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

Blog Subscription Form

  • Email Notifications
    Go

Archives

  • Roberts’ Supreme Court Overstepped Its Bounds, Again

    Last week the Supreme Court rendered two controversial landmark decisions, one on Obamacare subsidies and another on same-sex marriage. Both went in favor of the liberals on the Court, and many conservatives cried foul.

    While neither decision came as a surprise to me, Supreme Court observers on both the right and the left were surprised by the way the court went about making them. In both cases, there was a great deal of liberal “interpretation” of the law, and in the same-sex marriage case, states’ rights were trampled.

    Today, I will share a few of my thoughts on the landmark decisions last week. More importantly, I will share with you summaries of the “dissents” written by conservative Justice Antonin Scalia, one of my long-time favorites on the Court. He had some powerful thoughts on last week’s decisions that I think you will appreciate.

    There was one other troubling Supreme Court decision last week that you probably didn’t hear about, but you should have. The ruling cracks down on housing discrimination, which sounds like a good thing. Yet this decision could lead to a new housing bubble and the next financial crisis, so you need to know about it. This story appears as the first link in SPECIAL ARTICLES.

    Before we jump into the Supreme Court discussion, let’s take a look at a couple of important economic reports released over the last week.

    ...
  • The Hot Debate Over 4% Growth In The Economy

    On June 15, former Florida governor and GOP presidential hopeful Jeb Bush formally announced his campaign with a promise that, if elected president, he would return the nation to 4% economic growth and create 19 million new jobs over the next decade.

    That’s a huge promise, especially with the economy stuck at around 2% growth, and one he may regret if he indeed becomes our next president (which I doubt). In any event, Bush’s 4% promise has sparked a spirited debate on the right and the left.

    Pundits on the left almost unanimously agree that 4% growth is a pipe dream and believe we should be satisfied with 2-2½% GDP growth. Some on the right believe that 4% growth is indeed possible and some even offered specific steps to get there. Today, I will try to summarize both positions and draw some conclusions.

    ...
    Filed under: ,
  • Stock Markets Have Stalled Since March - Now What?

    The major stock indexes (Dow, S&P 500, Nasdaq) have gone virtually sideways since March. Yes, there was the brief day or two in May when all three indexes recorded new record highs, but then promptly sold off sharply. This suggests that there is a lot of overhead resistance just above current levels. As a result, the natives are getting restless! And for good reason. Today I have reprinted a very good report from a seasoned stock market analyst who points to a number of key factors that are weighing on the stock market presently, factors that most investors pay little or no attention to. His point is that it may be very difficult for the stock markets to break out of the recent trading range to the upside. For that reason, we could be headed for a serious downward correction - the likes of which we haven't seen since September/October of last year or worse. I think you'll find his analysis very interesting. Following that discussion, I will give you my latest thoughts on when the Fed will raise interest rates - what with so much attention focused on that question. And there's a possible new twist as to how the Fed may go about announcing and then actually implementing the first rate hike that you'll find interesting (or maybe too cute). Finally, the World Bank released its mid-year economic projections last week and downgraded its 2015 forecast for the US. No surprise there, at least not for me and my readers. What was most interesting was that the World Bank joined the IMF in asking the Fed not to rai

    The major stock indexes (Dow, S&P 500, Nasdaq) have gone virtually sideways since March. Yes, there was the brief day or two in May when all three indexes recorded new record highs, but then promptly sold off sharply. This suggests that there is a lot of overhead resistance just above current levels. As a result, the natives are getting restless! And for good reason.

    Today I have reprinted a very good report from a seasoned stock market analyst who points to a number of key factors that are weighing on the stock market presently, factors that most investors pay little or no attention to. His point is that it may be very difficult for the stock markets to break out of the recent trading range to the upside. For that reason, we could be headed for a serious downward correction - the likes of which we haven't seen since September/October of last year or worse. I think you'll find his analysis very interesting.

    Following that discussion, I will give you my latest thoughts on when the Fed will raise interest rates - what with so much attention focused on that question. And there's a possible new twist as to how the Fed may go about announcing and then actually implementing the first rate hike that you'll find interesting (or maybe too cute).

    Finally, the World Bank released its mid-year economic projections last week and downgraded its 2015 forecast for the US. No surprise there, at least not for me and my readers. What was most interesting was that the World Bank joined the IMF in asking the Fed not to raise interest rates until sometime next year. That raises the question: Is Janet Yellen listening?

    se interest rates until sometime next year. That raises the question: Is Janet Yellen listening?

    ...
    Filed under: , ,
  • IMF Urges Fed Not To Raise Interest Rates Until 2016

    On Thursday of last week, the International Monetary Fund downgraded its forecast for US economic growth this year from 3.1% earlier in the year to only 2.5% now. That is not surprising in light of the mainly disappointing economic reports we’ve seen recently, and other forecasters have been revising their estimates lower as well.

    Yet in addition to the downwardly revised growth forecast, the new IMF report openly called on the Federal Reserve to delay any interest rate hike until sometime next year. In all of my years of Fed-watching, I don’t remember the IMF ever trying to influence Fed monetary policy. This is an unusual development, and it will be very interesting to see how it plays out.

    The question is whether Fed Chair Janet Yellen and her fellow members of the policy setting Committee pay much, if any, attention to what the IMF has to say. We all know that the Fed really wants to raise short-term rates to give it some ammunition for the next recession.

    This apparent disagreement is between two of the most powerful women in the world – Christine Lagarde, head of the IMF, and Fed Chair Janet Yellen. This issue will be our main topic today.

    But as we often do, let’s first take a look at Friday’s stronger than expected unemployment report for May and the latest disappointing report on consumer spending.

    ...
    Filed under: ,
  • Our $1.3 Trillion Government-Assisted Student Loan Crisis

    I have been wanting to address our exploding student loan crisis for over a year now, but the topic didn’t seem to fit into the normal themes I tackle. Yet in fact, it does: It represents just one more financial/debt crisis facing our country that will surely impact the economy and the investment markets at some point.

    Student loan debt in the US topped $1 trillion in 2012 and by most estimates is over $1.3 trillion today. There are several reasons why student loan debt has skyrocketed – the disappointing economy, stagnant wages and the fact that more young adults have been staying in college longer rather than accepting low-paying or part-time jobs. Add to that the fact that college tuition has gone up significantly every year.

    What many Americans don’t know is that the federal government has largely taken over the student loan program since the current occupant of the White House has been in office. In so doing, the standards for qualifying for student loans have dropped significantly. As a result, even more people are getting student loans and becoming more dependent on the government – by design.

    But before we get into that lively discussion, let’s take a look at last Friday’s GDP report which reduced 1Q economic growth from modestly higher in the initial report at the end of April to decidedly negative (-0.7%) in the latest revision. We will also look at the latest controversy over whether the government’s estimates of 1Q GDP in recent years have been understated.

    Because the second estimate of 1Q GDP was decidedly negative, that has forecasters swiftly downgrading their estimates for 2Q GDP growth. We will round-out today’s economic discussion with a question I raised last month: Could the US economy already be moving into a new recession? While I doubt it, we should at least think about it. Let’s get started.

    ...
  • China Surpasses America As World’s Largest Economy

    For the first time in history, the People’s Republic of China’s Gross Domestic Product exceeded the GDP of America, as measured by purchasing power, in 2014. According to the International Monetary Fund, China’s purchasing power GDP hit $17.6 trillion last year versus $17.4 trillion in the US.

    This was an important milestone for both countries, and China will almost certainly expand its lead over the US in the coming years and decades. Yet that is not necessarily a bad thing for the US, as I will explain below. You probably didn’t hear about this in the media, and that’s why we will talk about it today.

    But before we get to our main topic, let’s look at a few recent economic reports of interest. The US economy has largely disappointed this year, with weaker-than-expected growth in sales, spending and production, with most of reports showing scant momentum.

    ...
    Filed under: ,
  • Why US Economic Growth May Disappoint Again In 2015

    Our main topic today is how the US economy continues to disappoint expectations, and 2015 looks to be no exception. Forecasts for GDP growth this year continue to be downgraded, and there is at least a small possibility that the US economy is slipping into recession, as I will discuss below.

    But before we get into that discussion, let’s look at a few recent economic reports that are not encouraging. Retail sales that were expected to bounce in April were flat and have been trending lower since 2012. Consumer sentiment, which had reached the highest level since 2004 by the end of last year, dropped to a seven-month low earlier this month. And factory output slipped in April, the fifth monthly decline in a row.

    We will end today with a new article on the Trans-Pacific Partnership from the Wall Street Journal, which explains why I continue to support this controversial trade agreement.

    ...
  • Problems The Media Ignored In The April Jobs Report

    Today we’ll start with a look at last Friday’s unemployment report for April. If you read the mainstream media accounts, it was fantastic – the official unemployment rate fell to 5.4%, the lowest level since 2007. But as usual, if we dig into the internals of the report, we find that the results were much less than desired.

    One of those findings was the fact that the percentage of adult women in the workforce has fallen to the lowest level in 27 years, but you had to look deep into the report to discover that data. The reasons for this phenomenon are not entirely clear, but I will offer some suggestions, in what is a rapidly growing debate.

    Following that discussion, we take a look at the exploding growth in “margin debt” on the New York Stock Exchange. In March, margin debt soared to a new record high of $476.3 billion. Some analysts believe this is a major problem for the equity markets, while others think it’s a positive development. But what we do know is that margin debt peaks at major market tops. With the major market indexes at or near their all-time highs, the next few weeks should be very interesting!

    ...
    Filed under: ,
  • Why Most Investors Consistently Underperform The Market

    Long-time clients and readers will recall that for years I have been writing about the annual Dalbar Studies which compare the actual performance of mutual funds versus what the average mutual fund investor actually earns. You may also recall that the numbers are quite ugly – the average investor makes significantly less than mutual fund performance reports would suggest in both stock and bond funds.

    The problem is not that mutual funds overstate their performance. The problem is that too many investors decide to switch into and out of mutual funds too frequently, in the hopes of boosting their returns. All too often, investors decide to sell the fund(s) they currently own, often at a low point, and switch into the latest hot performers, just before they hit a losing period. This practice too often results in selling low and buying high. I call it the “Mutual Fund Merry Go-Round.”

    If you have not seen these Dalbar statistics before, you are probably shocked. So was I when I first saw them in 1994! What is most surprising is that there has been very little improvement in the numbers over the last 20 years.

    ...
    Filed under:
  • Do More Americans Feel Confident About Retirement?

    More Americans say they are feeling more confident about their retirement. That’s according to the results of the latest “Retirement Confidence Survey” conducted each year by the non-profit Employee Benefit Research Institute (EBRI). The Washington-based EBRI is the leading source for data on savings, retirement, health and related issues.

    In their 2015 survey, some 37% of all respondents said they feel “very confident” about their retirement, and another 33% said they feel “somewhat confident.” The problem is that many Americans ‘say’ they are confident about having enough money to retire, even though they have nowhere near enough money stashed away. Many people overstate the amount of retirement savings they actually have and under-estimate how much money they will actually need in retirement.

    As we drill deeper into the latest retirement survey, we find that overall only 22% of current workers are now very confident about having enough money for a comfortable retirement. The 2015 survey also revealed that workers with a company-sponsored retirement plan are more than twice as likely as those without a retirement plan to be very confident – 28% with a plan, as compared to only 12% without a plan.

    I'll summarize the main findings in the latest EBRI retirement survey as we go along today. Following that discussion, I am compelled to criticize what I consider to be some of the worst investment advice I have seen in my 38 years in this business. The advice came in the form of a controversial video that was posted on a popular website last week.

    It was quickly criticized by a number of respected financial writers, mainly because the author, James Altucher, argued that investors and savers, especially younger ones, should avoid and/or abandon their employers’ 401(k) plans. He makes several erroneous statements about 401(k)s and their sponsors that many of us in the financial industry vehemently disagree with. So along with others who quickly discredited the video, I will criticize Mr. Altucher today. I hope no one takes his advice seriously!

    ...
    Filed under: ,
  • Has The US Dollar Topped Out, Or Headed Much Higher?

    The US dollar’s value has been on a tear since last summer, with the greenback’s value surging more than 20% against a basket of major foreign currencies. Reasons for the dollar’s sudden strong advance vary widely, but include the following among others:

    The US economy is faring better than most other developed economies, and foreign investors have to buy dollars in order to participate.
    The Fed is expected to raise short-term interest rates this year, and higher rates historically lead to a stronger currency.
    US stocks and bonds have been the leaders in market returns in recent years, and foreign investors continue to flock to them, creating more demand for dollars.
    Global tensions and concerns are rising in many parts of the world, and foreign investors are seeking a safe-haven in which to park their money.
    Basically, the US is the least worst of a bad lot when it comes to where international investors want to stash their money.
    For these reasons and others, international capital has been flowing into the US at a near-record rate since last summer. This has definitely boosted the value of the US dollar since last July and may continue to do so. But questions remain.

    The first question is whether the strong rise in the US dollar will continue? There are some compelling arguments that it will, as I will discuss below. Yet in March of this year, the US dollar turned lower. So the next question is, whether the recent downturn in the US dollar is a real change of trend? I’ll offer an opinion as we go along.

    Following that discussion, we will delve into the latest data on who pays income taxes and who doesn’t. The numbers may surprise you. Despite the fact that the top 20% of income earners pay almost 84% of all income taxes, the Democrats want to raise income taxes on high income earners and corporations. What else is new?

    ...
  • Why The US Unemployment Rate May Be Wrong

    Last Friday’s unemployment report for March was a stunner, no doubt about it. After 12 consecutive months of new job creation above 200,000 per month, the Labor Department reported that only a meager 126,000 new jobs were created in March.

    Theories abound as to the cause of the huge drop-off in new jobs last month, but the default reason cited, once again this year, is the severe winter weather. While bitter winter weather is a factor, questions arise as to whether this could be a sign of worse things to come in the US economy.

    We will focus today on the latest disappointing unemployment report and examine what the internals of the latest missive might mean for the economy, and for the Fed’s timing of its first interest rate hike.

    Following that discussion, I want to shift our sights to a new study which suggests that the government’s official unemployment rate, currently 5.5% is significantly lower than reality. This new study concludes that the real unemployment rate in America today is somewhere between 7% and 9% or even higher. I think you’ll find this discussion compelling.

    But before we get to today’s main topic on the latest unemployment report, I want to briefly share with you a new and disturbing economic forecast from none other than the Federal Reserve itself.

    At the end of March, the Federal Reserve Bank of Atlanta released a new forecast for US GDP growth of 0.0% for the 1Q. This surprising new forecast from the Fed itself has sparked a spirited new debate on the subject of where the US economy is headed this year.

    ...
  • On The Economy, The Environment & Income Tax Time

    The combination of topics for today’s E-Letter might seem unusual, and it is – the economy, the environment and income tax time. How do those fit together? They don’t really, but I think you will find today’s discussion on each to be interesting.

    The economy has been in a slow recovery for the past five-and-a- half years. It’s the weakest post-recession rebound in generations. The Commerce Department’s latest revision of 4Q GDP shows that nothing much has changed. Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker 1Q, perhaps only around 1% growth in GDP.

    Today we will look at several recent economic reports, most of which were (you guessed it, unless you didn’t read last week’s E-letter) disappointing. That includes last week’s final Gross Domestic Product report for the 4Q, Gallup’s Economic Confidence Index and February durable goods orders and housing starts.

    I also want to share with you some of the latest interesting polling results from Rasmussen Reports that I think you’ll find very interesting, especially regarding how most Americans feel about the IRS – given that income tax day is just two weeks away.

    But before we get to those topics, I want to share with you the findings of a couple of new Gallup polls which gauge Americans’ concerns about the environment and global warming. With so much alarmist rhetoric out there, you would think that the environment would be near the top of most Americans’ worry list. Let’s take a look.

    ...
    Filed under: , ,
  • US Economy Badly Disappoints Analysts’ Expectations

    Today we will talk about an economic indicator that I have not written about before, which is compiled and reported monthly by CitiGroup, the American multinational banking and financial services corporation headquartered in Manhattan.

    The report is known as the CitiGroup Economic Surprise Report. It is an interesting indicator in that it measures how actual economic reports exceed or fall short of their pre-report expectations, or “consensus” as we call it. 

    CitiGroup compiles the Surprise Report each month, not only for the US but also for other regions of the world, including the Eurozone, China, Asia and others. We will look at this particular indicator today since most US economic reports this year have come in below expectations, whereas in late 2014, most exceeded the consensus.

    What does this tell us about the future? Most analysts conclude that the recent downward trend in the Surprise Report means that the US economy is slowing down, perhaps significantly. I tend to agree. Yet some others maintain that the report tells us little, if anything, about the direction of the economy. That’s what we will talk about today.

    Following that discussion, we’ll turn our attention to the latest developments in the oil patch. Given the collapse in oil prices over the last year, the number of working oil rigs has plummeted by almost 50%. Yet very surprisingly, daily oil production and our level of above-ground crude inventory have continued to increase rapidly.

    The question is, how can the rig count drop by almost half, yet daily oil production has continued to soar? The answer may surprise you.

    ...
  • The Surging U.S. Dollar - Good For Some, Bad For Others

    The US dollar has been surging against most other currencies over the last year. The question is, is the rising US dollar good for the economy and the investment markets, or not? No doubt, the rising dollar has been buffeting the US equity and bond markets this year and is increasingly cited as the main culprit. That is what we will delve into today.

    Opinions differ whether a rising dollar is a net positive, or a net negative, for the US economy going forward. But as I will point out below, the strong US dollar is a good thing, despite what others may say. However, the main reasons why the dollar is surging may surprise you.

    The US dollar has risen about 33% from its low in April 2007. The euro is approaching a new low relative to the US dollar, reaching $1.05 last week, the lowest level since 2003. The euro could be at parity with the US dollar, or even less, very soon. But what does that mean for most Americans? We will answer that question today.

    At the end of today's letter, I will recommend that investors reduce exposure to equities or hedge long positions due to rising financial risks around the globe, which are reflected in the soaring US dollar. Be sure to read my analysis below.

    Before we get into that discussion, let’s look at some recent economic reports and data. We start with the results of the latest Wall Street Journal survey of over 60 economic forecasters. Next, we look at the wholesale price index which has now declined for the last four months. And then we look at retail sales which have declined for the last three months, well below expectations. Let’s get started.

    ...
    Filed under: ,

1 2 3 4 5 Next > ... Last »