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  • On The Economy, Inflation, China & Odds For Fed Liftoff

    The investment markets remain fixated on whether the Fed will hike interest rates for the first time in almost a decade on September 17. Stock market volatility spiked in late August and so far this month, with most global equity markets in “correction” territory. It remains to be seen if the latest stock market chaos will cause the Fed to delay lift-off until December or later.

    Other than global equity market weakness and below target inflation, other factors that would lead the Fed to tighten are in-line, although last Friday’s unemployment report for August could have been stronger. Today, we will examine the August jobs report, the strength of the US economy in general, inflation trends and the outlook for the US dollar. We’ll also take a look at the latest disappointing economic news out of China.

    We’ll end today with a look at the Fed Funds rate futures market to see what the probability is for a rate hike next week. At the end of last week, Fed Funds futures indicated an 81% chance of a rate hike on September 17, up from a 74% chance in August.

    It’s a lot to pack into one E-Letter, so let’s get started.

    ...
  • January Inflation Turns Negative - Is Deflation Upon Us?

    Consumer prices fell in January for the third straight month, while inflation over the past 12 months turned negative for the first time since 2009, largely because of cheaper gasoline. In January, the Consumer Price Index sank by a seasonally-adjusted 0.7%, the biggest one-month drop since the end of 2008, the Labor Department reported Thursday.

    The pace of inflation over the past 12 months, as measured by the CPI, fell to negative 0.1%, and it’s down sharply from 2.1% last summer shortly before crude prices collapsed. That’s the lowest annual rate since late 2009/early 2010. If this trend continues, we will fall into deflation.

    Deflation, not to be confused with disinflation, or a slowing rate of inflation, is dangerous because it reduces the supply of money and credit flowing through the economy, and it can create less demand for big-ticket items from cars to washing machines. At its worst, dwindling demand can lead to global depression.

    Many investors are celebrating the widely-held belief that lower inflation is good for stocks and higher inflation is bad. But, as is often the case, this conventional wisdom is misleading, if not plain wrong. A study by the by the National Bureau of Economic Research found that corporate earnings and inflation tend to move up and down together, generally speaking. So the idea that lower inflation is good for stocks may be dead wrong.

    But before we get into that discussion, let’s take a look at last Friday’s report on 4Q Gross Domestic Product, which was a disappointment. At the end of today’s E-Letter, I will comment on Fed Chair Janet Yellen’s testimony before the Senate last week. And we will end with some thoughts on President Obama’s quest to reach a nuclear deal with Iran.

    ...
  • Why Food Prices Are Soaring, Likely To Continue

    Do you know that the US state which produces the most vegetables by far is going through the worst drought it has ever experienced? Do you know that the size of the total US cattle herd is now the smallest that it has been since 1951, even though our population has doubled since then? Do you know why bacon prices are up 55% or more in the last few years?

    As you are no doubt aware, food prices are soaring higher and higher. As we’ll see below, one widely-followed food price index is up almost 21% in less than a year. The question is, why have food prices risen so sharply in the last few years? That’s what we’ll talk about today.

    ...
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  • Inflation Jumps in August - Implications For Bonds

    Today we look at the latest economic reports and in particular, the housing market where there are some encouraging signs. Among the reports we look at today are the latest inflation figures for August, both of which surprised on the upside. Both consumer prices and wholesale prices were well above expectations last month.

    As we all know, rising inflation is bearish for most bonds, especially Treasury bonds. Interest rates on intermediate and long-term bonds have been rising since late July. While some believe this jump is only a temporary "correction," we cannot rule out the possibility this may be a new trend in interest rates. If so, that will be very bad news for millions of investors who are overloaded in bonds.

    There are some good alternatives to long-only bonds and bond mutual funds. In a new SPECIAL REPORT, I explain what some of those alternatives are and how you can get them in your portfolio before it's too late. Near the end of today's E-Letter, I give you a link to the new SPECIAL REPORT and best of all, it's free.

    But before we get to all of that, I must bring you the bad news that the United States has fallen precipitously to #18 on the "Economic Freedom of the World Report," down from #3 in 2000. You will definitely want to read this! I have summarized this alarming report for you, and we'll start today's letter with that disappointing news.

    ...
  • Treasury Yields Fall to Record Lows, But...

    IN THIS ISSUE:

    1.  Treasury Note Yields Fall to All-time Lows

    2.  Bernanke Confirms That Inflation is Too Low

    3.  More Reasons Why QE2 May Not Work

    4.  New Fed Report on Tepid Small Business Lending

    5.  Is the Bond Bull Market Nearing the End?

    ...
  • Gridlock and the Fed

    IN THIS ISSUE:

    1.  Hello Gridlock!

    2.  Is Gridlock Really Good for the Stock Market?

    3.  The Fed on Auto-Pilot

    4.  Doom for the Dollar?

    ...
  • On The Economy & Waiting For Breakeven

    IN THIS ISSUE:

    1.  A Look at the Latest Economic Reports

    2.  Bernanke Setting Sail on the QE2

    3.  US Dollar Falls in Value

    4.  Waiting, Waiting, Waiting for Breakeven

    5.  The Advantages of Alternative Investments

    6.  Getting Started: How It All Works

    The Latest Economic Reports

    ...
  • Why the Economic Recovery is So Slow

    IN THIS ISSUE:

    1.  Latest Economic Forecasts Don’t Look Great

    2.  The Economic Recovery Has a Long Way to Go

    3.  Consumer Spending Faces Strong Headwinds

    4.  Americans Living in Poverty Hits New High

    5.  Lastly, My Thoughts on Inflation & Gold

    ...
  • The Slowing Economy & the Fed’s Dilemma

    IN THIS ISSUE:

    1. The Economic Slowdown Continues

    2. Confidence & Employment Remain in Retreat

    3. Bernanke Announces Fed's Latest Plan

    4. Is Obama Planning a "September Surprise"?

    ...
  • Inflation, Deflation or Stagflation?

    IN THIS ISSUE:

    1. The Inflation/Deflation Debate

    2. Why Governments Love Inflation

    3. Deflation – Beyond Lower Prices

    4. The Shock Doctrine

    5. What You Should Be Doing

    ...
  • Obama On Course To Double National Debt

    Based on the Obama administration's own spending forecasts, the US national debt is projected to double over the next 10 years. Currently at over $11.4 trillion, the national debt is projected to balloon to at least $22.5 trillion over the next 10 years, according to the non-partisan Congressional Budget Office. The CBO now forecasts the fiscal 2009 budget deficit at a record $1.845 trillion alone, with another deficit of $1.4 trillion in fiscal 2010. If our national debt in fact doubles in the next 10 years (and it could more than double), this will be bad news for the US dollar and interest rates, which in turn is bad news for stocks. As you might expect, the liberal media is not talking about these new debt numbers, so I will lay it all out for you this week. Feel free to pass this week's E-Letter on to others - we need to get out the word!...
  • Why The Stock Markets Are Collapsing

    The US economy is in the worst recession since the Great Depression, and the latest economic reports have been even worse than expected. The US stock markets continue to collapse, with the Dow and the S&P 500 down well over 50% since the peak in October 2007. It is estimated that $10 trillion in wealth has disappeared in the US alone as a result of the stock market bust. Investors around the world are asking WHY? In my opinion, a big reason why the markets are collapsing is the trillions of dollars in new federal spending that President Obama has enacted. Plus, his record $3.55 trillion federal budget for 2010 will likely result in a deficit of over $2 trillion for fiscal 2010. I believe that this enormous spending, plus his other liberal plans that he intends to put in place this year, are serving to drive stock prices much lower than what should be happening. This is a lot to cover in one letter, so let's get started....
  • The Fed, The Stock Market & What To Do Now

    The Fed left interest rates unchanged at 2% at the FOMC meeting last week, despite warnings in the media that rates would be increased. To the contrary, I have argued that the Fed will leave rates unchanged all year, and the FOMC policy statement last week supports that view. There are indications that inflation will moderate later this year, which will take pressure off the Fed to raise rates. Next, we turn our eyes to the stock market and ponder whether we are looking at a continued sideways market for several more years. If so, this will be bad news for millions of Baby Boomers that have not saved enough. Maybe it's time they consider something different, such as the investment programs I recommend....
  • The Recession & What To Do About It

    The US economy has held up better than most analysts expected for the first part of this year. But it does look like economic growth will go negative for at least the next 2-3 quarters, meaning a mild recession is likely in the months ahead. Meanwhile, inflation is definitely on the rise, what with energy and food prices exploding. The obvious question is, what will the Fed do? This week, we investigate the economic outlook in detail for the next year or so, the trends in inflation and how the Fed may react. More importantly, the investment outlook for the next several years is one of modest returns at best, and the risks to the downside continue to increase. At the end, I have some ideas for how to invest successfully in this high risk environment....
  • Where Are We Now - Recession, Etc., Etc.??

    Many market analysts and economists believe the US is either already in a recession, or will be shortly. This week, we take a look at the latest economic reports and ponder what the recession will look like, how long it might last, etc. We also examine the latest massive bailout of Bear Stearns and the substantial role the Fed played in this mega-takeover....