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  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    >>Nothing fancy, but when the market drops and as it crosses various
    >>moving averages, I begin to shift to bonds until I am 100% in fixed
    >>income. Then when the market bottoms, starts to rise and crosses
    >>those same moving averages to the upside, that is when I reallocate
    >>to equities until I eventually get to 100%.

    There is nothing wrong with that approach at all... you will be successful with achieving your goals relative to the risks you are willing to take. I provided my brother with an approach very similar to the one you describe because it is straightforward.

    Moving averages are a huge part of my approach at Pacific Park Financial, Inc. In some ways, THIS was the most telling moving average of all.

    Granted, I tend to consider more factors than market internals and technical analysis alone. I weigh macro-econ, micro-econ (corporate) and fundamental valuation as well... in the implementation of tactical asset allocation. It is worked quite well for the last 25 years. Nevertheless, I genuinely believe that you can be very successful with simple trend-following decisions... as any advocate would attest to... having successfully stepped aside in 2000-2002 and 2007-2009.


    Sep 25, 2015. 10:43 AM | Likes Like |Link to Comment
  • Resilient Consumer? Not During The Manufacturing Retreat And Corporate Revenue Recession [View article]

    >>I'm not sure where you're getting your information from on this
    >>but it isn't correct

    Please scroll down to #7 in the link below. Retail ex auto has already rolled over. Retail with auto is in the process of doing so.

    >>Let's not forget that the US consumer is strong

    Consumer spending has dropped on a year-over-year basis for 4 consecutive months; it has dropped in six of the last eight months. Consumer sentiment is at the lowest point in a year. GDP, even with remarkable new double adjustments, has averaged 2.2% since the end of the recession... not sure how you come up with 3% on any annual basis.

    Regardless, in this link below, you can look at the consumer data... and the 2008 GDP data in which few people other than myself anticipated the recession before the year began. I am not saying we are doomed to have a recession... I am saying that global manufacturing (U.S. included) is very shaky and the U.S. consumer has been retreating for much of the current year.

    Sep 24, 2015. 05:40 PM | 2 Likes Like |Link to Comment
  • Resilient Consumer? Not During The Manufacturing Retreat And Corporate Revenue Recession [View article]

    >>I have a feeling that the vast majority of folks who take the time
    >>to frequent financial blogs like Seeking Alpha and others also
    >>happen to be those firmly in the top 15-20%

    Without question... without question. They may not have data on something like that, but obviously, those who have significant assets to invest are more likely to visit financial web portals.

    >>All those stats you bring up just do not apply to their situation
    >>as they are firmly entrenched in some cozy managerial position
    >>or retired with a good pension and a solid additional brokerage
    >>account on top of that.

    There's some of that, for sure. Then again, not everyone has his/her head stuck in the sand. Can they really afford to? Most of the wealth that people think they have is tied up in assets that are likely to act as they did in 2000-2002 and 2008-2009. (Maybe not immediately, but yes... eventually.)

    There are a number of writers/money managers/economists who are expressing similar sentiments to my own. We may be expressing concerns that most are not discussing or thinking about intelligently, but that's okay.

    I would say, plenty of 1%-ers (myself included), realize that Fed policy/ZIRP/QE has benefited them immensely. Fed policy/ZIRP/QE has contributed handsomely to the top 20% tier a la stock/real estate wealth (and disproportionately, the top 1%-5%). Unless you have significant amount of wealth tied up in the reflated asset classes, you have likely lost out on terms of wages/salaries/median income. And if you are/were a risk-averse saver, you've been punished as well.

    Those who are listening/reading my commentary - and there are quite a bit across a variety of media formats (100,000+) - as well as those paying attention, may be able to keep more of the market-based security wealth. That's the issue for readers/listeners/money management clients at Pacific Park Financial, Inc. They understand that 2000-2002, 2008-2009, even 2011... we are no longer looking at once-in-a-lifetime shocks. Not when the whole world has resorted to never-ending emergency level stimulus.

    >>For me, a main stat of a healthy economy is seeing the velocity
    >>of money keep increasing, showing a vibrant consumer economy
    >>Ever since 2008, the velocity of money has just cratered
    >>and never recovered.

    Yessssss... yes, indeed. But if you think nobody's going to listen to my explanations of inventory-to-sales ratios or durable goods orders or labor force participation rates... will I ever succeed in the extremely relevant velocity of money stat? I can only put forward so much... and I try to tie it back to clear and present dangers to risk assets.

    >>I've been buying up bonds (EDV/TLT/BND/LQD) myself the
    >>past two months

    We've got the long treasuries and zero coupons and gold and francs and German bunds in our FTSE-Russell Multi-Asset Stock Hedge (MASH) Index. Some of our client base have that hedge. But for the active client base, we've stayed pretty close to the 10-year via IEF/BND.

    Keep in mind, the U.S. can probably play the game for a lot longer than many believe they can. Japan is 15 years in... we are only 7 years in. Economic concerns notwithstanding, we use trendlines and market internals to determine exposure. Heck, we will probably see a 2% 30-year mortgage before we ever see 2003's 50-year low (6% 30-year mortgage) again.

    In other words, even if we see a bearish shock in the immediate or intermediate-term, there will new and creative ways to move the cost of borrowing down to zip... and another superficial recovery would resurface. I have doubts that we might ever see the velocity of money increase meaningfully, or LFP flatten or rise for 25-54 via a jobs renaissance. But... that's me.

    Sep 24, 2015. 05:22 PM | 3 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    >>The question in my mind is how this deflationary pulse feeds back
    >>into the US economy.

    Okay... well. It already has. See link related to oil prices and deflation.

    >>There are few (if any) US econometric models which say lower
    >>commodity prices are bad for the US economy, the European
    >>economy or the Asian economies.

    We are not simply talking about a commodity slowdown. It has been a 4-year collapse across the entire commodity complex. We'd all like lower prices as consumers, sure. And that alone might beneficial. But it's a different story when you are talking about a deflationary spiral. That's what most cite as a significant driver of the Great Depression. That's what the Federal Reserve worries about... when it's efforts to push CPI inflation up as well as wage inflation higher fail miserably. Year-over -year wage growth lowest on record (0.2%) means less consumer firepower and possibly, deflationary concerns... year-over-year CPI inflation at 0.3% has never been farther from the 2% target. Tough to raise those rates, even a paltry 0.25%.... when goals are not being achieved.

    >>Basically, I'm not willing to concede that low commodity prices
    >>will negatively impact the developed world's consumers.

    Honest, nobody asks you to concede how you feel. But I am not sure how you maintain that the developed world's consumers are doing well. Where?

    Half of Europe, Canada, Australia, Asia... already staring at recessions. Japan? Even with all that QE and ZIRP for 15 years, nada. Developed world consumers meaning the U.S., then? Consumer spending has dropped on a year-over-year basis for 4 consecutive months; it has dropped in six of the last eight months. And U Mich Consumer Sentiment nose dive. And that's with the lower commodity prices that are supposedly so beneficial?

    But okay. Let's say that you are betting on the strength of the resilient U.S. consumer. Does the 30% of our economy that represents the beleaguered manufacturing segment no longer matter? It's in terrible shape, nobody would argue otherwise. So that means 70% of the U.S. economy needs to be so resilient, it overcomes a global slowdown, a U.S. corporate revenue recession and a stagnant domestic manufacturing segment.

    We better get a whole lot more punch bowl from the Fed then.

    In the beginning of this article, I spoke about short memories. Very few analysts or economists projected the "Great Recession" until late summertime/fall of 2008, when the recession was already in full swing the damage to investing portfolios had largely been done. As I stated in the article above, I introduced a recession forecasting tool to popular financial web portals in December 2007 (like Seeking Alpha) that placed the odds of a recession in the ensuing 12 months at 70%; the same model appeared in Investor's Business Daily in January 2008, bumping up the likelihood to 80%. Here is that link again, in case it interests you.

    All the Best,

    Sep 23, 2015. 03:43 PM | 5 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    Sometimes, I make the mistake that people have been reading me for years and/or following every article that I have written for months. So let me try to clarify:

    For the majority of my moderate client base during June-July when U.S. benchmarks were at all-time records, we ratcheted down the risk from 65%-70% diversified equity to 50%; we ratcheted down the risk from 30%-35% diversified income to 25% investment grade. We have 25% cash/cash equivalents and we are NOT reallocating to normal risk targets without confirmation from valuations/market internals/econ shift and so forth.

    In spite of the confusion, and I apologize for that... I did NOT mean to imply that a person should be 100% allocated to stocks or 100% out of the stock market. Nor did I mean to imply that a person should divide 100% cash into three increments for SPY alone.

    Depending on a person's unique set of circumstances, I meant that if a person had money that he/she wanted to put to work, perhaps because that person had 100% in cash or was just starting to put a rollover IRA back in place, he/she could use a test of the lows to put some money to work. So let's say that a person wants to get his portfolio up from 45% stock to 60% stock. Then I would do it in 1/3 increments. But I would only go 1/3 back to 50% at the correction lows... and I would reconsider the circumstances based upon whether the lows held or did not hold.

    Generalized guidance here... but I hope that clarifies.

    Sep 23, 2015. 01:25 PM | 1 Like Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    Sorry for the confusion.

    I did not mean to imply that a person should be 100% allocated to stocks or 100% out of the stock market. Nor did I mean to imply that a person should divide 100% cash into three increments for SPY alone.

    Depending on a person's circumstances and risk tolerance, I meant that if you had money that you wanted to put to work, perhaps because you were 100% in cash already, you could use a test of the lows to put some money to work. So let's say that a person wants to be 60% in stock. And he is currently 45% in stock. And let's say he/she wanted to move back to that target. Then I would do it 1/3 increments. But I would only be 1/3 back to 50% if the lows held.

    Hope that makes sense. It's not always easy to provide general ideas. I do not give specific recommendations for obvious reasons that we all have different needs and different timelines.

    So in our money management, for many of our moderate growth/income portfolios, we already moved down from 65%-70% equity to 50%... and we are not moving back in until and unless a variety of risk factors change. In the article, I only intended to give an example of moving back in for someone who wishes to do so, because he/she was significantly under-allocated to his/her desired level of exposure.

    Hope that helps. Best,

    Sep 22, 2015. 10:54 PM | Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    >>With that statistic counting people 16+,
    >>does that mean that people's 85-year-old grandparents are
    >>considered as potentially working? Pretty silly statistic if that's
    >> the case.

    Actually, that is not the case. The LFP rate that Yellen's Fed considers quite closely and mentions quite frequently covers 16+ year old Americans who are either employed or who are ACTIVELY LOOKING FOR WORK. It is not looking at the entire population over 16.

    >>Seems to me that the decreasing % of labor force participation is
    >>driven by the aging population and baby boomers retiring,
    >>which is to say, nothing terribly surprising about that.

    In the article, you would discover directly under the LFP in #3 is the Inactivity Rate For 25-54 in #4. It debunks the notion that the dismal labor force participation is due solely to the retirement of baby boomers. Simply stripping out 55+ solves the issue of retirement en masse, so that one can look only at the prime time earners in the 25-54 demographic. The inactivity rate (opposite of LFP rate) should go down when you strip out the retiree population. Scroll back up to the article and you will see that the inactivity rate for the sub-set of the working-aged population (25-54) is rising dramatically.

    Perhaps ironically, the only part of the LFP rate that isn't declining, the only part of the inactivity rate that isn't rising, are the 65+. In other words, people are working longer, and it is the older workers who are keeping jobs longer than they had in the past. They have to work longer, unfortunately.
    Sep 22, 2015. 10:39 PM | 6 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]
    I am neither bearish nor bullish in practice. As the president of a Registered Investment Adviser with the SEC with $130M under management, we lower the risk of our target allocation when the fundamental, technical, historical and economic backdrop suggest doing so.

    For instance, in our moderate risk portfolios, we moved from 65%-70% diversified equity to 50% large cap equity in June-July of this year. We moved from 30%-35% diversified income to 25% investment grade. And raised 25% cash/cash equivalent by the end of July.

    We raise risk when back to targets when fundamentals are improving and valuations are more attractive.

    Other than that, in the 1000s of articles that I have written over the last decade, I have not made specific recommendations at all. I have mentioned 1000s of tickers on assets that interest us at Pacific Park and assets that do not.

    And when it comes to risk management, we are not buy-n-holders... ever. We use stop-limit orders to take big gains, small gains, or small losses... always to eliminate the possibility of a big loss.

    The tip jar site makes zero sense based on what the content of the 1000s articles are about, the generalized non-specific information (as opposed to specific advice) and how we implement our asset allocation as money managers. Anyone who would like performance figures for Pacific Park Financial Inc. over the last decade can request it from us at:
    Sep 22, 2015. 09:04 PM | 4 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]
    That has to be the most worthless analysis ever compiled... Tip Ranks? Never heard of it. But hilarious nonetheless. 12 picks in 10-plus years in 2000 articles with 5000 tickers?

    I have written 2000 articles over 10-plus years. Per disclosure, I do not offer a specific buy or sell recommendations. Everything is intended for generalized consumption.

    If it pleases you to rip apart a money manager with $130Million AUM and 100,000 readers across a wide variety of media, by all means... enjoy. My readers and clients know better.

    Tip Ranks... ha! What s hoot! 12 tickers of generalized discussion tracked since 2010. Ha!
    Sep 22, 2015. 08:45 PM | Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]
    Well, Pelican... take a look at the comments on my article, Market Top? 15 Warning Signs. It appeared on financial portals around the web like Seeking Alpha directly before the August-September correction.

    There were plenty of perma-bulls slamming me at that time, and during June-July as I lightened up on client equity positions. Not so much anymore. But there are a few anonymous perma-bulls who will still pop up. They tend to do so whenever there's a bounce.

    Of course, nobody ever knows what will happen next. Even though I have called this activity to a tee - from July 2015's Remember the A/D Line? July 2011 Remembers to last month's Selling the Drama or Buying The Rally - I readily acknowledge that I cannot predict what will happen. Nobody can.

    What can I do? I can reduce risk when the market internals deteriorate, the fundamentals hit extremes and the economic signs weaken. That's what I did for my clients at Pacific Park.

    Sep 22, 2015. 06:34 PM | 5 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    There's every bit of reason to think that we break through the lows of the correction before the Fed steps in to boost confidence. Look at what I wrote in Selling the Drama or Buying The Rally. (Note: Not everyone thought we'd be headed back down after the first correction low hit.)

    For those that have cash that they want to put to work, an increment can be made before 1870-1875. Heck, it could be made now. But trust me when I say that you do not have the trading community necessarily figured out.

    For one thing, this may be a long drawn-out correction where the downtrend remains intact with the S&P 500 consistently trading below the 200-day. It may also go below the correction lows, as it did in 2011 before the Fed and ECB stepped in. And for that matter, a bear is certainly within the realm of possibility.

    If you have extra cash, have an approach for any and all possibilities. I certainly require confirmation of the lows holding before putting second and third increments. A first increment? Sure, if you were overweight cash to begin with and the market is 9%-10% off the peak already.

    Sep 22, 2015. 06:20 PM | 5 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    You're not really missing it. You are close, indeed. The official labor force participation rate is 62.6% according to the Bureau of Labor Statistics (see link below). The nation’s civilian population, consisting of all people 16 or older who were not in the military or an institution, reached 251,096,000. Of those, 157,065,000 participated in the labor force by either holding a job or actively seeking one. 251M - 157M = 94M.

    Sep 22, 2015. 06:08 PM | 13 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    >>How many US recessions have we had which were preceded by anemic
    >>wage growth and collapsing commodity prices?

    Perhaps you are asking the wrong question. For one thing, recessions vary in length and severity. For another, each U.S. recession had been preceded by a variety of factors, each of which had different weightings of relevance at the time of the recession in question.

    In a simplistic sense, perhaps, a recession is a period of negative economic growth. So the questions you might want to inquire about include, (1) Could the world's deflationary troubles a la collapsing commodity prices contribute to negative economic growth in the U.S? After all, they have already done so in half of the globe's major economies, and severe commodity depreciation accompanied the negative GDP growth of Q3 and Q4 of 2008, well before anyone declared that a recession occurred.

    And (2a) If consumption represents 70% of the current U.S. economy, so much more so than in the 1970s or 1930s or 1900s, could the lack of wage growth occurring today be that much more important to economic growth than in previous recessions? And if not, (2b) if you will, why on earth would wage growth be so important to the Fed's picture of a healthy economy vis-a-vis inflation targeting as well as genuine employment goals?

    Keep in mind, we are a far more globally interconnected world today than we were before the 1990s. We affect others and they affect us. The commodity slump has had an adverse affect on many of the economies around the world today, and the consumption element of our GDP today is more dependent on consumer (i.e., wage growth) than when we were a manufacturing powerhouse.

    Look at the CCBR with 10-year yield widening. Look at compression in places along yield curve. With zero percent rate policy, you can no longer use an inverted yield curve alone to forecast a recession.... but these events are telling you that the economy is not particularly healthy. Does not mean a recession must occur, but watch the trend of these spreads.

    Sep 22, 2015. 05:55 PM | 13 Likes Like |Link to Comment
  • 13 Economic Charts That Wall Street Doesn't Want You To See [View article]

    Adjust away.

    7. Everyone anticipated higher retail sales due to the drop in oil prices, and the opposite has occurred. People have spent less. All things being equal, less being spent at the pump should be spent elsewhere... and it's not being spent elsewhere to help the economy. Massive stimulus is what it was supposed to be. Not happening.

    8. Sales declines across all sectors, Dow for 3 quarters, Info tech ex Apple sales decline. This is pervasive. You cannot blame the revenue recession on the energy sector alone.

    10. Manufacturing has been declining since 2011. Seriously, you're going to try to claim that oil is the reason manufacturing jobs have all but disappeared and new orders have been 0% year over year for most of those 4 years on oil prices? At least point the finger on the commodity slump that occurred in conjunction with China's 4-year slump or something.

    Sep 22, 2015. 05:25 PM | 14 Likes Like |Link to Comment
  • Why The S&P 500 Is Likely To Revisit The Correction Lows Near 1,870 [View article]
    Stephen A,

    As a fellow contributor, I am going to thank you for your different opinion on the state of the economy. Some fellow contributors lack basic etiquette in this regard, either slamming you/I from an anonymous bunker or endeavoring to be humorous. So thank you for the respectful disagreement.

    We agree (perhaps) on near-term market direction based on risk-reward, technicals, market internals and fundamentals (a la valuation concerns). Yet we differ on the U.S. economy that I suggest is stalling whereas you report it is "fine."

    Neither one of us is an economist. (Probably a good thing since it is a pseudo-science that fails its prominent club members as often as it helps them.) Yet allow me to demonstrate that when the vast majority of economists missed the oncoming recession in 2008 until way after bearish declines in stocks had already occurred (circa March of 2008 with Bear Sterns bailout and then in July), I had an article in Investor's Business Daily projecting an 80% chance of a recession in 12/2007 and Seeking Alpha at start of 1/08. My methodology with PMI Data, Conference Board Consumer Present and Future Expectations, Lower Lows S&P, CCBR spread with the 10-year and other yield spreads has a relatively strong track record, historically speaking. It didn't fail me in 2007, and it is likely to help me today.

    I am not sure that librarians partying in Italy in August is a venerable metric. If you were going solely by subjective observations like that, or tons of folks shopping in Apple stores, you miss what the overwhelming majority of Americans self-report on their spending as well as their feelings about the economy today and going forward.

    Most importantly, you are using the textbook definition of two consecutive quarters of a recession, and extrapolating that it could not start before Q4 2015, and only if that went negative, which you doubt entirely, and then Q1 2016 would have to be negative as well. Perhaps you would benefit from a historical look at the last recession, the one that I effectively projected. Two consecutive quarters never occurred in 2008 - not after annual revisions years down the road, and not in the initial GDP readings and not after the third and final reports on GDP in that year.

    Behold the third report and revisions for 2008 GDP at the time of the third reports of GDP in 2008, most of which were revised down in the year. But not to negative territory going back to Q1 and Q2. You will notice, no sign of recession based on your type of optimism on GDP growth.


    Q1 1.0%
    Q2: 2.8%
    Q3: -0.5%
    Q4: -6.3%

    In other words, if we use your notion of GDP, you would have completely and entirely missed the recession, or at best, decided somewhere in Q3 that something was wrong and that it would likely travel into Q4. Which is exactly what the overwhelming majority of economists did, start to tell people that a recession might be underway in the late summer, long after stocks had collapsed into a bear market. The recession began 12/07 but was only reported to have occurred then in October of 2008.

    Again, as another contributor said, you might want to consider what the Federal Reserve's inaction and statement (9/17) actually say about the state of the U.S. economy. In particular, the global economy that we are part of is weakening, our manufacturing segment is downright struggling/recessionary, and extremely poor LFP is critical in understanding actual employment.

    Knowing that traditional yield curve inversion cannot tell you any longer about the likelihood of a recession (Thanks to ZIRP seven years), you would benefit by looking at the tighter spreads between 3-month and 10-year, the wider spread between CCBR Corporate and 10-year, PMI trend and Conference Board Consumer Sentiment. All of those items tell you what the Fed is grappling with... that the economy is not fine. (Note: Recession odds are increasing, but I am only saying that we are stalling, and that we have been slowing for a while.)

    Again, I understand that you have a different opinion on the U.S. economy. But levered asset price reflation (stocks, real estate) is all that we have from the Japan-like solution to the Great Recession. That gives you below trend growth and record margin debt, but provides little pop for the increasingly "fed up" middle class.

    I think some of this info will appear in my next article, probably Tuesday, so stay tuned!

    All the Best Stephen,

    Sep 21, 2015. 01:28 PM | 4 Likes Like |Link to Comment