This Week in Barrons - 5-1-11

This Week in Barons – 5–1-11:

To Quote Donald Trump (oops):
I always question quoting someone as controversial as “The Donald” however in this case: “We are one of the richest energy nations on the planet. There are ships fully loaded with oil - outside our ports – waiting to deliver us oil, and we can’t find a way to let them in. Now why is there $4 gasoline?” The Ben Bernanke – during his press conference was asked directly about rising gas prices, he said that it was due to emerging economy demand. Really Ben, it has nothing to do with your money printing - really? So it’s pure coincidence that gasoline started rising just as the first of the Ben Bernanke’s Quantitative Easing’s began, and has accelerated ever since?

Honestly, as much as Wall Street says people are okay with $4 gas, do those same people really understand the 45 million people on food stamps, or the one out of every six people that are on some form of Government assistance?
Is it ONLY Donald Trump that is asking: “How did we get to this situation? How is it that the single biggest economy, with the single biggest military, has NO energy policy? How is it that Apple can track your every move through your cell phone, satellites can read license plates from space, yet when it comes to something as important to the nation as abundant inexpensive energy, we have NO policy?” To quote ‘The Donald’: “Do you really think that's just an oversight?”
The United States has enough natural gas to supply our energy needs for 150 years, but it's not utilized? How can the Government take over GM (selling cars that need GASOLINE) yet there hasn't been a refinery built in 40 years? How is it that our coasts and sovereign territories are flush with oil, yet we don't touch it, but rather send BILLIONS to Brazil to help them develop their fields so we can buy oil from them?

Well some facts:
- In 1944 the Bretton Woods Agreement pegged the U.S. dollar to gold – at the rate of $35 per ounce – and other currencies were pegged to the dollar. However, in order for the agreement to work – you either needed $35 per ounce gold forever, or you’d have to change the exchange rate as the price of gold changed. In any case – these two elements would absolutely need to move in ‘lock-step’ – and they didn’t.
- What started to happen was that nations would accumulate U.S. Dollars – cash them in for gold at $35 an ounce – and then sell the gold at a higher price on the open market for a profit!
- Fast-forward to 1971, due to the Vietnam War producing large account deficits – President Richard Nixon suddenly “closed the gold window” – stopping the dollar to gold conversion – except on the open market.
- So why would anyone want to use U.S. Dollars – you ask? Well – one reason is the military security that we offer. Secondly the real key to the world has always been energy. So, the U.S. (which had already developed the Middle East oil areas) got the Saudi's to agree to only sell oil based on US dollars in return for security. But what’s to keep the Saudi’s from developing their own fields and purchasing security on an ‘as needed’ basis - nothing is the answer!
- Well what is often overlooked in 1971 is along with ‘closing the gold window’ was President Nixon’s unilateral creation of the EPA. The EPA (along with maintaining many clean air and water standards) – indirectly (or directly) ensures that the Saudi’s would remain the global oil producers going forward and the ‘U.S. dollar’ would remain the global reserve currency by severely limiting any oil exploration or refining that can be accomplished inside the U.S.
- Fast-forward to 2011 – and no one wants the U.S. Dollar anymore. This makes the ‘old deal’ virtually worthless. The good news is once we are removed as the world’s reserve currency we will see a renewed interest in securing and using the oil and natural gas we have on our own shores – which will dramatically reduce the price of energy.

So ‘The Donald’ – in order to reduce the price of gasoline – look no further than your own EPA. And to quote Paul Harvey: “And now you know the rest of the story".

The Market:
Remember the program Fantasy Island – with Tatoo saying: “Boss – de plane, de plane!” A place where people would go to make all their dreams come true! Just this week our own Treasury Secretary told us that everything we’re doing is about a STRONG dollar. Meanwhile – gold is gaining $30 per day – and Silver is touching $50 an ounce. Now the world knows that this ‘strong dollar’ policy is a scam and is ‘honestly’ just playing along until the music stops! This week we saw some of the most interesting attacks on silver that the big cartel could make. With so many of the big banks on the wrong side of the silver trade, they've pulled out the stops – starting with raising the margin requirements TWICE in two days – next June’s expirations will be exciting and we are set up for some wicked movement in the silver pits over the next 3 weeks.

Now as Steve Forbes writes us: What could possibly be the upside to this market now that: (a) we’re within 1,000 points of the 2008 high, (b) the Ben Bernanke is openly concerned with inflation, and (c) the funds into QE3 will either be significantly less, just disguised as less than QE2. Often the method for controlling inflation is raising interest rates – but that’s in an economy that was fueled by jobs and by housing growth. This is a jobless recovery – with underemployment numbers hovering around 17% - and a housing recovery that is non-existent due to the shadow inventory of foreclosures sitting in the 4 to 7 million homes neighborhood. So if the Ben Bernanke keeps interest rates low (in order to satisfy investors and residential home buyers) – he simply fuels inflation. If he raises rates to contain inflation – obviously this further deepens the housing trough and further restricts demand – and subsequent employment. Sadly (and I agree with Steve here) – we could see a ‘finessing’ of the numbers over the next couple of months – i.e. changing the way we report elements such as inflation, CPI and PPI to name a few.

The market is dangerous folks, don't overexpose because when this music stops, the rush for the doors will be incredible. Take care!

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, SLW and USSIF.

In our short-term holds:
- FRG, QSURD, NGD, PAL, EXK, SVM, SD, NBR, and SQM.
- We’re still talking about how to contract and distribute the iPhone APP – so any thoughts – advice – you may have is more than welcome at this stage.

Watch SLW in the coming weeks as it continues to recover from ‘dip’ that it just experienced. I am keeping an eye on this – and it’s the stock price that will determine if we stay in SLW or go.

On a tip by Dave S. – we’re watching GXG – a basket of Colombian stocks. Colombia is the third-largest oil producer in South America, and now ranks 10th among the exporters of oil to the United States – a breakout above the 23 to 24 range would be appropriate.

Disclaimer:
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R.F. Culbertson

This week in Barrons - 4-24-11

This Week in Barons – 4–24-11:

Hunting for the Next Batch of Easter Eggs:

Happy Easter! In this case an Easter Egg means a good thing – something that you get rewarded for when you find it.

Before we start – a good friend recommended that I watch the documentary: “The Inside Job” http://www.sonyclassics.com/insidejob/ I will pass along the strong recommendation to all of you as well.

And if you wish to really dampen your Easter spirits – Steve Forbes writes: “Watch this: http://www.youtube.com/embed/VtVbUmcQSuk. The very scope of these numbers point to an impossible task. So, what's to become of the financial markets, US and otherwise? It's not IF, just when? And, what is the outcome of the fallout?”

The market soared this week – was it due to:
A – great earnings = NOPE.
B – initial jobless claims rising to over 400K new people looking for work = NOPE!
C – the Ben Bernanke coming out and saying: “We may be forced to reconsider our stance on QE3” = BINGO!

About a month ago I said that the Fed would start talking about the need to end Quantitative Easing (QE). I also said that QE would NOT end – that they would just tell everyone that it's ending and then continue it under a different name. Sure enough with Monday’s ‘bogus’ downgrade of the US debt situation, everyone is now talking about how we shouldn’t be too quick to end QE, and maybe we need to continue the programs. So gold, silver, food, and oil all go higher, and the dollar continues to fall.

On Tuesday the oil producing countries CUT production because there is a GLUT of oil sloshing around the world, and they’re running out of places to store it. Running the numbers, I actually believe the oil producers. And what this tells me is that The Ben Bernanke pushed the price of gasoline to $4 so the Banksters could make billions off the trade. So we’re paying 100% more than we should be paying for gasoline, and I guess that makes me feel better about paying 30% more for food – yes? Oh yeah - steel prices are rising between 16 and 18% - so automobile prices will be going up as well.

The Market:
The DOW ended the week at 12,505 – closing over its old resistance level of 12,400, and the S&P closed above the 1,333 level. So this would have to be called a breakout period. In my opinion, we are headed for DOW 12,700. What can stop this market?
- Earthquakes that level nuclear plants and cause radiation poisoning of our oceans = NOPE!
- $110 oil and $4 gasoline = NOPE!
- McDonald’s talking about food inflation = NOPE.
- Market participation being at it’s lowest level since stock ownership began = NOPE.
- How about the dollar being driven lower daily = NOPE!

So (using a religious metaphor) like Easter, does this market just continue to rise? And where do we find the next batch of Easter Eggs? Honestly – I don’t know just yet. Unlike any time in our history where the markets were at least relatively "free and open" - this one is far from it. We have The Ben Bernanke designing policies around moving stocks higher. Sure – there has been back room manipulation ever since the creation of the "Presidents Working Group On Capital Markets" – but never has it been (a) so big, (b) so up-front and in-your-face, and (c) so well funded. So this market will go up until “they” want it to come down, OR until a stampede of trillions of dollars worth of stock owners want out and it overpowers the billions The Ben Bernanke is injecting. When is that?

We have seen gold hit all time new highs, and silver hit 46, just a couple dollars shy of an all time high. Both of these are still showing strength, and as long as The Ben Bernanke is willing to pump billions into the "economy", the value of the dollar will continue to fall, and gold and silver will continue higher. To quote David Tepper: "Sometimes it really is that easy"!

About every other day, The Ben Bernanke hands over $2 - $8 billion to Wall Street banks, to purchase Treasuries. Those Wall Street Banks are then free to go play cowboy in the market. If they were ever to decide not to buy stocks for a few weeks, we'd plunge 2,500 points. So, the only thing to do that makes sense is to continue to "lean long". We are currently carrying 10 long positions in our short term account, and when we get substantial profits in them we sell half, take the proceeds and buy more gold and silver – because the money that I’m making on the trading side – is being offset by the inflation that's eating us alive. If you make 10% on the trading side – but lose the 10% due to ‘food or energy’ increases - you haven't gained anything. However, if you keep your money in gold and silver, they will rise and outpace inflation. Once again: “Sometimes, it’s really that simple.”

Considering that we "broke out" Thursday, we "should" move higher on Monday and Tuesday – and then stumble on Wednesday. We're still in earnings season, which means on any day, someone's earnings news can toss us around a bit, and we never like to hold any stock over its reporting period.

The debate over the debt ceiling is still going on, but there will be a deal! Because no one knows just how bad things could get if we default, they won't take the chance, and the congress will reach a deal. So, that news will probably push the market higher once again. I think we're going to try to attack DOW 12,700, and maybe that might just end up being the "end" of this insane run up.

In any event, I plan on enjoying the day with my family. It's a great day to huddle up and remember what is really important.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, SLW and USSIF.

In our short-term holds:
- We still believe in Silver and purchased more SLW and SLV this week.
- FRG, QSURD, NGD, PAL, EXK, SVM, AGRO, SD, NBR, and SQM.
- I’m trying to be more diligent on Twitter – I am ☺
- In fact I’m going to (over the next couple of months) release an iPhone APP – showing my actual trades / advice videos / etc. – stay tuned for that!

In the past week SLW has been in the news. We added to our SLW position at 45 a couple weeks ago. It did it's job and soared to 47 in a couple days. Unfortunately it fell back – but really due to the CEO stepping down – and he’s being replaced by a ‘more than competent’ insider. I am keeping an eye on this – and it’s the stock price that will determine if we stay in SLW or go.

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 4-17-11

This Week in Barons – 4–17-11:

I told you so … there I said it ☺
- Two years ago I told you silver (then at $17) would hit $50 – well this week it hit $42 (on it’s way up).
- Five years ago I said gold (then at $500) would hit $1,500 – and this week it hit $1,482 (on it’s way up).

How did I know that Silver and Gold would basically triple inside of two and five years respectively? It had nothing to do with a Fibonacci series, or a ‘cup and handle’ formation – but had everything to do with common sense - seeing bad loans, printing money, and sitting back and saying – people are going to need a stable currency – and what’s severed us well for the past 1,000 years – gold and it’s sister element silver.

Shifting gears - on Friday the government released their Consumer Price Index (CPI report) and according to The Ben Bernanke, prices (excluding food and energy) have only risen 0.1%. I apologize in advance but I cannot hold back my contempt for that elitist scumbag any longer. We all understand that housing is still imploding and because housing is such a large component of the CPI it makes the CPI basically fictitious – but really Benji – how can you make statements saying that you believe “inflation is contained”?

Factually:
- The World Bank calculates that global food prices are 36% above year-ago levels and have pushed an additional 44M people into poverty. (FYI the World Bank defines poverty as earning less than $1.25 per day!) The figures would be far worse if not for rice, whose price has remained stable because the U.S. is NOT being the premier supplier! Benji your printing press has people dying of hunger!
- Obama is gearing up to run again for 2012. His re-election budget is ONE BILLION dollars. It now costs you $1B to buy an election!
- In 2010, according to USA Today, only 45.4% of Americans had jobs – and last year just 66.8% of men had jobs – the lowest percentage on record!
- New unemployment claims rose above the 400,000 level again last week.
- This week, after a two-year investigation, members of Congress laid out a 5,000-page report concerning the housing bubble/toxic loan implosion. Senator Levin especially points to premeditated fraud and outright theft by Wall Street banks, and of course sitting on the top of the heap was Goldman Sachs. Senator Levin states, “In my judgment, Goldman clearly misled their clients and misled the Congress. Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing,"
- Doesn't anyone find it odd that just this week, the FBI shut down 3 online poker sites, impounding all the money and arresting the owner operators because online poker is "bad" – but that very same FBI can't find ONE criminal banker (Bankster) to take down – after evidence proves they committed “fraud and misled millions”?
- JPM is still illegally naked shorting a third of all silver production on earth.
- On Friday – the Office of the Comptroller of the Currency, the Federal Reserve, and the Office of Thrift Supervision announced a settlement yesterday with the 14 largest U.S. mortgage servicers including Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo. The settlement does NOT fine the banks for any of the wrongdoings but instead lists ways they need to improve their mortgage and foreclosure proceedings. WHAT? I can’t even misplace a parking ticket – but if you're JP Morgan, or Banc of America you get the free pass to steal, lie, cheat, and then have the taxpayers foot the bill for it all?
- And finally, this week regulators decided to EASE the rules on private companies selling stock allowing them to "raise more money without incurring the increased reporting and other requirements of becoming a public company". This is, of course is a bonanza for Goldman Sachs, JP Morgan and the rest of the Gang of 12, who are looking at goldmines called: Facebook, Twitter, Groupon, and Zynga.

It’s fairly evident that the world hates us – and they a special dislike for the U.S. Dollar. Just last week the nations that actually HAVE MONEY had a meeting about trade and currency, and the U.S. wasn't even invited. The leaders of Brazil, Russia, India, China and South Africa called for stronger regulation of commodity derivatives to dampen excessive volatility in food and energy prices, which they said posed new risks for the recovery of the world economy. In another dig at the dollar, the five BRICS nations agreed to establish mutual credit lines denominated in their local currencies, NOT in the U.S. currency.

In my view, the U.S. system should have failed – but that’s what capitalism was designed for – failure and then out of failure comes strength. But by letting the Central Bank save member banks, they have bankrupted the U.S. There is no way out. If The Ben Bernanke stops the printing press - we crash immediately. If The Ben Bernanke continues printing money - we hyper-inflate and then crash. Either way a severe downturn is coming to an economy near you.

The Market..
Currently we’re leaning long – however I suspect our biggest gains are in front of us and will come on the short side. But since the U.S. dollar is deteriorating, we don't keep our profits there – we put them in gold and silver, and I think this will be a successful strategy going forward as well.

This market can be called the Energizer bunny because when the government is behind the market – the market ‘just keeps going.’ Virtually every day The Ben Bernanke (thru POMO) gives Wall Street about $8 Billion, and the ‘Banksters’ are required to keep the market up as part of the deal. There will come a day when the collective redemptions of millions of investors will offset the money injected by The Ben Bernanke, and that is when the rug-pull is going to hit.

DOW 12,400 has held as an upper resistance level, and DOW 12,000 has provided the "floor". If the DOW closes over 12,400 two days in a row - you can expect a quick run to 12,700. If we fail DOW 12,000 for two closes, you can be sure we're about to drop ten percent in a short period of time. In the meantime, one of our favorite tactics is to buy heavy, and sell half quickly. This tactic seems to work well in a choppy market. Meaning – if we like ABC over $50 – and at 10:45 it breaks above $50 – we buy X shares (say 2,000) – and by 2 pm it's at 50.60 – we’ll sell half (1,000 shares) and pocket that quick $600 dollars. Then we set our stop at the entry price and let the balance ride. Hopefully over the course of several more days ABC is at $53 or $54 and we then take that trade off the table.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, SLW and USSIF.

In our short-term holds:
- We still believe in Silver and purchased more SLW and SLV this week.
- FRG, QSURD, NGD, PAL, EXK, SVM, AGRO, SD, NBR, and SQM.
- I’m trying to be more diligent on Twitter – I am ☺

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 4-10-11

This Week in Barons – 4–10-11:

It’s Funny – I wonder what a 3rd World U.S. will look like?

It’s funny – on Friday the big panic was the debate about shutting down the Government for a week as they haggle over numbers and politics that make no difference. When you realize that they're haggling over a few billion in a situation where we're underwater by trillions is kinda funny to me. As much as I do my best to stay out of politics, I have to chuckle when Nancy Pelosi tells everyone that the Republicans want to starve the elderly, while she's a headliner at George Soros's "Take Over the World" conference next week. We (the U.S.) lose over $4 Billion per HOUR into debt – and we’re haggling over $39 Billion in cuts – really? So we lost more money just DEBATING the cuts than what we saved – really?

It’s funny – to think what the U.S. will look like once the US Dollar is removed as the global world currency. You see there are a couple givens here: the dollar will crash, the dollar will be removed from its sole Global reserve status, Greece and Portugal are back begging for bail outs, Ireland has been given the green light to beg next year, and Germany is tired of paying for it all.

It’s funny – we’re talking about cutting defense. We’re presently at war in Afghanistan, Iraq and Libya – does anyone know why? Allow me to defer to the two-time Congressional Medal of Honor Recipient Major General Smedley D. Butler’s book: “War is a Racket!” The answer is simple says General Butler, “Bankers and the military complex create wars, so they can finance them and make billions.”

It’s funny – we’re talking about cutting social programs. Over two-hundred years ago a politician came out with the statement: “Doesn’t anyone realize that when we ALL start voting for the guy who gives us the most – we’re doomed?” Well, with 44 million people on food stamps, and 1 in every 6 Americans getting some form of Uncle Sam hand out – do you really think that the U.S. is ready to vote for really tough measures?

It’s funny – we’re talking about making changes to credit policies. Well – over the past 4 months we’ve seen consumer credit explode. People have been snookered into thinking the worst is behind us and are (once again) taking on more and more debt. Last week personal credit was expected to come in around $2.5 Billion – it came in at $7.2 Billion. I’ve seen this movie before – the ending will just kill ya!

It’s funny – as much as I’ve preached about inflation – and that someday Silver and Gold will rise both as currency hedges but also inflation hedges – this week we really saw them both take off. Beware – nations inflate and crash and the only thing that comes out smelling ‘like a rose’ is gold and silver.

Many are asking if it's "too late" to get in. Well – I continue to buy silver coins – why – (a) because it's going higher, and (b) there's a pretty good chance that JPM and HSBC have lost control and all their naked shorts are going to burn them. Just this week JPM (J.P. Morgan) was granted a vault and weigh station license. What that means is that J.P. Morgan decided that it was time to be a precious metals warehouse. Why become a warehouse now? My guess is that they’re going to take in a bunch of bullion, and then use it to cover all the naked shorts that they're getting killed on. Just like fractional banking – as long as ALL of the metal depositors don't show up all at once to make a withdraw, they can potentially pull it off. But that tells me (however) that they know the metals are going higher. JPM is horribly exposed to the short side and the "squeeze" is on. So in my opinion it's headed much higher, and I’m still buying.

The Market:
The market is in a very interesting area folks. The line in the sand is at S&P 1,333 and the resistance level on the DOW is 12,400. The market has attempted to attack these levels for days now, and each time gets rejected. A while back I had said to you all that we'd need to see a couple market closes above those levels to confirm they're going to push us even higher, and thus far they can't manage it. You could easily see the DOW "rolling over" from here. But of course this isn't your daddy's market, and we have Bernanke handing Wall Street $8 Billion a day via the POMO program, so it's hard to believe that this isn’t getting put to work and driving things higher.

But the one thing you have to understand is that all the gains are coming from overnight gaps. This is important - watch the futures overnight and they're usually red, and then they start their march towards green. By the open we're often big and green and the market "gaps up" and CNBC gets to gush that all is marvelous with the world. All that's happening here is that the Street is walking the futures up, luring in more and more dollars from “John Q Public” and then using their existing inventory of stock to sell right to him at higher prices.

Again – if The Ben Bernanke can push us over 12,400 on the DOW – the next stop is 12,700. However, if they can’t get us over 12,400 we may very well be looking at the start of a hefty pull back. On Monday I’d pop champagne over the "agreement" reached Friday night, but until we get a couple good healthy closes above those numbers we're in very, dangerous territory.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, SLW and USSIF. If any of you caught the USSIF 12% gain on Friday good for you. That stock is still 80 cents (yes – 80 cents) so it’s an interesting ‘speculative play’.

In our short-term holds:
- We purchased more SLW this week, along with SVN, and UXG.
- Still have FRG, QSURD, NGD, PAL, EXK, SVM, AGRO, SD, NBR, and SQM.
- Obviously the metals did very well this week – congrats to all of you who had those with me!

I am trying to be more diligent on Twitter at least in the early mornings when I do most of my business.

The oil space continues to scare me - The shale drillers last week - Approach Resources (AREX), GeoResources (GEOI), and Gulfport Energy (GPOR) – have all started to move south and we have not purchased as of yet because our recipe is: rising market, a catalyst, and a technical break-out.

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 4-3-2011

This Week in Barons – 4–3-11:

When you’re up 130% - What do you do?

If you purchased SLW, GG, NBR – others like AVL that are in our long-term holds – you’re currently up over 100% – and someone wrote me asking: “What should I do?” My advice is simply: Wash – Rinse – and Repeat – meaning sell 50% of the winner (so you’re now playing with the house’s money) and go find the next winner!

Moving on, I always wondered – if I was a pension fund manager in Germany (for example), and I had purchased a collection of mortgage backed securities (all rated AAA by the three US ratings agencies) – I would have been suing the world when I found out that what I had purchased was junk! But that has yet to happen – why not? Well, this week the Federal Reserve finally had to admit to who was doing all the borrowing during those dangerous years, and most of it was going to FOREIGN banks. According to Bloomberg, foreign banks accounted for at least 70% of the $110.7 billion borrowed during the week in October, 2008 (which was the ‘record’ week). Arab Banking Corp., the lender partly owned by the Central Bank of Libya, received 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers collapsed. Ah – at least now we know that there was ‘obviously’ a deal struck between The Ben Bernanke and the foreign central banks to bail them out of anything bad. As we look through the ledgers, tons of the really bad stuff is now the property of The Federal Reserve, and that is why The Ben Bernanke fought so hard to keep us out of his books. Now ask yourself how you feel about bailing out foreign banks? Ask yourself how you feel about The Ben Bernanke - knowing his buddies at GS, JPM, and others were packaging up absolute garbage, taking in billions in fees and bonuses, and then being rescued by tossing it on the backs of the American Taxpayer?

Well in April, 2011 – Bill Gross of the Pimco Bond Fund – the single largest bond fund on earth, and the gentlemen who has been behind it’s remarkable performance for years said: “I am confident that this country will default on its debt". Now for those of you that think Bill is ‘blowing smoke’ – I’d say - two weeks ago Bill sold ALL his US treasury funds. For a gent that trades nothing but bonds (and tens of billions of them) that's quite a statement. Bill’s convinced we will default and sold his T-Bills and notes as proof. The U.S. is in the process of quietly devaluing it’s currency in order to pay back debt with devalued dollars. It makes covering the debt easier. But this time it's not going to stop with just rampant inflation. Over the years (when we had recessions) the FED would rush in - lower interest rates - people would finally take advantage of the cheap money - buy "stuff" - create demand - and businesses would finally respond by hiring workers and creating a new economic boom. Currently we are 3 years AFTER TRILLIONS in stimulus, bail outs, work programs, owning auto companies – and the best we can get is a 10% unemployment rate, with Housing sales still falling like a rock, and a 2% "growth" rate! Unfortunately the ‘run of the mill’ devaluing of the dollar will not be enough to offset the trillions in debt. I think Bill Gross knows that, but is such a public figure he cant' say it. At some point the U.S. dollar will be ‘replaced’ with something – and judging by the way China, India and Russia are buying up gold at the Central bank level – it’s going to have some form of loose gold backing again.

So what do I do with my 130% returns? Well (a) I don’t want bonds (Bill Gross told me that) and the Government and most municipalities are bankrupt anyway, (b) I don't want most Real Estate because it’s still falling, and (c ) I’m not marrying stocks because they're works of fiction based upon two sets of accounting books. So – when you ask me whether I still like precious metals the answer is still - Yes!

The Market:

Fast times at Ridgemont High – “People on ludes, should not drive” (Jeff Spicoli). The market drove past it’s 2-year high this week, but couldn't hold it and closed under that by a small margin. Everyone said it was due to the 216k jobs number that came in on Friday. Maybe, but 112,000 of those jobs were ‘fictitious’ (birth/death model jobs).

In any event, the question now is – will we truly take out the old high and romp higher? The general feeling is yes. The market has ignored Europe imploding, the PIIGS, a nuclear meltdown in Japan, a Tsunami, massive frauds, crashing housing, stubborn unemployment, and anemic growth. But it’s different this time, because at no time in the history has the Federal Reserve come out and stated that their policy includes causing the stock market to rise. The Ben Bernanke loves the "wealth effect" it gives people. But currently fund flows are anemic, as baby boomers are beginning to face retirement and are actually cashing out, not buying more. So the question becomes – how long can The FED keep this market afloat? I have two streams of thought. One: The FED is pushing the end of QE2. Now if fund managers buy into the idea that the FED is going to end the printing of money in June - they are going to be convinced that it's going to fall like a rock in June and should sell out in Late May. Well, the market never makes it that easy. So, one very real possibility is that we begin a protracted market slide in April, well ahead of the fund managers that will be trying to get "every last drop" out of the market. So, IF we can't get up and over 12,400 on a closing basis, we might start rolling downhill now. BUT if we do get up and past that level, we'll probably run up some into earnings reporting season – and then I'd expect the rug pull. The second scenario that I see playing out is that since everyone is convinced that the end of QE will spell the end of the market, that the market just keeps on grinding higher and higher by quiet QE3, 4, and 5. The people that sell out in May and early June will watch it keep going higher. They will rush back in in late July and August, and THEN in September (after everyone's back in and we've made some new short term highs) the FED yanks the rug and yanks it hard.

Be careful out there. Don't be afraid to take some profits home.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, and USSIF. The double down on DNN from the week before proved to be very beneficial indeed - and I believe that there’s more to run there.

In our short-term holds:
- We sold N and AUGT last week (both on the plus side)
- Still have SLW, FRG, QSURD, NGD, PAL, EXK, SVM, AGRO, SD, NBR, and SQM.
- AVL had quite a jump forward last week – all of those who had it with me – congrats!

The shale drillers last week - Approach Resources (AREX), GeoResources (GEOI), and Gulfport Energy (GPOR) – have started to move north – but we have not purchased as of yet because our recipe is: rising market, a catalyst, and a technical break-out.

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 3-27-11

This Week in Barons – 3–27-11:

Didn’t Housing get us into this Mess?
Today’s the day my older son ends his spring break and goes back to attending Northwestern University – a day that always brings new meaning to the phrase: “Do you love them enough to say goodbye?”

In terms of the business at hand, today's 10 Year Treasury Bonds are trading at 3.33. In spite of inflation – that’s very good news for the bond and housing markets for the near term. Silver hit 30-year highs, Gold hit all time highs (in the $1,400’s), Oil is north of $105; therefore, one has to believe the market is getting ready to see bonds respond to the pressure and move north of 4.00. The sticking point here is housing! Housing accounts for approximately 7% of GDS – and is currently at near record lows for “New Home Starts.” New data just out from the Commerce Department indicate national home sales declined the third month in a row (Feb), the slowest pace on record, with sales down 16.9% to a 250,000 annual pace (from a reading of 1,400 in July of ‘05 to a reading just above 200 last month!) The new median price of a new home also fell 13.9%, (over the previous month) moving the market back to 2003 levels. And to add insult to injury – existing home sales fell 9.6% over the previous month. As Steve Forbes writes: “Depreciating home values and a declining pace of home-buying continue as critical factors to economic recovery. Couple that with global markets continuing to drive pricing in many sectors such as commodities and energy – and this not a ‘recovery friendly’ environment.” One point of note out of California in January is that 31% of closings were "cash.” It’s doubtful that the average ‘first time home buyer’ has the ability to purchase a home with cash. Therefore, one could conclude that the housing market in California is not currently supported by homeowners, but rather by investors flocking to the market. Until U6 under-employment numbers are halved to roughly 9%, US housing is going to remain “soft.”

Now think in terms of in 30 years we’ve gone from being #1 in the world to:
- An Underemployment (U6) reading of over 17%
- Over 50% of all US citizens survive on some form of Government subsidy
- Due to inflation (roaring @ 8 - 9%), wages have been stagnant for 14 yrs
- No energy policy (although we use more than anyone else on the planet)
- A million plus homes are in foreclosure
- We are engaged in 3 wars, none of which are winnable
- The FED has kept rates at 0% for years, and is the sole buyer of 50% of our treasuries
- Banks are insolvent, able to survive because they run two sets of books

Now my question is and the CFO of Best Buy asked the same question: “What happens when consumers buckle under the increasing pressures from unemployment and higher gas prices?”

The elephant in the room is ‘global currency’ devaluation. With so many central bankers printing money like it's going out of style, the whole system is simply too rotten to save. Everybody is going to have to get together and collectively agree to simultaneous devaluation. If you think not – let me remind you that George Soros – on April 8 of this year, is holding a major economic conference with the goals being to establish new international currency rules, and to reform the currency system. The event is bringing together more than 200 academic, business and government policy thought leaders to repeat the famed 1944 Bretton Woods gathering that helped create the World Bank and International Monetary Fund. Mr. Soros believes that central bankers printing money is causing the world to starve its population to death – and there’s certainly some truth to that rumor!

Two weeks ago I suggested that we should be hearing from the FED heads about ending QE2. As of Friday - 3 separate FED Heads have come out to tell us that QE2 is no longer necessary. So will quantitative easing end – of course not – it will just not be called Quantitative Easing. The FED will print until the crash – they have no choice. The point being that if enough FED heads continue to talk about stopping QE2 – some may sell their silver and gold – and that may cause a pull back and a buying opportunity in those two metals.

The Market:
Remember when people were biting their nails watching the market dive below DOW 12K and falling fast. But then (like a "miracle") it reversed and soared right back up, ending in the 12,200 area where the dip started. That’s just your usual fleecing! In case you missed it – the FED makes a regular policy of walking the market up in overnight futures trading and also in the late afternoon buying binges. ALL of the up moves come on very thin volume, but the selling comes with massive volume. I.E. Wall Street allows the FED money to walk the market higher, and then when it's rug pull time they liquidate massive amounts of stock. Then it gets walked higher again – rinse and repeat! But now the plot thickens. With the DOW smack in the middle of the "range" between 12K and the Feb highs at 12,400 - What happens now? One theory has us inching higher to the 12,400 level, and finally pushing up and through during earnings reporting season, and then it exhausting itself in a multi month long slide that drops us 10% or more. The other theory is that we inch higher and higher, but fail to break out and we experience a multi month long slide. Either way, as May - June gets nearer we feel the market will have topped and be in decline.

Mark P wrote me something that I found interesting about the element Iodine – boosted in popularity because of what’s going on radiation-wise in Japan right now. The company is called SQM. “SQM is the worlds leading producer of elemental Iodine. Chile is the largest exporter of iodine with almost 70% of the world’s capacity, followed by Japan with less than 30%. Annual world production for iodine is around 29,500 metric tons and Japan produces around 6,800 annually. Currently, due to the power outages in Japan their capacity for iodine is at 60%, and their appetite for iodine chemicals is extremely high. Iodine is used in plasma TVs and as intermediates in many chemicals. Furthermore the demand for use in pharmaceuticals is at all time high with the demand for potassium iodide pills. All of the 2011 iodine capacity has been pre-sold, with normal contract pricing running around $32-35 per kilogram. Currently the European spot price is approximately $50/kg and they expect that price to hit the U.S. very soon. SQM was (at one time) owned by the government of Chile; however, was divested by the government several years ago. Now – granted iodine is not gold or silver – but it is an essential element that is only provided by a small amount of companies.” I actually purchased some this week – so thanks Mark for that tip.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, and USSIF. Even with the commodity raid – we held through it – in fact we doubled our holdings in DNN down at the $2.20 level – so that 15% bounce upward was certainly beneficial to us – and I believe that there’s more to run there.

In our short-term holds we have:
N, SLW, FRG, QSURD, NGD, PAL, AUGT, EXK, SVM, and AGRO. Last week we did add SQM per Mark P’s suggestion.

As an example of our day trades over the past week - we currently own:
- SD at 12 – stop @ entry, and (if the market is flat to up – watch this one – could be a quick 20% gain)
- NBR at 28 – stop @ entry as well.

The shale drillers last week - Approach Resources (AREX), GeoResources (GEOI), and Gulfport Energy (GPOR) – have started to move north – but we have not purchased as of yet.

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 3-20-11

This Week in Barons – 3–20-11:

Should WE be a Buyer of this Market?
Do you remember the market topping on February 18th, and then entering a period of incredible chop with mood swings of over 150 points? This type of action is NOT normal and signals a change in the wind. At virtually any other time the easiest call in ‘investing’ would have been to say: “okay, go short and hold on". Unfortunately we have The Ben Bernanke who likes the "wealth effect" that rising stock prices have on people's attitudes – so at any moment, he may very well do another "injection" of stimulus, and "drive" the markets higher. It’s with this fear that most of my trades in the past 3 weeks have been strictly day-trades. I personally don’t enjoy ‘day trading’ all that much – and therefore I don’t publish my day trades on twitter, but I potentially will start if this market chop continues.

Many people suggest that this down turn was a result of the earthquake, and tsunami in Japan. I think that we were overbought, over extended, had gone months without so much as a hiccup, and had already dropped from 12,380 to 12,000 before the Japan issues started. So, it’s my belief that our market is moving in concert with ‘monetary policy’ more than anything else. In the last two days, we've bounced from 11,589 to 11,860 and let’s examine the news to potentially find a reason for the bounce.
- Even though The Ben Bernanke says inflation does NOT exist - a special index created by the Labor Department to measure the actual cost of living for Americans hit a record high in February! Ouch – now how can the cost of living increase to a record high if there is no inflation? So we know that the market didn’t go up due to a drop in the cost of living – how about the U.S. debt situation?
- A new assessment of President Obama's budget released Friday says the White House underestimates future budget deficits by more than $2 Trillion over the upcoming decade. I remember when our entire debt situation wasn’t $2 Trillion! So we know that the market didn’t go up on our debt situation – maybe good news coming from Japan?
- At 2:52 PM on Friday, breaking down in tears, the managing director of TEPCO concedes the radiation being emitted from the damaged reactors is enough to kill people. The NISA, which earlier raised its severity rating on the disaster, acknowledges the water-spraying operation is "fighting a fire we cannot see.” So we know the Japanese news didn’t send the market higher – so maybe the Middle East has calmed down?
- At 12:24 PM on Friday Syrian security forces kill at least one and wound dozens as they fire on demonstrators. And, "There is no longer any possibility of mutual understanding with this regime and he has no choice but to surrender authority to the people," says the head of Yemen's opposition after a massacre in which 42 were shot dead and hundreds wounded by security forces. So it doesn't look like there is an outbreak of peace across the Middle East – so maybe there was good news on the jobs front?
- Friday the Labor Department said that the unemployment rate rose in 351 metro areas, fell in only 16, and was unchanged in 5. That's worse than December, when the rate fell in 207 areas and increased in 122. So with unemployment rising – Japan melting – the Middle East at war – inflation increasing and the debt increasing – why did the market go on a two day romp higher?

The market bounced because Wall Street and more importantly The Ben Bernanke said it was time to bounce. So are we going to continue up? My guess is we have some more upside to come, but we won't be breaking out to new highs. I think they're going to try to claw back to the 50-day moving average that resides just above the DOW 12K line. In this new era, with Central bankers all around the world flooding the markets with dollars, yen, Euro's, etc. – all fundamentals have vanished. Now it's all about capital flows, which direction they're heading, and we need to understand that there's a very good possibility that the big banks are playing big games behind the scenes via their dark pool platforms. I personally believe that QE-3 thru QE-8 are right around the corner – they just may not be official! The end will either come by Central Banks tightening – which I view as unlikely – or hyper-inflation followed by a massive deflationary roll over. So our guess is that we bump up for a while longer, and then the air comes out again. As we come into the late spring, we should be looking at a much lower market as they anticipate the official end of QE-2.

The Market:
Once again I am hearing people calling a top in gold and silver. Please, the entire world is inflating "fake" dollars to try to plug all the holes. The real issue is that our Governments are bankrupt. We are facing sovereign debt issues that cannot be solved. The interest expense on the debt already borrowed is consuming the ability for productive spending. We have to borrow even more today, in order to re-pay the debts we created yesterday. Thus, global defaults will indeed be coming to a nation near you, and in the not so distant future.

It's not easy suggesting that the Lehman debacle and the economic meltdown were just ‘warm-ups’ for the big show that's coming. But, our economic and financial pains are not over, there is much more to come. Now, you can trust The Ben Bernake and continue to want his dollars; however, I (on the other hand) don’t want his dollars but will gladly exchange them for other currency of gold and silver – especially silver.

I continue to use the stock market to amass dollars, and then use those dollars to buy gold and silver. Maybe my lucky streak is going to run out and I'll look the fool, but every single fiat currency in the history of all time has always ‘gone away’ while gold and silver, simply march on.

Be careful out there. The day-to-day ups and downs will indeed be influenced by major headlines, but, the real danger lurks in the back ground, as each day brings us more and more bogus bucks. One day the banks will make more billions yanking the rug, so do NOT get caught in the rug.

Tips:
Our long holds looking like: SLV, NG, AAU, DNN, AVL, and USSIF. Even with the one day gold and silver raid last week – we held through it.

In our short-term holds we have:
N, SLW, FRG, QSURD, NGD, PAL, AUGT, EXK, SVM, and AGRO.

As an example of our day trades over the past week (which we will attempt to put out on twitter starting next week) - we currently own:
- CAT at 102.30 – closing Friday at 105.06,
- HK at 22.13 – closing at 22.49,
- ANR at 54.04 – closing at 55.28,
- GLNG at 20.52 – now at 22.96,
- BTU at 67.34 – now at 70.21, and
- FCX at 50.45 – now at 51.78.

We mentioned some shale drillers last week - Approach Resources (AREX), GeoResources (GEOI), and Gulfport Energy (GPOR) – however, did not purchase as of yet – but continue to have our eye on these!

If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson