The next Page, 10, shows that people aren’t as interested in the Stock Market as they used to be. You see that CNBC has moved their offices from New Jersey to Midtown and the viewership is down. All the business programs are down. Even though the market is flirting at an all-time high, people don’t seem to care as much as they used to. But I think that might return.
One reason people might be a little nervous is shown on Page 11. This bull markets is gone 70 months. The average of historical bull markets is 57 months. So we are pretty long in the tooth here but the fundamentals are very strong. I think we could be in a situation as we were in the 1990’s where the market performs in double-digits for a number of years in a row. The fundamentals are very good in the United States right now with 5% real GDP growth, auto sales strong, unemployment coming down, I’m looking for housing and capital spending to provide a positive. So my view is that 2015 is going to be a good year for the economy and the market.
Looking at Page 12, you can see there is going to be a reversal here. The Fed has been easing – that is the light blue line. The European Central Bank has been restrictive. Now we know the European Central Bank is going to be more accommodative and it said it is going to raise rates and that is one of the reasons why the dollar is strong and is likely to stay strong. The Federal Reserve Balance Sheet in the last six years, having taken 95 years to get to $1 trillion only took six years to get to over $4 trillion and you see on (Page) 13, Mortgage-Backed Securities are a big part of that.
Looking at (Page) 14, you can see the dollar has been very strong against many currencies, not just the Euro and the Yen. So, across the board. And overall, it is up 20% from its low. So I think it can go a little bit further but probably not a lot further. Looking at (Page) 15, the World GDP growth has really come down. It has come down because of China with controlling over 10%. It has come down because of the United States which is operating at a slower rate and has come down because of the emerging markets. In June of 2010, World GDP was growing at 4.36% now it is 2.55% but that is still satisfactory. But it still doesn’t mean we are going to have bear-markets across the board. I still think that we can have a good market this year.
The world is more independent as we see on (Page)16. The IMF shows that the World Goods Exports are running in the 20s (%). So countries are interdependent on each other. Fortunately, the United States is not a big export economy so the US can do well even though our exports may suffer because of our trading partners. But that will be offset by the lower price of oil. Our trade balance is improving because the price of oil as our most important imported commodity and that is cheaper, and so even if we don’t have the same exports, we are hoping for, we still are likely to have a very favorable balance of payments.
Now let us take a look at Russia on Page 17. What you see here is that the Ruble has collapsed from 33 to 79 and their Foreign Exchange Reserves have plummeted. So Russia is in real economic trouble. Now, Putin has said Russian people are used to suffering and I know they are, God knows. Second World War was proof of that ability to endure pain but I think too much is going on here and my view is that the Russian people are going to move against them. The sanctions are hurting. He could lift the sanctions by pulling back from Ukraine and I think that is what he is going to do. I think he will be humiliated in the process and I think he will resign before the end of the year. As I said, I get more pushback on that than anything else but I think at least a part of Number 8 which shows a more conciliatory attitude on the part of pushing out of power of Putin is going to happen
