Today's Market
by Dr Invest

Many of you thought I had died, but no! We are currently caught in a current that returns us back to where we began, a kind of Ground Hog's Day event. Oh yes, our financial advisers remind us that our economy is growing and we will all get rich; the Federal Reserve reminds us that our economy is growing and is robust enough for another interest rate increase; and our president reminds us that under his guidance, our economy has made enormous strides toward recovery after the Republicans had messed everything up.

Just a comment, it is like our government has DOUBLED its debt under the Obama administration and increased spending by 1/3, and implemented one of the largest healthcare fiascos ever placed on U.S. citizens, and then calling all of this a great success. Barf! If you are believing any of this, it is only because you don't have a clue about what is true.


The reason I am mentioning this at all, is because reality escaped the political and economic spheres a long time ago. It is all about the SPIN. It is how you tell the story and get the masses of people to believe it. Candidates are running for political office... it is about the SPIN. Financial Advisers are now boldly talking about there role as FIDUCIARIES, meaning that they have your best interest in mind. Still, they will put you into the investment that returns to them the best kick-backs from their companies.

Here is what Stan Druckenmiller, one of the worlds greatest traders recently said: “Sell your equity holdings.”

CNBC has a good summary:

“The conference wants a specific recommendation from me. I guess ‘Get out of the stock market’ isn’t clear enough,” said Druckenmiller from the conference stage in New York. Gold “remains our largest currency allocation.”

The billionaire investor expressed skepticism about the current investment environment due to Federal Reserve’s easy monetary policy and a slowing Chinese economy.

“The Fed has borrowed from future consumption more than ever before. It is the least data-dependent Fed in history. This is the longest deviation from historical norms in terms of Fed dovishness than I have ever seen in my career,” Druckenmiller said. “This kind of myopia causes reckless behavior.”

He believes U.S. corporations have not used debt in productive investments, but [have] instead relied on financial engineering with over $2 trillion in acquisitions and stock buybacks in the last year. This is finally showing up on the books of companies as operating cash flow growth in U.S. companies has gone negative year-over-year, while net debt as gone up, according to the investor.

Druckenmiller was negative on China’s economy going forward and believes recent attempts at further stimulus in the Asian country will not work and “aggravated the over-capacity in the economy…. Higher valuations, limits to further easing... the bull market is exhausting itself,” he said.

Without boring you with volumes of statistics, the ten-year expected return on equities is only 2% per year.   Mauldin Research can provide you the volumes of research, and much of it free. The point is that until there is a DRAMATIC fall in equities, there is no real opportunities to profit from the current market. Four words describe the current market conditions: HIGH RISK, LOW RETURN.

Even BOND purchases at this time are RISKY because the FED could raise rates, leaving you with a bond no one wants to purchase. If you have bonds you purchase many years ago, returning 5%... keep them!

The Federal Reserve and Central Banking as a whole, have set a course that is largely experimental. It would appear that we will eventually end up like Japan, in a stagnate and indebted economic state.

What to Do

There really is not a great course of action other than batten down the hatches and ride out the storm. If you have investments in a ROTH, selling your stocks and moving to Certificates of Deposit could work well and be secure. (Called, the Grandma Investment) You can get 1.2% returns on CDs at this time. Perhaps by July, if the FED raises interest a basis point, you might get even a higher rate of return.

Gold has been mentioned and at some point may bring great returns, but since 2012 gold has been a real loser. You want to see a return from an investment you don't have to hold for 30 years.