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

Why My Coffee Is Costing So Much More This Year

By for Profit Confidential

Why Deflation is Out of the Question for the U.S. EconomyWe are told that in the month of January, inflation in the U.S. economy increased by one-tenth of a percent. In February, prices increased by a similar percentage. In the entire year of 2013, the “official” rate was only 1.5%. (Source: Bureau of Labor Statistics web site, last accessed April 8, 2014.)

Some economists are calling for even less inflation in 2014 and even outright deflation (a period when prices decline).

This is absurd! Anywhere you look, things are costing more each passing day.

Consider the chart of gas prices below. Since the beginning of the year, spot prices for gasoline have increased by eight percent.

Gasoline Unleaded - Spot Prices Chart Chart courtesy of www.StockCharts.com

Unfortunately, gas prices aren’t the only thing that has gone up. Basic food prices are skyrocketing, too!

Since the beginning of the year, corn prices have gone up 22%. Coffee prices are up more than 75% year-to-date. Why aren’t these price increases reflected in the “official” numbers? It’s because the government leaves out two very important consumer essentials when it calculates its official inflation rate: energy and food prices.

As we all know, over the past few years, food stamp usage in the U.S. economy has dramatically increased. In January of 2014, 46.5 million Americans were using food stamps. (Source: U.S. Department of Agriculture, April 4, 2014.) The use of food stamps in the U.S. economy is a well-known fact, but have you wondered why so many Americans can’t even afford to buy food? You can blame inflation. Food costs are rising quickly so it’s becoming increasingly difficult for people to keep up with rising food prices when their incomes are not rising as fast.

I have been harping on about this for too long; all that new money the Fed printed over the past five years (trillions of dollars of it) will catch up to us in the form of inflation. And inflation in the future is going to be a major problem fo… Read More

Why Economic Growth Doesn’t Guarantee Rising Share Prices

By for Profit Confidential

Why Today's Earnings Are for Yesterday's Stock PricesTrading action in stocks has been all over the map so far this year, while investor sentiment remained generally positive. The fact that there was a bunch of profit-taking after the solid recovery in February and March is neither a surprise nor unnatural for a market at a high.

The Federal Reserve continues to be more than accommodative to Wall Street with its words of comfort and its willingness to provide continued monetary stimulus past previously stated benchmarks.

Near-term, geopolitical events in Ukraine are likely the biggest risk for stocks. It’s been a slow start this earnings season with unremarkable results, but the numbers aren’t that bad. Growth is growth.

The NASDAQ Biotechnology Index has just now crossed its 200-day simple moving average, if that’s meaningful. It’s done so several times over the last five years and recovered after a period of consolidation.

Biotechnology stocks aren’t worth paying a lot of attention to in terms of portfolio strategy. These risk-capital stocks trade on their own unique set of business fundamentals. They’ve been powerhouse wealth creators for sure over the last few years. They are due for an extended break.

I think the best plays in this market are still with dividend-paying blue chips as they experience price retrenchments. These stocks continue to have a tremendous amount of favor with big investors in a slow-growth environment. Dividend income is very important when top-line growth is in the single digits.

For those equity investors wanting to take on positions in this market, I’m still a fan of existing winners, particularly among the brand-name stocks that have distinguished themselves with long track records of rising dividends and operational growth. Some of these companies include 3M Company (MMM), Johnson & Johnson (JNJ), Union Pacific Corporation (UNP), NIKE, Inc. (NKE), and Colgate-Palmol… Read More

My Simple, Safe Investment Strategy for Playing Risky Stocks

By for Profit Confidential

Here's a Strategy to Play Momentum Stocks While Limiting RiskThere’s some hand-holding required out there in the stock market. We have seen destruction in the momentum biotech and Internet stocks that have corrected by more than 30%.

Now we are hearing some analysts on Wall Street saying to jump back in—but I’m hesitant at this juncture, as the downward risk is likely not over yet.

The reality is that, given the superlative gains recorded in 2013 by many of these biotech and technology momentum stocks, you shouldn’t be surprised to see the current malaise.

The fact that many of these highflying stocks in the stock market have more than doubled in a year should be a red flag. My simplest advice is to wait for the selling to subside in the stock market before you jump into these stocks.

You also need to be careful when hearing the bullish comments by Wall Street firms on these momentum stocks. Many of these firms have investment banking relationships with these stocks; it’s only natural to support your clients in the bad times.

Don’t get fooled by the stock market rhetoric. Instead, take a prudent approach to the stock market.

You don’t want to be caught exposed on this stock market unless you are fine with losing money should the selling intensify. Like I wrote at the beginning of the year, making money on the stock market will not be easy this year and capital preservation should be your objective.

Now, if you are willing to risk some capital and feel a stock market bottom is near, then what I suggest you do is consider using call options as a risk management investment strategy.

By employing call options, you can partake in a possible stock market bounce, while also controlling the amount of capital you have at risk, which is the premium paid for the option.

Let me show you how this simple strategy works using Tesla Motors, Inc. (NASDAQ/TSLA) as an example. (Note: this is only for illustration and is not meant to be an actual trade recommendation.)… 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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