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Welcome to Profit Confidential • Wednesday, May 23, 2012

Will 2008 See a Rally?

Monday, November 5th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential

The Federal Reserve drops rates, stocks go up a lot, and then they go down a lot. This market still has a long way to go before it develops any defined trend. Frankly, I’m not overly confident that stocks can develop any material rally in 2008.

The latest economic numbers like the GDP and payrolls were actually quite good, but the whole housing issue, which includes housing prices and subprime mortgages, is still going to be a major drag on the entire economy for quite some time.

Also, don’t forget that the commodity price cycle is still in full swing. You can’t really argue that it isn’t with the price of oil and gold trading at or near record highs. I also believe that commodity price strength is beginning to spill into agricultural commodities, which is good for farmers, but not good for inflation.

The dollar continues to be at significant risk in relation to global currencies. With the Federal Reserve willing to do whatever it takes to help the economy, I’m still very worried about inflation going into 2008. From the broader market perspective, the next several quarters are likely to be difficult.

But, individual investment opportunities are still plentiful. We just might not get a big tailwind from the rest of the stock market. China stocks continue to be the most attractive speculative opportunities at this time, and I expect this to be the case well into 2008.

No doubt, the probability of a major stock market correction in China is increasing, but that economy can handle the shock. As investors, we have to be prepared for this eventuality. It’s not a matter of if but when Chinese stock markets will experience a major correction. At the end of the day, however, I would not be betting against China. If that market corrects, it will definitely be time to open up our wallets.

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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