Opinion: Investors avoiding both stocks and bonds looks bearish for market – MarketWatch 11-05-15

Salient to Investors:

Conrad de Aenlle at Conrad de Aenlle’s Funds for Thought writes:

Louise Yamada at Louise Yamada Technical Research Advisors says ICI’s report of net withdrawals from both stock and bond mutual funds in July and August is a pattern not seen since the fall of 2008.

Todd Rosenbluth at S&P Capital IQ says mutual fund withdrawals around August were soaked up by ETFs: mom-and-pop investors accounted for the majority of mutual fund flows and institutions were behind the ETF flows – The trend away from mutual funds and toward ETFs represents an ongoing shift to passive products as people do not want to pay up to lose money.

Morningstar found 5 prior months over the last decade when investors had net withdrawals from stock mutual funds and ETFs combined, and from bond funds: 2 coincided with minor blips in long bull markets, and 3 occurred just before or in the middle of corrections or bear markets.

Read the full article at http://www.marketwatch.com/story/investors-avoiding-both-stocks-and-bonds-looks-bearish-for-market-2015-11-05

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The real impact of a decade of low interest rates – MarketWatch 11-05-15

Salient to Investors:

L.A. Little at Technical Analysis Today writes:

  • We have created mountains of debt to solve our existing debt problems.
  • Debt creation causes currencies to devalue and prices of most financial assets to rise for at least a while until the next country does the same.
  • Bonds are slumping just at the prospect of the Fed raising rates for the first time in a decade in December, and most likely only by 0.25%. A quarter point rise matters because almost all the trades are highly leveraged, and it is unknown how much the market will price in further rate increases.
  • While dollar strength deepens deflation, its more serious effect is on those countries, fund managers, et al that have used the cheaper dollar to go on a debt-buying binge. IIF estimates this debt doubled from 2008 to 2014 to $6.8 trillion, while non-financial corporate bonds in emerging markets tripled since 2008 to $2.6 trillion, to over 80% of GDP.

Read the full article at http://www.marketwatch.com/story/the-real-impact-of-a-decade-of-low-interest-rates-2015-11-05?mod=MW_story_recommended_default&Link=obnetwork

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Fareed Zakaria GPS – CNN 11-01-15

Salient to Investors:

Fareed Zakaria said:

  • Most transitions to democracy bring bitter struggles, viz South Korea, Taiwan, Chile.
  • Tunisia is almost entirely Sunni so has no sectarian and tribal differences and has had wise political leadership.
  • The end of China’s one-child policy was an admission that its greatest obstacle to long-term economic growth was its demographics.
  • The global population is twice that of 1968.
  • The Pew Research Center reports 98% of the American Association for the Advancement of Science scientists believe in evolution theory versus 65% of Americans. Ben Carson represents the height of arrogance to believe that humans can understand God’s mystery.
  • The Defense Department says that in just 20 months China reclaimed 17 times more land than Vietnam, Malaysia, Brunei, the Philippines and Taiwan have claimed over the past 40 years combined.

Richard Haass at the Council on Foreign Relations said:

  • 50 US ‘so-ops’ in Syria is not the beginning of restoring Syria as a country but an effort to stabilize it to allow diplomacy to succeed. Success in Syria would be 4-6 enclaves. The US goal is not to restore Iraq or a functioning national Syria but to keep innocent people alive and the terrorists from gaining territory.
  • A Middle East where Sunnis are dominated by ISIS would not be a success for Iran, who, along with Russia, understand that Bashar al-Assad has to go eventually.

Ruchir Sharma said:

  • The UN predicts over 2 billion more people in the next 35 years, but the rich world, especially Europe, faces a population implosion. As countries develop, their birthrates plunge: work population growth that averaged nearly 2% per annum for decades is now down to 1%. Women average less than 2 children in 83 countries that account for nearly half of the global population. The fertility rate in India is down to below 3 from over 6 in 1960.
  • Countries will thrive economically only if they become immigrant-friendly or increase their fertility rate.

Ann Selzer at Selzer & Co. said

  • US political debates do matter.
  • A candidate can conquer Iowa but not a California or a Texas in a meaningful way.
  • I never make predictions because they always include a wish.

Richard Dawkins at Oxford said:

  • Evolution is a fact, as much of a fact as the Earth orbiting the Sun.  The most powerful evidence for evolution is molecular genetics.
  • That all the Republican candidates except one say they do not believe in evolution is a disgrace. Evolution is the bedrock of biology, which is the bedrock of medicine, so for Ben Carson not to understand the fundamental theory of his own subject is a terrible indictment.
  • It is arrogant to say we know what God does.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1511/01/fzgps.01.html

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Here comes your biggest melt-up for stocks since 1998 – MarketWatch 10-30-15

Salient to Investors:

Nour Al-Hammoury at ADS Securities expects stocks to drop in November on the fears of a rate hike in December until the Fed changes its mind again.

Steve Sjuggerud at the Daily Wealth said stocks will soar over the next 18 months because we reached an extreme of fear in August: a la late 1998.

Bespoke Investment Group says the SPX is more than 2 standard deviations above its 50-day moving average, its most overbought level of 2015.

Read the full article at http://www.marketwatch.com/story/here-comes-your-biggest-melt-up-for-stocks-since-1998-2015-10-30-9103015?mod=MW_story_recommended_default&Link=obnetwork

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Powdering The GDP Pig – There Was No Escape Velocity Inside – David Stockman’s Contra Corner 10-30-15

Salient to Investors:

David Stockman writes:

The global economy is in deflation and the US economy is stalling and within months will be in recession and the market in panic. The Fed cannot prevent the US economy from sliding into the global slump. Since 2000, the Fed has twice before pushed on a string with the economy while inflating the Wall Street casino, with bad results.

The Commerce Department’s GDP deflator showing 0.9% inflation during the last 12 months understates true inflation.

Nominal GDP is the single most important macro variable in a debt-driven economy. Nominal GDP growth is down to 2.9% and headed towards zero – it has been decelerating since Q2 2012 – which last occurred in the 1930s.  During the 1990s recovery, nominal GDP grew at a 5.6% annual rate, during the Greenspan housing/credit boom after 2001 it grew at 5.3%, and since the pre-crisis peak it has gown at only 3.0%, even less since June 2009. Despite this, the Federal budget assumes 5.2% per year growth for the next 10 years.

If the GDP growth trend continues, federal tax collections will drop far below current projections and cause budget deficits and the national debt to soar.

Q3 2015 business plant and equipment spending rose just 0.6% from a year ago, while Q3 goods exports are down 7.8% from a year ago, due to the ending of China’s infrastructure building spree, and Q3 services exports have slowed to a 3.9% annual rate. Global deflation inherently means a strong dollar so service exports will start falling soon.

Nominal Federal consumption and investment spending is down to near Q2 2009 levels, removing another prop under the post recession recovery.

Business sales are rolling over, while the inventory correction has just started – the inventory to sales ratio is at October 2008 highs.  Auto sales have peaked due to the exhaustion of subprime customers.

Read the full article at http://davidstockmanscontracorner.com/powdering-the-gdp-pig-there-was-no-escape-velocity-inside/

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Retail investors are the most bullish, and least bearish, in 8 months – MarketWatch 10-29-15

Salient to Investors:

AAII report 40.4% of individual investors expect the stock market to rise over the next 6 months, versus 34.8% a week ago, and the highest since February. 20.6% were bearish, the lowest since February.

Retail investor sentiment is often cited as a contrarian indicator.

Read the full article at http://www.marketwatch.com/story/retail-investors-are-the-most-bullish-and-least-bearish-in-8-months-2015-10-29

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The charts that show Wall Street may have shifted its view on bad news – MarketWatch 10-29-15

Salient to Investors:

For the past year, stocks have risen on reports that indicate economic slowdown, and have fallen on positive economic data.  But Jani Ziedins at CrackedMarket says the market is slowly moving back to normalcy; when markets rise on good news and fall on bad news.

Jobless claims are at 1970s lows, indicating the jobs market is healthy.

Read the full article at http://www.marketwatch.com/story/the-charts-that-show-wall-street-may-have-shifted-its-view-on-bad-news-2015-10-29

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Fareed Zakaria GPS – CNN 10-25-15

Salient to Investors:

Fareed Zakaria said:

  • When politicians have been in power for a decade, voters usually want a change no matter how popular the leader is. The hallmark of populism is anger. Left-wing populism is mostly about economics. Right-wing populism is mostly about culture. Both hate the big city elites who they believe run the world.
  • Populism gets attention but rarely wins. The real democratic populists of the late 19th and early 20th century were agrarian reformists, anti-immigration activists, advocates of prohibition and ardent believers in the moral superiority of farms and small towns – but always lost the elections. The Democratic Party when it has been successful has never been about populism.
  • Ben Bernanke was the single individual responsible for preventing the financial crisis of 2008 from turning into something much worse.
  • Brazil is the biggest country in the entire Southern hemisphere, with the 6th largest population and 8th largest economy in the world, with a government with the lowest ever approval ratings according to Reuters.

Philip Tetlock at the University of Pennsylvania said:

  • The average expert in fields like politics is no better at making predictions than anyone making a random guess.
  • Many organizations, governments, and news media never truly evaluate the accuracy of their predictions.
  • Predicting is a skill that can be honed, and can be acquired with practice by anyone with a fair level of intelligence.
  • The best forecasters tend to be open-minded, consider information from many different sources, embrace nuance, qualifying their assertions carefully, and work well with those that disagree, without being disagreeable.

Ben Bernanke said:

  • You cannot have a collapse of the financial system and the rest of the economy emerges unscathed.
  • The US economy is recovering strongly, though not benefiting everybody. Globalization, huge technical and institutional changes have worked against the worker with the high school degree and little experience with technological change – a very long term problem that monetary policy can do little about.
  • Yellen has to decide if there is enough domestic momentum to keep us growing despite the drags from abroad.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1510/25/fzgps.01.html

Wall Street’s Latest Bounce – Ostrich Economics At Work – David Stockman’s Contra Corner 10-20-15

Salient to Investors:

David Stockman writes:

The price of financial assets is now artificial and wildly inaccurate. $300 trillion of global finance cannot remain stable much longer.

Bulls believe the Fed is on hold until at least next March, while Wall Street is projecting S&P 500 earnings of $130 per share on an ex-items basis for 2016, and which will never happen. The S&P is overpriced at 21 times earnings, and at 30 times trailing earnings or more when honest GAAP earnings for Q3, 2015 come in at $95 per share or less, versus the peak $106 per share in Q3 2014. More than $5 trillion of current cash flow and new debt is now allocated to corporate stock buybacks, M&A deals and LBOs.

Alan Blinder and Mark Zandi admit QE has possible negative side-effects, but say that for the most part they have yet to materialize. All the while the global economy heads into a deflationary conflagration.

This mother of all bond market bubbles will bring down the entire financial system when it inexorably bursts: central banks have vast powers, but they cannot repeal the law of supply and demand. $19 trillion of central bank bond-buying during the last two decades has dominated debt pricing on the margin for most of this century. Last week’s 60 basis points for 2-yr treasury notes or 210 basis points for 10-yr money do not reflect a surfeit of private savings or business and household hoarding of cash but a giant surplus of credit.

Real net business investment is still 17% below its 2000 level. Junk debt has risen from $1.3 trillion at the 2007 peak to more than $2.5 trillion today driven by yield-starved money managers and homegamers.

Debt-crippled, junk-rated Dell is buying EMC for $67 billion, or 17 times free cash flow for 1% annual growth, funded almost entirely with junk debt and tracking stock on EMC’s major asset, a public company that pays it no dividends or other regular cash returns. In a PC industry which is disappearing at a rapid rate.

China is headed for massive economic and financial conflagration, which will spillover into the rest of the world because the entire emerging market economy was built on China’s runaway economy and investment bubble. China’s insane accumulation of foreign exchange reserves over two decades of massive and blatant currency pegging could not continue indefinitely which is why it has seen $850 billion capital outflow of the last 4 or 5 quarters and a $500 billion drop in FX reserves since late 2014. There is no way to manage a $28 trillion house of debt cards, which grew by 56 times in less than two decades, to a soft landing.

The bubble is bursting in socialist Brazil, in Australian mining, in Canadian real estate, in the North Dakota Bakken, and in the German export machine, as China and its EM suppliers are being forced into liquidating dollar and euro credit, and stop buying luxury cars and engineering machinery on borrowed money.

Read the full article at http://davidstockmanscontracorner.com/wall-streets-latest-bounce-ostrich-economics-at-work/

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Fareed Zakaria GPS – CNN 10-18-15

Salient to Investors:

Fareed Zakaria said:

  • In the late 70s and 80s, Russia invaded Afghanistan and intervened elsewhere amid praise that it was winning the Cold War. Like then, it remains a mistake to believe that activity is achievement, that every crisis can be solved by a major power. If Russia and Iran win in Syria they will inherit a sinking hotspot led by a minority regime.
  • A peak of 170,000 US soldiers in Iraq and nearly $2 trillion produced a humanitarian catastrophe in Iraq: 4 four million displaced civilians and 150,000+ dead. Libya is called a ‘battled-worn wasteland’, and Yemen’s civil war is tearing it apart. Be glad that Obama has chosen Eisenhower’s path to global power and not Putin’s.
  • Opportunities are more available to women in America because of the idea that anyone can succeed here.
  • The IMF predicts a 246% debt to GDP ratio for Japan in 2015, versus 105% for the US.

Anne-Marie Slaughter at New America said:

  • With 60%+ of women working, the American workplace no longer makes room for care giving.
  • Since the 1990s, only 20% of women are in senior management because they get shut out when they have kids and are the lead parent. While women’s roles have changed radically since the 1950s, men’s have not.

Andy Moravcsik at Princeton said:

  • Sweden and Denmark are better at giving parental leave for care giving than the US.
  • Opportunities are more available to women in America because of the belief that anyone can succeed here.
  • Americans believe that a man who becomes the lead parent has the same legitimate standing in society that a woman does. Men are trapped in a role where they have to work and not also be caregivers.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1510/18/fzgps.01.html