Is The American Stock Market Overvalued and in a Bubble?

Can any say "Housing Bubble?" Sure you can.  Any American stock market investor, like most of the U.S. population has a short memory when it comes to bad things. Past catastrophes and the housing bubble bursting set off a chain reaction of bad things that we as a nation are still trying to dig out from under.  We’re an optimistic group, after all, so when it comes to common investment risks, investors may wish to find income producing assets in extremely small niche stocks, rather than the S&P.

Almost everyone to whom I pay attention say we’re headed for a fall, but it depends on a number of elements to align.  Bernanke’s asset bubble, as far as both he and Janet Yellen are concerned, is that over valuation is nothing to worry about.  Economic easing by printing money has caused stock prices to rise along with their "value" and corporate bottom lines. Stock prices, real estate and precious metals all rose in 2012 and most of 2013, with gold and silver in a downward slide these past few weeks.  So moving your money there may not meet your goals.

Forbes’ Jesse Columbo believes strongly about the market valuation beyond reasonable back in December, 2013,  Thomas H. Kee Jr. of Stock Traders Daily stated just yesterday the swings in the market this past week call for strict focus, and has been shouting from the roof tops since November, 2013 , that the stock market is way overvalued.  David Kostin of Goldman Sachs, as late as yesterday said there is no rationality to the overvaluation of the market.

Warren Buffet, perhaps the greatest investor in the world – ever, has felt negatively about the value of the American stock market since November, and his position hasn't changed as far as I know.
Here’s his take on how to value the markets. In 1999, and again in 2001, in an interview with Carol Loomis of Fortune:

"The market value of all publicly traded securities as a percentage of the country's business -- that is, as a percentage of GNP. The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment."

At a ratio of 70 – 80%, Buffet feels confident the market is doing fine, but heading nearer to 200% is playing with fire.  The Buffet Ratio is currently standing at 134%.  Smell anything smoldering?

The one positive person going on record of which I am aware is Kiplinger’s Anne Kates Smith . The view she sees is continued growth in the market, leaving he bears wanting.

Simply put, the real answer to the question is the American stock market overvalued is "it depends on whom you ask."  Let’s face it, people who are in the market have got to be asking themselves when the ride will end, and nearly no one wants the uptick to stop ticking up. With that being said, people looking for good investments should perhaps begin to look somewhere toward individual under-performing assets. Bubbles burst, don’t they?  Don’t let me sway your opinion.  Think about what your goals are and to what level risk you are willing to sustain. But, if you ask me, the bull can’t run forever.

U.S. Officials Hope Alternatives Will Save Public Pension Funds

It should come as no surprise that America’s public pension funds are in trouble. It seems that no matter how quickly pension funds grow, payments to pensioners appear to grow considerably faster. In an effort to try and gain back some lost ground, public pension funds in the United States have been flocking to alternative investments, in a frantic search for a higher rate of return.

Between 1984 and 1994, U.S. public pension funds held just 5 percent of their assets in alternatives and 50 percent in fixed income. By 2007, alternative investments had doubled to comprise 10 percent of all pension fund holdings. Since the introduction of the global financial crisis in 2008-2009, alternatives have nearly doubled again to 19 percent of total assets. In contrast, fixed income holdings have dropped nearly in half, to 27 percent of total assets.

The fact of the matter is that investment brokers and money managers want to sell alternative investments to pension funds. And, with the promise of higher returns, pension funds are often eager to invest. The underlying problem is that most public pension funds across the United States were on an unsustainable course, long before the global financial crisis hit. Unfortunately, public pension advisers and many plan actuaries made investing recommendations based on faulty assumptions about: the nature of pension promises, the inherent risks in global financial markets, the challenge of funding pensions in down markets, and politicians’ incentives for following through on all those generous pension promises. In short, pension fund managers and actuaries have been getting the wrong investment figures for years, and now they are hoping that big returns from alternative investment offerings, will help them balance the books.

Survey Shows Quarter of Investors Do Not Have Financial Plan

Nationwide Funds, which surveyed 783 potential investors with a minimum of $100,000 in assets, has revealed that nearly 25 percent of the investors they spoke to have no financial plan. Moreover, approximately 40 percent of that group does not anticipate developing one either. When asked what the barrier was, one third of the respondents surveyed said they have not consulted a financial professional for a variety of reasons; the 2 most common being: no desire to pay the associated fees and feeling confident that they can accomplish the planning on their own. Whatever the reason, the number is staggering, and shows that many investors have no direction with their finances and are potentially looking at losing a lot of money; if they are not careful about their choices.

Among other things, it would seem that a genuine lack of interest is one of the biggest reasons why this portion of investors have done little to no financial planning. For the most part, Americans (for example) are primarily concerned with paying for health care costs, retirement readiness and saving for their children's education. Moreover, when shocks in the stock market and events such as the American government shutdown and the threat of a U.S. government debt default make investors apprehensive, they second-guess traditional investment offerings.

Whether it can be attributed to political uncertainty, disruptions in the financial markets and/or having no desire to pay fees, many investors have failed to establish a financial plan for the future. The survey by Nationwide funds shows us that astonishingly one-in-four investors do not have a financial plan, and are not likely to develop one soon. Luckily for them, the emergence of alternative investments has introduced opportunities that are much easier to understand, than stock and bond markets, interest rates and international politics. Although these options are no substitute for sound financial planning and a well-diversified portfolio, they do offer steady investment returns with much less associated risk, for investors who feel confident to make investing decisions on their own.

U.S Vice-President In Full Support Of Port Infrastructure Upgrades

In the last five years, the United States has been going through tough times economically. The nation has been in a serious recession and it is going to take some time before it fully recovers and regains it’s status in the world, particularly as a major contributor to the global economy. Their leadership, both government and business, have to take a long, hard look at what will be the best investments to build a strong economic foundation moving forward.

In the 1930’s, in the heart of the great depression, the U.S. government had even less money to invest than what they have now. What they decided to do was to invest their limited amount of money into their infrastructure. The building of new roads, rail, ports and waterways not only laid the foundation for the future but also created short-term employment and helped stimulate the economy. Nowadays, it is the economic growth model that is used in many countries around the world looking to grow their own prospects. The reason being is that history has proven that this approach works.

Vice President Joe Biden, is on a trip throughout the nation, addressing the need for the United States to heavily invest in their ports. He said that failing to do so will result in the country falling behind it’s competitors.

"Every time we invest in infrastructure as Democrats or as Republicans - every time we have done it - the economy grows and it grows good, decent-paying jobs ... We've got to find the resources to do it, because it pays back multiple dividends to the economy and to the people of South Carolina and the country."- Joe Biden, United States' Vice President

The world’s shipping industry is going through an evolution towards bigger and more efficient container vessels and the global ports have to be in position to accommodate their massive size. The Panama Canal expansion, due to open in 2015, will allow for cargo ships with the capacity to carry over 13,000 TEU containers and if the US ports are not able to handle them, then they will simply lose out on the opportunity to capitalize when the time comes. The time to make the investments to get the ports ready is now. Time is of the essence. Failure to act now and make the right investments in their ports, will undoubtedly put the United States at a severe competitive disadvantage when the growing global economy hits full stride.

Alternative Investments Are Consistently Proving Their Worth

For any investor, the "bottom-line" is all that matters, at the end of the day. In the United States, giant pensions funds, private and state-owned, are always in the market to get the best return for their investments. The last ten years in the U.S., most financial firms and pension funds have had a difficult time consistently growing their portfolio while navigating the tumultuous waters of the stock market, banking and housing markets. This is in part related to the fact that many pension funds were established with traditional investment strategies, with little or no alternative options in their portfolios.

Nowadays we are seeing private investors and big pension funds, making the move away from traditional options like stocks and into alternatives like hard assets. A recent study noted that in the past ten years, the Missouri State Employees Retirement System was the highest-yielding retirement fund with an average return of 8.1%, compared to the average return of just 6.4% among 97 state pension plans surveyed. It just so happens that 65% of the retirement fund in Missouri was made up of alternative options, a far greater percentage than the rest of the funds surveyed. This is certainly going to get the other pension funds to take notice of the strategy and look to making some fundamental changes to their approach to making their investments in the future.

Because investing in alternative investments has proven to be profitable option, as well as a means of diversifying a portfolio, more and more private and institutional investors are favoring non-traditional assets, especially when the markets are uncertain. In the 1990’s, alternative investments made up less than 5% of an investor’s portfolio. Today, industry experts recommend including at least 20-30% alternatives, to guard against poor-performing stocks and bonds. Some have even gone as far as suggesting that number should be 50%. The bottom-line in investing is profits, regardless whether they are generated from traditional or alternative means. It just so happens that lately, alternatives have been out-performing the traditional options with consistent returns and a track record of long-term investment success. Understandably, this appealing to both pension fund managers maintaining their portfolio in tumultuous markets and private investors saving for retirement.

U.S Port Investment Debate Continues As Time Is Running Out

More than 140 countries and regions all around the world, are upgrading and modernizing their port and transport systems to put in place the proper infrastructure that is absolutely necessary to be able to compete in the new global economy of the future. In the United States, there are still debates going on whether or not the U.S should make the required investments in order to do so.

The American leaders, both in industry and government, better take a good look at their arguments on both sides of the important issue and make a move one way or another. Time is quickly running out and if the world’s biggest consumer market is in danger of putting themselves at a severe competitive disadvantage if they don’t do the right thing and invest in their ports in order for them to be able to handle the new giant post-panamax shipping container vessels that have now started to sail the world seas.

In 2015, the new Panama Canal expansion is expected to open that will allow cargo ships carrying up to 12,500 TEUs up from the existing maximum 4,400 TEUs that can pass through today. This is going to be a game-changer in relation to the way the global economy shapes up in terms of new trade routes that are currently being redrawn. Since the shipping industry is transforming itself with the introduction of these new massive container vessels, it is imperative that any port that wants to be on their trade routes, has the capability to handle their huge size. Simply put, any ports that can’t will inevitably miss the big boat.

President Obama has been consistent in his belief that the U.S. must invest in port infrastructure in order to build a solid economic future for the country. In a recent visit to Jacksonville, Florida, the U.S. President stated, "In a couple of years, new supertankers are going to start coming through the Panama Canal ... We want those supertankers coming here, to Jacksonville."

While the debate continues in the United States, the rest of the world nations are busy doing what is best for their country or region and making the investments required to put them “on-the-map” of the major shipping companies looking for ports to dock their giant container vessels. If the US doesn't hurry up and do the same, they will no doubt, put themselves behind when the new global economy kicks into high gear in the next few years.

"We already see the bigger ships coming through the Suez Canal ... They are already calling on us. But, if we can’t bring them in as fully loaded as the industry wants them to come, then they will bypass us."- Jaxport Spokeswoman

There really shouldn't be much debate about it as the answer is quite obvious. The problem is not in the ideology in the political spectrum, but in the fact they don’t have much extra money to invest in the first place as they are currently paying for their past investment mistakes. It would certainly be one big mistake if they failed to invest in their port systems and quickly. They could end up paying for it for decades to come.

China Makes Sizable Investments in United States' Backyard

The global economy has changed a lot in the last twenty years as it has seen a doubling of it’s value and is heading toward another doubling by 2020 and a further doubling by the start of 2030. What this forecast has spawned is a trend around the world with many countries and regions investing heavily in their port infrastructures to be able to compete in the new and more prosperous global economy in the future. If some countries did not have the money to do it themselves, they have looked to China and the UAE for help and they have been more than willing to help them out with their abundance of liquid cash.

Once-poor regions in the world are now starting to emerge as viable contributors and competitors in the new world economy including Africa and many South American nations. South America has long been considered America’s backyard but lately China has been making some huge investments into the region while the United States has been busy struggling with their past investment mistakes. As a result the U.S. could not take advantage of the numerous investment opportunities that have come up as they simply did not have the money invest if they wanted to. The US still has many holdings throughout the South American region, but they have lost their competitive bidding edge.

The recent announcement of China forming an alliance with Nicaragua to build the world’s biggest shipping canal in Nicaragua almost came out of nowhere and it has raised eyebrows in the United States as well as all around the world. It will certainly give China a massive economic advantage over the United States in that part of the world and many experts seem to agree that it could be a turning point in the direction of the future global economy, when it is completed by around 2020. China has invested billions of dollars in Brazil, Argentina, Peru, Chile, Colombia, Panama and Venezuela in recent years and are expected to continue to invest in these countries as the world’s most populous nation prepares for it’s own future by forming alliances with these strategically located nations.

China has a large population to feed and it is growing at a unprecedented rate along with it’s prosperity levels and their consumer base is increasing at a staggering rate, compared to previous years. China is simply taking advantage of good investment opportunities in South America. The U.S. would have it could have. The fact that the United States has not invested in South America, at the same level as China recently, is concerning to some American leaders as they see China's investments as essentially buying up world interests; including properties right in the U.S.’ backyard. There is no doubt that China’s influence in South America has taken a sharp rise in the past few years and the United States has been able to do little about it. Let’s just hope they make good neighbors in the future.

U.S. Shipping Industry Needs $30 Billion to Make Upgrades

There is no disputing the fact that the United States is facing a difficult challenge to manage their economy.. If they don’t make the right investments at this crucial time in history, they may as well look forward to an even more dismal economic future. Right now, the global economy is surging ahead and growing, mainly as a result of the world’s new emerging consumer markets that are rising in numbers and strength. The United States has to be careful if it doesn't want to lose it’s competitive advantages when the new more-inclusive global economy kicks into high gear, in the next few years.

While over 140 countries and regions around the world are investing trillions of dollars collectively upgrading their transport infrastructures, the U.S. has been quite slow to follow suit. The reason is, the country simply doesn't have the money required to do what is needed, to put America in the best competitive position on the current global economic stage. There have been studies that show that there is a shortfall of at least $30 billion, that is needed to modernize shipping ports and this fact has many port communities worried.

Once the Panama canal Expansion is complete sometime in 2015, there will literally be fleets of the new giant post-panamax container vessels sailing the world’s oceans. Ports that are unable to accommodate their huge size will inevitably be passed by. Right now, only a handful of U.S. ports are capable of handling the massive ships and unless more ports are upgraded in the future, the United States will most definitely be in a weak competitive position. The dynamics of the global economy is changing and the United States, once the main driving force behind it, are finding it difficult to keep up in the last few years.

In most port communities and regions, their port is the main economic stimulant. They create thousands of good jobs, contribute millions to local and state taxes and in many instances, generate billions of dollars to the local and surrounding economy. If the ports are not capable of handling the new super container vessels of the future then all these economic benefits could be lost, leaving these port regions in a worst state than they are currently in. If the United States wants to make the kind of investment decisions that give investors a good reason to invest in the future of the industry, then they must find a way to shore up their ports so they can compete, or else face closing up the ports and watch their economic future sail right on by.

Canadian Investors Have a New Perception of Emerging Markets

On the never ending voyage to economic fortune, a new strategy is being sought by Canada in 2013. Canadian investors have realized that they must focus on the prosperity in emerging markets and move away from Canada’s reliance on the United States. It is important for Canada to now branch off from the United States and become an independent trading nation. This may be a stretch for some, as Canada is not typically recognized as a country for financial investment and economic growth. For this to change, Canadian investors understand that they must ensure ongoing outward investments, into the emerging markets around the globe.

Canada will need to boost trade with emerging markets, in order to limit its dependence on the United States. This is an essential step, if the country expects to grow in the years to come. Canada’s historical reliance on the U.S may perhaps have been sufficient for previous centuries but hasn't prepared Canada for what’s to follow in coming centuries. At the moment, nearly three-quarters of Canada’s exports, go to the U.S. That is too concentrated, especially considering the United States' circumstances and mounting debt issues. Canada now has a window of opportunity, considering the performance of a strong dollar and monetary system, while other nations are affected by many economic obstacles. Because such great opportunities to invest have a have a habit of closing quickly, it is imperative that this nation develops strong independence, and becomes a friendly trading partner with current emerging markets, such as Brazil, China or India.

Bank of Nova Scotia’s Rick Waugh argues that too many Canadian companies are stuck in an old way of thinking.  A portion of Canada’s trades remain within the United States but Canada must change its philosophy and be more open to trading with other opportunistic markets. Mr. Waugh’s organization, Scotiabank, is considered Canada’s biggest international investor with operations in more than 50 countries. Last year alone, Scotiabank purchased 51 percent stake in Colombia’s Banco Colpatria for $1-billon dollars. Other companies should take guidance from Waugh’s strategy and introduce openness towards investments in emerging markets and budding economies.

Ultimately, Canada has to build its independence in the global trading market by introducing new markets and becoming a friendly and well-known trading partner. If Canada fails to increase trade partners with emerging markets they will never establish a strong economic foundation which would benefit them for years and years to come. Canada must demonstrate their economy’s autonomy when discussing global trade, as relying on one source proves unstable correlating conditions.

Large Ports Will Benefit Most from Panama Canal Expansion

Drawing close to the Panama Canal’s expansion project’s completion in 2015, countries are pursuing immediate investments in new vessels and port infrastructure. The Panama Canal expansion consists of building a 3rd lock, this lock will be wider than the 2 original locks which range 110 feet wide. The “New Panamax” is the term for ship size limits when travelling through the Panama Canal. These limits and regulations are set by Panama Canal Authority, and since the opening of the canal in 1914, “Panamax” has been in effect. In 2009, “New Panamax” was published by the Canal management. These new limits will begin to take effect, when the third set of locks is operational and ready for use. Based on lock dimensions, New Panamax will be fully functional to transport 13,000 TEU ships, compared to 5,000 TEU, prior to the expansion.

Regions all over the world are hurrying to complete infra-structure projects, so that their domestic shipping industry, can accommodate the New Panamax’s dimensions; and ensure their region’s port does not get passed. All throughout the east coast of the United States, port infrastructure is being upgraded and modernized. Ports of New York City, Norfolk and Baltimore have already increased their depths to at least 50 feet to meet the new demands. The Port of Miami has approved the same project and will be the closet deep water port to the Panama Canal, in the United States. New York and New Jersey Port Authority are also planning to invest $1 billion in raising the clearance of the Bayonne Bridge, to allow containers to reach port facilities in New Jersey.

Despite the fact that the new locks are much larger, there still remains ships which the Panama Canal cannot accommodate. Those like the Maersk E-class, the future Maersk Triple-E class container ships, TI class supertankers and Valemax ore carriers, are still much too wide for the new locks. Aside from economic and operational considerations, there is no technical reason that could prevent ships from getting larger and more efficient, to meet the demands of the shipping industry. Essentially, with the expansion of the Panama Canal in 2015, the large ports around the world that can accommodate the modern mega-container ships; will prosper from the expanding shipping industry.

Is It Any Surprise The United States is Facing Bankruptcy?

Are you wondering why the U.S is facing inevitable bankruptcy? To begin with, the U.S economy is currently carrying roughly $60 TRILLION in total public and private debt. This does not include the additional $70 trillion (or so) in “unfunded liabilities.” These debts and liabilities far exceed the debts and obligations of all the rest of the world, combined.

The “unfunded liabilities” alone represent trillions of dollars per year, that the U.S economy has no hope of ever being able to fund, through it's revenues. Therefore it’s not even theoretically possible for the U.S to avoid being crushed by its massive debts – unless, of course, it prints astronomically huge amounts of money to pay for them. Plus, the Obama administration is now predicting that over the next decade and a half, the projected increase in debt will be just enough to cover the interest payments on current debts. Every year, a larger and larger portion of every revenue dollar gets consumed by interest payments.

With the US government basing its budget projections on above-average growth of the US economy, in the real world its economic growth must trend in the opposite direction, as a matter of arithmetic. Furthermore, the reason why U.S default is almost certain, is because it’s totally inflexible and hopelessly gridlocked political system; is incapable of  generating the massive spending cuts needed to delay the U.S' bankruptcy.