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

U.S. Deficit

The debt crisis has taken the world by storm; but few seem to be sounding the alarm. The U.S dollar, the go-to currency for global economic stability and growth, is imploding at an unprecedented rate.

Profit Confidential editors have been critics of the U.S.’s inability to rein-in government spending. Based on the White House’s own figures, the national debt will reach $20.0 trillion by the end of this decade—about 140% of our current gross domestic product (GDP).

Historically, countries that have incurred considerable debt and consistent national debt-to-GDP multiples of 120% or more have experienced currency devaluation. The U.S. dollar has been in a free-fall against other major world currencies since 2009.

Since November 2008, Federal Reserve Chairman Ben Bernanke has initiated three rounds of quantitative easing (QE) in an effort to create more economic activity and increase home prices.

Since 2008, the Federal Reserve has printed roughly $3.0 trillion. And, it’s climbing each month by an additional $85.0 billion.

What have three rounds of QE accomplished? It was supposed to increase lending, create more jobs, and lower the unemployment rate. Instead, banks are sitting on a pile of cash and remain tight-fisted, fewer jobs have been created, and the unemployment rate remains high

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What QE has done is flood the global markets with trillions of U.S dollars. It’s not as if this new-found money is backed by gold. It’s simply created out of thin air.

And, things are not going to get any better. The Congressional Budget Office (CBO) expects the U.S. economy to remain moribund in 2013 and for unemployment to remain high. What’s more, the official U6 unemployment rate (which includes people who have given up looking for work and people who have part-time jobs but want full-time jobs) has held steady around 15% for months.

The unofficial shadow statistic unemployment rate (which includes the long-term unemployed) sits at 22%!

Americans are out of work, and their dollar doesn’t go as far as it used to. Consumer spending might have once been the workhorse for economic growth, but not anymore. And, that could spell doom for the U.S. economy.

After phenomenal amounts of bailouts were doled out, followed by non-stop government spending, the U.S. national debt rose 76.2%—from $9.2 trillion in 2008 to $16.3 trillion in 2012. (Source: TreasuryDirect, last accessed November 27, 2012.)

It gets worse. The current administration said it would keep the budget deficit below $1.0 trillion. It hasn’t. For fiscal 2012, the federal budget deficit was $1.1 trillion, slightly below the $1.3 trillion deficit recorded in 2011. (Source: U.S. Department of the Treasury, October 12, 2012.) What’s more, 2012 marked the fourth consecutive year in which the U.S. government experienced an annual deficit above $1.0 trillion. As a percentage of GDP, the U.S. government’s budget deficit for the year 2012 stands at seven percent.

Along with skyrocketing government debt, the Federal Reserve has printed $3.0 trillion. Where did the $3.0 trillion come from? It’s not backed by gold. It was simply created out of thin air. And, the presses continue to print an additional $85.0 billion a month!

At Profit Confidential, we believe a home-grown debt crisis is brewing for America, and we believe other aspects of our financial system will suffer because of it

High Risk to Start the New Year

By for Profit Confidential

High Risk to Start the New YearHappy New Year to our Profit Confidential readers!

In 2012, small-cap stocks were the second-best performing group, following the technology sector. The Russell 2000 was the top performer in December and has been since the end of the first quarter. How the small-caps fare this year will, again, depend on the global economy.

My stock analysis is that what happens in January will be an important indicator for the year as far as performance. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to the Stock Trader’s Almanac. In 2012, January was a strong month, so it was not a surprise to see the relatively good advance in stocks.

As we move into 2013, the focus will be on any remaining fiscal cliff fallout and the impact of the deal, along with the eurozone mess, the U.S. national debt, and jobs growth.

For 2013, my stock analysis is cautious to start the year, based on the high global risk.

The fact that the economy is triggering some jobs growth is encouraging. My analysis is that this will likely continue in 2013, although the unemployment rate is expected to remain relatively high at over seven percent.

My stock analysis tells me that we need to see leadership from such areas as the financial and technology sectors. The big banks were strong in 2012, but we also need to see technology take a leadership role.

It definitely will be a tricky year, given the global and domestic issues, along with suspect earnings and revenue growth to start the first quarter, which you can read … Read More

Canadian Dollar Poised for Long-term Strength

By for Profit Confidential

U.S. dollarWith the monthly jobs reports out in various countries, the news that the U.S. created only 120,000 new jobs in March was certainly less than expected; especially when you consider the trillions spent by the government trying to “stimulate” the economy. All we have left is a massive U.S. deficit. But in some countries there have been big job gains—Canada is one of these countries. Last month, the Canadian economy created over 82,000 jobs. With a population approximately 1/10th the size of the U.S., it would be the equivalent of the American economy creating 820,000 new jobs in March!

This situation already has my attention, as do investments based in the Canadian dollar. The Canadian dollar has already strengthened from a low of CAD$1.0657 to buy one U.S. dollar in October 2011 down to only CAD$0.9976 to buy one U.S. dollar. With the U.S. deficit pegged to hit and possibly exceed $1.3 trillion this year, this can’t help the U.S. dollar. In fact, I think this push to lower the value of the dollar is the explicit policy of the administration and this will help the Canadian dollar. How? Additional monetary stimulus (money printing) has devalued the U.S. dollar and pushed up commodity prices before and will do so again. Canada sells commodities, tons of them; from oil, to gold, to wheat and almost everything in between. The higher commodities go, the higher the Canadian dollar goes. This is combined with the fact that the Canadian government is very well managed financially, with some estimating that the Canadian budget deficit for this year will only be $20.0 billion. Their … Read More

My Market View: A Risky Start to 2012

By for Profit Confidential

My 2012 Market View: High Risk to Start OffHappy New Year!

In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.

The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.

I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.

For 2012, my market view is cautious to start the year based on the high global risk.

The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.

This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.

My market view is that we need to see leadership from such areas … Read More

The Place You Need to Have Capital in 2012

By for Profit Confidential

The market chaos continues to grip the stock markets. We have the European debt crisis and a concerted effort to fix it, albeit it will be extremely difficult and take years.

The European Central Bank (ECB) cut the eurozone’s interest rate by 25 basis points to one percent—the second cut in five weeks. However, keep in mind that the ECB increased rates two times prior to the cuts. The cut will have little impact on the effort to revive the region and avoid another recession given the debt crisis. The ECB should have cut interest rates to below one percent as we did in the U.S. and as the U.K. did. The concern was that inflation in Europe is three percent, so the fear was that lower rates could drive up inflationary pressures.

Stocks Facing Many Hurdles Ahead

By for Profit Confidential

The upside potential is limited at this time. The problems are global in nature. You have the massive debt crisis in Europe and the U.S., along with deepening U.S. deficit situations. We are seeing state governments take days off here and there in order to save a few extra bucks. But this is merely a loose bandage strategy and not a remedy for the ailing U.S. economy. President Obama and the Fed realize the extent of the hurt. Obama introduced a $447-billion plan to drive job creation, but whether it will work or not is up in the air. It’s not going to be easy and everyone realizes this.

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High Risk to Start the New Year

By for Profit Confidential

High Risk to Start the New YearHappy New Year to our Profit Confidential readers!

In 2012, small-cap stocks were the second-best performing group, following the technology sector. The Russell 2000 was the top performer in December and has been since the end of the first quarter. How the small-caps fare this year will, again, depend on the global economy.

My stock analysis is that what happens in January will be an important indicator for the year as far as performance. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to the Stock Trader’s Almanac. In 2012, January was a strong month, so it was not a surprise to see the relatively good advance in stocks.

As we move into 2013, the focus will be on any remaining fiscal cliff fallout and the impact of the deal, along with the eurozone mess, the U.S. national debt, and jobs growth.

For 2013, my stock analysis is cautious to start the year, based on the high global risk.

The fact that the economy is triggering some jobs growth is encouraging. My analysis is that this will likely continue in 2013, although the unemployment rate is expected to remain relatively high at over seven percent.

My stock analysis tells me that we need to see leadership from such areas as the financial and technology sectors. The big banks were strong in 2012, but we also need to see technology take a leadership role.

It definitely will be a tricky year, given the global and domestic issues, along with suspect earnings and revenue growth to start the first quarter, which you can read … Read More

Canadian Dollar Poised for Long-term Strength

By for Profit Confidential

U.S. dollarWith the monthly jobs reports out in various countries, the news that the U.S. created only 120,000 new jobs in March was certainly less than expected; especially when you consider the trillions spent by the government trying to “stimulate” the economy. All we have left is a massive U.S. deficit. But in some countries there have been big job gains—Canada is one of these countries. Last month, the Canadian economy created over 82,000 jobs. With a population approximately 1/10th the size of the U.S., it would be the equivalent of the American economy creating 820,000 new jobs in March!

This situation already has my attention, as do investments based in the Canadian dollar. The Canadian dollar has already strengthened from a low of CAD$1.0657 to buy one U.S. dollar in October 2011 down to only CAD$0.9976 to buy one U.S. dollar. With the U.S. deficit pegged to hit and possibly exceed $1.3 trillion this year, this can’t help the U.S. dollar. In fact, I think this push to lower the value of the dollar is the explicit policy of the administration and this will help the Canadian dollar. How? Additional monetary stimulus (money printing) has devalued the U.S. dollar and pushed up commodity prices before and will do so again. Canada sells commodities, tons of them; from oil, to gold, to wheat and almost everything in between. The higher commodities go, the higher the Canadian dollar goes. This is combined with the fact that the Canadian government is very well managed financially, with some estimating that the Canadian budget deficit for this year will only be $20.0 billion. Their … Read More

My Market View: A Risky Start to 2012

By for Profit Confidential

My 2012 Market View: High Risk to Start OffHappy New Year!

In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.

The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.

I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.

For 2012, my market view is cautious to start the year based on the high global risk.

The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.

This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.

My market view is that we need to see leadership from such areas … Read More

The Place You Need to Have Capital in 2012

By for Profit Confidential

The market chaos continues to grip the stock markets. We have the European debt crisis and a concerted effort to fix it, albeit it will be extremely difficult and take years.

The European Central Bank (ECB) cut the eurozone’s interest rate by 25 basis points to one percent—the second cut in five weeks. However, keep in mind that the ECB increased rates two times prior to the cuts. The cut will have little impact on the effort to revive the region and avoid another recession given the debt crisis. The ECB should have cut interest rates to below one percent as we did in the U.S. and as the U.K. did. The concern was that inflation in Europe is three percent, so the fear was that lower rates could drive up inflationary pressures.

Stocks Facing Many Hurdles Ahead

By for Profit Confidential

The upside potential is limited at this time. The problems are global in nature. You have the massive debt crisis in Europe and the U.S., along with deepening U.S. deficit situations. We are seeing state governments take days off here and there in order to save a few extra bucks. But this is merely a loose bandage strategy and not a remedy for the ailing U.S. economy. President Obama and the Fed realize the extent of the hurt. Obama introduced a $447-billion plan to drive job creation, but whether it will work or not is up in the air. It’s not going to be easy and everyone realizes this.

Why You Might Want to Look at Buying the Miners

By for Profit Confidential

George takes a look at examples of mining investments—gold, silver, copper, molybdenum—and why you might want to consider adding them to your portfolio right now.Metals are under selling pressure, but I feel that the selling has been overdone. Use the current weakness to buy, but be careful, as metals are extremely volatile at this time.

The reality is that the global climate continues to be favorable for metals given the U.S. deficit and the debt crisis in Europe (and the U.S.).

Yes, metals have been in correction mode, but I do not see this as fear. I smell opportunities, especially in the miners, which have lagged behind the gold and silver rally.

I like the smaller mining companies, especially those with a massive reserve of metals in the ground waiting to be developed.

The October Gold is hovering around the $1,600 level on oversold buying, but remains below its key 50-day moving average (MA) on weak Relative Strength. The golden cross on the chart remains, with the 50-day MA of $1,742 above the 200-day MA of $1,524.

Gold is extremely oversold. I feel that gold prices will hold and edge higher if the U.S. economy falters and another recession surfaces.

The SPDR Gold Shares (GLD) exchange-traded fund (ETF) is worth a look. For added risk and potential gains, take a look at the Direxion Daily Gold Miners Bull 2X Shrs (NASDAQ/NUGT)—an aggressive trade aimed at capitalizing on surges in gold at twice the normal rate.

The December Silver is around $30.00, but is facing selling. The next target is the 200-day MA at $36.05. The 50-day MA is at $39.95. The near-term view is bearish, but the chart is holding on to the bullish golden cross. With the selling, silver is extremely oversold.

While … Read More

Stocks & Economy: Contrarian View You Won’t Read Elsewhere

By for Profit Confidential

You’ll read a lot today about the Federal Reserve’s statement yesterday that it will buy long-term treasuries in an effort to bring down long-term interest rates. Why Michael thinks this is a counter-productive mistake.No, no, no! They’ve got it all wrong! The actions of the government and the Fed are contra to what the economy needs to get it going! More damage is being caused to the economy than good.

You’ll read a lot today about the Federal Reserve’s statement yesterday that it will buy long-term treasuries in an effort to bring down long-term interest rates. That’s a mistake in my opinion. It’s counter-productive.

Sure, the argument will be that lower long-term interest rates will be good for the real estate market. But we must realize that consumers are not interested in buying homes. The 30-year mortgage rate was already at a 30-year low before yesterday’s announcement and consumers were not buying homes. You can bring long-term interest rates to two percent and consumers will not move to buy houses, because they have no faith that housing will move up in price!

Now look at the repercussions of bringing long-term interest rates down:

  • Seniors dependent on long-term bond income will have less income, which means they will spend less, actually hurting the economy.
  • The rate of inflation will not outstrip the return on long-term bonds, making the dollar less valuable…any investor buying bonds today is losing the purchasing value of his/her money, as inflation outstrips investment returns.

Many economists said yesterday that the Fed’s attempt to lower long-term interest rates will not provide any significant stimulus. In fact, three Fed officials voted against the move.

You’ll hear news today that the stock market is going down because the Fed indicated yesterday that there is “significant downside risks” to the economy. Stocks are not … Read More

Poverty in America Hits 52-year
High as Economy Worsens

By for Profit Confidential

While I’m usually an upbeat and positive person, I’ll warn you that today’s issue is gloomy. Buried in yesterday’s news stories, which were dominated by a possible default by Greece on its debt, was a report from the U.S. Census Bureau on data that most Americans will find depressing. The data are downright scary…

SOS—America Needs Help

By for Profit Confidential

The market risk is high. We have the debt crisis and growth situation inEurope. On the domestic scene, the Federal Reserve and government are trying to figure out how to jumpstart the economy and deal with U.S. deficit, the housing mess, and the lack of jobs.

Putting the Japan to U.S. Economic Comparison to Rest

By for Profit Confidential

One of the most common questions I hear these days: “Is the U.S. headed in the same direction of the Japan economy of 1990s?” The big fear is that we are headed to 10 years of deflation, as Japan experienced in its “lost decade.” Yes, there many similarities between the Japan of the 1990s and the U.S. of the 2000s. Japan’s real estate market and stock market both peaked in euphoria and collapsed, just like they’ve done here.

Economists: Their Worst-kept
Secret for This Economy

By for Profit Confidential

“U.S. inflation rises by most since March,” flashed the headlines across the newswire last Thursday. Turns out, consumer prices in America are rising at an annual rate of
3.6%—sharply higher than the Federal Reserve’s “target rate.” Hold on a minute. Didn’t the Fed say last week that it will keep short-term interest rates near zero until at least mid-2013? How can they keep interest rates low and fight rising inflation?

Working to Age 68

By for Profit Confidential

A panel commissioned by the President to look at ways to cut the U.S. deficit delivered its plan on Wednesday. While we must remember that these are just suggestions, and I doubt most of the recommendations will ever get passed, you need to laugh at some of these ideas.

Why Investors Have Been Heading for the Exit

By for Profit Confidential

A brutal day on the markets last Thursday, with extreme selling in the last hour that drove the DOW to briefly below 10,000 near the close, before rebounding to 10,002. The S&P 500 lost 3.11%, while the Russell 2000 was down a whopping 3.44% to below 600. Triggering the selling was the news of the deficit and debt problems in Greece and Portugal, yet this has been known in Europe for months. Clearly traders used it as an excuse to take money off the table. The fear is that the crisis could spread and impact other members of the European Union and set back the economic recovery.

Why the Tumbling Dollar May Put America on the

By for Profit Confidential

Very few have predicted the kind of funk that the U.S. economy would slip into 18 months ago. Even the Oracle of Omaha, Warren Buffett, missed the warning signs of the panic and chaos that ensued when financial derivatives unraveled onto credit and financial systems. However, what Buffett did predict was the downward pressure on the U.S. dollar. He knew that importing, more than exporting, would eventually force the dollar to weaken. Two winters ago, he said, “Force-feeding a couple of billion a day to the rest of the world is inconsistent with a stable dollar.”

A Great Summer for Gold Stock Cherry Picking

By for Profit Confidential

Back on March 20, in a PROFIT CONFIDENTIAL story titled “Another Golden Opportunity for Investors… Almost,” I wrote about how I believed that investors in gold would have another chance soon to get into the yellow metal at attractive prices. On that day, gold bullion was selling at $920.00 U.S. per ounce.

I also wrote on March 20 how I felt that, from my readings of the charts, I wouldn’t be surprised to see gold bullion fall to $800.00 per ounce. Today, gold trades at $866.00 an ounce and my opinion about a move closer to $800.00 remains unchanged.

For investors in gold stocks:

Patience is a virtue. If you follow my writings, you are familiar with my belief that gold is a seasonable commodity. From the spring of each year to the fall, gold bullion usually moves sideways in price. Over the past five years, any big upswings in the price of gold have occurred in the periods from October to March.

I’d personally take any price weakness in major gold producing stocks during the summer months as an opportunity to add to my positions… to dollar cost average down. The stock of Barrick Gold Corp., one of the world’s largest gold producers, trades at under $40.00 today. Back in January, that stock traded for $54.00. Could Barrick go down to $35.00? Yes, say my price charts… and that’s when dollar cost averaging down on your gold stocks becomes ever so prudent.

Talking about Barrick, the company reported net profit of five hundred and fourteen million dollars in the first quarter of this year on sales of almost $2.0 … Read More

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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