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.)