Dan’s Blog

25 to 261

Dan Calandro - Saturday, March 23, 2013

Since little has changed in the stock market this week, I’ll take this blog in a slightly different direction. I was drawn to three Wall Street Journal articles this week, entitled:

  • Workers Saving Too Little to Retire
  • Health Insurers Warn on Premiums
  • Older Households Loading Up on Debt

The first article reports that 57% of U.S. workers have less than $25,000 in total household savings and investments (excluding their primary residences); and that 28% of Americans have no confidence that will have enough money to retire comfortably.  That’s based on a survey conducted today, based on today’s Market conditions.  

This week health insurers warned agents that premiums for individuals and small businesses could rise sharply due to the implementation of the Affordable Care Act (ACA). The ACA, which was signed into law in March 2010 and affirmed into law by the Supreme Court in June 2012, was supposedly designed to make healthcare affordable. But now it is expected to cause premiums to more than double as early as next year. As projected in Supreme Letdown, this is the beginning of the healthcare boom that will include massive broad scale inflation.

Add this to forthcoming cuts in Medicare and Social Security – cost of living for retirees is poised to rise dramatically from where it is today.

And today, seniors are already increasing their debt loads at alarming rates. Over the last ten years senior citizen debt has increased 120%. Historically, older households owned their homes outright, and to augment their Social Security benefits, earned sufficient income on bank savings accounts, certificates of deposits, or U.S. Treasury bonds. But with current and prolonged "easy money" policies employed by the last two Federal Reserves (Greenspan and Bernanke), this option no longer exists. There is simply nothing to be made there – interest rates are too low, and inflation easily negates any income earned.  

With the ACA, individuals and small businesses will suffer most. Large corporations – and those include unions – will suffer least. Why penalize individualism and entrepreneurs?  

Retired people, who have worked entire careers and played by the rules, are forced to move their savings from the safety of FDIC insured financial instruments and into the greedy clutches of the Wall Street establishment, where they must take on much higher risks for an incommensurate amount of return. The must mortgage the house they spent a lifetime paying for. And then they must deal with the aforementioned cuts to government programs that they have invested heavily in. 

Why is it that the U.S. government constantly screws people who deserve it least? 

Young working adults and recent college graduates, the healthiest demo among us, are forced to buy health insurance at premiums with no relation to their health status. They pay as if they are older, and sicker. That will make it harder for them to get ahead, save, and invest for the future.  

That’s what they get for being young and healthy.  

And then there are those that do nothing to enhance their self worth or financial status. They live off what the government will take from someone else and give to them. They don’t care about debt and deficits, taxes or interest rates. Free healthcare, food stamps and welfare, unemployment and earned income tax credits – that’s all they care about – no matter how much it drains and strains our collective worth and livelihood.  

For those of us too proud to fall into that minority – there’s only one thing We can do: make the most of what little money We have left.  

And the best way to do that is with superior 15-51 construction. 

Screenshot-3-23-13-2-11-PM-2

$25,000 multiplied by 1,044.2% equals $261,050.  

Easy to understand.  Simple to use.  Superior results.  

ShieldThe road to financial independence.™

Stay tuned...

Following Along

Dan Calandro - Sunday, March 17, 2013

The Dow Jones Industrial Average continues to retrace the 15-51 Indicator’s steps seven months in arrears. The laggard that it is, the Dow Average should peak in value around mid April 2013, and then start a steady and prolonged decline thereafter. I fully expect the Dow to breach the action zone high (14,854) before the slide begins. The slide, a.k.a. correction, should send the Average towards "fair value," shaving off at least 2500 points in the process. Discussion to follow after chart.

3-15-13

Once again, stock market strength via the 15-51 Indicator flattened out in July of last year; peaked in September; and then started its steady decline. The Dow is following along – be it seven months behind. The 15-51i is again ahead of the game. For two reasons.  

First, the Indicator is not manipulated by the Wall Street establishment. As previously mentioned, poor monetary policy is being used to artificially inflate widely followed stock market indexes. These inflated averages help Wall Street lure idle capital off the sidelines –- which helps them make more money. (Remember, mutual funds are currently experiencing their largest inflows in history.)

And what better corroboration for the advertisement of stocks than an artificially low gold value? Strong economies produce higher stock markets and lower demand for gold. So from the vantage point of just the Dow and gold, "the market" picture seems "normal" or at least getting back to "normal," as stocks are rising and gold is falling. This dynamic makes it appear as an "opportune" time to invest – or at least that’s how Wall Street is selling it. 

But that’s so not the case. Truth be told, the Wall Street establishment is again exploiting poor monetary policy and using it to defraud investors. This is them at their worst.  

Second, and as explained thoroughly in my book, it’s easy to stay ahead of the stock market if you take your cues from the Market and utilize superior 15-51 construction. Because the 15-51 Indicator is not widely followed, it isn't being manipulated by the Wall Street establishment. As a result, it shows a truer picture of the actual Market condition. This makes it easier to read and more reliable.

In addition, 15-51 construction moves faster and is more nimble than conventional portfolio models. The 15-51 Indicator therefore inflates faster, corrects sooner, and experiences swifter recoveries after downside corrections than the Average. 

These features make portfolio management easier to perform and much more profitable!  

For instance, on September 16th, 2013, my blog centered around the 15-51 Indicator reaching its all-time high. At that time I defined the stock market as "extremely over-valued." That is clear to see when using the 15-51i (the red line) as a reference point. That's the point here. See chart.

3-15-13

When "high" happens faster and is easily seen – it’s easier to capitalize on it.    

And remember, it’s buy low and sell high – not the greedy interpretation: buy at the lowest and sell at the highest. It’s too easy to slip on a wet floor.

Corrections occur when investments are over-valued – in other words, when inflation and speculation have pushed prices beyond economic worth. Remember, fourth quarter GDP rose just .1% and the stock market is already up 11% this year. The Dow just reached another all-time high, and is poised to move higher. 

Conditions are ripe for a significant correction –- 15 - 20%, easy. 

The impetus for such a steep Dow decline are the same that triggered the 15-51 Indicator to fall late last year. First, the Dow Average is extremely overvalued. And in the face of a slowing global economy, a global currency crisis, the threat of international war and unrest; the extremely poor employment picture existing throughout the world; and persistent government incompetency, mismanagement, and corruption – "the market" has no solid foundation.  

Just this week, U.S. regulators announced that they are investigating the price of gold. You may recall I noted the historical amount of short activity surrounding gold a few weeks ago. "Shorting" is the process of selling high and then buying low at some future point in time. It is the opposite of investment, where an investor buys low and then sells high. Shorting is divesture – a bet that the price will go down - as opposed to traditional investment which bets that the price will go up. 

Excessive shorting forces prices down, sometimes artificially. This dynamic, one should note, may be caused by something other than solid Fundamentals – be them related to a Market, Stock, or a Commodity, like gold. Purposeful manipulation and speculation in regards to short positions can easily cause a security to move down for no good reason.  

And that’s what’s happening to gold right now.

The current price decline in gold, the rise in the U.S. dollar, and the increase in the DJIA are not due to strong economic condition. Instead, they are due Wall Street speculation and manipulation, weakening global positions, and inflation.  

Proof of this was once again identified throughout the Euro Zone this week. The EU reported the highest level of unemployment in the region in more than seven years; the IMF warned of bigger EU bank losses than expected; Italy’s credit rating was again downgraded by Fitch Ratings firm; Spain is looking for help to fix its banking system after an auction to restructure a major midsized bank failed; and French President Francois Hollande announced that their budget deficit would exceed his campaign pledge made just ten months ago when he won the election.

Things aren’t getting better over there. 

And in America this week, Goldman Sachs and JP Morgan Chase received "weak" grades from their stress tests. There is absolutely no reason for this considering the billions of dollars being pumped into the banking system every month. Unemployment remains painfully high, at 7.7%; growth is non-existent; and gas prices are once again on the rise.

Needless to say, things aren't getting much better here either.

If you are following along you know that the Dow’s upward trend is nothing more than an inflationary move facilitated by the Federal Reserve and manipulated by the Wall Street establishment to solicit idle capital from cautious investors.

Don’t get sucked into this misnomer.  

Defense wins championships.  

See also:
Asset allocation

Dow Breaks Record -- or Did It?

Dan Calandro - Sunday, March 10, 2013

I almost choked on my tongue while reading a recent Wall Street Journal article entitled, Keeping Up with the Dow Joneses. The author, Justin Lahart, began that article by describing the Dow Jones Industrial Average as an "arbitrary collection" of stocks that is "arcanely constructed."  

Charles Dow must be rolling over in his grave to think that such a piece could be published in his WSJ – let alone employ a person who has absolutely no understanding of the DJIA’s masterful construction method. That prompted me to do something I never do, which was to email Mr. Lahart and offer him a free copy of my book where he could learn a little something about Dow Theory.  

In any event, that article went on to highlight one important fact. Although the Dow has surpassed its previous high watermark set back in October 2007, the Average has failed to keep pace with inflation. Those who have read my book know full well that the DJIA is a stock portfolio designed and constructed to indicate the market (GDP). And because the Dow is priced in current dollars, and therefore not adjusted for inflation, it looks to indicate the direction of Nominal GDP. Its long track record of reliability has earned it the honor of being referred to as "the market."

As you will see in the chart below, the Dow has barely reached the level of Real GDP. The difference between Real and Nominal GDP is inflation. In money terms, 15,872 Dow points today is equivalent to 14,165 in 2007. In other words, almost 1,500 points of inflation currently resides in the stock market average since 2007 – about 10% its current value. See below.

3-8-13c

If your stock portfolio has not outperformed the DJIA since 2007 you are losing money in Real terms. I made this point in my very first blog entitled, The Truth About Investment Performance.—Inflation will rob you like a thief in the night if you let it.  

That’s why you need to employ the Lose Your Broker method. The chart below is the same exact timeframe as the above except that the 15-51 Indicator and gold are included. 

3-8-13b

Investment is about making money with money – in Real terms. The only way to do that is to beat the Dow Average and Nominal GDP over the long term, which is easy to do with superior 15-51 construction.  

You can do it too.

And let me know if you need help.

ShieldThe road to financial independence.™

Paradox

Dan Calandro - Saturday, March 02, 2013

Well-known stock market indexes continued to suck low-information investors into the lion’s den this week. While the Dow Average failed to move again this week, it remains extremely elevated at the 14,000 mark, which is a market multiple the Dow hasn’t experienced since 2006, and before that 1999 – the housing boom and tech boom, respectively.  

Sorry folks, this economy cannot be compared to those two bona fide booms. It’s sacrilege. Caution is once again advised to investors who are misreading the writing on today’s wall.

This was another week that the Dow disregarded news located in its own newspaper. Fourth quarter 2012 GDP was revised up to a dismal .1%. The update was taken as good news to some as it reversed an originally estimated .1% contraction. But let’s be fair, .1% is .1% – a positive or negative characteristic translates into no big difference. The performance in either case is pathetic.

Also in the week, mass-market participants Target and Lowe’s reported lower profits in an increasingly difficult revenue market. Remember, their revenue is our spending; and January consumer spending was recently reported to have risen just .2%. Parlay this  stagnant spending with falling personal incomes (down 4% in the most recent quarter) and what you have is more tough times ahead for market expansion and stocks.

Yet January inflows to equity mutual funds enjoyed their largest influx of investor capital in history. A Wall Street Journal on-line article: Note to Self: Don’t Repeat the Mistakes of 2008, points out how many people are doing just. More than $65 billion flew into equity funds in January. 

But why

Taxes are rising and incomes are falling.; the economy is dead and the unemployment disease continues to infect thousands of new people everyday. This week JP Morgan Chase became the most recent financial organization to report the elimination of several thousand jobs – 4,000 to be exact. Almost everywhere you turn in the Market corporate revenues are weakening and profits are shrinking. And then, of course, there’s the embarrassment We call a government down in Washington DC – who are grossly mismanaging this Market economy on every fiscal and monetary front.  

Yet the Dow Jones Industrial Average is up 8.8% in the most recent twelve months – 7.5% in the first two months of 2013 alone. Take a look at the chart below.

3-1-13

Again, the market economy is shrinking and the Dow Jones Industrial Average is rising. It’s showing inappropriate strength in a similar way that gold is showing an unwarranted weakness. In fact, a functional market would be one where the Dow and Gold traded trend-lines in the above chart. That’s the paradox of today’s investment markets.

Stock market strength as indicated by the 15-51i continues to show the true picture. It shows an economy in decline – which is exactly what we have. 

As mentioned in last week’s blog, "Never minimize the establishment’s ability to inflict mass-market manipulation to mislead investors so they can benefit from the deception."

Resist the urge. To trade into this stock market because broad market averages are enticing you to do so is a huge mistake – this is the same mistake made by millions of American mutual fund owners in 2007, just one year before the entire financial market collapsed.  

The worst kind of mistake is making one that you already once made. 

There is an old saying in sports, Sometimes the best trade is the one you don’t make. And sometimes that’s also true with investment. 

If patience wasn’t a virtue then that sort of saying would never have become cliché.  

Stay tuned…


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