Research Reports - Chronological

2015 Reports

Date Report Title
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
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 as-sume 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
Is 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
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

March 24, 2014 InterMarket Forecaster The InterMarket Forecaster
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 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
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?
January 1, 2014   Track Record 2013

2013 Reports

Date Report Title
December 30, 2013 Investor Alert QE, ZIRP and the Treasury Bond Bust
December 23, 2013 InterMarket Forecaster The InterMarket Forecaster
December 20, 2013 Investment Focus Should Investors Trust Economic Data?
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 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&P 500 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   2012 Track Record
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

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.

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
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

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 10, 2012 Capitalist Advisor U.S. Equity Performance Amid Growth in Citizens' Dependence on the Federal Government
February 4, 2012   Bibliography - Chronological - 2000-2012
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
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 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 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 Special Report Track Record 2009
January 25, 2010 Special Report 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 13, 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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