May 2013 - 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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  • Investors Shun Stocks But Cling To Bonds - Why?

    This week, the Halbert family is taking it easy in sunny Florida, celebrating our son's graduation from college. Instead of my usual writing, I'm going to reprint an excellent article on investor behavior penned by the Wall Street Journal's Jason Zweig.

    As anyone reading my E-Letter knows, I have been concerned for some time about the effect of rising interest rates on bond prices, yet investors continue to pile money into these investments. Even in the face of a powerful bull market in stocks, investors are ignoring equities and clinging to bonds. It just doesn't make sense - at least not until you read the article below.

    Zweig seeks to answer the question of why investors continue to pile into bonds by examining the field of investor behavior. I think you will find his article to be interesting and perhaps a bit revealing. I have also added a few comments of my own throughout the article. Enjoy!

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  • 2013 Federal Budget Deficit Plunges – How, Why?

    It was so tempting to devote today’s E-Letter to a discussion about all of the scandals plaguing the Obama adminstration in recent weeks. In fact, some of my staff were very disappointed that I chose not to go there. My feeling was that the airwaves are so saturated with coverage of the Obama scandals, you might not want to see even more piling on from me, as much as I would like to. (There are some very good stories on the latest scandals in SPECIAL ARTICLES below.)

    Today, we’ll focus on the latest news that this year’s federal budget deficit will likely be significantly lower than previously estimated by the Congressional Budget Office, and the reasons why that is. But let us not be fooled into thinking that falling deficits are a permanent thing. No, in fact, the deficits and the national debt will continue a troubling increase over the next decade and even longer.

    We’ll also discuss the subject of our nation’s “unfunded liabilities” which now stand at a staggering $123 trillion, which is rarely ever mentioned by the media. And there are several other interesting points I will touch on today, but I don’t want to give everything away in this introduction. So please read on.

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  • Why Investors Are Still Their Own Worst Enemies

    Dalbar, Inc., a leading market research firm, studies investor behavior each year and calculates the performance of average stock and bond investors versus the returns of the major market indexes. Over the 20 years ended 2012, the S&P 500 Index delivered an annualized return of 8.21%, whereas the average investor in stock mutual funds earned only 4.25% annualized over the same period.

    You read that right. Due largely to jumping in and out of the market at bad times, and chasing the latest "hot" funds, the average stock mutual fund investor made only about half of what the market delivered. For bond mutual fund investors, the results are even worse over the last 20 years.

    Today we’ll look at the latest Dalbar studies which were released in April and show us – once again – that most investors are still their own worst enemy. Dalbar argues that stock and bond investors should stick to a strict “buy-and-hold” strategy and should never get out. We, on the other hand, have long argued that most investors don’t have the temperament to hang on during bear markets and are very likely to bail out at the worst times.

    I write about the Dalbar studies every couple of years, and the results are always the same. Average investors in mutual funds significantly under-perform the major market indexes. As we go along today, you’ll see the reasons why the study’s results are so consistent and why Dalbar’s recommended solution hasn’t changed investor behavior in over 20 years. Let’s get started.

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  • 6.7 Million “Missing Workers” – Where Did They Go?

    Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.

    Next we look at the latest Gallup poll showing how many Americans rate the economy as excellent, good, only fair or poor. You may be surprised at the results, which aren’t immediately clear in the chart. Following that, we look at some interesting data on mutual fund money flows which show that the love affair with bonds continues, and investor demand for stocks is waning.

    Finally, the International Monetary Fund downgraded its global economic forecast recently, including its forecast for the US and most of Europe. I have included the IMF’s graphic that lets you look at each country’s forecast for 2013 and 2014.

    By the way, we have a lot of charts and graphs today, so the letter will print longer than usual.

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