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     Choppy Trading Action Here to Stay
                                                                                                                PROFIT CONFIDENTIAL Forecasts
     —It’s an Index Trader’s Paradise
                                                                                                                 Immediate term outlook:
                                                                                                                 The bear market rally in stocks that started March 9, 2009 remains
     No Comments
                                                                                                                 intact. Since March of 2009 we have been and continue to be
                                                                                                                 immediate term bullish on stocks. Gold bullion is up $1,300 an
     Posted by Mitchell Clark, B.Comm. in blue chips, corporate earnings, economic analysis,                     ounce since we first recommended it in 2002 and we are still
     large-cap stocks, micro cap stocks, real estate market, small cap stocks, stock market on                   bullish on the metal.
     August 15th, 2011
                                                                                                                 Short-to-medium term outlook:
                                            I think investors really want to be buyers of stock at this          National debt increasing at the rate of $125 billion per month will
                                            time, but there isn’t much of a catalyst to do so.                   eventually debase the U.S. dollar. Our concern is future
                                            Institutional investors are buying, but they’re also                 deterioration of the greenback, an expansive money supply and
                                                                                                                 rising U.S. national debt will eventually push domestic inflation
                                            playing on the market’s volatility, accentuating the
                                                                                                                 and interest rates higher, negatively impacting the American
                                            results. Reality is beginning to set in now and there’s a
                                                                                                                 economy and equities.
                                            realization that corporate earnings are actually going to
                                            be strong in the bottom half of the year. The employment
                                            situation isn’t great and neither is the real estate
                                            market, but the corporate economy is well-positioned to
                                                                                                                PROFIT CONFIDENTIAL Estimates
                                            deliver solid earnings growth and this makes the                     Total 2011 per share earnings for 30 stocks in the Dow
                                            current stock market look very reasonably priced.                    Jones Industrial Average:

                                            Big, long-term investors relish the opportunity to buy               Dow Jones Industrial Average Price/earnings multiple:      13.4
                                            stocks when the indices convulse on the news of the
     day. Whether it’s adding to existing positions or taking on new opportunities, institutional
                                                                                                                 Dow Jones Industrial Average Dividend Yield:               2.6%
     investors (and insiders) are buying blue-chip stocks in this market.
                                                                                                                 3-month day U.S. T-bill Yield:                            0.01%
     There’s been a lot of bad news lately that’s taken a toll on investor sentiment, but I view the             10-year U.S. Treasury Yield:                               2.0%
     reduced expectations for the economy as now being built in to current share prices. The big,
     remaining investment risk has to do with the sovereign debt issue inEuropeand the potential
     for a cascading run on banks in European countries. Because of this very real and serious                  Search
     investment risk, there continues to be an attitude of wariness about the domestic equity

     Along with the S&P 500 Index, a lot of large-cap stocks that were the market’s leaders have                                             Search
     crossed their moving averages on the downside. Technically, the argument for a rising stock
     market holds very little water. The only good news is that the stock market isn’t overvalued.
     Because of strong earnings and a reasonable valuation, the market is actually holding up
     quite well.

     What everyone wants to know is what the future holds for the economy and stocks and it’s fair
                                                                                                                    If you missed Apple, shame
     to say that the question is unanswerable. In my mind, the case for the bulls and the bears is
     about even. We could go into recession again. The stock market could go down some more.
                                                                                                                    on us. If you miss this...
     Or, the interest rates that are artificially low might finally produce the catalyst for the economy
     to accelerate in the fourth quarter, and so might the stock market. This is why a lot of
                                                                                                                    A rare situation could trigger triple-digit gains for
     individual investors are sitting on the sidelines; there isn’t much in the way of definitive
                                                                                                                    this $7 the next 90 days. An opportunity
     economic analysis to take any bold, new action in this market.                                                 so rare, we’ve only seen it happen a few times before.
                                                                                                                    In fact, this company is strikingly similar to Apple
                                                                                                                    before its stock price took off.
     What I know is that investment risk for equities remains very high at this time. Large-cap,
     higher-dividend-paying stocks should outperform small-cap stocks and micro-cap stocks.
     Gold shares remain the most attractive for equity speculators.                                                  Learn all about the next Apple here!
     In a market without any defined trend, the news of the day makes the trading action. Expect
     more choppy trading action in the weeks to come. Pronounced stock market volatility is here                Recent Articles
     to stay for a while.                                                                                                                                Page 1 / 18
                                                                                                             The Next Step for the Stock Market

     U.S. Dollar and Gold: An Anniversary                                                                    By Michael Lombardi, MBA

                                                                                                             For the benefit of my new readers, and as an update for my long-
     No Comments
                                                                                                             time readers, today I want to talk about exactly where I believe
                                                                                                             we are in the stock market.  After a 25-year bull market in
     Posted by Michael Lombardi, MBA in bear market rally, gold standard, inflation, price of gold
                                                                                                             stocks, which was fueled by a 25-year decline in interest rates
     bullion, research reports, reserve currency, stock market, Stock Market Advice, U.S. dollar on
                                                                                                             and a period of great financial leveraging that accompanied
     August 15th, 2011                                                                                       collapsing interest rates, a Phase I bear market (often referred to
                                                                                                             as the first down-leg) brought stock prices down sharply.  From 
                                                  Forty years ago today, U.S. President Richard Nixon        its high of 14,164 ...
                                                  appeared on television to tell the world that the
                                                  U.S.was severing the relationship between gold
                                                                                                             Read More
                                                  bullion and the U.S. dollar.

                                                  Back in 1944, in a historic agreement reached in
                                                  Bretton Woods, New Hampshire, the U.S.
                                                  government agreed to redeem U.S. dollars for gold          What We Can’t Forget About in the Stock
                                                  bullion at the rate of $35.00 U.S. for one ounce of        Market Today
                                                  gold for the central banks of foreign countries.
                                                                                                             By Mitchell Clark, B.Comm.
     The relationship established between the U.S. dollar and gold bullion at Bretton Woods was
     often referred to as the “gold standard.” Based upon the relationship between the greenback             Street analysts are saying that, because of higher oil prices, the
     and gold, at Bretton Woods, the central bankers of foreign countries agreed to adopt the U.S.           Dow Jones Transportation Average is showing a real divergence
     dollar as their official reserve currency. In a nut shell, the U.S. backed its fiat money with gold     from the rest of the stock market. According to Dow Theory,
     bullion and foreign central banks backed their currency with U.S. dollars. All the currencies           confirmation from this index is required in order to uphold the
     had a link to gold.                                                                                     primary trend in the stock market. It’s kind of an old-fashioned
                                                                                                             way of predicting the stock market, but I do believe in it. Oil
     Thirty-three years after the Bretton Woods agreement, on August 15, 1977, Nixon took to the             prices have been stronger lately because of geopolitical
     airways to tell the world and in specific to tell the central banks of the foreign countries that the   concerns, but a lot of the stocks ...
     U.S.was reneging on the gold standard deal established at Bretton Woods.
                                                                                                             Read More
     We all know what happened once the tie between the U.S. dollar and gold was eliminated:
     The U.S. government was free to print money as needed, as it no longer had to worry if it had
     enough gold in its vault to back all the money being printed. Since the abandonment of the
     gold standard, the value of the U.S. dollar has lost considerable ground…a process called
     “inflation.” It takes a lot more U.S. pennies to buy a cup of coffee today than it did in 1971.         The Thorn in the PC Market Leader’s Side

     There have been very stark critics of America’s action in abandoning the concept that fiat              By George Leong, B.Comm.
     money should be backed by gold. Some say lack of the gold standard has caused global
     economic instability since 1977.                                                                        My kid hardly ever works on his desktop personal computer (PC)
                                                                                                             anymore, instead favoring a laptop. In fact, I often see him surfing
     But since 2002, another phenomenon has occurred. The price of gold bullion has boomed.                  the Internet and doing research using my “iPad” or his “iTouch.” 
     Gold has risen in price from $300.00 U.S. per ounce in 2002 to almost $1,800 today—a gain               This market shift is not only with my kid, but with millions who
     of 500%. And some economists, like me, are calling for gold to hit $3,000 per ounce.                    are also abandoning their computers in favor of tablets. The result
                                                                                                             of this is proving quite difficult for PC makers, who are fighting to
     There are many reasons why the price of gold bullion is skyrocketing. (I have written about
                                                                                                             come up with a defense. The market leader in PCs, ...
     those reasons in PROFIT CONFIDENTIAL countless times and will continue to write about
     why I believe the price of gold will rise.) Ultimately, I would not be surprised to one day see the     Read More
     value of the U.S. dollar somehow tied back to gold bullion.

     Michael’s Personal Notes:
                                                                                                             Platinum Surges 15% in Seven
     I love the weekends, as they give me time to catch up on my much-needed reading. All week               Weeks; Now Where Does it Go?
     long, I’m inundated with research reports. Sunday afternoons is my time to open up a bottle of
     Brunello and spend a solid four to five hours just reading financial reports on everything from
                                                                                                             By Sasha Cekerevac
     the market, the economy, and precious metals, to individual stock sectors and other forms of
                                                                                                             Some of the toughest decisions an investor has to make occur
                                                                                                             when you are up on a trade. I’ve highlighted some of the merits in
     What I’m finding quite fascinating is the number of analysts who are deeply bearish on
                                                                                                             investing in precious metals like platinum before, the last being
     America. I’ve never quite seen anything like this before…so many people calling for the
                                                                                                             on January 11, 2012, in the article Investors—Should You
     demise of America.
                                                                                                             Consider Platinum? At the time I wrote the article, platinum was
                                                                                                             trading approximately $1,497; as of today, the market for
     On the one hand, these are smart analysts who bring up very good facts to back up their
                                                                                                             platinum is trading around $1,723, a move of approximately 15%
     solidly bearish views. On the other hand, I’m wondering if all this bearishness is getting
                                                                                                             in less than seven weeks. In fact, ...
     overblown. After all, when does the market or economy do what is expected of it?

                                                                                                             Read More
     Here are just two reports from the weekend:

     Elliot Wave expert Robert Prechter believes that the U.S. is in the early stages of a depression
     right now.

     Well-known investor Jim Rogers, who is highly critical of specific people in Washington,                Extra
     predicts that the U.S. will eventually default on its debt obligations. Rogers believes that the
     U.S. economy never left the recession that started in 2008 and that we are still in a recession.
                                                                                                             A Study You Should Know About
     Yes, I’ve been very bearish on the economy as well. But, as a contrarian, one really has to
     wonder: will the stock market and economy really roll over and perform as the majority of
                                                                                                             By Michael Lombardi, MBA
     analysts predict?

                                                                                                             While most other economists tell us otherwise, I’ve been writing
     Where the Market Stands; Where it’s Headed:
                                                                                                             this year about how the numbers so far do not point to a U.S.                                                                                                                            Page 2 / 18
                                                                                                           economic recovery, but rather to a continued economic
     I continue to hold the belief that a bear market rally that started in March of 2009 presides.        slowdown, with the threat of recession. I’ve been focused on the
     According to a report from EPFR Global, a Massachusetts-based research firms, investors               average damaged consumer, who has lost value in his/her home
     pulled more money out from global stock funds last week than any other week since 2008.               and has been restrained by no income growth…if he/she is lucky
     And we all know what happened after 2008; stocks rallied big time.                                    enough to have a job. With over 47 million Americans on food
                                                                                                           stamps, I’m at a loss ...
     I’m going against the popular opinion, as usual, on this one. While many stock advisors are
     saying that stocks are dead, the rally is over, I’m sticking with my belief that the bear market      Read More
     rally, in spite of it being “long in the tooth,” is still alive and well.

     The Dow Jones Industrial Average opens this week down 2.5% for 2011.

     What He Said:
                                                                                                           Why Oil Prices, Gold and Silver
                                                                                                           Are Looking Good Again
     “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I
     personally started buying gold shares.” Michael Lombardi, PROFIT CONFIDENTIAL,                        By Mitchell Clark, B.Comm.
     December 13, 2002. Gold bullion was trading under $300.00 an ounce when Michael first
     started recommending gold-related investments. Michael has remained steadfastly bullish               With the recent strength in the euro currency, the spot prices of
     on gold since 2002.                                                                                   gold and silver have been stronger. Share price action in mining
                                                                                                           stocks has a very high correlation to underlying commodity
                                                                                                           prices and they’ve been moving up as well. I still believe in the
                                                                                                           commodity price cycle and that exposure to precious metals and
                                                                                                           other commodities should be a component of an investment
     The Only Asset Worth Betting on—You                                                                   portfolio this decade. The fundamentals are there to support
                                                                                                           higher prices for gold and silver. We have ...
     Guessed It! This Story’s Just Getting Started
                                                                                                           Read More
     No Comments

     Posted by Mitchell Clark, B.Comm. in gold shares, gold-related investments, investing in
     gold, precious metals, stock market, stock picking on August 12th, 2011                               Stocks at Multi-year Highs, But
                                                                                                           Watch for Some Near-term Topping
                                           If this is the decade of the commodity, then the single
                                           most attractive area for equity speculators remains the
                                           gold-mining business. The entire industry is swimming           By George Leong, B.Comm.
                                           in cash, while spot prices and physical demand for
                                           precious metals remain strong. Gold, silver and copper          The DOW broke above 13,000 on February 21 for the first time
                                           have been holding up exceedingly well, as the rest of the       since May 2008, while 14,000 has not been touched since
                                           stock market corrects. And it isn’t just the store of value     October 2007. My market view is that the upside break at 13,000
                                           argument or the so-called haven status of gold; the fact of     is bullish if it can hold, but the light trading volume suggests a
                                           the matter is that the global supply of the commodity is        minor bearish divergence between price and volume. My market
                                           relatively unchanged, while demand (particularly from           view is positive and suggests that more gains may be coming,
                                           India and China) is going up.                                   albeit stocks are technically overbought on the charts and are
                                                                                                           subject to resistance selling ...
     If I had to choose one stock market sector to focus on as an analyst and investor, it would be
     precious metals—gold in particular. It’s one of the few global industries with improving              Read More
     fundamentals and, because there is always demand for physical precious metals (even if
     economies are in recession), there are always companies out there worth speculating on.

     Right now, the rest of the stock market is in significant turmoil and there’s a lot of fear driving   Is this the End for Netflix?
     the share price action. But gold shares have been outperforming the market not only because
     the spot price is hitting new records, but also because gold-mining companies are now
                                                                                                           By Sasha Cekerevac
     consistently reporting record financial results.

                                                                                                           At this point, almost everyone knows about Netflix, Inc.
     It can be difficult stock picking in the mining universe. There’s nowhere near the number of fly-
                                                                                                           (NASDAQ/NFLX). The online streaming company offering movies
     by-night gold miners as there used to be. Standards for drilling results and feasibility studies
                                                                                                           and TV shows on demand was a pioneer in this field, which drove
     are now quite stringent and I would argue that a Street analyst is likely to be more accurate in
                                                                                                           corporate earnings for the firm. Such innovation and profitability in
     predicting the cash flow from a modern mining operation than just about any other kind of
                                                                                                           corporate earnings was bound to attract attention from
                                                                                                           competitors, many of them much larger than Netflix.  Anytime 
                                                                                                           you get larger competitors, the earnings outlook starts to get
     There are basically two kinds of mining opportunities for equity speculators. There’s picking
                                                                                                           cloudy. Recent news that cable giant Comcast Corporation
     an established producer with a forecast of cash costs and expected production. Then there’s
                                                                                                           (NASDAQ/CMCSA) is entering the online streaming market ...
     the pure-play venture capital opportunity, which is a company with a property and some cash
     in the bank to go drilling for metal. Either way, you have to do your homework or you’re just
                                                                                                           Read More
     throwing darts at a board.

     In the current environment, I would weight a speculative, pure risk-capital equity portfolio
     somewhere close to 50% in gold-related investments. From my perspective, it’s the only
     industry that’s generating meaningful growth and it’s the only way for speculators to beat the        Popular Tags
     current volatility in the broader stock market. Investing in gold is something that not all people
     are comfortable with. The business is tied to a commodity and, by their very nature,
     commodity prices are risky, unpredictable instruments. But with the general economy stalled
                                                                                                           austerity measures best stocks blue chips China's GDP
     and the stock market in the doldrums, gold mining is one of the few booming industries with
     strong expectations.
                                                                                                           Growth consumer confidence consumer spending
                                                                                                           corporate earnings corporate profits credit crisis debt
                                                                                                           crisis dividend paying stocks dividends DOW Dow Jones Industrial
                                                                                                           Average Dow         Jones Industrials earnings season
     The Stock Market Is Big; This Is                                                                      economic slowdown   euro Europe European Central Bank
                                                                                                           European debt crisis european economy            european union
     Bigger and More Important to You                                                                      eurozone financial crisis GDP growth gold bull
     No Comments                                                                                           market gold investments gold prices gross domestic
                                                                                                           product home prices inflation rate institutional investors investing                                                                                                                          Page 3 / 18
     Posted by Michael Lombardi, MBA in bond market, federal reserve, interest rates, real estate        in gold investing in real estate investing in stocks investment risk
     market, stock market, Stock Market Advice, U.S. dollar, U.S. Treasuries on August 12th, 2011        investor sentiment IPOs job creation jobs market large-cap
                                                                                                         companies    large-cap stocks Market Veiw micro-cap stocks
                                               The bond market dwarfs the size of the stock market.
                                               I know what some of my readers are thinking right
                                                                                                         mining stocks NASDAQ national debt NYSE     oil stocks penny
                                               now, “If I don’t invest in U.S. Treasuries, it doesn’t    stocks   price of gold quantitative easing retail sales retail
                                               matter to me if they go up or down.” This is wrong.       sector retail stocks rising interest rates silver silver stocks small-
                                                                                                         cap stocks Sovereign Debt stock-picking stock
                                               The price direction of  U.S. Treasuries is based on 
                                               interest rate expectations. If bonds are rising or        advisors Stock Market Condition Stock Market Picks stock
                                               decreasing in price, it means that future interest        market rally stock market risk stock market success Stock Market
                                               rates will either rise or fall. The entire economy is     Updates stocks Stocks Trading Tips technical analysis The
                                               based on interest rates. Higher interest rates would      Leong Side of the Market U.S. banks U.S. debt U.S. Deficit
                                               be catastrophic for the stock market, real estate
                                                                                                         U.S. home prices   U.S. real estate market U.S. recession U.S.
                                               market, consumers, and businesses.
                                                                                                         Treasuries unemployment rate Wal Mart
                                              Right now, 10-year U.S. Treasuries are near their
                                              record low, yielding 2.28% this morning. Why so
                                              low? Because, on Tuesday, the Federal Reserve
                                              took the unusual step of saying it would keep short-       Categories
     term interest rates near zero into mid-2013.
                                                                                                         Gold Stocks                         Real Estate Market
     The Fed cut short-term interest rates to between zero and 0.25% in December of 2008 and             Stock Market                        Gold Investments
     short-term rates have remained that low since. Now we are told that the Fed will hold rates at      Bear Market                         Debt Crisis
     those levels for another two years.                                                                 Bull Market                         Chinese Economy
                                                                                                         U.S. Dollar                         Economic Analysis
     But there is trouble in paradise…                                                                   Euro                                Benchmark Stocks
                                                                                                         Interest Rates                      Dow Jones Industrial Average
     Three of the 10 members of the Fed interest-rate-setting committee dissented from the               U.S. Deficit
     decision to give specific dates on how long short-term rates would be held close to zero. The
     last time this many of the committee members dissented was almost 20 years ago.
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     There are two schools of thought on how this story will end.                                                           correspondents by subscribing to
                                                                                                                            our RSS Feed.
     One camp believes that the U.S. is entering the same type of phase Japan went through in
     the 1990s: a period of deflation, where interest rates remained low for more than a decade.

     The second camp believes that the U.S. will need to raise interest rates, as its debt load
     increases and foreign countries balk at buying more U.S. Treasuries.

     China—the biggest holder of U.S. Treasuries—and Russia have been blasting the U.S. for
     failing to rein in spending. We also have two other problems: the U.S. dollar has been falling
     like a stone against other world currencies and the Fed has been a major buyer of U.S.
     Treasuries. Some look at this as the government buying its own debt. How confusing is that?

     I’m in the camp that believes a bubble is brewing in U.S. Treasuries. Just like a bubble
     happened in hi-tech in the late 1990s, just like the housing bubble that peaked in 2005, just
     like the stock market bubble that peaked in 2007.

     Whenever the U.S. government auctions off U.S. Treasuries, the offering is oversubscribed.
     Investors are lining up to buy securities paying 2.28% that are issued by a country that is
     technically bankrupt. That story can’t have a good ending.

     Michael’s Personal Notes:

     There’s a tremendous amount of fear in the marketplace today. I’ve never really seen anything
     quite like it before. One would believe that it’s 2008 all over again. Hence my belief that the
     stock market will not just roll over and collapse at this point. The market rarely does what is
     expected of it.

     A recent CNN/Opinion Research Corporation poll reported that 48% of Americans believe that
     another Great Depression is likely to start within the next 12 months. This is unheard of. If you
     asked people in 1930 if a depression was headed their way, they would not know what you
     were talking about. If history has taught us one thing, it’s that events happen when the great
     majority of people do not expect them to happen.

     We even have France, the second largest economy in Europe, now under attack by the bond
     vigilantes. Rumors have it that France will lose its Triple-A credit rating, just like the U.S.
     recently did. Yes, things are very difficult in Europe. Unemployment is high; jobs are hard to
     come by. But I’m starting to get the feeling that the pessimists are painting the situation as
     worse than it really is.

     Where the Market Stands: Where It’s Headed:

     The Dow Jones Industrial Average opens this last trading day of the week down 3.8% for the
     year. Personally, I’m not letting the multi-100-point up and down days on the Dow Jones
     bother me. I recognize that a lot of it has to do with automated computer buying and selling.

     I’m focusing on my long-term beliefs about the market. And those views have not changed.
     The first phase of the bear market brought stocks down to a 12-year low on March 9, 2009.
     From there, the second phase of the bear market took hold. And that’s where we have been
     for months.                                                                                                                           Page 4 / 18
     The third phase of the bear market will have stocks fall below their March 9, 2009 low. It will
     present a once-in-a-generation buying opportunity for investors. However, I don’t believe the
     third phase of the bear market is ready to start quite yet. The bear hasn’t finished its job of
     luring more investors back in before it takes prices down again.

     What He Said:

     “A Stock Market’s Obituary: It is with great sadness that we announce the passing of the Dow
     Jones Industrial Average. After a strong and courageous battle, the Dow Jones fell victim to a
     credit crisis and finally succumbed on Friday, October 3, 2008, when it fell decisively below
     the mid-point between its 2002 low and its 2007 high.” Michael Lombardi, in PROFIT
     CONFIDENTIAL, October 6, 2008. From October 6, 2008, to November 27, 2008, the Dow
     Jones Industrial Average experienced one of its biggest two-month losses in history.

     First Stocks, Then Real Estate—What’s
     the Winner Going to Be This Decade?
     No Comments

     Posted by Mitchell Clark, B.Comm. in commodity prices, Internet-related stock, investment
     strategy, precious metals, real estate market, S&P 500, stock market, Stock Market Advice,
     stocks, technology stocks on August 11th, 2011

                                           I think it’s probable that the stock market will continue to
                                           convulse for the rest of the third quarter and into the
                                           fourth. The trend in economic news is down and so is
                                           investor sentiment. We still have a lot of problems with
                                           sovereign debt issues in Europe and this is an
                                           investment risk that isn’t going away anytime soon.

                                          Right now, investor expectations are being dramatically
                                          reduced. The marketplace now expects little to no growth
                                          in gross domestic product (GDP) and investors aren’t
     expecting much, if anything, from the stock market. I still expect both the third and fourth
     quarters to be very good in terms of corporate earnings, so my view is that the stock market
     will undertake a prolonged period of consolidation around current levels, with chances of
     rallying in the fourth quarter.

     The old adage that investors should “sell in May and go away” perfectly illustrates a fitting
     strategy this year. If you pull up a chart on the S&P 500 Index, you’ll see the market’s
     substantial price appreciation from last September. Then in May, the market began to
     consolidate; slowly deteriorating until its recent move, breaking both its 50-day and 200-day
     moving averages.

     The S&P 500 Index has actually been in a period of consolidation for the last 11 years. Pull up
     a long-term chart on the Index and you can see it plainly. What you will also notice is the
     current price action, which looks like a right shoulder formation from the head set in 2007. It’s
     an ominous-looking pattern and, when looking at it, you can’t escape the feeling that the trend
     is going to complete itself. If it does, it means the stock market could be in for a lot more pain.
     Over the last decade, 800 on the S&P 500 stands out as the bottom support point.
     Regardless, the buy-and-hold investment strategy has barely paid off over the last decade.
     Without dividends, investment returns would now be negative, as the S&P 500 is currently
     trading below its level in December of 2008.

     Clearly, the best stock market advice would have been to buy technology stocks and Internet
     stocks in the 1990s. Then, the best subsequent investment strategy would have been to cash
     out of the stock market and buy real estate for most of the next decade. Now, it would seem,
     precious metals and agricultural commodities are experiencing the best price action from the
     global business cycle. First it was stocks, then it was real estate. Now the future belongs to

     I think the commodity price cycle will keep running for a number of years and, in a period of
     slow economic growth, investors need to have significant exposure to this sector. The
     fundamentals haven’t favored stocks for quite a long time. The real estate cycle was strong
     and highly profitable for those who got in and out at the right times. Now, all the debt in the
     world and money supply growth is creating a sustained period of higher inflation. Going
     forward, commodities and those assets that benefit from higher inflation will be the winners.

     New Higher Margin Requirement
     for Gold an Investor Opportunity
     No Comments

     Posted by Michael Lombardi, MBA in gold stocks, how to invest in gold, investor confidence,
     price of gold bullion, stock market, Stock Market Advice, stock prices on August 11th, 2011                                                            Page 5 / 18
                                            After months of patient waiting, the gold stocks came to
                                            life yesterday. Right across the board, whether it was
                                            junior or senior gold producers, the stock prices of gold
                                            companies were up sharply Wednesday.

                                            Hopefully, my readers have been following my guidance
                                            and seeking refuge in the gold-mining companies.
                                            Since the spring of this year, gold bullion prices have
                                            been rising sharply, while gold stocks stood pat. I have
                                            been writing that the leaders of the gold bull market
                                            would shift from the actual bullion to the gold stocks, and
                                            that’s what started happening Wednesday.

                                         Since the middle of June, the Dow Jones U.S. Gold
     Mining Index (an index comprised of the largest U.S. gold-mining companies) is up 12%,
     while the general stock market has gone down 11% in the same time period!

     But, like all good things, as the price of gold bullion hits $1,800, there are forces that want to
     put a wrench in the 10-year gold bull market, as many believe gold has become too
     speculative. Hence, this morning, we learn that CME Group Inc. (CME), the world’s largest
     futures market, changed the rules without advance warning and increased the minimum
     amount of cash speculators and investors must deposit to trade a futures contract of gold.

     In summary, margin requirements, with a flick-of-a-switch, have increased by 22% this
     morning. You may remember, the CME did the same thing to silver (increased the margin
     requirements for trading silver a few months ago) and silver fell sharply in price.

     Well, I have news for the market, and better news for my readers. The bull market in gold is
     too strong to have the metal fall in value by 30% as silver did after the CME increased the
     margin requirement for trading silver futures.

     For my readers, any pullback on the price of gold bullion caused by the CME’s newly imposed
     margin requirements would present a perfect buying opportunity for the junior and senior
     gold-producing stocks, once again. This is how to invest in gold now.

     Michael’s Personal Notes:

     On Tuesday of this week, the Federal Reserve made the unprecedented action of specifically
     saying how long it would keep short-term interest rates low. I’m sure you have heard. The Fed
     will keep rates low through mid-2013.

     On the news of a prolonged period of interest rates that are low, U.S. Treasuries rallied. It
     doesn’t matter if Standard & Poor’s has cut the credit rating of the U.S. It doesn’t matter if
     Congress has just given the Obama Administration another $2.1 trillion to spend. Investors
     want U.S. Treasuries.

     Yesterday’s auction of $24.0 billion in 10-year U.S. Treasuries was the first offering of U.S.
     debt since Standard & Poor’s cut the U.S.’s credit rating. There was a line up to buy these
     bonds—and the buyers walked away with the lowest yields on record—2.14%.

     At 2.14%, the dividend yield of the Dow Jones Industrial Average stocks of 2.8% sure does
     look competitive.

     Where the Market Stands; Where it’s Headed:

     It’s up and down, down and up for the markets. My readers need to understand that, when we
     have huge multi-100 point up and down days on the market, most of that trading is computer-
     driven. Very little of it has to do with individual investors buying or selling. Since the advent of
     index-traded funds, computer/automatic trading has become a big part of Wall Street.

     What am I doing? I’m sitting back and waiting. The current situation could go one of two ways.
     The market could move from here to test its March 2009 lows or the first real correction of
     2011 could be close to ending, at which point the bear market rally would resume its upward

     I’m in the camp that believes it is too early to test the March 2009 lows for a variety of reasons
     I have written about over the past two weeks. Some of those reasons: stocks are a better
     investment alternative today to 10-year U.S. Treasuries; monetary policy remains
     accommodative; the great majority of investors are pessimistic; corporate profits are still
     strong; and corporate insiders are buying stock at a pace not seen since the spring of 2009.

     What He Said:

     “Consumer confidence does not change overnight. In the U.S., 70% of GDP is based on
     consumer spending. And, in my life, all the recessions I have seen or studied have only come
     to an end when consumers started spending. With consumer sentiment getting worse, and
     with the U.S.personal savings rate near record lows, it may take years for consumers to start
     spending again.” Michael Lombardi in PROFIT CONFIDENTIAL, February 25, 2008. By the
     end of 2008, the rest of the world was realizing that the recession would be much longer and
     deeper than most had imagined.                                                             Page 6 / 18
     Stock Picking: Time Horizons Change,
     But the Environment Just Got Better
     No Comments

     Posted by Mitchell Clark, B.Comm. in economic analysis, investment opportunity, large cap
     companies, small cap stocks, stock market, Stock Market Advice, stock picking on August
     10th, 2011

                                            The economy might be lackluster and there is a risk of
                                            another recession, but the stock market is fairly priced
                                            and the outlook for corporate earnings continues to be
                                            solid. The gyrations of the stock market are based on
                                            fear—fear of a future without growth. Small-cap
                                            companies are going to have a more difficult time
                                            generating earnings growth over the coming quarters
                                            because their operations are more closely tied to the
                                            domestic economy. Large-cap companies, such as
                                            those in the Dow Jones Industrial Average and many
                                            within the S&P 500 Index, are going to keep growing their
                                            earnings because of their international operations and a
                                            weaker dollar that translates into a better bottom line.

                                          The economy no doubt has a lot of structural problems to
                                          overcome and it will take a few more years to do so. The
                                          fiscal situation has to be addressed and a measured,
     reasonable plan needs to be put in place to deal with deficits and debt. Excess inventory in
     the housing market needs to be taken up for homeowners to feel more secure about the
     valuation of their main assets. And, finally, the employment situation has to improve in order
     for incomes and consumer spending to rise. These are big hurdles to overcome and it will
     take more time to do so.

     From the investor’s perspective, the fundamental backdrop of the economy is something we
     have to live with. Corporations continue to be running very lean operations and, with interest
     rates low and cash balances high, large companies can grow their earnings even if the
     domestic economy is stuck in an age of austerity.

     Right now, the most attractive new investment opportunities in the stock market are large-cap,
     higher-dividend-paying companies with significant international operations. At the speculative
     end, gold continues to be the best play.

     I think it’s fair to expect the broader market to continue gyrating for the rest of the third quarter.
     Technically, the main stock market averages aren’t looking good, but these significant
     pullbacks have happened before and stocks recovered. As you know, the stock market is all
     about betting on the future. Right now, the market is digesting an uncertain future with the
     expectation of weaker economic growth (or a possible recession). Beyond this expectation is
     a fundamental backdrop that looks pretty good from the investors’ perspective, as
     policymakers begin to address their finances and the housing market has more time to
     balance itself out.

     Corporate balance sheets are in very good condition at this time. Insiders are buying their
     own shares. An economic analysis of the current data suggests that a period of slow to
     breakeven growth is likely in the bottom half of this year. In the not-too-distant future, the stock
     market will look beyond this expectation and investors will be buyers.

     Gold’s Burning up on the Chart;
     My Gold Advice
     No Comments

     Posted by George Leong, B.Comm. in BRIC countries, gold advice, gold prices, inflation,
     investing in gold, national debt, PIGS, safe haven play, stock market, Stock Market Advice, U.S.
     economy on August 8th, 2011

                                            The precious yellow metal is sizzling on the price charts,
                                            as traders shift capital from the higher-risk equities to the
                                            safe-haven sanctuary of gold.

                                            The U.S. is battling crippling debt levels and deficits.
                                            Some cities across the nation are shutting down to save
                                            money. The once powerful U.S. economic engine
                                            continues to show breaks and is stalling at this most
                                            critical time for the country.

     Over in Europe, we have the PIGS (Portugal, Ireland, Greece, and Spain) sucking money from
     the European Union and International Monetary Fund and taking away the ability to focus on
     growth.                                                               Page 7 / 18
     We are also seeing some economic fragility in the BRICS grouping (Brazil, Russia, India,
     China, and South Africa). Brazil, India, and China are seeing some stalling in their economies
     and stock markets.

     In China, you have inflation surging to 6.4% in June, the highest level in about three years.
     The Chinese central bank has increased the bank reserve ratios in an effort to stall lending.
     Slowing inChinahas an impact on the domestic and global economies that deal with China.

     Domestically, you have a national debt of $14.5 trillion and this will grow to over $16.0 trillion
     with the debt ceiling increasing.

     Given all of this risk, you should have some capital working for you in gold.

     Gold is considered a safe-haven play versus that of silver. Investing in gold is a safe haven
     play when the overall market risk rises, as what we are currently witnessing.

     On the demand side, China is a significant buyer of gold and this is expected to continue as
     the country hoards physical gold in its reserves. India is also a major buyer.

     The reality is that gold is a limited resource that needs to be found and mined. There is a
     certain amount of global reserves in the ground, but, after that, there needs to be more

     Gold has rallied in each of the last 10 years and shows a beautiful bullish price chart. My gold
     advice would be to accumulate gold on weakness.

     On the chart, the October Gold traded at a record high of $1,683.50 on August 4 before
     retrenching. The current chart looks bullish on strong Relative Strength. There is a “golden
     cross” on the chart, with the 50-day moving average (MA) of $1,558 well above the 200-day MA
     of $1,451.

     Some pundits have come out and suggested a $2,000 target on gold over the next few years.
     I even saw a staggering $5,000 price target on gold. Now the latter may be an extreme, but I
     feel that gold prices will continue to edge higher, especially if the U.S. economy falters and
     another recession surfaces.

     In the current climate, gold represents the best bet, while silver continues to be a trading
     commodity based on the economic recovery and demand for electronics and industrial

     My advice to you is to buy a mixture of exploration-stage gold miners along with small to large
     gold producers. In this scenario, you can play both the potential aggressive gains of
     exploration stocks and the steady returns of the large gold producers.

     Special Stock Market Report
     No Comments

     Posted by Michael Lombardi, MBA in 10-year US Treasuries, bear market rally, best stock
     advice, Dow Jones Industrial Average, S&P 500, stock market, Stock Market Advice on August
     8th, 2011

                                                   My commentary today is dedicated solely to the
                                                   stock market. Many of my readers are obviously
                                                   invested in stocks and are concerned over last
                                                   week’s volatility.

                                                   Let’s start with the general consensus…

                                                   Whatever I read this weekend, the message was
                                                   basically the same: “The stock market is in big
                                                   trouble.” Stock market advisors are turning
                                                   bearish in droves. You read a lot about the major
                                                   market indices breaking important 50-day and
                                                   200-day trend lines, hence even the market
     technicians have turned bearish.

     I have been in this business a long time; about 30 years. I have never seen a stock market
     follow the direction of the consensus opinion. In other words, I doubt the stock market will
     make everyone happy and just roll over, as the great majority of investors and analysts
     believe it now will.

     Let’s move to the companies that trade in the market…

     Earnings in corporate America remain strong. The weak economy is not hitting the big public
     companies. We have yet to see any of the big 30 Dow Jones Industrial companies report
     downgrade revisions to their expected earnings this year. Corporate America sits on over
     $1.0 trillion in cash.                                                           Page 8 / 18
     At a dividend yield of 2.65%, the Dow Jones Industrial Average is still a good alternative to the
     approximate 2.5% yield on the now S&P-downgraded 10-year U.S. Treasury. Stocks are not
     expensive in relation to their dividend yields and price/earnings multiples when compared to
     alternatives in the marketplace, including Treasuries.

     Moving to the Fed and the government…

     The government got what Wall Street wanted: a big increase in its spending limit. The
     government has been given permission by Congress to spend another $2.1 trillion of money
     it doesn’t have—make no mistake, Wall Street loves when the government has more money
     to spend.

     The Federal Reserve, it is my belief, is getting ready to come out with some new form of QE3.
     Monetary and fiscal policy remains as accommodative as I have seen in three decades of
     following the markets. Both the Fed and government stand ready to jump in and “save” the
     economy again as needed. They will pull out all the stops…and that is exactly why this bear
     market rally has lasted as long as it has.

     Finally, let’s look at what happened last year in the stock market, as investors have very short-
     term memories.

     As of this past Friday, the Dow Jones Industrial Average was down exactly one percent for the
     year. Let’s take a quick look back at last year. The Dow Jones Industrial Average started 2010
     at approximately the 10,500 level. Just like this year, the Dow Jones Industrial Average rallied
     from the beginning of 2010 to the spring of 2010. In the summer of 2010, stock markets in
     North America crashed. By July of 2010, the Dow Jones was down 8.5% for the year—yes,

     We all know what happened after that. The Dow Jones rallied from a low of 9,500 in the
     summer of 2010 to close at 11,500 by the end of 2010. The stock market actually gained
     about 10% in 2010 despite a terrible summer for stocks.

     My message to my readers…

     Don’t panic. It is the worst thing you can do. Be realistic and look at the numbers. Stocks are
     only down one percent this year. If we look back at 2010, stocks were down 8.5% for year by
     the summer and they still came back to close a great year.

     The majority of investors and analysts are bearish on stocks now—and we know from past
     experience that the majority opinion, often referred to as the consensus, is usually wrong.

     Corporate earnings are strong. The government has loaded its gun to spend more.
     “Helicopter” Ben Bernanke and his crew at the Fed are ready to jump in and “save” the
     economy again if needed.

     By this point in this report, you can tell I am not ready to give up on my belief that we are still in
     a bear market rally that started in March of 2009. I believe this bear market rally has more time
     left in its life cycle. Yes, the bear market rally will eventually end and Phase III of the bear
     market will eventually kick in—but it will not be that well-publicized.

     If we were to look at this from a pure technical interpretation, the Dow Jones Industrial
     Average would have to fall below 9,658 for the bear market rally to officially end (the mid-point
     between the March 9, 2009 low and the May 2, 2011 high). We are far from 9,658 on the Dow
     Jones Industrial Average.

     That, my dear reader, is the best stock market advice I can give you.

     The Most Important News to
     Listen to—It’s the Real Deal
     No Comments

     Posted by Mitchell Clark, B.Comm. in big corporations, corporate earnings, housing market,
     most important news, stock market, U.S. dollar on August 4th, 2011

                                       I still feel that the most important news investors
                                       should be listening to is from corporations themselves.
                                       They are the enterprises, not government, and therefore
                                       they are the drivers of earnings growth. The fact of the
                                       matter is that we are in the age of austerity, and we
                                       deserve to be. All the excesses of the past have created
                                       the slow economic environment of the present.
                                       Investors’ concern about government cuts to spending
                                       is a worry that’s misplaced. The economy shouldn’t be
     based on government spending and stimulus; that’s up to individuals and entrepreneurs.

     Just like last year, big corporations are saying that earnings are solid, and the expectation is
     for further improvement in the bottom half of this year. Many Wall Street analysts are
     increasing their earnings expectations for S&P 500 companies this year and next, and, based                                                               Page 9 / 18
     on those expectations, the stock market is looking very reasonably priced at this time.

     No doubt, the sovereign debt issue in Europe and the debt-ceiling negotiations in
     theU.S.were confidence killers. Add in some weaker economic news and you can easily see
     why the stock market retreated. But I think this market has a real resiliency to it and there’s a
     good chance that it won’t break down. If this were to happen, it would go against what
     corporations are saying about their businesses.

     There is one important factor that investors need to keep in the back of their minds. What
     matters most in capital markets is the numbers. Unfortunately, people don’t particularly count.
     What I’m getting at is that the stock market can tolerate persistently weak employment
     numbers if corporate earnings are growing. If employment was improving and so was the
     housing market, then I have no doubt we would be in a full-blown bull market right now. As
     this is not the case, I think the market will hold together and tick higher modestly as long as
     the earnings growth is there. All that really matters in the equity market are earnings and this
     news so far is promising.

     There is one big reason why I think corporate earnings can keep growing even if growth in the
     domestic economy grinds to a halt. It’s the dollar—a weaker dollar that should persist for
     several years to come. A weaker dollar is the biggest gift to domestic exporters and large-cap
     multinationals, because the earnings abroad translate into bigger earnings at home as the
     dollar falls relative to foreign currencies. The U.S. Dollar Index, which measures the value of
     the U.S. dollar compared to a basket of the world’s main currencies, has bounced around
     quite a bit over the last three years. However, since the beginning of 2010, it has been in a
     significant decline. The near-term trend for this index looks intact and this is good news for

     As I say, there are plenty of potential shocks out there and investor confidence is already low.
     With a little bit of stability on the confidence front, I see corporate earnings swaying investor
     sentiment going into the fourth quarter. Stocks should be able to advance based on earnings
     news alone.

     How Stocks Are Reflecting the
     Structural Excesses of the World
     No Comments

     Posted by Mitchell Clark, B.Comm. in Stock Market Advice on August 3rd, 2011

                                              Now that the S&P 500 Index is below 1,300 again, it’s
                                              time to worry. This index has been trading in a tight range
                                              ever since the beginning of the year and it hasn’t been
                                              able to break out past 1,350 in any meaningful way. On
                                              the support side, 1,250 looks like an important technical
                                              barrier; if it’s broken, it would not be a healthy
                                              development for stocks.

                                             The S&P has already broken its 50-day moving average
     and is poised to break its 200-day moving average at this time. Now, it’s important to
     remember that these statistical indicators are just those—statistics. Last summer, the S&P
     broke both moving averages, consolidated for three or four months, and then reaccelerated to
     its current level. Just looking at the chart of the index; it does look like it’s rolling over a little bit.
     At the very least, the trend shows that the market looks tired, which is a word I like to use to
     describe a lackluster, trendless stock market.

     Equities seem to be maintaining their trading correlation with the spot price of oil. That
     remains a good, short-term indicator that really is reflecting the current state of investor
     sentiment. One thing’s clear; it’s a difficult time to be stock picking in a marketplace that’s so
     unsure of itself. Investors want to be buyers of stocks, but the economic data so far aren’t
     playing ball. This is why higher-yielding, large-cap stocks should continue to outperform, as
     institutional investors buy yield in order to generate some sort of return on investment.

     As odd as it may seem, the stock market’s actually been in a “consolidation” for just over 10
     years. We had a huge bull market in the 80s and 90s, culminating in the spectacular wealth
     creation of Internet stocks, followed by an equally spectacular correction after the bubble.
     Stocks recovered from the speculative excess in the technology sector, only to see the market
     completely melt down again due to the excess created by subprime mortgages. Again, the
     stock market recovered from this debacle, and it is now having to deal with the excess of
     sovereign debt. All of these events contributed to today’s weak economic growth. Somehow, it
     would seem that the stock market has just been a reflection of the structural excesses in the
     world that we live in.

     The biggest worry in global capital markets is always currencies. When currencies start to
     experience big moves, entire countries can easily swing into major recessions. Right now,
     the Japanese yen currency is trading right around its record high against the dollar. The high
     valuation of that currency is hurting the very economic recovery that the country needs after the
     recent earthquake disaster.

     Unknowingly, big currency moves can wreak havoc on individual pocketbooks. High levels of
     sovereign debt and debt ratings do matter to the marketplace and this is why investing in gold                                                                     Page 10 / 18
     seems so attractive. As we all know, everything in financial markets involves risk. The key to
     outperformance is to always be aware of it and manage it as the marketplace changes. Right
     now, the equity market is not looking very healthy at all.

     What These Food Stocks Are
     Telling Me About the Future
     No Comments

     Posted by Michael Lombardi, MBA in Stock Market Advice on August 3rd, 2011

                                           — reporting from Florence, Italy

                                           Something different for my readers today…

                                           I’m going to talk about food. But don’t worry; in the end,
                                           I’ll relate it back to the economy and the stock market, as
                                           I eventually do with all my stories.

     Okay, so I’m eating out every night here in Florence. And when I look around, I see few people
     with a bottle of wine at their table. Wine, in Italy— isn’t it cheap here?

     Yes, generally, good wine is less expensive in Italy than in America. But times are also
     difficult, very difficult, in Europe.

     It’s common to see a family of four people at a decent Italian restaurant having salads and
     sharing (yes, sharing) a bottle of water and a pizza. And in Rome, fast food restaurants are
     becoming more and more common.

     Europeans are suffering, economically. Unemployment is sky-high in most countries. Wages
     are low. Austerity measures have hit the pockets of citizens. For a young couple to get married
     and move out of their parents’ home is not common. What is common is getting married and
     living with the parents or in-laws.

     And that got me thinking about back home, in America.

     McDonald’s Corporation (NYSE/MCD) last week reported a whopping profit of $1.41 billion in
     the second quarter of 2011—well above analyst expectations.

     And McDonald’s stock price chart, it looks like a straight line up since the beginning of 2009.
     (Stock market advice: I’d buy the stock; but, at 18.4 times earnings, it’s too rich for me. The
     easy money has been made on this stock.)

     Now let’s look at Morton’s Restaurant Group, Inc. (NYSE/MRT), the world’s largest operator of
     company-owned upscale steakhouses (no, none in Italy). Morton’s has been posting some
     great earnings as of late. But the stock is in the dumps. In 2007, the stock went for $20.00.
     Today, it trades at $7.64.

     What’s going on?

     The stock market is a forecaster of future events. And right now the stock market is telling us
     that the future for consumer dining dollars will go to cheap, fast-food companies like
     McDonald’s, not fine-dining restaurants like Morton’s. In a nutshell, consumers will be cutting
     back on spending.

     The price action of the dining stocks is in line with my belief that we will experience difficult
     economic times ahead in America. The way people live in Europe, their lack of income and
     their decaying standard of life could travel to America  quicker than most consumers care to 

     About 44 million Americans are using some form of food stamps. It’s downright scary. And
     when you have the stock market giving companies like McDonald’s a major vote of
     confidence in the form of a booming stock price, we need to take a step back and look at what
     it forecasts for our future.

     When I walk around the streets of Italy, be it Rome, Florence or Venice, and see how the well-
     educated, middle-class people struggle, as sad as it sounds, I see America’s future. And it’s
     not pretty.

     What He Said:

     “In 2008, I believe investors will fare better invested in T-Bills as opposed to the stock market.
     I’m bearish on the general stock market for three main reasons: Borrowing money in 2008
     will be more difficult for consumers. Consumer spending in the U.S. is drying up, which will
     push down corporate profits.” Michael Lombardi in PROFIT CONFIDENTIAL, January 10,
     2008. The year 2008 ended up being one of the worst years for the stock market since the
     1930s.                                                           Page 11 / 18
     Trading Action Repeating Itself—What
     the Stock Market’s Setting Itself up for
     No Comments

     Posted by Mitchell Clark, B.Comm. in corporate earnings, gold stocks, price of gold, price of
     silver, S&P 500, silver stocks, stock market on July 29th, 2011

                                          While the price of gold and price of silver continue to be
                                          very strong, a lot of gold stocks and silver stocks have
                                          been pulling back in price. It’s a reflection of the current
                                          state of things, with investor sentiment seemingly stuck in
                                          a rut. We’re in a market with so much uncertainty that any
                                          call is valid and all outcomes are plausible. The stock
                                          market could completely fall apart, stay the same, or
                                          advance. A market malaise has set in and it’s almost
                                          entirely due to the sovereign debt situation.

     Just last week, stocks were looking set for a decent run, as corporate earnings mostly
     impressed the Street. That rally fizzled pretty quickly and now the S&P 500 Index is back down
     at the 1,300 level, which I view as problematic in terms of the market’s overall health. What’s
     happening is that investors are beginning to ignore good news and event-driven trades don’t
     seem to have any legs. It’s a strong signal that the market is tired and very unsure of itself.

     With this backdrop, there certainly is no rush to take action on the long side. Even if the
     sovereign debt issue were to be settled right now and the market were to make a big
     advance, there’s just as much probability that it would pull back a month from now on
     lackluster economic news. The equity market sure isn’t making it easy for traders.

     The S&P 500 Index has basically been trading range-bound since the beginning of the year
     with declining volume. Oddly, it’s following a very similar trading pattern to the beginning of
     last year where stocks advanced and then didn’t do anything for about 10 months before
     breaking out. We could be in for a similar scenario this year where stocks might not
     experience any material rally until sometime in the fourth quarter. That is my current figuring.

     While corporate earnings are strong, economic data are not. Last year—and so far this year—
     the stock market was held together by good corporate earnings, as investors were willing to
     wait for the economy to recover. The pace of that recovery is most certainly unclear and the
     marketplace is growing impatient. Couple this with all the problems associated with country
     debt and deficits, and you could easily make the case for an S&P below 1,300.

     I think we’re going to get continued range-bound trading for the next several months with the
     potential for an end-of-year rally based on the expectation for good fourth-quarter numbers.
     Corporations are doing their part; now it’s time for the economy and policymakers to do

     Stock Market: What’s Really Going on Now
     No Comments

     Posted by Michael Lombardi, MBA in bear market rally, debt ceiling, John Boehner, stock
     market, Stock Market Advice, stock prices, U.S. economy on July 28th, 2011

                                          What a day for the market yesterday. Wherever we looked,
                                          we saw a sea of deep red. Stocks got chopped. Gold was
                                          down. Bonds were down.

                                          My dear reader, you’ll read opinions here in PROFIT
                                          CONFIDENTIAL that you will not read elsewhere. (Maybe
                                          that’s why 30,000 people a month are flocking to us!)

                                          Here’s the bottom line as I see it…

                                          Some investors, big investors, made a killing in the
                                          markets yesterday. Why not? Why not play on investor
                                          fears, use the “debt ceiling” scapegoat to send the
                                          markets steeply lower…but let me get my shorts in place

     In reality, increasing the debt ceiling does more harm to the American economy than good.
     The higher the debt ceiling, the bigger the “carte blanche” we are giving Washington to spend
     money it doesn’t have…a concept that is bad for the economy, but great for Wall Street.

     Speaking of Wall Street, it’s giving a strong message to President Obama, John Boehner,
     and Ben Bernanke. Wall Street’s message is this: Keep the government on a spending
     binge, keep Bernanke increasing the money supply, or else we’ll huff, puff and take this stock
     market down!                                                          Page 12 / 18
     Let’s use common sense. Wall Street makes its money by selling its wares. Investors are not
     going to be buying stock, especially new issues, with the stock market nose-diving. The big
     banks, which own most of the big brokerages, know the game.

     Going back to that bear market rally I’ve been writing about since March of 2009—it’s not over
     yet. No, it still has life left in it. Wall Street wants higher stock prices, the bear wants higher
     stock prices, and all in an effort to lure investors back to the market.

     I’m sure this morning that we have many people in the Obama Administration and Boehner’s
     Congress saying, “Wow, the Dow Jones got hammered 200 points yesterday. We need to get
     this debt ceiling lifted.” That’s exactly what Wall Street wants. It’s exactly what the bear market

     The debt ceiling, my dear reader, will eventually get increased Stocks will boom again on the
     news. But the rejoicing will be very short in nature. The bear…it has more unpleasant, long-
     term plans for stock prices. That’s my stock market advice for the day.

     Michael’s Personal Notes:

     Cracks in theU.S.economy are starting to show almost daily now…

     Yesterday morning, the U.S. Commerce Department reported that orders for durable orders
     tumbled an unexpected 2.1% in June. Analysts had been expecting an increase.

     Durable goods are classified as goods meant to last at least three years. Demand for
     business equipment, machines and computers are dropping.

     Consumers are pulling back on spending. Fears about the debt ceiling, a stubborn
     unemployment rate, a depressed housing market, and even European concerns—these are
     all concerns weighing on the shoulders of American consumers.

     And as consumers tighten their wallets again, business will reduce capital spending…a
     perfect scene for the recession’s Act II.

     By yesterday afternoon, the Federal Reserve confirmed our fears about the economy when it
     reported that growth has slowed in eight of the 12 regions the Fed follows.

     What He Said:

     “Even the most novice investor can now read the chart of the Dow Jones U.S. Home
     Construction Index and see that it is trading at its lowest level in five years. If, like me, you
     believe that stocks are on indication of what lies ahead, this important index is telling us
     housing prices are headed to 2002 levels! What would that do to the economy? Such an
     event would devastate the U.S.” Michael Lombardi in PROFIT CONFIDENTIAL, December 4,
     2007. That devastation started happening the first quarter of 2008.

     Gold: The Only Sector with
     Improving Fundamentals
     No Comments

     Posted by Mitchell Clark, B.Comm. in corporate earnings, gold investment, gold mining, gold
     mining shares, investing in gold, large-cap stocks, micro cap stocks, spot price of gold, stock
     market on July 28th, 2011

                                           The stock market is facing some strong headwinds over
                                           the short term and all the wrangling is a real shame
                                           considering that we’re still getting great earnings results
                                           from large-caps. It’s no wonder the spot price of gold
                                           keeps ticking higher; there’s nothing else for investors to
                                           rally around.

                                          I still view the current environment positively, but financial
                                          markets do not like uncertainty and all these issues
                                          regarding debt ceilings and sovereign debt inEuropeare
                                          wreaking havoc on confidence. In my view, corporate
                                          earnings are strong enough to support an S&P 500 Index
     of 1,500 by the end of the year. A number of analysts and institutional investors feel similarly,
     but there isn’t much buying of equities because of the uncertainty about sovereign debt.

     Investing in gold is becoming a more viable strategy and, for most investors, the sector could
     represent a larger part of their portfolios. I’m not usually a fan of buying high with the goal of
     trying to sell higher; but, in this case, with all the global fundamentals we have going on right
     now, gold investments are the best play.

     The gold sector of the stock market is ideal for speculators and, because there’s little growth
     to be had in the rest of the market, liquidity is great and it’s on the rise. This makes for more
     trading opportunities and more pronounced moves in share prices when there’s news. For                                                            Page 13 / 18
     event-driven traders, I would focus a large part of my attention on gold mining shares going

     There are a lot of micro-cap stocks in the gold sector, but less mid-cap and even fewer large
     gold mining companies. Quite simply, a gold exchange-traded fund (ETF) is an easy way to
     take on a position.

     With the spot price of gold at record levels, the gold mining business is a highly profitable
     business model. There are all kinds of small, junior gold producers that are making money
     hand over fist with gold over $1,200 an ounce. Most of the established, producing junior
     miners have tons of cash in the bank, so future exploration and development are virtually

     All opportunities in the stock market occur in waves of enthusiasm. Right now, there’s not a
     lot to be enthusiastic about. But, the one sector that stands out as the most attractive in my
     view is precious metals; gold, in particular. There just isn’t the growth in the rest of the
     economy and, frankly, investors aren’t willing to buy it even if they see it.

     U.S. Debt Ceiling: The Least
     of Our Real Problems?
     No Comments

     Posted by Michael Lombardi, MBA in bear market, economic analysis, financial news, gold
     prices, inflation, national debt, stock market, Stock Market Advice, U.S. debt ceiling, U.S.
     dollar, U.S. economy on July 27th, 2011

                                           As I read the financial newspapers and the popular
                                           Internet sites this morning, I realize that if there is one
                                           thing I hope I achieve in my own daily writings, it is to
                                           make my readers wary, almost suspicious of what the
                                           media is telling them.

                                           Here’s what got me thinking like this…

     Yesterday, the U.S. dollar hit a fresh, new three-year low against a basket of six other major
     world currencies. The media was quick to point to the bickering amongst the Democrats and
     the Republicans (over raising the U.S.debt ceiling) as the reason the dollar was falling to a
     new record low. Wherever I looked this morning, the news sites were basically saying,
     “Washington can’t agree on increasing the debt ceiling, the deadline is closing in, and the
     dollar is falling because of all this concern.”

     But that’s where reporters have it very wrong, as far as I’m concerned.

     Let’s take the debt ceiling issue off the table for a moment and let’s assume Washington
     passed a new debt ceiling limit of $16.0 trillion or $17.0 trillion. Would the greenback still be
     falling off the cliff in value? Of course it would.

     We are passing a law that says the government can borrow even more money. The greater
     the debt of a nation, the weaker its currency. We are actually better off if the government
     doesn’t pass a new debt ceiling and it starts spending within its means.

     I don’t want my readers to buy the propaganda the media spits out. At the very least, I want my
     readers to be aware of the fact that most people reporting the financial news today know very
     little about finances or economic analysis.

     The following are my five core beliefs. I hope my PROFIT CONFIDENTIAL family of readers
     will benefit from them.

     The devaluation of the U.S. dollar that started in late 2008, early 2009, will continue as: (1) the
     U.S.economy deteriorates further; (2) the national debt level continues to rise; and (3) the Fed
     prints more money.

     Inflation will become a real problem in America thanks to years of monetary policy that
     promoted artificially low short-term interest rates and the hyper-printing of U.S. dollars.

     Gold prices will rise on the back of a weak greenback and too many dollars in the system and
     as inflation comes back.

     The euro is as done as the dollar. Either Germanywill eventually kick the weaker countries out
     of the euro or it will adopt its own currency.

     The stock market will eventually test its March 9, 2009, lows, as Phase III of the bear market
     sets in.

     Where the Market Stands; Where it’s Headed:

     The next couple of days will bring the close of July 2011. And with another month behind us,
     the bear market rally in stocks that started in March of 2009 will have lasted 29 months. A                                                            Page 14 / 18
     tremendous feat? Not really. As I have written before, the 1934 to 1937 bear market rally
     lasted 35 months.

     I remain steadfast in my opinion. We are in phase II of a bear market. During this phase, the
     bear brings stocks higher in an effort to lure investors back into them. The easy money in this
     bear market rally has been made. But there still is upside potential for stocks, albeit it’s

     While the media is obsessed with theU.S.debt ceiling limit, the Dow Jones could easily
     continue to ride the “wall of worry” higher.

     What He Said:

     “The Dow Jones Industrial Average, the S&P 500 and the other major stock market indices
     finished yesterday with the best two-day showing since 2002. I’m looking at the market rally of
     the past two days as a classic stock market bear trap. As the economy gets closer to
     contraction, 2008 will likely be a most challenging economic year for Americans.” Michael
     Lombardi in PROFIT CONFIDENTIAL, November 29, 2007. The Dow Jones Industrial
     peaked at 14,279 in October 2007. A “sucker’s rally” developed in November 2007, which
     Michael quickly classified as a bear trap for his readers. By mid-November 2008, the Dow
     Jones Industrial Average was at 8,726.

     Record Results & Good Visibility for
     Railroad Companies, But Nobody’s
     Buying the Success
     No Comments

     Posted by Mitchell Clark, B.Comm. in blue chips, Dow Jones, earnings reports, railroad
     companies, railroad stocks, stock market, stock picking, technical trend on July 27th, 2011

                                          The railroad companies have confirmed that the industrial
                                          economy is on track for a solid second half. They are
                                          buying more equipment to deal with increasing load
                                          factors and most are planning to hire new workers to keep
                                          up with rising demand for their transportation services.
                                          This is a very good indicator for the future.

                                        One of the big companies, CSX Corporation (NYSE/CSX),
     reported record second-quarter results with earnings coming in at $506 million, or $0.46 per
     share, compared to $414 million, or $0.36 per share, in the second quarter of 2010. This was
     a 28% gain in an environment of rising costs for raw materials. Company revenues grew 13%
     to $3.0 billion and management cited increased business activity in all major markets,
     including merchandise, intermodal and coal. Revenues were driven by volume growth and
     higher prices, which offset increased fuel prices.

     If you read the earnings reports of all the major railroad companies (which I highly
     recommend), you’ll notice that they are all saying the same thing.China’s appetite for coal is a
     major contributor to business growth in rail transportation. Growth in utility demand at
     domestic power plants is lackluster, but sending coal to Asiais a new bulkhead business
     that’s keeping the industry solidly profitable.

     Yet, for all the success that’s on the books, the stock market doesn’t seem to be celebrating
     the good earnings (and visibility). It’s as if the market is just plain grumpy and unsure of itself.
     The Dow Jones Transportation Average isn’t really saying anything with its recent
     performance. The Index is trading at the same level it was in April and May. It bounces
     around, of course, but there’s no technical trend that jumps out at you.

     I suppose the stock market reflects the mood of the economy. Some parts are doing okay,
     while others struggle. Stock picking in this kind of environment is much more difficult,
     because there is no wind at your back. It is a very good sign that the railroad companies are
     saying that things are good and they are shipping more coal and chemicals. Following this
     specific industry is an excellent way to get a feel for the industrial economy and to develop
     your market view.

     My feeling is that we’re going to be stuck in a period of mediocrity for several more years as
     the whole of the economy continues to balance itself out after a major period of excess and
     correction. The stock market should reflect this mediocrity and continue with its trendless
     price moves. This is why I like higher-dividend-paying blue-chips and some gold on the side
     for protection. Not much else is paying in this market.

     The Stock Market’s New Best
     Friend—Buffett Will Be Pleased
     No Comments                                                             Page 15 / 18
     Posted by Mitchell Clark, B.Comm. in age of austerity, dividend payments, large cap
     companies, large-cap stocks, Schlumberger, second-quarter earnings season, stock market,
     Stock Market Advice, Union Pacific on July 25th, 2011

                                         In the age of austerity, it’s workers who are going to get
                                         squeezed. How else are so many large companies
                                         reporting excellent earnings? While everyone would like
                                         the economy to be at or near full employment, I think the
                                         stock market is now settling into the reality of a sustained
                                         higher jobless rate. At least right now, big companies
                                         would rather return excess cash back to shareholders in
                                         the form of dividends, as opposed to investing in new
                                         plant, equipment and workers.

                                        Not every big company is doing well right now, but a lot
     are. The “Windows” sales of Microsoft Corporation (NASDAQ/MSFT) were a little soft, but
     guess what? It’s a very mature business and not everybody wants to upgrade their PCs right
     away. Consumers would rather invest in smartphones.

     But if the retail technology sector is a little slow, the oil services business is booming.
     Schlumberger Limited (NYSE/SLB), which is essentially an enormous technology company
     serving the oil and gas industry, just announced a 64% increase in second-quarter profits
     and a 62% increase in revenues. Then there’s the railroad company Union Pacific
     Corporation (NYSE/UNP), which reported record second-quarter earnings of $785 million, up
     13.6% on a per-share basis from last year (which is really good considering how mature the
     railroad industry is). The company reported that five of its six business groups showed good
     volume growth, with improvement in shipments of agricultural products and chemicals.
     Quarterly operating revenues grew 16% to $4.9 billion and management expects a solid
     second half.

     One thing I’ve noticed is that the cash hoards of large corporations continue to grow and this
     is a good sign that dividend payments to stockholders will be on the rise over the coming
     quarters. In fact, I argue that the current environment is a very good time to be considering
     new positions in large-cap, dividend-paying securities. We do have the sovereign debt issue
     hanging over global capital markets. This is an investment risk that’s very serious and isn’t
     going away. But investors, especially institutional investors, have to put their money
     somewhere and, as we’ve seen recently, it’s going to go into big companies paying big

     What this trend points to in my view is the continued success of those stocks that are already
     trading around their price highs. The momentum in this market is with large-caps that have
     previously gone up. This means that it’s more likely that a stock like International Business
     Machines Corporation (NYSE/IBM) will appreciate another 20% from its current price high of
     $185.00 per share than buying a value play and hoping for a 20% recovery.

     This is the market we’re in. Good old-fashioned blue-chip investing with a dollop of
     speculation in commodities should be a decent strategy for the next several years. Dividends
     are now the stock market’s new best friend.

     New Record Highs on the Stock
     Market—Who’s Hitting Them?
     No Comments

     Posted by Mitchell Clark, B.Comm. in corporate earnings, economic recovery, large-cap
     stocks, record highs, share prices, sovereign debt, stock market on July 22nd, 2011

                                         It would be so wonderful if the sovereign debt crisis in
                                         Europe was not at hand. It never pays to live in a fantasy
                                         world, but corporate earnings are coming in so good that
                                         the market would be a lot higher if we didn’t have to worry
                                         about country debt.

                                            According to a report by Bloomberg, of the 98 S&P 500
                                            companies that have reported earnings since July 11,
                                            about 85% have exceeded analyst estimates. That’s a big
     deal and it’s a testament to the jobless economic recovery we seem to be experiencing. A
     lower dollar certainly is a big help to domestic corporate earnings and so are faster growing
     economies in emerging markets. That’s the real power of American large-cap multinationals;
     they have a strong ability to translate international operations into profits at home.

     If you feel a certain stock market malaise right now, you have a lot of company. Investor
     sentiment is positive, but only slightly so. Everyone is worried about the future with the
     exception of large corporations. When subprime mortgages caused the recession, big
     companies were shaken by the enormous erosion of their share prices. It really seemed that
     the sky was falling. After the stock market reckoning, the recession really did cause
     management at big companies to fundamentally change their view of the world. The age of
     austerity took over as the new management credo and, subsequently, already-lean
     enterprises honed their expenses to the max. Now we’re seeing the effort of all that austerity                                                         Page 16 / 18
     in earnings results that are just plain excellent in relation to Gross Domestic Product (GDP)

     All kinds of large-cap companies are hitting record and new 52-weeks highs on the stock
     market right now. Baxter International Inc. (NYSE/BAX) just reported very good financial results
     that beat consensus and the company increased its guidance for the year. The stock is
     trading right at a new 52-high and doesn’t look expensive. Colgate-Palmolive Company
     (NYSE/CL) just hit a new record price on the stock market. This company hasn’t reported yet,
     but the shares don’t look pricey, and the current yield on the stock is 2.6%. Then there’s
     International Business Machines Corporation (NYSE/IBM), which reported strong second-
     quarter results based on its services business. This stock is trading at a new all-time high of
     $185.00 per share and is up a solid 50% since the beginning of September.

     When a company like Bloomberg does a survey saying that 85% of S&P 500 companies have
     so far beaten consensus estimates, I believe it. There is a lot of corporate strength out there,
     but not retail strength. The trickledown effect will take much longer to pan out.

     There’s no real momentum in the stock market, but earnings are on the right track. I see the
     broader market ticking higher over the near term unless the sovereign debt issue messes
     with confidence.

     A Stock Market That Just
     Wants to Move Higher
     No Comments

     Posted by Michael Lombardi, MBA in bear market rally, Dow Jones, economic news, stock
     prices, U.S. dollar on July 22nd, 2011

                                            Throw bad news at this stock market…it doesn’t
                                            matter…the assault on Dow Jones 13,000 continues its
                                            move ahead.

                                            Yesterday was another big upside day for stocks despite
                                            a series of what I believe were negative economic news

                                            Bloomberg ran a story saying that a deficit-reduction
                                            plan gaining acceptance amongst members of the U.S.
                                            Senate would result in the end of preferred tax treatment
                                            of capital gains and dividends. This type of news would
                                            usually rattle stocks.

                                           The Conference Board reported that its U.S. leading
                                           indicators rose in June at a pace of 60% below May. The
     Labor Department said that initial jobless claims rose by 10,000 in its latest reading. All
     negative economic news—that’s becoming the usual backdrop to rising stock prices.

     Finally, the Atlantis ended the U.S. space shuttle’s 30-year history Wednesday. Where will the
     9,000 people who worked for NASA get jobs now? House prices in Titusville, the closest town
     to Kennedy Space Centre, have already fallen 47% in five years (Source: Federal Housing
     Finance Agency).

     In spite of how poor the economic news was yesterday, the stock market had only one
     mandate and that was to move higher. And this is exactly how bear market rallies work: bring
     stock prices higher, lure investors back into the stock market, and give them the false hope
     that all is well with the economy.

     My prediction is that, by the time this bear market is over, a great number of investors will have
     been lured back into the stock market. As quickly as the bear brought stock prices up, it will
     bring them back down.

     Sure, it’s very enjoyable to see the Dow Jones jumping 100 or 200 points in a day to the
     upside. But when we see drops of 100 to 200 on the downside, it gets very painful, as most
     investors play the upside of stocks, not the downside (short selling).

     As I have been saying, enjoy the rally while it lasts, as this bear market rally’s life span is

     Where the Market Stands; Where it’s Headed:

     There’s not much I can say that I haven’t said above. We are in a bear market rally in stocks
     that started in March of 2009. The rally, although long and tired now, will likely take stocks
     past Dow Jones 13,000.

     In the immediate term, the dual forces of a government willing to go further in debt to spur the
     economy and a Federal Reserve ready to expand the money supply are overwhelming strong
     forces for the stock market.                                                           Page 17 / 18
     The ramifications of a devaluation of the U.S. dollar, spiraling U.S.national debt, rising long-
     term interest rates, rapid inflation—the bear market will have us dealing with them on a date
     soon to be announced.

     What He Said:

     “Starting two years ago, I was writing how the housing boom would go bust and cause the
     U.S. economy to suffer sharply. That’s exactly what is happening today. From what I see
     happening in the U.S. economy, I’m keeping with the prediction I made earlier this year: By
     late 2007/early 2008, the U.S. will be in a homemade recession. Hence, I expect housing
     prices to continue declining, soft auto sales, soft consumer spending and a lower stock
     market.” Michael Lombardi in PROFIT CONFIDENTIAL, August 15, 2007. You would have
     been hard-pressed to find another analyst predicting a U.S. recession in the summer of
     2007. At the time, the stock market was roaring, with the Dow Jones Industrial Average hitting
     its all-time high of 14,164 in October of 2007.

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