Monday, January 7, 2013

Hitting the WALL of Demographics...L&C

A few people have asked me why in my previous article, Forecast 2013, why I only had one recommendation and that being for gold in 2013? The main reason was space pertaining to the length of the article. In that light I have decided to add this, to follow up for 2013.
Keep in mind my basic premise that these pieces constitute a concept that is explored fully in my unpublished book, The Evolution of Democracy: the Book of Multiple Ideas and Predictions. I say this to add a cheap plug and remind you dear readers, that previous pieces combine to form a complete opinion as with another recent, previous article on the stock market called, Divergence Ahead...
Insiders Selling
can be added to the previous point about new highs and new lows for the market. Executives of listed corporations are selling their shares of their companies at an alarming rate of 6.67 to 1 ration - meaning that, for every one share bought, insiders sold almost seven. In addition, manufacturing which has been a big plus for the US economy is now in a declining trend which is bordering a return to the overall big picture decline since the 1970s. A closer look at the factory gauge tells all. In 2010, the level of activity was 57.3 of capacity. This number declined to 55.2 in 2011 and fell again in 2012 to 51.7.
Gasoline Usage
has declined every year since 2008, and the only reason why prices have not followed suite is market speculation. This downward force is gaining momentum. This action can bust more than hedge funds, especially with all those derivatives out there. There are other real market forces that are affecting supply and demand like unemployment and one that is not fully understood by the status quo appointed economists, and that is demographics. The baby boomers are 73 million strong with 10,000 retiring every day for the next 18 years. These people are downsizing, drive less, don't eat potato chips or drink soda and in general, conserve their money=less spending. This is a double whammy for the government. It means less revenues and more expenses through social security and other entitlement programs. It also means that the budget deficit and yearly revenues are ALL WRONG! They are all short of reality.
sales have dropped to extreme levels causing big declines to Dell, Hewlett-Packard and Intel which make the chips to power them. If you look at the Dogs of the Dow for 2012, you will find all of the above plus AT&T, Verizon, GE, J&J, Merck, Pfizer and DuPont.
Looking ahead, I like two bio/health stocks: Arena Pharmaceuticals and Celsion Corp. These are both speculative, so ask your broker or other professional if a position is right for you. I also feel that the baby boomers have all the smart phones and tablets that they need and market saturation will slow the companies that make these devices. Sadly, the sales of precious metal coins declined for 2012, but no trend is in place. Copper will probably hold at present levels since the SEC has allowed a fund to sell this under an index for this commodity. The pundits will claim it is the housing recovery that has stabilize the price of copper.
Finally, now that the fiscal cliff deal is done, the market will eventually realize that this deal for tax increases and spending cuts amounts to only 10% of the original Simpson-Bowles, which was a compromise to the original tax increase/spending cuts plan to the tune of 25%. Bottom line:a half-percent increase in our interest rates will negate the $60 billion in new revenues and when the rates begin to rise, it will be more than a half percent. Look at it this way, the government will get $60 billion in new revenues and when they finish the Hurricane Sandy Relief, it will cost the government $60 billion. This is why I say gold in 2013.
Liars and Crooks: President Obama and Congress with their fiscal cliff deal. This piece of legislation will continue 52 tax loopholes, credits, whatever you want to call this PORK! End the Fed!