Over the Long Term the Markets WILL be Up;Invest Accordingly

[Aman A.K.A. Ahamburger]

Thanks Q.  Been enjoying all the facts you're putting out there as well. 

 Normally I would post this info in various threads, but since 2013 is such a special year I will just post all this right here.  Since Q4 2012 earnings are behind us it's important to start looking at what growth will be like in 2013.  I have no doubt that companies will keep making money, and I have no doubt in the metrics that say the market is prices right and has 30-40% room to grow in the future.  It's just that GDP growth hasn't been strong enough for the last few years to pick up that 30-40% slack in the economy in the next 6 months.  The fact is that with all the new changes and taxes there is a chance that the U.S. economy, world's engine, remains in 'neutral' for the rest of the year.

  On the variable of stable global growth in the equation from the post above, China’s Economic Data Shows Weakest Start Since 2009 and Economic growth in India is slowing down. It really is starting to look like Global growth is burning out and fading away, especially when you look at how bad the situation is getting in the Mid East and Northern Africa.  

The interesting thing about China and India is that they both suffer from massive pollution problems and they are both facing issues regarding pollution, however, in very different ways.  India is trying to create new city centers but Blackouts dim prospects for south India's "next Bangalore".  Whereas in China, Chinese Anger Over Pollution, Main Cause of Social Unrest.  As discussed before, the Chinese govt is going to have no choice but to bet on consumer-led growth to cure social ills. Right in line with that previously discussed trend, the other half of it is falling in line as China Issues Plan to Streamline Government.

There are some positive signs coming out of Europe to a degree, however, a good friend of mine has informed me that due to the lack of GDP growth in the EU, there is an 85% chance that some kind of bank failure will hit Europe this year and,  Carmakers fear European recovery could take years.

All of those challenges are on the economic front, there is of course the other issues that are facing us in 2013.  Aside from the Middle East's uprising continuing to spread, North Korea forces China to shift stance on old friend, and China defends massive growth in military spending by saying they need to defend themselves from their neighbours.

I'm still as positive as ever on the USA economy as U.S. manufacturing jobs on the rise and things are "Made in the USA" again. The housing market is doing well and the 40% that housing market needs to come back is the reason that I know for a fact that the markets still have lots of room to run at some point.  Just think, the last time the markets were at this peak so was the housing market. Dow 20,000 here we come!

[Aman A.K.A. Ahamburger]

  Building on that 2013 equation:

As we have all just seen the situation in the EU isn't over yet. The scary this is that before the Cyprus Crisis(and bank failure), the rumblings were that Germany must not let France break EU fiscal pact.

The situation in the Mid East is  'significantly escalating as' Reports of Syrian jet fire into Lebanon. As Turkey links Syria to deadly car bombing at their border, Jordan closes main border crossing with Syria, and the Syrian Opposition Plunges into Disarray the Arab League gives Syrian seat to opposition?  I wonder if it has anything to do with the US training Syrian forces in Jordan?  Iran decides to stir the pot by saying that Israel is Unable to Threaten Iran, and the next day Israel fires into Syria after Golan attack on troops. Meanwhile in Egypt Mursi's warning stirs fears in Egypt opposition then Egypt Top Prosecutor Orders Arrest of 5 Activists.  Does this situation all come to a head during the Iranian elections in June? We will all soon find out.

As far as global growth goes, China's Vice Premier says economy faces headwinds, urges broad reforms and the UN Council to hold emergency Central Africa talks.  As discussed before this destabilization in Africa will(now is) bad for China, as they are seeking a relationship of equals with Africa.  How they are going to achieve this balance without meddling is beyond me, but as I always say, actions speak louder than words.  No meddling China you say? Putin I would be watching out if I were you as China punishes North Korea and the US asks for more.

The positive, that strength in the weakness trend that was emerging in 2012 is now starting to really shine. The March US job creation figures beat expectations, which means that with Housing back on track and the Energy intensity in US manufacturing sector down 17 percent, the USA will most likely be able to keep growing while the budget cuts and taxes take effect this year.  With the USA's strength starting to shine again the rest of the world is trying to do whatever they can to step into that light and share in the prosperity that we have all been blessed with here in the west.  Nowhere is this evidence more glaring than in China where the new first lady is modeling herself after the likes of Jackie Onassis 

I know I've said it before but God Blessed America!

 

[Aman A.K.A. Ahamburger]

The 2013 trends discussed above are really starting to peer through.  Like Mr.Z says in his long term investor thread, the best way to make money is to take a balanced level headed approach to the situation and not get caught up in the emotion of the market regardless of it's good or bad, which is also the basis for BiMetals 50/50 approach to retirement.

In Europe German Exports Fell in February Amid Euro-Area Recession and the EU raises flag over French, Italian, Spanish economies.  Something that wasn't mentioned very much that is actually a huge problem when you think about the amount of debt that China has on their books, was Fitch cutting China local currency debt rating.  These two issues combined with the spreading violence in the Mid East and other parts of Asia has the IMF chief worries about pace of economic recovery.  The slowdown in the global economy has some asking What happened to Canada’s economic miracle?, while Jim Flaherty’s Cyprus-style bank rescue plan is in place for the slowdown that is happening the Canadian housing sector.  The other "swan" in Canada that is showing its head is a problem for many, there is still SNOW everywhere in Saskatchewan and Manitoba, some of the biggest crop producing areas in all of North America.

Earnings from AA were great which is showing an underlining strength in certain sectors and it's definitely a reason to be optimistic for the long term.   Especially when you factor in that U.S. Job Openings Reach Highest Level In 5 Years, the US is halfway to Obama 5-year export-doubling goal and the fact we are Bringing manufacturing back to Detroit, one watch at a time.

 Over the near term though, the slow recovery in the US and the slowing global economy could really start to effect earnings to a point.  For instance Ruby Tuesday reported fiscal third-quarter results that came in below analysts' expectations and Foxconn sales drop could foreshadow Apple earnings.  The pain for MSFT gets worse as the New Xbox is going to have a hard time gaining market share in the living room and PC sales plunge as Windows 8 flops. This means that HP, dell, ect, ect are going to have some pretty bad numbers as well, more than likely.  

Bottom line, if the market crashes or corrects because of short term pain it's an opportunity for long term gain because NO MATTER WHAT THE MARKETS WILL BE UP. 

[Peace Of Mind]

Don't you just love being right! 

[Aman A.K.A. Ahamburger]

  Facts trump belief every time POM..  Don't you just love chemistry! 

[Peace Of Mind]

LOL!  Actually, I'm more partial to biology. 

[bimetalaupt]

Apr 11, 2013 17:32:13 GMT -5 Peace Of Mind said:

LOL!  Actually, I'm more partial to biology. 

POM,
 How about a compromise...Bio-Chemistry.. That is my field...Feed the body concentrated contraction with less free radicals...How is that for antioxidants  I would not want to get rusty.. I know but mmhmm is watching every world. 

BiMetalAuPt


Back to the Subject.. We have seen the market run ..up so 20% from one year ago (S&P 500) ..  I must have to say it could be time to take some money off the table.  No one has every gone broke by taking money out of the stock marfket.. Bonds like 10Y T-Notes could have the investment but inflation is about 3%.. You lose buying power...

now for some Schumann....http://www.youtube.com/watch?v=-GVTG_c3Y3I
Vladimir Horowitz plays Schumann Fantasie op. 17 in C major [3/3]

[Peace Of Mind]

Bruce, LOL!!   I'm a girl who always goes for antioxidants.  It does a body good!   

[Aman A.K.A. Ahamburger]

Nice to see folks keeping their arteries clean the natural way.. 

 I must have to say it could be time to take some money off the table.  No one has every gone broke by taking money out of the stock market.

  Banks are rocking per JPM's report today which means that the underling trend of the housing recovery is still very much intact, however, as you have pointed out before B, the savings rate is going the wrong way right now. The consumer sentiment today tells it all for the next few months as all these new taxes and health cares issues start hitting the market.. 

[frankq]

Aham,

I think I'm gonna take some profits today. It's been a nice run. We're due for a little pullback....

[Aman A.K.A. Ahamburger]

Q,

Its been a meteoric rise since 13,000 and as B has pointed out a few different times you never lose money if you take profits.  It's all about ones risk curve.  If it's doesn't pull back at this point there is nothing stopping you from putting that money back to work and it's not like you haven't been making money for the last few years. Plus, I know from your past postings that you got the balls of gold that you need to buy your shares back when everyone is yelling, SELL!!  

[Aman A.K.A. Ahamburger]

Well as of right now the Asian markets are off about 1.5% because China's first quarter GDP growth slips to 7.7 percent, as industry undershoots. This caused the World Bank to cut China, Indonesia growth estimate; and warn of asset bubbles which fits right into the thread on here about the Asian crisis in the making.  There are some big US housing numbers this week that should be good, however, the market might take that as the FED cutting back soon, so really there is a chance that good news in the housing market right now could be bad for the stock market short term.  Bottom line is that the slower growth trend for 2013 is continuing to peer through, stay  .

[Deleted]

Good day to you! Aham.    And many hugs to your family.

[Aman A.K.A. Ahamburger]

Thanks fun. Same back to yours!   

[Aman A.K.A. Ahamburger]

As noted in the last update, the US housing numbers are looking good, Starts Surged In March the Pace Is Fastest In 5 Years.  This along with low inflation has the talking heads saying that data favors continued Fed easing.  This is most likely not the case, keeping growth slow and steady while the economy recovers from the debt wall will ensure that inflation remains in check as the money supply finds its way into the market.

The problems in Europe aren't getting better, at all, Europe's Car Sales Plunged 10% in March as Germany’s Decline Hurts VW.  On the topic of Germany, Angela Merkel says Germany is 'too weak to withstand more stimulus' and as growth slows in China, China's bird flu death toll rises to 16 and the government warns of spread. Stay  .

[Aman A.K.A. Ahamburger]

Well earnings have been mixed so far, while some companies have beat, some big bellwethers, like CAT, not so much.  Even though CAT gave a poor forward guidance, traders were optimistic that Chinese growth would lead to better sales.  The numbers coming out of China tonight(Monday) signal that China’s Recovery Falters as Manufacturing Growth Cools. It will be interesting to see what the traders think tomorrow(Tue) on how they were wrong about a pickup in China, especially if the earnings for AAPL aren't that good.

Again, any talk of the EU situation being completely dead is premature, on Monday Merkel says euro members must be prepared to cede sovereignty.

As discussed throughout 2012, the Signs of a Canadian housing downturn are everywhere and it has started to pick up steam now that we are into 2013.  Time will tell if it gets to be half as bad as the US crash, as the author of the link provided suggests, however, 32,000 individual homes for sale in the greater Montreal market means that's worse than I even imagined it would be at this point.

In a cross over from the Middle East thread, a clear picture of Radical Islam's make or break point has been demonstrated in a terrorist plot being thwarted in Canada.  Just as I suspected the recent Arms deal with Middle East allies is a signal to Iran, meanwhile the Pentagon chief stresses Israel's right to hit Iran.  Iran's response... Tehran says election will not affect nuclear stance.

It would appear that the 2013 equation of continued slow US growth, mixed with slower global growth, is really starting to play out.  Recent earnings from big companies and slow/slowing GDP growth really have started to  sow doubt in economic rescue plans in some of the worlds leaders.  All I have to say to them is welcome to the American Renaissance and the "swoosh" economy, kinda like from 1873-1911. 

[Aman A.K.A. Ahamburger]

Along with China slowing down the Euro-Area April Manufacturing, Services Contract shrank from the 15th straight month, this has lead EU leaders to think that Debt Defaults Might Make Sense.  While this will make the ESM much more functional long term it's something that should have been thought about way before now because the slowdown is now everywhere in Europe, for the first time in decades a German auto plant in the country has been shut down.

 While the US housing market continues to move along, weak global demand mixed with slower domestic demand has US manufacturing growth at the worst in six months.

 The "swoosh" continues..... 

[Aman A.K.A. Ahamburger]

Another part of the 2013 slow down equation, slower earnings, looks like it's happening.  While some companies have beaten its been a mixed bag, toady U.S. Stocks Rise Amid Jobless Claims, Earnings Reports, however, so far..........

Profit at S&P 500 companies dropped 1.1 percent in the first three months of the year, according to analyst forecasts compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.

Stay  .

[Aman A.K.A. Ahamburger]

Further confirmation in last couple of days from the car companies proves that Europe and the emerging market slowdown is hurting bottom line profits. With only 43% of companies beating on revenue some might even say that Stocks Rise Despite Lackluster Corporate Earnings Reports.  We know that from Japan-to-Korea Output Misses Estimates as Taiwan Cools and that China Manufacturing Gauge Signals Slowdown Persisting.  The good news in China actually crosses over from another thread in this area of the board, and even though the Chinese Service Industries Expanded at Slower Pace in March, it now for the first time accounts for a bigger portion of Chinese GDP than manufacturing does.  However, the bad news in that is that if this bird flu starts to get any worse there is going to be a forced economic slowdown for a few months while they contain the situation.

The great first time claim number today proves that the housing market is contributing to GDP and we have to keep in mind that the Jobs report today is for April and March was lackluster and seen Construction spending rate hits seven-month low.  Just remember though, if you're out there looking for a house now that the market has bottomed, Forget Lowballing: Bidding Wars Return in Hot Housing Markets. 

[Aman A.K.A. Ahamburger]

Just a quick reminder, the equation I was looking for at the start of 2013 was; continued slow growth in the USA, mixed with a slowing global economy, and a continuing and growing recession in the EU. Stay  .

Banks on Verge of Collapse in Denmark Win Time in FSA Review

Recession in eurozone is now the currency bloc’s longest, surpassing even 2008-2009 crisis, EU recession for the sixth consecutive quarter; France joins the club with 0.2% contraction

Is China Really Mulling a Lower Growth Forecast? 
According to local media reports, China could lower its official growth forecast to 7 percent next year – a move that would definitely be worth watching and one that suggests Beijing is growing more comfortable with slower pace of growth, China watchers say.

Production Falls as U.S. Feels Global Weakness: Economy 
Industrial production declined in April by the most in eight months, indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts.

The larger-than-forecast 0.5 percent decrease in output at factories, mines and utilities followed a revised 0.3 percent gain that was weaker than first reported, Federal Reserve figures showed today in Washington. An increase in homebuilder optimism indicated housing remains the economy’s bright spot.............

..............“The economy is just not picking up steam,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who projected a 0.4 percent drop in industrial production. “The weakness in the rest of the world doesn’t help."......

Oh and just a quick note, the main stream is finally picking up on something that some of have been saying for years. 

China may not overtake America this century after all 
Doubts are growing about whether China can pass the US to become the world's biggest economy this century amid warnings that the country’s 30-year miracle is nearing exhaustion.

The world's tallest tower should have been built by now. Officials said last year that the great edifice with 220 floors would be erected in three months flat in China's inland city of Changsha by March, snatching the crown from Dubai's Burj Khalifa.

The deadline has come and gone, yet the wasteland sits untouched. It now looks as if the fin d'époque project – using prefab blocs – may never be approved. Even China knows its limits...............

......The report warned that China’s 30-year miracle is nearing exhaustion. The low-hanging fruit of state-driven industrialisation and reliance on cheap exports has already been picked. Stagnation looms unless Beijing embraces the free market and relaxes its suffocating grip over the economy. "Innovation at the technology frontier is quite different in nature from catching up technologically. It is not something that can be achieved through government planning," it said.

Even if Mr Li succeeds in pulling off this second economic revolution – and we should salute him for trying – China's growth rate is going to slow drastically. Demography will see to that.

The work force began to contract in absolute numbers last year, falling by 3.5 million. The International Monetary Fund says it will now go into "precipitous" decline, and much earlier than thought.

If you are wondering why police are still seizing pregnant women in Chinese cities and delivering them to clinics for forced abortions when they cannot pay the fine for breaching the one-child policy, you are not alone.

[Aman A.K.A. Ahamburger]

The underlying problems are really starting to be exposed in China, not only did 1 Trillion in new credit do nothing to boost growth, they are finailly being called out on their fake econ reports. This revelation, along with continue slow growth in the US, has lead the IMF and World bank to confirm what I have been saying since the start of the year, it's going to be slow going for a while.

However, the IMF is still not truly addressing that there are structural issues that have to be addressed before we can move forward as a global economy.  This is understandable as I believe that most are truly underestimating what is truly going on right now in the Middle East, and how the ripple effect through Europe and Russia is taking hold.

On the earnings front..... I guess we are just about to find out, as it's almost the season once again. The continuing and expanding EU recession mixed with slower growth lead Dupont to lower its forecast. Since revenue was flat last quarter across the S&P, growth in the BRICs has been slowing, the US is just slowing growing.... a "flight to safety" may prove to be the best time to start to taper off... 

China Debt Sale Fails for First Time in 23 Months on Cash Crunch 
Asia's ticking time bonds; time to cut and run? 
Tesco stops sourcing from a Bangladesh factory due to safety concerns 
Forbes 400 Billionaires Who've Signed the Giving Pledge 
India fiscal year GDP up 5%, weakest in a decade

[Aman A.K.A. Ahamburger]

As hard as the European leaders are trying to say that things are getting better over there, France and Ireland have slipped back into recession and more recently, German factory orders missed expectations for a second month. The EU leaders can say what they want but the fact is the numbers are showing that the EU recession has grown so far in 2013, confirming a part of the 2013 equation laid out at the start of the year.

I don't need to get into the growing unrest issues in the Middle East except to say that another part of the 2013 equation has also happened.

China, India, Russia, Brazil are all slowing down and the bright spot in the global economy is the USA. The US is being propelled forward as the American Renaissance takes hold, which of course is the last part of the 2013 equation.

I have made a case for a year that I have been "worried" about since 2011. The case has been proven as to why earnings growth will stall out in the next couple of quarters, and to that point, a record number of firms have issue negative Q2 guidance.

However, this is where it gets interesting. The USA is still the biggest economy in the world. The biggest variable to my biggest equational theory is volume. I have stated time after time that only God knows how much volume potential we are talking about in the emerging markets, and how this "second leg" of the world economy combined is still only about the size of the US economy.

So is there enough growth in the US to offset slower growth and unrest in the emerging markets and a continuing recession in Europe?

Earnings will tell, however, I know that the US housing market can keep growing and so can the US economy, even if earnings don't.

I also know that this means that even if earnings aren't that great the FED could still start to taper, which means that higher interest rates are on the horizon. What fun that will be for places like Canada, Australia, and the emerging markets in general... But that's more of a 2014 thing....  

Bottom line, we now get to sit back and watch how the rest of the "2013 equation" plays out, and how it will affect earnings over the next 18 months. These are, of course, just the thoughts of a long term dividend investor that likes real estate, bonds and business.

[jarrett1]

This is a great thread!...and in honor of its title:


Post by jarrett1 on Jun 26, 2013 at 8:46am "Market at What?.......

This market will make "new" highs this year...within the two weeks after the earnings reports are announced the second week of July...be patient ...

[frankq]

Well lets get to it!

[jarrett1]

we have been getting to it

[flow5]

Roc's in money are down. 

[jarrett1]

GDP at 1.7%...higher than expected with the drag of sequester!

[jarrett1]

Thank you sir...and you're a good writer too!

[Aman A.K.A. Ahamburger]

Thank you both for your kind words, it's nice to have the respect of a couple of people that I have lots of respect for.  

[jarrett1]

 Amen...Aham!