RF's Financial News

RF's Financial News

Sunday, February 24, 2013

This Week in Barrons - 2-24-2013


This Week in Barrons – 2-17-2013

Turning your 401K into Gold?

For a minute – let’s talk about the future of your 401K, IRA, or other tax-sheltered account(s).  Could our government initiate a Government sponsored retirement account program?  Absolutely.  Currently Americans have about $8 Trillion in various retirement accounts, and more than $16 Trillion if you include 401K's, IRA's, Roth accounts, and Bond holdings.  $16 Trillion just happens to match the amount of short-term debt the US finds itself in.  What if our government ‘told’ everyone to use a portion (half or more) of their retirement account(s) to purchase government bonds earning 3%?  What if our government went directly to the institutions that are holding our 401k’s, and told ‘them’ that Bill # _______ has been passed and all Americans have to invest half of their tax-sheltered account dollars into a new Government Retirement program.  (FYI: Argentina, Ireland and others have already enacted such a program.)

Is there a way to protect your retirement funds by using physical gold or silver?  Yes there is, and here is how it works.  Let’s assume you have an IRA with $50,000 in it, and you don't like the risk of the stock market, or the pathetic returns offered by savings and money market accounts.  You can transfer that IRA money into a special Precious Metals IRA Account and use the $50,000 to buy physical gold or silver bullion.  The funds would need to be spent by your IRA custodian to purchase the bullion on your behalf.  The bullion would then be stored in a secure vault in a US-based depository under your name.  That bullion will sit there, on the shelf, in that vault, with your name on it, until you choose to take a disbursement from your IRA.  That disbursement will of course be governed by all the normal rules on eligibility (including age, qualified expenses, etc.).

The good news is that if things ever get really bad and you'd like to take physical possession of your gold/silver, you can tell the depository to ship you your coins/bars (subject to any appropriate penalties and take an early distribution).  It's just like taking a cash distribution from your IRA, except instead of getting a check in the mail; the metal is shipped directly from the depository straight to your door within a couple days of your request.

For IRA's:
-       You must store the metals in a third party depository until you take a disbursement from your IRA.
-       You can create and fund a new IRA, or rollover an existing IRA.
-       These are treated like traditional IRA's, except your tax liability and distribution rules are different because you've already paid taxes on the money.

For 401k’s:
-       If you have an old 401k from a previous company, you can roll that over into an IRA and put the money into precious metals.
-       If you are self-employed, you can have a self-directed 401k that allows you to put your money into gold and silver, and you aren't required to store the metal at a depository (you can store the metal yourself).
-       If you have an active 401k and you are not self-employed, chances are you do NOT have the ability to hold precious metals.  The choices then become a bit draconian.  You can liquidate the 401K, pay the penalty and taxes, and then start an IRA, or simply continue to hold it as is.

But if the government comes for our 401K's, won’t they come for our precious metals as well?  I don’t think so.  Unlike the 1930's when the U.S. confiscated everyone's gold, I think that personal ownership is so low now, that they won't bother.  Most people have a 401K and that's where they would look first.  An IRA that's holding metal instead of cash will be (at the very least) safe at first. 

The questions are:
-       What custodian will you use for the precious metals IRA?  There are only a handful of IRA custodians that are legally able to allow for precious metal IRA's.
-       Who will you purchase the metal from?
-       And which depository will you want to use to hold your metal.  I would recommend the Dakota Depository.  They are more of a smaller business but do have state-of-the-art security.  

In terms of someone to call to guide you through all of this:  Cornerstone Bullion – www.cornerstonebullioin.com.  I would suggest that if you're considering doing a metal backed IRA or self employed 401K, call Cornerstone Bullion at:  1-800-558-4671. 

The Market:
Financially speaking:
-       Wal-Mart is blaming declining February sales on the re-instatement of the 2% hike in payroll taxes and a delay in tax refunds.  Either way, when sales are down at Wal-Mart, it means that people aren’t buying, and that's bad news for the economy.
-       2013 is proving to be a tough year for housing.  U.S. housing starts fell 8.5% in January, and homebuilder confidence declined in February – for the first time in 10 months.
-       Gas is now $4 a gallon (if not higher).  When it costs $70 to fill your tank, that's $30 many people aren’t spending on pizza.  It also raises costs and cuts margins for a whole lot of businesses.  High gas prices have led every sell-off in the S&P 500 over the past five years.
-       Finally we have the Elliot Wave scenario.  Ralph Nestor Elliot was a market psychologist and theorist who died in 1948.  His theory is that John Q. Public buys and sells stocks on market psychology, and psychology runs in waves.  Unfortunately most average investors finally buy in, right before the top.  Currently, we are peaking in the fifth wave – and following each wave is a very significant sell-off going back over 50 years.

This week we saw:  FED to the Rescue!  On Wednesday we got the minutes of the last Federal Reserve meeting and in those minutes they talked about how great the economy was doing, how great housing was doing, and all of a sudden investors got nervous.  Everybody wanted to sell, and sell quickly.  Why?  If the Fed stops printing money, and handing out tens of billions of dollars to the banks, everyone knows the game is over and the market will crash.  So, down we went.  Ahh, but on Friday the FED came to the rescue.

CNBC had one of the FED heads on, and he said: “Not to fear folks, the loose monetary policy is going to be in place for a long time and you can all go back to partaking of the punch bowl".  So instead of a correction, we bounced right back up and all the wires were abuzz with bullish analysts.  As long as the FED is willing to pump $85 Billion or more a month into the system, this market cannot crash. 



But it gets better.  According to the FED, they're not happy doling out $85 Billion to the 18 Primary dealer banks, they just announced a new "pilot" program to allow more banks to participate.  NEW YORK-The Federal Reserve Bank of New York is launching a pilot program with small broker-dealers in an effort to examine options for further broadening access to monetary policy operations. The limited, one-year pilot program will allow no more than five small firms to participate solely as counterparties in outright purchases and sales of U.S. Treasury securities for the System Open Market Account (SOMA) portfolio. The Treasury Operations Counterparty Pilot Program is being launched as a way for the New York Fed to continue to explore the effectiveness and feasibility of expanding operations to a broader range of counterparties.

Therefore, the FED is not pulling back from the stimulus; they're setting up to create more of it, and dole it out in more places. 
So there is no reason the DOW can't hit levels we cannot believe, and all of it based upon money printed out of thin air. 



So what’s the opportunity?  We have just seen them beat gold and silver senseless, and that's a buying opportunity to me.  I see the gold miners getting more ‘dislike’ than at any time I can remember; therefore, I’m beginning to scale into the GDXJ (a junior miners ETF).  And, I'm ‘this close’ to buying more physical silver.

In stocks, if they can manage 2 closes above 14,025, then I think that this tape is buyable.  Until that happens, being "too long" could be wrong. 



Tips:

The past week we sold out of SLB (-3.00) and some PRLB (+3.00).  
I still like the 3D printer space as a long-term hold:
-       3D Systems (DDD) on a pullback – maybe $55 (currently $56.50).
-       Stratasys (SSYS) on a pullback – maybe $58 (currently $67.40).

My current short-term holds are:
-       SPN – in at 25.09 (currently 26.20) – stop at entry
-       PTEN – in at 19.78 (currently 23.30) – stop at 22.50
-       MS in at 18.50 (currently 23.60) – stop at 22.00
-       SPY in at 141.97 (currently 151.90) – stop at 150.00
-       SIL – in at 24.51 (currently 18.63) – no stop yet
-       GLD (ETF for Gold) – in at 158.28, (currently 153.01) – no stop ($1,572.40 per physical ounce), AND
-       SLV (ETF for Silver) – in at 28.3 (currently 27.83) – no stop ($28.46 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



Sunday, February 17, 2013

This Week in Barrons - 2-17-2013


This Week in Barrons – 2-17-2013

Should I sell all my Gold – NOW?

Every day someone is writing to tell me that gold is done, and equities are where you have to be.  They often give me 3 reasons:
-       The Ben Bernanke (while speaking at the G-20) told everyone that our economy is improving and it might be time for him to consider "easing up" on the monetary stimulus.
-       George Soros (the noted billionaire) cut his GLD holdings last quarter by almost half.
-       And the stock market has continued to move higher and higher, while gold has languished since August.

Let’s review these one at a time. 

The Ben Bernanke – in a G-20 meeting in Moscow stated: "Stronger U.S. growth benefits the world economy".  He then alluded to stronger growth allowing him the flexibility to ‘ease up’ on the Fed’s printing press.  Philosophically I couldn’t agree more, but I question his words: stronger growth?  Especially when (on the same day) Mr. Jerry Murray (Wal-Mart’s VP of Finance and Logistics) sent an e-mail stating: “In case you haven’t see a sales report these days, February MTD sales are a total disaster.  The worst start to a month I have seen in my 7 years with the company.”  Wal-Mart (a) is the largest retailer in the U.S., (b) is the largest employer in the U.S., and (c) sells more ‘stuff’ than the next 3 retailers combined in the U.S.  And consider that Mr. Murray has been there during the economic crash, the credit crunch, the housing crash, and the foreclosure crash.  How is this possible that one person (on the ground) smells “disaster” and another (in the clouds) is thinking of backing off the stimulus?  So if I’m thinking of selling my gold because things are so wonderful, I need to consider who’s telling me that it’s so wonderful. 

Moving along to Mr. Soros.  Mr. Soros knows that his voice and his actions, combined with a very simplistic rationale will indeed move markets.  The #1 Rule in business is: “Buy Low, Sell High.”  We have a stock market that seems to be rising incessantly.  And when that happens, people get excited and want in.  So, given a choice between holding gold (which is going nowhere lately), and holding stocks (which have been going somewhere), I would chose-holding stocks.  Is the public ever right about their stock market timing?  Virtually never.  John Q. Public invariably buys high and sells low.  In fact, when John Q. Public starts telling you about how great the stock market is – get cautious, get really cautious, and then get out.  And by the way, the stock market is ONLY moving higher because The Ben Bernanke is handing out $85 Billion a month to the banks.  But is a rising stock market a reason for gold to fade away? 

On March 5th, 2009 during the big economic collapse, the DOW hit a low of 6,594, and gold was around $850 per ounce.  In August of 2012, the DOW hit 13,200, and gold was about $1,800 per ounce.  So gold gained about $1,000 per ounce (roughly doubling) during a time when the stock market gained 6,500 points (roughly doubling).  By this evidence, a rising stock market doesn't ALWAYS mean gold is going down.  So a rising stock market by itself is no reason to dump gold any more than The Ben Bernanke lying to us is a reason to dump it.  And I certainly won’t chastise Mr. Soros for talking the gold price down as he sells high.

Behind the scenes we have Plot #1: Venezuela, Germany and now Switzerland, Azerbaijan, and the Netherlands are requesting their Gold be returned.  Why are sovereign nations beginning to pull in their gold reserves?  Could it possibly be that the stated amount of gold in bullion banks is bogus and they know it?  Could it be that as more and more derivatives, forward leases, sales and swaps are placed against the physical assets – the real powers know that one day the call might go out to redeem all that gold, and their gold will NOT be there?  DS and JA both wrote me about the GATA (Gold Anti-Trust Action Committee) report – citing Adrian Douglas’ calculation that in 2010 there were approximately 45 claims for every actual ounce of physical gold in the market.  My research shows that in 2013 that number is more like 80 times and accelerating.

Further behind the scenes Plot #2: As our own Central Banks are printing money like it’s going out of style, it seems that they are buying MORE gold than ever before.  Imagine that.  Consider the following from CNBC:  “Central Banks purchased more gold in 2012 than they have annually in nearly half a century as they sought to diversify reserves”, the World Gold Council (WGC) said on Thursday.  It seems that Central Banks bought 534.6 metric tons of the precious metal last year - the most since 1964.  Net purchases by central banks accounted for 12 percent of overall demand in 2012, compared with a 10 percent share in 2011.

So it seems that the same people that are telling us that the rally in gold is over, are the same ones that buying more gold than they have in the past 50 years.  Are they really going to print fiat currency into oblivion, and when inflation finally goes hyper, and the economies implode – they (having all the gold) will be the only vestige of wealth?  If you believe that having the US, the Eurozone and now Japan printing untold amounts of fiat money will actually solve the issues we face, and all these economies will rise out of the ashes of the crashes and thrive, then YES you would probably want to SELL your gold and silver and take your profits and get dollars for them.  If on the other hand however, you think that all the debts, all the promises, all the funny money printing is now beyond the scope of normalcy, and into a period of unsustainability, then just what else would you want besides gold and silver?  

Can gold go down – absolutely.  In 2006 gold fell from $720 to $560 – over 22%.  In 2008, Gold fell from $960 in February to $715 in September – down over 25%.  George Soros has it right.  Buy Low, Sell High! 

The take away is: gold has had a spectacular run.  It has outperformed everything between 2000 and 2012.  It deserves a rest.  Thus far gold is only off 15% from its high.  I can see another 10% coming off.  If it does, that is when I will buy more.  But understand I’m not in gold for a trade.  As the currency wars come back into focus over the coming weeks, gold’s biggest job will be to offset inflation and maintain wealth.  As I look at a solid gold coin, a $100 bill, and my son’s Ten Trillion Dollar Zimbabwe note – I know which one I want. 

Many of you have written in asking for a ‘How To’ turn your 401k’s into GOLD without taking a penalty.  I’m going to address that in next Sunday’s letter.  Thanks for your patience! 

The Market:

Are we in a pull back?  I hope so.  It feels right, looks right, and the technicals say yes.  But we have been in this position several times in the past year and each time the market confounded me and pressed higher.  Why would this time be any different?  It wouldn’t.  If the only reason the market is in this position is because of The Ben Bernanke’s printing of money, then if Ben is still printing money, why would the market retreat?  Unfortunately, in this market, things don’t ebb and flow in reaction to supply and demand, they go where the "central planners" and the banks want them to go. 

We are well overdue for a good correction – one that scares people.  But each time the market has started a pull down it just magically rises.  Well, it’s not ‘magic’; it’s really The Ben Bernanke with his POMO injections.  POMO stands for Permanent Open Market Operations by the US Federal Reserve Board.  With a POMO injection, the Fed buys the US Treasury debt and pumps liquidity into the system.  The idea is that the money freed-up from holding US Government bonds will be put into use in boosting the spending and thereby the economy.  You can actually draw an EXACT line between POMO injections and a goosed (going-higher) market.  Just about every time the market is on the brink of having a really bad hair day, here comes Benji with his POMO money.  If that doesn't change, then there will be no pull back – no correction. 

Will POMO happen again?  Probably.  Each time the market sets up for a pullback, I go into a defensive mode.  I don't want to be caught carrying a lot of equities when a real correction hits, and The Ben Bernanke isn't there to save the day.  So right now, I’m still leaning long, but our fingers are awfully close to the sell button.  In fact, we sold out of some stocks on Friday and took profits. 

Tips:

The past week we sold out of KSU (-1.00), WFT (-0.50), SLB (even), SPN(+1.50), MS (+4.25), PTEN (+4.50), and SPY (+10).

I’m still looking to purchase more in the 3D printer space.  When President Obama mentioned the area in his State of the Union, the stocks shot higher but are settling down nicely with rumors of a correction.  We did however manage to nab PRLB before the talk – so that was good news.
-       Looking to purchase shares of 3D Systems (DDD) on a pullback – potentially as low as $55 (currently $59.40)
-       And shares of Stratasys (SSYS) on a settling of the pullback – potentially pulling the trigger shortly as it’s down to $68.50.

My current short-term holds are:
-       PRLB in at 43.48 (currently 47.24) – no stop yet
-       SIL – in at 24.51 (currently 19.73) – no stop yet
-       GLD (ETF for Gold) – in at 158.28, (currently 155.68) – no stop ($1,608.80 per physical ounce), AND
-       SLV (ETF for Silver) – in at 28.3 (currently 28.79) – no stop ($29.84 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



Sunday, February 10, 2013

This Week in Barrons - 2-10-2013


This Week in Barrons – 2-10-2013

The Year of the Snake:

On Saturday, China welcomed the arrival of the Year of the Snake with firecrackers, fireworks and a blaze of good fortune.  The Chinese zodiac (which repeats every 12 years), has deep spiritual meaning for the hundreds of millions that live in the East.  In fact, families will plan weddings and even births around the mystical powers of the various creatures that symbolize their astrology. 



The "age" that just passed was that of the dragon.  The dragon is often thought of as lucky, but the snake is very, very different.  In the past, the “year” of the Snake has contained:
-       The 1929 stock-market crash,
-       The Japanese attack on Pearl Harbor,
-       The killing of over 3,000 students in China's Tiananmen Square,
-       And the September 11th bombing of the World Trade Towers.

Singapore's Grand Master Tan Khoon Yong of Way OnNet Group said: "This is a disaster year.  A lot of things will not go smoothly.  The Euro may be in trouble, and the European Union itself may be threatened by division as soon as May.”



Hong Kong astrologer Chow Hon-Ming sees a disharmonious May causing an ongoing dispute between Japan and China possibly escalating into a brief war, as the two snakes are going to clash.  "May is known as the snake month.  And since it’s the Year of the Snake, between May 5 and June 6, these two snakes will meet and possibly go to war.”

It seems Snake years are marked by major, transformational change.  But can we really place any credence on some astrological sign?  I'd say the chances are pretty good.  If you take a quick glance at the world and sheer lunacy that is developing, it would be hard to NOT imagine something ugly coming this way.  In the past several weeks:
-       Venezuela (an oil-producing nation) announced the devaluation of their currency by 46% overnight.
-       Japan announced an end to 20+ years of deflation, and have targeted 2% inflation as their goal.  To get there, they must print trillions of yen, which devalues the yen - just like Venezuela.
-       US car companies (especially ‘Government Motors’) will require further currency devaluation – in order to keep pace with Japan’s devaluations and Toyota’s price decreases.  This should really heat up the ‘race for the currency bottom.’
-       Evidence is growing that assets are being pledged as collateral – 50 or more times – for the exact same asset.  Remember the housing crisis of 2008?
-       Germany has decided to give the world 7 years to actually produce and deliver it’s ‘gold’.  Why 7 years?  Because they know that the world doesn’t have it.  Germany is being nice and letting the Central Banks save face, instead of panicking the world.

So could 2013 usher in a bad upheaval (or two) in Euro land?  I'd be awfully surprised if it didn't.  The year of the Snake is described as cunning, sly, and mischievous.  And, when I look and see where the markets are, and think about the real world situation, it is almost a "given" that something is going to go really wrong.

With all the Central Banks printing money, and using every scheme imaginable to inject money into the US system without causing too much inflation, I’m surprised that more countries haven’t grown tired of the US.  Like China, Russia, and now Venezuela – there is going to be a renewed "currency war" and the first shots have already been fired.  If you remember back to the discussion we just had about the "velocity" of money, you realize that at some point – a huge percentage of that cash is going to rush forth, flood the system, and deliver hyperinflation.  Might 2013 be that year? 



So how do we deal with all of this?  One thing we know is that the market has doubled from its lows due to rampant money printing.  And as long as The Ben Bernanke keeps shoveling $85 Billion a month to the banks, the market has to continue up.  That money must go somewhere and it usually ends up in the markets.  So leaning long isn’t a bad strategy – just know that when the end comes, it could unravel quickly depending on which string is ‘pulled’.  In other words, if the end is simply monetary velocity picking up steam; then we will have time to back away.  If however, something more urgent happens, then that could cause an immediate market crash.

When the market tops out (whether that is at DOW 14,500 or 16,000), we will need to "short" the resulting down trend.  I remember when tech stocks of the 90’s were gaining $20 every day; the best position to take was shorting the market.  Put options were gaining thousands of percent.  It is my thinking that the lion’s share of the gains will (once again) be on the "way down" from whatever peak we set. 
With that in mind, if you don't understand put options, or if you don't know how to short a stock – please go learn.  It’s not complicated, and I can make the argument it's much safer than being long.  In 2000, over 250 stocks that traded over $200 per share went to $1 or less over a short period of time.

In terms of metals, don’t be misled by platinum and palladium.  Both platinum and palladium have made spectacular gains lately, but they are not flying higher due to money printing.  They are going higher because of the demand for new cars.  Manufacturers need platinum and palladium to use in the catalytic converters.  Moreover, with some of the political unrest in the mining countries, a lot of platinum and palladium production is off line, producing a scarcity in times of high demand.  Both of these metals will come back down when demand stalls.  I view gold and silver as a hedge against global troubles, currency wars, and hyperinflation.  You can certainly trade platinum and palladium – just don’t own them (as you would gold and silver) as your wealth / currency / inflation hedge.

Yes, 2013 is the year of the Snake.  Please tread carefully, and watch where you step – because snakebites really hurt!

The Market:

Lately, we’re seeing market chop, and lots of it.  We came into February with a triple digit DOW gain – then on Monday we gave it back – and then Tuesday it swung the other way again.  On Wednesday, Thursday and Friday we sort of ran in place.  All in all, despite all the big swings, the market is pretty much flat on the week.

When you look at a chart of the DJI (the Dow Jones Industrials), you will see 6 sessions where the market went "sideways".  That won't last forever.  We are going to either dramatically ‘springboard’ higher or sharply ‘roll-over’ lower.  As much as the evidence would point to a pull down, the way the market has defended every dip suggests that they're just building a base for another push higher.  And that push will take us up to challenge the all time highs.  Yes we're still overbought.  Yes some high-profile investors have made some huge bets on the VXX going higher.  [The VXX is a volatility index that normally goes higher in times of distress and markets falling.]  But that said each intraday dip has been brought-up and ended well off it’s lows by the close of trading.  It looks like they want more.

A sideways chop often portends the end of the recent trend; so the best play (this week) has been "not to play".  Keep your powder dry, and don't overextend.  In these times you wait on the market to make its next move, and then go.  It’s difficult to watch the market come roaring out of the morning gate, and not jump on board for the ride.  Unfortunately morning rushes have been brought back down, and morning dips have been brought back up.  Lately, being long or short for more than a day has been trouble.  So we wait.  

If we see the DOW put in two daily closes over 14,025 I have to assume they're willing to push this higher.  Until then, it's a simply a guessing game and I will pass. 



But that doesn't mean we don't see some value here and there.  Lately, I feel that Nokia (NOK) is looking like a decent long-term hold.  They have a lot of cash.  Microsoft is a major ally.  And their main product is an inexpensive phone for the emerging markets.  At $4 a share, we are going to pick some up this week and see what develops.  It’s strictly a speculative play and not for the faint of heart. 



I think we will know the market’s short-term direction by the end of this week.  I think it’s going up from here, but I won't be surprised if I'm wrong and we finally pull back into a correction – because we’re ridiculously overdue for one. 


Tips:

The past week we sold out of ORCL (+$1.50), PAY (+$0.50), and HD (+$4.50). 

Last week I mentioned the 3D printing space and received questions regarding who to buy, and where to enter the trade.  3D printing stocks are exciting, volatile, and potentially life-changing investments.  As early investors you want to be exposed to this sector group, but you don’t want to buy in at the highs.
-       I would look to purchase shares of 3D Systems (DDD) on a pullback – potentially as low as $55.
-       I would look to purchase shares of Stratasys (SSYS) on a pullback – potentially as low as $75.
-       I would look to pull the trigger on Proto Labs (PRLB) immediately as it’s under $44 per share.  PRLB is the most “under-the-radar” of these three plays, which leads to the biggest opportunity.  Their pullback is a confirmed signal and a reason to buy.
-       XONE (the Pittsburgh company) debuted at $25 and immediately ran to $30.  Congrats if any of you were in on it!

My current short-term holds are:
-       SLB – in at 80.02 (currently 78.93) – stop at 77.00
-       KSU – in at 95.03 (currently 94.73) – stop at 94.00
-       SPN – in at 25.09 (currently 26.05) – stop at entry
-       WFT – in at 13.50 (currently 13.17) – stop at 12.70
-       PTEN – in at 19.78 (currently 23.38) – stop at 22.50
-       MS in at 18.50 (currently 23.27) – stop at 22.00
-       SPY in at 141.97 (currently 151.75) – stop at 150.00
-       SIL – in at 24.51 (currently 21.10) – no stop yet
-       GLD (ETF for Gold) – in at 158.28, (currently 161.45) – no stop ($1,666.00 per physical ounce), AND
-       SLV (ETF for Silver) – in at 28.3 (currently 30.43) – no stop ($31.42 per physical ounce).

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

Please be safe out there! 

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