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Monday, November 07, 2011

ECRI Still Forecasts A Recession

Unimpressed with Current Economic Data, ECRI Still Forecasts A Recession 

The Economic Cycle Research Institute, a New York-based independent forecasting group also know as ECRI, continues to see a US recession in our future.  Even after a large rebound for the stock market with coincident economic data coming in better than expected, Lakshman Achuthan, ECRI's managing director, is not impressed. (More about ECRI)
Achuthan says economists on the Street are only “now-casting” which is not the proper way to forecast recessions. Lakshman said that on average “it is about six months inside of the recession that people realize there’s a recession”.  ECRI is still forecasting a recession as he sees “contagion among forward looking indicators.” 
"A lot of people are happy with GDP numbers" but "in the past century the vast majority of all recessions have begun in a quarter that showed positive GDP growth."
Watch his full CNBC interview here:
 

Read ECRI's Recession Call at:
I took profits near the highs this year and raised a lot of cash.  Then I put that cash to work near the lows for the year.  Then the market rallied and I sold a good deal of what I bought during the market weakness so I'm ready to do it again yet will profit nicely if the market goes higher.  Here are what some of my subscribers sent me via email recently:
  • Oct 28, 2011:  Steve P: Kirk, just want to say you had a great batch of sell actions last week.  Many of the financial threads I follow were saying a buy is in in their weekend notes.  Yet you were selling.  Good job.
  • 10/27/2011:  Bard P:  YES, I love those newsletters, and will renew by PayPal.  Thanks for all that Mad Money :)
  • 10/24/2011:  Patrick O:  Love your  newsletter...
  • 9/26/11: Barbara H: Yes, another year of your insightful newsletter.  Check is in the mail.
 
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Monday, October 31, 2011

The European Bailout Explained with a Cartoon

This explains well how the Eurozone solved their debt crisis. Also, my latest article: Did Jim Cramer Really Say Buy Netflix At $50 And Sell In High $100s?

Friday, October 21, 2011

October Update

Links and Articles for October

New from 2011 Charts
Gold/GLD: Resistance and support levels for the price of gold


Long Term Results that Speak for Themselves
Since 9/30/98 inception, "Kirk's Newsletter Explore Portfolio" is UP 338%
vs. the S&P500 UP only 38% vs. NASDAQ UP only 43% (All through 9/30/11
 
Subscribe to my service NOW and get the October 2011 Issue for FREE!   

In 2010, "Kirk's Newsletter Explore Portfolio" gained 20.4% vs. the DJIA up 11.0%
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
(More info)

Wednesday, October 19, 2011

Social Security COLA for 2012


Today the Social Security Administration announced the cost-of-living adjustment (COLA) for 2012. Here are the details from the Press Release:

Social Security Announces 3.6 Percent Benefit Increase for 2012

Cost-of-Living Adjustment is First Since 2009

Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012, the Social Security Administration announced today.

The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012.  Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $110,100 from $106,800.  Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum. 

Information about Medicare changes for 2012, when announced, will be available at www.Medicare.gov.  For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums. 


The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola.

Friday, September 30, 2011

ECRI says Jobs To Get Worse Under Recession-Bound U.S. Economy

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released its latest readings for its proprietary Weekly Leading Index (WLI) today. (More about ECRI)

From
ECRI's Weekly Leading Index Falls: Jobs To Get Worse Under Recession-Bound U.S. Economy
  • ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.
  • ...the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”
  • "if you think this is a bad economy, you haven’t seen anything yet."
For a better understanding of ECRI's indicators, read its book, "Beating the Business Cycle."
Book: Beating The Business Cycle
Click book to order
..

Tuesday, September 27, 2011

ECRI Recession Call

The Economic Cycle Research Institute, a New York-based independent forecasting group known as ECRI, called for a recession. (More about ECRI

 Here is what the International Business Times reported this mornng in a summary called "6 Signs We are in a Global Recession."
Stagnation may be an overly positive term. The Economic Cycle Research Institute in mid-September entitled its U.S. cyclical outlook "Economy on Recession Track."
Here's an excerpt from the report: "Today, we must sound the alarm bells loud and clear. ECRI's leading indices of U.S. economic activity have turned down in a textbook sequence. The recessinoary decline in a summary measure of numerous reliable leading indicators, coupled with an ominous drop in a broad measure of current ecnoomic activity representing facts, not forecasts, constitutes a compelling recession signal."
A recession seems baked into the cake already. We were at 1.0% GDP growth before the European PIIGS mess and then we got the double whammy of the dysfunctional congress kicking the deficit issue can down the road. Either of those "black swans" could be enough to kick the economy into a recession on their own but together they probably sealed the deal.

OK, lets assume we are currently in a recession. Is it a big one like the last one or a short, small one? The markets corrected roughly 20% off their highs this year. Is that enough pullback for a small recession?

The next question: Is this a short lived recession that was predicted already by the leading tech stocks already going down from a peak early this year? The market may have bottomed in August and could be on the way up to pull us out of a recession before the numbers even indicate one happened.

How would we know? The only way I know is to keep an eye on ECRI's leading indicators.

Wednesday, September 21, 2011

Fed Twist - US Federal Reserve Twist Statement Explained

Today the US Federal Reserve Open Market Committee (FOMC) met then issued a Press Release explaining what many on TV call the new "Fed Twist Policy." In a nutshell, the FOMC will sell short term US Treasuries to generate funds to buy longer term US Treasuries. They explain it in paragraph three of today's press release.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The FOMC will also support the housing market:
To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.
The FOMC also voted to keep interest rates between 0 to 1/4 percent and said they anticipate "exceptionally low levels for the federal funds rate at least through mid-2013." The decisions today were not unanimous. Eight members of the FOMC voted for this action and three opposed it.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.
best regards
Kirk Lindstrom
Editor of "Kirk Lindstrom's Investment Letter"
 

Monday, August 29, 2011

ECRI - No Recession Call Yet - Jury is Still Out

In this August 29, 2011 video interview ECRI's (The Economic Cycle Research Institute) Lakshman Achuthan explains why the jury is still out as to whether the cyclical (not transitory) slowdown will turn into a new recession.


For more information, read:
Click to order their book
Book: Beating The Business Cycle

Thursday, August 25, 2011

Steve Jobs’s Resignation Letter to Apple

On August 23, 2011 after the stock market closed, Steve Jobs resigned as CEO of Apple (Apple charts and Quote) Inc. Apple's stock close Aug. 23 at $376.18. The next day, Apple stock opened at $365.08, down 2.95%.  Below is the Steve Job's letter to Apples board of directors. (Source Apple Press Info)
August 24, 2011
Letter from Steve Jobs

To the Apple Board of Directors and the Apple Community:
I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.


As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.


I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.


I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.


Steve 
Here is a chart showing the performance of Apple's stock year-to-date. 
click chart for full size image 
I'd like to wish Steve Jobs the best of luck in his new, reduced roll at Apple and hope his health improves so he can enjoy and long and happy life.

Tuesday, August 23, 2011

East Coast 5.9 Quake Details - Bush's Fault

Flash News. President Obama says the shaking on the East Coast today is Bush's FAULT!
(A little California humor I thought of myself!)
Globe with Earthquake Location

5.9 Mw - VIRGINIA



Preliminary Earthquake Report
Magnitude 5.9 Mw
Date-Time

  • 23 Aug 2011 17:51:04 UTC
  • 23 Aug 2011 13:51:04 near epicenter
  • 23 Aug 2011 09:51:04 standard time in your timezone
Location 37.881N 77.952W
Depth 0 km
Distances
  • 14 km (9 miles) SSW (195 degrees) of Mineral, VA
  • 17 km (10 miles) SSE (165 degrees) of Louisa, VA
  • 23 km (14 miles) NE (52 degrees) of Columbia, VA
  • 58 km (36 miles) NW (312 degrees) of Richmond, VA
  • 141 km (88 miles) SW (216 degrees) of Washington, DC
Location Uncertainty Horizontal: 2.3 km; Vertical 3.1 km
Parameters

Nph = 23; Dmin = 50.0 km; Rmss = 0.44 seconds; Gp = 79°


M-type = Mw; Version = B
Event ID SE 082311a ***This event supersedes event USc0005ild.

For updates, maps, and technical information, see:
Event Page
or
USGS Earthquake Hazards Program

Southeast US Seismic Network
U.S. Geological Survey
University of Memphis

Sunday, August 21, 2011

ECRI Can Not Rule Out 2012 Recession

In this July 29, 2011 video interview ECRI's (The Economic Cycle Research Institute) Lakshman Achuthan says the business cycle slowdown they predicted while others were calling for a second half recovery "persists through year-end.”   
VIDEO
ECRI has not called for a recession but we do have a slowdown that makes the market more susceptible to a shock that can push the economy into a recession. Thus, they cannot rule out a 2012 recession.
Click to order
Book: Beating The Business Cycle
..

Thursday, August 04, 2011

2011 Intraday "Correction" Statistics 08/04/11

Make sure you check out my:
S&P500 Data - More S&P500 Charts

Last Market High 05/02/11 at 1,370.58
Last Market low 08/04/11 at 1,199.54
Current S&P500 Price =  1,200.07
Decline in Points = 170.51
Decline in percent = 12.4%
Max Decline = 12.5% 
Since the decline in the S&P500 is less than 20% and the 50-DMA is still above the 200-DMA, it is still officially a correction in a bull market.
  • This means the decline from intraday high to intraday low is 12.5% and we are currently 12.4% off the peak.
  • The decline in the S&P500 from the closing high to the closing low was 12.0% 
Comments welcome on my facebook discussion group "Investing for the Long Term"

Thursday, July 28, 2011

Capital Gains Tax Rates - History

The table here shows the Maximum capital gains tax rate history plus top federal income tax rates since 1916.
Table of Historical Capital Gains Tax Rates
In 1916 the Capital Gains Tax Rate was 15%.
Between 1987 and 1996, Capital Gains Tax Rate was between 28% and 29.2%.
In 1997, under president Bill Clinton, they cut rates to 21.2% and the stock market took off.
In 2003, rates were cut again and the market had another big rally, more than doubling before the financial meltdown.
Historical Chart of S&P500
Today the market seems stuck in a quagmire... could it be because capital gains tax rates return to 25% (21.2% plus 3.8% for Medicare under the Obama-care plan) in 2013?

Wednesday, July 20, 2011

July Articles on Seeking Alpha

Below is a list of my current articles on Seeking Alpha.
July 20 The Gold/Silver Price Ratio Is Back Below 40
"The price of gold made an all-time high Monday, July 18, 2011, at $1,602.40. Silver closed Monday at $40.34, up more than double from a year ago, but it remains well off its recent high of $49.82.....This means an ounce of gold is now less than 40 times more expensive than an ounce of silver."

July 13 Dow to Gold Ratio Still Following Strong Resistance Line Lower "At 7.96, the Dow Jones Industrial Average measured in how many ounces of gold it takes to buy the 30 stock Dow is only 13.2% from its 17-year March 6, 2009 low of 7.03. But, as the chart below shows, the ratio has been in a fairly flat, two-year trading range as it moved from long-term support to resistance."

July 10 Global Inflation Pressure Falling: Use TIPS to Profit  "Five of the seven regions covered show decreasing inflationary pressure with Australia ticking up but still in a decline overall while Japan was flat." 
Full list of Seeking Alpha Articles by Kirk Lindstrom

Monday, July 18, 2011

Top Ten Signs the United States Is Running Out of Money

Too bad this is too close to the truth!
10. For $10,000, you get your face on the dollar
9. The White House now has a two-drink minimum
8. There's a listing on eBay for North Dakota
7. Barack Obama sold his Nobel Prize to 'Cash4Gold'
6. Americans now attempting to sneak into Mexico
5. Renting Biden's house to backpacking German tourists
4. Costs $25 for each bag the president wants to check on Air Force One
3. John Boehner getting paid in beach bum tanning gift cards
2. Country is moving in with England until we get back on our feet
1. Applied for a $40 billion loan from Oprah

– The Late Show with David Letterman

Saturday, July 09, 2011

Did Raising Minimum Wages Kill Job Creation?

How much did raising the minimum wage 41% between 1997 and 2009 contribute the inability of the country to create jobs after the past two recessions?

Could the prosperity of the 1990s be due to everyone being able to get a low paying job which gave them a small reward for reliably showing up to work but MORE IMPORTANTLY gave them incentive to improve themselves and move up to a higher paying job?

Chart of United States Minimum Wage History from 1938 through today.

For the Raw Data, see US Minimum Wage History Data
My FIRST job at age 16 was busing tables at $1.35 an hour back when the minimum wage was $1.60. They were able to pay me below minimum wage because I got a $2 food allowance that bought a hamburger and a shake. Since I did a good job, the cooks rewarded me by upgrading me from a regular burger to a bacon cheese burger with fries. I learned it was a big deal to do a good job to make my co-workers jobs easier AND get a bigger share of the tips. I quit after six months when soccer season started so I could play on my school team again.
My second job was washing cars for minimum wage  of $2.10. They were upset I quit after only a month or two but I told them I'd love to stay at the outside job IF they could give me the $3/hr salary. The car wash boss wished me luck in my new job as a salesman inside a national department store.

Come discuss this in our "Investing for the Long Term" facebook group here
 

Tuesday, July 05, 2011

IMF Economic Outlook for the US

The International Money Fund, IMF, expects slow but steady economic recovery for the United States two years after the worst of the financial crisis.
In the June 20, 2011 "Concluding Statement of the 2011 Article IV Mission to The United States of America" the IMF makes the following forecast for US GDP growth:
  • 2011: 2.5 percent
  • 2012: 2.7 percent
  • 2013: 2.7 percent
  • 2014: 2.9 percent
  • 2015: 2.9 percent
  • 2016: 2.8 percent
The IMF notes:
The recovery has proceeded at a relatively slow pace, as in the aftermath of other severe financial crises, and has recently weakened. Monetary and fiscal policies have continued to support demand in the last two years, but the ongoing repair of household balance sheets amidst declining house prices and high unemployment have weighed on private consumption, while construction activity has remained depressed. On the positive side, exports have recovered markedly and financial conditions have improved, bolstered by unprecedented liquidity support. Core inflation has started to firm from historic lows. Recent indicators point to a growth slowdown in the first half of 2011, which appears related to increases in world oil prices, as well as to transient factors such as the disruptions to global supply chains from the Japanese earthquake.
The IMF notes many downside risks:
  1. Continued housing market weakness, with the possibility of further house price declines reducing household wealth and, thus, weighing on private consumption.
  2. Unfavorable fiscal outcomes. These could take the form of a sudden increase in interest rates and/or a sovereign downgrade if an agreement on consolidation does not materialize or the debt ceiling is not raised soon enough. These risks would also have significant global repercussions, given the central role of U.S. Treasury bonds in world financial markets. At the opposite extreme, an excessively large upfront fiscal adjustment could also significantly weaken domestic demand.
  3. Further commodity price shocks, which could impact both growth and inflation.
  4. Tight credit supply conditions—with weak securitization markets and tight loan standards for most sectors—which may become more binding as credit demand recovers.
  5. Challenging conditions for some European sovereigns that might trigger new global financial shocks.
The IMF is not 100% gloomy, they note:
On the positive side, the recovery could surprise on the upside if confidence improves and pent-up demand for consumer durables materializes more quickly, or if hiring picks up faster than expected, given healthy corporate balance sheets.

Saturday, June 11, 2011

What Caused the Housing Bubble & Who Warned About It

This video stands on its own.  Make sure you watch the bit near the end (starting at 8:10) where former president Bill Clinton gives his opinion.

All I can add is I saw many of these people make these statements on TV

Friday, June 03, 2011

ECRI's US-FIG Down Again in May

The Economic Cycle Research Institute, ECRI, released its latest readings for its proprietary monthly Future Inflation Gauges this morning.  ECRI says the value of their U.S. Future Inflation Gauge (USFIG) "lies in its ability to measure underlying inflationary pressures and thereby predict turning points in the U.S. inflatinon cycle."  (More about ECRI)
In May, the USFIG fell to 101.0, down from a revised 102.9 in April.    My chart below of CPI vs USFIG vs "expected inflation" for the next decade shows USFIG was down for the second straight month.
Commenting on today's release, ECRI's Co-Founder, Chief Operations Officer and author of "Beating the Business Cycle", Lakshman Achuthan said: "With the USFIG hitting a seven-month low, underlying inflation pressures have clearly begun to recede."

Monday, May 02, 2011

New Series I Bond Rates

Series I Bonds, "inflation bonds" or i-bonds, are a low-risk, liquid savings product. The Bureau of the Public Debt announced the new earnings rate for Series I (for Inflation) savings bonds issued from May 2, 2011 through October 2011 will be 4.60%.
The 4.60% composite earnings rate combines a 0.00% fixed rate of return with the 4.60% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U (CPI Data Table) increased from 218.439 in September 2010 to 223.467 in March 2011, a six-month increase of 2.30%.
For more information about Series I Bonds and Rates see:
More about Series I Bonds


Composite Rate History
Fixed Rate History

Friday, April 29, 2011

Gold -to-Silver Price Ratio Falls Below 30-Year Low

With the price of silver soaring faster than gold, the gold-silver price ratio has plunged below its 1983 low of 31.97. The gold-to-silver price ratio, defined as the price of an ounce of gold divided by the price of an ounce of silver, closed Wednesday (April 27, 2011) at 31.93. This means an ounce of gold is now less than 32 times more expensive than an ounce of silver.
Just four weeks ago, on March 31, 2011, the gold-to-silver price ratio was 37.98 when an ounce of gold was nearly 38 times more expensive than an ounce of silver.
Read my full Seeking Alpha article with more charts at:

Current Holdings: Personally, I own a very small amount of gold and silver hidden in the house for bribes if we see Armageddon. I also own silver and gold coins mostly as a collector but they would serve as currency in a disastere. For inflation protection, I own individual TIPS "treasury inflation protected securities" and Series I-Bonds. I recently sold my managed TIPS mutual funds (FINPX and VIPSX) after the recent surge in TIPS had the spread for the 5-year near record negative lows and used some of the funds to buy a new, individual TIPS with a positive return relative to inflation.  If the base rate for 5-year TIPS returns to a positive level, I may buy the TIPS ETF TIP rather than the managed funds I recently sold.

To best prepare for Armageddon, I own a
MSR MiniWorks EX Microfilter
I can use this to make drinking water from all the swimming pools and hot tubs near me plus the creek around the corner.  I can then trade the drinking water for food and fuel if my extra supplies in my "earthquake kit" run out.


Wednesday, April 27, 2011

Survey Survey Best CD Rates

The top CD annal percentage yield (APY) this week is at Discover Bank for a 10-year certificate of deposit currently paying 3.00%.

With the 10-year US Treasury paying 3.36%, there is little incentive to lock up money for 10 years at banks.   For shorter periods, like one to five years, you do better with bank CDs.  For example, the Pacific Mercantile Bank currently pays 1.26% for their 1-yr CDs while the 1-YR US Treasury only pays a minute 0.20%.

With rates so low, banks will try to sell you their annuity products. Make sure you read my article: Beware of Annuities
The table below shows the best CD rates for other terms. If that table is hard to read, then try Very Best CD Rates.
 
"Highest CD Rate Survey + Current US Treasury Rates"

Term
Highest
Rate (APY)
Where?
(Click link for Full Rate Sheets)
Vanguard Daily
0.07%
Vanguard Prime Money Market Fund
Vanguard Tax Exempt
0.13%
Vanguard Tax Exempt Money Market Fund
FDIC Daily Savings
1.25%
Best Savings Account Rate Survey 
6 Month CD
1.07%
  Ascencia Internet Bank
1 Year CD
1.26%
 Pacific Mercantile Bank
1 Yr US Treasury
0.20%
US Treasury Rate Quote
18 - Month CD
1.41%
 Pacific Mercantile Bank  
2 Year CD
1.66%
Melrose CU & 1.55% @ MetLife Bank
3 Year CD
2.17%
 Melrose CU 
4 Year CD
2.42%
Melrose CU & 2.35% @ Tennessee Commerce Bank
5 Year CD
2.93%
Melrose CU & 2.65% @ Tennessee Commerce Bank
5 Yr US Treasury
2.07%
US Treasury Rate Quote
7 Year CD
2.75%
  PenFed CU
10 Year CD
3.00%
Discover Bank
10 Yr US Treasury
3.36%
US Treasury Rate Quote
Vanguard Money Market & US Treasury Rates shown for Reference  
With rates so low, banks will try to sell you their annuity products. Make sure you read my article: Beware of Annuities

Historical CD Rates: 
Click charts to see full size images

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