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Written by Keith Springer 5.16.13 

Stocks continue to inch higher as investors remain stumped. This is the most hated rally in my 29 years of managing money. Nothing in the economy supports these new highs, except of course one thing: Ben Bernanke is “making it rain” (and so are his good friends at the European Central Bank (ECB) and the Japanese central bank (JCB) ). As I said last week, Ben is afraid of being lonely, and “You don’t fight the Fed chairman.”

Most investors feel the Fed will eventually have to quit printing money because they are creating hyper-inflation. The reality is that we are in a negative inflationary, otherwise known as a deflationary environment. Yesterday’s economic reports were eye-opening for many on Wall Street, although certainly not for readers of this newsletter. Factory output, manufacturing production, and industrial capacity utilization, all dropped like a rock as global demand is waning.

The alarming report came from the  Producer Price Index (PPI) , that shows the inflation level, which came in a massively surprising negative .7%. This was the largest decline in wholesale prices in almost 4 years. Clearly all of the global stimulus measures can’t stand up to the massive demographic headwind faced by the entire developed world, which I explain in Facing Goliath – How to Triumph in the Dangerous Market Ahead.

Although this is harrowing news for the economy, as a whole, it is good news for investors. How can this be, you may ask? Well, said the blind man as he picked up his hammer and saw, this data gives the Federal Reserve incredible leeway to keep stimulating the economy with an easy monetary policy. Or in other words, the world’s central banks are making it rain.

My fear continues to be the end of Quantative easing, which does not appear in the cards anytime soon. With global demand waning, and deflation not inflation the fear, money will continue flow and stocks will benefit. This will continue to be the most unloved rally in history, at least for a while. However, when we start to see overwhelming investor pessimism turn to optimism, that will be the signal to run for the hills.

Investor Strategy

With the commitment by global banks to continue the money printing, and with cash and CD’s giving a negative return after inflation, investors have to be invested. The “sell in May and walk away” correction was far too expected this year, and has likely been pushed off until later in the summer. The market does not crash when everybody expects it to. Investors should be invested, but very selectively, looking to get decent returns based on your personal needs, and ignoring the averages. Invest for need and not for greed™ has never been more apropos. When this market corrects and/or the rally ends, it’s going to be very ugly and you do not want to be in the wrong place or doing it yourself.

The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900.

I was lucky enough to get away for a few days to go scuba diving in Indonesia with my dad. I took some great photos, take a look at my photo gallery.

 

I want to know, why is Federal Reserve Chairman Ben Bernanke so dang lonely? Seriously, how else can you explain his actions? I mean it was just 2 weeks ago that several of the Fed governors finally admitted that the stimulus was doing little to help the economy and common man, and that it should be ended. That, of course, sent the stock market plummeting.

Well Helicopter Ben must have had a glimpse of losing all of his friends if he ceased the free flow of money, because in the Fed minutes released last Wednesday, he stated that he might actually increase monetary easing! His message couldn’t be any more clear even if he stood on a chair in the NYSE and screamed out “buy stocks!” This of course was music to traders ears, and now the market is making new highs. I guess you “don’t fight the Fed Chairman!”

As you know I have been concerned that the “sell in May and walk away” would hold true again. Apparently I was not alone, as Bernanke’s statement just happened to coincide nicely with the European Central Bank cutting the Euro interest rate by 25 basis points. They also indicated that negative Euro interest rates might be in the future. Toss this in with the record stimulus the Japanese are initiating, and it looks like a worldwide effort to keep global markets artificially inflated even as the world over is experiencing slow to no growth.

In case you are not aware, the age old “sell in May” scenario implies that stocks decline from May to November. Over the last 62 years, the market was down in 25 May-October periods, negative in only 13 of the November-April periods, and down only three times in the last 20 years! There have been just three times when the “good 6 months” have lost more than 10% (1969, 1973 and 2008), but with the “bad six month” time period there have been 11 losing efforts of 10% or more.

Why you ask? Well my friend Mr. John Thomas, the Mad Hedge Fund Trader summed it up best:

“Up until the 1920′s, we had an overwhelmingly agricultural economy. Farmers were always at maximum financial distress in the fall, when their outlays for seed, fertilizer, and labor were the greatest, but they had yet to earn any income from the sale of their crops. So they had to borrow all at once, placing a large cash call on the financial system as a whole. This is why we have seen so many stock market crashes in October. Once the system swallows this lump, it’s nothing but green lights for six months.”

Of course, the Feds are fighting an uphill battle as practically the whole world’s population is aging, and people spend less as they get older. I discuss this in depth Facing Goliath-How To Triumph In The Dangerous Market Ahead. However for now, liquidity rules the day…but for how long?

Investor Strategy

With the commitment by global banks to continue the money printing, and with cash and CD’s giving a negative return after inflation, investors have to be invested. I still expect a significant correction this summer, which I thought could start in May. However, with so many expecting the “sell in May” scenario, it is unlikely to happen on cue. The market does not crash when everybody expects it to. That said, now is not the time to throw caution to the wind and be all in. Simply look to get decent returns, based on your personal needs, and ignore the averages. If you want all the upside, you consequently also get all the downside, and when this market corrects, it’s not going to be fun.

The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, attend one of my free investor workshops, or call for a no-cost no-obligation consultation today at (916) 925-8900.

Favorite quote of the day

“Bonds are priced artificially because you’ve got some guy buying $85 billion a month. That will change at some point, and when it does, people are going to lose a lot of money,” -Warren Buffett.

Written by Keith Springer| 5.2.13

In a recent talk with an investment club, I was asked to compare the cyclical demographic problems our country is facing, which I explain in-depth in Facing Goliath- How To Triumph In The Dangerous Market Ahead, to something that you can actually see in society today. The most fitting analogy I came up with was the mini-van. Think about it. Sure they’re around, but nowhere en masse like they used to be 10 or 15 years ago. In 2000, Americans bought 1.4 million minivans, which made up 8% of all auto sales. But by 2012, that number had fallen by nearly two thirds, to just 500,000, and today only 3% of all auto sales are minivans.

Did American kids stop taking piano lessons and playing soccer? Of course not. It is simply the effect of changing demographics in the U.S. 1961 saw the peak of the baby boom. Jump ahead 30 years when most people have children in the 1990s, and those 30-something baby boomers became parents, constantly carting around the rug-rats in every direction, but those days are over. My son Josh is now in college, and I drive almost 1/3 as much as I used to. No, I never had a mini-van thank you! Not so coincidentally, this just happened to come at the point in my life when I started thinking about my retirement. While spending less in the economy, I was also starting to save more for my golden years 20-30 years down the line.  At $4 a gallon for gas, that was a big savings for me, and also a whole lot less was spent on stuff I no longer needed. This trend was nationwide, for by the early 2000s, most baby boomers had hit 40.

Where are those baby boomers today? They are now in their 50s and 60’s, and things like pizza parties, and basketball or soccer practice are distant memories. Our children, the echo-boomers, are moving out of the house and some already have kids of their own. The minivan was a vehicle created for baby boomer parents, and its rise and subsequent fall corresponded perfectly to the family formation cycle.

Are min-vans coming back? Hell no. No one thinks their parents’ tastes are “cool”. We rejected our parents wood-paneled station wagons, and our children will reject minivans. A young mom may proudly take her son or daughter to soccer practice, but that doesn’t mean she wants to be called a “soccer mom.” What they will drive is anybody’s guess, but you can rest assured that the major automakers are asking themselves the same question.

One interesting trend is that luxury automakers are taking a different tack. For as long as I can remember, we Americans have loved the bigger, higher profile cars in order to impress. The new generation of high-income consumers are not only looking for the perfect combination of comfort and style, but also to be eco-sensitive.  This is why we’re seeing almost all of the high-end brands rolling out smaller luxury cars. Have you seen the new Ferrari hybrid? (pictured above). Ferrari just unveiled a new 789-horsepower gasoline engine, and a 160-horsepower electric motor V12-powered hybrid supercar that can go from a dead stop to 62 miles per hour in under three seconds, with a top speed of 205 miles an hour!

Unfortunately, we are still 5-7 years away from the echo-boomers hitting their peak spending years. Most of them are just finishing school (Josh is just a freshman at University of Arizona)  and entering the workforce. No matter what else happens in the news, this is the single most important trend we will see for decades. The last boom of the 80s and 90s was a consequence of the baby-boomers settling down, raising families, and spending money in the economy.

The 2020s will be a decade in which fortunes are made. Until then, there are still plenty of ways to prosper. The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as our investment approach is built to do.

…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, attend one of my free investor Workshops, or call for a no-cost no-obligation consultation today at (916) 925-8900.

Michael Silva, Senior Financial Advisor of Springer Financial Advisors, appears on KTXL FOX40: Home sales up; an update on Gold

Michael Silva, Senior Financial Advisor of Springer Financial Advisors, appears on KTXL FOX40: Samsung captures more market share; Microsoft & Google in a patent lawsuit

 Keith Springer, president of Springer Financial Advisors, appears on KTXL FOX40: Fed announces they want to quit stimulus by the end of the year