This Week in Barrons – 05_17_09:
"For decades I've heard stories and rumors about manipulation. I've always brushed those rumors aside. But, this is a different world, and the nation is literally fighting for its life. People ask me do you really believe the government would really manipulate the markets? My answer you bet I do, they're willing to do absolutely anything in their struggle to get the US economy back to normal again." - 88 Year old Newsletter writer Richard Russel, made famous via the DOW Theory letters.
Thoughts:
The question is NOT whether we are going to come out of this recession soon – or whether we are going to return to "normal" or just see lower growth. The Question IS. Will the coming depression be sharp, painful and fast, or long and grinding? Yes I know:
- consumer sentiment is higher
- some of the nasty economic readings are "not accelerating" to the down side
- everyone wants to believe that the worst is past us and we are going to be okay soon – unfortunately that’s not in the cards.
- Chrysler and GM closed 2,000 dealerships (roughly 120,000 jobs – good jobs) – with more to come.
- But what about the trickle down → the advertising dollars on newspaper and local TV ads – the local coffee and lunch shops – the local charities – the suppliers of office equipment.
- And what about that job loss number that was hovering around 600k+ job losses per month – is that going down by this move?
- And what about the commercial property that they sit on – Commercial Real Estate is already on the ropes – and what banks are tied into those properties?
- Nothing has been done about the trillions in toxic derivatives that banks are holding. The ‘Mark to Fantasy’ model simply means that banks can lie about their value longer - it doesn't make them go away.
- What about Uncollectible credit-card debt rising to 8.82% - in February, the most in the 20 years that Moody's Investors Service Inc. has kept records.
- What about 101 companies in the Standard and Poor 500 eliminating their 401K contribution matches
- What about 480 trucking companies (7% of the nations trucking business) went out of business in the first quarter of 2009.
All along you always knew there'd be troubles here and there, politicians doing silly things, the occasional war we shouldn't be in, but through most of it I had a decent feeling about my fellow man. But now, seeing how our economy has been destroyed, while people we trusted who should have known better, simply let the greed take over, it shakes my beliefs in the moral fabric. It's degenerated to the point where instead of feeling that basically people are good and well intentioned, I'm beginning to think that man might be evolving to be a bit more evil at the core than I want to believe – with the end game being a centralized governing body over global finance. You see rich folks don't like having Government in their lives – but poor folks need Government in their lives. So what if the ‘game plan’ was to make more and more people broke, and thus dependant upon government. This economic crash wasn't by accident – it wasn’t a some good ideas gone sour – not was it silly greed gone wild – but rather it
"But if we are really heading for a massive depression, why is the market doing so well, and some of the economic numbers looking better?"
- the economic numbers have never gone in a straight line neither up nor down – there is always a counter trend blip in the opposite direction for a short period of time
- the "market" usually does things that don't make a tremendous amount of sense in the here and now. For instance why did the market gain 105% in 1933, as we were in the grips of the Great Depression, before rolling down to new lows? You need a longer view in order to have it all make sense.
Currently Banks, Insurance companies, Auto companies, Real estate companies, Manufacturers of all persuasions, and a host of other Industries need capital. They can't borrow it, and most already have debt loads they can't service. The "market" rising right now makes no sense if compared to the economic situation of the day – but if a rising market helps draw private investors into these capital starved companies, it allows the bankers and Wall Street to "live another day". With the help of the Presidents Working Group on Capital Markets, and some well placed futures buying from the major institutions (Goldman, JPM, and Citi) a rise was manufactured that caught the fund managers short, and then the fund managers and hedge funds had to scramble to "get in". And that becomes slightly self-sustaining, as they fear missing the run up more than getting clobbered again. Then, as the ‘sometimes misleading’ economic reports to look better than they possibly could, it "gives hope" to more people, and those people decide to "get in" before the market leaves them behind.
For example: A Friday Headline: “Led by a large decline in energy prices, U.S. consumer prices were unchanged in April after seasonal adjustments and have fallen .7% in the past 12 months, the largest decline in 54 years , the labor department reported Friday.” Excuse me – prices are falling where again? Oil was up $10 / barrel - Gasoline (according to AAA) was up 24 cents / gallon - Food prices are up - Medical costs are up - Education is up. BUT – the "government’s seasonal adjustments" to these figures were ENORMOUS - allowing the government to post the above headline. Therefore - to the average person – “things are getting better.”
Oh and what about the retraining for ‘better jobs’ in this world economy: "A Labor Department audit found that only 1 in 5 who participated in programs for displaced workers found jobs for which they had been retrained; nearly 40% ended up working part time or for less than they had earned before; 28% had not yet found any work at the end of their training."
The Market:
In the here and now, we see the market stumbling a bit – and louder are coming the calls to retest the lows. Yet I think the probability of that happening right now is very low. Yes we could still get a "correction" but it's not going to be as deep as everyone thinks. Why? Because everyone is looking for this big deep retrenchment, so they can hop in at a cheaper price, and when the bulk of the investing world is expecting something to happen, it will not happen. Everyone will try and "get in ahead" of the next guy, and it will automatically short circuit itself. Could we fall a total of 8 - 10% → maybe → but right now, we can't even seem to manage a 5% pull back, let alone 10. The market won’t do what everyone wants it to do, but it will do what it wants to do – which is keep inching higher, trying to prove to the world that the healing is upon us and all will be well. Just realize that even if I'm right and we move ever higher into and through the summer, it's the ultimate suckers rally. We'll want to take the ride, but we will want to step off and go short when it's over. Don't sit there and "buy and hold" forever, you'll get crushed. Take this rally for what it is, and then when it tops out – get out.
Tips:
We sold the last remaining shares of FAS at 12.73 → up 400%.
We sold the last UYM at 19.70 → up 59%.
We sold the last BUCY at 27.77 → up 40%.
We sold the last GMXR at 17.24 → 72%.
Looking forward:
- Inflation is roaring no matter what Uncle Sam says, and tangible assets (think commodities like iron, agri, coal) will do well.
- Technology will become more important as struggling companies replace workers with machines.
- Remember that a rising market lifts all boats, and a falling market exposes the fragile the most. Watch the market for signs of the trend, and pick your spots.
Remember the Blog http://rfcfinancialnews.blogspot.com/. Be careful and talk to you next week.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, May 17, 2009
This Week in Barrons – 05_10_09:
"For decades I've heard stories and rumors about manipulation. I've always brushed those rumors aside. But, this is a different world, and the nation is literally fighting for its life. People ask me do you really believe the government would really manipulate the markets? My answer you bet I do, they're willing to do absolutely anything in their struggle to get the US economy back to normal again." - 88 Year old Newsletter writer Richard Russel, made famous via the DOW Theory letters.
Thoughts:
The question is NOT whether we are going to come out of this recession soon – or whether we are going to return to "normal" or just see lower growth. The Question IS. Will the coming depression be sharp, painful and fast, or long and grinding? Yes I know:
- consumer sentiment is higher
- some of the nasty economic readings are "not accelerating" to the down side
- everyone wants to believe that the worst is past us and we are going to be okay soon – unfortunately that’s not in the cards.
- Chrysler and GM closed 2,000 dealerships (roughly 120,000 jobs – good jobs) – with more to come.
- But what about the trickle down → the advertising dollars on newspaper and local TV ads – the local coffee and lunch shops – the local charities – the suppliers of office equipment.
- And what about that job loss number that was hovering around 600k+ job losses per month – is that going down by this move?
- And what about the commercial property that they sit on – Commercial Real Estate is already on the ropes – and what banks are tied into those properties?
- Nothing has been done about the trillions in toxic derivatives that banks are holding. The ‘Mark to Fantasy’ model simply means that banks can lie about their value longer - it doesn't make them go away.
- What about Uncollectible credit-card debt rising to 8.82% - in February, the most in the 20 years that Moody's Investors Service Inc. has kept records.
- What about 101 companies in the Standard and Poor 500 eliminating their 401K contribution matches
- What about 480 trucking companies (7% of the nations trucking business) went out of business in the first quarter of 2009.
All along you always knew there'd be troubles here and there, politicians doing silly things, the occasional war we shouldn't be in, but through most of it I had a decent feeling about my fellow man. But now, seeing how our economy has been destroyed, while people we trusted who should have known better, simply let the greed take over, it shakes my beliefs in the moral fabric. It's degenerated to the point where instead of feeling that basically people are good and well intentioned, I'm beginning to think that man might be evolving to be a bit more evil at the core than I want to believe – with the end game being a centralized governing body over global finance. You see rich folks don't like having Government in their lives – but poor folks need Government in their lives. So what if the ‘game plan’ was to make more and more people broke, and thus dependant upon government. This economic crash wasn't by accident – it wasn’t a some good ideas gone sour – not was it silly greed gone wild – but rather it
"But if we are really heading for a massive depression, why is the market doing so well, and some of the economic numbers looking better?"
- the economic numbers have never gone in a straight line neither up nor down – there is always a counter trend blip in the opposite direction for a short period of time
- the "market" usually does things that don't make a tremendous amount of sense in the here and now. For instance why did the market gain 105% in 1933, as we were in the grips of the Great Depression, before rolling down to new lows? You need a longer view in order to have it all make sense.
Currently Banks, Insurance companies, Auto companies, Real estate companies, Manufacturers of all persuasions, and a host of other Industries need capital. They can't borrow it, and most already have debt loads they can't service. The "market" rising right now makes no sense if compared to the economic situation of the day – but if a rising market helps draw private investors into these capital starved companies, it allows the bankers and Wall Street to "live another day". With the help of the Presidents Working Group on Capital Markets, and some well placed futures buying from the major institutions (Goldman, JPM, and Citi) a rise was manufactured that caught the fund managers short, and then the fund managers and hedge funds had to scramble to "get in". And that becomes slightly self-sustaining, as they fear missing the run up more than getting clobbered again. Then, as the ‘sometimes misleading’ economic reports to look better than they possibly could, it "gives hope" to more people, and those people decide to "get in" before the market leaves them behind.
For example: A Friday Headline: “Led by a large decline in energy prices, U.S. consumer prices were unchanged in April after seasonal adjustments and have fallen .7% in the past 12 months, the largest decline in 54 years , the labor department reported Friday.” Excuse me – prices are falling where again? Oil was up $10 / barrel - Gasoline (according to AAA) was up 24 cents / gallon - Food prices are up - Medical costs are up - Education is up. BUT – the "government’s seasonal adjustments" to these figures were ENORMOUS - allowing the government to post the above headline. Therefore - to the average person – “things are getting better.”
Oh and what about the retraining for ‘better jobs’ in this world economy: "A Labor Department audit found that only 1 in 5 who participated in programs for displaced workers found jobs for which they had been retrained; nearly 40% ended up working part time or for less than they had earned before; 28% had not yet found any work at the end of their training."
The Market:
In the here and now, we see the market stumbling a bit – and louder are coming the calls to retest the lows. Yet I think the probability of that happening right now is very low. Yes we could still get a "correction" but it's not going to be as deep as everyone thinks. Why? Because everyone is looking for this big deep retrenchment, so they can hop in at a cheaper price, and when the bulk of the investing world is expecting something to happen, it will not happen. Everyone will try and "get in ahead" of the next guy, and it will automatically short circuit itself. Could we fall a total of 8 - 10% → maybe → but right now, we can't even seem to manage a 5% pull back, let alone 10. The market won’t do what everyone wants it to do, but it will do what it wants to do – which is keep inching higher, trying to prove to the world that the healing is upon us and all will be well. Just realize that even if I'm right and we move ever higher into and through the summer, it's the ultimate suckers rally. We'll want to take the ride, but we will want to step off and go short when it's over. Don't sit there and "buy and hold" forever, you'll get crushed. Take this rally for what it is, and then when it tops out – get out.
Tips:
We sold the last remaining shares of FAS at 12.73 → up 400%.
We sold the last UYM at 19.70 → up 59%.
We sold the last BUCY at 27.77 → up 40%.
We sold the last GMXR at 17.24 → 72%.
Looking forward:
- Inflation is roaring no matter what Uncle Sam says, and tangible assets (think commodities like iron, agri, coal) will do well.
- Technology will become more important as struggling companies replace workers with machines.
- Remember that a rising market lifts all boats, and a falling market exposes the fragile the most. Watch the market for signs of the trend, and pick your spots.
Remember the Blog http://rfcfinancialnews.blogspot.com/. Be careful and talk to you next week.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
"For decades I've heard stories and rumors about manipulation. I've always brushed those rumors aside. But, this is a different world, and the nation is literally fighting for its life. People ask me do you really believe the government would really manipulate the markets? My answer you bet I do, they're willing to do absolutely anything in their struggle to get the US economy back to normal again." - 88 Year old Newsletter writer Richard Russel, made famous via the DOW Theory letters.
Thoughts:
The question is NOT whether we are going to come out of this recession soon – or whether we are going to return to "normal" or just see lower growth. The Question IS. Will the coming depression be sharp, painful and fast, or long and grinding? Yes I know:
- consumer sentiment is higher
- some of the nasty economic readings are "not accelerating" to the down side
- everyone wants to believe that the worst is past us and we are going to be okay soon – unfortunately that’s not in the cards.
- Chrysler and GM closed 2,000 dealerships (roughly 120,000 jobs – good jobs) – with more to come.
- But what about the trickle down → the advertising dollars on newspaper and local TV ads – the local coffee and lunch shops – the local charities – the suppliers of office equipment.
- And what about that job loss number that was hovering around 600k+ job losses per month – is that going down by this move?
- And what about the commercial property that they sit on – Commercial Real Estate is already on the ropes – and what banks are tied into those properties?
- Nothing has been done about the trillions in toxic derivatives that banks are holding. The ‘Mark to Fantasy’ model simply means that banks can lie about their value longer - it doesn't make them go away.
- What about Uncollectible credit-card debt rising to 8.82% - in February, the most in the 20 years that Moody's Investors Service Inc. has kept records.
- What about 101 companies in the Standard and Poor 500 eliminating their 401K contribution matches
- What about 480 trucking companies (7% of the nations trucking business) went out of business in the first quarter of 2009.
All along you always knew there'd be troubles here and there, politicians doing silly things, the occasional war we shouldn't be in, but through most of it I had a decent feeling about my fellow man. But now, seeing how our economy has been destroyed, while people we trusted who should have known better, simply let the greed take over, it shakes my beliefs in the moral fabric. It's degenerated to the point where instead of feeling that basically people are good and well intentioned, I'm beginning to think that man might be evolving to be a bit more evil at the core than I want to believe – with the end game being a centralized governing body over global finance. You see rich folks don't like having Government in their lives – but poor folks need Government in their lives. So what if the ‘game plan’ was to make more and more people broke, and thus dependant upon government. This economic crash wasn't by accident – it wasn’t a some good ideas gone sour – not was it silly greed gone wild – but rather it
"But if we are really heading for a massive depression, why is the market doing so well, and some of the economic numbers looking better?"
- the economic numbers have never gone in a straight line neither up nor down – there is always a counter trend blip in the opposite direction for a short period of time
- the "market" usually does things that don't make a tremendous amount of sense in the here and now. For instance why did the market gain 105% in 1933, as we were in the grips of the Great Depression, before rolling down to new lows? You need a longer view in order to have it all make sense.
Currently Banks, Insurance companies, Auto companies, Real estate companies, Manufacturers of all persuasions, and a host of other Industries need capital. They can't borrow it, and most already have debt loads they can't service. The "market" rising right now makes no sense if compared to the economic situation of the day – but if a rising market helps draw private investors into these capital starved companies, it allows the bankers and Wall Street to "live another day". With the help of the Presidents Working Group on Capital Markets, and some well placed futures buying from the major institutions (Goldman, JPM, and Citi) a rise was manufactured that caught the fund managers short, and then the fund managers and hedge funds had to scramble to "get in". And that becomes slightly self-sustaining, as they fear missing the run up more than getting clobbered again. Then, as the ‘sometimes misleading’ economic reports to look better than they possibly could, it "gives hope" to more people, and those people decide to "get in" before the market leaves them behind.
For example: A Friday Headline: “Led by a large decline in energy prices, U.S. consumer prices were unchanged in April after seasonal adjustments and have fallen .7% in the past 12 months, the largest decline in 54 years , the labor department reported Friday.” Excuse me – prices are falling where again? Oil was up $10 / barrel - Gasoline (according to AAA) was up 24 cents / gallon - Food prices are up - Medical costs are up - Education is up. BUT – the "government’s seasonal adjustments" to these figures were ENORMOUS - allowing the government to post the above headline. Therefore - to the average person – “things are getting better.”
Oh and what about the retraining for ‘better jobs’ in this world economy: "A Labor Department audit found that only 1 in 5 who participated in programs for displaced workers found jobs for which they had been retrained; nearly 40% ended up working part time or for less than they had earned before; 28% had not yet found any work at the end of their training."
The Market:
In the here and now, we see the market stumbling a bit – and louder are coming the calls to retest the lows. Yet I think the probability of that happening right now is very low. Yes we could still get a "correction" but it's not going to be as deep as everyone thinks. Why? Because everyone is looking for this big deep retrenchment, so they can hop in at a cheaper price, and when the bulk of the investing world is expecting something to happen, it will not happen. Everyone will try and "get in ahead" of the next guy, and it will automatically short circuit itself. Could we fall a total of 8 - 10% → maybe → but right now, we can't even seem to manage a 5% pull back, let alone 10. The market won’t do what everyone wants it to do, but it will do what it wants to do – which is keep inching higher, trying to prove to the world that the healing is upon us and all will be well. Just realize that even if I'm right and we move ever higher into and through the summer, it's the ultimate suckers rally. We'll want to take the ride, but we will want to step off and go short when it's over. Don't sit there and "buy and hold" forever, you'll get crushed. Take this rally for what it is, and then when it tops out – get out.
Tips:
We sold the last remaining shares of FAS at 12.73 → up 400%.
We sold the last UYM at 19.70 → up 59%.
We sold the last BUCY at 27.77 → up 40%.
We sold the last GMXR at 17.24 → 72%.
Looking forward:
- Inflation is roaring no matter what Uncle Sam says, and tangible assets (think commodities like iron, agri, coal) will do well.
- Technology will become more important as struggling companies replace workers with machines.
- Remember that a rising market lifts all boats, and a falling market exposes the fragile the most. Watch the market for signs of the trend, and pick your spots.
Remember the Blog http://rfcfinancialnews.blogspot.com/. Be careful and talk to you next week.
R.F. Culbertson
rfc@getabby.com
http://rfcfinancialnews.blogspot.com/
Sunday, May 10, 2009
This Week in Barrons – 05_10_09: Before we start let me begin today by wishing all the Mom’s out there - a very Happy Mothers Day! Being a mom is ‘by far’ the toughest job out there – it only starts with 24/7/365. My hat’s off and my sincerest thanks to all of you!
Thoughts:
On Friday the official release of the Jobs Report told us that 539,000 people were let go in April, and the unemployment rate rose to 8.9%. This brought out everyone telling us that: 1) the RATE of job cuts is slowing, 2) the economy is bottoming, 3) because unemployment is a lagging indicator and this means that the economy is in recovery mode, and the ‘topper’ 4) the unemployment rate inching a bit higher is a good thing as more people realize the recovery is taking place and are now actively seeking work. Honestly – NONE of these people should work on Wall Street – but they all do.
Let’s really examine the report:
- 13.7 million people are unemployed, a level not seen since 1948.
- Capacity utilization at our nations manufacturing plants fell to 69.3%, a level not seen since they started measuring it in 1967.
- Included in the jobs number was 66,000 people hired by Uncle Sam for the sole purpose of taking the 2010 consensus, which is only a temporary job. So adding 66,000 to 539,000 – we’re once again above 600,000.
- The hours worked fell to 33.2, the single lowest measurement on record.
- The rate of temporary employment, which employers use to "test the waters" fell, meaning they don't even want to hire someone even knowing they are only going to be around for a while.
- The unemployment rate rose to the 1983 level of 8.9%.
Now let’s further examine this number. Remember in weeks past – we talked about the unemployment number being only a small piece of the total unemployment number. The government reports the U3 figure – however looking at some other figures – U6 (for example) is the measure that includes people who are working part-time but want full-time work, as well as the "marginally attached" (i.e. people not actively looking, because there are no jobs in their area, but want and are available for a job and have looked for work sometime in the recent past.) When you measure unemployment like that the unemployment rate is 15.8% - and in over 25 states, it's actually over 20%.
There is even a “Birth/Death" component of the unemployment number = U3. That is to say – to Uncle Sam - for every company that lets employees go, some of those employees will go out, open a business and hire people. With absolutely NO proof of any of that actually happening, Uncle Sam takes a guess at what that number is, and in this release it added 226,000 NEW jobs due to that ‘guess.’ So 539,000 jobs lost – add the amount of temporary census takers of 66,00 and then add 226,000 due to the “Birth/Death” component – you’re suddenly over 800,000 jobs lost. Therefore in my world – the jobs number didn’t show me anything – really – other than a deteriorating economy.
So what about the "stress tests" that Wall Street found to be so comforting? Honestly – how can our banking system be "solid" when 10 of 19 need billions more to survive? OK – but what about the future projections – what about the trillions in toxic sludge that is "still there" – and what about ‘Mark to Fantasy’? Recent Real Estate actions show sales going at roughly 60 cents on the dollar – but the banks have marked it ‘dollar to dollar’ – humm – that’s going to be a problem. The FED has made it clear that they will hand select whom they will put on life support for eternity, while letting little guys roll over so the can be "absorbed". Remember – we’ve done EVERYTHING the FED has asked – over 12 Trillion in bail-out funds → basically our entire GDP → and is that unemployment report the recovery?
Will history repeat itself? Back in 1920 – BEFORE the ‘Great Depression” and following World War I, the war excesses in credit and debt had come back to bite us hard. Unemployment was soaring, production was crashing and the people were broke. Like Obama today, Warren J. Harding started his Presidency in the face of a massive economic collapse. Yet Warren didn't open the floodgates – he was quite brilliant – he basically told the people: "Folks, we're screwed. We lived like drunken sailors from too much credit and too much debt. We face horrid inflation, job losses and tough times. We're going to have to buckle down, tough it out, and pay for the mistakes of the past. It won't be pleasant, and you're all going to have to sacrifice. We have to man up to the problems, face them down, charge them off and start fresh. We don't need any wild new concepts, no untried policies. What we need to do is take our medicine and work through it." Warren let bloated businesses fail. He cut back social program spending and infrastructure spending. He reigned in credit, and stood on principles of living within your means. Well guess what – in less than a single year, the economy had flushed itself, the free market rewarded the strong, and disbanded the weak and after a brief period of pain, the economy was on the road to recovery. In fact, it was one of the shortest lived economic downturns of it's type ever seen. Of course that isn’t being talked about because when President’s like Jackson or Harding actually do the ‘right thing’ it becomes an abomination to the banks, and the banks do any and all things they can to keep you in the dark about how things really work.
The Market:
The market has put on one of the most impressive shows it's had in 70 years. Nine (9) weeks of almost straight up has caused everyone to breath a little easier, and feel a little better. People are beginning to believe the hype that the FED has got it right and soon we'll all be okay again. Their 401k’s are going up instead of down. And honestly - $12Trillion in stimulus and non-stop propaganda does indeed have that effect. We’ve amassed massive gains – and even when the market "guru's" said that the run was over 3 weeks ago and we would be testing the bottom again – we disagreed, suggesting that the market would continue higher. Not because of earnings (they stink), or economic improvement, we based our belief on the market’s goal of taking as much money as possible from the largest amount of people at any one time. So, when everyone was shouting to retest the lows, and many went short – the most probable action was for the market to soar even higher, confounding and confusing the masses, and rewarding the few.
Tips:
Right now the "call" is becoming much harder, because once all the naysayers were proven wrong, they had to scramble and get in at all cost. Then they had to change their tune from "this is a bear market bounce" to "this is a raging bull market!" Frankly I have two problems trying to decipher if we are going higher in the short term or not. The long term is easy, once all this fallacy implodes we will see a DOW of 4500. Honestly – we are so overdue for a smack-down that puts the fear of God in all the late arrivals, that it keeps me in a state of nervousness. All throughout history bear market bounces have been punctuated with major sharp reversals that keep people in fear of buying stock, then the market confounds them by quickly recovering and moving higher.
We’ve had a pause but no smack-down. Granted, sometimes a pause is all you get as wave after wave of people try to catch up move their money out of CD's and savings accounts into the market, creating overwhelming demand. But even so, 9 weeks without a scary sell off is very significant to me. There has to be one brewing and we can only guess at this point – but I can advise you that the ‘smack-down’ will be buyable. I would continue to "lean long" but don't bet the ranch. If we were to get a sharp sudden downdraft of 400 or 500 points I would probably be a major buyer, because I then believe it would reverse and rush back up. But without that happening, each day higher is simply stretching the rubber band.
Please celebrate Mother’s Day - show Mom how much you love her. They're great people and deserve a day of rest and praise.
R.F. Culbertson
rfc@getabby.com
Thoughts:
On Friday the official release of the Jobs Report told us that 539,000 people were let go in April, and the unemployment rate rose to 8.9%. This brought out everyone telling us that: 1) the RATE of job cuts is slowing, 2) the economy is bottoming, 3) because unemployment is a lagging indicator and this means that the economy is in recovery mode, and the ‘topper’ 4) the unemployment rate inching a bit higher is a good thing as more people realize the recovery is taking place and are now actively seeking work. Honestly – NONE of these people should work on Wall Street – but they all do.
Let’s really examine the report:
- 13.7 million people are unemployed, a level not seen since 1948.
- Capacity utilization at our nations manufacturing plants fell to 69.3%, a level not seen since they started measuring it in 1967.
- Included in the jobs number was 66,000 people hired by Uncle Sam for the sole purpose of taking the 2010 consensus, which is only a temporary job. So adding 66,000 to 539,000 – we’re once again above 600,000.
- The hours worked fell to 33.2, the single lowest measurement on record.
- The rate of temporary employment, which employers use to "test the waters" fell, meaning they don't even want to hire someone even knowing they are only going to be around for a while.
- The unemployment rate rose to the 1983 level of 8.9%.
Now let’s further examine this number. Remember in weeks past – we talked about the unemployment number being only a small piece of the total unemployment number. The government reports the U3 figure – however looking at some other figures – U6 (for example) is the measure that includes people who are working part-time but want full-time work, as well as the "marginally attached" (i.e. people not actively looking, because there are no jobs in their area, but want and are available for a job and have looked for work sometime in the recent past.) When you measure unemployment like that the unemployment rate is 15.8% - and in over 25 states, it's actually over 20%.
There is even a “Birth/Death" component of the unemployment number = U3. That is to say – to Uncle Sam - for every company that lets employees go, some of those employees will go out, open a business and hire people. With absolutely NO proof of any of that actually happening, Uncle Sam takes a guess at what that number is, and in this release it added 226,000 NEW jobs due to that ‘guess.’ So 539,000 jobs lost – add the amount of temporary census takers of 66,00 and then add 226,000 due to the “Birth/Death” component – you’re suddenly over 800,000 jobs lost. Therefore in my world – the jobs number didn’t show me anything – really – other than a deteriorating economy.
So what about the "stress tests" that Wall Street found to be so comforting? Honestly – how can our banking system be "solid" when 10 of 19 need billions more to survive? OK – but what about the future projections – what about the trillions in toxic sludge that is "still there" – and what about ‘Mark to Fantasy’? Recent Real Estate actions show sales going at roughly 60 cents on the dollar – but the banks have marked it ‘dollar to dollar’ – humm – that’s going to be a problem. The FED has made it clear that they will hand select whom they will put on life support for eternity, while letting little guys roll over so the can be "absorbed". Remember – we’ve done EVERYTHING the FED has asked – over 12 Trillion in bail-out funds → basically our entire GDP → and is that unemployment report the recovery?
Will history repeat itself? Back in 1920 – BEFORE the ‘Great Depression” and following World War I, the war excesses in credit and debt had come back to bite us hard. Unemployment was soaring, production was crashing and the people were broke. Like Obama today, Warren J. Harding started his Presidency in the face of a massive economic collapse. Yet Warren didn't open the floodgates – he was quite brilliant – he basically told the people: "Folks, we're screwed. We lived like drunken sailors from too much credit and too much debt. We face horrid inflation, job losses and tough times. We're going to have to buckle down, tough it out, and pay for the mistakes of the past. It won't be pleasant, and you're all going to have to sacrifice. We have to man up to the problems, face them down, charge them off and start fresh. We don't need any wild new concepts, no untried policies. What we need to do is take our medicine and work through it." Warren let bloated businesses fail. He cut back social program spending and infrastructure spending. He reigned in credit, and stood on principles of living within your means. Well guess what – in less than a single year, the economy had flushed itself, the free market rewarded the strong, and disbanded the weak and after a brief period of pain, the economy was on the road to recovery. In fact, it was one of the shortest lived economic downturns of it's type ever seen. Of course that isn’t being talked about because when President’s like Jackson or Harding actually do the ‘right thing’ it becomes an abomination to the banks, and the banks do any and all things they can to keep you in the dark about how things really work.
The Market:
The market has put on one of the most impressive shows it's had in 70 years. Nine (9) weeks of almost straight up has caused everyone to breath a little easier, and feel a little better. People are beginning to believe the hype that the FED has got it right and soon we'll all be okay again. Their 401k’s are going up instead of down. And honestly - $12Trillion in stimulus and non-stop propaganda does indeed have that effect. We’ve amassed massive gains – and even when the market "guru's" said that the run was over 3 weeks ago and we would be testing the bottom again – we disagreed, suggesting that the market would continue higher. Not because of earnings (they stink), or economic improvement, we based our belief on the market’s goal of taking as much money as possible from the largest amount of people at any one time. So, when everyone was shouting to retest the lows, and many went short – the most probable action was for the market to soar even higher, confounding and confusing the masses, and rewarding the few.
Tips:
Right now the "call" is becoming much harder, because once all the naysayers were proven wrong, they had to scramble and get in at all cost. Then they had to change their tune from "this is a bear market bounce" to "this is a raging bull market!" Frankly I have two problems trying to decipher if we are going higher in the short term or not. The long term is easy, once all this fallacy implodes we will see a DOW of 4500. Honestly – we are so overdue for a smack-down that puts the fear of God in all the late arrivals, that it keeps me in a state of nervousness. All throughout history bear market bounces have been punctuated with major sharp reversals that keep people in fear of buying stock, then the market confounds them by quickly recovering and moving higher.
We’ve had a pause but no smack-down. Granted, sometimes a pause is all you get as wave after wave of people try to catch up move their money out of CD's and savings accounts into the market, creating overwhelming demand. But even so, 9 weeks without a scary sell off is very significant to me. There has to be one brewing and we can only guess at this point – but I can advise you that the ‘smack-down’ will be buyable. I would continue to "lean long" but don't bet the ranch. If we were to get a sharp sudden downdraft of 400 or 500 points I would probably be a major buyer, because I then believe it would reverse and rush back up. But without that happening, each day higher is simply stretching the rubber band.
Please celebrate Mother’s Day - show Mom how much you love her. They're great people and deserve a day of rest and praise.
R.F. Culbertson
rfc@getabby.com
Sunday, May 3, 2009
This week in Barrons – 5.3.2009
Thoughts:
The insanity continues to take my breath away – do we actually think the economy is getting better when:
- 631,000 people had to file for first time unemployment last week, and does the ‘average joe’ realize that the previous weeks initial reading was revised even higher than what was reported?
- What about continuing claims (the people already on the unemployment rolls) hitting another all time high?
- What about the unemployment rate? Most people think that it’s around 8% because that’s what you are being told. Actually the U.S. publishes 6 levels of unemployment from U1 - U6. The reported number is U3. For example U6 are the people who are ‘discouraged’ – and because there are no jobs in their area that they can attain. Now prior to 1995, these workers WERE part of the unemployment rolls, but because the numbers became too high – they were eliminated from the reported number. Now if you were to add back those discouraged workers – the rate would be above 18% - and in some states over 20%. In the Great Depression the rate was 25% - so we’re almost there!
- Inflation – the FED tells you 2% - when in reality it’s closer to 12 to 13%
- Housing foreclosures which were "trumpeted" as slowing down, were (in reality) just hiding the 600,000+ properties that weren't even being booked by banks, because they didn't want them showing up on their ledgers. And now that foreclosures have started again – 136,000 new filings just hit – with more to come.
The Government’s Plan is simple:
- flood the system with trillions of printed dollars
- allow the ‘average joe’ to start borrowing again
- feed the taxpayer money to the banking cartel – and let rival banks go belly in order to allow the cartel to buy their good assets for pennies on the dollar and toss their losses onto the taxpayer
- expand ‘detention centers’ and bring more and more military into play in civil manners – to begin to deal with the revolt which will occur when the economy crumbles
The Market:
Not a single element we see in the true economic numbers equates to a rising market. However, if you believe that the market loves to inflict the maximum amount of pain on the maximum amount of people – then we’re performing correctly and in line with human psychology. For instance - a common adage "the market always looks out 6 months and anticipates what's coming" – appeals to human psychology – but ‘in fact’ just isn’t true. This would tell us that people are looking 6 months out – and investing in equities and their 401k plans – yes? Nope – what in reality is happening is that people are becoming savers – on average saving almost 5% of their incomes. So if people aren’t investing, foreign investors hate us (to quote the Chinese Premier) – who then is driving the market up? Well – it’s not just one person – is many people working behind the scenes – not the least of which are “The President’s Working Group on Financial Markets. The FED, using powers given to it years ago, employs the "working group" which we call the "Plunge Protection Team" (PPT) starts buying futures, and even equities. Once the PPT halts any slide, they then drive the market higher – forcing the shorts to cover – with the ultimate goal of bringing the ‘average Joe’ back into the market – and making their path self-sustaining.
Otherwise – explain earnings reports like this: “Late Thursday, DryShips posted a net loss of $101.8 million, or 93 cents a share, compared to a net profit of $176.3 million, or $4.58 a share, a year earlier. Excluding items, earnings would have been 45 cents a share, much better than the 19 cents analyst predicted. Revenue fell 15% to $196.6 million, slightly below the $197 million analysts were looking for. Voyage revenues fell 58% and the time charter equivalent, a measure of how much a vessel makes on a voyage, tumbled by 58%. Total revenue was boosted by the addition of its drilling business, which it didn't own last year, where revenues were $99 million.” The stock responded by going higher by 11% - but look closely – by ‘Excluding Items’ earnings would have been 45 cents. Heck – by ‘excluding’ my expenses – my income would be higher as well. Meanwhile – they lost 93 cents a share / revenues were down – and even with the $99M from an acquisition they couldn’t make revenue targets. But all the ‘average Joe’ hears is that DryShips beat estimates.
Tips:
If reality had any say in any of this, what's next would be DOW 5000, but the game is to get the ‘average Joe’ back in – and then crash to DOW 4500 (my guess). Remember several months ago, I said:
- bonds would crash
- interest rates (despite all the FED is doing to keep them down would rise)
- and the TLT, would bust under 100
- WELL it’s done ALL that.
But my point here is that as millions of people sell treasuries, where are they putting their money? In the quest for some form of return, they begin to buy equities and more derivatives. That doesn't mean we won't have smack-downs, pauses, back and fills, and all manner of herky-jerky behavior. What it does mean is that there's still a 70% probability that the market will simply work itself higher and higher over the next several months. Between the stimulus money, the tax refunds, the 13 trillion in pledged money, the TARP’s, TALF’s and PPIP’s aligned with bond money looking for a home, there's even a possibility of a "melt up" where stocks simply don't even take normal pauses.
But please play this carefully. Do NOT go ‘all in’ as there’s still a 30% chance that you’ll be crushed. So, you use smaller allocations, and you take them off the table when they are profitable for you. You don't Buy and Hold – you Buy and Manage. If it's going up, you leave some in play, if it's rolling-over, you dump it and find something else. We currently have 7 individual stocks in play – up on average of 62%: SLW / UYM / GSI / GMXR / WAG / URRE / BUCY / and ARAY.
We are still just below the recent highs of 8251, and as I said weeks ago, that's a fairly significant area in my mind. If the market gets over it and can close a day or two above it, we should see 8500 in short fashion. But I won't be surprised if we need a bit more "work" here underneath that level, before we get over it. In other words, I won't be surprised if we get a sharp smack-down here.
But if there is a ‘smack-down’ I'll be a buyer of the drop, because it's our guess the market has to confound a lot more people before it rolls over for good again and will power back up after any significant drop.
Until next week – Please be safe.
Remember the blog and twitter location: http://rfcfinancialnews.blogspot.com/
R.F. Culbertson
rfc@getabby.com
Thoughts:
The insanity continues to take my breath away – do we actually think the economy is getting better when:
- 631,000 people had to file for first time unemployment last week, and does the ‘average joe’ realize that the previous weeks initial reading was revised even higher than what was reported?
- What about continuing claims (the people already on the unemployment rolls) hitting another all time high?
- What about the unemployment rate? Most people think that it’s around 8% because that’s what you are being told. Actually the U.S. publishes 6 levels of unemployment from U1 - U6. The reported number is U3. For example U6 are the people who are ‘discouraged’ – and because there are no jobs in their area that they can attain. Now prior to 1995, these workers WERE part of the unemployment rolls, but because the numbers became too high – they were eliminated from the reported number. Now if you were to add back those discouraged workers – the rate would be above 18% - and in some states over 20%. In the Great Depression the rate was 25% - so we’re almost there!
- Inflation – the FED tells you 2% - when in reality it’s closer to 12 to 13%
- Housing foreclosures which were "trumpeted" as slowing down, were (in reality) just hiding the 600,000+ properties that weren't even being booked by banks, because they didn't want them showing up on their ledgers. And now that foreclosures have started again – 136,000 new filings just hit – with more to come.
The Government’s Plan is simple:
- flood the system with trillions of printed dollars
- allow the ‘average joe’ to start borrowing again
- feed the taxpayer money to the banking cartel – and let rival banks go belly in order to allow the cartel to buy their good assets for pennies on the dollar and toss their losses onto the taxpayer
- expand ‘detention centers’ and bring more and more military into play in civil manners – to begin to deal with the revolt which will occur when the economy crumbles
The Market:
Not a single element we see in the true economic numbers equates to a rising market. However, if you believe that the market loves to inflict the maximum amount of pain on the maximum amount of people – then we’re performing correctly and in line with human psychology. For instance - a common adage "the market always looks out 6 months and anticipates what's coming" – appeals to human psychology – but ‘in fact’ just isn’t true. This would tell us that people are looking 6 months out – and investing in equities and their 401k plans – yes? Nope – what in reality is happening is that people are becoming savers – on average saving almost 5% of their incomes. So if people aren’t investing, foreign investors hate us (to quote the Chinese Premier) – who then is driving the market up? Well – it’s not just one person – is many people working behind the scenes – not the least of which are “The President’s Working Group on Financial Markets. The FED, using powers given to it years ago, employs the "working group" which we call the "Plunge Protection Team" (PPT) starts buying futures, and even equities. Once the PPT halts any slide, they then drive the market higher – forcing the shorts to cover – with the ultimate goal of bringing the ‘average Joe’ back into the market – and making their path self-sustaining.
Otherwise – explain earnings reports like this: “Late Thursday, DryShips posted a net loss of $101.8 million, or 93 cents a share, compared to a net profit of $176.3 million, or $4.58 a share, a year earlier. Excluding items, earnings would have been 45 cents a share, much better than the 19 cents analyst predicted. Revenue fell 15% to $196.6 million, slightly below the $197 million analysts were looking for. Voyage revenues fell 58% and the time charter equivalent, a measure of how much a vessel makes on a voyage, tumbled by 58%. Total revenue was boosted by the addition of its drilling business, which it didn't own last year, where revenues were $99 million.” The stock responded by going higher by 11% - but look closely – by ‘Excluding Items’ earnings would have been 45 cents. Heck – by ‘excluding’ my expenses – my income would be higher as well. Meanwhile – they lost 93 cents a share / revenues were down – and even with the $99M from an acquisition they couldn’t make revenue targets. But all the ‘average Joe’ hears is that DryShips beat estimates.
Tips:
If reality had any say in any of this, what's next would be DOW 5000, but the game is to get the ‘average Joe’ back in – and then crash to DOW 4500 (my guess). Remember several months ago, I said:
- bonds would crash
- interest rates (despite all the FED is doing to keep them down would rise)
- and the TLT, would bust under 100
- WELL it’s done ALL that.
But my point here is that as millions of people sell treasuries, where are they putting their money? In the quest for some form of return, they begin to buy equities and more derivatives. That doesn't mean we won't have smack-downs, pauses, back and fills, and all manner of herky-jerky behavior. What it does mean is that there's still a 70% probability that the market will simply work itself higher and higher over the next several months. Between the stimulus money, the tax refunds, the 13 trillion in pledged money, the TARP’s, TALF’s and PPIP’s aligned with bond money looking for a home, there's even a possibility of a "melt up" where stocks simply don't even take normal pauses.
But please play this carefully. Do NOT go ‘all in’ as there’s still a 30% chance that you’ll be crushed. So, you use smaller allocations, and you take them off the table when they are profitable for you. You don't Buy and Hold – you Buy and Manage. If it's going up, you leave some in play, if it's rolling-over, you dump it and find something else. We currently have 7 individual stocks in play – up on average of 62%: SLW / UYM / GSI / GMXR / WAG / URRE / BUCY / and ARAY.
We are still just below the recent highs of 8251, and as I said weeks ago, that's a fairly significant area in my mind. If the market gets over it and can close a day or two above it, we should see 8500 in short fashion. But I won't be surprised if we need a bit more "work" here underneath that level, before we get over it. In other words, I won't be surprised if we get a sharp smack-down here.
But if there is a ‘smack-down’ I'll be a buyer of the drop, because it's our guess the market has to confound a lot more people before it rolls over for good again and will power back up after any significant drop.
Until next week – Please be safe.
Remember the blog and twitter location: http://rfcfinancialnews.blogspot.com/
R.F. Culbertson
rfc@getabby.com
Sunday, April 26, 2009
This week in Barrons - 4.27.2009
This week in Barrons ... 04.27.2009
Today's Commentary:
Thoughts: My worry is that the average “Joe” is paying more attention to what the economic experts have to say, because he's been affected directly by the meltdown. He has seen his friends laid off, his home value fall, and his 401K get decimated. So, he’s now trying to get a handle on current affairs, however he's being fed a line of BS from the very media he's attempting to learn from. So, in a way, it’s not “Joe’s” fault, and he’s becoming convinced that Uncle Sam will ultimately pull us out of all this and life will go on. CNBC tells him that it's the best possible time ever to buy stocks because "by Q4 – 2009 everything will be rockin." The media tells him every day that things are "less bad" than they were, and the numbers aren't sliding as fast as they were. All in all “Joe” has come to the conclusion that it's "all going to be okay". In boxing there’s an old saying “it’s the punch you don’t see – that knocks you out!”
This week we finally got what everyone already knew, that the government forced the buyout of Merrill Lynch by Bank of America. Ken Lewis of B of A told us that Hank Paulson made him do it – “or be crushed.” What about all those great bank earnings – well Goldman posted it's largest loss in December – but cut off its fiscal year in November and restarted recording in January. Where did December go? Morgan Stanley just did the same thing à who as a result of changing ‘fiscal year ends’ from November 30th to December 31st – reported a $1.3B net loss – presented on page 19 of their ‘financial supplement’. So, a $1.3B loss just evaporates from the actual balance sheet – income statement and appears as a footnote on page 19. And all the “average Joe” knows is that things are getting better and Uncle Sam and the FED have pulled off a miracle.
The average “Joe” this week has heard numbers suggesting that the steep decline in housing has ended, and there are "silver linings" in the recent reports. Unfortunately 62% of those home sales were “foreclosures or short sales” AND there are more than 650,000 more homes in foreclosure that banks haven't "taken back" because they don't want the homes to show up on the balance sheet as non performing? At the end of 2008 and into 2009 – most lenders put a moratorium on foreclosing, waiting for Obama's rescue plan, and now that the plan is shown to be of little use, they are foreclosing again. Most banks have allowed people to live in homes "rent free" because the minute the bank actually takes them in, they have to pay property taxes on them, mostly in arrears. ARM resets will hit again this year – and that a record 19 million homes stood empty in the first three months of 2009.
I wonder if the average “Joe” knows that according to Bloomberg, directors, officers and other insiders have sold $353 million worth of stock in this fading month, or 8.3 times the total bought. In fact, insider purchases of $42.5 million are on track to make April the skimpiest month for such buying since July, 1992. Directors, officers and insiders ONLY listen to the ‘front lines’ and are not seeing a whole heck of a lot that they like.
This week in the Market: Please don’t be an average “Joe”. We are racing towards a wicked inflationary depression. You can’t drink yourself softer, and you can’t fis a debt and credit spiral with more debt and more credit. The market is currently at a ‘catch your breath’ place. We are on an economic "landing" now, just catching our breath from the first major wave of the downfall. There's a long flight of downward stairs ahead.
- Continue to own gold and silver. Gold is money, and can't be debased with a printing press.
- Don't overextend yourself – and don’t buy a new ‘boat’ or ‘bit item’ just yet
- Stay away from debt and save your cash.
Currently the market is higher in order to absorb the up-coming news of the ‘stress tests.’ Virtually all the firepower of the institutions, banks, and Federal Reserve is focused on propping up the market. But let’s not lose focus – the market is a constant series of methods of confrontation and confusion. So, at the DOW low of 6600 as tens of thousands were closing their accounts, going short, and stopping contributions to their 401K, the market inflicted "max pain" and ran for 1600 points, and instead of rolling over and dying, it's held up, confounding even more people.
I do expect a major smackdown again, for 2 days – coming shortly – and that should shake out the nervous and the latecomers. So I think the ‘punch’ will come – but it won’t be massive and it will be “buyable.” As most people adopt the old "sell in May and go away", the market will probably confound them and move even higher. Back on 4/17 the DOW hit 8251, and since we're below that right now at 8076, that old high could be short term resistance for a while. I wouldn't be putting much money into the market here, until we put in a good solid close over that 8251. But, if we can do that, we'll see 8500 soon enough.
Tips:
- We’re up over 50% in UYM, and I'm starting to consider taking a bit more off the table.
- FAS we only have ¼ position left (after the 300% increase) – so I won’t hold if it goes below 6
- So, is there anything else I'd like? In the future we're going to short the retailers, the commercial real estate guys, and the market themselves. But, I think that’s several months away. If I'm right, we'll get a punch down this week, but it won't be cataclysmic, just a bit scary, and it will be buyable. And a few names I’d watch are: Amazon (AMZN) and Apple (APPL).
- Finally you may be hearing about a company called ARAY. ARAY owns a medical device called the "cyberknife", which is a very advanced way of shooting cancers with radiation and the results have indeed been stunning. They are calling it the next Intuitive surgical, and for a small company to have such a successful machine is indeed a big deal to the bottom line. It’s currently trading at 5.99 - has already had a decent run and may be tired. In time, ARAY could be worth a double at some point as more and more operating rooms buy Cyberknife for treating prostrate, brain and lung cancers. So, if you take a position, make it small, and sit on it. You might see 5 before seeing 7, but it's possible that given 6 months or so, it could see 9.
Good luck folks, and please don't be an average “Joe” – remember it’s the punch you don’t see that knocks you out. Until next week – Be Careful!
R.F. Culbertson
rfc@getabby.com
Today's Commentary:
Thoughts: My worry is that the average “Joe” is paying more attention to what the economic experts have to say, because he's been affected directly by the meltdown. He has seen his friends laid off, his home value fall, and his 401K get decimated. So, he’s now trying to get a handle on current affairs, however he's being fed a line of BS from the very media he's attempting to learn from. So, in a way, it’s not “Joe’s” fault, and he’s becoming convinced that Uncle Sam will ultimately pull us out of all this and life will go on. CNBC tells him that it's the best possible time ever to buy stocks because "by Q4 – 2009 everything will be rockin." The media tells him every day that things are "less bad" than they were, and the numbers aren't sliding as fast as they were. All in all “Joe” has come to the conclusion that it's "all going to be okay". In boxing there’s an old saying “it’s the punch you don’t see – that knocks you out!”
This week we finally got what everyone already knew, that the government forced the buyout of Merrill Lynch by Bank of America. Ken Lewis of B of A told us that Hank Paulson made him do it – “or be crushed.” What about all those great bank earnings – well Goldman posted it's largest loss in December – but cut off its fiscal year in November and restarted recording in January. Where did December go? Morgan Stanley just did the same thing à who as a result of changing ‘fiscal year ends’ from November 30th to December 31st – reported a $1.3B net loss – presented on page 19 of their ‘financial supplement’. So, a $1.3B loss just evaporates from the actual balance sheet – income statement and appears as a footnote on page 19. And all the “average Joe” knows is that things are getting better and Uncle Sam and the FED have pulled off a miracle.
The average “Joe” this week has heard numbers suggesting that the steep decline in housing has ended, and there are "silver linings" in the recent reports. Unfortunately 62% of those home sales were “foreclosures or short sales” AND there are more than 650,000 more homes in foreclosure that banks haven't "taken back" because they don't want the homes to show up on the balance sheet as non performing? At the end of 2008 and into 2009 – most lenders put a moratorium on foreclosing, waiting for Obama's rescue plan, and now that the plan is shown to be of little use, they are foreclosing again. Most banks have allowed people to live in homes "rent free" because the minute the bank actually takes them in, they have to pay property taxes on them, mostly in arrears. ARM resets will hit again this year – and that a record 19 million homes stood empty in the first three months of 2009.
I wonder if the average “Joe” knows that according to Bloomberg, directors, officers and other insiders have sold $353 million worth of stock in this fading month, or 8.3 times the total bought. In fact, insider purchases of $42.5 million are on track to make April the skimpiest month for such buying since July, 1992. Directors, officers and insiders ONLY listen to the ‘front lines’ and are not seeing a whole heck of a lot that they like.
This week in the Market: Please don’t be an average “Joe”. We are racing towards a wicked inflationary depression. You can’t drink yourself softer, and you can’t fis a debt and credit spiral with more debt and more credit. The market is currently at a ‘catch your breath’ place. We are on an economic "landing" now, just catching our breath from the first major wave of the downfall. There's a long flight of downward stairs ahead.
- Continue to own gold and silver. Gold is money, and can't be debased with a printing press.
- Don't overextend yourself – and don’t buy a new ‘boat’ or ‘bit item’ just yet
- Stay away from debt and save your cash.
Currently the market is higher in order to absorb the up-coming news of the ‘stress tests.’ Virtually all the firepower of the institutions, banks, and Federal Reserve is focused on propping up the market. But let’s not lose focus – the market is a constant series of methods of confrontation and confusion. So, at the DOW low of 6600 as tens of thousands were closing their accounts, going short, and stopping contributions to their 401K, the market inflicted "max pain" and ran for 1600 points, and instead of rolling over and dying, it's held up, confounding even more people.
I do expect a major smackdown again, for 2 days – coming shortly – and that should shake out the nervous and the latecomers. So I think the ‘punch’ will come – but it won’t be massive and it will be “buyable.” As most people adopt the old "sell in May and go away", the market will probably confound them and move even higher. Back on 4/17 the DOW hit 8251, and since we're below that right now at 8076, that old high could be short term resistance for a while. I wouldn't be putting much money into the market here, until we put in a good solid close over that 8251. But, if we can do that, we'll see 8500 soon enough.
Tips:
- We’re up over 50% in UYM, and I'm starting to consider taking a bit more off the table.
- FAS we only have ¼ position left (after the 300% increase) – so I won’t hold if it goes below 6
- So, is there anything else I'd like? In the future we're going to short the retailers, the commercial real estate guys, and the market themselves. But, I think that’s several months away. If I'm right, we'll get a punch down this week, but it won't be cataclysmic, just a bit scary, and it will be buyable. And a few names I’d watch are: Amazon (AMZN) and Apple (APPL).
- Finally you may be hearing about a company called ARAY. ARAY owns a medical device called the "cyberknife", which is a very advanced way of shooting cancers with radiation and the results have indeed been stunning. They are calling it the next Intuitive surgical, and for a small company to have such a successful machine is indeed a big deal to the bottom line. It’s currently trading at 5.99 - has already had a decent run and may be tired. In time, ARAY could be worth a double at some point as more and more operating rooms buy Cyberknife for treating prostrate, brain and lung cancers. So, if you take a position, make it small, and sit on it. You might see 5 before seeing 7, but it's possible that given 6 months or so, it could see 9.
Good luck folks, and please don't be an average “Joe” – remember it’s the punch you don’t see that knocks you out. Until next week – Be Careful!
R.F. Culbertson
rfc@getabby.com
Sunday, April 19, 2009
All – hope this finds you well ...
Someone asked me this week – has society’s insanity increased or is it simply because our ‘information reach’ is so much further, faster? Factually 70% of our information is gained ‘peripherally’ (i.e. things that we’re not directly concentrating). Due to the downturn: the world is consumed in ‘focus’ and ‘getting by’ and not in any type of ‘peripheral’ knowledge gathering. Hence it’s this ‘peripheral’ knowledge that is giving us the illusion of increasing in speed. Now – having said that – it’s actually ‘both’. Because it now takes ‘catastrophic’ news to even ‘dent’ our behavior. We are in a time of information overload – and with much of the information being ‘catastrophic’ in nature. Where this impacts you and I – is that it often prevents us from putting all of the pieces of the puzzle together.
As this economic recession deepens, we will all see that the banks actually run the country, and how those 15 Goldman Sachs alumni (placed in the highest areas of Government and economic policy) are going to influence virtually everything. For example: Goldman Sachs, carrying billions in garbage toxic slime, lent over $13 Billion to AIG (through the back door), SHORTED AIG stock – and then had the gall to produce $1.8 Billion in profits for the first quarter? Why didn’t CNBC (or any major news network) notice this? How can Tim Geithner ask for $2 Trillion more for a banking system that is recording "record" profits – because he knows that a ‘Depression’ is coming!
Factually:
- Another wave of Adjustable Rate Mortgages are set to reset, and that will cripple another 600k familes.
- Last week, General Growth Properties filed the biggest real estate bankruptcy in history. This is Commercial Real Estate and as more retailers and businesses fold – commercial space will be left vacant – and the Real Estate holders can’t roll-over the debt because the banks won't lend to them. This will easily eclipse the private real estate disaster that we’re presently experiencing.
- In the good old days we had $680 billion dollars a year coming to "consumers" via home refinancing – well – we’re on track for 2009 to be $36 Billion = 5%.
- By relaxing the Mark to Market standards so more business can Mark to "Fantasy", companies will post earnings that let them look solvent for a while longer as they try and unload their toxic waste and pray against hope that they can roll over their existing debt with new financing.
- And no one is talking about the other hundreds of Trillions in Credit Default Swaps (CDS's) that were written against anything and everything. That time bomb is still ticking and the fuse gets shorter every day.
This week in the Market:
The market is still clawing out gains, although you can feel the toppiness. Will the market roll over and crash downward – or will it continue to confound to the upside? Look at near-term behavior: In 2007, despite horrible economic news, people piled into the market because they couldn’t stand missing the run-up. Then, like clockwork it pulled the rug and we crashed for 7K points. Then, back around the beginning of March, 2009, everyone was so tired of losing money they stopped participating in their 401K, closed their brokerage accounts, and some even went short. Once again, when the maximum amount of people had crossed-over, "boom" up we went in a tear only equaled once, and that was in the midst of the great depression.
We’ve run up hard – and by some accounts over 30% in just 6 weeks. About two weeks ago we started hearing the “sell” and “overbought” cries and this was just a bear market bounce and we'd be retesting the lows soon. Now the mindset has changed to more and more people are beginning to get the urge to "get back in" and make back their losses. This is a crucial time for the market, probably the most important time of the last 6 months. This coming week will bring us hundreds of earnings reports. If the market simply pauses and backfills a little, but holds it's uptrend, there will be a stampede to "get back in". We could rock higher for another 2K DOW points in a matter of just a few months.
You see, the FED knows that with $13.2 trillion in hand outs and pledges, if the market were to roll over and crash again, it would show that people have lost all faith, the programs weren't working, and they'd have no more ammunition left. So, it's to the FED’s best interest to have their "Plunge Patrol Team" directly buy equities under the blanket of "unusual methods" to keep this market moving higher. The FED has already given out: TARPS, Mark to market changes, Geithner’s PPIP plan, and $Billions to 9 banks so they can lower mortgage payments on defaulting homeowners. The FED can’t let that firepower slip away. On the other hand, the data still stinks. General Growth is bankrupt. Foreclosures are up 24%, and China’s growth rate came in below estimates.
Tips:
My view is that the odds still favor a move higher. Granted we need a pause (a quick slapdown), but it’s my guess that any pause gets bought right up and we soar even higher. Remember when we talked about seeing people sell Treasury Bonds – well the Treasury Bond ETF (TLT) is now at 101 and soon to dip below 100 – as investors are selling bonds they’re investing in stocks and in gold!
Speaking of gold: As you all known the physical price of gold is set by the "paper" price of trading on the Comex. Well, gold has gone lower during this run-up however, more and more investors have been demanding delivery instead of cash settlement, and they don't appear to have the gold on hand to fill the deliveries.
It's my guess there will be a short squeeze in the next month that sends gold soaring again because frankly I don't believe the dealers have the gold that Comex declares they have. I think they've been borrowing to cover, and that cannot last forever.
Here are a couple trades for you to consider:
- FSYS over 15
- ORA and other ‘GeoThermal’ Companies
- UYG, XLF, UYM have made a 50% gain for us – and we may sell and buy in if there’s a pause
- FAS – we cashed in most of our 300% gain
- SLW – has backed off to 7.41 – over 100% gain – under 7 we’re gone – but of all the silver miner/aggregators – SLW is positioned the best
- GSI – a Chinese Steel Holding Company because the Chinese are desperately getting rid of ‘dollars’ buying up real resources, like copper, steel etc. GSI has the ability to make good on that.
Be safe – and until next week, be careful.
R.F. Culbertson
rfc@getabby.com
Www.getabby.com
Someone asked me this week – has society’s insanity increased or is it simply because our ‘information reach’ is so much further, faster? Factually 70% of our information is gained ‘peripherally’ (i.e. things that we’re not directly concentrating). Due to the downturn: the world is consumed in ‘focus’ and ‘getting by’ and not in any type of ‘peripheral’ knowledge gathering. Hence it’s this ‘peripheral’ knowledge that is giving us the illusion of increasing in speed. Now – having said that – it’s actually ‘both’. Because it now takes ‘catastrophic’ news to even ‘dent’ our behavior. We are in a time of information overload – and with much of the information being ‘catastrophic’ in nature. Where this impacts you and I – is that it often prevents us from putting all of the pieces of the puzzle together.
As this economic recession deepens, we will all see that the banks actually run the country, and how those 15 Goldman Sachs alumni (placed in the highest areas of Government and economic policy) are going to influence virtually everything. For example: Goldman Sachs, carrying billions in garbage toxic slime, lent over $13 Billion to AIG (through the back door), SHORTED AIG stock – and then had the gall to produce $1.8 Billion in profits for the first quarter? Why didn’t CNBC (or any major news network) notice this? How can Tim Geithner ask for $2 Trillion more for a banking system that is recording "record" profits – because he knows that a ‘Depression’ is coming!
Factually:
- Another wave of Adjustable Rate Mortgages are set to reset, and that will cripple another 600k familes.
- Last week, General Growth Properties filed the biggest real estate bankruptcy in history. This is Commercial Real Estate and as more retailers and businesses fold – commercial space will be left vacant – and the Real Estate holders can’t roll-over the debt because the banks won't lend to them. This will easily eclipse the private real estate disaster that we’re presently experiencing.
- In the good old days we had $680 billion dollars a year coming to "consumers" via home refinancing – well – we’re on track for 2009 to be $36 Billion = 5%.
- By relaxing the Mark to Market standards so more business can Mark to "Fantasy", companies will post earnings that let them look solvent for a while longer as they try and unload their toxic waste and pray against hope that they can roll over their existing debt with new financing.
- And no one is talking about the other hundreds of Trillions in Credit Default Swaps (CDS's) that were written against anything and everything. That time bomb is still ticking and the fuse gets shorter every day.
This week in the Market:
The market is still clawing out gains, although you can feel the toppiness. Will the market roll over and crash downward – or will it continue to confound to the upside? Look at near-term behavior: In 2007, despite horrible economic news, people piled into the market because they couldn’t stand missing the run-up. Then, like clockwork it pulled the rug and we crashed for 7K points. Then, back around the beginning of March, 2009, everyone was so tired of losing money they stopped participating in their 401K, closed their brokerage accounts, and some even went short. Once again, when the maximum amount of people had crossed-over, "boom" up we went in a tear only equaled once, and that was in the midst of the great depression.
We’ve run up hard – and by some accounts over 30% in just 6 weeks. About two weeks ago we started hearing the “sell” and “overbought” cries and this was just a bear market bounce and we'd be retesting the lows soon. Now the mindset has changed to more and more people are beginning to get the urge to "get back in" and make back their losses. This is a crucial time for the market, probably the most important time of the last 6 months. This coming week will bring us hundreds of earnings reports. If the market simply pauses and backfills a little, but holds it's uptrend, there will be a stampede to "get back in". We could rock higher for another 2K DOW points in a matter of just a few months.
You see, the FED knows that with $13.2 trillion in hand outs and pledges, if the market were to roll over and crash again, it would show that people have lost all faith, the programs weren't working, and they'd have no more ammunition left. So, it's to the FED’s best interest to have their "Plunge Patrol Team" directly buy equities under the blanket of "unusual methods" to keep this market moving higher. The FED has already given out: TARPS, Mark to market changes, Geithner’s PPIP plan, and $Billions to 9 banks so they can lower mortgage payments on defaulting homeowners. The FED can’t let that firepower slip away. On the other hand, the data still stinks. General Growth is bankrupt. Foreclosures are up 24%, and China’s growth rate came in below estimates.
Tips:
My view is that the odds still favor a move higher. Granted we need a pause (a quick slapdown), but it’s my guess that any pause gets bought right up and we soar even higher. Remember when we talked about seeing people sell Treasury Bonds – well the Treasury Bond ETF (TLT) is now at 101 and soon to dip below 100 – as investors are selling bonds they’re investing in stocks and in gold!
Speaking of gold: As you all known the physical price of gold is set by the "paper" price of trading on the Comex. Well, gold has gone lower during this run-up however, more and more investors have been demanding delivery instead of cash settlement, and they don't appear to have the gold on hand to fill the deliveries.
It's my guess there will be a short squeeze in the next month that sends gold soaring again because frankly I don't believe the dealers have the gold that Comex declares they have. I think they've been borrowing to cover, and that cannot last forever.
Here are a couple trades for you to consider:
- FSYS over 15
- ORA and other ‘GeoThermal’ Companies
- UYG, XLF, UYM have made a 50% gain for us – and we may sell and buy in if there’s a pause
- FAS – we cashed in most of our 300% gain
- SLW – has backed off to 7.41 – over 100% gain – under 7 we’re gone – but of all the silver miner/aggregators – SLW is positioned the best
- GSI – a Chinese Steel Holding Company because the Chinese are desperately getting rid of ‘dollars’ buying up real resources, like copper, steel etc. GSI has the ability to make good on that.
Be safe – and until next week, be careful.
R.F. Culbertson
rfc@getabby.com
Www.getabby.com
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