What a day for the market yesterday. Wherever we looked, we saw a sea of deep red. Stocks got chopped. Gold was down. Bonds were down.
My dear reader, you’ll read opinions here in PROFIT CONFIDENTIAL that you will not read elsewhere. (Maybe that’s why 30,000 people a month are flocking to us!)
Here’s the bottom line as I see it…
Some investors, big investors, made a killing in the markets yesterday. Why not? Why not play on investor fears, use the “debt ceiling” scapegoat to send the markets steeply lower…but let me get my shorts in place first!
In reality, increasing the debt ceiling does more harm to the American economy than good. The higher the debt ceiling, the bigger the “carte blanche” we are giving Washington to spend money it doesn’t have…a concept that is bad for the economy, but great for Wall Street.
Speaking of Wall Street, it’s giving a strong message to President Obama, John Boehner, and Ben Bernanke. Wall Street’s message is this: Keep the government on a spending binge, keep Bernanke increasing the money supply, or else we’ll huff, puff and take this stock market down!
Let’s use common sense. Wall Street makes its money by selling its wares. Investors are not going to be buying stock, especially new issues, with the stock market nose-diving. The big banks, which own most of the big brokerages, know the game.
Going back to that bear market rally I’ve been writing about since March of 2009—it’s not over yet. No, it still has life left in it. Wall Street wants higher stock prices, the bear wants higher stock prices, and all in an effort to lure investors back to the market.
I’m sure this morning that we have many people in the Obama Administration and Boehner’s Congress saying, “Wow, the Dow Jones got hammered 200 points yesterday. We need to get this debt ceiling lifted.” That’s exactly what Wall Street wants. It’s exactly what the bear market wants.
The debt ceiling, my dear reader, will eventually get increased Stocks will boom again on the news. But the rejoicing will be very short in nature. The bear…it has more unpleasant, long-term plans for stock prices. That’s my stock market advice for the day.
Michael’s Personal Notes:
Cracks in theU.S.economy are starting to show almost daily now…
Yesterday morning, the U.S. Commerce Department reported that orders for durable orders tumbled an unexpected 2.1% in June. Analysts had been expecting an increase.
Durable goods are classified as goods meant to last at least three years. Demand for business equipment, machines and computers are dropping.
Consumers are pulling back on spending. Fears about the debt ceiling, a stubborn unemployment rate, a depressed housing market, and even European concerns—these are all concerns weighing on the shoulders of American consumers.
And as consumers tighten their wallets again, business will reduce capital spending…a perfect scene for the recession’s Act II.
By yesterday afternoon, the Federal Reserve confirmed our fears about the economy when it reported that growth has slowed in eight of the 12 regions the Fed follows.
What He Said:
“Even the most novice investor can now read the chart of the Dow Jones U.S. Home Construction Index and see that it is trading at its lowest level in five years. If, like me, you believe that stocks are on indication of what lies ahead, this important index is telling us housing prices are headed to 2002 levels! What would that do to the economy? Such an event would devastate the U.S.” Michael Lombardi in PROFIT CONFIDENTIAL, December 4, 2007. That devastation started happening the first quarter of 2008.