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Ignore the Experts: Things Aren't Getting Better Soon

Thursday, 20 May 2010 03:17 PM

During the past few weeks, most of the so-called Wall Street “experts” and stock market pundits that regularly appear on broadcast financial shows told investors that the economy is continuing to improve and that stock prices would likely continue to trend higher.

Just like during late 2007, those same “experts” advised investors to continue to add to their stock portfolios.

Yet, some recently released economic statistics clearly indicate that the economy is not improving.

Quite the contrary, many of those statistics suggest that the U.S. economy will grow at a very slow pace, at best, during the second half of this year and that several European and Latin American countries are in danger of falling back into a recession.

ALERT: Frazier: Stocks Rolling Over. Get Out Now.


For example, the Federal Reserve Bank of New York reported on Monday that its index of manufacturing activity in the tri-sate are of New York, New Jersey and Connecticut slowed substantially during May, while the Federal Reserve Bank of Philadelphia announced this morning that manufacturing area in its area rose at a slower pace during each of the past three months. More importantly, the Philadelphia Fed reported that new orders for manufactured goods fell sharply during the first half of May, as compared to the prior month.

In a separate report, economic research firm The Conference Board announced today that its index of leading economic indicators fell during April for the first time since May 2009. That announcement was preceded by a report from the U.S. Department of Labor showing that first-time claims for unemployment benefits, a very significant leading economic indicator, rose last week after being unchanged during the prior week.

Those reports follows an announcement from the U.S. Department of Commerce on Tuesday showing that building permits for the construction of new homes fell sharply during April.

In regard to the employment situation, the National Federation of Independent Business announced last week that its members reported during April that they plan to continue to reduce the size of their workforce during the next three months.

Meanwhile, the M2 Money Supply rose at a snail’s pace of only 1.6 percent during April, compared to the same month a year ago, thus indicating that the Federal Reserve is no longer trying to stimulate the U.S. economy.

Apparently, the supposedly brilliant economists at major Wall Street Investment firms weren’t familiar with or didn’t bother to read those reports because those economists, on average, expected unemployment claims to decline during each of the past two weeks and for the Conference Board of Leading Economic Indicators to rise during April. (Note: First-time claims for Unemployment Benefits, the Rate of Increase in the M2 Money Supply, and Building Permits for New Housing Starts are major components of the Conference Board’s Index of Leading Economic Indicators, with unemployment claims and the year-over-year rate of increase in the M2 money supply accounting for the largest weightings in that index).

Or, perhaps those economists were purposely misleading investors in an attempt to give their firms’ traders more time to unwind their stock positions.

I say that because trading action in the equities market has indicated that institutional investors sold more shares of stock than they purchased during the past four months, while the composition of institutional investment portfolios indicates that institutional investors allocated a larger portion of their assets to defensive sectors of the equities market during April.

In regard to European economies, measures that are being implemented by Greece, Spain, Portugal, German and the United Kingdom suggest that those countries will face substantial difficulties in growing their economies during the remainder of this year and that some of those countries might soon fall back into a recession.

Meanwhile, any such slowdown in the United States and Europe would likely lead to a decline in the demand for raw industrial materials from countries like Brazil, Chile, Canada, Australia and New Zealand, which are substantial producers of materials such as steel, copper, coal, platinum and oil.

In light of the factors and developments mentioned above, I strongly urge you to stop listening to the so-called Wall Street “experts” and to focus on preserving the value of your capital rather than striving for further gains.

 If you’re interested in keeping abreast of important economic and geopolitical developments that might impact the value of your investments, you might want to try a trial subscription to David's investment advisory service – The ETF Strategist – which focuses on showing investors how to make money in both up and down markets.

As of last Friday’s close, the recommendations had beaten the S&P 500 by a whopping 55 percentage points, since its inception on September 18, 2007

About the Author: David Frazier
David Frazier is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes two very successful investment newsletters. Discover more by Clicking Here Now.

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DavidFrazier
During the past few weeks, most of the so-called Wall Street experts and stock market pundits that regularly appear on broadcast financial shows told investors that the economy is continuing to improve and that stock prices would likely continue to trend higher. Just...
david,frazier,experts,profits,crash
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2010-17-20
Thursday, 20 May 2010 03:17 PM
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