The Bear Market’s Little Secret
Thursday, September 14th, 2006
By Michael Lombardi, MBA for Profit Confidential
If you believe, like me, the U.S. housing market is headed for a hard landing instead of a soft landing, then the economy is headed for trouble. Really, can all those Americans who bought homes with little or no money down, or with adjustable rate mortgages which eventually re-adjust themselves to market interest rates, cope in an environment of high interest rates?
If you believe, like me, the U.S. Federal Reserve will have to lower rates once they see the housing market is in trouble, then a lower valued U.S. dollar lies ahead. After all, didn’t U.S. interest rates rise 17 times and the American dollar basically stayed at about the same value against the euro and other major world currencies?
If you believe, like me, that the general bear market in stocks which started in the year 2000 is in full force today, then stocks are deflating in price. Couple that with deflating housing prices and general price deflation we are importing from China, then the Fed’s job ahead is to lower rates sharply and to expand the money supply aggressively to fight deflation. In that situation, what possible foreign demand will exist for U.S. dollars?
All these “if you believe” scenarios lead me to the point of today: In time, the only real alternative to U.S. dollars will be something real. And that reality is gold bullion.
As I wrote last week, I’m taking the action in the gold market as a signal the gold bull market correction is still not over. “If you believe…” then the recent price action of gold bullion and gold shares are an opportunity for patient money.
Next Post: The Letter and the Spirit of LawPrevious Post: Demand Overseas Fuels Appetite
Tags: bear market, federal reserve, interest rates, U.S. housing 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




