April 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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    • US Economy to Get a Hollywood Makeover

      You may have heard that the government is going to make some major changes in how our Gross Domestic Product is calculated later this year. Your first thought might be that this is no big deal. However, I will argue today that it is a very big deal, the biggest in a decade, and you need to know why. So I hope you read what follows with more than a passing interest.

      Last week, the Commerce Department’s Bureau of Economic Analysis (BEA) announced it will be making some significant revisions to the way it calculates Gross Domestic Product in late July. This change is somewhat controversial in that it is expected to add a whopping 3% to GDP in one fell swoop in the last week of July. That’s about $1,500 worth of extra goods and services for every person in the US!

      The reason for the changes is the fact that our economy increasingly depends on the production of intangible goods, and we need to recognize that the production of ideas is an important form of investment. So in the future, the BEA is going to count a company’s research and development as a form ofinvestment just like the purchase of a new office building. And the creation of a lasting work of art – a painting, a movie, a television series, etc. – that can be sold year after year will, likewise, be treated as a capital investment.

      Today, I will talk about these sweeping changes and what they will mean for all of us.

    • An Awesome Gift For Your Kids, Grandkids, or You

      This week, I veer from our usual economic and investment themes to tell you about what I believe is one of the greatest gifts you can ever give your children, grandchildren or others who are dear to you (or maybe even yourself). What I am about to describe is something that has literally changed the lives of dozens of my friends and relatives over the last 30+ years.

      Today we’re going to revisit the Johnson O’Connor Research Foundation and how it can have a huge impact on the future of any young or middle-aged person who goes there for aptitude testing and career counseling. Johnson O’Connor helps people decide which career fields they are most naturally suited for based upon scientific testing of their unique set of individual aptitudes.

      I have published similar articles on Johnson O’Connor (J-O) in the past because it has been such a godsend to everyone in my immediate family, many relatives and dozens of friends and business associates over the years. So, I urge you to read the following, especially if you have any loved ones who are struggling to find a career path.

    • Fed to End QE, Obama’s Tax & Spend Budget

      Today I tackle several topics, each of which could take up an entire E-Letter. But these topics are very important, and I want to address them today. The first is the minutes from the March 19-20 Fed Open Market Committee meeting that were released last Wednesday. Those minutes definitively confirm that the Fed is ready to chart an end to quantitative easing.

      The second topic is President Obama’s proposed federal budget for fiscal 2014 that was also released last Wednesday. The Obama administration claims that the latest budget proposal will cut the federal deficit by almost $1.2 trillion over the next 10 years. It will not. Furthermore, his new budget proposal would raise taxes and fees by over $1.1 trillion over the next decade. And that’s just for starters.

      But before we go there, I want to touch on new data which confirms that US economic growth in the current recovery has been the weakest EVER, since 1930 when such data was first recorded – even worse than after the Great Depression. The recent Great Recession officially ended in the 2Q of 2009 – true enough. But growth since then has been the slowest on record.

      That’s a lot to cover in one letter, so let’s get started.

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    • Workforce Shrinks, Unemployment Falls – Say What?

      Today we begin by examining last Friday's miserable jobs report. The official unemployment rate edged down fractionally, but it was because almost a half a million people stopped looking for work last month. In fact, the labor force participation rate dropped to the lowest level in 33 years.

      From there, we look at the reasons why the Fed's massive quantitative easing (QE) is doing little to nothing to help the plight of the long-term unemployed. We also look at the growing number of “discouraged workers,” which are defined as those long-term unemployed who have stopped looking for work and the reasons why.

      The number of Americans on disability insurance has increased for the last 16 years, and the total stood at a record 8.85 million people as of March, according to the Social Security Administration.

      Finally, we are hosting a lunch seminar in Austin on May 8th at 11:30 featuring Hanlon Investment Management, a Registered Investment Advisor managing apprx. $3.5 billion in assets. If you live in Austin or will be in the area on May 8, call Joanne at 800-348-3601 to reserve your spot. Seating is limited. The lunch seminar will be at the Westin Hotel in The Domain at 11:30. This is also an opportunity for me to meet you personally.

    • Why This Economic "Recovery" is So Weak

      We start today with an excellent editorial I read last week written by Mort Zuckerman, Editor-In-Chief of U.S. News & World Report. My goal every week is to do a lot of reading and summarize what I’ve learned in these pages week in and week out.

      But every now and then I run across something so good that it just makes sense to reprint it in its entirety, even if it’s not my own work. Not many of my contemporaries are willing to do that, as they think it makes them look less scholarly. I don’t have that problem. 

      Following that, we’ll take a look at the stock markets now that the S&P 500 Index has finally reached a new record high. You would think that investors would be jubilant with stocks at new record highs, but consumer confidence is still in the tank. We’ll look at some of the reasons why.

      Finally, we will revisit the public’s continued love affair with taxable bonds. Despite the huge bull market in stocks, investors continue to pour money into bonds and bond mutual funds. I continue to maintain that long-only bonds are in for a bear market due to rising long-term interest rates.