markets – the exact opposite of what the Fed expected from QE2
- The rise in cotton prices has been 'terrifying' and could force U.S. retailers like Gap (GPS), J.C. Penney (JCP) and Wal-Mart (WMT) to pay their Chinese suppliers as much as 30% more for clothes. The price hikes will be passed along to consumers.
- The Empire State manufacturing report came in at Minus 11 (saying that manufacturing is shrinking)

Today I was reading a Drudge report on two young kids who had their ‘cupcake’ stand closed down due to an elder (in the town) calling the police because of their failure to have a permit. Does anyone out there really believe that in America we ENCOURAGE entrepreneurship? Every time I hear Obama speak on job growth coming from small business I have to laugh – because who’s going to tell all of those Washington Agencies to ‘call off the dogs?’ Want to get people back to work – eliminate about 90% of the EPA's rules, eliminate the 7 years of "environmental impact" studies they require, eliminate the political correctness and replace it with common sense. Gee – I’m really looking forward to flying to visit relatives this Thanksgiving – but not nearly as much as I’m looking forward to having TSA agents ‘feel my junk’ and oogle people with x-ray specs.

The Market:
I would guess that the single biggest question on people's minds right now is - Are we going to rally into the year-end or not? I think the answer is yes. I think we'll consolidate here a bit (as they have defended the 11K level) and then see one last charge higher into year-end. However and I think we need to remember the “January Effect” – that is to say – if the market does well in January, it does well for the year. Well – I do not think we're going to get a ‘favorable’ January effect. Here’s my thinking: If you sell your stocks now, you'll be paying taxes on them in April, 2011. If you can wait until January, 2011 to sell – you’ll be paying those taxes in April, 2012. I have a feeling a lot of people are going to need cash in January, and so it’s possible we run up higher into year-end, and then sell off fairly substantially in January.

Since Ben Bernanke put himself on record as saying: "higher stock prices will contribute to the wealth effect", there can be no question that the Fed manipulation we talk of so often is not only true, but happening daily. With that in mind there are two consequences: One is that by having the member banks push the market higher, we are seeing valuations start to attain nosebleed levels. The second consequence of QE2 is that materials and "commodities" are going higher and higher - resulting in price inflation. While Bernanke floods the system with more printed money - it has to go somewhere. One place it's going is banking reserves - because frankly a lot of them are still insolvent if they had to actually account for their holdings via any semblance of GAAP. The other place the money is going is into the stock and commodity market. With Government POMO operations continuing right on through December, with people's hesitancy to sell and pay taxes now, with the Fed leaning into the market, and with the momentum leaning higher - I have to think we can lean long into year end. But after that it's got a great chance to be a nasty place, and we'll certainly be looking to go short.

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY – DNN – and VXX

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

Here are some we’re watching:
In solids: JOYG over 76.55, ANR over 50, MEE over 50, CLF over 71, BTU over 60
In tech: ATHR over 34, IBM over 145.6, AAPL over 310, CRUS over 14, STC over 15 (may see 16.50 quickly)
In retail: AMZN over 165.7, TJX over 46.5
The rest: GS over 170, and PAAS over 38 would all be interesting to me.

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 11-14-10

This Week in Barons – 11–14-10:

Something Wicked this way Comes?
After 36 hours in Seoul, South Korea - the leaders of the G-20 (talking about whose fault it is that America’s gone broke again) achieved a spectacular breakthrough late in the day, when crazed mediators from Britain, France, and Germany, persuaded the G-2 to call the whole thing off and go home. Presidents Obama and Hu quickly agreed to go home and blamed the whole impasse on the Irish and Greek governments for not living within their means and surrendering to German and French demands to slaughter their bondholders. Naturally no Irish or Greek representatives were present. While everyone bolted for the airport, President Obama remembered just how bad things are at home and headed off to visit Japan instead, one of the few industrialized G-20 nations with an outlook even worse than America’s. Before the next summit the IMF was chartered to study the currency wars and suggest a solution = Stay long precious metals. After this G-20 meeting:
- America is still living far beyond its means and setting out to trash its currency in the expectation this will somehow reduce unemployment,
- Europe is still heading towards a Club Med situation,
- China is still racking up a massive dollar surplus and has a domestic property bubble that could burst at any time,
- And Japan is aging its way towards a domestic crisis.

In other Asian news, China’s latest 5-year plan is intended to convert China from the world’s manufacturer to the world’s consumer. If that were to happen and 1.3 billion people start consuming like Americans (all on credit) we are heading for the boom of all booms, and then a massive credit bust. Happily it’s unlikely to happen. The world would quickly price scarce limited basic resources too high for the transition to occur. Even so, China has served notice that we are in for a decade of change ahead, starting in the next 5 years. Another reason to = Stay long precious metals.

I do tend to believe that there are baseline drawings that we can look at and make presumptions:
- One – it’s no secret that there are more people on this earth every day – all needing food, clothing and shelter. So we must think about the "commodities" as something important to our future.
- Two – the real detective work comes in the form of deciphering what is easily replaceable, and what is not. For instance, wheat - when the weather is good, the world produces more than enough – oil on the other hand can not be easily reproduced.

So are “stocks" at a generational low, and is this the buying opportunity of a lifetime like so many pundits suggest? In the here and now, a lot of the world is in an economic mess of biblical proportions. The US is broke, while Ireland, Spain, Portugal, Italy, and about 14 others from the Euro zone throughout emerging markets are bloated and debt ridden. And as much as I write about the doom and gloom, chances are pretty good that on the other side of what ever it is – we should climb back out and see a more stable economic picture emerge.

But here are some headlines:
- Our Q3 housing report shows accelerating declines in home values and a record 23.2% of mortgages underwater.
- As municipalities across the country pay billions to big banks to get out from under interest-rate swaps – the termination payments are coming at the worst possible time, as the recession has left states and cities facing huge budget gaps.

The number one issue right now is our currency. Bernanke is out to devalue it and the world knows it. I love the classic quote: "It might be OUR currency, but it’s YOUR problem". What do you do if you're China and you have well over a $Trillion in reserves that are related to or directly in dollar assets? Each new dollar Bernanke prints, lowers the value of the dollars in your vault.

I have said over the years that the dollar is doomed, and it will be replaced as the global reserve. I don't think the structure for the replacement is known just yet but it's in the works – and it will eventually need to be tied to a gold standard.

Gold and silver were beat-up this week. It's been long overdue, people became complacent – please use it as a buying opportunity – I am. Until economic sanity comes back and something new hits the stage – I’ll stick with precious metals – they’ve worked for 10 years – and I really can't see why they won't work for at least 4 more.

The Market:
On Friday and this week the market ended “red.” We've peeled off almost 500 DOW points in just a week. The general feeling was that Bernanke would unleash QE2, the market would love every dollar of it, and we'd soar higher. But this week the atmosphere changed - not only are most of the sane people in America upset over this next round of stimulus, but the rest of the world is angry at us too. So in Case #1: since expectations were probably running at 90% that we'd get QE2 and that the market would rally on it – the market decided to simply take everyone's money that hopped aboard for the ride higher. Then after fleecing the sheep it will turn back North and hit fresh new highs. Case #2 is that something more long term has hit. The global pressures, the backlash against QE2, the insiders selling in droves, the record bank closings, and a hundred other things have finally added up to the point where "stocks are expensive and need to be sold.” The problem with Case #2 is that this is not new – it’s been around for months. And as much as “something wicked this way comes”, and as much as I believe the market should be considerably lower – it begs the question – Where will $600B POMO dollars go if not into stocks? Honestly – if you're a big time banker, and because of a sweetheart deal between you and the Federal Reserve, what on earth do you do with all that money you’re raking in from selling Treasuries to the Fed other than buy stocks? The existing POMO program – is schedule to buy $7–9B on 11.16, $5B on 11.16, $4–6B on 11.17, $7-9B on 11.18, $6-8B on 11.19, $1-2B on the 22nd – and this continues for all of November and December. So if the money doesn’t go into stocks – where does it go – and I don’t have a good answer to that!

So I think it’s Case #1 – the garden variety fleecing of the short-term sheep, and they'll step back in and run this puppy back up with all their Fed POMO money. I think we'll know by Wednesday evening just what we have here. If the selling continues Monday and Tuesday, and we don't get a classic "Wednesday reversal" we'll have to consider the idea that something bigger is going on and look at some short side ideas. Be careful out there!

Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – NGD – ABX – FCX individual gold miners
GLD – pegged to the price of Gold itself
SLW – SSRI – SLV - silver miners and indexes
AUY – specific miner
VXX – volatility index (for the long haul)
DNN bought at 2.75
CBOE – JCI – MDT all stopped out for a slight gain
PHYS – Sold for not going up fast enough

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 11-06-10

This Week in Barons – 11–07-10:

2012 Could Bring a Very Different Day of Reckoning:
Ben Bernanke once said: "consumer confidence will rise with the gradual rise of stock prices". Ben could only say that – because he had the ability to MAKE the stocks go up. When Ben said this - the DOW was at 7k – and sure enough – as strange as it sounded – as home sales hit historic lows – as retail sales went down – as foreclosures hit record highs – as joblessness continued to rise – the market just kept going up! And yes – "the market can stay irrational, longer than you can stay solvent". But we’re talking thousands of points within the biggest recession since the Great Depression. It’s not so impressive to me that he knew what to do – after all he’s a student of the ‘depression’ scenario – but how did he set up the system to ‘quickly’ to make this happen? And Ben’s last weeks quote in the Washington Post hit it on the head: "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." So 2 years AFTER he muttered those previous words – he comes out and says almost the same thing again - but this time credits his manipulations for making it work.

OK – so this week Bernanke un-leased yet another $600 Billion of fantasy money that we don't have – and what happened - Gold went up $41, Silver hit a new recent high – and other countries - Germany, China, Brazil, Russia and a host of other nations lashed out against Bernanke’s policies. Hey – who can blame them? If I held a ton of US dollars I’d be upset as well if (in an instant) they became worth less! Here’s an excerpt from the German finance minister: "With all due respect, U.S. policy is clueless." Wolfgang Schaeuble believes there is no shortage of liquidity: "To say let's pump more into the market is not going to solve their problems.” China in turn said: “The unbridled printing of dollars is the biggest risk to the global economy. As long as the world exercises no restraint in issuing global currencies such as the dollar, then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament.”

Did you catch the word ‘inevitable’? As Bernanke continues on his College day thesis that pushing money out of helicopters is the solution to all problems – more and more of our moral friends are turning into our financial enemies. And what about this little gem that Obama and Bernanke were not going to tell us: “The cost of Fannie, Freddie bailout might hit $685B. Initially projected two years ago to cost taxpayers $200B, the tab so far is $134B, but a slowdown in the housing market might lift that total to $280B. Creating the companies to take the place of the two fallen mortgage giants will likely cost taxpayers another $400B in capital.” - an expensive repair job for U.S. taxpayers.

The jobs report came on out Friday – and on the surface it told us that 151K jobs were created. I couldn’t believe it so I did some digging. 61K of those jobs were created from the ‘birth/death’ model – so those are not real. 7K more manufacturing jobs were lost - but wait it gets worse. The labor participation rate is at its lowest point since 1984, at 64.5%. If we were to assume a ‘normal’ participation rate of 66% - that means 3.5 Million people have dropped off the employment rolls – and have quit looking for work. Adding this number back into even ‘their unemployment number’ would increase the unemployment rate to 11.6%.

Where the heck did 3.5M people go? One day they were out there looking for work and the next day, "poof" they're gone. With a sweep of the mighty pen, people active in the job market fell to a 26 year low, with 3.5M are unaccounted for.

So there you have it - Bernanke’s going to continue to print money, the rest of the world hates our guts and will embark on their own form of protectionism – to think that this ends well is naïve! I’m trading the market gains and investing in gold and silver like crazy – but frankly – I think that a major league disruption is lurking and it's going to hit by 2012 – maybe those ‘old Mayans’ were onto something!

The Market:
It’ Up! That's all you need to know. If someone asks you: "What's the market doing lately?" just say: “It’s UP!” On Thursday we learned that 450,000 people had to apply for first time unemployment benefits – but the market went up! For two years we've averaged 450K initial jobless claims per week – and there has been NO private sector job growth.

We went long FCX on Thursday morning – by noon on Friday (one day later) it was up $7 per share (7% in one day). We also bought SVM on Thursday morning at $10.58 – and on Friday it was $12.35 (16% in a day)!

My ‘gut’ has screamed for two weeks that we are topping out – but the market marches higher. We are in a momentum driven, Fed induced dream, and it is no longer going to use regular methods to tell us when it ends. In any event here's the deal: If someone says "stay long this market, it's going up-up-up" - and it does, it's not because he's a genius, it's because the Fed and Wall Street want it up more. Likewise if a well-respected trader/investor says "be cautious this market is very over-extended" and yet it goes up - don't give him grief. There is not ONE SOUL that really knows when this will end except Ben Bernanke and the boys of international banking. Only the clan of elites (doing their behind the scenes magic) knows when the rug pull will come.

We have to keep leaning into this market, because it keeps going up despite any semblance of reality, but I refuse to swing for the fences. I am buying smaller positions and keeping my stops tight. Watch the dollar - when it weakens load the boat with stock. When the dollar bounces - sell out. Nothing could be easier actually, it's really that simple – and completely insane.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – NGD – ABX – FCX individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – SLV - silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)
CBOE at 24.02
JCI at 33.00
MDT at 34.05

We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL. Jim Cramer now wants 20% of your portfolio in metals – wow pretty insightful!

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

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.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson