Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

The Question Everyone Is Asking This Morning

By for Profit Confidential

Stocks Turn Negative for 2014; Likely to Get WorseYesterday, the Dow Jones Industrial Average fell 317 points, while the NASDAQ Composite Index fell 93 points—respective losses of about two percent per index. This morning, stock market futures are down again.

As a reader of Profit Confidential, this “rout” we are now in should come as no surprise. I have been writing for months how overpriced the stock market has become, how the stock market has become one big bubble thanks to the easy money policies of the Federal Reserve, and how the bubble would burst.

Yesterday, those who have been riding the stock market’s coattails higher and higher got the first taste of what is being called a “correction” by the mainstream media. But like I just said, to me, this is a stock market bubble that is bursting—very different than a correction. For months, historically proven stock market indicators (many of which I have written about in these pages) have been flashing red…but very few investors paid any attention to them.

The Dow Jones is now down for 2014. Yes, seven months into the year and big-cap stocks have gone nowhere. So far in 2014, investors would have done better owning gold and silver or U.S. Treasuries.

I have been predicting this will be a down year for the stock market and I’m keeping with that forecast. After five consecutive positive years for the stock market, the bounce from the 2008 market low of 6,440 on the Dow Jones could finally be over.

Dear reader, as elementary as it sounds, interest rates are the catalyst for all this.

After falling for 30 years, a time in which the stock market did very well, interest rates bottomed out in July of 2012 and started moving upward. The 10-year U.S. Treasury yielded 1.46% on July 16, 2014. Today, that Treasury yields 2.56%, up 75% in two years.

The Federal Reserve itself couldn’t be any clearer; it is predicting the federal funds rate will rise from about zero today to 1.2% by the end of … Read More

Why Exposure to Healthcare Sector Is a Must

By for Profit Confidential

How These Companies Celebrate a Great QuarterIn what is on par with the course in today’s stock market, biotechnology firm Amgen Inc. (AMGN) posted double-digit revenue and earnings growth while raising its full-year outlook.

The kicker for this stock and its recent price strength was the news that the company plans to cut 12%–15% of its global workforce (2,400 to 2,900 employees) and close four of its facilities in Washington and Colorado. A lot of the job cuts will be to middle management, according to Amgen’s Securities and Exchange Commission (SEC) Form 8-K.

The company’s second-quarter sales grew 11% to $5.18 billion on strong sales and better margins on “ENBREL,” which is a treatment for arthritis. GAAP (generally accepted accounting principles) earnings grew 23% to $1.55 billion, while adjusted earnings per share grew 25% to $2.37.

On the back of such a strong earnings performance, you’d think the company would be hiring. But such is the marketplace with large corporations and large institutional investors.

Amgen has finally broken out of a 12-year price consolidation on the stock market and is set for more capital gains.

A share split wouldn’t be a surprise and the company is well positioned to provide shareholders with another dividend increase at the beginning of next year.

While Wall Street earnings estimates are going up for this company, I would say that a lot of good news (and drug development expectation) is built into the share price. Still, I don’t see Amgen as overpriced considering its business plan for the next few years. The company’s new restructuring plan is substantial and is likely to be rewarding to stockholders.

Healthcare-related stocks are proven wealth creators and are a valuable addition to any long-term portfolio. There’s a lot more risk in pure-play drug development, of course, and biotechnology stocks are pure risk-capital plays

But a company like Johnson & … Read More

How It Pays to Play the Momentum Stocks

By for Profit Confidential

Why Making This Mistake Was a Good MoveI have been following social media company Twitter, Inc. (NYSE/TWTR) since the stock debuted to heightened fanfare on November 7, 2013. The hyped-up momentum play spiked to just over $74.00 on superlative enthusiasm and pure insanity, prior to its subsequent sell-off.

I must admit that Twitter intrigued me as a trade but only if the stock price broke below $30.00, as I have suggested in these pages before. Well, on May 7, Twitter declined to a low of $29.51.

For those of you who picked up some shares at this low, it was the correct decision; Twitter surged 25% on Wednesday morning on news that the company had easily beat on revenues and earnings estimates. Revenue growth was impressive at 124%, as the company was able to monetize its user base just as Facebook, Inc. (NASDAQ/FB) has done.

Twitter Inc Chart

Chart courtesy of www.StockCharts.com

Twitter grew its user base at a faster pace than the stock market expected and better yet, it was able to make advertising money from these efforts, which is what you want from social media stocks.

With these results, we are seeing numerous rating and price target upgrades for Twitter from Wall Street, which has been anxious to do something in an otherwise boring stock market.

As a trader in the stock market, I would be looking to buy Twitter on downside weakness—after all of this hoopla has faded. At this time, the valuation continues to be obscene.

The reality is that what happened with Twitter indicates the strong upside potential in Internet stocks that can be achieved for aggressive traders in the stock market. You may make steady returns on companies like General Electric Company (NYSE/GE) and Wal-Mart Stores Inc. (NYSE/WMT), but these returns would be nowhere close to the potential gains you could achieve with higher-risk growth stocks.

For momentum traders, my favorites across the spectrum of Internet stocks include The Priceline Group Inc. (NASDAQ/PCLN), … Read More

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

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