February 2012 - 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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  • Will the Bond Bubble Burst This Year?

    Today, there are more people invested in US bonds (of all types) and bond mutual funds and ETFs than ever before. The degree to which this shift from stocks to bonds occurred in the last few years is simply stunning. For the period from 2007-2011, ICI reports that a net total of $408 billion was redeemed from US equity mutual funds – that’s huge!

    A record $792 billion in new money was invested in US bond funds in 2007-2011. While not all of the equity outflows immediately went into bond funds, this represents a shift of over $1 trillion in five years! A shift of this magnitude has never happened before. Is this a signal that the bull market in bonds is just about over? Could well be.

    Today, we look at reasons why long-term interest rates could rise this year. While the Fed has promised to keep short-term rates near zero well into 2014, this doesn't mean that bond rates can't move higher this year. The US economy is improving, albeit very slowly, and inflation hit 2.9% in the 12 months ended in January, and the European debt crisis is far from over. These are not good signs for bonds.

    Bonds have been a terrific investment for the last several years, but the bull market is now quite long in the tooth. If you are overweight in bonds, I would highly recommend that you take some profits and consider moving that money to an actively managed bond program such as Wellesley Investment Advisors with the potential to make money whether bonds go up or down (no guarantees of course).

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  • 12 Market-Beating Investment Strategies

    From time to time, I like to share with readers what I do in my "real job" at Halbert Wealth Management. We are an Investment Advisory firm in Austin, Texas and we specialize in identifying successful independent money managers. However, these are not just any money managers, they all employ active management strategies in an effort to lessen the risks of being in the market.

    At the end of 2011, we ran our performance numbers on our AdvisorLink® programs and saw that ALL of our recommended managers beat the S&P 500 Index since the inception dates of each program. Not only were returns higher, but losing periods (drawdowns) were also significantly less. Higher returns with lower risk - that's the Holy Grail of investing.

    In this week's E-Letter, I'm going to review the performance of our active money managers as well as discuss how you can become one of our clients, if you are not already. Even more importantly, I'll tell you why NOW may be the best time to diversify your portfolio to include active strategies.

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  • On Obama’s 2013 Budget & the Crisis in Greece

    Today we begin by looking at President Obama's new federal budget request for FY2013, which begins on October 1. To the surprise of no one, he's asking for a record $3.8 trillion to spend in 2013. Also to the surprise of no one, his new budget calls for a myriad of tax increases, especially on families making over $250,000 a year. The budget does include some spending cuts, but remember that in Washington, a slowdown in funding growth qualifies as a spending cut.

    The federal budget deficit for 2012 is now estimated to be $1.3 trillion, marking four consecutive trillion-dollar budget deficits under Obama. But wait, the deficit for 2013 is only supposed to be $901 billion. Obama's new budget offers projections for the next decade, and the budget deficit never falls below $500 billion over the next 10 years.

    Next, we turn to Greece and the latest passage of a new round of austerity measures, spending cuts and more government layoffs in order to qualify for a new EU/IMF bailout loan of €130 billion ($173 billion). The loan will ensure that Greece does not default next month when a big bond bill comes due. While €130 billion should tide Greece over for awhile, the struggling nation will need more bailout money before year-end. It remains to be seen how long the EU nations will continue to write checks.

    It also remains to be seen what will happen in Greece's national elections in April. Given the massive demonstrations and torching of buildings that happened over the weekend, today's Greek leaders are almost certain to be kicked out of office. If they are replaced and the new leaders reverse the austerity programs, then Greece will default and withdraw from the EU. If that happens, it will be very ugly!

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  • CBO’s New Forecasts & The Unemployment Report

    Today we begin by focusing on the Congressional Budget Office's (CBO) latest long-term economic forecasts. Actually, we will focus most of our attention on the CBO's 2012 and 2013 forecasts, since going beyond the next year or two is really just speculation in these uncertain times. There is a lot to consider in the CBO's latest forecasts.

    From there we move on to some scintillating news that many federal workers, including at least 36 members of Obama's own White House staff, are far behind in their income taxes owed to the IRS. How far behind? Can you say $3.4 billion? Yes, $3.4 billion and counting. President Obama says we all need to pay our "fair share" (ie - higher taxes on the rich), but I would suggest that he focus on those in his Administration and Congress that are behind on their tax payments.

    Finally, I will examine last Friday's unemployment report which surprised just about everyone. There is a reason the unemployment rate is going down, but you may be surprised to learn why. I'll give you the straight story, plus I will review the latest economic reports at the end. Let's get started.

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