This Week in Barrons – 11-29-2015:
Thoughts:
Dear President Obama:
There was at least ONE
record set on this year’s Black Friday, and that was the processing of 185,000 weapons
background checks on a single day. And
just this week we were reminded why – people are scared. We were vividly reminded of the horror that can
be created, when 2 people (armed with AR 15's) went into a company function and
killed 14 people. Companies are asking the
question: “Are we next”? And as our
economy slides further downward, and the economic dislocations become larger
than in the 2008 melt down, I think that there will be more of these ‘outbursts’.
Gun shops are selling 4 TIMES more weapons
than last year. J.Q. Public is ‘talking
with his wallet’ that no amount of militarized police, or ‘warm and fuzzy’ talk
is going to stop bad people from doing bad things.
President Obama you
continue to say that we are the only country that has these problems, when factually
the world suffers more than we do. For
example:
-
France (in 2015)
has suffered more casualties from mass public shootings than the U.S. has
suffered during your entire presidency - (508 to 424 – and that includes Wednesday’s
San Bernardino massacre).
-
Norway, Anders
Behring Breivik used a gun to kill 67 people and wound 110 others – with still
others being killed by bombs that Breivik detonated.
-
Of the TOP 4 worst
school shootings, 3 have occurred in Europe with Germany having 2 of them.
-
And in 2004,
Beslan, North Ossetia-Alania, Russia was the scene of a terror attack where 32
armed men invaded a grade school – capturing over 1000 hostages, and killing
386 people over the 3-day event.
President Obama, between
2007 and 2011 (outside of Iraq, Afghanistan and the U.S.) there were an average
of 6,282 terrorist attacks per year with more than 27,000 people (on average)
being killed, injured or kidnapped. As
the years go on I fear that we will dissolve into more social unrest, with even
more staged events, and that the 185k Black Friday figure will continue to grow
exponentially. This is NOT a U.S. issue,
but rather a global issue. What will it
take for us to put our politics aside and take a real first step?
The Market:
I’m sorry to say, the
economic news this week wasn’t exactly wonderful:
-
The Index of
Purchasing Managers was supposed to report a 50.5 level – and instead came in
at a 48.6 level – with new orders falling once again.
-
The ISM
Manufacturing Index fell to its worst level since 2009.
-
The CEO Economic
Outlook dropped back to its 2012 level.
-
And the Swiss
10-year bond is now yielding an insane NEGATIVE 0.41%.
However, there was good
news out of China this week. Their
currency (the Chinese Yuan) was admitted to the International Monetary Fund’s
(IMF’s) Special Drawing Rights (SDR). This
is a strategic basket of global currencies that are combined to form a global ‘elite’
currency. It gives China the measure of
respect and prestige that they deserve, and forces all of the big currency
players to take them seriously. But, it
doesn’t end there.
Our global plan continues to
try and draw Russia into the world’s hot spots and see what kind of weapons
they bring to the party. The more
missiles and electronic jamming devices they employ in Syria (for example), the
more we get to learn about their latest technology. Meanwhile, China is building Islands in the
South Sea for the purpose of expanding their navy and corresponding naval bases. Throughout history, war has been the solution
for virtually every major economic calamity. Bankers love it because they get to finance
both sides. Elitists love it because
they can hide in the shadows, and not get blamed for causing the war (which
they did).
So China's inclusion into
the IMF’s SDR is not just about accepting the world’s second largest economy
into the ‘Big Boys Club’, but rather another dagger in the heart of the U.S.
dollar. If I’m right, not too far into
the future we will hear about China wishing to back their Yuan with a
percentage of GOLD. At that point the world will need to make a decision:
Do the major players want U.S. Dollars that are backed by nothing more than the
‘full faith of our Government’, or will they want the Chinese Yuan that is backed
by gold? Naturally, the Yuan will soar,
causing large pension and insurance funds to sell U.S. Dollars, Euros, Yen and British
Pounds – in order to increase their stake in the Chinese Yuan. And other
nations will then react by increasing their gold holdings in order to prevent any
further erosion of their own currencies.
Also this week, ahead of
Mario Draghi's ECB statement, funds ‘bought the rumor’ that he would do a lot
more QE and slash deposit rates to record levels. However, his official announcement wasn't
nearly as big of an event as all had anticipated – so all those ‘buying’ funds instantly
‘sold the news’. And by the time
Thursday was over, we had lost over 300 DOW points.
But on Friday we received two
bits of news. First the Non-Farm
Payrolls report told us that (on the surface) the U.S. had created 218k jobs
last month. Of course what was hidden behind
that 218k number, was the creation of 311k ‘part-time’ jobs which (therefore) caused
the ELIMINATION of 93k full-time positions.
I guess none of the news agencies had the backbone or the moral
obligation to report that. Secondly, Mario
Draghi came out on Friday and basically said: “Hey, don't fret over what I just
said on Thursday, I'm really going to dump all the QE necessary to drive
inflation up to 2% - and I'm going to do it quickly." Those two elements combined for a positive
370 DOW point and 42 S&P point up day.
So what happens now? We have a FED meeting on the 15th
and 16th, and their decision on rates (going higher) will be
delivered on the 16th. Therefore,
we only have 7 trading days before we hear what the FED will do. Will the markets remain brave into that day,
and try and move over their various resistance levels at 2094, 2103 and then at
2116? I tend to think that in the beginning of the week we will give back
some of Friday's gains. I think we fade back
from 2092 to 2080 on the S&P, then firm up, trade sideways for a bit, and
then finally try and attack those same 2094, 2103 and 2116 levels.
TIPS:
I would like to:
-
Add to the UVXY
trade below because volatility should increase going into the FED meeting on the
16th.
-
Look at an Iron
Condor on Apple (AAPL) either the Dec5, 105/110 to 125/130 for $0.62 or the Jan
100/105 to 125/130 for $0.86.
-
Look at an Iron
Condor on Caterpillar (CAT). I think it
has found a temporary floor with earnings due out at the end of January. Either sell the Jan 60/62.5 to 75/77.5 Iron
Condor for $0.52 or the Jan 55/60 to 77.5/82.5 Iron Condor for $0.31.
-
Finally look at Harley
Davidson (HOG). With earnings on Jan 28th,
there is a rumor of a potential ‘leveraged buyout’ which could cause some
upside movement in the stock. I think
their present 2.6% dividend yield and their 12 P/E will keep a floor on the
stock. I would look to sell the 42.5 / 45 Put Credit Spread for $0.29, or
(if you like the rumor) then sell the 45 / 47.5 Put Credit Spread for $0.96.
I am:
-
Long various mining stocks: (AG, AUY, EGO, GFI, IAG, and FFMGF),
-
Long the FANGs (Facebook, Amazon, NetFlix and Google),
-
Long AMZN, December, Broken-Wing Butterfly (690 / 700 /
705),
-
Long REN @ $0.56 – currently $0.91
-
Sold the SPY, Dec4, Iron Condor (190 / 195 to 216 / 218),
-
Sold the IYR, Dec, Call Credit Spread (-76 / +77),
-
Sold the UVYX Dec, Put Credit Spread (-22 / +21), and
-
Sold the XRT Dec, Call Credit Spread (-42.5 / 45).
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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