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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  • Handing Down Your Legacy - A Special Gift For Readers

    This week I'm going to cover a topic that is likely to be unpopular but vital to any financial planning process - death. In our culture, we often put off talking about a time when we will no longer be around to enjoy family and friends. Yet it's important to plan for the inevitable and take steps to help ease the strain on loved ones left behind.

    There are many times when surviving spouses contact my firm after the death of a loved one with no idea how the family's finances are organized. Many times, they don't even know where important papers are located, much less how to manage the assets they represent. Because death is so difficult to talk about, those left behind often find themselves in the dark about what to do in case of an untimely death.

    Along with this week's E-Letter, I'm offering a FREE gift of our Handing Down Your Legacy e-booklet. This booklet serves as a resource that you can use to record all of your financial information so it will be available in one convenient place for loved ones left behind upon your death. While it's not pleasant to think about your own death, having your financial information in one place for your loved ones will prove invaluable when that time comes. Because this planning tool is so valuable, I encourage you to forward this E-Letter to your family and friends so they can also take advantage of this free offer.

  • Another Budget & Debt Ceiling Fiasco Starts Now

    With the Fed's surprising decision not to "taper" its monthly QE bond and mortgage purchases, at least for now, the markets' attention now will focus on the upcoming federal budget and debt ceiling battles. Either one could lead to a government shutdown, and even if a shutdown is avoided, it will be a nervous few weeks in the markets just ahead.

    Fiscal year 2013 ends next Monday, and FY2014 begins on Tuesday. Not surprisingly, we do not have a federal budget for FY2014, so last Friday the House of Representatives passed a temporary "continuing resolution" to fund the government through mid-December. However, that resolution contained a provision to cancel funding for Obamacare indefinitely.

    That provision will definitely not survive in the Senate, so it remains to be seen what happens between now and next Tuesday. Almost certainly, we'll see another political battle and the threat of a government shutdown. Then two weeks later, we will see another political circus over raising the debt ceiling, which could also trigger a government shutdown.

    President Obama has repeatedly warned recently that he will not negotiate with House Republicans on raising the debt ceiling, so another political fiasco is virtually assured around the middle of October when the Treasury will run out of money to pay the nation's bills. This fight will not be good for the stock markets. Here we go again.

    Finally, the Congressional Budget Office just released a new report which warns that our spiraling national debt is "unsustainable." Imagine that! We'll take a look at the report's latest findings as we go along.

  • Stock Funds’ 5-Year Track Records Set to Double

    Many investors focus on the previous five years annualized return when analyzing which mutual funds to buy. We also pay a good deal of attention to the 5-year performance number when analyzing mutual fund and ETF returns at Halbert Wealth Management. And currently the 5-year average returns for most equity mutual funds are not all that attractive.

    But what if I told you that between now and the end of the year, most funds’ 5-year track record will double or more! And that will happen even if the funds don’t make another penny this year. How can this be, you ask. It just so happens that some of the worst losing months for stocks occurred during the latter part of 2008 when the Dow and the S&P 500 were on their way to 50+% drawdowns (losses). We all remember that gut-wrenching period!

    But guess what? Those terrible losing months in late 2008 will steadily be falling off of 5-year performance records between now and year-end. As a result, most 5-year performance records are about to skyrocket due to nothing other than the passage of time. You can bet the mutual fund companies are licking their chops in anticipation of new brochures showing the much higher 5-year returns! I will explain how this will happen in detail below.

    Finally, I would be remiss not to discuss the key Fed policy meeting that starts today and ends tomorrow. It is widely expected that the Fed will announce plans to “taper” its monthly QE purchases of Treasury bonds and mortgages. That decision could have significant market implications, which I will discuss as we go along today.

  • Some Scary Bumps in the Road Just Ahead

    The major stock indexes moved lower after setting new record highs in early August, although prices have recovered somewhat in the last few days. So was the weakness in August just an overdue correction before moving even higher? Maybe, but there are a number of things coming up in the next month or so that could rattle the markets even more, including whether or not we go to war with Syria.

    Clearly, the stock and bond markets continue to be nervous about the Fed cutting back on its QE bond and mortgage purchases, perhaps as soon as the Fed’s next policy meeting that ends on September 18. There is also some anxiety about who will be the next Fed chairman (or woman).

    Yet there are other upcoming concerns that the markets seem to be worried about, as well they should. Certainly, the continued rise in interest rates is a serious issue for the markets and the economy. The yield on 10-year Treasury notes has soared from 1.6% back in May to near 3%. Long bond yields are nearing 4%. Investors don’t know what lies ahead.

    The markets are also starting to factor in the looming battle in Washington over the federal budget for FY2014, which begins on October 1. President Obama vows he won’t negotiate this time around. Also, there is another battle over the debt ceiling coming by mid-October and yet another threat of a government shutdown.

    We'll look into all of these issues today and how they may affect the markets.

    But before we get into those issues, let’s examine last Friday’s jobs report for August. The White House and the media hailed it as a success since the headline unemployment rate fell from 7.4% to 7.3%. What they failed to point out was the decline occurred because a lot more folks dropped out of the labor market. Truth is, the report was once again a disappointment.

  • How Syria Could Spark New Middle East War

    What does the stand-off in Syria have to do with the investment markets? Potentially, a lot. As I have argued in recent weeks, if the Middle East devolves into another military quagmire, it could be quite bearish for the US stock and bond markets going forward. That’s why we will talk about the implications today.

    President Obama is hell-bent on attacking Syria for gassing over 1,400 innocent citizens on August 21. Normally, it would not be unusual for an American president to want to respond to such a humanitarian outrage. But it is still not clear why this liberal president – who’s mandate was to get us out of war – is now so intent that we need to attack Syria militarily.

    We begin our analysis today by briefly examining how the civil war in Syria began and why. From there, we examine whether the US has any justified reasons to get involved or to punish Syria’s president Bashar al-Assad for the recent chemical attacks on his own people. For whatever reasons, President Obama initially felt that he alone had the authority to take the US to war with Syria, and made plans to do so last week.

    However, an NBC poll released last Friday revealed that almost 80% of Americans believe that the president must get congressional approval before taking the nation to war. Other polls showed that a majority of Americans don’t want the US to attack Syria, period. So on Saturday, Obama backed down and said he would wait for Congress to have its say next week.

    But before we get to that discussion, let’s take a quick look at the latest economic reports, including last Thursday’s 2Q GDP estimate, which was revised up from 1.7% to a more healthy 2.5%, and a few other recent reports. Let’s get started.

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  • America is Turning Into a "Part-Time Nation"

    Part-time work accounted for a whopping 77% of the jobs the US economy created from January through July, according to household survey data from the Bureau of Labor Statistics. Last year during the same time period, part-time jobs were only 53% of the total versus 47% full-time jobs. This trend toward part-time, low paying jobs is accelerating rapidly.

    A rising number of companies are citing healthcare reform as the reason for the growing part-time workforce. As a result, the US labor pool is rapidly restructuring toward “29-ers” – employees working just under the 30-hour full-time threshold. This meteoric increase in part-time versus full-time new jobs has been happening since 2009.

    Next, we look at the latest clues as to when the Fed will start to “taper” its monthly bond and mortgage purchases. The minutes from the Fed’s July 30-31 policy meeting indicated that a growing number of FOMC members are leaning toward reducing purchases before year-end. But we still don’t know when Bernanke & Co. will pull the trigger.

    Finally, in my blog last Thursday, I wrote about a new study which found that, in at least 35 US states, a person on welfare can get more cash benefits than a person working 40 hours a week at the minimum wage. In some states, a whole lot more than the minimum wage. Today, we explore this dangerous trend and why we have a record number of Americans on welfare.

    But first let’s take a quick look at the latest economic reports and what’s ahead this week.

  • The Big Secret Mutual Fund Companies Are Hiding

    Do you know that most (if not all) mutual fund and ETF sponsors are keeping vital information about their funds secret from you? We’ll start today’s E-Letter with a discussion about what that valuable information is and why fund companies don’t want you to know about it. I'll also tell you how you can download my latest FREE Special Report entitled, "The Secret That Mutual Fund Companies Don't Want You to Know."

    Better yet, after you read my latest Special Report, I’ll show you how to beat the fund companies at their own game by learning this secret about the actual mutual funds (or ETF’s) in your own portfolio. This is information you really need to know, and you may be very surprised by what you learn!

    From there, we shift our focus to the Fed. As you will recall, Fed Chairman Ben Bernanke first hinted of reducing “quantitative easing” (QE) bond and mortgage purchases in late May, and stocks and bonds took an immediate hit. In late June and July, Bernanke tried to walk-back the idea of “tapering” Fed purchases, and stocks soared to new record highs. However, in the last few weeks, “taper-talk” has become widespread again.

    Most forecasters now believe that the Fed will cut its monthly QE purchases from $85 billion to around $65 billion at its next policy meeting on September 17-18. That prediction sent stocks reeling last week, and 10-year and 30-year Treasury bonds plunged to their lowest level in two years. We'll talk about this and a lot more today. Let's get started.

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  • Middle East Is A Looming Tinderbox – Think Egypt

    Today, we depart from our usual topics and focus on why the Middle East could soon deteriorate into a full-blown crisis that could affect markets around the world. We begin by looking into the latest unprecedented embassy closures across the Middle East and North Africa. Did President Obama take the appropriate actions, or were the closures a sign of weakness to our enemies in the region? Or maybe both?

    From there, we turn our attention to the worsening political tensions in Egypt. There is a real threat that Egypt could deteriorate into a full-scale civil war in the months ahead. Egypt controls the Suez Canal through which the majority of the oil produced in the region passes to get to the West. While the military controls the country for now, a civil war could threaten oil flows and send crude prices through the roof. As investors, we absolutely need to keep a close eye on the unrest in Egypt.

    And finally, did President Obama break the law in his press conference last Friday when he revealed that the US has a “sealed indictment” against some of the perpetrators of the attack on our consulate in Benghazi last year? Divulging the existence of a sealed indictment is against the law. The media is largely silent on this, but I will give you the details today.

  • Are Americans Optimistic or Pessimistic About the Future?

    Today's letter will move fast as we touch on several pressing issues of the day, with lots of charts and graphs. We begin with some new polls which indicate that most Americans are pessimistic about the future, even though consumer confidence is up this year. Another major poll finds that only 29.4% of Americans feel the country is headed in the right direction, while 61.4% believe we are on the "wrong track" longer-term.

    From there, we take an in-depth look at last Friday's unemployment report. While the headline unemployment rate unexpectedly fell to 7.4%, there was a lot of troubling data in the report that the mainstream media simply ignored. Not only were new jobs less than expected, they were dominated by low paying and part-time jobs.

    Next, we take a closer look at last Wednesday's 2Q GDP report, which came in a little higher than expected (1.7% vs. the consensus of 1.1%). The media gushed over this number and assured us that the recovery is gaining momentum. But how can you get excited over a report showing growth is still less than 2%? This is still the weakest economic recovery in most of our lifetimes, despite what the media says.

    Last but not least, Congress has figured out that ObamaCare is going to be a "train wreck," this according to one lawmaker who helped write the massive healthcare law. As a result, Congress is trying to find a way to exempt itself from ObamaCare - surprise, surprise! That will be very difficult, so President Obama appears ready to give members of Congress subsidies up to 75-80% to buy health insurance on the exchanges, even though they make $174,000 a year, plus benefits and lifetime pensions. This is outrageous!

  • New GDP Revisions to Boost US Economy by 3%

    Tomorrow morning at 8:30 EST, we get the government’s first look at 2Q GDP. The pre-report consensus is for a rise of 1.1% (annual rate) in the 2Q following 1.8% in the 1Q. Most forecasters agree that the economy slowed somewhat in the 2Q, so a reading of 1.1% shouldn’t come as a big surprise.

    At the end of April, the Commerce Department’s Bureau of Economic Analysis (BEA) announced it would be making some significant revisions to the way it calculates Gross Domestic Product on July 31. It will revise economic growth for all years going back to 1929. This change is somewhat controversial in that it is expected to add up to 3% to total GDP in one fell swoop tomorrow morning.

    The reason for the changes is the fact that our economy increasingly depends on the production of intangible goods, and the BEA believes 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 of investment, just like the purchase of a new office building or a new printer. And the creation of a lasting work of art – a painting, a movie, a television series, etc. – that can be sold or viewed year after year will likewise be treated as a capital investment.

    Since the US GDP is increasingly made up of intangible assets, some of these revisions probably make sense. Yet the caveat is that intangible things such as R&D and art are far more difficult to value precisely. So today we’ll discuss the GDP revisions coming out tomorrow and whether or not such changes are a good thing.

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  • Average Gas Price Could Hit $4 by Labor Day... Or Not

    With the recent jump in gasoline prices, several energy analysts are forecasting that prices at the pump will top $4 a gallon (national average) later this summer. On the other hand, some analysts feel that gas prices will only go up another 5-10 cents a gallon just ahead, and then move lower in the fall. Of course, no one knows for sure. Today, we’ll take a look at what’s driving gas prices higher.

    But before we get to that discussion, let’s take a quick look at the latest economic reports, most of which were disappointing. The only good news here – if you can call it that – is the economic data of late is not encouraging enough for the Fed to begin tapering its bond purchases anytime soon, as I discussed at length in last week’s E-Letter.

    The Fed reported recently that Americans’ cumulative net worth has finally hit a new record high of $70.3 trillion in the 1Q, up $3 trillion from the 4Q of 2012. While this is good news on the surface, much of the increase came as a result of Americans spending less and paying off their debts. Slower growth in consumer spending is not good for the economy.

    Last but certainly not least, I will reveal the results from our recent Financial Literacy Test. This quiz was wildly popular with my readers. And today, I’ll tell you how you did – which was really good. You may be surprised at the results, including the two questions that stumped about half of those taking the test. My thanks to all who participated!

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  • Fed’s Gobbledygook - What Do They Really Mean?

    Recent communications from the Fed and comments by Chairman Bernanke cast a great deal of uncertainty on the equity and bond markets in late June. Specifically, Bernanke's remarks in his press conference on June 19 - where he discussed ending its program of quantitative easing - prompted a huge global selloff in the stock and bond markets.

    In response, various Fed officials tried to "walk back" the idea that the Fed was ready to begin scaling back its $85 billion a month in bond and mortgage purchases as early as September and end the program by mid-2014. Based on those reassurances, stock prices recovered, but rumors of the Fed scaling back its stimulus later this year continued to circulate.

    Last Wednesday, the Fed released the actual minutes from the June 18-19 Fed Open Market Committee meeting. Those minutes revealed that the Committee did indeed discuss the possibility of scaling back its QE purchases, and even ending them at some point. However, in the end, all but one member of the Committee voted to continue the $85 billion a month in purchases indefinitely.

    With that news, the Dow Jones and the S&P 500 indexes surged to new record highs last Thursday. It is obvious that the equity markets are addicted to the Fed's stimulus. It remains to be seen, however, what this latest Fed decision will mean for the sagging bond market. So far, not much.

    Finally, there is something REALLY BIG brewing with regard to ObamaCare. President Obama's recent decision to postpone the "employer mandate" by one year to 2015 may have been unconstitutional.

    If you oppose ObamaCare, you absolutely must read the final section of this E-Letter. You won't hear about this in the mainstream media. If you don't read anything else, scroll down to: Delay of ObamaCare May Backfire on the President. You need to know about this.

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  • Are You Financially Literate? Take the Test!

    In late May, the Financial Industry Regulatory Authority (FINRA) released the results of its 2012 National Financial Capability Study, and the news wasn't good. While some areas of financial capability had improved since the last study in 2009, a large part of the American public is still virtually illiterate when it comes to even the most basic financial concepts and practices.

    The consequences of financial illiteracy are many, but they generally involve putting American families at a disadvantage when it comes to borrowing, saving and investing for retirement and other everyday financial matters.

    This week, I'm going to discuss the results of the updated FINRA study and also allow you to take our expanded financial literacy test for yourself. I'll also mention some ways to improve financial literacy, some of which may surprise you. I encourage you to not only take our financial literacy quiz yourself, but also share this E-Letter with friends, loved ones and even school administrators in your local area.

  • Fed Sparks A Stampede Out Of Bonds

    No doubt you are aware that interest rates have spiked higher in the last two months. As a result, there is a stampede to get out of bond funds that have been clobbered recently. I have been warning about this repeatedly since late last year. Now it’s happening and it may well continue. We’ll discuss that more as we go along today.

    With the Fed’s latest decision to start winding down its unprecedented quantitative easing stimulus program later this year, the investment markets are not happy. Stocks, bonds and precious metals have been hit hard in recent days and weeks. While stocks and bonds have recovered modestly, the selling pressure may not be over. Investors are really nervous!

    On the political front, President Obama just can’t help himself. Despite the various scandals swirling around his administration, he has resurrected his formerly failed plan to institute a new tax on carbon emissions. Only this time he plans to circumvent Congress and enact this costly tax via the Environmental Protection Agency and new Executive Orders that are almost impossible to reverse. He apparently does not care that a new carbon tax will increase energy prices for everyone, including low income folks who will be hit the hardest.

    But before we get into those issues, let’s take a quick look at the latest economic reports, including last week’s very discouraging 1Q GDP report that showed the economy is still just limping along. From there, we’ll look at some other economic reports which offer at least a little encouragement.

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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.


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