Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

The Federal Reserve Works, But Guess Who Has to Pay for It?

Friday, March 8th, 2013
By for Profit Confidential

But Guess Who Has to Pay for ItThanks to the Federal Reserve, borrowing costs are down. But the last time I took my vehicle in for service, it cost me well over $1,000 because a few parts had to be replaced. I have a trustworthy mechanic, but it seemed like a lot for what got done.

My insurance bill was up quite a bit from the previous year and what really bugged me was that it was with less coverage. My optometrist, dentist and veterinarian are all charging more for their services. And my plumber, God bless him, swims in his heated outdoor pool in winter with snow on the ground. Point being—I don’t care what any statistic says, there is price inflation in the marketplace right now. More than is being admitted to by the Federal Reserve or comprised in the Consumer Price Index (CPI). And we haven’t even gotten to fuel costs yet.

There is nothing wrong with a little price inflation. The Federal Reserve, like many other central banks, targets a two-percent annual inflation rate, but the big problem is inflation in the face of stagnant incomes. That’s wealth destruction and the Federal Reserve can’t do a thing about it.

Compared to other economies, the U.S. economy has always been good at righting itself after a shock or recession. But now, it really is different. There is little to no financial flexibility in fiscal and monetary policy. The Federal Reserve created the money and it’s been spent. Corporations and Wall Street benefitted significantly, but the average consumer is stuck—and with the bill too.

The headlines show tame inflation numbers, but we all know there’s price inflation out there because it costs more to get to work, eat out, pay your electricity bill, and take the subway. But the real problem going forward is this: the commodity price cycle, which is not over.

The U.S. economy should be able to squeeze out some modest GDP growth this year. But with corporate attrition, cutbacks and limited new hiring, lasting job creation will be challenging. (See “The Fed’s Running the Show and Risk Keeps Going Up.”) This means that income growth should be flat and, with the inflation we already have, purchasing power will continue to erode for a lot of people.

  • Double your money every year for 24 years running?

    Since 1989, we've made 912 option picks, with an average annualized profit of 166.17% per recommendation.

    All from Lombardi's best option picks!

    Click here to learn more.

When the commodity price cycle makes its full transition into the agriculture sector, raw material costs are going to go up even more and this means food will become much more expensive. Food and energy—the two most important things that are excluded from inflation numbers.

The only way the Federal Reserve can fight higher inflation is with higher interest rates. They already dropped a hint about ending QE3. So, the very thing the Federal Reserve’s been pining for will soon become a reality. The cycle is going to change, and guess who will be paying for it?

VN:F [1.9.22_1171]
Rating: 1.0/10 (1 vote cast)
VN:F [1.9.22_1171]
Rating: +1 (from 1 vote)
The Federal Reserve Works, But Guess Who Has to Pay for It?, 1.0 out of 10 based on 1 rating

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 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. Add Mitchell Clark to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.