Leeb's Market Forecast

Leeb's Market Forecast
April 22, 2008

Dear Investor, Below is the most recent Market Forecast update. To ensure that you continue to receive our timely market emails, please add us to your address book or safe list. Market Update   ------------------------------------- In this week's update...   ***** The recession picture:  Much ado about nothing. ***** The Strategic Oil Reserve:  Not just about politics? ***** Look out:  "It's the Oil Factor, Stupid!" -------------------------------------   The market has us worried these days.  We'd be dishonest not to admit that.  Nonetheless, when we sit back and look at the economic data, we find it much easier to make a bullish case than a bearish one.   We've been straining our eyes, peering over the horizon, looking for signs of a real recession, but none are to be found.  We can accept that the U.S. economy might get a recession in name only -- a quarter or two of very mild slowing growth -- but nothing worse than that.    There's just no hard evidence to support a serious downturn.  And any evidence we can find is uniformly softer than a roll of Charmin -- stuff like survey data, unemployment stats, and weakening consumer confidence (no doubt brought on by scary but exaggerated newspaper headlines).    Fortunately, as insecure as the average consumer claims to be, he hasn't cut back on spending in a meaningful way.   We're not just referring to recent retail sales, which is one of those soft figures based on surveys.  Hard data from Wal-Mart, the biggest retailer of them all, strongly suggest that money is still moving through the tills at a brisk pace.  Wal-Mart stock has racked up an 18% gain so far this year.  And when the market cap of a $222 billion-dollar company rises 18%, that's real money -- nearly $40 billion of it, in fact.  Not something that would happen if retail sales were plummeting.   True, some specialty retailers have suffered of late.  But let's get real.  Wal-Mart dominates the retail industry.  If it's doing well, the industry is healthy.   Not only is Wal-Mart doing well, but so are transportation stocks (the most economically-sensitive group) and home builders.  Lately, even financials have joined the party.    What's more, our 3-Dial Recession Indicator still has all three needles firmly in the black.  Unemployment Insurance claims are still under 400,000.  Industrial commodities remain near all-time highs.  And the broad market is acting quite well relative to the big cap stocks.   To top it off, our Master Key has ticked up to over 5, adding further support to our view that the market is in good shape.   Admittedly the economy has slowed.  For all we know, future economists will declare this time to have been a recession, at least technically.  But what matters is that there is no sign the slowdown has become the kind of recession that feeds upon itself.    All in all, it looks as though stock prices are headed higher.  But we would be remiss if we left out the following caveat ...   Advertisement ------------------------------------- Who says real estate is in a slump?   Housing prices may have declined in recent months. But you can still make a lot of money in real estate these days.  Let me show you how ...   For one thing, houses have become more affordable than they have been for a long time.  And with interest rates low, the next few months look like a great opportunity to snap up bargains in real estate.   Even better ... there are ways you can make some very big, very fast profits from the rebound in the housing industry without ever owning a piece of land, and for a much smaller investment upfront.   How big?  How fast?    How about a 48% return in just 2 days!    That's what participants in Leeb's ETF Trader program made in the beginning of this month from the bounce in the homebuilder stocks.  And that's just the beginning.  Many more great short-term trading opportunities could arise in the next few months as the recovery in the housing industry catches most investors completely by surprise.   Let us show you how to multiply your short-term profits from housing and other fast rising sectors.  We'll give you all the instructions as to how and when place your trades.    The only things you need are the willingness to act and a commitment to only use this program for the speculative part of your portfolio.    Best of all:  as a TCI subscriber, you can try out this program right now for a discount of $2,000 off the regular rate -- and enjoy a 60-day moneyback guarantee if you change your mind.  What could be better than that?    Just click on this link ... Leeb's ETF Trader   -------------------------------------   HOW OIL AND POLITICS MIX   One of those hard numbers we like that doesn't get talked about much is the amount of oil in America's Strategic Petroleum Reserve.  Recently, this figure has caught our attention in a big way.    In case you haven't heard, the U.S. has been storing oil since the 1970s to be used in the event of an emergency.  So far, we have dipped into this pool on several occasions, and then refilled it again.  The first Persian Gulf war was one such occasion.  Another was Hurricane Katrina.   Of course, what constitutes "an emergency" to those living in the White House can sometimes be quite different from what you and I would consider.  For example, President Clinton released some oil from the Strategic Petroleum Reserve in the 1996, supposedly to give homeowners some relief from high heating oil prices.    Coincidentally, he made this decision in the months leading up to a Presidential election, which he subsequently won.  We couldn't help wondering at the time if the real emergency had been a shortage of voters wanting to have the same President twice in a row.   Which brings us to the current period.  With the Republicans on the defensive over the economy and other matters, and with gasoline hitting all-time highs well ahead of the usual summertime hikes... we might expect Mr. Bush to follow his predecessor's example.  We would expect him to release some oil, and help lower oil prices, in order to remind voters why they should vote Republican.   Yet, rather than release oil from the reserve, President Bush is adding oil to it.  Could it be that Mr. Bush is more high-minded than Mr. Clinton?  Is Mr. Bush above doing things merely for political reasons?  Maybe.    On the other hand, for Mr. Bush to be so intent, during an election year, on building up the reserve for a rainy day, makes us wonder if he knows a big thunderstorm is coming.   What sort of storm could that be?  Some have suggested that Mr. Bush may be planning an attack on Iran -- as a final preemptive strike before handing the reins of government to a new Decision-maker.    We doubt it.    Though anything is possible in this crazy world, we hardly think the Administration would be willing to risk the total collapse of the economy (which is what an attack on Iran could lead to) in the middle of an election year.  A more likely possibility is that the President may have become convinced the "Peak Oil" scenario has become immanent.   Peak Oil, you may recall, is the hypothetical point in time after which it becomes impossible to increase worldwide oil production.  Not only will oil production be unable to keep up with demand, but the actual number of barrels produced each year will enter a permanent decline.   If we are close to or at Peak Oil, the question is how fast oil production will fall.  Will it be a gentle, gradual decline, or a big, sudden drop?  Most people have always assumed it will be a slow decline, but perhaps Mr. Bush knows something we don't.  Maybe production will fall faster than anyone expects.   Who knows, for instance, what might be happening within Saudi Arabia?  Probably only a few Saudi Arabians know.  Whatever it is, we expect it is bad news for us.  After all, when a political animal (and U.S. Presidents are politicians, after all) starts behaving in unpolitical ways, chances are something is afoot.   Of course, there could be some innocent explanation.  Maybe Mr. Bush is hiking up the reserves now so he can flood the market with oil right before the election -- as proof his party can bring gas prices under control.  If this is just a Machiavellian ploy, we will consider ourselves lucky.   If we're unlucky, and oil supplies are about to take a big downturn, then the stock market will truly lose its bullishness.  The next President will likely have the toughest problems to deal with since the Great Depression, and when he loses the election after that, everyone will remind him, "It's the Oil, Stupid."   So what does that mean for investors? ....   Advertisement ------------------------------------- How to make money staying out of stocks -- mainly.   In volatile markets, here's how you can make better returns picking your entry points carefully and taking profits as they come...   Micron Technology (MU) is a semiconductor maker whose products appear in a wide range of consumer electronics.  On April 2, we took advantage of the stock trading at a historically low price/book ratio. The stock has also been in the process of rebounding from a 52-week low - and it was supposed to report its quarterly results. Plus, there had been some positive news for the industry as a whole.   Now, if this had been 1998, we might have bought this stock and held it for a year or more.  But with today's uncertainty, we would rather take profits as they come.  So 14 days later, when the stock was up nearly 11% above our entry price, we were quite happy to sell -- instantly eliminating any risk that the price would pull back.   Another example was our recent trade on Charles Schwab (SCHW).  Schwab had limited exposure to the subprime meltdown and credit crisis, but its share price had been pulled down along with the entire financial industry.  We expected that when the company announced good earnings there would be a rebound in the shares.   So we bought the stock right before the earnings announcement, and sold it the next day for a profit of over 8% -- which is a great return considering our market risk lasted less than 24 hours.   To get in on trades like these, check out Leeb's Ground Floor Trader program.  It's easy to use.  It takes very little time.  You don't need much trading experience -- because we give you all the help you need.  It doesn't use complicated strategies like options.  And it comes with a 60-day moneyback guarantee, so you can essentially test-drive it for free.   Just follow this link... Leeb's Ground Floor Trader.    ----------------------------------   TIME TO GET ON BOARD   Oil, sadly, is what will really drive the markets.  And if it's not the biggest problem in the immediate future, it certainly will be in the long term.   The risk of a major disaster with oil -- the risk of $200-$300 oil arriving very quickly -- is why we continue to hold energy shares.  (Although, we would probably lighten up on oil shares if such a huge spike occurs.)    It's also a major reason why we continue to own gold.  Even though gold has disappointed in the past few weeks -- and may for a few weeks longer -- stay calm.  Long-term, we expect gold will be a stunning outperformer for the foreseeable future.  In the inflationary times that will follow the arrival of Peak Oil, you will be very glad to own gold.   If we are lucky enough to see gold drop to the low $800s -- which is the lowest we can imagine gold prices retreating -- we will be buying aggressively.  But even in the low $900s, the upside to gold exceeds the downside risk many times over.  So stay with gold as well as energy.   So for the short-term at least, the market is on very safe grounds -- unless and until energy makes its move.  When that happens, you'd better be riding that locomotive, otherwise you'll get crushed by it.     Until next week, Stephen Leeb Editor, The Complete Investor     If you cannot view this mailing click here. 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