Tag: economic analysis

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The Secret Behind What Drives The Stock Market

InvestWithAlex Wisdom 17

Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “The economy is doing very well right now and the fundamentals are good. What would be the catalyst for the bear market you talk about? ” – Peter. 

    • The secret behind what drives the stock market. 
    • Why most people get it wrong when it comes to forecasting.  
    • The natural cycles behind all economic and market developments. 
    • How this one little thing can double your portfolio performance virtually overnight. 

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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NASA Announces Plans To Send The US Economy To The Moon

economic_forecasting

Daily Ticker Writes: The economy is only going to get stronger

Zandi has a bullish outlook on the U.S. economy: he’s forecasting 3% GDP growth this year and 4% growth in 2015.

“The U.S. economy is set to experience much stronger growth as the middle of the decade approaches,” he writes in his latest macro outlook. “Businesses are highly profitable and very competitive, households have reduced debt and are saving more, and the banking system is well-capitalized and liquid.”

Zandi says better economic growth will also lead to more jobs. He estimates that 3 million new workers will be hired in 2015, up from 2.25 million in 2013 and 2012. That would mean the economy returns to full employment (a federal jobless rate of 5.5% to 6%) by 2016.

“The job market is headed in right direction,” Zandi says. “Broadly speaking the economy is performing steadily better.”

Read The Rest Of The Article Here

I am not sure who this Zandi, but one thing is for sure. If you are to believe his forecast you will be in for a beating. By the market that is.

The article above is garbage. Again, I am dumb founded that most economist and market practitioners don’t understand our current economic environment. Perhaps I was dropped on my head as a child a few too many times and see things differently. Thanks Mom!!!

Anyhow, the economic growth we see today is not real. It is driven by massive infusion of credit and speculation. That’s it. Further, there is no point to perpetuate any growth or forecast into the future. Since it is all “artificial”, it will vanish into thin air as soon as the speculative bubble driven by credit pops.

People always ask me what the catalyst will be for such an event. They are missing the point.  Typically there is no catalyst. Let me give you an example. Was there a catalyst for 2007-09 decline? NO.  The market simply started to go down in October of 2007, slowly at first, then accelerating later.  It was the stock market that drove the economy into the ground and not the other way around.  

Point being, for the most part there is no external catalyst. The market itself is the catalyst. It is the market that drives the fundamentals. Most people miss this very important point. As such, the market will go down when its ready to go down.

Based on my mathematical work that time is already upon us.   

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What You Ought To Know About The Upcoming Economic Storm

CNN Money Writes:  Financial risks recede in 2014

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Eurasia, which advises businesses on political and economic concerns, released its annual list of potential risks to global economic stability in 2014 — and impending financial doom is not among them.

“That’s over,” the Eurasia analysts wrote in the report. “In 2014, big-picture economics are stable if not yet comforting.”

Europe has emerged from recession and Japan’s economy is shaking off decades of stagnation. The recovery in the United States is expected to accelerate this year even as the Federal Reserve gradually reduces its stimulus policies. China’s new government is implementing reforms to make the world’s second-largest economy more stable.

The relatively calm outlook comes after a period of heightened financial risks. Investors and economists have been on alert for another meltdown since 2008. But none of the dire predictions came to pass. The euro is still around. China has not crash landed. And the U.S. didn’t fall off the fiscal cliff.

Read The Rest Of The Article Here

I am sure you have heard of the “Calm Before The Storm”. The report above pertains to exactly that.  Just because the “storm” hasn’t arrived yet, doesn’t mean that it never will. Let’s take a look at the reality.

Has Europe emerged from a recession?

Is there any evidence to support this statement? Of course not. As far as I am concerned only German economy is doing good. The rest of EU members are not doing so well. While the Socialist Party in France is working overtime trying to destroy their economy, countries like Spain, Italy and Greece are going through downright depression with 20%+ unemployment and an insolvent banking systems. Maybe the EU emerged from a recession right into a depression.

Japan’s economy is shaking off decades of stagnation?

It might seem that way at the initial glace, yet the reality is different. The perceived improvement in Japan has nothing to do with real economy or any sort or real economic growth and everything to do with currency debasement and massive credit/stimulus expansion.  As always, short term gains will eventually turn into a long term pain.

As for the US and China, all of the fundamental issues remain there. Just because the calendar year turned 2014 doesn’t mean that all structural issues got better or vanished into thin air. If anything, things are getting worst. The only reason things haven’t blown up, just yet, is because both Governments pumped a huge amount of liquidity into the system to paper over issues.  Eventually, this will force the markets to correct themselves with greater intensity in the future.  

Bottom line is, the report above is garbage. Don’t believe it for a second.  This is the calm before what might be “The Perfect Storm”. 

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 What You Ought To Know About The Upcoming Economic Storm 

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What You Ought To Know About Machines Taking Your Job

Bloomberg Writes: A Computer Might Come After Your Job Next

terminator-investwithalex
I am taking your job

 

First it won at “Jeopardy.” Now it might threaten millions of low-wage jobs. At least, that seems to be the implication of a Bloomberg News article on International Business Machines Corp.’s Watson supercomputer.

Developers are now figuring out how to use Watson’s processing power to replicate the experience of working with an “experienced in-store salesperson” when shopping for clothes. The software would combine databases provided by retailers with customer preferences for style and fit to help people find what they’re looking for.

If it works, this technology would be a boon for everyone who prefers to buy things from the comfort of home. Right now, only a small percentage of shopping occurs online. Shipping costs could be one reason. Another is that many people are hesitant to buy things over the Internet when they can’t try them out first, especially clothing. That reticence could be overcome by these new technologies. If a computer knew your body shape and knew the dimensions of each piece of clothing, it could show you exactly how items would fit.

Read The Rest Of The Article Here

As we move deeper into the 21st century, technological changes continue to accelerate. One thing that fascinates me as an investor is what type of an impact machines (computers and robotics) will have on the future of the labor force and by default, the overall economy.

I believe both robotics and enhanced computer systems  are already having a significant impact on the overall labor force. It is difficult to measure, but in many sectors of the economy improved productivity means fewer jobs. While I don’t believe it is having an impact on the overall rate of employment just yet,  within a few decades things might be drastically different. Imagine a world where robotics take most (if not all) lower skill manual or blue color type of jobs at the cost of $0.5-2 an hour.  What happens when enhanced computer system get so good that they start to squeeze out white color work force at the fraction of the cost. To be honest with you, I have no idea.

Many will argue that this is a normal economic shift that will create more and better jobs in other sectors of the economy. Perhaps it will, but I don’t see how. This change is very different from the industrial and the low level technology revolution that preceded it.  Given  expected massive worldwide population growth I don’t see where the future high paying jobs will come from.

Does that mean a lower overall standard of living?  Once again, not necessarily. It might mean a better standard of living for future generations. One thing is for sure. This is a trend worth watching as it will impact our lives over the next few decades more than we can imagine. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

What You Ought To Know About Machines Taking Your Job 

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How The US Government Guarantees Full Employment

BusinessWeek Writes: The U.S. Job Market Won’t Be Normal Until 2017, Says Goldman

 labor market inveswithalex

Two economists at the Federal Reserve Bank of Kansas City concluded recently that at the current rate of progress, the U.S. labor market won’t get back to normal until the summer of 2015. That’s bad enough. But Goldman Sachs (GS) economists, examining the same data, conclude in a report today that normal might not arrive until the beginning of 2017.

Either way it’s pretty depressing, considering that the recession began in December 2007. The financial markets are betting that the Federal Reserve’s rate-setting Federal Open Market Committee will start tapering purchases of long-term bonds sometime in early 2014. But the FOMC has said that the purchases will continue“until the outlook for the labor market has improved substantially in a context of price stability.” If the FOMC sticks to that commitment, bond purchases could continue longer than many people expect.

I really have no idea how they come up with these numbers. Maybe they have a supercomputer in their office churning out billions of calculations per second or maybe they just throw darts at the calendar. I think the latter is more plausible.

The problem with their analysis is they are discounting continual economic growth over the next 5 years. Well, let me ask you something. What if instead of economic growth our financial markets and our overall economy go through another severe contraction as I constantly argue? Are we going to normalize by 2017 or will the chart above take another dive? I think you know the answer to that.

The labor market in the US is facing strong headwinds. I think the situation we have today is the new norm and even that will continue to deteriorate.  With our economy, financial markets, Obama care, outsourcing, robotics and higher productivity rates all putting negative pressures on full time employment, the labor market picture going forward is not pretty. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!  

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Warning: The Machines Are Coming After Your Job

Bloomberg Writes: A Computer Might Come After Your Job Next

terminator-investwithalex
I am taking your job

 

First it won at “Jeopardy.” Now it might threaten millions of low-wage jobs. At least, that seems to be the implication of a Bloomberg News article on International Business Machines Corp.’s Watson supercomputer.

Developers are now figuring out how to use Watson’s processing power to replicate the experience of working with an “experienced in-store salesperson” when shopping for clothes. The software would combine databases provided by retailers with customer preferences for style and fit to help people find what they’re looking for.

If it works, this technology would be a boon for everyone who prefers to buy things from the comfort of home. Right now, only a small percentage of shopping occurs online. Shipping costs could be one reason. Another is that many people are hesitant to buy things over the Internet when they can’t try them out first, especially clothing. That reticence could be overcome by these new technologies. If a computer knew your body shape and knew the dimensions of each piece of clothing, it could show you exactly how items would fit.

Read The Rest Of The Article Here

As we move deeper into the 21st century, technological changes continue to accelerate. One thing that fascinates me as an investor is what type of an impact machines (computers and robotics) will have on the future of the labor force and by default, the overall economy.

I believe both robotics and enhanced computer systems  are already having a significant impact on the overall labor force. It is difficult to measure, but in many sectors of the economy improved productive means fewer jobs. While I don’t believe it is having an impact on the overall rate of employment just yet,  within a few decades things might be drastically different. Imagine a world where robotics take most (if not all) lower skill manual or blue color type of jobs at the cost of $0.5-2 an hour.  What happens when enhanced computer system get so good that they start to squeeze out white color work force at the fraction of the cost. To be honest with you, I have no idea.

Many will argue that this is a normal economic shift that will create more and better jobs in other sectors of the economy. Perhaps it will, but I don’t see how. This change is very different from the industrial and the low level technology revolution that preceded it.  Given  expected massive worldwide population growth I don’t see where the future high paying jobs will come from.

Does that mean a lower overall standard of living?  Once again, not necessarily. It might mean a better standard of living for future generations. One thing is for sure. This is a trend worth watching as it will impact our lives over the next few decades more than we can imagine. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

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The Secret Behind Macroeconomics & Value Investing (Part 3)

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Step #2.  Use Common Sense

This is by far the best tool you have in your tool set.   As the saying goes,  “If it sounds too good to be true, it probably is”. Meaning and as you have probably noticed, most market pundits (whether it’s the economists, talking heads or the money managers) are perpetually bullish. No matter what the situation  is they are always talking about how great things are and how all stocks will be going up over the next 12 months.

That is an excellent point of view to have if you are working in the self-help inspirational type of an industry, but a dangerous one to have if you are working with stocks. If you haven’t noticed, stocks do go down at times. Sometimes they collapse (aka 2007-2009). That is why having your own, well researched common sense opinion is so valuable.

Case and point, today’s economic environment presents us with a perfect  example. (Written Nov 7th, 2013)

Majority Opinion:  Today’s stock market closed at an all time how with the Dow at 15,746. If you listen to the main stream media, the economists, read the newspapers and magazines, listen to market pundits and talking heads you would undoubtedly walk away with an overwhelmingly BULLISH opinion. According to most of them the US stock market and the US Economy are in the early stages of a major bull run and economic recovery. If fact, you would probably be so excited that you would invest  every single penny that you have.

Common Sense Opinion:  Yet, if you would listen to my or form your own opinion you would see an opposite point of view.  You would understand that today’s economic recovery is nothing more than a mirage driven by a massive infusion of credit into the system through monthly QE of $85 Billion, low interest rates and massive amount of speculation. After digging deeper you would see that all asset classes (stocks, bonds, real estate and even art) are in a massive speculative bubble that is unsustainable.

Digging even deeper and looking at the technical picture you would probably think twice about going long here. Instead of looking at the market and saying it’s at an all time high with many years of bull left on the table, you would probably look at the market and say, “Hmmm, this market is way overbought and given the current economic environment and the fact that everyone is so bullish I think the market is setup for a large bear move”. Instead of going long you would consider either getting out of the market all together or going short.  Your research and common sense understanding of the economic situation would clearly support that decision.

As you can see the difference between Majority Opinion and a Common Sense Opinion is vast. One would have you buying every stock under the sun while the other makes you want to run for the hills. Which one is right?  Well, that is for you to decide, but I would always pick a well researched Common Sense Opinion from a trusted source.  More often than not it pays to do so.  

In conclusion, following the two easy steps above will put you well ahead of the competition within a short period of time.  It will put you on the fast track of fully understanding the macroeconomic picture and what is going on in our financial markets.  More importantly, you will become self proficient and 99% more accurate than most of the economist and talking heads out there. You will be able to make much better investment decisions and avoid unnecessary losses most often caused by following the crowd.   

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!   

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Americans Hate Each Other?

The Exchange Writes: Americans Are Losing Faith in … Themselves

negative mood investwithalex

Who are “the American people?”

If you ask politicians (on the record), they’ll tell you the American people are the greatest font of collective wisdom in the history of wisdom. Yet even Americans have growing doubts about their own sensibilities.

A recent Gallup poll found that Americans’ trust in “the American people” has fallen to a record low. Just 61% of respondents said they have a great deal or a fair amount of trust and confidence in their fellow Americans when it comes to making judgments about important issues facing the country. That number peaked at 86% in 1976. In 2005 it was 78%. Even during the 2007 – 2009 recession, the number stayed in the 70s. It began to plunge in 2010.

So Americans seem to be saying to each other, “You’re nuts and I’m not.”

Everybody, of course, has declining confidence in politicians. Confidence in Congress is at a pitiful 10%, the lowest level in the 40 years Gallup has been asking the question. Confidence in the presidency has dropped from a middling 51% in 2009, when Obama took office, to 36% today (though it was slightly lower from 2006 to 2008).

People clearly feel something is wrong in America, and without knowing exactly what it is, they blame government, business, the media , the education system, the wealthy and even organized religion.

Read The Rest Of The Article Here

I highly recommend anyone involved in the stock market to read the article above. While seemingly unrelated, the premise in this article has huge repercussions on the financial markets and/or the overall economy.

It could be successfully argued that financial markets and the overall economy are driven not by fundamentals, but by social mood. Elliot Wave Investment Approach has dedicated decades to that point of view and has legitimate data to prove it.  Whether or not you agree with such a premise, I can attest that in many cases MOOD SWINGS are the primary driver (not the secondary) where the fundamentals simply follow.

For example, you see such a situation in the stock market at March 2009 bottom. Even though the fundamentals were falling apart and will not recover for at least a year, the mood changed and stocks started to go up. In regards to the article, this is an important indicator to watch.

Further, I see a Nation clearly divided along political lines with each side viewing the other as “UN American.” Clearly that is not good  for the future of the country. Basically, this is an important trend to watch. If the indicators above continue to go down, it spells trouble for both the US economy and it’s financial markets. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

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American People Are Sick Of Economic BS

Bloomberg Writes: Americans in Poll Doubt Economy Rebound

american economic recovery investwithalex

Americans are losing faith in the nation’s economic recovery even as forecasters expect growth to accelerate, according to a Bloomberg National Poll.

Fewer people anticipate improvement in the economy’s strength over the next year than in the last survey in June, with 27 percent saying the expansion will be more robust, down from 39 percent who expected improvement three months earlier.

Forty-four percent of poll respondents say they expect the economy, which has expanded for nine consecutive quarters, to remain about the same, while 28 percent see it weakening.

 “We’re still in a recession; I don’t know why they say it’s over,” says Chris Sams, 28, a disabled Navy veteran from Daingerfield, Texas. “It may be over in Washington, D.C., where the per capita income is higher than anywhere else, but down here the minimum wage is the highest wage.”

Read The Rest Of The Article

President Obama and Mr. Bernanke, I have news for you. American people are no longer buying your bullshit. 

You can attempt to twist economic recovery numbers anyway you wish, but since the reality for most Americans is so much different from your reported number….. it will not work.  Only the richest 5% of Americans benefited from your one sided actions. Only those who had the direct access to your cheap capital reaped the rewards. The rest of Americans see their economic situation erode. The pole above clearly indicates that.

Now, a contrarian in me might even argue that this kind of a view from the majority of the population is great news for both the stock market and the economy. However, such an opinion would only be valid if we were at the bear market bottom……not sitting at an all time high.  I believe this is the case of American people finally waking up and saying “Wait a second, even though there are all these great economic news, my situation is not improving, as a matter of fact, it is declining”.

As such realization sets in across the nation and confidence erodes further, financial markets should feel the impact. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

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Federal Reserve Pledges More Stupidity

The Washington Post Writes: Federal Reserve considers explicit pledge: Low rates if inflation stays down

bernanke meme

The Federal Reserve is leaning toward an explicit commitment to keep interest rates at rock-bottom levels, as long as inflation remains low.

The pledge would be an attempt to strengthen assurance that the central bank will not tap the brakes on the recovery until it is certain that the momentum can be sustained. The Fed already has vowed not to raise rates — a move that would slow economic growth — at least until the unemployment rate falls to 6.5 percent or inflation rises above 2.5 percent.

Read The Rest Of The Article Here

There are a couple of things in this article that drive me up the wall.

  • We are not in an inflationary environment,  we are in a deflationary environment. The only reason you we are seeing inflation in certain parts of the economy is due to the FED printing a massive amounts of money ($85 Billion/monthly) and dumping it into the financial system by keeping interest rates artificially low. If that wasn’t happening we would already see clear signs of deflation.
  • The FED is punishing savers and true economic growth by keeping interest rates too low for far too long. All while developing significant economic imbalances that will have to be deflated at a later date.  The situation is made worse by creating an environment where only people with access to cheap financing benefit. At the same time the US poverty rate is at all time high or close to 50 Million people. 
  • The article assumes that the FED is in complete control of interest rates. At least for now everyone believes that. Yet, nothing could be further from the truth. While the FED can influence the rates, it cannot control it. The market controls the rates. 

This in return presents a trading opportunity for those who think otherwise. Eventually the interest rates will move independent of the FED and destroy the whole scheme in the process.

When will it happen?

Actually, it might be already happening as interest rates already up 100% over the last 12 months. Is the FED finally losing control? I hope so. In the long run it would be great for the US Economy. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!