-- Posted Sunday, 1 June 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
“Phenomenally accurate forecasts”
Last week’s suffocating tedium on Wall Street may have seemed like prelude to yet another boring and eventless summer, but we all know better. There are too many stalking monsters out there for the next three months to pass quietly. Real estate values can only continue to fall, and energy prices to rise. Gasoline looks like it’s headed seasonally above $4 a gallon no matter what happens on the futures exchanges, and it’s possible that by September we’ll look back on $4 regular with nostalgia. Will we feel nostalgia as well for a recession that remained statistically deniable even with real estate prices deflating more rapidly than during the Great Depression?
The pundits seem to be growing increasingly confident in predicting there will be no recession. Make a mental note of who these clowns are, since we wouldn’t want to lose track of them six months from now when they attempt to scurry back into well deserved obscurity. Most recently, they drum-rolled an upward revision in first quarter GDP as reason to infer that the worst is past for the U.S. economy. GDP growth for Q1 was originally reported as 0.6%, but a downward revision in inventories allowed the Commerce Department to nudge the figure up to 0.9%. We see little cause for celebration in this, however, since, like the surreal employment data that we are fed each month, inventory figures seem all too easy to manipulate.
Born-Again Savers
To get a better idea of what’s going on, we’d suggest watching corporate profits and consumer spending. The former fell 6.8% in the first quarter, while the latter grew a feeble 1.0% -- well below the 2.5% pace of the fourth quarter. Whence will the inevitable collapse in consumer spending come? We expect to see it reflected in a soaring savings rate. This has not happened yet, but a steep retrenchment by savers is absolutely inevitable as long as households are subjected to the double-whammy of collapsing real estate prices and rising costs for goods. On the basis of these two factors alone, we think that forecasters who see no recession should be dismissed out-of-hand. We’ve referred to them as clowns, but perhaps that’s being unfair to clowns. Self-aggrandizing liars is probably more accurate –and who can blame them, since how many people can you think of who got rich, famous or elected by telling it like it is?
For our part, we’ll continue to tune out reality and simply let our charts tell us what is likely to happen next. Because the stock market has become the final redoubt of hubris, mass psychosis and misplaced hopes, its pending collapse holds crucial implications for the U.S. and global economies. In the meantime, anyone who thinks the banking system has moved out of the red zone should have a look at the eye-popping charts we have prepared for subscribers. Click here if you would like them e-mailed to you.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Sunday, 1 June 2008 | Digg This Article | Source: GoldSeek.com
