November 2009 - Forecasts & Trends

Forecasts & Trends is much more than just investment blog posts. You need to know the "big picture;" you need to have a "world view," especially in the post-911 world; and you need more information than ever before to be successful in meeting your financial goals. Gary intends to help you do just that.

Forecasts & Trends

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  • Mutual Fund Managers Don't Invest in Their Own Funds!

    In my June 24, 2008 E-Letter, I wrote about a shocking Morningstar study that revealed that only 47% of mutual fund managers invest their own money in the funds they manage. As I wrote at the time, I suspected that the Morningstar study would result in more fund managers putting some of their own money in the funds they manage. But to my surprise, the numbers have gotten even worse!

    The latest Morningstar report finds that an incredible 51% of mutual fund managers have not a dime of their own money in the funds they manage. Frankly, I am stunned once again. Why over half of all highly paid fund managers have none of their own money on the line is beyond me, and I find it very troubling.

    I, on the other hand, have my own money invested in EVERY program I recommend to my clients. I would have it no other way. If I don't have my money on the line, why should I ask you to? Let's talk about it.

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  • Why This Real Estate Bust is Different

    In my September 29 E-Letter, I wrote extensively about the looming crisis in the commercial real estate sector. Things have not improved since my late September letter, and in fact have gotten even worse, despite the pick-up in the economy in the 3Q. Commercial real estate prices have continued to fall, and foreclosures continue to rise.

    The core problem with the commercial real estate (CRE) market is the $3.5 trillion in outstanding mortgage debt. Of that amount, an estimated $1.3-$1.5 trillion of outstanding loans will have to be refinanced in the next 3-4 years alone. Banks are still overloaded with CRE debt; investors have soured on collateralized mortgage securities; and there is not nearly enough money in REITs to buy up all the CRE property that fails.

    So, it is a real possibility that we will have yet another credit crisis on our hands over the next few years, which supports my view that this could well be a double-dip recession, with the second downturn sparked by widespread defaults and foreclosures in commercial real estate.

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  • Are We Sure the Recession is Really Over?

    The announcement on October 29 that 3Q GDP surged 3.5% was seen as a confirmation that the recession is over. However, a closer examination of that report reveals that it was still a disappointing quarter for the economy, especially considering how much government spending contributed to the gain... The government reported last week that US worker productivity surged to the highest level in six years in the 3Q. Normally rising productivity is a good thing but this time, much of the increase is due to massive layoffs -- fewer workers are having to do more work -- and many companies are laying off the best and brightest, such as scientists and engineers... The unemployment rate surged to 10.2% in October, the worst in a quarter century.

    This week, we will examine all these issues at length, plus I have included a very worrisome analysis from economic forecaster Nouriel Roubini regarding the US dollar and what he sees as the next credit crisis on the horizon. Finally, I have included an article from the Wall Street Journal that lists the most insidious parts of the new healthcare bill that just passed - prepare to get very angry!

    Finally, our thoughts and prayers go out to all of the families of the innocent soldiers who were killed and injured in the tragedy at Fort Hood that occurred on November 5.

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  • Dalbar Update: Investors Still Lagging The Market

    The Dalbar organization recently completed the 15th update of their landmark Quantitative Analysis of Investor Behavior (QAIB) Study. As long-time readers know, I have often quoted statistics from these annual updates that show average investors receive inferior long-term returns when compared to gains posted by stock and bond mutual funds. The reason, by and large, is that investors switch from fund to fund chasing hot returns. In doing so, they often end up with low returns, and sometimes even losses. Most interesting, however, is that the 2009 Dalbar QAIB Study update finally comes to the realization that traditional buy-and-hold approaches do not work, and that investors continue to panic and trade out of stocks when losses run high. In other words, emotions often trump rational investor behavior. This week, I'll update you on the most recent Dalbar Study findings, and also discuss our solution to emotional trading that we discovered back in 1995.

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