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. 

Today's Market
by Dr Invest

Never have markets appeared so confusing. We are being reassured that the economy has never been stronger, that the economy is bounding toward stabilization and growth. Don't stop investing in stocks yet, they say, because there are still months remaining of a bull run in the market.

It is this reassurance that makes me particularly nervous. Two months ago, I listened to Robert Shiller explain why the P/Es were not that high in relation to stocks. (See wikipedia: Shiller PE / CAPE)  Now, even Robert Shiller is concerned about the future of the "bull run". Here is what he is saying:

Robert Shiller, Yale professor and Nobel prize winnner, is "definitely concerned" about the outlook for stocks based on the cyclically adjusted price-to-earnings ratio (CAPE) he created. At 26, the so-called Shiller PE is currently well above its long-term average of 17 and approaching levels that previously presaged doom for equities. Shiller has plotted CAPE going back to 1881 and notes (with some alarm) it has only been higher than current levels three times: In 1929, 2000 and 2007. "It looks to me like a peak, I would think there are people thinking 'it's gone way up since 2009, it's likely to turn down again.' That's what people might plausibly think."

Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. "We don't know what it's going to do," he says. "Realistically, stocks should be in one's portfolio but maybe lighten up."

Shiller acknowledges that in light of low interest rates on bonds, there is really no other place to put your investments other than stocks, but is worried that we are on the edge of a pull-back. (see the video at: http://finance.yahoo.com/blogs/daily-ticker/-it-looks-like-a-peak---robert-shiller-s-cape-is-waving-the-caution-flag-004753218.html)

RE ACCESSING

Nothing has really changed in the markets. Yesterday, the FED had lowered their estimate of growth for the previous quarter almost 3%.  The final assessment was that the economy had shrunk. Facts are not pointing to a growing economy, but a shrinking economy. Still, Yellen, proposed that the economy would continue slowly trending upward toward the end of the year. Yellen's report was rewarded with the stock market climbing even higher. Is it not exuberance, when stocks continue to advance in the light of a declining market.

ECONOMIC DRAG

John makes $48K annually. He could not afford to pay for a healthcare plan and had chosen to take the chance that he would not get sick or injured over the next several years. After paying all of his bills, John  could see an additional $500 monthly of disposable income to be used in purchasing things he wanted. 

Over the past year, John noticed that rent, gas, food, home insurance, car insurance, and utilities had diminished his disposable income to only $250 monthly. Then came the news of Obamacare. John would have to apply or pay a penalty. With such a low income, John received a subsidy for his health insurance. John would only have to pay $248 monthly for his new Obamacare plan. 

John's new reality was a disposable income of $2 monthly. John could only hope that he would have enough credit to purchase new tires to replace the balding tires now on his car.


This story is about economic drag. Where John once had $500 monthly to spend on whatever his wished, he now has only $2 monthly to spend monthly on whatever he wishes. This is important because manufacturing inventories are on the rise, but there is no consumer spending to decrease these inventories. At some moment in time, companies will need to release employees from employment unless consumer spending increases. 

This kind of economic drag hurts the poor first, then the middle class, who are pulled down into poverty. Real change will require a strong economic recovery, but there are discussions of raising federal taxes on gasoline and diesel fuels. These kind of increases on families will continue to reduce their disposable income. 

POSITIONS

My advice is to stay out of stocks and bonds, remaining in cash over the next six to nine month. Wait till the business cycle turns down, dropping 30 to 40%; then return to securities. If you already have stock positions, put a stop-sell on your stocks at what you deem an acceptable loss, changing your stop-sell as the value of your stock increases.

What is key here is that when the stock market begins a firm move downward, the downturn will occur at a lightening speed. Only the first people to get out of the market will succeed in keeping their gains. And, let me reassure you that in today's computerized trading, other people have the same ideas you do. They too, will be trying to get out of the market. When the market turns to panic, selling your stock so as to keep your returns will be almost impossible. 

CLOSING

What you see in the market is not reality. Zero interest and stimulus is the equivalent to "life support" for the market, removal of this "life support" will result in the immediate death of the patient (our economy). All the economic growth, profits, and current rise in stock values are ARTIFICIAL. I can't imagine myself putting money into an investment that I know is manipulated, so why are you?


(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

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.)