November 2011 - 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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    • European Debt Crisis - Is This Really The End?

      I have written a great deal about the European debt crisis over the last several months. Today I thought I would give you the latest analysis of the crisis from The Economist, the widely respected, London-based forecasting giant. I've been reading the Economist for almost 30 years, and I think you'll find their latest views on the European crisis interesting (if not scary).

      Following the analysis from The Economist, we take a look at how some of the world's largest banks are preparing for what could be the end of the euro. While most large European banks are in denial about the possible end of the euro, other large banks around the world are scrambling to reduce their exposure. I have also linked to a very good article on this very subject at the end of today's E-Letter.

      Next, now that the Super Committee has failed, the automatic spending cuts of $1.2 trillion over a decade are set to kick in starting in January 2013. The media is warning that such draconian cuts will devastate the Defense Department. Well guess what? $1.2 trillion over 10 years is only $120 billion a year. The federal budget is projected to increase by more than $120 billion a year over the next decade. In that case, there will be no net new spending cuts, just a slowing of the rate of increase. That's the dirty little secret the media is not telling us!

      Finally, if this extremely volatile stock market has rattled your nerves, I have a suggestion for you. I suggest that you consider investing with Metropolitan Capital Strategies, one of my favorite professional money managers. Metropolitan has the option of going 100% to cash (money market) in extremely volatile times such as we see today. We are hosting a free live WEBINAR with Metropolitan Capital Strategies this Thursday, December 1 at 2:00 EST.  I highly recommend that you join us!

    • On the Economy, Europe & the Super Committee

      We begin this week with the latest GDP report which came out this morning. The Commerce Department reported that Gross Domestic Product rose only 2.0% (annual rate) in the 3Q, down from 2.5% in its previous report last month. This was below pre-report estimates but still suggests that the economy is not falling into a new recession. A new report from Credit Suisse estimates that the chance of the US economy going into a recession next year have dropped from 36% in September to only 24% today.

      In another new report, Fitch Ratings warned that large US banks face "serious risk" in regard to the European debt they hold. Specifically, Fitch claims that the six largest US banks had at least $50 billion in loans to Portugal, Ireland, Italy, Greece and Spain at the end of September. This suggests that the European debt crisis could cause serious problems for US banks if any defaults occur in the Eurozone. This should not come as a surprise to my regular readers - I've been warning about this since July.

      Next, we revisit the so-called "Super Committee" which announced late yesterday that it has failed to reach an agreement to reduce federal deficits by at least $1.2 trillion over the next decade. This, too, should not have come as any surprise to my readers. There are those who believe that the (not so) Super Committee was designed to fail from the beginning. I happen to be one of them. The Super Committee was an embarrassment! Our national debt will continue to explode.

      Finally, with this being Thanksgiving week, I close with some personal thoughts on what I'm thankful for.

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    • European Bank Woes & the Super Committee

      A recent study from Credit Suisse revealed some alarming information about Europe's largest banks. We already knew that Europe's largest banks are mired in so-called "sovereign debt," that owed them by the various government's of the Eurozone. The Credit Suisse study found that in addition to sovereign debt, most of Europe's largest banks still have billions in toxic assets that were acquired prior to the credit crisis in 2008. Most of these toxic assets are related to real estate/mortgages, CDOs, etc. that were bought prior to the recession and are now presumably worth far less than face value. In short, European banks have done a lousy job of cleaning up their balance sheets and writing off troubled assets.

      Following that discussion, we will revisit the so-called "Super Committee" that is trying to find at least $1.2 trillion in deficit reduction over the next decade. As you might expect, the committee of six Republicans and six Democrats is deadlocked as this is written, and the real deadline is next Monday, November 21 when the committee needs to present its deal to the CBO for scoring. The bottom line: I don't think the Super Committee is going to agree on $1.2 trillion in spending cuts. Read on and I will tell you why.

    • Greek Soap Opera Continues to Roil Markets

      While Greece is but a small country, its debt crisis continues to influence financial markets around the world on an almost daily basis. It is not unusual for news from Greece to send the global stock markets up or down 2-3% in a single day. Events in Greece are unfolding daily, including the resignation of its Prime Minister, George Papandreou, just last Sunday. As this is written, a new coalition government is being formed in Greece to pave the way for the latest €130 billion ($180 billion) bailout package agreed to by European leaders late last month.

      In addition to Greece's troubles, the European debt crisis is spreading to other Eurozone countries. Italy appears to be the next domino to fall, and Spain may not be far behind. Italy has the eighth largest economy in the world based on GDP and the fourth largest in Europe. If Italy has to be bailed out, it would likely spark another global financial crisis that could make 2008 look tame. The latest G-20 summit in France failed to do anything to avert another financial crisis in Europe. Surprise, surprise!

      Given the deteriorating situation in Europe, expect stock market volatility to remain very high in the months ahead. Investors are scared by the events unfolding in Greece and the rest of Europe and are herding out of stocks and equity mutual funds in droves. I can't say that I blame them. Near the end of today's letter, I offer some advice on what these investors on the sidelines should consider doing with their money that is no longer invested in the stock markets.

    • 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.