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Global Recession 2008: How to profit as markets go mad

Posted April 21, 2008

‘George Soros just told us that the dollar is headed much lower and the Fed is likely to cut rates even further. So we’re going to see a much weaker dollar and much stronger gold.’ — Ian Cooper, editor of SC Trading Pit

Baltimore – (TFN): The following was taken from the transcript of this week’s TFN Smart Trading video featuring Ian Cooper. Watch this video.

Laura Cadden: Economists are still at least another quarter away from being able to call the current economic downturn a recession proper. But the mainstream newsmakers believe that the U.S. is already in a recession, maybe even heading toward a depression. My guest today is Ian Cooper. One of the few analysts who accurate predicted the full extent of the sub-prime mortgage crisis back in early 2007 and forecasted a climb in the Dow as well as the real estate crisis in Britain. So Ian, by definition, the beginning of a recession can only be called retrospectively. What indications do you see right now that could say for sure we’re in a recession?

Ian Cooper: Well, GDP growth may have come out at .6% but if you look at domestic segments of the economy, they actually declined at .4%. It’s the same negative trend which is also referred to as Gross Domestic Purchases that we saw in the beginning of the recessions in 2001 and in 1990 and that’s probably only going to get worse. The classic definition of recession is two negative quarters of GDP growth but we’re obviously in a recession now with unemployment numbers and the economy just flat-lining with a dip in consumer spending.

Laura Cadden: Now, the IMF just downgraded, for example, Germany’s growth for 2008-2008; how hard will a U.S. recession hit globally, do you think? And what countries in particular will truly be affected?  Whose economy really depends on U.S. consumption?

Ian Cooper: We’re gonna see declines all over the world; we already see France, Britain, China and Germany taking a hit. Germany and France are expected to show a growth of 1.4% and while Japan’s gonna show a slight growth of 1.4% — but it’s still a loss of momentum. With a growth of 1.6% in Britain, I expect it to spread. We’re gonna see this get a lot worse before it gets better.

Tired of reading? Watch the financial video.

Laura Cadden: What do you see is the down side for the Dow this year?

Ian Cooper: I’m calling for a Dow 10,000. You know, eight months ago, I was calling for Dow 12,400. It crashed under that significantly. The credit crisis is still unfolding, sub-prime is still unfolding, we’re still seeing global recession fears, we’re seeing crisis, we’re seeing banks fall apart, consumers stop spending money, foreclosures go through the roof, you name it. The Dow at 10,000 really isn’t out of the question. How we’re trading above 12,000 right now is beyond me.

Laura Cadden: Now you like to leverage market volatility. What specific sectors are you planning to tap for profits?

Ian Cooper: Right now, I’d stay away from anything credit-related. Any credit holder is going to go down even further because we’re beginning to see much higher delinquency rates, especially with credit card holders like Capital One, Discover, and American Express. You also wanna stay away from anything housing related. If you’re really gung ho and want to own a credit card company, you want a Visa or a MasterCard because they don’t issue credit. They are card processors, so they don’t worry as delinquency rates go up. Their only concern is, "Hey, how much money am I going to make per transaction?"

Laura Cadden: In your strategizing, do you prefer stocks or options?

Ian Cooper: Well, I like both but you know, options give me further leverage.

Laura Cadden: What do you recommend Smart Trading viewers should do right now?

Ian Cooper: Hold on to their seat and be prepared for a bumpy ride. As I said, you know, I’d recommend being in Visa and MasterCard because they don’t have exposure to the credit market delinquencies, I’d also be very bullish on gold right now. George Soros just told us that the dollar is headed much further lower and the Fed is likely to cut rates even further here. So we’re gonna see a much weaker dollar and much stronger gold.

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