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Welcome to Profit Confidential • Monday, May 21, 2012

Will the Recovery Plan Work?

Saturday, September 24th, 2011
By George Leong, B.Comm. for Profit Confidential

The U.S. debt currently stands at a staggering $9.74 trillion, as of September 23 and, worse yet, $2.0 billion a day over the past year. This translates to $31,938 for each American. Now, you may think that fiscal spending should be more constrained, but the reality is that spending has been on the up.

 The problem is that the country faces a slowing economy, characterized by a weak housing market, declining consumer spending, and significant troubles in the financial sector. The government has already carried out a massive $161-billion economic stimulus program that is set to end in December, but appears to have had minimal success at best, as consumers are not spending and this means a jolt to economic growth.

 Now, the country is faced with trying to prevent a massive meltdown in the financial services sector, like what we saw during the U.S. Savings and Loan Crisis of the 1980s and 1990s, which required significant government help and capital infusion. The Bush administration is now looking at significant $700-billion financial bailout legislation aimed at dealing with the current crisis and that could offer some aid to homeowners. The key goal of the legislation would be the ability of the government to buy devalued assets from financial companies in trouble and help prevent the blockage in credit to these companies so that a turnaround could surface.

 While the concept appears to be workable, we question whether it would work given the condition of the housing market and its impact on financial firms. At the end of the day, the government will need some luck and hope that the economy begins to pull out from the current slowing in order for the legislation to have any significant impact.

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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