Today's Market
by Dr Invest

How high can you go? What has changed? What fundamentals are you looking at that shows a new strong economic environment? In 2012, the economy began to falter and thanks to Bernanke's bond buying and quantitative easing, we escaped the hard cold truth that our economy was failing. It has never stopped failing since 2012. We have just kicked the can down the road by borrowing and stimulating. Fundamentally, nothing has changed.

There is the promise that our economy is soaring but a careful look at the fundamentals show something very troubling. Many wall street brokers continue their mantra, "Keep that balanced portfolio and hold-on, things will only get better." This encouragement comes in the face of a business cycle that is already long-of-tooth and likely to collapse at any moment. Furthermore, the FED has pumped up the economy, increasing our debt and limiting future potential growth. So let's look at some of the fundamentals that your financial adviser is not showing you.



Durable Goods has fallen - 5.3% in the past year. This is a precursor of a recession. Look at 1990, 2000, 2009, and note 2012 that was only saved by Quantitative Easing.




The ISM Manufacturing PMI has declined -13.5% over the past year. Is this a precursor to recession?- note the dotted red lines representing recessionary periods. Again, look at 2012, where we were saved by QE. Now, in 2015, the decline is below that of 2012 when Bernanke acted to save us slipping into recession. This slide is a precursor of recession.



Capacity Utilization has declined -1.9% over the past year. We are interested in the yellow line. Note: Capacity Utilization touched zero in 2012 and would have advanced further excepting QE. Over the past year, a strong decline has pushed CU below zero into the negative envelope, a strong sign of potential recession.



The GDP chart is the most troubling of all. There has been a steady decline in the GDP with no real expansion occurring since 1982. Think of GDP like an unwinding music box, with the music getting slower and slower; likewise, since 2000, our economy has slowed to a crawl. Even looking from 2009 until now, the GDP has continued its decline with the GDP likely falling to 1.8% in 2015.

Closing Thoughts

Can the economy be robust and vibrant at a GDP of 1.8%? No one I know would think so. Dr. Shiller is warning that stocks are over valued in the U.S. market. Dr. Faber is warning that stocks are rising on only a narrow few stocks that are reporting profits, while the majority are reporting missed projections; Bill Gross and George Soros both warn of a waning economy and a recessionary environment. Still, the S&P, DOW, and Nasdeq continue their rise while investors have become blind to the impending risks.

A month ago, when the investors were smarting from a downturn in the market, I comforted them and reassured them that there would be a bounce. I warned, you will see a bounce but don't interpret it as a rebounding economy. I fear my advice was not taken. Relieved that the market was returning to an all-time high, many have decided to stay-in and ride out the ups and downs. They will see again, the sudden and unnerving fall that comes at the end of a business cycle, only this time there will not be a bounce.

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