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Fellow investor,
"Overall economic activity continued to weaken across almost all of the Federal Reserve’s districts…"
That was the conclusion of the Fed’s latest report on the U.S. economy, released Wednesday.
In a speech on the same day, Minneapolis Fed President Gary Stern said, "The economy is in the midst of a serious recession that seems likely to persist for at least another two quarters…"
Two retailers, Goody’s and Gottshchalk’s, applied for bankruptcy protection. A third, Neiman Marcus, said it will layoff 375 employees.
No, the U.S. economy is not getting better. It’s getting worse. Daily Profit has been saying that unemployment will go higher and that we will see many more bankruptcies, especially in retail. But that doesn’t mean it’s any easier to take in the bad news.
*****In the January 8 edition of Daily Profit, I said buying the ProShares Ultrashort Consumer Goods ETF (NYSE:SZK) looked like a good trade. This ETF is designed to inversely outperform the Dow Jones US Consumer Goods index by a factor of two. So if the Dow Jones Consumer Goods index drops 4 points, the UltraShort Consumer Goods ETF should go up 8 points.
SZK was available between $74 and $75 the day I wrote that. It’s up nearly 10% since, to $81 and change.
It’s not my intention to brag, but rather, to show that there are always ways to make money, if you’re willing to listen to what the market is saying.
*****RealtyTrac, a foreclosure listing firm in California, is reporting that 2.3 million homeowners faced foreclosure proceedings in 2008. That’s an 81% increase over 2007. 860,000 homes were actually foreclosed on, a 50% increase from 2007.
Moody’s is forecasting that actual foreclosures will rise another 18% in 2009. That means another one million homeowners will lose their homes.
Add in the fact that new claims for unemployment continue to exceed expectations and you get a clear picture of the vicious circle that’s fueling the recession. As housing prices continue to fall, consumers spend less, which leads to more layoffs and more foreclosures.
Some economists still hold out hope that the housing market will bottom sometime in 2009. But that simply means it will stop getting worse. I have yet to find the economist or analyst willing to forecast a recovery for the housing market. And I wouldn’t trust them, even if they did.
*****Monday’s recommendation to take profits on Graham Corp (AMEX:GHM) is looking better and better. You should have had no problem getting out above $11 a share. And the stock has dropped 14% since. With the major indices zeroing in on support levels, if Graham drops below $9, I may have to recommend re-buying the stock. Stay tuned.
*****Long-term Treasury bonds are yielding around 3.5%. Prices are very close to all-time highs. I’ll be initiating a position that will inevitably profit as yields rise and bond prices fall for my $100,000 Recovery Portfolio. To me, this will be one of the most solid profit opportunities in 2009.
I’ll be revealing the details of this trade at the $100,000 Recovery Portfolio video seminar airing January 22, 2009 at 6 pm ET. All you have to do to get the details is reserve your seat and attend this groundbreaking event.
But you’ll need to hurry. Seats are filling up fast, and we’re opening registration to the general public tomorrow. So if you’d like to sit in as I put up $100,000 of my own money to demonstrate how to build your wealth in the current environment, then please, follow this LINK for the details.