Research Reports - Chronological
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2016 Reports

Date Report Title
June 24, 2016 The Capitalist Advisor

Buying Britain on Brexit
Polls, betting odds, and most economists predicted otherwise, but yesterday the UK people voted 52-48% in favor of “Brexit” – that is, leaving the European Union (EU).1 Tory Prime Minister David Cameron promptly agreed to step down and have an election next October to replace him. On news of the unexpected outcome the British pound and the euro dropped 10% and 3%, respectively, against the dollar. Gold surged 22%. Britain’s FTSE 100 Index declined by 3% and other major equity indexes also fell 3-5%. Sovereign bonds jumped as yields fell. We expect all of this to reverse sharply over the coming weeks. Here, we explain why.

June 17, 2016 Investment Focus

The Paradox of Fiscal Profligacy in Japan
The Japanese government is the most highly leveraged of the G-7 sovereigns, with gross public debt now 250% of GDP (vs. 225% in 2010, 142% in 2000 and 51% in 1980), yet its benchmark bond yield is now negative (vs. 1.25% in 2010, 1.8% in 2000 and 9.2% in 1980). It’s a paradox. In private credit markets the more leveraged borrower typically pays a higher, not lower rate (all else equal). Today bond investors think it’s valid to pay to lend to Japan. This has been going on for decades, as we’ve documented,1 but it’s been changing lately. Are they right? Here we examine the relationships among public debt, government spending and bond yields using historical evidence since 1980 for Japan and the other G-7 nations. Our Saysian findings show how Keynesian monetary policies do not "stimulate" and what this portends for bond investors.

June 8, 2016 Investor Alert

Negative Growth Consequences of ECB Bond Purchases
The European Central Bank (ECB) recently began massive purchases of euro-denominated corporate bonds, supposedly to spur economic growth. By one account, “the purchases kick-started a multibillion-euro program of corporate-bond purchases that is part of the central bank’s years-long attempt to stoke inflation and lower financing costs across the euro area.”1 This report presents ten years of historical evidence and the simple logic demonstrating why the ECB's purchases will not cause the desired effect.

May 31, 2016 The Capitalist Advisor

U.S. Regulation, Corporate Taxes and the Growth Slowdown
We've long documented how and why relationships among market prices in the five main asset classes (especially interest rate spreads) forecast an economy and returns on its derivative financial assets. But longer-term economic-financial trends, in contrast, are best understood as reflecting tax and regulatory regimes. Regulations are but a form of taxation, a political cost of doing business which can curb or even kill business activity and vitality. Unfortunately, regulations in the U.S. have grown rapidly in recent decades and corporate tax rates remain higher than in other OCED nations. Here, for those investing in the U.S. and elsewhere, we provide some essentialized metrics, data and relationships that are most germane to longer-term portfolio outcomes. The economic control freaks are in control, and they don’t care that U.S. growth is stagnating into the nebulous and the negligible. Indeed, some of them wish it devoutly. Think socialists, populists, and environmentalists.

May 25, 2016 InterMarket Forecaster

The InterMarket Forecaster
Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month

  • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work
  • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
  • Models use price changes in one asset class to forecast another — as markets themselves do.
  • Five model portfolios, 1 year ahead (broad, non-security-specific; including sector rotation)
  • Prices of 182 strategically definitive investibles: 6 months ahead and 12 months ahead
  • The five main asset classes and subclasses, U.S. and globally
May 14, 2016 The Capitalist Advisor

Implications of Puerto’s Rico’s Debt Crisis – Part 2
Like the 50 states of the U.S., Puerto Rico can’t file for bankruptcy, so its bondholders can’t rely on the courts to protect their rights and provide an orderly process to recoup some of their investment (as in the cases of Detroit and other municipalities who are allowed to declare bankruptcy4). Here we examine some 80 years of capricious tax policies and the incentives they created for government borrowings. Also examined are: Puerto Rico's labor force participation rate; effects on Real GDP growth; comparative municipal debts; population growth and public leverage (Debt/GDP) for Puerto Rico, the 50 U.S. states (individually and average U.S.) and Latin America and the Caribbean; five of the biggest muni-bond funds having the worst exposure to PR municipal bonds; prospects for debt and reform; rational investment criteria and our expectations.

May 7, 2016 The Capitalist Advisor

Implications of Puerto’s Rico’s Debt Crisis – Part 1
Normally, a little debt crisis like this wouldn’t matter much to the U.S. markets (or to us), any more than did the little Greek debt crisis of 2015.1 After all, Puerto Rico’s GDP is just $103 billion, roughly half of Greece’s GDP. But this one may matter more, because the U.S. Congress is directly involved – as this report explains – and that’s rarely a good thing. Moreover, the Obama Administration is pushing for a bailout or aid package. Pandering, opportunistic politicians in this election year surely will see a link to the “Latino vote.” Thus there’s the potential of a very bad public finance precedent being set. Illinois and other over-leveraged U.S. states would like to tap into the Federal treasury, whether directly or through loan guarantees, which would be terrible for U.S. finances. Congress may also enact a law (H.R. 4900) to strip bond-holders of their rights – another bad precedent.2

April 30, 2016 Investor Alert

The Meaningless Saudi Threat to Dump U.S. Treasuries
Reportedly, Saudi Arabia has threatened to dump as much as $750 billion in U.S. assets, some of which may include U.S. Treasury securities. If so, some people believe, it would reduce Treasury prices and raise yields. Apparently professional opinion is mixed on the possible effects of a possible Saudi portfolio dump, and some analysts even portray it as something that might “wreck the U.S. economy.”1 This is silliness squared. To claim the price of anything rises because someone buys it, or likewise, that a price declines because someone sells, is to say nothing, because every price necessarily reflects the joint actions of buyers and sellers. To focus on just one side of the price-setting process suggests the perception of a gnat, or its equivalent, a financial journalist. Here we show the definitive hard facts on who, abroad, holds short- and long-term U.S. Treasury securities; their proportions of total U.S. publicly held debt; and the absence of historical links between the type of owners and the actual performance of T-Bonds (including referencing our report of 3/31/11, "The ‘Who’ vs. ‘What’ of Investing: The Irrelevance of PIMCO on T-Bond Returns"). Finally, we indicate the signals that really matter for reliably forecasting U.S. T-Bonds.

April 25, 2016 InterMarket Forecaster

The InterMarket Forecaster
Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month

  • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
April 15, 2016 The Capitalist Advisor

The Disproportionate Burden of U.S. Corporate Taxation
The U.S. imposes the highest statutory tax rate on corporate income, and it causes further high compliance costs that result from the innumerable exemptions which a high-rate system engenders. Politicians won’t pursue fairness or common sense on this issue by slashing the high rate and reducing exemptions (which would yield more tax revenues), because they prefer instead to game the system and keep extorting funds from corporate lobbyists. This report compares present and historical international corporate income tax rates and documents how this terrible system breeds economic stagnation, and worse still, how those in the fast-growing, anti-capitalist “de-growth” movement actually favor economic contraction - a potentially ominous development for producers, savers, investment managers and portfolio returns.

April 7, 2016 The Capitalist Advisor

Cruz Gains on Trump, But Prediction Markets Still Foresee a President Hillary and Democrat-Controlled Senate
Political betting odds, which are more objective and prescient than opinion polls, continue to foresee Trump becoming the GOP nominee, Clinton becoming the Democratic nominee, and the latter becoming U.S. president starting in January 2017. Cruz is the best candidate, so he gets the least media coverage, relative to the demagogues, dancing bears and caustic clowns. Here we indicate how American democracy is worsening and becoming ever-more punitive towards good behavior and wealth-creation – which is dangerous when embodied in public policy.

March 31, 2016 Investment Focus

Dr. Copper and the U.S. Business Cycle
“Dr. Copper” is the notion that copper’s price, historically, has been a unique and accurate forecaster of the business cycle. Since copper’s price has plunged 26% in the past year, some will expect a pending recession. But does copper have the reliable forecasting power people imagine? This report traces more than a half-century of the hard evidence of several key commodities' prices to objectively measure and compare their signalling power. Preview: wheat performs best of all commodities and currently signals a booming economy. But that's silly. We have no plans to start touting the prescience of “Dr. Wheat.”

March 24, 2016 InterMarket Forecaster

The InterMarket Forecaster
Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month

  • Models use price changes in one asset class to forecast another — as markets themselves do.
March 15, 2016   Track Record 2015
Demonstrating our ongoing commitment to being paid only for being right: our 16th, annual, unabridged, cumulative, fully transparent Track Record detailing our 2015 year-ahead forecasting reliability for 182 strategically definitive investibles across all 5 major asset classes and subclasses globally - proof that markets can be persistently and reliably forecast (better than a 50/50 coin toss) using a disciplined, all-price-based inter-market method. IFI delivered another good forecasting performance in 2015, with an overall success rate of 62%, close to our 15-year average of 65%. We also out-performed Wall Street strategists for the 12th time in 15 years. Three of our four model portfolios out-performed benchmarks, as we correctly forecasted U.S. equities beating bonds, bills, and commodities. Plus: Annual & Compounded Returns on IFI’s 4 Model Portfolios vs. Benchmarks, 2003-2015; and IFI’s 2014 year-ahead forecasts for 2015 compared to actual results and Wall Street Strategists.
March 7, 2016 The Capitalist Advisor

Secular Economic Stagnation and the Welfare-Regulatory State
When governments take an ever-larger portion from the economy and spend it unproductively, for many decades on end, it invites trouble. This has been happening since at least 1960. Herein we focus on the U.S., Japan and Germany - showing how welfare-regulatory states harm long-term economic growth rates; and how they court secular stagnation. There seems to be no clear end — let alone reversal — for this ominous trend and the suffering it imposes on innocents and the productive.

February 29, 2016 Investor Alert

Oil and Equities: A Reminder
The oil price has risen 25% in the past two weeks (to $32/barrel). Reprising our prior science in the price relationships between gold and oil, this report reminds our clients of our year-ahead oil price forecast and the inter-market price reasons behind it. Extending that science, we then ask and answer the question, “Does rising oil signal higher equity prices?”

February 26, 2016 InterMarket Forecaster

The InterMarket Forecaster
Forecasting can and ought to be - practical, reliable forecasts and AA guidance updated every month:

  • Five model portfolios, 1 year ahead (broad, non-security-specific)
  • Prices of 182 definitive investibles: 6 months ahead and 12 months ahead
  • The five main asset classes and subclasses, U.S. and globally
  • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work
  • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
  • Models use price changes in one asset class to forecast another — as markets themselves do.
February 16, 2016 The Capitalist Advisor

Are U.S. Equities More Volatile in Presidential Election Years?
On the surface, U.S. presidential elections don’t exhibit any pattern of greater volatility or worse equity performance relative to other years. So 2016 seems an exception (so far). But a closer look at market and political history reveals a discernible pattern for investors to exploit towards potential out-performance.

February 10, 2016 The Capitalist Advisor

Populism vs. Prosperity: The American Elections of 2016
History shows that populism and protectionism are dangerous politically and bearish financially. The top three candidates for president of the U.S. — Clinton, Trump and Sanders — are populists and protectionists, to varying degrees, and are competing with each other to become even more so with every passing week. Poor equity performance and higher volatility so far this year may reflect investors‘ anxiety over the likely political outcome — that Clinton becomes the next U.S. president (according to reliable betting odds). Cruz is the only Constitution-respecting, capitalist-friendly alternative, but the betting odds have yet to favor him.

January 31, 2016 Investment Focus

Junk Bonds: Tenuous Forecasters of Equities & the Economy
Junk bonds have registered losses in the past year amid widening spreads, causing many prognosticators to insist that this condition presages a recession and full-year equity losses in 2016. Here we examine the past half-century of never-revised, market price evidence to demonstrate the contemporaneous and lagged relationships between high yield bonds and stocks, and to show how and why junk bonds exhibit a meager forecasting power that’s easily dwarfed by our other market signals like the yield curve. In that context, we show what today's yield curve is reliably signaling for the economy and why.

January 22, 2016  

Outlook 2016
Our year-ahead, rigorous, market-based forecasts of more than 150 strategically definitive investable assets, with a time horizon of six and twelve-months in the 5 major asset classes and subclasses globally — providing quantitative, practical guidance for strategists, portfolio managers, and traders focused on maximizing risk-adjusted returns and surpassing the performance of both benchmarks and peers. Plus: IFI's Forecasts for 2016 compared to Wall Street Strategists.

January 15, 2016 Investment Focus

January as a Predictor of Full-Year Equity Performance
Some equity analysts believe that “as January goes, so goes the year,” so with U.S. indexes down 6-9% so far this month, they assume 2016 must be a down year. We examine the pertinent history since 1951, reveal defects in the approach, and show how the key market-price signals have offset “the January effect“ in the past, and will likely do so in 2016 as well.

January 11, 2016 Investor Alert

Looking for Stock-Market Correction Culprits in All the Wrong Places
Although the equity market swoon cannot plausibly be attributed to the Fed, China, or oil, the influence of leading political candidates is another matter entirely.

2015 Reports

Date Report Title
December 28, 2015 The Capitalist Advisor

Ten Things Every Economist Should Know About the Gold Standard
Understanding the operation of the gold standard (1717-1971) in contrast to the inferior performance of central bank fiat money provides money managers with two key benefits: first, the ability to more accurately forecast today's financial markets, and second, the means to rationally advocate abandoning subjective money for the return to objective, gold-based money. Among the myths and truths we demonstrate in this report: 1. The gold standard did not entail government “price fixing.” 2. Fiat money tends to be more expensive than gold-based currency. 3. Gold supply “shocks” weren’t particularly shocking. 4. Excluding the 1930s, the data of 17 countries for over 100 years shows virtually no evidence of a link between gold-based deflation and economic depression. 5. The gold standard did not cause the 19th-century American financial crises or the Great Depression of the 1930s. 6. The gold standard did not require central bank “management,” and fares better without such intervention.

December 21, 2015 Investor Alert

Deflation: No Necessary Impediment to Profitability
The U.S. has seen disinflation in recent years, and the S&P 500 EPS is down 7% this year. But it’s not true that disinflation or deflation precede recession, while inflationary “pricing power” signals robust growth. What matters isn’t “pricing power” but profit power, which can be had even amid flat or falling prices. Here's the historical hard-evidence and common-sense logic.

December 14, 2015 The Capitalist Advisor

Why Christmas Should Be More Commercial
Many people express chagrin that Christmas has become more commercial in recent decades. Here’s an alternative view, based on the historical evolution and real meaning of Christmas in America and the Western world. We should feel proud, not guilty, of our commercialism, because it represents the best of human achievement, creativity, and benevolence. At a time when Islamic terrorists are intensifying their assault on the West, and on Western values, it’s worth reminding ourselves what the Western way of life truly means, historically and philosophically.

December 7, 2015 The Capitalist Advisor

The Service Sector as Recession Preventer
The latest U.S. economic expansion is now 6½ years old (78 months), having begun after the recession of 2007-2009. The average duration of eighteen U.S. expansions over the century from 1907 to 2007 was roughly four years (49 months). Consequently, economists lately have become increasingly suspicious of the staying power of the current economic expansion. Is there a valid historical basis for such suspicions? Here, we examine the growing share of the service sector in U.S. GDP, how that growth has affected the number and duration of recessions, and current relationships amid the long-end of the U.S. yield curve. Although our findings are contrarian, the all-important financial services sector and its precarious dependence on unorthodox Fed policies means that future U.S. recessions – even one in the near future – can’t be ruled out.

November 30, 2015 Investment Focus

Differential Investment Performance from Differential Central Bank Rate Policies
Investors should be aware not only of the likely investment effects of Fed rate-hiking, but the effects if other central banks don’t also raise rates when the Fed does so, or don’t raise rates by as much as the Fed does (as is likely over the coming year). This report provides results, drawn from the last 45 years of financial history, for G-5 currencies, benchmark yields and equities.

November 23, 2015 InterMarket Forecaster

The InterMarket Forecaster
Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month:

  • Five model portfolios, 1 year ahead (broad, non-security-specific)
  • November 13, 2015 Investment Focus

    U.S. Equities versus Non-U.S. Equities Amid Fed Rate-Hiking
    Here, we continue our documenting of differential returns on various asset classes during previous episodes of Fed rate-hiking.1 This report examines the relative performance of U.S. stocks versus foreign stocks as measured by the S&P 500, developed-world equities (EAFE) and emerging-markets equities (EEM). We also briefly review the inputs to our models of relative performance of U.S. versus non-U.S. equities, and show what a nation's equities most depend on for outperformance against other nations - a highly contrarian finding that's nonetheless proven by long history. Our findings are also contrarian and conclusive as to the relative performance / outperformance of the S&P 500, EAFE and EEM with and without Fed rate-hiking.

    November 6, 2015 Investment Focus

    U.S. Equity Style Performance Amid Fed Rate-Hiking
    When the Fed last embarked on such a policy (in 2004) we advised investors about the likely effect on U.S. equities,4 particularly on equity styles – the choice of large-cap stocks versus small-cap stocks and value stocks versus growth stocks. Here, we update that work in today's fulll context, and we show what our inter-market models are forecasting for equities and eauity styles - what will outperform for another year at least, how and why. We also demonstrate how history says our largely contrarian forecast is not incompatible with Fed rate-hiking.

    October 31, 2015 The Capitalist Advisor

    The Risk of Shifting from ZIRP to NIRP
    The Fed’s ZIRP (“zero-interest-rate policy”), copied from the Bank of Japan’s Keynesian playbook,1 and from the Fed’s own earlier yield-pegging scheme, has been in place for seven years now (since 4Q2008). Even if the policy were to end soon, we say there’s little chance the FOMC will “normalize” the policy rate in the coming decades (see our report of March 20, 2015 coining the term, "Perma-ZIRP").
    The FOMC’s post-meeting statement last week has some analysts convinced the Fed will begin raising its policy rate over the coming year. They’ve been fooled before, of course.4 Here, we probe the historical triggers, likelihoods and investment risks of a shift from ZIRP to NIRP (negative interest rate policy) including a) three central bank NIRP precedents, b) statements by Fed officials and the BIS, c) G3 central bank policy rates, d) the historical and modern supporters and flawed rationales of Keynesian nostrums like NIRP and "stamped" money, and e) how, in recent years, FOMC statements have lamely attributed interminable rate-hike delays to crises in Greece, Russia and China. We also integrate some our work of five years ago when real yields (on TIPS) went negative (“The Meaning of Negative Real Yields,” Investor Alert, September 20, 2010) and more recently, our work on “Financial Repression: Political Causes & Investment Effects,” of May 7, 2013.

    October 23, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month:

  • Prices of 150+ definitive investibles: 6 months ahead and 12 months ahead
  • October 12, 2015 Investment Focus

    Do Widening Credit Spreads Necessarily Precede Recessions?
    Corporate credit spreads in the U.S. have widened recently and that’s making some market-watchers worry that another recession is coming – or might be upon us already. Yes, credit spreads have widened lately, but have they widened materially? Have they widened in tandem with other signals and necessary conditions for a coming recession? Which spreads have crucially important forecasting power amid which contexts? Here, we answer these questions by examining US interest rates and spreads surrounding seven US recessions amid the contexts of some of our other proven, all-price-based signals - including US Corporate Bond credit spreads by sector.

    October 5, 2015 Investment Focus

    Does a Decline in Profit Growth Portend Recession?
    Whenever stock prices “correct” over a brief span of time,1 many people begin speculating about whether another recession is coming. There are (at least) two problems with this approach: it’s biased downward2 and it presumes falsely that the stock market reliably forecasts recession....

    September 25, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • The five main asset classes and subclasses, U.S. and globally

    September 21, 2015 The Capitalist Advisor

    ZIRPs Make Credit (and Prosperity) Scarce, Not Plentiful
    After misleading markets for months, with the claim that it would finally raise the near-seven-year-old, near-zero Fed Funds rate in September, the Fed last week reneged, on the grounds that the global economy was too weak for it.1 A rise of merely 25 basis points can undermine global economic growth? That’s silly – and no less so than the claim that the Fed’s zero-interest rate policy (ZIRP) has “stimulated” economic (or credit) growth. All major central banks have imposed ZIRPs in recent years; economic growth has been weak not despite ZIRPs but in part because of them. Here, we show and analyze the crucial evidence including: recent rates of credit creation relative to the past fifty years; Washington's credit level overtaking that of the non-financial business sector; the source of the "ZIRP stimulates" error; and the mechanism by which artificially-low interest rates function as price controls that depress credit creation.

    September 14, 2015 Investment Focus

    Three Factors Forecasting the Oil Price
    Our models currently project a mild rise in oil’s price over the coming year,1 based mainly on three factors ... The most crucial is not, as oil analysts typically insist, China,2 OPEC,3 or supposed “shortages” and “gluts” in supply-demand conditions.4 On the latter myth, we stress that in the absence of price controls, markets (including oil markets) always clear – i.e., quantity supplied and demanded are always and everywhere equal. Moreover, it is futile (perhaps even arrogant) to try to forecast changes in price (including oil’s price) by tallying up and weighting the innumerable factors that comprise supply and demand; no single brain (or team of brains) can calculate or even model such vast information. An inter-market, price-based approach to forecasting is far more sensible...

    September 7, 2015 The Capitalist Advisor

    Non-Labor Days: As Fewer Americans Work, Output & Equities Suffer
    The annual celebration of Labor Day as an official U.S. holiday is a good time to assess long-term trends in the labor market. Most economists spend a lot of time analyzing and commenting on short-term labor market conditions, which have little direct relevance for the performance of production, profits, and equities. Indeed, economists classify the labor market a “lagging indicator,” which is oxymoronic: that which lags behind surely can’t be said to signal the future. At best, labor data can only corroborate what’s already happened with the (supply-side) measures (production, profits and equities) professional investors should care most about.

    August 28, 2015 Investor Alert

    The Real 'Correction' is Upward
    How odd, that the term ‘correction’ is reserved for cases of market downturns, as if prior gains were ‘mistaken.’ In fact, the norm (75% of the time) is rising values, whether one looks at equities, bonds, or commodities (1926-2014). . . . Even given the latest swoon, history is clear: there’s no necessity that any equity ‘correction’ must degenerate into a full-fledged bear market. That unique sequence tends to occur under very specific conditions...

    August 21, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work

    August 14, 2015 Investment Focus

    China Devalues Again. Does It Matter?
    Chinese currency devaluations aren’t new, the latest one is nebulous, they’re mostly self-inflicted wounds, and U.S. and Japanese equities have performed well despite yuan devaluations. Only if China were to devalue the yuan by 20-30% would it exert material and bearish effects abroad, especially for those who sell to or invest in China. China’s trading partners may also try to inflict “competitive” devaluations, as occurred in Southeast Asia in 1997-98. It’s not a remote scenario. But for now, a large yuan devaluation seems unlikely – which is a good thing (for all concerned).

    August 7, 2015 Investor Alert

    Current Signals from the Yield Curve: Don’t Worry Yet
    In recent months long-term U.S. T-Bond yields have declined sharply,1 which some analysts interpret as a flight to safety away from equities and junk bonds, per-haps due to another pending recession. We sympathize with the market-based approach, but disagree about the conclusion, for reasons we give below. It’s not the level of yields per se but their relationship (the “term structure” of interest rates) that matters most in good forecasting.

    July 31, 2015 Investment Focus

    The Aftermath of a Lateral Equity Trend
    What does a "dull" stock market portend? Historically (1920-2014), the S&P 500 has risen two-thirds of the time (67%) over one-year periods; likewise, it has risen 67% of the time in single years after ‘dull’ U.S. equity markets. The identical frequency may explain why most analysts can’t forecast based on dullness alone. Yet it’s possible to out-perform this 67% frequency by using our three all-price-based signals (from other asset classes)... In this way our inter-market approach offers a performance edge.”

    July 24, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)

    July 17, 2015 Investment Focus

    China’s Equity Performance: Does It Matter Much?
    Many economists and investment strategists assume that because China has become the world’s ‘third largest economy,’ its performance must be impactful for other economies and markets. That’s not true for the U.S. or for the commodities said to be so ‘China-sensitive.’ When Chinese equities plunged 26% recently, observers said it contributed to the S&P 500’s drop of nearly 4%; many now worry that further equity drops in China will bode ill for U.S. equities. In this report we provide hard evidence that China’s equities don’t drive U.S. equities; the two tend to decline in tandem only in the aftermath of prior inversions of the U.S. yield curve by the Federal Reserve.

    July 7, 2015 Investor Alert

    No Greece Fire in the Euro Kitchen
    As we predicted, there haven’t been any material market-based signs of ‘disaster’ or ‘contagion’ related to Greece’s antics – even as Greece has been doing all the wrong things. There are, however, two main risks to the longer-term worth and viability of the euro related to the more responsible euro-members and the creation of the broad fiscal-political union that’s so necessary to make the euro truly bullet-proof.

    June 29, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • Models use price changes in one asset class to forecast another — as markets themselves do

    June 22, 2015 Investment Focus

    Production of Money vs Production of Wealth
    A fable in recent years says markets imploded on their own in 2007-2009 but thankfully, recovered due to the ‘unorthodox’ monetary policies of the Federal Reserve and other major central banks—i.e., by huge expansions of their balance sheets, bank reserves, and national money supplies. The sequel to this fable entails the fear that phase-outs of unorthodox policies will hurt output and equities. In truth, the Fed precipitated the debacle of 2007-2009, and its subsequent vast expansions of monetary measures haven’t helped the recovery. Here we show, using 55 years of U.S. data – plus two decades to explain the bullish 1920s and bearish 1930s – that the economy and equities do far better when money supply grows slowly, and far worse when money supply grows rapidly.

    June 15, 2015 Investor Alert

    Accelerations in U.S. Profits and Investment
    The six-year old U.S. economic expansion has had many doubters, and the longer it lasts the more vocal they’ll become. We’ve been refuting them at least since “Dr. Doom” last dominated the airwaves in 2009.1 We’ve forecasted and frequently noted the U.S. profit revival 2 while explaining why equities haven’t been “overvalued” or boosted artificially by “unorthodox” Fed policies.3 Given the lateral motion of U.S. equities this summer, it’s time to update the picture.

    June 7, 2015 The Capitalist Advisor

    Grexit Risk: Bullish Aspects Outweigh Bearish Ones – Part 2
    Using supply-side analysis, and building upon our financial aspects findings of Part 1, we uncover the root cause of Greece's economic decline and evaluate its standing relative to all other Eurozone countries in the contexts of economic contraction, statutory tax rates, annual changes in government spending, unemployment, corruption rank, and, relative to GDP: gross sovereign debt, government budget surpluses/deficits and government spending.

    May 31, 2015 The Capitalist Advisor

    Grexit Risk: Bullish Aspects Outweigh Bearish Ones – Part 1
    Here our supply-side, inter-market methodology demonstrates why Greece's unlikely exit from the euro (aka, “Grexit”) would nonetheless be bullish for the euro, bearish for Greece alone, and wouldn’t entail anything close to a global “contagion” – i.e., no inevitable domino effect whereby other nations (say, Italy, Spain or Portugal) leave the euro-system and revert to national currency issuance, to the wider detriment of global markets. Part 1 covers the financial aspects of Greece’s failure (including a resulting new investment buying oportunity); part 2 will cover the economic aspects.

    May 25, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    Forecasting can and ought to be - practical, reliable forecasts and AA guidance updated every month:

    • Five model portfolios, 1 year ahead (broad, non-security-specific)
    • Prices of 150+ definitive investibles: 6 months ahead and 12 months ahead
    • The five main asset classes and subclasses, U.S. and globally
    • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
    • Models use price changes in one asset class to forecast another — as markets themselves do.
    May 15, 2015 Investor Alert

    Rebounds from U.S. Equity Plunges in Historical Context
    It seems a growing number of investment strategists doubts that U.S. equities can make further gains, now six years into the rebound following the Great Recession of 2007-2009. But there’s no reason for skepticism on mere grounds of the rebound’s duration; equities are driven by fundamentals, not calendars. Nor, as we've shown in prior reports, is skepticism justified on the grounds that since unorthodox Fed policies inflated stock prices, their removal will deflate them. Is there reason to believe equities are due for a sustained decline because they’re somehow “overvalued?” Consulting history provides interesting lessons on the relationship between equity plunges and rebounds.

    May 7, 2015 Investor Alert

    The Fed's False View of Equity Valuation
    Fed chief Yellen asserted on May 6th that U.S. equities are over-valued - allegedly foretelling "potential dangers." This report shows how, in relying on a risk-free bond yield, the Fed's own equity valuation model is fundamentally flawed. We then show how, although the risk-laden, Baa corporate yield better indicates the S&P 500 price level, the fuller context requires other determinants like interest rates, inflation rates, earnings growth, earnings quality, and especially the Yield Curve Spread.

    April 30, 2015 Investor Alert

    The Oil Price Rebound: Farther to Go?
    Todays’ oil price closed at $59/barrel, or 34% above its level when we issued our bullish report on January 31st. How much farther might the oil price rise? Here we examine two of our multi-factor oil model's inputs to show what today's inter-connected market prices portend for oil.

    April 25, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • The five main asset classes and subclasses, U.S. and globally...

    April 15, 2015 The Capitalist Advisor

    The Irrelevance of Budget Deficits and Public Debt to T-Bond Yields
    A study of the relationships between T-Bond yields and government leverage for the G7 nations during the past five years; and among long-history U.S. T-Bond yields, government spending, receipts, deficits, redistributionist transfer payments and leverage since 1966 - showing when monetary policy – for good or ill – matters more in inflation and bond yields than widening budget deficits and higher public leverage.

    April 7, 2015 Investment Focus

    U.S. Dollar Performance Amid Fed Rate-Hiking
    Continuing the series documenting the past impact of rate-hiking on major asset classes, the report examines the U.S. Dollar amid 8 episodes of prior Fed rate-hiking.

    March 31, 2015 Investment Focus

    A Simple Spread to Forecast the Fed
    It’s necessary to have a good model for forecasting the Fed’s rate policy, and fortunately we have that. By the Fed's own description, however, ZIRP and QE are “unorthodox” – i.e., not normal. Here is an alternate means to reliably forecast the Fed Funds Rate.

    March 27, 2015 InterMarket Forecaster The InterMarket Forecaster
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)...
    March 20, 2015 The Capitalist Advisor

    Perma-ZIRP: Why the Fed Won't Normalize Rates in Our Lifetime
    After its latest meeting the FOMC removed language about being “patient” before it would resume rate-hiking, but that doesn’t mean it’s now “impatient” or eager to raises rates.

    March 10, 2015 Investor Alert

    Signals from the Long-End Yield Curve Spread
    Even amid ZIRP, the U.S. yield curve exhibits forecasting power, and the current signal is moderately bullish.

    February 27, 2015 InterMarket Forecaster

    The InterMarket Forecaster
    • Forecasting as it can and ought to be - practical, reliable forecasts and AA guidance updated every month...

    February 19, 2015 Investment Focus

    U.S. Sector Performance Amid Fed Rate-Hiking
    Investors should be prepared for the possibility of renewed rate-hiking. This examination shows how rate-hiking has affected the relative performance of S&P 500 sectors since 1965.

    February 10, 2015 Investment Focus

    Commodity Performance Amid Fed Rate-Hiking
    In the event the U.S. Federal Reserve raises its policy rate this year or next, how might such rate-hiking effect commodity prices? Will it prove bullish, bearish or neutral? Analyzing six decades of data provides the answers.

    February 6, 2015   Track Record 2014
    Demonstrating our ongoing commitment to being paid only for being right: our 15th, annual, unabridged, cumulative, fully transparent Track Record detailing our 2014 year-ahead forecasting reliability for 185 strategically definitive investibles across all 5 major asset classes and subclasses globally - proof that markets can be persistently and reliably forecast (better than a 50/50 coin toss) using a disciplined, all-price-based inter-market method. Plus: Annual and Compounded Returns on IFI’s 4 Model Portfolios vs. Benchmarks, 2003-2014; and IFI's Forecasts for 2014 compared to actual results and Wall Street Strategists.
    January 31, 2015 Investor Alert The Coming Rise in the Oil Price
    The real value of oil is fairly steady and hasn’t changed much over the long-term; this fact has enormous significance for forecasting purposes.
    January 27, 2015 Investment Focus

    U.S. Bond Performance Amid Fed Rate-Hiking
    The U.S. Federal Reserve might well raise the Fed Funds rate this year or next. If so, how might the policy affect the U.S. bond market? Will it prove bullish, bearish or neutral? The answers are found by consulting six decades of data.

    January 20, 2015   Outlook 2015
    Our year-ahead, rigorous, market-based forecasts of more than 150 strategically definitive investable assets, with a time horizon of six and twelve-months in the 5 major asset classes and subclasses globally - providing quantitative, practical guidance for strategists, portfolio managers, and traders focused on maximizing risk-adjusted returns and surpassing the performance of both benchmarks and peers. Plus: IFI's Forecasts for 2015 compared to Wall Street Strategists.
    January 5, 2015 Investment Focus U.S. Equity and Economy Performance Amid Fed Rate-Hiking
    The U.S. Federal Reserve might raise its policy rate in 2015 or 2016. If so, what effect might it have on the U.S. economy and equities? Must it be bearish? Below we consult six decades of data to provide answers.

    2014 Reports

    Date Report Title
    December 30, 2014 Capitalist Advisor

    Policy Uncertainty and Economic-Financial Performance
    The adage that "markets hate uncertainty" is oft-cited but rarely well-measured or easily-predicted.

    December 24, 2014 InterMarket Forecaster The InterMarket Forecaster
    Forecasting can and ought to be - practical, reliable forecasts and AA guidance updated every month:
    • Five model portfolios, 1 year ahead (broad, non-security-specific)
    • Prices of 150+ definitive investibles: 6 months ahead and 12 months ahead
    • The five main asset classes and subclasses, U.S. and globally
    • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
    • Models use price changes in one asset class to forecast another — as markets themselves do.
    December 15, 2014 Capitalist Advisor

    Fiscal Discipline is Bullish for Equities and Economies: U.S. Evidence
    A study of the U.S. only, from 1939 to 2013, showing that fiscal discipline – a narrowing of government budget deficits, due mainly to spending restraint – has been associated with superior economic-equity performance, while the opposite policy, fiscal profligacy has been associated with inferior performance.

    December 8, 2014 Capitalist Advisor Fiscal Discipline is Bullish for Equities and Economies: Global Evidence
    A study of 41 nations from 2010to 2014, showing that fiscal discipline – a narrowing of government budget deficits, due mainly to spending restraint – has been associated with superior economic-equity performance, while the opposite policy, fiscal profligacy has been associated with inferior performance.
    November 30, 2014 Investment Focus

    The Relative Impact of Oil on Global Equities and Economies
    With the US$/oil price down 35% over the past half year, it should be worthwhile for global investors to know of its disproportionate impact on economies and equities around the globe.

    November 28, 2014 InterMarket Forecaster The InterMarket Forecaster
    November 17, 2014 Investor Alert The Relative Irrelevance of Japan's Latest "Recession"
    Japan once again has fallen into recession – officially de-fined as two or more consecutive quarters of declining real GDP.
    November 9, 2014 Capitalist Advisor Europe in the Quarter-Century Since the Fall of the Berlin Wall
    Investment research and strategizing are prone to myopia, especially in our "Information Age," so occa-sionally it‟s valuable to step back, widen the lens, and take a broader perspective.
    October 31, 2014 InterMarket Forecaster The InterMarket Forecaster
    October 29, 2014 Investor Alert U.S. Treasury Yields Without QE and ZIRP
    As it previously promised, the Fed today terminated "QE3," or its third round of "quantitative easing" (aka, money-printing)1 after a year of so-called "tapering" (reducing the rate at which it added Treasury securities and mortgaged-backed bonds to its already-bloated $4.5 trillion balance sheet).
    October 14, 2014 Investor Alert

    Moving Average Breaches Don't Reliably Signal Bear Markets
    With its latest decline (-6.8% since September 18th), the S&P 500 index nonetheless is up 7.5% over the past year and +1.4% year-to-date, but yesterday, for the first time in nearly two years, the index closed at 1875, below its 200-day moving average, a technical indicator which some analysts use as a (bearish) forecasting de-vice.

    October 9, 2014 Investor Alert

    Does Europe's Economy Presage U.S. Performance?
    Recent poor economic performance in the Euro-zone makes some economists and strategists assume it‟s a reliable warning sign for the U.S. economy.1 We disagree. Although...

    September 30, 2014 Investment Focus Cases When Dollar Strength Justifies Bearishness on U.S Equities
    As the dollar continues to appreciate in foreign exchange markets, some observers insist that it's causing the recent decline in equities.
    September 25, 2014 InterMarket Forecaster The InterMarket Forecaster
    September 17, 2014 Investment Focus Dollar Strength: Bullish For Equities, Bearish for Commodities
    As we predicted, the dollar has strengthened against foreign exchange this year,1 and all else equal that's bullish for equities and bearish for commodities, contemporaneously and with a multi-year lag.
    September 12, 2014 Investor Alert

    Wall Street Strategists Again Lagging the Market — and IFI
    Once again, Wall Street strategists are playing catchup with actual U.S. equity gains – and with IFI's earlier bullish forecasts

    August 31, 2014 Capitalist Advisor

    The U.S. Economic-Financial Expansion in Context
    The U.S. economic expansion and financial asset recovery is now five years old, and in our view has further to go, based on key market price signals.1 The latest expansion remains a half-year short of the average duration of U.S. expansions in the post-WWII decades, yet many economists complain of its alleged inferiority relative to prior expansions. Is the claim true?

    August 25, 2014 InterMarket Forecaster The InterMarket Forecaster
    August 14, 2014 Investor Alert

    To Those Who'd Dare Short This Bull Market
    Ever since U.S. equities peaked on July 24th, we've seen some panicky prognostications of a "correction" (-10% or more) or even a "bear market" (-20% or more).1 We've disagreed with the worrywarts. Forwardlooking market-price signals, which embody rational expectations about economic, financial, monetary, and geo-political events and trends, simply don't warrant bearishness on risk assets. The U.S. yield curve remains steep, the dollar steady, commodities flat, and profits strong. Even geo-political events this year have been rather normal (relative to history), and thus mainly anticipated.

    August 8, 2014 Investment Focus

    IFI's Model Advice on Global Equities
    The past three years have been pock-marked with various global/financial "crises," and although none quite as severe as those of 2008- 2009, they've been worrisome to many economists and strategists: the euro-zone debt "crisis,"1 the U.S. debt downgrade,2 the alleged "fiscal cliff,"3 the Cypriot banking collapse (2012-2013), emerging market currency depreciations (early 2014),4 heightened geo-political risks (Russian-Ukraine, Israel- Hamas),5 and Argentina's public debt default (last week). More than ever it's crucial for investors to see clearly through the clutter of data and the chatter of pundits to access reliable and forwardlooking market prices which incorporate the market's collective wisdom and help forecast investment returns and optimize portfolio allocations.

    July 31, 2014 Investor Alert The Incorrect Greenspan Correction
    Below we also discuss a handful of possible causes of the latest swoon, which also will likely cause some further swoons over the next year or two. Of course, no equity
    July 25, 2014 InterMarket Forecaster The InterMarket Forecaster
    July 17, 2014 Investment Focus When Heightened Geo-Political Risk is a Good Thing
    If you're simultaneously bullish on "risk assets" (equities, high-yield bonds) and bearish on "safe assets" (T-Bonds, gold), you should welcome those occasional instances when your preferred assets lose value (aka, "go on sale") due to bad news, bearish headlines and incidents that only temporarily scare markets.
    July 10, 2014 Investment Focus Are Lower Foreign Bond Yields Depressing U.S. T-Bond Yields?
    Despite fears of a price plunge in the U.S. T-Bond market due to a diminution of the Fed's T-Bond buying and probable higher inflation rates, yields remain low and haven't rise much since bottoming at the end of May, when the 10-year T-Bond yielded 2.44%. It now yields 2.53%, but that's down from 2.65% last week and from 3.04% at the end of 2013. We expect higher bond yields a year from now, but could it be that low public bond yields abroad are depressing U.S. T-Bond yields?
    June 30, 2014 Investment Focus

    Is Out-performance by Defensive Sectors a Bearish Signal for Equities Broadly?
    With the S&P 500 up 6% so far this year, slightly better than we projected, bears have become ever -more desperate in warning that the gains are fake and unsustainable.

    June 25, 2014 InterMarket Forecaster The InterMarket Forecaster
    June 13, 2014 Investment Focus Does Record-Low Volatility Signal Trouble for Equities?
    If equity investors seem relatively unworried – some say overly "complacent" – is that alone a good reason to worry (i.e., to expect bearish equity results)?
    June 4, 2014 Capitalist Advisor China a Quarter-Century After the Government Massacre in Tiananmen Square
    Today marks the 25th anniversary of the communist Chinese government’s massacre of protesting stu-dents in Beijing’s Tiananmen Square in 1989, so it’s an appropriate time to look back and assess China’s economic-financial performance, especially because so many economists and strategists in the decades since 1989 have so frequently heralded China’s alleged economic “miracle” while also predicting equity out-performance. Have these pro-China prognosticators been correct? In recent decades there’s been far less bullishness and hype from economists and strategists towards Russia than towards China, and yet the former has proved the far better bet, while the latter has been a real loser.
    May 31, 2014 Investor Alert Is the U.S. in Recession – or Headed for One?
    U.S. GDP contracted at an annualized rate of -1.0% in 1Q2014 (Figure One), but does that necessarily mean he U.S. is entering into yet another recession, or that another recession is likely over the coming year?
    May 21, 2014 InterMarket Forecaster The InterMarket Forecaster
    May 14, 2014 Investment Focus Ahead of the Curve
    Using the Term Structure of Interest Rates for Investment Outperformance
    May 7, 2014 Investment Focus The Treasury Yield Curve
    Seven Inversions for Seven Recessions
    April 28, 2014 Capitalist Advisor Should Investors Trust Forecasts of Fed Policy Made by Fed Policymakers?
    Connecting the Dots in FOMC Projections
    April 21, 2014 InterMarket Forecaster The InterMarket Forecaster
    April 14, 2014 Capitalist Advisor The Effect of the U.S Corporate Tax Take on Output and Equities
    This being U.S. tax season, it's fitting that investors be reminded of some of the more relevant relationships, especially as they pertain to possible portfolio returns.
    April 8, 2014 Investor Alert The Irrelevance of Jobs Data to Equity Returns
    Some people believe that a material, one-day (or even one-week) move in equity prices somehow reflects minor shifts in the number of U.S. jobs; in so doing, they imply that there's some kind of important, longer-term relationship between jobs and equities which investors should monitor and worry about.
    April 3, 2014 Investment Focus Dubious Dow Theory Revisited
    In stock-price forecasting, “Dow Theory” claims that unless the performance of transportation equities and industrial equities corroborate each other, the direction of the latter (industrials) is unsustainable and prone to reversal. Today, adherents are getting bearish. Should you be? The essential historical evidence says, “No.”
    March 24, 2014 InterMarket Forecaster The InterMarket Forecaster
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
    March 14, 2014 Investor Alert Fed Exit Plans and U.S. Bond Returns
    When the year began, we advised a moderate short position in U.S. T-Bonds, but T-Bond values have increased so far in 2014. Should we abandon the initial strategy?
    March 9, 2014 Investment Focus Five Lessons from the Five-Year Equity Bull Market
    Today marks the five-year anniversary of the trough in global equity prices (March 9, 2009), and the subsequent bull-market in global equities, so it's worth examining how asset classes have performed in this time, and considering what lessons might be drawn from the relative performance
    February 28, 2014 Capitalist Advisor

    Bernanke's Record at the Fed: "Unorthodox" (Thus Harmful) From Start to Finish
    Ben Bernanke just completed his 8-year reign as head of the Federal Reserve (on January 31st), so it's an appropriate time to assess how he and his colleagues performed, and how Fed policy has affected investment returns.

    February 21, 2014 InterMarket Forecaster The InterMarket Forecaster
    February 14, 2014 Investment Focus

    EM Currency Turmoil: No Necessary Impediment to DM Equity Gains
    Many developed-market (DM) strategists and portfolio managers have been fretting unnecessarily this year over yet another episode of currency debasement in emerging markets (EM).

    February 7, 2014 Investor Alert

    IFI's Foreign Equity Forecasts in 2013 – and the Currency Connection
    The main investment story so far this year, aside from the change of the Fed's monetary czar,1 is the supposed trouble presaged by the plunge in a few obscure emerging-market currencies for the performance of equities in developed markets. The link between the two isn't nearly as tight (nor as bearish) as many strategists are suggesting, so we say this is a buying opportunity in developed- market stocks. We'll examine that issue more deeply in future reports, but for now we briefly review our forecasting record for global equities in 2013, and show how it relates to currency performance.

    January 31, 2014 Capitalist Advisor Why Inflation Has Been Low Despite Rapid Money-Supply Growth
    This report synthesizes some of our recent research on the seeming anomaly of a low U.S. inflation rate occurring in the wake of a previous and quite-rapid rise in the base money supply.1 The exhibits herein will help set the context for our subsequent reports this year on the likely economic-investment impact of the Federal Reserve’s on-going “exit strategy” from its “unorthodox” monetary policies (QE and the ZIRP).
    January 27, 2014   Track Record 2013
    Demonstrating our ongoing commitment to being paid only for being right: our 14th, annual, unabridged, cumulative, fully transparent Track Record detailing our 2013 year-ahead forecasting reliability for 129 strategically definitive investibles across all 5 major asset classes and subclasses globally - proof that markets can be persistently and reliably forecast (better than a 50/50 coin toss) using a disciplined, all-price-based, inter-market method. Plus: IFI's Forecasts for 2013 compared to actual results and Wall Street Strategists.
    January 20, 2014   Outlook 2014
    January 8, 2014 Investment Focus Persistence in U.S. Equity Performance
    Having a bullish equity outlook yet again, are we somehow defying the odds?

    2013 Reports

    Date Report Title
    December 30, 2013 Investor Alert QE, ZIRP and the Treasury Bond Bust
    Ever since the Federal Reserve adopted a policy of debt monetization (QE) and ZIRP in late-2008, it has included the following type of language in its postmeeting press releases (including the most recent, on December 18th): “Sizable and still-increasing holdings of longer-term [government] securities should maintain downward pressure on longer-term interest rates” (emphasis added).1

    “Downward pressure?” A year ago we first predicted that the Fed’s policy shift would elevate long-term interest rates and thus prove bearish for T-Bonds starting in mid-2013, especially after the Fed named thresholds (jobless rate, inflation rate) for a eventual phase-out of QE and ZIRP (entailing a resumption of rate-hiking).

    December 23, 2013 InterMarket Forecaster The InterMarket Forecaster
    December 20, 2013 Investment Focus Should Investors Trust Economic Data?
    An example of our occasional “negative research” – showing what does not matter to forecasting portfolio returns and can be safely ignored – saving you time.

    Most of our research is devoted to documenting and explaining the inter-market pricing patterns which can help guide the portfolio optimization and asset allocation decisions of imvestment managers. Yet we realize that many economists and investors spend a good deal of time and analytical effort parsing the reams of economic accounting data released each day by government, industry groups, and companies. If the goal of economists and investors is to plan ahead and try to anticipate shifts in portfolio returns, however, then much of the time, energy, and attention paid to such "Macro" data is wasted.

    It’s simply isn’t so that investment returns are predicted by prior moves in economic-accounting data; more often, the data lag. Indeed, most investment returns are registered prior to movements in the economic and accounting-based data. A further basic truth is that market activity and prices tend to foreshadow what eventually will occur in the economy, as captured in historical accounting-economic data. Thus portfolio asset returns tend to precede moves in economic data.

    Here we present the 50-year, generally slim correlations of fourteen, backward-looking macro-economic data to lagged-one-year total returns in U.S. Equities, T-Bonds, T-Bills and Commodities - demonstrating why "Macro" inputs are unreliable forecasters of markets and investment performance. Given our unique, all-price-based forecasting and research, we are often asked why so many other purveyors of investment research provide abundant amounts of macro data like GDP, non-farm payrolls, unemployment, and government spending. In our opinion, the answer is because over the years these professionals have found it difficult to be prescient, whether because they occlude themselves with minutia and can’t see the forest for the trees, or because they have bad models of the economy and markets and can’t map their way through the woods. Consequently, although they’re unsure and less decisive, they pose as experts, making bold predictions with a fallback position of presenting as much material as possible, in as slick a way as possible --- then letting users decide for themselves.

    It’s not a totally irresponsible approach, but it means these professionals are mainly information providers, not investment strategists or advisors; by itself that’s not a bad thing, but they are highly-paid for the latter role, instead of being lower-paid for the former role. IFI by contrast is committed to providing prescience and to being paid only for being right.

    December 13, 2013 Investor Alert

    Persistent But Unwarranted Fears About U.S. Municipal Bonds
    Since the Great Recession of 2007-2009, many economists have been stubbornly bearish on the credit sector of the fixed-income investment space, even though this was the first sub-set to rebound, as has always been so for post-recession periods.

    December 6, 2013 Capitalist Advisor Why the U.S. Economic Expansion Isn't Really Sub-Par
    The post-2009 U.S. economic expansion seems sub-par only from a demand-side perspective; viewed from the supply-side, which investors should care about, the expansion has been above-par.
    December 2, 2013 Investor Alert Why Emerging Market Equities are Lagging Despite a Global Bull Market
    Typically, equities in less-developed (aka, "emerging") markets are more volatile than those in developed (industrialized) markets; like cyclical sectors, they have "high betas" and so tend to out-perform amid global bull markets and under-perform during bear markets. For some strategists, this is roughly sufficient for forecasting; one need only forecast the U.S. and other developed markets and from that infer a forecast for emerging markets.
    November 26, 2013 InterMarket Forecaster The InterMarket Forecaster
    November 14, 2013 Investment Focus Does Bullish-Bearish Sentiment Forecast Stocks?
    In this report we examine whether investor sentiment reliably forecasts U.S. equities...
    November 6, 2013 Investment Focus

    Equity Performance in Various Inflation-Deflation Contexts
    Inflation is bearish for U.S. stocks, and contrary to common opinion, low inflation and even mild deflation are bullish for stocks.

    October 31, 2013 Investment Focus

    Are Traditional Drivers of Equities Still in the Driver's Seat?
    Here, we compare Earnings Per Share, Dividends and GDP - each in anticipation of the S&P 500. History shows that although earnings appear to be diminishing as reliable indicators, dividends and other signals remain reliable. Although U.S. equities will not register robust, 20%+ gains in the coming year, our models signal moderate 10% gains. Inflation is bearish for U.S. stocks, and contrary to common opinion, low inflation and even mild deflation are bullish for stocks.

    October 25, 2013 InterMarket Forecaster The InterMarket Forecaster
    October 17, 2013 Investor Alert The Storm Before the Calm: Debt Ceiling Spats, Default Threats, and Portfolio Returns
    As I noted last March, frequent fiscal "crises" are typical of governments that are over-sized, under-funded, and out-of-control.
    October 11, 2013 Capitalist Advisor The Next Fed Head: Out With the Old, In With the Old
    Will Yellen mimic Bernanke? The fact is, Bernanke already has been following and adopting Yellen's preferred policies in recent years.
    October 4, 2013 Investor Alert Are U.S. Government Shutdowns Bearish? It Depends on Duration
    Having failed to reach a fiscal budget deal for FY 2014 (October 1, 2013 – September 30, 2014), the dithering politicians who wield such powerlessness in Washington have just condoned a "shutdown" of the U.S. federal government for the first time since November 1995. Should the U.S. equity investor be worried?
    September 30, 2013 Investment Focus Japan's Persistent Push to Print Prosperity
    For most of the past year policymakers in Japan have intensified their efforts – initiated in the late-1990s – to restore prosperity by printing money and debasing the foreign exchange value of the yen
    September 18, 2013 InterMarket Forecaster The InterMarket Forecaster
    September 12, 2013 Investment Focus Are U.S. Equities Over-Valued?
    There will always be analysts and strategists contending equities are "over-valued," hence likely to tumble in price,1 but stocks rise far more than half the time, and with the S&P500 up by 18% over the past year (and up by 150% since the trough back in March 2009), it's worth reviewing the record, to understand the context for our currently-bullish outlook.
    September 3, 2013 Investment Focus The Inflation-Jobless Context of Fed Yield Curve Inversions
    As we've documented over the last dozen years, the U.S. Treasury yield curve is the supreme forecaster of the U.S. business cycle, just as yield curves abroad forecast foreign cycles.
    August 28, 2013 InterMarket Forecaster The InterMarket Forecaster
    August 20, 2013 Investor Alert The Message in U.S. Sector & Style Performance
    With the S&P 500 higher by 15.9% so far in 2013, skeptics and pessimists have questioned the robust gain as either unjustified or unsustainable. But a brief review of the "internals" of the market's performance – namely, its sector performance and the relative results on its "value" and "growth" stocks – suggests that market gains are justified and sustainable.
    August 13, 2013 Capitalist Advisor The U.S. Expansion: Four Years and Still Going
    For all the gloomy talk of a weak U.S. economy and an alleged "double dip" recession on the horizon (which has been nothing but a mirage for doomsters like Nouriel Roubini and Gary Shilling), the fact remains that the last U.S. recession, which started in December 2007 (as we predicted),1 ended four years ago, in June 2009.
    August 6, 2013 Capitalist Advisor Frank-n-Dodd and the Financials – Part II
    When Washington enacted the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (2010) three years ago, it not only won majority political support but praise from those economists1 who attributed the crises of 2008-2009 to "deregulation" – that is, a majority of economists.
    August 2, 2013 Investor Alert The Good News in Detroit's Bankruptcy
    Detroit finally filed for bankruptcy protection this week, but it's good news, akin to cops and doctors being summoned to arrest knife-wielding assailants and shield long-abused citizens from further harm.
    July 31, 2013 Capitalist Advisor Yellin vs. Summers as the Next Fed Head
    In our view it's too early and even a misuse of time at this stage to fully explain the monetary theories and likely policies of the two front-runners to replace Ben Bernanke as the new Fed head in January 2014
    July 26, 2013 InterMarket Forecaster The InterMarket Forecaster
    July 15, 2013 Capitalist Advisor Is Washington Understating the Inflation Rate?
    An accurate measure of inflation is crucial, since it affects perceptions of real investment returns, of economic growth rates, and Fed policy (which itself influences inflation and the business cycle).
    July 8, 2013 Capitalist Advisor Central Bankers Say Price Stability is Best, But Condemn Japan for Actually Achieving It
    Price stability" is one of the Federal Reserve's three policy "mandates" (the others being "maximum employment" and "moderate long-term interest rates").1 Other central banks, especially the ECB, also insist that price stability is a priority, but such stability doesn't mean a stable or steady rate of inflation or deflation; it means no material change, up or down, in broad price indexes like CPI. It means zero inflation and zero deflation. Yet few central banks seek price stability, let alone achieve it. The Fed, we know, deliberately aims for inflation of at least 2% p.a., which violates one of the three mandates codified in law by the U.S. Congress. Moreover, a 2% annual inflation means the dollar loses a quarter of its purchasing power every 15 years.
    June 28, 2013 Investor Alert Has Fed Money Creation Fueled Artificial Stock Gains?
    Just as many fixed-income strategists believe the Federal Reserve's massive purchases of U.S. Treasury bonds (via QE, or "quantitative easing") since 2007 must have artificially boosted bond prices (and reduced yields), many equity strategists believe the Fed's mass production of monetary base (defined as currency plus bank reserves) must have artificially boosted equity prices. But as we've shown, QE schemes have actually reduced U.S. TBond prices and raised yields, not lowered them.1 Likewise, there's reason to doubt similar claims about the bullish impact of the Fed's QE schemes on equity prices.
    June 25, 2013 InterMarket Forecaster The InterMarket Forecaster
    June 14, 2013 Investment Focus

    The Gold-Oil Multiple as a Forecaster of Oil
    Ever since the U.S. dollar was "floated" monetarily (in August 1971),1 the $/gold price and $/oil price have moved closely together, reflecting the relatively stable purchasing power of gold itself.2 Whenever moves in the two prices have diverged materially investors have had an opportunity to exploit it profitably. That seems possible again today, as is clear from Figure One: the gold price has declined by 15% over the past year, while the oil price has remained elevated, and is still up 8% in the past year. Many commodity players today seem to believe oil also must decline. Well, let us see about that.

    June 11, 2013 Investor Alert

    The Fed's QEs Have Raised U.S. T-Bond Yields, Not Lowered Them

    According to conventional market opinion, the recent rise in the 10-year U.S. T-Bond yield, from 1.63% in
    May to 2.20% today, reflects growing expectations that the Federal Reserve will be "tapering" its "quantitative
    easing" (QE) programs (currently, $85 billion in monthly purchases of T-Bonds and MBS). Of course, this opinion
    presumes that QEs actually reduce T-Bond yields. That's surely the Fed's aim, but the facts say otherwise, as...

    May 31, 2013 Investor Alert Gold's Moves and IFI's Allocation Advice
    May 24, 2013 InterMarket Forecaster The InterMarket Forecaster
    May 14, 2013 Investment Focus

    Reserve Currencies and the Investment Implications of "Exorbitant Privilege"
    A "reserve currency" is one issued by a major central bank but held by a majority of other central banks, to back their own currency issues; such a currency is held mainly for safety, liquidity, and because central backs wish to hold the public securities denominated in it. Importantly, the issuer of a reserve currency enjoys a benefit that non-reserve-currency issuers do not: it sees a steady demand for its currency, which permits it to issue a far greater supply of it, and thus to obtain more real resources, without debasing it (i.e., causing inflation) as much as it otherwise might.

    May 7, 2013 Investment Focus

    Financial Repression: Political Causes & Investment Effects
    Financial repression," a term introduced decades ago,designates public policies devoted to helping deficit-spending governments borrow at artificiallylow costs – i.e., at low or even negative real interest rates.

    April 30, 2013 InterMarket Forecaster The InterMarket Forecaster
    April 25, 2013 Investor Alert Investment Implications of Gold's Gyrations
    The gold price has gyrated a lot recently, and this is worth some attention, considering gold's historically unique forecasting prowess. What does the price recent plunge and sharp rebound portend? Are shortterm moves in gold as relevant as longer-term moves?
    April 15, 2013 Capitalist Advisor

    Who's Paying the Taxes – and Why It's Not Enough
    It's two months late, relative to what the laws requires, but the Obama Administration last week finally issued its federal budget proposal for FY 2014 (to cover the period September 2013 – September 2014).

    April 9, 2013 Investment Focus Forecasting U.S. Financials: The Bond-Stock Nexus
    Consistent with our long-term emphasis on intermarket analysis, which stresses how seemingly disparate markets in fact are inter-related and can be used as reliable signals of each other's performance, a year ago we argued that the boom then occurring in U.S. bank bonds was providing a bullish signal for the performance of U.S. bank stocks, as was the steeply-sloped U.S. Treasury yield curve, in contrast to the bearish signals sent in 2007-2008. Our year-ago forecast has panned out nicely.
    March 29, 2013 Investor Alert European Financial Disaster? Where?
    Since March 2010, when signs of trouble first emerged on Euro-zone sovereign debts and the status of major banks, many economists and strategists have been issuing dire forecasts – whether of a new, deep recession, or contagious bank failures, or government debt defaults, or a dissolution of the 14-year old euro.1 In contrast, we've been sanguine about the Euro-zone.
    March 25, 2013 InterMarket Forecaster The InterMarket Forecaster
    March 14, 2013 Capitalist Advisor Recent Budget Deals Won't Curb the Long-Term Rise in U.S. Leverage – But That Doesn't Guarantee Higher Bond Yields
    Budgetary histrionics have been the rule in Washington since the debt ceiling wrangling of August 2011, when the U.S. lost its triple-A debt rating (from S&P), and more frequently so in recent months, with the so-called "fiscal cliff" (averted on January 1st) and "sequester" (adopted on March 1st). Still more is set to come. By March 27th Washington will need a new CR ("continuing resolution"), else it'll lack any legal spending authority, and some opportunists may threaten a shutdown. And on May 19th the temporary debt ceiling extension will expire, inviting another standoff.
    March 8, 2013 Investment Focus

    The Roots of Wall Street's Mistaken Bearishness
    The best way to forecast the business cycle and investment returns is by using forward-looking market prices which don't get revised retroactively, instead of relying on backward-looking (lagging) or even coincident and flawed accounting-oriented data. IFI uses...

    March 4, 2013 Investor Alert Gains from Shorting T-Bonds: Can They Continue?
    In 2012 our fixed-income model was bullish on U.S Treasury bonds, correctly predicting a decline in yields, as well as a downshift in the entire yield curve, whereas each of the ten strategists we compete against predicted an increase in T-Bond yields. The 10-year TBond yield declined by 26 basis points in 2012, to 1.72% (average for December 2012) and T-Bonds returned 4.2% for the full year. Despite a cascade of new Federal debt issuance, we'd been expecting yields to decline and to remain low, due mainly to the Fed's deliberate policy of "financial repression" (ZIRP, QE). But...
    February 22, 2013 InterMarket Forecaster The InterMarket Forecaster
    February 12, 2013 Capitalist Advisor The Federal Reserve is Swamping the Banking System
    A central bank has a legal monopoly on the provision of base money, or the currency and reserves used by banks to redeem their checkable demand deposits. As such, a central bank needn't be large relative to the size of the banking system for which it provides reserves; in fact, in a fractional-reserve system, central bank liabilities (currency and reserves) should be no more than 5% of banks' total assets (securities, loans) and liabilities (deposits, debt). A central bank larger than this, and growing, isn't so much providing needed reserves but, more likely, financing a deficit-spending government.
    February 5, 2013 Capitalist Advisor From Safety Net to Dependency Trap: One Reason America's Middle Class is Shrinking
    Find any American today with annual take-home pay (in wages) of roughly $30,000 and ask him a simple question: "Would you prefer to take home more than twice that sum, or $70,000?" His selfinterest, you'd assume, would make him answer "yes." In fact, many such people effectively say "no," as evidenced by their behavior, due mainly to the perverse incentives embedded in America's so-called "progressive" system of welfare and taxation, which entails no motive to progress from poverty to lower income, or from lower income to middle income. Advocates of the system hail it as a "safety net" (and demonize critics who'd scrap it), but in truth it's a destructive dependency trap.
    January 31, 2013   Track Record 2012
    January 22, 2013   Outlook 2013
    January 11, 2013 Investor Alert Positive Signals from Major World Yield Curves
    More than a few prominent economists and strategists in 2012 were unduly bearish; some expected a "double-dip" recession in the U.S.,1 and even now, some believe bearishness is justified in 2013. At IFI, in contrast...
    January 4, 2013 Investor Alert No Spending Restraint in the Fiscal Deal: That's Bearish, Not Bullish
    Throughout the 2012 presidential campaign, and up until New Year's Eve, President Obama kept insisting that any solution to the U.S. "fiscal cliff" required what he called a "balanced approach" – meaning that forthcoming federal budget deficits should be narrowed partly by tax hikes (on "millionaires and billionaires") and partly by spending restraints. Mr. Obama and the Democrats wanted only tax hikes, while the Republicans wanted only spending restraint. In the November election, Democrats won the White House, while the GOP won the House of Representatives, so a "balanced" result seemed justified. But the GOP has caved under pressure: the "deal" that was struck in Washington on January 1st and approved by the Senate (89-8) and House (257- 167) entails all tax hikes and no spending restraint.

    2012 Reports

    Date Report Title
    December 27, 2012 Investor Alert "Fiscal Cliff " or Not, There'll Be No U.S. Recession in 2013
    We dislike this silly, hackneyed term, "fiscal cliff," not just because everyone uses (and abuses) it, but because it's ridiculous, hyperbolic and sensationalist. It's really a pseudo-term, which tries to grab our attention, to make us panic, or to cause intransigent but clueless policymakers do something – anything ! ! – even a stupid thing or two, if necessary.
    December 21, 2012 InterMarket Forecaster The InterMarket Forecaster
    Complementary report: See how forecasting can and ought to be - practical, reliable forecasts and AA guidance that's updated every month:
    • Five model portfolios, 1 year ahead (broad, non-security-specific)
    • Prices of 150+ definitive investibles: 6 months ahead and 12 months ahead
    • The five main asset classes and subclasses, U.S. and globally
    • Mostly ETFs: broad strategic guidance for your styles, strategies, hedge and more security-specific work
    • All forward-looking price-based models (no backward “macro” data, opinion surveys or naïve trends)
    • Models use price changes in one asset class to forecast another — as markets themselves do.
    December 13, 2012 Investor Alert The Fed's New Targets and the Coming T-Bond Bust
    The post-meeting policy statement released by the Federal Reserve yesterday contained unprecedented quantitative targets which effectively commit the Fed to resume rate-hiking, and in our view, when this policy is eventually adopted, investors should expect a resumption also of rising T-Bond yields, as markets anticipate a series of further rate-hikes, after the first one arrives. Of course, ...
    December 6, 2012 Investor Alert How Much Longer Might Financials Trounce Utilities?
    When this year began our models foresaw the S&P Financials as the second-best sector performer in 2012, to gain 17%, beat the S&P 500 by 3% points, and trounce the predicted worst-performer, S&P Utilities, to trail the S&P 500 by 6% points.
    November 28, 2012 InterMarket Forecaster

    The InterMarket Forecaster

    November 23, 2012 Capitalist Advisor

    Canada as a Fiscal Role Model
    As Washington politicians gather to avoid an alleged "fiscal cliff" – which means: to make sure excessive federal spending persists and even higher tax rates are imposed – it's worth noting that better equity performance tends to arise from less, not from more government spending, taxing, deficits, and money-printing. Keynesians keep insisting that deficit-spending has kept economies afloat since the debacle of 2008-2009, yet everyone also seems to realize the fiscal profligacy and poor equity results of the euro-zone's southern nations. What about a positive fiscal role model? It exists in Canada, as we illustrate below. Sadly, the U.S. refuses to adopt this model.

    November 15, 2012 Capitalist Advisor

    The Coming U.S. Tax Hikes Shift Will Be Bearish
    Barack Obama and his semi-socialist regime won reelection in America on November 6th, just as we predicted, and yet GOP sympathizers (and even some Democrats) still can't seem to believe it happened. We've consistently forecasted just this result for nearly a year, even while saying Romney-Ryan weren't as bad, and that their losing would be bearish.

    October 31, 2012 Investment Focus

    The U.S. & Japan: Money-Printing vs. Money-Making
    Tragically, U.S. policymakers still insist that political money-printing can ensure economic moneymaking, even though the two are by no means synonymous; indeed, the former tends to freeze or displace the latter. In this regard U.S., policymakers are merely copying Japan's policies, with a lag of about a decade, as we first noted in 2010,1 but at least the lag allows forecasters and investors to better anticipate the U.S.'s future.

    October 25, 2012 Investor Alert

    The InterMarket Forecaster

    October 19, 2012 Capitalist Advisor

    High Public Debt Slows Future Economic Growth
    As investors contemplate the outcome of next month's U.S. elections, what that outcome might mean for the so-called "fiscal cliff" in January,1 and the overall investment implications of the world's horrific political climate, it's worth noting that whoever wins in the U.S., and whatever happens abroad (for example in the euro-zone), since the Great Recession of 2008-2009, most nations have become bogged down with huge public debts – which is highly relevant to future growth.

    October 11, 2012 Capitalist Advisor

    Are the Jobless Numbers Being Manipulated?
    Even though employment data lag the business cycle by a year or so, and shouldn’t be treated as a predictive device by forward-looking investors (except to corroborate what’s already occurred), the data certainly influence electoral outcomes, and these in turn affect economic and investment results over multi-year periods.

    September 30, 2012 Capitalist Advisor

    Contrasting Two Recovery-Driven Elections: Reagan (1984) versus Obama (2012)
    Barack Obama has little in common with Ronald Reagan when it comes to political ideology, but like Mr. Reagan in 1984, Mr. Obama in 2012 is running for re-election as an incumbent U.S. president who purports to have rescued America from a previous, economically disastrous administration – with Reagan overcoming that of Jimmy Carter (1977-1981) and Obama overcoming that of George W. Bush (2005-2009). In each case the economy was a more salient issue than foreign affairs. In each case the robustness (or lack thereof) of the economic recovery was heavily debated, as was the extent to which prior administrations were responsible (or not) for the pace and means of recovery. In 1984 Reagan won in a landslide against Walter Mondale (Carter's former vice president) Will Obama do the same in 2012? Even if he wins no landslide, will he still win marginally?

    September 24, 2012 InterMarket Forecaster The InterMarket Forecaster
    September 14, 2012 Investor Alert Investment Implications of QE to Infinity and Beyond
    The Fed yesterday announced an indefinite continuation of its policy of "quantitative easing," or "QE," and since this is its third round since 2008, they call this one "QE-3." But let's be clear: QE itself is nothing but a silly euphemism for an otherwise wasteful, even destructive policy of money-printing to purchase dubious debt. Yesterday's QE announcement, unlike prior ones, gave no end date. QE is now open-ended, so technically, it's unending. Until further notice, it's a permanent policy. As Buzz Lightyear, hero of "Toy Story" might put it: "QE to Infinity – and Beyond!"
    September 7, 2012 Investor Alert

    Why ECB Purchases of Government Bonds are Bullish
    The ECB yesterday announced a bullish policy that we've anticipated for many months now, but apparently some market-makers did not: a policy to purchase even larger sums of sovereign debt than it has already, in the euro-zone secondary market, especially the more depressed- value (junk-type) debt issued by wastrel governments in Greece, Spain, and Italy.1 These bonds rallied materially on the ECB's announcement, but they already had been rallying for most of this year, despite all the doom-and-gloom we've all heard. We're still hearing this same gloom and doom today, from biased sensationalists like Nouriel Roubini and Paul Krugman, who insist the world is in a "depression," and yet, also, that Mr. Obama deserves re-election.

    August 30, 2012 InterMarket Forecaster The InterMarket Forecaster
    August 22, 2012 Investment Focus The Real Story on U.S. Stocks Since 1880
    August 15, 2012 Capitalist Advisor A 5th Decade Into the Unchartered Territory of Paper Money
    August 8, 2012 Investor Alert

    The U.S. Debt Downgrade a Year Later and the Risky Range of Future T-Bond Returns
    Even though employment data lag the business cycle by a year or so, and shouldn’t be treated as a predictive device by forward-looking investors (except to corroborate what’s already occurred), the data certainly influence electoral outcomes, and these in turn affect economic and investment results over multi-year periods.

    July 30, 2012 Investor Alert US House Prices Stablize & Are Poised to Rise
    July 24, 2012 InterMarket Forecaster The InterMarket Forecaster
    July 16, 2012 Investment Focus The Unheralded Revival in U.S. Corporate Profitability and Industrial Production
    July 10, 2012 Investment Focus Note to Worrywarts: Euro-Zone Debt Woes Aren't Boosting Financial Stress Measures
    June 30, 2012 InterMarket Forecaster The InterMarket Forecaster
    June 22, 2012 Investor Alert U.S. Household Deleveraging is Not the Real Impediment to a Vigorous Economic Recovery
    June 14, 2012 Capitalist Advisor The U.S. Interest Expense Burden
    June 7, 2012 Investor Alert Yet Another Chance to Accumulate Gold – and Why the Euro Still Out-Performs the U.S. Dollar
    May 30, 2012 InterMarket Forecaster The InterMarket Forecaster
    May 25, 2012 Investor Alert

    Note to U.S. Equity Bears: The U.S. Profit Revival is Real

    May 22, 2012 Capitalist Advisor

    The Good, the Bad and the Ugly of Fiscal Austerity: A Guide for Investors
    There’s been a lot of confusion lately among leaders in the investment community, economists, and policy-makers about the real meaning and likely future impact of “fiscal austerity,” a loosely-defined set of public policies that have been tried and enacted by numerous over-indebted sovereigns since spring 2010. Fiscal austerity is also commonly referred to as “fiscal consolidation,” or “fiscal retrenchment.” Whereas some economists, strategists, and policymakers endorse fiscal austerity and believe it can be bullish for the economy and portfolios, most oppose it and believe it’s bearish. Here we offer a classification scheme for “fiscal austerity” policies, to help investors clarify their real meaning and discern which of their components is in fact bullish or else bearish for...

    May 16, 2012 Investor Alert

    Gold’s Decline Favors Financial Assets – But Can It Persist?
    The US$-gold price, after booming by 50% in the year before its peak in September (at $1923/ounce), has since declined by 20%, to $1540/ounce today, and it’s down by 12% alone since its more recent high last February. Despite this latest drop, and others like it since late 1999 when gold bottomed, the great metal has materially out-performed U.S. stocks and bonds, especially since 2007 (see Figure One). Those who failed to be bullish on gold since 2007, or were bearish, are again eager to try to discredit the “barbaric relic.” A similar sentiment emerged a year ago, when commodity prices fell a bit and many predicted a full-scale collapse, but we advised against expecting a return of the commodity-price deflation of 2008.1 Here, we opine on gold’s likely future move - first making sure that we’re all clear about what a sustained gold price drop might mean.

    April 30, 2012 Investment Focus

    How U.S. Leverage and Debt Cost Can Be Inversely Related
    In a phenomenon we call the “paradox of profligacy,” governments sometimes borrow increasing sums relative to GDP, thus leveraging themselves relative to potential underlying tax revenues, and yet simultaneously secure new funding at lower interest rates. In private markets, of course, a precisely opposite relationship tends to hold: the more leveraged a borrower, and the worse his credit-worthiness, the higher the yield he must pay bondholders. Yet at least since 1980 the trend among G-7 governments...

    April 25, 2012 InterMarket Forecaster InterMarket Forecaster
    April 18, 2012 Capitalist Advisor Income Inequality, Effective Tax Rates, and U.S. Economic-Financial Performance
    April 5, 2012 Capitalist Advisor Trillion Dollar U.S. Deficits as Far as the Eye Can See: Is the Problem Excessive Spending or Deficient Revenues?
    March 31, 2012 Investment Focus Wall Street Strategists "Predict" Last Year's Equity Performance Instead of Next Year's – Unlike IFI
    March 23, 2012 InterMarket Forecaster InterMarket Forecaster
    March 16, 2012 Investor Alert Does "Shadow" Housing Inventory Presage More Trouble?
    March 9, 2012 Investor Alert Banking Sector Bonds are Reinforcing Other Bullish Signs for an On-Going Bank-Stock Rally
    March 6, 2012 Investor Alert Riskier Bonds are Out-Performing – Which Isn't Bad News
    February 27, 2012 InterMarket Forecaster InterMarket Forecaster
    February 10, 2012 Capitalist Advisor U.S. Equity Performance Amid Growth in Citizens' Dependence on the Federal Government
    February 3, 2012   Track Record 2011
    January 31, 2012 Capitalist Advisor Betting Odds Say Romney Will Be the Republican Nominee and GOP Will Regain the Senate – but Obama Will Remain President
    January 25, 2012 Investor Alert The Fed's Extension of ZIRP to Late-2014 Justifies Bullish Stance on U.S. T-Bonds
    January 11, 2012   Outlook 2012
    January 5, 2012 Investment Focus The Worst of the Housing Debacle is Over

    2011 Reports

    Date Report Title
    December 29, 2011 Investment Focus A Robust Economy Requires More
    Investment, Not More Consumption
    December 22, 2011 InterMarket Forecaster InterMarket Forecaster
    December 19, 2011 Capitalist Advisor Obama's Policies Causing Dependency, Driving Would-Be Workers to the Couch
    December 14, 2011 Capitalist Advisor Investment Implications of Fiscal Reform Plans in Europe
    December 6, 2011 Investor Alert U.S. Banks Not Overly-Exposed to PIIGS Debt
    November 28, 2011 InterMarket Forecaster InterMarket Forecaster
    November 11, 2011 Capitalist Advisor Approval Ratings, Swing States & Obama's Re-Election
    November 8, 2011 Capitalist Advisor The Jobless Rate, Stocks & Obama's Re-Election
    November 4, 2011 Capitalist Advisor The U.S. Economic Recovery & Obama's Re-Election
    A year from now American voters will decide whether to re-elect President Barack Obama or instead choose the GOP candidate. In our view Mr. Obama is unfit to be America's president and doesn't deserve re-election, yet strong evidence clearly suggests that he'll win re-election anyway.
    October 25, 2011 InterMarket Forecaster InterMarket Forecaster
    October 14, 2011 Capitalist Advisor Don't Trust the Stock Market to Forecast Recessions
    Forecasters use many factors to anticipate the business cycle, but if forced to choose between the fixed-income market and the equity market, when forecasting U.S. recessions, they should...
    October 6, 2011 Capitalist Advisor The TARP After Three Years: It Made Things Worse, Not Better
    TARP didn't "prevent" the financial crisis of 2008 but contributed to it, as did the Fed's previous inversion of the Treasury yield curve and the subsequent insolvencies of Fannie Mae and Freddie Mac. U.S. bank stocks were recovering before TARP was adopted on October 2008, up 52% in the prior few months, but then plunged while TARP was being debated and by 72% in the five months after it was enacted.
    September 30, 2011 Investor Alert The Fed's Old 'Twist' – and Shout-Out for Yet Another U.S. Recession
    September 27, 2011 InterMarket Forecaster InterMarket Forecaster
    September 16, 2011 Investor Alert  Impact of Greece and Other Would-Be Deadbeats
    September 7, 2011 Capitalist Advisor Obama’s Belabored, Beleaguered Economy
    August 31, 2011 Investment Focus
    The Yield Curve as a Forecaster Amid the Fed’s ZIRP
    A low level of interest rates by itself is no sure means of inoculating the U.S. economy from recession... history reveals that business cycles and recessions can occur even amid very low interest rates. But if short-term interest rates are to be zero indefinitely, it seems the Treasury yield curve can no longer invert. If so, are there reliable alternatives for predicting forthcoming recessions? The answer is yes. Also included: an appendix citing 17 selected IFI research reports spanning our 11 years of advanced, global yield curves analysis.
    August 25, 2011 InterMarket Forecaster InterMarket Forecaster
    August 18, 2011 InterMarket Forecaster A Brief History of the U.S. Dollar and Its Debasement
    August 11, 2011 InterMarket Forecaster Despite U.S. Debt Trajectory, Fed’s Extended Zero-Rate Policy Ensures Low T-Bond Yield & Higher Gold Price
    July 29, 2011 Investor Alert Revisiting the Bullish Case for Emerging Markets
    July 26, 2011 InterMarket Forecaster InterMarket Forecaster
    July 22, 2011 Capitalist Advisor Sovereign Debt Turmoil: Political Causes & Investment Consequences
    Sovereign debt defaults are nothing new, historically--but what's new is that they're now becoming more typical of sovereigns in "developed" nations. The root problem is the welfare-warfare state, which is going bankrupt in slow motion. The U.S. is no exception. Although many people worry about sovereign debt defaults, few oppose its cause, the welfare-warfare state itself.
    July 15, 2011 Investment Focus Corporate vs. Treasury Yields as Business Lending Revives
    June 30, 2011 Investor Alert Revisiting the Bullish Case for Consumer Cyclicals
    June 27, 2011 InterMarket Forecaster InterMarket Forecaster
    June 14, 2011 Investor Alert Is Another Financial Crisis Imminent?
    June 7, 2011 Investment Focus The Finance-Energy Gap as a Forecaster of Stocks
    May 27, 2011 Capitalist Advisor A Brief History of the U.S. National Debt & Its Limit
    May 25, 2011 Investment Focus The Myth That a Weak Dollar Boosts Equities
    May 20, 2011 InterMarket Forecaster InterMarket Forecaster
    May 11, 2011 Investor Alert The Commodity-Price Reversal: Don't Worry, Be Happy
    April 25, 2011 Investor Alert Fed Money-Printing and the Rise in Global Bond Yields
    April 25, 2011 Investor Alert Fed Money-Printing and the Rise in Global Bond Yields
    April 18, 2011 Capitalist Advisor Economic Stagnation and Punitive Tax Burdens on the Rich
    April 7, 2011 Investor Alert Does the Oil Price Spike Signal Another Recession?
    March 31, 2011 Investor Alert The "Who" vs. "What" of Investing: The Irrelevance of PIMCO on T-Bond Returns
    March 25, 2011 InterMarket Forecaster The InterMarket Forecaster
    March 11, 2011 Investor Alert Bottoms Up: The Equity Rebound After Two Years
    March 7, 2011 Investment Focus Oil's Jump: It's Bernanke, Not Gadhafi
    February 28, 2011 Capitalist Advisor

    Bank Profits vs. Fed Profits
    There's been a significant revival in the profitability of U.S. commercial banks (and the financial sector generally) over the past year, although the level of profits has yet to revisit the record level registered before the recession of 2007-2009 (see Figure One), due to a below-par rebound in lending – the most profitable activity. Tragically, the Federal Reserve is now...

    February 24, 2011 InterMarket Forecaster The InterMarket Forecaster
    February 9, 2011 Investor Alert The Corporate Bond Winning Streak
    The same Fed policy that boosts corporate bonds, with a lag – a steeply-sloped yield curve and inflation – doesn't necessarily help nominal Treasury bonds.
    February 1, 2011 Investor Alert Egypt, Crude Oil and Emerging-Market Equities
    January 30, 2011   Track Record 2010
    January 25, 2011 - Outlook 2011
    January 17, 2011 Capitalist Advisor U.S. Public Profligacy on the Cheap: How Long Can It Last?
    January 7, 2011 Investor Alert U.S. Equity Performance When the GOP Controls Congress vs. a Democratic President


    2010 Reports

    Date Report Title
    December 29, 2010 Investor Alert The Revival of Corporate Profits – Revisited
    December 23, 2010 InterMarket Forecaster The InterMarket Forecaster
    December 16, 2010 Investor Alert The Continuing Case for TIPS - Revisited
    December 6, 2010 Capitalist Advisor

    The Widely-Ignored U.S. Fiscal Turnaround
    Amid the just-released report on the U.S. federal deficit by an Obama-appointed commission, it's an appropriate time to review the state of federal finances since the U.S. recession ended in June 2009, and to note how the fiscal situation turned for the better last February and has since undeniably improved, despite every effort by Keynesian policymakers to spend the nation into oblivion and insolvency.

    November 30, 2010  

    Latest European Debt "Crisis" Still Overblown
    Six months ago, when the first wave of what we characterized as over-wrought fears of European sovereign debt troubles swept through financial journalism and market commentary, we downplayed the materiality of the risks Europe faced and reiterated our bullish case for continental stocks.1 Fears last spring mostly surrounded Greece, Spain and Italy, but now mainly surround Ireland. In both cases, we contend that the sensationalist and pessimistic accounts largely obscure many positive facts.

    November 24, 2010 InterMarket Forecaster The InterMarket Forecaster
    November 16, 2010 Investor Alert California's Greek Tragedy
    November 5, 2010 Investor Alert QE2 and the Iceberg
    October 31, 2010 InterMarket Forecaster The InterMarket Forecaster
    October 20, 2010 Investor Alert The Currency Warriors – and Their Collateral Damage
    Both the U.S. Treasury and Federal Reserve want a weaker dollar, one that declines steadily in value—and they're getting it (just watch gold). Policymakers falsely claim that a weaker dollar will boost U.S. growth, by curbing imports. This is currency protectionism—and utter nonsense—but it inflicts collateral damage, by repelling incoming foreign capital, which the U.S. sorely needs.
    October 18, 2010 Capitalist Advisor Don't Expect Miracles After Election Day
    October 11, 2010 Capitalist Advisor The Burden of the TARP Trap
    Contrary to the opinion of most investors, we contend that TARP has been a disaster – one of the top ten policy blunders of the past decade – because it's been an unjust grand larceny inflicted on innocent taxpayers and a burdensome, costly snare imposed on over 700 banks and institutions, most of which were compelled to take government loot. [...]
    September 30, 2010 InterMarket Forecaster InterMarket Forecaster
    September 25, 2010 Investment Focus What About "Gold for the Long Run?"
    The decade-long decline and stagnation in U.S. equities is worrisome to those who welcome moneymaking and prosperity. Yet despite the depth and duration of these results, many Wall Street professionals still favor stocks, while de-emphasizing (or often ridiculing) holdings in commodities like gold. Even those economists who foresee only doom for U.S. equities repeatedly deride gold as likely to under-perform all other asset classes – even silly pork derivatives like Spam.1 In sum, most investment professionals have an unshakeable faith in Jeremy Siegel's dictum about the supposedly inevitable benefit of holding "stocks for the long run," even though gold has surpassed U.S. stocks and bonds for more than a decade, and [...]
    September 20, 2010 Investor Alert The Meaning of Negative Real Yields
    September 9, 2010 Investment Focus Fears of Deflation are Ridiculous
    There's no deflation in the U.S. today, there hasn't been deflation for more than 50 years, and market signals say none is forthcoming. Even if we were to get deflation, it wouldn't hurt equities, profits or economic growth.
    August 30, 2010 InterMarket Forecaster The InterMarket Forecaster
    August 26, 2010 Investor Alert Revisiting a Bullish Stance on Emerging Markets
    August 20, 2010 Investment Focus Fed Policy Mirrors the Bank of Japan – and Thus Depresses T-Bond Yields
    Tragically, the Fed and U.S. Treasury are copying the futile and failed policies of the Bank of Japan and Tokyo's Ministry of Finance from the 2000s. It's this policy – not the risk of a "double-dip" recession or "deflation" – that's lowering T-Bond yields.
    August 15, 2010 Investor Alert Uneven Recoveries (Like the Current One) are Normal
    Every economic recovery in modern history seems riddled with complaints about how tentative and prolonged it is, and with so little job creation — even though that's the norm.
    August 6, 2010 Capitalist Advisor Frank-n-Dodd and the Financials - Part I
    July 31, 2010 Investment Focus Be It Inflation or Deflation, Gold Performs Very Well
    July 26, 2010 InterMarket Forecaster The InterMarket Forecaster
    July 16, 2010 Capitalist Advisor The Paradox of Profligacy
    Typically, a more leveraged and less creditworthy borrower must pay a higher interest rate than does a less leveraged, more creditworthy borrower (collateral aside) and the principle holds true regardless of the phase of the business cycle we're in, whether recession, recovery or expansion. Rational markets require that a riskier borrower pay more than a safer one – that the profligate pay more than the frugal – whether as an individual or a business. Unfortunately, this same, prudent principle doesn't always hold true for government borrowers. [...]
    July 9, 2010 Capitalist Advisor The Macro-Climate Trumps All Else
    Whenever I re-read the book Security Analysis, the investment bible of Graham and Dodd, I'm transported to a past era when investment life was much simpler and easier. I could [...]
    June 30, 2010 Capitalist Advisor America's Longest War: Why Failure is Washington's Preferred Option
    The so-called "war" in Afghanistan, begun in October 2001, soon after the 9/11 Muslim terror attacks on New York City and Washington, is now the longest on record in U.S. history. This prolonged, tortuous quagmire is wholly unnecessary – and thus a profound tragedy. The Bush Administration is largely to blame. But now consider [...]
    June 23, 2010 InterMarket Forecaster The InterMarket Forecaster
    June 11, 2010 Investor Alert The Continuing Case for TIPS
    June 4, 2010 Investor Alert The Real Story on Currencies and Stocks
    Perhaps the most relevant financial story of the year so far has been the appreciation of the U.S. dollar and pronounced weakening of the euro, a trend attributed, by most observers, to over-leverage (and resulting debt woes) in the so-called "PIGS" of Southern Europe (Portugal, Italy, Greece, Spain).1 While there's some truth to this insight, it's important for investors to recognize that [...]
    May 28, 2010 InterMarket Forecaster The InterMarket Forecaster
    May 21, 2010 Investor Alert Latest "Crisis" is Much Ado About (Almost) Nothing
    "Crisis" is an over-used word in tumultuous times. The media use it to lure a shrinking pool of viewers. Politicians use it to justify their wealth-smashing interventions (and power). As H.L. Mencken once observed, "The whole aim of practical politics is to keep the populace alarmed – and hence clamorous to be led to safety – by menacing it with an endless series of hobgoblins, all of them imaginary." While the recent month swoon in stock prices (-8%) isn't wholly imaginary – nor inexplicable – it's also best interpreted as a healthy pullback. In our view, [...]
    May 10, 2010 Capitalist Advisor How Fed Policy Busts Washington's Budget
    Qhen Federal Reserve chairman Ben Bernanke testifies before Congress, he typically warns members against profligate deficit spending. But Bernanke's own policies – like Alan Greenspan's before him – have been a major cause of Washington's widening budget deficit. Since most Congressmen don't know this, they accept the criticism and even praise Bernanke for his wonderful policymaking skills and conscientious fiscal advice. It would all be a huge charade – if it weren't so reckless. Figure One nearby is a reminder [...]
    May 5, 2010 Investment Focus Corporate vs. Treasury Yields as Relative Holdings Shift
    Even though U.S. T-Bond yields skyrocketed by 175-225 basis points, trough (December 2008) to peak (April 2010), their subsequent-month drop of 35-45 basis points has led analysts and bond managers to doubt the bearish case on T-Bonds.1 Yet our models, ...
    April 30, 2010 Capitalist Advisor Representation Without Taxation
    The America of the past century has been the near opposite of that of the 1700s. Instead of a populace demanding a limited and laissez-faire government, its a populace which wants (as evidenced by election results) bigger and ever-more invasive government. Instead of fair taxation with representation, the America of recent decades has endorsed an increasing degree of representation without taxation. [...]
    April 26, 2010 InterMarket Forecaster The InterMarket Forecaster
    April 15, 2010 Investor Alert Yes, the Recession Ended Last Summer -- and Don't Expect a 'Double Dip'
    April 7, 2010 Investor Alert Greece Government Debt and all That
    March 31, 2010 Capitalist Advisor Ominous Trends in the Burden of the Jobless on Taxpayers
    March 25, 2010 InterMarket Forecaster The InterMarket Forecaster
    March 16, 2010 Investment Focus Profligate Public Finance: US versus Japan
    March 9, 2010 Investor Alert The Year Since The Bottom: What's Next?
    February 28, 2010 Capitalist Advisor Doctor Doom Revisited
    February 19, 2010 InterMarket Forecaster The InterMarket Forecaster
    February 12, 2010 Track Record 2009
    January 25, 2010 Outlook 2010
    January 13, 2010 Investment Focus Equity Volatility Revisited
    Indeed, volatility has plummeted over the past year, as stock prices soared. But what's the year-ahead signal for volatility? Is volatility likely to decline again (or by as much) in 2010 as it did in 2009?
    January 6, 2010 Investor Alert Prospects for Investment Returns in the Coming Decade
    What can an investor reasonably expect to gain in the coming decade?


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