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Keith Springer
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Keith Springer is the author of "Facing Goliath: How to Triumph in the Dangerous Market Ahead," radio host of "Smart Money with Keith Springer" on 1530 KFBK, editor of the Smart Money Newsletter, a market technician, a financial writer, multinational philanthropist, and... More
My company:
Springer Financial Advisors
My blog:
Keith Springer's Financial Blog
My book:
Facing Goliath: How to Triumph in the Dangerous Market Ahead
  • It's Now Greek to All of Us -Market Draws Line in the Sand around Greece

    The market has drawn a proverbial line in the sand, and it runs along the Greek border. Investors have decided that the future of the free world lives and dies with Greece. The thinking is that if Greece defaults, it will have a Lehman type domino effect and not only bring down other weak nations like Portugal, Italy and Spain (those are the PIIGS you’ve probably heard about, add in Ireland and you see the acronym), but strong banks too. There is certainly reason to worry. They are right. Just like when Lehman failed, forcing several money market funds to “break the buck”, a European contagion would have a similar affect, only worse. For this reason, I have been advising clients to use Government Money Market Funds exclusively. Yes, even money markets aren’t safe, as they too will eventually fail.

    However, that is not going to happen today, as the Greek Parliament put off the inevitable. Everyone knows that there is no chance that Greece could ever repay the debt they’ve taken, but the western world takes a very Zen approach to a very non-Zen problem – why pay for something today if you can pay twice the price in blood and treasure tomorrow. It’s kicking the can down the road, so to speak.

    The bigger issues facing not only our economy but most of the developed world are still with us. The country’s demographics, where we now have an aging population – (basically too many old people and old people just naturally spend less than people in their 30’s and 40’s), and an over-indebted population. The funny thing is that this still comes as a surprise to most investors. Even Ben Bernanke has expressed his surprise at how slow the recovery has been. What most fail to understand (or admit) is that these issues have been brewing for years and will be with us for some time, and are exactly what I discuss in my new book, Facing Goliath: How to Triumph in the Dangerous Market Ahead. This is a must read for every investor.

    For the more immediate future now that the threat of a Greek default is behind us, (temporarily of course), investors’ attention will once again focus on earnings. In the big picture, it is earnings that move stocks, while the headlines move emotions. That’s welcome news because earnings should be very good this quarter. Yes, earnings can be good in a bad economy, for a little while at least. Just don’t be lulled into a false sense of security. U.S. corporations continue to have good sales growth, but they’re not giving it back in wages and labor. This keeps margins high and earnings growing, even though the unemployment rate stays grossly high. Currently, wages and salaries make up 48.9 percent of gross value- added for domestic businesses, according to Commerce Department data. That’s up slightly from 48.7 in December, the lowest since records began in 1929. Meanwhile, corporate profits continue to scream higher. Basically, this means that corporations are squeezing productivity from workers, which helps their bottom line, but not the economy.

    However, this could very well be the peak in earnings for this cycle, as there is no doubt that the economy is slowing, largely from the issues I mention above. Without a QE3, the economy will likely continue to sink, so there is little doubt that the Fed will not maintain its accommodative stance. If we do not see a full blown QE3, we will most certainly have the continuation of QE Mini-Me. Clearly investors need to be properly prepared, investing “tactically” to get the very best returns with the least risk possible. Invest for need and not for greed!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jun 30 11:12 AM | Link | Comment!
  • Mandatory Reading for anyone nearing retirement

    "It was just three years ago that the financial world as we know it ended in the spectacular collapse of the real estate and banking sectors. Hundreds of billions of dollars in stock market values and home equity evaporated almost overnight, delaying indefinitely the retirement plans of many baby boomers. Yet now, after more than two years of almost uninterrupted bull market, investors appear to be letting their guard down again and are making many of the mistakes they made in the years leading up to the crash. To give an example, risk premia in junk bonds and emerging market bonds have all but disappeared--implying that investors believe that these volatile sectors are no longer risky. Easy money made available by the Federal Reserve has helped to unleash the market's animal spirits again, but is the optimism warranted?

    In Facing Goliath: How to Triumph in the Dangerous Market Ahead, Keith Springer gives it to you straight. He is neither a bull nor a bear; he is a realist. There are plenty of attractive investment opportunities out there for investors willing to take a tactical approach. But those investors accustomed to growing wealthy by buying and holding have a long, hard slog in front of them. The tailwinds that pushed the market forward over the past 30 years have now reversed to create some very menacing headwinds. Unlike in 1982, the start of the last secular bull market, we are not starting from a position of high and falling interest rates and inflation; both are near 30-year lows.

    Furthermore, the easy credit that characterized the period is now a thing of the past. Rather than make new loans, banks are struggling to repair their balance sheets. And consumers, given that their homes are likely underwater, have little interest in borrowing more, even at rock-bottom rates.

    Using historical examples ranging from 18th century France to 1990s Japan to support his arguments, Springer sees a prolonged period of on again / off again deflation and advises his readers on how best to invest in this climate.

    If you are concerned about your retirement savings, pick up a copy of Facing Goliath."

    —Charles Lewis Sizemore, CFA, author of Boom or Bust, Understanding and Profiting from a Changing Consumer Economy

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jun 27 1:49 PM | Link | Comment!
  • The Economy is Slowing – Golly Gee, Who Could Have Guessed! -Without Stimulus, earnings better be good.

    The recent spate of disappointing economic news has sent the stock market reeling for 7 straight weeks now. 

    What is a surprise is that the market has sold off and generated such negative sentiment so quickly on news that was essentially old, as all of today’s problems have been in the headlines months. It has been common knowledge that Greece and the Euro-zone are a mess, Japan’s tsunami and nuclear crisis would disrupt production and demand, and the Middle East turmoil would spike energy, and that all of these together would create major economic headwinds. Let’s toss in the terrible weather in the US, and the current global economic slowdown is certainly expected and not a surprise.

    So, is this correction marking the end of the 2 year Fed stimulus driven bull market? No, not yet. Market tops occur when least expected and investors are very optimistic, like late 2007. Markets rarely die when all the bad news is out and so well covered, like today.

    So what is really going on? It’s the same old story that has been going on since the market started rallying over two years ago; no one likes, believes or trusts it. For instance, just this past May at the peak of the market, massive outflows from equity funds continued, totaling $6.09 billion while bond fund inflows totaled $20.3 billion! That’s unheard of.

    The good news is twofold: the selling is largely from a lack of buying interest and not from intense selling pressure and the growing bearishness (negative sentiment) is a good thing for the market. It is important to remember that stocks ultimately trade on earnings and earnings have not turned down yet. Corporate earnings are at record levels and many analysts are raising this year’s estimate from $95 to over the $100 level. Currently, with S&P earnings at the $82 to $83 level, the markets price-to-earnings (P/E) are at 15.4. You would have to go back to 1994-1995 to find an era of lower P/E’s. During the 2007-2009 bear market stock market collapse, earnings were collapsing. The S&P 500 earnings fell from the mid $80’s to under $15. That was a -80% drop, and for a large part explained the -50% drop in stock prices.

    We are approaching a critical juncture. Earnings are the only thing that is going to turn this market around. Luckily, earnings season is only a couple of weeks away. If they are good, better than expected (as I anticipate) the rally will continue. Although, as I have mentioned, this is likely to be the peak in earnings for this cycle, so investors must be prepared. If, on the other hand, earnings are disappointing, then run for the hills.

    The wildcard is whether Bernanke and the Fed come up with a QE3 or a horse by a different name. Many thought I was nuts when I said there would be a QE3 months ago. Now, there are more than mere rumblings about another stimulus plan. Just this past Monday in the Washington Post, Larry Summers (one of Obama’s top economic advisors) advocated more government stimulus to jumpstart the struggling U.S. economy.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jun 17 10:42 AM | Link | Comment!
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