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Revealed: Who Will Win The Inflation-Deflation Battle And Make A Killing

Inflation or Deflation InvestWithAlex

Business Insider Writes: BILL GROSS ‘Be Careful 

In his February investment letter, Bill Gross, the manager of the biggest bond fund around at PIMCO, warns investors to “be careful.”

Why? Gross believes the rally has been fueled by ever-expanding debt.

Now, due to a combination of smaller government deficits and tapering of the Federal Reserve’s quantitative easing program, the rise in debt is slowing, which Gross argues is bad news for risky assets like stocks and good news for bonds.

“Bull markets are either caused by or accompanied by credit expansion. With credit growth slowing due in part to lower government deficits, and QE now tapering which will slow velocity, the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume. Perhaps the whisper word of “deflation” at Davos these past few weeks was a reflection of that. If so, high quality bonds will continue to be well bid and risk assets may lose some luster.”

Read The Rest Of The Article Here

Bill Gross is, of course, right on the money.  

The one question that gets left behind is whether or not we will have inflation or deflation over the next 5-10 years. That is an incredibly important question. A correct answer should greatly impact your overall portfolio allocation over the next couple years. Getting it right would mean outperformance, getting it wrong would only yield severe losses.

Gold bugs, inflationist and hyper inflationist would lead you to believe that hyperinflation is just around the corner, your dollars won’t be worth the paper they are printed on and that gold is about to surge to $100,000 an ounce.

Deflationist would lead you to believe that we are on a verge of an economic collapse, credit collapse, market collapse, great depression and that all asset prices are likely to decline to the tune of 90-95% over the next few years. If this scenario does indeed come true, it would be prudent to invest into a stockpile of canned food, a small arsenal of guns and a container load of ammo.

Who is right?

No one. The reality is somewhere in the middle. Technically we are in a deflationary environment due to a massive credit expansion and the subsequent collapse of that credit throughout our economic system. Basically, we are still feeling the impact of 2007-09 credit defaults, with more defaults coming up over the next few years (due to upcoming recession).   

On the other hand, the FEDs have been printing money like crazy over the last couple of years and distributing it though various channels of the economy. Mostly through financial institutions, speculation and asset price appreciation.   

That is why we are seeing the evidence of both inflation and deflation throughout  the economy. Which one will win out over the next couple of years and how to invest in such an environment?

Please listen to today’s podcast in order to get your answer. 

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Revealed: Who Will Win The Inflation Deflation Battle And Make A Killing  Google

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Who Makes More Money, Investors or Speculators?

InvestWithAlex Wisdom 19Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “Is it better to be a long-term investor or a speculator. Who makes more money?”  – Robert Casper, TX 

    • Why This Is The Wrong Question To Ask. 
    • The Secret Truth Wall Street Doesn’t Want You To Know. 
    • Who Makes More Money. 
    • Who Should You Be In Order To Maximize Your Returns.  

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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What Will The Stock Market Do & Why You Should Care.

InvestWithAlex Wisdom 18

Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “Hey, as long-term investors, why should we care about what the market does. Shouldn’t we just concentrate on picking good stocks? ” – Angela . 

    • The answer that will shock you to your core. 
    • How knowing what the market will do can easily double your returns. 
    • Why timing is the most important element when it comes to investing. 
    • What you can do now to combine timing with fundamentals to maximize your gains. 

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Harvard Economist Starts A Run On His Bank of America. Should You Follow?

 PBS Writes: Is your money safe at the bank? An economist says ‘no’ and withdraws his

bank run investwithalex

Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.

Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money.

Read The Rest Of The Article Here

After reading this article I am seriously considering running into my bank later on today and screaming out “Give me all of my money Bi*%#@, NOW”. It’s just my hope that they won’t misinterpret my demand for my own money and give me all the money in the vault. I don’t’ think the FBI would appreciate my sense of humor. (On the side note, I wonder how many keywords this paragraph has set off at the NSA).

Anyhow, I actually tried to withdraw a fairly large amount of money at my local branch of Bank of America a few years ago. Without giving it a second thought I walked in and asked for a miserly $125,000 in cash. With a smile of course. They gave a deer in a headlights look, the same kind of look I would expect if I was trying to cash in about $20 Billion, and then proceeded to tell me “I am sorry, we don’t have that kind of money on hand, would you like us to request that for you and you can come pick it up in 2 days. “

WTF? You have a huge vault and you don’t have $125,000 in cash on hand? That is not good.

Listen, the article above is right on the money when it comes to our banking system and highly recommend that you read it in its entirety.  The bottom line is, the American banking system is only as stable as the perception of stability associated with it. The banks, by their greedy nature, have lent out all of the money they have had.

If there is a run on the banks, no commercial bank in the US today will be able to meet its obligations to the depositors. Surely, the government will backstop, but that’s not the main point here.

The main point is that the banks are not paying any interest on deposits.  Thanks to the FED and their interest rates policies, you would be lucky to get 0.05% APY on your saving account.  That doesn’t sound fair, does it?  I don’t know why Obama and Bernanke/Yellen hate our senior citizens on fixed income so much.

Now, based on my mathematical timing work,  I reject the notion of the “PermaBears” and “Gold Bugs” that our economy and our markets will completely collapse, there will be a banking holiday and we will all be shooting rabbits for food.  Again, it is not going to happen.   

While I believe your money is inherently save at this juncture, I do agree with the premise of taking your money out of the banking system and trying to get a higher yield elsewhere. That is, if you want. 

So, what should you do?

1. Never have more than the FDIC insured amount on deposit at any given bank. If you do, you are a stupid wanker just asking for trouble.

2. Open a safety deposit box and store some cash there.   Always have a substantial amount of cash on hand.  If you want to take the diversification to the extreme open bank accounts in Hong Kong or Singapore and store your cash there.

Then what?

Do nothing. Just sit on it. Yes, I can give you some tips of what to do if you would like to earn higher yields, but that would come with additional risk.  Believe it or not, I think the US Dollar is substantially undervalued and will do very well over the next few years while financial markets around the world come down to the tune of 40-60%. Including the US.

Having large quantities of cash at the bottom of the bear market will allow you to come in and buy wonderful companies at huge discounts and that is how you make a lot of money over the next 5 years or so.  

BTW, I gave the same advice to my clients in 2006-2007 and that worked out pretty well.  

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Harvard Economist Starts A Run On His Bank of America. Should You Follow? Google

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Weekly Investment Update and Summary. February 1st, 2014. InvestWithAlex.com

daily chart Jan31, 2014

Continue to maintain a LONG/HOLD position.

Weekly Summary: 

Even thou the market had a number of significant down days during the week, the Dow Jones ended up down only -180 points or (-1.14%). Both the Nasdaq and the S&P fared much better. Loosing only -24 points (-0.59%) and -7.7 points (-0.43%) respectively. 

If this week can teach us anything, its that volatility is back. Every trading session was opened up with a fairly large gap. With Fridays gap being close to 200 points on the DOW. What does that mean?

It means the cyclical composition of the market has shifted from a general uptrend exhibited in 2013 and for the large part since the start of this bull market leg in March of 2009 to a bear market leg identified here last week. 

Again, my mathematical timing work had confirmed that the DOW Jones topped out on December 31st, 2013 at precisely 16,576, ushering in the new bear market leg that will take us into the 2017 cyclical bear market bottom. 

Now, most market participants believe that the decline since the start of the year is nothing more than a simple correction that is long overdue.  While I disagree we still have to wait for a technical confirmation before taking our short position to profit from the bear market leg.  Such confirmation must come from a short term bottom here, subsequent bounce and resumption of the bear move thereafter. 

Our model portfolio established at the beginning of the year has been in cash this entire time @10 Year Note, helping us avoid the decline. For our previous investments, we continue to maintain our LONG/HOLD position without adding anything new. Once the bear market confirmation arrives we will get out immediately and go short. 

If you recall, I have mentioned that the market opened up large gaps on the way down from 16,400. At this stage it is highly probable that the market will bounce back to those levels before resuming the bear market let once the bottom of this correction is set. When will that happen. Please see our Mathematical & Timing analysis below.  

Fundamental Analysis: 

As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to massive infusion of credit by the FED over the last few years and pure speculation. I am acutely aware and as most market commentators point out, based on the P/E ratio of 18.5 and some other metrics that the market is not overpriced and is within its historic range. At lest suggesting that there is no need to worry about any sort of a decline. 

s&p ratio

However, everyone is missing the elephant in the room. The earnings for most corporations have been “juiced up” to the tenth degree by the same credit infusion. If you take the credit and those earnings out, the P/E ratio is likely to be in the 50-100 range. Making this market not only overpriced, but putting it in the “are you fucking kidding me overpriced” category. 

Please note, that is exactly what happened when the P/E ratio shot up to over 124 in May of 2009 even though the market had lost over 50% since October of 2007. When earning disappear (as they will), today’s valuations will look astronomical.   

Macroeconomic Analysis: 

It doesn’t matter where you look, we have the same cancer spreading across the globe. Massive credit expansion juiced up the FED. This week the Fed announced a further cut in QE from $75 Billion to $65 Billion due to perceived “Economic Strength”. I have argued for a long time that the FED will be unable to withdraw this support without a massive blow up one way or another. We already starting to see strain show up in emerging markets. 

With our mathematical work confirming the bear market over the next 3 years, this plays very well into our scenario. The bottom line is, our economy is driven by credit and will deflate on a large scale as soon as the credit intervention goes away (as it is now) and/or the velocity of credit slows down (as it is now). 

Technical Analysis: 

Technical picture remains murky. 

Long-Term: The trend is still up. Market action in January could be viewed as a simple correction in an ongoing bull market. 

Short-Term: The trend is down as the market structure turned bearish. Please see my timing analysis for further instructions. 

Overall, we must wait for a confirmation before taking a short position. 

Mathematical & Timing Analysis: 

There is a number of important mathematical turning points arriving over the weekend and next week. Will these points signal the end of the bear move and a reversal into an anticipated rebound? I believe so. As soon as the rebound completes we should see the market roll over the resume a bear market leg in March of this year.  

Time Targets: Coming Next Week.

Price Targets: Coming Next Week 

CONCLUSION: 

If you are out of the market as we have been, stay out. If you are still fully invested consider liquidating your positions as we go through a rebound over the next few weeks. Once the rebound plays itself out and the market confirms the next bear leg down, I would recommend going short at that time. 

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What You Ought To Know About America’s Unemployment Problem

post-unemployment

Reuters Writes: Help wanted: Obama calls on CEOs to help fix jobless problem

WASHINGTON, Jan 31 (Reuters) – President Barack Obama will meet on Friday with a group of chief executive officers who have agreed to make sure their companies do not rule out hiring people just because their resumes show they have been out of work for a while.

More than 300 companies have agreed to a one-page list of “best practices” for recruiting and hiring people from the ranks of the long-term unemployed – a group that has struggled to find work in spite of an otherwise improved economy. “It’s saying that those who are long-term unemployed should get a fair shot,” said Gene Sperling, Obama’s top economic advisor.

The U.S. jobless rate has remained stubbornly high at 6.7 percent, but Sperling told reporters the rate would be closer to 5 percent were it not for the roadblocks to finding work for those unemployed for six months or more.

Read The Rest Of The Article Here

The whole notion of Obama calling on CEO’s to “help fix jobless problem” is an idiotic notion to begin with. A PR stunt. It’s identical to throwing fire crackers at a massive cargo ship and expecting any sort of a result.

The unemployment problem is a function of the overall economy. Business will start hiring when they hit capacity and start growing again. You might scratch your head and ask, well, isn’t our economy is growing fast? At least that’s what the media keeps telling us.  

NO. Again, the recovery you see is artificial. Driven by credit and speculation. Even the primary beneficiaries of this so called recovery (financial institutions able to borrow money for free) are for the most part not hiring. Why? It’s a complex issue. For some it has to do with technological improvements, for others with outsourcing and even robotics.

Yet, the main issue remains. There is no “TRUE” economic growth and too much uncertainty to warrant any kind of a hiring binge. By anyone.

Then there is the big issue of 6.7% unemployment. The number excludes those who have given up looking for work and those who are underemployed (part time, but want full time). If you add both categories into the pool, the true unemployment number is likely to be between 15-20%. That is a massive problem for the economy that is “supposedly” back to its pre 2007 levels.

Is there a solution? I don’t see it. If anything, the situation is about to get a lot worse. As my stock market work clearly indicates we are on verge of a severe bear market and another economic recession.

This will do nothing but make the unemployment problem a lot worse.     

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How French Economic Policies Are Turning France Into a Fascist State

INS Writes: ‘Jews, Out of France!’

french nazi

Chilling video shows hundreds of anti-Semites on the march in Paris, illustrating the frightening rise of anti-Semitism in France.

It is nothing short of chilling.

A video, taken on the eve of International Holocaust Remembrance Day, shows masses of French protesters marching down a Paristhoroughfare chanting openly anti-Semitic slogans and calling on Jews to get out of France.

Chants include “Jews, France is not yours!” “Jews out of France” and “The story of the gas chambers is bull***!” At one point, in a show of raw, seething hatred, the crowd simply spits out the word “Jew, Jew, Jew!” 

Many of the marchers can be seen giving the “quenelle” inverted Nazi salute popularized by anti-Semitic comedian Dieudonne. The gesture is seen as a way for anti-Semites to give a Nazi salute without incurring the wrath of authorities – although one demonstrator can be seen giving a full-on Nazi salute as well.

Read The Rest Of The Article

I have written about France’s insane economic policies before in France Is Being Flushed Down The Toilet… Just As Predicted.  As such, it should come as no surprise that France is slowly turning into a Nazi Germany.  Maybe not to the extent, but to a degree everyone should be aware of.

If history teaches us anything, it is the economic structure and not the ideology, that leads to genocide and wars. It was the economic devastation that was the primary reason behind the rise of Nazi Germany in the early 1930’s.  Now, the French Socialist Party is hell bent of destroying French economy by taxing the rich and businesses to death. Subsequent economic suffering leads to social unrest and an eventual rise of hate and fascism. We see this very same type of a situation happening in Greece as well.  

Idiotic and uneducated masses always need someone to blame.  Based  on today’s news it looks as if the French hate the Jews. It is my only hope that all the Jews pick up and leave either for the US or Israel.  Just as their exodus devastated every corner of Russia’s economic and scientific community, France should have the privilege to suffer the same faith. Let this be a lesson to those trying to turn their market economies into socialist nanny states.

One thing is for sure, I won’t be visiting France anytime soon. Au revoir connards

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How French Economic Policies Are Turning France Into a Fascist State

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What Is The Fastest Way To Get Rich? Diversification or Concentration

InvestWithAlex Wisdom 16

 

Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “What would you recommend if I would like to maximize my investment returns while minimizing risk? Diversification or concentration…” – Justin White

    • Find out which strategy is a clear winner.
    • The proper way to execute this unique approach.
    • Major problems associated and how to avoid them.
    • What you should do next to start accumulating large profits.   

Please tweet me your questions @investwithalex

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Is It Possible To Predict The Stock Market? YES

InvestWithAlex Wisdom 15

Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: Why are you so confident that we have hit the top? As far as I know no one can predict the markets. Please explain your approach…” – Roger Strand  

    • Is it possible to predict the market? 
    • The secret behind timing and/or predicting the market? 
    • What does it tell us about the future? 
    • What to do in case my timing work is incorrect. 

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

 

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Who Else Wants To Buy At The Top?

advisors

 

Business Week Writes Investment Advisers Go All In on Stocks

Advisers surveyed weekly by the National Association of Active Investment Managers have 98.3 percent of their clients’ portfolios allocated to stocks. Exposure to equities averaged 72 percent during 2013.

What a shocker!!!  Just as always and exactly at the wrong time.

This is nothing new when one sees the market from the vintage point of human psychology. Most investors make the same mistake. When speculation and advancing market psychology grips investors psyche, there only one thing left to do. BUY. BUY. BUY. Why? Well, because everyone else is doing it and just like the retail market participants, financial advisors and money managers don’t want to be left behind.

Yet, as per my article yesterday, “MARKET TOP” the markets just topped out. As always, instead of getting out or going short most investment advisors are rushing into stocks. Just like they were rushing OUT of stock in March of 2009, when they should have been buying everything under the sun.

Sometimes human nature never changes. 

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