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The good news is that I dont see a recession in America in 2016. However, the
economic growth around China, Brazil,
Russia, Europe, and most other nations
remains weak. This means less demand
for US exports. This slowed demand for
US goods, combined with the strong dollar and coupled with weak international
growth will continue to mute earnings
growth in 2016.
Interest Rates Will Rise in 2016 The
Question is How Fast?
The Federal Reserve has lifted the cap on
interest rates and although I dont expect
the Fed to take an aggressive stance, the
impact of higher rates will hurt bond prices
and mutual fund portfolios. That will be
bad for your 401k!
I dont see inflation as a problem in 2016.
However, if inflation does rip through the
US market, the expected impact would
be for the Fed to raise interest rates much
That is why in 2016 I would reduce all exposure to the stock market to about twopercent of your net worth. I suggest buying
stocks on substantial sell-offs when they
begin to show value relative to the sales
price.
Do not listen to your financial advisor when
they tell you to be long in the market. It
is in their own interest to keep you in the
market in order to protect their fees. Right
now the market is a gamble and not worth
the risk.
I see little room for upside movement when
the S&P 500 is trading at 17.2 times its earnings over the last 12 months. This is much
higher than the 14.5 ratio weve seen over
the last decade. With stock prices this high
there is little room left for them to rise unless we see substantial economic growth
or a huge market sell-off. At this time I am
on the sidelines.
Another consideration for the stock market in 2016 is the upcoming presidential election. Whenever we have a change in the oval
office the stock market becomes volatile, which then becomes a catalyst for corrections. Capital markets do not like uncertainty
and changing presidents is the ultimate uncertainty.
Unlike most economists, I believe that in 2016 a correction of 20% or more is probable. I think in the first quarter of 2016 we are going to see a correction of 10% or more. Oil, a change in the President and a world slowdown are all reasons for the market to sell off
and there are very few reasons to see upside.
China remains my top concern and any negative information can cause a market sell off to correction levels of 10% or more. If nothing more, the possibility of a sell off is significant enough to avoid following the normal strategy most financial advisors recommend,
which is to buy ETFs and mutual funds.
I repeat, fees on these investments can quickly consume any profit. But more importantly, these funds are likely to underperform
and unlikely to even see any profit in the year ahead. What the advisors are saying is a safe investment is not safe at all; it is a high
risk losers game!
Speaking of Debt
Speaking of debt, I need to return to a recurring theme that refuses
to stay under the carpet, no matter how often the politicians try
to sweep it under!
We must constantly be aware of the impact of our US national
debt on every aspect of our economy and its recovery. The current debt of the United States is $19 trillion at the Federal level
-- and growing daily.
Consider these two facts:
Since 2000 total spending by the US federal government
has increased by 107%.
Since 2000 Gross Domestic Product (GDP) has increased
by only 87%.
Economics 101 defines GDP as the basic measure of the market
value of all goods and services sold in an economy.
Total spending will undoubtedly increase as our population demographics create further drag with an aging population.
Our job is to deal with the facts, accept that most of this is out of
our control, and make what adjustments we can in our lives to
control our own financial well-being.
We are now in an environment where interest rates are on an
upward trend, which means America will have to spend even
According to IRS data and the Congressional Budget
Office, the top 10% of all income earners already pay nearly 70%
of all the federal income tax collected.
The top one-percent (1%) of all earners pay nearly 33%
of all the income taxes collected by the IRS.
To me, that seems like they are paying a fair portion of income taxes. In addition to paying the majority of income taxes, the rich pay
the largest share of consumption taxes. We are talking about sales tax, taxes on fuel, excise tax, and import duties, etc.
Still, when you listen to the Democrats, they seem to beat the same drum incessantly about maintaining entitlements and taxing
the rich.
Throwing Stones At The Wrong Target Wont Solve The Problem
Since the facts dont support the democratic solution, I can only guess that they are following the rules of the advertising industry,
which says, If you can pull your customers emotional trigger, they are yours.
When people are scared, they want a scapegoat to blame for their troubles. In this case it is easy to make an enemy out of the rich
niche. And the rich niche has its own collection of scapegoats to blame for our precarious economic picture.
The truth is that as long as we are looking at other people to blame, we can avoid looking at ourselves. We can avoid making our
own decisions. We can avoid being accountable for our own results.
I wish taxing the rich were the simple solution, but ignoring the facts in favor of a wishful world is not the way to find that solution.
There are solutions there must be. We got into this mess by making a series of incremental choices and we will find our way out
my making different incremental choices.
We need as a society - to stop trying to make something true that simply isnt true. We need to stop placing blame, start looking
at facts and work from there.
Yes, we need a better tax code and yes, there are many inequities and too many pork barrel inefficiencies in the current tax code.
As of today, we have over 74,000 pages of tax code to tell us how to comply when filing our tax return. Until we can change it, we
must work with what we have.
I suggest that if Bernie doesnt want to deal with reality, he move to another nation governed by Socialism. I will gladly buy him a
ticket! He will see soon enough that that system has never worked and never will.
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Meeting Calendar
I just want to thank you all again for your continued interest and support in my efforts to share with you my insights regarding economic trends and how they playout in our investment world.
The club is proud of our educational program and we believe it rivals anything taught at any of Americas finest business schools.
Here is our line-up so far:
All events are scheduled at Orleans Hotel and Casino.
All evening events start at 6:59 p.m. sharp.
Members: Free
Non-members: $25 | BECOME A MEMBER - CLICK HERE
January 25, 2016
The Las Vegas Investment Club Presents:
Economic Outlook for 2016
[ REGISTER FOR MEETING - CLICK HERE ]
Mike Lathigee will discuss his outlook for 2016 and conduct a discussion about the regulations impacting small businesses.
February 29, 2016
The Las Vegas Investment Club Presents:
An Evening with Federal Reserve Economist
Our very special guest is a Senior Economist from the Federal Reserve Bank. It is very rare to interact with any Federal Reserve Bank
Economist and this is a MUST ATTEND event for any serious investor.
March 8, 2016
The Las Vegas Investment Club Presents:
The impact of Maccau on Las Vegas
Our guest speaker graduated from Oxford University in England and is the President of one of Americas most influential organizations. He will be discussing the impact of Maccau on the Las Vegas Economy and the cultural changes we have to expect in Las
Vegas. I have seen him speak and he is entertaining and very interactive, so this evening will be a treat!
April 2 & 3, 2016
The Las Vegas Investment Club Presents:
EconoSummit 2016
Experience eight world-class presenters over two days. The club works all year round to put this event together and coordinate
speakers from all across America.
This years theme is : Based on what is happening in the world and the economy what investors can do to maximize the returns in
their portfolios. We will discuss specific strategies.
The 2016 EconoSummit runs from 8:00 a.m. to 6:00 p.m. both days, with plenty of potential one-on-one time between attendees
and presenters, so bring your questions.
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Member Announcements
We have had a good year in 2015 in terms of membership and events. I look forward to seeing all of you at our next meeting, along
with your guests, which brings me to this announcement.
The Las Vegas Investment Club works on the breakeven basis to provide world class education to members and maintain a strong
community presence. We have been grateful to the Board Members of the Las Vegas Club for their subsidizing the shortfall of running the Las Vegas Investment Club over the last few years. Now it is time for a small adjustment.
We have had a fairly flexible open-door policy in the past, and it is now time for the club to move toward breakeven. So, starting in
2016, mon-members will be charged a modest admission to attend club meetings.
And if you find value with us, we encourage membership. The cost to join the Las Vegas Investment Club is $299 per year. Your membership provides you with admission to our meetings and events at no cost, or at least at a deep discount. We also have special
fieldtrips available to club members only!
To join the Las Vegas Economic Club please CLICK HERE!
TO LEARN MORE ABOUT THE AUTHOR OF THIS NEWSLETTER GO TO WWW.MIKELATHIGEE.COM
WE ARE ALWAYS REQUIRED TO INCLUDE A DISCLAIMER SO PLEASE READ!
DISCLAIMER: THE AUTHOR OF THIS NEWSLETTER IS NOT A FINANCIAL ADVISOR. YOU SHOULD SEEK FINANCIAL ADVICE FROM
A REGISTERED FINANCIAL ADVISOR BEFORE TAKING ANY STEPS DISCUSSED IN THIS NEWSLETTER.
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