RF's Financial News

RF's Financial News

Sunday, June 2, 2013

This Week in Barrons - 6-2-2013


This Week in Barrons – 6-2-2013

Are We Healed?

Factually:
-       The initial jobless claims rose by 10K to 354K, which is really bad.  But if the jobs picture stinks, it keeps The Ben Bernanke's foot on the gas, and that's all Wall Street wants.
-       Last month’s viewership of CNBC fell to levels not seen since 2005.
-       The Case Schiller housing index showed that home values in some areas had risen over 20% YOY (year over year).
-       Consumer confidence came in at 76.2 beating the estimates of 71 quite handily.   
-       The Richmond Fed manufacturing index came in at -2 (contracting), and the wages dropped to a one year low, new orders fell to below January levels, employment went negative, and the workweek contracted.
-       The Dallas Fed reported a manufacturing index of -10.5 (worse than expected) for a state that we all thought was booming – yes?
-       And 48 million Americans are still on food stamps.

When economic reports start to show something that resembles economic growth, I lift my eyebrows and ponder the idea that some form of healing is taking place.  But let’s look inside housing figures because unemployment is still raging, and most of the jobs that were created were in services, hospitality, and food delivery.  I’m wondering how someone working for $10.50 an hour has the money to buy a $200K home?  If a bank needs 20% down, then our $10.50 an hour worker would have to put every single penny of his income into a savings account for over two years.  And assuming that people on food stamps cannot purchase a house, this means that an additional 15.2% of the U.S. population is automatically excluded from the housing market.  Ah – but the key to housing seems to be investment money.  For example, Blackrock is buying 20,000 homes at a clip.  It doesn't take long to buy every single $100k to $190k house in an area if ONE investor is buying 20,000 of them.

Now, housing serves two purposes, and they do not necessarily coincide.  (1) For someone looking to enjoy their life, raise a family, and feel good about building equity in an asset – buying a home makes a lot of sense.  You get the mortgage deduction.  You have a bit of security.  And you build equity in the asset itself.  All that said, housing is an investment unequaled in the history of building wealth.  One of my favorite lines has always been: “A good way to get rich is to own many homes and let someone else pay for them (via rent).”  And then because of inflation, you can sell them (as you need to) in order to create a nice income stream.  So housing can be a home, or it can be a true investment.

However, when housing is gaining 20% a year (and in certain areas we’re hearing of bidding wars again), at what point does the word ‘bubble’ resurface?  Interestingly, what the TV reporters didn't tell you was that if you take out the ‘distressed’ sales (foreclosures, short sales, etc.) the rise in housing prices was only 5% YOY.  However, I am puzzled to explain how lumber prices have fallen 30% off their highs?  What are they building all these homes with?  And this week we heard that the mortgage applications fell 8.8% - after falling 9.8% last month.  So how are houses selling fairly well?

This week Carrington came out and told us that they were ending their ‘buying of houses and turning them into rentals’ campaign – because they are not getting the return that they expected for the 25,000 rentals that they have accumulated.  Over at Colony American Homes, they have purchased 9,950 houses for over a $1Billion to rehab and rent out, but have only found tenants for 51% of those rentals.  Goldman Sachs estimates that investors have purchased approximately 14 million ‘leased’ single-family residences that are worth an estimated $2.8 Trillion.  If all these investors decide that they would rather sell their houses (than try and rent them profitably), we are going to see a wave of homes come to market that rivals the 2008 foreclosure mess.

So, are we healed?  We know the Fed has placed over $3+ Trillion dollars with banks, trying to make them whole, and hoping that it would all trickle down via loans.  Unfortunately banks are not machines, and banks have done what is best for banks – not necessarily what is best for the economy.  Pour in a little greed and manipulation, and you get a very different outcome than what may have been planned.  Bankers got rich, and small pockets of the economy received a stimulus.  However, the overall effect has been more of a distortion than anything else.  Never before have the 1% gotten so rich, while the 99% continue to struggle to eat.

The talk now is that the Fed is going to "taper" off its QE.  Along with that discussion, there is talk that someone else is going to get selected to run the Fed as The Ben Bernanke may soon step down.  The analysts are saying that if the Fed tapers, it is bullish for everything – because it shows that the economy is firing well enough to take off on its own.  I tend to think that there is some real whistling past the graveyard going on here.  If $3 Trillion in Fed money has the Dallas manufacturing index at a minus 10.5 after almost 6 years, how is cutting QE going to fix it?  If durable goods are selling slowing with interest rates at historic lows, how will higher interest rates spur sales?  If 48 million people are on food stamps now, how does reducing Fed money get them off food stamps?  If all these so called housing sales grind to a halt because investors are choking on them, how does that help the economy?

Today, my youngest son will graduate from high school.  I want desperately to believe he's got a shot at a tremendous career, and a bountiful life.  I want him to have all the things that I've been blessed with.  I want to believe that the Fed has solved the problems, the economy is really fixed, and great opportunities lie at his feet.  But alas, I feel we're in a decade of long struggle, and there are going to be a lot more dislocations to deal with.  I feel he's got a lot of wind in his face as he embarks on his move into college and his ultimate career path.

The economy is not healed.  Housing is being driven by speculation first, desperation second.  Manufacturing is limping along, while handouts grow exponentially.  Companies are buying back stock for their short-term gains, and ignoring the process of establishing long-term expansion and renewal.  If the Fed does try and pull back from its QE programs, there's no growth to fill the void, and things will get ugly very quickly.  I truly wish it wasn’t so.

The Market...

We came into the Holiday shortened week on Tuesday, and they made it 20 consecutive ‘up’ Tuesdays in a row.  On Tuesday the market was up 200 points early – so we sold our DIA calls for a gambler’s profit.

One of the long running adages of the market is that you're best off to sell in May and "go away".  Meaning, that for the most part the market does most of its gains between October and April.  This has indeed been historically accurate, but like most things it isn't 100%.  And this May did not keep to the script, as it ended the month up from where it started.  But this May is so completely dislocated from historical norms that you can't pin any type of age-old adage to it. And honestly, you can't really look at the entire year with anything but skepticism.  We've simply seen too many bizarre market moves that defy reality.  We haven't had a 10% correction in months.  20 Tuesdays in a row have been up, accumulating almost 78% of all the market gains. 

Last week I started "feeling" that something was changing.  Maybe it was the insanity that is Japan, as their bond market has been halted a dozen times for strange imbalances.  Or maybe it is the increasing drumbeat of "QE tapering" that TV is trying to scare into me.  Maybe it is the fact that the lies are so deep, and the disconnects so wide, that people are becoming fearful.  Even someone with a grade school education can’t reconcile soaring housing prices – linked with lumber and iron ore prices down 30%.  The math just doesn’t add up.

Lately, the most ink is being spilled over QE, and the market’s reaction to “removing the punch bowl.”  TV is trying to convince me that it will be fine, no worries.  They say the economy is improving to the point where tapering off is a good thing.  But those of us in the real world simply ask the obvious: if we are posting such horrific economic numbers while enjoying the Fed pushing $85 Billion a month into the system, how is this going to stand on its own when/if it is removed?  I content that it cannot.

Calling any form of a "top" in this market has been suicide.  Just when we set up for a picture book correction, they rush in and force it higher, burning the shorts to death.  Yet we know that nothing can just go straight up for ever.  It might seem that way, but even Japan’s famous run from 9,000 to 45,000 ended in a two decade long struggle that brought it down to 9,000 again.  The only question is: When?

I am not calling a top here.  I'm honestly scared to even consider the word "correction", since they've short-circuited every correction since November of 2012.  But all that said we are once again set up for a meaningful pull back.  The stochastics are rolling over, and the transports and the utility sector are hanging by a thread.  If this were any other period of time, you could look at the data and declare: "We are in for a 10% correction".  But today, it’s all about The Ben Bernanke.

For example, in the entire month of June, there will only be two days without POMO (Permanent Open Market Operations).  In other words, the Fed is going to inject billions of dollars into the system virtually every single day of June.  Can we really get a normal 10% correction with that kind of stimulus going on in the background?  Thus far the answer has been no. 

I think this is a good time to sit on your hands and do a lot of nothing.  While they might rescue this correction and push us right back up, I need to see the S&P get over 1675 for a clear break to new highs.  Between here (S&P at 1630) and there, virtually anything could happen.  We could chop sideways, or actually fall through 1620 and go down and visit the 50-day moving average down at 1600.

Safety right now is key.  Keep your powder dry and wait to play another day.

  
Tips:

We sold out of our DIA Calls on Tuesday at the open – for a nice 67% gain.  Wow – 67% over a holiday weekend.  You have to love the 20th consecutive up Tuesday!  This week I did take:
-       C @ 53.03 (currently 51.95) – sold out flat,
-       XLF @ 20.20 (currently 19.80) – sold out flat, and
-       CCJ @ 21.80 (currently 21.72) – sold out flat.

My current short-term holds are:
-       ABX @ 20.20 (currently 21.16) – stop at entry,
-         SIL – in at 24.51 (currently 14.34) – no stop yet
-         GLD (ETF for Gold) – in at 158.28, (currently 134.12) – no stop ($1,392.60 per physical ounce), AND
-         SLV (ETF for Silver) – in at 28.3 (currently 21.45) – no stop ($22.22 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 <rfcfinancialnews.blogspot.com>.

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>

Sunday, May 26, 2013

This Week in Barrons - 5-26-2013


This Week in Barrons – 5-26-2013

What’s The Fed got to do with it?

First off - I want to wish all of you a very wonderful Memorial Day holiday.  I hope you spend it with friends, family, some good food and drink, and remember those that sacrificed so that we can celebrate.  

I received an email the other evening: ”You say that the market gains are all because of Federal Reserve money, but I've been reading that Companies are so flush with cash that they're buying back their own stock and pushing prices higher.  So what's the Fed have to do with it?

There are many ways that Federal Reserve funds make their way into stock prices.  Currently The Ben Bernanke is printing $85 Billion a month, and using it to buy up Treasuries and Mortgaged Backed Securities (MBS’s).  By being the buyer of last resort, they have driven interest rates to virtually zero.  Buying up MBS’s does a couple of things:
-       First, it lets banks off the hook.  A large portion of the big meltdown was because banks got caught with junk mortgages.  So, one of The Ben Bernanke's first jobs in 2009 was to relieve the poor banks from all those trashy MBS's.  But, not only did the Fed buy them (freeing the banks from deadbeat borrowers), they bought them at “par”.  In other words, because there were so many garbage loans, an entire purchase may have been worth 39 cents on the dollar, but the Fed gave the banks the entire dollar.
-       Secondly, when The Ben Bernanke buys Treasuries (at $45B / month) it reduces interest rates.  It also hands money over to the primary dealer banks.  You see, Benji just doesn’t walk down the hall in DC and buy Treasuries from the Treasury Secretary.  If he did that, the banks wouldn’t get their cut.  He buys them thru the 18 Primary dealer banks so that they get their ‘processing fees.’  

On one hand we have the banking system taking in massive amounts of Fed cash, with no place to put it – so they play cowboy in the market.  And on the other hand (due to the insanely artificially low interest rates) companies have realized they have the perfect Ponzi scam to buy-back their own stock.

The market runs on ‘Earnings per Share’ (EPS).  Assuming you’ve increased your profits / earnings as far as you can – the only way remaining to increase ‘earnings per share’ is to reduce the denominator – reduce the number of shares outstanding.  Back in 2007, companies went on a buy back binge like never before – trying to keep the 2005 - 2007 market rally alive.  Now (in 2013) they are trying to exceed that buy-back binge.  This year, big U.S. companies have given the go-ahead for $286 billion of buy-backs, up 88% from the same period last year.   Currently, U.S. companies (not counting banks and financial firms) have bought-back more than $1 trillion of stock in the five years through 2012.  

So companies are increasing their EPS by buying back stock and therefore making the denominator (the float) smaller.  However, there is a catch.  Companies are BORROWING the money to do it.  Why are corporations borrowing the money – because interest rates are virtually at zero!  So if Corporations couldn't borrow money for free, they wouldn't be buying back stock.  On top of that, the Fed's ZIRP (Zero Interest Rate Policy) has allowed corporations to sell their own corporate bonds (for a couple percent higher than treasuries) and take the proceeds and buy-back even more stock.  Virtually all of the corporations announcing buy-backs are not using corporate savings to buy-back stock, they're issuing debt.  Corporations are not expanding, not hiring, not re-tooling – they are buying back stock (to the tune of $3B/day) to goose their EPS. 

None of this insanity could happen without the Fed pushing a trillion dollars a year into the system.  Corporations couldn’t be offering buy-backs if interest rates were anywhere near normal (i.e. corporations wouldn’t want the risk of trying to pay out 7 or 8% interest on a couple billion dollars.)  So, between handing the banks big bucks for MBS's and Treasuries, The Ben Bernanke's interest rate policy has pushed companies into playing the "Get it while it’s hot” game.  

This is why just the rumor that the Fed may taper off the juice, sent the market into spasms of selling this week.  Imagine what happens when it really hits?  No more buy-backs.  Banks will have non-performing loans again.  Trading desks won’t have free money to play with.  This is why The Ben Bernanke's so trapped in a box.  If he stops this insanity, we crash.  If he doesn't stop, the distortions become so huge, we implode from within.

Look at Japan.  They've had to halt their bond market 9 times in the past week.  The Yen injections are tossing their entire system into spasms, and it’s getting quite dangerous.  The Central Bank currency wars are causing distortions that are not easily fixed.  When Japan announced their big monetary push, their stock market gained 40% in just weeks.  That is not normal.  It feels like each day the distortions are bigger, and the feelings of panic grow stronger.  So do the Boy Scout thing – Be Prepared.  

The Market...

Back in April ‘The Powers that Be’ arranged a massive hit on Gold.  The bullion banks and the gold warehouses were critically short of inventory and needed to shake people out of their gold holdings.  I said then – do NOT buy this dip, because if their first attempt didn't work they will do it again.  Sure enough after the GLD bounced from a low of 130 on April 12th, it ran to 142.50.  Then they stepped in again, and smacked it right in the face, sending it down from 142.50 on May 8th, to 130.88 on Monday.   

Prior to Monday, for 7 sessions the GLD hovered around 142.50.  Since then, we have received at least a dozen absolutely lousy economic reports, from the Philly Fed to the Durable Goods report.  Logic dictates that due to strong demand, bad economic news, and global unrest the metals should have gone higher.  But after consolidating for 7 sessions the metals went down, because the Central banks and Bullion banks wanted them to go down in order to increase physical selling.

Gold is currently being purchased by anyone with big bucks, and that includes the Central Banks, Bullion Banks, and people like George Soros.  FYI: It was widely reported that George Soros sold his GLD shares (the ETF that ‘presumably’ tracks to the price of Gold).   But Mr. Soros didn’t ‘sell’ his GLD shares like I would sell my GLD shares.  Mr. Soros (the large player that he is) sold/redeemed his GLD shares for physical gold.

This attack on the metals will exhaust itself, and when it does I will be a buyer again.  I feel the time is close, because the physical demand has increased during this latest pull down.  Don't forget, with paper assets you can manipulate a market to conform to virtually any silly notion you want.  But in the physical market, you need a live buyer for every seller.  Currently, there are 4 buyers for every seller!

On Friday I ‘gambled’ and purchased a small amount of DIA calls.  Why do I call it a ‘gamble’ rather than an investment?  Because I did it for all the wrong reasons – none of which have anything to do with ‘logic’ and ‘investing’.
-       The market has not experienced 3 consecutive down days this year.
-       Fridays ahead of a 3-day weekend have been green 70% of the time.  And on this Friday (although we opened down over 100 points) we finished a +8!
-       And given we come back on Tuesday, we haven’t experienced a down Tuesday in 2013.  

Having said that, we’ve been set up 11 times this year for what appeared to be a correction, and the market just pushed higher.  One day that record will fall, and I think the fall will be fast and furious.  So, while seeing the market run wild is fun, not many want to talk about what happens when it ends.
  
Tips:

We made some trades this week, we sold out of:
-         GS – in at 157.00 – sold @ 162.14
-         UA – in at 60.19 – sold @ 64.20
-         SBUX – in at 60.70 – sold @ 64.70
-         NSC – in at 77.03 – sold @ 79.00

DS sent us a hint to watch CCJ going forward.  Canada is the #2 supplier of uranium to the world, and the largest supplier in Canada is Cameco Corporation (CCJ).  It’s one of many companies that will ride the uranium bull.  Cameco mines are responsible for about 14% of global uranium production.  It owns mines in Canada, the United States and Kazakhstan – which collectively hold 465 million pounds of proven reserves.

My current short-term holds are:
-         SIL – in at 24.51 (currently 13.40) – no stop yet
-         GLD (ETF for Gold) – in at 158.28, (currently 134.16) – no stop ($1,386.80 per physical ounce), AND
-         SLV (ETF for Silver) – in at 28.3 (currently 21.60) – no stop ($22.48 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 <rfcfinancialnews.blogspot.com>.

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>

Sunday, May 19, 2013

This Week in Barrons - 5-19-2013


This Week in Barrons – 5-19-2013

Mr. Collins – I just don’t know...

Mr. Sam Collins – a technical market analyst for 45 years writes:  Never in my over 45 years in the investment business have I seen such a lack of enthusiasm for one of the biggest, boldest bull markets in history.  Even the major institutions talk down the potential for higher prices.”

Mr. Collins:
-       Maybe people aren't very enthusiastic about this market because the last two market bubble crashes took all of their money?
-       Maybe they remember the late 90's where every analyst would come on CNBC and tell us stocks could only go up, until (of course) the didn’t in March of 2000?
-       Maybe people got tired of Bank manipulations concerning housing, and they bought a house for $500k in 2006 that was $79k in 2002 because the experts told them that real estate can only go up, until (of course) it didn’t in 2007?
-       Or just maybe it's because CNBC has folks like Henry Blodget on, pushing stocks 24/7, and you find out that people like Mr. Blodget have either been fined, or have admitted financial misconduct.  In 2002, New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Mr. Blodget gave his actual assessments about stocks which conflicted with what he was publicly publishing.  In 2003, the U.S. Securities and Exchange Commission charged Mr. Blodget with civil securities fraud.  Mr. Blodget agreed to a permanent ban from the securities industry and paid a $2 million fine plus a $2 million disgorgement.
-       But it gets better, Mr. Blodget (on CNBC on Friday) was interviewing Charley Rangel.  Mr. Rangel (a member/chair of the House Ways and Means Committee) has been charged 5 times for Ethics violations, and has been tax delinquent for over 3 years.

So maybe, Mr. Collins, people aren't racing toward stocks because on any given day we have a guy who paid $4 million to the SEC to keep his story quiet, interviewing a powerful crook who happens to be the U.S. Representative for New York's 13th congressional district on the most well known Financial Station.  (I can't make this stuff up!)  And maybe, Mr. Collins, we should all just believe The Ben Bernanke when he says:
-       (2/15/2006) "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."
-       (2/15/2007) "Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low."
-       (3/28/2007) "At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."
-       (1/10/2008) "The Federal Reserve is not currently forecasting a recession." AND
(When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) "The Federal Reserve will not monetize the debt.”

The Ben Bernanke is a very smart man, but pardon me if I don’t believe him when he says:  (a) we’re not in an asset bubble, (b) there is no inflation, and (c) the economy is looking pretty good (when we hit an all time high for food stamp delivery last month).  Or maybe I should just Google: “Goldman Sachs Fines” and see (on the first page alone):
-       Goldman Sachs fined $16 million for pay-to-play scheme...
-       Mistakenly Released Documents Reveal Goldman Sachs Back-Stabbed Investors...
-       Goldman Sachs to Pay Record $550 Million to Settle SEC Charges...
-       Goldman Fined for Failing to Block Trader's $8.3 Billion Bet...
-       Goldman Sachs among banks fined over lobbyist payments…
-       U.K. regulator fines Goldman $31m...
-       Goldman Sachs FINED $27 Million By U.K. Agency - Huffington Post

So, Mr. Collins, (short of visiting a Chicago politicians meeting) can you find a more criminal group to recommend?  But you are right about one thing, not everyone is agog at this market run up.  Anyone with a functioning brain is not very excited about this recent market bubble because it isn’t based upon growth or earnings or opportunity.  A stock that misses earnings, warns for the future, and lowers guidance is NOT a reason for that stock to go higher.  Every bubble meets its pin. Tech hit it.  Housing hit it.  Credit hit it.  I get really scared when I hear The Ben Bernanke say: "No fear, there's no bubble and if there was, I can let the air out slowly."

The Market...

Every person that I talk to (who has been in the business longer than 10 years, and doesn’t have an agenda to push) believes that we have entered the end game.  Thus far, in 2013, if you would have invested in the market on a Monday and sold on a Tuesday you would have accumulated over 70% of the market’s gains.  There has not been a ‘down Tuesday’ in 2013.  Is it ‘normal’ that Tuesdays and Fridays account for over 90% of the market gains in an entire year?

As long as The Ben Bernanke, the ECB and Japan are willing to print – then money will end up in the markets.  A recent art auction at Christie’s broke all-time records.  Real estate (in certain areas) is commanding all-time highs.  The rich would rather get something for their dollars than watch them inflate away.  The stock market makes an all-time high, virtually every day – with a 40-point drop being viewed as a "horrible correction".

But while prices of food, medical, education, and clothing are rising considerably – elements like lumber (which is used to build all the houses) are crashing.  Iron Ore is down 20% and in a bear market.  Oil is sloshing around everywhere, as there's no demand.  And gold and silver (the two best metals to offset currency devaluations) are falling.  

I’ve seen this movie before.  I continue to lean long into the market, taking profits as I go.  I am just about to make another purchase of physical gold and silver.  My guess is that since the ‘safety stocks’ (that pay big dividends) have been played out, the materials and cyclicals will become popular.  If I’m right, names like CLF, JOY, UYM, and BAS should move.  I'm getting ready to push the ‘buy’ button on the miners – specifically the GDX and GDXJ.  The latest attack on gold and silver has pushed the miners to a point where they're bordering on ridiculously cheap.  When this particular attack is complete, I'm buying both.  I said a while ago that if gold dropped into the high 1,200's and silver to 22, I would be a buyer of the physical metals for delivery.  Gold is getting there and silver is already in the high 22's.

This summer, the market needs the financials to pull it higher.  Goldman Sachs (GS) and JP Morgan (JPM) are setting up for breakouts.  JPM’s breakout is around 50.45 with GS is around 157.00.  If both break through those levels and hold them for 2 days – we will NOT see a ‘Sell in May and Go Away’, but rather a market that will drift higher through the summer.  Right now GS (on Friday) hit 158.27, and JPM hit 52.48.  Watch over the next two days to see if they can hold those levels.  So for this rally to really continue, JPM and GS need to hold their breakout levels.  If they fail, it could be the "one thing" they use for a correction.  


Tips:

We made some trades this week.  We sold out of SLB +$0.25, ANF + $1.25, CAT +$1.50, and TJX +$1.50.

My current short-term holds are currently:
-         GS – in at 157.00 (currently 158.27) – stop at entry
-         UA – in at 60.19 (currently 62.34) – stop at entry
-         SBUX – in at 60.70 (currently 64.13) – stop at 63.00
-         NSC – in at 77.03 (currently 80.10) – stop at 78.25
-         SIL – in at 24.51 (currently 12.84) – no stop yet
-         GLD (ETF for Gold) – in at 158.28, (currently 131.46) – no stop ($1,364.90 per physical ounce), AND
-         SLV (ETF for Silver) – in at 28.3 (currently 21.46) – no stop ($22.34 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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