Today's Market
by Dr Invest

In my last article, I alluded to consumer spending being down. This is because many corporations are only offering part-time jobs, which continue to be low-pay and circumvent the Obamacare ACA regulations. In the U.S. full-time employees must have their medical insurance paid by the corporation. (I know I'm being simplistic here, but there's not enough space to discuss ACA.) No one would argue that workers are being paid less, that inflation has been rising, that hidden taxes, fees, and medical insurance forced upon the U.S. populace has left families with less to spend at restaurants and stores. So consumer spending is down, affecting GDP and pulling down on economic recovery. 

Brian Louis recently wrote:

Empty stores from retailers that went out of business years ago -- such as Borders Group Inc., which had big floor plans that are hard to fill -- are dotting shopping centers across the country at a time the rest of the commercial real estate market has rebounded. They’re now going to be joined by thousands of additional stores that will soon be vacant as retailers such as RadioShack Corp. file for bankruptcy and department-store operators including J.C. Penney Co. and Macy’s Inc. cut locations to save money.

Vacancies at U.S. regional malls rose to 8 percent in the fourth quarter from 7.9 percent a year earlier, partly because of Sears Holdings Corp. store closures, according to Reis Inc. The real estate recovery for neighborhood and community shopping centers has “remained at a snail’s pace,” the New York-based research firm said in January.

Retailers and restaurateurs said last year they planned to close 5,483 locations, more than double the 2,592 in 2013, which was a record low, according to a report by the International Council of Shopping Centers and PNC Financial Services Group Inc. Last year’s total was the highest since 2010, according to the study.

Since then, retailers including apparel chains Wet Seal Inc. and Cache Inc. have filed for bankruptcy. Fort Worth, Texas-based RadioShack, with about 4,000 locations, sought protection from creditors on Feb. 5.

More troublesome for landlords than the relatively small Wet Seal and RadioShack locations are the spaces being abandoned by J.C. Penney and Macy’s. Replacement tenants will be difficult to find for those stores, with their large footprints. Macy’s Inc., based in Cincinnati, said in January that it will cut 14 of its approximately 790 Macy’s store locations within a few months. Plano, Texas-based J.C. Penney said it would close 40 stores around the U.S. this year.
Today's headline that unemployment has never been lower is admirable, but says little about the real condition of our economy. We may well see a dramatic recovery from yesterday's dramatic losses in the market, but the underlying economic sickness remains. Since 2012, when stimulus and bond buying began, our economy has been on life support. It is only a matter of time before economic conditions slip lower and a dreaded recession wipes away trillions in stock gains and the dreams of financial security.

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

Today's Market
by Dr Invest


Only now have analyst begun to admit that there are flaws in our U.S. economy, and only after a continued troubling downturn in the market. Shiller, professor at Yale, acknowledged that he was getting out of U.S. stocks, later saying that investors were continuing to invest in stocks out of fear. Stocks, he said, are the only game in town and that investors were exchanging risks for returns.

David Rosenberg took a step back to highlight four of the biggest obstacles facing the bull market.

Rosenberg, a typically bullish analyst  outlined:

1. Earnings momentum has slowed. Bottom-up consensus forecasts for S&P 500 operating earnings growth in the first quarter have fallen to -3.1% from +5.3% year-over-year. "The second quarter has been sliced to -0.7% YoY as well, so technically speaking we could be looking at a mild profits recession here in the US – this is down from the +5.9% estimate at the start of the year," he wrote.
2. Valuations are high. The trailing P/E ratio is 20x, compared to the long-run norm of 16x. "It actually is not all that uncommon to see the equity market up in years when EPS growth is flat-ish (as the consensus now believes for 2015) but that requires price-to-earnings multiple expansion."
3. Economic data has been disappointing. The Citigroup Economic Surprise Index is at the lowest level since August 2011, and in that month, the S&P 500 dipped in a way that led some to think the economic cycle was turning.
4. The strong dollar is hurting profits. "There is such a thing as too much of a good thing," Rosenberg wrote, and the dollar bull market is not over. He advised investors to avoid sectors that have EPS forecasts below zero, including Utilities (-6.6%) and Telecom (-0.8%.)

Up until last week, no analyst would acknowledge these grim figures. There was only the acknowledgement of a economy reaching velocity to break free of the recessionary levels held the past five years. Even president Obama touted how strong the economy had become under his leadership with employment reaching new highs. The problem is that the improvement in employment has come in part-time jobs that are relative low pay. Companies, seeking to avoid paying for the healthcare of full-time employees have begun to offer only part-time positions. Now heads of households must hold two part-time jobs and then those jobs pay less. When those jobs are recorded, they are recorded as though two people are now employed, when only one person has two jobs.

You may have a short memory, but back in the recession of 2008 there was a change in the way statistics were reported that made the GDP appear more robust, a kind of rewriting of the rules. Most of these changes were because of politics, so our economy would appear more robust. 

The reality is that people are making less income and they are being taxed more. Rules have been rewritten in the U.S. tax code so you pay more... more in fees if you don't have medical insurance... more in fees if you sell a second home (NIT), fees called medicare surtax, and redefining pretax income. (For instance, before 2014 your company could pay for your heath insurance and it would not be counted as income to you. Now the $10,000 to $15,000 your company pays for your health insurance must be added to your total income. So if your company paid $10,000 for your health insurance and your salary was $50,000 a year.... your total income would now be reported as $60,000. Effectively, your are being taxed more, even if taxes were not raised.)

Taxes put a drag on growth. Add to the mix a over valued dollar and declining consumer purchases and you have a recipe for disaster. So hold on to your hats, because the wind is picking up. Politicians and Wall Street brokers will continue their mantra that the economy is taking off. Don't believe it!

(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

Let me reiterate, we have been in a recession since 2012. The Federal Reserve, shrewdly used money printing (Liquidity) to float the economy. You will remember that in May of 2012, Bernanke, the then head of the Federal Reserve, began Quantitative Easing (QE). This inflated a market that was then in recession and is still in recession. The recession that began in 2012 never really ended. All of the QE would have caused remarkable INFLATION, excepting that we were in a RECESSION. The recession mean people receiving less INCOME. With less income and less consumer spending, there were less TAX REVENUES. City governments, State governments, and our National government suddenly found their selves short of the money needed for government programs. Numerous cities filed for bankruptcy. Even some state governments neared bankruptcy and were only pulled back by radical spending cuts.

THE CRY FOR INCREASING MINIMUM WAGE HAD NOTHING TO DO WITH COMPASSION, RATHER TO GAIN MORE TAXES FOR GOVERNMENT. It is loathsome to couch compassion for the poor under paid worker on the seat of self gain. This government's greatest concern is that business are not increasing the salaries of their workers. Is this because of their great humanitarian concern? No! This is because if companies would only increase salaries, the government could collect more taxes. Now if there is legislation to raise your taxes, you will likely call your Congressman immediately. But this kind of taxation is far more subtitle.

The implement a national healthcare insurance program (Obamacare) that BIG BUSINESS will have to pay for. This is hidden form of TAXATION. Increase minimum wage on BIG BUSINESS. This is a hidden form of TAXATION. Fees for people not wanting national healthcare insurance. This is a hidden form of TAXATION. If you own a second home and you sell it, there is a FEE that is paid into OBAMACARE. That is a hidden form of TAXATION. There are many other FEES that have been implemented on tobacco, alcohol, or luxury purchases, all amounting to a hidden form of TAXATION. There are a number of FEES yet to be implemented, but they are forms of HIDDEN TAXATION.

Businesses are buying back their stock and investing in their plants. Yet, these same businesses are cutting less desirable workers, hiring more desirable workers, and keeping their profits abroad. The government is begging them to hire more workers, but they are saying no! The government is begging them to bring their profits home, but they are reluctant to do so. The government's interest is not for the companies to reinvest in the U.S., but to TAX those companies, so government can continue to expand. It is the LACK OF FUNDS that keep the government from continued expansion.

So LIMITED INCOME, HIDDEN TAXATION, and INCREASED DEBT present a drag on the economy that is insurmountable.

TODAY'S MARKET NEWS

Wall Street and the Federal Reserve have talked about reaching "ESCAPE VELOCITY" for the economy in 2015. Although this term has been used over the past three years, we have yet to achieve "escape velocity". To the chagrin of bankers and brokers all over Wall Street, today was marked by the DAY THAT ALL THE GAINS IN 2015 WERE ERASED.  This was because earnings are in worse shape that investors recognized.

Do what! I thought we were at "ESCAPE VELOCITY" in our economy. The dollar is suddenly higher than the nations around us whose currencies are DEFLATING.  To make the dollar drop in value, we have to print more dollars. Already wall street is demanding that the Federal Reserve return to Quantitative Easing.   The projection was for a 3.2% increase in the GDP, when earnings growth for companies have contracted 5.1% during the first quarter. Now analysts are wondering if the Federal Reserve's projections were at all correct.

Go to BUSINESSCYCLE.COM and read their latest news. The economy is not improving and not projected to improve.


Providing the above chart, the ECRI shows us that a combination of demographic trends and government intervention is leading GDP lower.

Finally, Dr Lacey at Hosington has written one of the most accurate assessments I have read regarding the present economic conditions. You would be foolish not to read this article. You can get there by going to http://www.hoisingtonmgt.com/pdf/HIM2014Q4NP.pdf

Dr Lacey notes the DEFLATIONARY condition in the economy, CURRENCY MANIPULATION by the FED, OVER INDEBTEDNESS by governments, businesses, and individuals, and continued efforts by central banks to compete in an ever declining market.

SUGGESTIONS FOR INVESTORS

If you are invested, consider how much you are willing to lose and SET SELL POINTS. In other words determine how you are going to get out of the market. Don't wait too long to sell. The first out wins, the last out carries the losses.

If you are not invested, stay in cash until a firm downtrend has been established. Look for 30% to 50% losses. Only then could you consider re-entering the market. It is better to be out of the market wishing you were in, than to be in the market wishing you were out.

I have been positioned in a market, seeing losses each day; it is not a happy time. So walk carefully.

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