Expect No More Than 3 Percent Returns in the Next 20 Years

By John Mauldin – Re-Blogged From http://www.newsmax.com

We didn’t have all of this big data or computing power when I started in the investment publishing industry in 1982. But we do today.

This data not only shows us the present state of the stock market, but also tells what that means in terms of probable returns over the coming 7, 10, and 12 years and what it means in terms of relative risks.

Below, I picked out three telling charts that reveal how pricey the stock market is and what that tells us about probable forward returns.

Median P/E (Price-to-Earnings Ratio) Shows That We Are At The Second Most Overvalued Point Since 1964

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Why You Should Be VERY Careful With Stocks Here

By Graham Summers – Re-Blogged From Gains, Pains, & Capital

I want to warn you to be very VERY careful with stocks right now.

The common narrative is that the US is entering a golden age in its economy and that this growth will drive stocks ever higher.

The reality is that GDP growth has collapsed. The third quarter of last year (3Q16) was the quarter everyone thought signaled a new beginning with growth of 3.5%. However, the very next quarter’s growth (4Q16) collapsed to 1.9%.

And thus far this quarter 1Q17 is tracking at 1.8%

Put simply, growth is NOT coming soon if at all. Even Trump’s top economic advisor has admitted that GDP growth of 3% is unlikely until the end of 2018.

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Major Stock Bear Still Looms

By Adam Hamilton – Re-Blogged From Zeal

The US stock markets spectacularly defied the odds in 2016, soaring after both the UK’s Brexit vote and US presidential election.  Both actual outcomes were universally feared as very bearish for stocks before the events.  These contrary stock rallies have left traders feeling euphoric, convinced stock markets are impregnable.  But with stock valuations hitting bubble levels in an exceedingly-old bull, a major bear still looms.

Though you wouldn’t know it in recent years, stock markets are forever cyclical.  They rise and fall, flow and ebb, in great valuation-driven cycles.  Bull markets always eventually give way to bears, and vice versa.  Stocks can’t and don’t rise or fall forever, extreme popular greed or fear never last for long.  The history of stock markets looks like a great sine wave, an endlessly-alternating series of bulls and bears.

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Tax Effects on Markets

cropped-bob-shapiro.jpg   By Bob Shapiro

Many factors affect the ups and downs of markets, including Taxes.

Let’s look at how Capital Gains Taxes exert their influence, especially at year end.

There are two kinds of investors:

  • Those who think a particular investment will go up, and
  • Those who think a particular investment will go down.

All of these investors have various ways to place their bets on what they expect the future to bring. For stock market Bulls, they may buy the underlying stock, they may buy call options, or they may sell put options. For Tax purposes, the effects are close enough that I will consider them the same.

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Irrational Exuberance In US Stock Market Grasps At 20K For Dow Index

By David Haggith – Re-Blogged From Great Recession Blog

Since Trump’s election, the US stock market has climbed unstoppably along a remarkably steep path to round off at a teetering height. Is this the irrational exuberance that typically marks the last push before a perilous plunge, or is the market reaching escape velocity from the relentless gravity of the Great Recession?

This burst of enthusiasm in response to Trump’s victory, flew in the face of almost everyone’s predictions. That it lifted the market from seven months of languor certainly makes 20K on the Dow look like the elevation marker of a breathtaking summit.

While breaking 20k, if it happens, may be as meaningless as one more mile on the odometer when all the numbers roll over, it is psychologically potent for many. Breaking through it, could cause fear as eyes turn down and see how far below the earth now is, or the rarified air up here may bring euphoria that lifts the market to even greater levels on a rising current of hot air.

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Dollar Euphoria, Stocks, And Gold

By Adam Hamilton – Re-Blogged From http://www.zealllc.com

The US dollar has rocketed higher since early November’s US presidential election, rivaling the massive gains seen in the stock markets.  With the world’s reserve currency catapulted to extreme secular highs, dollar euphoria has naturally exploded.  Traders are overwhelmingly betting the dollar’s strong upside will continue.  But this greed-drenched currency looks very toppy and ready to fall, which is very bullish for gold.

The US dollar’s recent stampede higher has been amazing, as evidenced by the venerable US Dollar Index.  Launched way back in 1973, the USDX is the dominant and most-popular market gauge of how the US dollar is faring.  Since Election Day 2016 alone, the USDX has soared 5.1% higher in merely six weeks!  That isn’t much behind the flagship S&P 500 broad-market stock index’s 5.9% post-election rally.

But the post-election USDX surge is still far more extreme.  The world’s handful of reserve currencies are decisively commanded by the US dollar.  Because of the vast amounts of dollars flooding the globe, it has great inertia.  Thus like an oil supertanker, the dollar’s moves tend to be gradual and unfold over a long time.  The USDX usually moves with all the sound and fury of a tortoise, leisurely meandering around.

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Radical Gold Underinvestment 3

By Adam Hamilton – Re-Blogged Fron http://www.Gold-Eagle.com

Gold was again blasted to new post-election lows this week, further trashing contrarian sentiment.  The Fed proved more hawkish than expected in its rate-hike-trajectory forecast, unleashing heavy selling in gold futures.  This catapulted gold bearishness back up to extremes not seen in a year.  Investors are once again convinced gold is doomed, and thus radically underinvested.  That’s actually super-bullish for gold.

It certainly wasn’t the Fed’s second rate hike in 10.5 years this week that hammered gold.  Actually that was universally expected.  Federal-funds-futures traders had assigned it an average 96% probability in the two weeks leading up to that rate hike.  If the Fed had simply raised its federal-funds rate by 25 basis points to a 0.50%-to-0.75% range, gold-futures speculators would’ve likely yawned.  They knew it was coming.

The unexpected hawkishness came in the FOMC’s Summary of Economic Projections that is published quarterly at every other policy meeting.  Also called the “dot plot”, it shows where each FOMC member and regional Fed president expects the FFR to be in the next several years and beyond.  The collective expectations of these top officials who actually set monetary policy grew from two rate hikes in 2017 to three.

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