February 2014 - 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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  • The Most Interesting Articles I Read Last Week

    I have been quite distracted over this past week as my 95 year-old Mother-In-Law was admitted to the hospital due to severe bronchitis. Debi and I have shared time being at her side since then. Fortunately, she was discharged from the hospital yesterday, and we have moved her to a skilled nursing facility where she will hopefully regain her strength and get to go back home before long.

    Given the demands of the last week, I had little time to work on today’s E-Letter, so I have chosen to reprint the two most interesting articles I have read over the last week. Both are very insightful and answer some critical questions that the media is ignoring. Regardless of your political leanings, this is information that all Americans ought to know.

    I will offer some brief commentary prior to each of the articles. Let’s get started.

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  • US Savings Rate Falling Again – Here Comes "MyRA"

    Today we weave together several different topics that are all connected in one way or another. We begin with the US savings rate which is trending lower once again. From 1975 to 2007, the savings rate fell to an all-time low of 2.4%. While it jumped up briefly after the 2008 financial crisis, it is now moving lower yet again.

    In an effort to boost the US savings rate, especially for lower income groups, President Obama introduced a new type of starter retirement account for Americans of modest means that he called the MyRA, which stands for “My Retirement Account” and rhymes with IRA.

    While the new MyRA may be well intentioned, it is fraught with problems – most notably that it can only be invested in government securities that have yielded paltry returns over the last decade or longer. And when inflation rises, MyRAs are sure to be a big disappointment. I’ll tell you why as we go along today.

    Next, the recent Congressional Budget Office report, with its economic projections over the next 10 years, contained several troubling findings that the mainstream media and politicians in Washington deliberately didn’t tell you about. I’ll tell you why below.

    Finally, the president recently told a series of whoppers following the CBO’s latest report that claims Obamacare will cost 2.5 million jobs over the next decade. He lied, misrepresented and completely contradicted several key statements he has made in the past. Obama easily hit a new high in his presidency for deception.  You really need to read this!

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  • Why Quantitative Easing Didn’t Work

    While equity investors yearn for the Fed’s QE policy to continue, it’s actually a good thing that this unprecedented stimulus looks to be coming to a halt by the end of this year or early next year. Why is that a good thing? Because QE hasn’t worked, certainly not as intended.

    One of the most frequent questions I get from clients, business associates and even friends is: “Why didn’t quantitative easing work to stimulate the economy and create jobs?” It’s a complicated answer, but today I will do my best to explain why.

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  • Emerging Market Woes + Fed Tapering = Stocks Plunge

    January saw US stocks record their first losing month since last August. After reaching new record highs at the end of December, the Dow Jones shed almost 1,000 points in the last half of the month and the decline continues. Analysts attributed the sell-off in large part due to troubling news from several emerging nations, in particular to the so-called “Fragile Five”– Turkey, India, Brazil, Indonesia and South Africa.

    These countries and others –including Argentina, Ukraine, Thailand and even China–have seen their currencies come under pressure due to capital flight, and most have had to raise interest rates significantly and drain reserves to support their monetary systems.

    No doubt, this mini-storm is partly a reaction to the Fed’s decision to begin “tapering” its monthly purchases of Treasury bonds and mortgage-backed securities starting in January. At its latest policy meeting last week, the Fed moved to reduce its QE purchases by another $10 billion in February. Obviously, the Fed is serious about ending QE and this, too, weighed heavily on stocks last month and again yesterday. Is this the much-awaited “correction” or something worse?

    Next, we take a look at some of the latest economic reports. We got our first look at 4Q GDP last Thursday, with an advance estimate of +3.2%, about as expected. What was not expected was a huge drop in the manufacturing sector in January based on yesterday’s weak ISM Index report.

    Finally, if you watched the 2012 film documentary “2016: Obama’s America,” you may be interested to know that Obama’s Justice Department recently indicted the film’s producer, Dinesh D’Souza, on two alleged felony charges related to campaign-finance irregularities. Such violations, if true, are rarely prosecuted, but in this case, they want to ruin his life. You can read the story at the end of today’s letter.

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