Saturday, April 20, 2013

Rallying past the record - or not?

The S&P 500 index record closing price of 1565 held for more than five years since October 2007.  Then on April 10th the S&P shot up to a record close of 1587, looking like it might be a decisive start to a rally.  However it stayed flat for the next couple of days, and then on Monday - an April 15th which will live in infamy - the S&P fell back to earth to close at 1552, accompanied by the largest one-day decline in the price of gold in decades.

If you're wondering what the stock market is going to do next, then join the club.  We're "due" for a modest correction soon, and sentiment is still leaning towards optimism, which is bearish.  However other indicators, such as volatility and volume-related metrics, are still bullish.  Hopefully the market will pick a direction soon and pull most of the indicators into agreement one way or another, at which point a more confident forecast may be possible.

The beginning of the end of the IRA is here

A couple of years ago I predicted that individual retirement accounts (IRAs) were ultimately doomed due to warped socialist ideas of "fairness." If the president's 2014 budget is approved as is, then the IRA's death scene has already begun. The budget includes an annuity-rate-dependent cap on the total savings in all of one's IRA accounts which assumes that an annual annuity payout of $205,000 is sufficient for all retirees.

As always, big things have small beginnings, and there's no doubt that if this IRA cap is passed, the "fair annual payout limit" - and therefore the limit on the amount of savings - will descend to lower and lower levels in subsequent budget years as the government scrounges for more money to pay the ever-increasing bloated federal budget.

These moves by the government are perfectly predictable if you think like a socialist.