Lombardi Publishing Corporation was established in 1986 as an investment newsletter providing stock market analysis to its readers. Today, we publish 26 paid-for investment letters, most of which provide stock market direction and individual stock picking analysis.
Profit Confidential is our free daily e-letter that goes to all our Lombardi Financial customers and to any investor who wishes to opt-in to receive it. Written by Lombardi Financial editors who have been offering stock market guidance to Lombardi customers for years, Profit Confidential provides a macro-picture on where the stock market is headed.
We start by determining if we are in a bear market or a bull market; based on that analysis, we look at what sectors are hot and what sectors to avoid.
Profit Confidential famously warned its readers to bail from stocks in 2007 (the bull market was over, and a bear market was setting in), telling investors to jump back into the stock market in March of 2009 (a bear market rally began).
Michael Lombardi was one of the first to predict the U.S. economy would be in a recession by late 2007. On March 22, 2007, he warned, “Over the past few weeks, I’ve written about subprime lenders, and how their demise will hurt the U.S. housing market, the economy, and the stock market. There’s no escaping the carnage headed our way because the housing market and subprime business are falling apart. The worst of our problems, because of the easy money made available to borrowers, which fuelled the housing boom that peaked in 2005, has yet to arrive.”
At the same time Michael wrote that former Federal Reserve Chairman Alan Greenspan said, “The worst is over for the U.S. housing market, and there will be no economic spillover effects from the poor housing market.”
Michael also warned his readers, in advance, of the crash in the stock market in 2008. On November 29, 2007, Michael Lombardi predicted, “The Dow Jones Industrial Average, the S&P 500, and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market reality of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.”
The Dow Jones peaked at 14,279 in October 2007. A “sucker’s rally” developed in November 2007, which Michael quickly classified as a bear trap for his readers. One year later, the Dow Jones Industrial Average was at 8,726.
Profit Confidential turned bullish on stocks in March 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009 to 12,876 on May 2, 2011, a gain of 99%.
The two-year bull market rally is coming to an end. The start of a bear market doesn’t mean investors should run to the sidelines. In fact, the bear market will present investors with an unprecedented opportunity.
In 2013, Michael predicts that the devaluation of the U.S. dollar that started in early 2009 will accelerate as the U.S. economy deteriorates, that gold prices will continue to rise, and that the euro is done. Michael also predicts that inflation will be a big, big problem for the U.S.; probably for the rest of the decade. Finally, Michael believes that 2013 will be a poor year for stocks.
That doesn’t mean it will be a bad year for all stocks. Even in the deepest bear market, there are always some stocks going against the grain. Michael has ways investors can protect their holdings and even make money off the weak economy.
Not everyone is happy with the current bull market, despite the fact that the S&P 500 and the Dow are headed for their fourth straight year of gains and seemingly more records to break.
As the old saying goes, “the trend is your friend,” and so far, this has played out.
Just take a look at the chart below of the S&P 500 and its rally from the March 2009 bottom. Also note the rising flow of money into the system by the Federal Reserve, as indicated by the green upward-trending line. (Read “Thank the Fed for Your New Car, Home, Investments.”) Cheap and ample money combined with extremely low interest rates and yields on bonds has helped to fuel the stock market rally.
Chart courtesy of www.StockCharts.com
The stock market advance could continue, as long as the Fed and other central banks around the world are willing to continue to print money.
Now, let me explain why not everyone is happy.
With the burden of home foreclosures, job losses, declining wages, and continued uncertainties, many Americans do not have the resources to play the stock market. These lower- and middle-income Americans are just trying to pay for the necessities to survive daily, never mind thinking about their 401(k)s and retirement funds.
So you have the people making tons of money from the stock market. These are the consumers buying new cars, homes, traveling, and playing the stock market.
Then you have the people who are still struggling and haven’t yet recovered fully from the Great Recession. It could take a few more years for these … Read More
According to BlackRock, Inc. (NYSE/BLK), the biggest U.S. money manager by assets, $70.1 billion was funneled into exchange-traded funds (ETFs) in the first quarter of this year. What’s even more surprising is that 93% of all the inflows were in the U.S. equities market funds. (Source: Wall Street Journal, April 2, 2013.)
Morningstar, Inc. (NASDAQ/MORN), an investment research firm, states that 352 mutual funds that are classified as bond funds had exposure to the equities market as of the end of March 2013. This number is up from 312 at the end of 2012 and 283 in the first quarter of 2012. (Source: Wall Street Journal, May 1, 2013.)
Take Loomis Sayles Strategic Income fund, for example. This $15.0-billion fund is shifting its gears toward stocks, as its allocations to the equities market soared from five percent in mid-2011 to more than 19% now. According to the fund, it can allocate up to 35% of its assets into the equities market in preferred stocks and dividend-paying common shares. (Source: Loomis, Sayles & Company, L.P. web site, last accessed May 3, 2013.)
On top of this, and as it has been documented in these pages before, central banks are investing in the equities market, too.
It is no longer a hidden fact: investors, like central banks, and bond funds are rushing toward the equities market, because investment returns elsewhere are very low. These investors are taking a higher risk for an average rate of return.
The Dow Jones Industrial Average rose 11% in the first quarter—the best start to a year since 1998—and the S&P 500 soared 10%.
All … Read More
So much change is in the air: the stock market breakout, declining commodity prices, and a world awash in cash.
Thinking about gold, it is just a piece of soft rock. But it’s a rock with a special connotation and with unique properties. It did a fantastic job helping the space shuttle, and a lot of people think it looks pretty good.
The first gold jewelry-makers must have been jumping for joy when they found a shiny rock they could shape without breaking. I read that approximately just 10% of gold production is used in industry; the rest is for jewelry and physical investment.
Because people throughout the centuries attributed value to gold, the soft rock has some worth.
Today, gold prices are determined by derivative traders, central banks, and what barterers believe it to be worth. This is not a group of market-makers that inspires confidence.
I certainly see a role for a little gold as part of an overall portfolio. It has always been a diversification, fear, and inflation-related hedging tool.
With lower gold prices, gold miners are struggling on the stock market. Even the best-quality, fastest-growing gold miners can’t get their stocks to move.
This is the inherent difficulty with resource stocks, and it will never change.
Predicting gold prices is a crapshoot. For the most part, it seems to me that gold prices just trade off their near-term directional momentum, save for a shock. Figures on the supply and demand of the commodity seem to play a lesser role in … Read More
As I have been writing in these pages, after a bull market that has gone on for 12 years, the recent pullback in gold bullion prices should be seen as a correction in an ongoing bull market in the metal. I see the pullback as a buying opportunity.
While news headlines flash a bearish sentiment towards gold bullion prices, the gold bears are screaming about how much money central banks have lost due to the plunge in prices and the gold miners are facing pressures. The usual gold bullion consumer countries, India and China, are seeing robust demand.
According to the All India Gems & Jewellery Trade Federation, India is experiencing its greatest demand this year as gold bullion prices have declined. (Source: Bloomberg, April 18, 2013.)
In China, customers are lining up to buy gold bullion. According to the director of sales and operations at Chow Sang Sang Holdings International Limited, the number of gold bullion products sold in the Hong Kong and Macau area during the weekend of April 13 soared 150%.
Other countries in the global economy are witnessing increased demand for the metal as well. As talk of gold bullion entering a bear market continues, consumers from countries like Australia and Japan have ramped up their gold buying.
Gold bullion sales at The Perth Mint in Australia have soared. The treasurer of The Perth Mint, Nigel Moffatt, commented on this situation by saying, “the volume of business that we’re putting through is way in excess of double what we did last week.” He added, “there’s been people running through the gate.” (Source: “Golden times for Perth … Read More
From last Friday to Monday of this week, gold bullion prices fell from about $1,550 an ounce to as low as $1,350—a decline of more than $200.00 dollars, or almost 13%.
The financial media tells us the reasons for the sell-off are many; some are saying gold bullion prices declined because Cyprus was asked to sell its gold to pay its bills, while others are saying the bull run in gold bullion is over altogether.
Just like other commodities, there are human and psychological emotions present when it comes to gold bullion trading. The metal isn’t immune to panic selling. But what still holds true, regardless of the rush to sell, is that demand for gold bullion is still very present; the fundamentals haven’t changed.
Central banks are buying with two hands. As I have been harping on about in these pages, central banks will continue to be major buyers. Central banks from countries like Russia are adding record amounts of gold bullion to their reserves. As a whole, central banks purchased the largest amount of gold in 2012 since 1964. But even with all this gold buying, countries like China, India, and Japan still don’t hold as much gold bullion as the United States, Germany, France, and Italy.
Consumer investment demand for gold is robust as well. Sales of American Eagle gold bullion coins from the U.S. Mint are booming. In April 2012, the U.S. Mint sold 20,000 ounces of gold bullion in coins. So far in April of this year, the amount of gold bullion coins sold has reached 50,500 ounces—and the month hasn’t even ended yet! … Read More
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