Happy New Year
My latest video, a quick recap of the important charts of 2016 is available for viewing at the link below
https://www.youtube.com/watch?v=g70om7d6VVQ
Next Stop 108
With the FED raising interest rates yesterday and setting the expectation there will be 3 more in 2017, the dollar as projected ripped higher and confirmed November 21st breakout from the (blue) rectangle. The ongoing saga of whether the dollar has topped or just consolidating for its next move higher can finally now be put to bed after 95 arduous weeks.
Those that follow know rectangles are my favorite patterns to invest in as the lines for buying and selling are easily determinable, as are the targets. In this case the pattern break and confirmation projects to an upside target of ~$108. On a much longer term view, if this current breakout turns out to be a continuation from a very long term bull flag, that target is north of $120.
I have been talking about the possibility of the USD testing all-time highs since it broke out of long term consolidation in mid-2014. Not wanting to repeat myself but I do because the implications are huge. It is THE elephant in the investment room and should not be ignored. Understanding the intermarket relationships (correlations) between your investments and the dollar will be valuable knowledge and keep investors on the right side of the track going forward while king dollar pushes higher.
I’m Here to Collect $93k
While not tops on the list (that honor goes to Alaska), California has the second highest public pension unfunded liabilities totals, estimated at $1T (yes you read that correctly it is one trillion dollars with a T). Which, as it turns out, is approximately $93k per each CA household. Oh, and by the way, this is up $15k since 2014 alone. Bad investment returns apparently are to blame.
I’ll pause here and let that sink in. Every household will be responsible for contributing $93k to meet these commitments!
The bottom line is that either the pension payouts will need to be lowered or taxes will need to be raised to meet the obligations (or some combination thereof). Which do you think it will be? Do you have your checkbook handy, just in case? And no, there is zero chance we will be able to “grow our way out of the problem” so don’t go there. And unlike Social Security, California will not be able to print money and bail out the system like the Government can and will likely be forced to do with Social Security.
Much of the blame for this mess rests squarely on the “experts” who, when establishing the annual funding levels, used an investment rate of return that was unrealistically high which helped keep contributions to a minimum throughout the years. Their model may have been reasonable some 40-50 years ago when the pension systems were established but not in a dynamic, changing world. The most frustrating thing about this mess is that it is not a new revelation as it has been known about it for years (and decades). But rather than address the issue, those same experts and politicians just kicked the can down the road. So if you ever wonder why, under most circumstances I recommend tapping into your pension as soon as you have access because it is my belief most pensions will fall short of being able to meet their full obligations for the reasons above. As such I am a full believer you should take what you can while you can. As Stevie Guitar Miller sang, “Take the Money and Run”
To read more on this future crisis go to
November 2016 Charts on the Move Video
With the election behind us the market has chosen its path of least resistance and, bythe way, is once again going against what everyone predicted. Seasonality trends should provide a tailwind through the balance of the year to keep equities elevated. As such, keep an eye on the money flow (rotation) is it gives a huge clue as to where the big boys are placing their bets.
Below is the link to my most recent CotM video
Uncle Buck
I have been saying for almost 2 years since the initial breakout of the dollar in late 2014 that it is poised to go higher, much higher. After peaking in March of last year from the first labeled breakout in the chart below, the dollar has been in a massive, multi-year horizontal consolidation waiting for the impetus to escape its clutches. Apparently Trump’s the election was what the doctor ordered as last week it found massive escape velocity and vaulted out of the rectangle.
While the first upside target is only about 8% higher to ~108, the implications on the rest of the markets are enormous. Emerging market stocks and bonds, US stocks, commodities (including oil and gas), precious metals among other all have historically been negatively correlated with the dollar and as such struggled (and some mightily) as it rises. Because correlations do not always hold, the question investors need to ask themselves is will this time be different?
Regardless of the answer, Uncle Buck is signaling it’s moving higher and investors would do well to keep a close eye on their investments. Strong currency moves, especially in the world’s reserve, can have nasty implications for those caught unaware.