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  • The US Economy – The Good, The Bad & The Ugly

    As is true more often than not, there are mixed signals in the economy. There are indeed some “green shoots” emerging that suggest the economy is finally gaining some momentum. Yet there are also continued troubling signs that, while not warning of an impending recession, suggest we could be stuck in a structural period of continued below-trend growth.

    Today, we’ll look into the latest economic indicators – good, bad and in between – and see if we can make any sense of where we are. My view is that the economy is most likely to remain in sub-par growth (i.e. – below 3%) for at least the rest of this year and maybe longer. Yet as we’ll see below, some others feel that the economy is nearing “breakout velocity.” We’ll see, but I am not so optimistic. Let’s hope I’m wrong.

    A new report finds that President Obama’s economy is the worst in over 80 years. You can read this story at the first link in SPECIAL ARTICLES below.

    Let’s start with the latest good economic news.

  • 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.

  • Inflation Jumps in August - Implications For Bonds

    Today we look at the latest economic reports and in particular, the housing market where there are some encouraging signs. Among the reports we look at today are the latest inflation figures for August, both of which surprised on the upside. Both consumer prices and wholesale prices were well above expectations last month.

    As we all know, rising inflation is bearish for most bonds, especially Treasury bonds. Interest rates on intermediate and long-term bonds have been rising since late July. While some believe this jump is only a temporary "correction," we cannot rule out the possibility this may be a new trend in interest rates. If so, that will be very bad news for millions of investors who are overloaded in bonds.

    There are some good alternatives to long-only bonds and bond mutual funds. In a new SPECIAL REPORT, I explain what some of those alternatives are and how you can get them in your portfolio before it's too late. Near the end of today's E-Letter, I give you a link to the new SPECIAL REPORT and best of all, it's free.

    But before we get to all of that, I must bring you the bad news that the United States has fallen precipitously to #18 on the "Economic Freedom of the World Report," down from #3 in 2000. You will definitely want to read this! I have summarized this alarming report for you, and we'll start today's letter with that disappointing news.

  • Subprime Mortgage Crisis #2 in the Making?

    In May 2009, President Obama created the “Financial Crisis Inquiry Commission” (FCIC) to investigate the causes of the financial crisis of 2007-2009. Basically, the FCIC put the blame for the financial crisis on lax regulation, greed on Wall Street, faulty risk management at banks and other financial firms and on households for taking on too much debt.

    The FCIC’s Democratic majority placed the blame for the financial crisis on the private sector and dismissed the idea that government housing policy could have been responsible. The report went so far as to suggest that Fannie Mae and Freddie Mac, and the politicians that oversaw them, were not the cause of the financial crisis.

    I strongly disagreed in my May 18, 2010 E-Letter and now a new book on the subject comes to the same conclusions that I did. Now Fannie and Freddie and the politicians responsible are back in the news again.That’s good!

    What is not good is the recently reported fact that the government is once again pressuring regional and community banks to make mortgage loans to low income families that can’t afford them. This could be the making of subprime loan crisis #2. You need to know about this, and I will give you the details as we go along.

    To round-out today’s letter, I will show how the so-called government “Agency Debt” – that which is supposedly not backed by the full faith and credit of the government – really is guaranteed by the government. Agency Debt has exploded over the last 25-30 years, yet it is not included in our official national debt. You need to know about this as well.

  • Fannie & Freddie - The Unnecessary Disaster

    Earlier this month, mortgage giants Fannie Mae and Freddie Mac requested an additional $19 billion in government bailout money just to stay afloat. Since Fannie and Freddie were taken over by the government in September 2008, the government has poured $145 billion in taxpayer money into these mortgage agencies. These quasi-government agencies have been out of control for decades, and I will argue that they were largely responsible for the housing bubble, the financial crisis that followed, and the Great Recession. The Bush administration tried to reform these agencies for years, but the Democrats blocked all such efforts. Why? Because Fannie and Freddie were huge political contributors. You will definitely want to read this week's E-Letter, and you will probably want to share it with others. Feel free.

  • The Economy & This Rocky Recovery

    For the most part, the economic reports over the last month or so have been positive, including last Friday's 1Q GDP increase of 3.2% (annual rate). Most economists agree that the recession hit bottom in the middle of last year, and we have now seen three consecutive quarters of positive GDP growth. Yet while it would seem safe to conclude that the Great Recession is over (for now), economic growth will be handicapped all year by the continued housing crisis. Home foreclosures continue to increase at a record pace, including an unprecedented 367,056 properties in March alone. Thus, it is quite possible that the 3.2% growth rate in the 1Q will be the best we see all year. We will take a look at most of the latest economic reports in this issue, as well as the rapidly growing problem in home foreclosures.

  • Consumer Confidence & Bank Lending Plunge

    Two economic/financial reports last week were shockers and support my view that we may be facing a double-dip recession. First, consumer confidence unexpectedly plunged in January - no analysts that I read saw this large a drop coming. Second, the Federal Deposit Insurance Corporation (FDIC) released its quarterly report which showed that lending by US banks plunged last year in the sharpest decline since 1942. We also saw new unemployment claims spike higher for the week ending February 20.

    What does this all mean? For one, the economy is not improving and more and more Americans are coming to know this. And banks are still not lending - what else is new? Are we indeed headed for a double-dip recession? Maybe, maybe not, but the odds are increasing. This week, we go over the latest reports, and try to come to some conclusions. And we end on a personal note from me. Let's get started.

  • The "Catch 22" Housing Slump Is Not Over

    We begin this week by looking at the latest report on the economy. GDP rose a bit more than expected in the 4Q, up 5.7% (annual rate). Despite that, many economists are downgrading their forecasts for growth in 2010. Following that, we will take a close look at the latest reports on the housing market. Despite the improvement in the economy, home prices continue to fall in most areas of the country. The housing slump is still not over, and this is a big reason why consumer spending is not likely to recover to pre-recession levels anytime soon. If you are concerned about the housing market, you will definitely want to read this week's E-Letter.

  • The Economy & What To Expect In 2010

    This week, we start by looking at the latest economic data, and how hard it is to get a new job if you become unemployed. We also examine President Obama's new 'jobs program' that would spend what's left of last year's TARP money that was supposed to be repaid to taxpayers. Next, we look at the Democrats' move to raise the national debt ceiling, and what they really have in mind for the debt limit in January.

    Following that, we will look at the disappointing holiday spending levels - as if anyone is surprised. On the plus side, there was at least a little encouraging news on the housing front over the last couple of weeks. Finally, we take a look at some of the forecasts for 2010 - hint, they are all over the board.

    As always, thank you for taking the time to read this weekly E-Letter, and I especially appreciate your comments and suggestions. Happy New Year everyone!!

  • Why This Recession Could Last Another Year

    While we have seen some encouraging economic data over the last month or so, the vast majority of reports remain negative. The housing slump is getting worse, not better, with home prices plunging a record 19% in the 1Q. The home foreclosure rate skyrocketed 46% over year-ago levels in March. Meanwhile, millions of adjustable rate mortgages (ARMs) are going to "reset" to higher monthly payments over the next couple of years. And finally, the default rate on commercial real estate loans and mortgages is rising rapidly. All of this reinforces my view that this recession will last all year or longer, and this is bad news for the credit markets and the stock markets. Don't be fooled by all the talk of "green shoots" in the economy. We are not out of the woods yet....
  • Signs of the End of the Recession - Maybe

    While most of the latest economic reports remain quite bleak, we have seen a few modestly positive indicators over the last few weeks. In addition, the latest Wall Street Journal survey of 53 economists concludes - on average - that the recession will end by the 3Q of this year. If correct, that would be very good news. Yet the leading economic indicators (LEI) and the unemployment rate continue to worsen month after month. Thus, I continue to believe that we will be in this recession for the rest of this year. The Federal Reserve's latest Beige Book assessment agrees, unfortunately. This week, we will take an in-depth look at the latest on the economy, the credit crisis and when we might see an end to this recession. Finally, I will discuss the recent rally in the stock markets, and whether this is a new trend or simply a bear market rally. Let's jump in....
  • Market Mayhem & Credit Fears - What's Next?

    Market Mayhem & Credit Fears - What's Next? IN THIS ISSUE: 1. The Economy - The News Is Not All Bad 2. Consumer Spending Remains Firm For Now 3. Housing & Subprime - More Bad News 4. Should The Government Come To The Rescue? 5. The Fed Needs...
  • Stock Prices Plunge In The Perfect Storm

    Stock Prices Plunge In The Perfect Storm IN THIS ISSUE: 1. Stocks Make New Record Highs, Then Plummet 2. Forget The Cheese, Just Let Me Out Of The Trap! 3. Unwinding The "Yen Carry Trade" 4. Fed & Central Banks To The Rescue 5. So What Next...
  • On The Economy, Stocks & Protectionism

    On The Economy, Stocks & Protectionism IN THIS ISSUE: 1. US Economy Improved In The 2Q 2. BCA's Latest Thinking On The Economy 3. The Bull Market In Stocks Continues, Sort Of 4. Angelina Jolie Stock Index - What's Next? 5. Fed Holds Steady...
  • More Fundamentals Of Financial Planning part2?

    Introduction In my November 23, 2004 E-Letter , I discussed some of the very basics of sound financial planning. I had a number of readers respond to that article thanking me for the advice, and many said they were going to send it on to friends and family...