Hello World,
Answer: They will both be destroyed by Progressives! (Take 2 minutes to see the future)
At the link below is a power point file (argentina.pps) which makes a powerful statement. Copy and paste this link in your browser to locate and download the file:
http://www.resistnet.com/forum/topics/a-must-see-is-america
For current asset management guidance, subscribe to my Contrarian Market View Newsletter. $99/year. Subscribe today and receive How to Profit and The Aftermath of Greed free with the paid subscription -- both books to be shipped together to USA residents only. Click here to subscribe today. -- be sure to include your address.
-- H. L.Quist
Monday, March 15, 2010
Wednesday, March 3, 2010
Free Preview of March CMV Newsletter
Hello Investor,
We are repeating our offer of a free copy of "The Aftermath of Greed" and "How to Profit From The Coming Inflationary Boom" with a paid subscription to the Contrarian Market View e-Newsletter -- a $140 value for the price of $99. This offer is open to US residents (books shipped to a single address only) and will be available for a limited time only.
Here is the link to subscribe today http://bit.ly/CMVyearbook
Be sure to provide your screen name and mailing address.
FREE PREVIEW of the February CMV Newsletter section. (The recommended list is available only to paid subscribers.)
(The actual newsletter is better looking, due to the limitations of blog posts.)
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV).
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these gains to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance % Allocated to CMV
Conservative 10%
Moderate 15%
Aggressive 30%
Speculative 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the
recommended portfolio. Please consult with your adviser and conduct additional research on your
own.
Inflation
This topic is a major focus of CMV for two primary reasons:
1. It could be the single most important factor to you in your investment, financial, retirement, business and personal planning going forward, and
2. Americans are inundated with manipulated information that demonstrates that the threat of inflation does not exist.
The following information is provided by Jeff Nielson writing for Bullion Bulls Canada in the February 20, 2010 edition entitled, "Bank Lending Plummets as Wall Street Strangles Economy." Nielson quotes extensively from John Williams' Shadow Government Statistics (shadowstats.com) whom CMV has also relied upon for factual (truthful) data on the US economy.
Nielson says, "John Williams now believes that US hyperinflation could kick-in as early as this year." Nielson adds, "However, with phoney inflation statistics pretending that there is no inflation in the US, many are asking ‘where is this inflation?' Confusing the issue further, a stubborn group of ideologues insist that there can't be inflation — because we are headed for a deflationary implosion."
To illustrate the point, the US Bureau of Labor Statistics (BOLS) indicated in mid-February that the Producer Price Index (PPI) rose 1.4% in January, or over 20% on an annualized basis. The PPI reflects the cost of finished goods which ultimately, of course, are passed on to consumers. In contrast, the PPI was a negative number in 2009. But BOLS is quick to add, if oil and food increases (which none of us consume !) are removed from the index, the gain is only .04% and therefore not a harbinger of inflation.
Similarly, the January Consumer Price Index (CPI) showed an increase of 2.6% over December, 2009 and, annualized, over 30%! However, when "seasonally adjusted" the increase was reduced to only 0.2%. Jay Bryson, an economist at Wells Fargo was quoted as saying in a Wall St. Journal article that there were substantial declines in rent, education and healthcare. Arizona universities (as some of the rest of the nation) just announced up to a 30% increase in tuition and the largest provider for health insurance in California, Anthem Blue Cross, just reported a 39% increase in some premiums effective May 1st. CMV suspects that none of these numbers will ever see the light of day at BOLS. John Williams reports that inflation was 9.8% in January. Who do you believe?
So, why would BOLS under-report or adjust the numbers to minimize inflation?
1. To convince the consumer that prices of goods and services are not increasing and therefore stockpiling or hoarding isn't necessary.
2. To minimize the cost of US Treasury borrowing. The Treasury currently pays approximately $360 billion interest on $10 trillion of debt at exceptionally low rates. The government will need an additional $2-3 trillion in new financing in 2010 alone. Interest on the Federal Debt will be the largest line item soon in the country's budget.
3. To minimize the bank's interest costs from borrowing from the Federal Reserve as well as the costs to large corporations, hedge funds and private equity firms.
Most consumers and some observers fail to recognize that inflation is first and foremost a monetary phenomenon. It's simple arithmetic. When the government increases the supply of money at the fastest rate in history the price of that commodity (money) must fall. The devaluation of the USD is in reality, the definition of inflation. Those in control of the inflation numbers and those who benefit most from lower interest costs are deliberately masking what is about to unfold. John Williams believes that the "Inflation Jeannie's" appearance will be sudden and soon. CMV believes that the process will be more gradual allowing investors to realize gains from asset inflation before the ‘crack-up boom."
Bank Lending
Closely related to the above analysis is the commodity or fiduciary element that creates this phenomenon — MONEY. The purpose of the TARP program was to save the banking system from collapse. Ostensibly, that mission has been accomplished (at the money center banks) and those institutions should now be in position to lend again as a requisite for recovery. That has not happened. Look at the chart below indicating the largest drop in commercial and industrial loans in history.
Source:
http://www.businessinsider.com/chart-of-the-day-commercial-and-industrial-loans-at-all-commer cial-banks-2010-2
Early 1990s
Note the drop in loans after the real estate crash in 1990.
2000 to 2002
Note the drop in lending after the .com bubble burst and 9-11.
2002 to 2007
Note the dramatic increase in lending leading up to the sub-prime fiasco.
2007 to Present
Note the incredible drop from +$300 billion in lending in 2007 to a minus $300 billion currently.
So, where is the money going? Jeff Nielson calls it the "scorched-earth" strategy. Here, he says, is what is happening:
1. The Federal Reserve monetizes (prints) massive amounts of new money.
2. The Fed loans the money to the money center and regional banks (he calls them OLIGARCHS) at a nominal cost.
3. Instead of lending out these funds, the banks deposit the funds at the Federal Reserve where they earn 1% interest (ostensibly at no risk).
4. The Fed then uses these deposits to buy U S Treasury bonds which funds the massive US budget deficits, keeps interest rates low and the bond bubble from bursting. These purchases are from "direct sources" which are not named but we can now conclude The Fed is the primary buyer.
An event occurred on February 10th, that went unnoticed by perhaps 99% of the population. The US Treasury had, what many considered, a "failed" auction. Every week the Treasury auctions off gazillions dollars of debt to the highest bidder. Normally the bid to cover ratio is 2/3 to 1 for every bond sold, or in other words oversubscribed. More bidders than supply means lower interest rates. In this particular auction however, 24% of the bond issue was bought by direct buyers who are not identified. Shazam! Up steps Mr. Bernanke and the Fed becomes the secret "direct buyer" for an estimated 11% of the total purchases - a record.
Tim Geithner, the Secretary of the US Treasury when asked about this "failed" auction and the problems in Greece, was quick to respond. "The US will never lose its' AAA bond rating." To observers like CMV this is government doublespeak, meaning a downgrade of US debt is probably imminent. What then? US bond yields balloon, the USD falls and the Inflation Jeannie exits her bottle to party.
So, what have these "banksters" accomplished in this charade? One, they've "kicked the can" down the road. They are avoiding an immediate debt default by the US Treasury, providing a good portion of the various stimulus programs, feeding FHA, Fannie Mae, and Freddie Mac to shore up the housing market and in short — delay the inevitable collapse.
Secondly, and most important for readers of the CMV, the "scorched-earth" strategy will create an inflationary boom or as Nielson says "The Mother of all Rallies." In a last-gasp desperation move the banks, given an additional injection of money from the Fed, will begin a frenzy of lending abandoning (again) all lending standards creating Hyper-Inflation described by Ludwig von Mises, as a "crack-up boom."
Herein describes the problem and the opportunity. This scenario to CMV is clear. The timing is not. But, in all probability CMV will be able to gauge the process and keep you advised. You should not miss the opportunity to achieve gains in your portfolio during the "Mother of all Rallies," but before it's over CMV will probably advise liquidation of all assets. (And, where to shelter them.)
The Stock Market
The Bears have come out of hibernation and it's not spring yet! The "fear factor" (that there will be a major decline in the market) is as high as it was in November, 2008, according to Shaeffer Investments. A poll of newsletter writers (not including CMV) shows that only 34.1% are Bullish which is the lowest since March, 2009, when the Bear market rally began. You may recall that CMV postulated in the January CMV newsletter that there could be a correction of 10% to 20%. Through February the correction is less than 1.0% Here is a quick insight into some of the Bearish soothsayers:
-- Meredith Whitney, who was one of the first analysts to call the sub-prime crash was Bullish until the end of 2009. In an interview with Maria Bartiromo recently on CNBC, she turned Bearish. Reason? The banks are under-capitalized.
-- Doug Fabian is a big Bear booster. He says this market rally is a "Bear Trap" much like the 1930 rally of 48%
-- Paul Farrell of Market Watch has listed 20 reasons why the market will fail in 2012. (CMV believes that there could be a significant rally in the ensuing two years also ending around that time.)
-- Bloomberg is forecasting a "great reckoning" in the US economy, meaning deflation.
-- Forbes believes that, in a short period of time, the total Federal Debt will equal 90% of GDP and the US economy will arrive at the "tipping point."
And, the Bearish beat goes on.
Late 2009 when the soothsayers were 90% Bearish on the US dollar and calling for its' demise, CMV (through its alter-ego The Myth Buster) took the Contrarian View and forecast a Rally in the dollar. Sure enough, much to the surprise and chagrin of the Bears, too many of them crowded together on to the same side of the ship and it capsized. What does this have to do with the stock market? When the Bears become the majority here, it will be time for the stock market to continue its rally that began in March, 2009. It appears that we're close to that point.
What's Bullish to CMV? Look at recent reported earnings:
-- Sears reported quarterly earnings of $430 million, up double from last year.
-- Target reported quarterly earnings of $936 million, up 54% over the same period last year.
-- Priceline earnings doubled and expect bookings to rise 48% in 2010.
-- Whole Foods earnings jumped 71% over last year.
What do these companies have in common? They all represent consumer spending and specifically to lower demographic groups.
It has been reported that over 80% of the S&P 500 companies have earnings in excess of estimates. Namely:
-- John Deere - earnings up 19% in the first quarter of FY 2010, and they're re-hiring workers.
-- Caterpillar also reported robust earnings and they're re-hiring 600 employees in the next 60 days.
-- Edmonds Shoe Corp. is also calling back laid off employees.
-- H-P reported a 25% increase in earnings and forecast an increase in sales of 26% in 2010.
What we have here, in CMV's opinion, is a massive disconnect between the Bullish indicators of business (specifically large corporations) and the consumer versus the Bearish outlook of the banking and government sectors. The question we all want answered is, will the economy continue to improve (as evidenced above) DESPITE the burgeoning Federal Debt and the incompetency and divisiveness in our political system? Most Bears see the out of control Federal Debt and deficits as the Sword of Damocles that will come crashing down to cut off the lifeblood to our Capitalistic system. Will Keynesianism succeed? Stay tuned and informed.
Leadership?
In February, the President signed an executive order creating a Bi-Partisan National Commission on Fiscal Responsibility and Reform. How absurd is that ... when the President's own budget proposal estimates that deficits will total $8.5 trillion over the next 10 years? According to the Wall St. Journal (WSJ) what the President is really trying to accomplish is "political cover" for huge tax increases scheduled for after the mid-term elections. The WSJ says this charade should be called the VAT (Value Added Tax) Commission because that will probably be the recommendation.
Representative Scott Garrett, (R, NJ) has introduced a bill titled the Accurate Accounting of Fannie Mae & Freddie Mac Act which would require an accurate accounting to taxpayers as to the total liability of these two mortgage giants now under control of the US Treasury. The massive losses that the "evil twins" plus the $1.6 trillion of their corporate debt are presently not included as taxpayer debt and, are in Washington terms, ‘off-balance-sheet' items. As CMV has reported on several occasions, losses will continue to mount, FNM and FRE executives will continue to receive outlandish bonuses and taxpayers will never know the true liabilities. In the end, our political leaders will bury the loss along with the twins. That's real "leadership."
In CMV's opinion, there is no other corporate market leader that was contributed more to the real estate debacle and the resultant financial collapse of the US economy than Goldman Sucks. Now we've learned that Goldman played a significant role in Greece's potential default on its sovereign debt! These Masters of the Universe (for humongous fees and commissions) advised the Greeks how to hide their ballooning debt off-balance-sheet — for a number of years until two weeks ago. Now the Grecians are rioting and storming the stock exchange and government offices to rally against budge cuts. Shouldn't they direct some of their ire to the true architects of this global chaos? (As CMV goes to press the Federal Reserve is opening an investigation into Goldman's involvement in Greece. Rots of ruck!)
For those of you who remain partisan, it's the call for change in all Leadership that is the mantra of the Tea Parties. These are former Democrats, Republicans and Independents that have got it figured out. And, this is the critical point: Inflation and its' big brother hyper-inflation are a direct result of loss of confidence in leadership and the value of the country's currency. This massive mountain of debt coupled with the change in public sentiment are the roots of the ‘flations.
. . .
The above is a partial preview of the March CMV Newsletter. To get all the information including the recommended portfolio, AND receive a copy of "Greed" and "Profit" subscribe today - click here.
-- H. L. Quist
We are repeating our offer of a free copy of "The Aftermath of Greed" and "How to Profit From The Coming Inflationary Boom" with a paid subscription to the Contrarian Market View e-Newsletter -- a $140 value for the price of $99. This offer is open to US residents (books shipped to a single address only) and will be available for a limited time only.
Here is the link to subscribe today http://bit.ly/CMVyearbook
Be sure to provide your screen name and mailing address.
FREE PREVIEW of the February CMV Newsletter section. (The recommended list is available only to paid subscribers.)
(The actual newsletter is better looking, due to the limitations of blog posts.)
March, 2010
H. L. Quist's
Contrarian Market View Newsletter
H. L. Quist's
Contrarian Market View Newsletter
Introduction
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV).
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
March 2000 to October 2002
July 2007 to April 2009
July 2007 to April 2009
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these gains to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance % Allocated to CMV
Conservative 10%
Moderate 15%
Aggressive 30%
Speculative 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the
recommended portfolio. Please consult with your adviser and conduct additional research on your
own.
Market Overview
Inflation
This topic is a major focus of CMV for two primary reasons:
1. It could be the single most important factor to you in your investment, financial, retirement, business and personal planning going forward, and
2. Americans are inundated with manipulated information that demonstrates that the threat of inflation does not exist.
The following information is provided by Jeff Nielson writing for Bullion Bulls Canada in the February 20, 2010 edition entitled, "Bank Lending Plummets as Wall Street Strangles Economy." Nielson quotes extensively from John Williams' Shadow Government Statistics (shadowstats.com) whom CMV has also relied upon for factual (truthful) data on the US economy.
Nielson says, "John Williams now believes that US hyperinflation could kick-in as early as this year." Nielson adds, "However, with phoney inflation statistics pretending that there is no inflation in the US, many are asking ‘where is this inflation?' Confusing the issue further, a stubborn group of ideologues insist that there can't be inflation — because we are headed for a deflationary implosion."
To illustrate the point, the US Bureau of Labor Statistics (BOLS) indicated in mid-February that the Producer Price Index (PPI) rose 1.4% in January, or over 20% on an annualized basis. The PPI reflects the cost of finished goods which ultimately, of course, are passed on to consumers. In contrast, the PPI was a negative number in 2009. But BOLS is quick to add, if oil and food increases (which none of us consume !) are removed from the index, the gain is only .04% and therefore not a harbinger of inflation.
Similarly, the January Consumer Price Index (CPI) showed an increase of 2.6% over December, 2009 and, annualized, over 30%! However, when "seasonally adjusted" the increase was reduced to only 0.2%. Jay Bryson, an economist at Wells Fargo was quoted as saying in a Wall St. Journal article that there were substantial declines in rent, education and healthcare. Arizona universities (as some of the rest of the nation) just announced up to a 30% increase in tuition and the largest provider for health insurance in California, Anthem Blue Cross, just reported a 39% increase in some premiums effective May 1st. CMV suspects that none of these numbers will ever see the light of day at BOLS. John Williams reports that inflation was 9.8% in January. Who do you believe?
So, why would BOLS under-report or adjust the numbers to minimize inflation?
1. To convince the consumer that prices of goods and services are not increasing and therefore stockpiling or hoarding isn't necessary.
2. To minimize the cost of US Treasury borrowing. The Treasury currently pays approximately $360 billion interest on $10 trillion of debt at exceptionally low rates. The government will need an additional $2-3 trillion in new financing in 2010 alone. Interest on the Federal Debt will be the largest line item soon in the country's budget.
3. To minimize the bank's interest costs from borrowing from the Federal Reserve as well as the costs to large corporations, hedge funds and private equity firms.
Most consumers and some observers fail to recognize that inflation is first and foremost a monetary phenomenon. It's simple arithmetic. When the government increases the supply of money at the fastest rate in history the price of that commodity (money) must fall. The devaluation of the USD is in reality, the definition of inflation. Those in control of the inflation numbers and those who benefit most from lower interest costs are deliberately masking what is about to unfold. John Williams believes that the "Inflation Jeannie's" appearance will be sudden and soon. CMV believes that the process will be more gradual allowing investors to realize gains from asset inflation before the ‘crack-up boom."
Bank Lending
Closely related to the above analysis is the commodity or fiduciary element that creates this phenomenon — MONEY. The purpose of the TARP program was to save the banking system from collapse. Ostensibly, that mission has been accomplished (at the money center banks) and those institutions should now be in position to lend again as a requisite for recovery. That has not happened. Look at the chart below indicating the largest drop in commercial and industrial loans in history.
Source:
http://www.businessinsider.com/chart-of-the-day-commercial-and-industrial-loans-at-all-commer cial-banks-2010-2
Early 1990s
Note the drop in loans after the real estate crash in 1990.
2000 to 2002
Note the drop in lending after the .com bubble burst and 9-11.
2002 to 2007
Note the dramatic increase in lending leading up to the sub-prime fiasco.
2007 to Present
Note the incredible drop from +$300 billion in lending in 2007 to a minus $300 billion currently.
So, where is the money going? Jeff Nielson calls it the "scorched-earth" strategy. Here, he says, is what is happening:
1. The Federal Reserve monetizes (prints) massive amounts of new money.
2. The Fed loans the money to the money center and regional banks (he calls them OLIGARCHS) at a nominal cost.
3. Instead of lending out these funds, the banks deposit the funds at the Federal Reserve where they earn 1% interest (ostensibly at no risk).
4. The Fed then uses these deposits to buy U S Treasury bonds which funds the massive US budget deficits, keeps interest rates low and the bond bubble from bursting. These purchases are from "direct sources" which are not named but we can now conclude The Fed is the primary buyer.
An event occurred on February 10th, that went unnoticed by perhaps 99% of the population. The US Treasury had, what many considered, a "failed" auction. Every week the Treasury auctions off gazillions dollars of debt to the highest bidder. Normally the bid to cover ratio is 2/3 to 1 for every bond sold, or in other words oversubscribed. More bidders than supply means lower interest rates. In this particular auction however, 24% of the bond issue was bought by direct buyers who are not identified. Shazam! Up steps Mr. Bernanke and the Fed becomes the secret "direct buyer" for an estimated 11% of the total purchases - a record.
Tim Geithner, the Secretary of the US Treasury when asked about this "failed" auction and the problems in Greece, was quick to respond. "The US will never lose its' AAA bond rating." To observers like CMV this is government doublespeak, meaning a downgrade of US debt is probably imminent. What then? US bond yields balloon, the USD falls and the Inflation Jeannie exits her bottle to party.
So, what have these "banksters" accomplished in this charade? One, they've "kicked the can" down the road. They are avoiding an immediate debt default by the US Treasury, providing a good portion of the various stimulus programs, feeding FHA, Fannie Mae, and Freddie Mac to shore up the housing market and in short — delay the inevitable collapse.
Secondly, and most important for readers of the CMV, the "scorched-earth" strategy will create an inflationary boom or as Nielson says "The Mother of all Rallies." In a last-gasp desperation move the banks, given an additional injection of money from the Fed, will begin a frenzy of lending abandoning (again) all lending standards creating Hyper-Inflation described by Ludwig von Mises, as a "crack-up boom."
Herein describes the problem and the opportunity. This scenario to CMV is clear. The timing is not. But, in all probability CMV will be able to gauge the process and keep you advised. You should not miss the opportunity to achieve gains in your portfolio during the "Mother of all Rallies," but before it's over CMV will probably advise liquidation of all assets. (And, where to shelter them.)
The Stock Market
The Bears have come out of hibernation and it's not spring yet! The "fear factor" (that there will be a major decline in the market) is as high as it was in November, 2008, according to Shaeffer Investments. A poll of newsletter writers (not including CMV) shows that only 34.1% are Bullish which is the lowest since March, 2009, when the Bear market rally began. You may recall that CMV postulated in the January CMV newsletter that there could be a correction of 10% to 20%. Through February the correction is less than 1.0% Here is a quick insight into some of the Bearish soothsayers:
-- Meredith Whitney, who was one of the first analysts to call the sub-prime crash was Bullish until the end of 2009. In an interview with Maria Bartiromo recently on CNBC, she turned Bearish. Reason? The banks are under-capitalized.
-- Doug Fabian is a big Bear booster. He says this market rally is a "Bear Trap" much like the 1930 rally of 48%
-- Paul Farrell of Market Watch has listed 20 reasons why the market will fail in 2012. (CMV believes that there could be a significant rally in the ensuing two years also ending around that time.)
-- Bloomberg is forecasting a "great reckoning" in the US economy, meaning deflation.
-- Forbes believes that, in a short period of time, the total Federal Debt will equal 90% of GDP and the US economy will arrive at the "tipping point."
And, the Bearish beat goes on.
Late 2009 when the soothsayers were 90% Bearish on the US dollar and calling for its' demise, CMV (through its alter-ego The Myth Buster) took the Contrarian View and forecast a Rally in the dollar. Sure enough, much to the surprise and chagrin of the Bears, too many of them crowded together on to the same side of the ship and it capsized. What does this have to do with the stock market? When the Bears become the majority here, it will be time for the stock market to continue its rally that began in March, 2009. It appears that we're close to that point.
What's Bullish to CMV? Look at recent reported earnings:
-- Sears reported quarterly earnings of $430 million, up double from last year.
-- Target reported quarterly earnings of $936 million, up 54% over the same period last year.
-- Priceline earnings doubled and expect bookings to rise 48% in 2010.
-- Whole Foods earnings jumped 71% over last year.
What do these companies have in common? They all represent consumer spending and specifically to lower demographic groups.
It has been reported that over 80% of the S&P 500 companies have earnings in excess of estimates. Namely:
-- John Deere - earnings up 19% in the first quarter of FY 2010, and they're re-hiring workers.
-- Caterpillar also reported robust earnings and they're re-hiring 600 employees in the next 60 days.
-- Edmonds Shoe Corp. is also calling back laid off employees.
-- H-P reported a 25% increase in earnings and forecast an increase in sales of 26% in 2010.
What we have here, in CMV's opinion, is a massive disconnect between the Bullish indicators of business (specifically large corporations) and the consumer versus the Bearish outlook of the banking and government sectors. The question we all want answered is, will the economy continue to improve (as evidenced above) DESPITE the burgeoning Federal Debt and the incompetency and divisiveness in our political system? Most Bears see the out of control Federal Debt and deficits as the Sword of Damocles that will come crashing down to cut off the lifeblood to our Capitalistic system. Will Keynesianism succeed? Stay tuned and informed.
Leadership?
In February, the President signed an executive order creating a Bi-Partisan National Commission on Fiscal Responsibility and Reform. How absurd is that ... when the President's own budget proposal estimates that deficits will total $8.5 trillion over the next 10 years? According to the Wall St. Journal (WSJ) what the President is really trying to accomplish is "political cover" for huge tax increases scheduled for after the mid-term elections. The WSJ says this charade should be called the VAT (Value Added Tax) Commission because that will probably be the recommendation.
Representative Scott Garrett, (R, NJ) has introduced a bill titled the Accurate Accounting of Fannie Mae & Freddie Mac Act which would require an accurate accounting to taxpayers as to the total liability of these two mortgage giants now under control of the US Treasury. The massive losses that the "evil twins" plus the $1.6 trillion of their corporate debt are presently not included as taxpayer debt and, are in Washington terms, ‘off-balance-sheet' items. As CMV has reported on several occasions, losses will continue to mount, FNM and FRE executives will continue to receive outlandish bonuses and taxpayers will never know the true liabilities. In the end, our political leaders will bury the loss along with the twins. That's real "leadership."
In CMV's opinion, there is no other corporate market leader that was contributed more to the real estate debacle and the resultant financial collapse of the US economy than Goldman Sucks. Now we've learned that Goldman played a significant role in Greece's potential default on its sovereign debt! These Masters of the Universe (for humongous fees and commissions) advised the Greeks how to hide their ballooning debt off-balance-sheet — for a number of years until two weeks ago. Now the Grecians are rioting and storming the stock exchange and government offices to rally against budge cuts. Shouldn't they direct some of their ire to the true architects of this global chaos? (As CMV goes to press the Federal Reserve is opening an investigation into Goldman's involvement in Greece. Rots of ruck!)
For those of you who remain partisan, it's the call for change in all Leadership that is the mantra of the Tea Parties. These are former Democrats, Republicans and Independents that have got it figured out. And, this is the critical point: Inflation and its' big brother hyper-inflation are a direct result of loss of confidence in leadership and the value of the country's currency. This massive mountain of debt coupled with the change in public sentiment are the roots of the ‘flations.
. . .
The above is a partial preview of the March CMV Newsletter. To get all the information including the recommended portfolio, AND receive a copy of "Greed" and "Profit" subscribe today - click here.
-- H. L. Quist
Monday, March 1, 2010
H L Quist to be Featured Speaker at Northwest Valley Tea Party
Hello World,
H L Quist will be the featured speaker at the Northwest Valley Tea Party, Wednesday March 3, 2010. The meeting starts at 6:30 p.m.
RSVP required to: 623-340-8091, a $10 voluntary donation is requested to cover the cost of the meeting room.
H L will talk on his insight into today's economy, and strategies to deal with the prospect of hyper-inflation.
Talisman Hall
Sun City Recreation Center
10433 West Talisman Road
Sun City, Arizona 85351
http://phoenixteaparty.ning.com/events/nortwest-valley-tea-party
Mapquest of location: http://bit.ly/blRZTG
-- H L Quist
H L Quist will be the featured speaker at the Northwest Valley Tea Party, Wednesday March 3, 2010. The meeting starts at 6:30 p.m.
RSVP required to: 623-340-8091, a $10 voluntary donation is requested to cover the cost of the meeting room.
H L will talk on his insight into today's economy, and strategies to deal with the prospect of hyper-inflation.
Talisman Hall
Sun City Recreation Center
10433 West Talisman Road
Sun City, Arizona 85351
http://phoenixteaparty.ning.com/events/nortwest-valley-tea-party
Mapquest of location: http://bit.ly/blRZTG
-- H L Quist
Wednesday, February 3, 2010
2 Book Free Offer - With Contrarian Market View Newsletter
Hello Investor,
Two Free books with the annual subscription to H. L. Quist's CMV Newsletter. Now more than ever is the time to get a Contrarian's view of the markets.
The Contrarian Market View (CMV) Newsletter launched in January is available for a free preview (see December 10, 2009 post on this blog). You can also preview "The Aftermath of Greed" and "How to Profit From The Coming Inflationary Boom" by clicking on the icons on the side bar of this blog.
I believe so strongly that this newsletter is the best Contrarian Market Perspective you can receive as an investor, that I am offering my two books free with a one year paid subscription to the newsletter — a $140 value for the price of $99. This offer is open to US residents (books shipped to a single address only) and will be available for a limited time only.
Here is the link to subscribe today. http://bit.ly/CMVyearbook
Be sure to provide your screen name and mailing address.
FREE PREVIEW of the February CMV Newsletter section. (The recommended list is available only to paid subscribers.)
(The actual newsletter is better looking, due to the limitations of blog posts.)
February, 2010
Introduction
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV)
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these gains to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance % Allocated to CMV
Conservative 10%
Moderate 15%
Aggressive 30%
Speculative 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the recommended portfolio. Please consult with your adviser and conduct additional research on your own.
CMV Maintains that price inflation is gaining momentum and is already embedded in the system, but since no one in government, Wall St. or the Fed wants the "Inflation Jeannie" to get out of her bottle, the evidence to document inflation is difficult to find. For example, the Wall St. Journal (WSJ) on January 21, 2010 on page A-1, indicated that the Producer Price Index (PPI) for finished goods, was up an incredible 4.4% in December, year over year. This followed a 1.8% rise in November. The brief article under VITALS on page A-1 refers the reader to page A-2 for details. There is no additional information on A-2 or in the entire section. A rare omission by the WSJ.
Going to the Internet to get the Bureau of Labor's report, it confirms the 4.4% figure but when "seasonally adjusted" the number is reduced to a minuscule .02%. Like the Consumer Price Index (CPI), the government number crunchers have the ability to arrive at just about any number they want. The report does disclose, however, that finished good prices were up 1.4% in December (See Food & Water).
The Saturday, January 17/18 WSJ has a feature article, Inflation Remains Tame, With a Warning Sign The article cites the CPI for December as a "tame" 0.1%. It then says, "But in an ominous sign, a separate report from the Federal Reserve showed industrial capacity shrinking as new investment fails to keep pace with depreciation." The article says that the US economy's capacity to produce goods was down 1% from a year earlier — the largest annual decline since 1967. In short, the manufacturing engine wouldn't be able to meet a rise in consumer demand. What happens in that event? Prices rise! CMV doesn't see any economists or forecasters predicting increases. In fact, the consensus seems to be the opposite — PRICE DEFLATION. CMV has dreams of Jeannie making her appearance soon.
FYI: The Jeannie in the bottle reference is taken from the 60's sitcom "I Dream of Jeannie" starring Barbara Eden and Larry Hagman who would later be the villain in "Dallas." Jeannie was pretty "hot." So is inflation.
The Economy
The Blue Chip Economic Indicators which are derived from 49 economists scattered around the US are projecting an expansion in the economy for both 2010 and 2011. They do not see a "double dip" recession as has been the concern of investors and businesses. They see a 3% GDP growth for 2010 and unemployment declining to 7.9% by the 4th Qt of 2011.
The Conference Board's index of leading indicators (LEI) jumped 1.1% in December which recorded its ninth straight month of improvement. A significant sign that the US is out of the recession. The Board also reported that the Consumer Confidence Index rose to 55.9 in January, the highest level in more than a year.
As some readers will recall CMV forecast (through its alter-ego The Myth Buster - TMB) a surprisingly strong 3rd Qt in 2009, early in the year which the Bureau of Economic Analysis finally reconciled at around a 2% growth rate of GDP. At the same time TMB forecast a robust 4th Qt and a retail boom at Christmas. The Bureau announced on January 30th that the US economy grew at a 5.7% rate in the 4th Qt — the fastest pace in four years. Fortunately, CMV and TMB were accurate though a tad conservative when most observers thought our forecast was too aggressive.
Economists are quick to modify the 5.7% number, however. They say inventory reduction reduces the number by 3.4% and if import growth is removed the GDP comes in at 1.7%. Even when the messenger brings good news, he gets killed!.
What is CMV's forecast for the First Quarter 2010? A GDP number around 3% and an increase in corporate earnings over the fourth quarter, which CMV believes will surprise on the upside.
Food & Water
"Sometime in the next few years, we're going to have very serious shortages of food everywhere in the world and prices are going through the roof." — Jim Rogers, CNBC interview
CMV brings to you issues and opportunities that are ignored by perhaps 97% of the US population. Is there anything that would financially and socially adversely impact our way of life than the shortage of food and water? And, they're inexorably intertwined.
As previously discussed in How To Profit From The Coming Inflationary Boom And, Avoid the Next Crash (PROFIT by H. L. Quist) a critical component of these necessities of life are strategically positioned in the San Joaquin Valley in California. This is 5 million acres of the most productive farm land in America and some sources say that its products feed 25% of the US population. This area consumed 6 million acre feet of water per year until last spring when Governor Arnold Schwarzenegger cut off most of the irrigation water from the Sacramento River in Northern California to the Valley. Farmers and citizens lost a lawsuit brought by eco-terrorists who preferred to preserve the Delta Smelt (a small fish no bigger than your index finger) and the Desert Harvest Mouse, both who live in the Delta, than feed people. Sacrificed were the economic lives of thousands of farm owners and their employees, not to mention the loss in value of irrigated farm land. Expect the prices of cantaloupe, cucumbers, strawberries, squash, pumpkins and a wide array of fruits and vegetables to rise significantly while the State loses millions of tax revenue and is on the verge of bankruptcy.
Another unknown element. One third of our daily diet depends on honey bee pollination (21 different foods). California is now facing "The Silence of The Bees." Massive death of mobile bee colonies from parasites and unknown disorders have severely impacted the food supply. Arizona has been exporting bees to California. One source reported that California had its worst crop year since records have been kept. To add to the mix, the citrus greening disease is entering San Diego County from Mexico and once entrenched it can kill an orchard in two years.
A four year drought and reduced snow pack in the watershed in the High Sierras is the principal culprit. The lack of snowfall has also drained the reservoirs in Utah and Arizona. Arizona officials have announced in January that Lake Powell, which feeds Lake Mead in Nevada, will no longer be making extra releases of water.
Lake Mead is down to within two feet of a severe crisis. CMV has learned that the siphons that suck the water out of the lake are positioned well above the bottom and won't draw water soon. As H L Quist reported in Profit, the gamble of buying real estate in Las Vegas isn't whether the market rebounds, the risk is the loss of their principal water supply! As this CMV is being drafted one of the largest storms in recent history has hit California and Arizona. It will help but it's not the solution to this incredible nightmare that virtually everyone has ignored.
How does the investor profit from an almost inevitable shortage of water? CMV is adding PowerShares Water Resources Portfolio (PHO) to its recommended list. The fund is based upon the Palisades Water Index which consists of ADRs and common stocks of companies that are focused on potable water. The fund is up about 70% from its March, 2009 low but up only 3% from its inception in January, 2006.
As far as food is concerned PowerShares also offers it's Dynamic Food & Beverage Portfolio (PBJ) which is based upon the Dynamic Food & Beverage Intellidex Index. Some of the fund's core holdings are familiar names like Coca Cola, General Mills, Kellogg, Heinz, McDonald's Corp, etc. Consumer staples are 80% of the fund. The fund is up 40% from the March, 2009 low but up only 0.13% from its inception in June, 2005. An investor could expect modest long-term growth from both PHO and PBJ until shortages and increased pricing occurs.
The Washington Earthquake
We all watched in horror as the film clips revealed the devastating earthquake that hit Haiti. Americans, as they always have in time of crisis, generously donated medical care, manpower, and money to help those in need. Your author had for several years supported children at a Catholic orphanage in Haiti which suddenly ceased operations without any word. Haiti's succession of corrupt dictators has continued to divert financial aid to themselves at the expense of its people. Maybe the devastation of this country will be its salvation.
A second earthquake occurred in Massachusetts on Tuesday, January 19th. The predominantly Democratic and Independent state sent a resounding rebuke to President Obama and his "progressive agenda" that will have a far-reaching social and financial impact on the US. The WSJ's front page article the day after said the "Voters Lack Confidence He (Obama) Can Cure Nation's Woes, Say He Overreached." Mitt Romney, the former governor of Massachusetts said, "Massachusetts rejected the President's policies and his arrogance." Ironically, it was the former Republican governor's universal health insurance plan for his state that resembles Obamacare, that fired up the voters. In three years, employer-sponsored premiums for health insurance in Massachusetts are the highest in the nation, while promising to lower costs! The citizens of Massachusetts rejected Ted Kennedy's legacy! How significant is that?
On a national scale, Americans (except those waiting for a re-distribution of wealth) are focused on the $447 billion omnibus spending bill and earmarks for fiscal 2009, the $787 billion stimulus bill and talk of a second tranche, $3 billion for cash for clunkers, $75 billion in mortgage assistance (HAMP) which has a modest success rate and is only "kicking the can down the road," $34 billion for child health care, $30 billion in expected auto loan bailouts and a deficit that could reach $1.5 trillion for fiscal 2010. All of those senators and congressmen and women who supported this Keynesian irresponsible spending also face a rebuke and defeat in November. A halt in spending and an end to the progressive movement should be a major plus for and growth in business and the economy. It's a must! How can the Treasury possibly pay the interest on this debt if it doesn't?
Those in the media and Obamanites who scoffed at The Tea Party efforts a few months ago can't escape the symbolism of the moment. The Boston Tea Party in 1773 marked the beginning of the end of British rule. The current Tea Parties will end the power-hungry far left Progressive's desire to take control of this country.
Real Estate Financing
Just when you think there's light at the end of the tunnel it turns out to be a train to nowhere. That's the trip that the following real estate lenders (taxpayers) find themselves.
First it was the "Christmas Eve Massacre." The US Treasury announced that day that there would be NO limit on the availability of funds for Fannie Mae (FNM) and Freddie Mac (FRE) when they had just previously announced a $400 billion ceiling. Both firms are in conservatorship and in all probability will be nationalized.
Now it's the Federal Housing Administrations (FHA) turn to come to the brink. In 2006, FHA's share of the mortgage market was only 2%. As the sub-prime market began to implode, mortgage companies and banks refinanced their junk loans with FHA guaranteed loans. Many of these borrowers made one payment then defaulted unloading risk from institutional investors to the taxpayers. Congress requires that FHA maintain a 2.00% capital reserve ratio and as of September 2009 that ratio was at .05%. And, Barney Frank wants to expand FHA's role and its loan limits! On January 21st, FHA Chief David Stevens announced a number of cosmetic changes including upping the mortgage insurance premium, lowering the maximum seller contribution and requiring a minimum credit score of 580 for those with a minimum down payment. Like FNM and FRE the hole will simply get deeper. In CMV's opinion the residential financing market (these agencies currently provide about 85% of the loans) are headed for total 100% nationalization. Within a year or so there will be no hand wringing and debate in Congress because the losses will be buried. The Department of Agriculture (appropriately the DOA) discovered this method of accounting years ago. Americans have Bill Clinton and Congress' "Modification" of the Community Reinvestment Act and Barney Frank's desire "to roll the dice" for destroying these agencies.
NOTE: Just as CMV was going to press Barney Frank, the Chairman of the House Financial Services Committee announced on January 22 that "I believe this Committee will be recommending abolishing Fannie and Freddie in their current form and come up with a whole new system of housing finance." CMV has followed the "Evil Twins" since 2002. It was the Chairman and his Committee that led the Twins to a life of crime. On a minimum basis they should be charged with parental abuse!
CMV has been asked to comment on the commercial real estate market. One subscriber, an investor in the market, forwarded an article by Dan Amoss titled "The End of Extend and Pretend." Amoss says "zombie" buildings are popping up all over the US and REIT investors believe that, "Banks will simply rollover underwater loans once they reach maturity, in the hopes that a future rebound in property values will catapult these loans back into solvency. This phenomenon is known as ‘extend and pretend'." Amoss believes that a 40% decline in the REIT index is in the future. CMV recommended the Vanguard REIT (VNQ) at $44.74/share which was up 100% from its March, 2009 low. If Amoss and others are right in their assessment, one way to hedge your holdings whether they are shares or property is to purchase the Ultra Short Real Estate Pro Shares (SRS) which will increase in value if the REIT market sells off. CMV will not include SRS in its recommendation list but felt compelled to keep its subscribers informed and offer alternatives. It's been CMV's consistent position that the solution to the entire real estate market it a formal devaluation of the US dollar. With the recent economic boom in China and their central bank raising interest rates, the pressure to re-value the Yuan and possibly decouple it from the US dollar is growing enormously. CMV has a sense that something has to break otherwise the light at the end of this tunnel will be a train.
1. Cash and Fixed Income (Preservation of Capital and Income)
As bond investors became concerned about the ability of certain European Community Nations (EU) to meet their obligations on their sovereign debt, the US bond market became (again) the safe haven. Those countries, unflatteringly referred to as the PIIGS (Portugal, Italy, Ireland, Greece & Spain) are all experiencing a decline in tax revenue with high debt loads. These events should not impact any of your holdings in JEMDX or FAX. The chief beneficiary has been PTTRX which has a total return (capital appreciation plus dividends) of 1.6% since January 1, 2010. The US Federal Reserve recently cautioned investors that interest rates will rise in the future which will adversely impact PTTRX and other US bonds and bond funds. hedges against that potential change.
2. US Equities (Moderate Growth, Stability, Seek Capital Gains)
The Dow Jones Industrial Average lost 3.46% to 10,067 in January and the NASDAQ was down 5.37% which accurately reflects the performance of DIA and QQQQ in the CMV Portfolio. As CMV indicated in the January issue, a correction of 10% to 20% wouldn't be a surprise after the dynamic up market off the March, 2009 lows. Some market analysts believe that this market move was driven by the "smart money," large institutional and individual investors, who are now taking profits. If that is the case (and CMV believes it's a valid premise), they will wait for the sell-off to run its' course and buy in at the appropriate time. Of more concern is the impact on the "January effect" as also reported in the January, 2010 issue — i.e., as January's market performs, the balance of the year follows. Historically, there's a validity to this theory but CMV believes that the fundamentals of growth, earnings, interest rates, etc. will be the principle determinant how the market performs for the balance of the year.
Ford (F) reported the first profit ($2.7 billion) in four years and the stock made a nice move. The financials ETF (XLF) suffered only a small decline despite the Obama administration's frontal attack on the banks which is crating uncertainty for all the markets. FAIRX up 3.3% for January continues to post positive gains in down markets. According to a feature story in Barrons.com (January 21st) Procter & Gamble (PG) is poised for new growth.
3. International Equities (Aggressive Growth, Seek Capital Gains)
As anticipated by CMV, those countries that exhibited explosive growth in 2009 were bound to have a correction. Brazil in particular (EWZ -13% and BRF - 15%) are case in point. IF you have shares in either Brazilian ETFs, you should wait for the correction to end and then add to your positions. CMV suggests that you hold CRESY if you bought it. It should be noted that China's Shanghi market is also down 15% from its 2009 high which was not recommended by CMV in anticipation of this correction. India (PIN) and Australia (EWA) have had small corrections also but the fundamentals have not changed.
4. Hard Assets (Aggressive Growth, Sector, Capital Gains)
This sector is highly influenced by the prospective outlook for the global economy. The perception that China, the world's largest single user of these products, may be experiencing a government induced slowdown and higher interest rates to avoid inflation is a principal factor that has led to a correction in these names. CMV remains confident that the energizing markets and economics as well as domestic needs will soon re-establish demand for these products.
5. Precious Metals (Aggressive Growth, High Volatility, High Risk)
As CMV's alter-ego (The Myth Buster) forecast three months ago, the US Dollar has rallied from about 75 on the US Dollar Index in December, 2009 to 79.47 on January 31, 2010. A move of about 7%. Virtually every economist and market analyst on the planet was betting on the demise of the dollar. TMB commented that when all the passengers move to the same side of the ship, the boat usually capsizes. It had to happen and it did. Dollar rallies, the PMG declines. Gold bullion was only off 1.3% from the December 31, 2009 basis of $1,097/oz. This move by the USD will, in CMV's opinion, reverse dramatically when the inflation Jeannie escapes from her bottle.
(Charts courtesy of www.stockcharts.com)
CMV is adding two more PMG ETFs to the Portfolio. Platinum bullion (PPLT) and Palladium (PALL). Both of these ETFs were just introduced in early January, 2010. PPLT reached a high of $165/share with early high demand and profit taking resulted in a close of $150/share on January 29th. PALL had similar results running up to $47/share and closing at $41.69 on January 29th. Both of these metals are utilized in catalytic converters for automobiles. Platinum bullion is currently $1,512/oz and tracks gold also as a precious metal. Palladium, at $419/oz is a cheaper alternative for catalytic converters and usually enjoys increased demand when its sister metal becomes higher priced. Platinum is also highly used in jewelry and the above-ground supply is tightening.
George Soros, in addition to putting his money on Barack Obama, is also a major player in the stock and commodity markets. He has been particularly successful in taking a position where he can politically or financially "influence" his trade. He recently announced that "gold is in a massive bubble" and is due for a sell off. It wouldn't surprise CMV that Soros is seriously shorting gold and plans to profit from its decline. Nothing would be better for America and our markets than to have this and other trades go horribly wrong for Mr. Soros.
6. Commodities (Aggressive Growth, High Volatility, High Risk)
The appreciation of the USD affects all commodities negatively (at present) and MOO is no exception. Refer to CMV's comments prior on Food and Water. We're adding the Water Resources Portfolio (PHO) and the Dynamic Food & Beverage Portfolio (PBJ) to the CMV Recommended List. Both ETFs are long-term hold situations.
7. Real Estate (Aggressive Growth , Illiquid)
Please note CMV's comments prior on real estate financing.
8. Special Situations
The top performer for the month is GDPEF which gained 18%. The company is in the process of completing 30 additional exploratory drill holes in order to obtain a NI 43-101 Canadian government compliance report which will establish the proven reserves on a portion of the property. This report could be a key milestone in determining the value of its deposit and the stock.. Go to goldenpeaks.com.
CMV had suggested RRLMF in January. Several subscribers have asked for more information on Rare Earths. Jim Dines (The Dines Letter) is the foremost authority on the subject. He has studied the industry for 10 years and gave a BUY signal on several names on May 22, 2009, which propelled the six stocks in his index up 800%! Here is what Jim says about Rare Earth Elements (REE):
"...Rare Earths are 15 obscure elements in the lanthanoid species, plus two more elements, for a total of 17, and they have extraordinary properties: they are used for super magnets that can withstand heat for batteries of hybrid cars, so Toyota can't build a Prius without over 65 pounds of them: you couldn't use your iPhone or Blackberry without Rare Earths: and get this, people running around saying they're going to build a lot of windmills so we don't need nuclear power don't seem to realize that you cannot build 3 megawatt windmills without over 700 pounds of Rare Earths, and China controls 97% of the world's production!...Once our Pentagon totally realizes that it cannot built ‘smart bombs' or predator drones without Rare Earths, and that China controls their production, the Pentagon will likely have a military version of apoplexy and call for a crash program to develop friendly American, Canadian and Australian resources."
Who is the most likely candidate with their property in the US? Rare Element Resources (RRLMF). Dines also recommends 5 other companies. Google James Dines and get THE DINES LETTER. He's an expert on natural resources and the human condition. CMV highly recommends his newsletter.
TBT declined 6% in January due to the inflow of funds into US bonds and the rally in the USD. IF you've already taken a position in TBT, Hold. If not wait for the dollar rally to run its course. It's a matter of time when interest rates rise as the Vice-Chairman of the Fed just warned this past week.
NOTE:
The February CMV was based upon the market close as of January 29th. There was a significant market reversal to the upside on Monday, February 1st. The Institute of Supply Management (ISM) Index increased four points in December to its' highest level in four years. In addition, the Wall St. Journal reported that banks were easing borrowing requirements. The entire CMV Portfolio was up 3% in one day, which supports CMV's position that the economy is improving at a faster pace than most analysts acknowledge.
-- H. L. Quist
Subscribe today for the free book offer.
Two Free books with the annual subscription to H. L. Quist's CMV Newsletter. Now more than ever is the time to get a Contrarian's view of the markets.
The Contrarian Market View (CMV) Newsletter launched in January is available for a free preview (see December 10, 2009 post on this blog). You can also preview "The Aftermath of Greed" and "How to Profit From The Coming Inflationary Boom" by clicking on the icons on the side bar of this blog.
I believe so strongly that this newsletter is the best Contrarian Market Perspective you can receive as an investor, that I am offering my two books free with a one year paid subscription to the newsletter — a $140 value for the price of $99. This offer is open to US residents (books shipped to a single address only) and will be available for a limited time only.
Here is the link to subscribe today. http://bit.ly/CMVyearbook
Be sure to provide your screen name and mailing address.
FREE PREVIEW of the February CMV Newsletter section. (The recommended list is available only to paid subscribers.)
(The actual newsletter is better looking, due to the limitations of blog posts.)
February, 2010
H. L. Quist's Contrarian Market View Newsletter
Introduction
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV)
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
March 2000 to October 2002 July 2007 to April 2009
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these gains to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance % Allocated to CMV
Conservative 10%
Moderate 15%
Aggressive 30%
Speculative 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the recommended portfolio. Please consult with your adviser and conduct additional research on your own.
Market Overview
InflationCMV Maintains that price inflation is gaining momentum and is already embedded in the system, but since no one in government, Wall St. or the Fed wants the "Inflation Jeannie" to get out of her bottle, the evidence to document inflation is difficult to find. For example, the Wall St. Journal (WSJ) on January 21, 2010 on page A-1, indicated that the Producer Price Index (PPI) for finished goods, was up an incredible 4.4% in December, year over year. This followed a 1.8% rise in November. The brief article under VITALS on page A-1 refers the reader to page A-2 for details. There is no additional information on A-2 or in the entire section. A rare omission by the WSJ.
Going to the Internet to get the Bureau of Labor's report, it confirms the 4.4% figure but when "seasonally adjusted" the number is reduced to a minuscule .02%. Like the Consumer Price Index (CPI), the government number crunchers have the ability to arrive at just about any number they want. The report does disclose, however, that finished good prices were up 1.4% in December (See Food & Water).
The Saturday, January 17/18 WSJ has a feature article, Inflation Remains Tame, With a Warning Sign The article cites the CPI for December as a "tame" 0.1%. It then says, "But in an ominous sign, a separate report from the Federal Reserve showed industrial capacity shrinking as new investment fails to keep pace with depreciation." The article says that the US economy's capacity to produce goods was down 1% from a year earlier — the largest annual decline since 1967. In short, the manufacturing engine wouldn't be able to meet a rise in consumer demand. What happens in that event? Prices rise! CMV doesn't see any economists or forecasters predicting increases. In fact, the consensus seems to be the opposite — PRICE DEFLATION. CMV has dreams of Jeannie making her appearance soon.
FYI: The Jeannie in the bottle reference is taken from the 60's sitcom "I Dream of Jeannie" starring Barbara Eden and Larry Hagman who would later be the villain in "Dallas." Jeannie was pretty "hot." So is inflation.
The Economy
The Blue Chip Economic Indicators which are derived from 49 economists scattered around the US are projecting an expansion in the economy for both 2010 and 2011. They do not see a "double dip" recession as has been the concern of investors and businesses. They see a 3% GDP growth for 2010 and unemployment declining to 7.9% by the 4th Qt of 2011.
The Conference Board's index of leading indicators (LEI) jumped 1.1% in December which recorded its ninth straight month of improvement. A significant sign that the US is out of the recession. The Board also reported that the Consumer Confidence Index rose to 55.9 in January, the highest level in more than a year.
As some readers will recall CMV forecast (through its alter-ego The Myth Buster - TMB) a surprisingly strong 3rd Qt in 2009, early in the year which the Bureau of Economic Analysis finally reconciled at around a 2% growth rate of GDP. At the same time TMB forecast a robust 4th Qt and a retail boom at Christmas. The Bureau announced on January 30th that the US economy grew at a 5.7% rate in the 4th Qt — the fastest pace in four years. Fortunately, CMV and TMB were accurate though a tad conservative when most observers thought our forecast was too aggressive.
Economists are quick to modify the 5.7% number, however. They say inventory reduction reduces the number by 3.4% and if import growth is removed the GDP comes in at 1.7%. Even when the messenger brings good news, he gets killed!.
What is CMV's forecast for the First Quarter 2010? A GDP number around 3% and an increase in corporate earnings over the fourth quarter, which CMV believes will surprise on the upside.
Food & Water
"Sometime in the next few years, we're going to have very serious shortages of food everywhere in the world and prices are going through the roof." — Jim Rogers, CNBC interview
CMV brings to you issues and opportunities that are ignored by perhaps 97% of the US population. Is there anything that would financially and socially adversely impact our way of life than the shortage of food and water? And, they're inexorably intertwined.
As previously discussed in How To Profit From The Coming Inflationary Boom And, Avoid the Next Crash (PROFIT by H. L. Quist) a critical component of these necessities of life are strategically positioned in the San Joaquin Valley in California. This is 5 million acres of the most productive farm land in America and some sources say that its products feed 25% of the US population. This area consumed 6 million acre feet of water per year until last spring when Governor Arnold Schwarzenegger cut off most of the irrigation water from the Sacramento River in Northern California to the Valley. Farmers and citizens lost a lawsuit brought by eco-terrorists who preferred to preserve the Delta Smelt (a small fish no bigger than your index finger) and the Desert Harvest Mouse, both who live in the Delta, than feed people. Sacrificed were the economic lives of thousands of farm owners and their employees, not to mention the loss in value of irrigated farm land. Expect the prices of cantaloupe, cucumbers, strawberries, squash, pumpkins and a wide array of fruits and vegetables to rise significantly while the State loses millions of tax revenue and is on the verge of bankruptcy.
Another unknown element. One third of our daily diet depends on honey bee pollination (21 different foods). California is now facing "The Silence of The Bees." Massive death of mobile bee colonies from parasites and unknown disorders have severely impacted the food supply. Arizona has been exporting bees to California. One source reported that California had its worst crop year since records have been kept. To add to the mix, the citrus greening disease is entering San Diego County from Mexico and once entrenched it can kill an orchard in two years.
A four year drought and reduced snow pack in the watershed in the High Sierras is the principal culprit. The lack of snowfall has also drained the reservoirs in Utah and Arizona. Arizona officials have announced in January that Lake Powell, which feeds Lake Mead in Nevada, will no longer be making extra releases of water.
Lake Mead is down to within two feet of a severe crisis. CMV has learned that the siphons that suck the water out of the lake are positioned well above the bottom and won't draw water soon. As H L Quist reported in Profit, the gamble of buying real estate in Las Vegas isn't whether the market rebounds, the risk is the loss of their principal water supply! As this CMV is being drafted one of the largest storms in recent history has hit California and Arizona. It will help but it's not the solution to this incredible nightmare that virtually everyone has ignored.
How does the investor profit from an almost inevitable shortage of water? CMV is adding PowerShares Water Resources Portfolio (PHO) to its recommended list. The fund is based upon the Palisades Water Index which consists of ADRs and common stocks of companies that are focused on potable water. The fund is up about 70% from its March, 2009 low but up only 3% from its inception in January, 2006.
As far as food is concerned PowerShares also offers it's Dynamic Food & Beverage Portfolio (PBJ) which is based upon the Dynamic Food & Beverage Intellidex Index. Some of the fund's core holdings are familiar names like Coca Cola, General Mills, Kellogg, Heinz, McDonald's Corp, etc. Consumer staples are 80% of the fund. The fund is up 40% from the March, 2009 low but up only 0.13% from its inception in June, 2005. An investor could expect modest long-term growth from both PHO and PBJ until shortages and increased pricing occurs.
The Washington Earthquake
We all watched in horror as the film clips revealed the devastating earthquake that hit Haiti. Americans, as they always have in time of crisis, generously donated medical care, manpower, and money to help those in need. Your author had for several years supported children at a Catholic orphanage in Haiti which suddenly ceased operations without any word. Haiti's succession of corrupt dictators has continued to divert financial aid to themselves at the expense of its people. Maybe the devastation of this country will be its salvation.
A second earthquake occurred in Massachusetts on Tuesday, January 19th. The predominantly Democratic and Independent state sent a resounding rebuke to President Obama and his "progressive agenda" that will have a far-reaching social and financial impact on the US. The WSJ's front page article the day after said the "Voters Lack Confidence He (Obama) Can Cure Nation's Woes, Say He Overreached." Mitt Romney, the former governor of Massachusetts said, "Massachusetts rejected the President's policies and his arrogance." Ironically, it was the former Republican governor's universal health insurance plan for his state that resembles Obamacare, that fired up the voters. In three years, employer-sponsored premiums for health insurance in Massachusetts are the highest in the nation, while promising to lower costs! The citizens of Massachusetts rejected Ted Kennedy's legacy! How significant is that?
On a national scale, Americans (except those waiting for a re-distribution of wealth) are focused on the $447 billion omnibus spending bill and earmarks for fiscal 2009, the $787 billion stimulus bill and talk of a second tranche, $3 billion for cash for clunkers, $75 billion in mortgage assistance (HAMP) which has a modest success rate and is only "kicking the can down the road," $34 billion for child health care, $30 billion in expected auto loan bailouts and a deficit that could reach $1.5 trillion for fiscal 2010. All of those senators and congressmen and women who supported this Keynesian irresponsible spending also face a rebuke and defeat in November. A halt in spending and an end to the progressive movement should be a major plus for and growth in business and the economy. It's a must! How can the Treasury possibly pay the interest on this debt if it doesn't?
Those in the media and Obamanites who scoffed at The Tea Party efforts a few months ago can't escape the symbolism of the moment. The Boston Tea Party in 1773 marked the beginning of the end of British rule. The current Tea Parties will end the power-hungry far left Progressive's desire to take control of this country.
Real Estate Financing
Just when you think there's light at the end of the tunnel it turns out to be a train to nowhere. That's the trip that the following real estate lenders (taxpayers) find themselves.
First it was the "Christmas Eve Massacre." The US Treasury announced that day that there would be NO limit on the availability of funds for Fannie Mae (FNM) and Freddie Mac (FRE) when they had just previously announced a $400 billion ceiling. Both firms are in conservatorship and in all probability will be nationalized.
Now it's the Federal Housing Administrations (FHA) turn to come to the brink. In 2006, FHA's share of the mortgage market was only 2%. As the sub-prime market began to implode, mortgage companies and banks refinanced their junk loans with FHA guaranteed loans. Many of these borrowers made one payment then defaulted unloading risk from institutional investors to the taxpayers. Congress requires that FHA maintain a 2.00% capital reserve ratio and as of September 2009 that ratio was at .05%. And, Barney Frank wants to expand FHA's role and its loan limits! On January 21st, FHA Chief David Stevens announced a number of cosmetic changes including upping the mortgage insurance premium, lowering the maximum seller contribution and requiring a minimum credit score of 580 for those with a minimum down payment. Like FNM and FRE the hole will simply get deeper. In CMV's opinion the residential financing market (these agencies currently provide about 85% of the loans) are headed for total 100% nationalization. Within a year or so there will be no hand wringing and debate in Congress because the losses will be buried. The Department of Agriculture (appropriately the DOA) discovered this method of accounting years ago. Americans have Bill Clinton and Congress' "Modification" of the Community Reinvestment Act and Barney Frank's desire "to roll the dice" for destroying these agencies.
NOTE: Just as CMV was going to press Barney Frank, the Chairman of the House Financial Services Committee announced on January 22 that "I believe this Committee will be recommending abolishing Fannie and Freddie in their current form and come up with a whole new system of housing finance." CMV has followed the "Evil Twins" since 2002. It was the Chairman and his Committee that led the Twins to a life of crime. On a minimum basis they should be charged with parental abuse!
CMV has been asked to comment on the commercial real estate market. One subscriber, an investor in the market, forwarded an article by Dan Amoss titled "The End of Extend and Pretend." Amoss says "zombie" buildings are popping up all over the US and REIT investors believe that, "Banks will simply rollover underwater loans once they reach maturity, in the hopes that a future rebound in property values will catapult these loans back into solvency. This phenomenon is known as ‘extend and pretend'." Amoss believes that a 40% decline in the REIT index is in the future. CMV recommended the Vanguard REIT (VNQ) at $44.74/share which was up 100% from its March, 2009 low. If Amoss and others are right in their assessment, one way to hedge your holdings whether they are shares or property is to purchase the Ultra Short Real Estate Pro Shares (SRS) which will increase in value if the REIT market sells off. CMV will not include SRS in its recommendation list but felt compelled to keep its subscribers informed and offer alternatives. It's been CMV's consistent position that the solution to the entire real estate market it a formal devaluation of the US dollar. With the recent economic boom in China and their central bank raising interest rates, the pressure to re-value the Yuan and possibly decouple it from the US dollar is growing enormously. CMV has a sense that something has to break otherwise the light at the end of this tunnel will be a train.
1. Cash and Fixed Income (Preservation of Capital and Income)
As bond investors became concerned about the ability of certain European Community Nations (EU) to meet their obligations on their sovereign debt, the US bond market became (again) the safe haven. Those countries, unflatteringly referred to as the PIIGS (Portugal, Italy, Ireland, Greece & Spain) are all experiencing a decline in tax revenue with high debt loads. These events should not impact any of your holdings in JEMDX or FAX. The chief beneficiary has been PTTRX which has a total return (capital appreciation plus dividends) of 1.6% since January 1, 2010. The US Federal Reserve recently cautioned investors that interest rates will rise in the future which will adversely impact PTTRX and other US bonds and bond funds. hedges against that potential change.
2. US Equities (Moderate Growth, Stability, Seek Capital Gains)
The Dow Jones Industrial Average lost 3.46% to 10,067 in January and the NASDAQ was down 5.37% which accurately reflects the performance of DIA and QQQQ in the CMV Portfolio. As CMV indicated in the January issue, a correction of 10% to 20% wouldn't be a surprise after the dynamic up market off the March, 2009 lows. Some market analysts believe that this market move was driven by the "smart money," large institutional and individual investors, who are now taking profits. If that is the case (and CMV believes it's a valid premise), they will wait for the sell-off to run its' course and buy in at the appropriate time. Of more concern is the impact on the "January effect" as also reported in the January, 2010 issue — i.e., as January's market performs, the balance of the year follows. Historically, there's a validity to this theory but CMV believes that the fundamentals of growth, earnings, interest rates, etc. will be the principle determinant how the market performs for the balance of the year.
Ford (F) reported the first profit ($2.7 billion) in four years and the stock made a nice move. The financials ETF (XLF) suffered only a small decline despite the Obama administration's frontal attack on the banks which is crating uncertainty for all the markets. FAIRX up 3.3% for January continues to post positive gains in down markets. According to a feature story in Barrons.com (January 21st) Procter & Gamble (PG) is poised for new growth.
3. International Equities (Aggressive Growth, Seek Capital Gains)
As anticipated by CMV, those countries that exhibited explosive growth in 2009 were bound to have a correction. Brazil in particular (EWZ -13% and BRF - 15%) are case in point. IF you have shares in either Brazilian ETFs, you should wait for the correction to end and then add to your positions. CMV suggests that you hold CRESY if you bought it. It should be noted that China's Shanghi market is also down 15% from its 2009 high which was not recommended by CMV in anticipation of this correction. India (PIN) and Australia (EWA) have had small corrections also but the fundamentals have not changed.
4. Hard Assets (Aggressive Growth, Sector, Capital Gains)
This sector is highly influenced by the prospective outlook for the global economy. The perception that China, the world's largest single user of these products, may be experiencing a government induced slowdown and higher interest rates to avoid inflation is a principal factor that has led to a correction in these names. CMV remains confident that the energizing markets and economics as well as domestic needs will soon re-establish demand for these products.
5. Precious Metals (Aggressive Growth, High Volatility, High Risk)
As CMV's alter-ego (The Myth Buster) forecast three months ago, the US Dollar has rallied from about 75 on the US Dollar Index in December, 2009 to 79.47 on January 31, 2010. A move of about 7%. Virtually every economist and market analyst on the planet was betting on the demise of the dollar. TMB commented that when all the passengers move to the same side of the ship, the boat usually capsizes. It had to happen and it did. Dollar rallies, the PMG declines. Gold bullion was only off 1.3% from the December 31, 2009 basis of $1,097/oz. This move by the USD will, in CMV's opinion, reverse dramatically when the inflation Jeannie escapes from her bottle.
(Charts courtesy of www.stockcharts.com)CMV is adding two more PMG ETFs to the Portfolio. Platinum bullion (PPLT) and Palladium (PALL). Both of these ETFs were just introduced in early January, 2010. PPLT reached a high of $165/share with early high demand and profit taking resulted in a close of $150/share on January 29th. PALL had similar results running up to $47/share and closing at $41.69 on January 29th. Both of these metals are utilized in catalytic converters for automobiles. Platinum bullion is currently $1,512/oz and tracks gold also as a precious metal. Palladium, at $419/oz is a cheaper alternative for catalytic converters and usually enjoys increased demand when its sister metal becomes higher priced. Platinum is also highly used in jewelry and the above-ground supply is tightening.
George Soros, in addition to putting his money on Barack Obama, is also a major player in the stock and commodity markets. He has been particularly successful in taking a position where he can politically or financially "influence" his trade. He recently announced that "gold is in a massive bubble" and is due for a sell off. It wouldn't surprise CMV that Soros is seriously shorting gold and plans to profit from its decline. Nothing would be better for America and our markets than to have this and other trades go horribly wrong for Mr. Soros.
6. Commodities (Aggressive Growth, High Volatility, High Risk)
The appreciation of the USD affects all commodities negatively (at present) and MOO is no exception. Refer to CMV's comments prior on Food and Water. We're adding the Water Resources Portfolio (PHO) and the Dynamic Food & Beverage Portfolio (PBJ) to the CMV Recommended List. Both ETFs are long-term hold situations.
7. Real Estate (Aggressive Growth , Illiquid)
Please note CMV's comments prior on real estate financing.
8. Special Situations
The top performer for the month is GDPEF which gained 18%. The company is in the process of completing 30 additional exploratory drill holes in order to obtain a NI 43-101 Canadian government compliance report which will establish the proven reserves on a portion of the property. This report could be a key milestone in determining the value of its deposit and the stock.. Go to goldenpeaks.com.
CMV had suggested RRLMF in January. Several subscribers have asked for more information on Rare Earths. Jim Dines (The Dines Letter) is the foremost authority on the subject. He has studied the industry for 10 years and gave a BUY signal on several names on May 22, 2009, which propelled the six stocks in his index up 800%! Here is what Jim says about Rare Earth Elements (REE):
"...Rare Earths are 15 obscure elements in the lanthanoid species, plus two more elements, for a total of 17, and they have extraordinary properties: they are used for super magnets that can withstand heat for batteries of hybrid cars, so Toyota can't build a Prius without over 65 pounds of them: you couldn't use your iPhone or Blackberry without Rare Earths: and get this, people running around saying they're going to build a lot of windmills so we don't need nuclear power don't seem to realize that you cannot build 3 megawatt windmills without over 700 pounds of Rare Earths, and China controls 97% of the world's production!...Once our Pentagon totally realizes that it cannot built ‘smart bombs' or predator drones without Rare Earths, and that China controls their production, the Pentagon will likely have a military version of apoplexy and call for a crash program to develop friendly American, Canadian and Australian resources."
Who is the most likely candidate with their property in the US? Rare Element Resources (RRLMF). Dines also recommends 5 other companies. Google James Dines and get THE DINES LETTER. He's an expert on natural resources and the human condition. CMV highly recommends his newsletter.
TBT declined 6% in January due to the inflow of funds into US bonds and the rally in the USD. IF you've already taken a position in TBT, Hold. If not wait for the dollar rally to run its course. It's a matter of time when interest rates rise as the Vice-Chairman of the Fed just warned this past week.
NOTE:
The February CMV was based upon the market close as of January 29th. There was a significant market reversal to the upside on Monday, February 1st. The Institute of Supply Management (ISM) Index increased four points in December to its' highest level in four years. In addition, the Wall St. Journal reported that banks were easing borrowing requirements. The entire CMV Portfolio was up 3% in one day, which supports CMV's position that the economy is improving at a faster pace than most analysts acknowledge.
-- H. L. Quist
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January, 2010
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV).
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
March 2000 to October 2002
July 2007 to April 2009
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these assets to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance -- % Allocated to CMV
Conservative -- 10%
Moderate -- 15%
Aggressive -- 30%
Speculative -- 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the recommended portfolio. Please consult with your adviser and conduct additional research on your own.
As the year 2010 begins, not since the Great Depression or World War II perhaps, is there more political, social and economic uncertainty in America. CMV will attempt to articulate the Macro Events that form the basis for making the specific (Micro) investment recommendations listed below:
Keynesian Economics
The Obama Administration is ideologically committed to the theory that through central planning of the economy and creation of unprecedented amounts of new debt, the government can increase the GDP and put people back to work. As history clearly reminds us, bureaucratic intrusion into free enterprise and increased taxation, will deter the expansion of commerce and not promote more jobs. Employers, not knowing what to expect in potential health care costs, bank and equity financing and demand for their goods will, in most cases, do nothing until these initiatives become clear. The fourth quarter GDP of 2.5% could be an illusion created by the $787 billion stimulus plan that was rear-end loaded to carry over to 2010 for the mid-term elections.
The Fed and The FDIC
The Fed Funds rate is basically zero and the Fed will have to raise rates soon to avoid another speculative bubble. An unexpected 1.45% rise in the USD index on December 4, 2009 due to a questionable jobs report resulted in a sell-off of gold and commodities and a concern that equities would be adversely effected by rising interest rates. The FDIC is broke and is assessing its member banks three years deposit insurance premiums in advance which will further reduce lending and close many more banks. The USD has lost about 18% against a basket of foreign currencies in 2009. That's market devaluation. CMV expects the possibility of a Formal USD devaluation that could come at any time possibly as a result of a downgrade of US Treasury Debt by the rating agencies.
Note: Subscribe to this blog for in-depth updates on the above and other topics.
Inflation
Is a monetary phenomenon. The US Treasury has to rollover $2 trillion in short-term debt in 2010 plus an additional $1.5 trillion in deficit spending. Where will the money come from at these low rates? Printing USD (monetization) is highly inflationary. An unexpected rise in food prices in the first half of 2010 could be the visible trigger for inflation that's already cooked into the system.
1. Cash & Fixed Income
Given existing yields on money market funds, CDs and US Bonds, CMV sees much better opportunities offshore. _________ Total Return Fund is one of the best managed US Bond funds. The total return (dividend plus capital gains) of 14% last year will be very difficult to match in an increasing interest rate environment but if anyone can do it,_________ can. Some money market funds should be held in Norwegian krone and Australian dollars which both appreciated almost 20% vs. The USD in 2009. Go to Everbank.com for more information. Investment in Municipal and high-yield junk bonds should be avoided.
2. US Equities
Is the most difficult sector to recommend because of the rumors of a formal USD devaluation and an over-bought US stock market that is losing steam. CMV has listed_________ because of it's dominance in consumer staples in both US and foreign markets. The Dow Jones Industrial Average ETF_________ is the preferred choice for large cap multi-nationals and the NASDAQ 100 ETF _________ is the best aggressive growth exposure to the large cap technology sector. The _________ Mutual Fund _________ has had exceptional performance during the past 10 years. The fund has appreciated (with dividends reinvested) almost 14% per annum since its inception in November 1999. This compares to a per annum decrease of -1.1% for the S&P 500 Index. CMV anticipates a market correction in this sector at any time. All financial ETFs are not recommended at this time.
3. International Equities
A sector, often referred to as the BRICs (Brazil, Russia, India & China) within the international equity market is enjoying almost explosive growth. CMV is at present limiting its recommendations to two countries in Latin America plus Australia and India. China will soon have to move to curtail unsustainable growth and inflation and CMV will continue to monitor conditions there. Russia is too high risk and volatile for CMV at present. Europe is struggling with non-performing debt and an appreciating EURO and therefore is a wait and see. A formal devaluation of the USD would severely impact Euro land.
4. Hard Assets
If CMV is accurate in its assessment that the US and most of the world is entering a period of competitive currency devaluation and an inflationary cycle, the recommendations listed in Sections 4, 5, 6, 7, and 8 (herein) should out-perform the other three sectors. This trend could change and deflationary forces could emerge. If that occurs CMV will reverse this position. _________ is recommended for both growth and income. _________ is the largest transportation and energy storage company in North America. The stock is up about 40% from it's March 2009 low of $41/share is currently paying a 7.5% dividend. The_________ ADR (Argentina) is a new offering and provides the investor with global exposure to agriculture, oil, timber, water and precious metals much the same as _________. _________ is the US Natural Gas Fund which has declined from about $25/share a year ago to around $9. Natural Gas is a true contrarian play. Oil specific ETF's are _________ (Service) and _________ (Production) and_________, an oil and gas producer, has been a favorite of CMV since oil was $10/BBL about 10 years ago.
5. Precious Metals Group (PMG)
The entire group is principally gold, silver, platinum and palladium. This group has been the beneficiary of explosive growth during the past 10 years due principally to the devaluation of the US dollar and the proliferation of fiat (paper) money worldwide. Gold was at a low of $256/oz 10 years ago. A year ago when the global financial crisis imploded gold (Au) fell from $1,030/oz to $700 /oz in a matter of two months reaching a low of _________ in November 2008. Since that date Au has not only made a steep V correction to its previous high, it exceeded it by 20% closing at $1,226/oz on December 3, 2009. Silver (Ag) somewhat tracks Au but is undervalued. Most investors can't handle the volatility of PMG and consider it "too risky." After the market debacle of 2008, risk should be defined and assessed in new terms which you will learn in CMV.
Of the four ETFs recommended, _________ is a proxy on gold bullion. You trade the ETF as a stock and bullion is held in trust equal in value to all the shares outstanding. The same for silver _________. _________ is the gold miner's index and provides an exposure to publically traded gold mining companies worldwide. _________ provides an exposure to junior miners or small cap and therefore is higher risk. _________ is the_________ Gold &Precious Metals Mutual Fund which, unlike the ETFs, is a fully managed fund of PMG Mining Companies. ETFs trade like a common stock and you can buy and sell anytime. _________ trades are at the Net Asset Value at the end of the trading date. The 3 year return is 12.8%, 5 year 18.5% and 10 year is 16.4%. YTD is 53.4% (10/30/09).
One very important word of Caution. Gold and Silver are treated differently by the IRS tax code. They are considered collectibles and not capital assets and therefore don't qualify for the 15% tax rate on long-term capital gains. Gold and silver bullion and coins and ETFs are taxed a maximum rate of 28%. If held for less than one year, the gain is ordinary income. You should consult your CPA or adviser on this or any tax matter.
The recent correction in December in the PMG was healthy with a rally in the USD inevitable but temporary. Au was up to a new record high in 21 of 24 trading days in the last 30 days (as of the drafting of this newsletter). In CMV's opinion the major move that will potentially propel Au to much higher prices is the prospect of inflation over the next two or three years or even longer. CMV will monitor this situation on an on-going basis. If inflation morphs into hyperinflation the possibility of a 'crack-up boom' or the end of this cycle will require that all positions in PMG be liquidated.
Some investors will and should take possession of their gold investments in kind. PMG coins and bars are highly recommended. Be absolutely certain that you deal with an experienced and reliable dealer and that you have suitable storage for these assets. And, don't divulge your acquisition to anyone except a trusted member of your family. Contact Pat Gorman at Resource Consultants, Inc. (800) 494-4149 or (480) 820-5877.
6. Commodities
_________ is an agribusiness ETF and provides exposure to publically traded companies worldwide that derive at least 50% of their revenues from the business of agriculture. Some of the better known names in the _________ are John Deere, Monsanto, Archer-Daniels-Midland and 43 other companies. CMV will feature the anticipated rise in food and commodity prices in a future issue. Watch the prices of a cup of "java." Coffee could rise from $1.45/lb to $2.00/lb.
7. Real Estate
Is also a true contrarian play. The investor must overlook the fact that 23% of ALL residential mortgages in the US are underwater and 30% to 40% of all loans that are modified default for a second time. Defaults amongst prime borrowers exceeds sub-prime for the first time and is occurring amongst the employed as well as unemployed. Fannie Mae (FNM), Freddie Mac (FRE) and FHA are providing 80% of the residential financing at present and all three are surviving on taxpayer support. FNM is now renting homes to their borrowers rather than foreclose. A vivid case-in-point when government interferes with free enterprise.
Despite all the bad news, new home sales nationally were up 6.2% in October and resales were up 23.5% for the same month influenced significantly by the extension of the $8,000 tax credit for new home and $6,500 for resales.
So, how do you play the residential market? One, work with a seasoned, reliable realtor or syndicator experienced in foreclosures, short sales and other opportunities. For those who want to invest in the Phoenix Metropolitan market and require full hands-on management you should consider Empire Residential Opportunity Fund, LLC. This is a private offering available only to "accredited investors." Interested parties should contact Empire directly, or email CMV at hlquist@cox.net
In the commercial market, which exceeds residential in the bearish news department, Vanguard's REIT ETF is a representative play for the potential longer-term upside in this market. The stock is already up 100% from its low so it isn't a screaming buy. Total assets are near $10 billion and are diversified as follows:
Industrial -- 4.9%
Office -- 16.2%
Residential -- 17.1%
Retail -- 25.5%
Specialized -- 27.1%
Diversified -- 9.2%
8. Special Situations
These names are for aggressive investors who can afford to lose most if not all of their capital allocated to the 3 natural resource stocks in this section. _________ (_________) is a Canadian precious metals exploration company with a large prospect in Argentina (H. L. Quist owns and controls a substantial holding in this company)._________, Ltd. is a Canadian diversified investment and merchant banking company. It is invested in small cap uranium, oil and gas, precious metals, potash, lithium and rare earths as well as biotech and technology sectors. Uranium exploration is a major part of_________ holdings. _________, Ltd., (_________) is also a Canadian exploration company focused on rare elements which are used in virtually all communication devices. It is reported that China owns or controls 90% of the rare earths known in the world. _________ is also involved in gold exploration. Anyone interested in any of these special situations should go to the respective websites for full information.
_________is Proshares Ultra Short ETF which is a play on rising interest rates. As rates rise the value of the Lehman Long-Term Bond Index (20 years +) loses value and thereby a gain for the investor who is "short" the bonds. Ultra means that the security is leveraged 2x1 thereby doubling any gains or losses. As long-term bond yields rose from January, 2009 to June, 2009 this ETF rose from $36/share to $58/share, but dropped 20% when rates declined in late summer. This security is for aggressive investors only.
H. L. Quist is associated with DJM Wealth Strategies, LLC, a Registered Investment Advisor and has a branch office at 4323 East McDonald Drive, Phoenix, Arizona 85018. All inquiries should be directed to hlquist@cox.net
H. L. Quist's CMV Recommended List is NOT included in preview.
DISCLOSURE:
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss.
-- H. L. Quist
P.S. You may also send me a message through the newsletter site and I or my internet assistant will get back to you. HLQuist_Contrarian_Market_View-owner@yahoogroups.com
Free Preview of H. L. Quist's Newsletter!
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January, 2010
H. L. Quist's
Contrarian Market View
Newsletter
Contrarian Market View
Newsletter
Introduction
A CONTRARIAN is someone who looks at things differently than the majority of people. That definition fits H. L. Quist and CMV perfectly. In market parlance when 80 to 90% of investors are certain that the market is going to continue upward, the contrarian heads the other direction. Conversely, when the news is about as bad as it can get, the true contrarian is usually on the ground floor buying. That's what you can expect from H. L. Quist's Contrarian Market View (CMV).
CMV is not a market timer, but we don't want to be 100% exposed at a major turn in the market. In the past ten years there were two occasions to be defensive, significantly change the asset allocation, or be out of the market altogether.
March 2000 to October 2002
July 2007 to April 2009
The results, in the above case, were significant as most participants are painfully aware (Pages 68 - 75 How to Profit From The Coming Inflationary Boom and Avoid the Next Crash, by H. L. Quist). CMV anticipates that market volatility will continue in the future and our form of Active Management will serve the investor well.
In most cases, CMV anticipates that most readers will manage their own assets. In addition, most readers/investors will use CMV's specific recommendations to compliment their existing portfolios according to their own risk tolerance, time horizon and suitability. The recommendations included in this newsletter are principally aggressive and speculative in nature and should be used to offset or compliment the investor's complete portfolio. When determining what percentages should be in various asset classes, the reader/investor should list ALL of their assets such as cash in all accounts, life insurance and annuities, IRAs, 401Ks, commodity accounts, investment real estate, etc. The principal point of this exercise is that most advisors totally ignored alternative investments such as gold, oil, commodities etc. in past allocation of assets and not only failed to realize the gains these assets provided in the past 10 years, but they didn't have these assets to offset the losses in the .com bubble bust and the sub-prime market meltdown. Going forward Buy and Hold is not a prudent investment strategy.
Here is an example:
Risk Tolerance -- % Allocated to CMV
Conservative -- 10%
Moderate -- 15%
Aggressive -- 30%
Speculative -- 50%
The above is simply an example of how the reader/investor may want to use this newsletter and the recommended portfolio. Please consult with your adviser and conduct additional research on your own.
Market Overview
As the year 2010 begins, not since the Great Depression or World War II perhaps, is there more political, social and economic uncertainty in America. CMV will attempt to articulate the Macro Events that form the basis for making the specific (Micro) investment recommendations listed below:
Keynesian Economics
The Obama Administration is ideologically committed to the theory that through central planning of the economy and creation of unprecedented amounts of new debt, the government can increase the GDP and put people back to work. As history clearly reminds us, bureaucratic intrusion into free enterprise and increased taxation, will deter the expansion of commerce and not promote more jobs. Employers, not knowing what to expect in potential health care costs, bank and equity financing and demand for their goods will, in most cases, do nothing until these initiatives become clear. The fourth quarter GDP of 2.5% could be an illusion created by the $787 billion stimulus plan that was rear-end loaded to carry over to 2010 for the mid-term elections.
The Fed and The FDIC
The Fed Funds rate is basically zero and the Fed will have to raise rates soon to avoid another speculative bubble. An unexpected 1.45% rise in the USD index on December 4, 2009 due to a questionable jobs report resulted in a sell-off of gold and commodities and a concern that equities would be adversely effected by rising interest rates. The FDIC is broke and is assessing its member banks three years deposit insurance premiums in advance which will further reduce lending and close many more banks. The USD has lost about 18% against a basket of foreign currencies in 2009. That's market devaluation. CMV expects the possibility of a Formal USD devaluation that could come at any time possibly as a result of a downgrade of US Treasury Debt by the rating agencies.
Note: Subscribe to this blog for in-depth updates on the above and other topics.
Inflation
Is a monetary phenomenon. The US Treasury has to rollover $2 trillion in short-term debt in 2010 plus an additional $1.5 trillion in deficit spending. Where will the money come from at these low rates? Printing USD (monetization) is highly inflationary. An unexpected rise in food prices in the first half of 2010 could be the visible trigger for inflation that's already cooked into the system.
Notes To Portfolio
1. Cash & Fixed Income
Given existing yields on money market funds, CDs and US Bonds, CMV sees much better opportunities offshore. _________ Total Return Fund is one of the best managed US Bond funds. The total return (dividend plus capital gains) of 14% last year will be very difficult to match in an increasing interest rate environment but if anyone can do it,_________ can. Some money market funds should be held in Norwegian krone and Australian dollars which both appreciated almost 20% vs. The USD in 2009. Go to Everbank.com for more information. Investment in Municipal and high-yield junk bonds should be avoided.
2. US Equities
Is the most difficult sector to recommend because of the rumors of a formal USD devaluation and an over-bought US stock market that is losing steam. CMV has listed_________ because of it's dominance in consumer staples in both US and foreign markets. The Dow Jones Industrial Average ETF_________ is the preferred choice for large cap multi-nationals and the NASDAQ 100 ETF _________ is the best aggressive growth exposure to the large cap technology sector. The _________ Mutual Fund _________ has had exceptional performance during the past 10 years. The fund has appreciated (with dividends reinvested) almost 14% per annum since its inception in November 1999. This compares to a per annum decrease of -1.1% for the S&P 500 Index. CMV anticipates a market correction in this sector at any time. All financial ETFs are not recommended at this time.
3. International Equities
A sector, often referred to as the BRICs (Brazil, Russia, India & China) within the international equity market is enjoying almost explosive growth. CMV is at present limiting its recommendations to two countries in Latin America plus Australia and India. China will soon have to move to curtail unsustainable growth and inflation and CMV will continue to monitor conditions there. Russia is too high risk and volatile for CMV at present. Europe is struggling with non-performing debt and an appreciating EURO and therefore is a wait and see. A formal devaluation of the USD would severely impact Euro land.
4. Hard Assets
If CMV is accurate in its assessment that the US and most of the world is entering a period of competitive currency devaluation and an inflationary cycle, the recommendations listed in Sections 4, 5, 6, 7, and 8 (herein) should out-perform the other three sectors. This trend could change and deflationary forces could emerge. If that occurs CMV will reverse this position. _________ is recommended for both growth and income. _________ is the largest transportation and energy storage company in North America. The stock is up about 40% from it's March 2009 low of $41/share is currently paying a 7.5% dividend. The_________ ADR (Argentina) is a new offering and provides the investor with global exposure to agriculture, oil, timber, water and precious metals much the same as _________. _________ is the US Natural Gas Fund which has declined from about $25/share a year ago to around $9. Natural Gas is a true contrarian play. Oil specific ETF's are _________ (Service) and _________ (Production) and_________, an oil and gas producer, has been a favorite of CMV since oil was $10/BBL about 10 years ago.
5. Precious Metals Group (PMG)
The entire group is principally gold, silver, platinum and palladium. This group has been the beneficiary of explosive growth during the past 10 years due principally to the devaluation of the US dollar and the proliferation of fiat (paper) money worldwide. Gold was at a low of $256/oz 10 years ago. A year ago when the global financial crisis imploded gold (Au) fell from $1,030/oz to $700 /oz in a matter of two months reaching a low of _________ in November 2008. Since that date Au has not only made a steep V correction to its previous high, it exceeded it by 20% closing at $1,226/oz on December 3, 2009. Silver (Ag) somewhat tracks Au but is undervalued. Most investors can't handle the volatility of PMG and consider it "too risky." After the market debacle of 2008, risk should be defined and assessed in new terms which you will learn in CMV.
Of the four ETFs recommended, _________ is a proxy on gold bullion. You trade the ETF as a stock and bullion is held in trust equal in value to all the shares outstanding. The same for silver _________. _________ is the gold miner's index and provides an exposure to publically traded gold mining companies worldwide. _________ provides an exposure to junior miners or small cap and therefore is higher risk. _________ is the_________ Gold &Precious Metals Mutual Fund which, unlike the ETFs, is a fully managed fund of PMG Mining Companies. ETFs trade like a common stock and you can buy and sell anytime. _________ trades are at the Net Asset Value at the end of the trading date. The 3 year return is 12.8%, 5 year 18.5% and 10 year is 16.4%. YTD is 53.4% (10/30/09).
One very important word of Caution. Gold and Silver are treated differently by the IRS tax code. They are considered collectibles and not capital assets and therefore don't qualify for the 15% tax rate on long-term capital gains. Gold and silver bullion and coins and ETFs are taxed a maximum rate of 28%. If held for less than one year, the gain is ordinary income. You should consult your CPA or adviser on this or any tax matter.
The recent correction in December in the PMG was healthy with a rally in the USD inevitable but temporary. Au was up to a new record high in 21 of 24 trading days in the last 30 days (as of the drafting of this newsletter). In CMV's opinion the major move that will potentially propel Au to much higher prices is the prospect of inflation over the next two or three years or even longer. CMV will monitor this situation on an on-going basis. If inflation morphs into hyperinflation the possibility of a 'crack-up boom' or the end of this cycle will require that all positions in PMG be liquidated.
Some investors will and should take possession of their gold investments in kind. PMG coins and bars are highly recommended. Be absolutely certain that you deal with an experienced and reliable dealer and that you have suitable storage for these assets. And, don't divulge your acquisition to anyone except a trusted member of your family. Contact Pat Gorman at Resource Consultants, Inc. (800) 494-4149 or (480) 820-5877.
6. Commodities
_________ is an agribusiness ETF and provides exposure to publically traded companies worldwide that derive at least 50% of their revenues from the business of agriculture. Some of the better known names in the _________ are John Deere, Monsanto, Archer-Daniels-Midland and 43 other companies. CMV will feature the anticipated rise in food and commodity prices in a future issue. Watch the prices of a cup of "java." Coffee could rise from $1.45/lb to $2.00/lb.
7. Real Estate
Is also a true contrarian play. The investor must overlook the fact that 23% of ALL residential mortgages in the US are underwater and 30% to 40% of all loans that are modified default for a second time. Defaults amongst prime borrowers exceeds sub-prime for the first time and is occurring amongst the employed as well as unemployed. Fannie Mae (FNM), Freddie Mac (FRE) and FHA are providing 80% of the residential financing at present and all three are surviving on taxpayer support. FNM is now renting homes to their borrowers rather than foreclose. A vivid case-in-point when government interferes with free enterprise.
Despite all the bad news, new home sales nationally were up 6.2% in October and resales were up 23.5% for the same month influenced significantly by the extension of the $8,000 tax credit for new home and $6,500 for resales.
So, how do you play the residential market? One, work with a seasoned, reliable realtor or syndicator experienced in foreclosures, short sales and other opportunities. For those who want to invest in the Phoenix Metropolitan market and require full hands-on management you should consider Empire Residential Opportunity Fund, LLC. This is a private offering available only to "accredited investors." Interested parties should contact Empire directly, or email CMV at hlquist@cox.net
In the commercial market, which exceeds residential in the bearish news department, Vanguard's REIT ETF is a representative play for the potential longer-term upside in this market. The stock is already up 100% from its low so it isn't a screaming buy. Total assets are near $10 billion and are diversified as follows:
Industrial -- 4.9%
Office -- 16.2%
Residential -- 17.1%
Retail -- 25.5%
Specialized -- 27.1%
Diversified -- 9.2%
8. Special Situations
These names are for aggressive investors who can afford to lose most if not all of their capital allocated to the 3 natural resource stocks in this section. _________ (_________) is a Canadian precious metals exploration company with a large prospect in Argentina (H. L. Quist owns and controls a substantial holding in this company)._________, Ltd. is a Canadian diversified investment and merchant banking company. It is invested in small cap uranium, oil and gas, precious metals, potash, lithium and rare earths as well as biotech and technology sectors. Uranium exploration is a major part of_________ holdings. _________, Ltd., (_________) is also a Canadian exploration company focused on rare elements which are used in virtually all communication devices. It is reported that China owns or controls 90% of the rare earths known in the world. _________ is also involved in gold exploration. Anyone interested in any of these special situations should go to the respective websites for full information.
_________is Proshares Ultra Short ETF which is a play on rising interest rates. As rates rise the value of the Lehman Long-Term Bond Index (20 years +) loses value and thereby a gain for the investor who is "short" the bonds. Ultra means that the security is leveraged 2x1 thereby doubling any gains or losses. As long-term bond yields rose from January, 2009 to June, 2009 this ETF rose from $36/share to $58/share, but dropped 20% when rates declined in late summer. This security is for aggressive investors only.
H. L. Quist is associated with DJM Wealth Strategies, LLC, a Registered Investment Advisor and has a branch office at 4323 East McDonald Drive, Phoenix, Arizona 85018. All inquiries should be directed to hlquist@cox.net
H. L. Quist's CMV Recommended List is NOT included in preview.
DISCLOSURE:
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss.
-- H. L. Quist
P.S. You may also send me a message through the newsletter site and I or my internet assistant will get back to you. HLQuist_Contrarian_Market_View-owner@yahoogroups.com
Thursday, December 3, 2009
MACRO CHANGE! The Myth is: Keynesian Economics will succeed in the Obama Presidency
Hello World,
MACRO CHANGE! The Myth is: Keynesian Economics will succeed in the Obama Presidency
Economic Myths can persist for many years and undeservedly some become truth. The Myth Buster and time has debunked many of them. Like:
"What is good for General Motors is good for the Country," or
"The Federal Reserve is independent," and
"The US dollar is as good as gold."
You get the drift. But, there is one persistent economic myth that has survived for over 70 years and has resurfaced (for the umpteenth time) as the solution to America's and the world's financial dilemma created by the abuse of power by capitalists and Wall St. greed.
That myth is the Keynesian Theory of Economics.
A short history is in order and is taken from a research paper "Keynes at Harvard, Economic Deception as a Political Credo," compiled by the Trustees of the Veritas Foundation. The Trustees were all graduates of Harvard and it was published in 1962 in an attempt to prevent the Economics Department at Harvard from being dominated by Keynesian radical socialists. Unfortunately, the Trustees failed in their mission but their research is even more valuable and appropriate today. Veritas in Latin means truth.
John Maynard Keynes (JMK) was born in England in 1883 and was the son of a Cambridge professor who, when Keynes was seven years old, wrote a book attacking the principles of Laissez-Faire (government should not interfere with business and commerce) and the free enterprise system. Greatly influenced by his father JMK, "banded together with a group of radicals who were destined to become the outstanding socialist leaders of Great Britain." (Page 43 of "Keynes at Harvard"). At age 20 JMK became a member of the Fabian Socialists at Cambridge. Despite his ideological disdain of profits for individual gain, JMK built up a sizable fortune of 500,000 pounds ($2.5 million) by 1937, which reveals the hypocrisy of the man and his comrades who railed against capitalism and personal wealth.
Despite the fact that JMK visited the US in 1931 and met with officials at the Federal Reserve and President Herbert Hoover, it wasn't until he published "The General Theory of Employment, Interest and Money" in 1936 that his reputation grew throughout the world. With the Great Depression impacting all corners of the globe JMK's theory was immediately heralded (in desperation) as a panacea but in reality it opened pandora's box. Franklin D. Roosevelt "blessed" JMK's theory on the basis that "Socialism would save Capitalism."
What were the basic tenets of Keynesianism?
-- Capitalists are the cause of business cycles and unemployment and the primary villains are the money-lenders.
-- Capitalism should be regulated and controlled by a central authority. The US Constitution should be scraped so as not to interfere with government.
-- The economy can be controlled by variations of the rate of interest, budgetary deficits and surpluses, public works and a redistribution of personal incomes in the egalitarian direction.
-- A scientific facade is necessary to create the illusion of modern progressivism. (Think global warming.)
-- Large scale deficit financing by government is necessary during recessions to achieve full employment.
Roosevelt as well as Stalin, Hitler and Mussolini all drank JMK's Kool-Aid. FDR's New Deal cocktail was spiked with sugar Keynes. What most readers will not know or recall is that despite all the stimulus provided by the New Deal, the US economy fell into a deeper recession in 1937 and 1938. On May 9, 1939 Henry Morgenthau, FDR's Secretary of the Treasury wrote:
"We have tried spending money. We have spent more than we ever had before and it does not work...After eight years of this administration we have just as much unemployment as when we started...and an enormous debt to boot!"
That says it all. America's version of Keynesianism did not work. World War II ended the Great Depression. And, that could happen again. When Obamanomics fails, start a war. (Think Iran.) Keynesianism was not economic theory, it was political ideology!
JMK died in April 1946 but his ideology was re-ignited in the 1960s by Lyndon Johnson and his "Great Society." It converted Richard Nixon and lead to the disastrous inflation during the Presidency of Jimmy Carter (1976-1980) when the Consumer Price Index (CPI) reached 13%, the prime rate topped out at 21.5% and residential mortgage rates peaked at 17%. Milton Friedman, one of America's foremost economists, originally supported JMK's theory in the New Deal era, but in the 50s he reversed his position and challenged the premise that government could manage the economy. Friedman forecast the "Stagflation" that did occur in the Carter era. Friedman's theory of Monetarism and unabashed belief in Laissez-Faire and free enterprise greatly influenced Ronald Regan. It is interesting to note that in Friedman's last interview in 2006, he forecast that Islamofacism would be the greatest threat to the free world. If Friedman were alive today, he would surely add Obamanomics and the rebirth of Keynesianism as a threat to America.
All this history could be a prelude to what is ahead given President Obama's acceptance of JMK's theory of governance and deficit spending. Within the next 12 months, the US Treasury will have to refinance $2 trillion in short-term debt plus approximately an additional $1.5 trillion in deficit spending. Where in the world will the Treasury be able to borrow $3.5 trillion in one year when the last T-Bills were at a negative rate? That's equal to approximately 30% of the Nation's GDP! The Greenspan-Guidotti Rule states that any country should maintain hard currency reserves equal to at least 100% of their short-term debt. The US has only about $500 billion in reserves. The bottom line? The US is headed for a default on its sovereign debt. Massive amounts of public and private debt will never be paid. When? No one knows.
In The Myth Buster's book "How To Profit From The Coming Inflationary Boom and Avoid the Next Crash", he said:
"One of John Maynard Keynes' most oft repeated line's was, ‘In the long run, we are all dead.' Meaning — don't be concerned about the aftermath of massive deficits — we'll all be dead when the problems arise. Advocating and utilizing his theory today will ultimately lead to monster inflation and quite possibly hyperinflation and a "crack-up boom." Maybe then, we will be able to bury Keynes forever."
The problem is that in the end we'll all be alive and our children and grandchildren will be burdened by the myth that deficits don't matter. Our President and Congress took "intellectual cover" in Keynesianism as sound economic policy. If they had read history they would have discovered that Keynes and his theory were a fraud.
-- H. L. Quist
Sign up for my very special monthly newsletter "H. L. Quist's Contrarian Market View".
This is the service many of you have been asking me for.
I have decided to come out of retirement, as a result of many factors, including requests for my services in Asset Management. In addition to private consultation, I am offering a private Internet newsletter, which will provide you with specific investment recommendations and also special alerts as needed. This newsletter will be sent about once a month, or as needed, and will cost $9.95/month or $99/year payable in advance.
The first issue will be sent out the first week in January, 2010. Expect the first newsletter to provide you an important market forecast for the year.
Click here to subscribe for a year (about 20% off the monthly cost) $99/year.
Or click here to sign up on a month-by-month basis $9.95/month.
You must provide your preferred screen name to receive the newsletter and also the initial 'invitation' to join this private group (it is provided through a yahoo-group feature, closed to the public).
I am now associated with DJM Wealth Strategies, LLC - an announcement letter will be sent out shortly. -- H. L. Quist
MACRO CHANGE! The Myth is: Keynesian Economics will succeed in the Obama Presidency
Economic Myths can persist for many years and undeservedly some become truth. The Myth Buster and time has debunked many of them. Like:
"What is good for General Motors is good for the Country," or
"The Federal Reserve is independent," and
"The US dollar is as good as gold."
You get the drift. But, there is one persistent economic myth that has survived for over 70 years and has resurfaced (for the umpteenth time) as the solution to America's and the world's financial dilemma created by the abuse of power by capitalists and Wall St. greed.
That myth is the Keynesian Theory of Economics.
A short history is in order and is taken from a research paper "Keynes at Harvard, Economic Deception as a Political Credo," compiled by the Trustees of the Veritas Foundation. The Trustees were all graduates of Harvard and it was published in 1962 in an attempt to prevent the Economics Department at Harvard from being dominated by Keynesian radical socialists. Unfortunately, the Trustees failed in their mission but their research is even more valuable and appropriate today. Veritas in Latin means truth.
John Maynard Keynes (JMK) was born in England in 1883 and was the son of a Cambridge professor who, when Keynes was seven years old, wrote a book attacking the principles of Laissez-Faire (government should not interfere with business and commerce) and the free enterprise system. Greatly influenced by his father JMK, "banded together with a group of radicals who were destined to become the outstanding socialist leaders of Great Britain." (Page 43 of "Keynes at Harvard"). At age 20 JMK became a member of the Fabian Socialists at Cambridge. Despite his ideological disdain of profits for individual gain, JMK built up a sizable fortune of 500,000 pounds ($2.5 million) by 1937, which reveals the hypocrisy of the man and his comrades who railed against capitalism and personal wealth.
Despite the fact that JMK visited the US in 1931 and met with officials at the Federal Reserve and President Herbert Hoover, it wasn't until he published "The General Theory of Employment, Interest and Money" in 1936 that his reputation grew throughout the world. With the Great Depression impacting all corners of the globe JMK's theory was immediately heralded (in desperation) as a panacea but in reality it opened pandora's box. Franklin D. Roosevelt "blessed" JMK's theory on the basis that "Socialism would save Capitalism."
What were the basic tenets of Keynesianism?
-- Capitalists are the cause of business cycles and unemployment and the primary villains are the money-lenders.
-- Capitalism should be regulated and controlled by a central authority. The US Constitution should be scraped so as not to interfere with government.
-- The economy can be controlled by variations of the rate of interest, budgetary deficits and surpluses, public works and a redistribution of personal incomes in the egalitarian direction.
-- A scientific facade is necessary to create the illusion of modern progressivism. (Think global warming.)
-- Large scale deficit financing by government is necessary during recessions to achieve full employment.
Roosevelt as well as Stalin, Hitler and Mussolini all drank JMK's Kool-Aid. FDR's New Deal cocktail was spiked with sugar Keynes. What most readers will not know or recall is that despite all the stimulus provided by the New Deal, the US economy fell into a deeper recession in 1937 and 1938. On May 9, 1939 Henry Morgenthau, FDR's Secretary of the Treasury wrote:
"We have tried spending money. We have spent more than we ever had before and it does not work...After eight years of this administration we have just as much unemployment as when we started...and an enormous debt to boot!"
That says it all. America's version of Keynesianism did not work. World War II ended the Great Depression. And, that could happen again. When Obamanomics fails, start a war. (Think Iran.) Keynesianism was not economic theory, it was political ideology!
JMK died in April 1946 but his ideology was re-ignited in the 1960s by Lyndon Johnson and his "Great Society." It converted Richard Nixon and lead to the disastrous inflation during the Presidency of Jimmy Carter (1976-1980) when the Consumer Price Index (CPI) reached 13%, the prime rate topped out at 21.5% and residential mortgage rates peaked at 17%. Milton Friedman, one of America's foremost economists, originally supported JMK's theory in the New Deal era, but in the 50s he reversed his position and challenged the premise that government could manage the economy. Friedman forecast the "Stagflation" that did occur in the Carter era. Friedman's theory of Monetarism and unabashed belief in Laissez-Faire and free enterprise greatly influenced Ronald Regan. It is interesting to note that in Friedman's last interview in 2006, he forecast that Islamofacism would be the greatest threat to the free world. If Friedman were alive today, he would surely add Obamanomics and the rebirth of Keynesianism as a threat to America.
All this history could be a prelude to what is ahead given President Obama's acceptance of JMK's theory of governance and deficit spending. Within the next 12 months, the US Treasury will have to refinance $2 trillion in short-term debt plus approximately an additional $1.5 trillion in deficit spending. Where in the world will the Treasury be able to borrow $3.5 trillion in one year when the last T-Bills were at a negative rate? That's equal to approximately 30% of the Nation's GDP! The Greenspan-Guidotti Rule states that any country should maintain hard currency reserves equal to at least 100% of their short-term debt. The US has only about $500 billion in reserves. The bottom line? The US is headed for a default on its sovereign debt. Massive amounts of public and private debt will never be paid. When? No one knows.
In The Myth Buster's book "How To Profit From The Coming Inflationary Boom and Avoid the Next Crash", he said:
"One of John Maynard Keynes' most oft repeated line's was, ‘In the long run, we are all dead.' Meaning — don't be concerned about the aftermath of massive deficits — we'll all be dead when the problems arise. Advocating and utilizing his theory today will ultimately lead to monster inflation and quite possibly hyperinflation and a "crack-up boom." Maybe then, we will be able to bury Keynes forever."
The problem is that in the end we'll all be alive and our children and grandchildren will be burdened by the myth that deficits don't matter. Our President and Congress took "intellectual cover" in Keynesianism as sound economic policy. If they had read history they would have discovered that Keynes and his theory were a fraud.
-- H. L. Quist
Sign up for my very special monthly newsletter "H. L. Quist's Contrarian Market View".
This is the service many of you have been asking me for.
I have decided to come out of retirement, as a result of many factors, including requests for my services in Asset Management. In addition to private consultation, I am offering a private Internet newsletter, which will provide you with specific investment recommendations and also special alerts as needed. This newsletter will be sent about once a month, or as needed, and will cost $9.95/month or $99/year payable in advance.
The first issue will be sent out the first week in January, 2010. Expect the first newsletter to provide you an important market forecast for the year.
Click here to subscribe for a year (about 20% off the monthly cost) $99/year.
Or click here to sign up on a month-by-month basis $9.95/month.
You must provide your preferred screen name to receive the newsletter and also the initial 'invitation' to join this private group (it is provided through a yahoo-group feature, closed to the public).
I am now associated with DJM Wealth Strategies, LLC - an announcement letter will be sent out shortly. -- H. L. Quist
Thursday, November 12, 2009
The Myth Was: 2009 Would Be Bad Year In The Economy and Financial Markets!
Hello World,
The Myth Buster (TMB), the ever consistent contrarian, didn't agree with the hordes of economists, market analysts and pundits of all stripes who forecast a dismal, depressing 2009. On December 1, 2008, TMB posted on his blog "Another Bubble" which forecast that "Billions, yes maybe a trillion will flee from (US) Treasuries..." that would fuel, in part, a surprising bull market in several sectors. Specifically, this is what TMB said on December 1, 2008: (Also repeated on page 61 in "How to Profit From The Coming Inflationary Boom: And Avoid the Next Crash")
"Where will a large portion of this money go?
First, equities. A dramatic bear market rally could be ahead (A 55% rally in the DOW validates TMB's forecast)
Second, gold. The ultimate money and inflation hedge. (49% rally from $750/oz to $1,115/oz validates TMB's forecast)
Third, real estate. A surprising rebound could defy all prognostications. (Recent reports from Beazer Homes and Toll Brothers that new home construction and sales have been positive in the third quarter and the sheer volume of purchases of foreclosures by investors and home buyers have been a pleasant surprise and defied most prognosticators)
In the book "Profit" (written in late spring of 2009) TMB made numerous other forecasts that have been or are about to occur: A few are:
1. Auto Sales (Page 96)
"...your author forecasts a headline that will appear in most American newspapers by fall saying, Car sales are up!...Ford, in your author's opinion, will be the big winner." Note: Ford was the big winner and made $1 billion.
2. University of Michigan Consumer Sentiment (Page 96)
"Your author boldly forecasts that by the end of the third quarter of 2009, this index will rise appreciably..." Note: The Index rose from a low of 56 in February 2009 to a high of 73 in September 2009.
3. Bank Earnings (Page 97)
"Never in our Nation's history has the banks cost of funds been so low and the earnings spread so wide in our banking system. Barring an unforseen catastrophe, bank earnings in the last half of 2009 and going forward in 2010 will be robust." Note: Earnings at Goldman Sachs and other banks have been so robust that bonuses (if the Salary Czar permits them) in 2009 will be the largest ever.
4. The Coming Boom in Retail Sales Arrives in Time for Christmas (Page 85)
"A shortage of goods coupled with tax rebates and consumer savings could create a classic supply-demand imbalance going into the Christmas Season. Toys, in particular, could be in short supply." Note: Obviously the jury is still out on this forecast but early indications are that TMB nailed at least one market — Toys. An article entitled, "Stores Run Low on Holiday's Hot Toys" that appeared in the November 10th edition of the Arizona Republic indicates that as early as six weeks prior to Christmas, the nation's retailers don't have adequate supplies of five popular toys. Personal savings are at a 15 years high and amount to approximately $300 billion more over the same period last year. A much better than expected retail results will also impact consumer sentiment moving forwards into 2010.
An ardent and supportive fan of TMB read the draft of this post and commented:
"I can't believe this guy! He told me to put my money market accounts in Norwegian Krone and Australian dollars and they're up over 20% this year. He told me to buy gold and it's up 40%. Virtually all the forecasts in his book have come true. I can't understand why so few people know who The Myth Buster is. You gotta read his stuff and buy his newsletter and books!" -- T.M. Scottsdale, AZ (Note: Information on the newsletter will be forthcoming.)
TMB reminds all readers that this "turning point" in the economy evidenced by the above has been a result of artificially inseminated liquidity and stimuli. The early stages of this inflationary boom can be profitable for investors and business owners, but if prices of goods and services accelerate out of control a "crack-up boom" could be devastating. Keep in touch with TMB to monitor events.
Two Special offers on the books by H L Quist: (Be sure to provide the mailing address(es).)
Single copy of "How to Profit from The Coming Inflationary Boom: And Avoid the Next Crash" is just $20 shipped to any USA address and includes shipping and handling. Click here to order.
Two book SPECIAL OFFER — 25% discount! Includes PROFIT and "The Aftermath of Greed: Get Ready for the Coming Inflationary Boom," shipped to any USA address for just $35. Click here to order
A wonderful CHRISTMAS gift for your children and grandchildren who will be the most impacted by Buster's forecasts.
And check out my video, posted this week, on the "Inflationary Boom Has Begun." See the sidebar for the link.
-- H. L. Quist
What They Are Saying About THE MYTH BUSTER:
Hi,
I think we are on your list for your blog post updates, but would love to get your new newsletter and any other investment advise that you have. My husband and I met you at SEVRAR and have your 2 books, "The Aftermath of Greed..." and "How to Profit in Inflationary Boom..." We follow you and find that your predictions and common sense in the market far exceeds anyone else!! We have most of our (small amount) of investment money in real estate right now but I think that you are so right and may invest some in commodities or stock market. Thanks for sharing your knowledge with the world! -- B. E., Gilbert, AZ
. . .
Hi HL,
A close friend of mine Bob Kennedy turned me onto your site and books. I was very impressed with what you had to say and your ability to read the economic tea leaves so to speak. I would like you to include me on your blog, newsletter, and email lists. Also, which book are you referring to that tells how to play the coming inflationary period? I have been concerned about this for a while and you make more sense than anyone I have listened to yet. Thanks again, -- K.W. Arizona
The Myth Buster (TMB), the ever consistent contrarian, didn't agree with the hordes of economists, market analysts and pundits of all stripes who forecast a dismal, depressing 2009. On December 1, 2008, TMB posted on his blog "Another Bubble" which forecast that "Billions, yes maybe a trillion will flee from (US) Treasuries..." that would fuel, in part, a surprising bull market in several sectors. Specifically, this is what TMB said on December 1, 2008: (Also repeated on page 61 in "How to Profit From The Coming Inflationary Boom: And Avoid the Next Crash")
"Where will a large portion of this money go?
First, equities. A dramatic bear market rally could be ahead (A 55% rally in the DOW validates TMB's forecast)
Second, gold. The ultimate money and inflation hedge. (49% rally from $750/oz to $1,115/oz validates TMB's forecast)
Third, real estate. A surprising rebound could defy all prognostications. (Recent reports from Beazer Homes and Toll Brothers that new home construction and sales have been positive in the third quarter and the sheer volume of purchases of foreclosures by investors and home buyers have been a pleasant surprise and defied most prognosticators)
In the book "Profit" (written in late spring of 2009) TMB made numerous other forecasts that have been or are about to occur: A few are:
1. Auto Sales (Page 96)
"...your author forecasts a headline that will appear in most American newspapers by fall saying, Car sales are up!...Ford, in your author's opinion, will be the big winner." Note: Ford was the big winner and made $1 billion.
2. University of Michigan Consumer Sentiment (Page 96)
"Your author boldly forecasts that by the end of the third quarter of 2009, this index will rise appreciably..." Note: The Index rose from a low of 56 in February 2009 to a high of 73 in September 2009.
3. Bank Earnings (Page 97)
"Never in our Nation's history has the banks cost of funds been so low and the earnings spread so wide in our banking system. Barring an unforseen catastrophe, bank earnings in the last half of 2009 and going forward in 2010 will be robust." Note: Earnings at Goldman Sachs and other banks have been so robust that bonuses (if the Salary Czar permits them) in 2009 will be the largest ever.
4. The Coming Boom in Retail Sales Arrives in Time for Christmas (Page 85)
"A shortage of goods coupled with tax rebates and consumer savings could create a classic supply-demand imbalance going into the Christmas Season. Toys, in particular, could be in short supply." Note: Obviously the jury is still out on this forecast but early indications are that TMB nailed at least one market — Toys. An article entitled, "Stores Run Low on Holiday's Hot Toys" that appeared in the November 10th edition of the Arizona Republic indicates that as early as six weeks prior to Christmas, the nation's retailers don't have adequate supplies of five popular toys. Personal savings are at a 15 years high and amount to approximately $300 billion more over the same period last year. A much better than expected retail results will also impact consumer sentiment moving forwards into 2010.
An ardent and supportive fan of TMB read the draft of this post and commented:
"I can't believe this guy! He told me to put my money market accounts in Norwegian Krone and Australian dollars and they're up over 20% this year. He told me to buy gold and it's up 40%. Virtually all the forecasts in his book have come true. I can't understand why so few people know who The Myth Buster is. You gotta read his stuff and buy his newsletter and books!" -- T.M. Scottsdale, AZ (Note: Information on the newsletter will be forthcoming.)
TMB reminds all readers that this "turning point" in the economy evidenced by the above has been a result of artificially inseminated liquidity and stimuli. The early stages of this inflationary boom can be profitable for investors and business owners, but if prices of goods and services accelerate out of control a "crack-up boom" could be devastating. Keep in touch with TMB to monitor events.
Two Special offers on the books by H L Quist: (Be sure to provide the mailing address(es).)
Single copy of "How to Profit from The Coming Inflationary Boom: And Avoid the Next Crash" is just $20 shipped to any USA address and includes shipping and handling. Click here to order.
Two book SPECIAL OFFER — 25% discount! Includes PROFIT and "The Aftermath of Greed: Get Ready for the Coming Inflationary Boom," shipped to any USA address for just $35. Click here to order
A wonderful CHRISTMAS gift for your children and grandchildren who will be the most impacted by Buster's forecasts.
And check out my video, posted this week, on the "Inflationary Boom Has Begun." See the sidebar for the link.
-- H. L. Quist
What They Are Saying About THE MYTH BUSTER:
Hi,
I think we are on your list for your blog post updates, but would love to get your new newsletter and any other investment advise that you have. My husband and I met you at SEVRAR and have your 2 books, "The Aftermath of Greed..." and "How to Profit in Inflationary Boom..." We follow you and find that your predictions and common sense in the market far exceeds anyone else!! We have most of our (small amount) of investment money in real estate right now but I think that you are so right and may invest some in commodities or stock market. Thanks for sharing your knowledge with the world! -- B. E., Gilbert, AZ
. . .
Hi HL,
A close friend of mine Bob Kennedy turned me onto your site and books. I was very impressed with what you had to say and your ability to read the economic tea leaves so to speak. I would like you to include me on your blog, newsletter, and email lists. Also, which book are you referring to that tells how to play the coming inflationary period? I have been concerned about this for a while and you make more sense than anyone I have listened to yet. Thanks again, -- K.W. Arizona
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