This week in Barrons - 09-27-09

This Week in Barrons – 09-27-09:

Thoughts:
Allow me to change the pace a little bit – and talk about one of the aspects of ‘trading’ that could help all of us going forward. As a backdrop: the economic reports continue to show incredible weakness, no matter how well everyone tries to spin them: (a) we saw the durable goods number plunge and the July number revised lower, (b) we saw housing sales slow, and the median price of those homes dip some 12%, (c ) we saw another half a million people need to sign up for first time unemployment benefits, and (d) we saw Congress approve extending unemployment benefits another 13 weeks (making it a total of 92 weeks of unemployment – almost 2 years!).

Factually the US is broke beyond repair – and is no longer a viable corporation. We have approximately $75 TRILLION worth of liabilities (Medicaid, Social security, tuition loans, FHA, Fannie, Freddie, etc) – and even if you raised the tax burden to 100% of all incomes – we would still be woefully short of what is needed. 95% of this debt all came after Richard Nixon removed the dollar from the gold standard, making our currency backed by simply the "full faith" of the US Government – allowing the FED to print money like madmen and to satisfy all the projects our Government pledges. As we speak we are looking at trillion dollar deficits for as far as the eye can see, and frankly those will rise even higher. The only way that I see of combating this is to slowly ‘devalue’ the U.S. dollar. The U.S. could ‘devalue’ its currency - making its outstanding debts more palatable. Here's how that works: if you allow your currency to fall in value, you are repaying debts with cheaper dollars. For example - if a dollar was to be instantly worth 50% less tomorrow, your salary would have to "double" to remain the same. So if you have a 100K dollar debt and were making 40K dollars a year, now you'd still have that 100K dollar debt, but your pay would rise to 80K a year. Now – as a backdrop to this – the dollar has been falling since 2001! But it is like ‘boiling the frog’ – do it slowly – and no one notices – do it quickly and all ‘heck’ breaks loose. The U.S. could also raise interest rates – which would temporarily halt the slide in our currency, but that would instantly bring lending to a halt. The housing that is selling will stop selling. The commercial loans that are being made will cease. It will be the final nail in our economy's coffin – so that won’t happen.

However, as the dollar becomes worth less and less, things that are "real" such as commodities get more expensive – this IS INFLATION. This is why oil is up in the $60 to $70 range despite all the developed nations using less of it. This is why food is up, energy is up, and gold is up to $1000 an ounce.

The bottom line is that the dollar is going to be removed as the global reserve currency and the transition is in effect as we speak. Already the IMF (International Monetary Fund) has begun to issue it's own brand of SDR's (Special Drawing Rights). This is what they are going to use as currency between nations that don't want dollar exposure, until they settle on the new Global reserve currency. And it appears that China is going to demand that their currency is (at minimum) a part of a basket of currencies and probably with some form of tie to a metal backing (gold). Just know that this is all taking place in the background of the UN, the G20, the IMF and all the central banks.

Now, builders and lenders are beginning to dust off an old pitch - "0" down, 100% mortgages. And what happens when these same mortgage fail (as before) - we, the taxpayers, get to bail them out yet again. But the only reason this will happen now is because they know that as they devalue the dollar, it all gets paid back with much cheaper dollars. The question is, will it really help the true economy? NO. In no time in history can I find that devaluing a currency is a good way to promote stability and recovery. Sometimes there's a short-term boost as your exports grow, but in the longer haul the inflationary effects weigh more heavily and then interest rates climb, effectively killing the economy. We will NOT break the mold – so stay long gold, stay long silver!

Market Tutorial: First rule – Wall Street is designed to ‘take’ your money – and if you don’t to deal with that on their terms, you're going to go home broke. Wall Street is not there to help you retire and get rich – it’s there to take every last penny you have and toss you in the dumpster. Wall Street does that by confounding, and confusing as many people as possible at any one time. Which means that each day you need to ask yourself: “What would the market do, to confound, confuse and take the maximum amount of money from people?"? If the answer is: “Go Up” chances are awfully good you're going to go up that day and vice versa. When you can’t answer that question (and most of the time we can’t) then (like the rest of us) you will spend a large amount or your trading time doing nothing – PATIENCE is a VIRTUE in trading. Let the market come to you. From 6600 to 8000 on the DOW everyone cried – “it’s just a bounce.” When it went to 9k their cries got louder. At 9600 people are ANGRY that they missed the biggest run-up in 70 years and want ‘desperately’ to get back in. My lesson for today is: Do Not Push Trades – But Let the Market Come to You! You do not need to, nor should you be trading every day. Sure missed opportunities stink, but there WILL BE ANOTHER. Wait on the ‘bull or bear’ to form – and then strike. Don’t EVER Push a Trade.

The Market:
Earnings reporting season is just about to get started. This market has run for months on ‘hope and air’ – while a significant percentage of people are hoping to sell out around 10K – while Trillions of $’s more stimulus is waiting to be released – while Unemployment is still a disaster – while Fund Managers that didn't own the market are trying to get in, while etc. We’re coming to an interesting “no mans land” where virtually anything could happen. Earlier this week, the DOW hit 9937, just shy of taking a swipe at DOW 10K, but we rolled over a bit. We are in no hurry to try and go short, not with the very, heavy hand of Ben Bernanke and lurking in the background. Ben and the PPT can move this market 200 points in a day by firing off well-placed futures trades. After a run up of this size, one may have thought that a pretty good sized pull back might have been in order – yet the way we ended Wed/Thur/Friday (down 80, down 30, down 40) – nothing was dramatic or scary. That gives us the thought that they still don't want to roll us over yet. My guess is that the first half of the week is ‘weak’, and then by Thursday (the new month and quarter) they will try and work the market higher ahead of the big deluge of earnings reports. One thing is quite certain, any company that disappoints (such as RIMM in the short-term) is simply going to be slaughtered. If enough of the early reporting companies can pull off an earnings miracle and deliver “Happy Talk”, the market very well make that last big "blast higher" that sends us over 10K for a bit. But, if we don't see enough of them making the grade, there's probably a good chance the market will use those bad reports for the excuse to send us lower in a hurry.

Be careful out there and Don't Push Trades. There are too many forces acting on the market to have anything considering a real "market feel", and when things are like that, we like to be sitting in cash waiting for the next development, either up or down.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- AMZN is a darling – and should move up when the market heals
- UYM we've played many times – and a move over 30.40 brings me in.
- DBB is interesting if it gets over 19.
- JOYG over 50 is a very interesting position.
- BUCY over 36.30 brings me in
- CHNG is a China play on Natural Gas – I see accumulation there – a move over 13.35 and we’re in.
- PDC is a U.S. play on Nat Gas - a move over 7 is good
- AGT is a small (speculative) gold play – a move over 0.65 pulls me in
- FMCN a move over 11.00 could be very rewarding.

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 09-20-09

This Week in Barrons – 09-20-09:

Thoughts:
"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."- Irwin A. Schiff

Now, I have been a raging gold bull since June of 2000. Gold was in the pits. Britain was selling it left and right, and it was left for dead for the previous ten years. But we had a pretty good idea that rampant money printing (as the "American Miracle" was exposed to be nothing more than the unbridled use of massive credit and debt) would make gold an ever more valuable commodity. Because for 5,000 years, when all else went wrong, gold was found to be the only true "money".

All along the way (when gold was under $300), the ‘chart slaves’ kept exposing that the rise in gold wouldn’t last, the charts showed tops, and Fibonacci reversals, etc. Then we got the ‘chart slaves’ in line with the ‘gold haters’ in line with the ‘currency slaves’, who (in concert) told us that the dollar would go up, and gold would get slaughtered. Well – the dollar has continued to rise and gold has continued to rise.

A month ago we recommended GDX (as basket of gold miners). One of my friends wrote me (nervous) that he had found a chart technician telling people why the GDX was going to go 35, then 34 and then to 30 from it's current price of 37.50. The trouble with charts is that they cannot accurately reflect – data fraud – manipulation – and government subsidies accurately within the chart itself. Honestly, how can a chart tell you how many Chinese might buy gold once their Government removed the rules against personal ownership? In fact – why would Goldman spend millions to develop a high frequency trading platform and if charts could do it? Lastly – to further throw the ‘chartists’ off – the banks are using the stimulus money to play the market. Fund managers that didn't get in on the run up are desperate to get in at almost any cost because their bosses have a gun pointed at their heads saying "We’d better post gains this quarter!" and they are buying. So of course this begs the question: Is Ben Bernanke right? Are we out of the recession – like he said this week?

In my mind, being out of the recession means:
- People are being hired - yet we continue to lose a quarter million jobs each month
- People are keeping their homes and improving them – yet we just found out that another 300,000 foreclosures happened in August.
- If we were out of a recession - capacity utilization would be growing to "normal" rates – yet we are just a few ticks from the worst measurements since records began.
- If we were out of a recession - retail sales would be growing, yet they have been disappointing.
- Oh well – The Market’s UP!

Of course the market’s up – Ben engineered it to be up. Never forget his remark – when the market was down and the economic news was horrid – Ben said: “Consumer Confidence will rise with the gradual rise of equities". How did he know equities would rise? Simple, he gave banks money to play with. He’s using his executive "emergency" powers to buy stocks, and futures. He’s orchestrated a media blitz about green shoots and the recession ending.

The question is of course, how far does it go? Well if you believe that the job of the market is to confound, confuse and confiscate the most amount of money from the most amount of people – then it’s easy to see that while the market was crashing and people were panicking, and selling with both hands - they'd engineer a massive rally that punished all those people for selling out, and burning the shorts. So why did I pick 9600 as the "first stop?" Simple. There was some resistance at 9250, and I figured that if we got there, every chart slave would start screaming about a "head and shoulders" pattern on the DOW and how we would be doomed to roll over and test the lows. So the market would power up and through that, completely embarrassing all those chart heads, and even slightly exceeding the next resistance at 9500 – as it has.

But now:
- We have lots and lots more people desperate to get back in.
- Our leaders are telling us the recession is over.
- The retail investor is flocking back to the market in waves.
- And the market is patiently waiting to yank the rug on these late-comers to the party. Once it has decided that it has drawn in enough people, and Once enough shorts have covered and gone long, and Once it is convinced that most people think it's got further to go, the market will fall and fall hard.

When is that? I think it will happen when everyone begins to load up for a year-end rally. Now, will it happen in early October, or later – great question? A lot of people might get nervous about coming through Sept with no selling and back away in early October, which would of course make the market continue higher. Then if they came back in, in mid month, a major shakeout in later would be "perfect". So as you can see, the first 3,000 points were fairly easy to call. The next month will be increasingly more difficult.

The Market:
We had another positive week. We are in 8 positions, and all of them are higher – which has me incredibly nervous. And each time it appears that the market is ready for a “smack in the face” - the people who have missed the rally rush in and buy the dip.

I’d like to recommend that you take a look at one of my favorite plays à Silver – SLW. I like it over 12 – and on Wednesday it went to 13.25. I really like it on a pull-back because silver is going to go along for the ride with gold.

TIPS:
- we’re still holding MOO – agricultural space ETF)
- we’re still holding IPI – agricultural – potash arena
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG – natural gas space - @ 12.30 (sold remainder – up over 50%)
- TIE – commodities metals - @ 9.02 (hard stop @ 10.02)
- NBR – commodities oil space - @ 19.84 (stop @ 20.29)
- KWK – commodities coal space - @ 13.52 (stop @ 13.20)
- SLW – commodities metals - $12.50

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barons - 09-13-2009

This Week in Barrons – 09-13-09:

Thoughts:
This could be the Crime of the Century. It will be much larger than the Brinks robbery and the Manhattan Jewel heist combined. There will be no action footage on the evening news – nor will anyone realize it until years after it’s been completed. So what is this crime? It is the complete and utter raping and looting of the (non-super rich) American. The BANKERS have taken the American labor force, her resources, her productivity, her freedoms, her ambitions and finally her money. Senator Durbin said it best: “The Bankers now run the place.” This is coming from an elected official who is now admitting that he no longer has his hand on the ‘rudder’ but the ‘bankers’ do!
- People are feeling better - The preliminary September reading of the Michigan Consumer Sentiment index came in well above consensus (67.5) at 70.2. The reading in August was 65.7.
- Foreclosure filings topped 300K for the sixth month in a row, says RealtyTrac – up 18% from Aug. 2008.
- Unemployment is hovering at 9.7%
- RealtyTrac expects foreclosures to rise for another year – and that is not counting the shadow inventory of some 600k to 900k homes that have been kept off of the foreclosure markets so banks don't have to carry them as REO (real estate owned) that will come to market.
- That is NOT counting the "Pick A Pay" loans that are going to reset at the end of this year, or the Option adjustable-rate mortgages – both are estimated to an by 63 percent on average. These higher rates will likely push many of the already-strained loan recipients over the brink.
- That is NOT counting that between now and Dec 30, some 1 million people will exhaust their unemployment benefits. For hundreds of thousands of them, that unemployment was the only way they could make partial payments on their home.
- Our point – the media is telling us that housing has bottomed – and the fact is – it’s got 25% or more to go.

Also:
- The median income level fell 3.6% to $50,300, while the poverty rate increased to 13.2% from 12.5% - and naturally the number of people without health insurance increased. I really don’t care how inexpensive Obama makes health insurance - people with no job cannot buy it
- Corporate debt defaults have risen to 12.2% of companies, a number last touched in 1991, and is expected to rise to 13.2% in the fourth quarter.
- Corporate insiders are selling their stock rather than buying it at a rate of 30 to 1.

Countries are beginning to buy gold for their own reserves and encouraging individuals to buy gold as a "storehouse of value". With the dollar reaching new lows each day, gold is looking more and more attractive to people all over the world. AND on September 18th Tim Geithner has said that the Government will repeal the 3 trillion dollar backstop they provided to the money market industry. This will force people out of money markets – into Treasuries - keeping the interest rates low – and this should insure a ‘windfall’ for our friends the BANKERS!

The Market:
So far the market has put in 5 up days, and then on Friday it paused, giving back just 22 points. That's pretty amazing considering the true state of the economy, but always remember that the market and the economy are two completely different animals. Over the long term they do tend to coincide, but in short term time brackets, they are distinctly different beasts.

How long can we go up? Honestly, I we need to get the bulk of the lifting done before earnings start coming out in Late September and early October. That way everyone can blame poor earnings as the excuse for why the market is plunging. So I think the market holds up and even moves higher over the short term – and that should drag in the September worry warts, and then when satisfied – it will roll over and catch the longs. And, the shorts have slowly been capitulating, tossing in the towel. And yet there's no lack of people that don't buy this whole market – that are selling out and trying to find other places to put their money. So, many are starting to finally catch on to the idea that gold, silver and commodities might be the place to be if.

As you all know I've been a raging gold bull since 2000 – and I think we have a date with 1,500 per ounce and potentially more in the not to distant future. If the metal itself isn’t appealing – consider the GLD or the miners ETF.

I’m pretty confident that the Government, the Fed and Wall Street, are going to do their best to keep this rally going for a bit longer. If your playing stocks, keep your lot sizes small, and do NOT for any reason "invest for the long term" - that's suicide. Take ATPG for example – we bought in @ 12.30 – sold half @ 18.37 (52% gain in 5 days) and may sell the rest this week.

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- ATPG @ 12.30 (sold half @ 18.25)
- VRSN @ 22.02 (hard stop at 22.05)

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com

This Week in Barrons - 09-07-09

This Week in Barrons – 09-07-09:

Thoughts:
Sadly – as I pen this shortened letter on Labor day – I find LABOR is the one element that is missing from the American landscape.
- Friday’s Jobs Report said that only 216K people lost their jobs in August
- Friday’s Jobs Report said "unemployment rate" has climbed to 9.7%.
- The DAY BEFORE - 576,000 people signed for first time unemployment benefits.
- CURRENTLY 6.25 MILLION people are getting unemployment benefits weekly
- According to the BLS (Bureau of Labor Statistics) the ‘teenage’ unemployment rate is at 25.5%, its highest level since the BLS began keeping track of such data in 1948
- The U-6 (the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons) is 16.8% (according to the BLS)

Yet the market is happy because we ONLY lost 216k jobs – down from 700k+ jobs a couple months ago. But math skills are not our country’s forte any more. Currently:
- 78% of adults can NOT explain how to compute the interest paid on a loan.
- 71% of adults can NOT calculate miles per gallon on a trip.
- And 58% of adults can NOT calculate a 10% tip for a lunch bill.

My point is that we are living the "end game" of 45 years of ‘dumbing down’ the population – in order that the Bankers can actually run the show. The issue now is that the Bankers are losing control of the very ‘mess’ that they’ve created:
- Bankruptcy filings by U.S. consumers rose 24 percent in August compared with a year earlier and could reach 1.4 million this year
- WASHINGTON (Reuters) - More than 35 million Americans received food stamps in June, up 22 percent from June 2008 and a new record as the country continued to grapple with the worst recession since the Great Depression of the 1930s
- The second-quarter commercial mortgage default rate more than doubled from a year ago.
- Societe Generale strategist Albert Edwards warns stock markets, intoxicated by the mild recovery, are missing the big picture: "Firm evidence is emerging that the global economy is sliding towards a full-blown deflationary episode once this recovery falters..."
- CEO compensation at 20 banks that received emergency aid was 37% HIGHER than the average of CEOs at S&P 500 companies. In short, pay packages at banks "remain at levels completely disconnected from any real underlying value that executives may offer”

So, on this Labor Day - buy gold on any dip, accumulate silver, and keep your expenses down.

The Market:
September is historically the worst month of the year for the stock market. Over the past years (although everyone instantly things of October as being the "crash month") very few realized it was actually September that had the worst returns.

On the other hand – if the market's true "job" is to extract money from as many people as possible, is it just going to roll over and let everyone that went short, or pulled out get rewarded? It is possible, that a much better scenario is for this market to actually move higher in September, and then as everyone went from being short, to being fully long again, THEN roll over.

How long can we go up? If I'm right, I would think that they would need to get the bulk of the lifting done before earnings start coming out in Late Sept or early October. That way they could use poor earnings as the excuse for why the market is plunging. So it's my guess that the market holds up and even moves higher over the short term. Hang in there, as I said a week ago, the next few weeks could be the most interesting of the whole year!

TIPS:
- We sold some of our GDX (a basket of gold mining stocks) at a very handsome profit
- We sold our NGD (a gold miner) for 27% profit
- we’re still holding MOO (agricultural business ETF)
- we’re still holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.
- Also look at ATPG. A while ago we mentioned that it was looking good on a cross over 10 and it did that in grand fashion. Friday it challenged 12 and wiggled through. I like idea of it being a natural gas company, because Natural Gas has been beaten to death and at "some point" it's going to move up. Granted it probably won't be until October, but I think being a bit early isn't a horrible idea. It crossed 12, and then roared higher. If you like the idea and the chart, I think it's safe up to about 12.30 as a buy in. Natural Gas itself could easily fall another 50 cents before it firms. Let's call ATPG a longer term hold, and we'll give it a fairly wide birth before our stop-out - ATPG at 12.08 (stop at 10.80)

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This week in Barrons - 08.30.09

This Week in Barrons – 08-30-09:

Thoughts:
I’ve been fielding mail – many surrounding the same set of questions – how can government owned / operated institutions such as Fannie / Freddie / Citi / and AIG be doing so well – when but 3 months ago they were bankruptcy candidates – and by all counts – at least 2 of the 4 should currently be in bankruptcy? Along those same lines, I listen to people on CNBC tell me how AIG should be a $300 stock. So I ask you: “How many of the toxic assets have been retired?" Answer: “Who knows – but evidently the market doesn't think it's a problem". Then there is Ms. Blair (FDIC Chairperson) who honestly tells us that banks are in a whole lot of trouble and it's going to take years to sort it out. Their list of troubled banks has grown from 280 to 416 recently, all in the ‘red’ for over $299 Billion dollars, a 15 year high, and that (a) 28% of banks are now unprofitable, (b) Non-current loans now make up 14% of all loans (a normal range for that number is < 4%), and, (c ) charge offs have soared 48%. Oh, and did I say that the initial jobless claims came in at 570,000 once again. What I can’t figure out is how AIG can put Hundreds of Billions of dollars of toxic loans in the ‘mark to model’ category, the FDIC tells us that 416 more banks are in trouble – with 84 failing, people continue to lose their jobs at an alarming rate, and people are talking ‘green shoots’ and we are out of the recession?

Obama just appointed Ben "helicopter" Bernanke to another term. The market rejoiced – after all - where else can they find a gent so willing to completely indebt the middle class for decades on end, and at the same time collude to give bankers their bail out money, allowing them to make billions? My simple question is: Is Ben really fixing anything, or just delaying the inevitable? Aren’t we all a little bit amused when we hear: “Housing has bottomed” – and we find out that (a) Uncle Sam is giving away $8K dollar bonuses to first time buyers, (b) the FHA has lowered credit and income restrictions and is allowing 3% down payments, and (c ) banks have now started packaging toxic loans with prime loans and selling them as AAA again. Not to mention the tidal wave of foreclosures sitting "off the books" just waiting for the right time to hit the market.

Meanwhile, China is rapidly doing just about anything they can to get away from "dollars" and since selling them on the open market will crush the value of the ones they still hold, they've decided to go on a global shopping spree.
LOS ANGELES (MarketWatch) -- The president of China's well-financed sovereign wealth fund said his group plans a massive, ten-fold expansion of its overseas investment this year. China Investment Corp. President Gao Xiqing said the fund's foreign holdings will go from $4.8 billion last year to "several tens of billion dollars.” Allow me to clarify: China holds a lot of our dollar denominated paper, and they're trapped. Each day the dollar sinks in value, but if they try and unload them, the dollar will sink faster. So, instead they are now going to the market and purchasing raw materials, businesses, land, toll roads, etc. We are in the first stages of seeing a massive "dollar exit" and it could get ugly. That is why Gold and Silver are destined higher. If you don't have any of either, may I make a suggestion - get some.

One of the more interesting items we follow closely is the Federal Reserve, their monetization of debt, and of course the tug of war between the Feds and Senator Ron Paul – to bring you up to speed:
- The Federal Reserve, headed by Ben Bernanke is actually a private banking concern, and despite them making monetary policy for our Country, they will not allow ANYONE to see their books.
- Ron Paul introduced a bill that ask for a complete audit of the FED – who they were lending to, how they are actually monetizing our debt, and as you can imagine, they are fighting against that.
- Bloomberg had a question a bit ago – “Who’s getting the bail out money” – and the FED answers “none of your business.”
- Well Bloomberg took the FED to court – and the first court ruled for the FED – citing ‘state secrets’.
- Surprising – upon review – the appeals court overturned the ruling, stating that because the taxpayer was on the hook for this money - they should be able to see where it goes.
- The FED has gone ballistic, flooding the courts with all types of ways to block it, and appeal the ruling. The FED is saying that it's much better for us to guess, speculate and be completely in the dark about a bank’s integrity and possible insolvency.
- The FED is crying that if we don't let them do as they please with no oversight from anyone at any time, the system will collapse.
- I find it interesting, that if we were to go to one of their banks for a loan, they would make us produce documents proving our income, our payment history, money on hand, and assets. Yet according to them, WE the people (who are on the hook for the money the FED is doling out) have no right to see which banks are getting what because it might stigmatize them. Excuse me?
- You should do anything you can to help Ron Paul and HR1207 through the Senate! Remember the words of former Federal Reserve Board Chairman Arthur Burns, when asked about all the inflation he brought about in 1971 before Nixon's re-election, he said “The FED has to do what the president wants it to do, or it would lose its independence.” That’s’ about all you really need to know – yes? In fact, Chairman Bernanke stated on November 14th 2007, "A considerable amount of evidence indicates that Central Bank transparency increases the effectiveness of monetary policy and enhances economic and financial performance".

The Market:
We are coming into the single most interesting time of the ENTIRE year. The mad dash rally that started back in March has indeed been powerful, one of the most stunning run-ups since the monster bounce of 1933. But with next week running into the holiday weekend, with all the big hitters coming back from their stays in the Hamptons, the daily volume will indeed pick up, and they are going to "push" this market where they want it in the short term. But layered across all of that, we have major influences from several areas converging. For all the green shoot baloney and talk of a recovery, it seems that Insiders are selling at the single fastest pace virtually on record. Individuals who run the companies are not waiting for a higher market. Many (who got crushed in the down turn) are sitting there hoping for DOW 10K, so that they can pull their money out. Then of course the question: Where would the market go, to take the maximum amount of money from the most amount of people?

All these factors are going to come into play over the next 3 weeks. Remember back in March when we were predicting DOW 9600? Well we came to 9600 and abruptly stopped. And do you potentially think that some of that government printed money – has landed in Citi, Fannie, Freddie, and AIG – driving those stocks immensely higher (beyond all logic)? I’m having a hard time calling the next move, bit I see two very distinct possibilities. Scenario 1) We see the market slide (potentially heavily) this week – then when the big hitters come back after the Labor Day Holiday, we dip just a bit more and then "boom" another incredible push higher that takes us to 10K. Scenario 2) The market continues higher this week, and when the big hitters come back, we continue up for a few more days then out of the blue, "boom" down for a thousand points quite quickly.

Either of these scenarios are possible and they both make equal sense to me, and I do think that the dip is ‘buyable.’ The next 3 weeks will be the most critical of the whole year. I would advise using smaller trading positions and don't be afraid to take profits when they are available.

TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Auto Stop
- we sold NGD (a gold miner) for 27% profit
- we’re holding MOO (agricultural business ETF)
- we’re holding IPI (a potash hold – again in the agricultural theme)
- If you can hold your finger on the ‘sell trigger’ – there’s ‘daily’ money to be made in the volatility associated with Citi (C ), Fannie Mae (FNM), Freddie (FRE), and AIG (AIG) – but remember the ‘sell’ button.

If I dive into anything this week – it will have a hard stop associated with it!

Remember the Blog http://rfcfinancialnews.blogspot.com/

Until next week – be safe.

R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/

This Week in Barrons - 08-23-09

This Week in Barrons – 08-23-09:

Thoughts:
A Culture of Corruption:
Roll that around your tongue for a few minutes. Try and get the flavor of what it says. For example: an X-Credit Suisse broker was found guilty of fraud. Eric Butler, a former Credit Suisse (CS) broker, was convicted of securities fraud in connection to the sale of millions of dollars of subprime securities to corporate clients. Butler could face as much as 45 years in prison, though the judge said he's unlikely to impose such a strict term because Butler operated in a "culture of corruption." What is the judge saying. The judge is saying that the financial business is so filthy, diseased, and fraudulent that lying, stealing, and cheating are actually normal behavior. This is:
- why the SEC was no where to be found (on 4 separate occasions) concerning Bernie Madoff,
- or why GE had to pay a fine for announcing fraudulent earnings numbers,
- or why Paulson bailed out the crooked bankers that took down the system,
- or why Bear Sterns was assassinated,
- or why $2 Trillion dollars in bail outs has basically disappeared,
- or why the Term Asset Backed Securities Loan Facility needed to extend (for 6 months) their $1 Trillion dollar bail-out program (if things were going so well)
- or why Readers Digest just had to declare Chapter 11,
- and why we’re on track for a $2 Trillion dollar deficit – which is hopelessly beyond our ability to pay,
- and why some journalists are actually referring to the U.S.A. as a ‘Banana Republic’!

We’re coming off a $14 trillion loss of household net worth, which represents a 20% implosion of the consumer balance sheet coupled with a post-bubble credit collapse, which means that despite the government stimulus, despite the brave heroics of Jim Cramer and the PPT, the economy is going to be limping along for a prolonged period of time as savings rates rise and debt ratios decline.

However – on this anniversary of WoodStock please realize:
- Job suicides have risen by 28%
- Keeping up with rising food and energy prices and job stress have produced uproars at the "town hall" meetings
- Obama’s popularity is sinking like a stone
- In bad times (just like Woodstock) the silent majority wakes up and gets very, very vocal.
- The silent majority is saying: "Hey if I can't spend my way to glory, maybe the Government shouldn't either.” Because Thursday’s headline read like this: WASHINGTON (Reuters) - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week.
- The National Debt is growing at approximately $3.92 BILLION per DAY and is roughly $12 Trillion dollars.

On Friday night, three more regional banks failed. Then on Saturday, another one bit the dust. I believe that makes 81 this year, and 114 in the past 20 months. Our original estimate was for 550 to croak, and we are well on our way.

What about housing? The latest sales figures showed a jump in sales from 0 to $125k, a smaller jump from $125 to $250k, from 250 to $500k they were down and from 500 to $2 mill they were down over 30%. So, what we are seeing is twofold: (1) 31% of the homes bought were first time buyers taking advantage of an 8K dollar tax credit that the administration put in place as an incentive, and (2) 37% of the homes sold were foreclosures and distressed property. With millions more foreclosures waiting in the wings, and with the incentives to end in November, we can expect sales to slump once again – Housing has NOT bottomed.

What about manufacturing? The Philly Fed came in +4%, the first time in ages it was positive. However, employment in the index was -12%, prices paid were +10%, while prices received were -1.5%. So, with inventory at a minimum, they had to boost some production to replace and restock the shelves. But inventory replacement is a far cry from having to increase capacity utilization to meet strong demand. Like housing, this is a short-term phenomenon.

The Market:
Tuesday night someone popped a pin into the Chinese market and the Hang Seng fell hard. That rattled the world and mid-week our futures looked bleak at best. But on came the cheerleaders à CNBC and Jim Cramer were on telling us why the bear arguments were silly, china doesn’t mean anything, and that rising oil prices proves demand and that's why we should not worry. Then out of the clear blue, on no news, the market soared 100 points in 14 minutes. Why? Markets just don't move 100 points in 15 minutes for no reason.

Remember back in March, with the DOW plunging to 6600, we stated in this letter that we were on the verge of a massive rally that would go further than anyone thought possible, and we picked 9600 – and now here we are at 9505. However, this rally has lacked one thing – real ‘smack-downs.’ It’s missing the 200 and 300 point down days that are common in a Bear Mark rallies. My guess is that because the Fed and Uncle Sam are juicing this market with all they got, they've been able to keep the monster smack downs at bay.

Now do we continue higher, flirting with 10K soon, or are we ready yet to roll over once again and take some of the steam out of this? My guess is that we are working on forming something of a "short term blow off top" here soon. That means we could easily see several more strong up days, putting us in a massively overbought condition and then "poof" the air comes out and we put in a significant drop. Over the next week or so, I would not be surprised to see us reach up, way up, and then roll over and fall back.

Watch for the pace of the action to accelerate. As shorts scramble to cover and the media makes a circus out of the new highs, we could see multiple "fast gains", but I suggest you be very careful. It's fun riding the wave higher, it's not so much fun getting caught in the curl and wiping out. So, take this run for what it is, a bear market manipulated joy ride. Just don't overstay your welcome, because one of these days Mr. Bear will want to take another bite.

TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Auto Stop
- we’re holding NGD (a gold miner) @ $2.48 – hard stop @ 3.25
- we’re holding MOO (agricultural business ETF)
- we’re holding IPI (a potash hold – again in the agricultural theme)
- I still like CIEN over 14 if it gets there. There's a huge gap to fill from 14 to 17 it created last September
- I like PCX over 10.05
- I like CBI over 15.00
- I like MRVL over 14.30
- I like over 25.00
- I like BTU over 36

If I dive into anything this week – it will have a hard stop associated with it!

Until next week – be safe.

R.F. Culbertson

This week in Barrons - 08-16-09

This Week in Barrons – 08-16-09:

Thoughts:
The wheels are coming off the train. It's a slow motion train wreck, but make no mistake about it, the wreck is in progress.
- Toll Brothers released earnings – Q3 signed contracts were up 3%, and revenues down 5% from a year ago. Deliveries were down 36% and 42% respectively.
- Home foreclosures rose 3.8% - so of those home sales – 36% were foreclosures – with the median price of a home sliding 15.6%. So much for Cramer’s call for a ‘housing bottom’ (two months ago)!
- FACTUALLY -- We are currently running 18.7M home vacancies (that’s not counting new homes unsold) – but ONLY 3.8 of those homes are for sale! That means that 14.9M homes are NOT even being offered for sale because the banks that have foreclosed on these home (14.9M of them) – as soon as they put them up for sale – will need to do all the paperwork on them – show the loan losses for what they really are – and potentially file for ‘bankruptcy’ protection themselves. So these ghost homes sit vacant – for the time being.
- Reuters came out and said that almost 48% of the people in 2011 will owe more on their houses than what they are worth!
- Maguire Properties Inc., one of the largest office-building owners in Southern California, is planning to hand over control of seven buildings with some $1.06 billion in debt to creditors, the latest sign that rising vacancies and falling rents are causing stress in the commercial real-estate sector.
- Over the coming months – as many as 1.5M jobless Americans will exhaust their unemployment insurance benefits – now do you suppose that just some of those 1.5M people might have homes that they are just barely clinging to?
- Thanks to Steve F. for contributing → From the perspective of second quarter GDP, it appears that it has been revised downward to -1.7% from -1.0%. Along with the Census Bureau reporting that sales and manufacturers' shipments although improving – the recovery will have a long way to go, as sales are still down 18% since June 2008.
- On Friday the regulators closed 300+ branches of Colonial BancGroup – a major lender in the real estate development market.

Now let’s look at the working ‘Average Joe’ in this country.
In 2007, the latest census bureau reading, the "average household" takes in was 50,233 dollars. Now, the median income per household member (including all working and non-working members above the age of 14) was $26,036. Now, if you start to take expenses, and taxes out of that income, we come up with a shocking problem - life costs more than the ‘Average Joe’ makes. The only true reason we as Americans have lived life so very high on the hog – for so long - has been CREDIT. With both parents already working – the cost of life exceeding wages – the only logical movement is to have (wage earning) children move back in with parents – in order to reduce costs and potentially increase earnings.

But it's not just jobs, falling housing, crashing Commercial real estate - this is just the warm up pitcher. (Reuters) - Banks in the United States are poised to make $38.5 billion in customer overdraft fees this year, citing research by Moebs Services. A large portion of the revenue is likely to come from the most financially stretched consumers, according to the paper. Many banks have increased charges on overdrafts and credit cards in order to boost profits. Banks are returning to a fee-driven model and overdraft fees are the mother lode. Overdraft fees accounted for more than 75 percent of service fees charged.

So how’s this playing out in the rest of the world? The Baltic Dry Index (one of the best indicators of true growth we have) – has crashed because the global economic crisis is wreaking havoc on shipping. Ports are filling up with fleets of empty freighters. We’ve never had a shortage of ‘cargo’ before – and this crisis has fueled cut-throat competition and not all companies will survive.

What's really happening is the "monetization" of all our debt. Don't forget – the FED has pledged to buy $1.2 trillion in mortgage backed stuff, and several hundred billion in straight treasuries. This money goes straight into the major investment banks – who are buying up stocks and commodity futures. When we let "them" change the rules and allowed assets to be market to fantasy versus marked to market, the banks were allowed to carry all their toxic sludge, without accounting for it's true value. So, they took the TARP money, and all Bernanke's monetization money and went to work in the markets.

This is NOT an accident, however we are in completely unexplored territory. Never before, and I mean NEVER has the world been in a synchronized recession, while at the same time operating on Fiat currencies. To think that all these Central bankers are going to be able to pull the right levers and push the right buttons to right this ship is just beyond my scope of imagination. I don't believe they can pull it off correctly. In other words, it's my guess that the truly worst of this nightmare lies ahead of us, not behind us. Nothing has been fixed, all we've done is rearrange the chairs on the Titanic. Please continue to buy gold and silver as they are the only two things that have a shot at remaining valuable.

The Market:
Last Week's Insiders Transactions: 10 Buys For $60 Million, 136 Sells For Over $1.15 Billion. NOW, if all these company insiders really thought things were as rosy, wouldn't they be BUYING their own stock?

My ‘recent’ bottom line is that the market will always do what inflicts the most pain on the most people. At this point in time, who would stand to take the biggest beating over the next week? Would it be the shorts as the market just plows higher, or the bulls as it rolls over? Unfortunately the cries are pretty even from both sides, and that is a major problem. There's an awful lot of people screaming that this market is overdone and needs a rest. But there's also quite a few saying that with the stimulus coming, the "better" earnings, the shot at a positive GDP because of inventory rebuilding, we are going higher. The camps are so equally divided that I can't get a real feel for whom the market is going to "smack".

Now I understand that this isn't how you were taught to invest. You were taught to invest in good companies with stable incomes, and pay attention to their earnings, etc. The new game is simply "which way do the criminals want the market to move?" For an example of how that works, from March to June – we had a stunning run - better economic numbers - analysts preaching we were going to the moon - people were buying hand over fist – then from 8800 in early June to 8051 on July 10th – the late comers to the party got seriously singed. Then the guru’s started screaming that the market was putting in a "head and shoulder" pattern and it was going to plunge for over 1000 points – people got nervous – started taking profits and going short – we said that this market ‘will go up’ – and it went from 8051 to 9466 – again burning the maximum amount of people.

Now, in the big picture, I think this rally still has legs – but my guess is in the short term we see some more soggy, sideways trading with a slant to the downside for a few days. But if chorus for "the market is going to tank" gets louder and louder, it will blast higher.

TIPS:
- we’re holding the GDX (a basket of gold mining stocks) with No Auto Stop
- we’re holding NGD (a gold miner) @ $2.48 – hard stop @ 3.25
- we’re holding MOO (agricultural business ETF)
- we’re holding IPI (a potash hold – again in the agricultural theme)
- we sold our XLK (a technology (minus healthcare) ETF)
- we sold our DIA’s @ 84.45 with a stop @ 93
- we sold our SPY’s @ 91.97 with a stop @ 100
- we sold our QQQQ @ 36.26 with a stop @ 39.40
- we sold our UYM @ 22.11 with a stop @ 23.40 → all with nice profits across the board !!