Category: Invest with Alex

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The Secret To Predicting The Future

 BusinessWeek Writes: The Importance of Tuning Out the Noise

 PredictingFuture investwithalex

The Dow Jones Industrial Average jumped more than 300 points yesterday on news of talks in Washington to resolve the government shutdown/debt ceiling crisis. Was it a relief rally? A head fake? Will the points disappear if the talks don’t produce results?

Who knows? I don’t. Nor does Wall Street or the finest brain cells and black boxes in Connecticut hedgie-land. Even the most powerful and decorated economists in the country were pretty much blindsided by the Great Subprime Meltdown, a trauma that chopped stocks in half in just months.

So, yes, we’re all pretty much flying blind.

Read The Rest Of The Article Here

Articles such as these anger me. They perpetuate the notion that predicting financial markets is impossible and that no mortal should even attempt to try it.  If they do, they are surely to fail.  After all,  if not even “brilliant” Nobel winning economist can predict the future, what chance do you have?

Actually, a very good one.  In fact, it is very hard for me to understand why most people or our “brilliant economist” can’t see the future.  I am not by any measure brilliant, yet I could clearly see the 2007-2009 meltdown coming as early as 2005. I have even tried to warn people, yet most wouldn’t listen. Today, it is clear as night and day as well. Not only from the fundamental perspective, but from a cyclical and technical one as well. They all confirm.

Basically, the US Economy and its financial markets are about ready to roll over and go down significantly. No, it will not be an overnight drop, but it is now unavoidable.  My work indicates that it will take 2-3 years for the market to hit its lows with lots of up and downs in between. I will present my timing work over the next few months that will illustrate that a little bit better. 

My only advice is this. We are not flying blind. Ignore financial media and concentrate on reality and fundamentals. When you do, you will very soon realize exactly where we are in the economic cycle and clearly see what is coming up over the next few years. 

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Unknown Secret About China’s Export Drop

Bloomberg Writes: China Exports Unexpectedly Drop

china exports investwithalex 

China’s exports unexpectedly fell in September, signaling constraints from global demand and highlighting distortions from fake invoices that have yet to be eliminated from trade data.

Overseas shipments dropped 0.3 percent from a year earlier, the General Administration of Customs said yesterday in Beijing, trailing all 46 estimates in a Bloomberg News survey that had a median projection for a 5.5 percent gain. The trade slowdown resulted from a high basis of comparison with last year, the agency said in a statement.

“There has been an export recovery since July to the U.S. and Europe but it’s been pretty weak,” Shen said. “The driving force for China’s recovery at this stage is still housing and infrastructure investment.”

Read The Rest Of The Article Here

I am not sure what is so unexpected about the export drop. You could see this coming from a mile away. What’s more is that this is a trend that is just starting. I would continue to expect weakness in the Chinese export sector as the global economy starts to contract. 

This is very basic. The US Economy is literally running on fumes, QE and a lot of credit infused speculation. As such factors dissipate or lose force (already happening) the US Economy will slip back into a recessionary environment. The whole world will follow (or lead) the way. Under such a backdrop, it is impossible for the exports to be anything but down.

Chine exports “Unexpectedly” dropping is just another sign that we are in early stages of such a development. As I have said many times before, right now would be a good time to think about protecting your assets from the upcoming recession.

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Who Else Wants To Cancel Christmas?

Yahoo Finance Writes: Retailers’ Warning to Congress: You’re Killing Christmas!

 grinch investwithalex

In an open letter to congressional leaders, National Retail Federation (NRF) president & CEO Matthew Shay made a persuasive case that without an immediate end to the government impasse the American economy is facing disaster with or without a technical debt default. According to the NRF the recurring nature of the debt ceiling debates have created repeated headwinds for his industry over the last several years, suggesting a temporary bargain is of limited value.

The problem is reaching an apex at the worst possible moment for retailers. Traditionally the holiday season accounts for the bulk of a retailers’ profits. In fact, Black Friday earned the name because most merchants would be in the red (losing money all year) if not for the month between Thanksgiving and Christmas.

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In my previous post titled Why I Really Hate Christmas & My Gift To You I have predicted that retailers will have a miserable holiday season.  I have also suggested that you should wait till the last moment to buy your Christmas gifts this year. By that point stores will literally be giving stuff away.  Today, we are beginning to see a much more clearer evidence of just that.

Retailers now claiming that the Government shutdown is the primary reason for their weak sales. Certainly the government shutdown does have an impact, but not nearly to the extent that most retailers claim. The real culprit the US Economy.

Now running out of steam, the US Economy and the Financial Markets face a certain future. They are heading south, way south.  The economy is not nearly as strong as the US Government and the media want us to believe. With high structural unemployment, overwhelming debt and no income growth, the American consumer is tapped out.  As I have said before, expect a terrible retail holiday season this year. 

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What Everyone Ought To Know About The Future

CNN Money Writes: Fed minutes: Decision not to taper was a ‘close call’

ben bernanke cat investwithalex

Federal Reserve officials were torn on whether to continue their stimulus program at their last meeting in September, according to minutes released Wednesday.

At that meeting, the Fed surprised investors and economists, who were largely expecting the central bank to start reducing its $85 billion in monthly bond purchases — a gradual wind-down process that has come to be known as “tapering”.

The decision not to taper, was a ‘relatively close call’ for several members of the Fed’s policymaking committee, the minutes said.

What tipped the scale?

Read The Rest Of The Article Here

This is the most important news no one is talking about. Forget the Government shutdown.  That situation will resolve itself shortly. The subject matter above is much, much, MUCH MORE important.

As I have mentioned before the only thing that is keeping the US Economy afloat is QE buying of Bonds to the tune of $85 Billion per month. That is the only thing keeping interest rates down and the economy humming along. Even thought the velocity of monthly QE impact is getting weaker and should dissipate itself soon either way, removing or tapering this stimulus will have immediate negative consequences on the US Economy and the financial markets.

Basically, the interest rates will shoot up, the economy will slow down drastically and shift into the recessionary environment.  The stock market, the real estate market, car sales and the rest of the economy will decline substantially.

We are beginning to see cracks at the FED in terms of QE decision making process. That is significant because it is the first clear indication that at least some at the FED are ready to start tapering. Eventually they will. When they do all of the above will happen.

Please be aware that the stock market is a future discounting mechanism and as such will decline long before the FED announces anything. That is why looking for first cracks is so incredibly important. You have been warned.

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The Secret Of Russian Billionaires

Wall Street Journal Writes: Who Wants to Be a Russian Billionaire?

 new russians investwithalex

MOSCOW—When it comes to household wealth, it seems Russia has come full circle.

In the days of the Soviet Union, the country boasted that all its citizens shared the wealth equally, but a new report has found that a mere 20 years after the end of Communism, wealth disparity has soared with 35% of the country’s entire wealth now in the hands of just 110 people.

“Russia has the highest level of wealth inequality in the world, apart from small Caribbean nations with resident billionaires,” Credit Suisse’s annual global wealth report says.

Read The Rest Of The Article Here

After beating up on China for a while, it is now time for mother Russia. I highly encourage everyone to read the article above in full to gauge a better understanding.  

I am not surprised by the numbers above. If you are not aware, at least the first round of Russian Billionaires made their money from theft of Soviet Union resources. Most Billionaires in the western world had to work for it, but not in Russia. It was done by picking up the phone back in the early 1990s by a few very well connected people and saying “Hey Boris (Boris Yeltsin), can I have that Zink/Gold/Oil factory/refinery in Siberia, it is in disrepair anyway”.  If the Boris was drunk enough or happy enough or paid off well enough he would do you a favor and give you a factory. That was their secret. 

BOOM. You are now a Billionaire. While the explanation above is very simplistic, it is not that far from reality.

Either way you twist this, this is not a good state of affairs for Russia. Given its natural resources and the boom in the commodities market over the last 10-15 years Russia should be much further along. Yet, it is not.

This is of course the failure of its government and those in power. Given the situation I do not see a bright future for Russia.  While it will remain a powerful player on a global scale I don’t see how it can compete with either the US or even China in economic terms. Should commodity prices decline, expect Russian economy to dive into a deep recession (many argue its already there).

It is unfortunate, but some things never change.   

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Little Known Way To Profit From The US Government Default Scare

BusinessWeek Writes: Go To Cash

idiot in government investiwthalex

I speculate there can’t be a better time to sell than now.

We are linked in our shattered hopes and dreams of wealth creation, the emotional baggage of sequential and frequent black swans.

I further speculate there can’t be a better time to sell than now.

Boehner is not speaking with Obama, who is not speaking to McConnell, who is not speaking to Reid, and around we go. None of them are speaking to Hillary.

I speculate that this moment is surreal and deeply disturbing.

Read The Rest Of The Article Here

As the article above shows, people are starting to freak out about the whole Government Default thing.  It is clear by now that most of our politicians are somehow retarded (no offense to the mentally challenged community) and we just have to live with it now.

Even the stock market and the bond market are starting to show the signs of worry. Should you worry as well?

As I have mentioned in a few previous posts, I don’t believe so.  Even thought our politicians are irresponsible, I don’t think they are irresponsible enough to plunge the country into abyss of economic chaos. I guarantee you there is a lot of movement behind the scenes that I believe will put this issue behind us at any moment now.  Further, I believe the existing setup gives speculators a perfect opportunity to profit. Here is how.

As I have mentioned before, the stock market has opened up a lot of gaps on the way down from the previous top. Before any sustained bear market move can take place, the market must go back up in order to close them.  That should put us into a mid 15,500 range or about an 800 point move from where we are today.

Further, I believe the resolution of the Debt Crisis  would be a clear catalyst for such a move.  As such, traders should be setting themselves up for an upswing to benefit from an eventual resolution of an existing crisis. Who said I was always a bear?

*** Don’t Forget To Do Your Own Research Before You Follow This Advice. 

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The Secret Of Upcoming Real Estate Crash

Bloomberg Writes: A Lonely Housing Bear Predicts a Big Tumble

 housing bubble

Talk to Mark Hanson about the housing market for five minutes and you may find yourself wanting to sell your home and park the cash in a suitcase. 

The Menlo Park, California, real estate analyst, blogger and founder of consultancy Hanson Advisers predicts a decline of 20 percent in housing prices in the next 12 months. Half the gains since the latest housing bottom in 2011 could be erased in the hot areas — Florida, California, Nevada, Arizona and Georgia — by rising interest rates and a thinner herd of speculative private-equity buyers, he says.

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In my last week’s post I Am Calling For A Real Estate Top Here I have laid out a case of why I  believe the real estate market is topping and should decline from this point on. It seems like other people are starting to see the forest through the trees as well.

Even thought I have briefly mentioned it before, I would like to take this opportunity to talk about an important point as it pertains to the real estate market.  If you study financial markets, as I have, you soon begin to see patterns and similar structures in all markets. One of the easiest things to understand is that markets NEVER go straight up and down and they RARELY complete their moves in one motion.  Typically it takes 3 to 5 distinct moves (up and down) to complete either a bear or a bull move.

As such, what we have experienced in 2007-2010/11 real estate market was only the first leg down.  What we are experiencing now is a rebound, 2010/11 to today. Rebound acts as a perfect tool to suck investors or buyers back in by promising that the worst is over and by offering outsized gains.   Rebounds are often powerful, yet short lived. When they are over, markets tend to shift fast to continue on with their original move.

This is where we find ourselves today. The rebound is topping and the market is getting ready to reverse itself. As soon as it does (and I believe it is already happening) the market will resume its BEAR MARKET in real estate. The third leg down is typically more powerful than the first one. As such, I would expect significant declines over the next few years in the real estate arena.

Fundamental certainly support this development as well. 

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Timed Value. What Is Time?

I am incredibly excited to announce that I have decided to write and publish my first investment book over the next few months.  The topic of the book will be….. 

TIMED VALUE

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It will concentrate on the investment style that I have developed over the last 15 years. As far as I know I am the first one to use this investment style and the title associated with it. 

The book will talk about timeless principles of Value Investing, how it works, what to look for and various issues associated with it. 

The book will then shift to mathematical work that I have developed over the last decade that does a great job with timing the market and individual stocks. Most importantly it asks the question “What Is Time” as it pertains to the stock market and dives deep into the subject. 

The book will then go on to tie together Value Investing with My Timing work in order to show you how to maximize returns while minimizing risk. Most importantly, I will write the majority of the book on this blog with various chapters or sections being published on the daily basis.

It is my hope that you can join me on this adventure and exploration of what I believe to me incredibly unique work unavailable anywhere else.  

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The Secret Of Upcoming Government Default

Bloomberg Writes: A U.S. Default Seen as Catastrophe 

 Oct 7, 2013 chart

Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.

Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.

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The media is in overdrive talking up fiscal disaster or catastrophe associated with the “FIRST EVER DEFAULT” over the next few days,  the American people are freaking out, the stock market doesn’t care, the largest bond fund (Bill Gross) is buying bonds while claiming no default…..hysteria and confusion everywhere.

So, what is going on here? What will happen?

To gain clarity all you need to do is step away from all this mess for a second and keep a close eye on only one indicator. The stock market.

Let me put it this way,  if there is a real default, it would indeed be catastrophic. So much so, that I wouldn’t be surprised to see the stock market drop 20-50% within a very short period of time. A crash so to speak. Yet, crashes do not happen when everyone is expecting them (as in this case).

As such and for now, the stock market is predicting that the US Government Fiscal Crisis will be over shortly. In fact, technically speaking the market is setup for a very strong rally here.

Will it be associated with the end of the crisis? I believe so. Take a look at the stock market, everything else is simply noise. I would anticipate the issue to be resolved at any minute now with the stock market surging higher from this point on because of that.  

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Is Egypt On The Brink Of A Civil War?

Bloomberg Writes: Egypt’s Coming Civil War

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Three months ago, Egypt’s military seized power in a coup that it said was necessary both to prevent civil war and to restore democracy. By now it is clear that the military is failing on both counts.

Today, suspected Islamists killed at least nine soldiers and police in attacks. Yesterday, security forces killed 51 pro-Muslim Brotherhood protesters at a rally in Cairo that, according to witnesses, had been entirely peaceful. Meanwhile, the country continues to live under a nightly curfew.

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This is an important matter for regional stability and overall macroeconomic picture. The article argues that Egypt is basically on the brink of a civil war. It goes without saying, should such a war erupt, it will have significant repercussions on the entire region.

At least at this time I am not in the camp that believes Egypt will face civil war.

Why?

Because Egyptian stock market has been on a tear over the last few months (see chart above) indicating further stability and economic growth. Could the stock market be used as an indicator of upcoming economic and civil stability?

Not always, but it is the best future anticipation machine that we have and at least for not it is saying that Egypt will pull through. 

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