March 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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    • On the Fed, the Keystone Pipeline & the War On Jobs

      The Fed Open Market Committee met last week and its decision was to continue the $85 billion a month in purchases of mortgages and Treasury bonds indefinitely. However, in his press conference after the meeting, Fed Chairman Bernanke hinted that the Fed could reduce these purchases later this year if the economy continues to improve. Very few in the financial media picked up on this important new clue, so I will expound on it today.

      There are some reasons to believe that the economy will improve later this year. The housing sector continues to rebound. Home prices have surged so far this year. The number of people who are "under water" on their mortgages is falling, and foreclosures are down as well. Some other economic indicators are also pointing higher. So while the economy still feels like a recession, growth should be better in the second half.

      Would you like to know the real story on why we haven't started building the Keystone Pipeline that would bring apprx. 600,000 barrels of oil a day from Canada and North Dakota to the Texas Gulf Coast? So did I. Today, I have reprinted the best article I have seen on this subject. I trust you'll find it enlightening, but it will almost certainly make you mad!

      Finally, I've been warning about the bond market bubble since late last summer, and Treasury bond prices have come down significantly since the peak back in late July. I close out today's letter with some links to the actively-managed bond programs we recommend. If you still haven't taken steps to protect yourself from bond losses, I urge you to consider moving to one or more of these professionally managed programs before it's too late.

    • Is The Government Lying To Us About Inflation? Yes!

      On Friday, the Labor Department reported that the Consumer Price Index (CPI) jumped an unexpected 0.7% in February. This was above pre-report estimates and was the highest monthly reading since 2009. We should be very concerned, right? Let's take a closer look.

      Upon further examination, we find that if we subtract food and energy from the CPI, the cost index rose only 0.2% last month. It turns out that most of the big increase in the CPI last month was due to the sharp rise in gasoline prices.

      But the real question is whether or not the CPI reported to us each month by the government is really indicative of the actual inflation rate. Today, I will argue that it is not a very good indicator for a variety of reasons, including the methodology used to calculate it.

      The government says inflation over the last four years has averaged 2% as measured by the CPI. Others argue that the real rate of inflation in the US is in the 5%-8% range. That's what we will explore today, and you can be the judge.

    • Who Cares if There’s a High-Yield Bond Bubble?

      The demand for high-yield bonds and bond funds has literally exploded over the past couple of years as the Fed continues to keep downward pressure on interest rates. Often known as "junk" bonds, these debt instruments typically pay a higher rate of interest to compensate for their higher potential for default. Some retirees see this higher income as a godsend, but the higher yield definitely comes at a price.

      Unfortunately, many high-yield bond investors are buying and holding these bonds and bond funds without regard to the risks they are taking. As the number of analysts predicting a high-yield bond bubble increases, the risks of buying and holding these securities increases.

      This week, I call upon high-yield bond expert, Steven D. Landis, CFP®, to shed some light on how you can participate in the higher yield and potential capital gains in high-yield bonds while minimizing the risks of doing so. He'll also explain why it really doesn't matter whether there's a high-yield bond bubble now or in the future, IF you have the right strategy on your side.

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    • Why Our Best Ideas Come In The Shower & Why They Are So Hard To Remember

      In perusing the many sites I visit regularly on the Internet this past weekend, I happened to notice an article on that caught my eye. The piece was entitled “Why We Have Our Best Ideas in the Shower: The Science of Creativity.” Does that sound familiar to you? It sure did to me.

      As it turns out, there are physiological and mental reasons why we tend to have our most creative thinking at times when we’re doing certain things like: taking a warm shower, driving home from work, exercising, cooking, etc. But there are also reasons why our creative thoughts are often fleeting and hard to remember.

      Best of all, there are ways you can increase your creativity. And there are some simple ways you can remember your creative ideas better. I’ll summarize the articles I read on this topic below. I think you will find it very interesting, as I did.

      Following that discussion, I’ll have some thoughts on the economy, the much over-hyped sequester and how the campaign for the 2014 mid-term elections has already begun in earnest.