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Technology can fix anything: even the Federal government’s
deficit. At least, that’s what the Technology CEO Council told White House
officials yesterday. The council, headed by IBM (NYSE:IBM) CEO Sam Palmisano
said investments in efficiency technology could save the U.S. government $1
trillion over the next 10 years.
Of course, the meeting was basically just a sales call. And
seeing how much loot the government’s been doling out, I wonder what took
them so long.
But seriously, the Technology CEO Council makes a good
point. The only way to improve the American economy is by investing in it.
Sure, infrastructure projects are a good way to put some people back to work.
But this type of spending isn’t going to create years of growth.
We need investment in education. We need investment in
renewable energy. We need investment in biotech. I’m sure we come up with
more, but the point is, simply not spending money is not going to help the
U.S. grow. In fact, that’s probably a great way to ensure that we never
recover.
Yesterday, Goldman Sachs said that its outlook for the U.S. economy could be summed up
thusly: “fairly bad” or “really bad.”
Fairly bad is GDP growth in the 1%-1.5% range. Really bad is
slipping back into recession.
Clearly, Goldman has a much more bearish outlook than the
International Monetary Fund (IMF), which is looking for GDP growth of 2.3%
next year.
I know it’s easy to look at the current problems, most
notably 10% unemployment, and assume that these conditions will continue far
into the future. But that perspective fails to take into account that
unemployment is a lagging indicator.
Goldman Sachs is a savvy enough company to know that. So
what’s the recession fear mongering about? More quantitative easing, that’s
what.
Low interest rates and asset backed security buybacks are a
goldmine for Goldman and other investment banks. I think Goldman Sachs is
just talking its book with this forecast.
I’m pretty sure
that Treasury Secretary Geithner wasn’t talking about the U.S. when he said
“More and more countries face stronger pressure to lean against the
market forces pushing up the value of their currencies…The collective
impact of this behavior risks either causing inflation and asset bubbles in
emerging economies, or else depressing consumption growth and intensifying
short-term distortions in favor of exports.“
But his remarks in a speech at the Brookings Institute, most
likely aimed at China, certainly apply to the U.S. as well. Fed Chief Ben
Bernanke has done his level best to keep the dollar weak. And Congress has
taken up the cause to pressure China on the yuan.
Let’s not forget that our very own housing bubble got its
start when the dollar was weakened by Alan Greenspan’s monetary policy. And
it’s likely that interest rates will have to rise at some point to fight
inflation. I can only imagine how high gold prices will be at that
point.
My colleague at
Wyatt Investment Research, Jason Cimpl, the trading
strategist for TradeMaster Daily Stock
Alerts, had this to say in his morning missive to
subscribers:
“As mentioned numerous times in the past, the market is
not overbought. It has rallied hard over the past month and the move higher
offered very few dips to buy, but most indices are not overbought. Also, the
indices have not recorded any reversal candles to indicate a turn
approaches.
Until one of those changes we should not get
bearish.”
At the same time, Jason advised his readers to raise their
stop losses on open positions to lock in the gains they’ve achieved over the
last few weeks.
That’s great advice and the perfect way to play this
rally.
Finally, Alcoa (NYSE:AA)kicks off 3Q earnings season after the bell today.
Of course, I’d like to hear your thoughts here: [email protected]