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.)