This Week in Barrons - 6-12-2016

This Week in Barrons – 6-12-2016:

“’You're like Jesus, if he was arrogant and all of his miracles were fake… I'm just trying to create a space for wisdom.” … Merritt McKinney - Now You See Me 2

Thoughts:

Recently I saw the movie ‘Now You See Me 2’ and it dawned on me that society is making the individual, global FED players ‘rock stars’, only all of them are “arrogant and all of their miracles are fake”.  We are doing this at the expense of the actual markets, and the companies within them.  The stars are now: Janet Yellen, Mario Draghi, Haruhiko Kuroda, Zhou Xiaochuan, and Mark Carney of the United States, Europe, Japan, China, and England respectively.  Unfortunately, over the last decade the FED heads have decided that it was their ‘obligation’ to decide the winners and losers.  The losers would be the savers, pension funds, and insurance funds that have seen interest rates plummet.  The winners are every corporation that has even the slightest political intention.  Nobody realized that by manipulating interest rates, you would effectively manipulate everything.  In fact by pushing interest rates negative, you force ‘savers’ to increase their risk tolerance and enter the stock market.  Instead of ”trying to create a space for wisdom”, investment decisions are being made on guessing what the various FED heads will do next.

The Bank of Japan (after introducing negative interest rates) is now actively purchasing Japanese stocks.  They are now a top ten shareholder in 90% of the stocks traded in Japan.  Not to be outdone, the European Central Bank (ECB) has also moved on from negative interest rates and is purchasing corporate bonds.  This means (for example) that the citizens of the EU are actually funding the Bayer acquisition of Monsanto.  Bayer (in an effort to accumulate the funds necessary to purchase Monsanto) sold billions of dollars of Bayer corporate bonds.  The ECB then printed the appropriate amount of money, and immediately bought the bonds from Bayer.  Therefore, Bayer just received billions of dollars to buy Monsanto directly from the ECB.  If you were Bayer, you never had to increase sales, or change any business practices.  You acquired Monsanto because the ECB printed money out of thin air and gave it to you.  There is no precedent for that amount of FED head authority or intervention.

We’ve never seen anything like it.  Switzerland, China, Japan, and the European Central bank all admit to buying stocks.  Corporate earnings could go to zero, and stocks in these areas would still rise just as long as they are being purchased by money that is simply printed into existence, instead of money that has been earned and saved.  This type of FED head action is being termed the ‘Hidden Hand’. 

Marc Faber of the ‘Gloom, Boom and Doom Report’ said: “Central banks are only interested in their own prestige.  If a particular element did NOT work in the past, they will do it again and increase the dosage.  Eventually, (for example) they will buy all the bonds, and all the shares outstanding.  And when the housing market goes down, they will buy all the homes – and then the government will own everything."

I have no idea when or how this all ends, though I'm fairly certain that it won't be pretty.  The crazy thing about these FED heads is that they are all academics that have never worked a day in their lives.  However, their game is not without risk.  Goldman Sachs estimates that a 1% increase in U.S. Treasury yields would trigger over $1 trillion in losses – exceeding all of the losses from the last financial crisis.  I believe that gold and other hard assets will be the spectacular winners of this manipulation.  George Soros and other semi-retired investors have also voiced their opinions on the side of buying gold and gold miners.  So far this year the Gold Miners (GDX) are up 90% as compared to a 3% increase in the S&P.

To that end I would like to recommend a FREE precious metals seminar taking place on the 16^th, 17^th, and 18^th of this month.  It’s a collection of 20 interviews from the how’s and why’s of buying precious metals, to identifying fakes and frauds, and even touching on where to ‘hide’ them.  This online seminar is FREE to listen to, and is $20 to purchase the podcast.  It only requires a first name and e-mail to enter and you can review the speaker list and content at: http://cdi.ontraport.net/t?orid=98572&opid=55.  I have it on excellent authority that it will be the best, free education you will ever get on the precious metals.

The Market:

Factually:

-       China’s financial defaults are rising significantly,

-       Another $2B left the market last week – making it 10 out of the last 12 weeks where money has been fleeing the stock market.

-       The amount of global sovereign debt with negative yields surpassed $10 trillion for the first time in May.  It is spread across 14 countries, with Japan by far the largest source of negative-yielding bonds.

-       Businesses accumulated debt in the 1^st Quarter of 2016 at the fastest pace in three quarters.  Business debt grew at a blistering 7.9%, and has expanded by almost 8% in three of the last five quarters.

-       Household debt grew at a much slower 2.7% pace, with student and auto debt leading the way and credit card debt growing by 6.1%.  Mortgage debt grew at the slowest pace of 1.6%.

-       DS informs me that for the past 54 consecutive months, rent increases have exceeded pay increases.  This is crushing seniors and the lower middle class as in many cases – they are spending 40% of their income on rent.

If you listen to the market carefully you can almost hear the creaks and groans.  The distortions from so much pushing and pulling on a market that clearly doesn't belong at these levels, are causing all kinds of problems.  In the middle of the week, the DOW and the S&P were trying to ‘fade lower’, but that ‘Hidden Hand’ kept powering them back up.  On Friday, the ‘Hidden Hand’ showed up in the final hour to take us off the lows, but the DOW ended down 119 points and the S&P lost 20.  

One of the issues that hit on Friday was that a new poll in the UK showed 55% of the respondents are leaning toward a ‘BrExit’, or (in other words) leaning toward having the UK leave the European Union.  The Global Elites definitely don't want any part of that because it would trigger other nations following suit.  And this is where their ‘one world government’ plot would start to dissolve in the test tube.

A theory that surfaced on the back of the BrExit poll concerned the FED meeting this week.  The FED has a scheduled meeting focused on interest rates on Tuesday and Wednesday of this week.  Currently, the market is giving the FED a ZERO chance of doing a rate hike.  But if our FED had inside knowledge that the UK was indeed going to BrExit (leave the EU), then it could freely raise interest rates and blame the market’s behavior (falling) on Britain.  I'm not saying that is what's going to happen, but rather a rumor circulating around the trading floor. 

On the downside of things, the S&P has to hold 2085, or we are going to the 50-day moving average at 2076, and then to 2065.  On the upside, if we can gain back all of Friday’s loses and see the market over 2109, then we could see them try and pull off another run at the old highs. 

Remember, this week we have the FED meeting and ‘triple witching’ on Friday.  After that, we have an upcoming vote on BrExit.  Hang onto your hats, as all heck could break loose over the next two weeks.

TIPS: 

I would look at some of the silver miners whose profit per ounce of silver is moving higher.  The ones that I see that have a relatively low cash cost of mining an ounce of silver from the ground and are increasing their profit margins are:

-       Fortuna Silver Mines (FSM),

-       Avino Silver & Gold Mines (ASM),

-       First Majestic Silver (AG), and

-       Hecla Mining (HL).

Avino, First Majestic and Hecla Mining each produced an ounce of silver at about  $5 per ounce, in the first quarter of this year.  Fortuna (FSM) produced at same ounce for $1.44.

I am:

-       Long various mining stocks: AG, AUY, CDE, FFMGF, FSM, NGD, and PAAS,

-       And Long an oil supplier: REN.

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts aand 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 - 6-5-2016

This Week in Barrons – 6-5-2016:

“I am The Greatest.” … Muhammad Ali (passed away at the age of 74)

Thoughts:

Few people in my lifetime have called themselves “The Greatest,” and have gone on to prove it to the world.  Muhammad Ali won boxing’s heavyweight title three times in his 21-year career.  But it was his life outside of the ring that inspired adjectives such as: pretty, badass, fast, loud and brash.  He openly attacked American racism at a time when he was expected only to say thank you and keep quiet.  He joined the Nation of Islam at a time when the FBI labeled them a dangerous cult bent on destroying America.  He challenged the legitimacy of the Vietnam War, refused to enlist, committed an act of civil disobedience, and was suspended from boxing for more than three years.  But Ali’s greatest trick may have been his transformation – from one of the nation’s most reviled characters to one of its most beloved.  Born Cassius Clay Jr. in 1942, he was the son of a sign painter and a domestic worker – his grandfather a convicted murderer and his great-grandfather a slave.  Cassius Clay had dyslexia and struggled to read the printed word.  He discovered his talent for boxing by accident when his bicycle was stolen, and the rest is history.

Just imagine living through:

-       Seeing the U.S. go from being #1: to #11 in 4^th grade Math, #13 in GDP per capita, #23 in PISA science scores, and #24 in Literacy.

-       And seeing the U.S. go from being #1 at LOANING money to the rest of the world; to #1 at OWING money to the rest of the world.

He (like a lot of us) lived through:

-       Having his baby crib painted with lead-based paint,

-       Having NO childproof lids on medicine bottles, wearing NO helmets while riding our bikes,

-       Hitchhiking, and riding in the back of a open pick-up truck on a warm day,

-       Drinking water from a garden hose,

-       Sharing a soft drink (in one bottle) with lots of friends,

-       Falling out of trees, getting cut, breaking bones – all without a single lawsuit,

-       Having team tryouts and not everyone making the team,

-       And playing sports and NOT everyone getting a medal.

Muhammad (even at his most subversive) spoke with a twinkle in his eye, in poetic verse, and always eager to please and torment simultaneously.  I remember him saying: “He who is not courageous enough to take risks, will accomplish nothing in life.”  Muhammad Ali was the most fearless, political, and radical athlete that ever lived.  He was a man of strong principles and convictions that never shied away from letting anyone know what he thought, even if it made him unpopular.  It's impossible to overstate the impact Ali had on the world.  He began his life as Cassius Clay, winning an Olympic gold medal in 1960 before becoming the man everyone would grow to know and love.  His role outside of boxing remained huge even after his career ended, as he helped to secure the release of 15 hostages in Iraq in 1990.  Ali was the kind of talent who comes along only once in a lifetime (if you're lucky), and one whose legacy will last forever.  "Float like a butterfly and sting like a bee, his hands can't hit what his eyes can't see."  Muhammad Ali – may you Rest In Peace.

The Market:

There is a clear downward trend in JOBS – starting in October of 2015.

Factually, what can you say about last week’s action in the stock market?  We received May’s Nonfarm Payrolls Jobs Report – and it wasn’t pretty.

-       We saw the worst job growth in 6 years.  We added only 38K jobs (versus an expected 160K) with the prior 2 months also being reduced by 59k.

-       The FED’s Birth/Death model added 224,000 ‘fictitious’ jobs to that 38K reading.  Therefore, by removing that distortion, we actually LOST 180K jobs in May.

-       The unemployment rate slipped to 4.7% from 5%, but only because more Americans (664K) left the labor force.  A staggering 94.7M people are no longer in the workforce, causing the participation rate to fall to 62.6% (the lowest since 1977).

-       Part-time workers for economic reasons increased by 468K.  That means either: (a) there were NO full time jobs available, and people needed anything they could get, or (b) they were making so little money at their first job, they needed another job to make-ends-meet.

-       New York's Purchasing Manager’s Survey collapsed to the lowest reading since April 2009,

-       China's PMI's slipped lower, and U.S. mortgage applications fell,

-       GM sales fell 16%, Ford fell 5%, with the average auto loan topping 7 years and over $500 in monthly payment for the first time in history.

-       Manufacturing performance was the weakest in over 6.5 years,

-       The Chicago Purchasing Manager’s Index showed a contraction,

-       S&P 500 1^st Quarter earnings declined for the 4^th straight quarter, and more sharply than in any quarter since 2009,

-       Preliminary 1^st Quarter Productivity declined 1%,

-       The dollar plunged, while safe-haven related investments such as bonds and gold jumped higher,

-       But stocks ended down only slightly on the day.

This should put to bed any thoughts that our stock market is a ‘free market’ that reacts to ‘fundamentals’.  With the worst jobs report since September of 2010, we should be looking at the beginning of a crash, but we aren't because the FED is holding the market up.  The low rates continue to fund share buybacks and mergers & acquisitions activity.  But earnings have now declined for three straight quarters and the economic data certainly hasn’t provided the results the FED had been hoping for.

If I'm right and the market is being held up artificially, so that J.Q. Public thinks that all is well in the world, why not just go all in (100% invested) and take the ride?  After all:

-       The Swiss National Bank has purchased $14B worth of U.S. stocks in the first quarter alone.

-       The Bank of Japan is buying $Billions of U.S. stocks.

-       The ECB is printing $85B a month, and is now buying Corporate Debt.

-       Economic reports continue to deteriorate, big brands have gone bankrupt, the oil industry has experienced 121 bankruptcies, and we’ve seen weak durable goods orders, and falling earnings – HOWEVER, we are just 2% from all time highs.

I believe the market is up for 2 reasons: (a) to give the illusion that the economy is strong, as most people still believe that the DOW is a reflection of the economy.  And (b) that there are so many current derivatives that use equities as collateral, if the FED allowed the markets to fall it would cripple our economy.  

I also believe there are 2 reasons why you might NOT want to be 100% long in this market: (a) The FED has tried all of their tricks and they are now desperate.  What if they just loose control (circa 2007)?  And (b) what if they’re just holding it up long enough to get a reconstruction plan in place to pick up the pieces (potentially with The Donald at the helm), and then just allow it to crash?

I remember November of 2007 – the market was at an all time high and Jim Cramer was on CNBC screaming “Buy-Buy-Buy”.  The FED’s Ben Bernanke was saying: “There is zero chance of any major economic event.”  Yet a few months later we came into the worst stock market crash since the 30's.

What if we're in the same situation?  What if they press the ‘reset’ button?  What if (despite their best efforts) market forces simply overwhelm the FED?  After all markets generally rise for a long time, and then they ‘snap’.  We are 8 years into this run, and they’ve tossed the kitchen sink at it to keep it going.  If you think that they can pull it off – go for it and go 100% long.  I (on the other hand) think that reality always wins, and we will get another ‘snap’.  I’m considering buying more physical gold and silver, and investing more in Bitcoin.

It’s scary to think that the FED has raised rates only once in the past 10 years, despite unemployment dropping well below their mandated 5% and inflation ticking higher.  If oil keeps rising, then the Fed will have rising inflation to deal with as well.  Due to the Jobs Report, the odds of a June rate hike have dropped from 30% to 4%.  I think the most amazing part of the whole ordeal was that Friday’s market closed right at S&P 2100 – a level they've been flirting with for months.  No mater how big the intraday dip, they always seem to find a way back to 2100.

So the question is, what now?  You can see that the FED is trying to push us higher, and that remaining flat is the 2^nd best thing.  The charts tell me that putting in a close under 2085 on the S&P would trigger more selling, and closing above 2105 would trigger more buying and requiring them to challenge the all-time-highs.

We live in perilous times.  Please be safe out there.

TIPS:

Is the next ‘gimmick’ for our FED going to be Negative Interest Rates?

SF wrote me pointing out that in the 2008 financial crisis – 34% of working age individuals were without work, and today 37% are not working.  Over the next several weeks I’m going to try to find the actual number of hours worked from 2008 to 2016 per sector.  The goal is to understand whether these ‘new jobs created’ have actually contributed to a recovery.  OR have we simply turned one full-time 40-hour/wk. job into several part-time 12-hour/wk. jobs, and we’re calling that a recovery because we now have 3 jobs where previously we only had 1.  I (like SF) am guessing that the real net gain in hours worked is less than what the decline in unemployment would lead us to believe, and (in fact) we may be having NO recovery at all.  If anyone has access to that data (average hours worked per sector between 2008 and 2016) – please let me know, and thank you in advance.

Short Term:

-       The SKEW is at 135, and the 10-day Moving Average of the Put/Call ratio is dropping – both bearish indicators for the upcoming weeks’ indices.

-       Gold and Silver appear bullish.

-       Charts of Goldman Sachs (GS) and J.P. Morgan (JPM) both look bearish.

I am:

-       Long various mining stocks: AG, AUY, CDE, FFMGF, FSM, NGD, and PAAS,

-       And Long an oil supplier: REN.

To follow me on Twitter.com and on StockTwits.com to get my daily thoughts aand 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>