RF's Financial News

RF's Financial News

Sunday, November 1, 2015

This Week in Barrons - 11-1-2015

This Week in Barrons – 11-1-2015:

Thoughts:















Allow me to introduce your new boss.


Dear Ms. Yellen:

Remember when Herman Edwards said: “You play, to Win – the Game”?  As the economic data continues to weaken, can you win this game?  After all, you’re currently sitting at ‘zero’ interest rates, and you’re already the world’s largest buyer and holder of bonds and mortgage back securities.  With GDP coming in at a disappointing annual rate of 1.5% rate, I have to wonder, how long you will last in your present position under President Donald Trump?

When I first wrote about Donald Trump’s success, I received a lot of comments about him being a ‘novelty’ and a ‘flash in the pan’.  But the voting public continues to think differently.
-       They’re not buyin’ another 4 years of ‘same old – same old’. 
-       They like qualities such as: flamboyance, daring, wealthy and worldly.
-       They know that ‘illegals’ are taking our jobs – both here and abroad.
-       And that costs continue to rise, while wages continue to fall.

Donald Trump is the only candidate talking J.Q. Public’s thinking to heart.  When John Harwood (of CNBC) dismissed Trump as a ‘comic book’ candidate – 75 million tweets went out defending ‘The Donald’.  The great political machines are scared, as they never thought that Trump or Carson could hang in there.  The fact that both have gained in market share have many running scared.  Donald Trump’s message of: ‘Make America Great Again’ resonates with J.Q. Public.  The public wishes for the ‘good old days’, and Trump promises that he’ll give them back.

But my question to you Ms. Yellen is: Can you win the game?  Because if Donald Trump is elected, history shows that he surrounds himself with winners.  And if you’re not winning the economic battle, you can expect to hear another ‘now famous’ quote: “You’re Fired.”


The Market:

So the market is in melt up mode beyond any reason.  I was reminded last night about the Greenspan quote: “The market can remain irrational – longer than you can remain solvent”.  Meaning, you may have shorted this market 200 S&P points ago, knowing that it does not fundamentally belong this high.  Meanwhile, you're going broke as it simply moves higher and higher.

We are looking at one of the best Octobers in HISTORY.
-       Draghi of the ECB is printing $80 Billion a month.
-       Chevron recently laid-off 7,000 people, and Husky laid-off another 1,400.
-       The most recent PMI report showed employment falling back, and order backlogs contracting for the 8th straight month.
-       Sweden, Denmark, Italy, Switzerland, Germany and others are selling notes with NEGATIVE interest rates.  This has never happened in the history of mankind.
-       The Wall Street Journal talked about how stocks are up on hopes of more stimulus.
-       And this week September durable goods orders fell by 1.2%, and August was revised LOWER by 3%.

This October rally is all on the hopes of more FED stimulus.  Whether it's Japan, Europe, China or the FED – it’s all about: “More Please!”  It’s not earnings.  It’s not employment.  It’s not capital expenditures for equipment.  It’s not durable goods orders.  It’s not anything tied to fundamentals.  It’s all about free money.

This is a very dangerous market.  While everyone loves it when stocks are rising and their 401's are making money; when markets run higher on hopes of debasing the currency, or on hopes that the last standing savers will finally jump into a bloated market – you know that this bubble will find a sharp object.  We saw this same movie in 1999.  The market melted up into year-end, and then in March it started lower – ending with the NASDAQ 60% lower.

There's little question that the market is tired.  It needs more than a pause – it needs a few big red days to work off some of the froth.  Was Friday's 92-point drop the start of it?  It could be.  But Monday is the first trading day of a new month and more times than not, new months bring in some new pension money – so I wouldn't be surprised if we move up for a day or two and then roll over.

But that said, there was a development on Saturday morning that may prove to be disturbing.  A Russian passenger jet with 223 people on board crashed, and all the passengers perished.  While that is a huge tragedy on its own, ISIS has claimed responsibility.  Normally that would just be propaganda, but video has surfaced showing an airliner flying alongside and then exploding.  Whether or not that video is real or not, is certainly a question.  However, if Russia decides that ISIS was responsible – it opens a new can of worms.  Remember, our allies support these mutants with money and weapons, and many were trained within the U.S.  This is a development that could move markets, so we will need to keep an eye on how Europe is trading early tomorrow morning.

If you're trading this market, keep your position size small and your time frames short.  The last quarter of the year is usually the strongest, but I wonder if the insanity of October pulled forward a lot of the gains that would have normally come in November and December.

Just keep your fingers near the sell buttons.  When this market runs out of steam, the rush for the exits is going to be epic.


TIPS:

INDU 17,664:           There is resistance at 17,800 and support 17,200.
NDX 4,648:               The tech heavy index is pushing up against resistance.  Apple’s earnings were good but not great.  Look for back-filling here.
SPX 2079:                 I would look at 2100 as resistance with 2040 as support.
RUT 1162:                The Russell (the broadest market measure of order flow) is lagging the other indices.  A close this week above 1180 could mean we are heading for a holiday Fed rally.  On the other hand, a close below 1140 could find us heading back to 1120 or 1100 – as real fundamental concerns are starting to drown Fed’s easy money.

I’m looking for Friday’s Non-Farm Payrolls Report to force some consolidation around the 2061 level of the S&P, and then later down into the 2035 level.
-       AG – BOUGHT Stock @ $3.58 / and Jan, 2018 $2 Calls @ $2.30
-       AUY – BOUGHT Stock @ $2.50 / and Jan, 2017 $2 Calls @ $0.90
-       EGO – BOUGHT Stock @ $4.00 / and Jan, 2017 $3.50 Calls @ $1.10
-       GFI – BOUGHT Stock @ $2.80 / and Jan, 2017 $2.50 Calls @ $0.90
-       IAG – BOUGHT Stock @ $2 / and Jan, 2017 $1.50 Calls @ $0.85
-       FFMGF – BOUGHT Stock @ $0.33
-       SPX:
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


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

<http://rfcfinancialnews.blogspot.com>

Sunday, October 25, 2015

This Week in Barrons - 10-25-2015

This Week in Barrons – 10-25-2015:

Thoughts:

















Layoffs … you’re talking about … Layoffs!


Dear Ms. Yellen:

It’s been almost 14 years since Jim Mora (at an Indianapolis Colts press conference) uttered those words.  They had just lost a terrible game, some reporter asked about their ‘playoff’ chances.  I thought it appropriate that after such an ‘unexplainable’ week in the markets – that I ask about all of the employee ‘layoffs’.  Obviously, after a certain point the math no longer works on the: ‘borrow money to buy-back stock’ shenanigans.  Just this week it appears that corporations figured that out as well, as they started cutting people (in earnest) to improve their bottom lines.  A few of the layoffs that were announced are: 3M for 1,5000, Advanced Micro Devices for 500, BioGen for 1,000, Caterpillar for 5,000, Chesapeake Energy for 1,000, Chevron for 7,000, ConAgra Foods for 1,500, Credit Suisse for 3,400, Disney for 300, FMC for 1,000, Hewlett Packard for 30,000, Lockheed Martin for 250, Monsanto for 2,500, Microsoft for 1,000, Perrigo for 1,000, SunEdison for 1,200, Twitter for 325, Wal-Mart for 450, Weatherford for 3,000 and Whole Foods for 1,500.

These same corporations are using the ‘proposed’ savings from these layoffs to continue to buy-back their own stock.  I think this practice is dangerous.  For starters, if a company’s sales are not increasing – then chances are the buy-backs won’t work either.  Secondly, it’s possible that the buy-backs won’t reduce the overall share count due to the new shares being created and used as compensation to the executives.  Finally, with increased layoffs come declines in retail sales.  And something that SF pointed out, the average FICO credit score for loans originating in September is at its lowest level in at least 4 years.  That means we’re combining bad credit, with lower lending standards, with retail sales and transportation declines – yielding a recipe for a fairly sick economy.

Ms. Yellen, what do you get when you put the following together:
-       32 nation’s Central banks are cutting their own interest rates.
-       China’s GDP is expanding by 6.9% yet they are devaluing their currency, reducing their imports by 20.4%, and jailing people for talking negatively about stocks.
-       The oil industry rig count is down 1,001 rigs over last year.  The ripple effect comes from all of the banks and loans associated with these (now) non-performing rigs.
-       Caterpillar has seen its global sales fall for 3 straight years, and in their latest report not a single area of the globe was positive.
-       Denmark’s negative interest rates have pushed real estate to a point that rents are now up 60%.
-       Obamacare costs (and premiums) are increasing by double-digits.
-       European Central Bank (ECB) President, Mario Draghi signaled that more stimulus is on the way, and suggested negative interest rates.
-       The Bank of Japan is ramping up its largest asset-purchase program (including buying into their own stock market).
-       England’s interest rates are at record lows.
-       And not to be outdone, China’s central bank announced another rate cut.

Ms. Yellen, it’s YOU against the rest of the world right now.  As soon as you announced the end of QE3 and began setting rate hike expectations – the U.S. dollar started to rally.  But what comes with a higher U.S. dollar is increased difficulty selling U.S. goods and services overseas.  In this case, a competitive environment means that you need to DEVALUE your currency to make the products you are trying to export more attractive.  It’s a ‘Race to the Bottom’.   Devaluing creates inflation, and that is exactly what you want.

Therefore, with China’s interest rate cuts, Draghi’s radical announcement of negative interest rates, combined with Japan’s central bank actually buying stock market securities – what is becoming a higher probability is that you need to choose your poison: QE4 or negative rates.  FYI – in 2001 the Colts did NOT make the playoffs.  Let’s try and not make the same mistake with our economy.


The Market:

This week has certainly been one for the history books.  I haven't seen this level of lunacy in the markets since the late 90's, and since the housing run-up in 2006.  I remember in late 1999 when stocks were gaining 200 points in a day.  It was a ‘new paradigm’.  Nothing mattered until the NASDAQ lost 60% of its value virtually overnight.  More than 100 companies that had stock prices at $100+ per share went belly-up.  This melt-up is even worse because every COUNTRY is racing each other to the bottom.  Recorded history has never seen zero or negative interest rates, and words like ‘new paradigm’ are being used again.

Just last week some very smart people were calling for a market crash by the end of 2015:
-       Gerald Celente of Trends Journal and Bo Polny said on Oct14th: “Heading into November cycles suggest a massive crash taking us down as much as 70% is possible.”
-       Graeme Irvine suggested:  “For better or worse, there is a massive sea change underway in global politics.  An unprepared voting public is desperate, disillusioned, and mostly unaware of the cause of the decline in their lifestyle.  Stay long physical gold and silver. Globally we seem, to have run out of road and talent.”
-       Nomura's Bob Janjuah remarked:  “I did not expect such a strong upside move in response to such bad data!  I would not be surprised to see attempts to recapture the highs of the year if the 2020 level holds.  And a weekly close in the S&P below 1970 would put 1820 and the low-1700’s back on the radar.”

Every tick of this market is now being managed by the Central banksters.  I know it sounds James Bond’ish, but on a daily basis I’m seeing "Unidentified" accounts buying tens of millions of index futures JUST when a market is starting to sag.  

Right now we have a ton of fund managers ‘chasing returns’ because they need their year-end bonuses, and have terrible performance year-to-date.  We have Central banksters who know that their economies are on the ropes.  This is a bad earnings season, with most big banks missing both their top and bottom lines.  One common theme (however) is a lower forecast.  Some forecasts have been lowered based on the dollar and world trade, others have been on contracting sales growth.  It’s the sales (top-line) story that’s important to me because it is where the ‘rubber meets the road’.  With today’s accounting practices, bottom lines can become distorted.  For me, I would always rather see top-line growth in revenue, even if bottom line profits shrink.  Share buy-backs, lowered forecasts, a weak job market, and a strong dollar (disinflationary) environment – are all reasons that our FED will NOT be raising rates any time soon.

I’m watching the Russell (RUT) Small-Cap Index.  Currently it has been unable to rise above the 1180 area, and this tells me that the general market order flow is not really buying into this rally – yet.  The Russell has been in a bear market since July, and we have not had any higher highs.  Getting above 1180 on good volume is key to proving that money is flowing back into the market as a whole.  If the Russell has problems moving higher and revisits the 1140 area, then I think we could see selling pressure across all of the other indices.

I am still leaning toward this rally ‘petering out’ and sliding downhill.  I know that means doing battle with the strongest time of the year, fund managers that are desperate for returns, and Central banksters that want things to go up.  I get all that.  But I think they lack the fuel to keep it going.  Time (obviously) will tell.

So on one side of the ledger we have: (a) funds are down for the year and desperate, (b) we're entering the strongest period of the year, (c) we've had a 10% correction, (d) the technicals have improved, and (e) rate hikes are now a myth – unless the FED decides to crash the market.  On the other side of the ledger we have: (a) the real economy is in the toilet, (b) the world economy is in recession, (c) zero rates have perverted everything, (d) debt has increased dramatically, (e) earnings are lousy, (f) world currency wars are raging, (g) over a hundred million are NOT in the labor force, (h) record numbers are on welfare, and (i) top-line revenue misses have become the norm.

Of course this rally is based on easy money, not strong earnings or a strong economy.  Remember correlation is NOT causation.  The market is not a measure of the economy, nor is the market a measure of the business fundamentals.  We are in a midst of declining revenue and sales forecasts, yet we are in the middle of a stock market rally.  This is a FED-induced rally.  Don’t fight the Fed.  But don’t get fooled into believing it is anything other than what it is.  People get hurt when bubbles burst, but get destroyed when they don’t know WHY or HOW the bubbles were created.


TIPS:

RUT 1165:     If we can break above 1180 and close above it, it might signal the end of the bear market that has been with us since June.  We could have a FED-fueled rally into year-end.  Not a Santa Claus rally, but rather a FED rally.  If the Fed starts talking or hinting at easy money policies – we could move higher.  If they actually launch another easy money program – we could rocket higher.

Now, if the FED actually launches an easy money program – look at the precious metals and the miners.  The bulk of them are so beaten down, that even if they went out of business – the most you could lose is $2 or $3.  AUY is $2.52, GFI is $2.89, EGO is $4.09, and IAG is $2.11.  But the most attractive part of the mining space is that they have options.  With their stocks being so inexpensive, you can buy a 1 year + 3 month option on many of these stocks for pennies.  Take IAG for example: the January 2017 $1.50 call options are going for around $0.85.  That means you have the right to buy IAG for $1.50/share all the way out to the 3rd Friday of January 2017.  If our FED introduces a program to devalue the dollar – then silver is back up to $25/ounce and IAG is back to $5.

I’m still light – but buying more and more of the miners and FFMGF:
-       AG – BOUGHT Stock @ $3.58 / and Jan, 2018 $2 Calls @ $2.30
-       AUY – BOUGHT Stock @ $2.50 / and Jan, 2017 $2 Calls @ $0.90
-       EGO – BOUGHT Stock @ $4.00 / and Jan, 2017 $3.50 Calls @ $1.10
-       GFI – BOUGHT Stock @ $2.80 / and Jan, 2017 $2.50 Calls @ $0.90
-       IAG – BOUGHT Stock @ $2 / and Jan, 2017 $1.50 Calls @ $0.85
-       FFMGF – BOUGHT Stock @ $0.33
-       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


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

<http://rfcfinancialnews.blogspot.com>