MONEY MATTERS

With last week’s performance, the Dow now is still down for the year.

The concerns that I have been voicing over the last several weeks regarding

the fact that most stocks on the stock market are down, and many are in bear

market territory, the fact that year on year corporate profits look awful, that

consumer confidence is declining, and a variety of other data that I have

outlined for you, are starting to have their effect on some of the world’s largest

money managers. (Whew! That was a long sentence.)

Goldman Sachs says the market will run into problems in 2016 caused by

rising interest rates, a strengthening dollar, and stalled profitability. One major

concern is the price of stocks, which Goldman says are high by historical

standards. “Only 6% of the time during the last 40 years has the median stock

traded at a P/E multiple higher than it does today,” wrote Goldman’s analysts.

Jeremy Grantham, who has had a remarkable record of predicting bubbles

over the last 45 years, is already on record predicting “the market bubble will

burst, as bubbles always do, and will revert to its trend value, around half of its

peak or worse.” If his prediction is right, he is expecting the Dow to be down to

9000 next year.

Some of the world’s top hedge fund managers are getting large percentages

of their holdings out of the stock market as well. As a group, these large

money managers have reduced their stock market exposure by $200 billion

since September, according to data compiled by Bloomberg based on hedge

fund filings.

It appears that the financial community is starting to come around to my way

of thinking. While they are not getting out of the stock market completely, as

we did, many of them have reduced their stock market exposure by close to

40%.

What do you think? Do you think it’s possible that we could be on the edge of

the precipice right now? Do you think another bear market is coming?

If so and you are still in this market, I believe you are in great danger of

losing large amounts of your net worth. Please do not leave your

financial security at risk. If this turns out to be the bear market that I

think it is, we could see the market drop very quickly.

In November 2007, I warned that a major bear market was coming, and I see

the same signs today. The difference now is that we could see countries going

bankrupt this time and not just big banks.

Our strategy triggered a sell signal in late August, and despite the rally that we

have seen, I firmly believe that we are in a bear market and don’t know it yet.

The 2008 bear market wiped out 12 years of gains in just 17 months. I do not

want to see that happen to anybody. It is why I write this email, it is why our

advisory firm exists, it is why I do my radio show and why we have our

seminars. I want to help as many people as possible have peace of mind.

Consumer confidence unexpectedly declined in November to the lowest point

in a year according to the Conference Board’s index. The November gauge

was weaker than the lowest forecast in a Bloomberg survey of economists.

This seems to be a trend where the numbers that are coming in our weaker

than even the most pessimistic economist.

As the global economy is slowing down, we are seeing that commodities are

losing their value. Historically, declining commodity values have also been a

precursor for a market decline.

The big gorilla in the room, of course, is China. As I reported to you last week,

their economy has slowed more than expected for 13 months in a row now. I

believe that growth in the Chinese economy is actually much lower than the

government is telling us.

The Shanghai Composite closed down 5.5 percent in one day last week! This

was at the worst day since the turmoil in August. News that regulators have

launched probes into several brokerage firms and Chinese industrial

companies' profits fell 4.6 percent in October are the apparent culprits.

It is important that I also tell you that the market sometimes wants to go

up in the face of overwhelmingly bad economic data.

The market can behave irrationally as we saw in 1998 through 2000 when the

market went up on the backs of companies that had no business plan, no

money, no customers, but had a dot com after their name. If you had shook

your head and said, “this is ridiculous I don’t want to play” you would have

missed out on 2 ½ of the best years in decades.

Our strategy is one of watching the trend of the market, and if it insists on

going up, we want to participate. Therefore, it is possible that we could hit our

buy trigger in the next few days or weeks. When we do, we will buy. Simple as

that.

The important thing is having the right strategy when the time comes to buy.

That’s why I offer you the free consultation and portfolio review with one of our

advisors so that you can come in and visit with us and prepare yourself for

that eventuality.

When people ask me “what do you do for a living?” I say, “we sell peace of

mind.” Our product is peace of mind. If our clients can feel peace of mind

during times of great market adversity like we have had over the last month,

then we have delivered our product.

There is nothing more important to us than that. It is our singular goal to keep

our clients from becoming poor. Preserving the wealth that they have built is

job number one for us.

I believe that avoiding large losses is the single most important thing that we

should be concerned about as investors.

Perhaps you were given a package by your employer. Perhaps you sold an

asset and want to know how to properly invest the proceeds. Perhaps you

inherited money and want to keep it safe and grow it if you can. Perhaps you

just want a second opinion. These are all reasons for you to take advantage of

all of the resources that we at Money Matters have to offer you.

We want to help you to achieve your financial goals.

Thank you for subscribing to this newsletter. I hope it finds you and yours in

good health and spirits.

Cheers!

Ken