February 2015 - 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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  • U.S. Supreme Court - 2015 Will Be A Blockbuster Year

    The Supreme Court is poised for a blockbuster year in 2015 – and the list of high-profile cases could keep growing. Already, the Court is set to rule in a key case that threatens to wreak havoc on Obamacare. In addition, the justices will consider important cases regarding religious freedom, free speech, and limits on political fundraising.

    That mix of cases poses big risks for liberals, who were caught off guard by the Court’s willingness/enthusiasm to take on another high-stakes Obamacare battle much sooner than expected. Yet conservatives have a lot on the line as well. Under mounting pressure, the High Court agreed to hear a landmark the case on same-sex marriage once again – one that could clear the way for same-sex couples to legally marry in every state.

    We will take a look today at the most high-profile cases that the Supreme Court will hear this year, and what lies at stake in each of them. I wish Americans paid more attention to the Highest Court in the land.

    Before we get into that discussion, let’s take a look at the minutes from the most recent Fed Open Market Committee (FOMC) meeting on January 27-28. Those minutes revealed that several members on the Committee have new concerns about the economic recovery, especially in light of falling inflation and the rising US dollar. While the minutes didn’t say so specifically, it is clear that several members of the Committee now question whether short-term interest rates should be raised at all this year.

    Finally, we’ll look at the federal court decision in Texas last week that stopped President Obama’s executive action on immigration dead in its tracks, at least for now. This is an interesting development, and it remains to be seen if Obama can get this decision reversed.

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  • The Most Successful Public Company In The World

    Today we focus on the most successful and profitable company in the entire world. It just happens to be an American company, but many of us have never heard of it. If you had invested $1 in this company in 1968, your investment would have soared to $6,638 at the end of last year. I think you’ll be surprised to see which company this is.

    Following that discussion, I will address the growing trend of “socially-responsible” investing. That is, not investing in so-called “sin” stocks such as tobacco, alcohol, gambling, firearms, etc. A new report from Credit Suisse points out that there is a cost associated with socially-responsible investing – in the form of lower performance returns.

    I bring this to your attention, not in an attempt to discourage it, but to point out that there is a cost involved in “politically-correct” investing. In my 35+ years in the financial business, I have never seen an analysis that compares socially-responsible investing to investing in so-called sin stocks. I think you’ll find it very interesting.

    But before we jump into those topics, I want to briefly revisit the likelihood that the Federal Communications Commission, under orders from President Obama, will vote a week from Thursday to take control of our precious Internet. It now looks inevitable that the federal government will enact what may prove to be one of the largest power grabs in history!

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  • Deflation Is Spreading In Europe – Is America Next?

    US consumer prices fell in December by the largest amount in six years, reflecting another big monthly decline in gas prices and providing further evidence of falling inflation pressures. The Labor Department said Friday that its Consumer Price Index dropped 0.4% in December, the largest one-month drop since December 2008.

    Consumer prices also fell in the Eurozone in December by 0.2% for the first time in over five years. Given that consumer prices in the US and Europe went negative in December, we are hearing a lot more talk about deflation – which is a general decrease in prices for goods and services.

    A general decline in prices may sound good on paper but when deflation takes hold, it can wreak havoc on the economy. That’s because consumers and businesses have an incentive to delay purchases and investment since prices are expected to fall further. Deflation strangles borrowers because their debts get harder to repay. Just ask Japan.

    With the growing concern about the threat of deflation, I am receiving more requests from clients and readers to address it. While I don’t think deflation will take hold in the US anytime soon, it is growing rapidly in parts of Europe, one of our largest trading partners, and elsewhere. So today, we will focus on deflation and the trouble with falling prices.

    Before we go there, I would like to discuss two important recent economic reports. The first is last Friday’s unemployment report for January which was widely hailed by the mainstream media. The other recent report we’ll look at is the January Consumer Confidence Index which surged higher than anyone expected.

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  • President Proposes $4 Trillion Budget & New Tax Increases

    Most every year about this time, I criticize the sitting President of the United States for submitting an ever-larger federal budget that almost always includes a big deficit which adds to our massive national debt. I have criticized every president for this going all the way back to Ronald Reagan who also ran budget deficits, especially in his second term. Yes, I even criticized “The Gipper” who sparked my initial interest in politics way back in 1976.

    Given my long history of speaking out on this issue, I see no reason to make an exception today. On Monday, President Barack Obama submitted the largest proposed federal budget in history to Congress. In the past, most presidents who were shellacked in the mid-term elections tended to compromise in order to work with the opposition in Congress. Not this president!

    The president’s proposed federal budget for fiscal year 2016 is a whopping $3.99 trillion which would increase spending for government agencies by a whopping 7% and includes numerous onerous tax increases to pay for most of it. Yet even with the tax increases, the FY2016 deficit is projected to be $474 billion.

    The reality is that this is all simply political theatre. The president knows he won’t get nearly all of the new spending increases and taxes on the wealthy and corporations he proposes, what with a Republican-controlled Congress. But he does throw a very large bone to his liberal political base, while making the Republicans look like the “Party of No.” 

    In any event, I’ll briefly summarize the president’s latest record-large budget proposal today, and you can make of it what you will. But before we go there, let’s take a look at last week’s disappointing 4Q GDP report and what transpired at the Fed’s first policy meeting of 2015.

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