January 2010 - 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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    • Why the Economy May Disappoint in 2010

      This Friday we will get the first report on 4Q GDP, and most forecasters expect it to be a very good one. While most forecasters believe the economy rebounded strongly in the 4Q, largely due to inventory rebuilding, these same analysts are lowering their estimates for growth in 2010. Why is that? Mainly because consumer spending is not rebounding as many had expected. With unemployment remaining above 10%, most consumers are worried about the future, as they should be. This week, we take a look at the latest economic reports, and I bring you one of the best articles I have read regarding how we got in the mess we're currently in. It all should make for an interesting letter.

    • Record Year For Ponzi Schemes

      Over the years I have been writing my weekly E-Letter, I find myself returning to some recurring themes that are important to investors. One such topic is how to spot and avoid investment scams such as Ponzi schemes that seek to steal your nest egg. A recent Associated Press story noted that the number of Ponzi-type schemes uncovered in 2009 were almost quadruple the number that were discovered in 2008. With so many investors being affected by these latest schemes, I think it is once again time that I provide some ground rules for spotting and avoiding investment scams.

    • The Largest Tax Increase in US History

      Back in 1948, President Harry Truman nicknamed the 80th Congress the 'do-nothing Congress.' Today, we sometimes find ourselves wishing that we could return to the days when Congress was accused of inaction. Unfortunately, the stage may now be set for that wish to be granted, but the consequences will be far from favorable. By allowing the Bush tax cuts to expire, Congress could levy one of the largest tax increases ever, all by just doing nothing.

      While President Obama and the Democratic leadership claim that they want to keep all of the Bush tax cuts in place for everyone making under $250,000 per year, they also know that they are going to build up huge budget deficits unless they find ways of generating some tax revenues. With cap-and-trade legislation and its expected tax revenues all but dead, the Dems are going to have to figure out some other way to pay for their march toward socialism.

      The expiration, or 'sunset', of the Bush tax cuts could provide the necessary tax revenues they seek and all without having to cast a vote in favor of a tax increase. This week, I'll discuss the possible effects of a huge tax increase during a fragile economic recovery as well as the possibility that Congress may just sit on their hands and do nothing in order to fill their insatiable need for tax revenues.

    • Anatomy of a Stock Market "Meltup"

      As the principal of an investment advisory firm, I have to admit that the stock market sometimes causes us to scratch our heads, wondering what in the world it's up to. As the current market rally continues unabated, this is definitely one of those times. In 2009, the S&P 500 Index soared 65% since its lowest closing value in March and ended the year up over 23%. However, this huge rally seems to have driven stock prices beyond where they should be based on the economic fundamentals.

      Even more confusing is the fact that statistics compiled by the Investment Company Institute (ICI) show that domestic equity mutual funds have had net outflows of money (more withdrawals than new investments) over the past five months, meaning that retail mutual fund investors have been heading for the exits in favor of cash or other asset classes. So, how can it be that the market goes up even though investor sentiment for domestic equities is still decidedly bearish?

      The answer may lie in an obscure market phenomenon known as a 'meltup,' which is a momentum-based rally that usually bears little relation to the underlying market fundamentals. This week, we'll delve into the anatomy of a stock market meltup, discuss possible reasons why stock prices went higher even as retail investors were pulling money out of domestic stock mutual funds and speculate as to whether the meltup might continue in 2010.