Today's Market
by Dr Invest


I have been paying close attention to some of the headlines reporting: Stocks Cheap & Stocks to Close at All-time High by End of the Year. 2012 has been filled with contradictions...Stock prices rise, but profits fall. Unemployment is falling, but consumer purchases are falling too!

Today the IMF slashed their forecast for world growth, so said Justin Menza with CNBC.


The global economy continues to weaken but how long the slowdown persists will depend on whether U.S. and European policymakers address underlying economic challenges, the International Monetary Fund said in a report on Monday .

"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the slowdown has a more lasting component," the IMF wrote in its latest World Economic Outlook. Much will depend on whether European and U.S. policymakers deal with their major short-term economic challenges, the IMF noted.

I think you get the picture here. The outlook has moved from scattered thunderstorms, to storm warning. Where you expected to get rained on from time to time, now there is a warning to find shelter as soon as is possible.

Yes, Bernanke will be cranking out the QE-3 to the tune of $40Bln per month in hopes that it will somehow stymie the impending recession... and he might just be successful once again. But Keynesian economics doesn't always work. In the American Spectator, Dr Ron Ross writes:

An elemental but too often overlooked reality about our economy is that it is based on voluntary exchange. Voluntary exchange is an even more fundamental feature of our economy than is the market. A market is any arrangement that brings buyers and sellers together. In other words, the primary purpose of a market is to make voluntary exchange possible.

Voluntary exchange leaves large amounts of control in the hands of private individuals and businesses. The market relies on carrots rather than sticks, rewards rather than punishment. The actors, therefore, need to be induced to move in certain desired directions rather than simply commanded to do so. This is the basic reason why incentives are such an important part of economics. If not for voluntary exchange, incentives wouldn't much matter.

article - "FATAL FLAWS OF KEYNESIAN ECONOMICS"

So what is he saying? He is saying that you can't force people to buy things... and you can't force businesses to hire people. You can stimulate until hell freezes over and growth cannot occur until people spend money. If there is an effect, it is only temporary. (Think of CASH FOR JUNKERS. It did stimulate the economy, but only for a short while.)

Now people just don't have money to spend, so they wait for jobs. But companies are not hiring because they are uncertain that they can afford more employees. Sitting on extra cash, the company wonders how much the government will ask them to pay for the additional employees...things like pension, healthcare, vacation, etc.

President Obama has thrown insults at corporations, chided corporations, and threatened corporations, but they are still free to choose the number of employees they will hire.

TODAY'S RETURN

I have been invested in TIP and BND and IAU. My gain on these ETFs stand at 1.98% My gold investment IAU dropped, pulling the average gains down for TIP and BND. (see May blog for investment method.)

Considering that I am in competition with the FED's bond buying program, I am surprised that my gains are not lower. I did not keep stocks as they sold in more volatile downturns and hit their stop-sell. My bond portfolio purchase in May started with regular gains until the stock rally in July. I didn't buy stocks in July because I saw the rally in stocks as FED induced. Instead, I have stuck to an investment strategy as defined in the May blog. Using seasonal charts, the best time to buy stocks is at the end of October. Using the Ivy Portfolio Method, I will look at VTI and VEU ETFs. VTI is a total U.S. stock index and VEU a total world stock index. The prices of these ETFs must remain above their 217 day SMA (simple moving average). Only then will VTI or VEU ETFs be purchased.

Until the end of October, I will keep watching my present positions. I will keep educating each of you on the madness called, investing.

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