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| Welcome to Market Forecast | |
| March 24, 2008 | |
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| Dear Investor, _______________________________________________________________________ Dear Subscriber, Congratulations on your recent decision to subscribe to my free Market Forecast newsletter. Now you are a part of our extended family that includes The Complete Investor, Leeb’s Income Performance Letter, Leeb’s Aggressive Trader, Leeb’s ETF Trader, Leeb’s Ground Floor Trader and more. During the course of your free subscription, you will be receiving our Market Forecast Commentary by email. In this commentary, you will learn about my and my editorial team’s opinions in what I deem to be the major trends and developments that have the ability to affect your investments. ______________________________________________________________________________________ Leeb’s Income Performance Update -----------------------------------------------------------------------------------------------
Mr. Bernanke, Meet Mr. Market Commodities Take a Breather
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Helicopter Ben has been a busy guy this past week, cutting rates not once, but twice, among other things. The Fed Funds rate is down to 2.25 percent now (it was 5.25 percent when the trouble in the credit markets started brewing last summer). The market, however, is signaling that the Fed's work isn't down yet. Three-month Treasury bill yields, which typically track closely with the Fed Funds rate, currently stand at just 0.57 percent, their lowest level since 1954. Mr. Market is telling Mr. Bernanke that he's still behind the curve. Rate cutting by itself won't heal what's ailing the credit market. Other recent moves by the central bank, however, are along the lines of what's needed to stem the problem. These include the Fed allowing securities firms to borrow at the same interest rate as commercial banks, extending the terms of those loans to six months from 28 days and accepting as collateral non-agency mortgage backed debt securities. J.P. Morgan picking up Bear Stearns for a song (with the backing of a $30 billion government credit line for Bear's troubled holdings) was a bailout in all but name. The move has gone a long way to restoring investor confidence. What we've seen in the seen in the credit market in recent weeks is akin to a good old fashion run on the banks. But as we've been saying since the credit market started to unravel last summer, any financial problem can be fixed if you throw enough money at it. The Fed has since thrown a heck of a lot of money into the system. Monetary policy typically acts with a lag of six to nine months. When relative calm returns we could see a powerful rally in stocks in general and financials in particular, thanks to the dramatic decline in short-term rates. Meantime, we may have to endure a few more stomach-churning, 300 point one-day swings in the Dow Industrials before returning to business as usual. Hang in there. Keep in mind that while we're constructive on the stock market here we're not locked into that forecast. So far, there are enough positive signs that the economy is not in recession or at worst the slowdown will be very mild. However, we're keeping a way eye on jobless claims, which have inched higher but remain below recessionary levels. Likewise, industrial commodity prices are still strong, although they have weakened a bit. If we see these two key economic indicators deteriorate much further it will be cause for concern. Advertisement Turn good news that's really bad news into good news. Have you ever considered that stocks in a downtrend can be an easy source of fast profits? For some time, we've been following the downfall of RadioShack, that Tyrannosaurus Rex of a retailer that's been stumbling on its way to extinction. With falling sales and high costs, the stock has been plummeting since last June. The first time we made money from RadioShack was October 2007. Taking a short position on the stock (essentially, betting against any rise in the share price), we made a 19.4% profit in just 37 days. Even more exciting, we made a similar bet against RadioShack in February 2008 - and took home a 64.7% gain in just 12 days. How did we do it? Well, one secret with a stock that's obviously weak is to sell a rally that doesn't make sense. In the February example, RadioShack had jumped on an earnings report that seemed fairly good. But when we looked closely, we realized the gain was due to cost cutting. Sales, which are the lifeblood of any company, were still dropping. It seemed clear that the rise in the share price that followed the report was caused by other short sellers taking profits, and would not last long. Another secret is to get out of your position once you're showing a solid profit, and a rebound seems likely. To learn more of our trading secrets, including how to take advantage of similar opportunities in the weeks ahead, click on this link ... Not only will you see a special offer just for TCI subscribers, but you'll learn about our generous guarantee that lets you test-drive your participation before you make up your mind. If you believe that the markets are in a period of higher volatility, and you want to profit handsomely from it, then this is one service you won't want to be without. ------------------------------------- Commodities Take A Breather A week ago we were talking about oil and gold setting new records. At the time we acknowledged that both could rise a bit further but that quick retracements wouldn't be the least bit surprising. Fast forward to today and we find oil off about 9 percent from its highs and gold down 11 percent. Our advice for investors with stakes in both commodities hasn't changed: Ride out the dips rather than trying to time your entry and exit points. The pullbacks will chase out the weak hands and the declines are likely to be merely temporary retreats along the way to much higher prices down the road. If there is one thing we can be sure of it's that in the coming years inflation will make a roaring comeback, fueled in large part by energy and easy money. As a result, gold and energy stocks should play a role in everyone's portfolio. Until Next Time, Your LIP Team 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. 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