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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  • Support Wanes For Obama's Huge Stimulus Plan

    The Senate finally passed its version of President Obama's near $1 trillion economic "stimulus" package. But as Americans saw that this so-called stimulus package is loaded with pork-barrel spending and does not include nearly enough in tax cuts and direct incentives, public support for it plummeted. The Republicans' alternative plans that proposed more in tax cuts were ignored (of course). I have numerous problems with the giant stimulus program, especially regarding the "protectionism" elements as you will see. Finally, earlier today Treasury Secretary Geithner announced a new plan to spend $2-$3 trillion to bail out banks, buy troubled assets, unfreeze the credit markets, etc., etc. I will have more to say about this as the details become available....
  • Obama's Tax Policy: None Dare Call It Welfare

    We have recently learned the details of President-elect Obama's massive income tax overhaul, and the plan is much worse than we had anticipated. Obama's liberal tax plan would give annual tax rebates to millions of Americans who already pay NO income taxes whatsoever. Giving government tax rebate checks to those who already pay zero income taxes is nothing short of expanding the welfare state (or socialism as I prefer to call it). Worst of all, if Obama gets his massive tax plan approved, it will mean that a majority of Americans will pay little or no income taxes, while the so-called "wealthy" will foot the rest of the bill. If we reach such a point, there will be little to no chance of true tax reform for the foreseeable future. Read what follows very carefully....
  • Democrats' Conundrum - Should Hillary Drop Out?

    The Democratic presidential race continues to heat up following Hilary's recent win in Pennsylvania. Yet Obama still leads her in pledged delegates and in the popular vote (excluding Florida and Michigan). Due to the Dem's system of "apportionment" - wherein both candidates get some portion of the delegates, unlike the GOP's winner-take-all system - the race is now pretty much a stalemate....
  • The Worst Economic Recovery in a Lifetime

    I hope everyone reading this had a memorable Independence Day holiday. We certainly did with lots of family and friends at our home on Lake Travis, and with lots of cooking on my part (but unfortunately, no fireworks this year due to the severe drought in Central Texas). July 4th is one of my favorite national holidays.

    Due to the short week, I have elected to reprint a surprising new study that has just been released by the Congressional Joint Economic Committee (JEC). The JEC is a bipartisan committee including 10 Senators and 10 House Representatives, evenly divided between Republicans and Democrats. The JEC’s main purpose is to make a continuing study of matters relating to the US economy.

    The latest study from the JEC, which was developed at the request of two Republican members of the Committee, compares the current economic recovery with previous recessions and recoveries. The conclusion: economic conditions are worse today than in any recovery since at least World War II.

    Because the study was commissioned by two Republicans, the analysis includes some partisan statements, unfortunately. However, the data and charts in this study are accurate, and this is the worst economic recovery in at least 70 years. I have written often this year about this disappointing economic recovery, and this relatively brief analysis sums it up very well. It is reprinted in its entirety below, including over a dozen charts and graphs, so it will print longer than usual.

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  • On the Economy & Obama's Trillions

    Most (but not all) of the economic reports over the last month or so have been positive, and more and more forecasters now believe that GDP growth will be slightly positive in the 3Q. Unfortunately, we don't get our first 3Q GDP estimate until the end of October. The latest GDP estimate for the 2Q was unchanged at -1.0%, which was better than expected. I will cover the latest encouraging (and not so encouraging) economic news just below.

    Next, on Friday, August 21, the Obama administration quietly announced that the White House Office of Management & Budget revised upward its long-term federal deficit projections to fall in line with those of the Congressional Budget Office. The White House finally admitted that its economic assumptions were too optimistic - to the tune of $2 trillion over the next 10 years. So now it's official - even President Obama admits he will more than double the national debt in the next 10 years, which will likely lead to another financial crisis.

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  • Best Critique of Obama I’ve Ever Read

    The holidays sneaked up on me faster than usual this year, what with a couple of extra business projects that required a lot more time than I expected over the last few months. Given a number of year-end deadlines, I have elected to reprint an excellent article today by Peter Ferrara that is perhaps the best critique of President Obama that I have ever read. If you are an Obama fan, you probably don’t want to read this; on the other hand, maybe you should.

    Ferrara succinctly examines Obama’s upbringing, his early professional life, his liberal ideology, his ascendency into politics, his becoming President of the United States and his policies since occupying the White House. This is a very interesting and insightful read, especially in light of the challenging economic and financial times we find ourselves in.

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  • Stocks At Record High, Treasuries At Record Low - A Rarity

    Stocks as measured by the S&P 500 and the Dow have cruised to new record highs over the last week. Treasury yields on 10-year notes and 30-year bonds moved to all-time record lows last week. Historically, these two things rarely happen at the same time. In fact, the S&P 500 has hit a record high when the 10-year Treasury note yield was below 2% only once in the last 40 years.

    The fact that stocks are at new highs and Treasury yields are at new lows is largely due to red-hot foreign demand for US securities. There are continued worries about the UK and Europe in the wake of "Brexit" and rising concerns about China's economy. With negative interest rates spreading around the world, foreign investors are gobbling up Treasuries which still have positive yields and adding US equities as well. Some say this is the "New Normal." But is it?

    That's what we'll talk about today.

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  • "BREXIT" - Should They Stay Or Should They Go?

    The citizens of Great Britain will make a monumental decision that will be felt worldwide if they vote to leave the European Union (EU) next week on June 23. If the Brits vote for “Brexit” it could eventually lead to the end of the EU and the euro. It could potentially lead to serious turmoil in the world financial markets in the days and weeks following the referendum if the vote is to leave.

    Yet if Brexit passes, it does not mean that Britain will leave the EU immediately. We are told that there will be a transitionary period which could last a year or longer. Maybe this will limit the potential turmoil in the markets, but that’s far from certain. In any event, I think most Americans should understand the long-range implications of next week’s key vote.

    I have read a great deal about what may happen if the Brits vote to leave the EU. It is clear that Brexit is part of a groundswell of dislike around the developed world for all things “Establishment.”  This growing trend also explains in part why characters like Donald Trump and Bernie Sanders did so well in the election primaries.

    To help us understand these trends and the important implications, I have chosen to reprint a very good analysis on this subject today. It appeared in TIME Magazine online last Friday and is written by Frank Luntz.  Mr. Luntz is a well-known political analyst, professional pollster, author and contributor to CBS News and the Fox News Channel among others.

    You should read it. I will be writing more on this key topic in the weeks and months ahead.

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  • Is "Brexit" The Beginning of the End For European Union?

    Just about everywhere I go lately people ask me what I think about “BREXIT” and the ramifications it will have for Great Britain, Europe and even the United States. My standard answer since the vote on June 23 is that I don’t think about it much.

    The reason is that, other than the vote itself wherein the “Leave” crowd won 52%-48% over the “Remain” crowd, nothing else has happened to make Brexit the law of the land, and may not happen for months to come. British Prime Minister David Cameron resigned the day after the vote didn’t go his way, but offered to stay on until October if need be to find a replacement.

    In order to officially initiate its withdrawal from the European Union, Britain must invoke “Article 50” of the 2007 Lisbon Treaty with the EU, and it now looks likely that such a notification won’t happen until after the new Prime Minister is in office. And then withdrawal from the EU is a two-year process after that.

    I last wrote about Brexit on Thursday, June 23, the day of the referendum, in my Blog. At that time, I noted that some of the final polls showed a slim lead for the Leave crowd. I also noted that the Leave crowd in Britain is part of a “global anti-establishment movement” that is growing around the world – which has brought us the likes of Donald Trump and Bernie Sanders.

    While the Brexit outcome roiled the global equity markets for the first couple of days following the vote, some of those losses have been recovered. Frankly, I expect Brexit will fall out of the headlines soon, if it hasn’t already, and the media attention for the rest of this month will be on the GOP convention on July 18-21 and the Democratic convention on July 25-28.

    Nevertheless, I will give you my thoughts and those from others I read on Brexit as we go along today. Just keep in mind that we don’t have any idea when Brexit will happen, under what terms it will happen or even if it will happen at all.

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  • Global Bonds In Worst Selloff In 13 Years - How Come?

    Bond investors have had a rough ride in November. The Barclays Global Aggregate Bond Index plunged by 5% during the last two weeks just before and after the election – its worst such drop since March 2003, according to Dow Jones data. When yields rise, bond prices fall, and vice-versa.

    As you know, interest rates have been falling for over 35 years since peaking in 1980. It has been a spectacular bull market for bond investors, that is until just recently. To say that the reversal over the last few weeks came as a surprise to bondholders around the world is an understatement.

    More than $77 billion in assets are benchmarked to the Barclays Global Aggregate Bond Index, according to Morningstar, making it one of the most widely followed in the fixed-income world. It incorporates investment-grade debt denominated in 24 different currencies. Sovereign bonds have historically been the Index’s most heavily-weighted constituent, followed by asset-backed securities, corporate bonds and government-related debt.

    Global bond yields have been edging up since falling to historic lows in late June/July following the UK’s vote to leave the European Union. But the selloff accelerated aggressively after Donald Trump won the US presidential election – an outcome that took most bond market participants around the world by surprise.

    The sharp selloff was predicated on the notion that Donald Trump’s campaign promises to rebuild America’s infrastructure, cut taxes and raise trade barriers, would – if they become reality – drive up inflation, and possibly force the Federal Reserve to raise interest rates much more aggressively than had been expected.

    In just the two days following Trump’s election, global bonds shed an estimated $1.1 trillion in value, the worst rout in a year and a half as investors sold bonds and bought stocks in many cases. The stampede out of bonds propelled US Treasury yields to their highest levels since January.

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  • "How America Lost Its Mojo" - Some Troubling Trends

    In my business, I read a lot more than the average American, in large part due to my “speed-reading” training in college. Most of what I read is about the economy, markets, financial matters, world events and yes, politics among other topics.

    I especially enjoy reading well-written articles on shifting demographic trends in the US and around the globe, which give us insights regarding what the country and the world might look like in 10-20 years. I recently read just such an article on the rapidly changing demographics in America and their long-term implications.

    After thinking about it for several weeks, I decided to reprint it for you today. I think you will find it very interesting.

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  • Clinton & Trump Unveil Very Different Economic Plans

    Former Secretary of State Hillary Clinton and New York billionaire Donald Trump both announced their major plans for the economy last week, if elected president in November. As you might expect, the two plans are very different. I will summarize both as we go along today, and you can draw your own conclusions.

    Before we get to that discussion, I want to bring to your attention the fact that the Atlanta Fed is forecasting a significant improvement in the US economy for the current 3Q. As you may recall, the Atlanta Fed produces a real-time estimate of the US economy which is called “GDPNow.” As of last Friday, the GDPNow is forecasting a jump to 3.5% in GDP in the 3Q.

    Keep in mind that US GDP was only 0.8% in the 1Q and 1.2% in the 2Q. A strong jump to 3.5% in the 3Q would be almost triple the anemic 1.2% in the 2Q. The obvious question is, what is the Fed seeing so far in this July to September quarter that is making it so confident? That’s what we’ll talk about just below.

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  • On The Economy & The CBO's Credibility

    I felt really bad about sending out last week's E-Letter in which I predicted that we will face another serious financial crisis and perhaps another depression sometime in the next several years. But later that same day, the latest poll by Fox News/Opinion Dynamics showed that 79% of registered voters believe that an economic collapse is still possible. 84% of Republicans, 80% of Independents and 71% of Democrats all agree that the worst may not be over. Obviously, there are a LOT of Americans that agree with me that Obama's trillion-dollar deficits and the skyrocketing national debt represent the biggest threat to our economic and financial futures.

    This week, we take a look at the latest economic reports, most of which suggest that growth this year will fall well short of the 5.6% rise in GDP in the 4Q. We also review the recent actions in the stock and bond markets, both of which have had their share of surprises. And finally, we will review how the non-partisan Congressional Budget Office 'scores' major pieces of legislation in terms of their overall cost. You may be surprised to learn that Congress can game the system and get just about any CBO score they want - as was the case with ObamaCare.

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  • Economic Recovery vs. Rising Unemployment

    This Thursday, all eyes will be on the 'advance' estimate of 3Q GDP, and most analysts expect it to be positive and confirm that the US economy emerged from the recession in the July-September quarter. Yet even if the GDP report is positive on Thursday, we all know that the unemployment rate (currently 9.8%) continues to rise and is likely to go up for at least several more months.

    If the government counted everyone who is unemployed, or is working part-time because they can't find a full-time job, the real US unemployment rate was 17% as of the end of September. So even if the recession 'officially' ended in the 3Q based on this Thursday's GDP report, this economy is far from out of the woods. And if the dollar continues to fall, even more dire consequences (ie - a double-dip recession) are likely to follow. It's a lot to cover in one letter, so let's get started.

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  • Dalbar Update: Investors Still Lagging The Market

    The Dalbar organization recently completed the 15th update of their landmark Quantitative Analysis of Investor Behavior (QAIB) Study. As long-time readers know, I have often quoted statistics from these annual updates that show average investors receive inferior long-term returns when compared to gains posted by stock and bond mutual funds. The reason, by and large, is that investors switch from fund to fund chasing hot returns. In doing so, they often end up with low returns, and sometimes even losses. Most interesting, however, is that the 2009 Dalbar QAIB Study update finally comes to the realization that traditional buy-and-hold approaches do not work, and that investors continue to panic and trade out of stocks when losses run high. In other words, emotions often trump rational investor behavior. This week, I'll update you on the most recent Dalbar Study findings, and also discuss our solution to emotional trading that we discovered back in 1995.

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