Today's Market
by Dr Invest

I wish there was something new to report, but there is little good news to report. A closer look at the housing start-ups show that most of the building was for the rental market, not new housing. Florida still has one of the highest defaults on mortgage. 1 out of every 32 home owners are defaulting on their mortgage and it is taking over 800 days to bring the owners into court to repossess the properties 

The good news is that the Federal Reserve is buying $40 billion in bonds (twist) and $40 billion in mortgages (stimulus 3) each month. Considering that a trillion dollars a year will go toward propping up the economy, it is easy to see that we will one day reap the consequences of this action. Removing all the stimulus would immediately sink the economy. The stimulus is our "life-support" and the economy could not proceed without it.

As an investor, I can't sit on my hands and watch the market's continual climb; but also, I cannot afford to take the risk of the market suddenly taking a downturn.

My total portfolio has recovered greatly. Having nearly 2.73% gains in WMT, Walmart sank around 7% after Christmas, only now nearing the original purchase price. RTH, a composite of a number of retail stores also fell into the negative and only now has risen 1.63% into positive territory. TIP has been a great performer, but has also seen negative territory. BND has been a poor performer with the Fed competing in the purchase of bonds with individual investors. I am hoping that BND will return to positive territory, where I will immediately and forcefully sell BND.  IAU, a gold trust, has fallen to a loss of 7.35% and only recently moved up to a loss of 5.21%.  The gold position is a long-term position with a window of one year to see a return.

Some of you have asked if I have some risk added investments. I would not recommend taking risks at this time but I will share with you a recent investment made at the end of December in RKUS. Ruckus Wireless is a new IPO and has some good history as a company and seems a good buy. I purchased RKUS on the 28th of December, returning 7.11% as of this date. I think that there is still some growth in this company but I would not recommend putting anymore than 10% of your portfolio into this company.

Another company I recommended was CATM. Oversold, it has begun to rebound. My suggestion was to buy CATM at the middle of December. CATM has now gained 16.34%. The immediate threat to these stocks are the decisions to be made on our DEBT CAP. The political haggling places a drag on the market and plunge the market into recession and a pull-back as much as 10%.

Rather thank blindly investing, one still needs to remain cautious, keeping stop-sells on all positions. Please go back to the SIDE BAR and look for RESEARCH AND MARKET REPORTS. Listen to me, ALL these reports are essential for your reading at this moment.

Hosington writes: The global economic environment is best characterized by an insufficiency of aggregate demand.  That is, the capacity to produce goods far exceeds the final demand for those 
products.  The root cause for this circumstance is debated, but we believe academic studies point 
directly to overconsumption relative to income in recent decades.  Borrowing, leading to overindebtedness, has funded this excess spending.  Economic systems must now repay or rationalize the debt in some manner.  Whatever the cause of the inadequacy of final demand, the result has been a deflationary environment.

This explains why an aggressive quantitative easing by the federal reserve is not moving the economy into immediate inflation and why central banks are having not better luck in moving their economies. People barely holding onto their jobs and other people without jobs can scarcely afford purchases of consumer items. The only hope of keeping profits high and world governments well funded is to keep people spending, so people without money must begin taking on debt to keep the economic cycle funded. Most Americans now have limited credit, reducing their ability to buy consumer goods; even more so in other parts of the world, the weight of debt has crushed purchasing power. The decrease of income to companies and individual provide less revenue to governments  Governments hungry for revenue, must increase taxes to pay for their own debts. As demands for goods decrease, companies have to cut prices to get more people to buy their goods. This is a deflationary condition that increases as the economy worsens.

The bottom line.... no one can predict the move of the market at this time. We will see volatility with significant rises in the market and sudden falls. Many believe we will revisit the lows of 2007. Simply go back to the sidebar and read the reports.

I suggest that you be vigilant to market movement and keep stop-sells in place. Some of these drops in the market could exceed 30 to 40%.  Your only protection is your immediate action to save your portfolio from market losses.

Note: the above information is for entertainment purposes only and not to be used in any way for investment advice.

Today's Market
by Dr Invest


Some of you have wondered about my investment position and the on-going market conditions. It is like waiting for the shoe to drop. In May, I had taken positions in two bond ETFs, TIP and BND. TIP has returned a pathetic 2.72% and BND has a loss at -.37%. These are lessons in what happens when government manipulates markets at the general public's expense. Both these very stable investments have proved to be awful investments, returning little more than a certificate of deposit. The expected return for TIP and BND should have been around 6% to 12%.

In November, I invested into two retail stocks, WMT and RTH. WMT has lost -2.21% and RTH has gained 2.46%.  As of this date, the total gain has been around 2.6%. Not a spectacular return, when you consider that had I paid a financial advisor 2%, my gain would have been closer to .6%.

Overall, the market has proven pathetic, even with the Fed devoting one trillion to buy bonds and debt in 2013. The Fed continues to be in competition with individual investors as they manipulate the market. Without the Fed stimulus, the market would collapse immediately. Presently, there are questions about the present course of the market.

In the last 6 months, the DOW has gained 5.72%. In the last 3 months the DOW has gained .62. And in 2013, the DOW has gained .71%. The political clouds rising in the month of February will likely erase any real gains we have seen in January. Expect more of the same in the days ahead: dramatic volatility in the market with stinging losses and exhilarating gains, only to end 2013 with pitiful gains that have been manipulated by the government. Look for the market to neither collapse nor to rise.

Having entered a stock position with WMT and RTH that is neither rising nor falling, I have found myself lost somewhere in stock limbo. The stock position is not rich enough to sell and has not fallen enough to trigger my stop-sell.

Is a collapse of the market possible with such determined efforts by the Fed to stimulate the market? Well, yes! But these determined efforts have floated the market in hopes that somehow the market will spontaneously recover. That economic recovery has failed to materialize and some believe it is unlikely to materialize until we deal with our national debt.

(Note: the above information is for entertainment purposes only and not to be used a investment advice.)

Today's Market
by Dr Invest

Some of you have wondered if I had stopped writing. No! There just hasn't been much to report. Politicians locked over whether to spend or scrimp, locked over whether to print money or save money, finally, in fear of losing their jobs made a last minute decision that at best was poor and at worse will deepen the recession in the coming months.

See, it seems that I am repeating myself here. The market is no worse off, nor better off. As often quoted "It was the best of times, it was the worse of times." The only thing really going for the market is $40 billion monthly to stimulate the economy. Without the stimulus, we would be in the red in a heartbeat experiencing something even greater than the GREAT DEPRESSION.

I hate stocks right now, but I bought WMT and RTH at the first part of November. They have been up...close to 3% and down close to 4%. I told my wife, "If the politicians don't settle the fiscal cliff, we are surely going to see WMT and RTH hit their stop-sell with a 5% loss."

You know the rest of the story, both WMT and RTH gained 1% today and my elation was met with the fact that within three short weeks, the haggling over the DEBT LIMIT will be a new source to deflate any new found gains.

One economist said, "The politicians will put together a "last minute deal", stimulating the market long enough to please investors... then fall off the cliff." I think this to be a likely scenario. I will hope for the best over the next two weeks and tightly close my TRAILING-STOP so the stocks sell.

I don't have much faith in either the Federal Reserve, nor our government. Spending will continue at full steam and Bernanke will provide the wood that fuels the economic engine. At some point, there will be no rich to tax; the government, as has happened in so many other countries with a fiat currency, will have to TAX THE MIDDLE CLASS.

If you look closely, you will already see that the middle class is being taxed, but I'm talking about 60% of your income returning to the government. You already work 5 months out of a year to pay for all taxes (property, city, state, federal, social security). But I am saying that with in five years, you will work 8 months to pay taxes and the government will give you what is left over. Now TAX FREEDOM DAY is estimated differently by different economists and it depends in which state you live.

Now Mitt Romney got in trouble for saying what was true. At that time 47% of the U.S. population was receiving some kind of benefit from the Federal Government. Just being logical here, why would you vote for someone who would cut off your government benefits. If I were King, and I said "no more government support for art... like a crucifix in a jar of urine... or a cow and calf cut in half, in a big Plexiglas vat of formaldehyde... there would be some artists who would truly hate me. Or if a cinematographer wanted his vision painted on the big screen, of three sisters engaged upon a sexual exploration from their innocent upbringing...blah, blah, blah, and I cut Federal funding for his offbeat movie, again, I would be hated. I understand these examples sound ridiculous but each of these examples are TRUE. The list goes on and on. http://endoftheamericandream.com/archives/30-stupid-things-the-governemnt-is-spending-money-on

I only wish government wasn't wasting your tax dollars, but all of this is pushing us further and further into debt. We had the change for REAL CHANGE, but the vote was for more socialism.

Let me turn you on to Chris Martenson. He explains some of the problems of growth, but also in relation to debt. https://www.youtube.com/watch?v=bRc-YfcXVYo Exponential growth is explained, so that at the end of a growth cycle or debt cycle, the growth or debt can exceed you ability to comprehend it and happen within a blindingly short period of time.

This is exactly what happens to an individual. They fail to understand the power of compound interest. When you pay more than double the original price of your home in interest, you are losing real money. Assuming you buy a $200,000 home, you are giving $231,000 to the lender. This initially seems to your advantage because you didn't have the $200,000 to pay for the home in the first place...so you are using someone else's money.

But when you have the $200,000 to pay for a home, you are saving $231,000 in losses over a 30 year period. This is $231,000 that can go to work for you. So money, when used properly over 30 years, seems to grow slowly at first, but at the end of the thirty-year period the growth is exponential.

That $231,000 lost to interest, would have grown in 30 years, at 6% interest, to $1,210,435. Your actual loss is $1,210,435 of investment power.

For the individual, a series of loans and credit purchases can erode their wealth and set them up with so much debt, that one set of tires or an unexpected illness can bring down their whole financial house.



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


 

Today's Market
by Dr Invest

I'm thinking the next month is going to be painful. I made an investment in stocks with a yet undetermined outcome. My view is that my positions in stocks will sell at a loss after hitting my stop-sell. I will feel the pain when my stocks sell, but I still hope that the promise of a fiscal cliff compromise will move my stocks upward.  Instead of sitting on gains, I find myself about even. The bond ETFs have continued upward, gold has climbed some but still remains in the red, stocks are now in the red. For the short-term, I feel the pain. And though twisted like a contortionist, I patient hold my position waiting for the uptick.

Outcomes

There really is nothing positive at this moment. If you were planning to buy something, stay away from the market right now. The Fed stimulus will likely prop up the market after the fiscal cliff. WMT and RTH will likely regain their footing if they don't fall enough to trip my stop-sell. YTD gains for WMT is still at 10% and WMT will continue their profits in 2013.

We could only hope for a good old fashion recession and 2013 could be the year for it, but remember Bernanke is committed to keeping the stimulus pumping regardless the cost. So we can expect a stimulus led bull market or an uncontrollable bear market that will tear at the core of your investments.

So, Merry Christmas and Happy New Year. I continue to wait for a new burst of gains and hope it comes soon.

Dr Invest

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


 

Today's Market
by Dr Invest

Ho, Ho, just like a yo yo! That is just what the market has been doing, the yo yo! One day my investments are screaming upward, the next day my investments are in free fall. Although the market climbed in 2012, the entire year has been... well, like a yo yo.

Though the S&P has risen a little over 13%, all the gains were nearly erased once in this year, and a second time slid toward all the gains being erased a second time. Bernanke on the ball, quickly promised zero interest and on-going stimulus until either unemployment returned to normal levels or inflation began affecting the economy.

So here we sit in one of the world's most volatile markets, wondering when the next axe will fall. Nothing is predictable; the market is growing too quickly to stay-out and falling too quickly to say in. If you don't invest, you lose 12%; if you do invest, you could lose 30%. And worst of all, nothing is predictable. Expected market cycles are almost non-existent.

Today's Gains

Today, I saw gains across the board. Everything was green, excepting my investment in IAU (a gold trust). There is really nothing to report. With the on-going political wrangling, the market remains vacillating and volatile.

I remain hopeful that financial winds will blow in a new direction, bringing eventual gains. I don't believe that central banks can keep pumping the market indefinitely and that there will be a "payday someday".

If you are to stay invesed in the market, protect your investments with a stop-loss and be prepared to get out of the market in a serious downturn.

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

Today's Market
by Dr Invest

I hate carping on my government, but today my dentist was telling me about the affordable health care tax of 2.3% on all dental devices. (all medical devices as well) So when you need that dental crown, your dentist pays a tax into Obama care and that tax, whether you are rich or poor, is passed on to YOU! Some how, I am not liking this new government plan.

FSA or Flexible Savings Accounts, to be used for heath care, permitted a total contribution of $5,000 annually that was tax deductible. Now that tax deduction will be capped at $2,500 and on the remaining $2,500 YOU WILL PAY THE TAX. Geeze, we need to get that money out of the hands of the extraordinarily wealthy. Listen, the wealthy don't need FSA, nor do they need insurance. When you make a million a year, do you really need an FSA? If your employer pays for your FSA or Health Savings Account, you will be taxed for $2,500 of that whether you are rich or poor.

In the past, you could take-off a deduction for large medical expenses you paid during the year. In 2013, the threshold for medical deduction rise from 7.5% to 10% of your total salary....whether you are rich or poor you will pay the additional taxes. What is worse, you will pay the extra taxes while you are sick and at the most vulnerable financially. If you are a senator or congressman, and your are reading this, you should do more than hang your head in shame, you should sponsor a bill tomorrow morning to rescind this tax on the sick.

All of these taxes amount to billions of dollars to the government to pay for what will be one of the poorest health care systems in the world. Two of my friends, who are medical doctors, have already shared with me just a few of the rules and restrictions facing them as the implement the new obamacare plan. And the paperwork..... OMG. There are reasons government is inefficient and those who have longed for a new America are going to get their CHANGE THEY CAN COUNT ON..... while the government gets their dollars.

BACK TO THE INVESTMENTS

In my experimental portfolio of $10K, my total gains increased today, eventhough my overall loss for WMT was not erased. WMT started strong, but slid lower as the day continued... but still keeping .65% of its gains.

As long as the fiscal cliff remains, the opportunity for significant gains for WMT remains slim. If agreement is reached on the fiscal cliff, WMT could climb 3% to 6% before the end of the year. RTH gained 1.25% as the retail sector climbed in hopes of a political conclusion to the fiscal cliff.

Conclusion

Sadly, there is really no real change in our economy. The government keeps stimulating the economy; the market moves unpredictably and erratically; and the ever increasing rise in the market makes it almost impossible for investors to stay out of the market.

So moving cautiously and keeping a stop-sell nearby is almost a must whether investing in BONDS or STOCKS. My gold position in IAU is down 4.45% but the gold position  was entered with an expectation of a rise in gold prices over the next nine months. The present portfolio position should produce decent returns before May of 2013, but being alert is important at this time. In spite of government intervention, the markets could collapse at ANY MOMENT. I definitely would not lose more than 6% on any stock or bond and would consider the 6% loss a gain if the market fell 30%.

What I am saying is if you lost 6% and the market fell another 24%, you would follow the falling stock with a stop-buy until it once again began to climb. This would put you in an excellent position to regain your 6% loss and add another 24% in gains as the market recovered. Don't be scared, be prepared.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)




 

Today's Market
by Dr Invest

Today a headline read, "Don’t Be Fooled by the Fed: Stimulus Is a Sign of Dysfunction, Not Opportunity". Stimulus is the course we have taken for a number of years because our economy needed to be propped-up. Listen, you don't have to have a doctorate to understand that if you need support beyond yourself, you aren't making it economically. This is the sign-of-the-times that many 40 year-olds are moving their families back-in with their parents because they can't make it any longer financially. Where will the U.S. government move when they can't make it any longer?

I really have no favorites between Republicans and Democrats, both seem equally inadequate in their governance; but if you only knew how the Obama administration is scheming at this moment to raise everyone's taxes and increase the debt ceiling, it would make you pale. Eliminating mortgage interest as a tax deduction is on the table... now who does that affect? Anyone who owns a house. Taxing company provided insurance as a benefit is another idea floated. A bevy of other taxes are being considered and all of them fall not only on the backs of the wealthy, but you too. Discussion of a capital gains tax seem logical, until you discover that the same capital gains would affect everyone with a 401K and an IRA, including the middle class trying to save for retirement. And then there is the consideration of Inheritance Taxes. Yes, the rich would pay their fair share, but many loopholes would have to be plugged. The middle class can't afford the tax lawyers to ferret out the loopholes and would pay the inheritance taxes, while the wealthy pass their wealth on to their families via trusts, limited partnerships, and other tax avoidance instruments.

On of the reasons corporations have moved abroad is to shelter their companies from one of the highest corporate taxes in the world. The U.S. is second, only behind Japan in the corporate tax rate. So why do business in the U.S.? The Progressives or New Socialists are excited about all the taxes they are going to raise so equitable programs can be implemented to pull the poor from their despair. Sadly, the middle class business men will be saddled with the new burdensome taxes to pay for the raised debt cap so the U.S. can continue to do business.

The Realities of the Fiscal Cliff

Boehner has made the first step toward eliminating the fiscal cliff by offering to raise taxes on those making over 1 million annually. Though it is not the deal the President wanted, it opens the way to tax the super rich. 241,000 people make over 1 million annually. This initially seems like a lot of people, but only represents a little less than 1%. Total tax projected to be gained is $3.6 billion.

What is not projected the is will of the wealthy to take advantage of the myriad of tax loopholes before 2013. To understand this, you have to think about the super-wealthy utilizing their profits to find new opportunities for generating new income streams (PROFIT). So they might redirect their profit to build an new company and hiring new employees or taking over another failing company they believe they could make profitable. To keep from paying Obama's new tax realities, the super-wealthy has to place their profits into investments that will shelter their income. Most, though, will likely move their income else where, so they can keep their money working for them.

Walmart is presently looking at purchasing an 80% stake of Turkish retailer Migros Ticaret AS, another rumor is that Walmart was looking at purchasing Hostess Brands Inc. The Chinese believe that Hostess will have a significant market in China and Indo-china, so does Walmart. Corporations and individuals are considering how to shelter their money and as usual, the governments plan to outsmart business men will result in them collecting less taxes and moving more jobs outside the U.S.

Investment Positions

The fiscal cliff has affected my conservative investment position. Care must be taken at this time to insure the best outcome. As mentioned in a past blog, I suggested placing a stop-sell 1 1/2% to 2% below the closing price of WMT and RTH.

If you didn't follow this advice, you are in the negative right now because both WMT and RTH have fallen. I have set my own personal stop-sell at 5% below the closing price and after falling nearly 4%, I have to ask myself if I want to take a 3% loss or move my stop-sell back to 5% below the purchase price. This is where judgment comes into play. For sure, I will be watching closely how the market responds to Boehner's offer to raise taxes on the rich.



With good news, WMT can quickly recover along with RTH. Even though gains have been recorded by retailers, questions remain on whether the fiscal cliff will dampen spending by the consumers, sending the economy into oblivion. To insure a viable economy, the FED has begun QE-3 with the warning that if the politicians fail to come to a timely agreement even the 40 billion a month may fail to keep markets viable. It is almost certain the politicians will find compromise and the stimulus will spur the economy and a rise in the market valuations. NOTE: MY BLOG on APRIL 22, 2012

In my blog, I show how underlying inflation increases costs of doing business, how businesses raise prices to the consumer, and how increased profits increase valuations. We are seeing a rising S&P, when we should be seeing the collapse of the S&P. No one doubts that if the FED's stimulus stopped, the economy would immediately fall into a recession.

While the safest strategy would be to say out of the stock market, the FED is punishing anyone buy stocks (because they are buying stocks and competing with the investors), and rewarding anyone buying stocks. Now it is doubtful that they can continue this stimulus forever, but 14 economies are presently stimulating their markets. It seems that world banks have agreed to all stimulate their economies together until all their debts are erased.  The problem is that if debt is not eliminated by governments, the stimulus would have to continue forever.

For the moment, it seems that central bank stimulus will keep stocks climbing and bonds weak. My guess is that at some point, the economy will weaken and slip into a recession. I would see that happening the first part of 2013, but it could happen at anytime.

For now, I am cautiously watching the fiscal cliff. If the market likes the political outcome, we will see the market revived at least temporarily.

Now all of these are only guesses on my part and the better part of wisdom is guard your investment. I am hoping that you have already sold WMT and RTH, but don't lose more than 5% on these stocks, you can always repurchase in January if the market appears to be improving.

(Note: the above information is for entertainment purposes only and not to be used a investment advice.)