This week in Barrons - 10.31.10

This Week in Barons – 10–31-10:

Buy the “Rumor” – Sell the “News”:
Happy Halloween to all of you. Trick or Treat – well this is truly one of the reasons I'm comfortable holding my gold and silver. It isn't just "money" it's the alternative to Government. When people completely mistrust their Government, they look to alternative ways to protect themselves and gold fits the bill. By the way, there was another interesting "blurb" concerning silver manipulation this week:

The Commodity Futures Trading Commission (CFTC) urged action on their silver probe. At a CFTC hearing, commissioner Bart Chilton pressured the agency to take action in its high-profile, two-year-old investigation of the silver market. Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices, and he believes there have been violations of CFTC rules that deserve to be prosecuted. Though Chilton declined to name specific offenders, sources said that the agency began to look into allegations earlier this year that JPMorgan (JPM), one of the largest silver traders, was involved in manipulative trading. CFTC Chairman Gary Gensler declined to comment on the silver investigation or Mr. Chilton's comments.

But wait, there's so much more we can ask. As you know, we've been helping to expose the gold and silver market fraud and manipulations for years. In the past year, the heat has been turned up, as it went public that Andrew Mcguire, a lone silver trader had called out the SEC and CFTC to watch the manipulation in "live time". He showed them what would happen, and it happened. So far there's been all sorts of "investigations" but no action. Now we hear that the lawsuit, being represented by Labaton, Sucharow has the ability to really expose JPM and HSBC as the true market manipulators we have said that they were. What happens if indeed one of the new guns in this election, actually has the backbone to stand up for what's right and helps those proceedings go properly, and exposes it to the American people? Do you think it would be a wake up call? Do you think people would listen to a politician exposing another area of high level corruption and the exact steps he's going to take to eliminate it? I think it would open some eyes. If there was a new Republican, or Democrat, that came in with guns blazing and decided to show America how things are really done here, he'd be my hero. Wouldn't it be a great “Trick” and a “Treat” if someone actually did the right thing and exposed the back room ponzi schemes! I feel Americans from both sides of the aisle would support him.

The Market:
For the past several sessions, the "market" has decided to take a wait and see approach to the elections and the upcoming announcements from Ben Bernanke about how much more quantitative easing he's willing to do. After running up for week after week, the market has remained in an incredibly tight range, ending the days "flat" almost to the point of unnatural. Now of course the big question is "what's next? I can make a case for the concept that we are about to see a major league rug pull coming. If the elections show a big sweep by the Republicans – some say that's good, and some say that’s bad – but the bottom line is that this is already been priced in. And what about Quantitative Easing by Bernanke – well once again, some measure of that expectation is already baked in the cake.

One of the oldest adages about the market is that it "buys the rumors and sells the news". Well the rumors are that the Republicans take a new majority of the House, and gain in the Senate. The rumors are that Bernanke is going to announce $100 Billion worth of more treasury buying. So, if both of them come to pass, what's to keep the market moving higher? The market is sitting just below 11,200 (a hefty resistance level) – but if it got here via interventions, what's to stop it from going even higher? Nothing – but I do have my suspicions, that banks are using their free money to bid the market higher and lure in John Q. Public - to put more money in the pot – and behind the scenes (via "dark pool" trading platforms) they're amassing huge short positions.

Here's how this scam works. When banks get their free money from the FED they go into the market and buy stocks. As John Q. Public sees the market go up – he fears not making any money – and at some point the amateur investor finally takes the plunge and puts his money back in the market. The market continues to rise for a bit and then "whammo" – the rug gets yanked. But it works both ways for ‘banksters’ – as they put their free money into the market - they take ownership of stocks and drive the price higher. So when John Q. Public shows up – the banks sell their higher stocks to Mr. Public for a tidy profit. The more sinister side of all of this is that big institutions now use platforms called "dark pools" to trade. It’s a way large institutions can hide what they're doing from the normal exchanges. In a "Dark Pool" their trades do not show on the tape. So, while on the open exchanges we see them buying, we don't know what they're doing on the other side of the pool. It's my guess they're building up a substantial short position. One of the reasons we can point to that belief is that this week the ratio of Insiders that are Selling their own stock, versus Buying it just hit an all time new RECORD of 3,777 to 1. The very insiders that are posting rosy earnings reports and telling us fairy tales about business going forward - are trying to get out faster and harder than at any time in recorded history. Since the insiders at big corporations are often tied closely to the very investment banks that can utilize dark pools, wouldn't it make sense that they are working together for their common good? The insiders cash out by selling their stocks with massive gains to John Q. Public, spurred on by knowledge that business isn't that great, and their banker buddies are probably telling them that the end is near. We just don't know the level from which they're willing to fleece the sheep. Maybe it's at 11,200, maybe it's at 11,700 or maybe they take it all the way back to 14K – but we feel that when the rug pull comes – it’s going to be violent.

The combination of the elections and the Central banks maneuvers, will be awful interesting to watch unfold this week. It's my guess this week has the ability to be one of the more volatile weeks we've seen this year. How will the bond pits, currency markets, and the stock markets react? Will gold set another new high? And when will Bernanke announce $100 Billion a month in Treasury buys? We’ll know a lot more by Wednesday evening – bring some popcorn!

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)
CBOE at 24.02
JCI at 33.00
MDT at 34.05
NGD at 6.90
ABX at 48.15

We still like the metals and are looking at buying some SIVR, SIL, and SGOL. Think about NEM over 65 and look at Freeport McMoRan (FCX). What scares me – is Jim Cramer also likes these picks ☺.

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 10-24-10

This Week in Barons – 10–24-10:

We are Human Beings – non Human Doings:
"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." -Alan Greenspan Just as Alan Greenspan knew what happens when you let the worlds "improvers" take over the money supply, Ben Bernanke also knows. Greenspan wrote an entire ‘white paper’ on the virtues of gold, and knew all along that loose monetary policies would cause great disruptions. But we are all human beings – not human ‘doings’ – and as such, we tend to do a lot of things that seem to run contrary to our core beliefs.

Scientist Stanley Millgrave, did a series of experiments after WWII, concentrating on human behavior and some of his findings were so outrageous that they were banned from public view. In one experiment, Dr. Millgrave took some very ordinary people (one group) and some actors (second group), and placed the actors in a glass booth. In this game - the Ordinary people, were to ask the people in the glass booth a question. If the ‘actors’ answered the question wrong, the ‘ordinary people’ had to hit a button that would "shock" the person behind the glass (the actor). Naturally, the ‘ordinary people’ didn't know there were ‘actors’ inside the booth – nor did they know that there really weren't any shocks being delivered, but upon a wrong answer and subsequent shock - the actors would plead, scream, writhe in agony, and beg them to stop. The astounding thing to all who witnessed the experiment was this: No matter how hard the actors screamed, pleaded and begged - the question givers did NOT stop. They succumbed to the "authority" that gave them the right to hurt these people if they gave the wrong answer. Millgrave repeated the experiment all around the world, to find the same result everywhere. Once in "power" the people used the power – and it was not uncommon to have it corrupt their morality. So Alan Greenspan and Ben Bernanke’s behavior is totally predictable. They are being told to make things pretty no matter the pain, anguish, and outcome – and like those Millgrave experiments, they’re doing exactly as they were told.

The important part about studying mob psychology, is trying to determine where they are going, and how long they'll stay. The idea of contrarian investing is that what ever way the masses are going, your best bet is to go the other way, because invariably they'll be proven to be chasing a mirage – well fair warning – last week was the first week in the last 23 where money flowed INTO ‘mutual funds’ – which could mean – that it’s really time for a ‘rug pull’ – time to leave the market for a bit.

Finally – this week Mr. Bernanke told us that inflation is virtually non-existent. I’m wondering (outside of housing) which inflation Mr. Bernanke doesn’t see:
- Corn prices are dramatically higher this year resulting in higher food costs across the world,
- Rising textbook prices have inspired University Bookstore and Tech Bookstore to search for new ways of lowering students' financial burden,
- Disney hiked adult admission prices 3.8%,
- Airfares are up 17%,
- A 30 pack of Bud-Lite is up 3.9%,
- Movies up 5.5%, Gasoline up 8.5%, Chicken up 13%, Beef up 14%,
- Used car prices jumped 8.5% in September from a year earlier, and
- The price of a 31-item basket from Wal-Mart rose 2.7% in September – and Wal-Mart prices have jumped 5% since the start of the year and have been at their highest levels in the 21 months


The Market:
This past week – what we saw was when the Fed was involved in POMO and large interventions – there was a big ‘up’ day – when it wasn’t – surprise – flat to big down day! Now, we all know, at "some" point, despite the Fed, despite the elections, the market is going to a “rug pull”. It's what it does. It lures people in and then dashes them on the rocks of desperation. Last week, we saw the first "inflows" of money into mutual funds in over 23 weeks – so John Q. Public can't take it any more - he sees the market moving up and up and up and he's scared to death the train is leaving the station without him. When the public starts showing up, you can bet a rug pull is not far behind.

One of the big theories is that the FED is keeping the market up for the elections. So, if that thinking prevails - they will have to keep the market "up" again for another couple weeks. I do not usually act on what I feel they're about to do, I let them do it first and then react. This is why we've been leaning long. But that doesn't mean I throw caution to the wind. We have been using smaller positions and less of them. Right now we’re in MDT which was up two dollars a share for us in a week, JCI which was up over a buck and our latest pick up, CBOE was up over half a buck for us.

The bottom line is that once again, the stars are aligned for a pull down, starting within the week. I don't know if it will happen, or if the Federal Reserve will step in and save the day again. In the past, they've tossed off the gloves and gotten their hands dirty, pushing us up despite the technicals. They very well might do it again, but understand the rubber band is very stretched and when it snaps back it will be violent.


Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)
CBOE at 24.02
JCI at 33.00
MDT at 34.05

Consider snapping up some NGD (New Gold) as it’s run over the 6.90 target we had on it. For a trade - I also like IBM over 140.5, CTXS over 60, and UYM over 40.5.

I’m still looking at the miners – because with the recent run up in the metals – their earnings could be a real up-side surprise – look at: ABX over 48, and NEM over 65.

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 10-17-10

This Week in Barons – 10–17-10:

Ben Bernanke = Pass - Fail
Some of you know me as a Professor at CMU – and in that capacity - very few people take the courses that I teach “Pass/Fail” – but those who do – often do so because they ‘lack the time’. Well – Mr. Bernanke – let’s assume you’re one of those people – taking my course – Pass/Fail.

As Steve Forbes wrote me this week: “I'm always flabbergasted at the CNBC's of the world and their absolute rejection of the notion that we're not headed for a catastrophic meltdown. They report the day-to-day life of traders, without consideration of what's happening in the real world. For example: in today's Seattle Times, they are advertising ‘resort style condominiums’, which originally went to the market from: $380k to $990k, are now one the auction block starting at $145k. This is in a prime, suburban area with all of the typical design highlights. You do the math – but taking a 40% haircut – 40 cents on the dollar – what is ‘Fair Market Value’ (FMV) anymore?”
- Well, I guess Ben just didn’t have the time to concentrate on housing, so Housing = ‘F’

Last week the world met to try and get a grasp on the global currency wars that we predicted so long ago, and which have come true. It seems that Gold has risen against 72 out of 72 fiat currencies around the world – with the U.S. and Zimbabwe falling into the same boat. What everyone was hoping for was a global agreement to emerge, but each country was sticking to its guns, knowing silently that their only hope for survival was to have their currency beat everyone else’s to the bottom.
- Well, I guess Ben just didn’t have the time for Currency either = ‘F’

Remember when Mr. Bernanke told us that our banking system was solid, and there was not a chance that anything bad could happen – and then the banking system imploded. Then he said subprime mortgages were contained, and there was no chance of a contagion that worked into other mortgage arenas – and then subprime imploded and now even prime mortgages were found to be fraudulent. Well a good friend Jacob Hawkinson wrote me this week about the most recent foreclosure fiasco – it seems as if in the mass of securitization, IOU’s, MBS’s, REMIC’s, MER’s (and the list continues) – it seems as if some people either forgot or ‘forged’ other people signatures in order to get the mortage/loan paperwork thru the conduit. The main thinking on any home title is that you need a clear ‘chain of title’. That is to say: you can endorse the loan/note as many times as you please, but you have to have a clear chain of title right on the actual note: I sold the note to ‘Moe’, who sold it to ‘Larry’, who sold it to ‘Curly’, and all our notarized signatures are actually, physically, on the note, one after the other. Now, if for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay. Now – let me repeat that – If the chain of title of the note is broken, then the borrower no longer owes any money on the loan! And what if some of those ‘signature enhancers’ (people who over-looked or faked signatures) – were investment banks. Well, now we get to sue the Goldman’s of the world for all kinds of issues – again!
- Well, I guess Ben just didn’t have the time for Foreclosures either = ‘F’

Now Mr. Bernanke is indeed a very smart fellow – and he knows exactly what is happening. What is Ben spending his time on – the answer is ‘inflation’ vs ‘deflation.’ And one of our major debt holders – China – is quite troubled over what we've been doing and what we continue to tell them to do. I can't say I blame them. We have a Treasury Secretary (in charge of Trillions of dollars), but couldn’t file a tax return? We have a Central banker who never saw a single issue coming our way, but now supposedly knows how to fix them. And we just announced to the world that some 60 Million U.S. mortgages ($ Trillions) and more Mortgage Backed Securities might be/could be/probably are fraudulent and potentially worthless. The fraud other nations are seeing:
- Steven Rattner (former car-czar) is finalizing a deal with the SEC over his role in a "pay to play" scandal involving New York's public pension fund – he’ll pay $6M and agree to a two-year ban from the securities industry
- Angelo Mozilo, CEO of Countrywide has agreed to pay the biggest fine ever assessed to an executive of a public company - $67.5 million.

Getting back to Ben – what Ben needs, is to get money into the hands of the U.S. consumer so that they can ‘shop till they drop.’ And without being able to write everyone a check ‘personally’ – he went to the most common vehicle he could manage – the stock market. Remember 2 years ago when Ben Bernanke said to a Senate committee: “a gradual increase in economic strength will be evident as asset prices (stocks) rise. Because as asset prices rise (stocks), the economy will get better.” Steve Sjuggerud’s research confirms that in 83% of the cases – following ‘Fed’ cash injections – the stock market was higher. Ben told us two years ago that asset prices would rise. He could NOT have known that unless he was going to make it happen.
- Well, Ben definitely had time for Market Manipulation = ‘PASS’

The Market:
So, if Ben’s directive works – asset prices (stocks) will go higher, and people will "get richer" and hopefully feel better and spend some money. That's the ONLY reason this market is at 11K! In fact, new data show us that the stock market saw it's 23rd consecutive weekly outflow of money via mutual fund redemptions, with $5.6 billion pulled out for the month. Only the Fed has pockets big enough to off-set billions fleeing from the ‘consumer’ side of the market.

So, we've been telling you all along to lean long, but keep a finger near the sell button – and so far that’s been working. But understand that this market – like a rubber band – is getting pretty stretched.

Since Friday was options expiration day, and it ended the session essentially flat – honestly – it’s hard to determine if they're looking to take a breather here, or "push for more returns".

Congrats to one of the readers who wrote in about a trade on Friday - SLAB – if it were to get over $38.10 it could run – well it ran immediately to $39.69 – congrats there!

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – AAU – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)

Consider snapping up some NGD (New Gold) as it’s run over the 6.90 target we had on it.

I’m still looking at the miners – because with the recent run up in the metals – their earnings could be a real up-side surprise – look at: ABX over 48, and NEM over 65.

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 10-10-10

This Week in Barons – 10–10-10:

Whistling past the Graveyard
This week:
- Mortgage applications and refi’s fell for the fifth straight week - despite the lowest mortgage rates ever recorded.
- Banks want to foreclose and sell the houses cheaper, to make their money on the spread, but they can't because no one can follow the paper trail.
- Global investors, screwed by the likes of Goldman are starting to push back via lawsuits.
- The jobs report showed that we lost 106k jobs (95k + 11k in the birth/death model) – and the real underemployment number rose to 17%.
- AND this past week 2,343 to 1 (sellers to buyers) of the largest corporations in the world – were selling their own stock rather than buying it! Yep the CEO’s and CFO’s are "gettin out while the gettin is good". Oracle insiders alone sold a whopping $465 Million dollars worth of their stock!

Yet the market went up. It broke over 11K and held it for the weekend. Now with gold and silver rising, bonds rising, insiders bailing out, mutual funds posting their umpteenth week of withdrawals, and a horrid employment report, should the market have gone up? It's rising because the Fed will continue to push fairy tale money into a bloated system. The Banks and Wall Street get the first cut, so they have no problem pushing stocks higher. Now, if the Fed does not react with another $2 - 2.5 TRILLION worth of stimulus – we will slide into a deep dark depression, AND some major banks will fail. Our credit economy was built on low down payments and easy monthly payments, and unless everyone is allowed to have that same level of leverage again, there is going to be a "new normal" and that new normal is economic activity on a much subdued level. So, Item One: we have 41 million on food stamps now, record bankruptcies, and millions out of work without access to unlimited credit. They can't "borrow themselves out of the hole". Item Two: Jobs. Sanofi just announced it was laying off 25% of it's American workers – notice they said "American". Item Three: We are no where close to a bottom in housing! Foreclosures had to be halted in many states because of bad paperwork? It seems that all along the way – during the bubble – we didn't care about recording deeds and liens properly. Now – currently the foreclosure industry is about 18 months behind – and is made up of two pieces: Piece #1: If you’re not paying your $1,500 or $2,000 a month mortgage each month, you have a lot of monthly money to go buy "stuff" with – such as: clothes, iPads, TV's, music players you name it – and people are using their mortgage money to live large. Piece #2: With all of the excess paperwork – it seems that the banks can’t figure out who owns the liens on the houses. So, judges have called a halt to a lot of the foreclosure process. We now have moratoriums in over 23 states until regulators can dig through the mess and figure out just who owns what. This allows people a little bit longer to ‘live large’ but puts a big crimp on the banks. You see – due to a recent change in the regulations – Banks now really DO want to foreclose, because if they foreclose and then blow the house out with a "short sale", Uncle Sam picks up the tab for the shortfall. In other words, if the original mortgage was for $500k, and the house now ‘short sells’ for $150k – the taxpayer makes up the $350k difference! If this moratorium continues, banks that were looking to make a fortune turning over cheap properties are going to take a big hit, but "folks" squatting in the houses get a stay of execution. And to add insult to injury – as more and more homes sit in foreclosure, more and more local Governments are going belly up. Governments need tax revenues to survive – and with swarms of houses paying no taxes, incomes at the town level continue to fall. And further on - townships are re-evaluating their real estate taxes and seeing homes assessed at 300K, only coming up at 100K now, thus taking in considerably less in tax dollars on down the road.

But wait - just this week, Goldman Sachs was sued this week by LBBW because it lost $37M in a Goldman-sold CDO deal. Goldman advertised the deal as being "Safe, Secure, and Nearly Risk Free". But inside this deal, it was 33% subprime and 46% "mid-prime" mortgages – which (naturally) all defaulted and LBBW took the hit. Now LBBW wants Goldman to admit to “committing fraud and, or, was negligent in marketing and selling the notes". LBBW is laying the groundwork for hundreds of these legal suits.

It gets worse – J.P. Morgan – who at one point was short 30% of the entire worlds silver production – is watching silver continue to climb. Who's making up for the losses? Are we staring at a situation where some of these monster short sellers are about to go under without another bail out? I believe we are. The short sellers have lost control of the manipulations and they are in dire straights.

We are going to get QE2. It’s not an accident that gold and silver have gone up against 73 fiat currencies of the world. As countries try to devalue their currency, gold and silver will do what they've done for centuries - preserve your buying power. You see - the Fed can create money but cannot control its "velocity". Meaning making the money is only half the job – the other half is getting it into the hands of those who will go and spend it. You see Bernanke thought that if they printed enough money, the banks would lend it out, consumers would eat it up and we could party like it's 1999 again. But the Banks didn't lend it - they instantly parked it right back at the Fed and made the interest rate spread with NO risk. So there was no velocity. Then the FED pushed business credit, but to quote one businessman - "I don't need credit, I need customers". So the Fed has been pushing the MARKET higher – so everyone feels rich enough to start spending. Well, we're over 11K – and the individual investor is still scared - (he should be, he's been fleeced twice in ten years) – and the sentiment surveys show a drop in confidence. So, the only question is, how far will they push the market? Honestly, I didn't really think they'd get it this far. It’s becoming increasingly clear that the world has had about enough of our economy and is scrambling to diversify out of our Treasuries – leaving the FED as the only customer for our paper, either Government or Corporate. That has never gone on all that long – and I have a feeling we're about to find out how far they can go.

The Market...
DOW 11K - I'm amazed. Who would have thought – when we bought SLW on May 14th, 2009 at $3.25 – that it would be $27 now. The shares of UYM at $10.50 at the time, are now worth $39. Our NGD that we purchased at $2.59 is now worth $7.00. Yes, the world certainly believes in the metals and miners.

Okay, so what happens now? The first scenario is that in the fall of the second year of a Presidency, stocks generally run up into December – because investors know that the midterm elections probably produced gridlock and they don't have to fear new policies. Then on top of that, we know that at some point Bernanke is going to unleash holy hell via Quantitative Easing, giving Wall Street even more money to go peddle stocks with. That is a powerful combination and could push us straight up from here. Scenario two is a bit bleaker with earnings season is upon us and we already know what the insiders think – they’re leaving their company’s stock in record numbers. Is it possible that despite the Presidential cycle and the Fed's money printing, enough companies give lousy guidance to derail the run for a bit, even allow for a mini rug pull so Wall Street can pick everyone's pocket?

Unfortunately - we could continue to 12K and beyond – stay strong into the elections and then see the bottom fall out, or we could have a rug pull at any moment. I honestly wish I could be more decisive. Pay special attention to materials and metals, since a weaker dollar makes commodities of all kinds more expensive. But it's prudent to use smaller positions and hang near those sell buttons just in case.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)
I did pick up some AAU @ 3.10

If the market continues to have legs – you may want to look at: MME over 35, MDT over 34, UYM over 39, and BTU over 52.

I’m still looking at the miners – because with the recent run up in the metals – their earnings could be a real up-side surprise – look at: ABX over 48, NEM over 65, and NGD over 6.90

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This Week in Barrons - 10-3-10

This Week in Barons – 10–3-10:

This Market has a Heart of Gold!
We're rushing headlong to an economic currency devaluation dilemma – if not, why would everyone be begging for QE2 (Quantitative Easing 2 = Government prints (and gives away) more and more money!)? A couple facts:
- “The dollar is one step nearer to a crisis and devaluation may be inevitable”, former People's Bank of China advisor Yu Yongding says. "Such a huge amount of debt is terrible. The situation will be worsening day by day. I think we are one step nearer to a U.S. dollar crisis." Now, China holds almost a trillion dollars worth of dollar denominated debt – so the idea of the US devaluing it's currency lowers their holdings values considerably. But the man is right, the amount is terrible, the situation does get worse day by day, and we are very near a dollar crisis.
- The Richmond FED Manufacturing Survey went from 11 last month to -2 this month (above 0 shows growth). With shipments going from 11 to -4, new orders going from 10 to 0, and jobs going from 12 to -3. The Chicago FED is showing an index of -1.4. AND to put icing on the cake: The Dallas FED Manufacturing Survey went from -13.5 to -17.7. So we’re declining all across the country!
- Pimco’s Bill Gross says: “Get used to a world of lower-than-average returns, as the most likely consequence of stimulative government policies will be a declining dollar and a lower standard of living."
- Consumer Confidence fell from 53.2 to 48.5 with the “Present Situation” going from 24.9 to 23.1, and “Expectations” going from 72 to 65.4. The statement from the Consumer Confidence Board came out as: "September's pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook.”

In the meantime, my favorite trade of all time, GOLD, has quietly been hitting new highs day after day (approx $1,320/oz). The best part is that the run didn't even start yet. As I see it, the world will continue to have currency wars, as they devalue the dollar. And as the Fed goes bankrupt buying Treasuries, Gold will continue to move upward, and one day will reach bubble velocity. Frankly I can't wait. One of our readers sent me pictures of a new ATM machine - coming to the U.S. – that automatically allows depositors to exchange dollars for Gold!

It's not too late. Gold could take a 5% hit on any particular week – and I’d personally buy more when that happens. Simply accounting for inflation, compared to the 1980 gold high of $800 – gold would currently have to be $2200 an ounce. We'll see even more inflation than that in the next two years as they debase our currency (hold onto your Gold!).

The Market:
On Tuesday:
- Ireland blew up (debt troubles and riots)
- The Regional Fed reports crashed.
- There were lowered mortgage applications.
- Mutual Funds saw an even greater withdrawals.
- Capital and Insider selling was at a ratio of 260 to 1.
- AND the market ended UP 40 points!

But, this past week was window dressing for the end of the quarter. Funds that stayed long are going to want to put on "window dressing" for their portfolio's – so even if they didn't own AAPL or NFLX, or AMZN - they're buying them now, so that it looks like they were smart. We’ve owned RIG now for about ten days and it's up a cool 10 dollars a share for us (18% in ten days – we’ll take it.)

But here comes danger – big time! Friday is the all mighty jobs report. I really think this will be one of the most interesting ones of the year. Why – well we know it has to stink. The weekly initial jobless claims are still at 450K, with more layoffs being announced in the thousands. The hiring we’re hearing about is "temporary" and for "Christmas". Unless they twist the entire system – this report should stink. Then what? Well, after the "best September" in 70 years – do we just keep roaring into October? Maybe, but the rubber band sure feels stretched.

Our guess is that we move up a bit more, despite the jobs report. Then, out of the blue a flash "rug pull" will hit, and drop us really quickly. Then for the year end they'll manufacture one more run before it's "lights out". Let's see how that all plays out.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
AUY – specific miner – heading into earnings season
VXX – volatility index (for the long haul)

If the market continues to have legs – you may want to look at: MMM over 88, ANR over 43 and CAT over 80.

I’m really looking at the miners – because with the recent run up in the metals – their earnings could be a real up-side surprise – look at: ABX over 48, NEM over 65, and NGD over 6.90

We’re still in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 09-26-10

This Week in Barons – 9-26-10:

Recession or Not – the Market Keeps Rising – How is this Possible?
Something very interesting happened last week on CNBC. President Obama did a "town hall" style meeting the very same day the NBER came out and said: "The recession ended in June of 2009". Now, this is only interesting because CNBC also interviewed Warren Buffet and by his own "common sense" definition, said that the United States is "still in a recession. I think we're in a recession until real per capita GDP gets back to where it was before. We're not gonna be out of ‘this recession’ for awhile." But wait this gets even better. Jack Welch (who was the CEO of General Electric for years and CNBC’s parent company) also comes on CNBC and says: “High unemployment may last for a long time because of the sluggish economy, bad politics, and advances in technology. President Barack Obama's administration has an anti-business bias, which manifests itself through intimidation, trade, taxes and regulation. The facts are in most businesses there's 20 to 25 percent excess capacity that they can fill in without adding any new people.” Now – who do you believe?

If you’re in a 10-foot hole, and you climb up 4 feet, you’re still 6 feet under – yes? With the economy, because of TARP, War spending, Cash for clunkers, etc. – we climbed up the hole a bit, but we never got out. Jobs never came back, work weeks never expanded, and capacity utilization never grew. All we did was pump up some economic activity (purchasing) and get a few quarters of sub par growth. BUT, despite the horrid headlines of increased first time unemployment claims, more banks being taken over in Florida – the market keeps going higher – AND – Gold and Silver are also climbing. How is this possible?

Normally gold goes up for protection from inflation. So if gold is going up because people are afraid of inflation, should stocks be going up too? Some will say - because inflation raises the prices of everything, including assets – stocks should be going up as well. Well, after listening to David Tepper on Friday – over the next 3 months – we’ll either recover on our own, or Bernanke is going to unleash a lot more quantitative easing. Which is simply another word for "print (and spend) a lot more money". When you print more money - it lowers the value of the existing dollars in circulation, and what we see is the dollar falling against other major currencies. The single biggest reason Gold is going up – is because the dollar is becoming worthless. Gold does not create wealth; it simply preserves the purchasing power of your currency. My son pointed out that there are ATM machines in Dubai that will now exchange currency for gold – right there – on the spot! The reason gold is going up, is that people the world over know that our administration and our Federal Reserve are going to effectively devalue the dollar – and effectively inflate away our debt burden.

But is the falling dollar any good for stocks? Now some will say it helps our export situation. When we were a manufacturing powerhouse and exported more than we imported, then yes, devaluing the dollar made tremendous sense. But today what really happens is that every working person is (in essence) getting taxed for our over-spending. For example: If you are currently making $1,000 per month (on somewhat of a fixed income) – and are making ends meet on that – and due to inflation – you need $1,500 to make ends meet – aren’t you going to cut back on what you might spend on TV's, clothes, etc – of course you will. Therefore – because we have a large number of people on fixed incomes (at least in proportion to those that will benefit due to increased exports) - the net net is that "we" lose purchasing power as the dollar falls. Now because China pegs their currency right below ours – believe me when I tell you – the currency wars are just BEGINNING.

The destruction of the dollar is sure. The currency wars are going to rage. And gold will probably just quietly keep rising. Stocks are the real "wild card". You see - two weeks ago the ratio of company insiders that were selling their shares, compared to those buying their shares was an astounding 650 to 1. So they are signaling that the stocks are going down. And, we’re also showing 22 consecutive weeks of mutual fund draw downs equaling $38 Billion. So with insider selling, the public selling, the news hitting new lows daily, high unemployment, lousy prospects – how does the market rise? Well, in Bernanke’s last FOMC statement he said: "We are prepared to provide additional accommodation if needed to support the economic recovery and return inflation, over time, to levels consistent with it's mandate." What this means is that QE2 (
Quantitative Easing #2) is in the ‘on-deck’ circle – warming-up. The idea behind QE2 (printing money) is that you push a lot of cash into the system, banks fill up and decide they'd better lend it out, and soon our credit economy will bloom and we're back to party mode. Unfortunately in the past the banks – hoarded the cash – borrowed more from the Fed at (0.2%) and lent it right back to the US Gov’t for 3.2% and were very happy making the 3% guaranteed. Well, if you shift your attention to stocks – and you’re able to buy so much stock that it forces the market higher – then you again get free money with no risk AND market gains. So the banks and Wall Street want QE2.

But again, no matter how much money they print, it still lowers the value of the money in circulation. So we have this "Gold". People are buying it because all the currencies of the world are being simultaneously taken down - on purpose. So, just as Mr. Tepper said: “It's real easy – if we recover stocks go up, if we get QE2 – stocks go up, and gold goes higher as well.” And (oh) Silver will tag along for the ride.

I tend to think the over riding difference however is that with stocks, you have to assume the underlying companies are going to be making money. Just bidding up the price of stocks will not last, if indeed the company’s earnings don't match the stock price with a P/E that is at least reasonable. There comes a tipping point, where prices exceed valuations to such an extreme we will crash. With Gold however, the price will only rise in relation to the destruction of the currency, "for the most part".

The Market:

- The market has shrugged off the dreaded "death cross" (when the 50-day moving average and the 200-day moving average cross).
- The market has shrugged off the mighty "head and shoulders" pattern that many said would plunge us lower.
- The market has shaken off the repeated "Hindenberg Omens" and Europe's sovereign debt.
- Free money will do that.

I think I know that at "some point" they're going to manufacture a pull down and take a lot of money from the people that are jumping onto this bandwagon. But, after that – do we just turn up and run higher again – if the Free Money spigot is open – probably. There’s a “smack-down” lurking out there – because nothing goes straight up (like this market has) without the wise guys yanking the rug now and again to "shake out the weak hands".

Everyday – my finger creeps closer and closer to that sell button.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
All are up nicely from our original purchase – in fact I recently purchased more NG thinking that it could run to $10 if it can get over $9 – and we’re thinking of putting ‘trailing stops’ on these – so that we don’t lose all of our gains.

We’re still in VXX for the long haul.
We’re in and out (mostly out these days) of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson

This week in Barrons - 9-19-10

This Week in Barons – 9-19-10:

Ripley’s Believe IT no NOT?
Each and every day, we have really bad news hitting the wire:
- The Empire State Manufacturing Index fell by 40% - from 7.2 last month – to 4.1 this month (which was less than predicted)
- Industrial production and Utilization fell once again,
- Personal investing is down 5% in the past month, 16% year over year,
- New orders fell by a whopping 21 points,
- Initial jobless claims came in at 450,000 again,
- Realty trac says foreclosures spiked yet again and home sales were off,
- AND CNBC is still telling us about buying the housing dip – and consumer discretionary stocks!

My first question is: “What ‘discretionary’ income?” The part that the 8 million people on 99 weeks of unemployment are getting, or the part where demand has fallen off of a cliff for most products and services?

But yet – and here’s the “Believe IT or NOT?” portion - the market fearlessly holds up on lower volumes, less participation, and lousy economic news. With Obama’s popularity ratings hitting the equivalent of people's attraction to bed bugs, with the Democrats in a full blown panic mode, and with the Tea Party movement gaining in popularity – I guess they’re saying: “We must keep the market up, so it doesn't look like it crashed on our watch".

There’s no question that tons of people have just given up. Last week – when reviewing the New York pension plan – they found that it was insolvent and that their un-funded pension liabilities are just too large. Most states and insurance pensions are in the same boat, and without the ability to get ‘free money’ from the government they would be forced to completely fail and shut down. You see – from 1980 to 2000 the market experienced 8 to 10% returns, and all the pension and insurance fund managers have set up their projections and assumptions on the fact that they were going to take in 8% a year in stock returns. Well, since 2000, not only have companies lost more contributing workers (via the 8 million lay offs), they saw major recessions and major stock market declines as well. So, there's literally "thousands" of pensions that simply would not exist if not for regulators allowing “funny”.

To win in this market – you need to think like a computer algorithm – because that is what is causing all the volume. What I look for are stocks right at resistance. If the market is falling, you can short it but only for a very short time, as the FED will step in to reverse the fall. So, really fast short sales, and stocks leap-frogging over a resistance level will put money in your account. This week we recommended RIG and CTXS. These recommendations were not based upon fundamentals, sales or their P/E – but rather - by looking at the put/call ratio and resistance levels. With the market was moving sideways, and both were against their resistance – they broke thru and ran for nice gains.

Now one element to review is the VIX. The VIX is a volatility index – and when it moves higher - it that means that people are going to be more fearful, and that the market is going to be going lower (people would be more fearful as they saw the market decline). A quick review: The CBOE Volatility Index, also known as the "fear gauge" and commonly known as the VIX, (VXX) is best used to find market bottoms. It's more effective at telling traders when fear is so high that they need to sober up and become one of the few buyers of cheap stocks that nobody wants. Basically, the VIX reflects how over-priced or under-priced options are. When traders become more fearful, they buy options. When they are scared out of their minds, they are willing to overpay for options, just like a person who thinks they have a high risk of health problems or death would be willing to pay high insurance rates -- and the VIX goes up – which is why the VIX is currently around 20 (calm), and was approaching 100 during the 2008 crash. The VIX is better used to call market bottoms than tops because complacency and fear are more gradual, while extreme fear tends to be short-lived, creating an opportunity that you can trade. When the VIX spikes too high and reverses, that's a "market buy signal", but sometimes, we are able to use the VIX as a signal that investors are way too complacent. There is a VIX "buy signal" (stock market "sell signal") that happened last week – and typically, the market takes a week or two to begin to correct. Now the last time the VIX-BB signaled over-complacency was in January, 2010 (right before the sovereign debt fears surfaced again). Then once again in April, when investors realized the sovereign debt issue wasn't just going to go away. We recently started hearing about the sovereign debt issue again, and we got the same signal.

Due to this VIX signal – I’m not sure if the market declines from here or breaks out. But my feeling is that, if we get a breakout, it will be short lived (maybe a couple months -- MAX), followed by another sharp move down. If the market breaks down from here, however, taking out the 1,040 lows on the S&P 500, my feeling is it will a sustained move lower.


Now onto the market..
A famous trader recently summed up the market as thus: "the market has become self-referential, an algorithm playing itself out, almost the way you would run a self-recursive equation on a computer. You end up getting very unpredictable results from very simple equations. I’m afraid the market has degenerated into a joke."

Bottom line? "someone, somewhere" is pushing this thing up. Why do I think this? Well:
- The market is going up on lower and lower volume
- The market is going up when 38 billion in mutual fund money is leaving,
- The market is going up despite an undeniable slowdown in economic activity, and this can really only mean a couple things: 1) it is being propped up, or there’s a real possibility that Bernanke's going to launch Quantitative Easying – Part 2 – which will be another $2.5 to $5 Trillion in monetary injection. Wall Street simply loves free money, so they could be buying it up, knowing that more of it is coming.

Currently we are oversold – from being up "too many" days in a row. Even if we were in the depths of the greatest bull market of all time, it cannot go up every day. I stick by my feeling that we are awful close to at least a quick 400+ point sell off if not more. So we might have to start looking for a quick short side sale or two.

Oh by the way, lot's of people are really getting interested in gold and silver now. Understand that's the way it always happens. Something runs for years and years, yet it gets no attention. Then it busts free of historical highs and all of a sudden "everyone" wants in. We've been in gold and silver for over 10 years, and it's been the single best investment of our entire lives. If you look at an ounce of gold like a "share of stock" the stuff we bought in 2001, is now up 1000 dollars per share. There's a good chance it will pull back a bit, make the newcomers sweat and sell back out and then push forward again. I see 1500 dollar gold, probably by February.

For those of you looking for a gold play, and have none of the miners or aggregators, consider taking a look at NG. We took on a position a while back at 6.80 and it's now 8.72. If it can get up and over it's May highs at about 9.20 it could hit ten in really rapid fashion.

But what you need to really ask is - What happens the day after the elections? Honestly, I’m still in a couple of stocks – but getting more and more ready to sell them and "see what's next'.

Tips:
Let’s review our holdings:
GDXJ – a basket of gold miners
GG – IAG – NG – individual gold miners
GLD – PHYS – pegged to the price of Gold itself
SLW – SSRI – silver miners and indexes
All are up nicely from our original purchase – in fact NG has truly exceeded our expectations – and if it can get over $9+ it could run to $10 fairly quickly.

We’re out of RIG now – sold for a nice profit.
We’re in VXX for the long haul.
We’re in and out of TZA, DXD and SDOW on a daily basis (these are ETF’s that allow you to invest directly in the market going ‘down’ – for those that do not like to ‘short’).

If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.

If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:

Remember the Blog:
Until next week – be safe.

R.F. Culbertson