Category Archives: US Economy

The Next Stock Market Collapse: Are we There Yet?

April 3, 2016

It seems that we are entering a decisive period for the stock market. The S&P 500 is right at the top of a channel between 2,100 and 1,920. Although I don’t like technical analysis, it is pretty clear that if it rises significantly about 2,100, then a new bull market will start. Conversely, if it drops below 1,920 a major market crash may follow.

S&P 500 10 Year Chart

S&P 500 10 Year Chart

Although anyone with limited knowledge of technical analysis would come to the same conclusion, I imagine 100,000,000 would-be retirees don’t look at this chart. And even if they did, they would not be able to see its importance.

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Inflation: The Silent Killer of 2016

With all the attention placed on Trump, Sanders and the other candidates, it amuses me how clueless the vast majority of Americans are. Most people are focused on the wrong thing. They focus on the inflammatory remarks made by Trump, on they believe in the panacea fantasy described by Clinton and Sanders.

Virtually no one is focussed on the real problem. The country is bankrupt. Does it really make sense for Clinton and Sanders to deliver on their promises if they will make the country’s finances even worse? Trump does not provide details or a plausible plan either, probably because he knows that if he did large numbers of people would not like it.

Chart courtesy of ShadowStats

Nobody talks about QE Infinity or the inflation that has been accelerating over the last decades. Nobody cares that the country is bankrupt or that the party is followed immediately by major financial upheaval. Continue reading

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Can Trump Defuse the US Debt Bomb?

When I wrote about the US Debt Bomb back in August 2009, it was only(!) about $12 trillion. Since then it has grown to $19 trillion. If it’s difficult to comprehend such a large figure, consider it breaks down to $159,000 per taxpayer!

US Debt Keeps Growing

US Debt Keeps Growing

Unfortunately, this is only a small part of the country’s unfunded liabilities. When you add Medicare and Social Security, the total is about $100 trillion. Many people believe that this is too much for the country to pay off, and that we will never be able to pay it.

How did this happen?

As I have mentioned before, most of the politicians that have run this country for the last 50+ years have not been fiscally responsible. They treat budget spending the same way a teenager uses a credit card. Am I saying that they are bad people?

No. I am just saying that they do not have the skills or inclination to fix the budget problem. They don’t know how to manage money or a business. Even if they did promise to fix the problem, they would never be voted into office. They would have to make massive cuts to Social Security, Medicare, military spending and every other area that people are not willing to cut. The people who depend on all this excessive spending would have to vote for the politician, and they would never do it.

Enter Donald Trump. Although there are many things that are not great about Trump’s proposals, I think that he has the potential to fix problems like this. He’s not a politician. He has so much money and power that he doesn’t have to play politics. And, his confrontational personality seems to be the incompatible with the political process of trading favors.

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Are you Ready for the Financial Crisis?

A wise man once wrote:

Markets top slowly and bottom quickly.

When I read this and anlyzed some of the major market tops over the last 100 years, I was surprised by the accuracy of this statement. (One major exception was the 2000 Tech Bubble, which was quite different from other market dynamics.)

S&P 500 Jan 2011 - 2016

S&P 500 Jan 2011 – 2016

The theory behind this is that the “smart money” figures out that a market is topping long before the average Joe. I’m not sure if I agree with the theory, but it does seem to me that the “stupid money” gets out way too late, after the market has dropped significantly.

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Chaikin Analytics Review and Free Trial

One of the biggest hurdles that the individual investor faces in trying to create a nimble, smart portfolio is the competition.

Investment bankers, quants, mutual fund companies, and big Wall Street firms are employing Ph.D. researchers with degrees in everything from finance to physics to create model portfolios. They use the latest and most powerful technology to guide their buys and sells.

The little guy doesn’t have a chance.

That’s what I thought, until last week. George and I had a chance to see a demonstration of Chaikin Analytics, probably one of the most complete set of investment tools and stock market model-building technology that’s available for the money. Or at least I’ve ever seen.

The Chaikin Analytics Dashboard

The Chaikin Analytics Dashboard

How does Chaikin level the playing field?

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From Main Street to Mainstream: Will More Businesses Accept Bitcoins?

From Main Street to Mainstream

From Main Street to Mainstream

If Bitcoin becomes mainstream, it won’t do so because of the bankers, hedge funders, and other Wall Street types. Those folks are happy to trade whatever type of currency comes their way. If tomorrow, the world switched to beaver pelts, you can bet that someone would create a beaver pelt ETF, or build a hedge fund that is invested heavily in beaver pelt-for-dollars trading.

But, for Bitcoin to become more accepted as a mainstream currency, users will need to pave a path to Main Street. That hasn’t been the case, so far. But there are signs that this is changing. In fact, two trends — gift cards and third-party Bitcoin facilitators — can make the alt-coin more user-friendly.

Main Street Vs. Wall Street

Main Street is more cautious and fearful than their “No Fear” counterparts on Wall Street. Bitcoin has terms that they’re not familiar with — algorithmic mining, blockchains, wallets, etc. It can be scary for someone from a non-tech background to embrace this alt-currency. Much easier for them to reach into their own physical wallet and produce a dollar bill or a credit card, right?

Then, there are governments who are taking shots at Bitcoin. They are not accepting it — and some are even banning it. This makes total sense. Bitcoin is a threat to their monopolies on currency, one of the key ways they hold power.

So, Bitcoin does have some hurdles.

However, there are signs that the ice of fear is starting to be chipped away. Trends are starting to develop that can build a bridge from alt-coin users to Main Street.

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Is this the Start of the next Bitcoin Bubble?

Bitcoin has started to rise again, and it looks like it might be the start of the next Bitcoin bubble. Although many people have known about Bitcoin for years, most people have not purchased any coins and do not understand it.

Image courtesy bitcoincharts.com

Image courtesy bitcoincharts.com

How is this bubble different?

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Is this a good time to buy gold?

Many people think that this is a great time to buy gold. However, the same people who are saying that now were saying it when gold was at $1,800 per oz.

The price of gold has fluctuated over the last 5 years.

The price of gold has fluctuated over the last 5 years.

Personally, I think it is better to hold gold than dollars. The dollar is collapsing, and I think it will continue to collapse over the next decades. However, that does not mean that everyone should go out and buy gold.

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10 Free Apps to Help You Declare Your Personal Financial Independence

Two things made the American Revolution work: Ideas and Tools.

It was a great idea to become independent and to create a democracy in the new world, dominated by archaic colonialism and monarchism. However, if it wasn’t for the printing press, those ideas would have never got out. If it wasn’t for the rifle, those ideas would have never been defended.

You might say the American Revolution was the ultimate app.

But what about you? Do you have great ideas on how to save money, invest money, and budget money, but don’t have the resources or tools? Here are a few ways to simplify those tasks and make this July 4th — and every day after that — the day you declare your personal financial independence.

And, by the way, all these apps are Free, just like the founding fathers wanted them to be.

Mint.com

Mint made personal financial tasks easier and simpler. Their mobile apps are getting rave reviews, too.

To learn more, go to the Mint Apps page.

Manilla

Manilla apps can help you organize your bill-paying chores. Not paying your bills on time can lead to stress, anger, and… higher bills.

Here’s the page to find out more about Manilla apps.

SigFig

Making a bad investment is one thing, but you don’t know it’s bad unless you can see how bad it really is. SigFig helps you monitor your portfolio — and spot those bad investments. And good ones. Find out more at SigFig.

BillTracker

The BillTracker app helps you monitor your bills and pay them on time. Find out more at BillTracker.

Doxo

Doxo bills itself as a digital file cabinet so you don’t have pesky paper bills floating around mucking things up. You can check out this hand app here.

Forbes Intelligent Investing

Forbes is one of the biggest names in financial news and information. Their Intelligent Investing column is downright educational. You can get a look at the Intelligent Investing app here. Click on the Intelligent Investing tab.

Morningstar Apps

Track all of your investments and study all of your investment ideas with these Morningstar apps.

FX360

Forex people! You need free apps, too. Here’s a nice one from FX 360.

ETrade

From one of the biggest brokers, here’s a great app. Check out ETrade’s suite of mobile apps.

TD Ameritrade

And last but not least, if you use TD Ameritrade as your broker, you might want to plug into this free app.

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Cognitive Biases — How Thinking Shortcuts May Cause Thinking Blind Spots When You Invest

You do not see the market clearly. No one does. You are peaking through a crack through a wall when you make an investment, or a trade. The mass that blocks your view from true reality is often referred to as “a cognitive bias.” In fact, there isn’t just one cognitive bias that makes up the wall that blocks your view of how things really are; there are dozens.

Cognitive biases are simply thinking shortcuts, ways you process the infinite amount of information that bombards your reality every day. (If you want to impress people, call them “heuristics.”)

Biases aren’t necessarily bad. They are actually forms of pattern recognition — one of the reasons humans remain at the top of the food chain. In fact, you might go crazy if you didn’t have some way to turn the swirling clouds of data that inundate us into sensible patterns. However, if you’re not aware of your own biases and acknowledge that they help you make decisions, these lenses quickly become blinders. Here are a few cognitive biases that might affect how you think about investing.

Anchoring or focalism – this is the tendency to rely too much on one piece of information when making decisions. Some investors have a particular metric when the make their decision and ignore other signs of company performance.

Backfire effect – when something happens to cause you to doubt your belief, you strengthen that belief. Ever buy something after a rapid loss and call it a “buying opportunity”?

Bandwagon effect – just because everyone is buying a house with a high-risk mortgage, you can do the same.

False-consensus effect – the tendency of a person to overestimate how much other people agree with him or her. Just watch any of the financial news networks until you find one that agrees with you.

Information bias – the tendency to seek information even when it cannot affect action.

Focusing effect – the tendency to place too much importance on one aspect of an event. You may experience this when, let’s say, the Fed makes one move, while there are other economic factors that are just important, and you focus on the Fed’s decision.

Optimism bias – the tendency to be over-optimistic, overestimating favorable and pleasing outcomes.

Pessimism bias – the tendency to overestimate the likelihood of negative things happening to them.

Recency bias – events that just happened seem more important. For example, a company has a good quarter — after a string of lousy quarters — and you focus on the new numbers.

Typically, we don’t suffer from one bias — but dozens. Sometimes, these biases are bouncing around at the same time.

Here’s a good list on Wikipedia.

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