This Week in Barrons – 10-11-2015:
Thoughts:
Dear Ms. Yellen:
One of my favorites lines
from the movie ‘The Intern’ was: “We’ve created a society where girls become
women, and men become boys.” So Ms.
Yellen, from one ‘boy’ to another ‘woman’ can I ask you to: Grow a Pair – and
stand up to your bankster buddies. By
even suggesting negative interest rates tells me that you’ve given up on trying
to cure this country’s economic woes. We
went from an interest rate hike of 25 basis points, that would have cost the
U.S. treasury an additional $500B in national debt servicing fees. To keeping rates at zero, that tells everyone
their accumulated savings from all of their hard work is worth NOTHING. And now you’re thinking about charging people
to store their own money in banks – just so your bankster friends can make a
couple extra bucks.
I realize that Deutsche
Bank just reported an $8B loss, and that Bank of America along with JP Morgan are
set to report fairly substantial losses this quarter as well. And I understand that you would like to help out
your friends by allowing them to charge interest on deposits. But do you remember rejecting that very same option
during the darkest days of the financial crisis in 2009 and 2010?
Negative interest rates
(just so we’re clear) would turn my $100 deposit into $98 over time by allowing
the bank to charge me $2 in interest / storage fees on my own money. I know that two FED officials: William Dudley
(President of the New York FED) and Narayana Kocherlakota (President of the
Minneapolis FED) are out ‘talking up’ the negative interest rate idea. But Ben Bernake recently said: “We decided
not to move to negative interest rates because the benefits are not that great,
and it may have adverse effects on money market funds.”
But Ms. Yellen, it gets even
better:
-
When you changed
the banking rules, you turned depositors into lenders. That means that the moment I deposit money
into a bank – it is no longer my money, but rather yours.
-
By depositing
money into a bank, I am actually ‘lending’ money to that bank. And banks have NO fiduciary responsibilities
to lenders. Therefore, the instant you
put money into a bank – they have the capability to immediately invest those
funds into high-risk assets in order to earn the spread and any gains from
appreciation.
-
Now the average
J.Q. Public thinks that if the bank makes some bad decisions and goes under –
at least the FIDC will save them.
-
As you and I
both know, that’s not exactly true. Since
deposits are considered bank liabilities, when the FDIC takes over a bank it
could very well convert a bank’s liabilities into bank stock. And bank stock can go down, if and when the
bank goes down.
-
The average J.Q.
Public may even think that they are “FDIC insured.” Unfortunately, NOT in this situation. Depositors would be turned into shareholders of
that bank, and (unfortunately) shareholders are NOT FDIC protected.
Ms. Yellen, are you really
willing to risk the health of the U.S. economy just to help out your bankster
friends – yet again?
The Market:
Factually:
-
The most recent ISM
(services) report showed the largest drop in ‘new orders’ since 2008, and that prices
are indeed DEFLATIONARY.
-
The latest Japanese
orders fell by 6%, and German exports fell by 5%.
-
The IMF cut its global
growth forecast for the 4th time in 12 months.
-
Adjusted for
inflation, the average worker makes LESS than in 1985.
-
Deutsche Bank announced
an $8B 3rd quarter loss. That
means Deutsche Bank, Adobe (a software company), Yum Brands (a restaurant
company), and Monsanto (an agricultural company) will all miss earnings estimates
by significant margins. This isn’t a
good sign for the economy.
-
Since 2009
companies have bought back over $2.4T in stock, and that has accounted for a
21% stock price increase. Prior to 2008,
companies bought back less than $25B billion in shares per quarter. Today, companies are buying back stock at
almost 6 TIMES that rate.
-
In the Middle
East, the U.S. wants Syria’s Prime Minister Assad out of power; therefore, we
have been arming the rebels in order to take Assad down. However, Russia
is friendly with Assad, and is taking out the rebels and ISIS along with them. This has caused Turkey, Saudi Arabia, Iran
and China to get involved. It's only a
matter of time until someone makes a mistake and either downs the wrong plane
or hits the wrong group on the ground.
If you look inside the
market, you will find some real carnage. For example: Micron Technologies was $35 in
January and $14 two weeks ago. Caterpillar was $92 in January and $63 two weeks
ago. And SanDisk was $99 in January and
$49 two weeks ago. The big money rotated from these ‘sinking ships’ and
into other ‘darlings’. That has kept the
averages from showing the market’s true destruction. I tend to think that the big money is running
out of places to hide. When the current ‘darlings’
roll over, the big money will simply sell out. I believe that the market top was set in May,
and we are in a slow motion roll over.
This earnings season is
shaping up to be a disaster. Everyone
will blame China. But what they won’t
say is that the world (including the U.S.) is drifting into a deeper recession. There are a lot of people’s lives, careers,
and derivative positions depending on ever-rising asset prices. The ‘powers that be’ will toss the kitchen
sink and garbage disposal at keeping stock prices higher. I tend to think they can't keep it up much
longer.
TIPS:
Recommendations:
-
NFLX – NetFlix jumped from $106 last week to $113+ this week, and announced
an increase in their price to new subscribers.
NetFlix has earnings on Wednesday, and this $1 price increase will play
nicely into its forward guidance. We also
know that implied volatility will increase into earnings – so (knock-on-wood)
we’re looking good into Wednesday’s earnings release.
-
Watch the symbol
FFMGF. It’s selling for 31 cents right
now. Now I’m not a penny stock guy, but
I like a bargain just like anyone else. This
company funds and buys precious metal mines that are basically in
bankruptcy. The metals have been held
down artificially, and some day the manipulation will either end of it's own,
or be overpowered by the demand for physical product. When the paper market finally loses control
of the price of the metals, I think FFMGF will have a long way to rise, and this
$0.31 stock could easily be a 10X gainer. FFMGF could easily be at $10 if the caps come
off the metals, Gold goes to $2500/oz., and/or Silver comes back to $50/oz.
I’m still light – but buying
more and more NFLX and AMZN heading into earnings:
-
ADBE – SOLD –
Iron Condor – Oct @ 75 / 77.5 to 90 / 92.5,
-
AMZN – BUY –
Calls – Oct4 +515 / -530 Call Debit Spread
-
LL – SOLD – Iron
Condor – Oct @ 12 / 13 to 18 / 19,
-
NFLX – BUY –
Calls – Oct @ 100, BUY – Calls – Oct @ 105, BUY – Calls – Oct @ 110, BUY – Calls – Oct @ 118, BUY – Calls – Oct @ 120,
-
NKE – SOLD –
Iron Condor – Oct 112 / 115 to 129 / 132,
-
YHOO – SOLD –
Call Credit Spread – Oct -32 / +35,
-
SPX:
o SOLD – Iron Condor – Oct4 @ 1800 / 1805 to 2050 /
2055,
o SOLD – Iron Condor – Oct4 @ 1825 / 1830 to 2070 / 2075,
o SOLD – Iron Condor – Oct4 @ 1880 / 1885 to 2120 / 2125,
o SOLD – Iron Condor – Oct5 @ 1860 / 1865 to 2090 /
2095,
o SOLD – Iron Condor – Oct5 @ 1780 / 1785 to 2070 /
2075,
o SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.
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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