Friday, December 13, 2013

2014 Financial Forecast in 15 Charts

What will 2014 bring? Will the bull market continue? Or will it stagnate? Or is it going to be another deflation crash like 2008? Most investors ponder and think about the possibilities here. There is no crystal ball, but it helps to see the few facts when we can. What are they? I may not be Santa Claus, but I have an early present for you this year. It’s actually 15 presents in the form of 15 charts of financial markets with analysis by Bob Prechter, the president of Elliott Wave International.

He created these charts – which cover markets like the S&P 500, NASDAQ, gold, and mutual funds – to explain where financial markets have been and where they are headed. These are not your typical price charts. They combine history and patterns to tell the story clearly, all from his distinctly different point of view. With this information, his Elliott Wave Theorist subscribers are now prepared for 2014. And you can be, too, because you can get the full 10-page issue, FREE.
Elliott Wave International hasn't offered a free issue from Bob in quite some time, but they feel that the message of this issue is extremely important and can provide you with an outlook for 2014 that you shouldn't miss.

Prechter says that “charts tell the truth.” Here is your chance to see what truths these charts are telling. If a picture is worth a thousand words, then this publication is like reading more than 15,000 words of his market analysis.

Pointer: Be sure to check out one of the coolest charts, which shows how Main Street investors actually see the markets better than Wall Street.

Download your free 10-page issue of The Elliott Wave Theorist now.
Enjoy your present!      
P.S. It’s a once-in-a-blue-moon opportunity. And it’s free. See these 15 charts for yourself now.

Tuesday, January 22, 2013

Deflation and the Coming Financial Turmoil

The following is a sample from Elliott Wave International's new 40-page report, The State of the Global Markets - 2013 Edition: The Most Important Investment Report You'll Read This Year. This article was originally published in Robert Prechter's July 2012 Elliott Wave Theorist. In the first five months of 2012, there were 20 times as many Google searches on "inflation" as there were on "deflation." This is down from a ratio of 50 times in June 2008. If any theme has been overdone over the past six years, it is the theme of inevitable inflation if not hyperinflation.
Inflation reigned for 75 years, from 1933 to 2008. People are so used to it that they cannot imagine the opposite monetary environment. Bullish economists have been calling for recovery, which means more inflation, and bearish advisors have been calling for a crash in the dollar, which means hyperinflation. No wonder those are the terms on which most people have been searching.
But only one word allows you to make sense of what's going on in the world, and inflation is not it. The secret word is deflation.
Deflation explains:
  • why interest rates on highly rated bonds are at their lowest levels in the history of the country;
  • why the velocity of money is the lowest since the 1930s;
  • why huge sectors among investment markets are down over 40%;
  • why the Consumer Price Index (CPI) just had its biggest down month since 2008;
  • why Europe is in turmoil.
Here are some details: Ten-year Treasury notes pay out less than 1.5% annually, their lowest rate since the founding of the Republic. Treasury bills yield essentially zero, their lowest level ever. The velocity of money failed to rise during the past three years of partial economic recovery, and it recently made new lows. Real estate prices have fallen 45% in the past six years. Commodity prices -- as measured by the CRB Index -- are down 39% over four years. This group includes oil and silver, two of the most hyped investments of the past decade. Remember in March when articles quoted analysts calling for $5, $6 and $8-per-gallon gasoline? In just three months since then, gas prices have fallen 15%, knocking the CPI into negative territory.
Deflation also explains why European loans are at risk, why Germany is tapped out, why Greeks are protesting in the streets, and why U.S. corporations' overseas profits are down. Deflation lets you make sense of the world.
What is deflation? Economists define it three different ways, but I find only one definition useful: Deflation is a contraction in the overall supply of money and credit.
Why must deflation occur? Answer: There is too much unpayable debt in the world.
As argued in Conquer the Crash, it ultimately does not matter what the authorities do; they can't stop deflation. This prediction is being borne out. Since 2007, the Fed has monetized $2 trillion worth of debt; the federal government has borrowed another $7 trillion; and it has pumped out $1 trillion worth of student-loan credit. Yet real estate and commodities slumped 40% anyway.
These drunken-sailor-type policies have indeed succeeded in nearly maintaining the overall volume of money and credit. But in the long run you can't fight a systemic debt overload by piling on more debt. The Fed and the government are shifting the burden of trillions of dollars' worth of debt obligations from reckless creditors onto innocent savers and hapless taxpayers. The ploy might work if the public's resources were infinite, but they aren't. Perhaps this policy temporarily prevented a series of big institutional disasters, but it was only at the ultimate price of a gigantic public disaster.
Such actions have become politically less palatable. Some observers realize that the student-loan program of lending at below-market rates is exactly the model the government used for housing loans, which ended in a spectacular bust. Others know that the government cannot continue to borrow at the current pace and expect to stay solvent. Politicians on both sides of the aisle are tired of the Fed's bailing out of highly leveraged financial-speculation institutions. But whether these policies continue or are curtailed is irrelevant to the outcome. If the government slows its borrowing, the overall value of debt will fall. If the government maintains or increases its present pace of borrowing, interest rates will eventually turn up, and the overall value of debt will fall. There is no escape from deflation.
Ironically, investors in the past decade have been doing exactly the opposite of preparing for deflation. Convinced of perpetually rising prices, they have bought every major investment. They chased real estate up to a peak in 2006. They bought blue chip stocks into the high of 2007. They pushed commodities up to a peak in 2008. They chased gold and silver up to highs in 2011. And through spring 2012, they continued to buy stocks and commodities on any rumor that promised inflation: European bank bailouts, Operation Twist, the Greek election, Group-of-8 summits, Fed meetings, Bernanke press conferences, improved economic numbers, predictions of QE3, central-bank interest-rate cuts, you name it. Meanwhile, the U.S. Dollar Index hasn't made a new low for four years. During deflationary times, cash is king, and by far most investors have chosen to own anything but cash.
Deflation is still not obvious to the majority. Even now, most economists expect continued recovery, mild inflation and a rising stock market. But the essays on are 180 degrees apart from conventional thinking. It may be too late for you to get out at the top, but there's still time to learn how to sidestep the worst of the crunch.
People will be using the secret "d" word much more often over the next five years. By the end of that time, they will also be using its cousin "d" word, depression.

Robert Prechter is the founder and president of Elliott Wave International, the world's largest financial forecasting firm. The rest of EWI's 40-page report, The State of the Global Markets - 2013 Edition: The Most Important Investment Report You'll Read This Year, is available for download. Follow this link to download the full report - for free.
This article was syndicated by Elliott Wave International and was originally published under the headline . EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Thursday, December 20, 2012

Do Stocks Predict Presidential Elections

Obama has won the elections. According to socionomic theory, it was expected because the agggregate mood of the population as reflected by the stock market has been up for 4 years now. In the wake of the Presidential election, the Social Science Research Network (SSRN) reports that the study, "Social Mood, Market Performance and U.S. Presidential Elections" has earned the #3 spot among the most-downloaded papers in the past 12 months.

The SSRN eLibrary is one of the world's leading social science resources and includes 430,000 paper abstracts from 200,000 authors. It has delivered close to 56 million downloads, and last year it received over 66,000 new submissions. Among those submissions: the elections paper written by a team from the Socionomics Institute.

Authored by Robert R. Prechter, Jr., Deepak Goel, Wayne D. Parker and Matthew Lampert, the study amounted to a bold challenge to conventional wisdom about the factors that predict presidential re-election outcomes.

"We demonstrated a counter-intuitive point about what matters, what doesn't and why" Prechter said about a FREE VIDEO.

"GDP was a significant predictor in some of the simple models," said Deepak Goel, "but it was rendered insignificant when we combined it with the stock market in multiple regression analyses. Inflation and unemployment had no predictive value in any of our tests." So what does matter?

Historians and political scientists have long argued that gross domestic product (GDP), unemployment and inflation have great bearing on presidential elections. So Prechter tested those ideas. They studied every presidential re-election campaign dating back to George Washington's successful bid in 1792. And what they found was amazing.

The stock market. Specifically, they found that the stock market's performance for the three years prior to Election Day does predict elections. But an even bigger finding came when they examined the question of whether or not money made or lost in the market had any effect.

"We contrasted eras when stocks were widely owned vs. hardly owned, and there was no difference in results," Robert Prechter said.

They ruled out GDP, unemployment, inflation and money made or lost in the market as factors. That left only one. Matt Lampert explained:

"The best explanation is that the trend of social mood is important in driving the valuations of both stocks and presidents."

You can read more on social mood and it's effect on economy, politcs and culture at this Kondratieff Wave website and understand the mechanics of Inflation and Deflation in a credit based economy that is ruled by human emotions that shows predictable behavior at aggregate level.

Saturday, October 27, 2012

OIL is Falling Despite the Printing Press

Despite today's less-than-stellar global economic environment, as recently as April, crude was trading well over $100 a barrel. Then Bernanke said he would keep printing money indefinately until economy gets better (in other words until prices go up). Can the printing press really stop Kondratieff Winter? Can Bernanke's newly minted dollars warm us up to borrow and spend again?
After a 4-day losing streak, on October 23 crude oil futures fell as low as $85.69 a barrel -- the lowest price since July.

Predictably, the mainstream energy market observers have blamed the drop on "global economic worries." Of course, we have pointed out before how, on one recent occasion, oil fell in the face of positive economic expectations. And on another recent occasion, oil fell despite the absence of any real news, period. Fundamentals, news, events do not determine the prices in financial markets. It is something else: Social mood drives markets.

So, the mainstream analysts have to do better than "global economic worries" to explain the latest oil selloff...except that they can't.

See, in the world of "fundamental" analysis, markets always react to something. If it's not A, then it's B; and if not B, then it's C. "Action" outside the markets produces a "reaction" inside them. So it's simply inconceivable for a conventional analyst to suggest anything other than an outside factor -- the handy "global economic worries," in this case -- to pin the October 23 selloff on.

Fine...except, doesn't every day now bring some 'concern about global economic growth'?

Europe has been dealing with the debt crisis for several years now; China's economy has been cooling off; and right here in the U.S. -- well, every month it's been hit and miss with various economic indicators, from unemployment to manufacturing to consumer confidence.

One could argue that in this environment, oil prices should be half of what they are today. But they aren't. In fact, as recently as April, crude was trading well over $100 a barrel.

When it's all said and done, you have to accept the fact: To get serious about forecasting the future trend in crude, you have to consider something other than the proverbial "fundamentals." Elliott wave analysis provides a real alternative.

By studying price charts, wave analysis tracks and measures the changes in the market's collective psychology. After all, what moves market prices but the market participants? If you can forecast their bias, bullish or bearish, you can reasonably forecast the market. And right now can you see how EWI Founder and President Robert Prechter views the common argument over "peak oil" for free.

Free Oil Report from Robert Prechter
In July 2008, when crude oil prices were at $148 a barrel and "peak oil" bulls were forecasting a rise to $200, even $300 a barrel, contrarian technical analyst Robert Prechter took the opposite stance: "One of the greatest commodity tops of all time is due very soon." Six months later, a barrel of oil cost just $32. Now, you can read Prechter's big-picture outlook on the oil markets in a newly released report.
Follow this link to download Prechter's 26-page oil report now

Saturday, February 18, 2012

US Dollar Big Picture

More credit is denominated in U.S. dollars than any other currency. What does this mean for the value of the dollar as the credit crisis continues its strangle-hold on the world economies?
Enjoy this video clip of Bob Prechter from an October interview with The Mind of Money host Douglass Lodmell, in which Bob discusses the debt implosion and the value of the U.S. dollar.
You can watch Prechter's full 45-minute interview here -- no sign up required!

Thursday, January 12, 2012

How will the stocks do in 2012?

A new year has started, and there are new high hopes for the stock market, as you can see in this December 21, 2011 headline from USA Today:

Strategists predict a glowing 2012

The article notes that a "quick survey of New Year's prognostications from investment strategists suggests stocks might deliver the double-digit gains that they have put up, on average, over the long term. A snapshot of 2012 year-end-price targets from five firms shows an average gain of 10.5% for stocks."

But, haven't we heard this before?

The 10.5% gains forecasted for the coming year is intriguing considering it is almost exactly the average gains that were forecasted for stocks in 2011. Take this Barron's cover story from December 2010 as a prime example:

OUTLOOK 2011: Our panel of savvy Wall Street strategists expects stocks to rise 10% next year, as an economic expansion takes hold.

But as you know, in 2011 we essentially had a flat market. The DJIA ended up 5.53% for the year, the S&P was flat...while the NASDAQ was down 1.80%. The broadest aggregate measure of stock market performance, the DJ Wilshire 5000, which includes nearly all stocks that trade, ended 2011 down 1%.

And the Dow's action masks a strongly negative stock market performance in the overseas markets.

So, how should you plan for 2012? What's really ahead for the markets, and what does it mean for your portfolio? Will the European credit crisis and U.S. debt debacle continue to loom over the markets or will the economic expansion actually take hold?

Elliott Wave International has just released a free report that will help you navigate the year ahead. You'll get all of the indicators that they have been analyzing over the past year, with 25 eye-opening charts and 14 pages of straightforward commentary to help you see where we've been and what's ahead.

Download your free report now: What will the stock market do in 2012?

Saturday, November 12, 2011

Weakest Borrowers Will Go Bankrupt

Greece is having trouble again and it seems Italy is about to join the party. Greece economy is small enough that it can be saved. But can the same be said for Italy? Why are these countries having trouble? Why are home owners having trouble paying their mortage? Let me explain.

In an interest based economy with fractional reserve banking, weakest borrowers will go bankrupt when deflation hits! Why?

Banks create money when we borrow. Google for "How do banks create money" to understand how it happens if you don't know. Entire money supply is debt. It is the principal we borrowed. But banks demand that it is paid with interest. It is not possible for every borrower to be employed at levels that enables them to earn principal + interest. Because the interest portion is not created yet. It is only created with more borrowing. The inflation created by money creation of banks punishes savers and forces more people to borrow. New money is used to pay old debt. When we run out of borrowers, it crashes. Here is how deflationary crash happens:

New money that is created in a society should belong to the society. It should not belong to private bankers. Thus, if any interest is to be paid, it should be paid to the people, not to the private bankers. A solution is to require 100% fractional reserve. Let treasury print principal + interest when a loan is made. Principal is loaned out to the borrower. Interest portion is spent in place of taxes. principal + interest is available to earn. When interest is paid back, destroy it. Web of Debt by Ellen Brown explains it well.

Current system requires perpetual debt since existing debt cannot be paid without further borrowing. Banks can at will withold loans and create a depression. Then they will make loans to their friends and withold loans from competitors. When competitors who cannot access loans go bankrupt, they are bought by the friends pennies on the dollar. This way the banking cartel gains control of the media and other industries. This is a ponzi scheme but when it goes bust, they get bailed out.

Last but not least, if banks did not create money out of nothing when they made loans, then home prices would be lower and savers would afford them cash down. This is because when 30% of the population works in financial services, the other 70% has to work harder to feed the 30%. If financial services is reduced to 1% just like farming, then they will be employed at more productive tasks (building homes?) and the burden on the 70% will be reduced.