January 2013 - 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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    • U.S. Debt Crisis End-Game Looms in 3-5 Years

      Today, the national debt has mushroomed to almost $16.5 trillion. It has exploded by over 60% just since President Obama took office, when it was at $10 trillion. At the end of 2012, our national debt exceeded 100% of GDP (104%) for the first time since WWII. By the end of Obama’s second term, our national debt will top $20 trillion at the rate it’s growing.

      We all know that at some point, this massive Ponzi scheme will come to an end. The only reason it has gotten to this point is because the US dollar is the world’s “reserve currency” which enables our government to print as much money as it wants. This will end only when foreign buyers of our debt decide to turn off the spigots. The only question is when.

      Last week, one of the most respected research groups in the world predicted that the US likely has only 3-5 years before the wheels fall off and the world is thrust into a major financial crisis, possibly even a depression.

      We’ll talk about all of these things as we go along today. But before we go there, let’s take a brief look at the economy before tomorrow’s advance (first) estimate of 4Q GDP.

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    • Gun Control & How To Play Upcoming Debt Battles

      As you probably know, the Republican leadership in the House decided last Friday to cave in to Obama on the debt ceiling issue (ie – no spending cuts). This week, they hope to pass a temporary extension of the debt ceiling until April 15, during which time they hope the Senate will adopt a new federal budget for the first time in almost four years.

      If somehow the Senate passes a new budget, and the House approves it, then it’s possible that all three upcoming debt battles could go away. I would NOT count on that! I don’t think Senate Majority Leader Harry Reid will spearhead a drive to pass a new budget and if not, all three debt battles could still play out.

      If I am right, then a lot of market turmoil still lies ahead over the next few months. Near the end of last week’s E-Letter, I alluded to an investment strategy that could position many of you to take advantage of the debt battles we will likely face just ahead. I’ll get specific today.

      However, before we get to that discussion of how to potentially take advantage of the upcoming debt battles, I have some commentary on President Obama’s sweeping gun control initiatives that he announced last week, in the wake of the Sandy Hook Elementary School massacre on December 14. While we expected that Obama would seize upon the Sandy Hook tragedy to put forth new gun control laws, we did not know that they would be the most wide-sweeping regulations in more than a generation.

    • Obama Claims We Don’t Have A Spending Problem

      Most of the forecasters I subscribe to expect economic growth to average only 1-2% in the first half of 2013. Most believe that 4Q GDP fell sharply from the 3.1% rate in the 3Q of last year, largely due to fears about the fiscal cliff. They also expect growth to improve modestly in the second half of this year to 2% or slightly higher. That’s not too optimistic.

      One reason is that the end of the payroll tax holiday on December 31 means that workers’ pay went down by 2% on January 1, thus adding more headwinds to the economy this year. A person earning $50,000 a year before taxes, for example, will pay an additional $1,000 or more to the government this year.

      Add to that the fact that we are sure to have another nasty debt ceiling battle next month, which will once again be unsettling to consumers who drive the economy. We all remember the fiasco in the summer of 2011 when the Dow plunged over 2,000 points. For these reasons and others, at least the first half of 2013 could be very dicey.

      Actually there are three debt battles – the so called “trifecta” – that lie ahead. In addition to the debt ceiling battle, there is also the sequester/automatic spending cuts on March 1 and the “continuing resolution” to fund the government in the absence of a formal budget passed by Congress. That happens in late March. We will look at all three of these upcoming battles below.

      Today we’ll also touch on the pork-laden fiscal cliff bill that passed on New Year’s Day. And we will ponder the question of whether the US has a “spending problem” or a “taxing problem.” Let’s start with this last one first.

    • Finally, a Solution to the Income Investing Dilemma

      This week, I'm going to address a topic that our surveys show is on the minds of many investors - income. In our 2012 survey, it came out loud and clear that many of my clients and readers are interested in producing income from their portfolios. Plus, there are others who are interested in income-type investments because such programs usually have the goal of preserving principal while also providing better returns than fixed income investments.

      This week, I'm going to discuss the plight of income investors in today's low-interest environment and what they can do about it. I'll also unveil a new investment geared specifically toward conservative growth and producing income - the Managed Income Strategy offered by Hanlon Investment Management. If you need an income from your nest egg or are seeking a conservative growth investment that takes risk management very seriously, the Managed Income Strategy may be just what you're looking for.

    • Fiscal Cliff Battle - Obama Won Big; Next Step - Abolish the Debt Ceiling?

      First, let me wish everyone a Happy New Year! I hope your holidays were joyous for you and yours. 2013 will no doubt be another challenging year, both for the economy and the financial markets.

      Second, many of you receiving today’s blog posting are not subscribers to my blog… at least not yet. Since I did not send my regular Tuesday E-Letter out the last two weeks due to the holidays, I decided to send everyone my weekly blog that goes out on Thursdays (and sometimes more often if there is late-breaking news).

      As for the fiscal cliff battle, virtually everyone believes it was a big win for President Obama. He succeeded in getting almost everything he wanted, and did so without any spending cuts. Most conservatives believe the bill that just passed in Congress is a disaster and are angry that more Republicans didn’t vote against it. Count me as one of them!

      Let’s take a look at the highlights (or lowlights) of the bill that passed in both houses of Congress on Tuesday.