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  • Global Bonds In Worst Selloff In 13 Years - How Come?

    Bond investors have had a rough ride in November. The Barclays Global Aggregate Bond Index plunged by 5% during the last two weeks just before and after the election – its worst such drop since March 2003, according to Dow Jones data. When yields rise, bond prices fall, and vice-versa.

    As you know, interest rates have been falling for over 35 years since peaking in 1980. It has been a spectacular bull market for bond investors, that is until just recently. To say that the reversal over the last few weeks came as a surprise to bondholders around the world is an understatement.

    More than $77 billion in assets are benchmarked to the Barclays Global Aggregate Bond Index, according to Morningstar, making it one of the most widely followed in the fixed-income world. It incorporates investment-grade debt denominated in 24 different currencies. Sovereign bonds have historically been the Index’s most heavily-weighted constituent, followed by asset-backed securities, corporate bonds and government-related debt.

    Global bond yields have been edging up since falling to historic lows in late June/July following the UK’s vote to leave the European Union. But the selloff accelerated aggressively after Donald Trump won the US presidential election – an outcome that took most bond market participants around the world by surprise.

    The sharp selloff was predicated on the notion that Donald Trump’s campaign promises to rebuild America’s infrastructure, cut taxes and raise trade barriers, would – if they become reality – drive up inflation, and possibly force the Federal Reserve to raise interest rates much more aggressively than had been expected.

    In just the two days following Trump’s election, global bonds shed an estimated $1.1 trillion in value, the worst rout in a year and a half as investors sold bonds and bought stocks in many cases. The stampede out of bonds propelled US Treasury yields to their highest levels since January.

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  • GDP Stunner: 2Q Growth Was Less Than Half of Forecast

    The Commerce Department reported last Friday that gross domestic product, the broadest measure of goods and services produced across the US, rose only 1.2% (annual rate) in the second quarter. That was less than half the pre-report consensus of 2.6%. This was one of the largest misses by forecasters in quite some time. I'll break down the report as we go along today. I will also discuss what the Fed's reaction to the disappointing GDP report is likely to be.

    At the end of today's letter, I will give you a link to a WALL STREET JOURNAL article on Sunday which claims that while Secretary of State, Hillary Clinton compromised national security by urging US technology companies to fund Russian research for military purposes. Assuming it’s true as the Journal claims, it will easily be the most serious scandal ever for Ms. Clinton. And it couldn't come at a better time!

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  • "How America Lost Its Mojo" - Some Troubling Trends

    In my business, I read a lot more than the average American, in large part due to my “speed-reading” training in college. Most of what I read is about the economy, markets, financial matters, world events and yes, politics among other topics.

    I especially enjoy reading well-written articles on shifting demographic trends in the US and around the globe, which give us insights regarding what the country and the world might look like in 10-20 years. I recently read just such an article on the rapidly changing demographics in America and their long-term implications.

    After thinking about it for several weeks, I decided to reprint it for you today. I think you will find it very interesting.

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  • Stocks At Record High, Treasuries At Record Low - A Rarity

    Stocks as measured by the S&P 500 and the Dow have cruised to new record highs over the last week. Treasury yields on 10-year notes and 30-year bonds moved to all-time record lows last week. Historically, these two things rarely happen at the same time. In fact, the S&P 500 has hit a record high when the 10-year Treasury note yield was below 2% only once in the last 40 years.

    The fact that stocks are at new highs and Treasury yields are at new lows is largely due to red-hot foreign demand for US securities. There are continued worries about the UK and Europe in the wake of "Brexit" and rising concerns about China's economy. With negative interest rates spreading around the world, foreign investors are gobbling up Treasuries which still have positive yields and adding US equities as well. Some say this is the "New Normal." But is it?

    That's what we'll talk about today.

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  • Emerging Nations Continue To See Huge Capital Outflows

    If you are wondering why the global economy struggled last year and so far this year, one only has to look at the trend in capital flows of emerging nations. After decades of positive capital inflows to most emerging economies, that trend has reversed sharply in the last few years.

    Net capital outflows from emerging markets (EM) weren’t just bigger than expected last year, there’s more pain to come this year, according to the Institute of International Finance (IIF) which monitors such data.

    Emerging markets faced a whopping net $735 billion in net capital outflows in 2015, the IIF, a global financial industry association, reported earlier this year. In October of last year, the IIF had projected $540 billion in net outflows in 2015, the first significant net negative figure since 1988. But in the end, the total outflow was almost $200 billion higher.

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  • Sub-3% GDP Growth: A Lost Decade For The US Economy

    Whew – January is finally over! Up until the last week or so, the downside carnage in January was the worst New Year’s stock market start in history. Thanks to last week’s rebound, it was only the worst New Year’s start since January of 2009 when the Great Recession was unfolding. Still, it was a hair-raising month for stock investors. And no one knows if the damage is over.

    There are many theories as to why equity markets around the world suddenly plummeted in January. I have written about several of them in the last couple of weeks. Most market commentators, including yours truly, have pointed to concerns about China’s economy, the collapse in oil/commodity prices, the strong US dollar, Fed interest rate hikes, etc., etc. as the likely causes for the January implosion.

    Rather than continue that discussion today, I want to point out a milestone that was reached with the end of 2015 and last Friday’s 4Q GDP report – and this milestone was not a good one. With 2015 behind us, it has been a decade since we have seen 3% yearly growth in the economy. The last year we had 3% growth was 2005. Call it America’s “Lost Decade.”

    Near the end of today’s letter, I will make some suggestions on how we could stimulate our now moribund economy – starting with a significant corporate income tax cut for businesses large and small. Republicans complain that they can’t override President Obama’s veto, so they do nothing. Yet with the economy now growing by less than 1%, I think the GOP would be surprised at how much support they could get from Democrats, especially in an election year.

    Before we get to that discussion, let’s take a look at last Friday’s GDP report for the 4Q. The advance report came in lower than expected with growth of only 0.7% for the final three months of last year. The sharply lower 4Q reading suggests yet another year of weak economic growth. And there is now a controversy over how much the economy expanded last year, which I will explain as we go along.

    And finally, I am very excited to announce our latest Special Report: UNDERSTANDING & MAXIMIZING YOUR 401(K). We have worked long and hard on this Report to help our many clients and readers not only understand how their 401(k)s work, but also how to maximize their benefits. If you have a 401(k), you definitely want to download our FREE Special Report.

    There’s a lot to cover in today’s E-Letter, so let’s get started.

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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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  • Stocks Plunge Most On Record Last Week, Oil Down 10%

    In the first week of 2016, US stocks plunged by more than in any other first week of January since records have been kept (before 1900). The Dow Jones Industrial Index fell over 1,000 points from 17,591 at the close on December 31 to 16,519 at the close last Friday – a loss of over 6% in one week.

    The S&P 500 Index shed over 100 points from 2043.7 at the close on December 31 to 1922.0 at the close last Friday – a loss of 6.0% in one week. The Nasdaq Composite lost 7.3% during the worst first week of January on record.

    Most global stock markets were hit with similar losses or even worse in some cases. Investors around the world were stunned and are wondering what happened in the worst New Year’s  week in history for share prices – and worry if more pain is to follow.

    The financial media maintained that the carnage was caused primarily due to new economic data out of China, which was worse than expected. I will get into that as we go along today, but the rout was due to more than just disappointing Chinese data.

    The collapse in crude oil prices since mid-2014 is also becoming a serious global concern for reasons I will outline below. The price of West Texas Intermediate Crude has collapsed over 70% since mid-2014 from near $105 per barrel to below $33 a barrel as of last Friday’s close. It fell 10% last week alone and is down so far this week.

    While sharply lower gasoline and energy prices are a boon to consumers, there are now serious concerns about sovereign debt defaults in numerous oil producing countries. In addition, there are growing fears of global deflation as a result of collapsing oil and other commodity prices. I will tell you why below.

    Yet before we get into the complicated issues raised above, let’s take a few moments to discuss last Friday’s stronger than expected unemployment report for December.

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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 The US Treasury Market Rigged? Some Say Yes

    The last time federal regulators took a hard look at how Wall Street banks and brokers trade US Treasury securities – the largest bond market on the planet by a longshot – a little company called Google Inc. was just starting out.

    That was 1998, and the technological leaps since then – including ones that are now transforming bond markets – have left government regulators in the dust. In particular, executives from three of the biggest market-making firms in Treasuries say an electronic bait-and-switch tactic known as “spoofing,” – which is already the focus of a manipulation allegation at a major futures exchange – needs to be investigated in cash Treasuries (OTC, etc.) and related futures.

    Rules first enacted in 1986 that have gone virtually untouched since then are allowing certain high-tech firms to outmaneuver less-savvy rivals and are manipulating bond prices. They say a lack of cohesive regulation and technology to monitor “high-frequency traders” is making the world’s biggest government bond market more dangerous for everyone.

    Today I am reprinting an eye-opening article that appeared in Bloomberg/Businessweek on December 11 on the subject of manipulation in the Treasury market. Since then, I’ve seen no one else touch it. I’ve googled this subject dozens of ways… and very little on this topic comes up.You can read it yourself, and I think you will find it very interesting and troubling.

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  • Economic Optimism Abounds As Crude Oil Plunges

    Each year at this time, we see a plethora of fresh forecasts for the New Year, and this year is certainly no exception, especially with the recent implosion in oil prices. There is widespread agreement that sharply lower energy prices will provide a boost to the global economy this year, especially for oil-importing nations including the US.

    As a result, almost all of the New Year forecasts that I have seen in recent days have been upbeat and revised higher with regard to the US economy. With that in mind, I thought it would be a good idea today to revisit the recent developments in the oil and energy markets over the last six months. What we have witnessed since last summer has been nothing short of breath-taking, to say the least!

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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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