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Many average investors like to think that the performance of the STOCK market is closely tied to the underlying ECONOMY. And in most normal times, that’s true. But the current market environment is anything but normal.
I say that because we’re in the midst of yet another round of money-printing-driven action. The fingerprints are everywhere …
Super-low volume rallies in stocks. Levitation in gold. A slump in the euro first, driven by the European Central Bank’s backdoor money-printing LTRO program, followed by a slump in the dollar, driven by more dovish talk out of the U.S. Federal Reserve.
All these clues tell me that the “asset” economy is floating on a sea of liquidity … for now. Meanwhile, the “real” economy is doing nowhere nearly as good. And that only proves my thesis, once again, that QE is completely ineffective at helping average people on the street find jobs or promoting real, healthy, sustainable economic growth.
But for Wall Street bankers, it means Party Time!
Latest Data Sure Doesn’t
Point to Booming Growth!
Since most of us care more about the real world, I want to start by reviewing the latest data to see what it shows …
* December consumer spending was unchanged, below expectations.
* January consumer confidence, as measured by the Conference Board, slumped to 61.1 from 64.8 a month earlier. That missed expectations.
* January’s Chicago-area manufacturing index fell to 60.2 from 62.2 a month earlier. That missed expectations.
* January’s ADP jobs report showed the addition of 172,000 jobs. That was down significantly from 292,000 in December and below expectations.
* November’s S&P/Case-Shiller figures showed home prices dropping by 3.7 percent year-over-year. That missed expectations.
* December new home sales fell 2.2 percent, while December pending sales of used homes dropped 3.5 percent. Both numbers missed expectations.
Are you seeing a pattern here? Because I sure am!
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| The markets are floating on a sea of liquidity. |
We’re seeing the best start to a year for the stock market since 1997 … despite an economy that’s doing nowhere near as well as the economy did back then.
Why?
The answer is that the Fed, the ECB, the Bank of England, the Bank of Japan, and other central banks are all doing some version of real- or quasi-QE!
Ride the Wave If You Want …
but Don’t Get Swept Away!
So what’s my advice for this kind of market? What can you do to ride the wave, without getting swept away?
Well, I’ve pared back broad market hedges and focused on a few, select asset classes and companies that can make the most of QE-driven gains … without completely collapsing once the free-money party ends. And that’s working out.
So I suggest you follow the same game plan as long as central bank money printing, rather than underlying economic fundamentals, is driving the bus.
Then a few months or quarters down the road, when investors realize that QE is failing — once again — to spur real economic improvement, I’ll flip right back to the strategy that performed so well last summer. Namely, the use of aggressive downside plays!
If you’re already on board with me, you’ll have access to crucial guidance on when and how to make that switch. But if you haven’t given Safe Money Report a try, then I urge you to consider doing so now.
You can find out more … and get started at a special discounted rate … by clicking here.
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 21 comments }
Look to Weiss Research for market timing advice? I think I’ll throw darts blindfolded at the Wall Street journal.
More people own homes in the US now than EVER before….EVER….over 60 %…in #’s and %, thereof..
real Estate is booming!!!…..ya just gotta know where to look….banks are flodded with applications….62 % are PURCHASES the highest % since 2001…
January was one of the best job reports ever….it was the least amount of announced job cuts EVER in the HISTORY of reporting such data..
..yer attempt at backpedaling is laughable….
Man…yer columns are getting shorter and shorter…
Sorry Vic, the number of people who own the home they live in is 66.4%, down form 69.2%.
Home ownership is actually stable, but people owe a lot more on their homes.
Boom…there it is sports fans….yer good buddy Frances makes another great ‘call”…134 on the SPY 45 days ago when it was at 121….cost me a nickel…and I kept adding to it every week…
Boom….7,286 dollar profit in 45 days…
And…we almost hit my call on the DOW from 9 months ago of 12,888….day ain’t over..
When ya know, ya know….when ya don’t you become an apologist…I meant an anthropologist…..
Man….you bears crack me up….
You were right, but lets see if i’m right now. Dow 11,000 by end 2011(wrong)Dow 9000 by June 2012 (forecast back middle of 2011) and Dow 8000 hit sometime in 2012.
Only two comments up and the Dow up more than 100 pts?
The Weiss censors must be doing a good job of keeping all the critics off this list. God knows how much bashing is waiting to be unleashed.
Well, to be perfectly honest, the advice here has been quite costly to those that followed it.
I have been following the Weiss Research for years. As far the market timing goes they are one of the worst ones.
Mike constantly says QE didn’t help the economy. As things get better and his bearish forecasts look less relevant, he plays both sides of the fence. His forecasts aren’t working out “because of QE intervention…, but, but…. the economy is bad, and if it collapses, I was still right!.”
He’s betting on every horse in the race. As the economy continues to improve, his column will say “harumph! As I told you months ago, ride the wave! Those who followed my advice are up 5000%.”
If the economy fails, he can say “harumph! As I told you months ago, QE doesn’t work! Those who followed my advice….”
This is some funny stuff. Mike usually provides some good info. But, his hubris is really not justified.
The professionals across the board are calling a top in the S&P as we speak at around the 1345 – 1350 range.
Very dangerous time to be going long!
I stick with my original forecast of Dow 8000 – 9000 by the end of the year. Frances – well done. I did not think the bear market rally would get that high. You nailed it. What are your thoughts now so the next year??? I have to admit, I thought you were full of baloney, but you are indeed a wise person and you did nail it.
That is not correct. Hillary Kramer says the Dow is headed to 14,000 and Nicholas Vardy says it is headed to 15,000. Louis Navallier is calling for 1420 on the S&P 500.
Hey King, you are probably right. Why not S&P 2000??? I would not be surprised at all. Gas then will be $25 per gallon and official unemployment rate will be 5% as well probably. Gold will be $5000 per ounce.
These bullish idiots are part of the problem. They welcome higher prices which hurts normal Americans. They should be rounded up and sent to jail – Ben B should share a cell with Bernie Madoff. Crime – knowingly devaluing the dollar currency and therefore raising prices which hurts normal Americans by pushing them into unnecessary poverty/hardship.
How can anyone welcome higher prices? Whats the point I ask? Higher prices and lower wages means the economy is broken.Period.
Some good Elliot Wavers and technicians looking for a 1345 top…some are so bold as to call it the BIG TOP…I still disagree and think we sell off and then push higher. I made a comment in another forum last year that it was starting to feel a lot like 1999 but that was crushed as Europe flared up again. Well deja vu, we’re back in a 1999 like time period where many people keep trying to short the market too early…people shorting in 99 had the right idea, they were just too early.
Read the article by Charles Hugh Smith titled “Hothouse Economy” for an essay on all the “life-support” schemes the US economy is being propped up by currently and how fragile and vulnerable it is if this life support were withdrawn. Ben Bernanke and Fed have transitioned us to a state of permanent centrally controlled/managed economy. http://www.oftwominds.com/blognov11/hothouse-economy11-11.html
Mike Larson you should have included some more points in your “Latest Data” that highlight that the “real” economy is in the crapper while the QE driven asset rally continues:
If economy is so good
-why the calls for QE3? why ZIRP policy end date pushed from 2013 to 2014 (for now)?
-why do we still have high and growing food stamp usage?
-why is the Not in Labor Force # growing year after year (as the government stops counting workers to make unemployment look better than it is)?
-If the economy is so good why the cries for more housing bailout schemes including putting taxpayers on the hook for refinancing underwater mortgages and (most outrageous) principal forgiveness)?
Oh and speaking of home “ownership”:
Why do we still have prices in the dump (and falling in many regions) when government direct and indirect subsidies are at record highs? Where’s my free government house? It’s aggravating that taxpayers who rent subsidize other taxpayers who “own” and taxpayers who make bad financial decisions and “own too much.” I’m talking about mortgage interest deductions, first time home buyer tax credits, and FHA loans. Don’t get me started on FHA loans; the feds have basically become the mortgage market and the new subprime lender. Buyers of all economic means are taking advantage of these loans and often putting less than 10% down on inflated appraised homes where the builder picks up the PMI (so the buyer has no actual skin in the game). Since the banks (mortgage servicers) were exposed committing fraud in the foreclosure process (and in the origination and securitization processes too) the foreclosure of many homes was halted in 2011. So this stimulus provided another year where “owners” were able to live rent/mortgage free and instead continue to fund their I-Phone and eat out.
I personally fall into the demographic in the United States that is being sodomized by my fellow Americans through the tax code. The employed, single, middle class, renter, owns a car, with no children. I subsidize the homeowners, the people with children, the people with no job or health insurance, the people who use public transportation, the small business owner, and of course the rich fat cat. I pay a higher rate of taxes than both those with less means that are in poverty, but also people with the same income, and also the very rich…so I hate the government’s overspending with even more passion than most Americans who are able to extract some benefit through subsidies (theft and redistribution) from current and future taxpayers (PONZI economics).
Lots of good salient factual and moral points…
However, these have been going on FOREVER in the US with slight revisions to the tax code across time…none of this is new…there are just more zeros at the end….
Subsidies cut both ways….farmers get subsidies….
they then go down to the implement distributor in a small Iowa town and buy tractors….the implement dealer then builds a nice house supplying loclal contractors with work…those workers then take their famlies out to pizza in that town…the pizza parlor owner employs people…and everybody along the line has some money for a car…which they have to buy gas and parts for locally…
Everyone and everybody is subsidize for the good, bad or indifferent…pull the subsdies??..more people being unproductive and on those food stamps you speak of triple….
One person subsidy is anothers pump primer….
Side note….The theory is the biggest and best investment one can make in their life is a home..a house..real estate…call it what you want…equity in real estate has dropped continually since World War II…
So…if housing is the foundation, where does it all go from there??…
Sorry for the “subsidies” tangent/rant. It’s just my opinion that things have gotten much worse and the amount of subsidies has increased and has become expected. Excessive subsidies by the government creates malinvestment (famously the housing bubble). In the “good old days” people had to actually save up a down payment of 20% to buy a home, had to have good credit, and weren’t allowed to borrow at at a debt to income rato much higher than 3 to 1. Every new loan I here about in my peer group is an FHA or VA loan financed with less than 5% down on homes that are 4-5 times what these people make (gross) each year. They get out of closing costs through seller finance and rolling that into the price/principal and they get out of PMI through other shenanigans (such as builder finance deals)…so basically people have no skin in the game in these loans backed by the government and are quick to just walk away from the loans when they go under water and they lose their government job (which is starting to happen more as government is forced to tighten its belt).
The fundamental cause of all the bubbles mentioned above and the current .GOV bubble is creation of too much credit-debt-money too fast (faster than the rate of growth in the real economy). Private demand for credit even at historic lows has been relatively pathetic; probably due to lack of jobs or good paying jobs and disposable income providing a means to service the debt. Therefore the “growth” and “expansion” has been reliant upon the OECD governments to borrow and spend…this is also to mask the effects of the depression that would’ve been apparent in our economy over the past few years. The definition of depression is a decline in GDP of greater than 10% and our US government deficits have been running at 9-11% from 2008-2011.
Besides housing another thing that pisses me off (and should piss of my entire generation and all young people in general) is financing (subsidizing) the very generous fat pensions of old timers. They were “grandfathered in” while younger people and new hires get defined contribution plans (401ks or equivalent) where we must gamble a smaller amount of money in the stock market in order to retire (that’s a fun ponzi isn’t it). What makes me even madder about the system (not the individuals I’m not a hater…but the system that allows it) is that I WORK with these so called “retirees” and “pensioners”. So the double dipping government workers (who are paid more on average than non-government workers) see their salaries nearly double after they “retire” and then return to the same job they were doing at the same salary as before (with their pension checks on top of that).
Oh yeah and Social Security…government(s) of the world might be able to fully fund these schemes into the distant future at the same nominal amounts with inflated currencies…in terms of purchasing power parity my generation will be lucky to get .30 cents on the dollar.
We could continue on and on and on with the broken system and government ponzi programs…into health care for example. I don’t want to tonight…not happy about the Patriots’ loss; great Super Bowl though.
Americans are pig sick of the crap coming out of the FED and the congress. The Occupy Wall Street will soon become Occupy the FED, Occupy the Congress and occupy the whitehouse! Why is it, when all these clowns are on TV, they talk crap in the interest of not breaking public confidence. Well i have some news, that confidence was broken years ago and their unfair taxes and devaluation of the peoples currency has not gone unnoticed thanks to Weiss!
CMON VIC WHAT ARE YOU TALKING ABOUT……………….MAYBE WHAT YOU SHOULD HAVE SAID IS MORE AMERICANS USED TO OWN HOMES……………………..I watch the foreclosures in all large metropolitan areas 100,000 and over, and im seeing one constant………….yea things are booming…………………………………………………foreclosures are booming……………………IVE NEVER SEEN SO MANY…………………….EVER !!!!!!!!!!!!!!!!! AND ITS EVERYWHERE and if your wondering who is buying the REOS AND SHORTS ITS INVESTORS !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!…………….and more and more of those investors are getting tapped out the banks are not giving them anymore credit………..and those foreclosures that they bought and fixed up just are not selling ………………..so after a year or two of sitting on the market and not selling they are forced to rent them out………..FROM WHAT I SEE………FAR TOO OFTEN IF SOMEONE IS ABLE TO PURCHASE A HOME THROUGHT H.U.D. AND THEY DO COMPLETE THE SALE WHAT HAPPENS IS THE NEW OWNER NEVER MAKES A PAYMENT AND VIC………IF YOU LOOK CLOSELY YOU WILL SEE THESE SAME HOMES THAT SOLD A YEAR EARLIER AND EVEN LESS BACK ON THE MARKET AS A REO AGAIN AND MANY TIMES AT LESS THAN HALF PRICE OF WHAT IT WAS UP FOR SALE THE YEAR BEFORE so if in your eyes if you think things are booming GET YOUR EYES CHECKED
Side note, Thor..
HARP 1 and HARP II are saving Americans millions of dollars in house payments…..cherry ass clients..
Guess what they’re gonna do with their money??..they’re Americans!!!>..they are gonna, spend, spend, spend, spend…
Give it a bit….the markets are gonna dig this even more..
You wouldn’t beleive how freaking backed up banks are right now..
Get yer own eyes checked…..life is passing you by again, idiot…
Mike, tt seems, the main point of your comment on the ever widening disconnect between real and casino economy, reality and pipe dreams have gone unnoticed by many, esp. by brainless bulls with no safeguards, no common sense. I recognize, timing of all investment decisions is rucial, but who, the hell, can seroiusly predict correctly breaking Events in an era of FED “extend and pretend” policy and in the midst of an avalanche of lies and fraudulent information forming current “new normal”, unless he/she is positioned somewhere close to the top of Goldman Sachs gang structure. Those who are not contrarians deserve their fate – they get fleeeced. As per ShadowStats US has had negative GDP of anything between -2,9 to -6,1% for 5 years now., QE, TARP, whatever included. US Dollars losing about 35% of its purchasing power in the meantime. Yet, we have a large herd of happy bulls that lost the grand perspective – that their ultimate destination is slaughterhouse.
DUH!!!!!!!!
http://www.cnbc.com/id/46298151
…and most of them followed Marty and his Boy Blunder right into the Poor-er farm…
Doi!!!!
and its only gonna get worse in the long run for da Bears…
I CANT FIGURE OUT WHAT PRODUCES MORE HOT AIR …………FRANCES MOUTH OR HIS BACK END………………….I GUESS THEY BOTH DO