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

Stock Market

Stock Market Outlook & Prediction for 2014

Lombardi Publishing was established in 1986 as an investment newsletter providing stock market analysis to its readers. Today, we publish 26 paid-for investment letters, most of which provide stock market direction and individual stock picking analysis.

In 2001, Michael Lombardi started his famous daily economic newsletter Profit Confidential. Written by Lombardi Financial editors who have been offering stock market guidance for years to Lombardi customers, Profit Confidential provides a macro-picture on where the stock market is headed, what sectors are hot, and which sectors to avoid.

Over the years, Michael’s financial commentary and the accuracy of his economic predictions have garnered him global attention, and the confidence of over one million investors in more than 140 countries.

Michael Lombardi has been widely recognized as predicting five major economic events over the past 10 years.

1)      In 2002, he famously told readers to get into gold

2)      Told them to get out of the housing market in 2006

3)      Predicted the recession of late 2007

4)      Warned readers to get out of stocks in the fall of 2007

5)      Advised readers to get back into stocks in March 2009

In 2002, Michael’s Profit Confidential famously advised readers to buy gold-related investments when gold bullion traded under $300.00 an ounce. “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I personally started buying gold shares.” (As published in Profit Confidential, December 13, 2002.)

In 2006, Profit Confidential “begged” its readers to get out of the housing market years before it plunged. Michael started warnings abut the coming U.S. housing crisis right at the peak of the boom. On August 2, 2006 Michael Lombardi predicted, “I’m getting very worried about the state of the U.S. housing market and its ramifications on the economy. The U.S. could be headed for its first annual decline in home prices on record, adjusted for inflation. And, I really believe this could be a catastrophe for the U.S. economy.”

Michael was also one of the first to predict the U.S. economy would be in a recession by late 2007. On March 22, 2007, he warned, “Over the past few weeks, I’ve written about subprime lenders and how their demise will hurt the U.S. housing market, the economy, and the stock market. There’s no escaping the carnage headed our way because the housing market and subprime business are falling apart. The worst of our problems, because of the easy money made available to borrowers, which fuelled the housing boom that peaked in 2005, has yet to arrive.”

At the same time Michael wrote this, former Federal Reserve Chairman Alan Greenspan was quoted as saying, “The worst is over for the U.S. housing market, and there will be no economic spillover effects from the poor housing market.”

Michael Lombardi also warned his readers in advance of the crash in the stock market of 2008. On November 29, 2007, Michael Lombardi predicted, “The Dow Jones Industrial Average, the S&P 500, and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market really of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.”

The Dow Jones peaked at 14,279 in October, 2007. A “sucker’s rally” developed in November 2007, which Michael quickly classified as a bear trap for his readers. One year later, the Dow Jones Industrial Average was at 8,726.

And, Profit Confidential turned bullish on stocks in March of 2009, and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

But, Michael is not resting on his laurels from the past 10 years.

In 2013, Michael predicts the devaluation of the U.S. dollar that started in early 2009 will accelerate as the U.S. economy deteriorates, that gold prices will continue to rise, and that the euro is done. Michael also predicts that inflation will be a big, big problem for the U.S.; probably for the rest of the decade. Finally, Michael believes 2013 will be a poor year for stocks.

It’s not all doom and gloom, though. He also has ways investors can protect their holdings, and even make money off the weak economy.

Jumping on the Risk Bandwagon? Think Again

By for Profit Confidential

The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market. On the back of a pretty decent second quarter, many corporate outlooks predict another year of decent growth, particularly with earnings. While the stock market retrenched recently, positive days are still led by the Dow Jones Transportation Average, the Russell 2000 Index, and the NASDAQ components, which are traditionally positive for broader sentiment. Some speculative fervor has come back to two stock market sectors that are traditionally volatile—biotechnology stocks and restaurant stocks. But there really isn’t an underlying trend to latch onto. Jumping on the bandwagon of risky stocks seems unwise considering the stock market is at an all-time record-high. This is a market where equity investors have to be highly selective and wait for the right opportunities to present themselves, if you’re considering new positions at all. This can be in the form of a specific sector theme (like oil and gas, for example) or looking for good companies that have retrenched for their own specific reasons. In any case, with the stock market at a record high, it’s difficult to find value, and new positions become entirely reliant on market momentum, not necessarily individual corporate achievement. There are very few companies that I would consider now, but within the context of a long-term stock market portfolio, investors want their money to be put to work. In equities, I still think that portfolio safety is the name of the game. This is a market that hasn’t experienced a material price correction for five years. There have been retrenchments and price consolidations, but no reset, no revaluation that would make stock market investors with cash want to jump into a marketplace still beset with huge monetary stimulus and strong balance sheets—a marketplace still extremely favorable to equities. Companies for consideration at this time that fit into my earnings (and dividends) safety list include Microsoft Corporation (MSFT), PepsiCo, Inc. (PEP), Johnson & Johnson (JNJ), and 3M Company (MMM). There should be exposure to oil and gas in this short list, too. Previously, I liked Kinder Morgan Energy Partners, L.P. (KMP), but with news that this high-yielding limited partnership is being bought out by Kinder Morgan, Inc. (KMI), I’m looking for a solid new pick in this sector. (See “This Company’s $70.0-Billion Acquisition a Boon for Investors.”) A lot of investors are more risk-tolerant than these mature enterprises might present. But institutional investors are still skittish; they are still buying earnings safety in this stock market. Accordingly, dividend-paying blue chips remain highly correlated to the broader market and for the investment risk, given that this market could experience a 20% correction at any time for a multitude of reasons, new buyers of equities should consider stocks offering earnings and dividends safety. In the equity market—which is a secondary market with a pricing mechanism subject to fear, greed, and the herd mentality—capital preservation is a worthy investment goal. So far in this bull market, blue chips have performed exceedingly well relative to the rest of the stock market and they are still where institutional investors want to be.The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market.

On the back of a pretty decent second quarter, many corporate outlooks predict another year of decent growth, particularly with earnings.

While the stock market retrenched recently, positive days are still led by the Dow Jones Transportation Average, the Russell 2000 Index, and the NASDAQ components, which are traditionally positive for broader sentiment.

Some speculative fervor has come back to two stock market sectors that are traditionally volatile—biotechnology stocks and restaurant stocks.

But there really isn’t an underlying trend to latch onto. Jumping on the bandwagon of risky stocks seems unwise considering the stock market is at an all-time record-high.

This is a market where equity investors have to be highly selective and wait for the right opportunities to present themselves, if you’re considering new positions at all.

This can be in the form of a specific sector theme (like oil and gas, for example) or looking for good companies that have retrenched for their own specific reasons.

In any case, with the stock market at a record high, it’s difficult to find value, and new positions become entirely reliant on market momentum, not necessarily individual corporate achievement.

There are very few companies that I would consider now, but within the context of a long-term stock market portfolio, investors want their money to be put to work.

In equities, I still think that portfolio safety is the name of the game. This is a market that … Read More

Why This Is Still My Favorite Entertainment Stock

By for Profit Confidential

How This Entertainment Stock Has Become a Top BusinessA top stock for investors and a strong equity market leader has been, and continues to be, The Walt Disney Company (DIS).

It’s a Dow Jones component, a solid dividend payer and, similar to other dividend-paying blue chips, it’s offered earnings (growth) safety to date. Institutional investors have bid this business tremendously.

The company’s latest quarter, its third fiscal quarter of 2014 ended June 30, 2014, produced a very good increase in sales, from $11.58 billion in the same quarter of 2013 to $12.47 billion.

Earnings grew impressively as well, coming in at $2.25 billion, or $1.28 per diluted share, compared to $1.85 billion, or $1.01 per diluted share, the year earlier.

These are impressive gains for such a mature business, and they support the company’s strong capital gains on the stock market.

Disney’s two-year stock chart is featured below:

Walt Disney Co. NYSE Chart

Chart courtesy of www.StockCharts.com

Within the numbers, there’s an excellent snapshot of what’s happening in the entertainment industry. Business conditions are really good.

The company’s largest operations are its media networks division, which includes cable networks and broadcasting. This division continues to grow and remains highly profitable.

Also growing is Disney’s theme park business, with fiscal third-quarter revenues coming in at $3.98 billion, compared to $3.68 billion last year.

Along with Shanghai Shendi (Group) Co., Ltd., Disney is building the Shanghai Disney Resort theme park for approximately $5.5 billion. Completion is expected to be early next year. Shanghai Shendi owns 57% of the park, while Disney has majority ownership in its management.

The company noted that it is seeing higher attendance and higher average guest spending at its domestic … Read More

Having Trouble Coming Up With Four Hundred Bucks

By for Profit Confidential

Economic Growth in 2014The burning question that’s facing economists like me today and that will only be answered in the future: did creating $3.0 trillion in new money out of thin air really make things better or worse for America?

My personal view, as expressed in these pages, is that the rich (the big banks and Wall Street) got richer from the “printing press” era, while the average American did not directly benefit from the Fed’s actions.

In fact, in America today, the spread in wealth between the rich and the poor has never been so great. As for the middle class, they are becoming extinct.

The “Report on the Economic Well-Being of U.S. Households in 2013,” recently published by the Federal Reserve, says 34% of Americans feel they are worse off today than they were five years ago, and 42% said they are holding back on the purchase of major or expensive items. (Source: Federal Reserve, August 7, 2014.)

But the data gets worse…

Of those Americans who had savings prior to the 2008 recession, 57% of them say they have used up some or all of their savings in order to combat the after-effects of the Great Recession.

Only 48% of Americans said that they would be able to cover a “hypothetical emergency expense” that costs $400.00 without selling something or borrowing money. Simply put, about half of Americans have less than $400.00 in emergency funds!

Meanwhile, 31% of Americans say they do not have any retirement savings or pension. Of those who are between the ages of 55 and 64, 24% of them expect to work as long as possible, … Read More

Why You Shouldn’t Overhaul Your Portfolio Right Now

By for Profit Confidential

Stocks Rolling Over Signal TroubleBiotechnology stocks and the Russell 2000 began rolling over at the beginning of July, followed by transportation stocks at the end of the month.

It’s definitely a signal that the stock market is tired, but after such a strong breakout performance in 2013, the market still hasn’t experienced a material price correction in quite some time.

Second-quarter earnings came in mostly as expected and many blue-chip stocks sold off on good results, while companies backed existing full-year guidance. This happens often, as management teams try to make it easier for the company to “outperform” Street consensus. In a lot of cases, the only reason earnings per share advanced comparatively was increased share repurchases.

But it was mostly a decent earnings season and corporate balance sheets remain strong.

There’s not a lot of action to take in this market. Stocks have gone up tremendously and earnings are playing catch-up with valuations.

A little extra cash isn’t a bad thing with equities at their highs; however, finding good value with the prospect of growth in this market is becoming difficult.

I still think the domestic energy sector has a lot to offer investors, particularly those who are looking for income. Pipelines are a good business to be in as they throw off lots of cash and in many cases, revenues are not tied to the spot price of the underlying commodity.

With speculative fervor now reduced as evidenced by the trading action in biotechnology stocks, initial public offerings (IPOs), and select technology companies, it’s reasonable to expect the next couple of months to be pretty lackluster in terms of trading action. (September … Read More

This Company’s $70.0-Billion Acquisition a Boon for Investors

By for Profit Confidential

Four Strong Businesses Now One Great CompanyAs evidence of the continuing bull market, Kinder Morgan, Inc.’s (KMI) massive acquisition of its partnership companies is a significant sign that business conditions remain strong in the energy industry.

Kinder Morgan surprised the marketplace by announcing plans to purchase Kinder Morgan Energy Partners, L.P. (KMP), Kinder Morgan Management, LLC (KMR), and El Paso Pipeline Partners, L.P. (EPB) in an enormous $70.0-billion consolidation.

The wealth effect from the news was immediately significant, with all partnership units rising substantially on the stock market.

Kinder Morgan Energy Partners is the largest master limited partnership in the United States and has been a top choice among income-seeking investors. The partnership was worth approximately $80.0 billion, or $80.00 per unit, with a 6.9% yield before news of its acquisition. It opened 20% higher, close to $100.00 per unit, on news of the deal.

Investors can choose cash or take up new shares in Kinder Morgan, Inc., which plans to increase its dividend 16% in 2015 to $2.00 a share. The company also plans to increase its dividend by at least 10% per year until 2020, and it’s likely that there will be a number of smaller divestitures over the coming quarters.

Once the company acquires all its related corporate entities, it will be the largest energy infrastructure company in North America. Management expects its debt to be investment grade, and the combined company should be able to garner a lower cost of capital.

The current environment is a great time to be in energy infrastructure. Transportation and storage of hydrocarbons is a growth business with rising domestic production.

And it’s tough to find double-digit … Read More

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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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