This Week in Barrons – 3-6-2016:
Thoughts:
"Gold is the money of kings; silver is the money of
gentlemen; barter is the money of peasants; but debt is the money of
slaves." … Norm Franz
Dear Ms. Yellen:
Ms. Yellen, I’m beginning to share the opinion voiced by S.F. this week
that our society is becoming desensitized to our debt levels. The level of ‘free stuff’ that our government
is handing out has become obscene:
-
Total U.S. Debt = $47.4
Trillion
-
Total # of U.S. Tax Payers = 119 Million
-
Total Due from EVERY Tax Payer = $396,230
-
Average Tax Payer Annual Wage = $52,000 / yr.
o
To payback debt, GIVE all wages to Gov’t for 7.6 years
-
Tot. U.S. Workers under Social Security = 163 Million
-
Tot. Due from EVERY S.S. Recipient = $290,404
-
Average Social Security Income = $14,160 / yr.
o
To payback debt, FORFEIT all S.S. benefits for 20.5 years
So, in order to get our country back on track and out of debt – all we
need to do is to have everyone work for FREE for the next 8 years, OR have
everyone give back all of their Social Security benefits for the next 21
years. Is any candidate (Billary or ‘The
Donald’) making these suggestions?
Combine those facts with some other ‘tid bits’:
-
Due to our lack of manufacturing, U.S. productivity (after
rising a paltry 0.7% in 2015) contracted in Q4 of 2016 at a 2.2% annual rate.
-
Moody’s announced that global corporate
defaults would increase by more than 30% in 2016 – reaching their highest level
since 2009.
-
Between 2007 and 2014, 7 deaths and 98 serious injuries were
directly related to Black Friday sales. What
does that say about our society when 7 people were trampled to death trying to
buy a TV?
-
A recent YouGov survey found that 43% of respondents
under the age of 30 had a favorable view of Socialism, and only 32% had a
favorable view of Capitalism.
-
Bill Clinton (by being impeached, disbarred, and found in
contempt of court while President) accumulated the worst record of determined
malfeasance of any President in history.
Meanwhile, his wife is a ‘shoe in’ for the Democratic nomination for
that same office.
-
The Bavarian Banking Association has recommended that its member banks
start stockpiling PHYSICAL CASH.
-
Almost 100 Million Americans have DROPPED OUT of the workforce.
-
Jimmy Rogers predicts an upcoming recession with 100% certainty.
-
And Kim Jong Un orders his nukes ‘ready to go’.
The only thing that seems to be behaving according to plan is gold. 3 weeks ago I penned a piece titled: “Gold …
are we there yet?” I asked the question
whether we had enough evidence (after a 5 year hiatus) to show that gold and
silver are ready to go up? I talked
about:
-
Central Bank buying that never decreased,
-
Sovereign buying that never let up,
-
And the draw down in physical inventory (especially in
silver) that was approaching critical levels.
The conclusion was: By combining the tightness in the physical market with the increased
dangers of global financial panic, the metals and miners should be ready to
make their move higher.
3
months before that, I outlined a ‘Vegas’ strategy (using stock and options) of
how to 50X your money over the next 5 years in gold – using one stock in
particular ‘First Majestic Silver Corp’ (AG).
Since writing that:
-
The miners have
been soaring,
-
The ‘Vegas’ play
on AG is rolling along nicely,
-
And just on
Friday: BlackRock Inc. suspended the issuance of new shares in their $8B
iShares Gold Trust – citing a surge in demand for gold. It seems that due to high demand for physical
gold, Blackrock doesn't have enough registered gold to continue issuing new ETF
shares. And why is gold going crazy? I can think of a dozen reasons – but the one
that NOBODY will talk about is NEGATIVE interest rates.
Why would anyone place their
money in a bank in Japan, Sweden, Denmark, the ECB, Switzerland, etc. – just to
PAY the bank interest on their own money? Why not turn those worthless paper currencies
into Gold. Gold (which pays no interest)
is currently offering a better return than CASH in the bank. Honestly, when a financial system becomes so
perverted that it starts hyping NEGATIVE interest rates (something history has never
seen) – the allure of gold and silver are going to be pretty compelling.
Ms. Yellen: we are saddled with debts that can never be repaid, a
currency nobody wants, and a culture where only ‘desperation, fear and hand-outs’
survive. My simple advice for all of us to
buy Gold!
The Market:
Beijing China said on Monday it expects to lay-off 1.8 million workers (15%
of the workforce) in the coal and steel industries as part of an ongoing effort
to reduce industrial overcapacity. Can you imagine laying-off 2 million people?
The world is so stagnant that China is idling 2 million people in the energy
and steel businesses. Call me crazy, but
that doesn't signal global strength to me. In the U.S.:
-
The Chicago PMI crashed to 47.4 (lower than anyone's
estimates) – with the labor portion reporting numbers at 2009 levels.
-
Pending home sales dropped to a 2-year low.
-
And the Dallas Fed Report came out with a reading of MINUS
31 – telling everyone that we are IN a recession.
With that as a backdrop,
the market continued its 3rd week moving higher – right after saving
itself from falling over the edge of the cliff. It has been quite a run,
and every sector has participated. In
fact, a company like Caterpillar (CAT) that has seen 38 straight months of
falling sales, has gained 20 points in three weeks. Why – because a ‘rising tide lifts all boats’.
The question is – how far
can this rally go?
1. On Friday the Non-Farm Payroll (Jobs) Report was created. While small business closures have exceeded
openings for 13 consecutive months, the report still suggested that we created
242,000 jobs. Of course the ‘fictional’
birth/death model created 129,000 ‘phantom’ jobs. And if you examine the tax records, you’ll
find that we actually created only about 75,000 jobs. But despite the totally bogus number, Wall
Street used it as the perfect reason for stocks to make gains once again.
2. Beyond the jobs report, Wall Street is looking toward
Mario Draghi from the ECB to make good on his promise. Mr. Draghi said (a while back) that he would
“do whatever it takes” to get the European economy moving again. Many are hoping and praying that he blankets
the planet in freshly printed Euro's. But thus far, the G20 has failed to
unleash a coordinated global printing attack, and China’s future plans do not
include any massive interventions either. Maybe Draghi disappoints this coming week?
3. Finally, the market was incredibly positioned to the
short side. Many attribute this ‘short
squeeze’ for most of the 200 S&P points that we’ve gained over the past 3
weeks. And while most of the shorted
stocks have gone higher, the ETF baskets haven't seen the same level of buying
interest. If the EFT baskets start pushing to the upside, then this market
could push up and challenge the all time highs set last May.
On Friday there were many
stocks trying to break out – that didn’t hold their breakouts. Friday was also the first day in a while that
the market did not close on the high of the day. In fact, if not for a late day push, we were
just an hour away from closing red.
I think we're at the end
of the run. We've come a long way in a
short period, and if nothing else, a pause should be in the cards. After all, ‘the powers that be’ know that the
wheels are beginning to fall off this illusion of an economy, and they are
desperate to push the ‘crash’ out past the election. One of the most accurate indicators of an
‘overbought’ condition (one where the market has run up too high) is called the
McClellan Oscillator. When it gets into
extremes (either up or down) it signals that a reversal is imminent. Well it's currently at overbought levels that
have rarely been seen. So if we add up
the McClellan Oscillator, with the lousy economic data, and the failure for the
G20 and China to ‘go crazy’ – it leads me to believe that we might be looking
at a pullback.
TIPS:
I am:
-
Long various mining stocks: AG, AUY, EGO, GFI, IAG, and FFMGF,
-
Long an oil supplier: REN @ $0.56,
-
Long GLD – Mar – Call Debit Spread – 115 / 120,
-
Long NKE – Mar – Call – 67.5,
-
Sold RUT – Mar – Call Credit Spread – 1100 / 1105,
-
Sold SPX – Mar – Call Credit Spread – 2025 / 2030,
-
Long SPX – 1925 – March / + April Calendar spread,
-
Long SPX – 2025 – March / + April Calendar spread,
-
Sold TEX – Apr – Put Credit Spread – 19 / 20, and
-
Long TSN – Mar / Apr – 62.5 Calendar
To
follow me on Twitter.com and on StockTwits.com
to get my daily thoughts and trades – my handle is: taylorpamm.
Please
be safe out there!
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