Diabetes is an epidemic – we will need lots of medical technology to diagnose and treat millions of patients

There are an estimated 30 million people in the U.S that are afflicted – nearly 1 in every 10 people have the disease.  Think of that when you are in an airport or shopping mall.  That number is expected to continue to grow by ~500k per year.  Of those afflicted today, 8.5 million people are estimated to be afflicted but undiagnosed. There will be billions of dollars spent on better ways to diagnose and treat the disease.  We are continuously looking for novel technologies to help drive down the cost of detection and treatment.   Jeb B Terry, Sr. Oct. 17, 2016

diabetes-population-10-17-16

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Lots of 30 year olds – signals sustained eco growth ahead

Demographics don’t lie.  Baby Boomers turning 30 drove the growth in consumer spending and bull market in the 80’s.  Millennials turning 30 will likely drive sustained spending for the next decade.  30 somethings have more children, become more productive, earn more money and act more like adults.  Millennials are the most educated generation to ever walk the planet.  They are not just tech savvy but are demanding tech users.  The following chart courtesy for Canaccord Genuity is an excellent illustration of the sharp acceleration in the number of 30 year olds we can expect starting now.    Jeb B Terry, Sr. Oct. 17, 2016

rising-30-yr-olds-canaccord-10-17-16

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Many reasons to see sustained market gains but margin debt may suggest a correction

Margin debt has been rising along with the stock market.  My suspicion is that the increased participation by hedge funds and other leveraged players may distort the historical picture. Nonetheless, spikes in margin debt (i.e. “negative credit balance” in the following chart) have been consistent with approaching market corrections or at worst, material market tops.  The analysis below was courtesy of Doug Short of Advisor Perspectives as annotated by Chris Kimble of Kimble Charting Solutions. Jeb B. Terry, Sr. March 3, 2013

Margin Debt March 2013

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Housing metrics show more strength, suggest economic strength and rising wealth effect

Recent housing metrics reveal near record high housing affordability, a return to normal housing vacancy as foreclosed homes are cleared from the market, a sharp drop in the supply of unsold homes on the market and accordingly (courtesy of Scott Grannis at Calafia Beach Pundit) and strong growth in prices (see Yardeni.com).  The National Assoc. of Realtors reported that the median price of existing homes gain approximately 12% in January vs. Jan. 2012 – the highest growth since early 2006. Rasmussen Reports polling in February showed that 54% of homeowners now believe their homes are worth more than when they bought it.  36% of them expect their home’s value will go up over the next year – up strongly from a June 2012 poll result of only 26%.  The strength in housing helps consumer and investor confidence.   Jeb B. Terry, Sr. March 3, 2013.

Housing Affordability and Vacancy Feb 2013

Unsold homes and New home sale Feb 2013

YoY Home Price Chang Jan 2013

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Improving housing metrics / values = improving wealth effect

The following chart was created by the Chief Global Equitis Strategist at Jefferies, Sean Darby (reprinted courtesy of Business Insider).  I like his comment.  “A virtuous circle in U.S. housing has commenced.”  Home values are rising and the willingness and ability of the public to buy is improving.  To be sure, rising home prices may pull more shadow inventory into the market but the facts remain – 5 years of depressed home building is finally restoring better supply/demand conditions.  Rising home values and a rising stock market = rising household net worth. The resultant wealth effect may produce a welcomed tailwind for GDP growth and renewed investment in capital goods and equities.  Jeb B Terry, Sr.Jan. 27, 2013.

Hoem Prices Buyer Flow 1-27-13

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Indeed – investors can be rational. As fear descends, greed ascends . . . “2013 will be a “game changer” as investors reallocate money” – Ray Dalio at Davos

The business press was full of “rotational” comments this weekend.  More people are getting on board with the notion that the huge quantities of cash now flowing into equity mutual funds may be just the beginning of the mother of all reallocations of capital out of bonds and into higher ROI assets – including equities – eh?  The title of this post includes a quote by Ray Dalio at the annual brain fest in Davos (reported by Bloomberg).  Ray is founder of Bridgewater Assoc., an $81 billion hedge fund – when he talks, people listen.  He also said this – “There’s a lot of money in a place that’s getting a very bad return and in this particular year there’s going to be, in my opinion, a shift,” . . . “The complexion of the world will change as that money goes from cash into other things. The landscape will change, particularly later in the year and beyond.”  Barron’s echoed the sentiment with the following subtitle to their “Trader” column . . . “The long-awaited tipping point may have finally arrived, as stocks start looking better than bonds”.  While there may be a market price correction there is ample precedent for the current string of positive weeks of rising stock prices to continue.  Jeb B. Terry, Sr.  Jan 27, 2013

NASDAQ weeks up

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“Gloomy investing books are everywhere. It must be time to buy” . . . says Tony Boeckh

A recent article in Canada’s Globe and Mail newspaper had the above headline.  Here are a few quotes from the article that I found most pertinent.  Jeb Terry, Sr. Dec. 7, 2012.

“the majority of stock seers are currently bearish, and the consensus view is typically incorrect because it’s likely to be already reflected in prices and therefore not much use for making money. To make decent profits, investors have to do something difficult: break from what the herd is thinking, and do the opposite.”

Mr. Boeckh, who hails from Montreal and formerly was associated with BCA Research, the well-regarded market forecasting firm, analyzed current business book offerings and found titles with doomster leanings outnumbered those with an optimistic tilt by a staggering 61 to five.”

Mr. Boeckh’s conclusion: to get so many bearish titles dominating book sales, a trend has to be long established and people must be “traumatized and disillusioned with economic and financial prospects.” It sounds pretty convincing to us at Inside the Market that investors should look at the book titles and be doing the opposite.”

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Banks have too much cash and too few loans. It will be hard to have a recession when there aren’t a lot of loans to charge off.

Part of the cause and effect of a recession is the banking system has to contract its assets.  As business conditions heat up, loans grow too fast, interest rates begin to rise, the banks’ cost of funds starts to rise, their capacity to make loans becomes constrained and the growth in the money supply slows to a trickle.  We don’t have conditions anywhere near that scenario in the banking system today.  Last week saw news of Bank of New York Mellon charging large customers who choose to store cash at the bank . . . did you get that . . . customers will have negative interest on their deposits!  As I have shown before, the growth in deposits has ballooned in recent weeks as investors/consumers have hoarded cash.  In the meantime the absolute level of loans has contracted since 2008 and is only now showing modest signs of recovery.  These are not the conditions we see at the eve of a recession.  While, they do imply a severe level of risk aversion, they are foundational for a potential prolonged recovery in productive growth.  Jeb Terry, Sr. Aug 17, 2011

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There is a record $21.2 TRILLION in US retirement accounts, cash and bank accounts and retail money market funds.

While there is a record high amount of assets in the retirement complex, there is a low percentage invested in equities.  I have used the market value of the S&P 500 as a proxy for the equity portion of the retirement assets.  US investors are underinvested in stocks.  The S&P 500 is equal to only 50% of the value of all retirement assets today compared to 89% in 1999.  Not since 1994 (with brief exception on 2008 bear market) have stock values been equal to such a small percentage of retirement and liquid retail assets.  A recovery to the average ratio of equities to retirement assets of 66% since 1995 would imply an increase of the S&P 500 market value of over $3.3 trillion or 31% greater than today.  There is not a lack of funds to invest – there is a lack of confidence to invest. Jeb Terry, Sr. Aug 17, 2011

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Over $52 billion was stuffed into money market funds last week – the most since the panic of 2008/2009.

Not since the chaotic days of late 2008 and 2009 – when we had much greater uncertainty, illiquidity and systemic crisis than today – have we seen so much money flee risk and go into “money of zero maturity”, aka MZM.  MZM is now equal to 96% of the total market value of the S&P 500.  This kind of spike in the percentage of near cash relative to equities has only occurred very near market bottoms. Jeb Terry, Sr. Aug 17, 2011

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