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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  • 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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  • 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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