First the Housing Bust, Then Soft Car Sales; Next, General Consumer Spending Tightens… a Recession Cometh
Wednesday, August 15th, 2007
By Michael Lombardi, MBA for Profit Confidential
Starting two years ago, I was writing about how the housing boom would go bust and cause the U.S. economy to suffer sharply. That’s exactly what is happening today.
The auto market, as is typical after a housing bust, is getting hit, too. In July, U.S. auto sales fell to their slowest pace in nine years. The drop in sales was sharp: GM down 22%, Ford down 19%.
Next, we will see consumers start to rein in general merchandise spending as they try to realign their budgets. Yesterday, we got the first glimpse of that, as both Wal-Mart and Home Depot came out and said they expect a soft-to-declining profit year as consumers get tight. The stock market didn’t like news of the inevitable… with the Dow Jones Industrial Average down about 200 points yesterday.
>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.
The stocks market, my dear friend, has been fueled by unprecedented liquidity over the past few years. And with liquidity disappearing, stocks deflate.
Quite interesting to note, the coming U.S. recession will be homegrown thanks to the housing bust, which ironically started because of too much easy money in their system. Other countries, such as those in Europe; as well as Canada, Australia, Japan, China, and yes, even Mexico, have economies running quite smoothly.
Next Post: Shrinking Capital Causing Problems for Canada and the U.S.Previous Post: Securities a Rather Secure Stock
Tags: consumer spending, stock market, U.S. economy, U.S. recession
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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
