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

Economic Forecast

An economic forecast is a prediction of what future periods of economic activity will be in various categories. This could be a prediction of the overall economy, through the Gross Domestic Product (GDP), employment levels, inflation, interest rates, and numerous other sub-categories. Economic forecasts help one try to estimate future business needs and the best way to allocate capital.

Is China a Ponzi Scheme?

By for Profit Confidential

Chinese economyWe continue to see the Chinese economy slow down, which is based on numerous sources both within the government and independent firms. The economic forecast of China has continued to move down according to many people, including myself. However, the worry is that if the economy were to crash suddenly, it would have a severe impact on the global economy, including the U.S. While the official government economic forecast cannot really be trusted, some information from the actual companies, the people on the ground, shows a disturbing trend for the truly bizarre.

Recently, a construction equipment maker in China called Zoomlion asked for $22.0 billion in credit so that it may fund its customers. First of all, this is a large amount of money for any firm, especially considering the company itself is only worth $12.0 billion. This is a sign of how desperate the situation is in China, as customers have no cash to purchase equipment. That doesn’t bode well for the global economy.

But it gets even more worrisome for the global economy. This equipment is used for construction in the real estate sector, a huge part of the economic forecast for China’s gross domestic product (GDP). We all know that the real estate sector in China is slowing as the monthly data shows. However, this request for additional credit to fund the clients of Zoomlion sheds light on how dire the situation is becoming. Similar to a Ponzi scheme, more and more money needs to be pumped out to continue the ever-escalating rise in sales. As customers run out of cash, they start borrowing and leveraging … Read More

Will the Real Inflation Rate Please Stand Up?

By for Profit Confidential

economic forecastThe American Institute for Economic Research (AIER), a not-for-profit research group, believes that the Consumer Price Index (CPI)—as measured by the government—does not reflect the true inflation rate in this country.

The AIER believes that the true cost of living should include everyday items that consumers must spend money on, which the CPI does not fully reflect. With this theme in mind, the institute went to great lengths to create its very own Everyday Price Index, which stands in contrast to the CPI.

The CPI includes many one-time big ticket item purchases in its inflation rate calculation. Computers, appliances and furniture are just some of the big purchase items that are part of the CPI.

The idea behind the Everyday Price Index is that the typical American family does not plan their budget on big-ticket items like the CPI assumes. The AIER contends that the things Americans must purchase at least once a month are what affect their budget.

The Everyday Price Index gives more weight in its calculation to food, gas prices, child care, prescription drugs, and Internet service than the CPI does. The CPI includes these items as well, but the CPI has less emphasis on these items, because the index makes room for the big-ticket items like furniture.

Over the last 12 months from February 2011 to February 2012, the Everyday Price Index claims that the true inflation rate in America was eight percent. The CPI during this same time period claims that the inflation rate was 3.1%.

The AIER claims that technology has helped bring down the prices of big-ticket items like cars and televisions. However, … Read More

China’s Economic Growth to Come Crashing Down?

By for Profit Confidential

In terms of what economic growth will look like in 2012, the mainstream is sticking to the “muddling along” economic forecast theory.

Just as in 2011, the economic forecast talk is of the U.S. being fine and that we will “muddle along” economically. I’ve been watching markets for 30 years and I’ve never seen economies “muddle along.” Economic growth either expands or contracts.

As I’ve been warning readers, the European recession (finally deemed official now by the European Central Bank [ECB], I declared it in January of this year) will affect China, which would eventually hit home right here in the U.S.

What’s startling is the quickness of the decline in the Chinese economy.

It was roughly two months ago that China’s fourth-quarter gross domestic product (GDP) came in at 8.9%. The Chinese economy was slowing, but economic forecasts remained in the 8.5%-9.0% range.

This week, China’s premier reduced the country’s GDP economic forecast for growth in 2012 to 7.5% from 8.0%. This may not seem like a significant drop, but compared to where we were even a few months ago, the drop is significant.

If GDP growth comes in as expected in 2012 at 7.5%, it would be the lowest economic growth experienced in China since 2004. Here are China’s GDP statistics over the last few years, dear reader…

(Is there a pattern developing?)

 2010 China GDP: 10.4%

2011 China GDP: 9.2%

2012 China GDP: 7.5% (economic forecast by Central Bank of China)

The slowdown in China and Europe is affecting other nations in Asia, namely Japan, Singapore, South Korea, and Malaysia. The drop-off in exports reported by each … Read More

Lower Rates and More Money Printing:
Just What We Don’t Need

By for Profit Confidential

This morning comes the news that the European Central Bank (ECB) has just cut interest rates again (for the second straight month) to one percent—the lowest level on record for the ECB. There is immense pressure on European leaders and the International Monetary Fund to bail out the troubled eurozone countries. The easiest way to bail them out is to issue more euros, somethingGermanyhas been steadfastly against. Increasing the money supply has been one of the Federal Reserve’s tools to stimulate growth in the U.S. during the recession.

Stock Market and Economic
Forecast for June 2011

By for Profit Confidential

Just as the Federal Reserve is winding down its $600-billion QE2 monetary stimulus program, the latest releases of U.S. financial data increasingly point to another slowdown in the American and global economies.

Being a technically focused analyst, I generally don’t mull over the numerous fundamental data considered to be leading or lagging indicators for the economy too much. Instead, I prefer to look for guidance to the yield chart of 10-Year U.S. Treasuries.

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Is China a Ponzi Scheme?

By for Profit Confidential

Chinese economyWe continue to see the Chinese economy slow down, which is based on numerous sources both within the government and independent firms. The economic forecast of China has continued to move down according to many people, including myself. However, the worry is that if the economy were to crash suddenly, it would have a severe impact on the global economy, including the U.S. While the official government economic forecast cannot really be trusted, some information from the actual companies, the people on the ground, shows a disturbing trend for the truly bizarre.

Recently, a construction equipment maker in China called Zoomlion asked for $22.0 billion in credit so that it may fund its customers. First of all, this is a large amount of money for any firm, especially considering the company itself is only worth $12.0 billion. This is a sign of how desperate the situation is in China, as customers have no cash to purchase equipment. That doesn’t bode well for the global economy.

But it gets even more worrisome for the global economy. This equipment is used for construction in the real estate sector, a huge part of the economic forecast for China’s gross domestic product (GDP). We all know that the real estate sector in China is slowing as the monthly data shows. However, this request for additional credit to fund the clients of Zoomlion sheds light on how dire the situation is becoming. Similar to a Ponzi scheme, more and more money needs to be pumped out to continue the ever-escalating rise in sales. As customers run out of cash, they start borrowing and leveraging … Read More

Will the Real Inflation Rate Please Stand Up?

By for Profit Confidential

economic forecastThe American Institute for Economic Research (AIER), a not-for-profit research group, believes that the Consumer Price Index (CPI)—as measured by the government—does not reflect the true inflation rate in this country.

The AIER believes that the true cost of living should include everyday items that consumers must spend money on, which the CPI does not fully reflect. With this theme in mind, the institute went to great lengths to create its very own Everyday Price Index, which stands in contrast to the CPI.

The CPI includes many one-time big ticket item purchases in its inflation rate calculation. Computers, appliances and furniture are just some of the big purchase items that are part of the CPI.

The idea behind the Everyday Price Index is that the typical American family does not plan their budget on big-ticket items like the CPI assumes. The AIER contends that the things Americans must purchase at least once a month are what affect their budget.

The Everyday Price Index gives more weight in its calculation to food, gas prices, child care, prescription drugs, and Internet service than the CPI does. The CPI includes these items as well, but the CPI has less emphasis on these items, because the index makes room for the big-ticket items like furniture.

Over the last 12 months from February 2011 to February 2012, the Everyday Price Index claims that the true inflation rate in America was eight percent. The CPI during this same time period claims that the inflation rate was 3.1%.

The AIER claims that technology has helped bring down the prices of big-ticket items like cars and televisions. However, … Read More

China’s Economic Growth to Come Crashing Down?

By for Profit Confidential

In terms of what economic growth will look like in 2012, the mainstream is sticking to the “muddling along” economic forecast theory.

Just as in 2011, the economic forecast talk is of the U.S. being fine and that we will “muddle along” economically. I’ve been watching markets for 30 years and I’ve never seen economies “muddle along.” Economic growth either expands or contracts.

As I’ve been warning readers, the European recession (finally deemed official now by the European Central Bank [ECB], I declared it in January of this year) will affect China, which would eventually hit home right here in the U.S.

What’s startling is the quickness of the decline in the Chinese economy.

It was roughly two months ago that China’s fourth-quarter gross domestic product (GDP) came in at 8.9%. The Chinese economy was slowing, but economic forecasts remained in the 8.5%-9.0% range.

This week, China’s premier reduced the country’s GDP economic forecast for growth in 2012 to 7.5% from 8.0%. This may not seem like a significant drop, but compared to where we were even a few months ago, the drop is significant.

If GDP growth comes in as expected in 2012 at 7.5%, it would be the lowest economic growth experienced in China since 2004. Here are China’s GDP statistics over the last few years, dear reader…

(Is there a pattern developing?)

 2010 China GDP: 10.4%

2011 China GDP: 9.2%

2012 China GDP: 7.5% (economic forecast by Central Bank of China)

The slowdown in China and Europe is affecting other nations in Asia, namely Japan, Singapore, South Korea, and Malaysia. The drop-off in exports reported by each … Read More

Lower Rates and More Money Printing:
Just What We Don’t Need

By for Profit Confidential

This morning comes the news that the European Central Bank (ECB) has just cut interest rates again (for the second straight month) to one percent—the lowest level on record for the ECB. There is immense pressure on European leaders and the International Monetary Fund to bail out the troubled eurozone countries. The easiest way to bail them out is to issue more euros, somethingGermanyhas been steadfastly against. Increasing the money supply has been one of the Federal Reserve’s tools to stimulate growth in the U.S. during the recession.

Stock Market and Economic
Forecast for June 2011

By for Profit Confidential

Just as the Federal Reserve is winding down its $600-billion QE2 monetary stimulus program, the latest releases of U.S. financial data increasingly point to another slowdown in the American and global economies.

Being a technically focused analyst, I generally don’t mull over the numerous fundamental data considered to be leading or lagging indicators for the economy too much. Instead, I prefer to look for guidance to the yield chart of 10-Year U.S. Treasuries.

Annual Forecast: My 2011
Outlook for the Stock Market

By for Profit Confidential

Before I get into my annual stock market prediction on where the market is headed for the year ahead, it’s important to first take a look back.

The Worst Performing
Investment of 2011 Will Be…
Welcome to My 2011 Interest
Rate Forecast Issue

By for Profit Confidential

If there is one investment to avoid in 2011, it will be bonds. Why? Simply because interest rates are headed higher in 2011.

No, we won’t see a spike in short-term interest rates. The Fed will not let that happen. But the Fed cannot control long-term interest rates.

Taking Out the Crystal Ball:
2011 Gold Bullion Forecast

By for Profit Confidential

The end of this year will make the ninth consecutive December 31 when the price of gold bullion was higher than the previous December 31. Gold has risen from approximately $300.00 in 2002 to $1,380 per ounce today—a gain of 360%.

Like Equities? Go Where the Money Is…

By for Profit Confidential

I still think that investors need to be looking for value in this stock market. Investment risk is too high to warrant chasing after high-flyers. For speculative investors, the two best sectors of this market continue to be mining shares and U.S.-listed Chinese businesses. The earnings are still coming in from these two groups and, from my perspective, they’re mostly strong.

Emerging Markets Not Impressed with QE2

By for Profit Confidential

The next G-20 meeting should be interesting. The Fed is intent on buying more of its assets and unleashing more paper money into the already oversupplied financial systems. This has governments and central bankers of emerging markets very worried, particularly those whose red-hot economies are potentially about to get $600 billion redder if the Fed goes through with the purchases of its longer-term debt. Such a massive influx of money supply is likely going to depress the U.S. dollar even more and further erode U.S. manufacturing and exports.

Lombardi’s Mid-year Forecasts Update

By for Profit Confidential

With the first half of 2010 behind us, here’s an update on where I see things headed for the remainder of 2010, and where I believe my readers can make some money:

Stocks:

The surprise in stocks for the immediate term is on the upside. People are still very worried about the economy. National debt is out of control. Employment is high. Retail investors are staying away from the stock market. But corporate earnings are beating analyst expectations.

If you were to ask me about the short term, which would include 2011, I would tell you I am very bearish. I’m bearish because our dollar cannot sustain its value on the great amount of debt we have accumulated. National debt of $20.0 trillion by the end of this decade (we’re at over $12.0 trillion today) will place immense pressure on the U.S. dollar, which will eventually result in higher interest rates.

Higher interest rates may also be required as a deterrent to rapid inflation, which has historically been a problem for America after a prolonged period of easy money. But, for the months ahead, the Fed cannot raise rates because the economy is fragile. A low-interest-rate environment combined with rising corporate earnings is what the stock market loves. So I’m bullish for the immediate term, bearish going into 2011.

Like I’ve said all along, the bear market rally will suck more investors in before its next leg downward. And the best way to suck investors in is to move the market higher so investors feel that all is well again.

Gold:

I bought more gold last week, because I believe … Read More

Finding the Best Trades — It Doesn’t Have to Be Complicated

By for Profit Confidential

I recently came across a few attractive technology stocks that would be considered small- to medium-cap in size. They operate in the semiconductor industry and are still riding Intel Corporation’s (NASDAQ/INTC) coattails. Still, I really prefer gold and silver in terms of a focused equity strategy for speculating at this time. While there’s no runaway market for any sector in this economy, mining stocks offer the best bang for the buck.

Credit Agencies Finally on the Hook

By for Profit Confidential

The new “Wall Street Reform and Consumer Protection Act” is a brick of a law at 2,300 pages. Being a mammoth, no wonder it had spawned a few unintended consequences, one being a just what is meant by credit agencies being held more responsible when providing their ratings. The panic was substantial to the point that the Securities and Exchange Commission had to act as a go-between, calming the markets and even invoking a reprieve of sorts from its own regulations.

Double Dip or a Lost Decade: Are These the Only Options?

By for Profit Confidential

The general uneasiness of the stock market is blatantly apparent and even good earnings news can’t seem to sustain any lasting interest from buyers. Clearly, the bear market reigns.
So far, corporate earnings are holding up well, but the numbers are padded by extreme cost control. Top-line growth just isn’t happening, and this is worrisome for the next 12 months. Unless we get more robust revenue growth, the earnings picture will slowly deteriorate.

Economic Growth in the Age of Debt

By for Profit Confidential

What is the relationship between government expansion and economic growth? It is a positively correlated one, almost symbiotic. If an economy is growing, its government is expanding, and vice versa. Governments need economic growth to finance their spending without inconveniencing taxpayers. In other words, economic growth makes for many happy customers.

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.

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