Today's Market
by Dr Invest

Bubbly analyst remind the small investors that even though stocks are at an all time high, it is still a good time to put all your money in stocks. There seems to be no trepidation about the Greek Stock Index dropping 18% in one day, or a barrel of oil dropping from $120+ per barrel to $56 per barrel. Even professor Schiller who developed the Schiller Price Indicator, can't acknowledge that his own indicator is flashing that it is time to get out of the market. <http://finance.yahoo.com/video/scary-market-indicator-shiller-121400665.html>

Looking For Head & Shoulders

We are looking for the forming of a head and shoulders pattern and that pattern seems to be shaping up in such a way that March through May would be the target for a downturn. Now I am speculating here and that is why you are reading a BLOG. Blogs are entertaining and serve no purpose other than entertainment and that is especially true of this blog. So let me speculate a little.

Everyone knows that the market could continue to go up or could suddenly collapse at any moment, but several patterns do seem to be prime patterns. Most recessions begin with a Head & Shoulders pattern.

The Fed-eral-Reserve Is On Its Way!  

The Republicans are empowered by a populace that is exhausted from government debt. Obama has already spent more than any previous president, initiated programs that will increase debt and limit incomes for years into the future, and with Fed stimulus programs increasing our national debt to even higher extremes, people are DEMANDING that the spending stop. This puts the Federal Reserve in even a more difficult position, opening the way for recession to finally unfold. Yet, it is likely that pressure will be put on the Fed to continue limited stimulus programs to advert any market downturns.

House of Cards

Recessions in Japan, Greece, Russia, and China are not without consequence. Other markets are also teetering on the edge of recession and likely to fall into recession. Can the U.S. continue a vibrant recovery in the face of world-wide recession?

I think you know the answer to this question. No!

Ken Moraif wrote: The international monetary fund (IMF) cut its 2014 world growth forecast for the sixth time since January 2013. Europe, Japan and China all seem to be on the verge of recession and are fighting to create growth.

All of their respective central banks are ramping up the process of printing untold trillions of dollars in an effort to stimulate their economies. As we saw last week, the Market will receive this very favorably. The Market doesn't care whether the growth is real or artificial it only cares that there is some.

The prospect of massive government stimulus programs in all of those economies will most likely make the Market go up over the next few months. The problem, of course, is that you can pump adrenaline into a sick person and he could get up and run around the room, but once the adrenaline wears off, the patient is still sick. This may very well be the case when governments around the world run out of stimulative options and all we are left with is a mountain of debt.

When that happens, the Markets will no longer be happy and we could see a significant correction.

If you are concerned about the market setting all-time highs and look below you and see nothing but the abyss, let me say that I agree with you. The rise since the end of the last bear market is historic. You and I both know that the higher the market goes, the further down it could fall.

Couple this with the fact that the longer we go between bear markets the more severe the bear market is when it finally gets here and we have the recipe for market volatility. We average a bear market every three and a half years. It has now been over seven years since the last one started. We are now 42 months overdue.

Since 2012, copper prices have collapsed while stock prices have soared. Since the price of copper moves with the price of stocks, it has been my belief that the market collapsed in May of 2012. May of 2012 was when Bernake began his major stimulus program which kept stock prices from collapsing, but the economy never really ignited as hoped.

If you are to remain in the market, be agile. He who gets out first, saves the value of his portfolio.

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

Today's Market
by Dr Invest

One of the major questions is who will take the next step? Who will invest the BIG MONEY? You may ask, "What are you talking about?" Well, the market has rebounded, but with very low volumes of trading. This means that investors are shy. The investors I am really talking about are not speculators or traders, but the "big boys", the institutional investors.

What we are seeing is an uncertainty in the market. There is talk of growth and a robust recovery, but no one really wants to get into the market at these high prices. Mark Hulbert interviewed Hayes Martin and found some very interesting ideas. You can read more about it for yourself at http://www.marketwatch.com/story/why-the-stock-market-is-weaker-than-it-looks-2014-11-07?siteid=yhoof2

Here are some highlights. First point, the market is weaker than it looks; second point, the recent rally is unsustainable; third point, investors are not committing to the market, there is no strong buying conviction. Hulbert writes:
,
A most telling weakness, according to Martin, is that the market never exhibited the kind of explosive upside action that is typically seen “early in a strong market advance off important lows.” For example, there has not been even one session in which trading volume for issues rising in price was at least nine times greater than the volume for declining issues — a so-called “9-to-1 up day,” as this phenomenon was dubbed by the late Marty Zweig.

This is noteworthy because, as Zweig wrote in his 1986 investment classic “Winning on Wall Street,” “every bull market in history, and many good intermediate advances, have been launched with a buying stampede that included one or more 9-to-1 up days.”

Martin suggest: Martin’s best guess? We’re not at the beginning of an intermediate-term advance that takes the broad market averages to significantly higher levels. Instead, the recent rally is merely “an interim bottom within a longer-developing top.”

I would agree with this idea, Our five-year Bull Market is long in the tooth and likely to collapse; stocks are over bought and over priced; QE is being abandoned because of the small affect on the market and the development of new market bubbles; and the likelihood of near term bear is very near. I have suggested that we could see recessionary pressures return in January, but it could be pushed into April of 2015. Finally, some are pointing to a more positive political climate with the GOP taking power, but since 2012 our market has been like no other. Everything you see in this economy is artificial and without real economic advances, no amount of money printing will produce a vibrant economy.

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

Today's Market
by Dr Invest

Dejavu, here we are, repeating the mantra, "Everything is OK, everything is OK, the economy is taking-off, the economy is strong and vibrant!"  Now a month ago, we were reassured by analysts and the Federal Reserve that we had the strongest of economies and were well on the way to recovery, only to loose most of the year's gains in stocks. A month ago, even the most positive analysts admitted that the S&P 500 at 2,000 was an indication that stocks were OVERPRICED. So with an abrupt decline in the stock market in October and now a rapid rise in stock prices and the S&P 500 now moving near 2,000 again, where are the clamoring voices warning that stocks are now OVERPRICED.

I'm hoping you are understanding what I am saying. Not a whole lot has changed in a month. The stock market blipped down and then back up. If we continue getting daily rises of over 1% in the indexes, we will soon break all-time highs for the stock indexes, yet again. Finally, in my logic, if stocks were over-valued a month ago and they return to the same heights as last month, then are stocks not still overvalued?

So let's be clear, stocks are still overvalued. Second, copper prices are not moving with the market... copper prices are deflated, petroleum is deflated, gold & silver is deflated.... but the stock market is growing? This isn't the way an economy moves.

So what is going wrong here? Bob Pisani wrote: The market internals do not reflect great strength. We are barely above break-even on the advance/decline line. Because the economic environment is so poor in Europe, the U.S. stock market is the only game in town. You are not the only one speculating in this market. There are desperate European investors, who are in declining economies; and they are coming into the U.S. market for the same reason you have moved your money from cash or bonds into STOCKS. 

So what happens in a competitive race to buy stocks.... they go up higher and higher, until stocks are so overvalued, that no one is interested in buying them. Stocks have been overvalued and overbought. With these new investors seeking gains, stocks may well continue to rise; not because of increasing VALUE, but because of increasing PRICE.  For example: You might pay anywhere from .99 cents to $1.25 for bottled water. But when the price of bottle water rises to $25.00, I will likely go look for a water fountain or bring my own water from home. 

Value is different than PRICE. The value of a stock is what a person would reasonably pay for the growth of a company. Let's say that a company, after expenses, returns $20 million this year, and if it continues on its current path of growth, next year it will return $30 million, and the next year $45 million etc. Then you would value the growth of its stock at what it will reasonably return if the company continues on a path of future growth. But if our company returned $30 million and someone offered to pay a PRICE for the stock at a $60 million valuation, I might not see how that company could possibly grow that much over the next year. I would be reluctant to buy-in and would see that stock as OVERVALUED. 

Real GDP has been under 2% a year since 2008, yet stock indexes have grown 140%. Divide 140% by 5 years and you get 25% annually. Is it possible that stocks have really grown 25% annually in a non-vibrant economy. In vibrant periods of growth, we have seen about at 12% annual average growth in the stock market. So, 12 times 5 years equals, 60%. Whether you see the growth as 140% or 120%, that rate of growth in a economically sick market can only be described as miraculous. Something is wrong, something doesn't smell right, look right, or act right. Regardless the opportunities for profits, what you are seeing is a sucker's game. 

A CNBC correspondent named TRADER went after Peter Schiff, telling him that he needed to admit that he was wrong about gold and needed to apologize. However your feel about this confrontation and attack against Schiff, in a few months, Schiff could be proven more right than wrong about gold. I am not particularly a GOLD BUG, but pushing into six years of remarkable growth in stocks just doesn't seem possible or likely. 

My warning is to just be real and realistic. If something doesn't seem right, it probably isn't.

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

Today's Market
by Dr Invest

We are being reminded that we have entered a robust recover and that there are NO RISKS in putting your life savings into stocks. In fact, we are told, there is no better opportunity to invest because stocks are so amazingly low after our recent decline. This is the magic reset that will allow us yet another year of great profits in the bright future of stocks.

Now all of this GOOD NEWS, must be weighed in the light of one major fact. We are still on stimulus. The government is still printing money.... oops, providing liquidity to the market. But the fact is that our economy is on life support and when it is removed, stocks will tank. To reassure us, the Federal Reserve says that they will be around to keep and eye on things and will not reduce stimulus if the market shows weakness.

Most people I know, don't believe that! When was the last time government made a great effort to save the common investor? They save BANKS, because they are too big to fail.  But the little investor has no friends to save their investment, and in truth, there is a plan to redistribute their wealth. (see Robert Shiller, advisor to Democratic Presidents) He says, that this has been in the works for years. Just as in the Great Depression, the little investors are the ones who will experience the greatest hurt in a sudden fall in stock prices.

So as stocks rebound, one has to ask the question, WHY? The EU is on the verge of collapse, the economy in China is slowing, Amazon's profits fell this quarter, Sears is closing 100 stores and letting go over 5,000 employees, soaring costs of housing is shutting out homebuyers, Ford Co. profit falls, more Ebola cases arrive in the U.S., the middle class continue to lose their buying power, corporations continue a move toward part-time employees to avoid payment for employee healthcare, real inflation continues to climb, while most middle class Americans have seen a decrease in income.

During the 2008 recession, many people lost their jobs. They had years of experience, giving them seniority. But by 2010, business culture had changed. Cutting the senior positions, allowed corporations to hire MORE EMPLOYEES to PART-TIME positions, saving the corporations the cost of healthcare. Furthermore, many corporations stopped their pension plans and moved to 401Ks that would now be owned by the employee. The corporation would provide matching funds to the 401K, but the employee would now be responsible for their own investment. The corporation would no longer be responsible for a pension fund that might be underfunded years later.... the employee would now be the only person to take the risk of a falling market, the employee would catch the falling knife.

So imagine having worked for 15 years, getting maximum pay, and then being "let go". Thinking that you could still get the same pay for your years of experience, you seek other companies to hire you. But you find that the only jobs offered are ENTRY LEVEL and PART-TIME. You still need to survive, you still need a salary. So you take the entry level part-time job. You are now making half as much as your earned two years earlier. Should I mention, that Obama-Care is the only source of healthcare insurance and the original promises of keeping your own doctor, and a $4,000 deductible has grown to $6,000 deductible. You pay $6,000 per person before insurance kicks in. A family of four could be out $24,000 in medical expenses before coverage begins. The average income in the U.S. has been $52,000 per year. Now that average income has fallen to around $48,000 to $49,000.  Subtract $24,000 and your are near poverty level.

Robust economy, uhh, no! Possibly in the imagination of some politicians and economists, but in real life, we seem light years away from a robust economy. Don't invest blindly. Understand that in the near future, we will return to a failing stock market and it won't be pretty.

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

 

Today's Market
by Dr Invest

I should be humored by the "big mouthed", "over confident" analysts who are now ringing their hands and scurrying around in sheer panic. This is the way a market crashes; it is unpredictable and unforseen. Far too much confidence has been placed in central banks (the Federal Reserve). They can bolster markets for a while, but eventually even the game players realize that they are being played and everyone loses confidence in the government hype. EXCEPT.... EXCEPT.... EXCEPT the poor middle-class fool who put his hope in the investment adviser dream-maker. The poor middle-class fool has been sold the bill of goods that the wisdom of his financial adviser in placing them into a buy and hold investment will perform the best in the long run. The problem is that study after study has shown that since the year 2000, that kind of investment strategy has failed.

We Break this Article for a Moment of Panic

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi said: "Consumers have pulled back, pulled back big. It's a little scary out there," Manufacturing data for the New York region also showed a slowdown, with the New York Fed's Empire State index plunging to 6.2 percent in October after hitting a five-year high last month. "Whatever the data is telling us ... it's kind of hard to swallow. Exports were at a record in August. Unemployment is coming straight down. I'm mystified by the data," Rupkey said.

Back to the Article

The Dalbar Study and many other analysts have pointed to major changes in stock investment over the past 14 years. When financial advisers sell their products.... and that is what they are doing.... they always take a clip of the seasons of the most rosy returns. If, they say, you had put $10,000 in XYG FUND in 1983, you would have gained blah blah percent. They are selecting that period because it shows a season of the best returns. If they say, "If you had invested $10,000 over the past three years, look at how much you would have gained.", they are using a the rapid growth in the stock market to fool you into thinking that future years will do the same. Think STIMULUS! The government has been causing that growth in stocks. The government has been trying to create a WEALTH EFFECT. There is no valid robust economy, the hard working, middle class fools have been duped by the young, bonus driven brokers and financial advisers preying on the uninformed. And when the market falls, the high flying sells team that misinformed you, will take their millions and retire in Costa Rica at 38 years of age. 

Getting Your Feet Back On the Ground

I am settling-in for a possible rebound and then a serious collapse in the economy. I don't know that the time is NOW, but it is soon. If you have made 15% or 20% returns since 2012, sell and cement your gains. I think there is rough financial weather ahead in the next six months. I expect a rebound until the end of the year, but that doesn't have to happen when you consider that the market actually collapsed in 2012. (See previous blogs and copper prices)

If you have made money, now is the time to take profits and run. Yamada said, "I'd rather be out of the market, wishing I was in; than be in the market, wishing I was out!" 

(The above article is for entertainment purposes ONLY, and is not to be used as investment advice.)

Today's Market
by Dr Invest

Some people have read in my yawn, that I'm somewhat disinterested in everyone's losses over the past few weeks.  Well, that's just unfair. In my last blog, I reported that in May of 2012 there was a well formed "head and shoulder's" pattern waiting to exert itself upon the market. Bernanke answered  that threat with months of bond buying at the costs of trillions of dollars. The clear cut result of that bond buying, stimulus, liquidity, or money printing was the stock market rocketing to new heights, while copper fell to new lows. If you are a trader, you will already know that copper moves in concert with stocks and can be used like a "canary-in-a-mine" to show the health of stocks. Listen, the canary has been dead since May of 2012.

The canary in the mine, that stopped singing in 2012, is simply showing us that the robust economy we thought we had is a mirage, a figment of our imagination. The reality lies with the descending price of copper.

A More Truthful Season?

You may ask: Is the Federal Reserve moving us into a more truthful season of economic reality?  The answer is NO! The FED has printed money at such a pace, that there are real concerns about inflationary impact. No one would argue that inflation is rising; yet with the failing economy in Europe, the dollar looks remarkably strong. I used the word, MIRAGE. What you see as economic reality is not real. When Japan and Europe begin the very shallowest of recoveries, the U.S. Dollar will fall like a rock and the foolishness of stimulus will show itself in a devalued dollar.

Patient on Life Support

No one.... absolutely no one, would argue that if the Federal Reserve removed all stimulus at this very moment, we would solidly and immediately fall into a RECESSION/DEPRESSION. This is inarguable! Without stimulus, the patient would die. (PERIOD)

Why then, are our political leaders talking about the robust economy they created? They revel in the declining unemployment numbers, while those employed are only part-time or at the bottom of the pay-scale. This SLACK as the FED calls it, is worrisome and reflects the economic sickness present in our system.

A New Head and Shoulders Pattern?

With a new weakness appearing in our market.... in spite of the continued FED stimulus, there is concern about technical indicators in stocks that would foretell the end of the Bull Market.  Here is what seems to be forming:

Looking at the current S&P 500, it appears that there is a head and shoulders pattern unfolding. I am projecting that it could be at the beginning of 2015, after investors mistakenly think that a market correction will result in a buying opportunity.

Changes to the Projection

The FED could aggressively increase bond buying to bolster the market once again. Yellen has suggested that she is not timid about more stimulus and Peter Schiff, James Rickards, Jim Rogers, Marc Faber and other perma bears have suggested that the FED would do so. I do suggest that you go to YOUTUBE and watch the analysis of James Rickards in "The Death of Money". Though Rickards analysis may be more theoretical, you should be prepared with an understanding of how things could unfold.

Governments are devoted to making their citizens believe that taxes are low, the economy is improving, and their dollar is strong. If it is within their power, they will keep the economic ball rolling.

The Problem

The problem is that there is no such thing as an eternal bull market. Given time, every Bull Market will collapse. Our market did so in May of 2012. Instead of allowing a market correction, Bernanke implemented a course of action that has prolonged this Bull Market for an unheard of almost five years. Economists will tell you that there have been such Bull Markets in the past, BUT THEY OCCURRED IN A ROBUST MARKET EXPANSION. There is no such expansion presently, and no hope of such an expansion in the near future.  Let me say it again, SMOKE AND MIRRORS. What you see as a robust economy, ISN'T! The economy is on life support. This is a time for defensive positions.

(note: the above information is for entertainment purposes only and should not be used for investment purposes in any way.)

Today's Market
by Dr Invest



While reading some research today, I came across a chart that confirms some of the ideas and concerns I have about the present market. Before I present the chart, let me be clear, in the short run, I think the market will continue its climb. Dr Robert Schiller's use of "Irrational Exuberance", a professor at Yale, was picked up by Alan Greenspan and used in a speech he made in 1996. Dr Schiller is also know for developing a more accurate measure of P/E ratio (price to earnings). He called that measure CAPE or Cyclically Adjusted PE. Schiller recently affirmed that stock prices had too rich valuations and were over priced. This is contrary to some Analysts who are trying to tell the public that "now is the time to buy because stocks have never been cheaper. 

Daniel J. Want, recently improved on the CAPE ratio by using the Baa yield. This seems to smooth out the data and give a more correct valuation. For those wanting the details, go to: http://thecrux.com/this-powerful-indicator-says-a-major-top-is-approaching/

Here is the chart:

Note the sudden dip around 2012 in the RED LINE, stock valuations had begun to fall, but were pushed higher as Bernanke started the $60bln per month by back of bonds. The valuation of stocks as risen, almost as high as any of the previous valuations preceding each recession. Stock are NOT at all-time lows, but all-time highs. As my chart below shows, copper prices dropped in May 2012, but the S&P continued to climb. Copper and the S&P are typically correlated and move together. In the yellow frame is copper and the S&P moving opposite of one another. This is at the same time in 2012, in the chart above, that shows stocks moving into rich valuations due to FED stimulus. 

Enjoy this exuberant moment... and it well could last, pushing the S&P to remarkable heights... but when the sudden and incalculable moment arises for its fall, without warning the stock market will make 2009 seem like a picnic. 

My suggestion, be cautious until the market has turned downward.

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

Today's Market
by Dr Invest

Someone recently asked me about our current market situation. My assessment is "EXUBERANT". Even the financial analysts can't admit to the obvious decline in current economic fundamentals and they advise that stocks are at an all-time low in valuation, that the market is almost non-volatile, and that the economy is rebounding. It is like whistling past a grave yard! Their advice is cheery, but you feel a bit uneasy that something is gonna jump out and get ya!

I've pointed you to the reports at Hussman Funds and at Economic Cycle Research Institute. I reported that a decline in economic fundamentals began in May of 2012 at which time the Federal Reserve began a major bond buying program to stimulate the economy. A stock market down-trend did not take hold and Bernake was able to muscle the stock market ever higher. Since interest nor stock dividends no longer provided a safe haven for investments, the only game in town were stocks. Speculation in stocks continue to drive the stock market higher, so that most stocks are overvalued at this time. Look at the chart I have provided below:

There are several things worth noting. First, the blue represents the price of copper. Most of you know that as the price of copper goes up, so do the stock prices. A drop in copper prices are certainly the indicator that the prices of stocks will soon follow. (see the yellow box showing an inverse pattern)

In 2012, there was the formation of a head and shoulders pattern, indicating a down turn in the market. That down turn was arrested by FED intervention. You would typically say, "Great, now let's make money!"  The problem is that though the S&P continues its climb, copper continues to decline after May of 2012. Copper prices are telling us something. Copper is suddenly inverse of the price of stocks. This is very unusual and out-of-the-ordinary. Another telling indicator is represented by the VOLUME of trading. From the middle of 2013 until April of 2014, the volume is about as low as 2008 into 2009. There is a temporary spike in 2014, but the volume quickly falls to its previous levels as the "good news" of the economy is overtaken by the true state of our economic realities. 

The Realities

Stocks continue to climb because there is no other game in town, and because the Federal Reserve continues its stimulus. There isn't any real confirmation of a strong uptrend because the volumes remain low. It is the speculators and the corporate stock buy-backs that keep the price of stocks rising. Analysts and financial advisers don't want the merry-go round to stop, so they keep pumping stocks. Still, a large percentage of people refuse to put their cash back into stocks. Several bubbles have started because of FED stimulus, and by almost all standards of measurement, excepting the government's standard of measurement, there is an indication that inflation is on the rise. When the general public was asked the question, "Do you feel richer today than you did three years ago, almost everyone responded with a resolute NO!" Though there is no standard of measurement by which the public can measure inflation, the general public feels poorer as costs continue to rise. 

A Few Voices Trumpeting the Truth

For the first time there are a few voices trumpeting a contrarian view, and some of these voices have been long-term bulls. They warn of caution moving forward. Today's headline was "Shares, bonds rally as investors bank on ceaseless stimulus." This current false rally can be pushed further as economies are propped up by the central banking system. The German economy is now needing stimulus as trade with Russia wanes. Portugal, Italy, Ireland, Greece, and Spain have done little to pull out of their economic doldrums. No matter how much money continues to be thrown at these economies, unless the economic fundamentals change, it is only a matter of time before a crisis. 

What to Do

Governments must cut their spending, reduce taxes on their citizens, reduce the size of government, reduce their debt, reduce the myriad of laws and regulations that destroy productivity, and abolish the Federal Reserve. Obama Care will result in an economic drag as insurance companies raise their rates and the consumers begin to pay the higher deductibles. A close friend, told me of her grand-daughter who has a blood disease, where the blood thickens. Costs for treatment... $56K per month. The insurance company underwrote the policy for Obama Care, told the 16 year-old that she would be dropped because there was an error in her address. (This is called, RECISSION) Insurance Companies have to sign you up, but they don't have to keep you.) She will be able to apply again for insurance in October, if she lives that long. We fundamentally know that change is needed, but who will stand up and take the criticism for suggesting such ideas. And yes, the U.S. without a Federal Reserve for a number of years. (See Andrew Jackson and the Federal Reserve)

What to Expect

Expect consumer spending to remain low. Expect companies to build stockpiles of unsold inventory. Expect the FED to continue stimulating the economy. Expect companies to buy up their own stocks to keep their stock prices artificially high and in demand. Expect stock prices to keep climbing... as long as stimulus continues. Expect economic energy (the GDP) to decline further. Expect companies to lay off workers again as unsold inventory builds up in warehouses. Expect the economic outlook to become soured as sales fail to ignite. Expect salaries to remain low. Expect layoffs to begin rising again. Expect stock prices to fall as profits decline. 

When will this happen? At any moment between now and the next two years! A crash has already been averted over the past two years, since 2012. The government might be able to hold off a recession another two years, but it seems unlikely that they can continue the current path they have taken. If you have stock positions, keep them; but use a stop-sell to sell them upon a sudden decline. If you don't have stock positions right now, don't buy them. Cash is King.

Explained Before

Typical business cycles would be 4 years bull market and 2 years bear market. A typical down trend will carry stocks down around 50% (or at least in the past recessions). So you start with a $100,000 investment, there is a recession and you lose 50% of your investment. You now have $50,000 invested. If your are invested in the S&P 500 index and it grows 100% over the next 4 year bull market, your portfolio will now be worth its original $100,000. 

If you held the $100,000 investment in CASH, and invested it in the S&P 500 index at the start of a 4 year bull market, and the market grew 100%, you now would have $200,000 in your portfolio. For a closer look, that 100% gain over a 4 year bull market would have averaged 25% per year. If you count both a 2 year bear and 4 year bull, your gains over a six year period would still be 16.6% annually. 

If you are wanting to invest, start at the bottom of the business cycle. Buy stocks cheap, and then let them grow. If you buy stocks now, you will buy them HIGH. The price you pay for a stock is projection of where you think profits will be in the future. I don't believe that profits will continue to remain high, but that's another subject. Like a Boy Scout, if you are not prepared, get prepared. A bear market is closer than you think. 

(Note: The above article is for entertainment purposes only and not to be taken as investment advice.)

Today's Market
by Dr Invest

If you are wondering... NOTHING HAS CHANGED. Financial advisers, brokers, bankers, and the sort, all want you to know that the market is doing "FANTASTIC". They remind you of how much stocks have gone up in the past two years, beating the drum of "staying in the market and investing more". Our president reminds us how wonderful the economy is under his watch, with unemployment at an all-time low. Daily, central bankers remind us that the future is remarkably bright. Laguarde of the International Monetary Fund spoke to central bankers last week, declaring "new age" in which Central Banks can resolve almost any financial crisis if they work together. This week Laguarde is saying that there will be a cut in the institution's global growth forecasts and that risks in the U.S. because of weak investment as the rebound accelerates.

Rebound? What rebound? The Federal Reserve's Yellen, just announced a cut to the Fed's original projected GDP for 2014. If you are confused, so am I. The Economic Cycle Research Institute said that we entered a recession in 2012. Though stocks have ignited, the GDP has averaged less that 2% annually. By the Fed's own statement, they have said that 2% is STALL SPEED for a recession. NOTHING HAS CHANGED. People are risking their money and their future on the advice of financial advisers they trust, as the market nears the moment in which take a new plunge.

Investor sentiment has never been higher. On paper, investments seem to have never been more productive. Financial advisers, brokers, and bankers are telling customers, "You don't want to miss out on the rally" and "This bull run still has legs."   What you are hearing are lies. Like a man who has cancer, but not yet symptoms, he feels ready for game; while all along the cancer is slowly eating away at his health.

As I've said so many times, if you removed the punch bowl of stimulus from the markets, they would immediately collapse. This isn't the sign of strength, but rather weakness. Who, excepting the ignorant, would invest in a market like this?

HUSSMAN'S TAKE

HUSSMAN.COM  Last week, the Bank for International Settlements, which acts as the central bank to central banks, issued its annual report. It is about the most insightful warning that one is likely to see from the central banking system, even if the Federal Reserve, ECB and other individual central banks are the ones being warned.

 “Financial markets have been exuberant over the past year, at least in advanced economies, dancing mainly to the tune of central bank decisions. Volatility in equity, fixed income and foreign exchange markets has sagged to historical lows. Obviously, market participants are pricing in hardly any risks. In advanced economies, a powerful and pervasive search for yield has gathered pace and credit spreads have narrowed. The euro area periphery has been no exception. Equity markets have pushed higher. To be sure, in emerging market economies the ride has been much rougher. At the first hint in May last year that the Federal Reserve might normalize its policy, emerging markets reeled, as did their exchange rates and asset prices. Similar tensions resurfaced in January, this time driven more by a change in sentiment about conditions in emerging market economies themselves. But market sentiment has since improved in response to decisive policy measures and a renewed search for yield. Overall, it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally.

“In the countries that have been experiencing outsize financial booms, the risk is that these will turn to bust and possibly inflict financial distress. Based on leading indicators that have proved useful in the past, such as the behaviour of credit and property prices, the signs are worrying.

“Term and risk premia can only be compressed up to a point, and in recent years they have already reached or approached historical lows. The risk is that, over time, monetary policy loses traction while its side effects proliferate. These side effects are well known (see previous Annual Reports). Policy may help postpone balance sheet adjustments, by encouraging the evergreening of bad debts, for instance. It may actually damage the profitability and financial strength of institutions, by compressing interest margins. It may favour the wrong forms of risk-taking. And it can generate unwelcome spillovers to other economies, particularly when financial cycles are out of synch. Tellingly, growth has disappointed even as financial markets have roared: the transmission chain seems to be badly impaired. The failure to boost investment despite extremely accommodative financial conditions is a case in point.

“Good policy is less a question of seeking to pump up growth at all costs than of removing the obstacles that hold it back. When policy responses fail to take a long-term perspective, they run the risk of addressing the immediate problem at the cost of creating a bigger one down the road. Debt accumulation over successive business and financial cycles becomes the decisive factor.

“In contrast to what is often argued, central banks need to pay special attention to the risks of exiting too late and too gradually. This reflects the economic considerations just outlined: the balance of benefits and costs deteriorates as exceptionally accommodative conditions stay in place. And political economy concerns also play a key role. As past experience indicates, huge financial and political economy pressures will be pushing to delay and stretch out the exit.

“The current weakness of aggregate demand may suggest the need for further monetary stimulus or for easing the pace of fiscal consolidation. However, these policies are likely to be either ineffective in current circumstances or unsustainable: taking a long-term perspective, they may simply succeed in bringing forward spending from the future rather than increasing its overall amount over the long run, while leading to a further rise in public and private debt. Instead, the only way to boost demand in a sustainable manner is to raise the production capacity of the economy by removing barriers to productive investment and the reallocation of resources. This is even more important in the face of declining productivity growth.

“The benefits of unusually easy monetary policies may appear quite tangible, especially if judged by the response of financial markets; the costs, unfortunately, will become apparent only over time and with hindsight. This has happened often enough in the past. And regardless of central banks’ communication efforts, the exit is unlikely to be smooth. Seeking to prepare markets by being clear about intentions may inadvertently result in participants taking more assurance than the central bank wishes to convey. This can encourage further risk-taking, sowing the seeds of an even sharper reaction. Moreover, even if the central bank becomes aware of the forces at work, it may be boxed in, for fear of precipitating exactly the sharp adjustment it is seeking to avoid. A vicious circle can develop. In the end, it may be markets that react first, if participants start to see central banks as being behind the curve. This, too, suggests that special attention needs to be paid to the risks of delaying the exit. Market jitters should be no reason to slow down the process.

“The temptation to postpone adjustment can prove irresistible, especially when times are good and financial booms sprinkle the fairy dust of illusory riches. The consequence is a growth model that relies too much on debt, both private and public, and which over time sows the seeds of its own demise. More generally, asymmetrical policies over successive business and financial cycles can impart a serious bias over time and run the risk of entrenching instability in the economy. Policy does not lean against the booms but eases aggressively and persistently during busts. This induces a downward bias in interest rates and an upward bias in debt levels, which in turn makes it hard to raise rates without damaging the economy – a debt trap. Systemic financial crises do not become less frequent or intense, private and public debts continue to grow, the economy fails to climb onto a stronger sustainable path, and monetary and fiscal policies run out of ammunition. Over time, policies lose their effectiveness and may end up fostering the very conditions they seek to prevent. In this context, economists speak of ‘time inconsistency’: taken in isolation, policy steps may look compelling but, as a sequence, they lead policymakers astray.

“The risks of failing to act should not be underestimated.”

With stocks at an all-time-high and overly rich valuations, the investor is placed at higher and higher risk to achieve the same returns. I have chosen to get out of the market, expecting to be rewarded with no losses and rich returns after reinvesting when the market cycle returns to its lows.

If you have to stay in the market to continue getting monthly returns, then you are to be most pitied. You can ask your broker / financial adviser to protect your investment in a serious down turn. He should know how.

Note: the above information is for entertainment purposes only and should never be used as investment advice.