Very Brief Update on Economy and Markets Economy:

The economy is adjusting to a new level of supply and demand. The combination of the natural demographic cycle (aging baby boomer turning from net spender to net saver) and the massive deleveraging process, which is removing trillions of dollars out of the economy, is drastically changing the level of demand for goods and services. Although government stimulus can mask it in the short term, no amount can make a difference long term.

Stock Market: A I previously mentioned, government stimulus cannot possibly not cure the crises, but it can hide it which means that stocks can keep rising for months or even years more. The rally from 2003 -2006 was a bear market rally. Remember, the best situation you can have for stocks is low interest rates and liquidity, and we have both right now. That’s why I have been calling this the “Great Viagra Market”. As long as the government pumps the economy with money, aka Viagra, the market should stay up.

2 things that I like about this market…with a warning:

1. Nobody believes in it. The best way to tell if investors are truly bullish is to watch what they are doing with their money. Based on mutual fund purchases and redemptions, investors remain skeptical and the flow of funds remains out of stocks and into bond funds. When people get bullish, I’ll turn bearish.

2. The technical’s look great with strong Buying Power and limited Selling Pressure. At present, the Buying Power Index is near its highest level months while Selling Pressure is in a well-defined downtrend and at its lowest level in 18 months. Typically, a sustained uptrend in Selling Pressure has occurred prior to every major market top over the past 77 years. Corrections should be used to accumulate the few attractive sectors.

Warning: this will become an increasingly selective market, so picking the right industries and sectors is critical. Every investor must have an exit strategy. Very simply, be the expert or hire one.

Bonds: Bonds go up when rates go down and vice versa. Although there is much talk about increasing inflation and rising rates, deflation remains as the problem at hand. The stimulus money will not have much affect long term as the deleveraging process is removing more money out of the economy faster than the government could possibly put in. This, along with the demographic cycle and the 17% unemployed (U-6 unemployment - the real #) will keep demand down for a long while. Plus a rise in rates would absolutely kill the fragile economy.

How to invest in this market: Tactical over buy-and-hold (buy-and-hope), be in very selective asset classes that will benefit in the current environment and a concentrate on dividends. Currently, there are great opportunities with dividends investments. MLP’s, Preferred stocks, REIT’s and short-term corporate bonds right now have great yields, many over 8-10%, which give them downside protection.

The Best way to understand what I’m talking about:
I did an extensive interview with Andrew O’day from MarketWatch last week, which I urge you to listen to. To listen, click the link: Springer: Higher unemployment is the new normal.

If you would like to discuss the market, economy or just get a free 2nd opinion on your portfolio, simply call or email me. Our proprietary process has been building successful retirement and tax-advantaged portfolios for over 25 years.

Free Award winning retirement Planning Seminar
We are once again hosting our free award winning public retirement planning workshops over dinner at Arden Hills Resort Club and Spa on Tuesday, January 19th, Wednesday, January 20th, and Thursday, January 21st.

This seminar is entitled: But what if I live? – The American Retirement Crisis, and will discuss how to create a secure retirement for you and your family, and help you understand the challenges faced by retirees of today and tomorrow. Some of the topics to be discussed: Securing a comfortable retirement, How to survive the current financial crises, Inflation, Rising health care costs, Living longer (Longevity), Social Security, Pensions and more.
Special Guest Speaker: Dominic McPeak, Retirement Income Planning Specialist.

These free dinner seminars will be held next week at Arden Hills Resort Club and Spa.
- Tuesday - 6 spaces left
- Wednesday - Full
- Thursday - 4 spaces left
Call Cathy at 916-925-8900 to RSVP.

New Special Report - Roth Conversion – What you need to know
My recently published Special Report for Advisory Clients entitled: Roth Conversion – What you need to know, is now available for download. To get the free report simply click on the link - http://www.keithspringer.com/Roth_Conversion.pdf
Let me know if you have any questions or need help with the process.

Regards –Keith

Keith Springer
President
Capital Financial Advisory Services
1383 Garden Hwy, Suite 200
Sacramento, CA 95833
www.KeithSpringer.com
Phone -916-925-8900
Fax – 916-925-8914

Providing Professional Financial Advice since 1985

"To leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded" -Emerson