 | |
| Leeb's Market Forecast | |
| April 8, 2008 | |
 | |
| Dear Investor, Market Update ------------------------------------- In this week's update... ***** Stage Two: ready for liftoff. ***** Fighting recession is choosing inflation. ***** Politically, inflation is a necessary evil. ***** Buy gold while its cheap. ------------------------------------- Market declines pass through some very obvious stages. One stage, which we think may have ended in January/February, is when the sky appears to be falling. It's the time when investors see no end to the unfolding crisis, and the Fed, along with all other in authorities, appears powerless to restore order. The next stage occurs when investors begin to see the light at the end of the tunnel. They know the authorities are taking charge of the situation and doing what needs to be done to keep the economy afloat. We appear to be in that stage today. The evidence that the end may be in sight comes from the market itself. Apart from last week's 4% rise in the S&P, we are cheered by the action in stocks such as UPS and FedEx. These stocks are among those most sensitive to worldwide market conditions, yet they have been doing quite well. Their share prices actually rose during the 1st quarter of 2008. Ditto for homebuilders, which were previously the weak link in the market. We are letting the market be our guide because stocks are the best economic indicator around. Stock prices may not reflect key economic conditions perfectly every time, but they do so better than anything else. So when we see the most economically sensitive stocks rising, it's a positive sign. It clearly shows that investors are becoming more optimistic. Recent action suggests that the market may find its bottom soon. Will that lead to a sustainable market rally? Probably. But there are certain conditions attached ... Advertisement Ground floor opportunity as precious as gold. Here's how to phenomenally improve your investment profits by buying stocks when they're downright cheap. Take, for instance, the current bull market in gold. We think gold will more than double in the next few years, thanks to the Fed's loose money policies. And along the way, those who buy the dips, will make the lion's share of profits. Of course, buying stocks at the bottom of their price range or on a dip takes courage, because that's when they look their worst. But with the right information and methods at your fingertips, you can take advantage of many exceptional investments that are poised for rapid gains. For instance, we've already spotted several undervalued gold companies that could do very well in the months ahead. To find out about these and other explosive opportunities on an on-going basis, just click on this link . . . Leeb's Ground Floor Trader. ------------------------------------- THE FED'S PRO-INFLATION POLICY Everything hinges on the Fed remaining hard at work fighting recession. If stocks find a bottom, it will be because investors have faith that the Fed's loose monetary policy, coupled with government stimulus, will be enough to do the job. That doesn't mean the job is done, just that it looks like it will be done. The Fed must keep the liquidity coming, and Washington must continue its stimulus. Everyone must see that the authorities have control of the situation and will pull the economy out of its nosedive before it becomes fatal. It's rather like when a crowd watches a burning building. Everything seems hopeless, until the fire trucks arrive. Once everyone sees the fire fighters working hard to douse the flames, they feel confident the fire will be extinguished before spreads to other buildings. However, the fire fighters must remain actively fighting until the flames are out. If the crowd sees the firemen give up early, their hope will vanish. Of course, there is a price to pay for every action. We have argued for some time that the world has changed considerably since the Goldilocks days of the 1990s. The safe zone we once enjoyed has narrowed to a razor's edge. On one side lurks the danger of a cataclysmic recession. On the other side, wealth-devouring inflation. Right now, the authorities are working feverishly to prevent recession. And the weapon they are using is liquidity. But while liquidity may starve recession, it is the very food of inflation. Already, the Fed has unleashed a flood of liquidity onto the world. Money supply growth, whether you look at zero maturity supply or M2, has been at near record highs over the past two months. Meanwhile, the government has passed a massive stimulus bill that will put more cash into the economy. At the same time, inflation is rising all across the planet. Asian inflation has made in the news a lot recently. But even With the Fed dedicated to keeping the world flooded with liquidity (meaning dollars) global inflation could not have picked a worse time to rear its head. Something is going to be hurt badly by the fight against recession, and that something has George Washington's face on one side, and a pyramid on the back... Advertisement Save $2,000 On This Simple But Powerful Trading System It leverages your money. . . controls risk. . .and is easy to execute. It takes advantage of the hottest trend on Wall Street. . . and if you aren't a total convert in the first 60 days, it costs you nothing! Just click here for details ... Leeb's ETF Trader ---------------------------------- INFLATION: IT'S WHAT'S POLITICALLY CORRECT Raising liquidity means creating more dollars and putting them into circulation. Simple economics says that when there are too many dollars, the value of each one drops. That means the recent decline in the dollar, as large as it has been, will surely continue. That's not necessarily a bad thing in terms of the economy. It will help the Fed avoid recession. After all, the only thing that has kept our economy above water recently has been rising exports, which are the result of a weaker dollar. But make no mistake: a falling dollar means higher inflation, as the price of almost everything in Wal-Mart's inventory rises. On top of that, rising inflation in High inflation is the economic story of the century, and a bigger threat than recession because it is more certain to happen. Will there come a time when the Fed says, "OK, we have too much liquidity. So let's turn off the taps and put our energy into fighting inflation"? Maybe. But monetary tightening is a dangerous business in an economy with a high level of debt, like ours. Try to engineer a little recession in order to contain inflation, and you risk triggering a big Depression, as defaults on all types of loans would trigger a massive chain reaction worse than the subprime crisis. And then, of course, there are political considerations. In 1980, a charismatic governor from You see, voters can tolerate high inflation, up to a certain point. But what they cannot tolerate is an economic collapse that leads to no jobs and no food on the plate. So, given the choice, government will always favor growth. And right now, that also means higher inflation. GOLD: YOUR INVESTMENT CHOICE FOR INFLATIONARY TIMES With that in mind, the case for gold, despite its weak performance last week, is extremely compelling. We continue to recommend you overweight gold along with other commodities. As we have been saying for some time, should stocks rally over the next month or so as we expect (barring a possible pullback this week), financials will likely be very strong performers. Long-term, however, you must invest with the expectation of rising inflation. So load up on precious metals.
Until next week, If you cannot view this mailing click here. This email was sent to LEMMETRY@GMAIL.COM. You are receiving this email because you have requested a free subscription to Dr. Stephen Leeb's Market Forecast. Click here to be removed from this mailing list. Click here to be removed from all of our promotional offers. TCI Enterprises, LLC 500 5th Ave., 57th Floor New York, NY 10110 Disclaimer TCI Enterprises LLC, The Complete Investor, Emerging Investments, Leeb ETF Trader, Leeb IPO Insight, Leeb's Aggressive Trader and their affiliated companies and publications ("TCI" or "Letters" or "Publications") are not registered as a broker dealer or investment advisers with the U.S. Securities and Exchange Commission or any state securities authority. Letters and their information and content providers make no representations or warranties of any kind in connection with the subject matter, performance or the suitability of the information contained in publications for any purpose and are not liable for the timeliness, accuracy, or completeness of the information contained herein. The information contained in publications is provided for general informational purposes, and is not a substitute for obtaining professional advice from a qualified person, firm or corporation familiar with your personal circumstances. Please seek the advice of professionals, as appropriate, regarding the evaluations of any specific security, report, opinion, advice or other content. TCI is not responsible for any trades placed by the recipients of TCI based on the information included therein. There can be no assurance that your portfolio or positions can achieve the indicated performance and therefore, the sample performance information should not be relied upon. Investment recommendations are not intended to be construed to be personalized advice, or recommendations to buy, hold, or sell mentioned securities and readers should consider their personal situation before making any investment. All opinions expressed and information and data provided therein are subject to change without notice. TCI, its officers, directors, employees, and/or associated entities may have positions in and from time to time make purchases, or sales of the securities discussed or mentioned in TCI. TCI shall have no liability for any e-newsletter that is lost, intercepted or not received by you in a timely manner, or at all, for any reason.  |
