RF's Financial News

RF's Financial News

Sunday, November 13, 2016

This Week in Barrons - 11-13-2016

This Week in Barrons – 11-13-2016:



“I’m not going to quit, and neither should you.”  Kate McKinnon (SNL – 2016) – singing Leonard Cohen’s ‘Hallelujah’ https://www.youtube.com/watch?v=mgydzfHqVZA

Thoughts:
Factually, most of us are still recovering from the election.  Donald Trump was elected because of a hacker named ‘Qucifer’, who discovered Hillary’s private e-mail server, and Julian Assange of WikiLeaks exposing the information for all to see.  Without that chain of events, the FBI would never have been involved, and the rage and the rural vote would have never come out like they did.  Combine that with:
-       The media that faked the truth, spun the lies, told us to ignore all the criminal behavior (on both sides).
-       The rural, non-college degreed white voters that showed up in numbers never seen before,
-       The ‘little guys’ tired of 30-years of stagnant wages, a two-tiered justice system, and job losses - all saying STOP at the same time,
-       FBI Director Comey bringing Hillary’s e-mail issues to the forefront – TWICE.  By not going forward to the DOJ or the Attorney General, he allowed the evidence to be tried in the court of public opinion,
-       WikiLeaks’ last release showing: (a) Hillary accepting Qatar money while she was Sec. of State, (b) the DNC and CNN colluding on the debate questions and leaking them to Hillary, and (c) the Clinton Foundation paying Chelsey $30m for her annual salary.
-       The Clinton campaign itself that: (a) never had her to visit Wisconsin as a Democratic nominee, and (b) only going to Michigan after polling showed that the race was a dead-heat.
-       Trump promised that he would LISTEN.



You can't say we weren't warned.  Brexit showed that the powers-that-be were out of touch with the rank-and-file.  The disconnect is not only about economics, but about attitudes, education and identity.  Trump preached two lessons: (a) be willing to change, and (b) be willing to stand up for what you believe in.  He refused to play by the rules.  He committed faux pas after political faux pas, but everything that the mainstream media said would matter – did not.  Trump had little infrastructure, and almost no ‘get-out-the-vote’ effort.  The joke may end up being on us given he goes in armed with a Republican Congress ready to:
-       Supply Middle Class Tax Relief – which would provide middle class families with two children a 35% tax cut,
-       Lower the business tax rate from 35% to 15%,
-       Provide Affordable Childcare and Eldercare – that would allow individuals to deduct childcare and elder care from their taxes, incentivize employers to provide on-site childcare, and create tax-free savings accounts for children and elderly dependents,
-       Repeal and Replace Obamacare, and
-       Re-Do the American Energy & Infrastructure Act – spurring $1 trillion in infrastructure investment over 10 years.

But what keeps nagging me is an old saying: "If elections really mattered, why would they let us vote?”  Donald Trump beat the best, well-oiled, political machine of all time, and I think it was for a reason.  I have said for years that there is going to be a global monetary reset.  The world is over $500 Trillion in debt, with over $3 Quadrillion in derivatives.  This is debt that cannot be repaid, and must be expunged.  I think Trump was tapped for three reasons: (a) In him they have a man that J. Q. Public could believe in.  (b) He’s navigated many bankruptcies in his past, and guiding us through a global currency reset would be a natural fit.  And (c) he’s disposable.  I have a feeling that Mr. Trump has been tapped to be the ‘excuse’ that the elitists have been looking for.  I think they're going to let him try and institute some of the things he wants to do, pull the plug on the global economy, and then blame him for his failed policies.

If Trump was picked to truly be the guy that reverses our slide – he's got the fight of his life in front of him.  But if he was picked to be the fall guy – the next few years are going to be incredibly brutal.  Make no mistake, I want to make America strong again and heal the divides, and as Kate McKinnon said on SNL – “I’m not going to quit, and neither should you.”


The Market:

“It ain’t what you know that gets you in trouble … it’s what you know for sure that just ain't so." Mark Twain

This week Mr. Stanley Drukenmiller (a well-respected fund manager) stated: "I sold all my gold on the night of the election because inflation is now set to spike, forcing money out of safe assets - like gold and Treasuries - and into the US Dollar.  I expect higher deficits, stronger growth, and another surge in debt.” 

That was followed by Mr David Stockman (Director of the Office of Management and Budget (1981-1985) under President Ronald Reagan) saying: “Donald Trump has no coherent program, and I believe the nation's long financial nightmare has just begun.  For months and years to come, our nation will be racked with fiscal, financial, political, and even constitutional crisis.  The stock market will now crash.  The stock-price obsessed C-suites of corporate America will begin to panic, and pitch inventory and workers overboard.  We will be in an official recession within 6 months.  The Federal budget will plunge back into trillion dollar annual deficits, and any notion of a Trump economic revival program will be stillborn in the financial and fiscal chaos ahead.”

So there are two really smart guys at polar economic opposites.  They both know about the debt picture, and are thoroughly aware of the derivatives and large counterparty risk associated with them.  They also both realize:
-       If Trump removes the regulations from coal, oil, and small business – jobs will improve.
-       If Trump cuts taxes – people and corporations will spend more quickly.
-       If Trump creates better trade deals – we will enjoy better trade ratio's.
But the fly in the ointment is still balancing the immense amount of necessary borrowing required to pull that off – with any future revenue creation.  The banks are insolvent, and can't be ‘fixed’ by Trump.  The system tried to purge itself in 2008, and instead of letting the crash happen our FED rushed in with the biggest monetary bazooka of all time – and kicked the can down the road.  Trump cannot fix that.



My market prediction was that if Trump won – the immediate reaction would be a severe plunge, and then a bounce.  That is exactly what happened, but I made a mistake on WHEN it would happen.  On Tuesday (as a Trump victory was becoming clear), the overnight futures kept falling with the DOW down -800 points, and -100 on the S&P.  But then the futures ‘magically’ started to climb, and by Wednesday at 4pm we closed up by 300 DOW points.  What happened?  Well, just because Trump was elected, it didn't stop Wall Street from doing funny things.  They let the enormous drop and recovery take place in the futures market in the middle of the night – when and where J. Q. Public doesn’t really participate.

And just because the DOW was up last week, other areas of the economy were still unhappy.  Oil prices dropped considerably.  It seems that data showed OPEC’s oil production rose by 230,000 barrels a day to a record high of 33.83 million barrels a day in October (exceeding the OPEC ceiling range of 32.5 million to 33 million barrels a day).  And in the U.S. we still have: (a) 96m people not in the workforce, (b) 44m people on food stamps, (c) over ½ of the population that can’t get $400 together for an emergency, and (d) over 1/3 of our working population – working 2 jobs.

The reason for the early powerful moves in the DOW are that the Republicans now control the Presidency, the Senate, and the House.  This directive means that in the first 100 days, many of the executive orders that President Obama has implemented can be easily reversed.  For example: (a) on Immigration, Trump could reverse the Deferred Action for Childhood Arrivals program, (b) on Climate Change, Trump will most likely cancel the Paris Agreement, and repeal many of the EPA regulations, and (c) on Trade, Trump will stop the Trans-Pacific Partnership, renegotiate NAFTA, and may even have his Treasury Secretary label China as a currency manipulator.

This week we saw massive moves higher in: financials (10.5%), healthcare (8.25%), industrials (7.8%), materials (5.3%) and the U.S. Dollar index (2%).  And we saw huge down moves in: utilities (4%), consumer staples (3%), precious metals (4%), long-term Treasuries (7%) and the Mexican Peso (13%).

Trump’s plans include large borrowing for infrastructure and a tax cut, which will result in a ballooning deficit and inflation.  This will either translate into economic growth or stagflation.  In the near-term, markets have discounted a significant amount of what they think will happen, and will probably need some time to digest these moves.  The sharp move higher in interest rates certainly gave the FED the green light to raise rates in December.  The strengthening dollar won't be good for our multinational corporations, and will also slow the FED's willingness to raise rates in 2017.  On Friday (a day when the bond market was closed), someone (nation) dumped $10B worth of paper gold onto the market @ 8:40 am ET – sending gold to a 4-month low.  This is NOT normal behavior. 

If I sound cautious and concerned here, it’s because I am.  The transaction volumes on Thursday and Friday were higher than normal, but in the end the S&P closed right around the flat line.  That means an awful lot of selling -  accompanied substantial buying.  We are in the seasonally strongest time of the year, and we may rally on from here; however, I'm frightened when I can't follow the plot.  Just because Trump says he's going to do all of these marvelous things, the market normally knows better than to follow in ‘lock-step’.  This is unusual behavior.  It's also unusual to see how many market ‘experts’ instantly flipped from saying Trump is a disaster, to ‘all is grand!’

While the stock market move was impressive (and there's probably more to come), all we can do is hope that earnings and economic activity will improve enough to match these lofty levels.  Currently the market is short-term extended.  I have to think that we're looking at a bit of a pull-back this week, but the pull-back will probably be a short term buying opportunity.  Don't forget, we are in the seasonally strongest time of the year.  With Obama wanting to go out on a high note, I could see them attaining more all-time highs before Trump gets sworn in on January 20th.


Tips:

It was Veteran's Day on Friday, and to all of those that have served, I say: Thank You.  The elements that soldiers bring back with them from war, impact their lives forever.  I tip my hat and say thank you to any and all that served, no matter what your role. 

Touching on Gold and Silver specifically:



In the past 3 days, investors have decided gold is not the place they want to be during the opening days of a Trump pre-administration.  In the heat of the election, gold initially jumped 2% higher, but soon gave up that rally to be down 4% at the end of the week.  Gold (if nothing else) is a long-term currency risk against the dollar’s current $600B deficit and $20 Trillion debt.  Prior to the election, gold was in a sweet spot.  The uncertainty cycle was peaking, inflation was picking up, the Fed was doing nothing, stocks were expensive, and bond yields were low.

The Trump spending plan (Reaganomics) increases the likelihood of a dollar collapse.  Yellen will be forced to raise rates at a faster clip than she was previously thinking.  This flies directly in the face of other global central banks that have been easing.  The FED raising while others are cutting will cause the dollar to increase too much, and hurt multinational corporate profits and America’s exports.  Combined with our current debt levels, Trump won’t be allowed to increase deficits as much as Ronald Reagan.  Reagan spending did increase debt as a percentage of GDP, but it was beginning at a much lower level than where we are at today.  Trump’s debt projections (without entitlement cuts) would be the highest in our nation’s history.  Unaccompanied by drastic cuts to government health care, defense, and social security – gold and other ‘flight to quality’ products are simply down temporarily.

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!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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, November 6, 2016

This Week in Barrons - 11-6-2016

This Week in Barrons – 11-6-2016:



“Life moves pretty fast.  If you don’t stop and look around once and a while you could miss it.”  Ferris Bueller


Thoughts:
On the eve of potentially one of the most contested, controversial, and eye-opening Presidential campaigns in decades I’d like to say thanks:
-       To Jeff Immelt – GE Chairman and Head of the U.S. Commission on Job Creation, for moving GE’s X-Ray Division from Waukesha, Wisconsin to Beijing, China.  I’m guessing President Obama forgot to tell you to create jobs INSIDE the U.S.
-       To Saudi Arabia – for lowering the price of oil so that the world is swimming in it.  This week the price dropped below $45 per barrel, and some of that could be attributed to Weatherford Oil’s insolvency issue (having $8B debt and only $600m in cash to pay for it), but without real production cuts – prices could soon move to $26 per barrel.
-       To President Obama – for keeping over 5 wars going simultaneously – NONE of them approved by Congress.
-       To Wikileaks for showing that Donna Brazile (on two separate instances) gave Hillary Clinton the debate questions BEFORE the debate.
-       To the FBI agents who (on their own time) found a pattern of pay-to-play bribery concerning the Clinton Foundation that includes the monetizing of political influence, fraud, obstruction of justice, and a possible RICO conspiracy.
-       To Wikileaks for saying that their source for all of their information is NOT Russian hackers, but rather “good-guy insiders” within the U.S. government who wish this information be known.
-       And to Chris Matthews for saying: “Do you like uncontrolled, illegal immigration?  Do you like the string of stupid wars from Iraq to Libya to Syria?  If you said yes to any of that, and if you want to keep it that way – then vote for Hillary Clinton.  If you wake up the day after the election, and it is the same as it is today – remember you had the chance to change it but you were too dainty to do it.”

The experts say that a Trump will win will depend upon:
-       The 'silent majority' of working-class white males showing up to vote,
-       Hillary Clinton bleeding votes to Gary Johnson – especially in Utah,
-       The African-American and Latino voter turnout dropping, and
-       The Northeast coming out in favor of Trump.



I’d like you to consider one thing.  Even though all of the anecdotal evidence suggests a Trump win (Trump-Pence signs on lawns, Trump vs Hillary attendance at rallies, Trump vs Hillary digital footprints, etc.) – let’s assume Hillary steals the election.  Trump will contest it and start bringing up evidence of fraud.  What happens if during that election investigation, the ‘good guys’ at the FBI find a way to get Hillary indicted via the foundation?  What the heck happens then? 

Unfortunately, I don’t think Tuesday ends anything – I think it’s just the beginning.  And I really hope that I am wrong.


The Market...

The question is: What aren’t we going to do?” … Ferris Bueller

Factually this week:
-       We received the results of the FOMC meeting = No rate hike.
-       We broke-down thru DOW 18,000, and landed at 17,814,
-       We broke-down thru S&P 2,100, and landed at 2,082,
-       The PMI fell, the Dallas FED fell, and we had another week of record outflows from mutual funds.
-       We had record low levels of Insider buying, and even a slow-down in stock buyback announcements.
-       Obamacare rates in most states will increase between 25 to 100+%.
-       The strength in the U.S. Dollar will put a lid on earnings, and may slow the FED’s hope for rate increases.
-       Corporations continue to embrace M&A over capital investments.
-       The Non-Farm Payrolls Report showed that we added 161k jobs – BUT:
o   Part time jobs increased 90,000,
o   Full time jobs DECREASED by 103,000,
o   The Birth/Death model created 197,000 fictitious (phantom) jobs
o   The Net Result – we actually LOST 36,000 jobs.

How many ways can you say volatility?  It has been 36 years since we’ve seen the S&P fall for 9 straight days.  Although a 9-day losing streak sounds incredibly bad, we are only off 4.7% from our all-time-high.  July 7th was the last time the S&P closed under 2120, and for almost 4 months the market bounced between 2120 and 2190.  But Friday’s close below 18,000 on the DOW, and 2,100 on the S&P – could get interesting.  But the more intriguing fact is that year-over-year we are now in the RED.



Since the great plunge of 2008, Governments and Central banks round-the-world have gone to incredible lengths to push the equity markets higher.  The U.S. is the strongest horse in the glue factory, and despite all the trillions in stimulus, we're limping along at a 1 - 2% GDP.  Imagine for a minute that the Central Banksters stopped printing, stopped buying stocks, stopped buying corporate debt, and stopped QE.  After all these years, the only thing we would have to show for the trillions in debt is a silly stock market.  No matter who gets into power things are going to change.  By combining the market wanting to go lower with the insanity of the election – we could be looking at the start of something.

So long-term (whether Hillary or Trump win), I believe the market goes lower next year.  In terms of an immediate reaction, the market's initial reaction will be quite different.
-       If Hillary wins, I think we see a major 3 to 5-day rally that pushes us right back up against the all-time highs.  This becomes a ‘blow off top’, and we start a long gradual slide that doesn't end until the markets are down over 40%.  So with Hillary, I think we get an immediate ‘pop’ and then a gradual ‘drop’.
-       If Trump wins, I expect to see a sell off as much as 20% that is both sharp and quick.  Then the normal ‘dead cat bounce’ sets in that lasts for a bit, and then a much slower slide lower.  So with Trump, I look for an immediate sell off, soggy bounce, and then a prolonged downturn.
-       Therefore, I think the short-term play on Monday would be to buy a straddle and take advantage of any large market move higher or lower.

After 7 years of being propped and prodded higher, this bull market has probably run its last range and is in need of a hefty correction – that could last for a long time.  Remember, the market takes the stairs up, but the elevator down.  In other words, crashes and corrections are normally fast and hard.  I would ask your financial advisor about buying protection (potentially via puts) in case this market does finally correct.

This should prove to be quite an exciting week.  I hope you have enough popcorn. 


Tips:
An investing roadmap for:
-       A Hillary win:
o   Banks would move higher for a while: GS, JPM, MS, BAC, and C.  You could play this using the financial ETF = XLF, or the 2x financial ETF = UYG. 
o   Foreign banks should move higher as well: DB, BCS, CS and RBS.
o   Aero and defense stocks will benefit: GD, RTN, NOC, and LMT.  You could play using the aerospace/defense ETF’s = XAR and ITA.
o   Hillary doesn’t like the prices in healthcare or bio-tech so watch for those to be under pressure.
-       A Trump win:
o   Coal will move higher and the easiest play is the coal ETF = KOL.
o   He wants us to be energy self-sufficient and will push for more oil and gas drilling.  Look toward some offshore drillers like RIG and DO.  He will try and put the frackers back to work, so look for him to sell natural gas around the world with UNG.
-       For playing the ‘short side’ of the market (i.e. making money when the market is going lower) consider some ‘Inverse ETFs’ such as:
o   SEF, UYG, or FAZ in the financials,
o   To short the DOW use DOG, 2x = DXD,
o   To short the S&P use SH, 2x = SDS, and
o   To short the Russell 2K use RWM.
-       I suspect major volatility is heading our way, and having some exposure to it makes sense.  Look at buying some VIX and some VXX – to play increases in market volatility.  Remember there are no cash values to these indexes, but rather they are based upon the number of calls versus number of put options – and can get pretty wild at times.
-       And of course you could simply buy put options on the SPY, DIA, XLF, and IWM.

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!

Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. 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 Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower -  "taylorpamm" is the 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