May 2012 - 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

Blog Subscription Form


    • CBO Warns of Recession in 2013

      The non-partisan Congressional Budget Office (CBO) has calculated the expected negative effects on the US economy if the Bush tax cuts expire at the end of this year. Their numbers just released last week are eye-opening! To give us some perspective, US Gross Domestic Product rose by 2.2% (annual rate) in the 1Q of this year.

      The CBO now forecasts that if the Bush tax cuts expire at the end of this year, GDP in the first half of 2013 will plunge to-1.3%. Think about that. We don't know what the economy will do for the rest of this year, but the consensus expectation is that GDP will probably average around 2.5% for 2012, barring any negative surprises. So a drop from around 2.5% this year to negative 1.3% in the first half of next year – if the Bush tax cuts go away - is HUGE!

      For all of 2013, the CBO forecasts GDP growth of only 05.% – if the Bush tax cuts go away, and even that may be too optimistic. I wrote at length on this news from the CBO in my blog last Friday. I will give you a link to that blog posting at the end of today’s E-Letter so you can read it.

      What we want to focus on today is why this economic recovery is so weak. We will look at the latest economic reports and ponder why they aren’t stronger. We’ll look at the latest news on the housing market and find that there are some signs of improvement. I will also bring you an independent analysis of why the recovery is so weak (and what caused it) that I think you’ll find very interesting. It’s a lot to cover in one letter, so let’s get started.

    • Greece Poised to Default & Exit the Euro

      Greece is coming dangerously close to defaulting on its debt, especially if the next round of bailout loans doesn't happen. Those loans are predicated on Greece continuing its austerity programs to balance its budget. Greece will hold its next national elections on June 17, and the party that is expected to win vows to roll back the austerity measures mandated by the EU and the ECB. At the least, it looks like we're headed for fireworks just ahead.

      The burning question: Is there any way that Greece can default on its debt and withdraw from the euro without causing a global financial crisis. Some believe there is. Today, I present such a plan that was suggested by Nouriel Roubini last Friday. But I will also tell you that I don't believe that the EU, especially Germany, will go along with Roubini's plan. Germany's Chancellor Andrea Merkel reportedly made that clear to President Obama last Saturday in a private meeting following the G-8 summit in Chicago.

      No one knows what will happen with Greece just ahead, but a debt default and an exit from the EU and the euro are now quite likely later this year. This is even more of a threat if the Left Coalition in Greece wins the elections on June 17. Obviously, this is having a very negative effect of the stock markets, making it all the more important to have investment professionals on your team.

      On Thursday we are hosting our latest online WEBINAR featuring Yacktman Capital Group, the latest money manager to make it onto our recommended list. The Webinar will be this Thursday at 1:00 p.m. Eastern Time. Yacktman's founder, Brian Yacktman, will talk about his successful "value-investing" strategy and how it works. There will be time for questions from audience members. With the recent decline in the stock market, now may be an excellent time to consider putting some money with Yacktman Capital Group.

      You can attend the free Webinar on Thursday at 1:00 p.m. Eastern by CLICKING HERE. I hope you'll join us!

      Filed under: , , , ,
    • Buy Low, Sell High - Any Questions?

      There's no doubt about it, investors are scared. After soaring upward in the first quarter of 2012, the S&P 500 Index has now plunged based on worries about the US recovery as well as continued Eurozone woes. Many investors are paralyzed on the sidelines while others are seeing their buy-and-hold portfolios look more like a roller coaster than an investment portfolio.

      However, there is an investment strategy that has the potential to take the market's lemons and make lemonade. Renown investor, Warren Buffett, follows a value-style investment strategy and has done so successfully for many years. For such investors, market uncertainty can actually mean opportunity to scoop up the stocks of good companies at discounted prices.

      This week, I'm going to review value investing and how it can bring some stability and growth potential to a portfolio. After that, I'll introduce you to Yacktman Capital Group, a value-style money manager right in our backyard here in Austin. Yacktman has improved upon Buffett's approach to value investing and we are excited to offer this emerging manager to our clients. If you are out of the market or heavily invested in buy-and-hold strategies, you owe it to yourself to check out Yacktman's Concentrated Composite Strategy.

    • 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.

    • Social Security - The Most Neglected Crisis

      The recent release of the Social Securities Trustees report was filled with bad news about the program's future, but was largely ignored by the mainstream press. Has the American public become so used to bad news about Social Security that they ignore the ever-worsening scenario? If that's the case, they do so at their own peril.

      In this week's E-Letter, I'm going to review the findings of the Social Securities Trustees regarding assets of the various entitlement Trust Funds and how long they are expected to last. We'll see how the weak economic recovery and high unemployment are continuing to negatively affect payroll tax revenues, and what that may mean for the future.

      I'll then discuss the various schools of thought in relation to the future of Social Security and end up with a laundry list of possible solutions. Since each alternative is unpopular with some segment of the population, we may find that we are now beyond the point where a political solution is even possible.