| Fellow Investor, I received an email from a Daily Profit reader yesterday that I want to address. John wrote: I take note of how you make an attempt at being balanced (positives/neg.). Your comment about the economic 'soft patch' and how you say things are 'worse' than a 'soft patch' I think makes it seem like you are just trying to scare people.
Seems to me (but, we've all been wrong before) that as the economy rebounds, and as you said profits and productivity have been good, any small increase in employment and other good news of any kind should be considered positive.
Anywho, just a short note to you in favor of looking on the bright side! I started writing about this "soft patch" a month ago, after the last FOMC meeting. You may recall that the announcement after that Fed meeting included statements about slowing economic growth and rising inflation, as well as the decision that QE2 would not be extended. Investors were mostly fixated on the QE2 revelations. I suggested at the time that the lower GDP forecast was the bigger story. Yesterday's sharp sell-off was a direct result of weakening economic data. The S&P 500 is now down around 60 points since that Fed meeting. As John notes, I do try to stay balanced in my commentary. Things are usually never as bad, nor as good, as they may seem. It's never been my intention to scare investors. At the same time, I won't advise relentless optimism, either. It's true that even small increases in employment are positive. I have also maintained that corporate productivity and profitability are driving the recovery. And Fed monetary policy has helped make the corporations healthy again. (The one exception may be the big banks. While they have been put in better shape, it's hard to give them a clean bill of health, and recent trading activity shows this clearly.) The problem is, corporate health is not translating to enough job growth to put the economy on solid footing. Corporations have found the balance between supply and demand. They aren't going to hire until demand picks up. The Fed cannot create demand. And the push for spending cuts in Congress will not create demand, either. In fact, it will lower it. It's true that demand created by deficit spending is not sustainable. But like we have discussed before, austerity plans will cost jobs and slow economic recovery. It's also likely that the economy will be on better footing once we get government debt under control. Let's just not kid ourselves that this will be an easy, painless process. | Special opportunity, article continues below.
| How to profit when the market dips The Dow Industrials first broke 10,000 on March 12, 1999. Ten years later, on March 12, 2009, the Dow closed at 7,170.
 That's led many to refer to the last 10 years as America's Lost Decade. And it's led many investors to conclude that the American economy is broken and that investing for growth is a fool's errand. Maybe you've felt this way yourself from time to time.
After all, how will America overcome 10%+/- unemployment?
$1 Trillion+ in annual budget deficits?
Record home foreclosures?
And most importantly, how can you, the individual investor, profit in the midst of this?
Invest in quality American companies, and buy their stocks at a discount. You can never go wrong investing in Great American companies, especially in times of crisis.
Find out how to spot these companies and how to buy them for a fraction of what everyone else is.
Click here... |
| *****Yesterday's action from the big banks concerns me. Back when the Treasury was doing its stress tests, the assumed conditions for the tests were very favorable. Now, a year and a half later, banks have been returning loan loss reserves to the balance sheet at a rapid pace. That makes them vulnerable to an economic slowdown. And I suggest that the recent weakness for banks means that investors are concerned banks have acted too hastily, and that they will be forced to return cash to loan loss reserves, impacting earnings. *****I have been focusing on regional banks with a strong history of stable growth and solid dividends for my High Yield Wealth readers. We just added two such banks that are paying 3.1% and 4.4% dividends. These banks avoided the excessive risk-taking that led to the financial crisis. And they are benefiting from the recovery. You can learn more HERE. Until tomorrow,  | Ian Wyatt
Editor
Daily Profit |  |
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