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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  • The Fed’s Dirty Little Secret: QE Does Not Work

    Bernanke speaks and the markets move, but probably not in the direction he expected. It appears that the stock and bond markets are addicted to QE and will crater anytime Big Ben even hints at taking his foot off of the gas.

    However, in this week's e-letter, I'm going to dig deeper into the Fed's activity over the past few years to dispel the myth that the Bernanke's unprecedented quantitative easing has lowered long-term interest rates.  In fact, I'll show how rates have actually risen during all three QE cycles.  You don't want to miss this.

    So how do you invest in this crazy market?  I have two words for you - "absolute returns."  I'll discuss how you need to take your eyes off of the short-term disruptions in the market and instead focus on the long term trends which, by the way, is where bulk of your investment goals likely reside. Plus, I'll show you how to get your FREE copy of my Absolute Return Special Report.

  • Will The Fed Tank The Markets Tomorrow?

    The Fed Open Market Committee is meeting today and tomorrow to set monetary policy going forward. The big question is whether or not the Fed will decide to “taper” its monthly purchases of $85 billion in Treasury bonds and mortgage securities, which have driven stocks and bonds higher over the last few years. The decision depends largely on the Fed’s view of the economy, so they tell us.

    No one knows for sure which way the Fed will go, but either way it will have a big impact on the markets. Both stocks and bonds have moved lower ahead of the meeting, and I expect a big move one way or the other depending on tomorrow’s announcement of the Fed’s decision on quantitative easing (“QE”).

    Following that discussion, we’ll look at the annual report from the Social Security Trustees. As usual, the Trustees warn that Social Security is going broke – what else is new? But there is a growing movement to raise the early retirement age from 62 to 64. Will it happen? I doubt it.

    Finally, I will update you on the growing list of Obama scandals and how the buck never seems to stop with the president. The result is that fewer and fewer Americans trust our government.

  • Economy Rolling Over, Obama Scandals Multiply

    There’s a lot to cover today, starting with last Friday’s unemployment report that was hailed by the media and the stock markets. But after looking into the data, I will argue that the report was lackluster at best. From there we’ll look at why the big picture economic outlook is becoming worrisome. We’ll drill down into the data only to conclude that the economy may be rolling over to the downside.

    And we’ll end with some thoughts on the Obama administration’s defense of the growing scandals. The Obama defense, as usual, is that this is nothing different from what George W. Bush did when he was in office. That story is wearing very thin, especially now that we’re five years into Obama’s presidency. The truth is, this is much worse! Plus, we’ll look at some new revelations that further suggest it was President Obama himself who caused the IRS to target conservative groups.

  • Fed Advisory Council Drops A Bombshell

    Last Friday afternoon, the Fed released the minutes from a May 17 meeting of the Federal Advisory Council (FAC) – that you probably never heard of before today. The Council is a group of 12 influential bankers from across the country who meet periodically and give the Fed Board of Governors input regarding the economy, monetary policy, etc. To my knowledge, no one in the mainstream media has reported on what you will read here today.

    Following that discussion, I will review the latest economic reports over the last couple of weeks and let you know what we’re looking for in reports during the balance of this week.

    Finally, I’ll give you my take on the escalating IRS scandal that is now being investigated in Congress. I will suggest to you that the roots of this scandal go all the way back to the landmark Citizens United vs Federal Election Commission decision made by the Supreme Court in January 2010. For whatever reasons, the media hasn’t seemed to make that connection.

  • Investors Shun Stocks But Cling To Bonds - Why?

    This week, the Halbert family is taking it easy in sunny Florida, celebrating our son's graduation from college. Instead of my usual writing, I'm going to reprint an excellent article on investor behavior penned by the Wall Street Journal's Jason Zweig.

    As anyone reading my E-Letter knows, I have been concerned for some time about the effect of rising interest rates on bond prices, yet investors continue to pile money into these investments. Even in the face of a powerful bull market in stocks, investors are ignoring equities and clinging to bonds. It just doesn't make sense - at least not until you read the article below.

    Zweig seeks to answer the question of why investors continue to pile into bonds by examining the field of investor behavior. I think you will find his article to be interesting and perhaps a bit revealing. I have also added a few comments of my own throughout the article. Enjoy!

  • 2013 Federal Budget Deficit Plunges – How, Why?

    It was so tempting to devote today’s E-Letter to a discussion about all of the scandals plaguing the Obama adminstration in recent weeks. In fact, some of my staff were very disappointed that I chose not to go there. My feeling was that the airwaves are so saturated with coverage of the Obama scandals, you might not want to see even more piling on from me, as much as I would like to. (There are some very good stories on the latest scandals in SPECIAL ARTICLES below.)

    Today, we’ll focus on the latest news that this year’s federal budget deficit will likely be significantly lower than previously estimated by the Congressional Budget Office, and the reasons why that is. But let us not be fooled into thinking that falling deficits are a permanent thing. No, in fact, the deficits and the national debt will continue a troubling increase over the next decade and even longer.

    We’ll also discuss the subject of our nation’s “unfunded liabilities” which now stand at a staggering $123 trillion, which is rarely ever mentioned by the media. And there are several other interesting points I will touch on today, but I don’t want to give everything away in this introduction. So please read on.

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  • Why Investors Are Still Their Own Worst Enemies

    Dalbar, Inc., a leading market research firm, studies investor behavior each year and calculates the performance of average stock and bond investors versus the returns of the major market indexes. Over the 20 years ended 2012, the S&P 500 Index delivered an annualized return of 8.21%, whereas the average investor in stock mutual funds earned only 4.25% annualized over the same period.

    You read that right. Due largely to jumping in and out of the market at bad times, and chasing the latest "hot" funds, the average stock mutual fund investor made only about half of what the market delivered. For bond mutual fund investors, the results are even worse over the last 20 years.

    Today we’ll look at the latest Dalbar studies which were released in April and show us – once again – that most investors are still their own worst enemy. Dalbar argues that stock and bond investors should stick to a strict “buy-and-hold” strategy and should never get out. We, on the other hand, have long argued that most investors don’t have the temperament to hang on during bear markets and are very likely to bail out at the worst times.

    I write about the Dalbar studies every couple of years, and the results are always the same. Average investors in mutual funds significantly under-perform the major market indexes. As we go along today, you’ll see the reasons why the study’s results are so consistent and why Dalbar’s recommended solution hasn’t changed investor behavior in over 20 years. Let’s get started.

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  • 6.7 Million “Missing Workers” – Where Did They Go?

    Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.

    Next we look at the latest Gallup poll showing how many Americans rate the economy as excellent, good, only fair or poor. You may be surprised at the results, which aren’t immediately clear in the chart. Following that, we look at some interesting data on mutual fund money flows which show that the love affair with bonds continues, and investor demand for stocks is waning.

    Finally, the International Monetary Fund downgraded its global economic forecast recently, including its forecast for the US and most of Europe. I have included the IMF’s graphic that lets you look at each country’s forecast for 2013 and 2014.

    By the way, we have a lot of charts and graphs today, so the letter will print longer than usual.

  • US Economy to Get a Hollywood Makeover

    You may have heard that the government is going to make some major changes in how our Gross Domestic Product is calculated later this year. Your first thought might be that this is no big deal. However, I will argue today that it is a very big deal, the biggest in a decade, and you need to know why. So I hope you read what follows with more than a passing interest.

    Last week, the Commerce Department’s Bureau of Economic Analysis (BEA) announced it will be making some significant revisions to the way it calculates Gross Domestic Product in late July. This change is somewhat controversial in that it is expected to add a whopping 3% to GDP in one fell swoop in the last week of July. That’s about $1,500 worth of extra goods and services for every person in the US!

    The reason for the changes is the fact that our economy increasingly depends on the production of intangible goods, and we need to recognize that the production of ideas is an important form of investment. So in the future, the BEA is going to count a company’s research and development as a form ofinvestment just like the purchase of a new office building. And the creation of a lasting work of art – a painting, a movie, a television series, etc. – that can be sold year after year will, likewise, be treated as a capital investment.

    Today, I will talk about these sweeping changes and what they will mean for all of us.

  • An Awesome Gift For Your Kids, Grandkids, or You

    This week, I veer from our usual economic and investment themes to tell you about what I believe is one of the greatest gifts you can ever give your children, grandchildren or others who are dear to you (or maybe even yourself). What I am about to describe is something that has literally changed the lives of dozens of my friends and relatives over the last 30+ years.

    Today we’re going to revisit the Johnson O’Connor Research Foundation and how it can have a huge impact on the future of any young or middle-aged person who goes there for aptitude testing and career counseling. Johnson O’Connor helps people decide which career fields they are most naturally suited for based upon scientific testing of their unique set of individual aptitudes.

    I have published similar articles on Johnson O’Connor (J-O) in the past because it has been such a godsend to everyone in my immediate family, many relatives and dozens of friends and business associates over the years. So, I urge you to read the following, especially if you have any loved ones who are struggling to find a career path.

  • Fed to End QE, Obama’s Tax & Spend Budget

    Today I tackle several topics, each of which could take up an entire E-Letter. But these topics are very important, and I want to address them today. The first is the minutes from the March 19-20 Fed Open Market Committee meeting that were released last Wednesday. Those minutes definitively confirm that the Fed is ready to chart an end to quantitative easing.

    The second topic is President Obama’s proposed federal budget for fiscal 2014 that was also released last Wednesday. The Obama administration claims that the latest budget proposal will cut the federal deficit by almost $1.2 trillion over the next 10 years. It will not. Furthermore, his new budget proposal would raise taxes and fees by over $1.1 trillion over the next decade. And that’s just for starters.

    But before we go there, I want to touch on new data which confirms that US economic growth in the current recovery has been the weakest EVER, since 1930 when such data was first recorded – even worse than after the Great Depression. The recent Great Recession officially ended in the 2Q of 2009 – true enough. But growth since then has been the slowest on record.

    That’s a lot to cover in one letter, so let’s get started.

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  • Workforce Shrinks, Unemployment Falls – Say What?

    Today we begin by examining last Friday's miserable jobs report. The official unemployment rate edged down fractionally, but it was because almost a half a million people stopped looking for work last month. In fact, the labor force participation rate dropped to the lowest level in 33 years.

    From there, we look at the reasons why the Fed's massive quantitative easing (QE) is doing little to nothing to help the plight of the long-term unemployed. We also look at the growing number of “discouraged workers,” which are defined as those long-term unemployed who have stopped looking for work and the reasons why.

    The number of Americans on disability insurance has increased for the last 16 years, and the total stood at a record 8.85 million people as of March, according to the Social Security Administration.

    Finally, we are hosting a lunch seminar in Austin on May 8th at 11:30 featuring Hanlon Investment Management, a Registered Investment Advisor managing apprx. $3.5 billion in assets. If you live in Austin or will be in the area on May 8, call Joanne at 800-348-3601 to reserve your spot. Seating is limited. The lunch seminar will be at the Westin Hotel in The Domain at 11:30. This is also an opportunity for me to meet you personally.

  • Why This Economic "Recovery" is So Weak

    We start today with an excellent editorial I read last week written by Mort Zuckerman, Editor-In-Chief of U.S. News & World Report. My goal every week is to do a lot of reading and summarize what I’ve learned in these pages week in and week out.

    But every now and then I run across something so good that it just makes sense to reprint it in its entirety, even if it’s not my own work. Not many of my contemporaries are willing to do that, as they think it makes them look less scholarly. I don’t have that problem. 

    Following that, we’ll take a look at the stock markets now that the S&P 500 Index has finally reached a new record high. You would think that investors would be jubilant with stocks at new record highs, but consumer confidence is still in the tank. We’ll look at some of the reasons why.

    Finally, we will revisit the public’s continued love affair with taxable bonds. Despite the huge bull market in stocks, investors continue to pour money into bonds and bond mutual funds. I continue to maintain that long-only bonds are in for a bear market due to rising long-term interest rates.

  • On the Fed, the Keystone Pipeline & the War On Jobs

    The Fed Open Market Committee met last week and its decision was to continue the $85 billion a month in purchases of mortgages and Treasury bonds indefinitely. However, in his press conference after the meeting, Fed Chairman Bernanke hinted that the Fed could reduce these purchases later this year if the economy continues to improve. Very few in the financial media picked up on this important new clue, so I will expound on it today.

    There are some reasons to believe that the economy will improve later this year. The housing sector continues to rebound. Home prices have surged so far this year. The number of people who are "under water" on their mortgages is falling, and foreclosures are down as well. Some other economic indicators are also pointing higher. So while the economy still feels like a recession, growth should be better in the second half.

    Would you like to know the real story on why we haven't started building the Keystone Pipeline that would bring apprx. 600,000 barrels of oil a day from Canada and North Dakota to the Texas Gulf Coast? So did I. Today, I have reprinted the best article I have seen on this subject. I trust you'll find it enlightening, but it will almost certainly make you mad!

    Finally, I've been warning about the bond market bubble since late last summer, and Treasury bond prices have come down significantly since the peak back in late July. I close out today's letter with some links to the actively-managed bond programs we recommend. If you still haven't taken steps to protect yourself from bond losses, I urge you to consider moving to one or more of these professionally managed programs before it's too late.

  • Is The Government Lying To Us About Inflation? Yes!

    On Friday, the Labor Department reported that the Consumer Price Index (CPI) jumped an unexpected 0.7% in February. This was above pre-report estimates and was the highest monthly reading since 2009. We should be very concerned, right? Let's take a closer look.

    Upon further examination, we find that if we subtract food and energy from the CPI, the cost index rose only 0.2% last month. It turns out that most of the big increase in the CPI last month was due to the sharp rise in gasoline prices.

    But the real question is whether or not the CPI reported to us each month by the government is really indicative of the actual inflation rate. Today, I will argue that it is not a very good indicator for a variety of reasons, including the methodology used to calculate it.

    The government says inflation over the last four years has averaged 2% as measured by the CPI. Others argue that the real rate of inflation in the US is in the 5%-8% range. That's what we will explore today, and you can be the judge.


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