Executive Summary

• Fertility rates are experiencing a "natural decrease" at record levels across the U.S.
• Poverty rates are rising across the country, despite the "recovering" economy
• What exactly is "powering" U.S. economic growth? Perhaps much less than realized.
• Why we are likely in the calm before the storm when corporate profits peak right before an economic downturn
• The 3 most likely scenarios for the stock market from here

If you have not yet read Part I: Marking the 4-Year Reflationary Rally: How Much Better Off Are We Really?, available free to all readers, please click here to read it first.

One of the challenges the U.S. stock market will increasingly face in the years ahead is continued growth in the Dependency Ratio. The U.S. Census Bureau alerted us to this trend back in 2010. For keen observers of demographics, this couldn’t have been a surprise). The rate at which the Dependency Ratio is growing, and is set to grow further, is accelerating:

The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category...The expected steep rise in the dependency ratio over the next two decades reflects the projected proportion of people 65 and older climbing from 13 percent to 19 percent of the total population over the period, with the percentage in the 20 to 64 age range falling from 60 percent to 55 percent...“This rapid growth of the older population may present challenges in the next two decades,” said Victoria Velkoff, assistant chief for estimates and projections for the Census Bureau's Population Division. “It's also noteworthy that those 85 and older — who often require additional caregiving and support — would increase from about 14 percent of the older population today to 21 percent in 2050.”

This is precisely one of the key, ongoing headwinds that faced Japan's stock market for 20 years. When Japan's economy moved steadily into its low-growth phase, unable to generate sufficient jobs, fertility rates and household formation declined rapidly. As I explained in The Arrival of Japan's Sunset, these will not be cured by the current devaluation of the yen, despite naïve cheerleading. And neither will they be solved here in the U.S.

But in contrast to Japan, the United States is only just embarking on its slow growth phase. Its demographically challenged culture and economy will reinforce each other as we move ahead in time. And, it's not just the retiring class of workers that will massively increase the Dependency Ratio in the U.S. in years ahead... » Read more

Executive Summary

• Sentiment measurement is proving to be an unreliable indicator
• Classic technical analysis is inconclusive but hints there is still weakness that needs to be flushed from the system
• The current era is feeling like 2007/2008 – gold could rebound strongly this year if enough weak economic data makes it out into the public
• The factors to look for that will indicate a price reversal is imminent

If you have not yet read Part I: Charting Gold, available free to all readers, please click here to read it first.

Two themes that we've been consistently stressing over the past several years were beautifully illustrated today, courtesy of a hacked AP Twitter feed.

They are:

• Our markets are broken (courtesy of High Frequency Trading, or HFT, computers), and
• When things finally shift, they will do so at a speed that will shock us.

But first, the hacked AP Twitter feed... » Read more

We've been closely following the tightness in supply in the physical bullion market this week. Premiums began spiking, and now it's becoming harder and harder to find metal in stock to purchase regardless of price. » Read more