You’ve Got to Milk This Market While It Lasts

By Mitchell Clark, B.Comm.

There are a lot of good trades out there in this kind of market—some of them are value trades, while others are momentum opportunities. With sentiment in the broader market quite positive, the likelihood of further capital gains in the main stock market averages is strong.

After many years of following the stock market on a daily basis, I’ve gained a healthy respect for the other side of the market. I’m not referring to being short; what I’m talking about is risk. I spend as much time considering the risks associated with a potential equity investment as I do the potential return. Both are unknowns in the investing process, but risk is the one factor that you can try to mitigate as you manage your portfolio of holdings.

Investment risk is always high in the stock market for the simple reason that equity securities trade in a secondary market. Their value is derived by buyers and sellers who use all the information the marketplace has to offer. Stocks always have two kinds of risks for investors: individual company risk; and the risk inherent in changing market sentiment. Both these risks are entirely beyond your control as an individual shareholder and, because of this, your personal investment risk is always high.

Right now we have a stock market that’s trending higher based on the expectation of strong earnings results and a recovering economy. That’s the good news. However, ahead of us there are major headwinds in the form of inflation, sovereign debt, and a demographic shift that’s going to change the very nature of the consumer economy. It’s a lot for a long-term investor to deal with and it’s something we all have to be wary of as investors.

I feel confident that the right shoulder formation of the S&P 500 Index will be completed. This expectation is based on the broader market’s current valuation, the stability of current investor sentiment, and the outlook for solid corporate earnings this year. But, beyond 2011, the commodity price cycle is going to force higher interest rates to deal with price inflation, which I think is more pronounced in the economy than the numbers indicate. Add in the likelihood of country defaults in Europe and I can easily see a marketplace where investor confidence disappears.

We’re not in a bull market for stocks at this time; we’re in a Fed-induced re-inflation of the economy and the stock market. On balance, I think the action is working, but the “free” money won’t last much longer, because global markets won’t let it. This means that the business cycle is going to change and it will be a whole new ballgame for the stock market and investors.

I remain optimistic about the economy and the stock market. I also remain wary of the systemic risks we face going forward. You can’t have investment returns without incurring investment risk. The key is to manage both in a way that keeps you covered when the marketplace changes. Make no mistake; the two constants in the investment business are change and risk.

Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.Tweet

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My Prediction on U.S. Housing Market and Prices

This year will mark the worst for the U.S. housing market, as foreclosures rise and prices fall. But don’t expect prices to climb back up anytime soon.

Let’s start by looking at the stark facts:

About seven million mortgages in the U.S. are now in the “late payment” phase—a delinquency rate of eight percent. Some 30% of all mortgages in the foreclosure pipeline have not made a payment in more than 24 months (source: Foreclosure Backlog Rises as Federal Aid Fails 3/30/11, HousingPredictor).

The S&P/Case-Shiller index of property prices says that property prices in 20 major American cities dropped 3.1% in January. According to RealtyTrac, foreclosure filings will jump 20% this year, marking a peak in foreclosures for the housing market.

Looking at the Dow Jones U.S. Home Construction Index, we see a bleak future for housing. While the broad stock market is up almost seven percent this year, the housing stocks are fighting to stay above their opening 2011 levels. It’s a bold prediction, but I wouldn’t be surprised to see the Dow Jones U.S. Home Construction fall to a new two-year price low later this year; about 15% below where it stands today.

Should I buy real estate now? If I need to buy a house, the later I waited until in 2011, the better deal I would get. More foreclosures coming onto the market and rising interest rates are two factors that the housing market cannot escape and that will keep prices low.

Where are property prices headed? I’m continuing with my prediction that U.S. residential home prices will fall between 5.0% and 7.5% this year.

If I were an investor, and there are plenty of them jumping into the U.S. real estate market, unless I have an exit strategy, I wouldn’t expect property prices to rise for years to come. If I’m correct and we are at the onset of new long-term trend of rising interest rates, U.S. real estate prices will remain depressed for years to come.

Michael’s Personal Notes:

Car sales are booming again. General Motors (NYSE/GM) posted a 9.6% increase in first auto sales, while Ford Motor Co. (NYSE/F) posted a 16% increase in first-quarter 2011 auto sales.

Unfortunately, the stock market doesn’t share this enthusiasm, which throws up a red flag for me. Ford is enjoying brisk sales, having outsold GM in the first quarter (for the second time in 13 years), but Ford stock is down 20% from its January 2011 peak. GM stock is down 18% from its January 2011 price high.

The stock market isn’t buying the run-up in auto sales, which is an area of concern. As a leading indicator, the stock market is looking out six to 12 months and saying it doesn’t like what it sees for the auto sector, an industry very dependent on consumer spending. This bodes well for my theory that all we have been witnessing since March of 2009 is a bear market rally and economic peril still lies ahead. Best stock advice I can give: avoid the auto stocks.

The auto sector is very sensitive to interest rates. Simplistic as it sounds, as interest rates start to rise this year, consumers will find their monthly payments for new vehicles rising, which could hamper demand.

Where the Market Stands: Where it’s Headed:

The Dow Jones Industrial Average opens this morning up 6.9% for 2011. The bear market rally in stocks that started in March of 2009 remains intact. However, the easy profits in this rally have been made. While I expect stocks to continue trending higher, the upside for investors is limited at this point in this rally’s life cycle. The market has already discounted much of the better-than-expected first-quarter corporate earnings results.

What He Said:

“I see the coming recession being deep and difficult because U.S. consumers do not have the savings to spend their way out of the recession. The same thing happened in Japan, The Japan example proved that, when consumer confidence is shattered, even zero percent interest won’t spur consumer spending. The same thing could happen here.” Michael Lombardi in PROFIT CONFIDENTIAL, August 23, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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How to Survive a Schizophrenic Stock Market

Today and tomorrow are your very last days to register for our special Squawk Box on Tuesday. (Click here.)

This is the first time we’re inviting the public to join our internal conference call in my company’s 40-year history.

Let me explain …

Never before in history have we seen a
more SCHIZOPHRENIC world!

Overseas, we have much of the world going up in smoke — massive riots in Europe and massive revolutions in the Middle East. But we also have emerging markets that are still growing by leaps and bounds.

In the U.S., we have federal, state and local governments embroiled in the most severe debt crisis in our nation’s 235-year history. But at the same time, we have the Fed printing money like crazy, driving asset prices higher, including U.S. stocks.

And that’s where we see the greatest schizophrenia of all — grossly overvalued stocks set to crash and burn PLUS stocks that offer unusual profit opportunities.

Despite the market’s rally, one thing’s for sure: At a time like this, nobody in their right mind would want to own the weakest stocks in America — the ones that are the MOST vulnerable to a sudden, massive decline!

That’s why I’ve invited you to listen in on our special Squawk Box the day after tomorrow: I have information that’s critical to your financial safety and success and I need to share it with you personally.

It concerns many of the most widely held household-name stocks in America today — stocks that you likely own or have considered buying: Huge national and global companies with a combined market cap of nearly one-half TRILLION DOLLARS.

These are blue-chip S&P 500 stocks in the sectors where YOU likely invest; in energy … food … basic materials … technology … finance … entertainment … and more.

Wall Street’s largest and most widely respected firms — J.P. Morgan … Citibank … Goldman Sachs … and others — may have told you to buy them. You probably own them whether you know it or not — they’re at the top of the list for many mutual funds, ETFs and pension plans.

And yet I have compelling evidence that these stocks are likely to crash and burn, hitting investors for losses of up to 97%.

This proprietary investment intelligence is clearly NOT going to make me any friends on Wall Street. And that’s why I’ve decided to break with all precedents here at Weiss and offer you this special one-time-only invitation: To join us as I name these stocks for our analysts in next Tuesday’s special Squawk Box session.

Until now, these critical Squawk Box sessions have been absolutely private — reserved for Weiss insiders ONLY — and for good reason:

Our analyst conference calls are a critical part of every service my company offers you; absolutely essential to help us help you protect your wealth and profit. The matters we typically discuss are confidential and outsiders have NEVER been allowed to attend before.

But again: The information I have for you now is so urgent — so critical to your financial safety and success — I feel I must make an exception this one time, tailor the session for friends like you, and invite you to join us.

There is no cost for attending this special Squawk Box session. All I ask is that …

FIRST: You let us know you’re coming so we can make the necessary arrangements. Just click this link to R.S.V.P. now. We’ll send your confirmation and instructions for attending by return email.

AND SECOND, show up a bit EARLY next Tuesday — a few minutes BEFORE 12:00 noon Eastern Time; 9:00 AM Pacific Time.

This Squawk Box will begin precisely at noon — and it is absolutely critical that you hear everything that will be presented. Missing anything could prove costly for you.

So once we begin, no additional attendees will be admitted. If you’re even a few seconds late, you will miss this presentation and be unable to act on our recommendations before the market closes.

Remember: Reserving your place is free and takes only a few seconds: Simply click this link to register now!

Good luck and God bless!

Martin

Dr. Weiss began his career in 1971 when he founded Weiss Research, dedicated to evaluating the safety of financial institutions and investments for consulting clients.  He is the publisher and contributing editor of the financial newsletter, Safe Money, known for its track record in picking major turns in interest rates, and serves as co-editor for a number of Premium Services. He is also the author of The Ultimate Safe Money Guide and The Ultimate Depression Survival Guide.

View the original article here

How to Survive a Schizophrenic Stock Market

Today and tomorrow are your very last days to register for our special Squawk Box on Tuesday. (Click here.)

This is the first time we’re inviting the public to join our internal conference call in my company’s 40-year history.

Let me explain …

Never before in history have we seen a
more SCHIZOPHRENIC world!

Overseas, we have much of the world going up in smoke — massive riots in Europe and massive revolutions in the Middle East. But we also have emerging markets that are still growing by leaps and bounds.

In the U.S., we have federal, state and local governments embroiled in the most severe debt crisis in our nation’s 235-year history. But at the same time, we have the Fed printing money like crazy, driving asset prices higher, including U.S. stocks.

And that’s where we see the greatest schizophrenia of all — grossly overvalued stocks set to crash and burn PLUS stocks that offer unusual profit opportunities.

Despite the market’s rally, one thing’s for sure: At a time like this, nobody in their right mind would want to own the weakest stocks in America — the ones that are the MOST vulnerable to a sudden, massive decline!

That’s why I’ve invited you to listen in on our special Squawk Box the day after tomorrow: I have information that’s critical to your financial safety and success and I need to share it with you personally.

It concerns many of the most widely held household-name stocks in America today — stocks that you likely own or have considered buying: Huge national and global companies with a combined market cap of nearly one-half TRILLION DOLLARS.

These are blue-chip S&P 500 stocks in the sectors where YOU likely invest; in energy … food … basic materials … technology … finance … entertainment … and more.

Wall Street’s largest and most widely respected firms — J.P. Morgan … Citibank … Goldman Sachs … and others — may have told you to buy them. You probably own them whether you know it or not — they’re at the top of the list for many mutual funds, ETFs and pension plans.

And yet I have compelling evidence that these stocks are likely to crash and burn, hitting investors for losses of up to 97%.

This proprietary investment intelligence is clearly NOT going to make me any friends on Wall Street. And that’s why I’ve decided to break with all precedents here at Weiss and offer you this special one-time-only invitation: To join us as I name these stocks for our analysts in next Tuesday’s special Squawk Box session.

Until now, these critical Squawk Box sessions have been absolutely private — reserved for Weiss insiders ONLY — and for good reason:

Our analyst conference calls are a critical part of every service my company offers you; absolutely essential to help us help you protect your wealth and profit. The matters we typically discuss are confidential and outsiders have NEVER been allowed to attend before.

But again: The information I have for you now is so urgent — so critical to your financial safety and success — I feel I must make an exception this one time, tailor the session for friends like you, and invite you to join us.

There is no cost for attending this special Squawk Box session. All I ask is that …

FIRST: You let us know you’re coming so we can make the necessary arrangements. Just click this link to R.S.V.P. now. We’ll send your confirmation and instructions for attending by return email.

AND SECOND, show up a bit EARLY next Tuesday — a few minutes BEFORE 12:00 noon Eastern Time; 9:00 AM Pacific Time.

This Squawk Box will begin precisely at noon — and it is absolutely critical that you hear everything that will be presented. Missing anything could prove costly for you.

So once we begin, no additional attendees will be admitted. If you’re even a few seconds late, you will miss this presentation and be unable to act on our recommendations before the market closes.

Remember: Reserving your place is free and takes only a few seconds: Simply click this link to register now!

Good luck and God bless!

Martin

Dr. Weiss began his career in 1971 when he founded Weiss Research, dedicated to evaluating the safety of financial institutions and investments for consulting clients.  He is the publisher and contributing editor of the financial newsletter, Safe Money, known for its track record in picking major turns in interest rates, and serves as co-editor for a number of Premium Services. He is also the author of The Ultimate Safe Money Guide and The Ultimate Depression Survival Guide.

View the original article here

The Next Major Bull Market Will Be In…

Economic nonsense.

I am not trying to be flippant, nor humorous. Indeed, we in the US will very likely see a massive escalation of propaganda, phony economic data, massaged labor statistics, and the like in 2011.

I’ve been railing against “massaged” government data for years. Whether it’s GDP numbers, housing data, unemployment claims, or retail numbers, virtually every economic metric the Government or state department publishes these days is massaged or adjusted to paint a picture that is far rosier that the real economic realities facing the US.

Let’s take US GDP Growth numbers, for instance. The most common manipulations used to overstate this number are:

1)    Understating inflation

2)    Overstating production of various segments of the economy

3)    “After the fact” revisions lower

Regarding #1, virtually every one on the planet realizes that the Fed’s CPI (measure of inflation) is a joke.  For those who are new to this little game, first off you need to know is that the Government has altered its measure of inflation several times in the last 100 years.

The original measure was to simply keep track of how much it costs to buy a particular basket of goods (say meat, milk, eggs, gasoline, etc). However, the problem with using this measure is that it quickly demonstrates that the cost of living has gone up in the US dramatically as a result of US Dollar devaluation. 

Indeed, if you’re trying to pump an economy higher on credit to cover up the fact that incomes have fallen 40% or so in 30 years (while simultaneously forcing consumers into financial speculation in order to maintain the illusion of wealth), the last thing you want is for Joe America to realize “hey, wait a minute, back in the ‘60s or early ‘70s only one parent worked and people were able to get by… why are both parents now working and still in debt up to their eyeballs?”

Consequently, the Feds changed their inflation measure to remove the costs of food and energy (after all, how many consumers actually need to buy items from those sectors?). The beauty of this is that it not only hides the fact that a gallon of milk now costs $4 or so vs. $1.15 in 1970 (and milk is DEFINITELY not three times as awesome now as then) but it also allows GDP to appear larger.

In order to illustrate this last point, think of a company that produces staples. Let’s say that in 1970 this company produced $1 million worth of staples. Today, this company produces $5 million in staples. So the company has grown five times larger right?

Not if inflation has risen five fold over the same time period. Instead, all you’ve done is shrink the value of the currency in which sales are denominated (in this case Dollars). Put another way, your company has NOT grown, it’s just that the currency it sells Staples in has lost a HUGE amount of value.

However, if you CLAIMED that inflation only rose three times as high (rather than five) then your company APPEARS to have grown a lot more. In simple terms, by changing the measure used to account for inflation, the Feds are able to make GDP growth appear larger than it really is.

Other GDP accounting gimmicks include overstating various economic segments and posting a higher growth number that is then revised much lower in the future. The Government also uses this on unemployment claims and numerous other statistics.

The above examples only pertain to GDP growth. Virtually EVERY economic metric published these days (whether it’s retail numbers, housing numbers, unemployment claims, inflation, etc) has similarly glaring defects/ issues that cover up just how bad things have gotten in the US.

Indeed, the worse the US economy has gotten, the poorer the economic accounting has become. Consider the following:

§  The US was only officially declared to be in a recession on December 1, 2008: right AFTER the ENTIRE financial system nearly imploded.

§  At that time, the recession was claimed to have begun in December 2007 (so it took a full YEAR before the Feds announced the obvious).

§  The recession was declared “over” by Ben Bernanke and pals in August 2009: a time when one in US eight mortgages were in arrears or foreclosure and one in eight US citizens were un/ underemployed or on food stamps.

§  The Financial Crisis is largely thought to be over (or at least the worst is over) despite the fact that NONE of the real issues plaguing the system have been fixed (not to mention the ongoing problems in the derivatives, commercial real estate, and debt markets).

With a Presidential election coming up in 2012, I believe we are at the beginning of a REAL bull market in economic/ political nonsense. The massaged data, nonsensical proclamations, and other shenanigans we’ve seen over the last decade are JUST the beginning.

After all, no one is going to run on a “we’re in a Depression, not just a Recession, and we’ve spent several trillions of dollars without fixing anything just so Wall Street can get record bonuses again” platform. 

Instead, we’re going to see economic data become even MORE divorced from reality, assertions that the economy is back on track, and that at worst there is the specter of a “double-dip” recession looming. Heck, even these fears are sugar-coated… literally (making an economic nightmare sound like an ice-cream sundae is a GENIUS marketing move).

So, I for one, am mega-bullish on economic/ political nonsense for 2011.  Put another way, I believe that the worse things get, the better they will sound coming from our nation’s leaders/ pundits (we’ve already revised 3Q10 and 4Q10 GDP numbers higher).

After all, with a Nobel Peace Prize winner upping troop numbers in a never-ending war, an economist who failed to see two bubbles until AFTER the destroyed more than $11 trillion in wealth winning Time’s Man of the Year, and a CEO who somehow managed to convinced the government to give his firm $13 billion in bailout funds despite allegedly having hedged all its exposure on the very investment that it claimed it needed bailouts for named Person of the Year by The Financial Times, why couldn’t you spin record food stamp usage as a “consumption miracle” or one in eight mortgages being in foreclosure as “careful inventory  accumulation” or a Depression as a “jobless recovery”?

We all know how this situation will turn out (HORRIBLY). The Fed lost control of everything in 2008. It will lose control again in the future. Only this time it will be out of bullets. And judging from what’s going on in the world right now, we can’t be far off.

On that note, if you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Prepare Now!

Graham Summers

PS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.

You can access this Report at the link above.

Your rating: None Average: 5 (4 votes)

View the original article here

The Next Major Bull Market Will Be In…

Economic nonsense.

I am not trying to be flippant, nor humorous. Indeed, we in the US will very likely see a massive escalation of propaganda, phony economic data, massaged labor statistics, and the like in 2011.

I’ve been railing against “massaged” government data for years. Whether it’s GDP numbers, housing data, unemployment claims, or retail numbers, virtually every economic metric the Government or state department publishes these days is massaged or adjusted to paint a picture that is far rosier that the real economic realities facing the US.

Let’s take US GDP Growth numbers, for instance. The most common manipulations used to overstate this number are:

1)    Understating inflation

2)    Overstating production of various segments of the economy

3)    “After the fact” revisions lower

Regarding #1, virtually every one on the planet realizes that the Fed’s CPI (measure of inflation) is a joke.  For those who are new to this little game, first off you need to know is that the Government has altered its measure of inflation several times in the last 100 years.

The original measure was to simply keep track of how much it costs to buy a particular basket of goods (say meat, milk, eggs, gasoline, etc). However, the problem with using this measure is that it quickly demonstrates that the cost of living has gone up in the US dramatically as a result of US Dollar devaluation. 

Indeed, if you’re trying to pump an economy higher on credit to cover up the fact that incomes have fallen 40% or so in 30 years (while simultaneously forcing consumers into financial speculation in order to maintain the illusion of wealth), the last thing you want is for Joe America to realize “hey, wait a minute, back in the ‘60s or early ‘70s only one parent worked and people were able to get by… why are both parents now working and still in debt up to their eyeballs?”

Consequently, the Feds changed their inflation measure to remove the costs of food and energy (after all, how many consumers actually need to buy items from those sectors?). The beauty of this is that it not only hides the fact that a gallon of milk now costs $4 or so vs. $1.15 in 1970 (and milk is DEFINITELY not three times as awesome now as then) but it also allows GDP to appear larger.

In order to illustrate this last point, think of a company that produces staples. Let’s say that in 1970 this company produced $1 million worth of staples. Today, this company produces $5 million in staples. So the company has grown five times larger right?

Not if inflation has risen five fold over the same time period. Instead, all you’ve done is shrink the value of the currency in which sales are denominated (in this case Dollars). Put another way, your company has NOT grown, it’s just that the currency it sells Staples in has lost a HUGE amount of value.

However, if you CLAIMED that inflation only rose three times as high (rather than five) then your company APPEARS to have grown a lot more. In simple terms, by changing the measure used to account for inflation, the Feds are able to make GDP growth appear larger than it really is.

Other GDP accounting gimmicks include overstating various economic segments and posting a higher growth number that is then revised much lower in the future. The Government also uses this on unemployment claims and numerous other statistics.

The above examples only pertain to GDP growth. Virtually EVERY economic metric published these days (whether it’s retail numbers, housing numbers, unemployment claims, inflation, etc) has similarly glaring defects/ issues that cover up just how bad things have gotten in the US.

Indeed, the worse the US economy has gotten, the poorer the economic accounting has become. Consider the following:

§  The US was only officially declared to be in a recession on December 1, 2008: right AFTER the ENTIRE financial system nearly imploded.

§  At that time, the recession was claimed to have begun in December 2007 (so it took a full YEAR before the Feds announced the obvious).

§  The recession was declared “over” by Ben Bernanke and pals in August 2009: a time when one in US eight mortgages were in arrears or foreclosure and one in eight US citizens were un/ underemployed or on food stamps.

§  The Financial Crisis is largely thought to be over (or at least the worst is over) despite the fact that NONE of the real issues plaguing the system have been fixed (not to mention the ongoing problems in the derivatives, commercial real estate, and debt markets).

With a Presidential election coming up in 2012, I believe we are at the beginning of a REAL bull market in economic/ political nonsense. The massaged data, nonsensical proclamations, and other shenanigans we’ve seen over the last decade are JUST the beginning.

After all, no one is going to run on a “we’re in a Depression, not just a Recession, and we’ve spent several trillions of dollars without fixing anything just so Wall Street can get record bonuses again” platform. 

Instead, we’re going to see economic data become even MORE divorced from reality, assertions that the economy is back on track, and that at worst there is the specter of a “double-dip” recession looming. Heck, even these fears are sugar-coated… literally (making an economic nightmare sound like an ice-cream sundae is a GENIUS marketing move).

So, I for one, am mega-bullish on economic/ political nonsense for 2011.  Put another way, I believe that the worse things get, the better they will sound coming from our nation’s leaders/ pundits (we’ve already revised 3Q10 and 4Q10 GDP numbers higher).

After all, with a Nobel Peace Prize winner upping troop numbers in a never-ending war, an economist who failed to see two bubbles until AFTER the destroyed more than $11 trillion in wealth winning Time’s Man of the Year, and a CEO who somehow managed to convinced the government to give his firm $13 billion in bailout funds despite allegedly having hedged all its exposure on the very investment that it claimed it needed bailouts for named Person of the Year by The Financial Times, why couldn’t you spin record food stamp usage as a “consumption miracle” or one in eight mortgages being in foreclosure as “careful inventory  accumulation” or a Depression as a “jobless recovery”?

We all know how this situation will turn out (HORRIBLY). The Fed lost control of everything in 2008. It will lose control again in the future. Only this time it will be out of bullets. And judging from what’s going on in the world right now, we can’t be far off.

On that note, if you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Prepare Now!

Graham Summers

PS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.

You can access this Report at the link above.

Your rating: None Average: 5 (4 votes)

View the original article here

The Best Stock Market Advice I Know: Get Ahead of the Business Cycle

By Mitchell Clark, B.Comm.

 

The timing isn’t quite right yet, but, in the not-too-distant future, there should be a reacceleration of U.S.-listed Chinese stocks. If you’ve been a speculator in these stocks, you’ll know that it’s been tough going. The entire group has been suffering from a lack of investor confidence and a lot of this sentiment is warranted. There remain, however, many very good companies out there whose stock prices have fallen along with the group and that are now excellent values in my view. I think we’re very close to achieving extreme pricing (on the downside) with many of these stocks and speculators should be putting a number of these stocks on their radar screens.

If you watch the stock market long enough, you’ll know that certain sectors experience waves of enthusiasm from investors. It’s like the latest trend in the fashion industry, only the business cycle in stocks changes extremely fast. One year, the darling of the market is solar energy stocks. The next year, silver stocks are soaring. The whole system in my view is about perpetual rolling interest from investors on the Street and getting ahead of these trends is the single most important contributor to making big money in the stock market. It’s not even about owning the right individual stocks at the right time; it’s about owning the right sector. Share prices move in groups and Wall Street takes no prisoners. The stock market isn’t a perfect system and valuations are always relative, but with so many participants on the long and short sides of the marketplace, prices are never true for long.

Stock picking has always been and always will be a difficult endeavor to get right on a consistent basis. Even in a bull market, it’s difficult to make money as a speculator, because sentiment changes so quickly and so do stock prices. One unfulfilled expectation and a stock’s price can be cut in half—in a matter of minutes! If stock picking were easy, there would be a lot more retired stock traders living on your street. Even Wall Street pros don’t last in the game for very long. Most investment banks make a lot more money selling you advice than trading stocks for themselves.

The one thing I’ve learned over the years is never to fight the market. The action is the action. It might not be rational; it might not even be fair. But the stock market is a system that is based on fear and greed, and emotions have more to do with prices than anything else. A big investor like Warren Buffett worries almost solely about valuation, because he is buying an entire company’s cash flow, not just a share. For equity investors (speculators more appropriately), a stock’s valuation is more about perception than anything. Understanding the market’s prevailing psychology usually wins out over the most stringent of analyses.

Right now, there are several sectors in the equity universe that are not participating in the current rally. If you’re a buy-low/sell-high kind of speculator, now is the time to be looking seriously. Here’s what my favorite stock picker likes to do (Jim Rogers); he waits for securities to achieve price extremes, then he makes his bets.

Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.Tweet

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The Best Stock Market Advice I Know: Get Ahead of the Business Cycle

By Mitchell Clark, B.Comm.

 

The timing isn’t quite right yet, but, in the not-too-distant future, there should be a reacceleration of U.S.-listed Chinese stocks. If you’ve been a speculator in these stocks, you’ll know that it’s been tough going. The entire group has been suffering from a lack of investor confidence and a lot of this sentiment is warranted. There remain, however, many very good companies out there whose stock prices have fallen along with the group and that are now excellent values in my view. I think we’re very close to achieving extreme pricing (on the downside) with many of these stocks and speculators should be putting a number of these stocks on their radar screens.

If you watch the stock market long enough, you’ll know that certain sectors experience waves of enthusiasm from investors. It’s like the latest trend in the fashion industry, only the business cycle in stocks changes extremely fast. One year, the darling of the market is solar energy stocks. The next year, silver stocks are soaring. The whole system in my view is about perpetual rolling interest from investors on the Street and getting ahead of these trends is the single most important contributor to making big money in the stock market. It’s not even about owning the right individual stocks at the right time; it’s about owning the right sector. Share prices move in groups and Wall Street takes no prisoners. The stock market isn’t a perfect system and valuations are always relative, but with so many participants on the long and short sides of the marketplace, prices are never true for long.

Stock picking has always been and always will be a difficult endeavor to get right on a consistent basis. Even in a bull market, it’s difficult to make money as a speculator, because sentiment changes so quickly and so do stock prices. One unfulfilled expectation and a stock’s price can be cut in half—in a matter of minutes! If stock picking were easy, there would be a lot more retired stock traders living on your street. Even Wall Street pros don’t last in the game for very long. Most investment banks make a lot more money selling you advice than trading stocks for themselves.

The one thing I’ve learned over the years is never to fight the market. The action is the action. It might not be rational; it might not even be fair. But the stock market is a system that is based on fear and greed, and emotions have more to do with prices than anything else. A big investor like Warren Buffett worries almost solely about valuation, because he is buying an entire company’s cash flow, not just a share. For equity investors (speculators more appropriately), a stock’s valuation is more about perception than anything. Understanding the market’s prevailing psychology usually wins out over the most stringent of analyses.

Right now, there are several sectors in the equity universe that are not participating in the current rally. If you’re a buy-low/sell-high kind of speculator, now is the time to be looking seriously. Here’s what my favorite stock picker likes to do (Jim Rogers); he waits for securities to achieve price extremes, then he makes his bets.

Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.Tweet

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Stock Market: Two Biggest Fears Getting Closer

The stock markets remind me of the real estate market in Toronto, Canada. While the U.S. housing market crashed, the real estate market in Toronto is as strong as it has ever been.

In fact, builders can’t find enough lots to build homes on and developers can’t put condo buildings up fast enough in Toronto. In decent areas, the prices of condos have gone up from $400.00 per square foot to well over $1,000 per square foot and buyers are lining up.

Same thing with the stock market: There are so many people out there saying “It’s overpriced,” but stocks just keep rising. Why? Simply, stocks keep rising because there is too much money around, too much liquidity in the system. I can’t see the Fed doing much else other than dropping money from helicopters to increase monetary stimulus. With so much liquidity around, stocks rise.

The S&P 500 companies alone sit on about $1.0 trillion in cash. Stock markets do not fall when with so much cash in the system.

But here is when stock markets do fall: when inflation rears its ugly head, and when interest rates rise.

My dear friend, neither of these two events is far off. All we need to do is look at the bellwether 10-year U.S. Treasury. Last October, the 10-year Treasury yielded 2.4%. Today, despite the crisis we have witnessed in Japan, which should have sent investors running to the security of U.S. bonds, the 10-year Treasury yields 3.4%, up 41% in less than six months. In fact, this bond is up drastically in the last three trading days.

Yes, stocks will continue to rise in the very immediate term, just like the condo and housing market in Toronto. But the warning signs of trouble ahead are getting clearer every passing day. Enjoy the bear market rally while it lasts, because it won’t last forever.

Michael’s Personal Notes:

It is with sadness that we learn this morning about the bankruptcy filing of Harry & David, the gourmet food and fruit basket purveyor.

Each year I look forward to getting Harry & David gift baskets from our various suppliers. I was an especially big fan of their fruit baskets; their jumbo pears being my favorite.

The stark reality today is that, unless you have a sizeable Internet presence, the old traditional mail-order model will no longer work. The U.S. Post Office continues to adopt the wrong model of raising its prices as it fights the Internet.

Harry & David was established around the time of the great depression: 1934. The business thrived as the decades passed (assets of $500 million today), but it was unable to really get the following that other merchandise companies have enjoyed on the Internet. According to compete.com, Harry and David’s monthly web site traffic was less than one percent of the traffic of Amazon.com.

Where the Market Stands; Where it’s Headed:

Not much I can say about the stock market that I already haven’t talked about. We opened Caesar’s most dreaded month of the year at about the same level that stocks are about to end the month, in spite of the Japan disaster and continued lack of focus by the politicians on curbing government spending.

The bear market rally in stocks, which started in March 2009, continues.

The Dow Jones Industrial Average opens this morning up 5.5% for 2011.

What He Said:

“The proof the party is over in the U.S. housing market could not be clearer to me. The price action of the new-homebuilder stocks is telling the true story—these stocks are falling in price daily (and the media is not picking it up). Those who will hurt most when the air is finally let out of the housing market balloon will be those buyers who bought in late 2005. In fact, the latecomers to the U.S. housing market may end up looking like the latecomers to the tech-stock rally that ended so abruptly in 1999.” Michael Lombardi in PROFIT CONFIDENTIAL, March 1, 2006. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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Urgent Market Update on Gold, Silver, Oil, Dollar!

Today was a landmark day in market history. Before late-session corrections …

Gold futures surged to the highest level in world history — $1,449 an ounce.

Silver hit $38.18, the most since the Hunt Brothers cornered the silver market in 1980.

Crude oil touched $106.69, a few nickels short of the highest level since September 2008 … corn jumped more than 3% a bushel … and cattle futures jumped to $1.16 a pound, just shy of the highest level on record.

Meanwhile the dollar continues to plunge, losing ground again against the euro … the Swiss franc … plus the Australian, New Zealand, and Canadian dollars. The broad Dollar Index is now within a whisker of a fresh 15-month low.

What’s going on?

Exactly what we’ve warned you would happen: The mad monetary scientists at the Federal Reserve are trashing the value of your dollars, driving up the price of commodities, and completely ignoring the rampant inflationary pressures each and every one of us can see in our daily lives!

I hope and pray …

That Washington will finally wake up to the urgency of our budgetary lunacy …

That Ben Bernanke will stop destroying the value of your hard-earned savings …

That America can somehow avoid a financial Armageddon.

But hopes and prayers alone are not enough. We also must heed the FACTS, and those facts point to a financial disaster of biblical proportions.

For precisely how to protect yourself — and profit — I urge you to see Martin Weiss’ amazing video, American Apocalypse.

The place is here and the time is now. That’s what today’s markets are telling you. And they’re right.

Click here, and it will begin playing on your screen without further ado.

Best wishes,

Mike

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money, Interest Rates Profits and LEAPS Options Alert. He is often quoted by the New York Sun, Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

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Salivating at the Upside Potential of the Gold Market

03/25/11 Tampa, Florida – Not long ago, as I recall, a pension fund in some foreign country, one of those Scandinavian ones I think, was ordered to invest no more than about 3% of its custody assets in gold, meaning that the fund had too much gold, and to sell part of its gold holdings in order to comply.

Personally, I think that the 4,500-year historical record shows that being 100% invested solely in gold over the long-term is almost always a Very, Very Good Idea (VVGI), while the 4,500-year record of being solely invested in stocks, bonds and housing over the long-term is almost always a Very, Very Bad Idea (VVBI).

Thus, even to a really stupid guy like me, it doesn’t take a lot of brain-horsepower to quickly see that to arbitrarily limit gold in one’s entire retirement holdings to a measly 3% is, in a word, stupid, whereas 100% invested in gold is not, again in a word, stupid, but, rather, in yet another word, intelligent, in that gold soars while the debasement of a fiat currency is always complete and catastrophic.

Or perhaps the word, in a word, could be “erudite,” as in referencing the Mogambo Book Of Economics Stuff (MBOES) under “Erudite: at least glancing at the entire 4,500 years of history and seeing very clearly that to not be 100% invested in gold and silver over the long-term, especially when your government is allowing such frightening increases in the money supply, is stupid and ultimately ruinous. See also ‘Broke, Why, Stupid, People’ and ‘Catchphrase, We’re Freaking Doomed (WFD)!’”

After all this talk of erudition, I am embarrassed to admit that I don’t know the word for “stupid” in any of those Nordic languages. I don’t worry, however, because the word for “stupid” in Spanish is “el Stupido,” so I figure that if any of those Scandinavian guys speak no English but they savvy a little Spanish, they can easily translate it for everybody else so that everybody can know that they are, you know, stupid, in case they didn’t know.

Unfortunately, this translation thing will not convey how I laugh at them with an undisguised Mogambo Sneer Of Contempt (MSOC), and/or how I, following the proud tradition of Monty Python, fart in their general direction to show my scornful disdain at their limiting ownership of gold to 3% of holdings.

So, my Timely Mogambo Tip (TMT) is that if you are some dumb-ass Scandinavian who is letting these morons manage your retirement money, then you may be interested to know that you are, as would seem to be inferred by this time after the foregoing paragraphs which is one long indictment of the level of laughable ineptitude of these losers, also stupid.

Of course, the stupid British let their stupid prime minister, the stupid Gordon Brown, sell all Britain’s gold at less than $400 an ounce, so it is not that there is no precedence for this kind of idiocy! Hahaha!

I bring it up because it fits perfectly with the essay titled “The Driver for Gold You’re Not Watching” by Jeff Clark of Casey Research.

He says that “the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.”

The “elephant in the room” part refers to size, not smell or any of the other huge downsides to owning an elephant in an urban, apartment-dwelling environment, as “Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint.”

He calculates for us that this staggering $31.1 trillion “is more than twice the size of last year’s GDP in the US ($14.7 trillion)”!

That exclamation point was put there by me, for dire reasons that I only vaguely suspect, as even a piddly 3% of that $31.1 trillion pile of retirement money, invested in gold, is a whopping $933 billion invested in gold!!

“Why the double exclamation points?” you ask. Have I got some weird reason why I am always using so many exclamation points, like maybe I am being paranoid and weird, plus be a full-time lunatic and part-time father?

Well, probably yes, for one thing, but also because, “The market cap of the entire sector of gold stocks (producers only) is about $234 billion,” while “If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.”

He goes on “According to estimates by Shayne McGuire in his new book Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.”

My excitement rising, he goes on, “And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you, me, Joe Sixpack, and Jiao Tsingtao, and we’re looking in the rear view mirror at $100 trillion”!

And this $100 trillion mountain of money trying to get into a market of gold and gold stocks that is currently valued at less than $1.5 trillion makes me, and him, too, salivate at the prospect, as he concludes, “I thought of titling this piece, ‘Why $5,000 Gold Is a Conservative Forecast.’”

And with numbers like that, and the last 4,500 years of history showing that people eventually stampede into precious metals in a panic, what can you say except, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications.

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Chart–Why the Market Is Going Higher, and Inflation Is Heating Up

Here’s a chart of the U.S. Monetary Base …

Any time you have more and more of something, the individual pieces of it are worth less and less.  That applies to the dollars in your wallet, too. 

Monetary policy is decided by the Federal Reserve.  Rage against Helicopter Ben Bernanke if you like.  But the latest version of Congress is refusing to spend money on stimulus we desperately need – trains, dams, bridges, education, job training and so on.  So, Ben gives us the only stimulus he can – creating more money. It’s a sideways approach to the problem, but when all you have is a hammer, every problem becomes a nail.

In every crisis there is opportunity, and sure enough, this flood of money is bullish for the positions I’m recommending to my subscribers in Red-Hot Global Resources and Crisis Profit Hunter.

But don’t kid yourself. This will likely end badly. Gold and silver and other hard assets, as well as select stocks and funds, can be your cushion against a hard landing.

Tagged as: Federal Reserve, U.S. monetary base

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Sentiment, the Dollar and the Market

Sentiment, the Dollar and the Market
March 21,2011  Analysis from Chris Kimble 

Last week technical analyst Chris Kimble shared his technical look at market volatility, which included an inset on the rise in bearish sentiment (first chart below). Today he expands on the topic with an added perspective on the market and the Dollar (second and third charts).

Chris comments: Last week we ran the 500/Sentiment chart, showing that a ton of investors had become bearish in a hurry.

At the close of last week the second chart reflects that the 500 index closed above support and created another "downside bullish" wick along key support.

With the Dollar breaking key support, the ingredients are in place for a surprise to the upside. For the most up-to-date Kimble analysis, check out Chris's blog: Kimble Charting Solutions.

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The G-7 Forex Intervention Is A Perfect Example Of How Manipulated The Global Currency Market Really Is

What do governments and central banks do when they don't like what is happening in the financial markets?  They directly intervene and they manipulate the financial markets of course.  On Friday, the central banks of the G-7 acted in concert to drive down the value of the surging yen.  So why did they do this?  Well, the fear was that a rising yen would hurt Japanese exports at a time when the economy of Japan needs all of the help that it can get.  So, as central banks have been doing with increasing frequency, they directly intervened in the Forex market in order to bring about the result that they desired.  Unfortunately, this is not an isolated incident.  The truth is that foreign governments, central banks and large financial institutions are constantly manipulating the Forex, precious metals and stock markets all over the globe.  You see, in today's global economy the "stakes are so high" that the free market cannot be trusted.

The reality of the matter is that none of the financial markets are really "free markets" anymore.  Not that they are completely rigged, but to say that they are very highly manipulated would not be a stretch.

At least this time the manipulation was made public.  Of course it would have been really hard to hide the fact that all G-7 central banks intervened in the Forex on the same day.

The last time there was such a coordinated intervention in the global currency market was back in 2000 when central banks intervened to boost the struggling euro.

But the truth is that individual central banks attempt to manipulate the Forex all the time.

Some of these interventions become public.  In September 2010, a bold 12 billion dollar move by the Bank of Japan to push down the value of the yen made headlines around the globe but had only limited success.

Another example of this from last year was when the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc.

Many nations around the world have become extremely sensitive to currency movements.

In particular, there are several Asian nations that are known to be constant currency manipulators.  For example, Singapore is very well known for intervening in the foreign exchange market in order to benefit exporters.

And that is what this most recent intervention on behalf of the yen was all about.  It was about making Japanese exports cheaper.

But who is going to say no to Japan right now?  It is believed that Japan asked the G-7 to do this, and so they did.

Japanese Finance Minister Yoshihiko Noda told the media the following about this massive intervention in the marketplace by the G-7....

"Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market."

So isn't the Forex supposed to be a free market?

If you still believe that, I have a bridge to sell you.

According to Kathleen Brooks, the research director at a major Forex trading firm, it looks like there is a certain level that global authorities simply will not allow the yen to rise to....

"It looks as though global authorities are willing to pull out all of the stops to defend the 80.00 level in dollar/yen."

The following is the full statement released by the G-7 defending their currency intervention....

Statement of G-7 Finance Ministers and Central Bank Governors

March 18, 2011

We, the G-7 Finance Ministers and Central Bank Governors, discussed the recent dramatic events in Japan and were briefed by our Japanese colleagues on the current situation and the economic and financial response put in place by the authorities.

We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector.

In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the United States, the United Kingdom, Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets. As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate.

But it is not just foreign governments and central banks that manipulate financial markets.

If you want to try to make money on the Forex, you had really better know what you are doing, because most "little fish" get swallowed up and spit out.

A number of years ago I actually invested in the Forex and I rapidly learned that it is not a "clean game".  I discovered that there are industry insiders that openly confess that several of the "big fish" in the industry brazenly "stop hunt" and regularly trade against the positions of their clients.

Not that stock markets around the globe are much better.  It would take thousands of pages just to document the well known cases of stock manipulation and insider trading.

And don't get me started on the precious metals markets.  As I have written about previously, very compelling evidence of manipulation in those markets has been handed to the U.S. government and they have essentially done next to nothing with that evidence.

Not that people don't make money in the financial markets.  Some people make a ton of money.  But those people are experts and they know how to survive in a "dirty game".

If you are an amateur, you really need to think twice before diving too deeply into the financial markets.  If you think that you can jump into the Forex or the U.S. stock market and "get rich quick" you are in for a rude awakening.

The financial markets have become a game that is designed to funnel money to the "sharks" and to the "big boys".  Once you put your money into the game, the odds are that "the house" is going to win.

For those that still do believe that the financial markets are a good way to build wealth, at least be prudent enough to get some sound financial advice.  There is no shame in having a financial professional invest your money for you.

But it is no guarantee of success either.  The truth is that millions of Americans have experienced a lot of pain in the financial markets over the last few years.

As the global economy becomes even more unstable, the manipulation of the financial markets by governments and by central banks is going to become even more dramatic.

As financial markets around the world crash and rise and crash again a whole lot of people are going to be wiped out financially.

You don't have to be one of them.

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The Stock Market: What’s Really Happening with It

My take on what happens in the financial markets and what you hear from reporters and see in the media are two very different things. I guess you know that or otherwise you would not be reading my column.

The facts are the facts. Since the crisis in Japan hit a week ago, the Dow Jones Industrial Average has fallen 3.2%. But if we look closer, we see that North American stock markets started declining back on February 18, 2011—that’s when the Dow Jones hit a new record high for the bear market rally.

My opinion is that profit-taking (who can blame investors, stocks were up almost 100% since March 2009) was already underway. The earthquake in Japan accelerated the decline in stock prices not because of the damage to the Japanese economy, but for very different reasons:

The stock market has adjusted itself lower in the expectation that Japanese investors will pull funds out of North American stock markets and bond markets, as money is repatriated back to Japan to help pay for rebuilding the country’s devastated regions.

When the Kobe earthquake of 1995 hit, Japanese investors sold $30.0 billion in U.S. securities in the aftermath of that natural disaster. Depending on which news report you believe, the damage in Japan from last Friday’s earthquake is pegged at over $200 billion.

Japan is the second largest holder of U.S. Treasuries, second only to China. Japan holds about $886 billion in U.S. Treasuries (Source: “Rising yen adds to Japan’s woes,” Globe & Mail Mar.17, 2011). If Japan stops buying our debt because their needs have changed, and they start selling U.S. securities to bring money home for rebuilding the country, the ramifications in the U.S. will be higher interest rates.

Add to this the Federal Reserve’s comments earlier this week that they will not expand their $600-billion QE2 bond purchases, and one needs to seriously ask: if Japan will reduce its buying of U.S. Treasuries and the Fed will not continue buying them, who will buy the U.S. Treasuries we so desperately need to sell in order to finance our debt?

In light of the above events, it’s a wonder that the stock market has held up so well over the past week.

Michael’s Personal Notes:

I tried to buy more gold-related investments yesterday like I did on Tuesday, but gold prices started to rise Wednesday and they are continuing to rise this morning. Hence, I’ll sit tight for now. Hopefully we will see some more weakness in the precious metal prices, which I would view as a buying opportunity.

For those readers who follow technical analysis, my charts show good support for gold at $1,340 an ounce, about $60.00 below where it is trading today. I would be a buyer of more gold-related investments on any pullback towards $1,340 an ounce; unfortunately, this may not happen. Over the past 12 months, gold bullion is up $273.00 an ounce.

No bull market goes up in a straight line; no bear market goes down in a straight line. The bull market in gold is no exception. Since 2002-2003, I’ve followed a policy of buying gold-related investments on gold price pullbacks.

Where the Market Stands; Where it’s Headed:

Okay, Michael; what’s it going to take for you say that the bear market rally in stocks is over?

Technically speaking, the low point for the Dow Jones Industrial Average was 6,440 on March 9, 2009, when the bear market started. The high point was 12,391 on February 18, 2011. The mid-point between the high and low is 9,415. The bear market rally in stocks would have to break below 9,415 to be officially over. This morning, the Dow Jones Industrial Average trades at 11,613.

Whether you call it an overreaction to the Japan crisis or simple profit-taking, the stock market is obviously taking a breather. But until the market proves me otherwise, I see the bear market rally in stocks that started in March 2009 as still in force.

Bear market rallies usually end in the midst of investor euphoria. We haven’t seen that yet.

What He Said:

“Why Google stock will go higher: Most investors in Google, surprisingly, are retail investors. And that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stock will certainly move higher.” Michael Lombardi, PROFIT CONFIDENTIAL, June 2, 2005. Michael recommended Google stock as a buy on June 2, 2005, when the stock was trading at $288.00. On November 5, 2007, when Google reached $700.00 U.S. per share, Michael advised his readers to sell their Google stock and to put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at about $700.00 per ounce in November 2007. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold, because he saw gold as a much better investment.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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Coming Stock Market Correction: What Could Be the Best Indicator Yet

Everything is due for a correction now: stocks, commodities, and several currencies. The stock market isn’t overvalued; it’s just had a great run and a correction would be healthy. In addition, the majority of the world’s commodities have also been in a bull market and they too are due for a correction.

Just because one’s economic analysis suggests that a correction would be healthy for the long-run action in stocks and commodities doesn’t mean it’s going to happen. If the S&P 500 Index pulled back 15% from its current level, I’d be a new buyer. If the price of gold retreated to $1,200 an ounce, I’d be a new buyer of gold stocks—a lot of them. From my perspective, the price trend is still up for both stocks and commodities. I’d like to see a correction in a number of markets, because I don’t like seeing securities go up in value like they’re following a straight line. I also would like a more attractive entry point for considering new positions.

If there was a pronounced correction in precious metal prices, I would seriously consider investing in gold and silver in a very meaningful way. I would take on new positions in intermediate producers as well as several juniors. I’d also own a gold fund or ETF that actually holds physical gold and silver bars in a vault. With all the risks out there (e.g. sovereign debt defaults, war, inflation, higher interest rates, housing prices, and unemployment), gold is a must-have asset. Perhaps for the rest of this decade.

Wall Street analysts and investment newsletters have been quite bullish since the beginning of fourth-quarter earnings season. Some see this as a sign that the current bear market rally is coming to an end. I don’t know what’s going to happen to stock prices, but my view is that it’s probable that the S&P 500 Index will keep ticking higher this year. My prediction is 1,500 on the index, as you know.

There’s a lot of risk out there that could sap global investor confidence and I think this is why a lot of individual investors are still sitting on the sidelines, not participating in equities in the way they were before. Individual investor confidence was decimated during the subprime financial crisis and the broader stock market still hasn’t recovered from the previous bubble in the technology sector. So, you have a situation where most of the market is being played by professional investors or speculators. This makes the price moves more pronounced and it almost removes a level of rationality from the marketplace, because all the action is with a short-term time horizon for making money.

It’s important for equity investors to keep listening to what large corporations say about their operations. It’s also very important for equity investors to follow the Dow Jones Transportation Average. This index is teetering on breaking down and it may be the best indicator yet for an upcoming stock market correction.

Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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A Birthday for the Bull Market

03/09/11 Laguna Beach, California – Welcome to today’s very special “Birthday Party Edition” of The Daily Reckoning! Our little bull market is two years old today… They grow up so fast! To begin the festivities, please put on your party hats and click on the following link:

Two years old and just as cute a button!… Yessirree, that’s our little bull market!

As of today, the S&P 500 Index has produced a dazzling total return of 103% during the last 24 months. The NASDAQ, for its part, has delivered a total return of 121%. Those are some great, big numbers for an itty-bitty bull market.

In fact, as The Wall Street Journal recently observed, the S&P 500 Index doubled from its March 2009 low in just 707 days – the fastest doubling of the S&P since 1936. Back then, it took a mere 501 days. The Dow Jones Industrial Average has not quite doubled, but almost:

“The chart above looks eerily similar to a chart of the Dow from September 1934 through October 1936,” our colleagues at The 5-Minute Forecast relate. “In just over two years, the Dow doubled from 87 to 174:

“What the Journal failed to note was what happened after that 100% climb in 1936. Let’s widen the scope a bit.

“Ugh… After reaching that double in October 1936, the Dow topped out in March 1937 at 194…pulled back…came within about 5% of that top again in August 1937…and then plunged by March 1938 back to where it was three years before.

“This was the infamous ‘Depression within the Depression.’ As went the stock market, so went the economy. Whatever gains had been goosed by New Deal spending evaporated. By 1939, Treasury Secretary Henry Morgenthau conceded to Congress: ‘We are spending more money than we have ever spent before, and it does not work… After eight years of this administration, we have just as much unemployment as when we started…and an enormous debt, to boot.’”

But the stock market’s tale of woe did not end in 1939. By April of 1942, the Dow had surrendered more than half its value from the 1937 top. Shortly after World War II ended, the Dow briefly revisited its 1937 high, before slumping anew and languishing for several more years.

Bottom line: The Dow did not break above its 1937 high, for good, until December 1949! We’re not saying history is destined to repeat itself. But the parallels are pretty obvious, and ominous.

Happy Birthday, Bull Market!

Eric Fry
for The Daily Reckoning

Eric J. Fry, Agora Financial’s Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling.  Following his successes in professional money management, Mr. Fry joined the Wall Street-based publishing operations of James Grant, editor of the prestigious Grant's Interest Rate Observer. Working alongside Grant, Mr. Fry produced Grant's International and Apogee Research —  institutional research products dedicated to international investment opportunities and short selling. 

Mr. Fry subsequently joined Agora Inc., as Editorial Director. In this role, Mr. Fry  supervises the editorial and research processes of numerous investment letters and services. Mr. Fry also publishes investment insights and commentary under his own byline as Editor of The Daily Reckoning. Mr. Fry authored the first comprehensive guide to investing internationally with American Depository Receipts.  His views and investment insights have appeared in numerous publications including Time, Barron's, Wall Street Journal, International Herald Tribune, Business Week, USA Today, Los Angeles Times and Money.

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Don’t Worry, Be Happy: Unemployment Is Down, The Stock Market Is Up And The Economy Is Going To Be Just Fine

Haven't you heard?  The coming economic collapse has officially been canceled.  The U.S. economy is in full recovery mode.  It has just been announced that the U.S. unemployment rate fell to 8.9% in February.  That was the third monthly decline in a row.  192,000 new jobs were created in the U.S. during February.  That was the fifth month in a row in which the U.S. economy has gained jobs.  Corporate profits are way up.  For the most recent month that numbers are available, sales of GM vehicles were up 49%, sales of Chrysler vehicles were up 13%, and sales of Ford vehicles were up 10%.  Can't you see?  The great American economic machine has roared back to life.  The stock market is way up this year.  The recession is over.  Our financial system is more stable than ever.  Pretty soon all Americans that want jobs are going to be able to get jobs and all of our government debts are going to be paid off.  The greatest days for the U.S. economy are just around the corner.  So don't worry, be happy.

Don't worry, be happy - the U.S. unemployment rate is falling and it will continue to fall.  Don't be concerned that according to Gallup, the U.S. unemployment rate actually rose to 10.3% at the end of February.  Everyone knows that U.S. government numbers are far more accurate than the numbers that Gallup puts out.  Just don't pay any attention to the "doom and gloomers" and just keep on watching American Idol.  Very soon there will be plenty of jobs for everyone.

Don't worry, be happy - globalism is doing wonderful things for the U.S. economy.  Just look at all the incredibly cheap products from foreign nations such as China that are available in our stores.  Do you think that all of this stuff would be so cheap if we didn't have free trade?  We may have a massive "trade imbalance" right now, but this is just temporary as we transition over to a one world economy.  The job losses may look bad right now, but once our wage levels go down low enough we will be able to export more stuff to the rest of the world.  So don't be alarmed when the "protectionists" tell you that between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.  Those workers just need to get more "education" so that they can be competitive in today's global economy.  And please don't listen to people like Alan Blinder, an economist at Princeton, who is projecting that offshoring will ulti­mately affect up to 40 million American jobs.  The truth is that there are many jobs that simply cannot be outsourced.  For example, workers over in China and India will never be able to flip the burgers that need flipping here in the United States and they will never be able to welcome people to your local Wal-Marts.

Don't worry, be happy - the fact that the number of Americans on food stamps has set another new all-time high (44 million) is just an indication that more Americans are learning how to use government services.  At some point this number will start to go down as the U.S. economy roars back to life.

Don't worry, be happy - the fact that new home sales in the United States have been setting record lows just means that the only direction they have to go is up.  As the employment situation continues to brighten, it is inevitable that the housing industry in the U.S. will surge to greater heights than ever before.

Don't worry, be happy - the fact that so many Americans are going back to work means that lots of additional tax money will soon be pouring into the coffers of state and local governments.  In Idaho, Boise County has just declared bankruptcy, but that is just an isolated incident.  We shouldn't be seeing too many more local governments default on their debts.

Don't worry, be happy - the economic improvement that we are seeing right now will soon mean that the austerity measures being implemented across the United States will soon come to an end.  Yes, times have been tough in many communities lately.  The following is an excerpt from a recent New York Times article that describes the brutal austerity that has been implemented in Vallejo, California....

Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city’s firehouses were closed. Last summer, a fire ravaged a house in one of the city’s better neighborhoods; one of the firetrucks came from another town, 15 miles away. Is this America’s future?

Sadly, that article in the New York Times was far too negative.  The truth is that things are starting to turn around.  Soon our cities and towns will be more prosperous than ever and all of this "austerity" will just be a bad memory.  It is only a matter of time.

Don't worry, be happy - Barack Obama has announced a great plan for reducing the federal budget deficit.  As the U.S. economy grows at a 5 or 6 percent pace for the rest of the decade the budget deficit is going to just keep on shrinking.  Thanks to Obama, our budget deficit will be reduced to 607 billion dollars by 2015.  Obama's policies are going to lead to much greater financial strength for the U.S. government.  Those that are warning that the U.S. government cannot handle this much debt simply do not understand history.  As a percentage of GDP, our debt really isn't that bad.  When analyst Mary Meeker recently told BusinessWeek that the U.S. government has a "net worth of a negative $44 trillion" she was just exaggerating the situation.  The truth is that the U.S. government is on really solid ground financially.

Don't worry, be happy - the price of oil cannot possibly stay this high.  Yes, U.S. crude rose to $104 a barrel today, but that is just because of the crisis in Libya.  The American people are just going to have to deal with higher gas prices for a few weeks.  ABC News is reporting that regular unleaded is selling for $5.29 a gallon at one gas station in Orlando, Florida.  But of course that won't last for too long.  Things will get back to normal soon.

Surely Barack Obama and his crack team of national security experts are on the verge of solving the crisis in Libya even as we speak.  With incredibly competent diplomatic professionals such as Hillary Clinton on the job, it is only a matter of time until the chaos in the Middle East comes to an end.

The peace and stability that the Obama administration is going to bring to the Middle East is going to drive oil prices back down.  So please don't worry - you will probably be paying 2 dollars for a gallon of gasoline by Christmas.  The price of oil is not going to set a new record high and it is not going to cause another financial panic like we witnessed back in 2008.

Everything is going to be okay.  Please do not listen to any of the "doom and gloomers", the "gold bugs", the "protectionists", the "armchair economists" or the "conspiracy theorists".  Do you think that they know more than the highly educated experts in the Obama administration, the highly educated experts running the Federal Reserve or the highly educated experts on the mainstream media?

Yes, we have had some "glitches" in the economy recently, but very competent people are very busy fixing all of those problems.  So instead of being obsessed with our "economic problems", you should just relax and have some fun.  Baseball season is getting ready to start and all month fantasy baseball leagues are going to be forming.  Now is a great time to join one.  A new season of Dancing With The Stars is going to begin shortly, and this cast looks like the best one yet.  Jennifer Lopez and Steven Tyler have been wonderful additions to American Idol this season.  Did you see the dramatic unveiling of the "final 13" on Idol the other night?  It was great television.  A new Matt Damon has just come out and Justin Bieber just got a new haircut.  Life in America is good.

Many of you already have to work two or three jobs just to pay the bills.  Why spend your precious free time reading websites like The American Dream which will just get you all riled up about the state of the economy for no reason whatsoever?

There is nothing to worry about.

Everything is under control.

Don't worry, just be happy.




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