This Week in Barrons - 6.19.11

This Week in Barons – 6–19-11:

The Child is the Father to the Man?
First off – Happy Father’s Day to all you dads out there. We may not always be in control, but ‘hopefully’ we’re part of the solution. Unfortunately we as Fathers will someday need to ‘fess-up’ to our children how we created such a financial disaster that only ‘bankruptcy’ and ‘devaluation’ can mend. As Steve Forbes writes: “Consider this: (a) we haven't paid off the Savings and Loan bailout from the late '80's, (b) our Government has borrowed ALL of the cash from the Social Security System, with forward estimates in excess of $50 Trillion owed, and (c) the Medicaid estimates are in the range of $30 Trillion owed. Now, how will future generations pay for these debts? What is the business model? Just how much “Government Help" can this economy and its constituency afford?”

As President Obama prepares to come to Carnegie Mellon University this week, to talk on Jobs and the Economy – it begs the questions: "What Jobs?" “What Recovery?” “What Economy?” People are acting like we came out of a recession, and if you remove the stimulus money – we’re still in a recession.
- The Philly Fed Report (a measure of economic activity) was at 44 in March, dropped to 18 in April, and fell to -7.7 in May!
- China’s inflation continues to accelerate.
- Well's Fargo stopped doing reverse mortgages, refusing to (for example) give people the $290k to live in their house for the rest of their lives, knowing that in the end the house may only be worth $160k.
- Initial jobless claims were still over 400k this week (that’s bad).
- Inflation is close to 10.5% and climbing.
- Real under-employment numbers are 22%.

Without QE3 to talk about - Greece is now the issue. As long as there is free money to play with, nothing's ever a problem, but as soon as the money dries up, then we care about Greece, jobs, and inflation. Realize with the trillions that we injected into the economy – very few jobs were created, very few factories were built, the ‘Food Stamp’ (Government Assistance) expanded dramatically, and no one responsible for the melt down of ‘07 – ‘09 went to jail.

With Greece, we continue to kick the Greek can down the road. They will eventually HAVE TO DEFAULT – and probably will take Spain, Portugal, Ireland, Italy, and Belgium with them. But where's the money coming from? The hard working Germans can only do so much. France is facing social program bills they cannot pay. So this is Central bank money. Our major Wall Street firms hold approximately $160 Billion dollars worth of Greek credit default swap debt. Now, did they hedge that by laying off some of that risk to someone like an AIG? Maybe, but no one’s talking there. As of right now, when Greece folds, our "Too Big To Fail" banks will again be begging to be saved. And if they did lay off the risk, what reinsurer has that kind of resources, and who saves them? That's right, just you and me and the Father’s Day children.

Now – here’s where it really gets interesting – right now we are witnessing a credit lockdown that’s under the radar. We are also witnessing a quiet run on some very large European banks. Yield spreads are widening, and credit is becoming more costly. Fear is just beginning and will get worse. Over in Europe, UniCredit (based in Italy) is going through a quiet "bank run", where depositors are slowly withdrawing funds, as they know the austerity measures imposed in Italy, Spain, Greece are forcing bank losses and UniCredit is the bank behind a lot of those other banks.

Now, why is our stock market selling off (losing over 1,000 DOW points in a month)? I believe that The Ben Bernanke truly believes that the economy is going to stand on it’s own, and Wall Street knows this is absolute horse manure, wants more free money, and will hold The Ben Bernanke hostage until he agrees to give it to them. Remember the only element President Obama can point to is the stock market for his re-election! Yes, Wall Street will eventually get it's wish – QE3, 4, and 5 – but until it’s announced, the markets will continue to slide. And when it's announced we'll get the counter rally back up. Now as we approach 2012, don’t be surprised if you hear of yet another war in the Middle East, a big one involving ground troops, Syria, and a host of other nations. History is complete with examples of how major wars are created when global economics are unraveling.

The Market
The Market fell, and fell, and finally got a shot at bouncing a bit. As I said above this is Wall Street pouting about no official QE program. They will continue to take this market lower, with the occasional bounce higher, until Bernanke cries uncle, or Obama and his cronies put a gun to his head and force him to come up with another stimulus package. Now, until we get that new program, the commodities market will tumble. We saw some of that with oil falling $10 quickly and several other commodities rolling over. Gold will hold up, Silver will eventually go higher – as it needs to get past the JPM (and others) naked shorts – but gold and silver will be looked upon as money, unlike oil, coal, copper, and lumber. The two-day bounce could work for another week, or it could end Monday, as it’s simply an oversold technical bounce, nothing more.

Now be careful if we don’t get some kind of resolution by the start of August concerning our debt limits, as Uncle Sam will become desperate. They've already borrowed from public pension plans and they are seriously looking at private 401k’s now, where there are trillions of dollars. It’s the traditional Central Bank ploy, print money, hope it lights an economic fire, continually uttering the words: “This time it’s different!” Unfortunately the pattern that repeats always involves the Government growing too large for itself, promising too much, expanding too far, and then at some point the money just isn't there to support it all. In the past it WAS different. I was reminded of that while watching the U.S. Open Golf tournament yesterday and seeing police close down a child’s lemonade stand (set up outside the tournament) because they didn’t have the correct permit!

It’s my bet that we make it through 2011, and in 2012 the fighting between Democrats and Republicans will be vicious. Yet, despite the money printing – jobs fall. Despite the currency devaluation – there’s no growth. Despite artificially depressing rates – homes don't sell because millions more are coming to market with foreclosure prices. But until then, there will be a QE3, that will try and support the sitting President, and whistle past the graveyard.


Tips:
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF, but let me expand this section this week.

The papering over ‘old money’ with ‘new’ isn’t cutting it, and without larger amounts of money being printed, we have no choice but to fall. But say I’m wrong – what good is 1% money if no one can borrow it? Or what if a large spending program is announced, won’t that just further trigger hyperinflation? Doesn’t anyone find $10 for a pound of lunchmeat, $6 for a jar of mayonnaise, or $13.79 for a can of coffee excessive? Knowing that Wall Street will hold the market hostage until it gets the next round of free money, I think it's time to explore some longer-term, short side plays. Thinking 2013 – when the Euro could be gone, and Spain, Italy, Portugal, Belgium, Ireland, and Greece could all be back on their own currency after defaulting.

I'm considering taking on some longer term put options and inverse ETF's.
- On the DIA's (which is the proxy for the DOW) the bargain that I’m seeing is the January, 2013 - $120 put options – for $14 and paying $13.30. If you believe that the DOW will sink hard over the next 18 months then this is a no-brainer!
- On to the Financials (the XLY is proxy there), if we move all the way out to January, 2013 the $38 put options are $4.90 – and with Greece and everything else – these could pay out very nicely indeed.
- Oil has many reasons to come down. One is over supply. Two is the nations that pump it need money and if they can't get it by high prices, they'll pump more to lower the price and "push" people to indulge. The SCO is an inverse ETF that looks at oil. If it were to run to the 200-day moving average at 53.18, I'd be all in, and I could even get brave and try some at 52.50
- The DUG is also involved in energy, focusing on oil and gas but more along the lines of suppliers – a move over 32.00 is attractive.
- The DOG is the inverse DOW index and it looks good at 42, then 42.50 then especially at 44.
- And Sagar M writes: “With China being the fastest growing economy in the world, with only 1.8% of it’s reserves being in gold compared to an average 11%. If China increases it’s reserves to the average – it will require 6,000 tons gold (the world’s entire supply for 2 years). Continue buying gold because: (a) Limited gold production and limited production capacity, (b) Continuous buying by Central Banks, India and China, and (c) Relative weakness of US$ and inflation / deflation issues in the world economy.

We continue buying physical gold and silver and will actively lean on the short side going forward with double and in some cases triple EFT’s such as DXD and TZA. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 6.12.2011

This Week in Barons – 6–12-11:

If this is Control – What does Out of Control Look Like?
Thanks to all of you that asked for my son’s movie link – here it is - enjoy: http://vimeo.com/24734772

Many years ago I was one of a VERY small handful of forecasters. In 2000 I suggested that the stock market bubble was about to bust – and recommended gold for the first time. In 2002, I talked about War in the Middle East, in 2003 we talked of the upcoming housing bubble, and then in 2006 talked of the entire financial backbone being in trouble. I’ve always preached silver and gold to the point that it’s sounding like a broken record to many of you, and me!

Well, now that every major bank in the U.S. has TWO sets of books – do you think the Central banks, the IMF, the World bank, or the Federal Reserve are any different? My point is: if the real world movers and shakers can simply print all the money they want (and keep it off one of the sets of books) then what is all of this manipulation about? I suggest that it’s all about ‘Control’, and ‘Control’ is all about making money – and in many cases: JOBS! Currently, the U.S. Government offers up security (in the form of ‘assistance’) to one out of every six individuals (16.6%). Now, is that 16.6% enough to get elected/re-elected? (FYI – often ‘tipping point’ theory looks at 18% to be the controlling percentage from which much of a remaining market place will ‘turn’ your way.)

Taking a step back, money is simply the exchange of value for labor, and if you produce something of value you will be rewarded for your efforts by receiving "money". But what if those at the very top don't really need your money (since they can make all they want), maybe what they really want is your LABOR to be directed by THEM? So what if the goal is to get the 16.6% to 18% - suddenly much of our ‘backward’ job creation theories make sense. For example: what if you’re a 20-something, and you can’t even get a job at McDonalds because they’re busy hiring college grads or professionals who’s jobs have been eliminated? Where's your hope for a "brighter future? Your hope lies (at least right now) with the U.S. Government – and that same Government probably has ‘purchased’ your vote!

Switching gears - everyday we hear about Greece and how it really doesn’t matter if they default on their obligations – because they’re just (well) Greece! Well I ask you, how many of the big banks in the U.S. are involved in insuring Greek debt? The answer is all of them! When Greece defaults, major American institutions will be on the hook for several hundred Billion dollars. Do these institutions HAVE several hundred Billion lying around? Absolutely not – they’re insolvent with the toxic crap they have on one of those sets of books now. So, when Greece rolls over, and the default insurances are demanded - where's that money going to come from? It needs to come from these banks, and yes these are the: “Too Big To Fail” Banks! So the U.S. taxpayer is going to foot that bill as well – yes? But since tax revenue isn't great enough to pay for the existing Government obligations, they will have to hunt for more money in very unusual ways. The Government has already borrowed public pension funds money, and they will be coming after your 401K next (mark my words)! There are very limited avenues left:
- Companies can’t expand when facing Obama-care, $100 oil, and the EPA.
- Infighting will be supreme during the upcoming presidential race (due to the closeness the Government is to that ‘tipping’ point).
- The Federal Reserve will continue QE3 via reinvesting the maturing debt they've already amassed, and they will "force" banks to mop up Treasuries in order to keep interest rates down.
- The dollar will continue to plunge in purchasing power, and gold, will slowly continue to move higher.

So, what do you do? The message is the same as it was 11 years ago – buy gold. Spend below your means. And with Father’s day coming up – share a meal or two with friends and family – the really important things.

The Market:
We’ve dropped 1,000 DOW points in a month – and we’re Down Again! We sold out of most of our long positions on May 2nd – 4th figuring the end was near, but did make the mistake of not going short. I said last week – I continue to be scared of going short simply due to the manipulation that the Ben Bernanke and POMO money have shown so many times in the past. I’m also very conscious and deeply respectful of the thousands of readers and your wellbeing – and therefore I never want to steer anyone into trouble. Yet, I should have followed my gut. I should have jumped to the short side. The economy is not in a soft patch as so many are suggesting, the economy is showing it's true colors. The selling is being blamed on the end of QE2, but that's so silly – there will be no end to QE, it just wont' be labeled QE. Yet without ever growing amounts of stimulus, the economy will continue to slow.

Failing to close above DOW 12,000 was indeed significant. They may try and rescue it as we come into this week, but the overall direction still appears to be sideways and down. I tend to think the best move for those that don't play the short game is to sit on the sidelines and not get long. Sure there will be bounces, some of them powerful, but this is the first time in two years where the market looked ripe for a fall and "They" DID NOT rescue it. Remember, we’ve peeled off almost 1K DOW points since May 1, and some form of dead cat bounce is in the cards. But frankly there's nothing out there to suggest any bounce is going to hold.

Tips:
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.

We continued buying physical gold and silver and will being to lean on the short side going forward with double and in some cases triple EFT’s such as DXD and TZA. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 6.5.2011

This Week in Barons – 6–5-11:

Security – Oh Me - Oh My - Oh
Apologies for the lateness in this week’s report – as I’ve been in Chicago moving my son – and watching the premier of his first short film – called ‘Cadence’ – look for it on YouTube if you will!

This week the economic reports began to give us a clear view of what happens when your stimulus injections wear off. It’s no different than a heroin junkie – in the beginning a little goes a long way, but in the end even A LOT only goes a little way. And along comes ‘Rehab.’ That is indeed where we are right now in the economy.
- It wasn't just the $800 B in bail outs for the Banksters run amok.
- It wasn't only the $878 B in pure Stimulus.
- It wasn't just the $1 T in Treasury bills/notes that The Fed has had to buy.
- It wasn't only the toxic assets that The Fed has had to soak up.
- It wasn’t just the tax breaks to buy houses, or even cash for clunkers.
- It was ALL OF THE ABOVE and then some – and NOW the hangover is rearing it's head.

And then there is the issue of jobs. With Friday’s Non-Farm Payroll’s report we found out that there’s basically no hiring going on in the country! Instead of the 155K jobs they were expecting we got 54,000. Of those, 62,000 new hires were by McDonalds. But wait – it gets better – this month the ‘birth/death’ model said that 206,000 jobs were created by people starting their own business (just a made-up number). So from the 54k jobs – we subtract 62,000 ‘Do you want fries with that’ – and another 206,000 ‘fantasy job creations’ – and we really LOST 214,000 really GOOD jobs!

Add to that:
- The latest business survey suggested 62% are not hiring or expanding,
- The ISM manufacturing survey took it's biggest downward hit in years,
- Greece is folding like a cheap card table,
- Housing prices are plummeting and financing is really hard to come by,
- And Moody's is suggesting it might have to "put the US on review" if we don't move quickly to raise the debt ceiling.

In so far as ‘Quantitative Easing’ (QE) is concerned → The Fed has purchased roughly $1.5 T of Treasuries in the past 10 months. Now, if The Fed doesn’t buy our notes – our interest rates will need to rise substantially to entice others to buy ‘devaluing’ dollars. And if we can’t sell homes with 4% mortgages, we’ll never sell them at 7%. Now – would rising rates cause things to improve? Well YES is the answer – but it would take a couple of years as people returned to SAVING money if there was the return to be gained there. This would create a large pool of real dollars to borrow from, and we could then start expanding the way economics are supposed to work. But in the short term there would be an Economic Disaster – and what politician is going to promise that to his people? So, QE MUST continue (in some form) because no one wants to face the pain of “Mopping up that Mess in Aisle 4” – while they continue to whistle past the graveyard, hoping that something is going to catch on and life will be fine. Potential outcomes:
- Hyper inflation = probable,
- Deflationary spiral = possible,
- Stagflation = already here!

The Ben Bernanke knows we're on the verge of a depression. He also knows the people that make him who he is, the banking families - need to be made whole and rich. But there is the other side – there are ‘good people’ out there that (in normal times) would never consider sticking up a bank, might very well do so when their personal economic situation comes to a point where they see everything as hopeless. Well I spent this weekend in Chicago shops – and a visible level of increased store security. My son noticed it – and as I began to dig a little deeper, I found headline after headline of material crimes being committed with those being caught having had stellar backgrounds. The U.S. currently has 44 million on food stamps. What happens if this program ends as more and more social programs get cut? We’re beginning to see more and more criminal elements such as train derailments where people steal the tracks to melt them down for scrap. More high-end boats were stolen last month than ever before. “Home invasions” are on the dramatic increase, and many are beginning to fear a new level of soaring, violent crime.

I personally have not stopped buying gold. Many people think it's run is over; however, it’s run will only be OVER when our monetary policy will be grounded in reality – and that won’t be for a least several years.

The Market:
If you look around the world, there’s a lot of evidence that global markets are receding. In the US, the market has risen in the face of what can only be aptly described as The Bernanke Put option. People naturally figure that if the market ‘blows-up’ – The Ben Bernanke will simply rush in and rescue it! But now what’s next? Of course QE will continue – but here’s where the ‘heroin junkie’ analogy gets interesting. Right now the Fed owns enough mortgages and treasuries that as they mature, they could conceivably put $600 B back into the system without printing more money. But just reinvesting into maturing assets isn't going to increase GDP, so The Ben Bernanke will need to come up with some other absurd plan to get more money into the Banker’s hands.

Now we’ve peeled off a little over 600 DOW points from the May first highs. Need I remind you of our letter on May 8th stating that the market ‘feels heavy’ and we were looking for a ‘rug pull.’

Frankly the word I use is fear. I've been afraid to short. The fact is some very good traders began shorting the market – “Sell in May and Go Away.” Now we've crashed through the 50-day moving averages AND the 100-day on the DOW and the S&P. Technically this is "Bad". The biggest support any market has is the 200-day moving average, and that’s still 600 points below on the DOW and 50 or so on the S&P. Are we actually going to go down and test this area? Good question given in the wings is Ben Bernanke and his darn POMO money – and his possible announcement of QE-3. If I had to guess I'd bet on a bounce Monday into Tuesday, but then a resumption of the slide lower. I'd continue to use the big index's for liquid trading like the SPY, and DIA's for bounces and the inverse ETF's like the DXD and SDS of those same vehicles to "short it". But on either side of the trade I'd sure be cautious and "quick to take profits"

Tips:
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.

We continued nibbling with small positions on SLV, SLW, GLD – and continue to purchase physical silver and gold with the profits on these short-term holds. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 5-29-11

This Week in Barons – 5–29-11:

Memorial Day = Celebrate and Remember…
My father, my uncle, my father-in-law and mother-in-law – all either served in WWII directly or as part of the government’s efforts along-side the war. I always use today as day to remember "What those folks did" and what they gave their lives defending. Well – another element occurred this week in California – a Lawyer named Marco Gonzalez, a lawyer for the Environmental Rights Foundation, won his day in Court on Friday. You see – Mr. Gonzalez represented the environment in the case of city fireworks displays needing an environmental impact study prior to display. He claims: "There are a whole host of impacts that we know occur from fireworks shows, from marine mammals, to marine birds, to water quality, to traffic, to noise, and to the air. We want it studied and we want it mitigated." So, the City of Chila Vista has cancelled their July 4th Fireworks show, and LaJolla (where it all started) is going to have to seek some form of injunction, so they don't have to abandon their own show – because there is simply not enough time nor money to create the environmental study. In reading my letters over the years – my stance is that the EPA and NOAA are much more about "control" than about the environment. So much for celebrating patriotism and our history – so celebrate Memorial Day before that’s gone as well!

In terms of the economy, QE2 cost $600 Billion and was supposed to rescue the economy. The Ben Bernanke created (maybe) 700,000 full-time jobs (from 111.8 million to 112.5 million employed). That’s $850,000 PER JOB! (Couldn’t we have just paid that to people instead?) Oh but just wait:
- housing prices are lower than before QE2,
- economic growth is slower than before QE2,
- the dollar is worth less than before QE2,
- inflation is higher than before QE2,
- the number of part time workers has gone down by 600,000 (almost offsetting the 700,000 gain)
- the percentage of the population at work is actually lower today (58.5%) than before QE2,
- AH but the stock market is HIGHER than before QE2!

Maybe Steve Forbes had it right when he wrote:
End of the Financial World by Harold Camping – New Data = October 21st:
Consider the following:
- US Debt Limit = $14,3t
- US Money Supply = $9.079t
- US Debt Held by Foreign Counties = $4.544t
- US Unfunded US Liabilities = $113.96t
- US Tax Revenue = $2.188t
- There is NO WAY to pay this back and NO END in sight…

OK – so what about Greece? Since 2008 their unemployment numbers are up over 100% so that there is a 30.1% unemployment rate Greece. So obviously they think that the ‘end is near’ – they’ve even given up trying!

And the End is Definitely Near in housing – as Richard writes:
- Good News = Freddie Mac announced this week that the 30 year fixed mortgage rate was at 2011 low’s of 4.6% and the 15 year was at an incredible 3.78%!
- Bad News = The banks continue to reign in lending, increase credit qualifying criteria, and constantly change underwriting standards.
- Remember those $1.4t in subprime loans that were originated in the heyday of lending. They came as a result of the 11:1 leverage and securitizations that were allowed. And that created an estimated $140t in exposure – all on the back of a $1.4t in assets.

So add the $140t in exposure to the above US numbers – and potentially Harold Camping has it right – October 21st (financially speaking) may be the Financial End of the World as we know it ☺ So please Celebrate this Memorial Day!

The Market:
On May 2nd the market was up at 12,876 and we said that the market felt “heavy.” From that day, the market fell from 12,800 to 12378. We did not short the market – for fear that they’d pull a fast one on us and goose it higher – but we played a couple bounces on the way down.

So what happens now? Our guess is that we are going to see a move higher from Friday's close. We think that they'll throw the kitchen sink at things trying to offset the worry over the bogus "ending of QE2". But, I do NOT think we'll regain that 12800 level. I think we'll come up short and then fade and fade hard. We're going to lean long, and scoop up what we can before they pull the rug.

Be safe out there folks, have a great weekend and by all means give thought to the fine people that have served this country - no matter what the capacity. To my Dad, uncle, father and mother-in-law – I salute them and will have a drink in remembrance of them.


Tips:
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.

We continued nibbling with small positions on SLV, SLW, GLD (and some gold miners as well) all of last week – and were rewarded handsomely - and continued to purchase physical silver and gold with the profits on these short-term holds.

Honestly – my purchases are smaller than normal and we’re holding them shorter than normal so tweeting about them almost defeats their purpose – but the show must go on. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 5-22-11

This Week in Barons – 5–22-11:

What Made America the Great?
The other day, I was wondering what my dad would have said (when I was growing up) if I would have told him that in 50 years:
- The U.S. would no longer be the manufacturing arm of the world,
- Our biggest employer would be Walmart (a discount store),
- GM and Chrysler both have gone bankrupt and the Government now owns them,
- Our national debt (then in the Millions $) is now in the Trillions (and impossible to pay back),
- The U.S. dollar is worth (by Uncle Sam’s stds.) 7 cents of buying power,
- 45 Million people are on ‘food stamps’,
- One out of every 6 people in the country are on some form of government assistance,
- We don’t produce oil any more, the Middle East does all that.
- The house he purchased for $11,000, would sell for $485,000 in 2006, and only 3 years later would sell for less than $200,000 again (and going down in value),
- AND now our own government allows banks to run two sets of books – one for ‘real’ and one to ‘show the stock market.’

I’m assuming my dad would have said that this was a ‘joke’, because there’s no way the U.S. would have done all of those things – someone would have had to step in and say STOP. BUT – HERE WE ARE!

In my dad’s time, it wasn't all wine and roses. People worked very hard, doing just about anything they wanted as long as it didn't hurt anyone else. With that freedom they figured out how to create the strongest nation on earth. Can we do that again – I don’t think so. Outside of the military we are not the same country as 50 years ago. Our steel mills are laying-off people here, because it’s cheaper (due to the lack of EPA guidelines) to build and operate steel making facilities in Brazil. Believe me, I'm not against clean air and water – I love it – and live in Pittsburgh, Pa to prove it! But if you’re telling me that ‘JOBS’ are the #1 priority – then the EPA and Congress didn’t get the memo! Just 30 days ago, 1 Million people applied for 50,000 jobs at McDonalds – just for the right to earn $8.50 per hour and say “Would you like fries with that?” Why - because the manufacturing plant where they ‘were’ working was closed in favor of doing production overseas. So I don’t see how we go back?

Think about the world:
- Greece is on it’s death bed.
- Spain, Italy, Portugal, Ireland and probably 4 others are Zombie economies, being propped up by stimulus.
- China, despite being the worlds manufacturer, is facing serious troubles with inflation, and still trying to figure out how to employ the hundreds of millions. (FYI - Estimates are there are 20 ‘multi-billion dollar’ cities in China – complete with houses, shops, streets, and lights – with NO people – all built – just to keep people employed!)

Now, the U.S. – because we’re once again at the debt limit and virtually bankrupt – we are going to use Government employee pension plan money to ‘tide us over.’ The U.S. is at 19% ‘under employment’ and initial jobless claims still hover over 400,000 each week. Gold and Silver are not bubbles – the only real ‘bubble’ we have is that we are printing fiat dollars, and taking on debt we cannot repay. Gold simply shows you the level of the currency bubble, and considering gold is at record highs, you can rest assured that the world has never seen such currency destruction. No, I'm not scared away from gold and silver, in fact I’m continuing to buy more.

The Market:
Heavy, is a word I would use to describe the market for the past 2 weeks. It's been pushed and prodded, forced to yield to higher levels despite "knowing" that the global economies are slowing. This is nothing more than The Ben Bernanke's money getting put to work via the major institutions. Remember the old market adage: “Sell in May and Go Away!” If not for POMO, where the Fed is giving 18 primary dealer banks billions each day in return for Treasuries – we would be thousands of points lower on the DOW and hundreds lower on the S&P. Mutual fund flows for months have been flowing “out" of stocks. The individual investor is using his 401K as a means to support himself. The level of "loans" against 401K's and complete “cash outs” have hit record levels. With all that negativity, and in an “open and free market”, stocks would probably be heading lower. But we have a manipulated market, and that makes this whole thing a lot harder to figure out.

We are still above the 50-day moving averages on the DOW and the S&P. The 50-day on the S&P is 1,325 and we finished the week at 1,333 (only 8 points away from violating a MAJOR technical support level). The DOW 50-day moving average sits at 12,383, and we closed on Friday just 129 points away from it at 12,512.

If either of these break below the 50-day, even with all The Ben Bernanke money, I have to suspect we'll get a flush out that could be pretty severe. But until that happens, all we can do is continue to lean long, but with incredible care. What we’ve been doing is quick and heavy buying and selling. For example (and use your own multiplier) – buy 1,000 shares of SPY @ 10am – noticing at 11:20 we are up 60 cents – so we sell out of half (500 shares) – but not allowing the other ‘half’ to go below our entry point. If the SPY ends the day above our entry level, we'll let it run for as many days as it is up for us.

It's not easy money any more. This week I suspect more battles between real investors wanting out, and Bernanke's banker buddies trying to keep it up. But, I do think we have a date with at least testing those moving averages, so be very careful out there friends!

Tips:
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.

We continued nibbling with small positions on SLV, SLW, GLD, SPY last week – and continued to purchase physical silver and gold with the profits on the previous short-term holds.

Honestly – my purchases are smaller than normal and we’re holding them shorter than normal so tweeting about them almost defeats their purpose – but the show must go on. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 5-15-11

This Week in Barons – 5–15-11:

Welcome my friends – to the Housing Crash that never Ends!

This weekend is graduation at Carnegie Mellon University – so my hat goes off to all the graduates – CONGRATULATIONS for a job well done!

For several week people have written me asking my opinion on the ‘housing bottom.’ Well, for a couple years, everyone (from Jim Cramer on down) has declared "unequivocally" (at least four times since the big crash) that the “bottom is in.” Well, I’m here to tell you not yet, and with a couple reasons why:
- Too much shadow inventory is waiting to come to market,
- 40%+ of the homes are being purchased by investors for ‘cash’,
- And prices are still too high!

Currently everyone is saying that housing has double dipped, and is in a recession - again. Clearly housing is a train wreck, and is going to get much worse before it gets any better. Why? With an estimated 6 to 8M homes sitting in foreclosure waiting to come to market – there just isn’t the demand to soak up the supply. Also, a lot of housing is still drastically over priced compared to where it "should be". [Go back to 1990 – do a trend line of gaining 2 to 4% per year – and then see where the price of the home should be.] Also, with over 9 million jobs lost in the last several years, and most of the new jobs being low paying service jobs like the recent McDonalds hiring spree – you just can’t afford to purchase a home with: “Do you want fries with that?” Finally, banks are not in any hurry to loan money, fully knowing that prices may still drop, the mortgagee gets upside down, and could simply walk away from the home – leaving the bank in a difficult situation (again).

I think that this next drop in pricing will be as dramatic as the last. Empirically, several mortgage insurers have simply refused to write policies in the "hot" states like Florida and Nevada. And who can blame them – when there’s a pretty good chance that the house is going to be worth ‘less’ a year from now – thereby inviting more ‘strategic defaults’.

A friend wrote me about a house he tried to sell in Florida. He wanted to sell it quickly so he went the ‘auction’ route. Usually an auction will drag out even the coldest of bargain seekers, and he advertised this one heavily. And on auction day – no one showed up! It’s that bad. I have another friend who wanted to purchase a house – and could afford to pay cash for it. But he thought that with a 4% mortgage, the mortgage interest tax deduction, putting over 40% down, assuring that the appraisal came in substantially above the asking price, that there wouldn’t be a problem. On two different properties with two different banks each bank ‘declined’ due to the fear that the house would be worth ‘less’ next year than now – irrespective of the down payment and the appraisal. So as you can see, housing is in a major funk and it will NOT be fixed any time soon.

If housing isn't going to appreciate and add to your net worth, the only benefit to owning versus renting is the stability of ownership, the mortgage deduction, and the ability to do what you want with it. But as far as simple "shelter" goes, the typical home isn't such a great deal. And when you add in maintenance, repairs, insurances, local taxes, etc. – owning isn’t such a great idea at all! As the economy continues to be kept on life support with Fed money, and the foreclosures still continue to roll in, more and more people are going to decide that there is too much risk, too much at stake to own a house. Housing prices will find a level where they don't fall any further, but there will be NO big fast explosion in higher prices to follow. Very simply – the price of a home needs to return to trend line – and then it well sell (be granted a mortgage), and then resume it’s 2 to 4% per annum increase. Bottom line – the gurus were wrong, Jim Cramer was wrong, the National Association of Realtors (NAR) were wrong – until all the excess is out of a bubble the sector will truly not expand. How long – I’m betting that a better market doesn’t appear for another six to ten years.

The Market:
Each and every day there's a power struggle that normally goes on between sellers and buyers, but today is a different world with the Central Bank handing Wall Street Billions of dollars each day, and some portion of that is getting plowed back into stocks.

Nine trading sessions ago, we hit a brick wall at 12,800 after a spectacular rise from 12,200 in mid April. Since then we’ve had 3 closes under the 18-day and the 10-day moving averages. In a technical sense, this isn't good for the bulls. But that’s in a normally functioning market, which we haven't had in years. Over the next several days POMO is scheduled to pour between $21B and $25B into the market place for the purchase of treasuries. Just to refresh, POMO is the name of the operation whereby the Federal Reserve is buying Treasuries from the 18 primary dealers on Wall Street. This is part of: “Quantitative Easing.” What I don’t know and am unable to find out – is when the primary dealers sell treasuries to the Feds – What is the Mark-Up? Are they making 10% or 50% on the sale? Now – we can factually – look back thru the charts and on days where there are large POMO buys (especially an outright treasury coupon purchase) – the market magically goes higher. So although we don't know how much of those Billions Wall Street gets to play with, my guess is that it's quite a bit.

So that is the problem with determining market direction. The simple (and frankly correct) thing to do up until now has simply been to buy every dip. For someone like myself, who has a track record of predicting market direction, this drives me insane. In normal times we would have seen increases in buying pressures, and increases in upside volume to halt any slide and reverse it to the upside. Today, due to dark pools and other programs, the reversals, saves and pushes higher are often on volume that cannot possibly be enough for the gains we get. If I were to look at the DOW chart right now – I would think that more downside is to come. But we’ve seen this movie before – and in the end The Ben Bernanke rides in and saves the day. I'm thinking like this: if we put in a close under 12,580 – that would be the lowest closing price in 12 sessions, and could finally lead to a hefty drop off. If on the other hand, we put in a close over 12,720, that would exceed the last couple highs, and probably would signal a move back up. So we’ll lean long – since that's been the trend, and we'll lean heavier on a move over 12,720. But if we hover under 12,580 and we close down there – it will be interesting to see the POMO money rescue us from that fall.

Be careful out there folks. We know The Ben Bernanke is trying to keep the market up so everyone feels great. But its failure will be ferocious when it hits. We’re using smaller positions and taking profits early. It's much more work than we like, but in this atmosphere, it's all we can do.

Tips:
It’s for weeks like this past one where setting stops really comes in handy. Nobody can ever get mad at you for taking a profit!

Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.

We continued nibbling with small positions on SLV, SLW and GLD last week – and continued to purchase physical silver and gold with the profits on the previous short-term holds.

Honestly – my purchases are smaller than normal and we’re holding them shorter than normal so tweeting about them almost defeats their purpose – but the show must go on. Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 5-8-2011

This Week in Barons – 5–8-11:

Do you make money – if you Buy a Depreciating Asset – with a Depreciating Currency?

One thing that I know that is ‘REAL’ is that today is Mother’s Day – so Happy Mother’s Day!

So what else is REAL:
- $4 gasoline = REAL
- Housing is in a proven double dip (which never really recovered despite tens of billions in loan modifications) = REAL
- Unemployment is at 9% officially, 17% unofficially = REAL
- Teen workers are in the worst shape of all time, because adults are taking their jobs = REAL
- The amount of people working part time because they can't find full time work is increasing = REAL
- The "household survey" polling hundreds of thousands of households showed a DROP of 190K jobs last month = REAL
- This week’s consumer credit showed a gain of $6 Billion dollars instead of the estimated $4.8B = REAL
- Housing foreclosure sales continue to be 40%+ of all sales = REAL
- The Government Jobs Report showing a gain of 244K jobs = LIE. 175k of the 244k jobs gain was as a result of the ‘birth –death’ model (fiction). If you're not familiar with the birth-death model – this website should help: http://www.bls.gov/web/empsit/cesbd.htm. In loose terms this means that for every “X” amount of people that get laid off, some percentage of those will go out and open a business and hire people. This number is just a ‘guess’ and is simply used to ‘goose’ the report higher when necessary.

What is REAL is that on April 19th McDonalds held a gigantic jobs push, and hired 62,000 people – with over ONE MILLION people standing in lines to get jobs. The employees got $8 an hour and virtually no benefits. Most of those hires were adults with nowhere else to go. So 244k jobs – minus the 175k jobs (birth-death model) – minus the 62k from McDonalds leaves you 7k jobs. So of all the people that read the 244k number and think good thoughts, remember the market has always had a knack for pulling in people at the wrong time and dashing them against the rocks of despair, and this time it's even worse.

You all know we're into gold and silver here as well as short term trading stocks, and we’ve done exceptionally well in those two areas. Now allow me to ask another question: Since gold isn’t used commercially for anything more than jewelry, why then has it risen from $270 in year 2000 to $1,500 today? Two reasons: the depreciating dollar and people losing faith in our economy.

This week, the dollar was perched on a very precarious ledge, and another nudge would have caused a considerable crash. You see - the U.S. Dollar index recently touched its lowest level against the Euro since December 2009, and was recently off 7.5% just in 2011. Since most commodities (including silver and gold) are priced in dollars, they generally move opposite to the greenback. On Thursday (surprisingly) Mexico took delivery of 100 TONS of pure GOLD. That would have been the nudge that pushed the dollar off the cliff; however, the Central Bankers decided that they ‘had no choice’ but to intervene and rescue the dollar causing oil to fall $10, gold to fall $50, silver to fall an additional $3 – but we saved the dollar from the crash (temporarily). But I ask you: If gold and silver are rising because gold is the only real money, followed by silver – and they’ve gone up because of the debasement of our own dollar, inflation fears, economy, etc. - Did we somehow fix that and I missed it?

So as much as I love to take Wall Street money via trading stocks, I still take my winnings and buy gold and silver. And ask yourself – if you’re not in the best performing asset class of the decade – why not? Lately, people have asked me if I would do a fund with them, and I’m seriously considering it. If you have the time – drop me a line on that thought.

The Market:
You cannot put trillions of dollars into an economy and not get some activity. Therefore, there are times and sectors when true economic activity is indeed growing. The issue of course is that without the enormous volumes of this liquidity (money printing) where would the markets be? One issue is that Wall Street itself gets instant money from the Federal Reserve virtually every day as the Fed buys Treasuries from the 18 "Primary Dealers" – which account for between $1 and $8B dollars each day. And the second issue is the good earnings reports from companies that are riding the wave of the stimulus money. But what happens if/when the easy money, Fed printing, quantitative easing programs are stopped?

A lot has been written about silver this week. It’s true that the CME (Chicago Mercantile Exchange) raised the margin requirements on silver futures four times in two weeks. Yes silver was due for a correction due to its recent parabolic path; however, this also shows (a) manipulation, (b) fear on the part of the 5 Big Banks that are openly short silver, and (c) some profit taking on the part of the big funds (George Soros – etc.) But ask yourself what has changed, as industrial demand for silver is still enormous. Nearly 75% of the world’s silver supply is used to make everything from chemical reagents to jewelry to solar panels to plasma TVs, and with the global economy expected to grow by 4.5% this year, the industrial demand for silver is only going to increase. Couple that with the mine supply of silver being tight. Silver fabrication demand grew by 12.8% last year, but silver mine production rose by only 2.5%, and mine supply accounts for 70% of all silver supply, according to GFMS. It’s hard for miners to crank up silver production because two-thirds of silver produced by mines is used as a by product to other metals. Mine supply is expected to rise this year, but it will be hard-pressed to keep up with the expected rise in demand. The fundamental fact is that, despite the recent correction, both gold and silver are in big bull markets. Until that changes, pullbacks and corrections are buying opportunities.

Also China (like many countries) used to be a major seller of silver supply, and now it’s an importer. So yes, we are seeing some air come out of the silver bubble - but I don’t think we’ve seen the real mania in silver yet. Can silver go down due to the Dollar rally or a global recession – of course! However, if you want to short silver in the face of strong demand – good luck to you because I think you’ll need it.

The market feels ‘heavy’ to me – and as much as we will continue to lean long, we're going to have our finger very close to the sell button. When the top arrives there will be no signpost. We're still making money in this manic market, but it’s harder as they fight off the market's urge to slide lower. Be careful out there folks, we are indeed in "uncharted" waters.


Tips:
It’s for weeks like this past one where setting stops really comes in handy. Nobody can ever get mad at you for taking a profit!

Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW and USSIF.

Most of our stop losses were triggered in our short term hold positions – and therefore we sold out of: FRG, QSURD, NGD, PAL, EXK, SVM, SD, NBR, all at profits – but we are still in: SQM

We started nibbling with small positions on SLV, SLW and GLD on Friday. And on Thursday and Friday I continued to purchase physical silver and gold with the profits on the previous short-term holds.

I’m watching SLW and some other miners this week - as we should begin to recover from the ‘dip’ that they just experienced. It’s the stock price that will determine when we dive back in or let it rest, and we’ll keep you posted via Twitter on anything there.


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