A Little Bit of Shock Value…

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I just published an article titled “Welcome to 2026.” It showcased my new-found optimism about the future of our economy and our markets. And, admittedly, I was going for a little bit of shock value when, near the end of the article, I declared the Dow Jones could hit 44,000 in ten years. The DJIA is currently around 18,500.

Here’s a link to the article in the local seniors’ paper, The Senior Beacon (article on page 24).

A FEW WARNINGS

After reading some scary articles about the very near-term, I wanted to repeat my warnings. We will absolutely have recessions, bear markets, catastrophes and other bad and volatile events. BUT…those things have never stopped the market in a super-bull cycle.

LOTS OF BAD THINGS

The world’s a total mess: there’s record-high government debt, record-low U.S. interest rates (indicating a weak economy), wars, invasions, bombings, negative global interest rates, worldwide growth slowdowns, Brexit–whoa, gotta wipe the sweat from my brow. Are you optimistic yet?

I’m aware of these major issues. They are important. But they’re not devastating.

WHAT WE’VE TRIUMPHED THROUGH

For example, the U.S. has survived most of those things before, including bigger trials like assassinations, Great Depressions, multiple World Wars, etc. You get the idea. All through this, the markets have reached new highs, generating new wealth.

I believe we’re on the cusp of another super-bull market. We had the latest in the ’80’s and ’90’s. Then we had the worst decade in the stock market. Ever. The worst ever. Even worse than the decade that includes the Depression.

That was the major down cycle. Now I think it’s time for the markets to move even higher up. Get ready for Dow 44,000…

Here’s a link to the article again. Check it out on page twenty-four.

If you’d like a free report that took 17 years to build, highlighting the ten most-repeated mistakes I’ve seen dozens of investors make, just email the word “ten” in the subject line to RonPhillipsAdvisor@gmail.com

This report can help you minimize risk, save you $1,000’s in unnecessary fees, protect you and your loved ones from financial devastation, and minimize or even eliminate your taxes on investments. Pull up your email program, put “ten” in the subject line, send to RonPhillipsAdvisor@gmail.com and sit back and wait for the most important free report you’ll ever read on your investments.

World’s Most-Traded Commodity on fire sale, selling at 64% discount

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OIL

A POPULAR OIL-BASED ETF (symbol: OIL)

A ONCE-HOT MARKET COOLS DOWN TO SUB-ZERO TEMPERATURES

The above picture is an extreme example of the bargains available in the energy sector. I don’t necessarily recommend that ETF but it shows how hard oil has been hit in the marketplace.

The commodity is suffering short-term and long-term issues. According to Nasdaq.com, the 2008 price of crude oil was about $140 per barrel and is now not quite 50 dollars.

WHAT’S THE MATTER WITH OIL?

First, the short-term problem. There’s a global growth slowdown, excluding the U.S., fortunately. The biggest lame duck is China. The fastest-growing economy losing their momentum spells big trouble for all sorts of commodities, ranging from copper and lumber to energy.

Another very short-term, seasonal issue is winter. We just use less gas, and oil, in the winter. We’re not running around having fun in the sun. We’re stuck in the house and at work, using natural gas and electricity.

LONG-TERM, SYSTEMIC OIL PROBLEMS

The major problem: technology, in the form of fracking and horizontal drilling. These two methods are smothering long-term high oil prices. They’re responsible for the U.S. turning around a 60-year (!) trend of fuel importing and turning into a fuel exporter.

That’s huge news. A systemic problem. We’re now in the league of Saudi Arabia and other major oil reservists. This change will have lasting impact in the industry and market.

That being said, is the world going to abandon oil use? Not any time soon. That’s why I’m optimistic about the price of oil coming back. I even made a prediction, earlier in the year, that oil would be 50% higher by the end of December. We’ll know very soon if I made a foolish prediction.

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A few widely-held ETFs that are oil plays (and year-to-date performance*):

  • USO: Unites States Oil Fund (-27.90%)
  • DBO: DB Oil Fund (-27.71)
  • IEO: iShares U.S. Oil/Gas Exploration & Production (-21.40)
  • XLE: Energy Select Sector SPDR (-21.06)

And a few popular oil-based stocks (with year-to-date performance*):

  • XOM: Exxon Mobile (-17.25%)
  • CVX: Chevron (26.82)
  • BHI: Baker Hughes (-6.28)

* Data sourced from Morningstar.com

Carl Icahn is worried…Should You be, too?

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Carl Icahn In His Latest Video: "Danger Ahead"

Carl Icahn In His Latest Video: “Danger Ahead”

For those of you who don’t know, Carl Icahn is a famous, “shareholder activist” billionaire. He’s even been called a corporate raider for those wanting to insult him.

But, in my opinion, he and his cohorts are a positive force in the market. When there’s an undervalued asset, bad management or other opportunity, these are the guys that shake things up. They own a lot of that particular corporate stock and if you do, too, then you’re in good company. And, most importantly, your stock may go up significantly.

With that said, I have to take his latest video with not a grain, but a wheelbarrow, of salt. I agree with about 90% of what he says except Icahn’s BIG PREDICTION: he thinks there will be a market crash soon that will make all crashes since the 1960’s look minor. I have to say: “Hogwash!”

For context, the worst crash since the 1960’s was The Great Recession we just endured from 2008-09. Very simply, the big fundamentals were going down. Both GDP (the size of our economy) and corporate earnings (the stock market’s major indicator of health or weakness) were going down. And we were at the end of a massive real estate/lending bubble. In other words, the market deserved to go down 50 percent. Which it did.

So, Mr. Icahn, where are GDP and corp. earnings now? Hitting new records. Like they’ve been doing for the last several years. Like they’re estimated to do for as far as can be forecast.

Just a side note: the wealthy and the politicians seem to have lost touch with Main Street. The video also mentioned various bubbles, one of which was an art bubble! Who cares about an art bubble except the ultra-wealthy? It certainly doesn’t cause a tumble in the U.S. economy….

Here’s a link to the complete video via The New York Times: video

Take a look at Icahn’s video. It is really worth watching. Let me know what you think about this billionaire’s thoughts. Please feel free to comment below or contact me any time at RonPhillipsAdvisor@gmail.com

“Wow,” was All I Could Muster For a Shocked Response

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The other day I picked up a copy of the Wall Street Journal. There was an article about The Great Depression by Morgan Housel. He mentioned a big hedge fund manager thinking that today’s economy is like the 1930s.

The two times are hugely different!

“Let me count the ways”:

1. Today’s economy: Up over 2% versus down 45% then

2. Today’s economy: 89% private and 11% government vs. about three percent federal government spending in The Great Depression (government spending = more diverse economy and on-going stimulus)(also, this doesn’t include current government payouts like Social Security, Medicare, etc. and their impact in the economy)

3. Today’s economy: internet, smart phones, apps, technology, biotechnology, alternative energies vs. none of that (in other words, we have a much-stronger, more-diverse economy)

4. Today’s unemployment: 5.5% vs. 25%

5. Today’s stock market: near historic highs vs. Dow Jones down 89% (and the current market is at an historically average price, when looking at forward 12-month earnings)

6. Today’s banking: FDIC insurance covering $250,000 per account vs. no bank insurance

7. Today’s brokerage: SIPC insurance covering $500,000 per account vs. no brokerage insurance during the 1930s

8. Today’s brokerage: margin limits of $1 equity to $1 debt vs. $1 equity and up to $9 debt! (this made the stock bubble and crash of the 1930s significantly worse and is even blamed for starting the depression)

9. Today’s retirement: Social Security income vs. none

10. Today’s retirement: Medicare coverage vs. none

(Both of these programs create an on-going stimulus from government dollars and a more-stable economy)

11. Today’s liquidity: corporate and personal cash of over $4.148 trillion vs. ??? (I really don’t know how much cash was around back then. I’m pretty sure that it was less than trillions, even adjusted for inflation)

12. Today’s Federal Reserve: experienced and aware of volatility caused by rate moves vs. inexperienced and short-sighted in The Great Depression

This list could be longer but you get the idea.

What was the hedge fund guru, Ray Dalio’s point? That the Federal Reserve is ready to raise rates and this could cause a market panic and drop. So have a lot of cash.

I agree with the “have cash” idea but that’s pretty well covered with over $4 trillion in cash.

Mr. Dalio’s other point was that the Fed Reserve was going to raise rates (like in the 1930s). That’s absolutely true. Rates are at zero. Most likely, there’s only one way to go with them…up. See my post for my predictions for 2015, including rate moves.

So worry not, dear investors, we will have stock market volatility. Probably a correction. Maybe even a moderate bear market. But we may also have a near-repeat of the record gains started in the late 1980s and running all the way through the 1990s.

You don’t want to miss a “super bull market.” Have cash but own a lot of equity….