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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  • 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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  • 2013 - Good Year Or Good Riddance?

    It’s New Year’s Eve, so I thought it might be interesting to look at some recent polls to get a sense of how Americans feel about how things went in 2013 and what they considered to be the most important news stories of the year.

    We’ll start with the most recent Associated Press-Times Square polls which asked a wide range of questions about Americans’ views of how 2013 turned out, and a host of other interesting questions and findings.

    We’ll also look at some polling averages from RealClearPolitics, including the “Right Track, Wrong Track” poll on the direction the country is headed. In addition, we’ll look at President Obama’s latest approval/disapproval ratings, as well as those for Congress (think ugly).

    Next, we’ll browse through a bunch of new polls from Rasmussen which cover a wide range of consumer concerns that I think you’ll find interesting.

    Finally, we’ll look at some recent polls that suggest how most Americans feel about the economy in 2014. Surprisingly, almost half of those polled think 2014 will be better than 2013. That’s easy to say when responding to a poll, but as I have discussed in recent weeks, we must see a rebound in consumer confidence if this economy is to get back on the right track.

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  • Economy Surprises On The Upside, But Is It Real?

    In today’s abbreviated holiday E-Letter, we’ll look at last Friday’s surprising report on 3Q GDP. In its third estimate of 3Q GDP, the Commerce Department reported that the economy surged by more than anyone expected. Given the surprisingly strong numbers, more than a few are questioning the report’s accuracy and wondering if it will be revised lower in January.

    One reason for all the questions revolving around Friday’s strong GDP report is the fact that consumer confidence plunged in October and November and has yet to recover. Since consumer spending accounts for 70% of GDP, the recent drop in consumer confidence has to rebound if the economy is to accelerate.

    Even if last Friday’s super-strong GDP report proves to be accurate, today’s economy certainly doesn’t feel like one that is growing at an annual rate of over 4%. While some areas of the economy are improving, only 24% of Americans believe economic conditions are getting better, while nearly 40% say the nation’s economy is actually getting worse. Today we’ll talk about why consumer confidence has tanked even as the economy is seemingly improving.

    On a different front, the Fed moved last Wednesday to reduce its $85 billion in monthly bond and mortgage purchases to $75 billion starting in January. I discussed the details of the Fed’s latest policy announcement in my blog on Thursday. The burning question now is: How quickly will the Fed phase-out its QE purchases altogether? I’ll tell you what the latest thinking is in today's holiday letter.

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  • Fed May Have An Unexpected Surprise In Mind

    My readers know that the global financial world is waiting with bated breath for tomorrow’s Fed decision on whether to start to “taper” QE purchases now or wait until next year. The Fed’s Open Market Committee (FOMC) is holding its last policy meeting of the year today and tomorrow, and Chairman Bernanke will hold a press conference afterward.

    The latest surveys indicate that most Fed watchers believe the FOMC will wait until next year to taper, but that remains to be seen. What is actually more interesting is some language that was buried in the minutes from the October 29-30 FOMC meeting. The minutes were released on November 20.

    Within those minutes, we find that the FOMC is considering lowering or removing the interest paid to commercial banks on money they choose to leave on deposit with the Fed. The minutes reveal that at the late October policy meeting, the Committee members discussed the possibility that the FOMC might reduce or eliminate the 25 basis-points of interest the Fed pays to big banks that leave excess reserve deposits at the Fed. This is potentially very big!

    Why would the Fed do this? The minutes suggest that the FOMC believes that reducing or eliminating the interest paid to commercial banks would spur those banks to draw down those deposits and use that money to make more loans, thus stimulating the economy – and pave the way for the Fed to start its QE taper. This is extremely interesting. I’ll lay it out for you today.

    But before we get into that discussion, I’d like to analyze the latest two-year federal budget that was passed by the House last week, and may pass the Senate as early as tonight. The bipartisan budget deal was hailed as a major victory by lawmakers and the White House. But as I will explain below, the latest budget deal represents a sell-out by both political parties.

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  • Fed: No More Excuses Not To Taper - Just Do It!

    We had some terrific economic news late last week. The 3Q GDP report and the November unemployment report were so strong that some are wondering if the data are credible, and are likely to be revised lower next month. The government reported that 3Q Gross Domestic Product jumped from 2.8% as reported last month to a whopping 3.6% in its second estimate last Thursday, well above the consensus estimate of 3.1%.

    Then on Friday, we got another stunner. The US unemployment rate plunged from 7.3% in October to 7.0% last month. In addition, the report cited 203,000 net new jobs created in November. Both jobs numbers were significantly better than the pre-report consensus.

    Given that these two key economic reports were so much better than expected, it’s only natural to expect that the discussion would turn to the Fed and the possible implications for “tapering” its monthly QE bond and mortgage purchases. At its October policy meeting, the Fed said it was awaiting better economic news. Well now they’ve got it!

    So, the question now is, will the Fed move to taper at its next policy meeting on December 17-18? I was never a fan of QE in the first place, so in my view there is no question that the Fed should start to taper as soon as possible. That will be the thrust of our discussion today. But let’s start with some details on the latest surprising (but questionable) economic reports.

    I’ll round-out today’s letter with an invitation to attend our next online WEBINAR with one of my favorite money managers of all-time, Wellesley Investment Advisors. This company manages over $1.5 billion in assets and invests in “convertible bonds,” which most investors know very little about – but should. The webinar will be on December 12 at 2:00 PM Eastern Time (11:00 AM Pacific).

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