This Week in Barrons - 10-11-2015

This Week in Barrons – 10-11-2015:

Thoughts:

Dear Ms. Yellen:

One of my favorites lines from the movie ‘The Intern’ was: “We’ve created a society where girls become women, and men become boys.”  So Ms. Yellen, from one ‘boy’ to another ‘woman’ can I ask you to: Grow a Pair – and stand up to your bankster buddies.  By even suggesting negative interest rates tells me that you’ve given up on trying to cure this country’s economic woes.  We went from an interest rate hike of 25 basis points, that would have cost the U.S. treasury an additional $500B in national debt servicing fees.  To keeping rates at zero, that tells everyone their accumulated savings from all of their hard work is worth NOTHING.  And now you’re thinking about charging people to store their own money in banks – just so your bankster friends can make a couple extra bucks.

I realize that Deutsche Bank just reported an $8B loss, and that Bank of America along with JP Morgan are set to report fairly substantial losses this quarter as well.  And I understand that you would like to help out your friends by allowing them to charge interest on deposits.  But do you remember rejecting that very same option during the darkest days of the financial crisis in 2009 and 2010?

Negative interest rates (just so we’re clear) would turn my $100 deposit into $98 over time by allowing the bank to charge me $2 in interest / storage fees on my own money.  I know that two FED officials: William Dudley (President of the New York FED) and Narayana Kocherlakota (President of the Minneapolis FED) are out ‘talking up’ the negative interest rate idea.  But Ben Bernake recently said: “We decided not to move to negative interest rates because the benefits are not that great, and it may have adverse effects on money market funds.”

But Ms. Yellen, it gets even better:

-       When you changed the banking rules, you turned depositors into lenders.  That means that the moment I deposit money into a bank – it is no longer my money, but rather yours.

-       By depositing money into a bank, I am actually ‘lending’ money to that bank.  And banks have NO fiduciary responsibilities to lenders.  Therefore, the instant you put money into a bank – they have the capability to immediately invest those funds into high-risk assets in order to earn the spread and any gains from appreciation.

-       Now the average J.Q. Public thinks that if the bank makes some bad decisions and goes under – at least the FIDC will save them.

-       As you and I both know, that’s not exactly true.  Since deposits are considered bank liabilities, when the FDIC takes over a bank it could very well convert a bank’s liabilities into bank stock.  And bank stock can go down, if and when the bank goes down.

-       The average J.Q. Public may even think that they are “FDIC insured.”  Unfortunately, NOT in this situation.  Depositors would be turned into shareholders of that bank, and (unfortunately) shareholders are NOT FDIC protected. 

Ms. Yellen, are you really willing to risk the health of the U.S. economy just to help out your bankster friends – yet again?

The Market:

Factually:

-       The most recent ISM (services) report showed the largest drop in ‘new orders’ since 2008, and that prices are indeed DEFLATIONARY.

-       The latest Japanese orders fell by 6%, and German exports fell by 5%.

-       The IMF cut its global growth forecast for the 4th time in 12 months.

-       Adjusted for inflation, the average worker makes LESS than in 1985.

-       Deutsche Bank announced an $8B 3^rd quarter loss.  That means Deutsche Bank, Adobe (a software company), Yum Brands (a restaurant company), and Monsanto (an agricultural company) will all miss earnings estimates by significant margins.  This isn’t a good sign for the economy.

-       Since 2009 companies have bought back over $2.4T in stock, and that has accounted for a 21% stock price increase.  Prior to 2008, companies bought back less than $25B billion in shares per quarter.  Today, companies are buying back stock at almost 6 TIMES that rate.

-       In the Middle East, the U.S. wants Syria’s Prime Minister Assad out of power; therefore, we have been arming the rebels in order to take Assad down.  However, Russia is friendly with Assad, and is taking out the rebels and ISIS along with them.  This has caused Turkey, Saudi Arabia, Iran and China to get involved.  It's only a matter of time until someone makes a mistake and either downs the wrong plane or hits the wrong group on the ground.

If you look inside the market, you will find some real carnage.  For example: Micron Technologies was $35 in January and $14 two weeks ago.  Caterpillar was $92 in January and $63 two weeks ago.  And SanDisk was $99 in January and $49 two weeks ago.  The big money rotated from these ‘sinking ships’ and into other ‘darlings’.  That has kept the averages from showing the market’s true destruction.  I tend to think that the big money is running out of places to hide.  When the current ‘darlings’ roll over, the big money will simply sell out.  I believe that the market top was set in May, and we are in a slow motion roll over.

This earnings season is shaping up to be a disaster.  Everyone will blame China.  But what they won’t say is that the world (including the U.S.) is drifting into a deeper recession.  There are a lot of people’s lives, careers, and derivative positions depending on ever-rising asset prices.  The ‘powers that be’ will toss the kitchen sink and garbage disposal at keeping stock prices higher.  I tend to think they can't keep it up much longer.

TIPS:

Recommendations:

-       NFLX – NetFlix jumped from $106 last week to $113+ this week, and announced an increase in their price to new subscribers.  NetFlix has earnings on Wednesday, and this $1 price increase will play nicely into its forward guidance.  We also know that implied volatility will increase into earnings – so (knock-on-wood) we’re looking good into Wednesday’s earnings release.

-       Watch the symbol FFMGF.  It’s selling for 31 cents right now.  Now I’m not a penny stock guy, but I like a bargain just like anyone else.  This company funds and buys precious metal mines that are basically in bankruptcy.  The metals have been held down artificially, and some day the manipulation will either end of it's own, or be overpowered by the demand for physical product.  When the paper market finally loses control of the price of the metals, I think FFMGF will have a long way to rise, and this $0.31 stock could easily be a 10X gainer.  FFMGF could easily be at $10 if the caps come off the metals, Gold goes to $2500/oz., and/or Silver comes back to $50/oz. 

I’m still light – but buying more and more NFLX and AMZN heading into earnings:

-       ADBE – SOLD – Iron Condor – Oct @ 75 / 77.5 to 90 / 92.5,

-       AMZN – BUY – Calls – Oct4 +515 / -530 Call Debit Spread

-       LL – SOLD – Iron Condor – Oct @ 12 / 13 to 18 / 19,

-       NFLX – BUY – Calls – Oct @ 100,  BUY – Calls – Oct @ 105, BUY – Calls – Oct @ 110, BUY – Calls – Oct @ 118,  BUY – Calls – Oct @ 120,

-       NKE – SOLD – Iron Condor – Oct 112 / 115 to 129 / 132,

-       YHOO – SOLD – Call Credit Spread – Oct -32 / +35,

-       SPX:

o   SOLD – Iron Condor – Oct4 @ 1800 / 1805 to 2050 / 2055,

o   SOLD – Iron Condor – Oct4 @ 1825 / 1830 to 2070 / 2075,

o   SOLD – Iron Condor – Oct4 @ 1880 / 1885 to 2120 / 2125,

o   SOLD – Iron Condor – Oct5 @ 1860 / 1865 to 2090 / 2095,

o   SOLD – Iron Condor – Oct5 @ 1780 / 1785 to 2070 / 2075,   

o   SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.

To follow me on Twitter.com and on StockTwits.com to 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

Creativity = http://vimeo.com/user8991651/review/105373017/0d0c374c28 

Investing = http://vimeo.com/user8991651/review/105373016/a5e84dd610

Marketing = http://vimeo.com/user8991651/review/105373015/d7237d026d

Sales = http://vimeo.com/user8991651/review/105373014/0e44b43962

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 - 10-4-2015

This Week in Barrons – 10-4-2015:

Thoughts:

            

Janet, does ‘data dependent’ really mean QE4?

Dear Ms. Yellen:

Based upon Friday’s Jobs Report, it’s now clear to me why you didn’t raise rates:

-       The U.S. economy created 29% FEWER jobs in September than were anticipated, and most of those were ‘phantom’ jobs – invented by a statistical ‘birth/death’ model.  Along with that horrific number, August was also revised lower by 27% fewer jobs.

-       The U.S. private payrolls for September were 40% BELOW estimates, with August being revised lower by 28%.

-       500K more people dropped out of the work force as the participation rate FELL to its lowest level in almost 40 years.

-       Factory goods orders for August FELL a greater than expected -1.7%.

-       In the 3^rd Quarter, U.S. companies announced 205,759 job cuts – the most since the Great Recession, and double the same time last year.

-       Last month, companies authorized $243.4B in stock buybacks – over 7 TIMES last year’s rate.

-       Canada is in a confirmed recession, with the EU and China not far behind.

-       [A shout-out to SF for the above numbers.]

But you did have a crazy September to deal with:

-       The Pope addressed Congress for the first time in history.

-       Donald Trump lead the GOP polls, while Speaker Boehner resigned.

-       The Chinese President and Putin both met with Obama.

-       You were expected to raise rates – you didn’t – and later said you would.

-       Hillary Clinton lost ground to an openly declared Socialist.

-       Volkswagen blatantly cheated on the EPA emissions requirements.

-       And the Iranian deal passed Congress, as Iran chanted ‘Death to Israel’.

Obviously Ms. Yellen, your rate hike is now off the table.  In fact the latest talk surrounds QE4.  The only mathematical solutions I see to avoid QE4 are:

1.    The government increases tax revenues, reduces deficit spending, and therefore reduces bond auctions.

2.    The government cuts spending, reduces deficit spending, and therefore reduces bond auctions.

3.    The FED raises rates to make bonds more attractive, and to generate enough buyers that the FED no longer has to participate in the auctions.

4.    Or the FED starts printing money.

I think we can all agree that the only probable element on that list is #4 – you turning on the printing presses.  But how many times can you go back to the QE-well?  After 7 years of QE, a $4 Trillion balance sheet, billions in bailouts, TARP, HARP, cash for clunkers, and all of the other illusions that you’ve manufactured – is your ‘data dependent’ phrase really going to translate into QE4? 

The world saw your fiscal actions on Friday.  After the worst jobs report in years, the market was immediately down over 250 points.  And just as the market was challenging the August lows, you (the ‘Plunge Patrol Team’) stepped in and pushed the market higher by 200 points.  At least we now know that the FED/Goldman line in the sand is the 1867 level on the S&P.  If the market falls below that level, it's a long way down.  Unfortunately, J. Q. Public doesn't know levels, what durable goods are, ISMs, or PMIs.  He doesn't hear the ‘factory orders recession warning’.  He doesn't know that the Atlanta Fed cut their GDP estimates for the year to a measly 0.75%.  But he does know that you’re playing a very dangerous game of musical deck chairs – on the Titanic.

The Market:

UBS (in return for immunity) is about to ‘rat out’ its peer banks about manipulating the gold and precious metals market.  Now, combine UBS coming clean next year about gold manipulation – with China backing their Yuan with gold – with China being admitted to the IMF’s SDR program, and you have a recipe for higher gold and silver prices.

But you’ve heard that all before so let me introduce some more information:

-       The supply of gold is thin, but the supply of silver is non-existent.

-       The bankers are going to be exposed for price manipulation.

-       The equity markets are taking it on the chin because everyone finally realizes that QE and buy-backs are the only reasons stocks go up.

-       The FED doing QE4 will directly translate to devaluing the dollar.

-       The Chinese backing their Yuan with gold, makes every other nation looks bad.

I really like silver at this price because silver (unlike gold) is used for: money, jewelry, and in industry.  Silver is used in solar, in space applications, in electronics, in medicine, and in dozens of other industries.  But, many silver mines have gone idle, and the physical amount available has diminished sharply.   This week I talked to silver and gold dealers and unanimously heard that they have never seen physical silver supply and demand so ‘out of whack’.  Demand for physical silver is exploding.  Wholesalers are depleted, and refiners are talking 3-month lead times to ship product.  And yet the ‘paper price’ continues to be held down.  I believe we are nearing a point where the physical demand will blow-up the paper market manipulation.

This miss-match in silver supply and demand is an opportunity.  The opportunity I see is an options trade in a very specific mining stock.  This same situation presented itself back in 2010 – where an investment of about $10k would have turned into $250k in 24 months.  The stock is AG – a silver miner that also does a little gold mining.  It’s currently trading for $3.58/share.  AG is a good company, but the miners have been crushed during the last 4 years of metals manipulation.  I’m basing this idea on the concept that: (a) AG survives, and (b) because physical silver is now almost impossible to get, we are nearing a time when the paper market has to break.  I’ve selected AG for two reasons: (a) as recently as October of 2012 - AG traded for $24, and (b) they have $2 call options available in January of 2018.  Buying a $2 call option would give you the ability to buy AG stock between now and January 2018 for $2 per share.  The current price for that option would be $2.20.  Now you could just buy a few options, hold them, and as the silver manipulation comes to an end – cash in on the appreciation of those option contracts.  But a way to make a lot ‘more money’ is the following:

-       Buy 50 contracts of the January 2018, $2 calls options for $2.20.

-       As silver rises, and AG hits $5/share, our $11K in options will be worth $20k.  We will then sell our 50 contracts, and use the gains to buy 100 contracts at the $5 strike price.

-       As silver rises, and AG hits $10/share, our 100 contracts will be worth  $53k.  We will then sell our 100 contracts, and use the gains to buy 250 contracts of the January 2018 $10 strike.

-       As silver rises, and AG hits $15/share, those 250 contracts are now worth about $132,000.  Sell those 250 contracts, and buy $100k worth of the January 2018 $15 strike.

-       As silver rises, and AG hits $20/share, you will have made $250k on your $10k investment.  You could even roll it out again, and have $500k when AG makes it to $25/share.

So the only real question is: ‘Can AG go from $3.58 to $20 in less than 2.4 years?’  The miners did similar things in the past, and there's even more reason for them to blast off this time if silver manipulation ends.  But honestly, if AG just goes from $3.58 to $6 you will still double your money.  This investing model is scale-able.  You don't have to start with $10k, you can simply buy 10 contracts for $2,200 or 1 contract for $220.  The math is the same – simply adjust your ending dollar amount based upon your investment.

Nothing is guaranteed, but this was the exact same strategy that worked in 2010 to 2011 in the miners.  I think because we have so much time – this could work again.  Remember, UBS is going to blow the lid on metals manipulation, and – there is NO more physical supply of silver.

TIPS:

-       INDU 16,472: A move into 16,600 would be normal.

-       NDX 4267:    A move into 4,400 could trigger a top.

-       SPX 1951:     Watch the 1960 level for a topping pattern.

-       RUT 1114:    The Russell is under-performing the rest of the market, and I need to see a solid move into 1160 to signal any kind of rally.

Recommendations:

-       NFLX – NetFlix is currently trading @ $106.11.  It’s old high was $129.29.  It has earnings coming up on October 14^th – therefore volatility in the stock itself will be increasing.  With volatility increasing, call options will increase in value even if the underlying stock value remains the same or slightly lower.  NetFlix was at $101 prior to its July earnings report – when it shot up to $129 after earnings.  If you are a conservative investor, purchasing some ‘in the money’ $105 NFLX call options might be appropriate.  For the more adventurous investor, purchasing some inexpensive ‘out of the money’ $120 call options would certainly be rewarding in the event of NFLX going back to its old highs.

I’m still light – but buying more and more NFLX and AMZN heading into earnings:

-       ADBE – SOLD – Iron Condor – Oct @ 75 / 77.5 to 90 / 92.5,

-       AMZN – BUY – Calls – Oct4 +515 / -530 Call Debit Spread

-       LL – SOLD – Iron Condor – Oct @ 12 / 13 to 18 / 19,

-       NFLX – BUY – Calls – Oct @ 100, Oct @ 105, Oct @ 110, Oct @ 118, Oct @ 120,

-       NKE – SOLD – Iron Condor – Oct 112 / 115 to 129 / 132,

-       YHOO – SOLD – Call Credit Spread – Oct -32 / +35

-       SPX:

o   SOLD – Iron Condor – Oct @ 1894 / 1900 to 2025 / 2030,

o   SOLD – Iron Condor – Oct4 @ 1800 / 1805 to 2050 / 2055,

o   SOLD – Iron Condor – Oct4 @ 1825 / 1830 to 2070 / 2075,

o   SOLD – Iron Condor – Oct4 @ 1880 / 1885 to 2120 / 2125,

o   SOLD – Iron Condor – Oct5 @ 1860 / 1865 to 2090 / 2095,

o   SOLD – Iron Condor – Oct5 @ 1780 / 1785 to 2070 / 2075,   

o   SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.

To follow me on Twitter.com and on StockTwits.com to 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

Creativity = http://vimeo.com/user8991651/review/105373017/0d0c374c28 

Investing = http://vimeo.com/user8991651/review/105373016/a5e84dd610

Marketing = http://vimeo.com/user8991651/review/105373015/d7237d026d

Sales = http://vimeo.com/user8991651/review/105373014/0e44b43962

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>