This Week in Barrons - 5-18-2014

This Week in Barrons – 5-18-2014

Rain, Rain Go Away:

To highlight the fact that much of the country is drowning in spring rains – S.F. contributed the following:

God:   In the year 2013, the Lord came unto Noah and said: “Once again, the earth has become evil.  Build another Ark and save 2 of every living thing along with a few good humans. Here are the blueprints and you have 6 months to build the Ark before I will start the unending rain for 40 days and 40 nights.”

God:   6 months later, seeing Noah weeping in his yard – but no Ark, said: “Noah!  I’m about to start the rain!  Where is the Ark?”

Noah: “Please forgive me Lord, but things have changed.  It seems that:

-       I needed a building permit

-       And I’ve been arguing with the Boat Inspector about the need for a sprinkler system.

-       My neighbors claim that I’ve violated the Neighborhood By-Laws by building the Ark in my back garden and exceeding the height limitations.

-       Then the local Electric Company demanded compensation for the future costs of moving power lines and other overhead obstructions, to clear the passage for the Ark’s move to the sea.  I told them that the sea would be coming to us, but they would hear nothing of that.

-       Then there was a ban on cutting local trees in order to save the Greater Spotted Barn Owl.  I tried to convince them that I needed the wood to ‘Save the Owls’ – but no go.

-       Then when I started gathering the animals the ASPCA insisted that I was confining wild animals against their will.  The said that the accommodations were too restrictive, and it was cruel and inhumane to put so many animals into a confined space.

-       Then the EPA (Environmental Protection Agency) refused to grant me passage until they conducted an environmental impact study on your proposed route.

-       The Human Rights Commission filed a petition on my needing more minorities for my building crew.

-       Immigration is still checking the Visa status the individuals that are working with me.

-       The Trade Unions say that I can’t use my sons – as they are non-union.

-       And the IRS (Internal Revenue Service) has seized all of my assets, claiming that I’m trying to leave the country illegally with endangered species.

-       So forgive me Lord, but I think that it will take me at least 10 years to finish this Ark.”

God:   Suddenly the skies cleared, the sun began to shine, and a rainbow stretched across the sky. 

Noah: Looking up in wonder asked: “You mean you’re not going to destroy the world?”

God:   No, clearly the Government has beaten me to it.

The Market...

Factually this week:

-       Industrial Production unexpectedly dropped in April.  Output at factories, mines and utilities decreased by 0.6%, while manufacturing alone decreased 0.4%.

-       Confidence among U.S. homebuilders dropped in May to the lowest level in a year.  This tells us that the residential real estate market may be slow to recover after an unusually harsh winter.  Tight credit conditions, limited availability of lots and falling affordability as home prices rise are preventing the residential real-estate market from gaining momentum.

-       As Wal-Mart missed top and bottom line financials last week, the sales of ultra-high end homes have never been better.  Registered sales have climbed from $85M to over $149M – for a single family home.

-       Inflation came in ‘hot’ this past week at over 0.3% per month.  The reality is that inflation is over 9%, but having the government admit to something > 2% is a step in the right direction.

-       David Tepper (the brash billionaire hedge fund owner) spoke at the SALT conference this week and said that that he liked Apple long, the Russell 2000 Index short, and urged attendees: “It’s not time to go all short, but don't be too friggin’ long either."

In the beginning of the week, the market’s tolerance for ignoring bad news was high:

-       Every report out of China missed estimates to the downside,

-       Germany's ZEW report crashed for 10 whole points,

-       And the U.S. retail sales figures (which were supposed to be growing like weeds after the winter’s "weather" excuse) came in up a paltry 0.1%.  And if you took out gasoline sales – then retail sales actually declined.

But on Wednesday the wheels of the market began to come-off and we closed down 101 DOW points and 9 S&P points.  We lost the all time highs, and also lost the 50-day moving average on the XLF (which is the financial sector).  Neither of these are bullish indications.  While one day does not a market make, we have high global tensions, bad economic reports, ugly earnings, and ‘Sell in May and Go Away’ hanging over our heads.

Thursday turned out to be even more ugly than Wednesday.  We dropped like a rock coming out of the gate, and at one point were down 234 points.  The shorts covered some by the close, but we still lost almost 170 DOW points.  The key was the 50-day moving averages.  Both major indexes used their respective 50-day moving averages as support, and bounced higher off of them.  That's important, because market technicians need visible levels of support.

If the DOW and/or the S&P lose their 50-day moving averages, they can fall a long way before their next really solid support level.  So, we need to watch those levels.  And, each time these levels are defended, the defense becomes tougher and tougher to manifest.  After all, retail sales are not that encouraging.  Of the 51 retailers that have announced earnings thus far, they are DOWN an average of almost 4% under last year.  And the pseudo housing recovery is dead.  Rental units are all that is being built.

No matter where I look, you can make the case for this market finally giving up the ghost.  However, we've seen this movie before.  All I can do is follow the numbers.  If the numbers fail their 50-day moving averages – it’s time to get seriously cautious.  If the market pushes back up to it’s old highs and gets rejected – it’s time to get seriously cautious.  In between those levels, we can chop around for days and even weeks.

We ended Friday with a show of bravado with the DOW gaining 45 points.  If nothing goes ‘bump in the night’, I think we will run higher early in the week and attempt a ‘break-out’.   However, if this ‘break-out’ fails, we could finally ‘break-down’.

Tips:

Congrats to those of you who were with me on the TLT trade.  We cashed in those calls at $114, for a 1.5 week – 100% gain.  I will dive back into TLT around $112.  TLT has been (for the past 6 months) one of those 5 days on – 5 days off types of trades.  That means I purchase at the bottom of a channel and (approximately 4 to 5 days later) I sell when it reaches the top of its channel.  I then wait for another 4 to 5 days – when it drifts to the bottom of the channel – and then I buy again.

Double congrats to those of you sticking in the MNKD trade as it gained over 10% last week.  A new pharma play has emerged: DRTX.  It has a drug receiving FDA approval on or around May 26^th, 2014.  And it also has a nice 10% monthly covered call yield – coupled with a 9% upward move in the stock.  So if you DO get called out of the stock, you will have accumulated close to a 20% gain in one month.

I also continue to like the small cap energy sector, and specifically stocks such as:  BXE, FET, FPP, HK, PFIE, HTM, PQ, and VTNR. 

Finally, I’m a buyer of Gold (GLD), Silver (SLV), and NUGT at these levels.

My current short-term holds are:

-       MNKD – in @ $6.35 – (currently $7.02), w/ 2% weekly Covered Call Yield,

-       TLT – out @ 114 – will be back in July Calls around $112,

-       USO (Oil) – in @ $37.19 - (currently $37.23),

-       BXE (Oil) – in @ $9.11 – (currently $9.19),

-       DRTX (Drug) – in @ $13.67 – (currently $15.93), w/ 10% Covered Call Yield,

-       FET (Energy) – in @ 30.42 – (currently $32.52)

-       FPP (Oil) – in @ $5.32 – (currently $5.17),

-       HK (Energy) – in @ $5.25 – (currently $5.79),

-       HTM (Energy) – in @ $0.75 – (currently $0.66),

-       LSCC (Tech) – in @ $7.85 – (currently $8.13),

-       NGLS (Nat Gas) – in @ 60.11 – (currently $64.00),

-       PFIE (Energy) – in @ $4.47 – (currently $3.96),

-       PQ (Energy) – in @ $5.69 – (currently $5.89),

-       RFMD (Tech) – in @ $7.96 – (currently $8.79),

-       VTNR (Energy) – in @ 7.02 – (currently $7.40),

-       SIL (Silver) – in at 24.51 - (currently 12.05) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 124.50) – no stop ($1,293.50 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 18.61) – no stop ($19.39 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, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him 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 his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 5-11-2014

This Week in Barrons – 5-11-2014

I must have missed something…

I must have missed something, or maybe I just didn't pay attention when I was growing up – but (way back then) we didn't seem to need the level of diversity training, grief counseling, and classes on ‘understanding others’ that are present today.  Maybe it was my parents, but I personally grew up oblivious to race, color, creed or sex, but rather strictly focused on results.  I’ve been trying to understand the most recent social engineering of the U.S. – that embraces a homogenous, one size, one thought fits all attitude.

Maybe I missed something but (more and more) people seem to be saying one thing and doing another.  The political candidate that shakes hands and kisses babies – suddenly gets busted for tax evasion, larceny, and insider trading.  The individual leading the ‘family power’ workshop – gets caught cheating with the spa manager. 

And I know that I missed this: Where has regular face-to-face, ear-to-ear conversation gone?  We now have Yik-Yak – a smart phone application that lets anyone post anything in message form – without identification.  That’s right, there is no username or password.  You are completely anonymous.  Imagine the shear number of people that are being insulted at will, be-rated 24/7, about anything and everything.

There have always been haters, cheaters, liars, and jerks.  Heck, in 1970 one of the most popular shows was: “All in the Family” – with ‘Archie Bunker’.  This show (if shown today) would potentially land the producer in jail.  In 1970 it was exciting, meaningful, and challenging to laugh at ‘Archie’, and in many cases laugh at yourself as well.  ‘Archie’ exposed our differences, and tried to mend some of them through humor.  Unfortunately, today we have a quick ‘n easy escalation from humor – to lack of civility – to rudeness – and sometimes ending in violence.

Maybe I’m missing something, but isn’t this escalation of violence occurring DESPITE all of the social engineering efforts that are taking place?  And this level of violence is occurring while the economy is still functioning.  What happens when things really get tough?  Last week, 44 people were shot in Chicago.  And last week the EBT cards were still functioning.  What happens when the EBT cards don’t work?  If we can see these levels of evil in ‘good times’, what unspeakable evils will we see during a melt down?

Last week I discovered that every Federal agency (right down to and including the Post Office) has been buying hundreds of thousands (in some cases – millions) of rounds of lethal ammunition.  Why is this?  I think they know that the economy and our currency are doomed, and when they fail (if things don't go well), all heck is going to break loose. So they’re buying up billions of rounds of ammo to protect themselves against John Q. Public if/when society breaks down.

To get a hint of where a society can go in a hurry, simply watch some of the real videos that are coming out of the Ukraine.  You’ll see mobs cutting off people’s legs, burning people alive, and beating people to death with blunt instruments.  That could be the U.S.  Look at the Yik-Yak posts.  Look at our inner city violence.  Look at our lack of face-to-face, and ear-to-ear communication.  The U.S. is one banking holiday / one EBT system failure away from these videos.  

Wow, I really must have missed something along the way?

The Market...

Happy Mother’s Day to everyone that has the toughest job in the world – being a Mom!

Also, a quick shout out to S.F. for reminding me about the Chinese currency (Renminbi) situation.   Recently, China’s Third Plenum voted in the boldest package of policies seen in decades.  Beijing is freeing up interest rates for foreign-currency deposits, easing restrictions on cross-border capital flows in the Shanghai free-trade zone, easing foreign investors access to Chinese markets and the daily trading band for the Renminbi-dollar rate has now been doubled to plus or minus 2%.  They have deregulated their services sectors, simplified their customs clearance, settled cross-border trade disputes, allowed two-way portfolio investment, and have allowed foreign companies to issue Renminbi bonds and access the domestic equity market themselves.  In light of all this, I now expect full Renminbi convertibility to come earlier than expected.  As Renminbi internationalization and financial reforms accelerate, their currency’s role in global reserve management should expand quickly.  I think very soon we will see a multiple reserve currency system in which the Dollar, Euro and Renminbi all play their part.

On Friday, we saw the DOW close at a new, all-time high.  And why wouldn't it?

-       Didn't the GDP (Gross Domestic Product) just disappoint to the downside?

-       Aren't home sales falling like a rock?

-       Wasn’t the most recent ‘Jobs Report’ horrible?

-       Aren't more small businesses closing than opening? 

Through a wicked twist of fate, it appears that the worse the numbers get – the higher we go on the DOW.  I guess that if we had all out nuclear war – we would see the DOW touch 25,000.  This market is being pushed higher despite the facts.  Yes - this is ‘Bubble Mania’ Part 2.

I’m guessing that the thinking on ‘The Street’ goes something like this:

-       The only way to get any return on your money is through buying either junk bonds or stocks.

-       Treasuries are paying less than inflation – so you're losing money.

-       Emerging markets are much too volatile.

-       The Fed has proven that if things start falling apart, they will rush in and hand out free money and support the market.

-       Therefore, stocks are the ONLY place to be right now.

But right now, there’s one big difference.  China continues to amass huge stockpiles of gold.  In the last year, China amassed (what amounts to) the entire worlds production of the metal.  Meanwhile, our gold storage amounts continue to decline – as we encourage ‘paper money’ being our ultimate salvation.  When you contrast what the East is doing with what America is doing, you can see why the West is in real trouble.  The U.S. encourages its citizens to go out and spend their savings on newer gadgets, and to accumulate large amounts of debt in order to increase consumption.  The Chinese authorities are encouraging their citizens to save in gold, store it in a safe place, and to be fiscally prudent.  Which culture will truly prosper?  Time will tell, but I'm leaning toward the East.

The point being, when you can ‘easily’ print paper dollars, you can always have a market hit all-time highs during a fading economy.  An economy where: (a) 93 million are unemployed, and (b) one out of every five citizens is on Government assistance.  John Q. Public sees the markets hit new highs, and figures that it's okay to go into more debt because ‘everything must be fine’.  It’s not.  On Thursday we saw the credit numbers explode by an additional $17 Billion.  All of the additional borrowing was due to student loans, and sub-prime car loans.  If you think that's healthy, you too have swallowed the Kool-Aid.

While the DOW has closed at an all-time high, the S&P has a way to go.  The reason is simple.  It is much easier to drive 30 stocks higher (the DOW), than to move the S&P (500 stocks).  Therefore, the S&P is not ‘breaking out’ as of yet.  On Friday the XLF (a financial sector ETF) did NOT even go positive on the day.  So, while the DOW put on a ‘brave face’ for the weekend, the broader market is still range bound.  In fact, the Russell 2000 (a measure of small to medium sized companies) – is actually in correction territory – down 10% from its highs.

Finally, the Ukraine tends to move from one headline to the next so fast that everything is ‘yesterdays weather’.  But I assure you, the Ukraine is not yesterday, but rather it is today and tomorrow.  If they pull off the referendum vote on Sunday, and by Monday we see that half of the Ukraine wants to be ‘Russian’, what next?  Do the U.S. and Europe introduce more sanctions, provocation, and warships?  What happens when Russia starts with their own sanctions against the U.S. and Europe?  Where does the fallout end?

The bottom line is that we're in a stranger position right now than I think I can remember.  If nothing goes ‘bump in the night’, the FED can keep printing and keep pushing the DOW higher.  But the right ‘bump’ could cause a flash crash – the likes of which we haven't seen in a long time.  Until the S&P puts in a few closing highs above the old all-time highs, I continue to tread lightly or not at all.

Tips:

Congrats to those of you who were with me on some of last weeks earnings trades: (mostly Call Credit Spreads) on: SSYS, TSLA, PCLN, QIHU, and GOOGL.

TLT (the Bond market ETF) touched $111.20 on Friday – which was my buy signal to purchase more June and July calls.  TLT has been a channel trade for the past 6 months.  That means you purchase at the bottom of the channel (in this case around $111.20) and sell when it reaches the top of its channel – in this case around $114.  TLT is also interesting because when it starts to decline – those declines normally last 4 to 5 days – then it’s time to buy again.

My faith in the long end of this market continues to reside in the energy sector, and specifically in small energy stocks such as:  BXE ($9.37), FET ($31.61), FPP ($5.17), HK ($5.69), PFIE ($3.84), HTM ($0.71), PQ ($6.20), and VTNR ($8.93). 

I’m also a buyer of both Gold (GLD) and Silver (SLV) at these levels.

My current short-term holds are:

-       MNKD – in @ $6.35 – (currently $6.22),

-       TLT – in @ $106.22 – (currently $111.24 – bought more on Friday),

-       USO (Oil) – in @ $37.19 - (currently $36.40),

-       BXE (Oil) – in @ $9.11 – (currently $9.37),

-       FET (Energy) – in @ 30.42 – (currently $31.61)

-       FPP (Oil) – in @ $5.32 – (currently $5.17),

-       HK (Energy) – in @ $5.25 – (currently $5.69),

-       HTM (Energy) – in @ $0.75 – (currently $0.71),

-       LSCC (Tech) – in @ $7.85 – (currently $7.87),

-       LSG (Gold) – in @ $0.78 – (currently $0.78),

-       NGLS (Nat Gas) – in @ 60.11 – (currently $61.63),

-       PFIE (Energy) – in @ $4.47 – (currently $3.84),

-       POZN (Pharma.) – in @ $8.68 – (currently $8.39),

-       PQ (Energy) – in @ $5.69 – (currently $6.20),

-       PTIE (Pain Tmt.) – in @ $5.34 – (currently $5.07),

-       RFMD (Tech) – in @ $7.96 – (currently $8.78),

-       VTNR (Energy) – in @ 7.02 – (currently $8.93<

-       SIL (Silver) – in at 24.51 - (currently 12.54) – no stop,

-       GLD (ETF for Gold) – in at 158.28, (currently 124.10) – no stop ($1,289.25 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 18.42) – no stop ($19.21 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, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him 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 his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>