The Two Biggest Profit Opportunities I See Ahead for Investors
Wednesday, May 20th, 2009
By Michael Lombardi, MBA for Profit Confidential
— by Michael Lombardi, CFP
Developing in the financial markets today are two profit opportunities that I believe investors can do quite well with in 2009. To start off, let’s look at how these profits have developed.
Avid readers are aware of my position in the stock market: We are in the middle of the bear market rally which will take stocks higher for 2009 before stocks turn around and test their March 9, 2009, lows. A big prediction. But my prediction is based on the fact that stocks never truly became undervalued at the March 2009 lows. Bull markets end in speculative euphoria. Bear markets end in exhaustion. Right now, we are simply witnessing a natural rally from severely oversold market conditions.
Hence, profit opportunity number one is making money when this bear market rally is over. Some stocks are getting ridiculously expensive again. And when the bear market rally is over, these stocks will come down like a rock.
Look at Whole Foods Market, Inc. (NASDAQ/WFMI). Is this high- end grocer worth $20.00 a share? I see the stock as expensive at 31 times earnings (the stock traded under $10.00 a share in November 2008). Once the current bear market rally is over, companies like Whole Foods, which have gotten ahead of themselves in this rally, are primed for a drop. There are plenty of stocks just like Whole Foods that are up 100% in this bear market rally, while their core fundamentals have not really changed.
Next, readers of this column are only too familiar with my fear of America having accumulated too much debt. The U.S. government is simply spending far more than it takes in and the situation is getting worse every day thanks to government bailouts and lower tax revenue. Just yesterday, I wrote about how interest on our debt is $500 billion alone each year.
The U.S. dollar has started its long-awaited decline in value against other world currencies. The bond market is declining, signaling that higher interest rates are not too far off. What currency will perform best in the economic environment I just described? Gold bullion. In my humble opinion, gold is poised to soon get back to $1,000 U.S. per ounce, as it did in March 2008. There are plenty of quality gold-producing stocks that are selling today at very attractive prices. Don’t let profit opportunity number two get away!
Michael’s Personal Notes:
All I can say is welcome and thank you. Since the beginning of this year, 36,236 people have signed up to receive this daily e-letter, PROFIT CONFIDENTIAL. We are obviously overwhelmed by the response. Hopefully we are making a difference in the lives of the people we write for each day.
Where the Market Stands:
Waiting. We are waiting for the Dow Jones Industrial Average to turn positive for 2009. All other major market indices are now up for 2009 except for the Dow Jones (which is down 3.4% for the year, as of this morning). We can’t have a bear market rally end without the Dow Jones giving consumers and investors the hope that the worst is behind us. Can we?
What He Said:
“Starting two years ago, I was writing how the housing boom would go bust and cause the U.S. economy to suffer sharply. That’s exactly what is happening today. From what I see happening in the U.S. economy, I’m keeping with the prediction I made earlier this year: By late 2007/early 2008, the U.S. will be in a homemade recession. Hence, I expect housing prices to continue declining, soft auto sales, soft consumer spending and a lower stock market.” Michael Lombardi in PROFIT CONFIDENTIAL, August 15, 2007. Who would have expected this in the summer of 2007 except for Michael?
Next Post: Two Markets, Two Sets of FundamentalsPrevious Post: Could History Repeat Itself?
Tags: bear market, Dow Jones Industrials, gold bullion, interest rates, stock market, U.S. dollar
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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
