Today's Market
by Dr Invest

Many questions are being asked today about the direction of the market. There really is no magic here in market analysis. Common sense tells you that the market cannot continue to climb forever, there has to be a rest that comes to the market. Rather than admitting that the market will decline, financial advisers and brokers just can't come to a place of saying, market decline. In this mix is thrown more political wrangling and a European recession. We have the sequester followed by the controversy over setting a cap on spending.  For the immediate future, things don't look very hopeful.

MOMENTARY DOWNTREND

What the facts are telling me is to stay out of the market. If you have followed this blog, you will note that I had invested in WMT, saw a slowdown, then a marginal recovery where I sold WMT at a minimal profit. For all the talk of gains in the market, there has been little substance. Volatility and broad market swings continue to be a pest to investors. Continued Fed stimulus moves stock prices higher without any real GDP growth. With 40 Billion added monthly by the Fed, the outcome can only be future inflation, a devalued dollar, and stagnant growth. More conservative economists are predicting a 10% to 20% pull back in the economy and then more enthusiastic stock buying over the summer months.

All that I can see in the immediate future is continued high risk and declining stock prices. Until the end of March and possibly into April, I don't see real buying opportunities. Even gold prices have been miserable, falling some 9% to 10%. I can't help but believe that the government is manipulating gold prices by the on-going devaluation of the dollar.

Keep your stop sell in place. You determine how much you are willing to lose. Wait for the right time to invest. Don't expect the stock market to continue into higher highs.

VIDEOS WORTH YOUR VIEWING

Called, "The Bubble Film", some of the great investors give their views on the present market condition. You can listen to excerpts on YOUTUBE. Here are some links:

Marc Faber

Jim Rogers

Ron Paul

Do your own search on Youtube.com for "The Bubble Film". This film gives you insights into the mind of some of the world's greatest investors and economists.

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

Today's Market
by Dr Invest

Yesterday, my gold position in IAU hit my stop-sell and sold. Perhaps that was a bad decision on my part, but I didn't want to see my investment in IAU fall any further. There has been a big sell-off in gold and plummeting gold prices over the past six months. Before that, gold had been consolidating or moving sideways. When I purchased gold, there was the possibility that it would either climb or fall; I had expected gold prices to climb, but I could not have foreseen the level of exuberance in the market. The promise of unlimited easing made desperate some investors bid the market even higher. Stocks have become overbought and overpriced, yet there seems to be an unlimited appetite to purchase even more stocks at higher prices.

The talking-heads of CNBC admonish that stock prices haven't kept up with the normal growth of the money supply; thus, prices should even be higher for stocks and stocks are undervalued. All this yada, yada, simply doesn't take into account that we have been in an economic contraction. You will not have a "normal growth of the money supply" when growth is not "normal".

Even the Federal Reserve admitted that the economy had contracted in the 1st quarter. So, while the elections were under way here in the U.S., this contraction was hidden from us. If you could think back for a moment, just before the election there was an uproar over a remarkable decline in unemployment,  creating a shining star for the president's economic savvy. ECRI reported that all their economic indicators showed that we entered a recession in October of 2012 and that recession is continuing into 2013. Still, a den of voices urge investors forward, telling them to ignore the temporary slow-down and buy stocks while they are cheap.

KEEPING TO YOUR SYSTEM OF INVESTING

What is important is to have a "trading system". I listen to news and to the talking heads, but their voices are of less importance than the trading system. So if the market is declining, I don't buy. If the market is rising, I do buy. If there are indicators that the market is OVERBOUGHT, I wait until the market is OVERSOLD and then buy. These are called, trends.

Here is the S&P 500 from a few days ago.

 Here is the S&P 500 today.

The past three days has seen the market decline, the trend, it seems, is turning downward. No one can predict where the market may go from here, but the investor needs to remain alert a longer term downward trend. Should this trend develop more fully over the next two weeks, the market may quickly sour. One look at the VIX shows me how nervous investors are.  If you are buy & hold, then keep dollar cost averaging but expect to lose 10% or 20% of your portfolio.

GOLD, WHERE DOES IT GO FROM HERE

Gold has become very unpopular. The Federal Reserve did their job well, making stocks preferable over the defensive position of gold. The investor, feeling confident that the Fed will meet all future market declines with more stimulus, is now shunning gold. So gold becomes like any commodity. Should the market slip into a recession, gold prices will fall as the entire economy is deflated or contracts. So gold could fall in price rather dramatically. It is then, that people will begin buying gold as a safe haven. The price of gold will soar as more and more people expect a deepening decline in the market. The other scenario is that an over stimulus of the market will create hyper-inflation. The value of Money will become worth less and less against the price of gold... so it will take more money to purchase all commodities including gold.

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

Today's Market
by Dr Invest


I can't tell you whether the market will rise or fall, but I do know a crash when I see one. Most importantly, I know how to run when a crash is imminent.

There is nothing pretty about a crash, something has failed or something some one has misjudged brings about a chain of events that end in a catastrophe. What was once flying high, suddenly falls into the earth with a sickening thud, spraying dirt into the heavens from its awkward descent.

So too, is the crash of a favored stock that has carried you safely, but then suddenly, and with little warning falls while carrying your precious investment.

DID YOU HAVE YOUR STOP-SELL SET?

The only hope for the pilot of a maleficent aeroplane, is a parachute to safely bring the pilot back to earth. Likewise, the only hope for an investor in a volatile stock market is a STOP-SELL. When a stock crashes, I am less concerned about the state of the stock than getting out of the stock in a timely way.

Seeing the price of WMT and RTH beginning to falter and knowing that the SEQUESTER and more political wrangling was nearing, I moved my sell price near the last closing price. That one decision saved me a lot of grief, allowing me to get out of the stock before suffering painful losses today.

WHAT HAPPENED?

Someone leaked that February's sales at WMT were unusually low. That information brought on a rush to sell WMT (Walmart). You might remember that President Obama reminded us that the economy was recovering and economic growth was strong. (Please permit me a moment to laugh.) Consumers are not spending and this seems particularly obvious in February, since February is typically an off month economically. RTH is a ETF that holds a group of retail companies. RTH will not fair any better than WMT in the long-term.

OUTCOME

RTH was purchased for $44.75 and sold for $46.41, returning 3.7% in gain. WMT was purchased for $70.00 and sold for $71.05, returning 1.5% in gain and 1.155% in dividends. So roughly, I gained about 2.655%.  Yes, there will be some taxes to pay, but less than today's losses.

I had expected that investments in these two ETFs would have returned 6% to 8% over the past 4 months. I was sorely mistaken. Here is the reason why.  As in previous election years, I had expected a rise in the value of stocks. I didn't and couldn't have seen how powerfully the fiscal cliff would impact the value of stocks. I also did see how the anticipated battle over the debt ceiling would drive stocks down even further. Add to this the sequester (automatic cutting of budget) and a clear recessionary downturn in Europe, and you have the makings of a perfect storm.

This is tragic, but I am happy that I have averaged over 3% between the two investments. What is disappointing is that 6% to 8% couldn't have been returned during the earnings season.

Again, both WMT and RTH were conservative investments, designed to limit risks and enhance gains. After the major threats to an increase in the value of stocks have been erased, WMT and RTH would be likely candidates to be re-bought in the fall.

The Scheduled Threats

• European Recession
• U.S. Sequester
• Budget and Debt Ceiling
• Skirmishes and Wars

I remain invested in TIP, BND, and IAU. Should now be the time for a 10% decline in stock prices, this position would likely return some profits.

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

Today's Market
by Dr Invest

Nothing has changed! We sit in an overvalued and overbought market. Stocks are climbing to all new highs with the help of $42 billion added liquidity by the Federal Reserve each month.

Let me repeat, if the hospital puts you on life support, you are sick! No one need to be brilliant to understand that the market would quickly slip into a recession without Quantitative Easing. No matter what new heights the S&P might hit, our economy is sick and cannot stand on its own.

The rapid rise in the market is a mirage that evokes an assurance that real wealth is there to be obtained, when it doesn't exist. The market can't climb 6.3% in a month and be expected to continue climbing higher while the GDP remains at an projected 2.8% for 2013. What this implies is that we will see another volatile market in 2013 with the market surging higher and then collapsing, and then surging higher again and falling.

The real issue is RISK. Investors see the market climbing, gaining 6% and the stock analysts suggesting that the sky is the limit and that our economy is growing. Hoping for a quick return, investors move from treasuries to stocks, hoping to catch some of the green magic bestowed by government stimulus. What they fail to see, is that all this is a ponzi scheme perpetuated by the very government and financial corporations that brought us the worst financial collapse since the "great depression".

Is it worth the RISK to fly high in the sky,(see photo) when the dangers are so great but the return is so little? It is EXUBERANCE, that brings us to risk so much. The clapping crowds, the adulation, the chorus of voices encouraging us to climb higher and risk even more. Then, with a sudden gust of wind, or single muscle spasm, or momentary slip of the hand, we loose that which is most precious to us.

Don't think that just one little war, a further decline of economies in Spain, Italy, or Greece, or a new political raul, couldn't push the market over the edge. You could also add a possible trigger, from our increasing national debt or simply the exhaustion of our own economic momentum. Economic "bang point" is used to describe the point where an economy no longer has the income to sustain its debt. The U.S. is borrowing money at astounding rates, but one day, we won't even be able to afford to pay the interest...that is the BANG POINT!

ANALYZING THE S&P

Above is the S&P. No one would argue that we are at the TOP. The market could climb higher, especially upon market exuberance. But the argument is really based on how likely is it that the market will continue to move higher? You can see the projected REGRESSION TO TREND. This is the problem... the higher the market moves, the less likely it is that it will continue to climb. No one can argue that our economy is strong unless they are deluded. And many analysts are making the argument that our economy is strong and ready for a strong surge in growth.

Listen, nothing has changed. Our economy is pathetic, the only growth is that which is manipulated by government stimulus, and the market continues to move higher as stocks are over valued and over bought. PLEASE GO THE SIDEBAR...CHOOSING "RESEARCH AND MARKET REPORTS" to read a thorough examination of our present condition. Though the market may climb a bit longer, there will be pull back of 10% to 20% and then investors jumping back in to push the market higher for a season, but expect that at sometime in 2013 to 2014 a decline of 30% to 40%. The years 1990 to 2000 provided us with an economy in growth. We have not seen that kind of market strength again over the past 12 years.  Growth of the S&P 500 since the year 2000 until now, has been 1.73%.  I don't care how many times you brag about your gains from the stock market or extol the importance of "buy and hold", the hard truth is that had you bought the S&P 500 as an index fund in the year 2000 and held it until now, you would have only gained 1.73% over the past 12 years.

Now consider CPI (inflation) adding up to around 20% over the past 12 years, the cost of a financial adviser adding another 20% to your expenses over the past 20 years. This totals 40% in losses to your portfolio before adding your 1.73% gain over the past 12 years. So your portfolio only has about 58% of its original value.Now you know the rest of the story.

My suggestion is to prepare yourself for a decline in the price of stocks. This decline may not happen until the end of April but you should be prepared for a pull back at any time. If you are using a "buy and hold" method, then be prepared for a few very bad years ahead. If you are a "swing trader", move your STOP-SELL closely to your closing price of your stocks.

One economist spoke of the coming collapse like a group of people continuing to play volley ball after hearing the report of a coming tsunami, thinking to their selves, when we see the tsunami coming, we can stop playing then.

By the time the tsunami comes, the streets will be crowded with cars and people will be running for their lives, confusion will be king. In kind, the time to prepare for a coming collapse is now. Once people see the financial tsunami coming, everyone will want to sell... there will be no buyers. You will be stuck with a declining portfolio and will have to ride the recession to the bottom. Perhaps, just like you did the last time.

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

Today's Market
by Dr Invest

I haven't been writing because there is little new information to add. I am holding WMT and RTH as my stock positions. They have risen and fallen since their purchase in November, and then risen over the over the past month. At this time both are around the price I originally paid.

My gold position, IAU, has fallen over 7% since my purchase in September, regaining 2% in January. The purchase of IAU was for a window of one year with an expectation of a 6% to 8% gain.

My bond position with BND and TIP purchased in May of 2012, has risen and fallen with BND loosing and TIP gaining. Both BND and TIP, when taken together are a wash. All the above positions taken together are only down .22%. When looking at this near return to the original investment, you need to remember that some of this money has been invested nearly nine months and with positions of this quality, I would have expected to have seen a return around 6% to 8%.

The election, the fiscal cliff, the debt ceiling, the constant wrangling over political agendas have all taken a toll on investments. Bernanke's commitment to stimulate the market to the tune of $82 billion monthly through "twist" and "QE-3". This kind of government market manipulation keeps stocks climbing, without any real financial fundamentals to support the rising market.

TALKING HEADS

Almost everyone is touting how wonderful the market will be in 2013. All the voices seem to rise in hearty agreement, get your money out of your savings and buy stocks... NOW! We can ride the fed stimulus wave for a little while longer, but at some point the wave will break and then economic fundamentals will take over again.

The talking heads point out that a leading indicator of recovery are the new home mortgages. So many of these points of recovery are simply mirages. Things are not the way they appear. Click on the link and listen to this video by David Stockman...... David Stockman Video

http://finance.yahoo.com/blogs/daily-ticker/housing-bubble-2-0-david-stockman-133026817.html

I believe that David Stockman has it right! Rising bubbles, whether housing or bond, are being created by the government. At some time these bubbles will burst.

Marc Faber, defends his viewpoint that in 2013 we could see a decline in February and then rise dramatically and finally end in a dramatic collapse. I believe that you should carefully consider everything he is saying for 2013.  Listen to his video.... Marc Faber Video

Let me say, you would be wise to consider the advice of both these men. I remain fixed in my investment positions, but I am defensive at this time. Stop-sells remain on all my positions and I am prepared to sell so I can minimize my loss.

RESEARCH AND MARKET REPORTS

I encourage you to move to the sidebar and look for "Research and Market Reports". Read all the recent reports under that heading. These are totally free to you and each one, if purchased from a research firm, would cost you any where from $250 to $500 per year.

John Hussman, Howard Marks, and John Lacey are at the tops of their field with billions under their management. These voices are warning you to take care. The economic exuberance that has overtaken the present market will end in a punishing correction. Whether you stay in the market or not, you need to be psychologically prepared for a coming downturn.

PREDICTIONS

It is hard to explain our present condition simply, but imagine living on canal near the ocean. Each day the tide take water out of the canal and then returns it. The government, thinking that it would be best if the canal remained filled, builds a retaining lock that keeps the canal filled; so to you, each day the canal remains full. No longer are their predictable cycles of lower water and higher water.

You can see the problem, from your perspective the canal is always full. You will pull out your boat and fish in the canal. You will go to visit your friends, and they visit you because the canal never empties.

One day though, the retaining lock will fall into disrepair and the government will no longer be able to keep the water in the canal. The water will rush out into the ocean and those fishing, traveling, and using the canal will find their boats stranded for weeks in inconvenient locations along the canal as the government makes the necessary repairs.

If you don't think this will happen then think, NEW ORLEANS. The government knew for years that the dyke system was failing. Then one day, without warning, sudden calamity.

I am not saying these things to scare you from investing. But you need to be adequately prepared if calamity does come. What will happen when the Federal Government can no longer maintain a $82 billion dollar stimulus program?

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