Thu, Mar 31, 2011

The first quarter comes to a close today with major averages at or near multi-year highs. Expect "substantial" further gains for stocks before a "major top" occurs in late summer, says noted forecaster Harry Dent, founder of HS Dent and The Dent Method.

The good news, for those long, is Dent predicts the Dow will trade as high as 13,200 by mid-summer and the S&P 500 as high as 1430, or more-than 7% above current levels.

The bad news is "then we could see another major crash," Dent says, forecasting the Dow could trade as low as 3300 in a worst-case scenario. "Bubbles go back to where they started or a little lower," he says. "The stock market bubble started at (Dow) 3800 in late 1994."

While Dent predicts the Dow's crash will play out over several years, he sees clear and present danger in gold, silver, oil and other commodities. "All investors should lighten up on or sell oil, silver, and gold as the U.S. dollar looks like it has bottomed and should rise ahead," he writes in the March issue of HS Dent Forecast.

In the accompanying video, Dent further explains his thinking for why commodities will stumble ahead of stocks, which is the opposite of what happened in 2007-08. In sum, he believes efforts by global central bankers to fight inflation — with the notable exception of the Fed -- will hurt growth in emerging markets as well as demand for many commodities.

As for the Fed, they are "checkmated," Dent says, suggesting the Ben Bernanke & Co. are damned if they do QE3 -- because the bond market will freak out -- and damned if they don't -- because the economy and financial markets are so dependent on easy money.

Stay tuned for additional segments to hear Dent's views on the economy, housing and the deflationary pressures detailed in his latest book The Great Depression Ahead, a bookend to his 1992 best-seller The Great Boom Ahead.

Link -
http://finance.yahoo.com/blogs/daily-ticker/harry-dent-major-crash-coming-stocks...
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For those not aware of Harry Dent, he has written several books -
1992 The Great Boom Ahead.  
2009 The Great Depression Ahead

Both books relate largely to Demographics and the effects of the Baby Boomer generation on the Economy.

The Great Boom Ahead relates to the Peak Earning & Spending years of the Baby Boomers from 1995-2005, whilst The Great Depression Ahead relates to what happens after those Peak Boomer years and the transition to a lengthy period of Demand Destruction, as Boomers first retire, then leave us forever.  

Dent also predicts Housing would need to go down 55-60%, to retrace its bubble.

Whilst I agree that Demographics has been & will continue to play a large part, in what happens, it must also be seen in context that it doesn't stand alone, but it is one of the major Economic influencing factors, which are -
1) Demographics (Ageing & then actual decline)
2) Peak Energy  
3) Peak Debt
4) Climate Change

Btw, there is a 6 minute embedded video, which I recommend!

All over America tonight, millions of elderly Americans are wondering if their money is going to run out before it is time for them to die. Those that are now past retirement age are not going to be rioting in the streets, but that doesn't mean that large numbers of them are not deeply suffering. There are millions of elderly Americans that are leading lives of "quiet desperation" as they try to get by on meager fixed incomes.

As health care costs soar, millions of elderly Americans find themselves deep in debt and facing huge medical bills that they cannot possibly pay. A lot of older Americans would go back to work if they could, but jobs are scarce and very few companies seem to even want to consider hiring them. Right now caring for all of the Americans that have already retired is turning out to be an overwhelming challenge, and things are about to get a whole lot worse. On January 1st, 2011 the very first Baby Boomers turned 65.  A massive tsunami of retirees is coming, and America is not ready for it.

Sadly, most retirees have not adequately prepared for retirement. For many, the recent economic downturn absolutely devastated their retirement plans. Many were counting on the equity in their homes, but the recent housing crash crushed those dreams. Others had their 401ks shredded by the stock market.

Meanwhile, corporate pension plans all across America are vastly underfunded. Many state and local government pension programs are absolute disasters. The federal government has already begun to pay out significantly more in Social Security benefits than they are taking in, and the years ahead are projected to be downright apocalyptic for the Social Security program.

So needless to say, things do not look good for the Baby Boomers that are now approaching retirement age.

The following are 21 signs that the new reality for many Baby Boomers will be to work as wage slaves until they drop dead....

#1 According to a shocking AARP survey of Baby Boomers that are still in the workforce, 40 percent of them plan to work “until they drop.”

#2 A recent survey of American workers that included all age groups found that 54 percent of them planned to keep working when they retire and 39 percent of them plan to either work past age 70 or never retire at all.

#3 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#4 A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.

#5 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#6 Most of the bankruptcies among the elderly are caused by our deeply corrupt health care system. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#7 The U.S. government now says that the Medicare trust fund will run dry five years faster than they were projecting just last year.



#9 Over 30 percent of all U.S. investors currently in their sixties have more than 80 percent of their 401k retirement plans invested in equities. So what happens if the stock market crashes again?

#10 All over the United States predatory lenders are coldly and cruelly foreclosing on elderly homeowners. You can read what one lender is doing to a 70-year-old woman and her terminally ill husband right here.

#11 Medical bills are absolutely devastating large number of elderly Americans right now. Many are going to great lengths to try to pay their bills. An elderly woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends. However, a neighbor ratted her out, and so now the police are shutting her garage sales down.

#12 Social Security's disability program has already been pushed to the brink of insolvency and wave after wave of new applications continue to pour in.

#13 Approximately 3 out of every 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity. However, by claiming Social Security early they get locked in at a much lower amount than if they would have waited.

#14 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010. That was not supposed to happen until at least 2016.  Sadly, in the years ahead these "Social Security deficits" are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.

As the Federal Reserve gathers in Jackson Hole, Wyoming, for its conclave this week, investors around the world are hoping (maybe praying) for Dr. Bernanke and his colleagues to, once again, ride to the rescue of global stock markets.

This past week’s volatility brought back memories of the not so good “good old days” of 2008 as markets struggled with dismal economic reports and the increasing likelihood of a double dip recession.

This week, stock market bulls will have to make a “last stand” from a technical point of view.



The economic view remains dark and threatening as this week’s readings brought no let up to the steady stream of negative data.

More shocking yet was the Philadelphia Federal Reserve report which plunged to -30.7 from +3.2 last month which is the lowest reading in this index since March, 2009, at the bottom of the “last recession.”

This is a most troubling number as readings below -20 in this index have always preceded or been accompanied by recession.

Treasury yields responded to the stock market volatility as bonds rose and yields declined to less than 2%, their lowest since the 1950s, while consumer prices continued their climb. So with rising inflation and falling bond yields, the 10 year Treasury is now producing a negative rate of return. Certainly not a good time for people on fixed income or trying to live off their bond yields.

The jobless picture remained glum with 408,000 new unemployment claims, again rising above the all important 400,000 level, while previous home sales declined to from last month’s levels, again missing a widely expected gain.

All the bad news and volatility caused the outflow from domestic stock funds to continue with the week ending August 10th seeing the biggest outflow since October, 2008.

What It All Means for Stock Market and ETF Investors
What it all means is pretty simple; more volatility, more danger and more opportunity for those who can be on the right side of these dynamic markets.

Markets remain oversold and so a dead cat bounce or bear market rally is a real possibility; however, the major trend remains negative and defensive positioning would seem appropriate.

I think that we have already entered a “double dip” recession and that we’ll see more evidence of that going forward as this global slowdown drifts into outright contraction. With U.S. growth already less than 1% for the first half of the year and economic reports continuing to deteriorate, it seems unlikely that there is any other possible outcome. At Wall Street Sector Selector, we remain defensive and expect the current downtrend to continue over the intermediate term.

The Business and Financial News Week Ahead
The big news this week comes on Friday.
Dr. Bernanke will speak at the Federal Reserve Conference in Jackson Hole, Wyoming, and market participants are hoping for a replay of last year’s conference when he laid the groundwork for “QE2.”

Finally, August Consumer sentiment will be released and either add to or minimize the gloom. These three items will be huge movers of the market, and coming on the same day, should provide a lot of fireworks going into an otherwise quiet August weekend.

So will the cavalry once more ride to the rescue?

Link -
http://seekingalpha.com/article/288820-will-the-fed-cavalry-ride-to-the-rescue-a...
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It seems the market may be looking at yet another bout of buy on the rumour & sell on the fact, as the DOW Futures have been upbeat for most of today?

The Truth is, whatever happens or doesn't happen, in the afterglow of the FED's Jackson Hole meeting, the FED has no real weapons that can  kill off the major Economic factors that are suffocating Global Economic Growth!

In effect, the FED, other Central Banks & Governments, are now impotent!

There is nothing left in their bag of tricks, which can put the Global Economy back on the road of good Economic Health, over the next 10-20 years, all they can hope for, is to influence outcomes, to prevent unmitigated disasters?

The Truth is, the Exponential Economic Growth Fairy is Dead and the remains will soon be buried!

New Home Sales in July fell 0.7% from June, to a rate of 298,000. Relative to a year ago, sales are up 6.8%. While the year-over-year rebound is more than welcome, it is still a very dismal rate of New Home sales.

Also, there was a downward revision to the June numbers of 12,000 to 300,000. Thus, relative to where we thought we were, it could be seen as a 4.5% decrease. The July level was worse than the expected rate of 310,000.

The 15 lowest months on record (back to 1963) for new home sales have all been in the last 15 months.

Relative to the peak of the housing bubble (7/05, 1.389 million), new home sales are down 78.5%. Prior to September 2008, there had only been 20 months in which new home sales were below the 400,000 level, with the most recent being in 1982. The graph below shows the history of new homes sales (blue, left scale) along with the growth in population (red, right scale), since presumably if you have more people, you will need more places for them to live.



Link -
http://www.zacks.com/stock/news/59528/New+Home+Sales+Drop+Again
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New housing starts Peaked in the US in July 2005, along with much of the US Economy!

That said, the US Population continues to increase (at present), but unoccupancy levels have also grown significantly.

Something will have to give, shortly?

Following is chart of projected PE ratio's, which The SanFran Fed has recently published.

BRISBANE homeowners have suffered the greatest property price falls in the nation, new figures show.

The RP Data-Rismark Hedonic Home Value Index, released today, showed the value of dwellings in Brisbane dropped 0.4 per cent in July to a median price of $420,000, seasonally adjusted.

The fall brings the total decline in the city's property prices to 6.6 per cent over the past 12 months - the worst in the country.

Perth homeowners have suffered the next greatest loss, with prices down 6.3 per cent over the year, while Melbourne's were 4.3 per cent lower.

Comparatively, Sydney and Canberra bucked the trend to rise 0.5 per cent and 1.9 per cent respectively, highlighting the emergence of a multi-speed national property market.

On average, home prices in the capital cities fell by 2.9 per cent over the year to July.

In a further sign that the residential property market is softening, the average time it takes to sell a home in the capital cities have risen to 55 days, from 45 days a year ago.

Link -
http://www.news.com.au/money/property/brisbane-homeowners-suffer-greatest-losses...

Women and baby boomers entering the American workforce helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services. Now as the share of women with jobs falls and older Americans age into retirement, the shrinking -- or, at best, slowly growing -- workforce will weaken economic activity for the next two decades.

The demographic changes may be the biggest and least- appreciated reason why the two-year recovery has slowed, because the rate of growth for labor and capital is “the most important determinant” of economic expansion, said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis.

More retirees mean slower household formation, reduced consumer spending and downward pressure on equity prices as retirement cuts people’s purchasing power, according to John Lonski, chief economist at Moody’s Capital Markets Group in New York, and Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pennsylvania.

“A weaker labor force does dampen the pace of the rebound,” along with “our expectation for what an expansionary trend is,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “We should be lowering our sights on potential GDP compared to when our population was younger.”

Growth ‘Speed Limit’
Anemic gains in the number of new workers has effectively cut the long-term “speed limit for growth” to 2.25 percent, estimates Maki, a former senior economist at the Federal Reserve. That compares with the Fed’s estimated 2.5 percent to 2.8 percent rate for gross domestic product and average growth of 3.2 percent from 1980 to 2000.

Automakers General Motors Co. (GM), Ford Motor Co. (F) and Toyota Motor Corp. (7203), motorcycle maker Harley-Davidson Inc. (HOG) and natural- foods grocer Whole Foods Market Inc. may be hurt by the shift because most retirees will cut spending on big-ticket items and nonessentials, said C. Britt Beemer, chairman of America’s Research Group in Charleston, S.C., a consulting company that studies consumer behavior.

“Older people tend to have lower incomes, their consumption tends to be lower and in that sense, consumer- spending growth would be weaker as well,” said Moody’s Faucher. “There will be fewer people in prime car-buying years,” and “recreational goods and services are a young-adult thing.”

Sell Shares
The aging population also may hold down stock values for the next two decades as boomers sell shares to finance retirement, according to a Federal Reserve Bank of San Francisco research paper released Aug. 22.

“The mentality has shifted to preserving wealth rather than growing wealth, with less-risky portfolio allocations,” said Emily Sanders, president of Sanders Financial Management Inc. in Norcross, Georgia, whose largest group of clients is aged 55-65. A typical 65-year-old may have 50 percent of his portfolio in stocks, which would drop to 30 percent at age 80, she said.

Aging Population
An estimated 72 million people, or 19.3 percent of the population, will be 65 and older by 2030, compared with 40 million, or 13 percent, in 2010, the Census Bureau estimates.

While new college graduates will assume some jobs as retirees leave the workforce, young adults’ share of the population is shrinking. By 2030, there will be 34 million people aged 18 to 24, representing 9.1 percent of the population, down from 9.9 percent in 2010, according to the Census Bureau. The share of people aged 25 to 44 will drop to 25.5 percent from 26.8 percent.

“We are at the threshold of retirement mountain: a huge, huge change in the numbers of people who are reaching the age where they are leaving the labor force,” said Neal Soss, chief economist with Credit Suisse Holdings USA in New York.

While losses from declines in the value of 401k and similar accounts may force some to delay retirement, these delays will be temporary, he said.

Boomers started turning 65 this year, and every day for the next 18 years, about 10,000 more will hit the age that historically has been associated with retirement, according to the Pew Research Center in Washington. Women’s participation in the labor force may decline slightly during the next 40 years to about 57 percent because fewer will have jobs as they grow older, the Bureau of Labor Statistics projects.

Contracting Labor Force
All this means the workforce will expand 0.6 percent annually for the next 40 years, down sharply from 2 percent between 1950 and 1985, according to the bureau. The labor force has contracted 1.1 percent since 2008, mainly because the recession has forced people out of jobs and made it difficult for them to find new employment.

http://www.bloomberg.com/news/2011-08-30/aging-baby-boomers-shrinking-labor-forc...
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Whilst much of this article is correct, it continues a trend where people look at issues in isolation.

In Truth, this Demographic trend is only one of the major trends affecting Global Economics!

The others are -
1) Demographics (A reducing global Population, as boomers die)
2) Peak Energy
3) Massive Global Debt
4) Climate Change

US jobs report for the month of August.

Oil prices slide on dismal US jobs data

World oil prices slumped on Friday after the United States reported that job creation ground to a halt in August, a stark sign of trouble in the world’s largest economy.

Prices took a nosedive after a government report showed that the US economy added no jobs in August, leaving the unemployment rate at 9.1 per cent and stoking fears of a double-dip recession.

Read more:

http://www.theage.com.au/business/markets/oil-prices-slide-on-dismal-us-jobs-dat...