This Week in Barrons - 3-3-2013

This Week in Barrons – 3-3-2013

Those feared words, “The U.S. Government is here to Help”

A friend of mine – Paul M. (got me thinking) and some CMU students asked me:  “Who ends up suffering due to the skyrocketing costs of higher education?”

Factually:

-       An average 4-year college education costs over $100,000.

-       60% of students incur student loan debt – averaging over $27,000.

-       Professional degree loan debt is an additional $100,000, with Doctors incurring over $200,000 in additional debt.

-       State Universities can’t keep with infrastructure, and (in many cases) have raised tuition over 80% in the past 3 years.

Combine this with the housing bubble of 2008 (28% of current mortgages are still underwater), and this gives us millions of new college graduates either unemployed or underemployed, 60% carrying student loan debt, and their parents with their largest asset virtually worthless.  But don’t worry, the U.S. Government is here to help – with the Affordable Care Act (Obamacare). 

The main reason Obamacare is going to hurt our young people is that it will make them purchase health insurance, even when the odds of them using it are low.  Currently 27% of 27 to 34 year olds do not carry health insurance.  After January 1, 2014 – they will ALL have to, or pay a fine/tax.  Obamacare is built on the premise that our young people are needed to purchase insurance and NOT use it – so that their premiums will be available to pay for the care of others (often much, much older).  The ONLY flaw in the plan is that our young people don’t have the money (unemployed or underemployed).  A single, 25 year-old making $23,00 a year would need to pay 6.3% of their income ($1,449) to Obamacare.  This is $120 a month that they don’t have and won’t use. 

Adding insult to injury:

-       Approximately 60% of all personal bankruptcies in the United States are related to medical bills.  And approximately 41% of all working age Americans have medical bill problems.

-       According to the Association of American Medical Colleges, the U.S. is currently experiencing a shortage of at least 13,000 doctors, that will grow to a 130,000 doctor shortage in 10 years.  Not counting the fact that 40% of all doctors are over the age of 55. 

-       U.S. ambulance industry makes more money each year than the movie industry.

-       Approximately 10% of all U.S. employers plan to drop health coverage completely when the major provisions of Obamacare go into effect in 2014.

-       16,000 new IRS agents are being hired to help oversee the implementation of Obamacare,

-       Currently there are more than 56 Million Americans on Medicaid, and under Obamacare 16 Million additional will be added.

-       Currently there are more than 50 Million Americans on Medicare, and Obamacare will add an additional 23 Million by 2025.

The only nice ending to this is to potentially invest in medical facility REITS (Real Estate Investment Trusts) or other medical investments that pay a high dividend. 

The Market...

“I know that it is painful.  Anytime you buy something and it loses 10, 15, or 20% of its value, it makes you mad and then you question yourself.  But always ask yourself the same basic question: ‘What has changed?’   If the answer is nothing, then the only thing I can logically surmise is that while holding gold through this big dip is painful, I have to think that in the end, it is the right thing to do.”

I wrote this in Barrons, of October 2006.  In May of 2006, I was looking like a genius as gold hit $725 an ounce (up from $300).  But by October it was trading at $560 – a drop of 22%.  The story was a simple one.  There was a housing bubble, a credit bubble and a debt bubble all brewing, and Gold was the only thing that made sense to own at the time.  I bought MORE gold, and the rest is history.

Today is much different than 2006, and the reasons for owning gold are bigger than they were in 2006.  Gold is the ‘anti-currency’ and the ultimate ‘money’.  Money is a storage of value for our production.  In order to store value, you need to be: rare, portable, divisible (make change), accepted universally as a medium of exchange, fungible – meaning it needs to possess the same value everywhere, and stand the test of time as a storage agent (it can’t be worth less next week).

So if Gold it's not dead, why is it struggling?  First off, has anything changed? Nope.  On Tuesday The Ben Bernanke told the banking committee that he was going to keep QE in effect for a long time.  But if The Ben Bernanke is destroying our currency, shouldn't gold be going up?  Yes it should be, and it is my bet that it will again.  But with the advent of Gold ETF’s, we’ve allowed Central bankers (via paper currency) to manipulate the price of the metal to make it look like there's no inflation.  The same Central banks that are using the paper market to drive metal prices lower, are then using the physical market to BUY the metal itself.

So what happens?  Either the illegal naked shorting, forward leasing, paper derivatives win the day and gold goes back down, or the physical demand outstrips supply, and coupled with the Central bank’s currency printing; prices rise in spite of the illegal activities.  In 2006 I sided with the idea that nothing had changed and economic disaster was in the wings.  Here in 2013 I suggest that we're still facing an economic disaster, coupled with a deranged Federal Reserve, who prints trillions as though it has no downside to it.  While nothing is ever written in stone, and no investment is without risk, when the head of the biggest central bank on earth says he's going to keep printing currency, and we see Japan wanting in on the game, and we see Draghi in Europe suggesting that the ECB has a lot more to give, then I have no choice but to go with logic.  I'm a buyer of metals on this dip.

Does the stock market deserve to be at All Time Highs?  Nope – on Friday alone:

-       We had the sequester looming.

-       The PMI numbers out of China were horrible.

-       U.S. incomes dropped the most in 20 years.

-       U.S. disposable income after taxes took the biggest plunge since 1959.

-       AND U.S. GDP came in with virtually 0 growth!

I think the only thing that will stop this lunacy is if the velocity of money increases to the point where we finally get a huge surge of inflation.  That would short circuit everything, and we would spiral downward quickly.  As long as Bernanke is willing to dole out free money, and the banks aren't pumping it into the economy, this game of an ever-rising stock market stays intact.

In the next several days (with everyone and his brother looking for all time highs), the market could easily pull off a correction instead.  So I’m still uncertain as to the direction of this market.  My guess is that we take out the all time high, just so they can say they did, and then we finally roll over for a while.  One tool you can use to try and decipher this mess is the XLF – the exchange traded fund (ETF) for the financial community.  In rough terms, the market really can't go anywhere without the financials and the XLF is their barometer.  If the XLF were to break up and over 18, then the rally would be intact.  If the XLF were to fall below 17, one could surmise we were finally going to get our overdue correction.

Because of all this slop and chop, trying to get brave and go "too long" or get short – well, I think it best to just to let this congestion pass.

Tips:

The past week we sold out of SPN (+1.00), PTEN (+4.00), MS (+3.50), and SPY (+9.00). 

My current short-term holds are slim indeed and mostly underwater:

-       SIL – in at 24.51 (currently 18.25) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 152.58) – no stop ($1,571.90 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 27.65) – no stop ($28.45 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

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: <http://rfcfinancialnews.blogspot.com> .

Please write to <rfc@getabby.com> 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 on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

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: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@getabby.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 2-24-2013

This Week in Barrons – 2-17-2013

Turning your 401K into Gold?

For a minute – let’s talk about the future of your 401K, IRA, or other tax-sheltered account(s).  Could our government initiate a Government sponsored retirement account program?  Absolutely.  Currently Americans have about $8 Trillion in various retirement accounts, and more than $16 Trillion if you include 401K's, IRA's, Roth accounts, and Bond holdings.  $16 Trillion just happens to match the amount of short-term debt the US finds itself in.  What if our government ‘told’ everyone to use a portion (half or more) of their retirement account(s) to purchase government bonds earning 3%?  What if our government went directly to the institutions that are holding our 401k’s, and told ‘them’ that Bill # _______ has been passed and all Americans have to invest half of their tax-sheltered account dollars into a new Government Retirement program.  (FYI: Argentina, Ireland and others have already enacted such a program.)

Is there a way to protect your retirement funds by using physical gold or silver?  Yes there is, and here is how it works.  Let’s assume you have an IRA with $50,000 in it, and you don't like the risk of the stock market, or the pathetic returns offered by savings and money market accounts.  You can transfer that IRA money into a special Precious Metals IRA Account and use the $50,000 to buy physical gold or silver bullion.  The funds would need to be spent by your IRA custodian to purchase the bullion on your behalf.  The bullion would then be stored in a secure vault in a US-based depository under your name.  That bullion will sit there, on the shelf, in that vault, with your name on it, until you choose to take a disbursement from your IRA.  That disbursement will of course be governed by all the normal rules on eligibility (including age, qualified expenses, etc.).

The good news is that if things ever get really bad and you'd like to take physical possession of your gold/silver, you can tell the depository to ship you your coins/bars (subject to any appropriate penalties and take an early distribution).  It's just like taking a cash distribution from your IRA, except instead of getting a check in the mail; the metal is shipped directly from the depository straight to your door within a couple days of your request.

For IRA's:

-       You must store the metals in a third party depository until you take a disbursement from your IRA.

-       You can create and fund a new IRA, or rollover an existing IRA.

-       These are treated like traditional IRA's, except your tax liability and distribution rules are different because you've already paid taxes on the money.

For 401k’s:

-       If you have an old 401k from a previous company, you can roll that over into an IRA and put the money into precious metals.

-       If you are self-employed, you can have a self-directed 401k that allows you to put your money into gold and silver, and you aren't required to store the metal at a depository (you can store the metal yourself).

-       If you have an active 401k and you are not self-employed, chances are you do NOT have the ability to hold precious metals.  The choices then become a bit draconian.  You can liquidate the 401K, pay the penalty and taxes, and then start an IRA, or simply continue to hold it as is.

But if the government comes for our 401K's, won’t they come for our precious metals as well?  I don’t think so.  Unlike the 1930's when the U.S. confiscated everyone's gold, I think that personal ownership is so low now, that they won't bother.  Most people have a 401K and that's where they would look first.  An IRA that's holding metal instead of cash will be (at the very least) safe at first. 

The questions are:

-       What custodian will you use for the precious metals IRA?  There are only a handful of IRA custodians that are legally able to allow for precious metal IRA's.

-       Who will you purchase the metal from?

-       And which depository will you want to use to hold your metal.  I would recommend the Dakota Depository.  They are more of a smaller business but do have state-of-the-art security.  

In terms of someone to call to guide you through all of this:  Cornerstone Bullion – www.cornerstonebullioin.com.  I would suggest that if you're considering doing a metal backed IRA or self employed 401K, call Cornerstone Bullion at:  1-800-558-4671. 

The Market:
Financially speaking:

-       Wal-Mart is blaming declining February sales on the re-instatement of the 2% hike in payroll taxes and a delay in tax refunds.  Either way, when sales are down at Wal-Mart, it means that people aren’t buying, and that's bad news for the economy.

-       2013 is proving to be a tough year for housing.  U.S. housing starts fell 8.5% in January, and homebuilder confidence declined in February – for the first time in 10 months.

-       Gas is now $4 a gallon (if not higher).  When it costs $70 to fill your tank, that's $30 many people aren’t spending on pizza.  It also raises costs and cuts margins for a whole lot of businesses.  High gas prices have led every sell-off in the S&P 500 over the past five years.

-       Finally we have the Elliot Wave scenario.  Ralph Nestor Elliot was a market psychologist and theorist who died in 1948.  His theory is that John Q. Public buys and sells stocks on market psychology, and psychology runs in waves.  Unfortunately most average investors finally buy in, right before the top.  Currently, we are peaking in the fifth wave – and following each wave is a very significant sell-off going back over 50 years.

This week we saw:  FED to the Rescue!  On Wednesday we got the minutes of the last Federal Reserve meeting and in those minutes they talked about how great the economy was doing, how great housing was doing, and all of a sudden investors got nervous.  Everybody wanted to sell, and sell quickly.  Why?  If the Fed stops printing money, and handing out tens of billions of dollars to the banks, everyone knows the game is over and the market will crash.  So, down we went.  Ahh, but on Friday the FED came to the rescue.

CNBC had one of the FED heads on, and he said: “Not to fear folks, the loose monetary policy is going to be in place for a long time and you can all go back to partaking of the punch bowl".  So instead of a correction, we bounced right back up and all the wires were abuzz with bullish analysts.  As long as the FED is willing to pump $85 Billion or more a month into the system, this market cannot crash. 



But it gets better.  According to the FED, they're not happy doling out $85 Billion to the 18 Primary dealer banks, they just announced a new "pilot" program to allow more banks to participate.  NEW YORK-The Federal Reserve Bank of New York is launching a pilot program with small broker-dealers in an effort to examine options for further broadening access to monetary policy operations. The limited, one-year pilot program will allow no more than five small firms to participate solely as counterparties in outright purchases and sales of U.S. Treasury securities for the System Open Market Account (SOMA) portfolio. The Treasury Operations Counterparty Pilot Program is being launched as a way for the New York Fed to continue to explore the effectiveness and feasibility of expanding operations to a broader range of counterparties.

Therefore, the FED is not pulling back from the stimulus; they're setting up to create more of it, and dole it out in more places. 
So there is no reason the DOW can't hit levels we cannot believe, and all of it based upon money printed out of thin air. 



So what’s the opportunity?  We have just seen them beat gold and silver senseless, and that's a buying opportunity to me.  I see the gold miners getting more ‘dislike’ than at any time I can remember; therefore, I’m beginning to scale into the GDXJ (a junior miners ETF).  And, I'm ‘this close’ to buying more physical silver.

In stocks, if they can manage 2 closes above 14,025, then I think that this tape is buyable.  Until that happens, being "too long" could be wrong. 


Tips:

The past week we sold out of SLB (-3.00) and some PRLB (+3.00).  

I still like the 3D printer space as a long-term hold:

-       3D Systems (DDD) on a pullback – maybe $55 (currently $56.50).

-       Stratasys (SSYS) on a pullback – maybe $58 (currently $67.40).

My current short-term holds are:

-       SPN – in at 25.09 (currently 26.20) – stop at entry

-       PTEN – in at 19.78 (currently 23.30) – stop at 22.50

-       MS in at 18.50 (currently 23.60) – stop at 22.00

-       SPY in at 141.97 (currently 151.90) – stop at 150.00

-       SIL – in at 24.51 (currently 18.63) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 153.01) – no stop ($1,572.40 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 27.83) – no stop ($28.46 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

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: <http://rfcfinancialnews.blogspot.com> .

Please write to <rfc@getabby.com> 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 on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

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: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@getabby.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 2-17-2013

This Week in Barrons – 2-17-2013

Should I sell all my Gold – NOW?

Every day someone is writing to tell me that gold is done, and equities are where you have to be.  They often give me 3 reasons:

-       The Ben Bernanke (while speaking at the G-20) told everyone that our economy is improving and it might be time for him to consider "easing up" on the monetary stimulus.

-       George Soros (the noted billionaire) cut his GLD holdings last quarter by almost half.

-       And the stock market has continued to move higher and higher, while gold has languished since August.

Let’s review these one at a time. 

The Ben Bernanke – in a G-20 meeting in Moscow stated: "Stronger U.S. growth benefits the world economy".  He then alluded to stronger growth allowing him the flexibility to ‘ease up’ on the Fed’s printing press.  Philosophically I couldn’t agree more, but I question his words: stronger growth?  Especially when (on the same day) Mr. Jerry Murray (Wal-Mart’s VP of Finance and Logistics) sent an e-mail stating: “In case you haven’t see a sales report these days, February MTD sales are a total disaster.  The worst start to a month I have seen in my 7 years with the company.”  Wal-Mart (a) is the largest retailer in the U.S., (b) is the largest employer in the U.S., and (c) sells more ‘stuff’ than the next 3 retailers combined in the U.S.  And consider that Mr. Murray has been there during the economic crash, the credit crunch, the housing crash, and the foreclosure crash.  How is this possible that one person (on the ground) smells “disaster” and another (in the clouds) is thinking of backing off the stimulus?  So if I’m thinking of selling my gold because things are so wonderful, I need to consider who’s telling me that it’s so wonderful. 

Moving along to Mr. Soros.  Mr. Soros knows that his voice and his actions, combined with a very simplistic rationale will indeed move markets.  The #1 Rule in business is: “Buy Low, Sell High.”  We have a stock market that seems to be rising incessantly.  And when that happens, people get excited and want in.  So, given a choice between holding gold (which is going nowhere lately), and holding stocks (which have been going somewhere), I would chose-holding stocks.  Is the public ever right about their stock market timing?  Virtually never.  John Q. Public invariably buys high and sells low.  In fact, when John Q. Public starts telling you about how great the stock market is – get cautious, get really cautious, and then get out.  And by the way, the stock market is ONLY moving higher because The Ben Bernanke is handing out $85 Billion a month to the banks.  But is a rising stock market a reason for gold to fade away? 

On March 5th, 2009 during the big economic collapse, the DOW hit a low of 6,594, and gold was around $850 per ounce.  In August of 2012, the DOW hit 13,200, and gold was about $1,800 per ounce.  So gold gained about $1,000 per ounce (roughly doubling) during a time when the stock market gained 6,500 points (roughly doubling).  By this evidence, a rising stock market doesn't ALWAYS mean gold is going down.  So a rising stock market by itself is no reason to dump gold any more than The Ben Bernanke lying to us is a reason to dump it.  And I certainly won’t chastise Mr. Soros for talking the gold price down as he sells high.

Behind the scenes we have Plot #1: Venezuela, Germany and now Switzerland, Azerbaijan, and the Netherlands are requesting their Gold be returned.  Why are sovereign nations beginning to pull in their gold reserves?  Could it possibly be that the stated amount of gold in bullion banks is bogus and they know it?  Could it be that as more and more derivatives, forward leases, sales and swaps are placed against the physical assets – the real powers know that one day the call might go out to redeem all that gold, and their gold will NOT be there?  DS and JA both wrote me about the GATA (Gold Anti-Trust Action Committee) report – citing Adrian Douglas’ calculation that in 2010 there were approximately 45 claims for every actual ounce of physical gold in the market.  My research shows that in 2013 that number is more like 80 times and accelerating.

Further behind the scenes Plot #2: As our own Central Banks are printing money like it’s going out of style, it seems that they are buying MORE gold than ever before.  Imagine that.  Consider the following from CNBC:  “Central Banks purchased more gold in 2012 than they have annually in nearly half a century as they sought to diversify reserves”, the World Gold Council (WGC) said on Thursday.  It seems that Central Banks bought 534.6 metric tons of the precious metal last year - the most since 1964.  Net purchases by central banks accounted for 12 percent of overall demand in 2012, compared with a 10 percent share in 2011.

So it seems that the same people that are telling us that the rally in gold is over, are the same ones that buying more gold than they have in the past 50 years.  Are they really going to print fiat currency into oblivion, and when inflation finally goes hyper, and the economies implode – they (having all the gold) will be the only vestige of wealth?  If you believe that having the US, the Eurozone and now Japan printing untold amounts of fiat money will actually solve the issues we face, and all these economies will rise out of the ashes of the crashes and thrive, then YES you would probably want to SELL your gold and silver and take your profits and get dollars for them.  If on the other hand however, you think that all the debts, all the promises, all the funny money printing is now beyond the scope of normalcy, and into a period of unsustainability, then just what else would you want besides gold and silver?  

Can gold go down – absolutely.  In 2006 gold fell from $720 to $560 – over 22%.  In 2008, Gold fell from $960 in February to $715 in September – down over 25%.  George Soros has it right.  Buy Low, Sell High! 

The take away is: gold has had a spectacular run.  It has outperformed everything between 2000 and 2012.  It deserves a rest.  Thus far gold is only off 15% from its high.  I can see another 10% coming off.  If it does, that is when I will buy more.  But understand I’m not in gold for a trade.  As the currency wars come back into focus over the coming weeks, gold’s biggest job will be to offset inflation and maintain wealth.  As I look at a solid gold coin, a $100 bill, and my son’s Ten Trillion Dollar Zimbabwe note – I know which one I want. 

Many of you have written in asking for a ‘How To’ turn your 401k’s into GOLD without taking a penalty.  I’m going to address that in next Sunday’s letter.  Thanks for your patience! 

The Market:

Are we in a pull back?  I hope so.  It feels right, looks right, and the technicals say yes.  But we have been in this position several times in the past year and each time the market confounded me and pressed higher.  Why would this time be any different?  It wouldn’t.  If the only reason the market is in this position is because of The Ben Bernanke’s printing of money, then if Ben is still printing money, why would the market retreat?  Unfortunately, in this market, things don’t ebb and flow in reaction to supply and demand, they go where the "central planners" and the banks want them to go. 

We are well overdue for a good correction – one that scares people.  But each time the market has started a pull down it just magically rises.  Well, it’s not ‘magic’; it’s really The Ben Bernanke with his POMO injections.  POMO stands for Permanent Open Market Operations by the US Federal Reserve Board.  With a POMO injection, the Fed buys the US Treasury debt and pumps liquidity into the system.  The idea is that the money freed-up from holding US Government bonds will be put into use in boosting the spending and thereby the economy.  You can actually draw an EXACT line between POMO injections and a goosed (going-higher) market.  Just about every time the market is on the brink of having a really bad hair day, here comes Benji with his POMO money.  If that doesn't change, then there will be no pull back – no correction. 

Will POMO happen again?  Probably.  Each time the market sets up for a pullback, I go into a defensive mode.  I don't want to be caught carrying a lot of equities when a real correction hits, and The Ben Bernanke isn't there to save the day.  So right now, I’m still leaning long, but our fingers are awfully close to the sell button.  In fact, we sold out of some stocks on Friday and took profits. 

Tips:

The past week we sold out of KSU (-1.00), WFT (-0.50), SLB (even), SPN(+1.50), MS (+4.25), PTEN (+4.50), and SPY (+10).

I’m still looking to purchase more in the 3D printer space.  When President Obama mentioned the area in his State of the Union, the stocks shot higher but are settling down nicely with rumors of a correction.  We did however manage to nab PRLB before the talk – so that was good news.

-       Looking to purchase shares of 3D Systems (DDD) on a pullback – potentially as low as $55 (currently $59.40)

-       And shares of Stratasys (SSYS) on a settling of the pullback – potentially pulling the trigger shortly as it’s down to $68.50.

My current short-term holds are:

-       PRLB in at 43.48 (currently 47.24) – no stop yet

-       SIL – in at 24.51 (currently 19.73) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 155.68) – no stop ($1,608.80 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 28.79) – no stop ($29.84 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there! 

Disclaimer:

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