Blog > Featuring... > Don’t look too far forward
Share this article:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • NewsVine
  • StumbleUpon
  • Twitter

Don’t look too far forward

Today's Financial News - Posted November 16, 2009

Don't look too far forwardThe markets are up once again today as the markets look at what the future holds. We will recover, but it will not be as quickly as most predict. We need to worry about today, before we plan for tomorrow.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Normally, I warn investors that the market is too short-sighted, but these days I am worried it is expecting too much from the future. The Street needs to slow down and worry about right now.

While so many investors are laying bets on what the future will look like, some ominous signs are popping up across the data spectrum.

On one end, we have unemployment into double-digit territory and showing no signs of letting up. On the other end, we have a national currency getting pulled in every direction. And somewhere near the middle is a horrific housing market.

Let’s start with the housing market. A good look at where things stand can be obtained by peering into Lowe’s (NYSE:LOW) third-quarter figures.

The most important figure is the bottom line. The home-improvement giant made just $344 million in profits over the past three months, compared to a gain of $488 a year ago.

On the top line, Lowe’s reported a 3% decline in revenues, selling $11.38 billion in goods and services.

Dwindling numbers are something the company had better get used to.

Sure, it tells analysts it sees signs that the housing market is finally beginning to level off, but is leveling off good enough?

My answer is no.

After the last decade, the industry got used to a low-competition environment. With McMansions popping up on just about every corner, consumers had very little control over prices. But now that the nation is holding off on big purchases and searching for the ultimate best deal, Lowe’s and its competition have a fierce battle on their hands.

While this may be a microscopic look at one segment of a giant industry, it is indicative of the power a slumping home market will have on the economy. Now that the home-equity ATM has been unplugged, massive amounts of spending have vanished.

It won’t be coming back anytime soon. And that is big trouble for a so-called “V-shaped” recovery.

A sick dollar

The health of the dollar is also a major focal point and will certainly be a hurdle for any sustained recovery.

Gold prices reached into record territory once again today as the dollar weakened thanks to rhetoric out of China.

But I warn investors to watch the ratcheting effect taking place. Each time the dollar rises, gold follows. But each time the greenback strengthens, the price of an ounce of gold does not follow in kind.

Prices are unduly ratcheting higher and higher. Eventually the mechanical advantage will be lost and gold will come down significantly.

As of now, I believe it will happen sooner than later. With Obama finally focusing (at least rhetorically) on the dollar and its relative strength, the upside is significantly limited. The powers that control the greenback – the Fed, Treasury and the White House – won’t let it get much weaker than it is now, not with so many eyes watching it.

That mean the bears are likely to take control of the gold market in the not-so-distant future. While they are out of hibernation, expect them to toy with the equities market as well.

The near-term data is simply too negative to confirm the positive long-term outlook. This recovery will be years, not months.


Next Article: The future of Energy, Ethics and Green Investing

Posted by Andrew Snyder · Filed Under Featuring..., Investment Strategies 

Share this article:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • NewsVine
  • StumbleUpon
  • Twitter

 Add to Technorati Favorites | Follow Us on Twitter!

One Response to “Don’t look too far forward”

Your comments are welcome