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Stock market, stock market today, stock market news

  1. 1. Lombardi: Expert Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986 Home Our Company Editors Topics Expertise Resources Welcome to Profit Confidential •   SIGNUP FOR PROFIT CONFIDENTIAL AND RECEIVE A FREE COPY OF Stock Market "A Golden Opportunity for Stock Market Investors" Lombardi Publishing was originally established in 1986 as an investment newsletter Our top analysts pick their number one stock for publisher offering stock market analysis to its readers. Today, we publish 26 paid-for 2012. See why we think it could be the best stock to own right now for the biggest profits. investment letters most of which provide stock market direction and individual stock picking And its yours FREE when you sign-up to get analysis. Profit Confidential is our daily free e-letter that goes to all our Lombardi Financial Profit Confidential daily with our compliments! customers and to any investor who wishes to opt-in in to receive it. Written by Lombardi Financial editors who have been offering stock market guidance for year to Lombardi customers, Profit Confidential provides a macro-picture on where the stock market is headed, Enter e-mail... SIGN UP what sectors are hot, what sectors to avoid. Our two most recent and popular calls were telling investors to bail from stocks in 2007 and telling investors to jump back into the stock market in March of 2009. We respect your privacy and will never share your e-mail address. Choppy Trading Action Here to Stay PROFIT CONFIDENTIAL Forecasts —It’s an Index Trader’s Paradise Immediate term outlook: The bear market rally in stocks that started March 9, 2009 remains No Comments intact. Since March of 2009 we have been and continue to be immediate term bullish on stocks. Gold bullion is up $1,300 an Posted by Mitchell Clark, B.Comm. in blue chips, corporate earnings, economic analysis, ounce since we first recommended it in 2002 and we are still large-cap stocks, micro cap stocks, real estate market, small cap stocks, stock market on bullish on the metal. August 15th, 2011 Short-to-medium term outlook: I think investors really want to be buyers of stock at this National debt increasing at the rate of $125 billion per month will time, but there isn’t much of a catalyst to do so. eventually debase the U.S. dollar. Our concern is future Institutional investors are buying, but they’re also deterioration of the greenback, an expansive money supply and playing on the market’s volatility, accentuating the rising U.S. national debt will eventually push domestic inflation and interest rates higher, negatively impacting the American results. Reality is beginning to set in now and there’s a economy and equities. realization that corporate earnings are actually going to be strong in the bottom half of the year. The employment situation isn’t great and neither is the real estate PROFIT CONFIDENTIAL Estimates market, but the corporate economy is well-positioned to deliver solid earnings growth and this makes the Total 2011 per share earnings for 30 stocks in the Dow current stock market look very reasonably priced. Jones Industrial Average: $900 Big, long-term investors relish the opportunity to buy Dow Jones Industrial Average Price/earnings multiple: 13.4 stocks when the indices convulse on the news of the day. Whether it’s adding to existing positions or taking on new opportunities, institutional Dow Jones Industrial Average Dividend Yield: 2.6% investors (and insiders) are buying blue-chip stocks in this market. 3-month day U.S. T-bill Yield: 0.01% There’s been a lot of bad news lately that’s taken a toll on investor sentiment, but I view the 10-year U.S. Treasury Yield: 2.0% reduced expectations for the economy as now being built in to current share prices. The big, remaining investment risk has to do with the sovereign debt issue inEuropeand the potential for a cascading run on banks in European countries. Because of this very real and serious Search investment risk, there continues to be an attitude of wariness about the domestic equity market. Along with the S&P 500 Index, a lot of large-cap stocks that were the market’s leaders have Search crossed their moving averages on the downside. Technically, the argument for a rising stock market holds very little water. The only good news is that the stock market isn’t overvalued. Because of strong earnings and a reasonable valuation, the market is actually holding up quite well. What everyone wants to know is what the future holds for the economy and stocks and it’s fair If you missed Apple, shame to say that the question is unanswerable. In my mind, the case for the bulls and the bears is about even. We could go into recession again. The stock market could go down some more. on us. If you miss this... Or, the interest rates that are artificially low might finally produce the catalyst for the economy to accelerate in the fourth quarter, and so might the stock market. This is why a lot of A rare situation could trigger triple-digit gains for individual investors are sitting on the sidelines; there isn’t much in the way of definitive this $7 the next 90 days. An opportunity economic analysis to take any bold, new action in this market. so rare, we’ve only seen it happen a few times before. In fact, this company is strikingly similar to Apple before its stock price took off. What I know is that investment risk for equities remains very high at this time. Large-cap, higher-dividend-paying stocks should outperform small-cap stocks and micro-cap stocks. Gold shares remain the most attractive for equity speculators. Learn all about the next Apple here! In a market without any defined trend, the news of the day makes the trading action. Expect more choppy trading action in the weeks to come. Pronounced stock market volatility is here Recent Articles to stay for a while. Page 1 / 18
  2. 2. The Next Step for the Stock Market U.S. Dollar and Gold: An Anniversary By Michael Lombardi, MBA For the benefit of my new readers, and as an update for my long- No Comments time readers, today I want to talk about exactly where I believe we are in the stock market.  After a 25-year bull market in Posted by Michael Lombardi, MBA in bear market rally, gold standard, inflation, price of gold stocks, which was fueled by a 25-year decline in interest rates bullion, research reports, reserve currency, stock market, Stock Market Advice, U.S. dollar on and a period of great financial leveraging that accompanied August 15th, 2011 collapsing interest rates, a Phase I bear market (often referred to as the first down-leg) brought stock prices down sharply.  From  Forty years ago today, U.S. President Richard Nixon its high of 14,164 ... appeared on television to tell the world that the U.S.was severing the relationship between gold Read More bullion and the U.S. dollar. Back in 1944, in a historic agreement reached in Bretton Woods, New Hampshire, the U.S. government agreed to redeem U.S. dollars for gold What We Can’t Forget About in the Stock bullion at the rate of $35.00 U.S. for one ounce of Market Today gold for the central banks of foreign countries. By Mitchell Clark, B.Comm. The relationship established between the U.S. dollar and gold bullion at Bretton Woods was often referred to as the “gold standard.” Based upon the relationship between the greenback Street analysts are saying that, because of higher oil prices, the and gold, at Bretton Woods, the central bankers of foreign countries agreed to adopt the U.S. Dow Jones Transportation Average is showing a real divergence dollar as their official reserve currency. In a nut shell, the U.S. backed its fiat money with gold from the rest of the stock market. According to Dow Theory, bullion and foreign central banks backed their currency with U.S. dollars. All the currencies confirmation from this index is required in order to uphold the had a link to gold. primary trend in the stock market. It’s kind of an old-fashioned way of predicting the stock market, but I do believe in it. Oil Thirty-three years after the Bretton Woods agreement, on August 15, 1977, Nixon took to the prices have been stronger lately because of geopolitical airways to tell the world and in specific to tell the central banks of the foreign countries that the concerns, but a lot of the stocks ... U.S.was reneging on the gold standard deal established at Bretton Woods. Read More We all know what happened once the tie between the U.S. dollar and gold was eliminated: The U.S. government was free to print money as needed, as it no longer had to worry if it had enough gold in its vault to back all the money being printed. Since the abandonment of the gold standard, the value of the U.S. dollar has lost considerable ground…a process called “inflation.” It takes a lot more U.S. pennies to buy a cup of coffee today than it did in 1971. The Thorn in the PC Market Leader’s Side There have been very stark critics of America’s action in abandoning the concept that fiat By George Leong, B.Comm. money should be backed by gold. Some say lack of the gold standard has caused global economic instability since 1977. My kid hardly ever works on his desktop personal computer (PC) anymore, instead favoring a laptop. In fact, I often see him surfing But since 2002, another phenomenon has occurred. The price of gold bullion has boomed. the Internet and doing research using my “iPad” or his “iTouch.”  Gold has risen in price from $300.00 U.S. per ounce in 2002 to almost $1,800 today—a gain This market shift is not only with my kid, but with millions who of 500%. And some economists, like me, are calling for gold to hit $3,000 per ounce. are also abandoning their computers in favor of tablets. The result of this is proving quite difficult for PC makers, who are fighting to There are many reasons why the price of gold bullion is skyrocketing. (I have written about come up with a defense. The market leader in PCs, ... those reasons in PROFIT CONFIDENTIAL countless times and will continue to write about why I believe the price of gold will rise.) Ultimately, I would not be surprised to one day see the Read More value of the U.S. dollar somehow tied back to gold bullion. Michael’s Personal Notes: Platinum Surges 15% in Seven I love the weekends, as they give me time to catch up on my much-needed reading. All week Weeks; Now Where Does it Go? long, I’m inundated with research reports. Sunday afternoons is my time to open up a bottle of Brunello and spend a solid four to five hours just reading financial reports on everything from By Sasha Cekerevac the market, the economy, and precious metals, to individual stock sectors and other forms of investment. Some of the toughest decisions an investor has to make occur when you are up on a trade. I’ve highlighted some of the merits in What I’m finding quite fascinating is the number of analysts who are deeply bearish on investing in precious metals like platinum before, the last being America. I’ve never quite seen anything like this before…so many people calling for the on January 11, 2012, in the article Investors—Should You demise of America. Consider Platinum? At the time I wrote the article, platinum was trading approximately $1,497; as of today, the market for On the one hand, these are smart analysts who bring up very good facts to back up their platinum is trading around $1,723, a move of approximately 15% solidly bearish views. On the other hand, I’m wondering if all this bearishness is getting in less than seven weeks. In fact, ... overblown. After all, when does the market or economy do what is expected of it? Read More Here are just two reports from the weekend: Elliot Wave expert Robert Prechter believes that the U.S. is in the early stages of a depression right now. Well-known investor Jim Rogers, who is highly critical of specific people in Washington, Extra predicts that the U.S. will eventually default on its debt obligations. Rogers believes that the U.S. economy never left the recession that started in 2008 and that we are still in a recession. A Study You Should Know About Yes, I’ve been very bearish on the economy as well. But, as a contrarian, one really has to wonder: will the stock market and economy really roll over and perform as the majority of By Michael Lombardi, MBA analysts predict? While most other economists tell us otherwise, I’ve been writing Where the Market Stands; Where it’s Headed: this year about how the numbers so far do not point to a U.S. Page 2 / 18
  3. 3. economic recovery, but rather to a continued economic I continue to hold the belief that a bear market rally that started in March of 2009 presides. slowdown, with the threat of recession. I’ve been focused on the According to a report from EPFR Global, a Massachusetts-based research firms, investors average damaged consumer, who has lost value in his/her home pulled more money out from global stock funds last week than any other week since 2008. and has been restrained by no income growth…if he/she is lucky And we all know what happened after 2008; stocks rallied big time. enough to have a job. With over 47 million Americans on food stamps, I’m at a loss ... I’m going against the popular opinion, as usual, on this one. While many stock advisors are saying that stocks are dead, the rally is over, I’m sticking with my belief that the bear market Read More rally, in spite of it being “long in the tooth,” is still alive and well. The Dow Jones Industrial Average opens this week down 2.5% for 2011. Why Oil Prices, Gold and Silver What He Said: Are Looking Good Again “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I personally started buying gold shares.” Michael Lombardi, PROFIT CONFIDENTIAL, By Mitchell Clark, B.Comm. December 13, 2002. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments. Michael has remained steadfastly bullish With the recent strength in the euro currency, the spot prices of on gold since 2002. gold and silver have been stronger. Share price action in mining stocks has a very high correlation to underlying commodity prices and they’ve been moving up as well. I still believe in the commodity price cycle and that exposure to precious metals and other commodities should be a component of an investment The Only Asset Worth Betting on—You portfolio this decade. The fundamentals are there to support higher prices for gold and silver. We have ... Guessed It! This Story’s Just Getting Started Read More No Comments Posted by Mitchell Clark, B.Comm. in gold shares, gold-related investments, investing in gold, precious metals, stock market, stock picking on August 12th, 2011 Stocks at Multi-year Highs, But If this is the decade of the commodity, then the single Watch for Some Near-term Topping most attractive area for equity speculators remains the gold-mining business. The entire industry is swimming By George Leong, B.Comm. in cash, while spot prices and physical demand for precious metals remain strong. Gold, silver and copper The DOW broke above 13,000 on February 21 for the first time have been holding up exceedingly well, as the rest of the since May 2008, while 14,000 has not been touched since stock market corrects. And it isn’t just the store of value October 2007. My market view is that the upside break at 13,000 argument or the so-called haven status of gold; the fact of is bullish if it can hold, but the light trading volume suggests a the matter is that the global supply of the commodity is minor bearish divergence between price and volume. My market relatively unchanged, while demand (particularly from view is positive and suggests that more gains may be coming, India and China) is going up. albeit stocks are technically overbought on the charts and are subject to resistance selling ... If I had to choose one stock market sector to focus on as an analyst and investor, it would be precious metals—gold in particular. It’s one of the few global industries with improving Read More fundamentals and, because there is always demand for physical precious metals (even if economies are in recession), there are always companies out there worth speculating on. Right now, the rest of the stock market is in significant turmoil and there’s a lot of fear driving Is this the End for Netflix? the share price action. But gold shares have been outperforming the market not only because the spot price is hitting new records, but also because gold-mining companies are now By Sasha Cekerevac consistently reporting record financial results. At this point, almost everyone knows about Netflix, Inc. It can be difficult stock picking in the mining universe. There’s nowhere near the number of fly- (NASDAQ/NFLX). The online streaming company offering movies by-night gold miners as there used to be. Standards for drilling results and feasibility studies and TV shows on demand was a pioneer in this field, which drove are now quite stringent and I would argue that a Street analyst is likely to be more accurate in corporate earnings for the firm. Such innovation and profitability in predicting the cash flow from a modern mining operation than just about any other kind of corporate earnings was bound to attract attention from business. competitors, many of them much larger than Netflix.  Anytime  you get larger competitors, the earnings outlook starts to get There are basically two kinds of mining opportunities for equity speculators. There’s picking cloudy. Recent news that cable giant Comcast Corporation an established producer with a forecast of cash costs and expected production. Then there’s (NASDAQ/CMCSA) is entering the online streaming market ... the pure-play venture capital opportunity, which is a company with a property and some cash in the bank to go drilling for metal. Either way, you have to do your homework or you’re just Read More throwing darts at a board. In the current environment, I would weight a speculative, pure risk-capital equity portfolio somewhere close to 50% in gold-related investments. From my perspective, it’s the only industry that’s generating meaningful growth and it’s the only way for speculators to beat the Popular Tags current volatility in the broader stock market. Investing in gold is something that not all people are comfortable with. The business is tied to a commodity and, by their very nature, commodity prices are risky, unpredictable instruments. But with the general economy stalled Chinas austerity measures best stocks blue chips Chinas GDP and the stock market in the doldrums, gold mining is one of the few booming industries with strong expectations. Growth consumer confidence consumer spending corporate earnings corporate profits credit crisis debt crisis dividend paying stocks dividends DOW Dow Jones Industrial Average Dow Jones Industrials earnings season The Stock Market Is Big; This Is economic slowdown euro Europe European Central Bank European debt crisis european economy european union Bigger and More Important to You eurozone financial crisis GDP growth gold bull No Comments market gold investments gold prices gross domestic product home prices inflation rate institutional investors investing Page 3 / 18
  4. 4. Posted by Michael Lombardi, MBA in bond market, federal reserve, interest rates, real estate in gold investing in real estate investing in stocks investment risk market, stock market, Stock Market Advice, U.S. dollar, U.S. Treasuries on August 12th, 2011 investor sentiment IPOs job creation jobs market large-cap companies large-cap stocks Market Veiw micro-cap stocks The bond market dwarfs the size of the stock market. I know what some of my readers are thinking right mining stocks NASDAQ national debt NYSE oil stocks penny now, “If I don’t invest in U.S. Treasuries, it doesn’t stocks price of gold quantitative easing retail sales retail matter to me if they go up or down.” This is wrong. sector retail stocks rising interest rates silver silver stocks small- cap stocks Sovereign Debt stock-picking stock The price direction of  U.S. Treasuries is based on  interest rate expectations. If bonds are rising or advisors Stock Market Condition Stock Market Picks stock decreasing in price, it means that future interest market rally stock market risk stock market success Stock Market rates will either rise or fall. The entire economy is Updates stocks Stocks Trading Tips technical analysis The based on interest rates. Higher interest rates would Leong Side of the Market U.S. banks U.S. debt U.S. Deficit be catastrophic for the stock market, real estate U.S. home prices U.S. real estate market U.S. recession U.S. market, consumers, and businesses. Treasuries unemployment rate Wal Mart Right now, 10-year U.S. Treasuries are near their record low, yielding 2.28% this morning. Why so low? Because, on Tuesday, the Federal Reserve took the unusual step of saying it would keep short- Categories term interest rates near zero into mid-2013. Gold Stocks Real Estate Market The Fed cut short-term interest rates to between zero and 0.25% in December of 2008 and Stock Market Gold Investments short-term rates have remained that low since. Now we are told that the Fed will hold rates at Bear Market Debt Crisis those levels for another two years. Bull Market Chinese Economy U.S. Dollar Economic Analysis But there is trouble in paradise… Euro Benchmark Stocks Interest Rates Dow Jones Industrial Average Three of the 10 members of the Fed interest-rate-setting committee dissented from the U.S. Deficit decision to give specific dates on how long short-term rates would be held close to zero. The last time this many of the committee members dissented was almost 20 years ago. Receive the latest updates from our There are two schools of thought on how this story will end. correspondents by subscribing to our RSS Feed. One camp believes that the U.S. is entering the same type of phase Japan went through in the 1990s: a period of deflation, where interest rates remained low for more than a decade. The second camp believes that the U.S. will need to raise interest rates, as its debt load increases and foreign countries balk at buying more U.S. Treasuries. China—the biggest holder of U.S. Treasuries—and Russia have been blasting the U.S. for failing to rein in spending. We also have two other problems: the U.S. dollar has been falling like a stone against other world currencies and the Fed has been a major buyer of U.S. Treasuries. Some look at this as the government buying its own debt. How confusing is that? I’m in the camp that believes a bubble is brewing in U.S. Treasuries. Just like a bubble happened in hi-tech in the late 1990s, just like the housing bubble that peaked in 2005, just like the stock market bubble that peaked in 2007. Whenever the U.S. government auctions off U.S. Treasuries, the offering is oversubscribed. Investors are lining up to buy securities paying 2.28% that are issued by a country that is technically bankrupt. That story can’t have a good ending. Michael’s Personal Notes: There’s a tremendous amount of fear in the marketplace today. I’ve never really seen anything quite like it before. One would believe that it’s 2008 all over again. Hence my belief that the stock market will not just roll over and collapse at this point. The market rarely does what is expected of it. A recent CNN/Opinion Research Corporation poll reported that 48% of Americans believe that another Great Depression is likely to start within the next 12 months. This is unheard of. If you asked people in 1930 if a depression was headed their way, they would not know what you were talking about. If history has taught us one thing, it’s that events happen when the great majority of people do not expect them to happen. We even have France, the second largest economy in Europe, now under attack by the bond vigilantes. Rumors have it that France will lose its Triple-A credit rating, just like the U.S. recently did. Yes, things are very difficult in Europe. Unemployment is high; jobs are hard to come by. But I’m starting to get the feeling that the pessimists are painting the situation as worse than it really is. Where the Market Stands: Where It’s Headed: The Dow Jones Industrial Average opens this last trading day of the week down 3.8% for the year. Personally, I’m not letting the multi-100-point up and down days on the Dow Jones bother me. I recognize that a lot of it has to do with automated computer buying and selling. I’m focusing on my long-term beliefs about the market. And those views have not changed. The first phase of the bear market brought stocks down to a 12-year low on March 9, 2009. From there, the second phase of the bear market took hold. And that’s where we have been for months. Page 4 / 18
  5. 5. The third phase of the bear market will have stocks fall below their March 9, 2009 low. It will present a once-in-a-generation buying opportunity for investors. However, I don’t believe the third phase of the bear market is ready to start quite yet. The bear hasn’t finished its job of luring more investors back in before it takes prices down again. What He Said: “A Stock Market’s Obituary: It is with great sadness that we announce the passing of the Dow Jones Industrial Average. After a strong and courageous battle, the Dow Jones fell victim to a credit crisis and finally succumbed on Friday, October 3, 2008, when it fell decisively below the mid-point between its 2002 low and its 2007 high.” Michael Lombardi, in PROFIT CONFIDENTIAL, October 6, 2008. From October 6, 2008, to November 27, 2008, the Dow Jones Industrial Average experienced one of its biggest two-month losses in history. First Stocks, Then Real Estate—What’s the Winner Going to Be This Decade? No Comments Posted by Mitchell Clark, B.Comm. in commodity prices, Internet-related stock, investment strategy, precious metals, real estate market, S&P 500, stock market, Stock Market Advice, stocks, technology stocks on August 11th, 2011 I think it’s probable that the stock market will continue to convulse for the rest of the third quarter and into the fourth. The trend in economic news is down and so is investor sentiment. We still have a lot of problems with sovereign debt issues in Europe and this is an investment risk that isn’t going away anytime soon. Right now, investor expectations are being dramatically reduced. The marketplace now expects little to no growth in gross domestic product (GDP) and investors aren’t expecting much, if anything, from the stock market. I still expect both the third and fourth quarters to be very good in terms of corporate earnings, so my view is that the stock market will undertake a prolonged period of consolidation around current levels, with chances of rallying in the fourth quarter. The old adage that investors should “sell in May and go away” perfectly illustrates a fitting strategy this year. If you pull up a chart on the S&P 500 Index, you’ll see the market’s substantial price appreciation from last September. Then in May, the market began to consolidate; slowly deteriorating until its recent move, breaking both its 50-day and 200-day moving averages. The S&P 500 Index has actually been in a period of consolidation for the last 11 years. Pull up a long-term chart on the Index and you can see it plainly. What you will also notice is the current price action, which looks like a right shoulder formation from the head set in 2007. It’s an ominous-looking pattern and, when looking at it, you can’t escape the feeling that the trend is going to complete itself. If it does, it means the stock market could be in for a lot more pain. Over the last decade, 800 on the S&P 500 stands out as the bottom support point. Regardless, the buy-and-hold investment strategy has barely paid off over the last decade. Without dividends, investment returns would now be negative, as the S&P 500 is currently trading below its level in December of 2008. Clearly, the best stock market advice would have been to buy technology stocks and Internet stocks in the 1990s. Then, the best subsequent investment strategy would have been to cash out of the stock market and buy real estate for most of the next decade. Now, it would seem, precious metals and agricultural commodities are experiencing the best price action from the global business cycle. First it was stocks, then it was real estate. Now the future belongs to commodities. I think the commodity price cycle will keep running for a number of years and, in a period of slow economic growth, investors need to have significant exposure to this sector. The fundamentals haven’t favored stocks for quite a long time. The real estate cycle was strong and highly profitable for those who got in and out at the right times. Now, all the debt in the world and money supply growth is creating a sustained period of higher inflation. Going forward, commodities and those assets that benefit from higher inflation will be the winners. New Higher Margin Requirement for Gold an Investor Opportunity No Comments Posted by Michael Lombardi, MBA in gold stocks, how to invest in gold, investor confidence, price of gold bullion, stock market, Stock Market Advice, stock prices on August 11th, 2011 Page 5 / 18
  6. 6. After months of patient waiting, the gold stocks came to life yesterday. Right across the board, whether it was junior or senior gold producers, the stock prices of gold companies were up sharply Wednesday. Hopefully, my readers have been following my guidance and seeking refuge in the gold-mining companies. Since the spring of this year, gold bullion prices have been rising sharply, while gold stocks stood pat. I have been writing that the leaders of the gold bull market would shift from the actual bullion to the gold stocks, and that’s what started happening Wednesday. Since the middle of June, the Dow Jones U.S. Gold Mining Index (an index comprised of the largest U.S. gold-mining companies) is up 12%, while the general stock market has gone down 11% in the same time period! But, like all good things, as the price of gold bullion hits $1,800, there are forces that want to put a wrench in the 10-year gold bull market, as many believe gold has become too speculative. Hence, this morning, we learn that CME Group Inc. (CME), the world’s largest futures market, changed the rules without advance warning and increased the minimum amount of cash speculators and investors must deposit to trade a futures contract of gold. In summary, margin requirements, with a flick-of-a-switch, have increased by 22% this morning. You may remember, the CME did the same thing to silver (increased the margin requirements for trading silver a few months ago) and silver fell sharply in price. Well, I have news for the market, and better news for my readers. The bull market in gold is too strong to have the metal fall in value by 30% as silver did after the CME increased the margin requirement for trading silver futures. For my readers, any pullback on the price of gold bullion caused by the CME’s newly imposed margin requirements would present a perfect buying opportunity for the junior and senior gold-producing stocks, once again. This is how to invest in gold now. Michael’s Personal Notes: On Tuesday of this week, the Federal Reserve made the unprecedented action of specifically saying how long it would keep short-term interest rates low. I’m sure you have heard. The Fed will keep rates low through mid-2013. On the news of a prolonged period of interest rates that are low, U.S. Treasuries rallied. It doesn’t matter if Standard & Poor’s has cut the credit rating of the U.S. It doesn’t matter if Congress has just given the Obama Administration another $2.1 trillion to spend. Investors want U.S. Treasuries. Yesterday’s auction of $24.0 billion in 10-year U.S. Treasuries was the first offering of U.S. debt since Standard & Poor’s cut the U.S.’s credit rating. There was a line up to buy these bonds—and the buyers walked away with the lowest yields on record—2.14%. At 2.14%, the dividend yield of the Dow Jones Industrial Average stocks of 2.8% sure does look competitive. Where the Market Stands; Where it’s Headed: It’s up and down, down and up for the markets. My readers need to understand that, when we have huge multi-100 point up and down days on the market, most of that trading is computer- driven. Very little of it has to do with individual investors buying or selling. Since the advent of index-traded funds, computer/automatic trading has become a big part of Wall Street. What am I doing? I’m sitting back and waiting. The current situation could go one of two ways. The market could move from here to test its March 2009 lows or the first real correction of 2011 could be close to ending, at which point the bear market rally would resume its upward trend. I’m in the camp that believes it is too early to test the March 2009 lows for a variety of reasons I have written about over the past two weeks. Some of those reasons: stocks are a better investment alternative today to 10-year U.S. Treasuries; monetary policy remains accommodative; the great majority of investors are pessimistic; corporate profits are still strong; and corporate insiders are buying stock at a pace not seen since the spring of 2009. What He Said: “Consumer confidence does not change overnight. In the U.S., 70% of GDP is based on consumer spending. And, in my life, all the recessions I have seen or studied have only come to an end when consumers started spending. With consumer sentiment getting worse, and with the U.S.personal savings rate near record lows, it may take years for consumers to start spending again.” Michael Lombardi in PROFIT CONFIDENTIAL, February 25, 2008. By the end of 2008, the rest of the world was realizing that the recession would be much longer and deeper than most had imagined. Page 6 / 18
  7. 7. Stock Picking: Time Horizons Change, But the Environment Just Got Better No Comments Posted by Mitchell Clark, B.Comm. in economic analysis, investment opportunity, large cap companies, small cap stocks, stock market, Stock Market Advice, stock picking on August 10th, 2011 The economy might be lackluster and there is a risk of another recession, but the stock market is fairly priced and the outlook for corporate earnings continues to be solid. The gyrations of the stock market are based on fear—fear of a future without growth. Small-cap companies are going to have a more difficult time generating earnings growth over the coming quarters because their operations are more closely tied to the domestic economy. Large-cap companies, such as those in the Dow Jones Industrial Average and many within the S&P 500 Index, are going to keep growing their earnings because of their international operations and a weaker dollar that translates into a better bottom line. The economy no doubt has a lot of structural problems to overcome and it will take a few more years to do so. The fiscal situation has to be addressed and a measured, reasonable plan needs to be put in place to deal with deficits and debt. Excess inventory in the housing market needs to be taken up for homeowners to feel more secure about the valuation of their main assets. And, finally, the employment situation has to improve in order for incomes and consumer spending to rise. These are big hurdles to overcome and it will take more time to do so. From the investor’s perspective, the fundamental backdrop of the economy is something we have to live with. Corporations continue to be running very lean operations and, with interest rates low and cash balances high, large companies can grow their earnings even if the domestic economy is stuck in an age of austerity. Right now, the most attractive new investment opportunities in the stock market are large-cap, higher-dividend-paying companies with significant international operations. At the speculative end, gold continues to be the best play. I think it’s fair to expect the broader market to continue gyrating for the rest of the third quarter. Technically, the main stock market averages aren’t looking good, but these significant pullbacks have happened before and stocks recovered. As you know, the stock market is all about betting on the future. Right now, the market is digesting an uncertain future with the expectation of weaker economic growth (or a possible recession). Beyond this expectation is a fundamental backdrop that looks pretty good from the investors’ perspective, as policymakers begin to address their finances and the housing market has more time to balance itself out. Corporate balance sheets are in very good condition at this time. Insiders are buying their own shares. An economic analysis of the current data suggests that a period of slow to breakeven growth is likely in the bottom half of this year. In the not-too-distant future, the stock market will look beyond this expectation and investors will be buyers. Gold’s Burning up on the Chart; My Gold Advice No Comments Posted by George Leong, B.Comm. in BRIC countries, gold advice, gold prices, inflation, investing in gold, national debt, PIGS, safe haven play, stock market, Stock Market Advice, U.S. economy on August 8th, 2011 The precious yellow metal is sizzling on the price charts, as traders shift capital from the higher-risk equities to the safe-haven sanctuary of gold. The U.S. is battling crippling debt levels and deficits. Some cities across the nation are shutting down to save money. The once powerful U.S. economic engine continues to show breaks and is stalling at this most critical time for the country. Over in Europe, we have the PIGS (Portugal, Ireland, Greece, and Spain) sucking money from the European Union and International Monetary Fund and taking away the ability to focus on growth. Page 7 / 18
  8. 8. We are also seeing some economic fragility in the BRICS grouping (Brazil, Russia, India, China, and South Africa). Brazil, India, and China are seeing some stalling in their economies and stock markets. In China, you have inflation surging to 6.4% in June, the highest level in about three years. The Chinese central bank has increased the bank reserve ratios in an effort to stall lending. Slowing inChinahas an impact on the domestic and global economies that deal with China. Domestically, you have a national debt of $14.5 trillion and this will grow to over $16.0 trillion with the debt ceiling increasing. Given all of this risk, you should have some capital working for you in gold. Gold is considered a safe-haven play versus that of silver. Investing in gold is a safe haven play when the overall market risk rises, as what we are currently witnessing. On the demand side, China is a significant buyer of gold and this is expected to continue as the country hoards physical gold in its reserves. India is also a major buyer. The reality is that gold is a limited resource that needs to be found and mined. There is a certain amount of global reserves in the ground, but, after that, there needs to be more exploration. Gold has rallied in each of the last 10 years and shows a beautiful bullish price chart. My gold advice would be to accumulate gold on weakness. On the chart, the October Gold traded at a record high of $1,683.50 on August 4 before retrenching. The current chart looks bullish on strong Relative Strength. There is a “golden cross” on the chart, with the 50-day moving average (MA) of $1,558 well above the 200-day MA of $1,451. Some pundits have come out and suggested a $2,000 target on gold over the next few years. I even saw a staggering $5,000 price target on gold. Now the latter may be an extreme, but I feel that gold prices will continue to edge higher, especially if the U.S. economy falters and another recession surfaces. In the current climate, gold represents the best bet, while silver continues to be a trading commodity based on the economic recovery and demand for electronics and industrial applications. My advice to you is to buy a mixture of exploration-stage gold miners along with small to large gold producers. In this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers. Special Stock Market Report No Comments Posted by Michael Lombardi, MBA in 10-year US Treasuries, bear market rally, best stock advice, Dow Jones Industrial Average, S&P 500, stock market, Stock Market Advice on August 8th, 2011 My commentary today is dedicated solely to the stock market. Many of my readers are obviously invested in stocks and are concerned over last week’s volatility. Let’s start with the general consensus… Whatever I read this weekend, the message was basically the same: “The stock market is in big trouble.” Stock market advisors are turning bearish in droves. You read a lot about the major market indices breaking important 50-day and 200-day trend lines, hence even the market technicians have turned bearish. I have been in this business a long time; about 30 years. I have never seen a stock market follow the direction of the consensus opinion. In other words, I doubt the stock market will make everyone happy and just roll over, as the great majority of investors and analysts believe it now will. Let’s move to the companies that trade in the market… Earnings in corporate America remain strong. The weak economy is not hitting the big public companies. We have yet to see any of the big 30 Dow Jones Industrial companies report downgrade revisions to their expected earnings this year. Corporate America sits on over $1.0 trillion in cash. Page 8 / 18
  9. 9. At a dividend yield of 2.65%, the Dow Jones Industrial Average is still a good alternative to the approximate 2.5% yield on the now S&P-downgraded 10-year U.S. Treasury. Stocks are not expensive in relation to their dividend yields and price/earnings multiples when compared to alternatives in the marketplace, including Treasuries. Moving to the Fed and the government… The government got what Wall Street wanted: a big increase in its spending limit. The government has been given permission by Congress to spend another $2.1 trillion of money it doesn’t have—make no mistake, Wall Street loves when the government has more money to spend. The Federal Reserve, it is my belief, is getting ready to come out with some new form of QE3. Monetary and fiscal policy remains as accommodative as I have seen in three decades of following the markets. Both the Fed and government stand ready to jump in and “save” the economy again as needed. They will pull out all the stops…and that is exactly why this bear market rally has lasted as long as it has. Finally, let’s look at what happened last year in the stock market, as investors have very short- term memories. As of this past Friday, the Dow Jones Industrial Average was down exactly one percent for the year. Let’s take a quick look back at last year. The Dow Jones Industrial Average started 2010 at approximately the 10,500 level. Just like this year, the Dow Jones Industrial Average rallied from the beginning of 2010 to the spring of 2010. In the summer of 2010, stock markets in North America crashed. By July of 2010, the Dow Jones was down 8.5% for the year—yes, 8.5%! We all know what happened after that. The Dow Jones rallied from a low of 9,500 in the summer of 2010 to close at 11,500 by the end of 2010. The stock market actually gained about 10% in 2010 despite a terrible summer for stocks. My message to my readers… Don’t panic. It is the worst thing you can do. Be realistic and look at the numbers. Stocks are only down one percent this year. If we look back at 2010, stocks were down 8.5% for year by the summer and they still came back to close a great year. The majority of investors and analysts are bearish on stocks now—and we know from past experience that the majority opinion, often referred to as the consensus, is usually wrong. Corporate earnings are strong. The government has loaded its gun to spend more. “Helicopter” Ben Bernanke and his crew at the Fed are ready to jump in and “save” the economy again if needed. By this point in this report, you can tell I am not ready to give up on my belief that we are still in a bear market rally that started in March of 2009. I believe this bear market rally has more time left in its life cycle. Yes, the bear market rally will eventually end and Phase III of the bear market will eventually kick in—but it will not be that well-publicized. If we were to look at this from a pure technical interpretation, the Dow Jones Industrial Average would have to fall below 9,658 for the bear market rally to officially end (the mid-point between the March 9, 2009 low and the May 2, 2011 high). We are far from 9,658 on the Dow Jones Industrial Average. That, my dear reader, is the best stock market advice I can give you. The Most Important News to Listen to—It’s the Real Deal No Comments Posted by Mitchell Clark, B.Comm. in big corporations, corporate earnings, housing market, most important news, stock market, U.S. dollar on August 4th, 2011 I still feel that the most important news investors should be listening to is from corporations themselves. They are the enterprises, not government, and therefore they are the drivers of earnings growth. The fact of the matter is that we are in the age of austerity, and we deserve to be. All the excesses of the past have created the slow economic environment of the present. Investors’ concern about government cuts to spending is a worry that’s misplaced. The economy shouldn’t be based on government spending and stimulus; that’s up to individuals and entrepreneurs. Just like last year, big corporations are saying that earnings are solid, and the expectation is for further improvement in the bottom half of this year. Many Wall Street analysts are increasing their earnings expectations for S&P 500 companies this year and next, and, based Page 9 / 18
  10. 10. on those expectations, the stock market is looking very reasonably priced at this time. No doubt, the sovereign debt issue in Europe and the debt-ceiling negotiations in theU.S.were confidence killers. Add in some weaker economic news and you can easily see why the stock market retreated. But I think this market has a real resiliency to it and there’s a good chance that it won’t break down. If this were to happen, it would go against what corporations are saying about their businesses. There is one important factor that investors need to keep in the back of their minds. What matters most in capital markets is the numbers. Unfortunately, people don’t particularly count. What I’m getting at is that the stock market can tolerate persistently weak employment numbers if corporate earnings are growing. If employment was improving and so was the housing market, then I have no doubt we would be in a full-blown bull market right now. As this is not the case, I think the market will hold together and tick higher modestly as long as the earnings growth is there. All that really matters in the equity market are earnings and this news so far is promising. There is one big reason why I think corporate earnings can keep growing even if growth in the domestic economy grinds to a halt. It’s the dollar—a weaker dollar that should persist for several years to come. A weaker dollar is the biggest gift to domestic exporters and large-cap multinationals, because the earnings abroad translate into bigger earnings at home as the dollar falls relative to foreign currencies. The U.S. Dollar Index, which measures the value of the U.S. dollar compared to a basket of the world’s main currencies, has bounced around quite a bit over the last three years. However, since the beginning of 2010, it has been in a significant decline. The near-term trend for this index looks intact and this is good news for corporations. As I say, there are plenty of potential shocks out there and investor confidence is already low. With a little bit of stability on the confidence front, I see corporate earnings swaying investor sentiment going into the fourth quarter. Stocks should be able to advance based on earnings news alone. How Stocks Are Reflecting the Structural Excesses of the World No Comments Posted by Mitchell Clark, B.Comm. in Stock Market Advice on August 3rd, 2011 Now that the S&P 500 Index is below 1,300 again, it’s time to worry. This index has been trading in a tight range ever since the beginning of the year and it hasn’t been able to break out past 1,350 in any meaningful way. On the support side, 1,250 looks like an important technical barrier; if it’s broken, it would not be a healthy development for stocks. The S&P has already broken its 50-day moving average and is poised to break its 200-day moving average at this time. Now, it’s important to remember that these statistical indicators are just those—statistics. Last summer, the S&P broke both moving averages, consolidated for three or four months, and then reaccelerated to its current level. Just looking at the chart of the index; it does look like it’s rolling over a little bit. At the very least, the trend shows that the market looks tired, which is a word I like to use to describe a lackluster, trendless stock market. Equities seem to be maintaining their trading correlation with the spot price of oil. That remains a good, short-term indicator that really is reflecting the current state of investor sentiment. One thing’s clear; it’s a difficult time to be stock picking in a marketplace that’s so unsure of itself. Investors want to be buyers of stocks, but the economic data so far aren’t playing ball. This is why higher-yielding, large-cap stocks should continue to outperform, as institutional investors buy yield in order to generate some sort of return on investment. As odd as it may seem, the stock market’s actually been in a “consolidation” for just over 10 years. We had a huge bull market in the 80s and 90s, culminating in the spectacular wealth creation of Internet stocks, followed by an equally spectacular correction after the bubble. Stocks recovered from the speculative excess in the technology sector, only to see the market completely melt down again due to the excess created by subprime mortgages. Again, the stock market recovered from this debacle, and it is now having to deal with the excess of sovereign debt. All of these events contributed to today’s weak economic growth. Somehow, it would seem that the stock market has just been a reflection of the structural excesses in the world that we live in. The biggest worry in global capital markets is always currencies. When currencies start to experience big moves, entire countries can easily swing into major recessions. Right now, the Japanese yen currency is trading right around its record high against the dollar. The high valuation of that currency is hurting the very economic recovery that the country needs after the recent earthquake disaster. Unknowingly, big currency moves can wreak havoc on individual pocketbooks. High levels of sovereign debt and debt ratings do matter to the marketplace and this is why investing in gold Page 10 / 18
  11. 11. seems so attractive. As we all know, everything in financial markets involves risk. The key to outperformance is to always be aware of it and manage it as the marketplace changes. Right now, the equity market is not looking very healthy at all. What These Food Stocks Are Telling Me About the Future No Comments Posted by Michael Lombardi, MBA in Stock Market Advice on August 3rd, 2011 — reporting from Florence, Italy Something different for my readers today… I’m going to talk about food. But don’t worry; in the end, I’ll relate it back to the economy and the stock market, as I eventually do with all my stories. Okay, so I’m eating out every night here in Florence. And when I look around, I see few people with a bottle of wine at their table. Wine, in Italy— isn’t it cheap here? Yes, generally, good wine is less expensive in Italy than in America. But times are also difficult, very difficult, in Europe. It’s common to see a family of four people at a decent Italian restaurant having salads and sharing (yes, sharing) a bottle of water and a pizza. And in Rome, fast food restaurants are becoming more and more common. Europeans are suffering, economically. Unemployment is sky-high in most countries. Wages are low. Austerity measures have hit the pockets of citizens. For a young couple to get married and move out of their parents’ home is not common. What is common is getting married and living with the parents or in-laws. And that got me thinking about back home, in America. McDonald’s Corporation (NYSE/MCD) last week reported a whopping profit of $1.41 billion in the second quarter of 2011—well above analyst expectations. And McDonald’s stock price chart, it looks like a straight line up since the beginning of 2009. (Stock market advice: I’d buy the stock; but, at 18.4 times earnings, it’s too rich for me. The easy money has been made on this stock.) Now let’s look at Morton’s Restaurant Group, Inc. (NYSE/MRT), the world’s largest operator of company-owned upscale steakhouses (no, none in Italy). Morton’s has been posting some great earnings as of late. But the stock is in the dumps. In 2007, the stock went for $20.00. Today, it trades at $7.64. What’s going on? The stock market is a forecaster of future events. And right now the stock market is telling us that the future for consumer dining dollars will go to cheap, fast-food companies like McDonald’s, not fine-dining restaurants like Morton’s. In a nutshell, consumers will be cutting back on spending. The price action of the dining stocks is in line with my belief that we will experience difficult economic times ahead in America. The way people live in Europe, their lack of income and their decaying standard of life could travel to America  quicker than most consumers care to  think. About 44 million Americans are using some form of food stamps. It’s downright scary. And when you have the stock market giving companies like McDonald’s a major vote of confidence in the form of a booming stock price, we need to take a step back and look at what it forecasts for our future. When I walk around the streets of Italy, be it Rome, Florence or Venice, and see how the well- educated, middle-class people struggle, as sad as it sounds, I see America’s future. And it’s not pretty. What He Said: “In 2008, I believe investors will fare better invested in T-Bills as opposed to the stock market. I’m bearish on the general stock market for three main reasons: Borrowing money in 2008 will be more difficult for consumers. Consumer spending in the U.S. is drying up, which will push down corporate profits.” Michael Lombardi in PROFIT CONFIDENTIAL, January 10, 2008. The year 2008 ended up being one of the worst years for the stock market since the 1930s. Page 11 / 18
  12. 12. Trading Action Repeating Itself—What the Stock Market’s Setting Itself up for No Comments Posted by Mitchell Clark, B.Comm. in corporate earnings, gold stocks, price of gold, price of silver, S&P 500, silver stocks, stock market on July 29th, 2011 While the price of gold and price of silver continue to be very strong, a lot of gold stocks and silver stocks have been pulling back in price. It’s a reflection of the current state of things, with investor sentiment seemingly stuck in a rut. We’re in a market with so much uncertainty that any call is valid and all outcomes are plausible. The stock market could completely fall apart, stay the same, or advance. A market malaise has set in and it’s almost entirely due to the sovereign debt situation. Just last week, stocks were looking set for a decent run, as corporate earnings mostly impressed the Street. That rally fizzled pretty quickly and now the S&P 500 Index is back down at the 1,300 level, which I view as problematic in terms of the market’s overall health. What’s happening is that investors are beginning to ignore good news and event-driven trades don’t seem to have any legs. It’s a strong signal that the market is tired and very unsure of itself. With this backdrop, there certainly is no rush to take action on the long side. Even if the sovereign debt issue were to be settled right now and the market were to make a big advance, there’s just as much probability that it would pull back a month from now on lackluster economic news. The equity market sure isn’t making it easy for traders. The S&P 500 Index has basically been trading range-bound since the beginning of the year with declining volume. Oddly, it’s following a very similar trading pattern to the beginning of last year where stocks advanced and then didn’t do anything for about 10 months before breaking out. We could be in for a similar scenario this year where stocks might not experience any material rally until sometime in the fourth quarter. That is my current figuring. While corporate earnings are strong, economic data are not. Last year—and so far this year— the stock market was held together by good corporate earnings, as investors were willing to wait for the economy to recover. The pace of that recovery is most certainly unclear and the marketplace is growing impatient. Couple this with all the problems associated with country debt and deficits, and you could easily make the case for an S&P below 1,300. I think we’re going to get continued range-bound trading for the next several months with the potential for an end-of-year rally based on the expectation for good fourth-quarter numbers. Corporations are doing their part; now it’s time for the economy and policymakers to do theirs. Stock Market: What’s Really Going on Now No Comments Posted by Michael Lombardi, MBA in bear market rally, debt ceiling, John Boehner, stock market, Stock Market Advice, stock prices, U.S. economy on July 28th, 2011 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! Page 12 / 18
  13. 13. 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. Gold: The Only Sector with Improving Fundamentals No Comments Posted by Mitchell Clark, B.Comm. in corporate earnings, gold investment, gold mining, gold mining shares, investing in gold, large-cap stocks, micro cap stocks, spot price of gold, stock market on July 28th, 2011 The stock market is facing some strong headwinds over the short term and all the wrangling is a real shame considering that we’re still getting great earnings results from large-caps. It’s no wonder the spot price of gold keeps ticking higher; there’s nothing else for investors to rally around. I still view the current environment positively, but financial markets do not like uncertainty and all these issues regarding debt ceilings and sovereign debt inEuropeare wreaking havoc on confidence. In my view, corporate earnings are strong enough to support an S&P 500 Index of 1,500 by the end of the year. A number of analysts and institutional investors feel similarly, but there isn’t much buying of equities because of the uncertainty about sovereign debt. Investing in gold is becoming a more viable strategy and, for most investors, the sector could represent a larger part of their portfolios. I’m not usually a fan of buying high with the goal of trying to sell higher; but, in this case, with all the global fundamentals we have going on right now, gold investments are the best play. The gold sector of the stock market is ideal for speculators and, because there’s little growth to be had in the rest of the market, liquidity is great and it’s on the rise. This makes for more trading opportunities and more pronounced moves in share prices when there’s news. For Page 13 / 18
  14. 14. event-driven traders, I would focus a large part of my attention on gold mining shares going forward. There are a lot of micro-cap stocks in the gold sector, but less mid-cap and even fewer large gold mining companies. Quite simply, a gold exchange-traded fund (ETF) is an easy way to take on a position. With the spot price of gold at record levels, the gold mining business is a highly profitable business model. There are all kinds of small, junior gold producers that are making money hand over fist with gold over $1,200 an ounce. Most of the established, producing junior miners have tons of cash in the bank, so future exploration and development are virtually assured. All opportunities in the stock market occur in waves of enthusiasm. Right now, there’s not a lot to be enthusiastic about. But, the one sector that stands out as the most attractive in my view is precious metals; gold, in particular. There just isn’t the growth in the rest of the economy and, frankly, investors aren’t willing to buy it even if they see it. U.S. Debt Ceiling: The Least of Our Real Problems? No Comments Posted by Michael Lombardi, MBA in bear market, economic analysis, financial news, gold prices, inflation, national debt, stock market, Stock Market Advice, U.S. debt ceiling, U.S. dollar, U.S. economy on July 27th, 2011 As I read the financial newspapers and the popular Internet sites this morning, I realize that if there is one thing I hope I achieve in my own daily writings, it is to make my readers wary, almost suspicious of what the media is telling them. Here’s what got me thinking like this… Yesterday, the U.S. dollar hit a fresh, new three-year low against a basket of six other major world currencies. The media was quick to point to the bickering amongst the Democrats and the Republicans (over raising the U.S.debt ceiling) as the reason the dollar was falling to a new record low. Wherever I looked this morning, the news sites were basically saying, “Washington can’t agree on increasing the debt ceiling, the deadline is closing in, and the dollar is falling because of all this concern.” But that’s where reporters have it very wrong, as far as I’m concerned. Let’s take the debt ceiling issue off the table for a moment and let’s assume Washington passed a new debt ceiling limit of $16.0 trillion or $17.0 trillion. Would the greenback still be falling off the cliff in value? Of course it would. We are passing a law that says the government can borrow even more money. The greater the debt of a nation, the weaker its currency. We are actually better off if the government doesn’t pass a new debt ceiling and it starts spending within its means. I don’t want my readers to buy the propaganda the media spits out. At the very least, I want my readers to be aware of the fact that most people reporting the financial news today know very little about finances or economic analysis. The following are my five core beliefs. I hope my PROFIT CONFIDENTIAL family of readers will benefit from them. The devaluation of the U.S. dollar that started in late 2008, early 2009, will continue as: (1) the U.S.economy deteriorates further; (2) the national debt level continues to rise; and (3) the Fed prints more money. Inflation will become a real problem in America thanks to years of monetary policy that promoted artificially low short-term interest rates and the hyper-printing of U.S. dollars. Gold prices will rise on the back of a weak greenback and too many dollars in the system and as inflation comes back. The euro is as done as the dollar. Either Germanywill eventually kick the weaker countries out of the euro or it will adopt its own currency. The stock market will eventually test its March 9, 2009, lows, as Phase III of the bear market sets in. Where the Market Stands; Where it’s Headed: The next couple of days will bring the close of July 2011. And with another month behind us, the bear market rally in stocks that started in March of 2009 will have lasted 29 months. A Page 14 / 18
  15. 15. tremendous feat? Not really. As I have written before, the 1934 to 1937 bear market rally lasted 35 months. I remain steadfast in my opinion. We are in phase II of a bear market. During this phase, the bear brings stocks higher in an effort to lure investors back into them. The easy money in this bear market rally has been made. But there still is upside potential for stocks, albeit it’s limited. While the media is obsessed with theU.S.debt ceiling limit, the Dow Jones could easily continue to ride the “wall of worry” higher. What He Said: “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 rally 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 Americans.” Michael Lombardi in PROFIT CONFIDENTIAL, November 29, 2007. The Dow Jones Industrial 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. By mid-November 2008, the Dow Jones Industrial Average was at 8,726. Record Results & Good Visibility for Railroad Companies, But Nobody’s Buying the Success No Comments Posted by Mitchell Clark, B.Comm. in blue chips, Dow Jones, earnings reports, railroad companies, railroad stocks, stock market, stock picking, technical trend on July 27th, 2011 The railroad companies have confirmed that the industrial economy is on track for a solid second half. They are buying more equipment to deal with increasing load factors and most are planning to hire new workers to keep up with rising demand for their transportation services. This is a very good indicator for the future. One of the big companies, CSX Corporation (NYSE/CSX), reported record second-quarter results with earnings coming in at $506 million, or $0.46 per share, compared to $414 million, or $0.36 per share, in the second quarter of 2010. This was a 28% gain in an environment of rising costs for raw materials. Company revenues grew 13% to $3.0 billion and management cited increased business activity in all major markets, including merchandise, intermodal and coal. Revenues were driven by volume growth and higher prices, which offset increased fuel prices. If you read the earnings reports of all the major railroad companies (which I highly recommend), you’ll notice that they are all saying the same thing.China’s appetite for coal is a major contributor to business growth in rail transportation. Growth in utility demand at domestic power plants is lackluster, but sending coal to Asiais a new bulkhead business that’s keeping the industry solidly profitable. Yet, for all the success that’s on the books, the stock market doesn’t seem to be celebrating the good earnings (and visibility). It’s as if the market is just plain grumpy and unsure of itself. The Dow Jones Transportation Average isn’t really saying anything with its recent performance. The Index is trading at the same level it was in April and May. It bounces around, of course, but there’s no technical trend that jumps out at you. I suppose the stock market reflects the mood of the economy. Some parts are doing okay, while others struggle. Stock picking in this kind of environment is much more difficult, because there is no wind at your back. It is a very good sign that the railroad companies are saying that things are good and they are shipping more coal and chemicals. Following this specific industry is an excellent way to get a feel for the industrial economy and to develop your market view. My feeling is that we’re going to be stuck in a period of mediocrity for several more years as the whole of the economy continues to balance itself out after a major period of excess and correction. The stock market should reflect this mediocrity and continue with its trendless price moves. This is why I like higher-dividend-paying blue-chips and some gold on the side for protection. Not much else is paying in this market. The Stock Market’s New Best Friend—Buffett Will Be Pleased No Comments Page 15 / 18