In our Dow Jones newsletter and S&P100 newsletter, we like to talk about the big picture and heavy duty industrial America. The frank truth is that the U.S. economy is in shambles and Americans will continue to see high unemployment and lower living standards for years to come. The bond market is telling us that hard economic times lie ahead and that deflation is a bigger threat than inflation, which is a risk the FED has recognized since it’s trying to inflate us out of this mess, which it can’t do. China is having its own problems in supporting itself as well as the world economy, the PIIGS (Portugal, Ireland, etc.) are in trouble, and debt deflation all over the world threatens social stability and a deflationary whirlwind.
No doubt about it in our minds – 2011 will see an intensifying of the recession we’re still in.
As to President Obama, he looks great and can confidently read from a teleprompter standing tall, but speech after speech is just empty talk. The Afghanistan war was a no-winner from the start as any historian will tell you that no nation has been able to conquer and pacify Afghanistan. President Obama’s one big success – a medical health insurance plan is likely to add costs on top of a besieged public when fully instituted. All this chaos started from a housing bubble, and a housing bubble originated with from loan crazy banks who decided it was a great idea to make loans that weren’t great because they could sell them and not have to keep them on the books. Wall Street went along with it, no one said anything about the lack of ethics and morals beneath this strategy (because they would have been relieved of their positions), and these were the guys who wrecked the world economy but kept their jobs.
As to the present job market which is suffering from the after-effects of this shock, for every new job there are now six applicants. Construction and housing production, which usually brings up the jobs totals, are down as is consumer spending based on credit. That means commercial real estate is in trouble because fewer people are shopping as freely as before, and so the malls are empty. Because nearly 70% of new jobs are created in small business, the fact that small business cannot borrow doesn’t help either. In terms of the long run again, since there is a lot of competition for job positions, employers can offer lower wages and young people entering the work force today can expect to make less money in their lifetime than previous generations, hence a lower standard of living into the future. Let’s not mention that housing production is at a 50-year low and vacancies and foreclosures are up.
So look at the headwinds coming over this next half year to year: (1) a slowdown in the U.S. as the Obama stimulus package fades, housing remains weak, commercial property is hurting as people are not spending, local and state governments will have to reduce wages, layoff workers and raise taxes, … sustainable jobs are not there because there’s no driver (2) austerity measures take hold in Europe, cutting wages and spending (3) China looks to dampen its own housing bubble, and is starting to face wage pressures, too.
Back to the U.S. … remember that ultimately it all comes down to jobs; it’s not much more complicated than that. Without a jobs recovery, there will be no consumer spending recovery (especially with declining wages), and without a return to previous consumer spending patterns (which is unlikely now that consumers are skittish about credit card debt), there’s little reason to be excited about the economy and thus the stock market. You can expect to see yet more vacancies at U.S. shopping centers and malls empty of fat wallet foot traffic. Of course, let’s not talk about the BP oil spill and its effect on businesses either.
The bottom line is, if you look at the market over the last ten years: you’re at a loss. That’s the bottom line. A few greats, such as Tom Bogle (Vanguard funds) warned several years ago that we have to lower our expectations. We had a very poor decade in the 1970s; you know, where the real return on stocks was probably 1 percent per year or something like that. The 80’s and 90’s spoiled us with double digit real returns. I once did a study of the long term gains of dynastic families such as the Vanderbilts, Rockefellers and Krupps of Germany. Their long run rate of return was 7-8% per annum. That’s all. You cannot expect that into the near future. Not at all.
The only solution for investors is either to put your money in bonds, paying zilch, or be nimble to trade in and out, going with sure things or lined up as much as possible.
Enter the era of the factor seasonal trader.
I want safer buys and sells. When the market is going down, find me shares where the stocks seasonally get hit as well because those economics are bound to be double down, and with volatility and risk rising, I want the safest trades and trends possible. Same for the bullish side — if it’s a bull market, put me in stocks where the seasonal normally heads upwards and the stock is following that seasonal, showing that earnings are following along with expectations for this cycle. That’s the seasonal trader approach.
If you just want to buy low and sell high, just use our chart books to determine when stocks normally have a high or low for the year. Once again, if a stock isn’t listed, that means none of the techniques that we use is able to match the past with high reliability, so we don’t make a projection. That’s common sense…who wants to mislead you?
That’s the Factor Seasonal Approach.
All I do is scan my watchlists for MACD signals, pop the stocks that trigger into my trusty factor seasonal program (you get a boiled down version of the program for PCs with a subscription to our Seasonal Cash Flow Super Package) and then buy or sell, OR EVEN GO MARKET NEUTRAL, accordingly. I can watch stocks via the FusionIQ rating system, Value Line ratings, VectorVest rankings, IBD ratings … and then act accordingly. Makes more sense then what most analysts are doing when forecasting the short term.
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