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WARNING!!! Is The Philippine Economy/Stock Market About To Collapse?

Philippine Inquirer Writes: PH “different” from troubled Asean peers, say report

 

The Philippines, Southeast Asia’s fastest-growing economy, can differentiate itself from its regional peers that are grappling with slowing growth and deteriorating external balance sheets, based on a common theme cited by international researchers in the past few days.

Although election spending was a factor behind the better-than-expected 7.5-percent gross domestic product (GDP) growth of the Philippines for the second quarter, a pace matched only by China, some of the reports cited some downside risks

“The local economy’s resilience in the face of external turbulence reinforces our view that the Philippines is somewhat differentiated from its peers not only by having a structural current-account surplus but also by having local growth drivers, mainly public spending and private investments, to lean on. The latter may be traced to local economic authorities’ ability to pursue accommodative policies given a benign inflation outlook and manageable public debt,” New York-based think tank Global Source said in an Aug. 30 commentary written by Filipino economists Romeo Bernardo and Marie-Christine Tang.

In a separate research, Credit Suisse said: “We think the Philippines offers the best macroeconomic prospects out of the Asean-4 economies,” referring to the four emerging markets of Southeast Asia that also included Thailand, Indonesia and Malaysia.

Read the rest of the article here

As of right now the Philippine economy is in a very dangerous situation. I say dangerous by simply relying on the Philippine Stock Exchange (PSEi) stock chart.  The chart looks horrific. It looks as if it is about to break down to the downside ………BIG TIME. 

From a purely technical perspective, if it breaks down below 5,700 level, the Philippine economy and the Philippine stock market is in huge trouble. There is no support of any kind until it reaches down to about 4,000 level.  From my experience,  I would put a chance of a breakdown here and a subsequent significant decline at about 80%.

philippines-stock-market

 Better chart here: http://www.bloomberg.com/quote/PCOMP:IND

What does all of this technical mambo jumbo means for average people. The stock market is a leading indicator. If the Philippine stock market breaks down as I anticipate above,  the Philippine economy will follow and slow down significantly.

The fundamental picture supports this thesis as well.  Due to an upcoming economic slowdown in the US, rising interest rates and a recent (substantial) move in the Philippine Peso, I would anticipate the Philippine Stock Market and the Philippine economy to break to the downside soon. Unfortunately, that would lead to either a significant slow down or even a recession in the country. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!!

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US Real Estate At A Turning Point. Act Now.

Bloomberg Writes: One Number to Explain a Confusing Housing Recovery

Housing-Decline-225x300

 

Reading the tea leaves in the housing market can be a confusing task.

Today we learned that pending home sales fell in July. Last week the news was that new home starts are down, too. But at the same time, serious delinquencies have hit a five-year low. For those of you who want a big picture view to gauge what’s going on, Trulia has a number for you: 64 percent. That’s how close the housing website says the market is to being back to normal.

To calculate the all-in stat, Trulia’s chief economist, Jed Kolko, combines three main factors: construction of new homes, sales of existing homes, and homes that are delinquent or in foreclosure. He then sees how far those those stats have come from the bottom of the market to a “normal,” prebubble pace. Existing home sales are the closest to normal, up to 94 percent of the original pace. But builders are putting up new homes at less than half the regular rate. Foreclosures and delinquencies, on the other hand, have fallen enough to make up more than half of the ground they lost in the downturn.

The results put the market in what Kolko calls the third phase of the recovery. The first stage started in 2009, when the sales and construction bottomed out. The second stage began in 2012, when home prices reached their low point. And this third phase, Trulia says, began this spring, when tight inventories loosened and mortgage rates started to rise.

At this point, the main issue holding the market back from fully recovering is household formation, or as Kolko puts it: “When young adults finally start moving out of their parents’ homes.” That in turn would spur the construction and sales of new homes and push the market closer to a full recovery.

Listen, there is no confusion at all. This is how the bear market works. First, a significant leg down (2006-2009) in real estate followed by a rebound (2009-now). The rebound acts as a “Trap” of sorts that reassures investors that the market is much better now and is about to recover. When everyone is sucked in, the trap is set and the market (Real Estate Market in this case) begins a massive leg down.

What you are seeing now and why a lot of people are “confused” is the topping out and a reversal process in the real estate market. In simple terms, watch out below. The US Real Estate Market is about to crater big time over the next few years. Don’t be in it, unless you have to. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!!

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3 Reasons Bond Investors Should Worry

CNBC Writes: Pimco: 3 reasons bond investors should chill

 

Bond investors are sweating bullets. In 3½ months, the 10-year yield has risen from about 1.6 percent to over 2.9 percent, before cooling off in recent days. And on Thursday, bond expert Jeffrey Gundlach made the case that the 10-year yield could reach 3.1 percent by end of the year.

As yields rise, bond prices fall, so the move in yields has been very painful for those who have owned bonds, and investors are heading for the exits. Bond funds saw outflows of $36.5 billion in the first 22 days of August, according to TrimTabs. Bond giant Pimco saw $7.4 billion worth of outflows in July alone, and double that in June.

But Tony Crecenzi, Pimco executive vice president, market strategist and portfolio manager, believes that the bearishness has gotten overdone. On CNBC’s “Futures Now” on Thursday, he made the case that “yields will move lower from here,” and he provided three reasons why.

1: Economic fundamentals don’t support these yields

Crescenzi said that yields could rise a bit more due to technical reasons, but the fundamentals don’t support it.

After all, “what’s priced into the bond market is the idea that the economy, in 2014, will accelerate,” Crescenzi said.

But he throws cold water on the rosy economic picture that some are drawing. “Bond investors will begin to reassess whether or not the optimistic forecasts, including the Fed’s own forecast, will come true.”

Indeed, many have questioned the accuracy of the Federal Reserve’s forecast for 3 to 3.5 percent GDP growth in 2014. On Tuesday, Krishna Memani, OppenheimerFunds’ chief investment officer of fixed income, said on “Futures Now”: “The economic growth that we’re looking for in the Fed’s forecasts is probably a bit overstated,” and for that reason, he, too, sees rates dropping.

Percent growth invest with alex

2: Inflation is not coming back

While Gundlach compared the recent rise in rates to the rate rally in 1994, Crescenzi said the present situation is markedly different.

“What 1994 was about was the last big battle against inflation expectations,” Crescenzi said. “When the economy began to accelerate from the 1991 recession, people started to say, ‘Well hey, more growth means more inflation. Why can’t the inflation rate get back to 4 and 6 percent again?’ Then Alan Greenspan came in and stomped on the bond market with big rate hikes to say there isn’t going to be an inflation acceleration like there used to be in the ’70s and ’80s.”

Because “that inflation battle has been fought,” the Fed doesn’t need to hike rates in order to tamp down the rate of economic growth and thus reduce inflation, according to Crescenzi. That means that a full repeat of the 1994 bond catastrophe-in which yields rose nearly 2 percentage points in three months-is unlikely.

3: Investors are misreading the Fed

Crecenzi believes there’s an “80 percent chance” that the Fed will begin to taper its qualitative easing program in September. But he thinks investors are misreading when the Fed will raise their Federal funds rate.

Again, because the Fed doesn’t need to worry about inflation expectations getting out of hand, Fed Chairman Ben Bernanke has no need to hike short-term rates as Greenspan did. “Unlike 1994, there won’t be rate hikes to reinforce the rise in interest rates,” Crescenzi said. So according to Crescenzi, “there won’t be a rate hike until 2015 and the earliest, and we think 2016.”

Any rise in rates would be investor-directed, then-and since the economy will not be as good as investors expect, he does not expect to see rates get pushed higher.

In fact, by the end of the year, this bond guru sees rates falling back to the low to mid 2s on the 10-year.

The points outlined in the article above are important and must be addressed. As I have mentioned in my previous article  “The Most Important Financial Story No One Is Talking About”  interest rates on a 10 Year T-Note have increased 100% over the last 12 months. That is a huge move. Should the investors be worried? I think so. Let’s take a look and take away their argument.

1. Economic fundamentals don’t support these yields: Oh yes they do. I don’t think the market is pricing in growth, I think the market is pricing in upcoming defaults and beginning of an inflationary environment.

2. Inflation is not coming back: That is kind of a definitive statement. My work is showing that inflation is just around the corner and will start to accelerate in 2016. I think the bond market is starting to price that in as well.

3. Investors are misreading the Fed: This is not about the Fed. This is simply following the market and trying to determine what the future holds. The Fed has an imaginary control, not a real one.

The bottom line is this. As I have indicated in my previous post I believe the interest rates have bottomed in July of 2012 and are now starting their multi decade climb higher. Yes, the rates are likely to decline here (pull back) only to resume their climb upwards within a short period of time. Of course, this will have huge negative consequences on the overall economy, the stock market and real estate.  

If you can, please share our blog with your friends as we try to get traction. Gratitude!!!

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Should McDonald’s Share Billions in Profit With Fast Food Workers?

Daily Ticker Writes: McDonald’s Should Share Billions in Profits With Fast Food Workers: Labor Organizer

 

When 250,000 people marched on the National Mall 50 years ago they demanded among other things a hike in the minimum wage from $1.25 to $2 an hour. Today thousands of fast food workers are holding a one-day strike in cities across the country, demanding a wage of $15 an hour. That’s equivalent to the $2 an hour protestors called for in 1963, after adjusting for inflation.

Fast-Food-Workers-Strike1

Organizers report that workers have walked off their jobs in 60 U.S. cities today, including New York City where 500 striking workers took over a McDonald’s at 5th Avenue near 34th Street, and the Empire State Building.

In addition to a $15-an-hour wage, protestors want the right to form a union without intimidation or retaliation from their employer.

Kendall Fells, the organizing director of Fast Food Forward, which is overseeing the New York City campaign, tells The Daily Ticker that these workers are not demanding that Congress raise the minimum wage but that the companies that employ them pay a living wage.

Read the rest of the article here:

What is happening to American capitalism? Why does everyone want a handout and/or a bailout. Why should you earn $15/hour when the market is only willing to pay $7.25/hour.  Why should corporations share profits with workers when the shareholders (the real people who took the risk) are left behind?

At least for now, corporations like McDonald’s should not worry about any traction in this movement. At the same time, these companies should

1. Fire striking workers.

2. Replace them with robots. Which is already starting to happen.

As for  the workers in question. Do yourself a favor and get a better skill set, a better job and a better pay. Any excuse that limits you ability to do so, is just that, an excuse.  Stop being lazy, get off your ass and do what you need to do in order to improve your life. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!! 

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Chinese Revolution…..Coming Soon?

Reuters Writes: Ditch the stats: China retailers don’t buy signs of recovery

 

HONG KONG (Reuters) – If things are really starting to look up for China’s economy, as a recent spate of better-than-expected government data seems to suggest, nobody appears to have told its biggest retailers.

A Reuters review of first-half earnings showed that more than 20 Chinese companies selling everything from footwear to food were not convinced the economic slowdown had bottomed out, and neither were their traditionally thrifty customers.

“The reality behind the numbers is gloomier,” said leading footwear retailer Belle International Holdings Ltd as a raft of data, supported by government statements, indicated the world’s second largest economy may be stabilizing after two years of slumping growth.

“There are uncertainties in future prospects as the economy is struggling with a difficult transition involving structural rebalancing and revamping the growth model,” said Belle, which has a market value of $11.6 billion and manages more than 18,000 retail outlets across 360 Chinese cities.

“As a defensive reaction, consumers are becoming more inclined to save and less willing to spend,” it added.

Economists have long doubted the accuracy of official economic data and this skepticism has increased as China plots a course towards consumption-led growth. The official retail sales measure, for example, counts a sale from when an item is shipped, rather than when it is actually sold.

The latest data, however, supports retailers’ complaints.  Read the rest of the article here

Listen, Chinese story is fairly easy to understand. Most of Chinese economic growth over the last decade came from massive infrastructure and real estate misallocation.  I say misallocation because there are literally empty cities in China.  If you haven’t already please watch this excellent report by 60 Minutes Here.

Now it is too late. China is left with huge misallocation that cannot just be dismissed. They must collapse. As the US Market slows down and shifts into recessionary environment over the next few years, as European Union continues to drag its feet in its own dysfunctional economic disaster,  I would expect Chinese export based economy to slow down significantly.

The most important question here, is what happens to the Chinese government when property prices finally collapse in China and Chinese families lose all of their multi-generational savings (something that every Chinese believes is impossible).  Of course, as financial professionals we must always look at the other side of the trade when 99% believes otherwise.

I believe we are in for some fireworks in China and fairly soon.  Within the next 5 years.  In fact, I believe we are in for a revolution in China as the government losses control.  One thing is for certain, it will be exciting to watch. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!! 

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The Secret Behind Upcoming European Union Breakup

Map-of-Europe

Bloomberg writes: German Jobless Unexpectedly Rises Even as Economy Grows

German unemployment unexpectedly increased in August for the first time in three months even as Europe’s largest economy expands.

The number of people out of work increased by a seasonally adjusted 7,000 to 2.95 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted a decline by 5,000, according to the median of 25 estimates in a Bloomberg News survey. The adjusted jobless rate stayed at 6.8 percent, near a two-decade low.

The economy in Germany, which faces elections next month, is forecast to slow after growth was bolstered last quarter by a rebound from a colder-than-usual winter that curbed output. While the euro area, the nation’s largest export market, has emerged from its longest-ever recession, some companies are still cutting jobs as countries in the periphery of the region struggle to recover.

“If data that signal the economy will gather pace in the second half of the year are to be believed, there’s a good possibility that employment will increase and unemployment will drop next year,” said Jens Kramer, an economist at NordLB in Hanover. “In the euro area, there’s at least hope that the worst is behind us.”

I think the best way to look at Europe at this point in time in from Macro Economic perspective. 

Obviously Germany is by far the strongest economy in the region and the only reason European Union hasn’t collapsed yet. The rest of the countries there are in a big time mess. 

I do not believe the worst is yet over for Europe. Not by a long shot. The only reason you are seeing an improvement and better data coming out of Germany is the same reason you see it in the US. Massive amounts of liquidity in the system. 

What is quite shocking is how weak the recovery has been in the European Union region even though record amounts of capital were deployed to sustain it.

What will happen next is quite simple. 

As interest rates continue to increase on the global scale, as the US Stock market begins to go down, as emerging markets continue their decline….there won’t be any reason for European Union to recover. As a matter of fact, quite the opposite. As all stimulus disappears, expect most of the European Union to fall back into a depression environment.  

An eventual break up of the European Union is not out of the question. As a matter of fact, I would be surprised if it doesn’t happen over the next 5 years. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!!

 

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The Most Important Financial Story No One Is Talking About

10 Year Note Chart

 

The chart above doesn’t look like much, but it is hugely important. It is the chart for a 10 Year Treasury Note and I cannot stress enough just how important it is. There are 3 things here. 

1. My timing work shows that what you are looking at is a multi-generational bottom in interest rates. It is unlikely that we see interest rates this low over the next 50-100 years. Stock market and interest rate history teaches us that much. 

2. While it doesn’t look like much, this benchmark interest rate moved from 1.43% in July of 2012 to about 2.80% today. That is a 100% increase in interest rates in just 12 months. That is a massive move by any measure and the largest of its kind in nearly 3 decades.    

3. The interest rates are just now starting their climb upwards. The trend has shifted and will continue upward for at least a few more decades. It will not be a straight line move and it will not be fast, but do anticipate a gradual increase from this point on. My timing work shows that these rates should accelerate to the upside after 2016 due to upcoming inflation. 

What does it all mean? In simple terms, this will have a huge negative impact on the overall US and Global economy, it will destroy the US housing bubble once and for all, it will suck down emerging markets (which is already happening). 

Why? Because the all of the above mentioned markets rely purely on extremely cheap finance and high liquidity. Once you take that away, the markets and the overall economy will start going down fast.

What should you do? This is what I would do as of today. 

  • Start liquidating your stock market portfolio. You can start buying back at much cheaper prices at 2016 bottom.
  • Lock in any loans you have (mortgage, business, personal) at current rates. 
  • Sell all of your real estate holdings if it makes financial sense and satisfies all of your lifestyle choices. Real estate will get completely crushed over the next 10 years.
  • Accumulate cash and keep it safe in short term treasury(1-6 month maturity). Keep rolling it over as interest rates increase.  When the next bottom in the stock market shows up (in 2016)….Go All In. 

If you can, please share our blog with your friends as we try to get traction. Gratitude!!!

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Did Hell Just Freeze Over? CNBC is Predicting a Stock Market Crash…

CNBC Writes: Prepare for the crash no one is predicting

Stock-Market-Drop

Stock market declines, especially the violent kind we refer to as “crashes,” are pretty hard to predict.

True, for every crash one or two visionaries emerge who called the market decline with unusual accuracy. In time, we generally conclude that these visionaries were more lucky than prescient, because there are no records of prognosticators who predict market crashes more than once.

But this time may be different.

The Federal Reserve has been propping up the stock market through its quantitative easing program that forced interest rates to all-time lows and drove investors out of bonds and into stocks.

But those days may be coming to an end.

Read the rest of the article here.

WOW, really CNBC, I am not sure what to think here. I thought that CNBC were perpetual bulls. One thing is for certain. If CNBC is predicting a crash, there won’t be one.

Here is the bottom line and what my mathematical/timing work is showing. There shouldn’t be a crash here. As a matter of fact, the next few years a quite boring.  The market will decline to the tune of 20-40% over the next two years, but it shouldn’t be anything drastic like a crash. As a matter of fact, the market is a little bit oversold here and I do anticipate a rebound.

See, who said I was always a bear?  

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Did the US Recession Already Start?

Well, actually and technically speaking, I believe that the US Economy never left the recession even though the stock market has appreciated well over 100% since the March of 2009 bottom.  Most of the gains where driven by technical reasons as well as massive infusion of capital into the system by the FED. Basically, everything had to appreciate in value.

Please watch this Lance Roberts, Charles Hugh Smith and Gordon T Long video sharing their research on the  question above through the use of 52 slides in this fast moving 43 minute video. I couldn’t agree more and it will soon become evident as the market begins its decline. 

 

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BitCoin. Crazy or Smart?

Bloomberg Writes: Bitcoin Spawns China Virtual IPOs as U.S. Scrutiny Grows

bitcoin_euro

Bitcoin craze is reaching new heighs in China.

Sun Minjie is a 28-year-old Internet worker who lives in Beijing. Eager to profit from growing demand for the digital currency, Sun has invested more than $3,000 in a company called 796 Xchange Ltd., an online exchange for trading stocks and other financial instruments related to Bitcoin, where initial public offerings are also being held.

He’s part of a small but growing group of investors in China who have put the country into contention with the U.S. as the biggest downloader of the virtual money that’s being used to buy a growing range of goods and services online. While intensified scrutiny by U.S. regulators casts doubt on the currency’s future there, China’s Bitcoin industry is expanding.

“What’s worrisome is that a lot of people could be just treating it as a speculative investment,” said Peter Pak, head of trading of BOCI Securities Ltd. in Hong Kong. “In China, the stock market, property and bond market are all not so good, so people get really excited when they hear of a new investment that generates high returns.”

Sun’s outlay of about 28 Bitcoins — or $3,108 — for more than 400 shares in 796 Xchange has returned about 46 percent since the stock’s Aug. 1 debut on the company’s own website. The benchmark Shanghai Composite Index (SHCOMP) has only gained about 2 percent during the same period.

Expensive to Crack’

Bitcoin is similar to other currencies — say, the Mexican peso — except it’s not controlled by any government and the total number is capped at about 21 million coins. Computer users can “mine” them by solving mathematical puzzles — uncovering the hidden series of letters and numbers that matches up with security keys specified by the computer programmers who invented Bitcoin in 2009. As more are mined, the puzzles get harder, and therefore more expensive to crack.

Sun turned to shares of Bitcoin companies after initially trying to mine the currency crunching algorithms on souped-up PCs at his office and home. He gave up after a month, concluding that his computers weren’t up to the task.

“Simple desktops can no longer dig them up,” he said.

Read the rest of the article here.

So, is Bitcoin a legitimate currency, a speculative investment or the future. This is a complex matter to discuss as there could be an infinite number of arguments made for or against it. However, here are some basic points to understand…. 

1. Understand that Bitcoin is a pure speculation at this stage. There is nothing to back it up and there is nothing to assign any sort of fundamental value to it.   As such, speculate away, but know that while it can appreciate significantly it can also go to zero in no time.

2. The US Government can crush it at will and at any time. Yes, I know it cannot be controlled by the government, it is independent and out there on the net. However, don’t be a fool.  As NSA just showed, the US Government basically controls the Internet and as such if it really wants to, it can destroy Bitcoin in hours through various means.

3. There is very little volume and the total value as a currency is very low. While it can be an advantage when the currency is going up, good luck trying to get out of it while it is heading down.  Plus, the fact that people in China see it as an investment vehicle now is a huge negative red flag.

Basically, there is no fundamental value to invest in Bitcoin at this stage. While it can appreciate significantly, know that all gains would be out of pure speculation.  There are no fundamentals to back it up.  On the flip side it can go to zero either because of the speculation or if the US Government decides (for whatever reason) to pull the plug on it.  I say it is too much risk if you value your money.