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Critical Economic and Market Update: 11-7-2008

Posted At : December 17, 2008 1:31 AM

Helping you Survive and Thrive in todays economic environment!

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Good morning.

We’re in dangerous times, and I thought you would enjoy my latest commentary

Issues discussed in this newsletter:
1.      Latest Report confirms predictions in Economic Tsunami Special Report
2.      Does the market perform better under a Democratic or Republican president?
3.      Stock Market Commentary
4.      Springer Turkey Challenge Help us feed those in need this holiday season.

Latest Report on Consumer Spending Confirms my Predictions in my Special Report for Advisory Clients: An Economic Tsunami Lies Ahead!

Well Reader, the latest retail sales report clearly shows a significant drop consumer spending. Last month was the weakest October in 40 years, a generation! The significance of this is astounding as almost 70% of GDP is generated from consumer spending. This clearly comes as a major surprise to many, as economists are searching for clues as to why the economy is slowing. However, this should come as no surprise to my readers because it’s what I believed would happen and wrote about in my recently published Special Report: An Economic Tsunami Lies Ahead, that was written last January, well before the economic crises.

In the report, I discuss in depth how the changing demographics in the US will cause consumer spending to slow to such a level, that a major financial meltdown would ensue followed by a stock market crash. Imagine that! I’ll admit, it occurred sooner than I thought it would, but I am proud to say that my lucky readers were warned and (hopefully) prepared. Even today, the cause of the crises is being blamed on low interest rates, over-building and greedy politicians. Yes they all helped. However, the main reason is more straight forward; it is simply the end of an entire generation’s purchasing power, the 78 million Baby Boomers. You see, as people pass their peak spending years, they typically curtail spending and turn from net spenders to net savers. With the largest generation in American history, the Boomers, now passing their peak spending years, a dramatic change is occurring within our country….and you better be ready because it likely will be much more severe than people think.

Anyhow, I just wanted to share the Retail Sales report with you (below). You may want to go back and read our report again. It is as pertinent today as ever. I spent a lot of time on it, and it’s a good read with lots of charts, graphs and statistics. For my new readers, if you would like a copy of my Special Report for Advisory Clients: An Economic Tsunami Lies Ahead, just send me your address and we’ll mail you a copy. It’s FREE to subscribers.

What does the election mean?

The long term outlook based on the election may surprise you. Since 1926, the S&P 500 has performed better under a Democrats than Republicans. 66.0% vs. 44.7% total return or 6.7% vs. 4.6% annual return. Small stocks did even better, with 8.2% vs. -3.5%. Hopefully that will hold true once again.

Economic and Market Update:

The Markets are clearly in a state of shock at the severity of the global crises. The Fed just lowered our interest rates to 1% and many other nations have followed suit with significant cuts as well. Although this seems like a welcome event, it points to much more serious financial crises than most were expecting, appearing as an act of desperation (which it certainly looks like). The market action is telling me that the situation is dangerous and that stocks are in for a longer bumpier road for a while, and we should not expect a bottom to occur with a rapid recovery anytime soon. Of course there are and will continue to be attractive places for your money, many far different than what we have become accustomed to, and they will be difficult to identify and take advantage of.

At this point, we should brace for a retest of the previous lows. Dow 7800-8200. If that breaks, we could see 7000. Once we set a short term bottom, I would beam (Temporarily) bullish for 3 reasons:

1. Widespread fear and pessimism You can’t find a Bull on Wall Street to save your life. Practically everybody in Bearish and feels it’s “obvious” that the market has to go down. Well, the market never does what “everybody” thinks. There’s an old saying on Wall Street – “If it’s obvious, it’s obviously wrong!”

2. The Government Bailout is essentially a giant stimulus package  Like it or not, the amount of liquidity that is about to enter the economy is enormous and it will bump the economy significantly, if even only temporarily.

3. The news is still bad Stocks tend to rally while the news is still bleak, well in advance of good news, leaving most individual investors in the dust.

If you have a portfolio built for the last bear market, there should be decent rallies and hopefully a better place to sell to make asset allocation adjustments. However, it would be a serious mistake to ignore your investments as many people are doing today in the hope that this crises will “blow-over” and bounce back quickly “like it always has”. It took the stock market 25 years to recover from the 1929 crash! HOPE may win the White House, but it is NOT an investment strategy! Be the expert or hire one!!!

Springer Turkey Challenge:

I take great pride and joy in my annual Springer Turkey Challenge to raise money to feed hungry families. The number of people in need is astounding, and no child should ever go hungry, especially during the holidays. Most of our contributions come in as Thanksgiving approaches. We accept donations as low as $15 to “buy a turkey”, which I then match, doubling the pot. As we get close to Thanksgiving, I present the money to local area food banks to feed the families most in need right here in our communities. Please help out if you can.

***I have helped clients properly manage their assets for nearly 25 years, and I have been now through 3 stock market crashes. There is no substitute for experience. Let me help you during these turbulent times. Simply reply back or call me for a complimentary review today.

Cheers Keith Springer

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