Betting Against a Market That’s Tripled in Value Since 2006 is Not Wise!
Monday, May 28th, 2007
By Michael Lombardi, MBA for Profit Confidential
If a speaker is getting $150,000 per speech, there must be immense pressure to say something startling. That’s my only guess as to the reason behind former U.S. Fed Chairman’s continued strong economic comments.
A few months ago, Alan Greenspan (via satellite) told a group of bankers in Toronto the U.S. could be in a recession by the end of this year. Last week, to a conference in Madrid (also via satellite), Greenspan announced that a crash for China’s stock market is imminent.
While I agree with the U.S. recession prediction, someone should give Mr. Greenspan a quick refresher lesson in technical analysis. There is no stronger economic force in the universe than an investment in a trend. As I’ve said many times, don’t fight the tape because the trend is your friend.
Since 2006, the main Chinese stock index has more than tripled in value. My Greenspan should remember the Chinese government is doing its best to keep its economy cool — by raising domestic interest rates and by increasing the loan reserves of its banks.
The reason why Chinese stock prices continue to rise is quite simple: A world awash in liquidity in an increasing global economy doesn’t want to miss out on the economic boom in China. While China’s population may be multiples of the U.S., and while China’s economic revolution may only be starting, the value of the NYSE is multiples more than that of the main Chinese stock market.
The strength of Chinese stocks might continue to surprise many analysts and economists, Alan Greenspan included.
NEWSFLASH — The median price of new homes sold this past April fell a record 11% from April 2006. It’s obvious new home builders are marking down prices to get their inventory moving. Meanwhile, the U.S. National Association of Realtors reports sales of existing homes dropped 2.6% in April. The median price of U.S. resale homes also fell in April by 0.8% — the ninth consecutive monthly decline in the median price of resale homes. The carnage in the U.S. housing market continues… especially with a record 4.2 million (8.4 month inventory) of unsold homes!
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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
