RF's Financial News

Sunday, June 19, 2016

This Week in Barrons - 6-19-2016

This Week in Barrons – 6-19-2016:

Thoughts:

Lately I’m wondering if Clueless was simply a 1995 movie staring Alicia Silverstone, or whether it was the ‘shape of things to come’.

1^st off, Happy Father’s Day to all of you lucky fathers out there.

Thanks to SF for reminding me of the British (musical) invasion of the 60’s and 70’s prompting: “The British are Coming, The British are Coming”, could be played in reverse this week. We could be witness to an even greater rallying cry: “The British are Leaving" – as a British vote to exit the European Union (BrExit) looms on June 23. Fearful of the BrExit vote, the German 10-year bond has gone negative for the first time in history. That’s right; traders have gone ‘Clueless’ and are putting their cash into something that is essentially a money-losing investment, due to rising BrExit concerns. A vote YES to BrExit is expected to have a huge negative impact on British and European jobs, trade and markets.

Current British polls show major moves toward exiting the EU, but the impending outcome is still too close to call. (FYI: The bookies are betting on Britain remaining in the EU.) However, a couple BrExit elements are fairly clear:

- If YES to BrExit, approximately 5,000 financial service jobs (and people) would be transferred back into the EU – as their ‘passporting’ privileges would be revoked.

- Voter turnout will be key, as referendum turnout levels have decreased steadily from 70% to less than 50% lately. The smaller the turnout, the more it could be swayed by the BrExit coalition.

- Polling shows us that: (a) over 50% of British citizenry believe that the EU undermines their very identity, (b) over 50% realize that Britain’s economy will decline if they leave the EU, and (c) over 50% of the BrExit supporters are over 55 years old.

- Many of the factors fueling Donald Trump’s campaign in the U.S. – low wage growth, declining living standards, disruptive labor market forces such as technology, immigration and globalization – have also been especially prevalent with the pro-BrExit supporters.

- For the EU, the June 23^rd referendum comes at an arguably terrible time given: slow economic growth, simmering Greek tensions, migrant pressures, and increasing skepticism surrounding the stability of the Euro.

- The number of EU nationals working in the UK has tripled over the past 10 years, and migrant figures are rising at a record pace. BrExit supporters have emphasized weak wage growth and security risks from migrants as central issues – very much paralleling the Trump presidential campaign.

On a brighter note, it’s becoming even clearer that our Congress is ‘Clueless’ about the economy and the shirking of their fiscal duties until after the general election in November. As an example of this, Ms. Yellen is due to speak on Capital Hill next week, and one of the pre-released talking points is: “Could a Trump victory hurt the economy?” My quick advice to Congress is to concentrate on elements that you know and on ‘getting stuff done’ – and leave the speculation to the media.

Finally, fewer than one in three U.S. teens obtains a summer job.

The number of summer jobs that 16 to 19 year olds have secured is down 14% from last year. And last year that same number was nearly 11% lower than the year before. This is part of a decades-long trend. While more than half of teenagers worked summer jobs in the 1970s and 1980s, these days fewer than one in three do.

One reason for the decline is that teens are choosing not to work. Many of them are volunteering, enrolling in educational programs or doing other things that may enhance their college applications. But also – there are just fewer opportunities. Restaurants and retail outlets are still hiring teens, but not as many as in the past, because they simply don’t need as many workers to meet seasonal demand. And while teens continue to have opportunities in the classic summer job settings such as: summer camps, neighborhood pools, and amusement parks – that number is not growing.

Experts see this as having a detrimental impact on teens because of the sought after experience gained working a summer job. Summer jobs help teens learn accountability, grit, and how to deal with situations where you don’t LIKE everything. Summer jobs develop responsibility and teach the value of money, even more than volunteering. This decline could continue until we change the college admissions process. Currently, while some college admissions officers value paid work, many look more favorably on a great volunteering experience. It’s a shame that working for the local muffler shop might not sound as good on a college application as working on ‘curing world hunger’ for a charity .

All of this leaves me wondering if ‘Clueless’ was just a movie staring Alicia Silverstone in 1995, or a disease that is slowly creeping into virtually everything we do?

The Market:

This is just a normal market right? Early last week: (a) Japan’s economy received a downgrade, (b) European markets felt the pressure and were RED by a lot, (c) the Orlando had a horrific terrorist shooting, and (d) by 10 AM the S&P was down by all of 1 point. Now you can tell me that this was just millions of investors, all at the same time, buying the dip – and I'll laugh at you. Because this action was clearly our buddies at the Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of Japan and others making sure we didn't roll into a pull back. When the dust settled, we only lost 25 points on the S&P for the week. Not a terrible amount actually, given our own FED put in a big time ‘stick save’ on Thursday.

Last week:

- On Monday, Tuesday and Wednesday – fearful of a BrExit, the markets were soggy.

- On Thursday, the market was getting really ugly with the DOW down 175 points and the S&P down 20 – all by 11am.

- Then (all of a sudden) there was panic buying as Jo Cox (the British Labour Party’s rising star) was shot dead with a handgun in England.

- The markets rose because both sides of the BrExit vote had decided to suspend their campaigns in respect of Ms. Cox.

- The markets also figured that the BrExit vote would be delayed until July, and rallied over 270 DOW points to end the day up 93.

- On Friday came the news that the BrExit vote is still ‘on’, and our markets became soggy again, ending the day down 58 on the DOW and down 7 on the S&P.

This begs the question: Aren't handguns illegal in England? According to the English rifle and gun club legal center, “Any person possessing a firearm in the U.K. must posses a Shotgun Certificate or a Firearm Certificate. Machine guns, pepper spray, semi-automatic, and pump-action rifles, and any firearm that has a barrel less than 30 centimeters in length are prohibited. All handguns, semi-automatic and pump-action non-rim-fire rifles are prohibited.” So very simply: If people want to do evil – they will find a way.

Last week was lumpy, and only made worse by the FED’s refusal to raise interest rates. The FED also REDUCED the number of interest rate increases that they plan on unleashing in 2016 from 4 to 1. That tells me that all of my whining about the economy being in the toilet is (unfortunately) on the right track, and the FED’s rosy pictures from earlier in the year were simply baloney.

The BrExit vote is still on, but it's too close to call. I would personally love to see them leave, but they probably won't. Therefore, I expect a stagnant market on Monday and Tuesday, with some possible extra movement on Wednesday if the polls start to show a really big lead in either direction: stay or leave. By Thursday morning we will have the results. If they vote to ‘stay’, the markets will put in a relief rally and move higher on the news. If they vote to ‘leave’, the markets may put on a bravado face for a bit – but ultimately will head lower.

Plan accordingly, because it could be a wild week.

TIPS:

I am:

- Long various mining stocks: AG, AUY, CDE, FCX, FFMGF, FSM, NGD, and PAAS,

- And Long an oil supplier: REN.

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

Please be safe out there!

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Sunday, June 12, 2016

This Week in Barrons - 6-12-2016

This Week in Barrons – 6-12-2016:

“’You're like Jesus, if he was arrogant and all of his miracles were fake… I'm just trying to create a space for wisdom.” … Merritt McKinney - Now You See Me 2

Thoughts:

Recently I saw the movie ‘Now You See Me 2’ and it dawned on me that society is making the individual, global FED players ‘rock stars’, only all of them are “arrogant and all of their miracles are fake”. We are doing this at the expense of the actual markets, and the companies within them. The stars are now: Janet Yellen, Mario Draghi, Haruhiko Kuroda, Zhou Xiaochuan, and Mark Carney of the United States, Europe, Japan, China, and England respectively. Unfortunately, over the last decade the FED heads have decided that it was their ‘obligation’ to decide the winners and losers. The losers would be the savers, pension funds, and insurance funds that have seen interest rates plummet. The winners are every corporation that has even the slightest political intention. Nobody realized that by manipulating interest rates, you would effectively manipulate everything. In fact by pushing interest rates negative, you force ‘savers’ to increase their risk tolerance and enter the stock market. Instead of ”trying to create a space for wisdom”, investment decisions are being made on guessing what the various FED heads will do next.

The Bank of Japan (after introducing negative interest rates) is now actively purchasing Japanese stocks. They are now a top ten shareholder in 90% of the stocks traded in Japan. Not to be outdone, the European Central Bank (ECB) has also moved on from negative interest rates and is purchasing corporate bonds. This means (for example) that the citizens of the EU are actually funding the Bayer acquisition of Monsanto. Bayer (in an effort to accumulate the funds necessary to purchase Monsanto) sold billions of dollars of Bayer corporate bonds. The ECB then printed the appropriate amount of money, and immediately bought the bonds from Bayer. Therefore, Bayer just received billions of dollars to buy Monsanto directly from the ECB. If you were Bayer, you never had to increase sales, or change any business practices. You acquired Monsanto because the ECB printed money out of thin air and gave it to you. There is no precedent for that amount of FED head authority or intervention.

We’ve never seen anything like it. Switzerland, China, Japan, and the European Central bank all admit to buying stocks. Corporate earnings could go to zero, and stocks in these areas would still rise just as long as they are being purchased by money that is simply printed into existence, instead of money that has been earned and saved. This type of FED head action is being termed the ‘Hidden Hand’.

Marc Faber of the ‘Gloom, Boom and Doom Report’ said: “Central banks are only interested in their own prestige. If a particular element did NOT work in the past, they will do it again and increase the dosage. Eventually, (for example) they will buy all the bonds, and all the shares outstanding. And when the housing market goes down, they will buy all the homes – and then the government will own everything."

I have no idea when or how this all ends, though I'm fairly certain that it won't be pretty. The crazy thing about these FED heads is that they are all academics that have never worked a day in their lives. However, their game is not without risk. Goldman Sachs estimates that a 1% increase in U.S. Treasury yields would trigger over $1 trillion in losses – exceeding all of the losses from the last financial crisis. I believe that gold and other hard assets will be the spectacular winners of this manipulation. George Soros and other semi-retired investors have also voiced their opinions on the side of buying gold and gold miners. So far this year the Gold Miners (GDX) are up 90% as compared to a 3% increase in the S&P.

To that end I would like to recommend a FREE precious metals seminar taking place on the 16^th, 17^th, and 18^th of this month. It’s a collection of 20 interviews from the how’s and why’s of buying precious metals, to identifying fakes and frauds, and even touching on where to ‘hide’ them. This online seminar is FREE to listen to, and is $20 to purchase the podcast. It only requires a first name and e-mail to enter and you can review the speaker list and content at: http://cdi.ontraport.net/t?orid=98572&opid=55. I have it on excellent authority that it will be the best, free education you will ever get on the precious metals.

The Market:

Factually:

- China’s financial defaults are rising significantly,

- Another $2B left the market last week – making it 10 out of the last 12 weeks where money has been fleeing the stock market.

- The amount of global sovereign debt with negative yields surpassed $10 trillion for the first time in May. It is spread across 14 countries, with Japan by far the largest source of negative-yielding bonds.

- Businesses accumulated debt in the 1^st Quarter of 2016 at the fastest pace in three quarters. Business debt grew at a blistering 7.9%, and has expanded by almost 8% in three of the last five quarters.

- Household debt grew at a much slower 2.7% pace, with student and auto debt leading the way and credit card debt growing by 6.1%. Mortgage debt grew at the slowest pace of 1.6%.

- DS informs me that for the past 54 consecutive months, rent increases have exceeded pay increases. This is crushing seniors and the lower middle class as in many cases – they are spending 40% of their income on rent.

If you listen to the market carefully you can almost hear the creaks and groans. The distortions from so much pushing and pulling on a market that clearly doesn't belong at these levels, are causing all kinds of problems. In the middle of the week, the DOW and the S&P were trying to ‘fade lower’, but that ‘Hidden Hand’ kept powering them back up. On Friday, the ‘Hidden Hand’ showed up in the final hour to take us off the lows, but the DOW ended down 119 points and the S&P lost 20.

One of the issues that hit on Friday was that a new poll in the UK showed 55% of the respondents are leaning toward a ‘BrExit’, or (in other words) leaning toward having the UK leave the European Union. The Global Elites definitely don't want any part of that because it would trigger other nations following suit. And this is where their ‘one world government’ plot would start to dissolve in the test tube.

A theory that surfaced on the back of the BrExit poll concerned the FED meeting this week. The FED has a scheduled meeting focused on interest rates on Tuesday and Wednesday of this week. Currently, the market is giving the FED a ZERO chance of doing a rate hike. But if our FED had inside knowledge that the UK was indeed going to BrExit (leave the EU), then it could freely raise interest rates and blame the market’s behavior (falling) on Britain. I'm not saying that is what's going to happen, but rather a rumor circulating around the trading floor.

On the downside of things, the S&P has to hold 2085, or we are going to the 50-day moving average at 2076, and then to 2065. On the upside, if we can gain back all of Friday’s loses and see the market over 2109, then we could see them try and pull off another run at the old highs.

Remember, this week we have the FED meeting and ‘triple witching’ on Friday. After that, we have an upcoming vote on BrExit. Hang onto your hats, as all heck could break loose over the next two weeks.

TIPS:

I would look at some of the silver miners whose profit per ounce of silver is moving higher. The ones that I see that have a relatively low cash cost of mining an ounce of silver from the ground and are increasing their profit margins are:

- Fortuna Silver Mines (FSM),

- Avino Silver & Gold Mines (ASM),

- First Majestic Silver (AG), and

- Hecla Mining (HL).

Avino, First Majestic and Hecla Mining each produced an ounce of silver at about $5 per ounce, in the first quarter of this year. Fortuna (FSM) produced at same ounce for $1.44.