Economic Meltdown 2009

Written By Brian Hicks

Posted September 5, 2009

Welcome to the Wealth Daily Weekend Edition – our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

It’s been another crazy low-volume market driving even the sanest of traders to the brink of insanity. Here’s what’s been happening. . .

Is the Recession Really Over?

Our near-term prediction: Watch for the government and its mass media puppets to soon call the recession’s end, as one of the most powerful signals — the ISM Manufacturing Index — showed its biggest move (to 52.9) in August.

Couple that with news that pending home sales were up 3.2% in July, and the chances of the government declaration grow stronger. With an index score of 97.6, that’s a 12% year-over-year improvement — the best read in two years, and the sixth straight month of improving conditions.

New Economic Boom? New Stock Market Boom? Not According to these Guys. . .

Goldman Sachs and Morgan Stanley may be bullish on the economy, but not every one is drinking the Kool-Aid. Paul Tudor, billionaire manager of Tudor Investment, says we’re in a "bear market rally" and nothing more.

Clarium’s Kevin Harrington believes, "this is more likely a ski-jump recession with short-term stimulus created a bump that will ultimately lead to a more precipitous decline later."

Brian Hicks is reallocating his portfolio for downside protection. "I don’t want to get caught with my pants down, heading into — historically — the two most volatile months of the year. So, I’ve initiated several short positions to protect the profits I already have," he says.

And they’re not the only ones feeling bearish. . .

"I think there will be at least 500 more banks fail[ing] between now and the end of the year," says legendary investor Wilbur Ross. Like us, Ross is especially worried about regional banks, which will get clobbered by the commercial real estate "Trillion Dollar Time Bomb."

Commercial real estate is a "looming problem," admitted FDIC Chairwoman Sheila Bair. Like us, she believes commercial real estate will be a major driver for bank failures this year and next.

Mortgage applications fell 2.2% last week, even as mortgage rates fell. Demand for purchase and refinance loans are down, says the Mortgage Bankers Association, despite the fall in the 30-year fixed to 5.15%. But maybe that’s because people can’t find work, as the unemployment number rose to 9.7%. And it won’t get any better when 1.5 million Americans lose their unemployment benefits by year’s end.

Worse, recovery hopes took it on the chin this week after:

  • The U.S. service sector contracted for the 11th month.

  • Retail sales fell 2.9% in August — the 12th straight month of decline.

  • Jobless claims came in at 570,000. . . worse than expected.

  • Personal bankruptcies were up 24% in August, year-over-year.

  • Student debt grew 25% in the 2008-2009 school year. Total student loans exceeded $75 billion during the year. And each student, upon graduation, faces an average $23,186 in student loan debt alone. We talk more about the troublesome higher education bubble here.

Don’t let the "recovery bulls" fool you. We’re still in deep.

Don’t shoot the messenger.

Good Investing,

Ian L. Cooper

P.S. We’d love to get your insight on the markets, and what you think of the topics we cover weekly here in your Wealth Daily Weekend Edition. . . you can talk to us directly by clicking on "Comment on this Article," and we’ll feature them in the weekly articles.

P.P.S. In case you’ve missed any of the recent top stories from Wealth Daily and our companion publications, we’ve included them below.

Chinese Gold Rush: China’s Gold Demand Soars amid Drop in Global Demand
Gold World Editor Greg McCoach explains how patience and opportunities from China’s rising gold demand will mean profit.

The Most Exciting Gold Discovery in the Past 50 Years
Scores of geologists agree with me 100%. . . the greatest gold exploration discovery in the past 50 years is right under our noses. It’s located only a few miles outside Timmins, Ontario. . . and has been churning out the yellow metal since 1907. It’s a world-class deposit that mining and exploration companies don’t want you to know about. . .

Portfolio Allocation Strategy: Make Fear Your Friend
Wealth Daily Editor Brian Hicks reveals how he’s allocating his portfolio in the coming months and shares with readers the specific stocks he has in mind.

Investing in Lithium Batteries: Investment Nirvana with Lithium
Green Chip Editor Nick Hodge discusses lithium’s coming rise to power in the battery world and how you can get ahead of the profit curve. . .

First Solar Stock: Buy, Sell, or Hold: First Solar and the Power Revolution
Wealth Daily Editor Steve Christ take a look at the solar power sector. Is First Solar a buy, sell or hold? Steve provides the answers. 

Alternative Energy Growth: Renewables Sail Past Nuclear
Energy & Capital Editor Nick Hodge talks about the EIA’s most recent Monthly Energy Review, which shows alternative forms of energy produced more electricity than nuclear for the first time. . . So much for the argument that alternative energy "will never make a dent."

The Housing Market’s Final Collapse
The second wave of our crisis is not only unavoidable. . . it will also be much worse than the subprime disaster. If you’re looking to get back even more than all the money you’ve lost in this market, you still have a chance. . .

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