Harry S. Dent Jr.'s Blog, page 93

What Killed the Middle Class?

[image error]Our middle class has been shrinking substantially since the 1960s and ’70s. Today, their share of wealth is the lowest in the world, at a mere 19.6%!

But what exactly is to blame for the demise of the middle class? Could it be the outsourcing of manufacturing jobs to China and other Asian countries? Maybe the flood of illegal and legal immigrants into U.S. jobs? Or possibly the growing wealth of the top 1%, and the insatiable greed on Wall Street?

All are viable candidates to take the blame. But most other developed countries face the same competition from the emerging world, many have some degree of influx of lower-skill immigrants, and most are also seeing their rich get richer… yet they haven’t been losing nearly as much of their middle class.

So, what gives in the U.S.?

Extreme political polarization and income inequality is what gives! We’re the highest on both. Today real incomes of the middle class are 5% lower than they were in 1970 and 12.4% lower than in 2000, when they peaked!

When we take the affluent 10% out of the picture, we see that the bottom 90% average only $32,352 in income per year. That top 10% skew the overall average dramatically, so the $55,132 you hear about isn’t accurate.

In the meantime, the top 0.1% have seen their share of wealth go up four times since 1975! And, since 1970, the “super elite” 0.01% has seen their incomes grow a whopping 628%!

For a closer look at all of these numbers, check out our latest infographic, What Killed the Middle Class?

 

 

 

 

Harry

Follow me on Twitter @HarryDentjr

The post What Killed the Middle Class? appeared first on Economy and Markets.

2017 Outlook: A Volatile Year from All Angles

Where to now… after what 2016 dished out?

First, there was the surprise upset of the presidential election of dear old Donald.

Then came the surprise shift in sentiment about the election. Before, he was a wrecking ball. After, he’s suddenly Jesus walking on water. Never mind that he’s already pissed off China… twice! Or that many are worried about his overly cozy relationship with “Darth” Putin, as with his new Secretary of State, Rex Tillerson, who is also cozy with Putin.

And let’s not forget the markets that were already overvalued suddenly breaking up irrationally on promises that Trump can deliver sustainable growth rates of 3% to 4% again.

So, we’ll just grow our way out of this big fat bubble, shall we? Ha! That has never happened – not once in history – and there’s NO CHANCE this will be the first time… not given our aging populations, low productivity and unprecedented debt burdens!

But the markets will continue up after a near term slump until they start to realize that there is no easy way out of the bubble that Trump himself has declared.

Tax cuts won’t get companies to expand substantially any more than did free money that largely only led to stock buybacks and mergers and acquisitions – financial engineering – not real growth. Besides, infrastructure investments take forever to get drawn up, approved and shovel ready.

While the Trump rally seems to have legs, it’s not based on anything substantial or real, except perhaps some cuts in regulations. I think it’s not likely to make it into the summer of 2017. In fact, it’s just another sign of how much the stock market is in an irrational bubble!

The debt ceiling is on the cards to be raised this March. Do you think the Republicans will back just any tax cut or infrastructure bill without considering how fast that will get us from $20 to $22 trillion in debt – or by past trends and our estimates of $40 trillion by 2024? Yes, the federal debt has been doubling every 8 years.

That’s what I thought.

So, here’s my forecast for this very tricky, new year:

The big divergence: I think stocks will continue to rise after a pullback near term, while bond yields and the dollar also rise to counter that trend… until it breaks. But I think Trump could have as much as a 6-month grace period before reality sets in about his ability to get things passed and to achieve 4% growth rates.
Stocks rise: I see stocks going as high as 22,000 on the Dow and 2,500 on the S&P 500 by mid-July or so… maybe even a bit later. After that, I expect the Russell 2000 (small caps) will lead us into the trenches. A growing divergence between large and small caps will be an important sign of such a top. Small caps have grown the most irrationally since the Trump win after lagging and could disappoint increasingly in the continued rally from here.
10-Year Treasurys: 10-Year Treasurys could rise to near 3.0% before reversing down on falling inflation and slowing economic trends again. Once they’ve started to fall, they could go as low as 1.0%, or lower, and then stay near there for years, creating the fixed income opportunity of the decade for buying 30-year Treasurys and 20-year AAA corporate bonds. (I detailed this in the January issue of Boom & Bust, so be sure to read it!)
The dollar strengthens: Look for the greenback to rise to 120, likely by late 2017, while the euro falls to 0.85-0.88. In fact, the euro’s very existence could be threatened by default scares in Italy and the failure of Deutsche Bank.
Gold falls: This is the year we’ll see gold sink to $650-$750 per ounce, likely by late 2017 or shortly there after. I still see it dropping to as low as $400 (if not lower) before this down 30-year commodity cycle is over between early 2020 and early 2023.
Oil rises a bit more and then crashes again: Oil will likely rise to as high as $60 at first, and then fall back to $26 or lower by late 2017. Ultimately, I expect we’ll see oil prices between $8 and $18 a barrel by early 2020.
Trump trumped:  Lastly, I reckon Trump will quickly discover that it’s not so easy to get most of his agenda passed. Even his Republican party is split on some issues. In fact, I’d go so far as to say he may not last the year… for many reasons.

All of which makes for a volatile, highly charged year. The most likely scenario: another 10%+ rally into the summer, then a dramatic first crash of up to 40% into the fall. I’ve warned many times that the first bubble crash can be as much as 40–45% in the first 2.5–3 months in the most bubbly sectors.

We’re deep into this economic winter season. My hierarchy of cycles remain in negative territory for the next three years with aftershocks for another three to follow. The threat of civil war looms over the Divided States of America, especially in late 2017 forward. Another challenge for the economy and “the Donald.”

Through it all, my team and I will be working with you to find the opportunities and make the most of them.

Happy New Year!

Harry

 

 

 

 

Follow me on Twitter @harrydentjr

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The Year of the Unexpected

What a year, man!

Between Brexit and Trump, I think the backward-looking theme of 2016 should be: “Expect the unexpected.”

It was mildly amusing to watch the media be so sure this, or that, “couldn’t possibly happen”… only to see it happen.

But I’m actually used to that by now.

Surviving traders learn to expect the unexpected. We learn to stay flexible and adjust the sails when markets shift – even if the shift is clearly irrational, in our opinion.

In such an instance, I always go back to one of my favorite Mark Twain quotes:

“When we remember we are all mad, the mysteries disappear and life stands explained.”

So true!

But, it’s not enough to say 2016 was “interesting” (a throw-away phrase). Instead, let’s really dig to see what sectors we were able to make money in, and how, during one of the strangest years in my career…

It Began With the 6th Worst January Ever

In late December, 2015, I wrote about the so-called “Santa Claus Rally,” the “First Five Days” study, and the “January Barometer” – all of which are statistical tools for forecasting stock returns over the calendar year.

By the end of January, all three indicators painted a bleak picture…

A much lower likelihood of positive returns in 2016. And if any returns could be mustered, there was a good chance they’d be well below average.

The January rout – which was the sixth worst on record – took a major bite out of investor confidence, which had already been growing wary after the sideways chop of 2015. Everyone and their brother was running for the hills.

I wrote cautiously about the rocky start – December 31, 2015, January 14, 2016, and, and February 1, 2016.

I tried to convey that the data was troublesome… and caution warranted… but, also, that the data did not guarantee an awful 2016. And that no matter what, I would continue finding opportunities to profit from short-term trends based on my data-driven indicators and strategies.

In late January, I wrote to you about one of those indicators – what I call the “kickstarter” signal, for its propensity to “kick start” strong, bullish rallies.

As I explained, the kickstarter signal occurs when six or more stocks move up in a day, relative to every one stock that goes down. The lopsidedly bullish day typically forecasts above-average returns over the next several months.

Sure enough, that stock rally materialized shortly after. The S&P 500 rose 8% between February and the end of April… and small-cap stocks were up even more, at 12%.

Following the bloodbath in January, the rally caught most investors by surprise. But my Cycle 9 Alert subscribers boldly took advantage of a number of bullish opportunities during the first half of the year.

In fact, we made out like bandits, making…

62% and 111% on the utilities sector, between January and March.
114% and 336% on a silver miner’s stock, between February and April.
106% on an industrial manufacturer, between March and June.

Clearly, following my systems-based investment strategy – and not our fearful intuition – was our key to big profits early in the year, when most were still in duck-and-cover mode.

By May, I talked about my take on the summer “soft spot” in stocks – the seasonally weak period between May and October. But much like my January warnings, I never once advised getting out of the market… only to proceed defensively.

My Cycle 9 Alert strategy got subscribers into two defensive, consumer staples sector plays during the summer, making…

25% and 56% on an energy-drink company.
50% and 80% on a home-improvement retailer, (both) between May and July.

The summer was actually fairly quiet, with everyone holding their breath for the Brexit vote. That late-June event set off a two-day sell-off, which was about 100 days shorter than everyone expected during the immediate aftermath of the UK’s shocking (and “foolish,” we said) decision to leave the European Union.

Stocks raced higher in July, triggering a market-beating rally in a notoriously “risk-on” sector: semiconductors.

My Cycle 9 Alert algorithm picked up on the sector’s momentum and I recommended trades on three semiconductor stocks. We made out quite well on two of them, making 74% and 106% on one… and 93% and 116% on the other.

And Then There Was Trump

2016 is ending, of course, with all eyes, ears and fingers (some with thumbs up… and some middle fingers at attention) on President-Elect Donald Trump.

All politics aside, Trump was a long shot, but now that he’s won, everyone is trying to figure out what that means (including Trump himself, many suspect).

What does the market think?

“WOOOOO HOOOOO!” stocks say.

I, on the other hand, am remaining more cautious, because personally, I still don’t know what to think. But, that’s OK.

Remember, I’m a surviving trader. I’m a quant. I’m a data-driven investment strategist. The market doesn’t care what I think. My opinion doesn’t matter.

All That Matters Is…

We have a time-tested systematic investment strategy – Cycle 9 Alert!

Realize, investors are not the fully rational machines that economic theory suggests… we’ve always displayed at least a thread of irrationality, and always will.

Similarly, financial markets are unpredictable… always have been, always will be.

But our strategy fully accounts for the uncertainty and irrationality inherent in markets. In fact, our strategy works to capitalize on that very uncertainty and irrationality.

The same goes for the fully systematic investment strategy that I’m currently sharing with a small group of beta-testers, through my latest endeavor, Project V, which we’re preparing to offer to a wider audience in the first quarter of 2017.

When I look back on 2016, I honestly don’t know how investors survived without a proven, data-driven investment strategy. I suspect everyone who tried to shoot from the hip this year is now nursing the proverbial bullet in their foot.

Could the same happen in 2017?

It can’t possibly be any weirder than 2016, right?

I wouldn’t bank on it…

I think the wild ride is just getting started. And I’m ready for it!

 

 

 

 

Adam

Editor, Cycle 9 Alert 

P.S. There’s only one day left before access to the Network closes, and I’ve heard that we may not open up spots for new members at all in 2017. So, if you want to own everything that Dent publishes… every service, book, webinar, and report, for life… you’ve got to sign up now, before time runs out!

The post The Year of the Unexpected appeared first on Economy and Markets.

What Changed in 2016… and What Didn’t

I try to stay away from financial news on the television. All that yelling and hype makes me tired, and I realize later that it was mostly meaningless. I know they must make everything sound like it will change the world to keep viewers tuned in, but I have better ways to spend my time.

Instead, I read a lot, from varying sources, so that I can bring the best information and analysis to you. In addition to Economy & Markets, I also write a weekly publication called the Dent Digest, which is distributed to our subscribers. In it I try to bring together the relevant stories of the week, including both the well-known and the not-so-obvious.

As the year draws to a close, I find myself asking what really changed over the last 12 months. So I perused my Dent Digest issues for the year.

Beyond the personal (kids got older, I turned 50, we became empty-nesters, etc.) and the political (Trump and GOP Congressional control), there were a few overriding economic themes in 2016.

Some things changed, but others stayed the same.

What Changed

The Brexit vote changed the course of history. After many wars on the Continent, European leaders developed economic cooperation as a way to bind their futures together, hoping to make armed conflict a thing of the past.

It worked.

Outside of small, but still deadly, conflicts in Eastern Europe, the past 70 years have been among the most peaceful in European history.

But the cooperation led to super-national organizations that could force policies on member nations. That might sound great to the bureaucrats that meet in nice hotels, but everyday citizens aren’t so keen on having people that never visit their cities or provinces telling them how to regulate their businesses.

The pushback on the EU was a long time coming. Britain was always the unruly child in the brood, but the Brits won’t be the last to demand more self-determination. As Europe comes to grips with the trend away from consolidation, it will be harder to maintain economic cohesion, and will tarnish, if not outright ruin, the euro.

Oil rebounded sharply this year, moving from the low $30s to the low $50s. OPEC members flooded the market with supply to drive out American frackers, which sort of worked, but then the frackers honed their efficiency.

As oil prices climb, more American producers are jumping back into the game. The latest OPEC agreement to cut supply might hold prices up for a little while, but to paraphrase the old saying, “The cure for high oil prices is high oil prices.”

With more money to be made, more producers will jump in, adding to supply and limiting the upside run. I don’t see oil prices breaching $60, but a drop back to the $30s is very possible.

Puerto Rico defaulted. Like Brexit, this is a game-changer.

As the Commonwealth’s legislature and the federal courts sort through the financial ashes after the meltdown, they will develop a framework for how other highly indebted public entities (cities, counties, states, school districts) will approach debt restructuring.

I think they will quickly sacrifice private bondholders, even though they have a clearly superior legal claim, in favor of public workers and retirees. This fight will play out in state capitols around the nation, pitting public employees against taxpayers and investors. It will get ugly.

What Didn’t Change

The Fed spent the entire year fretting over raising rates.

A year ago, Janet Yellen & Co. estimated that short-term rates would move from 0.5% (which we reached last December) to 1.75% by now.

Right. I didn’t buy it back then, either.

Without strong economic growth or inflation, there was no reason to push up short-term rates. The longer the Fed waited, and the worse the economy performed, the lower long-term interest rates fell. But as we entered the third quarter, the Fed started talking about higher rates anyway, and then Trump happened. So, rates climbed, more or less putting us right back where we started the year.

The Fed finally pushed up rates by a mere 0.25% this month, but given that growth should disappoint yet again in 2017, I don’t think they’ll raise rates three times in 2017 as they forecast, just like they didn’t push up rates this year.

As I mentioned, part of the Fed’s problem was anemic growth. Fed governors expected the U.S. to be growing by 2.5% to 3% by now. That didn’t happen. GDP increased 0.8% in the first quarter, and 1.4% in the second. We jumped 3.2% in the third quarter, but the annual pace will most likely still come in around 1.9% or so. That’s not enough to excite anyone, and probably won’t change in the next 12 months.

As with previous years, we’ll experience quarters of stronger growth from time to time, only to drop back again in later quarters. Escape velocity won’t happen anytime soon.

The U.S. dollar not only remained the dominant currency on the planet, but it also gained ground during the year.

As we’ve pointed out for some time, the U.S. might face a long slog of low growth, but we look like a race horse compared to the economies of Europe and Japan, and China is quickly decelerating. Harry has written many times that we’re the best house in a bad neighborhood. We’ll still be the strongest currency in 2017… and 2018…

One area that surprised me was housing. We started the year with a bit of a slump, which could have turned into an ugly rout. But it didn’t. Instead, housing stabilized and even expanded a bit.

I’m still cautious about housing, but it gets support from an underappreciated factor. The sector is much smaller than it was during the boom. Retail construction constituted 5% to 6% of the economy in the mid-2000s, but now sits around 3%. We’re building homes at a rate consistent with previous recessions, not expansions. It’s as if those in the industry remain hesitant, which is probably wise. When the next economic shoe falls, home prices should roll over again.

The biggest things that didn’t change are the ones that drive economies around the world and are difficult to adjust – populations and productivity.

We built our research on how many people are at each stage of life and what they buy. These are qualities that cannot be dialed up or toned down through economic policy.

My kids are out of the house. I need less stuff and I’m reconfiguring my annual budget to prepare for retirement (even though it’s a long way off!). No Fed policy or government program will change those things.

As long as individuals control their own economic destiny, demographics will drive growth.

We’re at the end of the eighth year of the economic winter season, with another six years to go. As we’ve seen for some time, legislators and central bankers will keep trying to move the pieces around the chessboard, but it won’t do much good. I guess that’s one more thing that will never change.

 

 

 

 

Rodney

Follow me on Twitter @RJHSDent

P.S.  A few spots are still available to our Network membership. Take advantage of this offer while you still can – the doors close on Saturday. 

The post What Changed in 2016… and What Didn’t appeared first on Economy and Markets.

The Year of Unexpected Shocks

I’ve spent a lot of time staring at my monitors this year and scratching my head, dumbfounded. Harry calls it a “market on crack.” I’m not sure what words I would use to describe it, but 2016 has certainly kept me guessing.

I shouldn’t complain. We made good money in Boom & Bust this year, and most of our major macro trends played out as we expected, even with all of the unexpected shocks. But this is definitely a year that I expect market historians to pick apart for a long time to come.

Let’s take a look at the year that has passed, draw some lessons from it, and put together a game plan for 2017.

2016 started with one of the very worst Januarys in history, driven mostly by the upheaval in the energy market. But the Fed’s rate hike at the end of last year played a part too, particularly in interest-rate-sensitive sectors like REITs. Then, the Fed backed off, energy prices found a bottom, and the stock market recovered… and went on to rise into the summer.

And that’s when it really got weird.

British voters opted to leave the European Union, and we got the dreaded Brexit… which was supposed to be the first domino to fall in the collapse of the EU. Well, the British pound took a hit, but British stocks went on to rally to new highs after taking a brief pause.

And then came Donald Trump. Our soon-to-be president was given virtually no chance of winning the election, even up until election day. And as his victory became more and more apparent, Dow futures collapsed by over 800 points. But the very next day, the market embraced the victory, and stocks have been rallying ever since.

So what conclusions do we draw from this?

To start, the conventional wisdom you read in the news is often wrong. And it’s not that the talking heads are necessarily stupid, mind you, and their reasoning often makes perfect sense. But they’re still often wrong because the world is ridiculously complex. And when you add in the emotional aspects of the market – attempting to predict how people will “feel” and react – it becomes virtually impossible to make sense of it.

Simply put, you can’t make sense out of market emotions any more than you can explain love or romantic attraction.

Media talking heads also often fail to consider how their words and actions affect the world they’re trying to predict. If “everyone” becomes convinced that a certain narrative will play out, then they’ve likely already traded on it, and it’s likely already reflected in market prices.

As Adam wrote recently, many of the greatest investors – think Warren Buffett or Cliff Asness – don’t read the news, or at least they don’t allow it to affect their investment decisions. Instead, they stick to investment strategies that work and tune out distractions.

So, how can we put these ideas to work in 2017?

To start, in Boom & Bust we’re sticking to our demographic macro themes. Yes, politics matter. But assuming nuclear bombs don’t start falling out of the sky, they really don’t matter as much as you might think, or at least in the ways you might think.

For example, the George W. Bush tax cuts were credited with creating newfound interest in dividends, which used to be taxed at higher rates. But was it tax cuts that spurred interest in dividends, or the coming retirement of the baby boomers and their ever-increasing need for income?

By following our macro themes in Boom & Bust, we’re holding our long positions in the dollar and our short positions in gold and the Japanese yen. And while we’re currently making money betting against bonds, we’re a lot more likely to reverse that trade and go long on bonds at some point relatively early in 2017.

Our demographic models suggest that we still have a couple more years of deflation, or at least very low inflation, and nothing coming out of Washington is likely to change that.

I’ll also look to continue grabbing cash-flow opportunities as they become available in my income service, Peak Income. Closed-end funds are trading at some of their deepest discounts since 2008 right now. We saw similar conditions around this time last year, and closed-end funds as an asset class went on to enjoy a spectacular rally from February through late summer.

Might we have a repeat in 2017? We shall see. But while we’re waiting, we can occupy ourselves with the steady stream of monthly dividends.

Best wishes in the New Year,

 

 

 

Charles

Portfolio Manager, Boom & Bust

P.S. Time is running out to grab a coveted Network membership. If you want lifetime access to everything that we publish at Dent – and gain sneak-peeks to services not yet available – you need to jump on this limited opportunity today. Sign up now and never pay an annual subscription fee again – you need to jump on this limited opportunity today. Sign up now and never pay an annual subscription fee again –details here! 

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With What We Saw in the Tech Space in 2016… 2017 Should Be Mind Blowing

It’s that time of year, when we stop to reflect on what 2016 had to offer. You’ll most likely being seeing a lot of this kind of review in the days to come, so I’ll start you off by looking back at the innovation that rocked the tech sector this year.

It should be no surprise that five of the seven most valuable companies in the world are technology companies.

Apple (Nasdaq: AAPL), Alphabet (Nasdaq: GOOGL), Amazon (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), and Facebook (Nasdaq: FB) are setting the pace for disruptive technology that we see, and often don’t see, every day.

2016 was a banner year for these companies, not only for the disruptive technology they created, but for the technology development environments they produced. Mainly technology policy.

This year we saw Apple lobby hard for mobile device encryption and Amazon hit the government about drone regulations for product delivery.

Both of these industry juggernauts know that without one foot inside our nation’s capital, their landscape growth is severely limited.

Apple has become a symbol of American innovation, but with wireless earbuds being the top innovation for 2016, hardware development options are looking bleaker every day.

Expect these top tech companies to double down on software and infrastructure innovation to support the burgeoning data problem we have now with On-Demand everything.

Thanks, Netflix!

Yes, with streaming movies, games, and TV shows, 3G wireless networks no longer make the cut. 4G-LTE wireless coverage is the only way to go. But these fast networks are only as good as the wired infrastructure backing them up.

Traditional tech service companies like Alphabet and Facebook are getting into the fiber infrastructure business to support their user’s hunger for more services, wired or wireless.

Cellular wireless is cool, but satellite wireless is cooler since your wireless signal comes from space. To make space infrastructure more affordable, SpaceX tested reusable rockets for satellite payload delivery in 2016.

Yes, these bad boys land back at the same pad they were launched from, refuel, and are ready for the next delivery!

Elon Musk was so excited about this capability, he shared his grand plan for a million-strong Mars Colony. The only catch, at least a million people have to sign up to keep the tickets under $200,000 apiece. What a value!

Just in case you’re planning on staying on Earth for a while, Alphabet (Google) launched a project to deliver affordable Wi-Fi to regions of the world that cannot support traditional cellular infrastructure.

It’s called Project Loon, and involves high-altitude balloons that float in the stratosphere (11 miles in the sky) to deliver a 4G-LTE wireless network.

No matter what wireless infrastructure your devices connect to, expect a lot more device-to-device communication for automation in 2017.

The Internet of Things (IoT) revolution has come full circle, connecting almost any device imaginable to the Internet for automation and intelligence. Fitness and health trackers, home automation, and driverless cars are just a few sectors at the tip of the iceberg with this life-changing capability.

2016 saw the launch of Tesla’s automated driving capability, but other auto manufacturers and tech companies are right on their heels. Even Uber, the world’s largest taxi company that owns little to no cars, launched a self-driving On-Demand taxi fleet in Pittsburgh this year!

In healthcare, we saw leaps in genetically engineering immune cells to fight cancer, and artificial intelligence computers assist physicians with patient diagnosis.

Monsanto (NYSE: MON) dumped the agriculture industry on its head by taking the same gene editing techniques applied to live beings, and purchasing it for plant gene editing. The company hopes to develop plants that are more drought and disease resistant without cross splicing species.

In short, 2016 was the year that brought us that much closer to the future. All those technologies dreamed up for Star Wars, the Jetsons, Star Trek… they’re not all just make believe anymore.

So, with all that in the rear-view mirror, what can we hope for in 2017? Really, anything in the realm of possibility (and imagination) is on the table. And we’ll be here to give you the latest market insights on how to profit from these changes.

From my family to yours, have a very Merry Christmas and Happy New Year!

 

 

 

 

Ben

The post With What We Saw in the Tech Space in 2016… 2017 Should Be Mind Blowing appeared first on Economy and Markets.

Merry Christmas… in Likely the Last Good Year for Many to Come

[image error]It’s the day after Christmas, so I’ll keep this short…

I wish I could say it’s a good thing that central banks have kept this third and final bubble going this long. The truth is it’s about to end. QE is failing and promises for fiscal stimulus are likely to be too late.

This totally irrational “Trump rally” may go on for a few months into 2017, but by early-to mid-2017 we may see the start of the greatest crash of our lifetime.

So, let’s celebrate while things are still good; but, at the same time, start preparing for the inevitable crash and debt/financial asset deleveraging that is way overdue.

My only advice on Christmas gifts is: If you gave a loved one any gold jewelry, take out put options against gold to hedge! Gold stands to devalue 40% or so in the next year!

Thanks for being loyal subscribers in a time when this bubble we are warning about seems to have no end…

Just remember that bubbles always burst… and so will this one. It’s just a matter of time. And time is running short.

You don’t get to spring without going through winter – just ask Japan. And the worst of the economic winter is ahead. Stimulus efforts to prevent this will only make it worse.

So, my advice is to squirrel away your nuts for winter.

If you do that, this Christmas may be your best ever!

 

 

 

 

Harry

Follow me on Twitter @HarryDentjr

The post Merry Christmas… in Likely the Last Good Year for Many to Come appeared first on Economy and Markets.

I’m Happy the Gift of Change Came Early

This time of year, my little neighborhood becomes an obstacle course.

I live on an island (it’s not as exotic as it sounds, but still pretty cool), with about 1,000 homes and a small downtown. Because the place has limited space and is overwhelmingly residential, whenever the locals do something en masse it clogs up traffic.

This happens during parades, fireworks, and even when good weather brings out cyclists and runners. It gets especially bad just before Christmas. Not because we’re all out shopping, but because we’ve already shopped – online.

So we spend three weeks weaving around and dodging all the delivery service trucks and golf carts that assist in high-volume residential areas this time of year, as they bring packages to our doors.

It’s enough to drive you crazy! No pun intended.

But this year, I’m not upset, or even annoyed, with the traffic inhibitors. Instead, I’m calm… if not downright happy.

Yes, they still get in my way and drive their carts like blind idiots with a death wish, but my focus is elsewhere. I’m still thinking about the gifts I’ve already received, instead of focusing on deliveries to my door.

In addition to the big gifts that make the Top 10 list in my nightly prayers (health, family, etc.), this year I can add social and political change. Before you get worried, I’m not fist-bumping strangers in “Make America Great Again” ball caps or high-fiving Brits that gave Europe the big heave-ho.

But I am excited that my country, as well as many other nations, is hungry for change…

I can’t help but think that, when it comes to economic policy, if we can break the sclerotic hold of politics that has gripped the Western world for decades, it will lead to a better tomorrow. Not just for me, but for generations to come.

For too long we’ve been held hostage by the idea that big government programs have somehow saved us from ourselves, and nudged us in the “right” direction.

We’ve been told that creeping regulatory burdens and increasing capital controls help everyone, even as we spend thousands of dollars every year on bureaucratic paperwork (tax forms, HR documentation, environmental compliance, etc.) and watch our savings accounts earn a pittance.

Voters around the world are saying the same thing with their ballots: “For goodness sake, stop helping me!” Hopefully, we’ll take back some control, and put responsibility back where it belongs – in the hands of the individual.

To be sure, many people across the globe are upset by the changes, but that, too, is reason for hope.

People are finally engaged. When we get together with people we love and respect – like co-workers, friends, and family (Hi, Aunt June!) – that disagree, we can drill down to the ideas that have divided us for too long, looking for some common ground. Hopefully this sort of conversation will happen away from yelling protests both in the streets and on television.

I’m not pushing to get rid of every environmental policy or workplace regulation, just as I’m not suggesting we eliminate tax enforcement or monetary policy.

Instead, I’m hopeful we’re on the cusp of unwinding some of the more egregious, overreaching governmental steps of the last 25 years, and putting more control in local hands. Let local officials make decisions… and then hold them accountable.

We can teach our kids through example that they get to make their own choices, and must live with the consequences.

Britain can leave the European Union, and must deal with the headaches of trade and border control. States in the U.S. can operate independent social programs through block grants, and must answer to their constituents on the results.

I’m not blind to the risks. I don’t think every outcome will be positive, or that changes will come quickly.

Western democracies have spent years painting themselves into a corner as their economies suffered with low growth and stagnation. Unwinding the many policies and programs that staved off the necessary adjustments, like credit contraction, that will lead to stronger future growth will take time… and potentially cause some pain along the way.

But in the end, we’ll be the better for it, as will the Brits, and a host of others.

So, as I consider Christmas, just a few days away, I have even more to be thankful for this year. In addition to sharing time, gifts, and meals with the people closest to me, I can share ideas about the changes that lie ahead, and how the new political landscape offers opportunities for growth that seemed unlikely just a few short months ago.

Merry Christmas!

 

 

 

 

Rodney

Follow me on Twitter @RJHSDent

The post I’m Happy the Gift of Change Came Early appeared first on Economy and Markets.

I’m NOT a Bull!

[image error]On December 13, Denzel Washington hit the nail on the head when he said:

If you don’t read the newspaper, you’re uninformed.

If you DO read the paper, you’re misinformed…

We live in a society now where it’s just “get it out first!”

We don’t care who it hurts.

We don’t care who we destroy.

We don’t care if it’s true.

Just say it!

Sell it.

And I’ve been victim of this same media mentality since I issued my Mea Culpa last week.

Somehow the media has decided that my admission of mistiming the market very short term was a switch from a perma-bear to a bull.

Seriously!?

Do these people read any further than their nose?

What about common courtesy or due diligence?

So far, only one media personality has phoned me for an interview on this so-called switch, and when I explained what I’m about to explain to you – in the hopes to be crystal clear about this – the interview turned into a non-starter!

How much more clearly can I say this?

You can see in the original article, (excerpt below), that I was pretty clear when I sent this note out.

I still believe the markets are due for a massive correction. Nothing has changed on that front.

Me going from “perma-bear” to “bull” couldn’t be further from the truth. And I am anything but a perma-bear if you look at my forecasts back to the 1980s forward.

Yes, this delusional Trump rally looks real for now. But it also looks more clearly like a final blow-off or 5th wave rally from the third and final bubble since March 2009 that is only likely to last months at best, not years.

Nothing has changed in the fundamentals of aging in demographic trends, massive debt burdens, and the imminent Italy debt default and the uber-Chinese real estate bubble burst.

Nothing has changed in the trends my four key cycles are currently moving through that all point down into early 2020. This has only occurred twice in the last century: in the early 1930s and early-t0-mid 1970s.

Nothing has changed in the economic season we’re living in right now. It’s still winter, and will be for at least another six years, and the worst of my cycles hits in the next three years.

My admission was that the bubble burst is taking longer than I had thought possible. That’s it. I even allowed for a slight new high in stocks in 2016… it just looks like a more substantial high on the “Trump” factor, with him promising near 4% growth – and pigs can fly!

I still believe there will be a massive market crash that will sweep the globe, now even more so and from higher heights… yes, an even greater bubble. And what do bubbles do? They burst, and violently.

It’s just that, while Trump’s election was a surprise, the market’s reaction was mind blowing. Believe you me… even the “smart money” I monitor on the Traders of Commitments report at COTbase.com totally missed this rally as well. It was a surprise across the board.

But now that the markets are believing Trump can instantly create 3% to 4% growth again, it’s up to the real economy to prove he can’t… and you know where I stand on that one. This rally could last weeks or months, but not years!

In fact, this delusional rally only proves how bubbly this market is. The higher it goes, the harder it will fall… our downside targets have not changed: 5,000 by early 2020 and 3,800 or lower by late 2022. Fundamental trends don’t change: human delusions around them do!

So I join Denzel in calling out the media: Get your message straight. Tell the truth! Quit playing on extreme stories: like perma-bear turns to perma-bull.

 

 

 

 

Harry

Follow me on Twitter @HarryDentjr

P.S. Here’s something else the media got wrong. How could anyone call me a perma-bear when I was the most bullish economist from the mid-to-late 1980s into 2007! Just goes to show you that the mainstream media of today is completely unreliable. And anyone who is a perma-bull or bear is an idiot, as everything goes in cycles… period! The greatest boom in history will turn into the greatest bust. It’s Newton’s third law of physics: equal and opposite reactions… Period!

The post I’m NOT a Bull! appeared first on Economy and Markets.

Why Are CEOs Earning 335x More than Their Own Employees?

There’s an ongoing epidemic on Wall Street.

It’s bad.

And it’s been happening to regular investors like yourself for many years.

But just how bad is it?

Well, what if I told you that up to 95% of companies currently trading on the stock market today are essentially stealing money right out of your pocket!?

These are some of the biggest names in the corporate world… companies that trade millions of shares a day, who you might be invested in right now (I reveal some of these names in the infographic below).

But where is this money going?

Right into the wallets of CEOs.

In fact, in many of these “bandit” companies, CEOs are earning 335-times more than their own employees!

What’s even more disturbing… there’s not a single thing these companies are doing that’s illegal. They take part in merger and acquisition deals for example, despite the fact that much of the time, their shareholders are the ones shouldering the losses.

And as you might guess, the executives and CEOs behind these huge deals often pocket massive payouts, either from the sale of the company itself, or from the hefty bonus they’re given in exchange for the acquisition.

Well, I’ve had enough!

While it may seem like Wall Street has the upper hand and you’re destined to be near the bottom of their payout list forever, I don’t believe it for a second. There is still a select group of companies out there that will pay you first. These are companies that a shocking 99% of investors are missing out on!

After spending more than 20 years on Wall Street, I now spend my days as a forensic accountant, helping everyday investors like you, rather than the corporate executives and insiders looking to add another million to their net worth.

Give our latest infographic, How CEOs are Earning 335x MORE Than Their Own Employees a read to discover more about just how far this Wall Street deceit goes… and how you can still uncover many more lucrative opportunities in the stock market today!

 

 

 

 

John Del Vecchio

Editor, Forensic Investor 

The post Why Are CEOs Earning 335x More than Their Own Employees? appeared first on Economy and Markets.