Where We’re Going (Part III in a Series)
Friday, November 26th, 2004
By Michael Lombardi, MBA for Profit Confidential
In my last two Profit Confidential commentaries, I made up a make-believe dialogue between President Bush and Fed Chairman Alan Greenspan on how they dealt with the tech- bubble that burst in early 2000.
In “How It All Started,” I talked about how U.S. interest rates were lowered drastically to avoid a recession like the one experienced by Japan. In “Where We Are Today,” I talked about how rates were moved higher by the Fed in the latter part of 2004. The Fed did this in an effort to stem consumer over- borrowing and to put an end to a possible real estate bubble.
So, here’s my make-believe conversation between President Bush and Alan Greenspan in late 2004:
Bush to Greenspan: “Alan, our dollar is sinking so fast I can’t get any foreigners to buy our bonds. You know I need to spend, spend, spend to get the economy going. And while I know a lower dollar is a smart thing for us domestically, it’s falling too fast. What can you do?”
Greenspan to Bush: “We can spike rates a bit more to make our debt instruments more attractive to foreigners. But higher rates could mean a lower stock market again, and a retraction of consumer spending.”
Bush to Greenspan: “Alan, if we don’t get foreigners buying our bonds, we’re toast. If the stock market hurts a bit, it’s better than the alternative of foreigners not financing our daily operations. If we keep going like this, countries might start using gold as their official reserve as opposed to the U.S. dollar.”
Greenspan to Bush: “It’s my last year sir, but I’ll see what I can do about getting those rates higher.”
And there you have it my dear friends. My prediction that we will see 2005 end with higher interest rates, a falling stock market and gold continuing its rally in light of a very weak American dollar. All I can ask, or suggest, is that you prepare your portfolio accordingly for the inevitable.
Next Post: Double your profits as oil prices skyrocket!Previous Post: Where We Are Today (Part II in a Series)
Tags: gold, interest rates, stock market
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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
