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Key Market Indicators

Rate Type Month Last Change
Fed Funds Rate October .25 0.0
Unemployment September 5.9% -.2%
Rate Type Month Last Change
Inflation (average) August 1.76% -.01%
Gold (oz) September $1,193 -$76
 
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Q1 2012
Mar 31, 2012
The Dow Jones Industrial Average closed the first quarter up 8.1%, and according to its Wall Street Journal steward, recorded its largest first quarter gain since 1998 – that was during the heat of the tech-boom era by the way.  Call me crazy but this environment feels nothing like that one.  

The 15-51 strength Indicator grew an impressive 33.5% during this same first quarter period, more than 4 times better than the Average.  And just like the Dow, it is over-valued at the present time and ripe for a correction.  Bob Doll, chief equity strategist for notorious mutual fund giant BlackRock Inc. assessed the quarter in today’s Wall Street Journal like this:

"This year has been all about people coming away from the abyss that the world might end, and putting risk back on.  We’re headed back to normalcy.  The world is breathing a sigh of relief that it didn’t all end."

Really, Bob.  Do you also have a bridge you’re looking to sell? 

Mr. Doll’s comments are classic Wall Street propaganda and totally bogus.  It’s nothing short of a sales pitch to lure skeptical investors off the sidelines and into the abyss. Professional fund managers like him are always reaching into investors’ pockets with this type of rhetoric, using inflated quarters like Q1 2012 to entice investors to ‘not miss the next big jump in price.’  

Don’t buy into the hype.  

Considering the 15-51 Indicator’s recent march towards the heavens the next jump could be off a very steep cliff. See the chart below.  

1q2012



Even though the 15-51 Indicator (15-51i) is a superior portfolio that consistently produces above-average performance doesn’t mean it can’t be over-valued and won’t dramatically correct when "the market" realizes irrationally exuberant stock valuations are at hand.  Like all inflated investments, the 15-51i should correct and it will correct at the time of reckoning.  

When is that time exactly there is no way to know.  Nor is this information required to invest successfully.  The key is to understand the environment you are investing, its relative value, and to allocate your portfolio appropriately.    

The facts remain that Market fundamentals remain extremely negative and hostile. Commodity prices are spiking all across the board: gold rose 6.7% in the quarter, silver gained 16%, copper advanced 11%, and just today news of short supplies in corn, soybeans, and wheat crossed the wire triggering price increases of 3% to 5%. Add to this $110 per barrel of oil and what you have is a market ripe for inflation.  That is, of course, what the investment markets are indicating with their upward moves.  

As stated many times in previous blogs, rising inflation will cause interest rates to move higher and we know what happened during the subprime mortgage debacle when fragile borrowers collapsed under rising interest rates, food and energy prices. This will cause another round of Euro-Zone crisis and continuation of a debt shell game that could end with the capitulation of Greece, Spain, Italy, Portugal, or Ireland – or the Euro in general.  Who knows.  

The point to takeaway here is that right now the investment markets are demonstrating broad-based investment inflation that is built not on economic growth and vitality but on the back of a fragile world economy that is over-leveraged, shrinking, and under threat of another Mid East war.  

So when the stock market realizes strong results in Q1 2012 you can expect strong volatility later in the year.  If you expect it now it won’t be so scary when it actually happens – and if you prepare your portfolio now it won’t sting as much either.  

Stay tuned and let me know if you need any assistance.  
The Tortoise and the Hare
Mar 27, 2012
Stock market valuations continue their march towards irrationally exuberant levels. The Dow closed yesterday at 13,243 – less than 200 points from the highpoint of the action zone – and is relatively unchanged in early trading to day.  

Caution to those aggressive players still looking to sell at higher levels. Market timers and fund managers can get itchy trigger fingers at any time and swiftly sellout at any time.  Conservative investors should have already positioned their portfolios in a defensive mode to capitalize on the next correction (buying opportunity.)

The 15-51 strength Indicator gained 43% in the most recent 12 months, compared to just 10% for the stock market Average.  Gold, though down in 2012, advanced 19% in this same one year period.  Here’s how their performance trends look.  

15-51i_Comp_3-26-12
 
As mentioned in previous blogs, 2012 is looking more and more like 2007 as time progresses.  Sloppy fiscal policy and extensively loose monetary policy are allowing Wall Street to make easy money on cheap money while creating a façade that it is a time to buy into recent stock market movements.  Recent stock market movements are inflationary – not real growth.  

Yesterday Ben Bernanke left the door open to more "quantitative easing" – a ponzi scheme with U.S. currency.  The Street loves this, because remember, when the Fed produces easy money they funnel it through the Wall Street establishment.  Wall Street is the Fed’s distribution network for the money they print.  And who loves easy profit more than Wall Street?  Whether it’s real or inflationary doesn’t matter to them.  

Independent investors need to be smarter than those clowns.  

If you think about it current market conditions really haven’t changed in the past year.  In spite of irresponsible fiscal and monetary policies unemployment is still above 8%, the free-market is in recession, inflation is continuing to present itself, Europe is a disaster, China is slowing down, and the Middle East is on the brink of further turmoil and another war.  

So let’s say for example that an independent investor moved to a 50-50 defensive posture last year – meaning their investment portfolio conisted of 50% in marketable investments and 50% in cash.  As should always be the case, marketable investments were built on an appropriate manner for the market condition and a superior foundation. Here’s how a sample 50-50 portfolio was allocated.  

Asset Class

%

Cash

50%

Stocks

25%

Gold

25%

Bonds

0%

Total

100%


The stock portfolio is the 15-51 Indicator and the gold allocation was supplied by the GLD etf. Here’s how the portfolio performed in the past year.
 

50-50


This 50-50 portfolio produced a 15% annual return compared to a 10% return for the Dow Average. That’s 1/3 more return with 1/2 of the risk!  You can make money by playing defense – more money, in fact.  

Defense wins championships.  
 
And the tortoise beat the hare.  
Where the Cream Goes
Mar 16, 2012
There is wide belief in the false premise that the U.S. economy is gathering steam – that systemic market failures have been corrected, and that the worst of market conditions are behind investors.   

I caution you against such naïveté.  

Wall Street is notorious for over-reacting to market stimuli – in both up markets and down.  You may recall that the Dow Jones Industrial Average stood at 14,100 points (an over-reaction to the upside) one year before the entire financial industry collapsed, at which time the Dow plummeted to below 7,000 (an over-reaction to the downside.)  Know that the over-reaction dynamic exists.  It’s a normal occurrence.
  
In times like these, when the DJIA experiences a sustained run-up in value, the Wall Street establishment moves itself into position for the kill, urging investors to put more capital at risk, using the Dow’s upward trend as proof positive of an economic recovery and, therefore, a signal to invest more heavily in stocks, fixed income, and emerging market investment products.  Get off the sidelines, they say, not investing is your greatest risk.  

Resist the urge.  

Remember that in times of adversity, in a world where everyone seems to lose, the Wall Street establishment games the system by blaming a mystical beast called "the market" for robbing your retirement account – while they plead innocent to negligence and escape away with multi-million dollar bonus packages.    
  
Just as Wall Street uses hostile markets to persuade investors to sell low, they use early season stock market hype to coax investors to buying in at these high levels. Each time the investor buys high and sells low the Wall Street establishment steals a piece of their wealth.  And that’s not the most sickening part of it.  

As if lackluster performance and grand larceny aren’t enough reason to distance yourself from the Wall Street establishment and take matters into your own hands, now we must hear the derogatory names they call investors behind their backs. What a filthy industry.  Here’s the story.  http://dealbook.nytimes.com/2012/03/14/name-it-clients-are-called-it/

It’s time to Lose Your Broker Not Your Money.  

If you’ve been following these blogs you understand the condition of the global market economy – the U.S. economy is fragile, Asia is in recession, Europe is falling apart, there’s is more hostilities in the Middle East.  It’s ugly out there – yet the Dow surges ahead to the top of its trading zone.  Here’s how it looks.  


3-15-2012


In a strong economy, when strong currencies are born and thrive, there is little need for gold as a mechanism to facilitate trade.  So there is less demand for it, and the price drops in value.  Both stocks (as indicated by the DJIA) and gold (GLD), right now, are correcting under a false premise of economic vitality.  This makes current market moves a short-term phenomenon – not a long lasting trend.   

This unsustainable burst is clearly demonstrated by the 15-51 Indicator, now trading at a powerful 63,843 – and up an amazing 1,148% since its inception in 1996.  The Indicator (scaled down to the Dow in this chart) is up 39% in the most recent 12 months compared to just 10% for the Dow Average.  There is no justification for either valuation.  

In all times, however good or bad, however over-valued or under-valued, the cream always rises to the top over the long-term.  

Superior 15-51 construction.  It is the road to financial independence.   
End of the Beginning
Mar 11, 2012
My first mini-series with Ashfordradio.com came to a conclusion on Thursday, March 8. In many ways it was an end to the beginning.  As such, let me start by thanking Ashford for breaking the Lose Your Broker story and allowing me to advance the independent investor message on their network.  They will always be the first media outlet to interview me and Christine Larkin will forever be my first interviewer – and also the first one to ask me if I was considering a run for the presidency. (Listen here.)  

While that was flattering, indeed, I left no question that my name won’t be on a ballot this November (though I could give Joe the Plumber a run for his money in Ohio.)  When Ms. Larkin followed with who I thought could beat Barack Obama in the coming election my answer might surprise you.  And while I will gladly offer political opinion on any issue – that’s not the purpose for this blog area.  

The purpose of this area is to acknowledge a governments’ role and function in the Market and evaluate how it relates to investment, "the market," and the course of the stock market.  Independent investors require this information which I try to encapsulate here.
 
Independent investors must be aware (or beware) that changes in government policy indicate changes in market condition and that these changes will affect the course of investment in some way, shape, or form.  My purpose with these blogs is to translate those changes into basic language with a common sense approach towards successful investment management – minus the political correctness or imposition. 

Successful investment requires this kind of clarity to capitalize on the many opportunities offered by the stock market to buy low and sell high over a long period of years.  That’s what Lose Your Broker is all about.  

To that end, it should be understood that stock market corrections usually follow an extended period of hyper-inflation, a rapid rise in prices and valuations. Stock markets "correct" because they are over-priced as related to their underlying economy.  And that’s exactly what we’re experiencing right now.  

Below is a chart that compares the performance of the Dow Jones Industrial Average and the 15-51 Indicator in the three years that followed the "last market bottom" which occurred in March 2009. Here’s how that three year trend looks.


1551i_2009


The Dow is up 79% during this timeframe and gold is up 82%.  That’s Average inflation by definition: the general rise in price, as defined by the Dow.  In other words, 26% per year is an average stock market return for the last three years.  If your portfolio hasn’t measured up to this benchmark it is a below-average performer.  

Built on a superior platform, the 15-51 Indicator produced an amazing 272% gain during this same three year period.  That’s 90% per year!— three times better than gold and "the market."  That’s what superior 15-51 construction does – it outperforms the Average and makes selling high easier because it’s easier to see.  

Don’t be blindsided by establishment propaganda during an election year.    

The stock market is over-valued right now and the 15-51 Indicator proves it. Currently trading above 60,000 points (see long-term track record here), the Indicator’s recent spike in price demonstrates what hyper-inflation looks like. That’s a signal to rebalance your portfolio – to sell high.  

A buying opportunity awaits – and that’s where the real money is to be made. 

Stay tuned…
 
Milestone
Mar 06, 2012
 
That's what strength looks like.  

 
15-51i-1000_1
 
Jump In or Stay Put?
Mar 01, 2012
I stumbled across an interesting interview with Blackrock Management’s Laurence Fink yesterday afternoon on CNBC.  Blackrock is one of the largest mutual fund companies in the world.  Mr. Fink, who should have appeared on my book cover with a clown nose on his face, is their CEO.  He was out trying to coax investors into putting their idle cash to work in the stock market.    

It was classic broker-speak.  

The interview began with a discussion about the foreign debt crisis and only moments later Mr. Fink was pitching high-yield mutual funds – Blackrock mutual funds, to be sure.  Fink went on to say that the "greatest risk" investors faced was "not making decisions….not investing…[and that] there is a huge cost to owing cash." (So not true, see proof.) 

Again, Larry’s a broker trying to raise money by creating demand using the Dow’s recent move as an indication that things are okay and a ripe time to invest.  By the end of the interview he suggests that the market’s true problem was "low volume.  In other words, get off the sidelines and give us more of your money.

And it’s coming soon to broker near you.  Here’s the link if you care to see what to expect: http://video.cnbc.com/gallery/?video=3000076058.  

However, if you follow what’s going on in the Market and read the news it’s impossible to make the argument that stock valuations warrant additional investment.  With the Dow at the top of its historical trading range it can’t be considered low.  Remember, making money is about buying low and selling high – which is hard to do when you buy up here.  

Besides, news for the global market continues to depress.  Sears (owners of Craftsman, Kenmore, Kmart, and Lands End) recently posted a stunning $2.4 billion loss; Cablevision’s profit fell 47%, Procter & Gamble released plans to cut $10 billion in costs after announcing to layoff 1,600 employees, and Caesars Entertainment recorded another $200+ million loss.  Add to this a continued decline in home prices, a 4% drop in durable goods, and escalating energy prices and what you have is one big ugly mess.  And with the Dow trading at 13,000 like there are no such problems – it’s an awful time to buy stocks.  

This, of course, is not to mention that even Fed chairman Ben Bernanke now sees inflation on the way (conveyed in his congressional testimony on Wednesday.)  A rise in inflation (the cost of money) will cause interest rates (the cost of borrowed money) to also rise, all other things being equal.  

Meanwhile the European Central Bank dished out another $700+ billion to troubled banks across the pond – the second such effort in the past few months.  It’s a real mess over there, and with higher interest rates on the way, it’s sure to get messier.  

And oh by the way, what exactly do you think is in those high yield mutual funds Larry Fink referred to in this interview?  You guessed it, foreign sovereign debt – because higher risk of repayment translates into higher interest rates. 
 
We know this from the subprime mortgage debacle.  In fact, Europe is like one big subprime mortgage portfolio.  That’s why European government bonds are currently paying around 7% while the U.S. is paying around 2%.  Inflation will cause both to move higher, which will create more distress and failure.  It’s an awful time to buy bonds.  

But Wall Street doesn’t care about that. They’re looking to raise capital to bailout the world because that’s what they do to make money.  They get a piece of the action they raise and every time investors buy high and sell low the Wall Street establishment gets richer by stealing a piece of their wealth.

That’s why Larry Fink says jump in and Danny Calandro says stay put.  All I have is one book to sell.  (Click the picture to read chapter 1 for free.) 
 
 
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