Stock Market Likes Something It Sees Ahead
Monday, August 25th, 2008
By Michael Lombardi, MBA for Profit Confidential
Tourism is down sharply in Europe this year. The high price of gas and a tougher economy at home are keeping American vacation travel lower than in recent past years. The hotels in Italy are feeling the pinch, so are the restaurants. The funny thing is that most of the major hotels here are owned by big American corporations; hence, softer travel by Americans overseas ultimately hurts companies back in the U.S.
Business headlines in newspapers in Europe about the American economy carry the same negative news stories the major papers back home carry these days. The question I get most often on this trip is: “Michael, when will the U.S. economy turn around?”
My fundamental problem about the bad news U.S. economy is this: I don’t think the economy is in as poor shape as the popular news stories and economists lead us to believe. Sure, U.S. home prices are down, but what about the boom that preceded the bust? Yes, the banks are taking big write-offs, but what about the billions they made when times were good?
Today, I read a story on the stock market on the Internet that said that the market was in pre-crash mode. We have “The New York Times” sending an e-news alert to its readers saying inflation at the wholesale level is running at the fastest pace since 1981. Lots of negatives out there…
But, in my humble opinion, we are far from the end of our economic stability. In fact, I believe that things are much better than they appear, economically. Here’s the way I see it:
— Inflation is not a problem. If it were, gold bullion prices would be rising, not declining. The possibility of deflation in this country is a bigger problem than inflation.
— Oil prices have fallen substantially from their high. If you look at our inflation numbers, most of the “inflation” was coming from oil prices. The stock market loves lower oil prices. Anything below $125.00 U.S. per barrel is “acceptable” to the stock market.
— The government is ready to step in at any time to stabilize the financial system. It stepped in to bail out Bear Sterns and it is ready to help Fannie Mae and Freddie Mac. Interest rates are very low and the Fed is ready to pump money into the system as needed. Ben Bernanke is doing a great job in my opinion.
Most importantly, the Dow Jones Industrial Average, an average of the stock prices of 30 of the world’s biggest corporations, is up 8.4% in less than 45 days. The stock market is a leading indicator… and it certainly likes something it sees ahead. Dear friend, the collapse of our economic stability is greatly over-exaggerated.
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Tags: Europe, gold, gold bullion, price of gold bullion, stock market
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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
