This Week in Barrons – 06_28_09:
Thoughts:
Does anything make sense anymore? Last week - credit card delinquencies another all time high. Now that logically isn’t good – if people are defaulting on their credit cards it must mean they are strapped for cash and desperate. You figure that stocks of "consumer discretionary" companies will take a hit because if consumers are so desperate to default on their credit cards, surely they aren't going out and buying up toys, and gadgets. So, if you shorted some discretionary stocks, you saw them soar on the day. So, what changed? Did the fundamental laws of business, supply and demand, cause and effect, simply vanish?
The reason is really simple. As has happened with just about every developed government – ours has decided to spend more money than they takes in. Our government’s initial attempts were amateurish – the Savings & Loan debacle. Their strategies needed some fine-tuning – but they were well on their way. In the late 90’s the NASDAQ learned how to manipulate IPO's via laddering and "spinning". Then they learned how to manipulate media – and hype the ‘new economy’. Meanwhile Goldman made hundreds of billions presenting companies to the public that had no income, no revenue, often not much more than a business plan. And then made billions more – shorting those same companies that they had just ‘hyped’ and poor ‘Average Joe’ got crushed – losing his life savings.
OK – somehow we needed to get money back into the ‘Average Joe’s’ pockets – so then came the housing bubble. Bankers would make trillions in profits by writing loans and paperwork fees. The government loved it because ‘Average Joe’ would feel rich and buy more – and would bring in more tax dollars. So everyone worked together to pull it off – Greenspan slashed rates to Emergency levels, Bankers jettisoned every known banking rule concerning risk, Corporations ramped up production ahead of the demand for everything from carpets to boats, campers, motorcycles, and cars. Even the ‘Average Joe’ got in on the scam, declaring income he didn't have on so called "liars loans". It was the perfect bubble and everyone was very happy.
But, there's only so far you can take a great bubble, no matter how perfectly executed, and they had to plan for the next move. Pull the Plug on the housing bubble - toss any and all losses on the American taxpayer – and here’s the BEST: Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms. A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products have sent profits at Goldman Sachs soaring!
In the middle of the single worst economic crisis in 80 years, Goldman's employees will get the biggest bonus payouts in their entire history. At the very moment that some 12.5 trillion dollars has been pledged to bail out banks, all being funded by the ‘Average Joe’ - Goldman is getting filthy rich. Now let me ask you: If these institutions are so amazingly smart that they can create record bonuses during the biggest meltdown of our lifetimes, don’t you think they knew that lending money to people with no way to pay it back was probably bad? Didn't it faze them that they really shouldn't have bundled toxic crap with good mortgages and sold it all over the world as AAA investments? Wasn't it a bit shady to insure all that garbage via AIG, putting them at all the risk, and THEN literally going short the very mortgages they sold to the world? Are you kidding me, it was yet another perfectly executed plan to make trillions.
But what about those “Green Shoots”? On Thursday morning the initial jobless claims spiked higher along with continuing jobless claims. Ben Bernanke was getting grilled by Congress over allegations he "told' Ken Lewis of Bank of America to take their deal or he'd be ruined. In other words the FED was on trial for fraud and corruption. What did the market do – it was up 180 points. For those of you who don’t know about the PPT (Plunge Patrol Team) - Uncle Sam created a "team" just after the 1987 Black Monday crash called "the Presidents working group on Financial markets". This outfit was sold to the ‘Average Joe’ as a way to "really" look into the whole economic scene and make sure we could avoid any major and massive mistakes. Honestly – we don’t even know who’s on this panel except for: Ex Treasury Secretary Hank Paulson, Current Secretary Geithner, Fed chief Ben Bernanke, and the chairmen of the SEC and the Commodity Futures Trading Commission (all with ties to Goldman Sachs – but that’s potentially just coincidental!) What they do is buy huge amounts of futures. Futures allow you leverage on that particular stock / sector – but what it mainly does is trigger stock buying of pre programmed baskets of stocks as the computers are trained to buy on specific rises in the futures market. So, buying tons of futures – causes the market to react higher.
So, when the initial jobless claims spiked higher, continuing claims spiked higher and our Fed Head was being grilled on what amounts to fraud and you see the market soar for 180 points, do you think that was because millions of informed investors thought it was a good idea to buy stocks? Ah – but look at the futures buying at 11:41, 11:42 that day – and you’ll have your answer. Sorry, but that's the way it really works in 2009
The single hottest piece of journalism sweeping the nation right now is "The Great American Bubble Machine" written by Matt Taibbi. This article is a well written piece about Goldman Sachs and how they have "caused" and profited from every bubble in the last 100 years, reaping trillions of dollars of profit at the expense of the "everyday American". Matt has done a remarkable job of cataloging exactly how Goldman has fleeced the sheep of America over the years.
The Market:
Now that you know how the market really works, it might be easier for you to understand how we arrive at some of our predictions. So, what happens now? There is one school of thought that says we're going to roll over and be weak all summer, and then run up into the fall. Our view is that because so many feel that way, it probably won't happen. The most unlikely scenario is that they make fools of all those who think that way and simply go higher. With so many people on the "sell in May and go away" train, watching the market move up into earnings season simply makes perfect sense. I don't think it will be smooth, and frankly if we did roll over and plunge it wouldn't surprise me. The only thing keeping it up right now is media BS about green shoots, and the "hidden hand" of the PPT. Yet with Obama's popularity decreasing daily, I'm pretty sure the word has gone out to his henchmen "keep this market up at all costs". Fraud and manipulation say "we need to make the ‘Average Joe’ believe the market is really behind us and the economy is mending." Fraud should win.
With that in mind, we've been looking at some long side plays, since we sold most of our positions for profit during the past two weeks. The big sector rotation from materials into tech is still ongoing, we picked up a tech this week that's up 4% in a couple days and should go for more. But we are looking at more in the tech space, and I think you should too.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o CSCO (Cisco) closing at 18.90, if they were to get up and over 19.20, I think they could have a buck or two in them.
o VMW – needs to get over 30
o STX over 10.35 would be interesting
o QCOM – is looking interesting, after closing at the 46.00 level a few days in a row a while back, they are at 46.19. I wouldn't be against trying some QCOM at the 46.45 level.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, June 28, 2009
This Week in Barrons – 06_21_09:
Thoughts:
Does anything make sense anymore? Last week - credit card delinquencies another all time high. Now that logically isn’t good – if people are defaulting on their credit cards it must mean they are strapped for cash and desperate. You figure that stocks of "consumer discretionary" companies will take a hit because if consumers are so desperate to default on their credit cards, surely they aren't going out and buying up toys, and gadgets. So, if you shorted some discretionary stocks, you saw them soar on the day. So, what changed? Did the fundamental laws of business, supply and demand, cause and effect, simply vanish?
The reason is really simple. As has happened with just about every developed government – ours has decided to spend more money than they takes in. Our government’s initial attempts were amateurish – the Savings & Loan debacle. Their strategies needed some fine-tuning – but they were well on their way. In the late 90’s the NASDAQ learned how to manipulate IPO's via laddering and "spinning". Then they learned how to manipulate media – and hype the ‘new economy’. Meanwhile Goldman made hundreds of billions presenting companies to the public that had no income, no revenue, often not much more than a business plan. And then made billions more – shorting those same companies that they had just ‘hyped’ and poor ‘Average Joe’ got crushed – losing his life savings.
OK – somehow we needed to get money back into the ‘Average Joe’s’ pockets – so then came the housing bubble. Bankers would make trillions in profits by writing loans and paperwork fees. The government loved it because ‘Average Joe’ would feel rich and buy more – and would bring in more tax dollars. So everyone worked together to pull it off – Greenspan slashed rates to Emergency levels, Bankers jettisoned every known banking rule concerning risk, Corporations ramped up production ahead of the demand for everything from carpets to boats, campers, motorcycles, and cars. Even the ‘Average Joe’ got in on the scam, declaring income he didn't have on so called "liars loans". It was the perfect bubble and everyone was very happy.
But, there's only so far you can take a great bubble, no matter how perfectly executed, and they had to plan for the next move. Pull the Plug on the housing bubble - toss any and all losses on the American taxpayer – and here’s the BEST: Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms. A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products have sent profits at Goldman Sachs soaring!
In the middle of the single worst economic crisis in 80 years, Goldman's employees will get the biggest bonus payouts in their entire history. At the very moment that some 12.5 trillion dollars has been pledged to bail out banks, all being funded by the ‘Average Joe’ - Goldman is getting filthy rich. Now let me ask you: If these institutions are so amazingly smart that they can create record bonuses during the biggest meltdown of our lifetimes, don’t you think they knew that lending money to people with no way to pay it back was probably bad? Didn't it faze them that they really shouldn't have bundled toxic crap with good mortgages and sold it all over the world as AAA investments? Wasn't it a bit shady to insure all that garbage via AIG, putting them at all the risk, and THEN literally going short the very mortgages they sold to the world? Are you kidding me, it was yet another perfectly executed plan to make trillions.
But what about those “Green Shoots”? On Thursday morning the initial jobless claims spiked higher along with continuing jobless claims. Ben Bernanke was getting grilled by Congress over allegations he "told' Ken Lewis of Bank of America to take their deal or he'd be ruined. In other words the FED was on trial for fraud and corruption. What did the market do – it was up 180 points. For those of you who don’t know about the PPT (Plunge Patrol Team) - Uncle Sam created a "team" just after the 1987 Black Monday crash called "the Presidents working group on Financial markets". This outfit was sold to the ‘Average Joe’ as a way to "really" look into the whole economic scene and make sure we could avoid any major and massive mistakes. Honestly – we don’t even know who’s on this panel except for: Ex Treasury Secretary Hank Paulson, Current Secretary Geithner, Fed chief Ben Bernanke, and the chairmen of the SEC and the Commodity Futures Trading Commission (all with ties to Goldman Sachs – but that’s potentially just coincidental!) What they do is buy huge amounts of futures. Futures allow you leverage on that particular stock / sector – but what it mainly does is trigger stock buying of pre programmed baskets of stocks as the computers are trained to buy on specific rises in the futures market. So, buying tons of futures – causes the market to react higher.
So, when the initial jobless claims spiked higher, continuing claims spiked higher and our Fed Head was being grilled on what amounts to fraud and you see the market soar for 180 points, do you think that was because millions of informed investors thought it was a good idea to buy stocks? Ah – but look at the futures buying at 11:41, 11:42 that day – and you’ll have your answer. Sorry, but that's the way it really works in 2009
The single hottest piece of journalism sweeping the nation right now is "The Great American Bubble Machine" written by Matt Taibbi. This article is a well written piece about Goldman Sachs and how they have "caused" and profited from every bubble in the last 100 years, reaping trillions of dollars of profit at the expense of the "everyday American". Matt has done a remarkable job of cataloging exactly how Goldman has fleeced the sheep of America over the years.
The Market:
Now that you know how the market really works, it might be easier for you to understand how we arrive at some of our predictions. So, what happens now? There is one school of thought that says we're going to roll over and be weak all summer, and then run up into the fall. Our view is that because so many feel that way, it probably won't happen. The most unlikely scenario is that they make fools of all those who think that way and simply go higher. With so many people on the "sell in May and go away" train, watching the market move up into earnings season simply makes perfect sense. I don't think it will be smooth, and frankly if we did roll over and plunge it wouldn't surprise me. The only thing keeping it up right now is media BS about green shoots, and the "hidden hand" of the PPT. Yet with Obama's popularity decreasing daily, I'm pretty sure the word has gone out to his henchmen "keep this market up at all costs". Fraud and manipulation say "we need to make the ‘Average Joe’ believe the market is really behind us and the economy is mending." Fraud should win.
With that in mind, we've been looking at some long side plays, since we sold most of our positions for profit during the past two weeks. The big sector rotation from materials into tech is still ongoing, we picked up a tech this week that's up 4% in a couple days and should go for more. But we are looking at more in the tech space, and I think you should too.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o CSCO (Cisco) closing at 18.90, if they were to get up and over 19.20, I think they could have a buck or two in them.
o VMW – needs to get over 30
o STX over 10.35 would be interesting
o QCOM – is looking interesting, after closing at the 46.00 level a few days in a row a while back, they are at 46.19. I wouldn't be against trying some QCOM at the 46.45 level.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Thoughts:
Does anything make sense anymore? Last week - credit card delinquencies another all time high. Now that logically isn’t good – if people are defaulting on their credit cards it must mean they are strapped for cash and desperate. You figure that stocks of "consumer discretionary" companies will take a hit because if consumers are so desperate to default on their credit cards, surely they aren't going out and buying up toys, and gadgets. So, if you shorted some discretionary stocks, you saw them soar on the day. So, what changed? Did the fundamental laws of business, supply and demand, cause and effect, simply vanish?
The reason is really simple. As has happened with just about every developed government – ours has decided to spend more money than they takes in. Our government’s initial attempts were amateurish – the Savings & Loan debacle. Their strategies needed some fine-tuning – but they were well on their way. In the late 90’s the NASDAQ learned how to manipulate IPO's via laddering and "spinning". Then they learned how to manipulate media – and hype the ‘new economy’. Meanwhile Goldman made hundreds of billions presenting companies to the public that had no income, no revenue, often not much more than a business plan. And then made billions more – shorting those same companies that they had just ‘hyped’ and poor ‘Average Joe’ got crushed – losing his life savings.
OK – somehow we needed to get money back into the ‘Average Joe’s’ pockets – so then came the housing bubble. Bankers would make trillions in profits by writing loans and paperwork fees. The government loved it because ‘Average Joe’ would feel rich and buy more – and would bring in more tax dollars. So everyone worked together to pull it off – Greenspan slashed rates to Emergency levels, Bankers jettisoned every known banking rule concerning risk, Corporations ramped up production ahead of the demand for everything from carpets to boats, campers, motorcycles, and cars. Even the ‘Average Joe’ got in on the scam, declaring income he didn't have on so called "liars loans". It was the perfect bubble and everyone was very happy.
But, there's only so far you can take a great bubble, no matter how perfectly executed, and they had to plan for the next move. Pull the Plug on the housing bubble - toss any and all losses on the American taxpayer – and here’s the BEST: Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms. A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products have sent profits at Goldman Sachs soaring!
In the middle of the single worst economic crisis in 80 years, Goldman's employees will get the biggest bonus payouts in their entire history. At the very moment that some 12.5 trillion dollars has been pledged to bail out banks, all being funded by the ‘Average Joe’ - Goldman is getting filthy rich. Now let me ask you: If these institutions are so amazingly smart that they can create record bonuses during the biggest meltdown of our lifetimes, don’t you think they knew that lending money to people with no way to pay it back was probably bad? Didn't it faze them that they really shouldn't have bundled toxic crap with good mortgages and sold it all over the world as AAA investments? Wasn't it a bit shady to insure all that garbage via AIG, putting them at all the risk, and THEN literally going short the very mortgages they sold to the world? Are you kidding me, it was yet another perfectly executed plan to make trillions.
But what about those “Green Shoots”? On Thursday morning the initial jobless claims spiked higher along with continuing jobless claims. Ben Bernanke was getting grilled by Congress over allegations he "told' Ken Lewis of Bank of America to take their deal or he'd be ruined. In other words the FED was on trial for fraud and corruption. What did the market do – it was up 180 points. For those of you who don’t know about the PPT (Plunge Patrol Team) - Uncle Sam created a "team" just after the 1987 Black Monday crash called "the Presidents working group on Financial markets". This outfit was sold to the ‘Average Joe’ as a way to "really" look into the whole economic scene and make sure we could avoid any major and massive mistakes. Honestly – we don’t even know who’s on this panel except for: Ex Treasury Secretary Hank Paulson, Current Secretary Geithner, Fed chief Ben Bernanke, and the chairmen of the SEC and the Commodity Futures Trading Commission (all with ties to Goldman Sachs – but that’s potentially just coincidental!) What they do is buy huge amounts of futures. Futures allow you leverage on that particular stock / sector – but what it mainly does is trigger stock buying of pre programmed baskets of stocks as the computers are trained to buy on specific rises in the futures market. So, buying tons of futures – causes the market to react higher.
So, when the initial jobless claims spiked higher, continuing claims spiked higher and our Fed Head was being grilled on what amounts to fraud and you see the market soar for 180 points, do you think that was because millions of informed investors thought it was a good idea to buy stocks? Ah – but look at the futures buying at 11:41, 11:42 that day – and you’ll have your answer. Sorry, but that's the way it really works in 2009
The single hottest piece of journalism sweeping the nation right now is "The Great American Bubble Machine" written by Matt Taibbi. This article is a well written piece about Goldman Sachs and how they have "caused" and profited from every bubble in the last 100 years, reaping trillions of dollars of profit at the expense of the "everyday American". Matt has done a remarkable job of cataloging exactly how Goldman has fleeced the sheep of America over the years.
The Market:
Now that you know how the market really works, it might be easier for you to understand how we arrive at some of our predictions. So, what happens now? There is one school of thought that says we're going to roll over and be weak all summer, and then run up into the fall. Our view is that because so many feel that way, it probably won't happen. The most unlikely scenario is that they make fools of all those who think that way and simply go higher. With so many people on the "sell in May and go away" train, watching the market move up into earnings season simply makes perfect sense. I don't think it will be smooth, and frankly if we did roll over and plunge it wouldn't surprise me. The only thing keeping it up right now is media BS about green shoots, and the "hidden hand" of the PPT. Yet with Obama's popularity decreasing daily, I'm pretty sure the word has gone out to his henchmen "keep this market up at all costs". Fraud and manipulation say "we need to make the ‘Average Joe’ believe the market is really behind us and the economy is mending." Fraud should win.
With that in mind, we've been looking at some long side plays, since we sold most of our positions for profit during the past two weeks. The big sector rotation from materials into tech is still ongoing, we picked up a tech this week that's up 4% in a couple days and should go for more. But we are looking at more in the tech space, and I think you should too.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o CSCO (Cisco) closing at 18.90, if they were to get up and over 19.20, I think they could have a buck or two in them.
o VMW – needs to get over 30
o STX over 10.35 would be interesting
o QCOM – is looking interesting, after closing at the 46.00 level a few days in a row a while back, they are at 46.19. I wouldn't be against trying some QCOM at the 46.45 level.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, June 21, 2009
This week in Barrons - 6.21.09
This Week in Barrons – 06_21_09:
Thoughts:
First – Happy Father’s Day to all the Dad’s out there!
This week we got to listen to Tim Geithner tell Congress why new regulations were necessary concerning financial issues and the Federal Reserve will basically be the "Overseer" of the entire world’s financial system. Now if you really think that this has anything to do with ‘regulations’ – please don’t drink the Kool Aid – but rather has everything to do with Power! Lack of regulation didn't cause the current problems. There were more than enough regulations in place to keep the bankers from going berserk and partying like drunken sailors. But, some of the toughest regulations were thrown in the toilet by the very (bought and paid for) Congressional seat warmers that are now screaming for more regulations.
Lack of regulation didn't cause the problem; however, removing and not enforcing the regulations that were on the books was a big part of it. Another big part is fraud, decent and manipulation. What about the unsustainable levels of economic activity that Alan Greenspan created? What about derivatives? Are we honestly to believe that letting loose over $600 trillion in derivatives around the world – none of it subject to anything more than a couple people sharing a handshake and a bourbon wasn't going to end badly? Yet the FED didn't stop it, they promoted it as "spreading risk" and creating a more stable financial situation. So we wish to give this same group MORE oversight and MORE power!
The very FED that sits in charge of our monetary policy aided and abetted the single largest economic disaster we've seen in 75 years. The very crew that was in charge of sitting in leadership roles as they aligned the stars for a colossal economic meltdown, now say they are ready and willing to fix it all. They have the know-how. This has absolutely nothing to do with tougher regulations and getting back to basics, this is a power grab. And to appease the masses they have concocted a "sweeping plan to regulate the financial industry". To the Average Joe in the Street, that sounds pretty good, I'm sure he figures that this is what's necessary.
But recently Ron Paul (that ‘other guy’ running for President of the U.S.) introduced a bill to audit the FED. It's HR1207 and now has 225 co sponsors. When the Government was created, it states that ONLY the Government would have the ability to "make money". The FED is a Private banking concern. In fact, so private we cannot audit their books, can't sit in on their meetings. Mr. Obama himself can not see their records. Yet these hand selected Genius's make our monetary policy, set our rates and basically "print money into existence" which instantly becomes a debt for you and me. So, Ron Paul says "lets take a look at the books. Let's see where their money goes. Let's see how much they really have on hand, and what their concepts are for regulating money supply. They've ruined the value of the dollar, and basically raped America for some 96 years now. It's time for the public to know who and what goes on here."
This is monumental in scope and I suggest everyone call/write their representatives and senators (the Senate bill is S604) and ask how they stand on this bill – and why or why not!
Many of you have written and ask whether we can sustain our current level of returns throughout the year (over 30%). Well Jessie Livermore is oft thought of as one of the greatest traders of the last generation. But trading is all about style and mental discipline. First: I'm a firm believer that you can't fight the tape. In other words, don't look for longs in a sinking market. We want to go long when the market is moving higher, and step off or go short when the overall market is moody and falling. Second: What we like to do is find a stock that has good potential (a real reason to move higher) and then align buying that stock when the overall market seems like it wants to romp higher. Third: Another thing we like to do is "selling halfs". Meaning say we purchase 2,000 shares of ABC @ $12 one day – and 2 days later to moves to $13.50 We sell ‘half’ – leaving only 1,000 shares in play and if it goes to 20 – great – we win – if it goes below our stop (which is potentially $12 or $13) – we still end with a overall profit. Fourth: We do NOT trade ‘everyday’! Finally: I’m more fond of ‘put’ options than shorting outright.
The Market:
Speaking of the market, what's going on in the here and now? Well, Monday and Tuesday the market sold off and Wednesday they tried for a reversal day but couldn't muster it. So, Thursday comes along and with it some economic news. 1) Continuing claims for unemployment fell by 148K, bringing the level off "record" highs to "just” 6.8 million. 2) The Philly Fed report wasn't as bad as expected. 3) The Leading indicators hit and it rose a bit – and by we were up by 80 points. Factually – the Philly FED ‘general business conditions report went from a MINUS 22.6 from a MINUS 24.4. And Factually – initial jobless claims actually ROSE on the week – while 148k came off the continuing claims report (do you think some of those 148k actually ‘ran out’ of benefits and that’s why they came ‘off’ the claims roles?). The Conference Board came out and said that ‘Seven of it’s Seven’ lagging economic indicators ALL FELL – none advanced. But again – let’s not let facts get in the way of good emotion.
My feeling is that I don't think the current rally is over and that higher prices are coming later in the summer. But in the very near term, I'm concerned about a good-sized drop. I'm going to play very cautiously here this week and maybe into next. But there's a pretty good chance that not doing much in the near term will prove to be a decent idea. I could easily be proven wrong and we could continue higher, because the power of the PPT (Plunge Patrol Team) has been enormous lately. But we could roll over for a bit – and if we do – we’ll lock in some more gains and wait to buy back in. It's not time yet to short for any length of time.
It's just our "guess" that they need to shake up a few more complacent people before we climb that wall of worry again.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re about to go back into SLW (silver)
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o SLW, NGD and GDX
o All commodities GSG if over $32
o AES (a utility stock) looks buyable over $10.80
o CHINA was once interesting at $80 – for speculation money – it’s now at $1.66 – so CHINA >$1.80 may be interesting.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Thoughts:
First – Happy Father’s Day to all the Dad’s out there!
This week we got to listen to Tim Geithner tell Congress why new regulations were necessary concerning financial issues and the Federal Reserve will basically be the "Overseer" of the entire world’s financial system. Now if you really think that this has anything to do with ‘regulations’ – please don’t drink the Kool Aid – but rather has everything to do with Power! Lack of regulation didn't cause the current problems. There were more than enough regulations in place to keep the bankers from going berserk and partying like drunken sailors. But, some of the toughest regulations were thrown in the toilet by the very (bought and paid for) Congressional seat warmers that are now screaming for more regulations.
Lack of regulation didn't cause the problem; however, removing and not enforcing the regulations that were on the books was a big part of it. Another big part is fraud, decent and manipulation. What about the unsustainable levels of economic activity that Alan Greenspan created? What about derivatives? Are we honestly to believe that letting loose over $600 trillion in derivatives around the world – none of it subject to anything more than a couple people sharing a handshake and a bourbon wasn't going to end badly? Yet the FED didn't stop it, they promoted it as "spreading risk" and creating a more stable financial situation. So we wish to give this same group MORE oversight and MORE power!
The very FED that sits in charge of our monetary policy aided and abetted the single largest economic disaster we've seen in 75 years. The very crew that was in charge of sitting in leadership roles as they aligned the stars for a colossal economic meltdown, now say they are ready and willing to fix it all. They have the know-how. This has absolutely nothing to do with tougher regulations and getting back to basics, this is a power grab. And to appease the masses they have concocted a "sweeping plan to regulate the financial industry". To the Average Joe in the Street, that sounds pretty good, I'm sure he figures that this is what's necessary.
But recently Ron Paul (that ‘other guy’ running for President of the U.S.) introduced a bill to audit the FED. It's HR1207 and now has 225 co sponsors. When the Government was created, it states that ONLY the Government would have the ability to "make money". The FED is a Private banking concern. In fact, so private we cannot audit their books, can't sit in on their meetings. Mr. Obama himself can not see their records. Yet these hand selected Genius's make our monetary policy, set our rates and basically "print money into existence" which instantly becomes a debt for you and me. So, Ron Paul says "lets take a look at the books. Let's see where their money goes. Let's see how much they really have on hand, and what their concepts are for regulating money supply. They've ruined the value of the dollar, and basically raped America for some 96 years now. It's time for the public to know who and what goes on here."
This is monumental in scope and I suggest everyone call/write their representatives and senators (the Senate bill is S604) and ask how they stand on this bill – and why or why not!
Many of you have written and ask whether we can sustain our current level of returns throughout the year (over 30%). Well Jessie Livermore is oft thought of as one of the greatest traders of the last generation. But trading is all about style and mental discipline. First: I'm a firm believer that you can't fight the tape. In other words, don't look for longs in a sinking market. We want to go long when the market is moving higher, and step off or go short when the overall market is moody and falling. Second: What we like to do is find a stock that has good potential (a real reason to move higher) and then align buying that stock when the overall market seems like it wants to romp higher. Third: Another thing we like to do is "selling halfs". Meaning say we purchase 2,000 shares of ABC @ $12 one day – and 2 days later to moves to $13.50 We sell ‘half’ – leaving only 1,000 shares in play and if it goes to 20 – great – we win – if it goes below our stop (which is potentially $12 or $13) – we still end with a overall profit. Fourth: We do NOT trade ‘everyday’! Finally: I’m more fond of ‘put’ options than shorting outright.
The Market:
Speaking of the market, what's going on in the here and now? Well, Monday and Tuesday the market sold off and Wednesday they tried for a reversal day but couldn't muster it. So, Thursday comes along and with it some economic news. 1) Continuing claims for unemployment fell by 148K, bringing the level off "record" highs to "just” 6.8 million. 2) The Philly Fed report wasn't as bad as expected. 3) The Leading indicators hit and it rose a bit – and by we were up by 80 points. Factually – the Philly FED ‘general business conditions report went from a MINUS 22.6 from a MINUS 24.4. And Factually – initial jobless claims actually ROSE on the week – while 148k came off the continuing claims report (do you think some of those 148k actually ‘ran out’ of benefits and that’s why they came ‘off’ the claims roles?). The Conference Board came out and said that ‘Seven of it’s Seven’ lagging economic indicators ALL FELL – none advanced. But again – let’s not let facts get in the way of good emotion.
My feeling is that I don't think the current rally is over and that higher prices are coming later in the summer. But in the very near term, I'm concerned about a good-sized drop. I'm going to play very cautiously here this week and maybe into next. But there's a pretty good chance that not doing much in the near term will prove to be a decent idea. I could easily be proven wrong and we could continue higher, because the power of the PPT (Plunge Patrol Team) has been enormous lately. But we could roll over for a bit – and if we do – we’ll lock in some more gains and wait to buy back in. It's not time yet to short for any length of time.
It's just our "guess" that they need to shake up a few more complacent people before we climb that wall of worry again.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’re about to go back into SLW (silver)
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme – we’re underwater here) – from $32
- we’re thinking about:
o SLW, NGD and GDX
o All commodities GSG if over $32
o AES (a utility stock) looks buyable over $10.80
o CHINA was once interesting at $80 – for speculation money – it’s now at $1.66 – so CHINA >$1.80 may be interesting.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, June 14, 2009
This Week in Barrons - 06.14.09
This Week in Barrons – 06_14_09:
Thoughts:
WASHINGTON (AP) - The No. 2 Republican in the House on Thursday compared President Barack Obama's plans for the auto industry to the policies of Russian Prime Minister Vladimir Putin, saying the White House has stripped credit holders of rights and given them to Democratic allies: "'Set aside the rule of law, let's strip secured creditors, bondholders, of their rights. Take them away outside of the bankruptcy process and give them to the political cronies and the auto workers' unions," Rep. Eric Cantor, R-Va., said in an interview with The Associated Press. "It's almost like looking at Putin's Russia," added Canton, the GOP's House whip. "You want to reward your political friends at the expense of the certainty of law?"
- According to the Center for Responsible Lending a new foreclosure starts every 13 seconds, equaling nearly 6,500 a day – the number of new foreclosure starts for the first five months of 2009 has reached one million
- One in 9 Americans are using federal food stamps to help buy groceries as the country's deep recession continues
- One out of every 6 dollars of American Income is some form of Government handout
- And then there’s Jim Cramer – who’s explaining how all the bad news is really ‘good news in disguise.’ For example: last week we learned that for the very FIRST time, Prime Borrowers defaulted on their loans more than Subprime Borrowers. The foreclosure rate on houses that carried prime loans spiked off the charts. So in my mind, I figured that even people with good credit and a down payment are getting so squeezed (or unemployed) that they can't afford to keep their homes. But according to Jim Cramer, this is a good sign - because those people DID put down a "down payment", so the banks are eager to take those homes back because they have value. It shows that banks are becoming stronger, and well lead to more lending and a reawakening in spending. HUH??
Our elected officials, and our Central bank are doing everything in their power to get people to spend money they don't have on things they don't need. They know there's nothing that's going to stop the depression from enveloping the nation and most of the world. The best they can hope for is that it happens in slow motion, versus an all out economic crash that hits like a tsunami all at once. However, once we do hit bottom, we're going to come out of this stronger. We are in a depression. It's going to get worse, much worse.
But as the retail sales number hit and it rose 0.5%. You could hear the cheers, the Kazoo's blowing on the exchange floor. The headlines went out over Reuters and Dow Jones news: “The consumer's not dead, he's getting ready to spend again!” Unfortunately, retail sales are not reported by units sold, but rather are reported by total dollars spent. So if you sold 10 widgets at $5 each one month ($50), and next month sold 5 widgets at $20 each ($100) – you would see a 100% increase in retail sales. Well the problem is that unless you live inside a refinery, gasoline has roared higher, gaining upwards of 50% in the last few months. And guess what - gasoline sales are included in the retail sales report. So it wasn't like we actually sold a lot more widgets last month, we just paid a lot more for the widgets we purchased – due to the huge increase in the cost of gasoline.
It’s these absolute distortions of the truth, these mis-directions of the facts that bother me. Retail sales were not strong, they were boosted by a huge jump in gasoline prices, and despite what Cramer says, rising gasoline prices are NOT good for our economy.
And then there are the ‘Bond’ sales this week. One morning Bond futures ‘soared’, and everyone asked why? CNBC came on saying that this is all “good news because foreigners were still willing to buy our treasuries.” Yet when you look over the report: To lure sovereign investors to buy our paper they had to jack interest rates up to 3.99% for the 10 year note, and 4.67% on the 30 year note. This was the biggest jump since May of 2007. Even then (if you connect the dots) it seems like our old buddies the FED came in and bought up about 18% of the auction. Think about that: the FED prints money out of thin air, then uses it to buy treasuries which is instantly a debt to the US, and requires we pay interest on it. Once again, only Jim Cramer could wrap "good news" around this.
So, with interest rates cracking 4% on the ten year, inflation is roaring and rates will go higher, possibly MUCH higher. This is why there was an all out attack on Gold this week. Right now, Germany and Dubai want their gold, but delivery seems a bit ‘slow.’ In fact, physical delivery demand is soaring. This has got to come to a head at some point, but for now realize that the central banks have been waging war on gold trying to suppress it, while physical delivery demand has been soaring for many months. Huge dislocations are taking place, and pretty soon we're going to see that resolve itself. If just 30% of the longs decided that they wanted physical delivery – the price would jump to $1,250. We're on record saying gold will hit $1,500 soon. We still believe it.
Lastly – since so many acres are delegated to producing an ethanol crop, the wheat, corn, bean crops were downsized. Now with the recent cooling of the heartlands, planting is behind schedule, and the yield is going to suffer. Well, for investment purposes keep an eye on agriculture where prices will rise as supply falls.
The Market:
Market? Well to be brutally honest, the market is really beginning to concern me. We see the plunge patrol team at work every single day saving the market from a roll over, and we have to ask, how long can they keep it up? My feeling is that I don't think the current rally is over and that higher prices are coming later in the summer. But in the very near term, I'm concerned about a good-sized drop out. I'm going to play very cautiously here this week and maybe into next. Yes we're long several stocks – and yes we’re up over 30% for the year. But there's a pretty good chance that not doing much in the near term will prove to be a decent idea. I could easily be proven wrong and we continue higher, the power of the PPT (Plunge Patrol Team) has been enormous lately. But if we do roll over for a bit, we'll lock in some more gains and wait to buy back in, because this is NOT the time to short the market for any length of time.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’ve held SLW (silver) since the 3’s – our Stop is set for $9.50
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme) – from $32
- we’re thinking about:
o DBA another agricultural name if > $28
o MOO more of it if > $39
o All commodities are doing well and another basket = GSG over $32 looks tempting
o I see more money going into the safety of utilities and even drugs – so AES (a utility stock) looks buyable over $10.80
o Finally – CHINA was once interesting at $80 – for speculation money – it’s now at $1.66 – so CHINA >$1.80 may be interesting.
- Now realize if the market rolls over – these roll over with it.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Thoughts:
WASHINGTON (AP) - The No. 2 Republican in the House on Thursday compared President Barack Obama's plans for the auto industry to the policies of Russian Prime Minister Vladimir Putin, saying the White House has stripped credit holders of rights and given them to Democratic allies: "'Set aside the rule of law, let's strip secured creditors, bondholders, of their rights. Take them away outside of the bankruptcy process and give them to the political cronies and the auto workers' unions," Rep. Eric Cantor, R-Va., said in an interview with The Associated Press. "It's almost like looking at Putin's Russia," added Canton, the GOP's House whip. "You want to reward your political friends at the expense of the certainty of law?"
- According to the Center for Responsible Lending a new foreclosure starts every 13 seconds, equaling nearly 6,500 a day – the number of new foreclosure starts for the first five months of 2009 has reached one million
- One in 9 Americans are using federal food stamps to help buy groceries as the country's deep recession continues
- One out of every 6 dollars of American Income is some form of Government handout
- And then there’s Jim Cramer – who’s explaining how all the bad news is really ‘good news in disguise.’ For example: last week we learned that for the very FIRST time, Prime Borrowers defaulted on their loans more than Subprime Borrowers. The foreclosure rate on houses that carried prime loans spiked off the charts. So in my mind, I figured that even people with good credit and a down payment are getting so squeezed (or unemployed) that they can't afford to keep their homes. But according to Jim Cramer, this is a good sign - because those people DID put down a "down payment", so the banks are eager to take those homes back because they have value. It shows that banks are becoming stronger, and well lead to more lending and a reawakening in spending. HUH??
Our elected officials, and our Central bank are doing everything in their power to get people to spend money they don't have on things they don't need. They know there's nothing that's going to stop the depression from enveloping the nation and most of the world. The best they can hope for is that it happens in slow motion, versus an all out economic crash that hits like a tsunami all at once. However, once we do hit bottom, we're going to come out of this stronger. We are in a depression. It's going to get worse, much worse.
But as the retail sales number hit and it rose 0.5%. You could hear the cheers, the Kazoo's blowing on the exchange floor. The headlines went out over Reuters and Dow Jones news: “The consumer's not dead, he's getting ready to spend again!” Unfortunately, retail sales are not reported by units sold, but rather are reported by total dollars spent. So if you sold 10 widgets at $5 each one month ($50), and next month sold 5 widgets at $20 each ($100) – you would see a 100% increase in retail sales. Well the problem is that unless you live inside a refinery, gasoline has roared higher, gaining upwards of 50% in the last few months. And guess what - gasoline sales are included in the retail sales report. So it wasn't like we actually sold a lot more widgets last month, we just paid a lot more for the widgets we purchased – due to the huge increase in the cost of gasoline.
It’s these absolute distortions of the truth, these mis-directions of the facts that bother me. Retail sales were not strong, they were boosted by a huge jump in gasoline prices, and despite what Cramer says, rising gasoline prices are NOT good for our economy.
And then there are the ‘Bond’ sales this week. One morning Bond futures ‘soared’, and everyone asked why? CNBC came on saying that this is all “good news because foreigners were still willing to buy our treasuries.” Yet when you look over the report: To lure sovereign investors to buy our paper they had to jack interest rates up to 3.99% for the 10 year note, and 4.67% on the 30 year note. This was the biggest jump since May of 2007. Even then (if you connect the dots) it seems like our old buddies the FED came in and bought up about 18% of the auction. Think about that: the FED prints money out of thin air, then uses it to buy treasuries which is instantly a debt to the US, and requires we pay interest on it. Once again, only Jim Cramer could wrap "good news" around this.
So, with interest rates cracking 4% on the ten year, inflation is roaring and rates will go higher, possibly MUCH higher. This is why there was an all out attack on Gold this week. Right now, Germany and Dubai want their gold, but delivery seems a bit ‘slow.’ In fact, physical delivery demand is soaring. This has got to come to a head at some point, but for now realize that the central banks have been waging war on gold trying to suppress it, while physical delivery demand has been soaring for many months. Huge dislocations are taking place, and pretty soon we're going to see that resolve itself. If just 30% of the longs decided that they wanted physical delivery – the price would jump to $1,250. We're on record saying gold will hit $1,500 soon. We still believe it.
Lastly – since so many acres are delegated to producing an ethanol crop, the wheat, corn, bean crops were downsized. Now with the recent cooling of the heartlands, planting is behind schedule, and the yield is going to suffer. Well, for investment purposes keep an eye on agriculture where prices will rise as supply falls.
The Market:
Market? Well to be brutally honest, the market is really beginning to concern me. We see the plunge patrol team at work every single day saving the market from a roll over, and we have to ask, how long can they keep it up? My feeling is that I don't think the current rally is over and that higher prices are coming later in the summer. But in the very near term, I'm concerned about a good-sized drop out. I'm going to play very cautiously here this week and maybe into next. Yes we're long several stocks – and yes we’re up over 30% for the year. But there's a pretty good chance that not doing much in the near term will prove to be a decent idea. I could easily be proven wrong and we continue higher, the power of the PPT (Plunge Patrol Team) has been enormous lately. But if we do roll over for a bit, we'll lock in some more gains and wait to buy back in, because this is NOT the time to short the market for any length of time.
TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Stop
- we’ve held SLW (silver) since the 3’s – our Stop is set for $9.50
- we’re holding NGD (a gold miner) from $2.59
- we’re holding MOO (agricultural business ETF) – from $32
- we’re hold XLK (a technology (minus healthcare) ETF) – from $17
- we’re holding IPI (a potash hold – again in the agricultural theme) – from $32
- we’re thinking about:
o DBA another agricultural name if > $28
o MOO more of it if > $39
o All commodities are doing well and another basket = GSG over $32 looks tempting
o I see more money going into the safety of utilities and even drugs – so AES (a utility stock) looks buyable over $10.80
o Finally – CHINA was once interesting at $80 – for speculation money – it’s now at $1.66 – so CHINA >$1.80 may be interesting.
- Now realize if the market rolls over – these roll over with it.
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, June 7, 2009
This Week in Barrons - 06.07.09
This Week in Barrons – 06_07_09:
This week’s letter will be slightly shorter – as my oldest son is graduating High School today – and I wouldn’t miss it for the world!
Thoughts:
"I wish to tell the U.S. government: Don't be complacent and think there isn't any alternative for China to buy your bills and bonds. The Euro is an alternative. And there are lots of raw materials we can still buy. Some people say the Euro is very weak. Okay, weak is good, we'll buy very cheap" - Yu Yongding (China's former Central Bank advisor)
Look at the commodity space – coal is up – copper is up – iron ore up – lumber up – gold up – silver (really up) – oil is up – and the list continues – mostly up!
China has one thing that we don’t – money. Crushing deficits are not affecting China – because they aren't running a $1.8 Trillion deficit. They aren't swimming in a national debt of $12.5 Trillion dollars. They don't have future liabilities of $99 Trillion as Richard Fisher of the Dallas FED recently just told us we have. And, as we continue to print more money – it lowers the value of the money already in circulation. With China sitting on a large pile of dollar denominated holdings (that are falling on a daily basis) – they first begin to yell at the Americans for letting things get out of control. And then, they begin to swap those depreciating dollars for "stuff" – hard stuff – stuff that you can make bridges and roads out of, burn in your power plants, and store in your vaults that won't lose value. The combination of dollar inflation from printing so many of them, and China's decision to decide to swap out of them in favor of hard goods has sent commodity prices soaring. Even the shipping industry (which had been left for dead) has put on a heck of a show recently as it takes lots of big ships to move hard good raw commodities from one area of the world to another.
Can this continue – yes – just look at oil. All over the globe falling asset prices, coupled with rising unemployment and sour economic fundamentals, forced people to cut back on travel and energy use. The result is that right now we're swimming in black goo. We've got untold millions of barrels floating around the high seas with no port to dock in and unload it. Yet despite that, oil has gone from 40 to 68 dollars. Why – doesn’t supply and demand work any more? Sure it does – it just so happens that oil is priced on the world market in dollars – as the dollar falls, it simply takes more of them to buy the same amount of oil. The purpose of the stimulus and “printing money” is to devalue the dollar. That way you get to pay back your debts with devalued money. So with inflation being around for any foreseeable future - it's absolutely essential that you have the number one and number two inflation hedges, that being gold and silver.
The point behind all this of course is that you should own some gold, and some silver. But while gold and silver are the king and queen of the value party (while the inflation is roaring) the other hard good commodities will stay in play. China is basically trying to get out of holding dollars, without plunging the value of them.
The Market:
Each and every day, anyone with a logical thinking mind wonders "When's the rug pull going to come?" Nothing about the market is ever easy, but we’ve been playing this game long enough to know how to follow the bigger trends. It's our guess that "overall" the market is destined to go higher. But along the way we should get at least one, if not two scary pull downs that keep people honest. Currently we’re up against the DOW’s 200 day moving average – a very important average – and I think we’ll remain a little flat – then run up to about 9K and then, yank the rug and send us down for several hundred points.
At some point - we are going to take a smack down, and it could end up being in the 8 to 10% arena. If that indeed were to happen here in the next few weeks, it would be another buying opportunity because this market hasn't finished doing it's business – because I think the DOW 10k+ is in the cards before we roll over into another massive bear market later in the year and all through 2010.
Bottom line - the "big" dips are still buyable. Last year our single biggest source of income was riding long term puts lower, some of them returning 400% and more for us. We feel another similar opportunity awaits us for next year.
TIPS:
Currently I like:
- IPI for fertilizer and growing crops
- MOO for commodities and growing crops
- SLW / PAAS for silver (the metal)
- NGD a gold mining company
- FSYS an alternative fuel systems company
- GDX the basket of gold miners
- GLD the basket for gold (the metal)
- XLK the basket of technology excluding health-care
- Look @ TIE – Titanium Metal investment over $11
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
This week’s letter will be slightly shorter – as my oldest son is graduating High School today – and I wouldn’t miss it for the world!
Thoughts:
"I wish to tell the U.S. government: Don't be complacent and think there isn't any alternative for China to buy your bills and bonds. The Euro is an alternative. And there are lots of raw materials we can still buy. Some people say the Euro is very weak. Okay, weak is good, we'll buy very cheap" - Yu Yongding (China's former Central Bank advisor)
Look at the commodity space – coal is up – copper is up – iron ore up – lumber up – gold up – silver (really up) – oil is up – and the list continues – mostly up!
China has one thing that we don’t – money. Crushing deficits are not affecting China – because they aren't running a $1.8 Trillion deficit. They aren't swimming in a national debt of $12.5 Trillion dollars. They don't have future liabilities of $99 Trillion as Richard Fisher of the Dallas FED recently just told us we have. And, as we continue to print more money – it lowers the value of the money already in circulation. With China sitting on a large pile of dollar denominated holdings (that are falling on a daily basis) – they first begin to yell at the Americans for letting things get out of control. And then, they begin to swap those depreciating dollars for "stuff" – hard stuff – stuff that you can make bridges and roads out of, burn in your power plants, and store in your vaults that won't lose value. The combination of dollar inflation from printing so many of them, and China's decision to decide to swap out of them in favor of hard goods has sent commodity prices soaring. Even the shipping industry (which had been left for dead) has put on a heck of a show recently as it takes lots of big ships to move hard good raw commodities from one area of the world to another.
Can this continue – yes – just look at oil. All over the globe falling asset prices, coupled with rising unemployment and sour economic fundamentals, forced people to cut back on travel and energy use. The result is that right now we're swimming in black goo. We've got untold millions of barrels floating around the high seas with no port to dock in and unload it. Yet despite that, oil has gone from 40 to 68 dollars. Why – doesn’t supply and demand work any more? Sure it does – it just so happens that oil is priced on the world market in dollars – as the dollar falls, it simply takes more of them to buy the same amount of oil. The purpose of the stimulus and “printing money” is to devalue the dollar. That way you get to pay back your debts with devalued money. So with inflation being around for any foreseeable future - it's absolutely essential that you have the number one and number two inflation hedges, that being gold and silver.
The point behind all this of course is that you should own some gold, and some silver. But while gold and silver are the king and queen of the value party (while the inflation is roaring) the other hard good commodities will stay in play. China is basically trying to get out of holding dollars, without plunging the value of them.
The Market:
Each and every day, anyone with a logical thinking mind wonders "When's the rug pull going to come?" Nothing about the market is ever easy, but we’ve been playing this game long enough to know how to follow the bigger trends. It's our guess that "overall" the market is destined to go higher. But along the way we should get at least one, if not two scary pull downs that keep people honest. Currently we’re up against the DOW’s 200 day moving average – a very important average – and I think we’ll remain a little flat – then run up to about 9K and then, yank the rug and send us down for several hundred points.
At some point - we are going to take a smack down, and it could end up being in the 8 to 10% arena. If that indeed were to happen here in the next few weeks, it would be another buying opportunity because this market hasn't finished doing it's business – because I think the DOW 10k+ is in the cards before we roll over into another massive bear market later in the year and all through 2010.
Bottom line - the "big" dips are still buyable. Last year our single biggest source of income was riding long term puts lower, some of them returning 400% and more for us. We feel another similar opportunity awaits us for next year.
TIPS:
Currently I like:
- IPI for fertilizer and growing crops
- MOO for commodities and growing crops
- SLW / PAAS for silver (the metal)
- NGD a gold mining company
- FSYS an alternative fuel systems company
- GDX the basket of gold miners
- GLD the basket for gold (the metal)
- XLK the basket of technology excluding health-care
- Look @ TIE – Titanium Metal investment over $11
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, May 31, 2009
This week in Barrons - 5.31.2009
This Week in Barrons – 05_31_09:
Thoughts:
Without people buying things they don't need with money they don't have, the true economic activity of this country is going to be considerably less than almost anyone imagines
Isn't this something - just two days after Obama came out and said America has "no more money" and that the country was swimming in debt, the average Joe tells the confidence board he's feeling pretty good despite:
- 36 banks have going bankrupt already this year
- Bank stress tests suggesting 10 of 19 banks need 87 billion more dollars
- Obama revising his budget higher by 90 billion, creating a deficit that's 400% HIGHER than anything we've ever seen
- The national Case-Shiller home price index reported that U.S. home prices fell a record 19.1% (year over year) – and continue to fall.
- GM and Chrysler have gone / are going bankrupt
- AND in a speech at the Kennedy School of Government, Richard Risher – President of the Dallas Fed said “the very deep hole [our political leaders] have dug in incurring unfunded liabilities of retirement and health-care obligations, we at the Dallas Fed believe total over $99 trillion”!!!
Let us not forget:
- when America changed (about 40 years ago) from the manufacturing capital of the world, to the “consumer” capital – and without ‘the Average Joe’ buying stuff à we're doomed.
- The Average Joe’s credit card balance is over $10,000, his house fell in value (AGAIN) and he may not have a job - tomorrow.
- After years of having our Armed Forces pay giant bonuses, give college grants, and beg young folks to come into the service, they are now bulging with people, so many that they are closing recruiting stations. It seems that so many young folks are struggling to find a job that they figure a 2 or 4 year stint with Uncle Sam is a better option, they're getting paid and probably learning a skill.
- ALSO older folks are signing up for Social Security earlier, instead of working into their golden years. The Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers. Currently claims have been running 25% ahead of last year. Why would this be? As people saw their homes implode and their 401K's implode, with little prospect of getting a good job, they decided that they'd sign up at 62 instead of 66. Fully knowing that by signing up early, they are getting a full 25% less than if they waited till 66. So why do it? Because people NEED THE MONEY NOW!
The consumer confidence numbers are propaganda – so don’t drink the kool-aid and don’t get lazy about your money. This is your typical ‘dead cat bounce’ – it could last month – but let’s be prepared for the next shoe to fall.
The Market:
So now that we're back to DOW 8500, a key level and the S&P is above 900 – it’s our view that except for sharp fast pull downs, the market is probably destined to go higher. Not because it wants to, but because it has become Job #2 at the FED to buy futures at key moments. So, for now we feel it's safe to "lean long" and buy the dips. Just know that one day the music will stop and there's simply not enough chairs. Anyone not buying gold, silver and specific mining stocks is going to regret it terribly one day.
Consider the following:
- 12.2% of ALL mortgages are delinquent.
- HALF of all the delinquent homes are EMPTY.
- PRIME mortgages are failing faster than subprime
- ALT -A and Pick a pay loans are going to reset this year and next at higher rates.
- Federal revenue from taxes fell 34% year over year (So Obama’s deficit projections are going to be far worse than previously anticipated)
- 48 out of 50 of our states are in serious budget shortfalls as they too are getting less revenues.
- Continuing unemployment claims have hit an all time high for 18 consecutive weeks – each week adding 650K+ people to the roles
- Inflation – for every new dollar the FED prints - it lowers the value of all the other dollars in circulation. As the deficits rise, as the States go "bankrupt", as more and more bailouts are requested, the FED will need to print more dollars. The consequences are: (a) commodities will indeed continue higher, (b) people will continue to dump bonds, and when bonds are ‘dumped’ – (c ) interest rates start to rise – which will (d) eliminate future home buyers from entering the market.
- Inflation – as interest rates rise that will cause more foreclosures from the Alt-A and Pick-A-Pay mortgages that will reset in late 2009 thru 2010.
- Printing more dollars – causes inflation – will causes the dollar to fall – oil is priced in dollars – which causes gasoline prices will rise – which will hurt the economy yet again.
- The Chinese have modified their investing – from buying longer term treasuries to shorter term treasuries – and also to buying gold – lots and lots of gold.
TIPS:
But again – fair warning – this is a Bear Market (“suckers”) Rally. It is designed to suck in the most amount of people before it rolls back over, and the next time it does there will be no stopping it. We will have a date with DOW 4500 in the next two years. Gold will be higher, much higher. Silver will be higher. Interest rates will be higher. I like:
- IPI for commodities and growing crops
- MOO for commodities and growing crops
- SLW / PAAS for silver (the metal)
- NGD for gold mining
- FSYS
- GDX the basket of gold miners
- GLD for gold (the metal)
- XLK the basket of technology excluding health-care
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Thoughts:
Without people buying things they don't need with money they don't have, the true economic activity of this country is going to be considerably less than almost anyone imagines
Isn't this something - just two days after Obama came out and said America has "no more money" and that the country was swimming in debt, the average Joe tells the confidence board he's feeling pretty good despite:
- 36 banks have going bankrupt already this year
- Bank stress tests suggesting 10 of 19 banks need 87 billion more dollars
- Obama revising his budget higher by 90 billion, creating a deficit that's 400% HIGHER than anything we've ever seen
- The national Case-Shiller home price index reported that U.S. home prices fell a record 19.1% (year over year) – and continue to fall.
- GM and Chrysler have gone / are going bankrupt
- AND in a speech at the Kennedy School of Government, Richard Risher – President of the Dallas Fed said “the very deep hole [our political leaders] have dug in incurring unfunded liabilities of retirement and health-care obligations, we at the Dallas Fed believe total over $99 trillion”!!!
Let us not forget:
- when America changed (about 40 years ago) from the manufacturing capital of the world, to the “consumer” capital – and without ‘the Average Joe’ buying stuff à we're doomed.
- The Average Joe’s credit card balance is over $10,000, his house fell in value (AGAIN) and he may not have a job - tomorrow.
- After years of having our Armed Forces pay giant bonuses, give college grants, and beg young folks to come into the service, they are now bulging with people, so many that they are closing recruiting stations. It seems that so many young folks are struggling to find a job that they figure a 2 or 4 year stint with Uncle Sam is a better option, they're getting paid and probably learning a skill.
- ALSO older folks are signing up for Social Security earlier, instead of working into their golden years. The Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers. Currently claims have been running 25% ahead of last year. Why would this be? As people saw their homes implode and their 401K's implode, with little prospect of getting a good job, they decided that they'd sign up at 62 instead of 66. Fully knowing that by signing up early, they are getting a full 25% less than if they waited till 66. So why do it? Because people NEED THE MONEY NOW!
The consumer confidence numbers are propaganda – so don’t drink the kool-aid and don’t get lazy about your money. This is your typical ‘dead cat bounce’ – it could last month – but let’s be prepared for the next shoe to fall.
The Market:
So now that we're back to DOW 8500, a key level and the S&P is above 900 – it’s our view that except for sharp fast pull downs, the market is probably destined to go higher. Not because it wants to, but because it has become Job #2 at the FED to buy futures at key moments. So, for now we feel it's safe to "lean long" and buy the dips. Just know that one day the music will stop and there's simply not enough chairs. Anyone not buying gold, silver and specific mining stocks is going to regret it terribly one day.
Consider the following:
- 12.2% of ALL mortgages are delinquent.
- HALF of all the delinquent homes are EMPTY.
- PRIME mortgages are failing faster than subprime
- ALT -A and Pick a pay loans are going to reset this year and next at higher rates.
- Federal revenue from taxes fell 34% year over year (So Obama’s deficit projections are going to be far worse than previously anticipated)
- 48 out of 50 of our states are in serious budget shortfalls as they too are getting less revenues.
- Continuing unemployment claims have hit an all time high for 18 consecutive weeks – each week adding 650K+ people to the roles
- Inflation – for every new dollar the FED prints - it lowers the value of all the other dollars in circulation. As the deficits rise, as the States go "bankrupt", as more and more bailouts are requested, the FED will need to print more dollars. The consequences are: (a) commodities will indeed continue higher, (b) people will continue to dump bonds, and when bonds are ‘dumped’ – (c ) interest rates start to rise – which will (d) eliminate future home buyers from entering the market.
- Inflation – as interest rates rise that will cause more foreclosures from the Alt-A and Pick-A-Pay mortgages that will reset in late 2009 thru 2010.
- Printing more dollars – causes inflation – will causes the dollar to fall – oil is priced in dollars – which causes gasoline prices will rise – which will hurt the economy yet again.
- The Chinese have modified their investing – from buying longer term treasuries to shorter term treasuries – and also to buying gold – lots and lots of gold.
TIPS:
But again – fair warning – this is a Bear Market (“suckers”) Rally. It is designed to suck in the most amount of people before it rolls back over, and the next time it does there will be no stopping it. We will have a date with DOW 4500 in the next two years. Gold will be higher, much higher. Silver will be higher. Interest rates will be higher. I like:
- IPI for commodities and growing crops
- MOO for commodities and growing crops
- SLW / PAAS for silver (the metal)
- NGD for gold mining
- FSYS
- GDX the basket of gold miners
- GLD for gold (the metal)
- XLK the basket of technology excluding health-care
Remember the Blog http://rfcfinancialnews.blogspot.com/
Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, May 24, 2009
This Week in Barrons – 05_24_09:
Thoughts:
Before we start on this Memorial day, let’s all give thanks to all the fine brave men and women who have slugged it out from the Hedgerows of France, through the jungles of South Asia, to the biting desert winds of Iraq. We thank you!
That being said: Without people buying things they don't need with money they don't have, the true economic activity of this country is going to be considerably less than almost anyone imagines.
“Unemployment” will begin to consume us, and this time ‘unemployment’ may NOT be the lagging indicator that it once was. In past recessions companies would lay off workers attempting to lower operating costs. So, the economy begins to slide, companies would lay-off, and the FED would cut rates and pump money. People would take advantage of the low interest rates and easy credit by borrowing and consuming slightly more. This increased demand on goods and services would cause an increase in production, and this increased demand would then bring workers back to work. So ‘normally’ the data shows that during this transition period – the economy does increase – BEFORE the uemployment picture improves. This is why everyone talks of unemployment as being a lagging indicator.
Unfortunately recent years of easy credit have left the consumer strapped with too much debt. Combine these debt loads, with the crash in Real Estate and in the economy itself, (toss in the fact that banks aren't lending as freely as they used to) and you have a situation where the lower interest rates and printing money by the Trillions doesn’t have the same effect. In reality – consumer credit is virtually frozen except for very high credit scores. Commercial credit IS frozen (i.e. banks aren’t lending to build more strip malls and offices). So unlike in previous times when people would take on more debt in order to get the economy going, this time (a) the credit isn’t available, (b) there’s fear in the minds of the consumer because their main personal asset has been catastrophically reduced in value, (c ) in response to fear savings rates have increased, and this combination eliminates the ability to create jobs by creating more business.
That is why (this time) the unemployment figure is NOT a lagging indicator, but rather a real time snapshot of what's going on in the economy.
- Potentially the ONLY avenue left to improve the consumer’s mind-set and get him purchasing again is via the value of his 401k (i.e. improve the value of the Stock Market – and the consumer could be spending again!)
- Another way out of a recession is WAR. On this Memorial Day I remember a quote by Major General Smedley D. Butler: "War is a racket brought upon us by profit seeking madmen.” To date, $832.2 billion dollars have been spent to fight the wars in Iraq and Afghanistan.
- Virtually every Friday night for the past 25 weeks we've had a bank failure and the Government has had to rush in and prop it up. Yet on Thursday the biggest bank in Florida, in fact the biggest banking failure of 2009 hit the wires, but this one was very different. There was NO bailout. In fact, Blackstone and Carlyle (two very large investment houses – B&C) were already lined up to take over the bank. Why no FDIC, why no bail out? Simple – B&C have information and contacts that allowed them to set up ahead of time and swoop in, picking up the best assets – and sending the bad assets, well back on the shoulders of the taxpayer. And truth be told – on Friday night two more Illinois Banks failed – bringing the total to 36 so far this year. Remember we said that the FED will hand pick who succeeds and who fails, and "non-team players" are destined to fail.
- Real spending on equipment and software dropped markedly in the first quarter, with declines about as steep and widespread as in the fourth quarter of 2008. Orders and shipments of nondefense capital goods excluding aircraft fell in March, turning negative again after having been flat in February. The fundamental determinants of equipment and software investment stayed weak in the first quarter: Business output continued to drop sharply, and credit availability was still tight. Despite the significant cuts in production in recent quarters, inventories remained sizable early in the year
- The dollar just hit a new 2009 low.
- Gold keeps inching higher.
- April housing starts fell to all time record lows.
- Potentially 600K more homes are sitting on the sidelines ("shadow housing") that will come to market in terms of foreclosures, shortly.
- Entering 2010, the “Pick-A-Pay”, and “Alt-A” loans will be resetting, and for many people that have been making the minimum payments during their "intro" period, they'll see jumps of up to 50%.
The Market:
Right now the market is digesting an incredible run, tacking some 36% on the S&P. By all means it should roll over and crash, but so many are now convinced that the FED has it all right and we'll be getting out of this soon, that they want in, not out. In our view, any reasonable dip will end up being bought. The market is probably destined to move higher over the next few months. Right now we're simply awaiting it to retake 900 on the S&P and 8500 on the DOW. If it can overtake both those levels, the next stop will be higher, in fact I can still see DOW 10K in our future.
But again – fair warning – this is a Bear Market (“suckers”) Rally. It is designed to suck in the most amount of people before it rolls back over, and the next time it does there will be no stopping it. We will have a date with DOW 4500 in the next two years. Gold will be higher, much higher. Silver will be higher. Interest rates will be higher.
- Stay long stocks over S&P 900, and DOW 8500.
- Sit on your hands under those levels.
- Buy gold – and try to move to the physical metal because the ETF can be manipulated.
- For the short term – I still like MOO, IPI, and XLK – again if over 900 and 8500 on the DOW
Remember the Blog http://rfcfinancialnews.blogspot.com/
Please celebrate Memorial Day. Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Thoughts:
Before we start on this Memorial day, let’s all give thanks to all the fine brave men and women who have slugged it out from the Hedgerows of France, through the jungles of South Asia, to the biting desert winds of Iraq. We thank you!
That being said: Without people buying things they don't need with money they don't have, the true economic activity of this country is going to be considerably less than almost anyone imagines.
“Unemployment” will begin to consume us, and this time ‘unemployment’ may NOT be the lagging indicator that it once was. In past recessions companies would lay off workers attempting to lower operating costs. So, the economy begins to slide, companies would lay-off, and the FED would cut rates and pump money. People would take advantage of the low interest rates and easy credit by borrowing and consuming slightly more. This increased demand on goods and services would cause an increase in production, and this increased demand would then bring workers back to work. So ‘normally’ the data shows that during this transition period – the economy does increase – BEFORE the uemployment picture improves. This is why everyone talks of unemployment as being a lagging indicator.
Unfortunately recent years of easy credit have left the consumer strapped with too much debt. Combine these debt loads, with the crash in Real Estate and in the economy itself, (toss in the fact that banks aren't lending as freely as they used to) and you have a situation where the lower interest rates and printing money by the Trillions doesn’t have the same effect. In reality – consumer credit is virtually frozen except for very high credit scores. Commercial credit IS frozen (i.e. banks aren’t lending to build more strip malls and offices). So unlike in previous times when people would take on more debt in order to get the economy going, this time (a) the credit isn’t available, (b) there’s fear in the minds of the consumer because their main personal asset has been catastrophically reduced in value, (c ) in response to fear savings rates have increased, and this combination eliminates the ability to create jobs by creating more business.
That is why (this time) the unemployment figure is NOT a lagging indicator, but rather a real time snapshot of what's going on in the economy.
- Potentially the ONLY avenue left to improve the consumer’s mind-set and get him purchasing again is via the value of his 401k (i.e. improve the value of the Stock Market – and the consumer could be spending again!)
- Another way out of a recession is WAR. On this Memorial Day I remember a quote by Major General Smedley D. Butler: "War is a racket brought upon us by profit seeking madmen.” To date, $832.2 billion dollars have been spent to fight the wars in Iraq and Afghanistan.
- Virtually every Friday night for the past 25 weeks we've had a bank failure and the Government has had to rush in and prop it up. Yet on Thursday the biggest bank in Florida, in fact the biggest banking failure of 2009 hit the wires, but this one was very different. There was NO bailout. In fact, Blackstone and Carlyle (two very large investment houses – B&C) were already lined up to take over the bank. Why no FDIC, why no bail out? Simple – B&C have information and contacts that allowed them to set up ahead of time and swoop in, picking up the best assets – and sending the bad assets, well back on the shoulders of the taxpayer. And truth be told – on Friday night two more Illinois Banks failed – bringing the total to 36 so far this year. Remember we said that the FED will hand pick who succeeds and who fails, and "non-team players" are destined to fail.
- Real spending on equipment and software dropped markedly in the first quarter, with declines about as steep and widespread as in the fourth quarter of 2008. Orders and shipments of nondefense capital goods excluding aircraft fell in March, turning negative again after having been flat in February. The fundamental determinants of equipment and software investment stayed weak in the first quarter: Business output continued to drop sharply, and credit availability was still tight. Despite the significant cuts in production in recent quarters, inventories remained sizable early in the year
- The dollar just hit a new 2009 low.
- Gold keeps inching higher.
- April housing starts fell to all time record lows.
- Potentially 600K more homes are sitting on the sidelines ("shadow housing") that will come to market in terms of foreclosures, shortly.
- Entering 2010, the “Pick-A-Pay”, and “Alt-A” loans will be resetting, and for many people that have been making the minimum payments during their "intro" period, they'll see jumps of up to 50%.
The Market:
Right now the market is digesting an incredible run, tacking some 36% on the S&P. By all means it should roll over and crash, but so many are now convinced that the FED has it all right and we'll be getting out of this soon, that they want in, not out. In our view, any reasonable dip will end up being bought. The market is probably destined to move higher over the next few months. Right now we're simply awaiting it to retake 900 on the S&P and 8500 on the DOW. If it can overtake both those levels, the next stop will be higher, in fact I can still see DOW 10K in our future.
But again – fair warning – this is a Bear Market (“suckers”) Rally. It is designed to suck in the most amount of people before it rolls back over, and the next time it does there will be no stopping it. We will have a date with DOW 4500 in the next two years. Gold will be higher, much higher. Silver will be higher. Interest rates will be higher.
- Stay long stocks over S&P 900, and DOW 8500.
- Sit on your hands under those levels.
- Buy gold – and try to move to the physical metal because the ETF can be manipulated.
- For the short term – I still like MOO, IPI, and XLK – again if over 900 and 8500 on the DOW
Remember the Blog http://rfcfinancialnews.blogspot.com/
Please celebrate Memorial Day. Until next week – be safe.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
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