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  • Stock Markets Plunge, Concerns Abound… Recession?

    The first half of January 2016 has been the worst New Year’s opening for the US stock markets in history. Yet nothing much has changed economically since the end of last year. So why is the Dow Jones down 8.24%, the S&P 500 down 8.00% and the Nasdaq down 10.36% in just the first two weeks or so of the New Year? The answer is not yet clear.

    According to the Stock Trader’s Almanac, if US stocks move lower in January, that means a down year for equities 75% of the time. While January is not over yet, it’s hard to imagine that stocks could close up for the month. So are we looking at the first down year for US stocks since 2008? Time will tell, but it sure looks that way.

    Questions abound. Did the Fed make a huge mistake by raising short-term rates by a mere 0.25% in December? Did news that China’s economy grew at only around 6% last year and may be slowing more this year upset the global apple cart? Are plunging oil prices really a bad thing?  Is a new global recession just around the corner? Should we be preparing for a new recession here in the US this year?

    These are the questions everyone is asking in the wake of the plunging stock market prices we have seen from the beginning of 2016. It is true that the current economic recovery which began in 2009 is the weakest in more than a half century, but this is nothing new. Rather than negative growth, GDP has expanded only by about 2% since Obama took office.

    Yet the Fed’s latest estimate of 4Q GDP growth has now fallen from 2.0% on December 17 to only 0.6% in the latest GDPNow estimate in the second week of January. This economy is losing momentum fast. The risks of a recession this year are quickly increasing. This may help explain why equities are tanking so far this year.

    There’s so much to talk about today, I’m not sure where to start. Let’s begin with the case for a recession this year, both globally and here at home.

    We’ll end on a positive note from Mark Hulbert, editor of the Hulbert Financial Digest, who suggests that this latest downward market correction may be over before too long. Let’s get started.

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  • Economy Is Improving, Yet Most Americans Are Pessimistic

    Today we tackle several issues. We start with the fact that several new surveys show that most Americans remain pessimistic about the economy and the direction the country is headed. This is despite the fact that the economy has been growing for the last five years, the unemployment rate is the lowest in seven years and the stock market has more than tripled since 2009.

    Yet despite these latest reports showing that most Americans are pessimistic about the future, the widely-followed Consumer Confidence Index has risen sharply in the last few years. Most analysts have no answer for this discrepancy. I have some specific thoughts on this contradiction, and I’ll do my best to explain it today.

    The much stronger than expected unemployment report on November 6 has sent the stock markets sharply lower in recent days, based on fears that the Fed will hike interest rates at its next policy meeting on December 15-16. I’ll offer my thoughts on what will determine the Fed’s decision next month. I wouldn’t bet money on a rate hike just yet.

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  • Stocks Fell Off A Cliff in Late August - What To Do Now

    What an absolutely CRAZY couple of weeks we’ve just been through! The collapse of stock prices around the world has stunned investors. By some measures, the plunge in the Dow and the S&P 500 in August was the worst in 75 years, even worse than the Crash of 1987. While I advised readers to reduce long-only equity exposure significantly in April and May, I was not expecting a 15% spike down in just a few trading sessions.

    Later in today’s E-Letter, I will introduce you to the latest money manager to make it on to our recommended list. This money manager specializes in buying and selling options on stock index contracts. This is one of the more unusual strategies I have seen over the years, but when you see the results, you’ll understand why I’m so excited to add ZEGA Financial to our stable of recommended Advisors.

    Before we get to the above issues, let me briefly comment on last Thursday’s better than expected report on 2Q Gross Domestic Product.

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  • China’s Stock Markets Imploded In June - Why?

    While the mainstream media has been obsessed with Greece over the last month or so, there has been scant attention paid to the fact that China’s high-flying stock markets unexpectedly have plummeted in June and were down around 30% through the end of last week.

    China’s exploding economy in recent years has made it the hotspot for global investors. Mutual fund families and ETFs have rushed to add exposure to the Chinese markets. China’s two major stock exchanges have seen their share indexes surge over 100% in the last year, drawing ever more investors to jump in. This includes many middle class Chinese who have never invested in anything before (many of whom have borrowed money to invest).

    Yet as noted above, in the last month, share prices on China’s stock exchanges have plummeted by around 30% as of the end of last week, to the surprise of just about everyone. The decline continued overnight (Tuesday).  Many investors don’t even know it yet since they have not seen their June account statements.

    With the world’s attention focused on Greece over the last couple of weeks, the China story has not made its way onto the media’s radars for the most part. For that reason, I will focus on the latest disturbing developments in the China story today.

    But before we get to the troubling news on China, let’s take a look at a few of the latest US economic reports – including the June unemployment report, the big jump in consumer confidence last month and the Gallup Job Creation Index which is at a new record high.

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  • Stock Markets Have Stalled Since March - Now What?

    The major stock indexes (Dow, S&P 500, Nasdaq) have gone virtually sideways since March. Yes, there was the brief day or two in May when all three indexes recorded new record highs, but then promptly sold off sharply. This suggests that there is a lot of overhead resistance just above current levels. As a result, the natives are getting restless! And for good reason. Today I have reprinted a very good report from a seasoned stock market analyst who points to a number of key factors that are weighing on the stock market presently, factors that most investors pay little or no attention to. His point is that it may be very difficult for the stock markets to break out of the recent trading range to the upside. For that reason, we could be headed for a serious downward correction - the likes of which we haven't seen since September/October of last year or worse. I think you'll find his analysis very interesting. Following that discussion, I will give you my latest thoughts on when the Fed will raise interest rates - what with so much attention focused on that question. And there's a possible new twist as to how the Fed may go about announcing and then actually implementing the first rate hike that you'll find interesting (or maybe too cute). Finally, the World Bank released its mid-year economic projections last week and downgraded its 2015 forecast for the US. No surprise there, at least not for me and my readers. What was most interesting was that the World Bank joined the IMF in asking the Fed not to rai

    The major stock indexes (Dow, S&P 500, Nasdaq) have gone virtually sideways since March. Yes, there was the brief day or two in May when all three indexes recorded new record highs, but then promptly sold off sharply. This suggests that there is a lot of overhead resistance just above current levels. As a result, the natives are getting restless! And for good reason.

    Today I have reprinted a very good report from a seasoned stock market analyst who points to a number of key factors that are weighing on the stock market presently, factors that most investors pay little or no attention to. His point is that it may be very difficult for the stock markets to break out of the recent trading range to the upside. For that reason, we could be headed for a serious downward correction - the likes of which we haven't seen since September/October of last year or worse. I think you'll find his analysis very interesting.

    Following that discussion, I will give you my latest thoughts on when the Fed will raise interest rates - what with so much attention focused on that question. And there's a possible new twist as to how the Fed may go about announcing and then actually implementing the first rate hike that you'll find interesting (or maybe too cute).

    Finally, the World Bank released its mid-year economic projections last week and downgraded its 2015 forecast for the US. No surprise there, at least not for me and my readers. What was most interesting was that the World Bank joined the IMF in asking the Fed not to raise interest rates until sometime next year. That raises the question: Is Janet Yellen listening?

    se interest rates until sometime next year. That raises the question: Is Janet Yellen listening?

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  • Is Your Stock Portfolio Up Over 30% This Year?

    This week’s Forecasts & Trends E-Letter beings with a simple question, but it’s one that can have a major effect on your financial well-being. Given that government intervention in the markets now seems to be built into our expectations, I’m going to recap one of our recommended money managers that has been able to navigate the QE3-induced market rally and is up over 30% year-to-date as of September 30.

    More importantly, the money manager I will talk about today - Niemann Capital Management - has significantly outperformed the S&P 500 Index since the company's inception in 1996, both on the upside and the downside.

    Yet return is only half of the equation. The other half is whether an investment strategy has the ability to manage risks by moving to cash when the market takes a downturn, which it eventually will. Niemann also covers both bases by offering a momentum-based strategy on the upside, and the ability to move to cash during downward corrections and bear markets.

    Best of all, Niemann’s not an amateur in this business.  Don Niemann and his staff have been successfully managing their Risk Managed Program for 17 years, so they’ve seen several different market cycles. I’m highlighting Niemann today because I think they are a viable alternative for investors who are in the market and getting nervous about a pullback, as well as investors on the sidelines who fear that the market may have risen too far too fast for them to participate.

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  • Stock Funds’ 5-Year Track Records Set to Double

    Many investors focus on the previous five years annualized return when analyzing which mutual funds to buy. We also pay a good deal of attention to the 5-year performance number when analyzing mutual fund and ETF returns at Halbert Wealth Management. And currently the 5-year average returns for most equity mutual funds are not all that attractive.

    But what if I told you that between now and the end of the year, most funds’ 5-year track record will double or more! And that will happen even if the funds don’t make another penny this year. How can this be, you ask. It just so happens that some of the worst losing months for stocks occurred during the latter part of 2008 when the Dow and the S&P 500 were on their way to 50+% drawdowns (losses). We all remember that gut-wrenching period!

    But guess what? Those terrible losing months in late 2008 will steadily be falling off of 5-year performance records between now and year-end. As a result, most 5-year performance records are about to skyrocket due to nothing other than the passage of time. You can bet the mutual fund companies are licking their chops in anticipation of new brochures showing the much higher 5-year returns! I will explain how this will happen in detail below.

    Finally, I would be remiss not to discuss the key Fed policy meeting that starts today and ends tomorrow. It is widely expected that the Fed will announce plans to “taper” its monthly QE purchases of Treasury bonds and mortgages. That decision could have significant market implications, which I will discuss as we go along today.

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  • Some Scary Bumps in the Road Just Ahead

    The major stock indexes moved lower after setting new record highs in early August, although prices have recovered somewhat in the last few days. So was the weakness in August just an overdue correction before moving even higher? Maybe, but there are a number of things coming up in the next month or so that could rattle the markets even more, including whether or not we go to war with Syria.

    Clearly, the stock and bond markets continue to be nervous about the Fed cutting back on its QE bond and mortgage purchases, perhaps as soon as the Fed’s next policy meeting that ends on September 18. There is also some anxiety about who will be the next Fed chairman (or woman).

    Yet there are other upcoming concerns that the markets seem to be worried about, as well they should. Certainly, the continued rise in interest rates is a serious issue for the markets and the economy. The yield on 10-year Treasury notes has soared from 1.6% back in May to near 3%. Long bond yields are nearing 4%. Investors don’t know what lies ahead.

    The markets are also starting to factor in the looming battle in Washington over the federal budget for FY2014, which begins on October 1. President Obama vows he won’t negotiate this time around. Also, there is another battle over the debt ceiling coming by mid-October and yet another threat of a government shutdown.

    We'll look into all of these issues today and how they may affect the markets.

    But before we get into those issues, let’s examine last Friday’s jobs report for August. The White House and the media hailed it as a success since the headline unemployment rate fell from 7.4% to 7.3%. What they failed to point out was the decline occurred because a lot more folks dropped out of the labor market. Truth is, the report was once again a disappointment.

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  • Stock Market Lingers At A Precarious Place

    The Dow Jones Industrial Average has flirted with its all-time of 14,198 twice in February as the Dow managed to rise above the 14,000 mark but then fell back. The S&P 500 Index is not quite as close to its all-time high, but it is within striking distance. There is widespread optimism that both indexes can break-out to new record highs, which would likely spark a new buying surge.

    On the other hand, if the Dow and S&P fail to break out, the result could be a nasty selloff. The stock markets shrugged off the fiscal cliff melodrama at the end of last year and then rallied strongly. But there are reasons to believe that the upcoming "sequester" fight could unsettle the markets and derail the attempt to make new highs. We'll talk about that possibility today.

    Before we go there, we take a look at the latest economic reports. There's good news and bad news - no surprise there. We'll also look at the latest surge in gasoline prices and why that is more bad news for consumers and the economy. And I will summarize the latest economic forecasts from the Congressional Budget Office. Finally, I will give you my thoughts on the issue of raising the minimum wage.

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  • September: A Rough Month for the Markets?

    September is often a bad month for the stock markets, historically speaking, and this year it could be especially turbulent. In addition to all the uncertainty about the weak US economy, there is uncertainty about what the Fed may do just ahead and what, if anything, will be done to address Europe’s recession and debt crisis. In addition, there is the looming presidential election which no doubt will go hyperbolic this month.

    We begin today by looking at the situation in Europe, now that the August vacations are over. It remains to be seen if European leaders can make good on their promises earlier this summer – I doubt it. From there we look at the latest US economic reports, which were a mixed bag. Next, we consider Fed Chairman Bernanke's speech last Friday and the probability of QE3 when the Fed next meets on September 12-13.

    We end today with some of my thoughts on the Republican National Convention last week, which I thought was very good. It remains to be seen how the Democrat Convention will go. I find it very odd that Hillary Clinton will not be there at all. And finally, I once again recommend that all of you go see "2016: Obama's America" movie. It's not what you think it will be.

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  • GDP Report: "Good News" - You’ve Got to be Kidding!

    I must begin today by thanking you for the overwhelming reader response we received to last week’s E-Letter. It was the largest response we’ve had in several years. Obviously, I struck a nerve with many of my readers last week! I’ll fill you in as we go along.

    Following that discussion, we dissect last Friday’s controversial 2Q GDP report, which most found disappointing but some in the mainstream media found encouraging (ie – at least we’re not in a recession). From there, we’ll discuss the Fed’s latest monetary policy meeting that ends tomorrow.

    The stock markets rallied strongly last week, partly on perceived good news from Europe, and partly because of renewed expectations that the GDP report would be weak enough to move the Fed to enact QE3. We’ll know one way or the other tomorrow afternoon. If Bernanke fails to announce more QE, stocks could tumble again.

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  • Spain & Weak US Economy Dominate Markets

    Stock markets around the world have been pummeled in recent weeks amidst the growing reality that we’re in a global recession, especially in Europe. Fears that the US will also fall into recession have intensified, particularly in light of last week’s very disappointing economic reports.

    At the same time, the European debt crisis has once again raised its ugly head, this time with the spotlight on Spain. Spain’s own Prime Minister has admitted that the country is in a state of emergency, and money is gushing out of Spanish banks. Interest rates have soared once again to levels that led to the European Central Bank’s €1 trillion bailout package late last year and early this year.

    Last week, the yield on Spain’s 10-year bonds spiked to 6.7%, a whopping premium of more than 5.5% above the yield on the 10-year German bund at the time. Meanwhile, short-term rates in Germany fell to zero as new money seeks a safe haven there and in the US where 10-year Treasury-note yields fell to a post-war record low of 1.45% last Friday.

    Spain is facing a full-fledged banking crisis and knows it. Yet Spain's leaders do not want a bailout and the accompanying loss of sovereignty. They see that such bailouts in Ireland and Portugal have not gone well. Still, Spain is running out of money fast, and the country is largely shot out of the credit markets. How this plays out is uncertain, but it won't be pretty.

    Following that discussion, I will address the fact that consumer confidence is dropping like a stone in the US. This has prompted new hopes that the Fed will unleash QE3. We will know soon enough as the next Fed policy meeting is June 19-20.

    We end up today with a suggestion on my part that the current swoon in stocks is a BUYING OPPORTUNITY. No one knows where the bottom is, of course, but consider this. If the Supreme Court renders Obamacare unconstitutional later this month, and I think it will, we could see a MONSTER RALLY in stocks. The High Court's decision is scheduled to be announced on June 25. This is why I think you need to be getting back in the market now, while it's down. And I offer two excellent suggestions on just how to do that at the end.

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  • Will The Bond Mania End Ugly?

    Since the stock market bottom in March 2009, the S&P 500 Index has almost doubled. That’s a gain of apprx. 100% in three years. Yet investors have been dumping stock mutual funds like they’re the plague over this same period. It is impossible to know where the millions of investors that have redeemed from stock funds over the last several years put all of their money, but it is clear that a lot of it went into bond mutual funds.

    Over the past several years, we have seen a stampede into bond funds, and especially US Treasury bonds funds. Investors around the world are seeking the perceived safety of US bonds. Many probably don't realize that bonds can be just as volatile as stocks, and sometimes more so. When interest rates do move higher, bond investors will experience losses - how severe we don't know.

    The Fed says it's committed to keeping short-term rates interest rates low through late 2014. Yet with the yield on the benchmark 10-year Treasury Note now below 2%, it is hard to see rates moving much lower. If you are overweight in bonds, now may be a good time to take some profits and lighten up. We have a professionally managed bond program which can invest either long or short, in addition to the convertible bond program offered by Wellesley Investment Advisors.

    At the end of today's letter, I'll show you a brand new presidential election poll from Rasmussen that is very surprising, at least to me. Rasmussen did a poll with a three-man race - Obama, Romney and Ron Paul as an Independent - and guess who wins by a comfortable margin? You may be as surprised as I was.

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  • Will Baby Boomers Wreck the Market? (The Sequel)

    Almost six years ago, I wrote an article about whether the Baby Boomers would crash the stock market when they retired. That dated article is still among the most viewed by visitors on our website even though a lot has happened in the financial world since it was written.

    The premise is that as Baby Boomers retire, they will cash in stocks in favor of lower-risk investments, thus tanking the stock markets. In my earlier E-Letter, I analyzed this claim and concluded that retiring Baby Boomers were not likely to negatively affect the stock markets in a major way for a variety of reasons.

    However, since writing that article in August of 2006 we've experienced a global financial crisis and major bear market in stocks. Would my advice be the same today?

    Because of the popularity of this topic, I am going to revisit the idea that retiring Baby Boomers may crash the stock market. Now that the oldest Boomers are actually retiring, it will be interesting to see if the answer is any clearer now than in 2006.

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  • Uncertainty is Fertile Ground for Scam Artists

    Over the years, there are subjects that I repeat periodically in my weekly E-letters due to their importance. One such is the subject of investment scams and what investors can do to recognize and avoid them. Unfortunately, even though I and many other writers continue to warn investors about these scams, thousands of people lose millions of dollars each year to such schemes.

    In this week's E-Letter, I'm going to discuss how you can avoid being a victim of scam artists and others intent on separating you from your money. I'll also discuss a few "new" scams that have been more prevalent now that fixed income investments have such low returns and stock market risk is high.

    Even if you are confident that you won't be the victim of an investment fraud, it might be a good idea to forward this issue along to friends and relatives who may not be as experienced and may not know that if it sounds too good to be true, it probably is.

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