Economy: Michael’s Top Seven Reasons to Worry

In my daily writings, my goal is not to continuously be the bearer of bad news. When it comes to the economy, my goal is to educate my readers as to the severe structural economic problems the U.S. faces in the hope that more awareness of the issues will help my readers prepare their portfolios for the inevitable hardships that lie ahead.

Most Americans go along their merry way, oblivious to the mounting economic challenges facing America. I assume that, since you and hundreds of thousands of others read this column daily, you do not want to be in the “merry oblivious group.” You want to know what’s really going on with different aspects of the economy and how they will ultimately play out for or against you.

The following are seven major problems facing the U.S.:

1. Foreign Ownership of America

Ten years ago, foreigners owned 20% of U.S. Treasuries. Today, they own between 40% and 50%. If we go back through history, when we see past countries exposed to such dependence on foreign investment, the debtor nation (in this case the U.S.) has eventually faced sovereign debt problems and high inflation.

2. Price Action of Gold

The price of gold has risen 413% in less than 10 years and, during that 10-year period, it has failed to face a major correction in its price advance. The spectacular but steady rise in the price of gold bullion is a leading indicator of either a collapse in the value of the U.S. dollar or rapid inflation or both.

3. The Fed

As blunt as I can be, and in a nutshell, here’s my opinion: The Federal Reserve’s printing press has been supporting the economy since March of 2009. At the end of this month, the Fed says it will stop its QE2 program—basically a fancy name for printing money, taking that money and buying U.S. Treasuries. I have read various reports issued by analysts and economists. Depending on which report I choose to believe, the Fed has been buying about 50% of the Treasuries issued by the government under QE2. Who will buy these Treasuries if the Fed stops buying them? Scary thought.

4. Debt

The U.S.’s budget deficit this year will be in the $1.5-trillion to $1.6-trillion range. Our debt ceiling (the amount the U.S. can legally borrow) is here and it’s $14.3 trillion. Only nine years ago, the national debt was $6.0 trillion. In less than a decade, our national debt has gone up 140%. But the official national debt numbers we hear do not include entitlements to U.S. citizens and unfunded liabilities. Include these and our total debt is in the $70.0-trillion to $100-trillion range, again depending on which analyst report you believe. The official national debt is expected to increase another $6.0 trillion by the end of this decade.

5. Government Gone Too Big

Under the Obama Administration, the government has only gotten bigger. Between 40% and 45% of households in the U.S. receive some form of government support. Over 30 million Americans use food stamps. And, of course, the government is the biggest employer in the country. Social Security and Medicare—those expenses are huge for the government. But conveniently, they are not included in the government’s total debt, as they are both unfunded expenses. The government took over Freddie Mac and Fannie Mae during the credit crisis. Since these two entities owned or guaranteed half the residential mortgages in the U.S., does this mean the U.S. government now owns or guarantees half of all residential mortgages in the U.S.?

6. U.S. Dollar

Since June of 2010, less than 12 months ago, the U.S. dollar has declined 16% against a basket of six major world currencies. The devaluation has been steady and slow. Frankly, considering all the debt the U.S. has piled on, I’m surprised that the U.S. dollar hasn’t simply collapsed. Maybe it’s being supported. I don’t know; I’m just a writer. But I have studied history. And I can tell you that no superpower has thrived as its currency has devalued. In the case of the U.S., the situation is dire—the U.S. dollar is the reserve currency for 70% of world central banks. If they all dump the dollar, the repercussions to the U.S. economy will be insurmountable.

7. House Prices

The average price of a home in the U.S. has declined 33% in 20 major cities from their 2006 price peak, according to the S&P/Case-Shiller Index. It will be years before the housing market recovers…a major impediment to the U.S. economic recovery.

Yesterday, at a conference in New York hosted by Standard & Poor’s, Robert Shiller, co-founder of the S&P/Case-Shiller House Price Index, was quoted as saying that he would not be surprised to see U.S. house prices decline another 10% to 25% over the next five years. Shiller noted that, in Japan, housing prices fell for 15 years after Japan’s property bubble burst in 1990.

For eight consecutive weeks now, the bellwether U.S. 30-year fixed mortgage has dropped, and consumers are still not interested in buying houses.

A 30-year fixed U.S. mortgage today costs 4.49%. Last year at this time, it was 4.72%. The record low was 4.17% in November of 2010 (Source: Freddie Mac).

If the 30-year mortgage rate in the U.S. fell to three percent, would buyers surface? I doubt it. Consumers have no faith in the housing market and the inventory overhang is unprecedented. Just when you think the housing market can’t get any worse, it will get worse.

Based on the above, I’m sure you can see why I’m so concerned about America’s future and my kids’ future. American is no longer the industrialized leader it was following World War II. We face severe economic problems in the years ahead; hence you see why I’m long-term bearish on the stock market.

Next week, I’ll tighten the time frame and give you my more immediate reasons as to why I believe the U.S. economy will soon fall back into recession. Today’s U.S. economy…it’s looking very similar to me to the Japan economy of the 1990s.

Where the Market Stands; Where it’s Headed:

Stocks broke through their longest losing streak since 2009 yesterday. Although I was disappointed the market didn’t end on its high for the day, the market is putting in a base here.

I’d be worried if the Dow Jones Industrial Average fell decisively below the 12,000 level (12,124 was the opening this morning), but until then, the “tired” and “long-in-the-tooth” bear market rally presides.

What He Said:

“Despite all my ‘yelling’ and ‘screaming’ about gold, I believe that only a few of my readers and a small fraction of the general public have taken a position in gold. Why? Because gold’s not trendy…buying condominiums for investment is! If you are an investor, you need to seriously look at investing in gold stocks because gold bullion prices will likely continue to rise.” Michael Lombardi in PROFIT CONFIDENTIAL, September, 21, 2005. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments.


Top Seven Reasons to Worry in Gold Stock

Tonight: The Biggest Speech of His Life; What Investors Can Expect

Most Americans will be glued to the television tonight to see what the leader of the most powerful country in the world has to stay about his plan to get the economy going; in specific, to create jobs.

There is no doubt in my mind: President Barack Obama will be a one-term president unless he delivers on the promises he will make tonight.

The economic situation in the U.S. continues to deteriorate rapidly:

The “underemployment rate,” which includes part-time workers who want full-time work and people who have given up looking for work, sits at 16.2% in the U.S. right now.

Last week, the U.S. Conference of Mayors (which includes the mayors of 1,191 U.S.cities with a population of 30,000 or more each) called upon Obama and Congress to create major road and bridge improvement through some form of transportation bill.

More than 6.3 million households are past due by 30 days or more on their mortgages.

My bet is that Obama will push for huge job creation in the form of huge, multi-billion-dollar programs…infrastructure improvement and help with payroll tax. The Republican-controlled Congress will balk at raising personal taxes to fund these initiatives, so we are eventually talking more debt.

Many analysts are now expecting the Fed to unleash a new form of QE3. This will pump more money into the system as more dollars are printed. Let’s face the facts. The only way our politicians and the Fed know how to stimulate the economy is to spend more and print more money.

Both actions will continue to place immense pressure on the U.S. dollar. Is it any wonder that gold prices have been going through the roof? Does $3,000-an-ounce gold really sound unreasonable now?

Michael’s Personal Notes:

Talk about big numbers…

In a study for the Dallas-based National Center for Policy Analysis, a Boston University economics professor claims that the true debt of the federal government is $211 trillion.

According to Professor Laurence Kotlikoff, the government has been “incurring enormous unofficial debt and using fraudulent deficit accounting to keep these huge bills facing our children off the books.” Social Security and Medicare are two huge government liabilities not on the books of the government.

If Kotlikoff is right, with the Gross Domestic Product (GDP) of the U.S. at $14.0 trillion a year, it would take 15 years of all the GDP the U.S. creates to erase the $211 trillion in U.S. debt.

It’s very disturbing. If the government were a business, under section SFAS 158 of GAAP (Generally Accepted Accounting Principles), adopted in September 2006, it would be required to include on the balance sheet the full net value of pension assets and obligations, measured as the difference between the fund assets and the projected benefit obligation. A company does not have to show the full value of assets and the full value of liabilities—just the net of the two. The government is special—it doesn’t need to show its pension liabilities to the public.

Hence, when we hear that our “official national debt” is $14.5 trillion, it’s only the tip of the iceberg. Our true debt is 14 times that amount. It’s a U.S.debt crisis. How can the U.S. dollar sustain itself under this mountain of debt? It can’t. That’s what the rise in the prices of gold investments and gold stocks has been all about.

Where the Market Stands; Where it’s Headed:

The Dow Jones Industrial Average opens this morning down 1.3% for 2011. It is my opinion that the bear market rally in stocks that started in March 2009 remains intact. Despite this bear market being “long in the tooth” and tired, it still has life left in it. Stock market investment returns are limited at this point. The easy money in the stock market has been made (mostly in 2009). I estimate that the market could advance 10% from here on the upside before the bear finally retires this phase of its cycle.

What He Said:

“Bonds could now be a buy: Bonds rise in price when interest rates fall, as their return makes them more valuable. After a bear market in bonds that has lasted for months, the action in the bond market, as I read it, indicates that the bear market in bonds could be over. I’ve always preferred quality when buying bonds, going with government bonds over corporate bonds. If you have some cash lying around, bonds could be a great deal.” Michael Lombardi in PROFIT CONFIDENTIAL, July 24, 2006. The yield on 10-year U.S. Treasuries fell from five percent in the summer of 2006 to 2.4% in October, 2011—doubling the price of the bonds Michael recommended.


Gold Stock Updates

Oil & Gold—Two Great Commodities Whose Prices Reflect the Fear in Financial Markets

The only trading action that seems to be working for long investors is in gold stocks these days. This isn’t a surprise, nor is it unexpected with the spot price of gold so high. Two more junior gold producers, AuRico Gold (NYSE/AUQ) and Northgate Minerals (AMEX/NXG), announced a deal to merge. The two juniors hope to create a new intermediate gold player and the expectation for production growth as a combined company is significant.

In this particular case, AuRico Gold is doing the buying. The company’s share price (which has almost doubled since the beginning of the year) appreciated swiftly to a recent 52-week high of $14.17 per share. Then the company announced the all-share deal to acquire Northgate. It’s a trend that we’re going to see more of over the coming quarters. With share prices lofty and bank accounts full, everyone in the gold mining business wants to bulk up before the party’s over.

The broader stock market’s trading action reflects the overall sentiment in the economy. Add in the fact that the month of September is often not a good one for stocks, and one could easily predict that the next several weeks are going to be difficult. The stock market isn’t expensively priced, but that doesn’t mean that it will be anytime soon. There’s a mini cycle going on in the stock market and it’s all about the revision of expectations for the future. Expected returns from stocks are going down big-time, as current economic data sink in. No doubt the stock market needs a major catalyst in order for it to advance. It’s unclear at this time what that catalyst will be. As is usually the case, the market will need a combination of factors to come together if it’s going to move higher in any sustainable fashion.

The S&P 500 Index did an impressive job of recovering from the 1,120 level. It clawed its way back to 1,200 and is now trying to balance itself out with the fears in the marketplace. The next major move could be anything. What’s likely in my view is that the trading action will very difficult until we get into third-quarter earnings. Any earnings warnings from corporations in this market will not be well received. The same goes for any changes in fourth-quarter visibility come reporting time. Everything now has a fragility to it—the economy, financial markets, and expectations for the future. The only exception is the market for gold; investors still view this specific asset as a haven, even though the spot price has already gone up dramatically.

The best near-term indicator for share prices continues to be the spot price of oil. A weaker oil price is exactly what the economy needs, but it also serves to illustrate declining sentiment about the future. Stocks won’t advance until the economic news shows some major improvement.


Oil & Gold—Two Great Commodities

The Biggest Bubble of Them All—Right Before Our Eyes

There’s an organization that’s been around for about 235 years. It’s more like a business today, taking in money and paying its bills.

After World War II, this business really got into high gear. It started exporting its goods all over the world. It actually lent money to its trading partners. Business was booming.

But then something happened. The business got too big. Too many managers were hired with their own agenda. The business started paying its people too much. Its trading partners caught on quickly, as they saw the big business getting bloated, and the trading partners started making their own goods.

The partners simply copied the manufacturing practices of the big business. And since the smaller trading partners had access to much cheaper labor costs, the small trading partners have become big suppliers over the past 20 years.

The big business went from being a company that lent money to its trading partners (customers) to a business that needed to borrow money from its suppliers in order to stay a float.

In regular business, it doesn’t matter if you have been around for 235 years. You go to a bank because you need money and, unless you meet the bank covenants, you will not be able to get a loan. This means that, unless you make money, you are out of business.

The big business I’ve described above is called the United States of America. It’s bankrupt. Its staff members, called politicians, spend more money than they take in. But, unlike a real business, the United States has a line of people (investors, domestic and foreign) who want to lend money to it.

And this is where this storyteller gets stuck. Why are people lining up to buy U.S. government debt? Would you invest your money in a 10-year bond that yields 2.2% per year (less than inflation) issued by an entity that has the world’s single biggest debt burden?

There’s an obvious answer. People are flocking to U.S. Treasuries because they see security in them compared to other government-issued debt. But, on the contrary, I see other governments implementing austerity measures to balance their budgets in two to three years. I fail to see this with the United States.

In this day and age, nothing is guaranteed. No, the U.S. will not file for bankruptcy or default on its debt. But it will pump the system with more U.S. dollars in a desperate effort to increase inflation—making the debt that investors and foreigners have bought worth less and less as time goes by.

Bill Gross, head of PIMCO, and the world’s biggest bond fund, was right when he said earlier this year that he was avoiding U.S. Treasuries because the returns could be risky. He was just too early in his opinion.

Never underestimate the length of time it takes to create a bubble, because we are living through one of the biggest bubbles ever created — U.S. Treasuries.

Michael’s Personal Notes:

Housing prices aren’t just falling in the United States…

This morning, it was reported that house prices in the United Kingdom fell in August the most they have in 10 months.

The Nationwide Building Society, based in Swindon, England, said that the average cost of a home in the U.K. fell about half of one percent in August from July. Most economic research reports on U.K. house prices for the remainder of this year are negative despite the prediction that the Bank of England will keep its benchmark interest rate at 0.50% until mid-2012.

The only major industrialized country left where housing is booming (yes, booming) is Canada. Canadian house prices continue to reach new record highs each passing month. In Toronto, Canada’s financial center, builders can’t put up condo buildings fast enough. Demand outweighs supply. Building cranes can be seen all over the skyline.

While economists in the U.K. have flatly blamed the slowing economies in the Unites States and major European countries for the U.K. economy stalling, Canada’s largest trading partner is also the United States. Add to that the fact that the Canadian economy actually contracted in the last quarter (negative GDP), and the only question that remains is not if, but when will the balloon pop for the Canadian housing market?

Where the Market Stands; Where it’s Headed:

As I had predicted, we closed out August in not-so-bad shape. The Dow Jones Industrial Average officially closed the eighth month of the year up half a percent for 2011. What started out looking like a catastrophe in the first couple of weeks of August was actually a buying opportunity.

I feel sorry for the thousands of investors who pulled money out of the stock market when the Dow Jones Industrials was having those 400- and 500-point daily drops. At the risk of sounding arrogant, I’m pleased we stuck to our guns, as many of our paid-for financial newsletters recommended buying equities when the Dow Jones Industrials fell below 10,800 in early August.

The bear market in stocks that began in March of 2009 enters its 31st month today.

What He Said:

“Despite all my ‘yelling’ and ‘screaming’ about gold, I believe only a few of my readers and a small fraction of the general public have taken a position in gold. Why? Because gold’s not trendy…buying condominiums for investment is! If you are an investor, you need to seriously look at investing in gold stocks because gold bullion prices will likely continue to rise.” Michael Lombardi in PROFIT CONFIDENTIAL, September, 21, 2005. Gold bullion was trading at under $300.00 an ounce when Michael first started recommending gold-related investments. Many gold stocks recommended by Michael’s advisories gained in excess of 100%.


The Biggest Bubble of the Gold Stock

Stock Market Action Déjà Vu: What’s Going on with Trading

It looks like the current trading action in stocks is the correction/consolidation that we should have had earlier in the year. Investor sentiment was perhaps too optimistic and economic reality has now caught up to the marketplace.

The only things that investors really care about are the numbers, and in those numbers they want to see growth. Investors sell when businesses aren’t growing and they even sell when business remains the same. The reality of a slow growth economy is now settling in and, no matter what the government or Fed does now, the economy is on its own.

We’re likely to get continued weakness in stocks until we get into second-quarter earnings season. If those numbers are bad, then stocks would be in serious trouble. The good news is that expectations for the second quarter remain quite solid. Not all industries are experiencing the same level of economic activity, and that’s to be expected. With this backdrop, however, it’s pretty reasonable to conclude that the equity market won’t be taking off anytime soon, which is a simple reflection of the current state of things.

As mentioned in this column many times over the last several months, there’s no rush for investors to be taking on new positions, especially at the speculative end of the market. Stock picking is much more difficult in a slow growth environment and the returns from speculating on corporate events are less robust in a bear market. From my perspective, we’re still in a bear market for stocks and the S&P 500 Index still hasn’t achieved the same level that it was trading at over 10 years ago.

Faster-growing economies like China and Brazil are what are keeping the earnings growing at large corporations. Without these emerging operations, the earnings results from S&P 500 companies would be a lot different. Because the world’s mature economies are growing slowly and the U.S. economy still has to work through the housing crisis, I think the stock market is experiencing the same kind of pattern it did from the mid-1960s to 1980. We’ve already been into the current stock market consolidation for a good 10 years now and there’s more to go. It’s one big trading range that, without dividends, would have meant negative investment returns from stocks.

Since last September, most investable assets have gone up significantly in price. Stocks, oil and gold have all been due for a correction because of that run-up. What the market is going through now is a reality check and a reminder that economic growth can’t be manufactured or engineered. The economy is still in the process of balancing itself out after a bubble period in housing. Once this situation is fixed, the economy will start growing again in a meaningful way.


Gold Stock Market Action

The Dilemma for Investors with Money to Spend on Stocks

It’s a tough market for equities right now because there’s no expectation for major growth. So far, big companies haven’t said enough on the subject and, with other less-than-enthusiastic news, the stock market is waffling. In fact, the main stock market indices could experience a total breakdown here if the numbers from corporations don’t start improving.

Investors bet big on strong first-quarter results and while, so far, big companies are reporting growth, they’re not reporting numbers that are beating consensus and this means that share prices are very unlikely to advance. In this kind of environment, new stock picking should go on the backburner. It’s a wait-and-see market and, like the economy, first-quarter earnings results aren’t going to be uniform at all.

Texas Instruments Incorporated (NYSE/TXN) just reported first-quarter financial results that missed consensus. This important benchmark company in the semiconductor industry reported growth, but nothing to write home about. Like many stocks in the technology sector, this one looks like it’s rolling over.

And the banking industry hasn’t reported numbers that have been up to snuff. Yes, there is growth, but, from my perspective, the numbers aren’t improving enough to warrant new positions in the sector. This is the situation the broader stock market finds itself in right now. First-quarter numbers are generally better, but not by much.

I come back to the gold mining industry as one of the few sectors with any growth left in them. Now that everyone is newly worried about debt and deficits (because Standard & Poor’s says so), upcoming currency wars are making the case for gold that much better every day.

With the news we have right now, I have to say that investment risk in equities remains high. The broader market already went up solidly in anticipation of strong first-quarter earnings. Companies so far aren’t beating consensus and they aren’t guiding higher. This presents a dilemma for investors with money to spend on stocks. Does the risk justify the potential return? Should you be a buyer of new positions in this kind of market? I say no to both questions, and it isn’t that I don’t expect the economy to improve or that corporations won’t keep growing their earnings. With the news we have right now, the growth isn’t strong enough to justify any bold new moves. We’re at a time now when a lot of previous expectations are coming together. What develops next is anyone’s guess. One thing I know is that I wouldn’t sell any gold or silver. This is the only growth industry left and it might just be the only store of value going if the sovereign debt issue cascades.


Spend on Gold Stock

Three Major Financial Trends Investors Can Profit From Today

Three major trends in the financial markets, all from which investors can make money, continue their development this morning…

Trend #1: Rising long-term interest rates. The 10-year U.S. Treasury hit a yield of 3.6% Friday morning. My forecast calls for the bellwether 10-year Treasury to easily sail past 4.0% this year.

I’ve been predicting that bond investors would take a hit since the summer of 2010, and that’s exactly what has been happening. The yield on the 10-year Treasury sits today at the same point it did in January of 2008—but short-term interest rates were a lot higher back then. Pressure is now mounting for short-term rates to rise as well.

The writing is on the wall with this one: long-term interest rates are rising despite the Fed’s QE2 effort, which is omnibus. Investors shorting long-term bonds are booking, and will continue to reap serious profits this year.

Trend #2: Stock prices will continue to rise in the immediate term. We told our readers to jump into stocks in March of 2009, and have kept them in stocks since then. The Dow Jones Industrial Average has risen 93% since March 9, 2009. Yes, the easy money has been made in the stock market, but there is another five percent to 10% upside profit potential.

Each passing day, more and more investors are becoming convinced that the worst is over for the economy. They will be proven wrong, but, in the meantime, the cash on the sidelines will push stock prices higher. The bear market rally of the past two years has been a true classic, panning out just as I expected, with more upside left.

Investors can continue to reap immediate-term profits from the stock market (almost anything, except real estate stocks, has been going up over the past 25 months), but, as long-term yields hit four percent and get closer to five percent, the market rally will be deflated like one big balloon.

Trend #3: Gold prices are at about halfway in their bull market cycle. This morning, gold bullion is up another $12.50 an ounce, closing in on $1,500 per ounce. Since 2002, I have been yelling, screaming, to anyone who would listen: Buy gold related investments! I continue to believe that gold is headed to $2,500 to $3,000 per ounce.

The U.S. dollar index chart ($USD) is about to break major support, the Fed is getting nervous about long-term inflation, and the Chinese are on a buying spree trying to get their hands on as many decent precious metal exploration and development companies they can. There are plenty of quality gold stocks listed on senior stock exchanges that will deliver serious profits to investors this year.

There you have it. My closing commentary for the week…three major financial trends investor can still profit from today.

Michael’s Personal Notes:

The widely expected move by the European Central Bank to raise interest rates yesterday, after keeping them artificially low for three years, marks the first time in 40 years that Europe has moved to raise interest rates before the U.S.

The European Central Bank (ECB) raised interest rates by one-quarter point to 1.25%. The equivalent bank rate in the U.S. is between zero and one-quarter percent. Germany’s economy is booming, inflation risks are high, and the ECB is acting. Two more rate increases of one-quarter point each are expected by the ECB this year.

The European Central Bank has now joined the ranks of Canada, India, China, New Zealand, Australia, Poland, and Sweden in raising interest rates post-recession. The U.S. Fed, usually the global leader in setting interest rates policies, will soon be the laggard in joining the global trend of rising short-term interest rates.

Where the Market Stands; Where it’s Headed:

A bear market in stocks still presides. Expect continued immediate-term rising stock prices. The short- to long-term picture continues to deteriorate.

What He Said:

“You’ve been reading my articles over the past few months and have seen how negative I’ve become on the U.S. economy. Particularly, I believe it’s the ramifications of the faltering housing sector that are being underestimated by economists. A recession doesn’t take much to happen. It’s disappointing more hasn’t been written on the popular financial sites and in the newspapers about the real threat of a recession happening in 2007. I want my readers to be fully aware of my economic opinion: I wouldn’t be surprised to see the U.S. economy in a recession sometime in 2007. In fact, I expect it.” Michael Lombardi in PROFIT CONFIDENTIAL, November 13, 2006. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.


Gold Stock Trends

The Gold Mining Business Model’s the Best There Is for Any Industry

The economic news out there still isn’t great, but the stock market doesn’t seem to care. Equity investors seem only worried about first-quarter earnings and the outlook for the numbers remains very bright.

Also looking good in this market are precious metal stocks, as spot prices remain very strong. This is a sector that needs rising spot prices for stocks to keep advancing, but the money continues to tumble in if you’re a gold producer. In fact, the business model is so good that most growing producers don’t know what to do with all their excess cash (what a great problem to have!).

As an example of the kind of profitability you can find in the precious metal sector, Avion Gold Corporation (TSX/AVR) is but one junior mining company that’s cashing in due to strong gold prices.

Avion Gold is a junior Canadian gold miner with exploration and production facilities in West Africa. The company holds 80% of the Tabakoto and Segala gold projects in Mali. Avion Gold announced strong earnings of 18.63 million dollars ($0.05 per basic and diluted share) for the three months ended December 31, 2010. This compares to net income of 3.97 million dollars, or $0.02 per diluted share, generated in the same quarter last year.

According to the company, it sold 27,908 ounces of gold at an average realized price of $1,370 per ounce, which represents a 10% increase over the average realized selling price of $1,234 per ounce in the previous quarter. Gold revenues were 38.2 million dollars, compared to 14.2 million dollars in the comparable quarter of 2009.

Where I’m from, a business that sells 38 million dollars’ worth of goods and generates over 18 million dollars in profits on those goods is really doing something right. Avion Gold produced 26,090 ounces of gold in the fourth quarter of 2010 at a total cash cost of $520.00 per ounce. For all of 2010, the company generated record earnings of 31.5 million dollars, or $0.09 per share, compared to 2.6 million dollars, or $0.01 per share, in the prior year. Total revenues were 115.3 million dollars compared to 33.6 million dollars in 2009 and total production grew to 87,631 ounces of gold. This year, Avion Gold expects to produce about 100,000 ounces of gold and the company is still predicting production of 200,000 ounces a year in 2012.

This gold stock is just one in a large universe of junior mining companies that are making money hand over fist with gold prices over $1,000 an ounce. It’s a great business model and it’s likely to stay that way for a considerable period of time.

Investing in gold has always been a risky business, because you can’t control how much gold is in the ground and what’s going to happen to the price of the commodity on the open market. All you can do as an investor is play the market as it is. In my mind, however, it’s no different than investing in a technology company. The risks are the same and so is the unknown.


Which is the best business in Stock Market?

The Stock Market: What’s Really Happening with It

My take on what happens in the financial markets and what you hear from reporters and see in the media are two very different things. I guess you know that or otherwise you would not be reading my column.

The facts are the facts. Since the crisis in Japan hit a week ago, the Dow Jones Industrial Average has fallen 3.2%. But if we look closer, we see that North American stock markets started declining back on February 18, 2011—that’s when the Dow Jones hit a new record high for the bear market rally.

My opinion is that profit-taking (who can blame investors, stocks were up almost 100% since March 2009) was already underway. The earthquake in Japan accelerated the decline in stock prices not because of the damage to the Japanese economy, but for very different reasons:

The stock market has adjusted itself lower in the expectation that Japanese investors will pull funds out of North American stock markets and bond markets, as money is repatriated back to Japan to help pay for rebuilding the country’s devastated regions.

When the Kobe earthquake of 1995 hit, Japanese investors sold $30.0 billion in U.S. securities in the aftermath of that natural disaster. Depending on which news report you believe, the damage in Japan from last Friday’s earthquake is pegged at over $200 billion.

Japan is the second largest holder of U.S. Treasuries, second only to China. Japan holds about $886 billion in U.S. Treasuries (Source: “Rising yen adds to Japan’s woes,” Globe & Mail Mar.17, 2011). If Japan stops buying our debt because their needs have changed, and they start selling U.S. securities to bring money home for rebuilding the country, the ramifications in the U.S. will be higher interest rates.

Add to this the Federal Reserve’s comments earlier this week that they will not expand their $600-billion QE2 bond purchases, and one needs to seriously ask: if Japan will reduce its buying of U.S. Treasuries and the Fed will not continue buying them, who will buy the U.S. Treasuries we so desperately need to sell in order to finance our debt?

In light of the above events, it’s a wonder that the stock market has held up so well over the past week.

Michael’s Personal Notes:

I tried to buy more gold-related investments yesterday like I did on Tuesday, but gold prices started to rise Wednesday and they are continuing to rise this morning. Hence, I’ll sit tight for now. Hopefully we will see some more weakness in the precious metal prices, which I would view as a buying opportunity.

For those readers who follow technical analysis, my charts show good support for gold at $1,340 an ounce, about $60.00 below where it is trading today. I would be a buyer of more gold-related investments on any pullback towards $1,340 an ounce; unfortunately, this may not happen. Over the past 12 months, gold bullion is up $273.00 an ounce.

No bull market goes up in a straight line; no bear market goes down in a straight line. The bull market in gold is no exception. Since 2002-2003, I’ve followed a policy of buying gold-related investments on gold price pullbacks.

Where the Market Stands; Where it’s Headed:

Okay, Michael; what’s it going to take for you say that the bear market rally in stocks is over?

Technically speaking, the low point for the Dow Jones Industrial Average was 6,440 on March 9, 2009, when the bear market started. The high point was 12,391 on February 18, 2011. The mid-point between the high and low is 9,415. The bear market rally in stocks would have to break below 9,415 to be officially over. This morning, the Dow Jones Industrial Average trades at 11,613.

Whether you call it an overreaction to the Japan crisis or simple profit-taking, the stock market is obviously taking a breather. But until the market proves me otherwise, I see the bear market rally in stocks that started in March 2009 as still in force.

Bear market rallies usually end in the midst of investor euphoria. We haven’t seen that yet.

What He Said:

“Why Google stock will go higher: Most investors in Google, surprisingly, are retail investors. And that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stock will certainly move higher.” Michael Lombardi, PROFIT CONFIDENTIAL, June 2, 2005. Michael recommended Google stock as a buy on June 2, 2005, when the stock was trading at $288.00. On November 5, 2007, when Google reached $700.00 U.S. per share, Michael advised his readers to sell their Google stock and to put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at about $700.00 per ounce in November 2007. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold, because he saw gold as a much better investment.
What’s Really Happening with Gold Stock Market

Stock Market Correction Phase Over? Spot Price of Gold Looks to Be Bottoming

The third quarter has finally closed…and thank goodness. If you weren’t short the stock market, you were feeling its pain. The broader market basically fell off a cliff in the last week of July and first week of August. The S&P 500 Index has been trading in a tight range ever since around the 1,175 level and the near-term trend seems to be more of the same. If there is to be any breakout to the upside, we’ll need some hardy news; likely regarding the sovereign debt issue in Europe or new policy action from the Federal Reserve. While the earnings picture looks good, it’s hard to imagine spectacular results from this economy.

Also notable late in the third quarter was the price correction in commodities. It only seems reasonable that reduced expectations for global economic growth should be felt commensurately in the prices for raw materials. The spot price of gold is mimicking the recent trading action of the stock market and it’s unclear when it might resume its upward trend.

However, I do think that the medium- to long-run upward price trend in gold is intact and this is due to a combination of fundamental factors that remain in force. And we can’t forget that, while the Main Street economy isn’t producing much growth, inflation is still out there stalking consumers’ ability to employ purchasing power.

I think the current environment is an opportune one to consider gold investments and other precious metals like silver. We’re now in the price correction that precious metals deserved. The top stocks for speculative investors remain gold miners and it’s the one industry that is generating double-digit growth in revenues and earnings.

Long-term, income-seeking investors can be buyers in this market; but, of course, expected returns have been reduced. I think a blue-chip investor would be lucky to receive a 10% return on investment in the age of austerity. It’s the new reality of the economy and it’s going to last for quite a long time.

If you want to see something interesting, pull up a five-year stock chart on SPDR Gold Shares (NYSEArca/GLD). This is the gold exchange-traded fund (ETF) that’s very popular with both individual and institutional investors. Looking at the chart, you’ll notice a very consistent and defined upward trend in the value of the ETF. You’ll also notice the recent spike to a record price high of $185.00 and the subsequent price correction to its current level of around $157.00 per share. In my mind, this price correction has now fully returned the SPDR Gold Shares ETF to its primary trend and is signaling a technical bottoming out for gold. Accordingly, now seems like an appropriate time to consider new positions in these kinds of assets.


Spot Price of Gold Looks to Be Bottoming

Gold or Silver: What Stands Out as the Better Trade?

Stock picking at this particular point in time is more difficult than it was at the beginning of the year. The tone of the marketplace is different and expectations have mostly been met. As companies reported first-quarter earnings that met or slightly exceeded consensus, the stocks sold off. This is representative of a market that wanted to complete the trade. Now investors are looking for a new trade, but nothing big stands out. A new catalyst has yet to be discovered.

Large-caps are holding up particularly well as the broader market churns. I still think that large-cap companies will be the biggest beneficiaries of the choppy economic recovery we’re currently experiencing. If it wasn’t for global operations, then the performance of many big companies would be a lot more reserved.

I don’t see the need for taking on new positions at this particular point in time. There are always stock trades around and the broader market could keep ticking higher, but I think we’ll be in a consolidation period for a quite a while longer. I don’t expect oil prices to stay below $100.00 a barrel and I’d like to see the price of gold pull back further so as to create a more attractive new entry point. While recent consumer price data showed that headline inflation shouldn’t be a problem for the Federal Reserve, the bigger driver of gold prices is the action in the U.S. dollar. That’s what gold is basically trading on.

While investing in gold is a core part of my investing philosophy during these times, I would say that silver is beginning to stand out as a better trade for a new entrant. Silver pulled back in price much more so than gold and, really, not that much has changed fundamentally for the story. The only thing that has changed is that some speculative fervor has been taken out of the market for silver prices. Demand for the commodity is still on the rise.

I’ve actually been hoping for a correction in commodity prices and I think we should let the trading action within the sector play out a little while longer. It’s probably a bit too early for new positions in silver or gold, but they are definitely worth following.

In non-resource sectors like technology, for example, both top- and bottom-line growth in many companies haven’t been very robust. This makes the trading action in these stocks much less opportune. Recently, I came across a very well valued semiconductor company that reported great financial results in the first quarter…and the market just yawned. This reflects a marketplace that was so enthralled with commodity-related assets that it ignored all others. Over the very near term, equity trading action is likely to be mediocre.

Best Bold Stocks

The Most Attractive Sector of the Market for Risk-capital Money

Stock picking now is much more difficult than it was just a month ago, as commodity prices have somewhat deflated (particularly in precious metals) and investor attention has moved to economic news while earnings season winds down. Even though mining producers are experiencing extremely good margins for their ore, these stocks still trade commensurate with the spot price of the underlying commodity. This never changes.

Investing in gold is typically a feast or famine type of endeavor. Either the trading action is good, or it’s the other way around. To be very honest, in this type of market where it’s a slow growth economy and there’s no big sectoral catalyst to trade (like during the craze in Internet or solar stocks), the single most attractive sector to focus on for capital gains is the mining business. As an investment theme, this would be my focus in terms of speculating for big returns. In doing so within the mining industry, an investor has to focus on those companies exploring for new discoveries.

This is what you want in a speculative mining investment in my view. You’ve got a known company with respected management that’s already in production with a solid plan for increasing production over the coming years. The business is already well financed, but it’s spending money exploring for more precious metals on its properties. If it hits a big discovery, then it will be easy for the company to raise the money to mine it. So, you kind of want to be an investor in an established business that’s prospecting as well. At this level, it doesn’t matter if the price of gold dropped $50.00 an ounce the day before; if gold is over $1,000 and there’s increasing mineral reserves, then the business is highly likely to make good money.

Institutional gold investors fall into two main groups. There’s the hedge fund speculators like George Soros, who buy and sell gold trusts based on their outlook for spot prices. Then there’s money managers, who pick and invest in individual stocks based on a miner’s property and its prospect for increasing production and reserves. It’s easy to be both; a speculator in the spot price and a prospector for properties. As always in the investment business, the key is to be well-informed and to know what you’re doing.

This is where working with an investment bank that finances junior mining companies can be advantageous. It gives the investor the opportunity to gain lots of information from research analysts who visit the actual properties being analyzed and it provides the opportunity to participate in private placement financings that don’t incur commission costs when taking on shares.

Regardless of how you play it, speculating in mining stocks remains the most attractive sector of the equity market for risk-capital money at this time.

Investing in Gold Stocks

Should You Buy Gold? The Answer’s Yes, But Not Quite Yet

There’s no rush to take any new action in this market. That’s the best stock advice I can give to any equity investor with new money to play with. There are all kinds of attractive opportunities out there, but this market needs a break. Stocks need a rest and so do oil, gold and silver. Investors shouldn’t feel any pressure to make any new trades. The timing isn’t quite right yet for bold new action.

With markets in need of a correction, it’s actually quite a difficult environment to be making new picks in. Investing in gold is a key strategy, but this sector’s been so strong that all the good companies have already seen their stock prices go way up. The returns are going to be mostly incremental from existing producers. Like always, the big money will be made with juniors who are making new discoveries.

As a speculative investor, I would actually devote a great deal of my efforts to the junior mining sector, especially given the state of the global economy. The underlying price of gold is going to stay strong for the next several years and institutional investors are on board with this view. Also, the domestic economy still isn’t strong enough to generate the kind of growth that a speculative investor is looking for. Even the technology sector isn’t producing the kind of top-line growth that gets people excited.

As I’ve written before, I like a junior miner to be an existing producer, have lots of cash in the bank with little to no debt, to be currently drilling for more minerals, and have a following from the Street and institutions. There are a lot of these companies out there, but the game has changed now that gold is trading over $1,000 an ounce. Now the business model really makes sense and companies have the cash to go looking for more metal.

The mining business has always been a cyclical industry and the same goes with investor sentiment for the sector. Right now, there is a ton of cash floating around the entire industry and, for investors, it’s time to milk it.

It’s always difficult giving generalized investment advice, because it’s tough to predict markets and each investor has a different view of things. Over the very near term, I would let both the equity and commodity markets consolidate for a while. Then I would be a new buyer of micro-cap gold stocks.
gold stock Updates

Dow Jones Gold Ratio: Making Money from this All-Important Indicator

If you are a stock market investor or a gold investor, or both, today’s PROFIT CONFIDENTIAL is a must-read. Why? Because, by the time you are finished reading this issue, you could very well be convinced long-term that the stock market is going down and gold is going up. And you can make a lot of money from these moves.

Let’s start with the important numbers all investors should be aware of:

Stock history first: The Dow Jones Industrial Average opened the year 2000 at 10,786. The same index ended 2010 at 11,577.50. In a nutshell, if you were an investor in the Dow Jones Industrial Average, your capital gain appreciation over the past 11 years would have been a paltry 7.3%. (No wonder we have always preferred micro-cap stocks, penny stocks and small-cap stocks!)

Gold history now: At the beginning of the year 2000, gold bullion was trading at $280.00 per ounce. Gold bullion closed out 2010 at $1,422 per ounce—a gain of 407% in 11 years.

Now, let’s pretend you can’t buy the stocks that comprise the Dow Jones Industrial Average in U.S. dollars, but you can only buy them with gold bullion. Taking the numbers above, in 2000, it would have taken 38.5 ounces of gold to buy the Dow Jones Industrial Average. At the end of 2010, it would have taken only 8.2 ounces of gold to buy the Dow Jones Industrial Average. In other words, when measured in gold and not dollars, the value of the 30 big stocks that make up the Dow Jones Industrials has plummeted over the past decade.

Now, when we look back at almost a century of data in respect to the relationship between gold bullion and the Dow Jones Industrials (often referred to as the Dow Jones Gold Ratio), it gets really interesting.

In the period from 1930 to 1949, a 19-year span, the price of the Dow Jones Industrial Average measured in gold bullion was under 5.0 (during that 19-year period it would have taken less than five ounces of gold to figuratively buy the Dow Jones Industrial Averages’ index).

In the period from 1974 to 1989, a 15-year span, the price of the Dow Jones Industrial Average measured in gold bullion was under 5.0 again.

As I started writing years ago, with the sharp rise in the price of gold since the year 2000, I believe we are entering another multi-year period where it will cost less than five ounces of gold to buy the Dow Jones Industrial Average. To see that happen, the price of gold needs to rise sharply, or the stock market has to come down, or both events need to occur.

Now the scary part: over the last century there have been three times when only one ounce of gold could buy the Dow Jones Industrial Average. If we are headed close to that level again (which I believe we are), fortunes will be made over the next few years on the long side of gold and short side of stocks.

Michael’s Personal Notes:

Words of wisdom from our esteemed technical analyst, Anthony Jasansky, P. Eng., on President Obama inadvertently putting the brakes on the stock market rally:

“Money talks and it has been talking very loud after Uncle Ben started the money printing presses at the old Fed in late 2008. He was so impressed by the results of the magical out-of-thin air creation of $1.75 trillion—dubbed ingeniously as ‘quantitative easing (QE)’—that, in the fall of 2010, he cranked up the printing presses again, launching the $600-billion QE2.

“Though these two huge money injections have been credited with reversing financial and economic calamity, they still fell short on some important fronts. Among the notable failings of QE are the anemic recovery in GDP, lack of growth in employment, continued weakness in residential and commercial real estate, the battered U.S. dollar, and unexpectedly higher yields of long-term treasuries and bonds.

“When recently questioned on the effectiveness of QE, the Fed’s chairman has pointed to the strong stock market as one important benefit. Without missing a beat, the U.S. President in his January 25 State of the Union speech mentioned the recovery in the stock market as being the result of government actions to prevent a depression. Knowing how perverse the market can be, Obama’s bullish assertion may turn out be a timely signal for the stocks to take a deep breather.”

Where the Market Stands; Where it’s Headed:

Could the bear market rally in stocks be over? After all, the Dow Jones Industrials suddenly fell 166 points on Friday. Last Friday was a wake-up call for investors and traders getting too cocky with this market. Stocks do not go up in a straight line week after week (as has been the case for most of December 2010 and this January).

While I need to see more action from the stock market before I throw in the towel on the bear market rally that started in March of 2009, I doubt the rally is over. This week opens with the Dow Jones Industrial Average up 2.1% for 2011.

What He Said:

“‘Home sales down 8.4%, could be the bottom,’ read the headline in last Friday’s USA Today. What do they know that I don’t? They know what realtors and their associations tell them and that’s about it. Unfortunately, the real estate news is predominately written by reporters—not real estate investors with years of experience to share. The hard facts about the real estate market in the U.S. are truly scary. How can the U.S. economy escape the hard landing in U.S. home prices? As we’ll soon find out, it simply can’t!” Michael Lombardi in PROFIT CONFIDENTIAL, January 31, 2007. While the popular media was predicting a bottoming of the real estate market in 2007, Michael was preparing his readers for the worst of times ahead.

Gold Stock Market Ratio

Taking Out the Crystal Ball: 2011 Gold Bullion Forecast

The end of this year will make the ninth consecutive December 31 when the price of gold bullion was higher than the previous December 31. Gold has risen from approximately $300.00 in 2002 to $1,380 per ounce today—a gain of 360%.

At this point of the gold bull market, we are at what I call phase two. Phase one is when the very smart money starts accumulating an asset because it is so depressed that no one wants it. For gold bullion, this can be classified as the period between 2001 and 2009, a period that saw gold rise from $275.00 to $1,000 per ounce.

So, today, we are in phase two of the gold bull market. At this junction, serious investors start to take note about the rise in price of the commodity. Many investors are concerned about the future of the U.S. dollar given the debt that backs it; others have given-up on the euro. If I were to ask 100 investors today, I would guess only five percent to 10% would have gold investments in their portfolio.

What I particularly like about this phase two of the current bull market in gold is that we have so many reporters, analysts and advisors saying it’s a “bubble” already! These people do not understand the strength of a bull market in any asset once it starts—bull markets end in euphoria and speculation. We are far from that in gold.

Two years ago, we couldn’t give away subscriptions to our gold stock newsletter. Today, it is selling well, “but not flying off the shelf” as they say. Hence, I see people starting to notice what’s happening with gold bullion and I see investors interested in getting their feet wet with the metal.

If you were to ask me for an educated guess as to when phase three of the bull market in gold would start, I would have to say when gold hits $2,000 an ounce. Now here’s the important part: phase three of a bull market can go until the asset under question goes up 50% from when phase three started.

What I’m saying is that, if phase three of the gold bull market starts when gold hits $2,000 an ounce, which is still some distance away, the metal can rise another 50% to $3,000 from there, just based on speculators and the novice public getting into the metal.

If you’ve ever played baccarat at the casinos, you know the cardinal rule is to not bet against the trend. Who am I to bet against a nine-year winning streak? Gold prices will end 2011 higher than they end 2010, that’s my bet. And that makes quality gold stocks still very attractive for investors.

Michael’s Personal Notes:

I know this is somewhat off-the-wall, but I want to share it with my thought-provocative PROFIT CONFIDENTIAL readers. The following is from my colleague and co-editor Robert Appel:

“Early in 2011, no later than May, we expect a world economic crisis similar to 2008, most likely involving currency pegs and the pricing of key commodities.

Many will refer to it, with hindsight, as a ‘perfect storm’ in that different aspects of the crisis will co-mingle seemingly unrelated challenges involving growing social unrest in many countries in response to the expanding feeling of powerlessness and disenfranchisement among the middle class.

Inflation and deflation will co-exist, which will be unsettling to consumers and academics both. Interest rates will creep up, slow and steady, but nonetheless unstoppable. There will be many unsettling incidents of international brinkmanship, especially between ancient enemies, but no major war that spans borders.

Two of the biggest business surprises will be a well-coordinated attempt by the Western governments to control/choke Internet traffic and the revelation that Hollywood’s delicate business model, essentially unchanged for over a century, is no longer working, and a new one is desperately needed. Yet another former film star will run for office. Headlines will be made when scientists disclose how common cancer has become.

Gold will touch $2,200 an ounce during the worst of the crisis, but close the year just under $2,000. The broad market in December 2011 will be where it was, approximately, in December 2010.”

Where the Market Stands; Where it’s Headed:

Not much of day for the markets yesterday, just more of the same: The Dow Jones Industrial Average trades around a high not seen in 22 months, U.S. bond yields rose again, with the 10-year U.S. Treasury now yielding over 3.5%. Gold eased off, but not enough for me to jump in and buy more.

The bear market in stocks that started in March 9, 2009, continues. I’m getting increasingly concerned about rising long-term interest rates and their impact on the stock market for 2011, but in the immediate term, I believe this rally has more leg left.

What He Said:

“I’ve been pushing gold bullion and gold shares for over a year now. Bank in January 2002, I personally started buying gold shares.” Michael Lombardi in PROFIT CONFIDENTIAL, December 13, 2002. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments. Many gold stocks recommended in Michael’s advisories gained in excess of 100%.

Gold Stock Bullion

What Gold Really Means for the Economy/Investors at $1,400

As a gold bug (I officially turned bullish on gold bullion in 2002), I see every weakness in the price of gold as an opportunity to buy more gold-related investments. That has been my strategy for the past eight years—gold prices correct on the downside and I invest more.

The last time I bought more gold was when gold traded at about $1,320 an ounce. I’ve been waiting ever since for another buying opportunity and it just hasn’t developed. But investment goes up or down in a straight line, so I will eventually have my opportunity again.

If we look at the long-term bull market in gold, 2010 has been particularly strong for the metal. Many gold stocks are up over 100% this year. Gold producers have never found it easier to raise money.

This got me thinking as to what the strong bull market in gold really means for investors and the economy. Here are my conclusions:

For the economy, one word: Inflation. The government’s easy money policy, the Fed doing quantitative easing again, interest rates near zero in the U.S.: all of this is very inflationary. If the real estate market weren’t still in the dumps, we would have outright inflation right now.

Bill Gross, the head of giant PIMCO, the world’s biggest bond fund, said last week that the U.S. will not likely be able to raise interest rates for years because of the fragile economy. I disagree with Gross, because I believe that the U.S. will need to raise interest rates sooner rather than later to support the weakening Greenback.

But supposing Gross is right and I’m wrong, the longer interest rates stay at zero, the more inflation we will get (which is bullish for gold). If I’m right and Gross is wrong, and interest rates do rise, gold will rally, because interest rates will only rise to support a devaluing U.S. dollar. We all know that gold rises as the greenback devalues.

As for investors, they are obviously flocking to buy gold. Why? Because they are not only concerned about inflation, but also worried about the future value of the U.S. dollar. Sure, Greece was the first country to face a financial crisis, and then came Ireland. Looks like Portugal, Spain and Italy are next. But really, how long before it’s the turn of the U.S.? The size and valuation of the gold market are relatively small when compared to the stock market. The more investors there are jumping on the gold bandwagon, the faster and sharper the price of bullion will rise.

When gold was trading at $300.00 an ounce and I predicted it was going to $2,000 to $3,000 an ounce, I literally got laughed at. With gold trading at about $1,400 an ounce, I’m still predicting $2,000 to $3,000 an ounce for gold…and people don’t find it funny anymore.

Where the Market Stands; Where it’s Headed:

Only 69 points to go! The Dow Jones Industrial Average opens this morning only 69 points below its post-recession high. Will it happen? Will stocks break to a new high? I believe they will. Once the Dow Jones moves above its recent high of 11,451, the market will be at its highest level since October 2008.

The Dow Jones Industrial Average opens this morning up 9.1% for 2010. Throw in a dividend yield of 2.5%, and stocks are up over 11% for 2010. Unfortunately, the majority of retail investors missed the boat and did not participate in this year’s rally. Hopefully, the majority of our readers heeded our advice and jumped into stocks back in March of 2009. As you know, we’ve been bullish on stocks ever since.

A bear market rally in stocks has been underway for 21 months and continues.

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.
Gold Stock Bullion Market