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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  • Out of Control Federal Regulations Stifle Economy

    Today we focus on the costs to consumers of out-of-control federal regulations. While government regulations have increased for decades, the issuance of such new laws has exploded in recent years under the Obama administration. This regulatory maze is taking a serious toll on the economy, as I will discuss below.

    Most Americans are unaware that the government issued over 3,600 new regulations in fiscal year 2013 alone! Likewise, most of us have no idea that this rising regulatory burden costs the economy up to $2 trillion each year. This is regulatory overkill, and it’s no wonder then that this economic recovery is so weak. That’s our main topic today.

    The Fed Open Market Committee is meeting today and tomorrow, and the focus is on whether the Fed will hint at when it might implement the first interest rate hike in almost eight years. The latest FOMC policy statement will be released tomorrow afternoon, and I will report on it in my blog on Thursday. If you have not subscribed to my free weekly blog, go here (http://garydhalbert.com).

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  • Labor Force Participation Lowest in 36 Years - Why?

    Last Friday’s unemployment report for August was significantly weaker than expected. While the headline unemployment rate dipped back to 6.1% (same as it was for June), the number of new jobs created last month was substantially below expectations and marked the lowest number of the year.

    Until last Friday’s disappointing jobs report, most economists assumed that job growth would continue at a pace of more than 200,000 new jobs per month. But today we’ll look at five facts which suggest that such an assumption was likely misplaced.

    Our main topic today focuses on the labor force participation rate – the percentage of Americans working or looking for work – which is now at a 36-year low. People are leaving the workforce in record numbers, and it’s not all because Baby Boomers are retiring. Over half of those leaving the workforce have simply given up on finding a job.

    The question is whether this is a “cyclical” phenomenon that will improve when the economy gets stronger, or whether it’s a “structural” problem that will be with us for years. That’s what we’ll explore as we go along today.

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  • Consumer Confidence Hits a Seven-Year High… But

    Last week, the Conference Board reported that its Consumer Confidence Index rose to a near seven-year high in mid-August. It was the fourth consecutive monthly rise in the Index and handily beat the pre-report consensus.

    While I have no reason to doubt the validity of the latest Consumer Confidence Index reading, there are several other indicators which suggest that consumers are not so optimistic in reality.

    When it comes to the direction the country is headed, 66% believe we are on the “Wrong Track,” with only 26% who believe we’re headed in the “Right Direction.”

    Recent polls on the question of whether the next generation’s life will be better than our own have been decidedly pessimistic. For example, the latest NBC News/Wall Street Journal poll of adults found that only 21% believe life will be better for their kids, while a whopping 76% feel it will be worse, the highest negative reading in the poll’s history.

    I will cite other examples of statistics that challenge the latest soaring Consumer Confidence Index as we go along today. The question is: How, in the face of all these negative indicators, can consumer confidence be at a near seven-year high?

    Before we get into the discussion of the latest consumer confidence reading, let’s take a look at a few other recent economic reports.

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  • Fed’s Getting Anxious About Interest Rate "Liftoff"

    While I have been a Fed watcher for over 30 years, rarely have I seen as much media angst over the central bank’s next move as we are seeing today. We all know that the Fed is going to raise short-term interest rates at some point. We expect the Fed to “normalize” interest rates slowly in measured steps over the next few years. The main question is, when does this process begin?

    The other question is, what effect will the eventual interest rate increases have on the stock and bond markets and the economy? While the Fed has made it clear that it intends to end its “quantitative easing” (QE) policy by late October, and that it will start to raise rates sometime next year, stocks and bonds have been on an upward tear all year. Stocks are at record highs, and bond prices have risen when most forecasters expected them to go down.

    When Janet Yellen took over as Fed Chair earlier this year, she suggested that the Fed would not begin to raise short-term rates until at least six months after QE ends. Most analysts assumed that meant no interest rate hike until at least April or May of next year, or even later. However, the minutes from the July 29-30 Fed policy meeting released last week suggested that several FOMC members think a rate hike should occur sooner.

    This revelation (dare we call it that) set off quite the buzz among financial writers over the last week. The concern is that if the Fed raises interest rates too early, that could choke off the feeble economic recovery. Yet while some financial analysts sounded alarm bells over the possibility that the Fed’s interest rate hike might happen sooner than expected, the markets seemingly could care less. That’s part of what we’ll talk about today.

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  • Three Interesting Articles I Read Last Week

    I’m taking most of this week off to hang out with the kids before they head back to college this weekend. So today we’ll look at a few of the most interesting articles I’ve read over the last week. I hope you enjoy them. I have some comments of my own at the end of each article.

    We will start with an article on Saturday from Larry Kudlow, a CNBC senior contributor and host of The Larry Kudlow Show on radio. Larry is one of my favorite economic and financial writers because he knows how to cut right to the chase and pulls no punches. In the following article, Larry offers his no-nonsense plan to get the economy back on track – and I fully agree with him.

    Following that, I have a very good article on the state of the European economy, and the news is not good. Europe may be headed in the direction of Japan. Our last article focuses on President Obama’s use of Executive Orders when Congress fails to cooperate and, specifically, his latest threat to grant a path to citizenship to millions of illegal immigrants by EO.

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  • The Border Crisis: Why Is It Happening & Why Now?

    The recent surge of tens of thousands of unaccompanied children to the United States from Central America has sparked an intense and emotional debate over the crisis on the US-Mexico border. Unlike illegal immigrants from Mexico that can be deported within 48 hours, illegals from “non-contiguous” countries must be provided a deportment hearing in a court of law.

    As a result, these illegals must be detained and housed (and educated if they are minors) until they have their day in court. Our government is quietly shipping these illegal immigrants to cities across America, often with no advance notice to the local communities. Why is this happening?

    Many Republicans say that the crisis is largely due to lenient US immigration policies that have led these illegal immigrants to believe that if they can get here, they can stay here. Many Democrats believe that these people are fleeing rampant violence in their home countries and that we should help them – along with a path to citizenship.

    Yet there are many more questions than there are answers. Is our government directly responsible for this humanitarian crisis? How do these families in poverty in Central America scrape together thousands of dollars to pay the “coyotes” and send their young children into potentially grave danger? Why is this flood of immigrants and children happening now?

    Finally, could the border crisis be a prelude to a National ID Card? Maybe it’s a preposterous question, but it needs to be asked. I will ask it today and explain why we need to be aware of this possibility. This should make for an interesting letter, whether you agree or not.

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  • Consumer Confidence Hits 7-Year High - Really?

    Today we’ll look at several key economic reports over the last week or so. Most have been better than expected. The Conference Board reported that its Consumer Confidence Index surged to the highest level in seven years in July. However, a couple of other reports we’ll look at below paint a very different picture.

    The advance report on 2Q GDP came in well above pre-report estimates. Last Friday’s unemployment report for July was disappointing, but at least new jobs were over 200,000 for the sixth consecutive month. The Fed’s favorite inflation indicator (PCE) climbed to the highest level since 2011 last month. And the ISM manufacturing index surged to a three-year high in July. We’ll analyze all of these reports as we go along today.

    Finally, a recording of our latest WEBINAR with YCG Investments is now available on our website. You’ll definitely want to hear Brian Yacktman and his team discuss their very successful “value investing” strategy.

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  • Fed’s Janet Yellen To Continue Punishing Savers

    New revelations have suggested that our new Fed Chair, Janet Yellen, may be the most liberal person to ever hold the highest monetary office in the world. This news comes after a recent extended interview Ms. Yellen did with The New Yorker Magazine and her testimony before Congress earlier this month.

    Today we’ll look into these revelations about Ms. Yellen and ponder what they might mean for Fed monetary policy going forward. Chair Yellen made it clear before Congress that she is quite willing to keep the zero interest rate policy (ZIRP) in place considerably longer than most forecasters have been thinking. That will continue to punish savers and those on fixed incomes.

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  • Economic Outlook Dimming, Yet Fed Plans Rate Hikes

    The mainstream media was largely successful in convincing the public that the dreadful 1Q GDP number (-2.9%) was the result of the bitter winter in January and February. The media spin was that the economy would snap back strongly in the 2Q with growth of 4%, 5% or even 6%. While there were some encouraging economic reports in April, May and early June, the economy now appears to be losing momentum again.

    Predictions of 4-5% GDP growth in the 2Q have faded. A new Wall Street Journal poll last week found that forecasters on average expect 2Q GDP growth of only 3.1%, down from a 3.5% estimate a month ago. The same poll of 48 forecasters now expects the economy to grow by only 1.6% for all of 2014, down from 2.8% forecast earlier this year.

    Despite this dimming economic outlook, the media is now concerned that the Fed may begin raising interest rates sooner rather than later, and that the expected series of rate hikes will happen more rapidly than previously expected. But is there any real evidence that Janet Yellen and the Fed have changed their plans? I don’t think so. I’ll tell you why as we go along.

    Finally, we’ll round-out today’s discussion by looking at the latest Gallup poll that gauges what most Americans consider to be our biggest problems. For most of this year, Americans cited the economy as our biggest problem. However, in the latest poll a new concern has jumped to the top of the list and for good reason: Immigration/Illegal Aliens.

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  • U.S. Now World’s Largest Producer of Oil & Gas

    Recent reports have confirmed that the US is now the world’s largest producer of crude oil with output exceeding 11 million barrels per day in the 1Q of this year. This surpasses the daily oil production of Russia and Saudi Arabia. This is the first time in over 40 years that the US has once again become the largest producer of oil in the world – and this is despite the Obama administration’s continued ban on new drilling for oil in our coastal waterways. Oil extraction is soaring at shale formations in Texas and North Dakota as companies split rock formations believed to contain oil using high-pressure liquids, a process known as hydraulic fracturing, or “fracking.” This oil boom has dramatically lowered petroleum imports into America. The share of US fuel consumption met by imports is down from 60% in 2005 to 33% in 2013 and is expected to fall to 22% in 2015, which would be the lowest since 1970. I will discuss the latest good news in detail as we go along today.

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  • Why The Fed Needs You To Sell Your Bonds

    Today I will attempt to explain why longer-term interest rates have fallen significantly this year when almost everyone expected rates to rise. This discussion focuses on the fact that there is a shortage of Treasury securities in the marketplace today, especially in maturities of 10 years or longer. The shortage is due to a combination of factors that I will discuss below.

    The bottom line is that when Treasuries are in short supply and demand is strong as it has been this year, buyers bid up the prices of these securities. When bond prices go up, yields fall. This is why the Fed would like investors to sell their bonds to help solve the shortage.

    It is doubtful that this trend of lower interest rates will continue if the economy continues to gain momentum. This should be an interesting letter for those of you who own bonds and pay attention to interest rates.

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  • 1Q GDP Plunges Nearly 3% - What Will The Fed Do Now?

    Today we take a closer look at last week’s very ugly 1Q GDP report and see if we can discern why it was so much worse than anyone expected (hint: it was more than the severe winter weather). Fortunately, it continues to look like 2Q growth will come in at +3.0% or better. But even if GDP for the rest of the year comes in strong, the devastating 1Q will ensure yet another slow growth year.

    The stunning 1Q GDP report immediately raised the question of what the Fed will do in response. Will the Fed slow down its methodical reduction of QE bond purchases? Will it put the so-called “taper” on hold? Or will it continue to taper as planned and end the program in the fall? I’ll share my thoughts as we go along today.

    Finally, one well-known financial writer – Mark Hulbert – believes that the recent decline in corporate profits spells the beginning of the end of the bull market in stocks. I have reprinted his latest article below, and I suggest you read it and give it some serious thought.

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  • Economy: 1Q Looks Even Worse, But 2Q Looks Good

    The government’s final estimate of 1Q GDP comes out tomorrow, and it is expected to be revised from -1.0% to near -2.0%. Based on recently released data, it is clear that healthcare spending by consumers was considerably lower in the 1Q than first estimated. We’ll look at some of the reasons why.

    From there, we’ll look at some disturbing economic data which show that businesses in the US are shutting down faster than new ones are starting up. This has never happened before in America according to a new Brookings Institute study.

    Next, we’ll review some recent developments which suggest economic growth has accelerated sharply in the 2Q. Most forecasts for 2Q GDP are at 3% or better. Our first look at 2Q GDP will come in late July.

    Finally, there is news that the US Immigration and Customs Enforcement (ICE) agency knew back in January that a flood of undocumented children – specifically 65,000 – were going to pour across the Texas border this year. They requested help on a government website.  This has the potential to be really BIG!

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  • Unimaginable Human Tragedy On The Texas Border

    Thousands of illegal immigrants are flooding across the border into Texas and other border states every day, but two things distinguish this wave from earlier illegal immigration waves. First, most of these people are coming from Central America, not Mexico. And second, large numbers of these illegal migrants are unaccompanied children. US authorities estimate that between 60,000 and 80,000 children will seek safe haven in the US this year, up from about 6,000 in 2011.

    The explosive increase in the number of illegal migrants coming over the border over the past several months – especially the number of children traveling without their parents – has overwhelmed the Border Patrol’s detention centers in South Texas. During the past eight months, Customs and Border Protection has detained 47,000 unaccompanied minors, most of them in the Rio Grande Valley area of South Texas.

    The question is, how and why are these hoards of young people coming here now. The working theory is that they are fleeing violence in their home countries. That may be true in some cases, but in most instances, they are coming because they believe they will get amnesty as a result of President Obama's lax immigration policies.

    This is a truly horrific story that all Americans need to know about. Feel free to share today's E-Letter with others.

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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.

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