Now for the good news... today we have some of the greatest investment opportunities of a lifetime. The major sell-off of 2008-2009 has thrown the baby out with the bath water. Don't be fooled, however, we are not out of the woods and certain areas such as financials, retail, real estate, and anything related to the U.S. consumer are still particularly vulnerable.
The "cash for clunkers" program which is being hailed as a great success is about the worst idea that the U.S. government has ever hatched. We are currently destroying perfectly good cars to push the U.S. consumer further into debt to buy new cars in a feeble attempt to save the automobile industry. The real kicker is that most of the money went to foreign car companies like Toyota!
IMHO, the greatest investment opportunity today is GOLD below $1,000 per oz. The inflationary pressures will almost certainly push up this store of value as the value of the dollar falls. The easiest way to invest is a gold exchange traded fund under the ticker symbol "GLD". This ETF is priced at approx. 1/10 the value of an ounce of gold (same goes for silver under the ticker symbol "SLV").
Tuesday, September 1, 2009
Wednesday, July 8, 2009
Unemployment 9.5%
The national unemployment rate is now 9.5%. Some states have entered double-digit unemployment (California, Nevada, Michigan, Indiana) and this trend may continue. I strongly believe that the unemployment rate provided by the Bureau of Labor Statistics is grossly understated. This rate does not include new college grads, people who have stopped looking for work, self-employed (real estate agents / independent contractors), and the under-employed (part-timers). Unless the employment rate improves the economy will continue to trend downward along with home prices, consumer spending, GDP, and corporate earnings.
Earning season is now kicking off with Alcoa. These earnings may wind up disappointing the market and we could enter the second stage of the bear market selloff of 2008-2009. The government stimulus will eventually wear off and we will be left only with the $12 trillion federal debt burden (which doesn't include entitlement programs like Social Security and Medicaid). China owns $800 billion of US Treasuries and the US stimulus program was $800 billion?!?!
If the Obama administration decides to push for another stimulus program it may send a sell signal on the US dollar which would be highly inflationary. The fed is also monetizing the US debt by buying Treasury bonds. The Fed announced on March 18 it would buy as much as $300 billion in Treasuries over six months to hold down borrowing costs (mortage rates, etc.). The exit strategy is nowhere in sight and it will be very difficult to raise interest rates when the economy is still extremely unstable.
Earning season is now kicking off with Alcoa. These earnings may wind up disappointing the market and we could enter the second stage of the bear market selloff of 2008-2009. The government stimulus will eventually wear off and we will be left only with the $12 trillion federal debt burden (which doesn't include entitlement programs like Social Security and Medicaid). China owns $800 billion of US Treasuries and the US stimulus program was $800 billion?!?!
If the Obama administration decides to push for another stimulus program it may send a sell signal on the US dollar which would be highly inflationary. The fed is also monetizing the US debt by buying Treasury bonds. The Fed announced on March 18 it would buy as much as $300 billion in Treasuries over six months to hold down borrowing costs (mortage rates, etc.). The exit strategy is nowhere in sight and it will be very difficult to raise interest rates when the economy is still extremely unstable.
Friday, March 20, 2009
Greenbacks = Wallpaper
The U.S. Government is in the process of running the printing press and debasing our currency. The true definition of inflation is the increase in the money supply... price inflation is just the effect of monetary inflation. Many high profile companies continue to slash dividends and make their stocks not worth holding. The only reason to own a stock is for dividends!
The scandals at AIG should be blamed squarely on the U.S. Government. You cannot just give a heroin addict money and expect them to use it for college and to pay off their debts. AIG is a bad company and they should have gone bankrupt. All the U.S. Government did was pay off their gambling debts to Goldman Sachs, etc. That is taxpayer money that will NEVER BE RECOVERED!!!
There has recently been a big shift away from the U.S. Dollar / U.S. Treasuries into commodities / foreign stocks. I expect this trend to continue and U.S. stocks / real estate to lose value. At the same time, however, I expect consumer good prices to increase. Everything from food, energy, and clothing will become very expensive due to limited inventories. People will continue to lose their jobs putting additional pressure on real estate prices and consumer credit across the country.
The scandals at AIG should be blamed squarely on the U.S. Government. You cannot just give a heroin addict money and expect them to use it for college and to pay off their debts. AIG is a bad company and they should have gone bankrupt. All the U.S. Government did was pay off their gambling debts to Goldman Sachs, etc. That is taxpayer money that will NEVER BE RECOVERED!!!
There has recently been a big shift away from the U.S. Dollar / U.S. Treasuries into commodities / foreign stocks. I expect this trend to continue and U.S. stocks / real estate to lose value. At the same time, however, I expect consumer good prices to increase. Everything from food, energy, and clothing will become very expensive due to limited inventories. People will continue to lose their jobs putting additional pressure on real estate prices and consumer credit across the country.
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