By R.F. Culbertson, Carnegie Mellon University
Thanksgiving – can’t we have one every month?
Steve Forbes writes me this week saying: “We still don't have any degree of certainty where the bottom of this housing market is. Why? Because the long term business model for the US still has not resolved how to put people back to work. The key is jobs. Remember, someone needs to have a job for over 2 years in order to become eligible for a FHA, Fannie or Freddy mortgage assistance. Potentially 2+ Million homes have remained outside of foreclosure specifically due to the extended unemployment benefits, which are likely to be stonewalled in Congress this term. Steve brought up some numbers: After $2.3 Trillion in stimulus for the entire 310 Million in U.S. Population à that’s $730,000 per person. Do we all feel $730,000 richer this year vs 2 years ago?
Factually:
- Sales of new single-family homes fell 8.1% in October
- Single family homes declined by 23.9% in the West, 20.4% in the Midwest and by 12.1% in the Northeast. In the South sales increased 3.1%.
- And to add insult to injury - the median price of a sold home fell a record 14%, hitting $194,900 in October, the lowest level since 2003.
- The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter.
- FYI – if you haven’t seen this video – and need a little something to get your heart started – and really angry at our government – well try this on for size: http://www.youtube.com/user/fiercefreeleancer <http://www.youtube.com/user/fiercefreeleancer>
I tend to think what really has a lot of the global market spooked is the news that Russia and China are tired of the US dollar problems, and have decided to trade between the two countries using their own currencies and NOT trading via U.S. dollars. That’s a major development – as for years we've been saying that the US dollar is doomed and will NOT be the world reserve currency going forward. Now, just because the dollar index rises – remember - with Ireland, Portugal, Spain and the rest of the great Euro experiment falling apart, the Euro will indeed fall against other currencies, including the dollar – so the dollar can "appear" strong, while at the same time losing most of it's value because everything is relative! So the race to the currency bottom has indeed begun.
As the time for New Years Resolutions looms ahead – 5 years from now:
- I do not believe the U.S. Dollar will be the global reserve.
- I do not believe the Euro will be intact.
- I do believe a new "global currency" will be floated, backed with a gold percentage.
The Market:
By socializing the private losses of banks, the nation states of Europe are all sequentially falling one after another. Ireland, Portugal and soon Spain will indeed get all manner of freebie money out of the ECB, but it is truly "Game Over". The Germans want no part of bailing out a failed Ireland, when Ireland won't even increase their corporate tax rates to just "HALF" of what Germany charges. So rightfully the Germans are saying – “we didn’t break it – and if you won't help yourself, we aren’t helping you fix it!” Stay long precious metals.
This week initial jobless claims came in at 407K, which was well below the 435K that was expected, but don't forget it is "Holiday Skewed". This week we also had “Black Friday”, and CNBC is trying to convince us that since the malls are packed, the market should rise because it shows people are willing to spend money. Frankly with the prices I saw in various stores this weekend, I think revenue will be less this year than last due to massive price cuts.
So the manufactured US stock rally has run into some big snags that even Billions of Fed money is having a problem overcoming. The Fed is desperately trying to push the market higher into Christmas so people spend money, but the global events have even this Ponzi scheme in danger. And just the other day, Bernanke came out and lowered the outlook for GDP and employment. I'm thinking we can still trade sideways and up to the Christmas season. However, it’s clear – the market wants to ‘sell off’ while Bernanke and the White House want it "up", and that’s why we fall 100 points one day, and gain back 130 the next.
In the short term I think we’re going to see some weakness, and that could snowball. If the market loses DOW 11K, we'll rocket slide down to 10,700 in very short order. If I'm right, we'll see the market come down and test the 50 day moving average again, but it should hold. Then I think the next push up will run us somewhere just shy of the 11,400 level we saw in early November. That will be our "seasonal push", and frankly, when it ends, we should seriously consider some wholesale shorts and puts. And because the Black Friday sales seemed to be "okay" they might try and hype us right out of the box on Monday, but, we need to be careful with that. The key is that 11K line. So far they've rescued that for every close – have that fail we’ll see them regroup at the 10,700 level in very short order before trying to send us higher.
I hope you enjoyed your weekend, and I always wonder why we can’t have Thanksgiving every month!
Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY (big pop this week) – DNN – and VXX
We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.
Here are some we’re watching:
I still like TJX over 46.50
PAY over 36.00
AEM over 80
ANR over 52.00
PCZ over 16.50
FFIV over 130 and again over 132.00
AMZN, which I liked the other day over 165.70, again over 170.00 too.
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.
