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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  • 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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  • Why Household Income Is Down Five Years Straight

    Between 1999 and 2012, the average US household lost over 9% in income. According to the Census Bureau, the median household income was $51,017 in 2012, compared to $55,080 at the peak in 1999. In short, most Americans are working harder but earning less. Today, we’ll look at the data and discuss why this trend continues even though the economy is in a slow recovery.

    In a similar pattern, growth in US worker productivity is also in decline. Productivity grew only 1.5% in 2012 versus 3.3% in 2010. So far this year, productivity is up only 1.9%. While that’s a modest improvement over last year, it’s still quite low. We’ll take a closer look at this problem as we go along today.

    The Bureau of Labor Statistics recently reported that there are over 27 million Americans who are “under-employed.” These Americans include those who are officially considered unemployed, plus involuntary part-time workers and “marginally-attached” workers – those who have not looked for work within the last four weeks. That is a new record high. And you’ll also be saddened to learn that almost half of college graduates work in jobs that do not require a college degree.

    But before we delve into the topics above, I want to alert you to two key economic reports that will be out this week. The second revision of 3Q GDP will be out on Thursday morning, and the November unemployment rate will be announced on Friday. I’ll tell you what to look for below.

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  • Iran Nuclear Accord: Historic Agreement Or Bad Deal?

    The United States and five other world powers announced an agreement Sunday morning that would temporarily freeze Iran’s nuclear program and supposedly lay the foundation for a more sweeping agreement later on. Not surprisingly, an intense debate followed the announcement with one side arguing it was a victory for the US and its allies, and the other claiming it was a major sell-out and a big win for Iran. So which is it?

    As you would expect, the mainstream media portrayed the agreement as a huge win for the US and its allies. Yet some in a better position to judge the deal concluded that it was a big win for Iran. We’ll hear from both sides today, and you can decide for yourself.

    As I pointed out in last week’s E-Letter, a major agreement between Iran and the P5+1 nations (US, Great Britain, France, Russia, China + Germany) to halt (or delay, as it turns out) Iran’s nuclear weapons program was very close, so it was no surprise that a deal was agreed upon in Geneva last weekend. However, the more I read the details of the agreement, the more I am disappointed in the outcome.

    It now appears that the P5+1 were more interested in a headline-making deal than they were in permanently halting Iran’s nuclear weapons program. As we’ll see below, Iran does not have to dismantle any of its 10,000+ working centrifuges, and the new agreement only slows down Iran’s ability to produce a nuclear bomb by a few months, at best.

    Iran’s new president and even the Supreme Leader hailed the agreement as a huge win for Iran. President Obama and Secretary of State John Kerry came out somewhat on the defensive, claiming that the deal was a big victory for the US and its allies. Today, we’ll look at the agreement and try to analyze the pluses and minuses for both sides.

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  • Nuclear Deal With Iran - Don’t Give Away The Store

    Obama administration representatives are quietly negotiating with Iran in an effort to stop its nuclear program. Under the proposed agreement, the US would relax or eliminate some of the tough sanctions that have crippled Iran’s economy. This is happening at the same time Congress is threatening to impose even tougher new sanctions on Iran.

    One question about this new negotiation is whether or not it’s a good deal for America and our allies in Europe. Another is, how will we be able to enforce its terms if Iran decides to cheat? And finally, why would Iran agree to halt its nuclear program at this time? The answers may surprise you. In any event, you need to know what is happening with Iran and why.

    At the end of today’s letter, there is a reminder for any of you who may not have ordered our new Handing Down Your Legacy, a free e-booklet in which to store all of your important investment/financial information in one place. Handing Down Your Legacy will help you manage your affairs now and will benefit your family too should you become temporarily or permanently disabled, as well as help them when it is time to settle your estate.

    Finally, what if there was a way to participate in the stock market’s rally without the worry of getting creamed when the Fed eventually takes its foot off of the monetary pedal? Be on the lookout tomorrow for an e-mail from me in which I will tell you about a specialized asset with the potential to do just that.

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  • Will 39% Hike in Minimum Wage Tank The Economy?

    President Obama called for a whopping 39% increase in the minimum wage from $7.25 to $10.10 per hour last Thursday. There is already a bill working its way through in the Senate to do the same thing. If this legislation passes, the minimum wage will be increased 95 cents each year for the next three years starting this year, to bring it to $10.10 by 2015.

    Many argue that this will be a huge job killer and could thrust the economy back into a recession. However, some of the critics I’ve read don’t consider that the 39% increase in the minimum wage will be phased in over three years. Supporters of the wage hike argue that the seemingly huge increase merely restores the purchasing power for the low-paid workers in America. We’ll look into both arguments today.

    Before we get to that controversial topic, let’s take a look at last Friday’s surprising unemployment report, last Thursday’s better than expected GDP report and the continued slide in consumer confidence.

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  • Thank The Fed For Big Stock Market Gains

    My guess is that just about everyone reading my E-Letters would agree that the Fed’s massive “quantitative easing”(QE) program has had a bullish effect on the stock markets over the last few years. Several new reports conclude that the Fed’s unprecedented QE bond buying program is responsible for ALL of the stock market advance since the bottom in early 2009.

    No doubt, the stock markets have shown a strong tendency to rally during weeks when the Fed is making its huge QE bond and mortgage purchases. But is this the only thing driving the stock markets to record highs? That’s what we’ll look into today.

    On a related note, Senator Rand Paul has recently threatened to block the nomination of Janet Yellen as the next Fed chairperson – unless he can get a Senate vote on his new bill to “audit” the Fed. Of course, the Fed claims that it is already audited. So what gives? This is an interesting story that we will want to follow as it plays out; I’ll break it down for you today.

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  • US Economy Mired in a Sea of Contradictions

    Consumer confidence has plunged over the last month, due in large part to the government shutdown and fear that the US might default on its debt – because of the ineptitude of our leaders in Washington. Normally, when consumer confidence plunges, we would expect a significant slowdown in consumer spending, which accounts for 70% of GDP.

    Yet according to the latest Gallup poll, consumers plan to spend even more this coming holiday season than in the past two years. This would seem to be a major contradiction. However, what this tells me that most Americans have figured out that there was never really a threat that the government would default on its debt, as I opined recently. That’s the good news.

    The bad news is that the delayed September unemployment report was yet another disappointment, even though the headline unemployment rate inched down to 7.2%. New jobs created in September were well below expectations. More importantly, the Census Bureau reported last week that there are now more Americans on welfare than those who have full-time jobs. That is very disturbing.

    Finally, I presume you noticed that our national debt skyrocketed by a record $328 billion in one day following the lifting of the debt ceiling earlier this month. The Treasury had to replenish all those “extraordinary measures” it used to fund the government  since we hit the previous debt ceiling back in May. Our national debt is on-track to nearly double under Obama.

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  • Is Your Stock Portfolio Up Over 30% This Year?

    This week’s Forecasts & Trends E-Letter beings with a simple question, but it’s one that can have a major effect on your financial well-being. Given that government intervention in the markets now seems to be built into our expectations, I’m going to recap one of our recommended money managers that has been able to navigate the QE3-induced market rally and is up over 30% year-to-date as of September 30.

    More importantly, the money manager I will talk about today - Niemann Capital Management - has significantly outperformed the S&P 500 Index since the company's inception in 1996, both on the upside and the downside.

    Yet return is only half of the equation. The other half is whether an investment strategy has the ability to manage risks by moving to cash when the market takes a downturn, which it eventually will. Niemann also covers both bases by offering a momentum-based strategy on the upside, and the ability to move to cash during downward corrections and bear markets.

    Best of all, Niemann’s not an amateur in this business.  Don Niemann and his staff have been successfully managing their Risk Managed Program for 17 years, so they’ve seen several different market cycles. I’m highlighting Niemann today because I think they are a viable alternative for investors who are in the market and getting nervous about a pullback, as well as investors on the sidelines who fear that the market may have risen too far too fast for them to participate.

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  • Consumer Confidence Plunging – Recession Ahead?

    The stalemate in Washington continues, the government remains in partial shutdown and the debt ceiling looms on Thursday. A bipartisan deal to fund the government until January 15 and raise the debt limit until early February is working its way through the Senate and could be voted on later today or tomorrow. It is unlikely that the Senate bill would pass in the House, which is reportedly working on yet another bill (see link below) that is unlikely to pass in the Senate.

    The mindless gridlock continues and the Treasury Department warns that it will run out of “extraordinary measures” by the end of this week and the statutory debt ceiling will be eclipsed on Thursday or Friday. While this will technically be a “default,” the Treasury will continue to collect enough revenue each day to pay the interest on all of our outstanding debt. Still, things are likely to get increasingly crazy in the next few days.

    As a result of all the hype and anguish over the shutdown and the debt ceiling, consumer confidence has plunged since the beginning of this month. The confidence index, as measured by Gallup, has declined by the most since September 2008 when Lehman Brothers went bankrupt at the height of the financial crisis. And it continues to fall. This raises fears that consumer spending will drop significantly and a recession could unfold just ahead.

    Following that discussion, we’ll look at some interesting facts surrounding our national debt which now stands at a mind-boggling $16.965 trillion. Since our national debt is Issue #1 on the minds of most Americans, the discussion below should be very timely.

    Finally, today’s E-Letter will print longer than usual because we have lots of charts and graphs.

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  • The U.S. Can’t Default On Its Debt… Right?

    The Treasury Secretary has warned that his agency will exhaust the “extraordinary measures” it has used to fund the government on October 17. On the Sunday talk shows, he warned of “catastrophic consequences” if Congress doesn’t raise the statutory debt ceiling by then. So, over the next nine days, you’ll be hearing ominous forecasts of what will happen if the US defaults on its nearly $17 trillion national debt, or even some of it. Sound familiar?

    Late last week, President Obama warned that he would not negotiate on the debt ceiling until Congress passes a “clean” continuing resolution to get the government funded and fully open again. Most Republicans are hanging onto their demand that the Obamacare mandate for individuals be delayed a year. If both sides hold out, increasing the debt ceiling could be tough.

    Somehow, these debt ceiling fights seem to get resolved at the very last minute, but the uncertainty can be brutal for the markets. In 2011, stocks lost around 19% of their value as this game of chicken played out. Some expect the current debt ceiling fight will be even more harrowing since Obama doesn’t have to worry about re-election.

    We’ll talk about all of this and more as we go along. Let’s begin by looking at the latest economic reports, or lack thereof, as was the case with last Friday’s unemployment report that was furloughed by the Obama administration, supposedly due to the government shutdown.

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