Today's Market
by Dr Invest

New winds are blowing among some analysts. Largely the mantra has been "The market is gaining strength and we have a great outlook for stocks in the years ahead." Only in the last few days have some analysts begun to admit that a downturn is likely and that they are hedging their positions.

Trader Douglas Borthwick argues that we entering a recession right now, pointing to last quarter's GDP, which grew only 0.1%. Job offerings relative to employments, he says, also paints a bleak picture. "The last time we saw this divergence was in 2007," said Borthwick. SharkTank investor Kevin O'Leary says this is a "far out call".

Bill Fleckstein of Fleckstein Capital says, "Expect a Flash Crash at any moment." The Fed has over printed money, there is exhaustion in the Nasdaq. Still, says Fleckstein, the FED is in control and could continue to add more liquidity to the market should there be a movement toward a recession.

Dennis Gartman reluctantly admits that there is going to be "more selling". He doesn't want to use the R word (recession), but admits that we are in a CORRECTION.

Jeff Cox pointed out that the FEDERAL RESERVE has missed every projection that they have ever made. Now he doesn't call them liars, but rather inaccurate. In 2011, they projected a 4.5% increase in growth, when the actual growth was 1.8%. In 2012, the FED projected a 4.8% growth, when the actual growth was 2.8%. And in 2013, they projected at 4.6% growth, with the actual growth being only 1.9%.

CONCLUSION

We can't know what the market will do. The FED is manipulating the market, and though the market is teetering on a downward move, the FED can re-enact stimulus and continue their policies undertaken over the past five years. The obvious is, that the party continues on FED money. But there is NO REAL ECONOMIC GROWTH HERE, only the continued sound of trillions dropping into the economy from FED stimulus. When the trillions in stimulus stop, the markets will drop like a rock.

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

Today's Market
by Dr Invest

Peter Schiff writes: In the 1990s and 2000s, expansions of the money supply have been used to create permanent inflation in order to relive the symptoms of inefficient government. As new money stimulates consumer spending and increases the gross domestic product (GDP), it creates an illusion of healthy economic growth. By diluting the dollar's value, it artificially reduces the cost of social programs, the massive national debt and budget, and our huge current account deficit. Reflected mainly in asset bubbles (stocks, bonds, and real estate) and being exported to buy consumer products from Europe and Asia, this inflation is not reflected in official figures, such as the consumer price index (CPI). But inflation it is, and it is diminishing the purchase power of the dollar as this is written. What is now high, if largely invisible, inflation will become acutely felt hyperinflation as dollars being accumulated abroad come home to roost.

Peter's words are only significant, if indeed they are true. Here is the problem, THEY ARE TRUE! In 1990, the price of a package of cigarettes was $1.00 in the U.S., in 2014, the average cost of a pack of cigarettes in the U.S. is $6.00. In case you feel me to be unfair, a gallon of gas cost around $.97 in the 1990s as compared to $3.50 in 2014. When all this ADDED LIQUIDITY from stimulus is finally soaked up by our economy, inflation is sure to have risen. Stock prices will be higher, because the dollar is worthless. And wages will slowly climb, because it will require more income for people to live. 

I think our politicians will succeed in raising the minimum wage, let's say to $15 per hour. But what about that manager at the store, who was making $15 per hour, finds that an untrained employee can command the same income he was making as a manager.....wouldn't he go and demand a higher wage from his boss? And so it goes on up the line. That hamburger that cost you $2.25 in 1990, and now costs $6.50 in 2014, will have to be increased again in price to cover all the additional increases in wages. 

CONTRAINDICATIONS

No one would argue that the cost of living has gone up, in short...INFLATION has taken a bite from our economy since 1990. But look at the governments record of CPI since 1990.

When I look at this graph, I am ready to go to Washington to congratulate our Senators and Congressmen for keeping inflation so low. Since 1990, inflation has gone down. The government is saying that COST OF LIVING has decreased. This could only be true (a decrease in inflation), if we have either been in a long-term recession or we have an error in how we calculate inflation. 

This is my concern, we have both. There has been a long-term recession and the government is calculating the cost of living incorrectly. 

The Graph below shows that health insurance premiums have risen 182% from 1999 until 2013. Contraindications are those which go against other research. The price of auto fuel has grown, the price of food has grown, the price of housing has grown. In my area, a two bedroom apartment rented for $600 monthly, 15 years ago, and now rents for $850 monthly. The government's calculations don't agree with the real inflation seen by the consumer. 


I could continue with a line-up of graphs proving my point about inflationary pressures in our economy, but you and anyone else reading this article will know that their cost of living is and has grown. They also know that the REAL INFLATION is much higher than 2.4% CPI. Finally, the above graph does not show increases of those UNEMPLOYED because they wouldn't have increases. The above graph would show worker's earnings growing 3.5% annually, but not the epic unemployment. The graph would not show the increases in income because of over-time worked. Varied earnings are simply averaged into the total.

So What We Have Learned

The government does not report accurately the real economic condition of the U.S.  The FOMC (Federal Open Market Committee) projects and expected growth, the Federal Reserve projects expected growth, and all these reports are readjusted to a quarterly report to Congress. Finally, all these reports will not be finalized for years and ALWAYS, ALWAYS, ALWAYS, the projections and reports to Congress are downgraded with the economic realities falling well below the government's estimations and reports. 

If you depend on the governments economic assessments, they will use your money to support their continued schemes to bolster a failing economy. When the government permits a recession, millions of consumer investors will lose 40 to 50% of their investments, amounting to trillions of dollars. Recessions are good for politicians, they can rush in and make promises for a economic recovery that will occur in spite of their efforts. On the other hand an extended Bull Market always means increased taxes to fund further government fopaux. Government manipulation of markets and consumers will not endure. People will get wise and eventually will cease to play the government's game. 

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

Today's Market
by Dr Invest

Sure, some of you want to hear what I think. See, nothing has really changed. For the past two years, the economy has been in a downturn. Of course, your adviser has told you that the sky is full of gold for those who are bold, but he's lying. Look, the economy has been on "life support". If you don't believe it... then what would happen if, this afternoon, the FED withdrew all stimulus?

There is not one person in the room, who wouldn't agree that there would be an immediate and decisive collapse of the stock market and our economy from removing stimulus. The so called, STRONG ECONOMY, is smoke and mirrors presented by those wanting to create a WEALTH EFFECT. They think that people will start spending money and happy times will arrive once more by promoting something that just isn't happening in our economy.

The "take-off" of our economy just isn't going to happen. The past two years, a floundering market has pretended to be vibrant and powerful. To add to our misery, OBAMACARE amounts to a TAX,  that takes wealth from families. The recession...although no one has used the R word, has left millions of Americans poorer, as they have fallen out of the "middle class". Millions more have lost their homes and cannot leverage any kind of debt. Millions more can only find part-time jobs because companies have quit hiring FULL-TIME employees, so they wouldn't have to pay the government's demands for corporate sponsored healthcare. Again, thank you Obama!

Tax income for government is at all time lows, because people aren't higher incomes which is the basis for taxation. So local governments are increasing their taxes since there is not enough revenue from taxation. Perhaps you noticed that you paid more in Federal taxes this year. Sure, the Federal government is increasing taxes as well... And these taxes are on people who are already stretched financially.

HERE ARE SOME RECENT REPORTS

BlackRock Inc. (BLK)’s Chief Executive Officer Laurence D. Fink said the U.S. housing market is “structurally more unsound” today than before the financial crisis because it depends more on government-backed mortgage companies such as Fannie Mae and Freddie Mac. 

David Tepper is arguably the most influential “smart-money” voice in the markets right now. While hedge funds have persistently underperformed the market of late, there are at least a handful of talented money managers with some undeniably jaw-dropping track records. Tepper is in that category.

Tepper, who had previously been adamantly bullish, struck a decidedly cautious tone. He didn’t advocate a stampede for the exits, but he notably warned that it’s probably not a good idea right now to be “so  freakin’ long.” The interview was the signature event of this year’s conference. The nervous tone may have helped sink stocks on Thursday.

BI: What do you think is the most worrisome sign in the economy?

LA: While the consensus keeps predicting an economy at “escape velocity,” with sustained 3%-plus growth, the reality remains far short of that, with yoy GDP growth hovering around 2% – what one quickly-forgotten Fed paper had called the economy’s “stall speed.” Meanwhile, business investment remains elusive and – as ECRI correctly predicted last summer – construction is decelerating, not accelerating, posing risks to the economy now highlighted by Janet Yellen.

BI: What do you think is the most underreported story in the economy?

LA: The steepening downturn in home price growth has been obvious in recent months, with yoy growth having peaked last spring for median new home prices, and last summer for median existing home prices.  We predicted this downturn months in advance, over a year ago, and we expect it to continue.

BI: You've previously argued that the U.S. economy went into recession in 2012. What's the status of that call?

LA: In hindsight, the epicenter of the recession looks to be the half-year spanning Q4 2012 and Q1 2013, which saw just 0.6% annualized GDP growth, mostly from a jump in agricultural inventories. GDP growth for those quarters could easily end up negative after revisions, much of which tend to arrive years after the fact. Nevertheless, just looking at the data in hand, yoy GDP growth during that period fell to lows never seen away from recessions in over half a century. We'll see how the revisions change the picture in retrospect. (note: yoy is YEAR OVER YEAR)

IN CLOSING

Listen, if you are convinced that endless returns are the future and that the Federal Reserve has  successfully vanquished recession for all time, you need to put your money in the market right away. I, on the other hand, am highly suspicious that we are near a precipice that will result in many tears. 

This past week, I sat in a board meeting with a not-for-profit organization that had disbursed $20 million in funds. One board member brought in a book by Peter Schiff called, CRASH PROOF. The book was of lesser importance that the fact that intelligent men are nervous about this economy, and that should tell you something.  see: http://www.libertarianismo.org/livros/pscp.pdf

Let me use one word.... UNCERTAINTY. Those who I know, remain invested in the market but are not adding any new positions. The risk in the market is too high. And even those who have kept their long-term positions, have placed STOP-SELLs on their positions for the coming downturn in the market.

(note: the above information is for entertainment purposes only and to be used in any way as investment advice.)