This Week in Barrons - 10-23-11

This Week in Barons: 10–23-11:

Your Single Best Investment

People forever ask – What’s your single Best Investment? Was it in stocks, bonds, gold, silver, or real estate? My answer has been the same for over 20 years – None of the above! It’s been in Education! The single best investment you can make is in educating yourself and/or the people around you. You are witnessing a global economic implosion that will eclipse the 2008 debacle, and things are just beginning to fray at the seams. People are becoming outspoken. Consider the “Occupy Wall Street” crowd. Right now they are a fairly peaceful group, but just this weekend 139 of them were arrested in Chicago. Consider what’s going on in Greece. On Friday we watched fires being set, petro bombs being tossed, and cars being overturned. Things are becoming desperate, and there's still no real way out. Heck, crime in certain areas of New York City is up 250%. Therefore, instead of arguing whether things are going to disintegrate into some re-enactment of “Mad Max”, let's think about what I consider to be the most important thing you can be doing right this minute. Educate yourself on your ‘options’, because that is going to be a very valuable skill as this economic train wreck continues. Most importantly – Don’t be an ‘easy mark.’

Factually:
- U.S. Underemployment has reached 17+ percent = 26 Million people
- Misery Index (inflation + underemployment) = 5+ and 17+ = OVER 22%
- Bank of America Corp. was hit by a credit downgrade and is moving all of its derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, so that if those derivatives fail (which they will) – the FDIC and we (the U.S. people) will be responsible for keeping them solvent!
- Pete M reminded us of a line from the Carter – Reagan debate: “We have inflation because the American people are living too well," says Jimmy Carter. “We have high inflation and high unemployment because the government is living too well," responded Ronald Reagan.

Wealth creation is a long and arduous process. Understand that it’s a discipline as much as it is a vision. In many cases it’s like ‘watching paint dry’ – but if you understand and listen to what is going on around you – you can then avoid the areas that are the most volatile. The world is upside down, and the economic unrest is making things worse.

The Market:
I said last Sunday that this past week would be one of the most important weeks of the entire year, and thus far that's proven to be true. The market was battling within a trading range of between 1125 and 1225 on the S&P. As we would approach the highs of the range, we would regularly bounce off of them and plunged down to the 1125 support level. For 3 days in a row, the market attacked that 1225 high and got repelled. Then on Friday it pushed up and broke over and out of that range, closing at 1238. There was much joy on the set of CNBC, and everyone was giddy with excitement. Is the market now set to run to the next S&P level of resistance at 1260? Is it finally time to pile in and ride the big wave?

I'd love to tell you YES, but I can’t. Why - because you need to consider the reason the market moved up in the first place. The market isn't moving on earnings or fundamentals. The market is moving on the hope that Europe has a plan to ‘carpet bomb’ it's members with Trillions of Euro's in order to bail out the banks and sovereign funds that are bankrupt. Unfortunately there us no such plan. We are going to hear about that plan on Wednesday of this coming week. Now, do I think that upcoming plan will encompasses several Trillion dollars, and solve all the immediate problems? Sorry, I don’t believe that we will. They've been “kicking the can” down the road now for months – making plans to make plans; therefore I am just not convinced that they are going to pull this off.

Do you know why Timothy Geithner has been travelling around Europe, begging and pleading for them to "get er done?" Because Timothy knows that some "very bad" things have been happening. In the past couple of months, U.S. money market funds have pulled approximately $400 Billion out of Europe. And with that much money leaving the European Banks and Investment Houses, it creates more debt problems for the Euro Zone. But because JPM, Citibank, Goldman Sachs, and many others have CDS’s (credit default swaps) written against these banks and sovereigns; when they go – we go because our financial houses do not have that kind of guaranteed money either! Timothy also knows that he can not get more bail out money out of Congress; therefore he’s seeing his friendly banks going ‘kaput’ – and hence his heavy travel schedule!

Will the International Monetary Fund (the IMF) come to Europe’s rescue? Will the German people allow their economy to be wrecked, so they can bail out the Greeks that still want to retire at age 50 with 100% pay? Is France strong enough to truly prop-up Spain? Are there really enough printing presses in the world to paper over the nightmare that Europe has become?

We rallied up and over a very important breakout level, and momentum could push this higher Monday and Tuesday. But will Wednesday’s Plan truly be enough? Currently I have my doubts.

We are "leaning long" into this rally, but I'm not ashamed to say that it's got me a bit scared. There is absolutely NO volume on these up days. On Friday when the S&P market got "up and over" that 1230 level we only traded 3 Billion, 765 Million shares. When the market was crashing on October 3rd – we traded over 5 Billion shares. When it was crashing back on August 8th – we traded 7 Billion, 491 million shares. I’m not inspired when there is huge volume on the big ‘roll-over’ days – and mediocre volume when we push over resistance level that was attacked 4 times.

I don't think we get a grand plan out of Europe, and I don't think they can pull it off if we get it. But, how our market deals with that has yet to be seen. With the lack of break out volume, I won't even be surprised if we sink back on Monday. However, pure momentum should keep us up, but I also tend to think that ammunition is running scarce about now. Mutual Funds are still losing money via redemptions. The bottom line is that if Europe doesn't come up with something substantial, I can easily make the case that we're going to plunge and plunge hard by the end of the week. It's something we have to all be aware of and be prepared for.

Tips:
In the short-term holdings account I’m carrying:
- SPY at 108.54 – now at 124.20,
- NTES at 42.43 – now at 45.60,
- GLD at 157.49 – now at 159.90,
- SLV at 28.00 – now at 30.46.

I did take some profits last week – but there’s still some more there to be taken. I’ll hold them for a bit longer just to see. If on the other hand things roll over, I'll cash out and play some short side using HDGE.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-15-11

This Week in Barons: 10–15-11:

This Seat is ‘OCCUPY-d’

Remember the 70’s – when "Enough was Enough!" I’m sensing the same energy in the Occupy Wall Street movement. What's it about? Is it really a Socialist movement inspired by the Unions? Is it some radical movement started by an underground network of revolutionists? Or is it as Jim Rickards suggests: “In America, we generally go about our private business and rely on elected officials and appointed bureaucrats to take care of the government. When protest arises, it's a sign that government is not doing its job, or not doing it in a way that serves the people. Elections are fine for gradual change, but sometimes immediate change is called for when government fails the people utterly and repeatedly in important ways. Such is the case with the Occupy Wall Street movement and its "Occupy" variations in cities around the world. Governments have failed to stop the concentration of wealth, the concentration of financial power, the proliferation of derivatives and the metastasizing of systemic risk facilitated by unethical, self-absorbed and shortsighted bankers. So the people respond.”

Now you can laugh at or disparage the demonstrators all you want. You can single out the fringe and think it's un-representative of the whole. But that won't change the fact that this demonstration has touched a nerve. A rag-tag group is standing up where the government, regulators, media and business elites have rolled-over and played dead. Thus far, this has been a peaceful uprising. But history shows us that there is a very good chance of escalation. Armed clashes are NOT out of the realm of possibility. Martial law in various cities is NOT out of the question. But perception is tricky stuff. No one knows where this all goes. My hope is that some of the younger freshmen politicians listen to the gripes, and start to make the changes that we know need to be made. Most “Occupy” protestors would be happy to go home if they could see some true government leadership. We are witness to an uprising that's not bound by territory or border. We're seeing a global spread of voices that are tired of being the ox that shoulders the burden for the elite.

The Market:
In terms of the market, we are at the biggest moment of the year. From the lows just 9 trading days ago, we've run from 10,404 on Oct 4 to 11,644 on Friday's close. Couple that ‘inflection point’ with Bill Pimco’s apology this week: “The simple fact is that our portfolio at midyear was positioned for what we call a “New Normal” developed world economy – 2% real growth and 2% inflation. We have now revised our internal growth forecast for developed economies to be 0% over the coming several quarters and our new portfolio more accurately reflects this posture.” WOW – 0% growth ahead! A recession is two quarters of negative growth – and negative growth is just one click away from zero – yes?

Followed by Pimco’s CEO Mohamed El-Erian – when ask about the global economy responded: “I’m between concerned and scared. We are watching three distinct, yet inter-related forces: poor economic growth, excessive contractual liabilities, and disappointing policy responses. The result is that western economies are getting trapped by the lethal combination of an unemployment crisis, a debt crisis, and mounting fragilities in the banking sector. The longer this persists, the greater the risk that even the healthiest parts of the global economy will get dragged into a prolonged period of economic and financial stagnation.”

I said last week that we would probably move up to challenge the resistances on the S&P at between 1220 - 1230. Well, Friday we ended the day at 1224. The question is: Do we blast through it, or does the air come out? On October 4 people were in a panic. We had every chance at really witnessing a crash that took us down to DOW 9K. I think that The Ben Bernanke called his Euro buddies and got the rumor started that changed the whole scene. The rumor of course was that the European Leaders had a plan to make a plan. The market reversed course in the last trading hour of that day, going from being down over 100 to being up over 200. From that day onward it simply marched straight up. However, the volume has consistently fallen each day as we've gone up. Mutual funds continue to show Billion dollar outflows – again! The economic news has been mediocre at best. So, I can indeed say that on one hand this has been a manufactured head fake rally, with the goal being to create "headroom" – just in case we received declining earnings and/or got more nasty European news.

And on the other hand, J. Q. Public is still scared. He's been pulling money out of his 401K to survive. The market’s ‘Talking Heads’ have repeatedly told everyone that we're range-bound and that when we get to the top of the range (where we are) you should sell out, as we'll sink back down. So, what happens if we push up and over 1230? Pushing over 1230 will ignite a frenzy of algorithms that will fire off a lot of orders, and will have J. Q. Public screaming to their fund managers to "buy-buy-buy!" So, we could see an enormous move higher that compounds on itself, and runs us up to the 1275 level in no time.

But don’t forget that this is all ‘supposedly’ because Sarkozy and Merkle have devised a plan to make a plan. The Plan is supposed to be released on or before Nov 4th. What if the plan is not good enough? What if it's not big enough? What if they find $4 Trillion? My point is, you can make the case that we roll over, you can make the case that manipulation wins out and we push over and soar for another two weeks. But no matter what happens, we have another big situation coming when they announce the "Plan".

Currently I’m thinking that no one expects the market to make it past this resistance, so it probably will, and we will spurt higher for a bit. If we get past 1230, all the shorts are going to cover in a panic, and we would see a fast pop to the upside. It could then build on itself and continue to roar as more and more figure the train is leaving the station. But be careful because it could be the last "hurrah", and it could roll over violently just after achieving new recent highs, crushing those that covered their shorts.

Tips:
I’m currently carrying a lot of short term long positions:
- SPY at 108.54 – now at 122.57,
- NTES at 42.43 – now at 45.46,
- RVBD at 22.17 – now 23.41,
- RHT at 46.03 – now at 47.44,
- RMBS at 16.04 – now at 16.61,
- GDXJ at 29.01 – now at 31.04,
- GLD at 157.49 – now at 163.40,
- SLV at 28.00 – now at 31.34.

There's a lot of profit sitting there for the taking, but we could see the market head fake everyone and push even higher, so I'll hold them for a bit longer just to see. If on the other hand things roll over, I'll cash out and play some short side using HDGE.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-9-11

This Week in Barons: 10–9-11:

“As for Steve Jobs in Heaven – the ‘Pearly Gates’ are probably more of a ‘Brushed Aluminum’ and let’s NOT call them ‘Gates’”! … Paula Poundstone

Steve Jobs passed this week and I read a marvelous piece by Firas Raouf of Openview Partners on his passing and I’d like to quote one line: “Thank you for making it possible for my 80-year-old mom to start interacting with the world online. Until we bought her an iPad last year, my mom had never used a computer, had never texted, emailed or IM’ed. Had never read anything online, and only had the phone as her way of interacting with her children and globally dispersed friends and family. Because of your vision of building tech products with intuitive and delightful user experiences, my mom was able to make the leap online with pretty much no training or pain. Thank you!” I certainly share Firas’ thoughts, and my wishes and prayers go out to Mrs. Jobs and family. He certainly made a difference, and will be missed!

Shifting gears – BET founder Robert Johnson on the "FOX News Sunday" program said: "I didn't go into business to create a public policy success for either party, Republican or Democrat. I went in business to create jobs, to create opportunity, and to create value for myself and my investors. And that's what the President should be praising, not demagoguing us simply because Warren Buffet says he pays taxes more than his secretary. Mr. Buffet should pay his secretary more and then she will pay more."

I was always taught, if you're playing poker and you haven't figured out by the third hand who the ‘stooge’ is – it’s YOU! That's sort of how I feel about how we’re being played about now. We all see "Occupy Wall St" folks protesting, and many of them don't have a clue what or why they're protesting. As a society we were ‘sold’ on an idea that:
- We could be a consumption society;
- We could consume ourselves to wealth;
- We could be a "service" society instead of a manufacturing society;
- Debts don't matter;
- We don't need a currency pegged to gold;
- Letting ‘banksters’ run free was a good idea;
- Giving houses to people with no way to pay for them was a good thing;
- The rich were evil;
- And competition might hurt ‘Little Johnny's’ self esteem!

The other day President Obama was interviewed and he said: "No! People are not better off than they were 3 years ago"! That's probably the only honest thing I've heard come out of his mouth in 3 years.

Factually:
- The Bank of Italy Deputy Governor sees a genuine risk of global recession, and calls for global monetary standards to safeguard savings.
- The U.S. Bank exposure to the Euro crisis may total = $640B!
- Wells Fargo may face a $8.79B cost for soured 2nd liens.
- Spain's credit rating was cut 2 levels on the spread of debt crisis.
- The housing bust is the worst since the great depression!
- Italy's credit rating was cut to A+ and Spain's to AA-, describing the outlook for both as negative.
- U.S. needs to generate 261,200 jobs per month to return to pre-depression employment by end of Obama’s second term.
- Consumer credit has contracted the most since May 1998.
- Portugal's credit ratings may soon be cut to junk!

My fear is that the U.S. cannot return to the glory it once had, when the things that made us great are now against the law.

The Market...

So, just how bad was the 3rd quarter? It was ugly! Hedge funds (in equities) lost on average 9.5%. Mutual funds saw massive outflows again. People are scared and rightfully so. For many years it was very fashionable to be a "contrarian" investor. You know the old adage: “Buy when there's blood in the streets. Sell when everyone else is clamoring to get in.” Thus you can make the point that this should be the greatest time to buy stocks we've seen in 80 years. People are scared, pulling out, the VIX (volatility index) is high, the economy's a mess, and the politicians are at each other’s throats. Could it get any better for the contrarian?
- Since the April highs we’ve seen the DOW fall from 12,800 to 10,400.
- We've seen unprecedented volatility.
- We've seen Europe continue to erode, now to the point where we're about to see our first outright defaults.

The problem with "Buying when there's blood in the street" is that they never tell you how deep the ‘blood’ is supposed to be before you buy. Is it deep enough when Greece defaults? How about when Spain rolls over? What about when the U.S. banks (that may have $640 Billion worth of exposure to Europe) take hits? It’s been several years since:
- TARP,
- The roll-outs of the stimulus plans,
- "Cash for Clunkers" and the 1st Time Housing Program,
- The reworked re-financing program,
- QE1, and then QE2,
- 9.1% unemployment (which is actually 16.4%),
- Falling housing, Higher national debts, No savings, and More senseless regulations!

Although the market is NOT the economy, and often goes in the opposite direction for prolonged periods, it usually does square up at some point. Supposedly the world is so smart that the market will start to rise 9 months ahead of an economic pickup. Then as the market runs and runs, the economy usually starts moving higher and higher, and then slowly the market will roll over and drop (while the economy still seems strong) and then finally the economy follows the market lower again. Over and over this has been the cycle.

So, for the market to start moving significantly higher from here, the worldly wizards would have to be thinking that 9 months out there's going to be a nice pick up in activity. If so – just where is the economy going to get the "oomph" from to fix itself in 9 months? It's been my premise that until The Ben Bernanke comes out with a true monetary stimulus plan, the market will be soft. And to that end, since June 1st the DOW has continuously made lower highs! That is not a pattern of strength. This week kicks off earnings season and CNBC is going to be foaming at the mouth as company after company announces they beat estimates by a penny. Yet how are they going to do it – layoffs! Layoffs have risen 117% percent this summer. So companies are making earnings (yet again) by cutting jobs, accounting tricks, and currency swaps.

Technically speaking – if the DOW can't get up and over 11,239 (which is the 50 day moving average) and put in a few solid closes, we have to imagine that we’re moving lower! I still think we go nowhere but sideways and down until The Ben Bernanke caves in and puts a $ Trillion more in the bankers hands. If the DOW were to hold up over the 50-day average, they could use the "great earnings" to try and power us up to the 11,600 level, where the next real fight will take place.

The economy has no reason to improve in 6 to 9 months; thus except for wide range ‘mood’ swings the equity market has no reason to improve and start a bull run. The risk is defined to the downside for now. But if The Ben Bernanke releases a huge stimulus, then we will indeed roar higher, kicking the can further down the road – but until then we're in danger, and short-term trades are the only game in town.

For Monday the action will be dictated by which rumor comes out of Europe over the weekend. Then (on Tuesday) earnings start with Alcoa. From there on out, sectors will be cheered or jeered depending on what the companies say, which will cause our insane market fluctuations to continue. Some have written in asking if my prediction of DOW 6,000 is still inline. Absolutely. I can't say when, but we could be on our way there right now. However, we do know The Ben Bernanke will come up with a spare $ Trillion to try and abort that. And we also know that the stimulus will wear off and we'll sink again, and the cycle will continue. This could go on until 2013 – but at some point we will sink back to those 2008 lows.

Am I still in love with gold and silver? Yes on both counts. I don't care how either of them behaves in the short term. I'm looking at them for the 2013 time slot. As Europe defaults, as currencies get kicked around, as economies slow – I don’t think people are going to be fast to "rush back" to fiat currencies. Some will want the metals and I’m in that camp.

Tips:
This week I sold my DIA put options for over $6, and since we purchased them for $2.80 we are very happy about that!

In my short-term holds I have DOG, and SH (that are inverse ETF’s focused on the market going lower). I also have GLD and SLV. As I looked out across earnings season - this week I purchased some miners: FCX at 34.53 and some GDXJ at 29.01.

As this market continues it’s sideways and down movement – look at HDGE – a very nice ETF you can use to play the downside. It has moved from $20 in May to being closer to $30 right now!

This market is NOT for the weak of heart.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-2-11

This Week in Barons: 10–2-11:

Laughing at our mistakes can lengthen our own life; however, laughing at someone else’s can shorten it! … Cullen Hightower

In a grim final speech as Kansas City Fed President, Thomas Hoenig said that he expects U.S. economic growth to lag behind historical norms for generations, and that Fed policy has done more harm than good: "When you encourage consumption by inhibiting your interest rates from rising to their equilibrium level, you will in fact buy problems, and we have in fact bought problems."

Wow, now there's something you will rarely hear – a Fed head telling us that we're going to be slugging it out for years on end and that their path was a mistake. But of course - he's retiring and no longer a part of the decision process at the Fed, and therefore no more backlash from The Ben Bernanke. Thomas Hoenig realizes that this recession, this debt load, this nightmare cannot be fixed using monetary policy. But meanwhile, the US economy has been slowly and deliberately eroded by inflation, falling wages, lower paying jobs, and more ridiculous regulations. Can we fix the economy – of course – but it would mean short term pain for some, because it would mean disbanding hundreds of government programs that hinder real growth, and then we’d have to take control of our money back from the Banksters. Remember when we had the single greatest economy on earth. If a child was failing in school, he was held back and made to study. Today the reading scores for high school seniors have hit the lowest level ever recorded. If we compare various elements over the past 20 years or so:

Ex #1: Johnny and Mark get into a fistfight after school.
20 Yrs Ago: A crowd gathers. Mark wins. Johnny and Mark shake hands and end up buddies.
Now: Police called. Johnny and Mark are charged with assault, and both are expelled even though Johnny started it.

Ex #2: Jeffrey ‘fidgets’ in class, and disrupts other students.
20 Yrs Ago: Jeffrey sent to the Principal, given a paddling, returns to class, stays still and doesn’t disrupt class again.
Now: Jeffrey given drugs, and the school gets extra money because Jeffrey has a disability.

Ex #3: Billy breaks his neighbor’s car window – Dad paddles Billy.
20 Yrs Ago: Billy is more careful next time, grows up normally, goes to college, and becomes a successful businessman.
Now: Billy's dad is arrested for child abuse. Billy is remanded to foster care and joins a gang.

Ex #4: Mark gets a headache and takes some aspirin at school.
20 Yrs Ago: Mark offers an aspirin to someone who also has a headache at school.
Now: Police called, and Mark is expelled from school for drug violations.

Ex #5: Pedro fails high school English.
20 Yrs Ago: Pedro goes to summer school, passes English, and goes to college.
Now: ACLU files class action lawsuit against the school system and the English teacher. English is banned from the core curriculum. Pedro ends up unemployed because he cannot speak English.

Ex #6: Johnny takes leftover firecrackers and blows up a red ant bed.
20 Yrs Ago: Ants die.
Now: Johnny charged with domestic terrorism. Johnny's Dad goes on a terror watch list and is never allowed to fly again.

Ex #7: Johnny falls while running during recess and scrapes his knee. He is found crying by his teacher, who hugs and comforts him.
20 Yrs Ago: In a short time, Johnny feels better and goes on playing.
Now: Mary is accused of being a sexual predator and loses her job.

Many of the companies that you buy stock in were first created in someone's kitchen, basement or garage. Because they were so good they grew, necessitating a move into a true factory, employing thousands. Now, you’d be arrested because that ‘garage’ would have to acquire "commercial" business permits that do little more than dissuade innovation. But no politician is going to stand up and tell the American public that to be great again, we need to go back and disband the EPA! Since the EPA showed up – we have lost over 50 Million high-paying jobs. Honestly, if TARP didn’t create jobs, and if QE1 and QE2 didn’t create jobs – why do we really think that pushing trillions more stimulus into the economy will have any effect?

The Market:
It’s been another roller coaster week. We saw the market gain 300 points on Tuesday, only to lose more than half. We saw the market up 117 Wednesday, only to end the day down by 179 points. We saw Thursday gain us 255 points by mid day, and tumble all the way down to DOW -41 by 3PM, and then rally all the way back to + 143 points end of day. Welcome to the world of high frequency trading.

So will the market roar higher or roll over? I can honestly make both cases, but here's something to consider. As you can figure out, all the schemes they're cooking up in Europe are 1 - not working, and 2 - probably not able to be implemented. So, we could be facing a Greek default any day. And if that were to happen, I suspect the immediate reaction would not be a good one.

I'm hearing that Germany has already begun printing Deutsche Marks. I can't confirm that, but there are more rumors swirling around Germany announcing that they want out of this ‘Euro’ thing. What happens if that announcement is made? A cascade of crazy things (and none of them are good) will happen – at least in the short term. But on the other hand, we could very likely see The Ben Bernanke come out of left field with a whole new round of stimulus on any particular day. So, with all those plates spinning in the air, to make any real predictions right now is silly. I feel the market wants to fade off and fade off hard, but if a few trillion in stimulus were announced they'd start to ignore all bad news and push us higher, because they can.

I've been carrying some short positions all week, and although there were times when they were not profitable, we ended the week in positive territory. I tend to think that we'll see more downside until The Ben Bernanke comes out with some form of stimulus pump. The issue of course is that it will happen after hours, and we'll gap up 300 points that day.

The bottom line is that we're mired in a horrible situation that really cannot be resolved without pain of some form. Therefore, you need to remain pretty cautious. One thing I feel strongly about is that whatever the course of action that they try, it's going to involve printing money, money that the world doesn't need to have pushed onto it. Gold and silver will naturally react to the upside. The recent bear raids on Gold and silver frightened a lot of folks, but for me, it was simply a buying opportunity at discount prices. ‘The Talking Heads’ say that the gold run is finished, but they said the same thing with gold at $500, $750 and $1,000. While funds have lost investors 28% this year - Gold is up on the year!

Tips:
This week I purchased more DOG, SH, GLD, SLV, and purchased more physical gold and silver as well.

I have DOG, SH, GLD, SLV in my short term holds, along with some Oct DIA 110 put options at 2.80 per share.

I am not going to put a stop on these, and still looking to add to physical metals on their down days. This trade isn't for the weak of heart.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 9-25-11

This Week in Barons: 9–25-11:

Face: “Murdoch, what’s going to happen?”
Murdoch: “Looks like we’re going to crash!”
Face: “Murdoch, what’s really going to happen?”
Murdoch: “Looks like we’re going to crash and die!”
… A-Team

This week everyone looked on anxiously as The Ben Bernanke pushed his one-day FOMC meeting into a two-day affair. The market was hoping for some real stimulus, but unfortunately all The Ben Bernanke gave us was the interest rate ‘twist’. And following that, we crashed for 600+ points in two sessions!

I have to admit, I thought (due to The Ben Bernanke’s thinking that the Great Depression could have been cut short if the government had just printed and shoveled more money into the system) that The Ben Bernanke would indeed let loose a ton of true monetary stimulus. I truly felt that he would cut the interest rate that the Fed pays to banks for their excess reserves, basically forcing them to push the money into the markets and into loans. And then there was Vice President Biden publicly saying: “What we need is more stimulus". Well, ‘Surprise’ - he didn't do any real stimulus, he simply gave us the interest rate ‘twist’, where he starts buying up longer term paper to lower the 10-year interest rates. Well, if you aren’t buying a home at 4%, it’s doubtful that 3.8% is going to even raise an eyebrow. The part that I got right was that if we didn't get some true stimulus, (if all he did was the ‘twist’) we were going to ‘roll over and plunge, and plunge hard.’ On Wednesday afternoon (after the decision), the DOW fell 280 points and Thursday (at one point) was off 530 and ended being off 395 points. So there was a point where the market was off well over 700 points in 1.25 days.

Now, as we told you Tuesday on Twitter, we sold out of all of our trading positions. However, knowing that if The Ben Bernanke cut loose with a ton of true stimulus the market was going to roar higher - you'd naturally wish to buy a CALL option (because calls pay you when the stock goes up). But we also knew that if The Ben Bernanke didn’t do anything, the market would fall, and therefore you should own a PUT option. We bought the October call options for about 2.60, and the October Put options for about 2.85. When the announcement came, we knew that it stunk and promptly sold the call options. When the market lost 240 points Wednesday, we ended the day profitable on the Puts. And when it fell another 500 points on Thursday, those puts had gone from our purchase price of $2.85, to over $6.00 – a 100% gain. The point being – we laid out all the reasons why The Ben Bernanke should reduce the reserve requirements – but he didn’t – and as part of ‘The Backup Plan’ – the strategy was to take advantage of the volatility that we knew would come.

OK - onto the Precious Metals. Everyone wants to know why gold and silver got so horribly whacked. The main reason was the coordinated central bank attack on the metals. JPM (in specific) has a dozen lawsuits pending where global traders have proven outright manipulation of the price, and yet there are no rulings. Then there were margin calls. Some of the real gold/silver selling was in anticipation of the waves of margin calls that would be flooding the market so market makers were raising cash. But then on Friday they added ‘insult’ to ‘injury’ by raising the margin requirements on Gold, Silver and Copper. So at the same time regular traders were doing "some" selling to raise money, the exchange comes out and hikes margin requirements on gold by 21%, on Silver by 16%, and on Copper by 18%. Do you think the big boys at JPM knew of this? With that knowledge in hand, the high frequency trading platforms then worked their magic to exacerbate that move – and suddenly we’re down a bunch. Remember – back in 1900 when J.P. Morgan himself uttered the words: “Gold is money, everything else is credit". I continue to always ask myself: What’s changed? Since Wednesday has Europe really been solved or just delayed? Has housing magically run higher? Has unemployment mystically healed itself? Isn’t the Government facing another shutdown next week? And as John A. writes: “With silver below the 200 EMA and gold down another $80, gold could be headed to its 200 EMA of $1,558.” I personally told you that I had stopped buying gold when it got over $1,650 (with my end of year prediction being $2,000 / ounce). On the other hand I have been buying silver as it hovered in the $35 to $40 area. And I don't think its day is done (at all) so I will buy more with it down here at $30. Could Silver drop to $20 – as those that didn’t sell, panic and sell at the lows – but come Monday I’ll be a buyer of silver and scale back into gold.

The Market:
What about stocks? We lost 600 points in two days, and ended the worst week since ‘09. Then on Friday we went "flat" – so is the selling over? It could be. They held the bottom at the same levels that held during the end of August’s 2,000-point plunge. But we have to consider the Thursday/Monday connection. In the past, there's been a correlation between gigantic sell offs on a Thursday, and a pretty horrible Monday, because of margin calls. When you get a plunge like we did, so many positions become upside-down, and the margin clerks have to start rounding up the folks that need to put in more money or sell out. But when you get a little bounce on Friday, they have to ‘rejigger’ the books as some fall off the margin call radar. Then come Monday, the true list is published - the phone calls go out, and the selling begins. Now, this doesn’t happen every time, but it's happened enough to where it's something to consider for early this week. If Monday does become a slaughter, then what usually happens is that it carries into Tuesday and then late in the session Tuesday the market recovers and "soars" higher.

What about the bigger picture? Well, without the extra stimulus I think that the market will continue lower. This week FedEx said that they see lower shipments, and fewer electronics coming over from Asia. They said their "peak" season is not going break any records this year, because Americans just aren't buying. I don’t think that will change. So, that despite some certain 'up days'" that look wonderful (don't forget, markets only stage insane 300 point up days while in bear markets) the overall trend I believe is going to be downward. If they use the recent low as some form of bottom to work up off of, I could see the market making it to the 11,300 - 400 area, before again running out of steam and rolling back down, and breaking below the 10,719 August close. If that happens, then my next level would be around 9,700 as the next true workable bottom.

As you can see, we're fraught with all manner of uncertainty. Each day seems to bring us more and more insane situations. From political infighting, to European madness, to evidence of societal breakdown, things are NOT going well. If we had gotten the trillion in stimulus, even though it would be kicking the can down the road, we'd be in a position to move cash into some funds and take the ride upward. Without the stimulus, I feel the market risk is to the downside.

Tips:
By the way, additional stimulus will be announced one day. As elements continue to deteriorate, additional monetary stimulus will occur. I have scaled into very small positions in the short arena. There’s nothing more dangerous than buying something short when the market is down 600 points in 2 days.

I have:
- DOG at 45.38
- SH at 46.42
- Oct DIA 110 put options at 2.80 per share

I am not going to put a stop on these, but rather I am going to buy more of them on UP days. This trade isn't for the weak of heart.

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 9-18-11

This Week in Barons: 9–18-11:

It’s All Greek to me – anyway you cut it – Default by Christmas!

The European Community, Timmy Geithner, and the Greek authorities have laid the groundwork to provide the liquidity needed to supply banks with cash, when a national default is announced. The good news is, when a national default occurs people immediately rush to get their money. We know that the average Greek citizen has approximately $20k in the bank, but less than $200 in his pocket. Therefore, when all the citizens rush to get their money at the same time, under normal conditions banks would be forced to shut down after the first 2 hours of a day – then armed guards would show up – people would riot – and lives would be lost. The Central Bank Dollar liquidity that was announced Thursday is a way to stave off the "bad" parts of a National default. If you can capitalize the banks to a point that when the bank run hits, you have the assets to give the people the bulk of their holdings, you can then have an orderly default – which (in my opinion) will occur between now and December. The bigger question is this: If they capitalize the banks to take care of the citizens, are they also going to cover the derivatives that are held against these banks? And the answer is: Absolutely! You see The Federal Reserve is comprised of shareholders – like J.P. Morgan (JPM). Now JPM has significant exposure to Greece, and do you think the Federal Reserve is going to let JLM get burned for hundreds of billions of dollars? Heck no – so the capitalization will include the derivative holders such as JPM and others as well. And what about sovereign debt vs private debt? When a nation defaults, we must assume that the country has not taken in enough revenue to offset it's spending and has run up extreme levels of debt. So, who gets paid first, second, and on down the line is a good question? Now, there will be many "businesses" and services that are owed money, and will receive nothing. But the contagion of sovereign investments from other countries getting crushed, that is what they're trying to defuse, and further rationale behind over-capitalization. However, the much bigger issue is the fact that Greece is tiny, so what about Spain? The Spanish housing market was much or more of a bubble than ours, and is currently bottomless. The Spanish "green jobs" initiative was a dismal failure. Spain is in ‘worse shape’ and larger than Greece, and will probably be next to fall. Then, what about the tag team of Portugal and Italy? Diffusing Greece is the #1 job (and it will cost billions), and trying to keep it contained to just Greece is job #2.

In the U.S. this week:
- The Empire State manufacturing report fell to -8.
- The Philly Fed report fell to - 17.
- The "Inflation Gauge" (which is rigged to start with) reported + 0.4% (very hot).
- The initial jobless claims spiked by 11K to over 428K.
- And the market this week had the S&P gaining 4.5%.

Now that the Central Banks are willingly open to supporting the market, this is a whole new world of investing. Think of it – we had a 20% crash in the summer – and now we’re working our way back to normal after all the Central Banks colluded to toss billions at the European Banks to keep them alive. Technically we’ve retraced 50% of the fall in the NASDAQ since that crash – and if the DOW can maintain levels above 11,488, and The Ben Bernanke is accommodative this week – we could be up for a run higher. Honestly, Central Banks aren’t supposed to band together and keep dead banks alive. Dead banks are supposed to die. The weak die, and the strong pick up the pieces. But today it’s all about: “Too big to fail".

Everyone is looking to the Federal Reserve meeting next week. Everyone desperately wants QE3 / free money. I think we're going to get something, and despite the fact that the market is telling me it's tired and wants to roll over (due to the desire for more stimulus) we very well might continue up. Not only that, if The Ben Bernanke coughs up some form of huge stimulus, we could just roar higher thru the end of the year.

This week was ‘options expiration’ week – and there is a ‘max pain’ principle. That is to say – around 70% of market movements are in the direction that will cause the ‘most pain to the largest number of people.’ Given options expiration week, we found that a lot more people had taken downward bets on the market vs upward bets. So – what did the market do – it moved ‘up’ in order to inflict the most (options) pain on the largest number of people.

This week is a Federal Open Market Committee (FOMC) meeting, and the entire world is looking for them to release some new form of stimulus. Two weeks ago even the Vice President said that what this market needs is "more stimulus". We then saw the FOMC change this meeting from a one-day event, to a two-day event. All of this is telling me that ‘something’ is coming. I think the immediate direction of the market is going to be in direct proportion to what comes out of that Fed meeting. If they don't do enough, the street is going to whine and fall. But if Obama has pushed his Chicago Style politics into the Fed's head, and he lets loose some wild amount of real stimulus, we very well could fly higher.

The Market:
We just came through a nice positive week. We had a hunch we would, although Friday did have the ability to be a bit scary - especially when in the Friday morning session we went from +100, to plunging all the way down to red, and then finishing green. In some ways, that's a real sign that the market is itching to go higher.

Remember, the market is yearning for something huge out of The Ben Bernanke's FOMC meeting. They’re not looking for some simple “twist” where they buy long dated paper to lower long-term rates. The Street wants cash, and what’s different about now vs then, is that NOW we have a Fed that loves the idea that their policies could move markets higher, creating a "wealth effect", which will drive people to spend more. So what’s the Fed going to do? I have a hunch that The Ben Bernanke is going to tell the member banks that their reserves are now adequate for the risk profile, and that they can release some of their reserves into the system. If he does that, $1 Trillion will come forth and it's going to be a party. The banks will use "X" amount of it to play cowboy in the stock market, and they'll use "Y" amount to start lending again. My hunch comes from a statement The Ben Bernanke made last week about considering cutting the interest rates that the Fed pays to banks for keeping their reserves there. Now, if he tells the public "Hey we're going to cut the interest rate we're paying the banks", it sounds good to the average listener, but what that really means is "Hey, banks instead of parking money with us (The FED) and getting a free 4%” – and therefore not lending to John Q. Public – we’re going to lower the rate we give you, and reduce your reserve requirements, so that NOW you’re free to use those excess reserves to make loans and invest!”

If Bernanke really cuts loose and frees up a $1 Trillion in stimulus, we’re going to rally, possibly right up into year-end. If he disappoints, takes a hard stance, and doesn't give up much more than the interest rate "twist", we're going to roll over and plunge, and plunge hard. Be very cautious.

Tips:
Our bets (this past week) have been in the "swing" trade. What we like to do is pick entries that let us hold something for 3, 5, or 10 days. This is fairly easy when the market romps for 5 up days! For instance we picked up WPRT early this week at 28, and sold half of it at 32.35 – netting 15% in a week. We also bought SNDK at 40.22, NVLS at 28.8, KLAC at 38.02, HES at 60, ORCL at 28, and some SPY at 118.53. We sold the SPY at 121.54 taking in $3 per share. We stopped out of WPRT at 30.98, taking almost $3 per share. We sold HES at 61.90, taking in almost $2 per share. And we sold ORCL at 29.19 taking in a little over $1 per share.

That leaves us some:
SNDK bought at 40.22, with a stop at 42.20,
NVLS bought at 28.80, with a stop at 29.80, and
KLAC bought at 38.02, with a stop at 38.60.

I think we see the market "hover" on Monday into Tuesday, and then we'll know by Wednesday what The Ben Bernanke is going to do. This should prove to be interesting, so hold onto your hat!!

Please be safe out there!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, RF Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: .

Please write to to inform me of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference .

If you'd like to view RF's actual stock trades - and see more of my thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave a little bit ago on “Fearless Investing”:

To unsubscribe please refer to the bottom of the email.

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article.

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 9-11-11

This Week in Barons –9–11-11:

"What is the point of being able to forgive, when deep down, you both have to admit you'll never forget?" … Jodi Picoult

This is the 10th anniversary of that dreadful day that forever changed most of our lives. I was on my way to teach a class at Carnegie Mellon University when monitors started showing ‘The Event’ in real time. The emotions cannot be described. ‘The Event’ touched virtually everyone that I came in contact with. My thoughts and prayers go out to everyone involved in that incredible day.

Switching gears – I don't understand The Ben Bernanke. Although he's certainly a very smart man, he has no problem lying and he does that often. Just the other day he said that he was perplexed as to why consumers aren't consuming more. Please – spare me the drama. I listened to Obama very intently thinking – this man is incredibly dangerous because of one thing – his ability to speak the written word. He is a tremendous, very dangerous speaker. He gets people very excited about Government (for once) doing the right thing, and then stabs everyone in the back for not doing EXACTLY what he says. He is a very good salesman. Both he and The Ben Bernanke are selling hopes and dreams – just not reality. In the past three weeks I've heard the world "entitlements" so many times my head is going to explode. The words normally refer to “Social Security”- referring to it as some form of ‘social program’ rather than a legal contract that you have paid into and the government has the obligation to pay back to you! For years Social Security had its own separate fund. Then Lyndon Johnson (looking to find money for his pet projects) found the Social Security account – and merged it with the General Account – and in an incredibly short period of time all the money was gone. I'm not saying that Social Security would be in great shape if they didn't raid the fund. I'm simply saying that Social Security would still be “Manageable.”

Continuing along the lines of politics – last week Dominion Resources applied for permission to turn part of its Cove Point, Md., terminal into an export facility. The Cove Point facility was built to "import" natural gas in liquefied state, but because we've found so much natural gas in the U.S. over the past ten years, Dominion is now looking to export it! We could easily increase production by 25% a year, creating thousands and thousands of jobs and not even put a dent in the supply we've found in the ‘Shale Deposits’ from NY to North Dakota. In fact, the biggest danger is that there is too much natural gas, and the price will fall! So where's the giant push from our politicians to get us off foreign oil and onto natural gas? I’m watching with anticipation the Dominion Resources request.

Globally, Europe's hanging on by a thread, and ‘frankly’ the PIIGS can't be saved. Greek default is just a matter of time. In Austria, they've made regulations that the general public can only buy approximately $20,000 worth of gold at any time. With Europe in such turmoil, people are doing anything they can to get rid of the Euro, and buy gold. You can bet similar actions will come to the UK and to the US as things continue to deteriorate. If you don't own gold and silver right now, I think you'd best "get on it" because I could see them trying that here.

The Market:
On Friday the DOW lost 300 points – most of it on developments from Europe. Just before the open we learned that a board member of the European Central bank decided to resign, which is usually a harbinger of bad news coming. So now it's all in Bernanke's hands, and he’s been playing tough, not mentioning more stimulus. There are several ideas floating around regarding the next Fed move, most of them revolving around the "Twist". This is simply a change in the way the Fed manipulates interest rates. By buying up short-term Treasuries, they have been able to keep short-term rates low. Now they might focus on longer dated paper, trying to drive those rates lower – thinking that corporations are not expanding because of excess long-term interest rates. (Honestly, corporations are not expanding because there's no demand. And (fyi) our country’s production output is running well below capacity.) On top of that, some think that a ‘Twist’ will spur housing. In my view, housing is in a death spiral, and no one wants to catch that falling knife. If 4.5% mortgages won't spur buying, it’s doubtful that 4.25% will either. So the ‘Twist’ isn't going to do much. And (of course) the Fed will continue buying treasuries with the billions that mature in the portfolio they have amassed, so in essence QE3 is in effect right now.

So, what else does The Ben Bernanke have up his sleeve? A couple months ago I suggested: "One day the banks are going to unleash all that excess reserve they've been hoarding and push it into the economy. It will be highly inflationary, but it will spur activity". I tend to think that one of the items that will be mentioned is that the Fed is going to back away from making the banks pull in more reserves. In fact, I think The Ben Bernanke might suggest that banks are overfunded compared to the risk and encourage them to reduce their reserves. This would be fancy talk for "Go forth and Lend", and that could inject between $1.5 - $2 Trillion into the system. Now that could be quite an interesting policy.

Obama is in trouble. The polls are showing that 87% of Afro-Americans think Obama's doing well, 48% of Hispanics and 33% of whites. Obama’s jobs speech was a complete flop on Thursday – nothing but another "Give a union man a job today, and we'll pay for it in the future" scam. So it’s left to The Ben Bernanke to potentially tell the banks to release $1.5 Trillion in reserves. He could easily tell banks to relax lending standards in order to buy more homes, cars, virtually anything! And if The Ben Bernanke comes out and let's his banks go nuts – we’re going to have the ‘mother’ of all stock market runs, with the ONLY fly in the ointment being Europe. Although a Greek default is immanent, it will be looked upon as a massive problem that could spread.

In the meantime, there have been various gold raids over the past week. The raids are coming closer together now, but it's evident they’re not working all that well. For example - on Friday – gold was beat down by $50 as 4,000 contracts were dumped in under 28 minutes. This is virtually impossible – and the only way that can happen is if the major bankers ‘literally’ call each other up, and determine a price they want for gold. On Friday they set their boxes to trade paper back and forth, each time a bit lower – it’s happens quickly and quite dramatic. However, over the course of the day gold was bid back up and cannot be stopped now. As I mentioned before, it’s just a matter of time until they put ‘buying restrictions’ in place.

We have some tough times ahead as unemployment will get worse, and businesses refuse to hire. Housing isn't going to recover for years, even if the Government "takes over" the foreclosed houses and rents them out as some have suggested. Be prepared, and raise some cash. If you're in “Long Only” mutual funds, be very, very careful. It’s my guess that a massive release of stimulus will propel the market higher, but it’s a head fake. In many ways you’re living thru historic times. Economically, the world has never seen what we're going through because until now the world was not a completely "fiat" basket of currencies. We're going to see some very disturbing things coming out of the EU, and contagion is not just possible, it's probable.

Tips:
We had purchased GDX (which is an ETF basket of gold "miners") at the 61 level and we sold out of it at 67 on Friday. Although we think gold goes to 2400, miners are sometimes looked at as a way to get gold cheap, and other times as a "stock" that should be sold. Although I think the GDX has more upside to it, possibly much more, I'd like to see it bust up and over 67 dollars before getting involved again.

Gold is still around $1,850 per ounce, with silver being close to $42.

The theme continues to be simple – take profits and buy more currency – where currency means more: gold, silver and energy.

Please be safe out there!

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