RF's Financial News

Sunday, July 10, 2016

This Week in Barrons - 7-10-2016

This Week in Barrons – 7-10-2016:

“Who’s the banana republic now?” … Bernie Sanders

Mr. Comey (Director of the FBI):

Welcome to Amerika – the next banana republic. Amerika used to be a place where you’d get a fair shake, a trial, and where your financial or power ranking made no difference. On July 5^th 2016, that all formally changed because you (Mr. Comey) told us that it was okay when ‘some people’ break the law.

Factually, Mr. Comey:

- Hillary said under oath, many times that there were NO classified e-mails on her servers. BUT according to you: “From the group of 30,000 e-mails returned to the State Department, 110 e-mails in 52 e-mail chains have been determined to contain classified information at the time they were sent or received. Eight of those chains contained information that was Top Secret at the time they were sent; 36 chains contained Secret information at the time; and eight contained Confidential information.” I guess Hillary lied.

- Hillary also said (under oath) that she had turned over ALL of the e-mails. BUT according to you: “We also discovered several thousand work-related e-mails that were not in the group of 30,000 that were returned by Secretary Clinton. We found those additional e-mails in a variety of ways. With respect to the thousands of e-mails we found that were not among those produced to State, agencies have concluded that three of those were classified at the time they were sent or received, one at the Secret level and two at the Confidential level.” I guess Hillary lied – again.

- Then you went on to say: “There is evidence that Secretary Clinton was extremely careless in her handling of very sensitive, highly classified information. She also used her personal e-mail extensively while outside the United States, including sending and receiving work-related e-mails in the territory of sophisticated adversaries. Given that combination of factors, we assess it is possible that hostile actors gained access to Secretary Clinton's e-mail account.”

Mr. Comey, let me get this straight:

- Hillary said (under oath) that there were NO classified emails on her servers, but you found 110 of them.

- Hillary said (under oath) that she had given the FBI ALL of her emails, but you found 2,000 additional emails.

- You said that it was very possible that people hostile to the U.S. hacked into her personal email account, and saw all 110 classified emails.

- And although you found evidence of violations of statues regarding the handling of classified information, your judgment was to bring NO CHARGES against her. You did this fully knowing that EVERY Amerikan with a single firing brain cell would say: "Are you kidding me? Most people would be crucified for much less.”

- You then went on to say: “To be clear, this is not to suggest that in similar circumstances, a person who engaged in this activity would face no consequences. To the contrary, those individuals are often subject to security or administrative sanctions.”

OMG. So yes she’s guilty, but because she's #Crooked Hillary, you were instructed to look the other way. The excuse that you’re using is that she exhibited gross negligence surrounding the highest level of state secrets, but did so in such an offhand fashion that she shouldn’t be prosecuted. So Mr. Comey this begs the question: If she's so careless that she might have let Russians, Chinese, and Ukrainians hack her emails containing state secrets – Is she truly FIT to run this country?

Honestly, I don't believe it had anything to do with being extremely careless or grossly negligent. I think #Crooked Hillary figured that by having control over her own private email server, no one would be able to find the shady deals she was doing through the Clinton Foundation – because private email servers are NOT subject to Freedom of Information requests.

Mr. Comey if this was you or I – we’d be rotting in Guantanamo for the rest of our lives. But this is #Crooked Hillary and she gets a pass because the whole political process is corrupt. And people wonder why Donald Trump is doing so well. It’s such a breath of fresh air when Mr. Trump comes on TV and tells us: “The whole process is rigged!" – and he was proven right once again on July 5^th.

Mr. Comey, both Hillary and Bill Clinton have looked into the cameras and have sworn on a stack of Bibles: "I did not have, receive or send classified email from my private server." But on July 5^th you confirmed just the opposite. I think the worst thing about being lied to, is knowing that you’re not worthy of being told the truth. Mr. Comey, if you’re wondering why Dallas happened, you need look no further than your July 5^th ruling because: “Mistrust is the sure forerunner of hatred” … Margaret of Valois.

I'm ashamed of what Amerika has become. Welcome to Amerika – land of the free and home of the brave – as long as your last name is Clinton. The first casualty of any war is truth, and it is most often killed long before the first shots are fired.

The Market:

In the grand scheme of things, equity market internals are precariously balanced and unfortunately deteriorating.

- Global currency wars continue. BrExit has led to a 31-year low in the British Pound, and 40% of the world’s bonds have negative yields. These currency wars are having pronounced effects on corporate earnings and domestic unrest.

- Global yields have accelerated downward. Corporations are embracing financial engineering and M&A over capital investments.

- Real assets like gold, real estate, and collectibles are inflating.

- Interest Rates remain the #1 variable. Low inflation and GDP growth means that interest rates will remain lower for longer.

Earnings are a clear function of low global GDP growth.  Earnings estimates are being revised downward for the 4^th consecutive quarter, and revenue estimates are fairing even worse.

- Investor psychology NOT fundamentals are driving PE (price to earnings) ratios. TINA (there is no alternative) has resulted in grossly inflated PE’s and valuations.

U.S. economic growth continues to muddle along at a sub-2% rate, and President Obama will have the distinction of being the first President in history (240 years) to never have at least one year of 3% GDP growth. Corporate earnings have now fallen for four consecutive quarters. Precious metals (the hottest market on the planet) continue to be in a bull market. JLA is looking for an additional $300 to $400 move to $1,700 per ounce by the end of this year. Many economists have gone back to the original Bretton Woods calculation – and using that same formula – have predicted the fair value for gold to be over $5,000 per ounce. And finally, negative rates punish all savers, pension plans and insurance companies, while rewarding debtors in the belief that zero or negative rates foster growth. Negative rates do NOT foster growth but rather force risk taking and the overvaluation of nearly all assets. Lower rates:

- Increase the value of a corporation’s discounted cash flows – forcing stock prices higher.

- But lower rates often mean lower earnings. Negative rates are demonstrating that there is a limit to how much lower rates actually stimulate growth, and there may be a tipping point where lower rates actually suppress growth.

On Friday, we ended the day with the S&P just a couple points shy of a new all time high. The reason for such a massive move was Friday’s Non-Farm Payroll report. According to the talking heads, we gained 287,000 jobs in June. But did we really create 287K jobs in June, after only creating 11,000 in May? When you examine the report:

- The BLS's ‘Birth/Death Model’ added 92K (fake) jobs to the report – lowering the total to 195K.

- 44K of those jobs were Verizon workers returning from being on strike – lowering the total to 151K.

- And then we find that 90% of the remaining job gains went to people working part-time and 55 years old or over. Can you say: “Welcome to Wal-Mart”?

- So we created 15K real jobs in June – which is consistent with the 11K we created in May.

Are we going to see new highs? It sure looks like it. If we close over 2130, can we just buy into it and hope for more? I think we can if order flow by the Central Banks is with us. However, we’re in a really bizarre time. If we break out over 2130, I wouldn't be terribly fast to jump on that trade because the possibility of a head fake is high. Please be careful out there!

TIPS:

Currently the actual movement of the market is higher than what implied volatility is pricing. That means in the short term – you should be buying directionally biased trades rather than selling spreads for premium purposes. I think the market is dramatically underpricing volatility, and therefore you can’t make much money ‘selling’ undervalued products.

The trades I like in this market continue to be in the precious metals arena. I’m keeping it fairly simple by being:

- Long various mining stocks and their respective call options: AG, AUY, CDE, FFMGF, FSM, NGD, PAAS, and PGLC, and

- Long Gold (GLD) and Silver (SLV).

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!

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Sunday, July 3, 2016

This Week in Barrons - 7-3-2016

This Week in Barrons – 7-3-2016:

“Half the world is redoing their kitchens, the other half is starving” … Don DeLillo

Thoughts:

Yeah, it’s the 4^th of July weekend – our Independence Day. 240 years ago we wanted to do things our way, and not be told by an oppressive government how to live our lives. Well, last Thursday the British brought out the ‘American’ in themselves and told their masters in Brussels that they were tired of being ruled, taxed, and led around by the nose by faceless elitists in a far away land. Funny isn't it? 240 years after we told England to ‘get lost’, the English told the EU to ‘get lost’. Donald Trump in his Independence Day message is asking people to break away from crooked politicians, and reminding everyone that: (a) We did not go from being the world’s biggest creditor to the world’s biggest debtor by accident, and (b) Our middle class system did not turn into The Have’s versus The Have-Not’s without leadership and guidance.

Our independence is being challenged economically, and thanks to ES for bringing many negative (‘Less-Than-Zero’) indicators to my attention:

- Currencies year-to-date (YTD): India (-1.9%), China (-2.2%), US (-2.5%), and UK (-9.7%)

- Equity Markets (YTD): NASDAQ (-3.3%), Euro (-9.8%), Shanghai (-17.2%), and Japan (-18.2%),

- $15T = current amount of NEGATIVE yielding government bonds,

- $700B = current (YTD) outflows from European bond funds,

- $525B = current (YTD) deals stopped by U.S. regulators,

- $4T = current (YTD) debt U.S. corporations have accumulated for stock buybacks – pushing business capital expenditure to a 6-year low,

- 0.2% = current annual DECLINE in U.S. productivity for 2016, and

- 71% = the amount of Americans that believe the stock market is rigged.

I worry that the term ‘Less-Than-Zero’ is influencing our ethics as well. I’ll point to this week’s Supreme Court ruling to overturn the Governor of Virginia’s conviction. Bob McDonnell was elected Governor of Virginia in 2010. In January of 2014, Bob and his wife Maureen were indicted on federal corruption charges for receiving improper gifts and loans from a Virginian businessman. A federal jury convicted them on almost all of the counts on September 4, 2014. On January 6, 2015, Bob and Maureen were sentenced to two years in prison, followed by two years of supervised release. The Supreme Court took up his appeal on the grounds as to whether it was ‘legal’ for Politicians to take bribes, and then repay those bribes with favors from their appropriate political office. Everyone would normally answer this with: ‘Heck No’. BUT this week the Supreme Court overturned the governor’s ruling, and held that although the Governor and his aides took actions, with state resources, and on behalf of the business that bribed them – those actions did not go FAR ENOUGH to constitute 'official actions'. The Supreme Court essentially just told elected officials that they are free to sell access to their office to the highest bidder. Scott Nelson said: “This ruling opens the way for wealthy individuals to undermine our democracy by buying influence at the highest levels."

Why did our Supreme Court rule like they did and when they did? That answer is easy = HILLARY. There are direct links between Hillary – her foundation being given millions, and then those very nations getting special deals, especially out of the State Department. This ruling lays precedent for her e-mail server and other misgivings not going FAR ENOUGH to constitute ‘official actions’. And taking it one step further, I now realize why Justice Scalia died. Justice Antonin Scalia would not have overturned the McDonnell case. Justice Scalia would NEVER have passed a blind eye to bribery. Consider the questions the Washington Post raised on February 10^th after his death: "You have a Supreme Court Justice who died, not in attendance of a physician. You have a non-homicide trained US Marshal telling the Justice of the Peace that no foul play was observed. You have a Justice of the Peace pronouncing death while: (a) not being on the scene, (b) not having any medical training, and (c) declaring that the justice died of a heart attack. What medical proof exists of a myocardial Infarction? Why not a cerebral hemorrhage? How can a US Marshal say, without a thorough post mortem, that he was not injected with an illegal substance that would simulate a heart attack? Did the US Marshal check for petechial hemorrhage in his eyes or under his lips that would have suggested suffocation? Did the US Marshal smell his breath for any unusual odor that might suggest poisoning? I think there is something fishy going on in Texas."

The folks that took it upon themselves to break free from England were determined to establish a new nation – a nation of freedom and laws. For those of us that believe we’ve lost some of our freedoms – I agree with that thought. But a lot of brave people fought and gave their lives for a shot at a new nation, a nation unlike any other, and for that I will give thanks for their actions. I applaud the spirit those folks had so many years ago. If you forget why we celebrate the 4^th of July, the following short clip by Mark Dice should bring a smile to your face as well as remind you: https://www.youtube.com/watch?v=2-Be9f7Ovgg

The Market:

“There are only two sure things: the infinite universe and human stupidity, and I’m not sure about the first one”… Albert Einstein

After talking to many of my friends in London, they all thought that BrExit NOT passing was a ‘sure thing’. Even Nigel Farage (the leader of the BrExit Party) after the polls had closed thought that it was a ‘sure thing’ that BrExit had LOST. Many people recently thought that gun control was a ‘sure thing’ (especially after Orlando). Most recently MSNBC (a liberal, left leaning website) ran a poll asking: "Do you believe people should be allowed to carry guns in public? Please chose from the following answers: (1) Yes – the Second Amendment guarantees it, (2) No – it’s too dangerous, and (3) Yes – but only for self-defense.” The voting results were: (1) = 449,000, (2) = 19,000, and (3) = 18,000. From this it appears that people are NOT worried about law-abiding citizens carrying weapons. And finally, everyone thinks that Hillary’s win in November is a ‘sure thing’. Her husband even met with the U.S. Attorney General on Air Force 1 this week – to seal-the-deal and to get this ‘email server thing’ taken care of.

A ‘sure thing’ is something that everybody knows in theory, but is forgotten far too many times in practice. Many ‘sure things’ DO come true. Back on Tuesday of this week (the day after the 850-point BrExit crash) the FED gave the green light to 31 banks to begin buying back their own stock again. This freed up billions in reserves that could now be used to bail out the sagging markets, and sure enough – stocks went up. Isn’t it humorous how our banks can’t seem to make money writing loans, but they have money to buy their own stock and run it up in price. Some of those announced buybacks are: (a) Bank of America = $5B, (b) Citigroup = $8.6B, (c) JP Morgan Chase = $10.6B, (d) Morgan Stanley = $3.5B, (e) American Express = $3.3B, (f) SunTrust = $960m, (g) U.S. Bancorp = $2.6B, (h) Ally Financial = $700m, (i) M&T Bank = $1.15B, (j) PNC = $2B, (k) BNY Mellon = $2.7B, (l) State Street = $1.4B, (m) Bank of New York = $2.14B, and (n) Discover Financial = $1.95B.

Global Central Banks only have two choices: (a) pull-the-plug and let the global economies crash, or (b) drag the stock market up at any cost because they’re not quite ready to let it crash and press the ‘reset’ button. So after the BrExit crash, the Central Banks engineered a complete ‘stick-save’ of the market, and we're back to where we were before the 850-point BrExit crash. Now they will back off a bit and let the market forces pull and push around the 2100 - 2130 level on the S&P. But behind the scenes:

- Silver and gold are moving higher, while

- The 30-year and 10-year treasury bonds are hitting ALL-TIME LOWS.

The bond market and the monetary metals markets understand the grand illusion that is being played out.

The FED’s plan was simple – save the market from rolling over. The timing for announcing the ‘all is perfect’ signal on the bank stress tests was spot-on. Our FED knew BrExit would cause a mess, and the two ways to get the market moving were to boost oil prices and boost the financials. After all, the financials are the single largest component of the market.

We are in some form of end game with the ONLY unknown being: "How long does it take?" I know that we are hurtling towards something major, something that many times I've called a ‘reset’. This week, I think we will see stocks move sideways and down for the next few days. This most recent run up was just too fast, too far – and some of that froth will need to be worked off with profit taking.

TIPS:

I've pounded the table for a long time about the precious metals being the ONLY legitimate place to be. I've also pounded the table on physical ownership of the precious metals. I laid out a play back in November using AG (a silver miner) and $19,000. As of Friday's close, silver is over $19/ounce level and that original $19,000 is now worth $192,000. Congrats to those of you that are in that play with me.

There are also some additional ‘dislocations’ in the metals that I haven’t seen in many years. For example: on the COMEX registers, the amount of people ‘standing for metal delivery’ in July, dwarf the amount of metal available to be delivered. So either a lot of those wanting delivery need to stand down and roll out, or the COMEX is going to default and require a cash settlement since they simply don't have the metal to cover the deliveries. So it’s left unsaid that I’m not the only person pounding the table on the precious metals and on physical delivery.

Some other low-cost precious metals stocks to consider:

- Auryn Resources (OTC: GGTCF) is a junior mining exploration company that engages in the acquisition, exploration and development of resource properties including the Committee Bay Gold Project, which covers almost 160,500 acres in Nunavut, Canada.

- Miranda Gold (OTC: MRDDF) is an exploration stage company that identifies, acquires and develops mineral properties, primarily exploring for gold. It includes Columbia with Pavo Real, which covers about 44,479 square acres in Tolima; and Oribella, which covers around 26,440 square acres in Antioquia.

- Pershing Gold (Nasdaq: PGLC) engages in the exploration, development and mining of precious metals, primarily in Nevada. It focuses on the Relief Canyon Mine, which covers an area of approximately 25,000 acres in Pershing County, Nevada.

- AMZN – Buy $780 July 29 Call Options (earnings play so volatility should increase),

- GOOGL – Buy $740 July 29 Calls / + $640 July 29 Puts (earnings play so volatility should increase) AND Buy + 690 July 29 Calls / + 690 July 29 Puts – Google will need to move more than $50.

- AZO – Buy $810 July monthly Call Options (see if we can get to all time highs), and

- POST – July monthly – 75 Calls – high short interest

I had a great week last week, and am keeping it fairly simple by being:

- Long various mining stocks and their respective call options: AG, AUY, CDE, FFMGF, FSM, NGD, and PAAS, and

- Long Gold and Silver with GLD and SLV.