Much for the Rate Cuts!
Shortly after the Federal Reserve began cutting short-term interest rates in September 2007, I told our readers that the Fed's attempt to stimulate the economy by lowering rates wouldn't work.
In fact, I wrote an article on Oct. 25, 2007 entitled "Checkmate — Fed & Treasury are Cornered," in which I stated that the Fed was between a rock and a hard place — in short, that any interest rate move by the Fed would likely have negative economic and financial consequences.
My forecast seems to have been largely correct, as the U.S. economy has weakened over the past five months while inflationary pressures have mounted. And, contrary to the comments made by many of the so-called Wall Street experts, stock prices have trended lower.
I've also warned our readers over the past several months that the Wall Street cheerleaders —investment-banking and mutual fund portfolio managers — would continue in their efforts to persuade individual investors to add new money to their stock portfolios in spite of the fact that a preponderance of financial data clearly indicated that stock prices would likely continue to fall.
In fact, I told our readers that those "experts" would repeatedly use typical Wall Street phrases such as "the economy is in good shape," "stocks are cheap," and individuals should "invest for the long-term."
Finally, I warned our readers a little over a month ago that most of these cheerleaders would soon capitulate, admitting that the U.S. economy will likely grow at an anemic rate, at best, over the next couple of quarters.
Well, guess what! Many of those same "experts" are now heading for the gates. They're exiting the equity markets in herds and putting their money in cash-like securities, such as money market funds.
So, what's next? My experience suggests that rather than following the herd, investors should now begin to look for longer-term investment opportunities.
My models indicate that there are numerous stocks (and exchange-traded funds) that will likely perform strongly during the second half of this year, and that those very stocks and ETFs can now be purchased at bargain prices.
Rest assured that you're unlikely to hear about those opportunities from Wall Street.
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