Today's Market
by Dr Invest

There's not really much to say about this market that hasn't already been said. Do to go ERCI Institute at www.businesscycle.com and view their latestest video. You need to understand that the consensus is driving the stock market higher, but there are not fundamentals to support the rise in the stock market.

Don't listen to the enchanting voices calling you to get into the market. Lakshman Achuthan explained that the FACTS don't fit positive expectations for market performance. Today, there are numerous headlines: Home Prices Continue to Fall, Corporate Pain from Billions in Pension Shortfalls, Oil Prices Going Much Higher, Orders for Manufactured Goods Plunges 4% in January. Which one of these headlines would make you pour all of your money into stocks? Eventhough consumer confidence is higher, and people are charging up their credit cards again, consumer confidence is still lower than it should be to spark a recovery.

Some of the best information we have about investing is FREE. It comes from universities, colleges, and academia. A little University called, YALE, printed a study from Campbell and Shiller. http://www.econ.yale.edu/~shiller/online/jpmalt.pdf  From Campbell and Shiller's work, new information has been published.

Benson, Bortner, and Kong estimate the return on equities using the matrix approach suggested by Bogle in 1991. In addition to Bogle’s approach, the authors incorporate share repurchases as suggested by Grinold and Kroner in 2002 and by Shiller’s P/E10.They demonstrate that this relatively simple approach provides reasonable estimates of subsequent 10-year returns for the S&P 500 Index. The authors also focus on the relationship between the P/E10 ratio and the market’s subsequent return. The authors demonstrate that when P/E10 is at low (high) levels in its historic range, the subsequent average 10-year market returns are relatively high (low or negative). When subsequent 3- and 5-year returns are examined, the relationship between P/E10 and subsequent average annual returns is even stronger. Finally, the authors’ analysis suggests that the demonstrated approach may be used to estimate returns for various market sectors or indices by applying the approach to estimating the returns on three Russell indices.

So here's the short of the story. We are coming down off a BIG DEBT DRIVEN HIGH. As a nation, we were not prospering from HARD WORK and PRODUCTIVITY, but from a DEBT DRIVEN ECONOMY.  Now this doesn't mean that there is not opportunities to make profits, but along with opportunities for profits will be seasons of market decline. You don't want to be in the market when the decline occurs and you want to get in the market when the market rises. The market is going to return to the REGRESSION. Bernanke has bought us a very small season of prosperity, but there is not enough money in the world to continue the prosperity. It economy must return to the regression and will likely go below the regression before returning to an up-trend. Wake-up! The Market is moving downward.


 Note: BLUELINE represents the P/E10

Even when the market is turning down, there are seasons of growth and decline. Understanding these cycles and where you are in the market cycle is important to maintaining the growth of your investment.

If you want to study Campbell and Shiller's paper, that is great. Just remember, the P/E ratio is high and it means that the market will be trending downward for a season.

Protect your investment against major losses by using a STOP-SELL.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

I've been waiting most of the day to hear what Economic Cycle Research Institute's Lakshman Achuthan has to say about the magnificent recovery of the market.

Lakshman predicted, in the fall of 2011, that all of his indicators presented that a recession was emminent. This created no small stir amongst the finanical news media and they demanded to know what indicators he was using. Pressing him, they asked when this was to take place. Lakshman predicted that around the second quarter a recession would begin that hasn't yet been experienced.

Now, here in the last part of Feburary, 2012, with the economy roaring forward over the past three months, the financial news media called upon Lakshman to return, expecting the resulting apology and admission that he was wrong in his economic outlook. After all, hadn't they been proven right!

THE ECRI PREDICTION

Here is the video response of Laksham: www.businesscycle.com  Many news media markets have been re-interpreting ECRI's prediction, but in this BLOOMBERG video response by Laksham, there is NO backing down. Listen! Economic growth is SLOWING! If you don't have your investment protected by a STOP-SELL, give your financial adviser specific instructions about how much you want to lose before selling. If you really don't care, ride out another 20% decline. If you do care about a 15%, 20%, or 30% loss, protect yourself and talk to your financial adviser now.

WHY A SUDDEN TURN IN THE STOCK MARKET?

Only a month ago, Bernanke was using terms like: "grim outlook for U.S. economy", "the FED will return to buying securities in the months ahead to buttress a weak recovery".  John Hussman defined the market at Hussman Funds as: "overvalued, overbought, overbullish, rising-yeilds syndrome, coupled with an EXHAUSTION SYNDROME that has historically been followed by declines on the order of -25% over the ensuing 6 month period. Our return/risks estimates are HARD NEGATIVE here. www.hussmanfunds.com/wmc/wmc120213.htm

Laksham has become the laughing stock of the economic community, ridculed for his prediction eventhough every previous prediction has been right on target. Could he be wrong? Possibly, but then he could be right.

Business Insider presented this chart saying, "We've run this chart several times this year, and it still holds. It's a one-year look at the S&P 500 (red line) vs. the yield on the 10-year (blue line).

FRED

As you can see, the S&P and the 10-year yield moved closely up until about last December, when the stock  market started taking off, and the yield stayed low.

This is the result of the FED buying bonds, which is the equivilent of PRINTING MONEY. With all the liquidity in the market, stocks are climbing. This is completely in character with KEYNESIAN ECONOMICS, a view that government can control the economy with various economic policies and methods. For this reason, the STOCK MARKET IS NOT BEHAVING IN CHARACTER to the way it has always behaved. What seems to be up is down, and what is down is up.

Let me conclude with John Hussman's assessment: As of last week, the Market Climate for stocks remained unfavorable, reflecting overvalued, overbought, overbullish conditions, rising yield pressures, an exhaustion syndrome, and reduced but continuing economic concerns. Strategic Growth and Strategic International remain well-hedged here. Strategic Total Return continues to carry a duration of about 4.5 years in Treasuries, with only a few percent of assets in precious metals, utilities, and foreign currencies. We would view a significant change in the investment opportunity set as a very welcome development, but we remain unwilling to accept significant risk for insignificant or negative prospective return simply because of the temporary absence of better opportunities. If history is any guide, then one thing is certain - more durable investment opportunities will come. When they do, their arrival is typically announced by the abrupt destruction of preceding speculative gains.

Let me interpret. The risk is too great for the investment opportunities out there. Where there is an ABRUPT fall in the market, the temporary speculative gains you did get will be erased. Then, with the fall of the stock market, more durable opportunities to invest will come.

Please refer to this graph and the graph above it. As mentioned, the FED's purchase of bonds is a way of increasing liquidity in the market. (PRINTING MONEY) Both graphs show this occurring at the same POINT IN TIME. That should tell you something important. The above graph is for 12 month period, but by looking at a five-year chart or ten-year chart the past three month climb appears steeper and even more dramatic.

Be Prepared

Be prepared is an old boy scout moto, but at this time the adage would be well advised. Tell your broker to put a STOP-SELL on your investments. If you manage your own investments, put a STOP-SELL to protect your gains. Bernake may well print his way out of the looming recession, but it appears that even he is doubtful. Only you can keep your investment from declining.

(note: The above information is for entertainment purposes only and not to be used in anyway as financial advice.)

Today's Market
by Dr Invest

Yes, I understand your concerns. The market keeps climbing... and climbing.... and climbing. Think of all the money you could be making. If you are presently in the market and enjoying the climb, don't sell. Do determine how much you are willing to lose should the market turn downward, put a STOP-SELL on your investments.

The VELOCITY in which the market rises, equals the VELOCITY in which the market falls. Even a healthy market cannot sustain growth forever, at some point in time, the market must collapse. So we have wealth creation and wealth destruction. Wealth Creation comes from the perceived value in the market by its participants, likewise; Wealth Destruction comes from the perceived loss of value in the market by its participants. 

Listen to the news media as they paint a happy face on the recovery of the market. The amateurs rush in to take the profits, but the institutional investors remain cautious. The amateurs push the market higher and higher. Other amateurs get excited with the reports of easily gotten gains and buy into the market, pushing the market even higher. Even though stocks are overvalued, they continue to climb higher. This is a recipe for disaster, the market will collapse at some point. This collapse might come from a change in market sentiment, or from political winds, or from a world conflict, or from some economic failure whether domestic or international. But mark my words, as quickly as the market has risen, it will fall.

Hussman Funds Report

John Hussman reported:

As of last week, the stock market remained characterized by an overvalued, overbought, overbullish, rising-yields syndrome, coupled with an "exhaustion" syndrome that has historically been followed by declines on the order of -25% over the ensuing 6-month period. Our return/risk estimates remain "hard negative" here. http://hussmanfunds.com/wmc/wmc120213.htm

The problem here is that, in spite of the glowing media reports of a growing economy, we have a weak economy. Bernanke has affirmed that our economy will likely grow only 2% in 2012. The draq of Europe is going to continue. This past Thursday, the DOW rose upon the reports that Greece had agreed upon a deal to curb a default, yet the Eurotribe is uncertain that they want to give Greece the money.

What we see as the rapid rise in the value of stocks, only indicates the coming collapse of the market in the days ahead. For me, I am not a true believer in the perceived recovery, and believe that a market decline is imminent. If what John Hussman has predicted is true, the 5% gain from January and February may result in a 25% loss later this year. Simply said, you are putting your money at risk to gain 5%, when you could lose 25%.  

see:  http://www.johnmauldin.com/images/uploads/pdf/mwo021312.pdf

I understand that as we move into the political season this fall, a good economic show will needed to prove the veracity of the candidates. I am in no hurry to lose money and know that the most opportune time will be this fall. Wait!

(note: the above information is for entertainment purposes only and not to be used in anyway as financial advice.)

Today's Market
by Dr Invest

Let me encourage you, it is OK to stay out of the market. If you are in the market, enjoy the profits but protect yourself from a sudden downtrend by determining how much you want to lose and selling if there is a sudden downtrend.Staying out of the market is one of the luxuries the small investor can enjoy, that the institutional investor cannot. Let's say that in January through February, the market moves in an uptrend 7%. In 2011, January into February, returned 7.1%; now that doesn't sound much different than 2012 does it? In 2012, to date, the return on the DOW is 5.4%. When compared to 2011, the return on the DOW for 2012 is almost tepid. Interestingly, we are just a little above the high in February of 2011 on the DOW.

Though the comparison is interesting, it really doesn't tell us how the market might behave. In the middle of February of 2011, the market began a decline ending at a bottom in August with losses of 20% to 30% for many portfolios. Because of the weakness of our economy, many analysts are reluctant to take a chance in the market. Because the market is growing, they have to invest and are heavily hedged. (Hedging: to buy a long-term position covered by short positions should the market reverse. IE: buying oil companies, covering with options or shorts x 2 to cover flash reversals. Called an INVERSE ETF, DUG will go up in value $2 for every $1 it goes down. Stay away from hedging unless you really, really, know what you are doing.)

As I said, small investors don't have to play that game and shouldn't. By going to the sidebar on this page, you can find: RESEARCH AND MARKET REPORTS. The first report is HUSSMAN FUNDS. Click on the embedded link and select: FIVE GLOBAL RISKS TO MONITOR IN 2012. Also, go here: http://hussmanfunds.com/weeklyMarketComment.html .  I found the article called: GOAT RODEO funny and revealing.

Second, go to the next REPORT in RESEARCH AND MARKET REPORTS by HOSINGTON MANAGEMENT. You wills see their report for the 4th Quarter Outlook. While my my advice is at best, dubious, I think these investment giants should be carefully respected and their ideas sincerely regarded.

After reading these reports, you can understand my own reluctance to jump into the frivolity presently found in the market. Alan Greenspan coined the phrase: "irrational exuberance" and that is precisely what we are seeing at this moment. The prices are being driven up and up, with no real fundamentals to support the rise in price. At some point, the market will falter and collapse. With the same momentum that the market rose, it will concurrently fall. (See TODAY'S MARKET August 9th, 2011)

A combination of "irrational exuberance" and a "weak economy" doesn't elevate my trust that the market is in an uptrend. Bernake said today, the job market isn't as strong as the steadily declining unemployment rate might suggest.  Bernanke maintained the Fed's position: the economy is improving at a frustratingly slow pace and that low rates are necessary to boost growth.  On January 25th, Bernake used the phrase: GRIM OUTLOOK for the economy.  Regardless the "irrational exuberance" and the news articles touting the "Obama Recovery", the economy is truly grim.

This doesn't mean that there will not be opportunities in the weeks ahead to make some money, but it is a lot like crossing a street. You have to watch for the traffic and wait for a hole. That hole may be a significant 20% to 30% decrease in the market, with a concurrent 20% to 30% rise in the market.

By March 20th, we will know more about what will happen with Greece and if they will default. Potential conflicts in Syria, and between the U.S. and  Iran lie somewhere in the economic chemistry.

There are always geo-political events and economic events effecting the markets, but there should be a clear trend upward before putting money into the market.

(Note: The above article is for entertainment purposes only & not to be used in any way as investment advice.)            

               

Today's Market
by Dr Invest
After the reported fall in unemployment the market rose for the first time in a week, erasing the previous decline. The promises by Bernake to pump money into the market, keeping the market advancing in this election year, could keep investor interest high and the market climbing. Statics do show that in election years, the market is a little over 8% higher.

A major hurdle to the market's advance will be the potential Greek default on March the 20th. While conflict with Iran looms on the horizon, the real impact to the market will be a Greek default and the potential for a domino effect on Italy. A number of voices including Fitch and S&P are saying: "Greece is insolvent and will default on March 20th".

I never underestimate the power of politicians and governments. They somehow find a way to "kick the can down the road" and I think they might well do it again, just before March 20th. Should another successful austerity agreement arise with Greece, March could be a good time to enter the market if only for two or three months.

My plan is this, I am going to ready myself to enter the market with a long-term trade. You will see the method in the SIDE-BAR and selecting the PRO-FOLIO method or Ivy Portfolio method. Do you own read. I would be using the BND, TIP, VNQ, and VT exchange traded funds (ETFs ) buying and selling based on the 10 month "simple moving average".

I hope to make a video show how I will implement these ETFs, so you can follow along and develop your own system of trading. I would NOT enter the market at this time. There is just not enough energy in the market to carry stocks much higher.

(Note: the above information is for entertainment purposes only and not to be used as financial advice.)

Today's Market
by Dr Invest

I'm sure you don't want to hear the news, but over the past week, I have been waiting for the explosive uptrend in the market. After all, this is all that being said by the news media. The recovery is full blown, while the Federal Reserve paints a much darker picture of market decline.

No, the market has not collapsed, but over the past week the DOW has closed with lower lows. Reality check comes tomorrow when we get the report on unemployment. Yes, for now, we are in a FLAT LINE.

Go With The Market

I have said this again and again, the sole determinate of the MARKET TREND is the market. It is not the economists, analysts, fund managers, or investment advisors who will determine market trend. Eventhough in years for a presidental election, the average return of the market is 8% higher than the typical year, this doesn't always remain true and the market doesn't really care about the averages anyway. It is the market that is sole determinate of MARKET TREND.

So when you invest, you want to see a CLEAR TREND UPWARD, or your momentary gains and elation will turn into long-term losses and depression. AT THIS TIME THE TREND OF THE MARKET IS UNCLEAR. Don't enter the market right now. Did you hear this? Not now!

I am waiting until MARCH to see if there is a clear upward trend. Right now the market seem to be on a flat-line.... IT IS MOVING SIDEWAYS this week. WAIT!  There is plenty of the year left to make some money.

Check the side panel for Knowledge Base & Books

I am highlighting A.L. Williams and his booklet last published in 1993 called: COMMON SENSE. A. L. Williams later became Primerica and, of course, they immediately took the book out of the public. Here is the promo from Big Hitter Club:

What makes this book so special is that it was THE cornerstone that fueled the revolution of AL Williams that resulted in us growing into Primerica—the number one financial services marketing firm in the world! Even though the numbers and examples have changed since 1983, 1985 and 1993, the concepts that started the revolution are still valid today. As a result of following this simple game plan, thousands have taken charge of their personal finances and become financially independent.

By reading the booklet, you will understand more of what I am try to achieve philosophically with this blog.

(note: The above information is for entertainment purposes only and not to be used as financial advice.)