Today's Market
by Dr Invest
Ok, I haven't written for a while because there is really nothing new. Remarkable returns have proceeded from the U.S. stock market in 2012 largely due to either the promise by Bernake to stimulate the market or the latest QE-3 unlimited purchases of mortgages at $40Bln monthly until the economy returns back to health. Added to the is the continuation of TWIST.
It is as if "liquidity alone" according to the Kensians, could lift the market, yet all the while the fundamentals of the economy have remained weak and perilous through out 2012. Though fiat currency is not printed, it is created.
Look, when someone gets a mortgage, money is created. What happens if someone defaults on a mortgage? That's right, money is destroyed. The Fed uses arcane methods of figuring money creation and money destruction, but you can understand that with so many mortgage defaults the FED had to step in to save the banks. So our kind Federal Reserve has been buying bad debts, repackaging them as derivatives, and selling them back at bonds and treasuries.
The very fact that the FED can buy $40Bln monthly of bad debts (mortgages) tells you just how much bad debt banks continue to carry on their balance sheets. Jim Rogers points out that BOA (Bank of America) has some numbers showing improvement on their balance sheets, but he says even they don't really know the true bottom line. Many other banks are in the same predicament. This call is made by Jim Rogers, because so many mortgages are in PROCESS. Process means, that the bank is waiting to take back the property or to settle back payments due on a mortgage.
So this is the dilema, many mortages are in PROCESS; if foreclosure occurs, money is destroyed. In a tepid market, individuals don't have the income to repurchase properties and the banks have to carry the losses on their balance sheets. So the friendly FED amickly buys the mortgages and sells them to desperate investors ready to buy the bonds at a negative price. One day, investors will see the bonds as trash and put their money else where.
Jim Rogers and Marc Faber
Rogers and Faber got after it on CNBC, where they both discussed the present economy. (Search for Rogers and Faber on YouTube.com.) Clearly they have differing investment styles but similar ideas. Rogers likes comodities and some Chinese stocks, Faber likes gold and some european stocks. But both agree that the U.S. economy is destined for a decline in 2013 because of Bernanke's agressive stimulus program. Bernake is writing a check he can't pay.
Their conclusion is that the dollar will be devalued and inflationary pressures will increase. Gas will be higher in costs, food higher in costs, construction higher in costs. Even if you have a job, your money will fall short of the rising costs. And if you have cash positions, your dollars will buy less and less. Sad day for retirees on fixed income.
The suggestions by Rogers and Faber are: buy real estate, buy gold and silver, buy commodoties, rice, sugar, and natural gas are suggested buys. Rogers likes undervalued Chinese stocks and Faber undervalued European stocks.
John Mauldin
http://www.mauldineconomics.com/images/uploads/pdf/OTB121020.pdf
John Mauldin largely draws his news letter from the Hosington Quarterly Report. You will see Hoisington listed under our RESOURCES and REPORTS sidebar. Do click on the label above to read Mauldin's letter. I think this report to be one of the most unabiased reports in the economic world considering they have billions in instutional investments. Bottom line...the economy cannot improve until there is a reduction in out national debt. Until politicans learn this lesson, we are destined for many more years tepid growth.
The Dr Invest Portfolio
In May we began investing in a BOND portfolio consisting of TIP and BND ETFs. We divided our total portfolio into thirds. 1/3 was invested into TIP and BND over a period of three months presently with gains of around 1.25%. We chose to invest in the BOND ETFs because the seasonal charts of a thirty year period show an investment in bonds performing well.
I would not consider 1.25% great performance but when considering we have been competing with the Fed in the purchase of bonds and Bernanke holding out stimulus promises it is surprising we have done as well as we have. You will remember that the S&P rose 12% between the end of July and the end of August. Since bonds move inversely of stocks, the unusual climb of stocks hurt our bond investment. Should the market continue its October decline, we could still see 3% gains in our bond portfolio by the end of the year.
10% of our $10,000 portfolio was used to purchase a gold ETF called IAU. This is a long-term investment seeking returns over the next 9 to 12 months. This gold trust is a hedge against money printing and inflation. It is expected that gold, a commodity, could decline as the stock market moves down but will readjust itself as market trends expose theirselves. For instance, war with Iran would send gold higher. Inflationary pressures would cause gold to rise in value. I am looking for the opportunity to put another 10% of this portfolio into gold or silver. Rogers believes that silver is a better buy because it is undervalued right now.
After our present market conditions have settled, we will look at stocks we can hold over Thanksgiving and Christmas. The dollar stores will be of interest once the market begins to revive. FDO is Family Dollar Store. DG is Dollar General. We will also look at our ETFs such as VTI, DBC, VEU, and VNQ.
In coming blogs we will do the research together so you can make your own decision in the future.
(note:the above article is for entertainment purposes only and not to be used as investment advice.)
by Dr Invest
It is as if "liquidity alone" according to the Kensians, could lift the market, yet all the while the fundamentals of the economy have remained weak and perilous through out 2012. Though fiat currency is not printed, it is created.
Look, when someone gets a mortgage, money is created. What happens if someone defaults on a mortgage? That's right, money is destroyed. The Fed uses arcane methods of figuring money creation and money destruction, but you can understand that with so many mortgage defaults the FED had to step in to save the banks. So our kind Federal Reserve has been buying bad debts, repackaging them as derivatives, and selling them back at bonds and treasuries.
The very fact that the FED can buy $40Bln monthly of bad debts (mortgages) tells you just how much bad debt banks continue to carry on their balance sheets. Jim Rogers points out that BOA (Bank of America) has some numbers showing improvement on their balance sheets, but he says even they don't really know the true bottom line. Many other banks are in the same predicament. This call is made by Jim Rogers, because so many mortgages are in PROCESS. Process means, that the bank is waiting to take back the property or to settle back payments due on a mortgage.
So this is the dilema, many mortages are in PROCESS; if foreclosure occurs, money is destroyed. In a tepid market, individuals don't have the income to repurchase properties and the banks have to carry the losses on their balance sheets. So the friendly FED amickly buys the mortgages and sells them to desperate investors ready to buy the bonds at a negative price. One day, investors will see the bonds as trash and put their money else where.
Jim Rogers and Marc Faber
Rogers and Faber got after it on CNBC, where they both discussed the present economy. (Search for Rogers and Faber on YouTube.com.) Clearly they have differing investment styles but similar ideas. Rogers likes comodities and some Chinese stocks, Faber likes gold and some european stocks. But both agree that the U.S. economy is destined for a decline in 2013 because of Bernanke's agressive stimulus program. Bernake is writing a check he can't pay.
Their conclusion is that the dollar will be devalued and inflationary pressures will increase. Gas will be higher in costs, food higher in costs, construction higher in costs. Even if you have a job, your money will fall short of the rising costs. And if you have cash positions, your dollars will buy less and less. Sad day for retirees on fixed income.
The suggestions by Rogers and Faber are: buy real estate, buy gold and silver, buy commodoties, rice, sugar, and natural gas are suggested buys. Rogers likes undervalued Chinese stocks and Faber undervalued European stocks.
John Mauldin
http://www.mauldineconomics.com/images/uploads/pdf/OTB121020.pdf
John Mauldin largely draws his news letter from the Hosington Quarterly Report. You will see Hoisington listed under our RESOURCES and REPORTS sidebar. Do click on the label above to read Mauldin's letter. I think this report to be one of the most unabiased reports in the economic world considering they have billions in instutional investments. Bottom line...the economy cannot improve until there is a reduction in out national debt. Until politicans learn this lesson, we are destined for many more years tepid growth.
The Dr Invest Portfolio
In May we began investing in a BOND portfolio consisting of TIP and BND ETFs. We divided our total portfolio into thirds. 1/3 was invested into TIP and BND over a period of three months presently with gains of around 1.25%. We chose to invest in the BOND ETFs because the seasonal charts of a thirty year period show an investment in bonds performing well.
I would not consider 1.25% great performance but when considering we have been competing with the Fed in the purchase of bonds and Bernanke holding out stimulus promises it is surprising we have done as well as we have. You will remember that the S&P rose 12% between the end of July and the end of August. Since bonds move inversely of stocks, the unusual climb of stocks hurt our bond investment. Should the market continue its October decline, we could still see 3% gains in our bond portfolio by the end of the year.
10% of our $10,000 portfolio was used to purchase a gold ETF called IAU. This is a long-term investment seeking returns over the next 9 to 12 months. This gold trust is a hedge against money printing and inflation. It is expected that gold, a commodity, could decline as the stock market moves down but will readjust itself as market trends expose theirselves. For instance, war with Iran would send gold higher. Inflationary pressures would cause gold to rise in value. I am looking for the opportunity to put another 10% of this portfolio into gold or silver. Rogers believes that silver is a better buy because it is undervalued right now.
After our present market conditions have settled, we will look at stocks we can hold over Thanksgiving and Christmas. The dollar stores will be of interest once the market begins to revive. FDO is Family Dollar Store. DG is Dollar General. We will also look at our ETFs such as VTI, DBC, VEU, and VNQ.
In coming blogs we will do the research together so you can make your own decision in the future.
(note:the above article is for entertainment purposes only and not to be used as investment advice.)
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