Today's Market
by Dr Invest


I've been hearing how great it is to be in the market. The future is bright and there is no place the market can go, other than up. The Obama presidency has restored the economy with jobs growing to an all-time high. And inflation is heating up, as the dollar  rises to it's own all-time high against world currencies.

NOW IF YOU BELIEVE THIS, I HAVE A BRIDGE TO SELL YOU.....


The financial industry is in trouble. Most of the financial news articles read on the internet are designed to push investors into the market. They are slanted in favor of banks, brokerages, and financial institutions. A recent study showed that the S&P 500, since 2000, only gained 1.8%. Yes, I know it looks like more than that, but if you take $1,000 and it loses 50%, you have to gain 100% to just get back to even. Since 2000, we have had two very deep recessions. That $1000 invested in 2000 would have only gained 1.8% per year.

Another issue is that we are taught that only a PROFESSIONAL FINANCIAL ADVISER can properly invest our money. When you consider that they often charge 2% to manage your portfolio, you could end up with your investment provide a negative return.

HOW DO YOU KNOW THIS?

Well the facts that I have just mentioned. Even though you can say, the S&P500 has return 138% since 2012, you have to begin counting since 2008 when we entered the bear market. That has been 8 years. Let's go back to that $1,000. You lose 50%, it takes a 100% gain to just return to $1,000; then you divide 38% by 4.75% per year. Take off another 2% for your financial adviser and now you have 2.75% return. The fly in the soup is this: not everyone is invested in stocks alone... they are diversified. The result is that only a hand full of investor brokers beat the S&P 500, the majority of investor brokers fall way short of the returns of the S&P 500.

SHORTFALLS IN PENSION FUNDS

Some of the brightest fund managers are directing investments for the pension funds, yet have fallen short of their investment goals. This has left pensioners with a declining pool of money to invest on their behalf.

To handle short-term short-falls in investment returns, these pension fund managers buy INSURANCE. One of the major players in this business is THE PENSION BENEFIT GUARANTY CORPORATION.  Listen to this report from the Washington Post:

The Pension Benefit Guaranty Corp., which insures private pensions, said it is $58.8 billion short of the cash it needs to cover benefits for multiemployer pension funds that are expected to run out of money within 10 years. That is up from the $52 billion deficit seen last year, marking a new high. With roughly $2 billion in assets, the insurance fund is on pace to run out of money by 2025, if not sooner, the agency said.

What does this mean to me? Why does the PBGC even matter to me? The answer is that even professionals have not been able to meet their investment goals in the current financial climate. Even the insurance company guaranteeing the returns is running out of money. By 2025, the promised pensions to millions of retirees cannot be guaranteed by the insurance company.

This does not speak to financial health, but financial weakness. News media can put their own spin on financial health, but the grind of declining profits for businesses and the poor long-term returns for professional financial advisers speak to real economic problems.

With over rich valuations for stocks and a long-in-the-tooth bull run, I would be nervous about staying in stocks until after we have had a market corrections. 

Happy Thanksgiving


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

Today's Market
by Dr Invest

Just a quick hello to friends. Some of you might think that financial calamity has escaped our economy. Yellen believes, along with other central bankers, that markets can be fully controlled by central planning. Hmmm....kind of sounds like socialism. Never the less, according to Yellen, we never need fearing a recession again.

Joining with her are a cadre of economists, brokers, bankers, politicians, and our own president: according to them, employment is at an all-time high, we have moved from the GREAT RECESSION to a increasingly robust economy, and Obama's health care legislation is a resounding success. If you keep repeating these ideas long enough, there is a belief that the public will believe them to be true.

Here are the facts:

Though there has been a consistent gain in jobs since the recession in 2008, we are no where near the number of employed before 2008. Job participation fell to 62% and many jobs offered are only part-time jobs. (Companies required to pay for health insurance for their full-time employees, have answered the new government demands by only hiring part-time employees.)

Second, for the past year and a half corporate profits have been in decline, shipping has been down, and retail sales in a decline. None of these are indicative of a robust economy. The GDP has grown at 1.8% and some believe it to be even lower than 1.8%. Rumors of an exploding robust economy have never fully materialized. When threats to the weak economic rally have appeared, Yellen has doubled-down, promising that she would step-in to spur the economy. Encouraged by endless low interest rates and on-going stimulus, stocks have soared in price. This gives the appearance of a strong economy, but is built solely on the promises of the Fed to continue spurring the economy. Stocks are overvalued with some PEs rising into the 20s, where a PE of 8 would be reasonable. (PE=PRICE TO EARNINGS)

Third, Obamacare has ruined a viable healthcare industry. Almost every promise made to the American people has been a great lie: "You can keep your doctor!", "The price for healthcare will be decreasing!". Agents have told me that costs are dramatically rising, and when you add in a $6,000 deductible before getting any help from your insurance policy, it is almost robbery. If you qualify for a subsidy, you might find Obamacare a great benefit, but most middle class workers with two family members will make more than $64,000 a year and find themselves paying full price. Listen, if you make more than $64,000 a year. you pay the FULL PRICE. This amounts to $1,500 a month, with a $6,000 deductible for a husband and wife or $18,000 a year for health insurance. If you deduct this health insurance from your salary of $64,000 a year.... you now have $46,000. Typically, I will pay another $4,000 for various medical issues between my wife and I. This would leave a middle class family with $42,000 to live on annually. Poverty-line in Williamson County, Texas is $31,700. A middle class family of two, paying for Obamacare, would be forced nearly into Poverty because they made more than $64,000 annually. This family would not qualify for any health insurance subsidy... and would likely pay more in TAXES for those getting a subsidy because they make under $64,000 annually. Excuse me, this doesn't sound like a successful idea...  Pushing middle class people close to poverty and penalizing them will only demotivate them to make money and be productive.  But you be the judge.

If you are fortunate enough to start your own business.... you will need pay for your full-time employees healthcare... and if a small company, you will need to pay an administrator to look over your shoulder verify all healthcare expenditures. This, of course, insures that that your healthcare provider or employee is not using healthcare unreasonably.. blah,  blah... and more money please for the Affordable Healthcare Administrator....(you have to pay for this oversight as a business man.)

The promise from some of our politicians this year is that "We are going to take care of the small business man. We are going to provide the right tools to help him build his business."  Blah, Blah!

Practically speaking, if a patient were put on "life support" we would not call that patient healthy. An economy driven by such ridiculously low interest rates and the promise of stimulus should an economic downturn suddenly appear, IS NOT A ROBUST ECONOMY BUT THE SUREST SIGN OF AN ECONOMY THAT IS SICK! But you be the judge.

Yes, the stock market could rise even higher. Stock prices could continue rising over the next year or two years, or four years. Rising stock prices are meaningless if they don't reflect true value. Should Yellen be wrong and we enter a full fledged recession, ALL GAINS THAT REFLECT AN ARTIFICIAL VALUE WILL BE WIPED OUT IMMEDIATELY. Stocks will eventually find their real value somewhere BELOW the true value of the stock. You could see stocks falling 50% to 80% of their current price. BONDS too, would fall in value. The scenario is that the FED could try to move bonds into a NEGATIVE INTEREST RATE. In a recession, the value of the dollar would also fall so that moving your cash into a 5% negative interest rate would be more economical to an investor than remaining in cash that would decline 25% in value.

GOLD.... Gold is a commodity and statistics show that gold always initially falls in price when there is a recession... because it is a commodity... like wheat, cotton, corn... etc. Gold begins to regain its value as a fear metal after the recession has endured for a while.

My opinion is unchanged, the risk does not outweigh the potential gains you could get by being in the market. Put your money into a Certificate of Deposit and go to sleep at night without worry. The S&P 500 has returned a paltry average of 1.8% since 2000. You can make a 1.27% in a C.D. almost beating the S&P 500 without the risks.

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

Today's Market
by Dr Invest

I have been trying not to write on investment over pass months because NOTHING has changed. We are in DEBT and borrowing even more. Both private and public sectors are pathetic. It appears the only real viable reason to buy more equities, is because people are buying more equities.

The price of equities is not based on FUNDAMENTALS or everyone would sell. No, the price of equities is base solely on the fact that people buy equities at ever increasing prices. There is a faux sense that stocks are growing in value, but the Price to Earnings reveal that stocks are just being over-valued.

For the first time, Yellen has admitted that a problems exists. Aaron Hankin wrote:

Federal Reserve Chairperson Janet Yellen delivered a downbeat message to the Senate Banking Committee on Tuesday, saying she sees "considerable uncertainty" in the economic outlook for the U.S. In a prepared speech to the Committee, Yellen was cautious on the outlook of the U.S. economy and the possible path of interest rates.


“Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace, whether the labor market will strengthen further, and whether inflation will continue to make progress toward our 2 per cent objective,” Yellen said.

"The pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate.”

When the Fed did adjust monetary policy in December 2015 (the first time in nearly a decade), their projections were for another four hikes in 2016. At last week's Federal Reserve meeting this number was down to two, with six of the 17 Fed officials seeing just one. After today's speech markets have increased the likelihood of no hikes in 2016.

The uncertainty in the prepared speech extended to offshore concerns, notably Thursday's referendum in the U.K., where she said the Brexit vote poses potential risks and could have "significant economic repercussions.” However, Yellen described the chances of potential spillover into the U.S. as moderate.

Yellen, who tends to shy away from comments on equity prices said the disjoint in asset prices as a result of the lengthy accommodative monetary policy has made equities expensive on a forward price-to-earnings basis. "Although equity valuations do not appear to be rich relative to Treasury yields, equity prices are vulnerable to rises in term premiums to more normal levels, especially if a reversion was not motivated by positive news about economic growth," Yellen said.

Traditionally, Yellen has remained upbeat about the path of U.S. growth during her tenure as the Federal Reserve Chair, but today she blinked for the first time saying “we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future.”

Let me interpret. Yellen says, "the price of stocks are overvalued, but never you mind because things are really going pretty good; but should there be bad news that hits the market, this whole thing could blow-up; but it probably won't because things are really pretty good."

You can't play this both ways, either things are bad or they are good. Yellen is suggesting that anything could happen.

In my previous post, I have shown that since the year 2000, a $1,000 investment would have grown 1.7% if invested in the S&P 500. It is unlikely that most people are beating the S&P Index, so this great gain doesn't lie. After the stimulus and operation twist by our central bank, we have erased the interest we would have normally gotten for bonds. Today, a 1.7% return on a bound would be super given that some countries are selling bonds with a negative interest.

Stocks CANNOT continue their climb without a serious event that will bankrupt investors, who are seeking ever higher returns at greater risks.

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

Today's Market
by Dr Invest

Sandy Jadeja is a technical analyst and chief market strategist at Core Spreads. He accurately predicted four market crashes to the exact date each time and says that there are three more dates to worry about.

He now warns that the following dates spell trouble for the Dow Jones in the US that could spread to other markets. 

1. Between August 26 and August 30, 2016.
2. September 26, 2016.
3. October 20, 2016.

Jadeja said, "We have interesting times ahead of us. We are dealing with issues on so many levels from economic uncertainty in the financial markets, including currencies and commodities as well as the rising house prices we have seen."

In 2005, he said he warned 2,000 investors at a speaking event in Shanghai, China, a talk in New York at a Traders Expo, as well as banks and investment houses at a speaking event in Dubai about the property market crash - eight weeks before it happened.

More recently, on July 31, 2015, before flying to Singapore to speak at a conference of more than 5,000 people, Jadeja warned investors on CNBC that something big would happen on August 18, and to "be prepared to bank profits and stand aside." There was then a flash crash where the Dow Jones Index lost 2,198 points (-12.5%) in just four trading days.

After that successful prediction, Jadeja told CNBC on August 28, 2015, that "there would be a further decline commencing on September 14 or 17, 2015. Then, yet again, the Dow Jones fell 991 points (-5.8%) over eight trading days.

And then on October 1, 2015, and in November, he told CNBC again that, "January 4, 2016 would face a bearish mood and see the markets fall despite the bullish consensus on Wall Street." On that date, US markets and other global indexes fell sharply, where the Dow Jones shaved off 1955 points (-11.2%) over 11 trading days.



Though an Analyst is unlikely to tell you all of his data and secret sauces to accurately pin point change, Jadeja does give some hints.

"We are currently in a very dangerous time zone between 2011 until 2018. This is an 84-year cycle [called the 'Time Cycle'] and the previous cycle appeared during 1928 until 1934 where the Great Depression took place," he said.



Then below is the next cycle he claims is coming.



"This exact same cycle is what we are in right now. And so I am worried that we could see a potential threat to our economy in the current 'Time Cycle' we are witnessing right now," said Jadeja. 

"We have a situation. This lasts until 2018 for this particular cycle. And my worry is that we could see sudden sharp declines take place and tripping investors if they are not prepared," he said. Jadeja is convinced that the sudden declines will take place on three dates - between August 26 and August 30, September 26, and October 20, 2016 - in this "time cycle."  (Business Insider - Lianna Brinded)

Although I am not a big fan of time business cycles, sun spots, and tea leaves, the remarkable accuracy of some analyst are worth noting. Considering the extraordinary length of this bull market and the overvaluation of stocks, one should take notice of the NEAR POTENTIAL RISKS.

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

Today's Market
by Dr Invest

I've been looking for something to celebrate in market recovery over the past month, and I am disappointed. All of the promised improvements in the U.S. economy have not appeared. Even worse, there is an apparent decline in the U.S. economy that even the Federal Reserve recognizes.  Yellen would never say that, but her planned increase in interest rates have been taken off the table. She, of course, reminds us that the Federal Reserve will be reviewing the progress of the economy and could increase interest rates at any time. (wink wink)

History shows that valuations above 23x earnings have tended to denote secular bull market peaks. Conversely, valuations at 7x earnings, or less, have tended to denote secular bull market starting points. This point can be proven simply by looking at the distribution of returns as compared to valuations over time.

From current levels history suggest that returns to investors over the next 10 and 20-years will likely be lower than higher. However, as I said, we can also prove this mathematically as well.

(1+nominal GDP growth)*(normal market cap to GDP ratio / actual market cap to GDP ratio)^(1/10)-1

Therefore, IF we assume that GDP could maintain 4% annualized growth in the future, with no recessions, AND IF current market cap/GDP stays flat at 1.25, AND IF the current dividend yield of roughly 2% remains, we get forward returns of:

    (1.04)*(.8/1.25)^(1/10)-1+.02 = 1.5%

So what we learn from John Hussman's formula is that AT BEST, we should be getting a return of 1.5% is every thing remains the same over the next 10 to 20 years.

TRUTH

Truth is hard to come by. On any one day, you will read articles that the economy is surging and that economy is floundering. Truth is what every investor desires. What is the TRUTH?

Below is a chart showing in the BLUE, returns promised by investment software. This is what your investment adviser uses to figure all the money your are going to get from your investments in the years ahead. Charts are always comforting to view, but are based on VARIABLES from past years. Note the word: VARIABLE.... it means things change.  



Most investment firms calculate your potential returns based on data from the 1950's. The economy changes and that is even more evident beginning in 2000.  When you visit your financial adviser ask him to show you the returns on $10,000 invested in the year 2000 until the present, and you will be shocked.

Overspending, high government and personal debt, defaults, and Central Bank stimulus have all taken their toll on returns. The myth is that the rich are getting richer, while the middle class is slipping into poverty. This idea is largely false when it comes to stocks. Truth!

Look for a moment at the S&P chart below:


The total return certainly looks better, but the real (inflation-adjusted) purchasing power of that $1,000 is currently only 316 dollars above break-even, a real compounded annual return of 1.71%.

So listen, if you are part of the crowd that beats their chest and complains about all the BIG money that rich investors are getting from stocks, think again. The compounded annual return for the buy and hold crowd is barely over the interest currently being paid by banks for a Certificate of Deposit. 

I give you permission to go and cry for awhile.  Tell the truth and don't perpetuate the myth of large profits, it just isn't happening.

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

Today's Market
by Dr Invest

Many of you thought I had died, but no! We are currently caught in a current that returns us back to where we began, a kind of Ground Hog's Day event. Oh yes, our financial advisers remind us that our economy is growing and we will all get rich; the Federal Reserve reminds us that our economy is growing and is robust enough for another interest rate increase; and our president reminds us that under his guidance, our economy has made enormous strides toward recovery after the Republicans had messed everything up.

Just a comment, it is like our government has DOUBLED its debt under the Obama administration and increased spending by 1/3, and implemented one of the largest healthcare fiascos ever placed on U.S. citizens, and then calling all of this a great success. Barf! If you are believing any of this, it is only because you don't have a clue about what is true.


The reason I am mentioning this at all, is because reality escaped the political and economic spheres a long time ago. It is all about the SPIN. It is how you tell the story and get the masses of people to believe it. Candidates are running for political office... it is about the SPIN. Financial Advisers are now boldly talking about there role as FIDUCIARIES, meaning that they have your best interest in mind. Still, they will put you into the investment that returns to them the best kick-backs from their companies.

Here is what Stan Druckenmiller, one of the worlds greatest traders recently said: “Sell your equity holdings.”

CNBC has a good summary:

“The conference wants a specific recommendation from me. I guess ‘Get out of the stock market’ isn’t clear enough,” said Druckenmiller from the conference stage in New York. Gold “remains our largest currency allocation.”

The billionaire investor expressed skepticism about the current investment environment due to Federal Reserve’s easy monetary policy and a slowing Chinese economy.

“The Fed has borrowed from future consumption more than ever before. It is the least data-dependent Fed in history. This is the longest deviation from historical norms in terms of Fed dovishness than I have ever seen in my career,” Druckenmiller said. “This kind of myopia causes reckless behavior.”

He believes U.S. corporations have not used debt in productive investments, but [have] instead relied on financial engineering with over $2 trillion in acquisitions and stock buybacks in the last year. This is finally showing up on the books of companies as operating cash flow growth in U.S. companies has gone negative year-over-year, while net debt as gone up, according to the investor.

Druckenmiller was negative on China’s economy going forward and believes recent attempts at further stimulus in the Asian country will not work and “aggravated the over-capacity in the economy…. Higher valuations, limits to further easing... the bull market is exhausting itself,” he said.

Without boring you with volumes of statistics, the ten-year expected return on equities is only 2% per year.   Mauldin Research can provide you the volumes of research, and much of it free. The point is that until there is a DRAMATIC fall in equities, there is no real opportunities to profit from the current market. Four words describe the current market conditions: HIGH RISK, LOW RETURN.

Even BOND purchases at this time are RISKY because the FED could raise rates, leaving you with a bond no one wants to purchase. If you have bonds you purchase many years ago, returning 5%... keep them!

The Federal Reserve and Central Banking as a whole, have set a course that is largely experimental. It would appear that we will eventually end up like Japan, in a stagnate and indebted economic state.

What to Do

There really is not a great course of action other than batten down the hatches and ride out the storm. If you have investments in a ROTH, selling your stocks and moving to Certificates of Deposit could work well and be secure. (Called, the Grandma Investment) You can get 1.2% returns on CDs at this time. Perhaps by July, if the FED raises interest a basis point, you might get even a higher rate of return.

Gold has been mentioned and at some point may bring great returns, but since 2012 gold has been a real loser. You want to see a return from an investment you don't have to hold for 30 years.

Today's Market
by Dr Invest

I will repeat that we are in a DECLINING market. The market went onto life support in 2012. The glee of a robust economy has never really taken place. Yes, we have seen stock prices dramatically climb because speculation in a party thrown by the FED. How can you loose when the FED is paying for the tab. Why not order another round for everyone?

Like the story of the KING'S CLOTHES, wall street has taken up the mantra that everything is alright...all the time knowing that investors in stocks are vulnerable. Even in the face of a declining stock market, they continue to tell investors that this is only a temporary downturn and encourage investors to take the ride to the bottom.

Here is the problem. ALL the fundamentals are pointing downward. Sales are slowing, job growth is slowing, transportation is slowing, and this is happening not only in the U.S. market, but world-wide. Redefining how we measure job growth and GDP cannot hide the FACT that there is a real economic problem.

Meanwhile, the president declares his economic policies a success. The Democrats openly tout their policies to spend more and tax more and move us further into socialism. The Republicans don't seem to have a real plan, but at least they are seeking ways to reduce debt and not raise taxes further.

GET OUT!

Only your judgment can tell you what to do next. Hopefully you have a financial adviser who can guide you into successful investment. I suggest that you trust NO ONE. Go back to the year 2000 and look at the total of you investment portfolio in that year. (ie:$100,000) Look at how much you have added to that portfolio over the past 15 years and deduct it. (ie: value in Jan of 2016 ($145,000 minus what you added over the past 15 years $47,000 = $98,000) This means you actually lost money over the past 15 years. Because your current balance is $145,000 you believe that you are making money, no you are loosing money because your continued investment make the total appear larger than it really is.

If this is true of your account, you need to run away from your adviser as quickly as you can. I have talked about diminishing returns. This is when you have $100,000 and lose 30% in a downturn, leaving you with only $70,000. Even though their is a return of growth, your $70,000 may only grow 20% before the next downturn, leaving you with only $90,000 in your nest egg. If this kind of volatility repeats itself often enough, you investment will diminish instead of growing.

The suggestion is that you simply review your portfolio. There is nothing wrong with re-balancing your portfolio, but pay a financial counselor by the HOUR instead of giving him 2% of your portfolio whether it is growing or declining. And avoid front-end and rear-end fees or LOADS. Loaded funds is the way financial advisers get 5% of your total funds invested. Pay them by the hour to give your advice to invest your funds into VANGUARD and don't listen to their baloney. By the time you add the LOADS and fees of their LOADED FUNDS, you will see that they are taking 5% for their self and annually getting another 2% for just handling your investment accounts. In ten years they have take 20% of your total portfolio and in 20 years, 40%.  (more or less)

(note: the above information is solely for entertainment purposes and must not be used in ANY WAY as financial advice.)

Today's Market
by Dr Invest

Ouch! The decline in 2016 has not been painless. I have been expecting a rebound in the market to form a the right shoulder of a head and shoulders pattern. If you are unfamiliar with a Head and Shoulders Pattern, look on WIKIPEDIA.

Looking closer at a GREEN CIRCLE on this graph, there are two points worth noting. First, stocks have NOT rebounded where the head and shoulders pattern would have begun the right shoulder. From a technical stand point, this is not a good sign.  And by following the downtrend, stocks have currently fallen below the lows in August of 2015 and to the lows of February 2014. A bottom is at January 2014, but if stocks continue below that bottom there is a free fall until July of 2013.

Things are not looking very good and this kind of dramatic market decline, along with the current poor economic fundamentals, only need a contracting job market to confirm what we suspected all along.

Excepting that the Federal Reserve intervenes, this PSUDEO RALLY that began in 2012 from Quantitative Easing by Bernanke will likely return the market to its MEAN.  The problem is that the market forgot where the MEAN was.

Some think that the GREEN LINE in the graph above represents the current HISTORICAL MEAN. Others would make the MEAN LINE higher and others would make it lower. This is the problem with VALUATIONS of stocks. Some say stocks are undervalued and others, that stocks are overvalued. The market will make its own decision on these opinions, but the market will return to mean.

The growth of the market above the top red line in the above graph was a surprise and likely the result market stimulus by the Federal Reserve. Like in the Great Depression, efforts to manipulate the market only have a short-term result. ALL of the gains above the red line will likely be lost. Most economists believe that the BOTTOM RED LINE will mark where the stock market will BOTTOM. That could put the S&P 500 near 1000 to 1200 points. That means a DRAMATIC loss in stocks. This would make the decline in 2008 seem more like a party in comparison. Should the S&P 500 proceed down to 2008 levels at 735 points, it would be a bitter economic decline that would ruin the lives of many Americans.

Sorry to be so negative, but if you are currently invested in the market you will need to be mentally prepared for the possibilities. Bear markets exhaust themselves too, but in this case the fall has come too quickly without the other declines like in jobs and consumer spending.

It is more likely that there will be stair steps down to the 1000 point mark in the S&P but where you manipulate a market, you can't really predict what might happen. So we will watch.

You may have heard on the news tonight, the worst decision you could make is getting out of the market. This would be true if you thought the worst to be over, but I think the worst is to come. There is a point however, where you should just stay in the market. I think another 12% in loss in 2016 will be that point. With the market down already 8% this month, we could quickly reach that 20% mark.

If nothing else, re-balance your portfolio. Get rid of the losers and move some of your investments into less volatile positions.

Gotta go, but you should be serious about staying out of the market for the next two years. Look for a 20% to 50% decline. Most bear markets will last one to two years, so you have plenty of time to move around. This mini decline can only be an indicator of what is yet to come.

(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 today's headlines read: "Why the heck are the markets tanking?". It is like they are surprised by a market downturn and that the what they heard in a recent State of the Union address was true that the economy is just fine and is robustly growing.

Listen, these are professionals. They are analysts, bankers, brokers, economists; they are your accountants and financial advisers and still they seem surprised? Everyone knew that the economy went onto life-support in 2012 with FED quantitative easing and bond buying, it was the only thing that would keep the U.S. from returning to a recession.

Yet, this bolstering of the economy at the tax payer's expense has promoted a false sense of economic well being, when without it the stock market would have collapsed. In all fairness, the economy did respond for a short period but by the fall of 2014 distortions were beginning to show in the economy and even with the bond buying and interest rates at zero, the market declined in 2015. Analysts predicted a 3% growth in the GDP in 2015, but the GDP was revised down to 1.8% by the end of the year. 

We heard throughout 2015 that the economy had almost reached escape velocity until October, when we were slapped with the reality of a failing economy. Still, we were told that this was a GOOD THING, a needed market adjustment leading into the robust recovery that had been promised by central bank intervention. All of the bring outlooks and predictions simply fell flat.

So here we are in 2016, looking the BEAR in the face and the BEAR ain't pretty. With us are the professionals who are asking, "Where did that bear come from?". Economic Cycle Research Institute has been predicting this for months, pointing to the slow down of economic indicators. (see businesscycle.com) People like Marc Faber, Jim Rogers, David Stockman, Robert Shiller, Carl Ichan, and even Donald Trump have warned of this impending downturn. A little research showed that Donald Trump was interviewed by David Rubenstein, a Philanthropist Co-Founder and Co-CEO of the Carlyle Group in December of 2014. Trump said that he was selling his stock and later sent a twitter message that read:

What does Donald Trump know that we don't. And most importantly, why was no one listening. Donald Trump escaped the down turn in 2015, while we believed the mantra of buy and hold that kept us little investors in a losing market. If Donald Trump is a WINNER, uh... what does that make us?  LOSER!

THE INTERVIEW WITH TRUMP

Economy is obviously not doing so well... the stock market is the one ray of hope. I've never been a stock market person. About three years ago I bought a tremendous amount of stock first time ever. I never believed in letting other people run my money.
 
The reason why I bought stock was because it's free money...interest rates are so low and CDs 1/4 of 1%, what do I have to lose?" "I feel like such a genius, up up up...
 
I sold my stocks a few months ago... everything because I'm not a great believer in the leadership of the country. Because interest rates were so low...at some point those rates are gonna go very high and that's gonna be a pretty difficult time I think for the country. I like to be invested in things that I run" "In a lot of cases, I don't have great respect for the people running some of these companies...
 

This is the dilemma for us as investors. We are gullible and believe whatever we are told. We expect that professionals have our best financial interest in mind, when the reality is that we are being fleeced. Years of hard work and savings become a resource upon which wall street can prey. They walk away with a gain for managing your portfolio, charging their 2% fee, while you have only a possibility of a gain of 0.7%. Even though the government claimed CPI (inflation at .02%) no one would argue that prices haven't gone up. Yes, gas prices down, but the bubble in real estate has driven the cost of a home or the rental of a home higher than two years ago. There are other considerations such as the value of the dollar rising, but salaries remaining virtually the same. Still, when all things are considered, you, the investor, are currently losing money if you are still invested in stocks.




Notice GDP is relatively steady, whereas the stock market value is a roller coaster. The further the blue line is compared to the Green line, the cheaper GDP is priced. These low areas correlated to good times to buy the stock market. At a current level way above the green line, the market is paying $21.6 trillion for $17 trillion in GDP. Does this indicate the market may be ready for another drop? The answer is YES! In 2000, in 2008, and now and even more so in 2016, the Wilshire Total Market has soared above the GDP. The beginning decline in the market in 2015 and continued decline into 2016 is totally predictable. The only question is why didn't the market decline in 2014?

This decline has been unraveling for a year or more, but without the slightest warning from those professional who we hired to protect us. David Stockton noted, "When was the last time the Federal Reserved warned American Citizens of a Recession?" When has your financial adviser warned you of an impending decline in the stock market? Banks, financial institutions, and brokers, have no responsibility to protect your investment and it is in their favor to keep your money invested with them or their associate firms.

WHAT IS NEXT?

Those of you who have followed my blog know that I look for a head and shoulders pattern. That seems to be unfolding and I would expect that a right shoulder would form in the current pattern.



There is no guarantee that a right shoulder would form, but by next week we will know if there is a short-lived rebound/bounce or whether this bear market is strong enough to carry stocks even lower. If there is a bounce, you will have only a short period of time to get your house in order. By April or May you could see a continued decline in stock fortunes.

THE FED, THE FED

In 2012, we were sliding into a recession. Bernanke managed to buy us out of a recession. Yellen has told the markets not to worry, that she too will intervene in a declining economy. She has already telegraphed that she will raise interest rates, but we don't really know when she will add the sugar or how much sugar she will add...(stimulus)

Others on the Federal Reserve Board have warned that stimulus has become less and less effective, and that stimulus has distorted the market. This doesn't assure us that Yellen will not try to do something to save the legacy of the Obama administration, but interest rates are already at all time lows and stimulus seems to be less and less effective. The only other option to Yellen is let the market take its natural course. Perhaps that is what should have happened two years ago.

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