The Purchasing Power of The Dollar Declines -82% in The Past 40 Years...

Aging Baby Boomers May Depress Stock Prices For Two Decades, Based On Demographic History

Equity valuations may be depressed as Baby Boomers shift from buying stocks to financing their retirement, according to the Federal Reserve Bank of San Francisco.

This massive demographic shift should be taken into account in long-term financial planning.

The baby boomers, born 1946 and 1964, began turning 65 this year. As they begin retiring in increasing numbers they are likely to sell off assets, especially risky equities, according to Fed researcher Zheng Liu and Mark Spiegel, a vice president in the economic research department.

Of course, many boomers already have diversified their portfolios by cutting down on stocks and adding fixed-income investments. Also, current asset prices should reflect the anticipated effects of these demographic changes to some extent.

Still, U.S. equity values historically have been closely related to demographic trends.

“In the context of the impending retirement of baby boomers over the next two decades, this correlation portends poorly for equity values,” Liu and Spiegel write.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, August 26, the S&P 500 closed @ 1177, and that was...
  
    -5.9% BELOW its 12-Month moving average which stood @ 1251.
    -8.6% BELOW its 40-Week moving average which stood @ 1288.
    -6.5% BELOW its 10-Week moving average which stood @ 1258.


Therefore, the INTERMEDIATE-Term trend IS BEARISH and the LONG-Term trend is BEARISH.

U.S. Economy is Slowing, Just As In 2008, But...

the jury is still out on whether another recession is in the offing...

Why Capital Preservation Is Paramount In This Climate...

One of our key indicators turned bearish for stocks in August.

When the 50-day BLUE moving average, is ABOVE the 100-day RED moving average, stocks are in an uptrend and stock market risk is below average.

When the 50-day BLUE moving average, is BELOW the 100-day RED moving average, stocks are in an downtrend and stock market risk is above average.

In the 2nd week of August, the 50-day BLUE moving average, crossed BELOW the 100-day RED moving average, increasing the odds that a new bear market may be at hand.

As a result, we have significantly reduced our stock market exposure in our managed accounts.

Until the S&P 500's 50-day BLUE moving average crosses ABOVE the 100-day RED moving average again, we will maintain a defensive posture, largely in cash.

Risk is too high and the odds of a severe market decline are too great to do otherwise.

John Harris

Startling AARP Poll Shows 92% Are Ignorant of A Primary Annuity Benefit!

$100,000 in a Bank CD earns interest. The interest is taxed.

$100,000 in an Annuity earns interest. The interest is tax deferred.

In a recent poll by AARP only 8% of the respondents (5,000 participated) knew that fact.

The means 92% of those who participated (4,600) did NOT know one of the key benefits of annuities, tax deferral.

Corporate Earnings Guidance is Not Yet Recessionary...

Corporations posted operating earnings growth of 12% in the second quarter, despite meager U.S. economic results.

Slowing global economic activity will undoubtedly take an even greater toll on profits during the second half of 2011, but profit growth is far from recessionary territory. And corporations have proven adept at maintaining profitability in a weak economic climate.

Although corporate earnings guidance deteriorated dramatically in July, negative guidance remains far below levels previously associated with negative profit growth in outright earnings recessions.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, August 19, the S&P 500 closed @ 1124, and that was...
  
    -9.6% BELOW its 12-Month moving average which stood @ 1243.
  -12.8% BELOW its 40-Week moving average which stood @ 1288.
  -11.4% BELOW its 10-Week moving average which stood @ 1268.


Therefore, the INTERMEDIATE-Term trend IS BEARISH and the LONG-Term trend is BEARISH.

Bear Markets Not Accompanied by Recessions Are Less Severe...

Quote of The Day: Japan-Like Economic Growth Ahead?

“It's pretty amazing that the Fed will (keep rates) exceptionally low until 2013,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “They are telling you that we are in a stage of Japanese-like economic growth.”

Recession in the USA? Depends On The Global Economy's Big Three...

Turmoil Dampens Already Slowing Global Economy

The eurozone sovereign debt crisis has contributed to rising risk aversion in global credit markets. Even more fundamentally, the crisis has reinforced the increasingly weak outlook for European economic growth. 

Europe accounts for roughly one-fifth of the global economy. 

Weaker European demand will likely further damage already decelerating export growth in Asia and other regions.

China’s economy has moderated substantially in recent months amid significant monetary tightening. A slowdown in exports raises the near-term risks of a hard landing there. 

Japan has been unable to fully regain its footing after its nuclear and natural disasters.

With Europe, China, and Japan accounting for 50% of non-U.S. economic activity, the world’s three largest economies outside the U.S. may be stalling.

Quote of the Day: "The Folly of Short-Termism"

"The central issue facing the U.S. is whether we turn away from unsustainable budget and trade deficits toward an economy that grows at historic rates with low inflation. More redistribution now won't do that. More investment and productivity growth now will, and it will also provide more resources to pay for a greater share of future health-care costs at lower tax rates."

~Allan H. Meltzer

Mr. Meltzer, a professor of public policy at the Tepper School, Carnegie Mellon University and a visiting scholar at the American Enterprise Institute, is the author of "A History of the Federal Reserve" (University of Chicago Press, 2003 and 2009).

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, August 12, the S&P 500 closed @ 1179, and that was...
  
    -5.8% BELOW its 12-Month moving average which stood @ 1251.
    -8.6% BELOW its 40-Week moving average which stood @ 1290.
    -8.1% BELOW its 10-Week moving average which stood @ 1283.


Therefore, the INTERMEDIATE-Term trend IS BEARISH and the LONG-Term trend is Moderately Bearish.

Happy Cost of Government Day: August 12; You Will Be "Government-Free" Starting Tomorrow

Americans for Tax Reform 

"Cost of Government Day" (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of the spending and regulatory burden imposed by government at the federal, state and local levels.

Cost of Government Day for 2011 is today, Friday August 12. 

On average, workers must toil 224 days out of the year just to meet all costs imposed by government.

In other words, the cost of government consumes 61.42% of national income.

Since he took office, President Obama's administration has pushed the day all the way forward to August 12. Americans are now working 27 more days per year to pay for government spending and regulations than on the day Mr. Obama became president.

Middle-Income Boomers's Survey Shows Lack of Retirement Security...

67% — Of middle-income boomers expect a much different retirement than their parents

60% — Of middle-income boomers "envy" the pensions of previous generations of retirees

55% — Of middle-income boomers have saved less $100,000

Unlike their parents, baby boomers retirement risks have shifted from employers and the government onto individuals with the switch to 401(k)s instead of corporate pension plans, cuts in employer-paid retiree health benefits and the uncertain future of Social Security and Medicare.

“Boomers may have to take more personal responsibility for their retirement financial security than was the case with their parents and plan for the risks that may jeopardize this security, like long-term care, inflation and outliving their money,” says Scott Perry, president of Bankers Life.

Don't Let Market Volatility Lead To Regrettable Investment Decisions...

• “Individuals who cannot master their emotions are ill-suited to profit from the investment process.” - Benjamin Graham
  
  
• Emotional investment reactions to sudden market declines and increased volatility tend to be driven by human behavioral biases, such as loss aversion.
  
  
• Historical patterns of investor behavior show that surging equity market volatility can cause some investors to make hasty, emotionally charged investment decisions that often turn out to be regrettable.
  
  
• Recognizing innate biases may help prevent investors from tampering with a well-crafted portfolio strategy during periods of severe market turmoil.
  
  

After The Debt Limit Deal: Federal Spending Still Out of Control...

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, August 5, the S&P 500 closed @ 1199, and that was...
  
    -4.4% BELOW its 12-Month moving average which stood @ 1254.
    -7.1% BELOW its 40-Week moving average which stood @ 1291.
    -7.4% BELOW its 10-Week moving average which stood @ 1295.


Therefore, the INTERMEDIATE-Term trend IS BEARISH and the LONG-Term trend is Moderately Bearish.

Chart of The Day: A Historical Perspective on Post-Massive Bear Market Rallies

Today's chart illustrates rallies that followed massive bear markets. For today's chart, a 'massive' bear market is defined as a decline of greater than -50%.

Since the Dow's inception in 1896, there have been only three bear markets whereby the Dow declined more than -50% (early 1930s, late 1930s until early 1940s, and during the very recent financial crisis).

Today's chart also adds the rally that followed the dot-com bust during which the Nasdaq declined -78%.

The current Dow rally has followed a somewhat middle of the road path and has most closely followed the post dot-com bust rally that began back in 2002.

If the current rally were to continue to follow the post-massive bear market rally pattern, the market would have to resume its rally in relatively short order.


Commentary & Analysis Courtesy of Chart of The Day

Government Spending As A Share of GDP Is Skyrocketing...

Spending as a share of GDP in the last 3 years is higher than at any time since 1946.

In 3 years the debt has increased by more than $4 trillion thanks to stimulus, cash for clunkers, mortgage modification programs, 99 weeks of jobless benefits, record expansions in Medicaid, and more.

The forecast is for $8 trillion to $10 trillion more in red ink through 2021.

If that happens, the U.S. dollar will no longer be the world's reserve currency.

Survey: Pre-Retirees Weigh In On Retirement...

69 — The age at which today's pre-retirees expect to retire


82% — The percentage of Americans 55 and older who name financial peace of mind as their key financial goal


54% — Of pre-retirees view retirement as a new chapter in life, not a winding down

Have We Become An Entitlement Nation?

Redistribution transfer payments to individuals were 66% of the federal budget in 2010, up from 28% in 1965.

We now spend $2.1 trillion a year on these redistribution programs, and the 75 million baby boomers are only starting to retire.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, July 29, the S&P 500 closed @ 1292, and that was...
  
    +2.2% ABOVE its 12-Month moving average which stood @ 1264.
    +0.1% ABOVE its 40-Week moving average which stood @ 1291.
    -1.2% BELOW its 10-Week moving average which stood @ 1308.


Therefore, the INTERMEDIATE-Term trend IS NEUTRAL and the LONG-Term trend is Moderately BULLISH.