This Week in Barrons - 5-5-2013

This Week in Barrons – 5-5-2013

The Forever Battle of: Illusion vs Delusion:

This week brought us the Federal Reserve meeting, their most recent monetary policy stance, and the Jobs report.  It also brought us JPM being brought up on charges of manipulating power prices in the west.  Imagine JPM (another Enron), manipulating both power and silver prices.  But this week was truly all about The Fed and Jobs.  The Ben Bernanke has printed more money than any head of the Federal Reserve in history.  He is arguably the world’s most powerful banker, and has never worked a day in his life inside a bank.  In fact, (as far as I can tell) he’s a true academic – and has never had a real job.

Given the bulk of the economic reports show little if any true growth, it begs the question: How is the stock market flirting with all-time highs?  The answer is both simple and widely accepted.  The Federal Reserve has been printing trillions of dollars and pushing it into the system.  These dollars must go somewhere, and they end up in the stock market.  We’ve seen over 23% of the world's central banks being so desperate for returns that they are buying tens of billions of dollars’ worth of stocks right out on the open market.  Therefore, if the Fed ever reduced their money printing, the market rally would stop on a dime.  Therefore, The Ben Bernanke is the most important cog in this machine.

Heading into the Wednesday release of the FOMC's statement, everyone was on edge concerning the potential phrasing of the remarks.  When the statement was released, you could almost hear a collective sigh of relief.  Not only was most of the statement like last month, but the statement added a condition that the committee would be “willing to do more” if conditions merited it.  That means that the Fed will do more QE, stimulus, money printing if needed.  And considering the lousy economic reports, it is clear that at some point it will be needed.

But we still had that nagging non-farm payroll report to deal with.  After the ADP report (released earlier in the week) suggested there were very few jobs created, everyone wondered what the government numbers would show.  The estimates focused around 140K jobs being created, and on Friday morning we were told that 165K jobs were created (considerably more than even the most bullish estimates).  So I took a look:

-       First: I noticed that the "hours worked" portion of the report fell by over 6% from 34.6 hours / week last month to just a little over 32 hours per week this month.  That is a huge fall.  What normally happens is that companies are so busy that people are forced to work more hours, and when they can't squeeze any more hours out of their existing workforce – then they go out and hire.  So what does it mean if people are hiring more and the workweek is shrinking?

-       Secondly: I noticed the part-time portion of the report, which really describes a part-time employment economy, with most of the new jobs being created in the part-time and service sectors – with wages and hours worked declining. (Remember, employers do NOT have to pay healthcare for part-time workers!)

-       Finally, because the Bureau of Labor and Statistics (BLS) included 193K ‘fake jobs’ (birth/death model) in their 165K jobs number, we actually LOST about 28K jobs in April.  [The Birth/Death model creates a ‘Phantom Number’ that hopes to estimate how many new businesses are created when various unemployment levels are reached.  The BLS then reports this ‘Phantom Number’ as fact.] Unfortunately I’m not seeing 193,000 people that have lost their jobs, or were sitting on couches collecting unemployment checks, actually going out and opening their own business.]

And just to add insult to injury, on Friday morning we also received the ‘Factory Orders’ report – which FELL 4 points.  So if everyone is hiring, wouldn’t you think that it was because there were more ‘factory orders’?  It seems that if businesses are hiring, they are hiring part-time workers that have the ability to ask: “Do you want fries with that?"

But the market loved the ‘Jobs’ number and we were off to the races.  In a matter of moments the DOW was flirting with 15,000 and the S&P was clearly into all-time highs again.  The single most important element on the planet right now is The Ben Bernanke’s printing press.  As long as the printing presses run, the market will continue higher.   I've never seen anything like it in history, and when it ends it too will be a historical event.  The crash that will follow this disaster is going to make the 2008 crash look lame.  Considering that the UK, the European Central Bank, and Japan have also entered the ‘race to the currency bottom’, the insanity that will happen when the nations begin to slow their collective printing is almost impossible to comprehend.  We could see a DOW 18,000, or even 20,000.  But remember Japan in the 80's, with a stock market that ran from under 9,000 to 40,000 and then spent the next 10 years under 9,000 again.

The Market....

On Friday, 15,009 was the intra-day high on the DOW and 1,618 on the S&P.  Both were new all-time highs, and both reached those highs for exactly the wrong reasons.   You know that.  I know that.  And even the talking heads on CNBC know that.  Jim Cramer even said: “Today, fraud is now just part of the equation.  The equation of course being: Why is the market always up?"  On Friday Jim mentioned that this market is just like the late 90's.  “You come into it, just knowing that the market is going to go up again".  I think Jim nailed it!

The issues that we all face are easy:

-       How long can this last?

-       How far can it go?

-       And, what happens at the end?  

The best answer is probably: This will go on until the money printing slows.  So far that has indeed been the ‘right answer.’  Now, how long before the QE is slowed or taken away is another problem entirely.  All of the old rules have been broken, and we are no longer being driven by fundamentals of any kind.  The printing presses being driven by:  Draghi (Europe), or Abe (Japan), or Bernanke are the only elements that matter.  I cannot think of a reason why this market insanity will stop.  While the Banks can certainly stop buying stocks for a while, and create their own pullback or "correction"; the fact continues that The Ben Bernanke is still printing, and the money will just pile up in the banks until they once again decide to deploy it.  Therefore, it would appear that the market direction will be "up" despite the occasional 5% correction or pause.

I have one small issue with reliving the late 90’s, and that is that the ‘tech sector’ – which caused the largest portion of the ‘bubble’ – still remains (13 years later) 33% off its highs.  This time (however) it isn’t just ONE asset class or just the DOW, S&P, NASDAQ, Bonds, Derivatives, etc. – but rather it is currency.  When this bubble finally pops, it is going to affect every single corner of our society from politics, to pensions, and from technology to medicine.

I will continue leaning long, and buying over-inflated junk.  But I’m still a believer that the big money will be made in the fall of this market.  On the hyperinflation side, I continue to protect myself with the physical metals.  While the gold haters are quick to gloat about gold pulling off its all time highs, they rarely gloat about the techs still being down 33% from their highs (13 years ago), or Apple (APPL) being off 30% from its high (last year).

In terms of what to buy when the market goes into ‘crash’ mode?  Luckily there are so many products out there right now, it has become much easier to "be short" the market in case of collapse.  The only problem is, will the ‘powers that be’ make shorting illegal?  Will they eliminate the ‘short-side’ ETF’s?  Remember, they’ve outlawed shorting before, so they very well might.  And considering the options market is so inter-connected these days, the basics of selling actual individual stocks short, and buying put options will still be our very best defense.

Honestly, we are so overdue for a true 10% correction that I’m even tired of hearing about it.  When we finally get a pullback that even remotely measures up to 10%, then we'll have to decide if we're looking at a "correction" or the market bubble popping.  The answer: If The Ben Bernanke is still printing $85 billion a month, I'll buy that dip because it’s just a correction.  If The Ben Bernanke stops printing, I’ll go wholesale short because “Look out below!”  

Tips:

We made some trades this week and our short term account is listed below.

My current short-term holds are currently only in the precious metals arena:

-     SLB at 75.18 (currently 75.72) – stop at 75.20

-     SBUX at 60.70 (currently 61.81) – stop at entry

-     TJX at 48.77 (currently 48.98) – stop at entry

-     NSC at 77.03 (currently 78.04) – stop at entry

-       SIL – in at 24.51 (currently 14.88) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 142.15) – no stop ($1,464.30 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 23.29) – no stop ($23.97 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there! 

Disclaimer:

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

Please write to <rfc@getabby.com> 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 <rfcfinancialnews.blogspot.com>.

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:http://www.youtube.com/watch?v=K2Z9I_6ciH0

To unsubscribe please refer to the bottom of the email.

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

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

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

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

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

Remember the Blog: <http://rfcfinancialnews.blogspot.com/> 
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@getabby.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 4-28-2013

This Week in Barrons – 4-28-2013

What's Next?

For years I've been claiming that the Central Banks are behind the stock market rise. And depending upon the person listening, I would get anything from: "Yeah I thought so" to "Are you nuts?”  This week, according to Bloomberg’s Sarah Jones: “Central Banks, guardians of the world's $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.  The Bank of Japan said that it would more than double investments in equity exchange-traded funds.  The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.”

Do you think that if Japan doubles it’s investment in stocks that the Japanese stock market might go up?  And when you think of the $85B a month that The Ben Bernanke is giving the banks, what percentage do you think makes it into the stock market?  But the disturbing part with Central Banks buying stocks, is that they have unlimited funds.  When a Central banker needs money, he can just print it.  And when you have Central Banks thinking that there's no better place to invest than in the stock market – it causes abnormal stock action.  For example, Caterpillar (CAT) came out this week and missed earnings, said that the world is slowing, and lowered it guidance.  CAT gained 6 points after releasing this information.  That’s our friendly banksters at work.  If the money costs you nothing, you have no real ‘skin in the game’; therefore, you can take risks all day.  Simply consider this week’s economic reports:

-       Durable goods orders fell 5.7%,

-       The March ISM report fell from 54.2 to 51.3,

-       The Chicago PMI (Purchasing Index) fell from 56.8 to 52.4,

-       The Richmond Fed report on manufacturing fell from +6 to -3,

-       The Kansas City Fed report fell from 0 to -5,

-       New York manufacturing fell from 10.04 to 9.24,

-       The US is indicating that we could get more involved in Syria due to their use of Chemical weapons,

-       The market experienced a flash crash over a hacked twitter report – losing a lot of money due to their stops, and

-       Europe's Bank Lending Survey showed (this week) that the Eurozone is firmly in a soft depression.

Stocks are up in the face of fading economic reports because the Central Banks are keeping them there.

Now you all know that I like gold and silver.  But the raid on the precious metals a couple weeks ago had 2 distinct goals.  One was to scare many people away from buying them.  Another was to lower the price to a level where Central Banks felt good about buying gold and silver for themselves.  Getting the price down worked.  But the idea that everyone would be scared away from buying Gold backfired.  Gold set record sales levels in Asia and India last week.  The U.S. Mint ran out of 1/10 ounce gold coins, and sold a record 60,0000+ gold coins in the days after the plunge.  The J. P. Morgan (JPM) inventoried warehouse of commercial gold fell like a rock, as their holdings fell to levels not seen since 2010.  Since JPM's commercial holdings fell 64% in virtually a day, it appears that people are demanding physical delivery of their metals.  The only piece of this that I find odd is that as Central Banks are talking ‘down’ the price of gold, they are buying more than at any time since 1964.  Bloomberg reported: “Central banks are buying the most gold since 1964.  The World Gold Council says that Central Banks added 534.6 metric tons to reserves in 2012, the most in almost a half-century, and expect purchases of 450 to 550 tons this year.  Central Banks owned 31,671 tons at the end of 2012, about 19 percent of all the metal ever mined, the London-based World Gold Council estimates.”

It appears that Central Banks:

-       Own one fifth of all the gold ever mined.

-       Are purchasing more gold and silver. 

-       Are pushing the paper price lower in order to consume more. 

-       Are ‘playing in the stock market’.  This Thursday two headlines crossed the wire: “US based stock funds posted their largest weekly outflows in a year –  $7.3B, and US based stock ETFs posted their largest weekly outflows in a year – $8.4B.”

-       Are doing a very good job of ‘playing in the stock market’.  As almost $16 Billion was pouring out of our ETFs and stock funds, our market is challenging it’s all time highs again simply due to our Central Banks.

Unfortunately (by many accounts) this ends badly, and there are only three ways out of this mess:

1.    We stop the printing and go through massive bankruptcies, implosions, pick up the pieces, and rebuild.

2.    We continue printing until the velocity picks up to the point of hyperinflation and everything collapses.

3.    OR we rebuild American on cheap energy (coal, oil, shale, natural gas) and become the world’s supplier and change our tax structure accordingly.

Central Banks are buying gold, silver and stocks.  Stocks are the one element that Central Banks can cause to go higher – and often that’s a sign of desperation.  I leave you with one thought: If the Central Banks want physical gold and silver, we should want it too.

The Market:

This week the market suffered a week of horrid economic news, and ended with substantial gains.  The media is telling us that the market is climbing higher because there is no place else to put your money, and even the foreign investors are buying.  Unfortunately, (factually) this week was the lowest volume week in 3 months.  I think we are caught in Twilight Zone – between ‘reality’ and ‘created reality.’   

-       The Fed tells us that market demand is strong, and investors are diving in, but mutual funds and ETFs saw record outflows.

-       The Fed tells us that the country is growing wildly, but GDP missed estimates.

-       We are told that foreign inflows are at record levels, but market volume hits 3 month lows.

-       We are told that stocks are going up on earnings, yet earnings have been relatively weak and revenues simply "lousy".

Since the Fed is pulling the strings, the easiest thing to do is to hold your nose, jump in with both feet and pray the music doesn't stop.  Each dip in the market is being ravenously bought.  Each bad business report is being rewarded with higher stock prices.  The only issue I have is that I'm investing money into a market that is being manipulated.  It just feels wrong.

Factually, the market has some significant resistance at the 159’ish level on the SPY (a Standard and Poor’s EFT).  The SPY marched up on Monday, Tuesday, and Wednesday, and then on Thursday it hit 159.27 as the intra day high.  The SPY then pulled back and ended lower on Friday closing at 158.24.  So resistance (for now) is at the 159’ish level.  So as an investor / trader you don’t want to get ‘too long’ until you have two market closes above the 159 level on the SPY.

And soon we will have to consider seasonality.  “Sell in May and Go Away” isn't just an old adage; it is something that is based in fact.  Most market gains come between September and April, and most market stagnations are from May to September.  Are we going to see that loosen up – as it has the past 3 years in a row?  We should see seasonal weakness, but if the banksters aren't ready to stop pushing stocks higher, then stocks can't stop going up, seasonality or no seasonality.

Tips:

We made some small trades this week – but basically we sat on our hands and enjoyed the run-up in precious metals.

My current short-term holds are currently only in the precious metals arena:

-       SIL – in at 24.51 (currently 14.63) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 141.00) – no stop ($1,453.60 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 23.16) – no stop ($23.76 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there! 

Disclaimer:

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

Please write to <rfc@getabby.com> 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: http://www.youtube.com/watch?v=K2Z9I_6ciH0

To unsubscribe please refer to the bottom of the email.

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

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

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

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

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

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

R.F. Culbertson

<mailto:rfc@getabby.com>

<http://rfcfinancialnews.blogspot.com>

This Week in Barrons - 4-14-2013

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This Week in Barrons – 4-14-2013

Winds Of Digital Change are Blowing…

Sometimes it is hard to stay buried in economics and financial structure when so much is changing around you.  Who wouldn't have wanted to be there when Polaroid debuted its new technology?  Or when Johnson and Johnson (back in 1885) brought out the first "ready to use" bandages?  The speed of innovation has not just doubled or tripled in the last hundred years, it has gone parabolic.  My great grandmother (when she was alive) – went from living in a wood structure with a horse, buggy, and no plumbing – to seeing someone land on the moon.  There is one particular technological innovation that we're living through that is going to affect all of our lives in a way that we don't fully understand – it is the complete transition to a cash-less society.  Money has been around (in one form or another) for thousands of years.  Money created it’s own ‘business boom’ because money (rather than barter) made it easier to buy things.  Money is on slightly newer ground now – not being backed by a ‘gold standard’.  But what happens when we become a completely digital, cash-less society – and every transaction becomes a card swipe, or a smart phone pass.  Every transaction comes with a complete digital, unbroken trail.  No more hiding from the IRS. 

-       Will sales increase because you can swipe faster than you can wait for change?

-       Will jobs be created because you can no longer hire someone "under the table"?

-       Drug dealers will potentially go out of business – as will any other companies that don’t comply with regulations.  But what will that impact be?

After all, governments are broke and they're on a wild hunt for tax income – tracing money is their game, and digital currency makes it that much easier.  

A huge thanks to Mitch F. and Morgan C. for contributing the following on a new global, digital, decentralized currency called Bitcoin.  The value of a Bitcoin (the first global, digital currency) has gone from $15 to $260 to $90 in 3 months – so it is ‘investable’.  But there are some differences between Bitcoins and today’s currencies.  Often, global (country based) currencies are backed by a Central Bank – that produces ‘real money’ on an ‘as needed’ basis.  Bitcoins are created at a constant rate by a process called ‘mining.’  Their creation is based upon a mathematical solution and has a hard limit of 21 million Bitcoins in existence.  As the number of Bitcoins in existence (mined) approaches the 21 million limit, the creation algorithm is mathematically slowed in order to maintain the balance.  Here is a video that explains this using pictures: http://vimeo.com/duncanelms/bitcoinexplained

To invest in Bitcoins – you need to use an online exchange.  Of the three major exchanges: MtGox.com, BitStamp.net, and CampBX.com – MtGox.com is (by far) the largest exchange – and the one our experts recommend.  In order to do a transaction, you will need to deposit funds into the exchange.  MtGox provides instant deposits by using BitInstant.com.  But, be aware, this costs you a 4% fee, and should only be used if you want funds in your account as soon as possible.  Otherwise, bank transfers are available that take 1 to 3 days, and charge less than a 1% fee – or potentially no fee at all.  In terms of sales and withdrawals – the transaction speed and percentages are the same.

Once you have some Bitcoins you will need a digital wallet to store them in.  Why not just store your money in the exchange itself?  The reason not to do that is because these exchanges are fairly young, and therefore targets for hackers.  E-wallets such as Blockchain.info are strongly recommended.  Your E-wallet will give you a Bitcoin address (or several) in order that your Bitcoins can be automatically transferred (as needed) in and out of your ‘more secure’ wallet.  Because it’s digital – make sure you keep an automatic back-up of your digital wallet account.  For a more thorough FAQ discussion – please refer to the wiki page: https://en.bitcoin.it/wiki/FAQ.

Like any new element, Bitcoin is not without it’s hurdles.  Last week the main Bitcoin exchange was subject to several DOS (denial of service) attacks which caused the price to fluctuate wildly between $260 and $90 per coin in one day.  Therefore, Bitcoins are not for the faint of heart investor – but rather a step into a completely global, digital currency that brings as many questions as it does promises.  As for me, I’m going to try it, because I think it is the shape of things to come.

The Market:

I have to start with gold, since it made headlines Friday.  Gold, silver, copper and many other metals were attacked on Friday, but it was gold with the most dramatic result.  Why did gold decline by $70 an ounce?  After all, isn’t Gold supposed to go up during inflation, and at minimum "hold steady" during times of turmoil?  There is significant inflation and tons of global turmoil, however; Gold is off 20% from its 2011 high.  As a very smart gentleman once told me: “People sell – when they need the money.”  Now as mundane as that sounds, what he meant was – most people don’t calculate the exact moment to sell – and then execute the trade.  Most of the really big trades happen - when people (countries) really need money.  And if you knew that a specific country really needed money, and their only asset was Gold – you would do everything you could to ‘reduce’ the price of that asset (in this case Gold) before the sale – in order to maximize your profit – yes?  Now would the amount of Gold that a nation like Cyprus "could" sell on the open market actually correlate to a $70 drop?  No.  But if sovereigns wanted Cyprus’ gold at a real bargain, then pushing the paper market down ahead of any sale would be quite advantageous.  

Also, with the consistent deterioration of the Japanese Yen and the Euro, the US dollar is still the defacto global currency.  Due to that – there is still no love lost between any Central Banks, Wall Street and the precious metals.  Nobody can package up ‘bogus tranches’ of gold to sell to investors and make large premiums.  In fact when gold is falling, financial institutions are often quick to tell you that you should sell any and all of it and buy ‘their’ financial instruments.

Can Gold go lower?  Sure.  Is this a reason to bail out and run for the hills?  For me, once it stops falling and finds its footing, I'm going to buy more.  Personally, I would rather buy more at $1,400 than at $1,500, but let’s see where it settles.

Speaking of stocks, both J.P. Morgan and Wells Fargo made their earnings estimates on Friday, but they made it by moving loan loss reserve monies into the "general pool" thereby increasing earnings.  Fair warning, that’s an accounting scheme that’s just wrong.

Another consumer sentiment report came out Friday, and it showed the single, largest "estimate miss" ever recorded.  We were expecting a consumer confidence reading of 78.8, and instead received one of 72.3.  After weak bank earnings and the lousy economic data, we still ended UP 2 DOW points on the day.  Many analysts are calling this most recent stock market run-up a ‘bubble’ that could go on for months or could end Monday.  I have seen the market ignore 11 separate economic report misses.  But, the Fed isn't going to stop printing any time soon, so we could be looking at Japan 1989 – when their stock market made it to 40,000 before imploding to 9,000.  In those days, Japan went from 5,000 to 38,870 in 5 years, fell back to 9,000, and today (24 years later) is around 13,400.

If you are "IN" the market, then things are good.  If you’ve been in the market for over a month, then you have some cushion, and could sell and take profits right now.  But getting in NOW is extremely dangerous.  If the Fed is pushing the DOW to 17,000, then you want to be in.  You just don’t want to be in days ahead of its first correction.  Bubble markets are scary.  We're in one, and each day brings new excitement.  Small positions and taking profits quickly aren't the ideal plays, but it beats not being in at all, and it beats losing when a ferocious drop comes.  Be careful out there.

Tips:

Thursday COP hit 60.63 (up over $1 a share) – and on Friday we stopped out flat.  The same was true for ORCL.  I'm still watching SBUX and JNJ, but lets face it, this market desperately needs a rest.  Even a manipulated market needs help now and then.  So I'm okay going slow here.

My current short-term holds are performing nicely (with gold and silver still lagging):

-       NUAN – in 19.10 (currently 21.64) – stop at 20.50,

-       SPY – in at 154.45 (currently 158.67) – stop at 157.25

-       SIL – in at 24.51 (currently 16.20) – no stop yet

-       GLD (ETF for Gold) – in at 158.28, (currently 143.55) – no stop ($1,501.00 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 25.10) – no stop ($26.32 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there! 

Disclaimer:

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