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| Leeb's Market Forecast | |
| March 28, 2008 | |
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| Dear Investor, Leeb’s Income Performance Update ----------------------------------------------------------------------------------------------- When the going gets tough... Reading the tea leaves in utilities and transports... South Korea says "thanks, but no thanks"... ----------------------------------------------------------------------------------------------- There was slew of economic data out today and it's hard not to be encouraged by the data.
We got the final read on fourth-quarter GDP from the U.S. Commerce Department, which came in at 0.6 percent. That was unrevised from the last estimate and better than analysts had expected. Admittedly that's a weak number, but it's not recessionary. The first quarter data will likely come in negative
The Commerce Department also report that consumer spending rose by a revised 2.3 percent annual rate in the quarter, up from a previous estimate of 1.9 percent, proving once again, when the going gets tough, Americans go shopping.
We heard from the U.S. Labor Department today that first-time claims for unemployment insurance declined by 9,000 last week to 366,000. We've long viewed jobless claims as a coal mine canary: A sharp, sustained jump above 400,000 would spell trouble, while a reading below that level suggests the slowdown will be shallow. As long as people aren't reading about long lines at the local unemployment office, they'll keep opening their wallets.
The other proverbial canaries are small cap stocks and industrial commodity prices. Here again, we've seen some weakness in the small caps but on a relative basis they're behaving fairly well. Ditto for industrial commodities, which are less than 4 percent from their highs. Our chief concern is crude oil--which isn't included in our favorite industrial commodity index. Advertisement Register Today for Live Telephone Presentation: "Profiting from Today's Financial Crisis" Join Dr.Stephen Leeb, Dr. Patrick J. DeSouza, and Greg Dorsey , on April 10, 2008, at 5 PM, as they present timely information on some of the unique money-making opportunities available in today's market. In this 40-minute, live presentation, you'll discover...
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The idea that high energy prices are with us to stay is gaining credence, although there are still plenty of optimists around that expect prices to drop significantly in the future. Any contrarian worth his weight in salt knows that means surprises are therefore more likely to be to the upside.
While further evidence that the economy is slowing could temporarily cause prices to slump, crude is more likely to rise on a threat to supplies, as we saw today. Oil approaching $108 a barrel isn't all that disruptive to the economy. However, should we get a spike in the cost of crude up towards $120 it would give consumers and businesses alike reason to pause.
If crude prices don't rocket higher, the economy should avoid a prolonged downturn, thanks to the aggressive rate cutting by the Federal Reserve since last summer. The impact of those rates is only just now starting to be felt, however. And it will be at least several more months before their full influence will come to bear on the economy.
More liquidity is being added to the system via the Fed's newly created primary broker discount window, too. Taking advantage of what is essentially free money, investment banks and broker-dealers have borrowed $37 billion from the Fed this week, up from $29 billion a week ago.
In the meantime, the Fed put on a full-court press today with no less than five members making public appearances, giving speeches on the state of the economy, the credit situation and JP Morgan Chase's rescue of Bear Stearns. Most notable among these talks were comments from Atlanta Fed President Dennis Lockhart. He conceded that the economy may not get back into high gear for some time. Here's a sliver of what he had to say:
"A few months ago our forecast at the Atlanta Fed saw growth slow in the first half of 2008, then pick up in the second half of the year. But it now appears to me that the contraction in housing and the dampening effects of financial turmoil on household and business spending could persist through the remainder of this year."
If he's right, short-term interest rates will remain low for some time to come, ultimately exacerbating mounting inflationary pressures. Of course, as we've said before, the stock market is an excellent discounting mechanism. So it's worth looking at what they're telling us here and now.
For starters, the major averages appear to have bottomed in January, despite plenty of bad news to hit the front pages since then. Moreover, the Dow Transportation average is up close to 20 percent from its lows. These economically sensitive stocks are telling us that good times aren't far off for the constituent companies. The performance of the interest-sensitive Dow Utilities, on the other hand, has been downright atrocious since breaking its uptrend in January. The erstwhile "safe" stocks are off more than 14 percent from their highs and are presently trading just a hair above their 52-week lows. It looks like the market is not only telling us that growth will pick up, but that inflation is also set to takeoff. Advertisement Leeb's ETF Trader A Trading Advisory Service For Active Investors Leeb's ETF Trader offers investors a sophisticated short-term trading strategy that is easy to follow, requires only a few minutes a week, and features on-going support from a team of professional analysts. -------------------------------------
Swapping Debt for Equity
Today the NPS that it will cease making purchases of U.S. Treasury bonds. The pension fund cited falling yields and it reiterated its desire to hold a broader range of foreign stocks. While the Koreans' money will remain invested on our shores, the move is yet another sign the U.S. dollar is slowly losing its grip as the world's reserve currency. And the implications aren't pleasant. Until Next Time, Your LIP Team 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.  |
