Forecasts & Trends

Forecasts & Trends is much more than just investment blog posts. You need to know the "big picture;" you need to have a "world view," especially in the post-911 world; and you need more information than ever before to be successful in meeting your financial goals. Gary intends to help you do just that.

Forecasts & Trends

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  • Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts

    Today, millions of Americans will file their 2013 income tax returns, and many are expecting to receive a tax refund from the IRS in a few weeks. Many income tax filers expecting a refund already have plans for how that refund check will be spent. But what you may not know is that the government can and does seize tax refunds from the children of parents who are deemed to owe the government money.

    The government is now going through old records to see if it overpaid Social Security benefits to people in the past. If it thinks it did, it can now seize the IRS tax refund checks of the children of those people it thinks it overpaid. Uncle Sam can seize your refund without your knowledge or consent, even without proof or exact details. It has been doing this for the last three years, confiscating hundreds of thousands of Americans’ tax refunds. It has already confiscated $1.9 billion in tax refunds this year alone.

    Worst of all, much of this supposed debt is over 10 years old. The Social Security Administration says it has identified over 400,000 children of deceased parents in an effort to collect billions in overpayments of benefits in years past, including $714 million that is over 10 years old. The SSA says it will start proceedings against all of those people by this summer.

    This is critical information that all Americans should know! Feel free to forward today’s E-Letter to anyone who can benefit from this knowledge.

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  • How High-Frequency Trading Benefits Most Investors

    A controversial new book came out in late March that lambastes so-called “high-frequency trading” on the major stock exchanges and claims that such computerized trading robs retail investors of good executions and profits on their stock orders. The book, “Flash Boys: A Wall Street Revolt,” was written by former bond salesman turned author, Michael Lewis, who appeared on CBS’ 60 Minutes on March 30. Since then, his book has stirred up quite the controversy among stock market investors.

    Mr. Lewis has joined other critics who say that the booming high-frequency trading field, in which computers buy and sell stocks at lightning speed to take advantage of minute changes in prices, has essentially rigged the market against small investors. Lewis and other critics charge that high-frequency traders are essentially “front-running” investors’ orders – a practice that is otherwise illegal.

    Today, I will make the counter-argument that high-frequency trading is actually good for retail investors in that it greatly increases trading volume, narrows “bid-ask” spreads and enhances trade execution for most of us. I’ll cite a recent example wherein the Toronto Stock Exchange restricted high-frequency trading and overall market volume plunged by 30%, thus resulting in worse trade executions for most individual investors.

    As a result of the latest high-frequency trading controversy, these groups are being investigated by the FBI, the SEC, the New York Attorney General and of late, the Justice Department, and I’m all for that. There probably are some abuses that need to be eliminated. Yet I hope the regulators will not make the assumption that all high-frequency trading is bad for retail investors, as Mr. Lewis concludes.

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  • Consumer Confidence Up, But Concerns Remain

    The Conference Board reported last week that its Consumer Confidence Index jumped to 82.3 in March (up from 78.3), the highest reading since January 2008. But the two underlying components of the Index provided two different perspectives, as we will discuss today.

    Basically, consumers as a group are feeling better and more confident about the economy and their present situation.  However, when asked how they feel about their financial situation six months from now, most consumers are much less confident. About as many expect their situation to get worse as those who expect it to get better. That’s not good.

    But before we get to that topic, let’s take a look at last week’s third and final estimate of 4Q GDP which showed a modest increase (2.6%) over the second estimate in February. We now know that the economy stalled a bit in the 4Q of last year, following growth of 4.1% in the 3Q. And it likely slowed even more in the 1Q of this year due to bad weather.

    Following that discussion, I want to introduce you to a new breakthrough economic statistic that we’ll be hearing about for the first time later this month.  It’s called “Gross Output” (GO) and is a measure of total sales volume at all stages of production. GO is much larger than GDP, the standard yardstick for measuring final goods and services produced in the economy. I’ll explain why GO is being introduced and why we investors need to pay attention to it.

    Finally, President Obama’s disapproval rating has soared to a new all-time high, and his approval rating is falling once again. Americans continue to blame him for Obamacare, and 57% dislike his handling of the Ukraine situation.

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  • Looming Retirement Crisis – Boomers In Big Trouble!

    Let’s face it, we all know this country is facing a retirement crisis. The first of the Baby Boomers turned 65 and started retiring in 2011. The number of Boomers retiring each year will rise rapidly over the next decade or more. Before the end of this decade, Boomers will be turning age 65 at the rate of 8,000 per day.

    This massive retirement of Baby Boomers will stretch our health care and health delivery systems to the max and beyond. Our public safety net – entitlements – has long been poorly managed, ill-thought-out and threadbare. Imagine what will happen as tens of millions of Boomers retire.

    Yet the worst part of all is that so few people or families have saved anywhere near enough for retirement. According to a survey conducted earlier this year, 60% of workers have saved less than $25,000 for their retirement. And 36% have saved less than $1,000. This is appalling!

    Another new study found that 43% of Baby Boomers are at risk of running out of money in retirement. And this number is almost certainly understated because, as I will discuss below, many Boomers are untruthful about their assets when responding to retirement surveys. The point is, most Boomers are far, far behind in saving for their retirement.

    Given the magnitude of the coming retirement crisis, it will be a continuing theme I will be writing about periodically in the months and years ahead. I hope to present you with some ideas for saving more for retirement and, of course, making more on your investments.

    In that regard, I will be unveiling a new investment strategy that has me more excited than I’ve been in years! The risk/reward profile of this strategy is very impressive. We call it “ALPHA ADVANTAGE.” Trust me, you’re going to like what you see. I’ll talk a little more about it at the end of today’s E-Letter, but the details, including the performance, etc., will be unveiled in a special E-Mail to all clients and readers tomorrow. You don’t want to miss it!

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  • Understanding The "Millennial Generation"

    As the father of two adult children who were born in the early 1990s, I have a particularly keen interest in the “Millennial Generation” – those 80 million or so people born in the US between 1980 and 2002, the largest generation ever – and who will be running the country before too long.

    America is in the throes of a huge demographic shift, and a major factor in this sea-change is the Millennial Generation, which is forging its own distinct path toward the future and will precipitate many social changes in the years to come. As a result, we all need to understand them better.

    Since most of my clients and readers are Baby Boomers, many of you also have adult children who are Millennials, and I thought it might be insightful to take a closer look at this unique generation that is actually larger than the Boomer generation.

    I've gathered a lot of really interesting info and stats on Millennials, including the findings from a new Pew Research Center survey of this under-34 generation.

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  • U.S. Household Net Worth Hits New Record High

    The Federal Reserve announced last Thursday that US household net worth reached a new record high by the end of last year – at $80.7 trillion. The Fed said the new record was made possible largely due to vaulting stock prices, increased home values and Americans paying off more of their debts.

    Much of the surge in net worth went to affluent families and older Americans. Both groups are less likely to spend their gains and more likely to save and build more net worth – which is not particularly good for the economy unless it translates into new jobs.

    Meanwhile, many Americans continue to pay down their debts, a trend referred to as “deleveraging.”  Total household debt fell from near $13 trillion in 2008 to just under $11 trillion in 2012. For better or worse, that trend seems to have reversed in 2013 as more Americans started to take on debt again. We’ll discuss the details as we go along today.

    We also take a look at why the economic recovery is still sluggish, some four years after it officially began. Specifically, we’ll compare the current recovery with the average of the last 10 economic recoveries to determine the size of our so-called “growth deficit.”

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  • The US Economy - Back To The Slow Lane Again

    Late last year, President Obama predicted that 2014 would see“breakout growth” in the US economy. His optimism was not completely unwarranted since the economy grew by a healthy 4.1% (annual rate) in the 3Q of last year, driven largely by an unexpected surge in inventory rebuilding. Then in late January, the Commerce Department reported that the economy grew by a better than expected 3.2% in the 4Q.

    A 4.1% jump in GDP in the 3Q followed by an above-trend 3.2% in the 4Q gave some forecasters, including President Obama, reason to predict that our anemic economy might finally be out of the doldrums. That was until last Friday’s second estimate of 4Q GDP, which was revised significantly lower to only 2.4%. That’s our lead topic for today, along with a look at some other recent economic reports that raise cause for concern.

    Finally, we will look at some professional analysis of President Obama’s plans to significantly downsize our military in the next few years. If Obama and defense secretary Chuck Hagel get their way, the Army will be reduced to its lowest level in 75 years. Hopefully, Congress will stand up for our military, but in any event, you need to know what this president wants to do. Be sure to read the latest military intelligence analysis from LIGNET which appears later on.

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  • The Most Interesting Articles I Read Last Week

    I have been quite distracted over this past week as my 95 year-old Mother-In-Law was admitted to the hospital due to severe bronchitis. Debi and I have shared time being at her side since then. Fortunately, she was discharged from the hospital yesterday, and we have moved her to a skilled nursing facility where she will hopefully regain her strength and get to go back home before long.

    Given the demands of the last week, I had little time to work on today’s E-Letter, so I have chosen to reprint the two most interesting articles I have read over the last week. Both are very insightful and answer some critical questions that the media is ignoring. Regardless of your political leanings, this is information that all Americans ought to know.

    I will offer some brief commentary prior to each of the articles. Let’s get started.

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  • US Savings Rate Falling Again – Here Comes "MyRA"

    Today we weave together several different topics that are all connected in one way or another. We begin with the US savings rate which is trending lower once again. From 1975 to 2007, the savings rate fell to an all-time low of 2.4%. While it jumped up briefly after the 2008 financial crisis, it is now moving lower yet again.

    In an effort to boost the US savings rate, especially for lower income groups, President Obama introduced a new type of starter retirement account for Americans of modest means that he called the MyRA, which stands for “My Retirement Account” and rhymes with IRA.

    While the new MyRA may be well intentioned, it is fraught with problems – most notably that it can only be invested in government securities that have yielded paltry returns over the last decade or longer. And when inflation rises, MyRAs are sure to be a big disappointment. I’ll tell you why as we go along today.

    Next, the recent Congressional Budget Office report, with its economic projections over the next 10 years, contained several troubling findings that the mainstream media and politicians in Washington deliberately didn’t tell you about. I’ll tell you why below.

    Finally, the president recently told a series of whoppers following the CBO’s latest report that claims Obamacare will cost 2.5 million jobs over the next decade. He lied, misrepresented and completely contradicted several key statements he has made in the past. Obama easily hit a new high in his presidency for deception.  You really need to read this!

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  • Why Quantitative Easing Didn’t Work

    While equity investors yearn for the Fed’s QE policy to continue, it’s actually a good thing that this unprecedented stimulus looks to be coming to a halt by the end of this year or early next year. Why is that a good thing? Because QE hasn’t worked, certainly not as intended.

    One of the most frequent questions I get from clients, business associates and even friends is: “Why didn’t quantitative easing work to stimulate the economy and create jobs?” It’s a complicated answer, but today I will do my best to explain why.

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  • Emerging Market Woes + Fed Tapering = Stocks Plunge

    January saw US stocks record their first losing month since last August. After reaching new record highs at the end of December, the Dow Jones shed almost 1,000 points in the last half of the month and the decline continues. Analysts attributed the sell-off in large part due to troubling news from several emerging nations, in particular to the so-called “Fragile Five”– Turkey, India, Brazil, Indonesia and South Africa.

    These countries and others –including Argentina, Ukraine, Thailand and even China–have seen their currencies come under pressure due to capital flight, and most have had to raise interest rates significantly and drain reserves to support their monetary systems.

    No doubt, this mini-storm is partly a reaction to the Fed’s decision to begin “tapering” its monthly purchases of Treasury bonds and mortgage-backed securities starting in January. At its latest policy meeting last week, the Fed moved to reduce its QE purchases by another $10 billion in February. Obviously, the Fed is serious about ending QE and this, too, weighed heavily on stocks last month and again yesterday. Is this the much-awaited “correction” or something worse?

    Next, we take a look at some of the latest economic reports. We got our first look at 4Q GDP last Thursday, with an advance estimate of +3.2%, about as expected. What was not expected was a huge drop in the manufacturing sector in January based on yesterday’s weak ISM Index report.

    Finally, if you watched the 2012 film documentary “2016: Obama’s America,” you may be interested to know that Obama’s Justice Department recently indicted the film’s producer, Dinesh D’Souza, on two alleged felony charges related to campaign-finance irregularities. Such violations, if true, are rarely prosecuted, but in this case, they want to ruin his life. You can read the story at the end of today’s letter.

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  • Obama: NSA Spying To Continue, Even If Illegal

    On Friday, January 17 President Obama delivered a speech which was heralded in advance as a sweeping change for the nation’s spy agency, the National Security Agency, which has been collecting enormous amounts of phone and other data on the general public for the last several years. The changes Mr. Obama announced in his speech were anything but sweeping. The NSA will continue its massive phone data collection operation, largely unabated.

    Prior to the president’s Jan. 17 speech, he met with a special review panel that he appointed last year to investigate the NSA’s phone data operations. The special review panel recommended 46 actions to limit the NSA’s power to collect phone data, and that any action to gather public data must be approved by a court on a case-by-case basis in advance.

    The president also met prior to his speech with an independent federal privacy watchdog agency – the Privacy and Civil Liberties Oversight Board – which has recently concluded that the National Security Agency’s program to collect bulk phone call records has provided only “minimal” benefits in counterterrorism efforts, that it is illegal and should be shut down.

    Obviously, President Obama did not agree. In his speech he made it clear that the NSA will continue to collect phone data on virtually all Americans, albeit with additional oversight from the courts. Likewise, Mr. Obama took only a few of the 46 recommendations from his review panel. So the spying on all Americans’ phone and other records will continue.

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  • Why Male Workers Are Disappearing in America

    Last month’s unemployment rate plunged from 7% in November all the way to 6.7% in December, which was lower than any of the pre-report estimates. That should be a great thing, right? Wrong! The unemployment rate fell because more Americans gave up looking for work and dropped out of the labor force entirely.

    Even worse, new jobs created in December were a fraction of what they were in recent months at only 74,000 versus over 200,000+ in the last several months. Even the Obama administration could not avoid admitting that the latest unemployment report was grim when you look into the internals. That’s pretty bad!

    The plunge in new jobs to only 74,000 in December is worrisome enough, but if you dig deeper into the data, you find something even more disturbing. Only 71.8% of working-age men have a job or are looking for work. That’s a huge decline from 80% in 1970! The question is, why are so many men disappearing from the workforce? That’s what we’ll talk about today.

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  • Was Your Stock Portfolio Up Over 40% in 2013?

    Editor's Note:  There is no need to read today’s E-Letter unless you are interested in an investment opportunity that delivered the following:

    A 2013 calendar-year gain of over 43%, net of all fees and expenses;
    An annualized return since inception that beat most equity benchmarks;
    Would have turned a $100,000 investment at its inception in September 1996
    into a nest egg of over $577,000 by the end of 2013;
    The flexibility to move to cash should we encounter a bear market or major downward correction; and
    The minimum investment is only $50,000.
    If you can say all of that about your portfolio, then you probably don’t need the opportunity I’ll be discussing today. Otherwise, please read on. As always, past performance is not necessarily indicative of future results.

    Last October, I wrote about how  Niemann Capital Management’s “Risk Managed Program” was outperforming the S&P 500 Index by a significant margin. This was no small feat, since the S&P had a year-to-date gain of almost 20% as of the end of September.

    Now fast forward to the end of 2013 when Risk Managed finished the year with a whopping 43.79% gain, net of fees – more than 11 percentage points higher than the S&P 500’s excellent gain of 32.39% (including dividends). This difference in performance is known as “alpha,” which is often defined as the added value that a portfolio manager brings over and above a given benchmark, in this case the S&P 500 Index.

    Today I want to revisit Niemann's Risk Managed Program and discuss how it managed to significantly outperform the S&P 500 in 2013 and for the last 17 years on an annualized basis. You don't find many professional money managers who can say that!
    If you have not looked at Niemann, I highly encourage you to consider their Risk Managed Program for part of your portfolio. If you read today's E-Letter, you'll understand why.

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  • Consumer Confidence Jumped in December, But Why?

    Today we’ll look at several economic reports, including a big jump in consumer confidence last month. That seems a little odd given that over 63% of Americans still believe the country is headed in the wrong direction as I reported last week.

    From there, we will consider some economic and market predictions for the New Year. Many forecasters believe the stock market will experience a downward correction sometime this year, which happens often in mid-term election years. We’ll look at a chart showing all of the mid-term year corrections going back to 1930. You may be surprised.

    Finally, despite President Obama’s plunging approval ratings, he still plans to proceed with an aggressive liberal agenda in 2014. Bill Clinton wisely moved to the center when his liberal agenda became unpopular. Not this president!

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