Michael Lombardi’s Prediction of Critical Warning Number Six

In the present scenario, the American economy is having its way over thin ice and insecurity is at its every step. Some disagree and say that American economy is benefiting and recovering but this doesn’t seem to be true as there is no such sign as neither the employment rate has increased nor the rate of profit. US housing sector is going through a desolation phase and new sales have to agree with the present low rate since 1963. It is assumed that the prices of housing will continue to be low in coming days too.

US are still experiencing unemployment of 15%. The American banks are not showing any better results. The banks are getting affected by the debt crisis prevailing in Europe by $1 trillion. These facts indicate another recession befalling in the United States. As per estimation, budget deficit in US is expected to be $1.3 trillion. The official national debt is also predicted to reach $20 trillion excluding some off balance sheet items like Medicare, old age security, etc. the US national debt is considered to be about $100 trillion. Politicians have added trillions of dollars to government spending since the year 2008 as they believed that the present economic problems would be fixed. However, the problem may be more severe as the national debt may become about 150% of the GDP. The condition was similar to that during the World War II. The credit rating of USA has been downgraded.

The US rates of interests were lowered in the year 2004. As a result it leads to good amount of borrowing and investing of the same in the real state. This led to inflation in the country. The price of gold has escalated almost 500%. An expectation of a high rate of inflation in near future might be possible. The second session of recession that is expected to come may lead to even more worse condition in comparison to the 2007-08 economic instability and the great depression of the year 1929. During those years, the Wall Street led to a sudden crash and brought severe effects word wide. Poverty and high unemployment were some of the outcomes of the fall in the economy. The economic condition of the country was not expected to get good in future and therefore. The consumer debt amount increased and the burden on the US economy also increased. The companies that worked in sectors like shipping, mining, construction, agriculture, automobiles and other appliances were very badly hit by the downfall of the economy. This condition went on worsening till the year of 1933. Many of the businesses were closed and the banks went in deep loss. The incomes that came from farms became almost half in 1929. By the year 1933, a huge mass of people got under unemployment.

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The value of the stock dropped to about one fifth of the value it had in 1929. The rate of unemployment continued till the year 1937. There is confusion in people that will the country come out of this recession soon and if it comes out, will the country be in a state to withstand another recession. This is a big question as it may almost shatter the country vigorously and stretch it towards the grave. Since last three years, the Federal Reserve was trying to display that the condition of the American economy is good and it is not experiencing any problem. If this display was not provided to the common men, US would not have been called as a bankrupt country. The interest rates have been already lowered to zero and now it cannot be lowered more. The money printing by the Fed is going to pump in more air in the balloon of inflation. This may lead to a very hapless economy.

Critical Warning Number Six

The future of the US economy is something to be well thought of. The US national debt has increased by about $5 trillion since Obama became the president. This was the condition after 4 years of presidential rule of Obama. The size of the balance sheet of the Federal Reserve was increased by $2 trillion. The value of the US dollar has been getting lower since then. About 70% of the world central banks have US dollar as their official reserve currency. The financial imbalance in Europe has made the investors to push themselves back from euro and the dollars are still considered better by them today. However, the inflation and the debt show a possibility of further lowering of the dollars. This all is to take place just because of the US Federal Reserve’s trick of printing more and more money. The time is not far when the foreigners may let go the US dollar and look ahead for some more reliable currency.

The price of gold is rising continuously and this may lead to an increase in the demand of the gold mining stocks. The price of the gold bullions may come across ups and downs but at the end of the year, it always starts at a higher price. This trend has been followed by gold since last eleven years and so is considered to follow it for the rest of the years too. When the Federal Reserve continues to print money and the value of dollar drops, the prices of gold are expected to go on rising. On the other hand, the crisis of the euro zone also continues and thus has been weakened. This has led to the weakening of the euro against the US dollar.

In the present scenario of the stock market, the bear market rally in stocks is expected to lose its set-direction and may reach to the March 2009 lower figure. This condition would for sure bring down the Dow Jones to about 52% from its present state. During the phase I of the bear market, the stock prices experienced a sudden fall. The Dow Jones Industrial Average got shattered down to about 54% and reached to 6,440 from the previous value of 14,164. In the Phase II of the bear market condition, the bear may ensnare the investors back to the stocks, thus giving them a false view of security. The market may look as in stability and good for any investments but this is just a false belief that you are provided with. As an effect of the bear, Dow Jones scrambled up above 12,000. Making a comparison of the condition during 1934 to 1937, Phase III is expected to come in few months and may finally bring the stock prices below their March 2009 lows.

At present you are in the above discussed state. Michael Lombardi has these views regarding the economy of United States at present and in future. Michael writes for Profit Confidential. To bring front some facts about him some past predictions of him are mentioned below form which “all” of them came to be true. Following were those predictions:

  1. He advised to invest in gold in 2002.
  2. He advised to get out of housing market.
  3. He predicted the recession of late 2007.
  4. He advised to get out of stocks in the fall of 2008; and
  5. He advised to get back into stocks in the March of 2009.

His readers have always benefited from the priceless advice that he has been providing and now he comes up with a prediction of the sixth major event that bears the title:

Critical Warning Number Six

If you have query regarding what should be your approach considering the present situation and what should an investor and consumer must do to make them stay protected from the fast approaching economic upheaval. What should be your portfolio so that you can gain more out of the present situation by utilizing your portfolio and your new view? Get answers for all the queries that you have in your mind from our Michael and make a profitable investment. Michael gives you suggestions so that the stocks you invest in goes up even when the market goes down. The suggestions by Michael Lombardi will help you to

  • Look through the declining value of the US dollar
  • Pay no attention to the collapse of euro
  • Disregard the price fluctuation and rise in the price of gold
  • Smile even in the speculative stock market condition
  • Go brave even through the inflated economy
  • Be in profit even in adverse conditions

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Critical Warning Radio

Critical Warning Radio: The U.S. is getting submerged in the ocean of its national debt, which is presently knocking on the $16.65 trillion figure. This is indeed a serious cause for concern and there is an urgent need for the citizens of the country to sit up and take due notice. After all, it is their money; their future and their families as well, that are at stake! Michael Lombardi, author of Profit Confidential has alerted the nation in the past and a majority of his readers, having taken due cognizance of his five major economic predictions have benefitted from his befitting words of caution, which have become famous as “Critical Warnings”. Having been hailed as one of the most successful economic predictors of the world today, Michael Lombardi has come up with his important “Sixth Prophesy,” which, he strongly feels, should reach each and every individual in the country, so that he/she can get an inkling of what the future has in store for the U.S. They should understand the enormity of the repercussions that the rounds of quantitative easing will lead to; of how the national debt will keep on mounting; of how jobs -cuts will be on the rise; of how this will contribute to the increasing rate of unemployment and lastly, how inflation will stay put for an infinitely long time! These are only some of the major crucial issues that are plaguing the U.S. It is imperative that people who wish to fend for themselves in such testing times heed in advance to his “Critical Warning Six,” presented in the video-mode, as an informative write-up and also broadcast on the radio.

Gold and Silver Gain With Dollar While Stocks and Oil Fall

Close

Gain/Loss

Gold

$1576.90

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+$12.30

Silver

$28.68

+$0.15

XAU

137.04

+1.84%

HUI

361.32

+1.40%

GDM

1059.19

+1.64%

JSE Gold

1935.19

-72.06

USD

81.38

+0.32

Euro

131.89

-0.96

Yen

107.46

+0.56

Oil

$92.84

-$2.38

10-Year

1.976%

-0.045

T-Bond

143.8125

+0.71875

Dow

13880.62

-0.34%

Nasdaq

3131.49

-1.04%

S&P

1502.42

-0.63%


The Metals:

Gold climbed up to $1584.70 by about 11AM EST before it fell back off in the last five hours of trade, but it still ended with a gain of 0.79%. Silver surged to as high as $28.88 and ended with a gain of 0.53%.

Euro gold climbed back to €1196, platinum lost $32.50 to $1613, and copper fell four cents to about $3.56.

Gold and silver equities rose over 2% by midmorning before they fell back off a bit in afternoon trade, but they still ended with about 1.5% gains.

The Economy:

Report

For

Reading

Expected

Previous

Initial Claims

2/16

362K

358K

342K

CPI

Jan

0.0%

0.1%

0.0%

Core CPI

Jan

0.3%

0.2%

0.1%

Existing Home Sales

Jan

4.92M

4.94M

4.90M

Philadelphia Fed

Feb

-12.5

1.5

-5.8

Leading Indicators

Jan

0.2%

0.3%

0.5%

There are no major economic reports due out tomorrow.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil remained lower after the Energy Information Administration reported that crude inventories rose 4.1 million barrels, gasoline inventories fell 2.9 million barrels, and distillates fell 2.3 million barrels.

The U.S. dollar index rose as the euro fell on a report that showed services and manufacturing in the region shrank at a faster pace in February than economists forecast.

Treasuries found decent gains as the Dow, Nasdaq, and S&P dropped on poor economic data.

Among the big names making news in the market today were Hormel, Hewlett-Packard, and Carlyle.

The Commentary:

Yesterday’s downside reversal in the S&P 500, coming on the heels of the FOMC minutes, combined with a cornucopia of Central Bankers taking to the microphones today, seems to have FINALLY jolted the complacency of the Equity Perma Bulls. The Complacency Index, my name for the Volatility Index or VIX, has jumped quite sharply as signs are beginning to emerge that yesterday’s FOMC minutes have rattled those who have somehow been hypnotized into believing that Central Banks have a magic can filled with magic beans that magically make all problems go away into never, never land, never to be seen again except in the dark recesses of our imaginations.

Here is a look at the chart that has gotten the technicians extremely concerned….

The extent of the stock market rally that we have witnessed since the beginning of this year alone is proof in my mind that investors can be herded into unthinking behavior faster than the word, “oligoply” can roll off the tongue.

Let’s be honest here, the entirety of the stock market rally has been fueled by hot money courtesy of the Federal Reserve’s Electronic Printing Press. It began with it back in 2008 with QE1 and has continued ever since then. Yes I know some point to corporate profits and signs of improving growth but does anyone out there genuinely believe that this economy can withstand higher interest rates? If the growth is so solid and the path to recovery is so entrenched then why is the Fed still continuing to conjure $85 BILLION each month that it might have it injected into the economy. Come on already….

The current fiasco involving the so-called “sequestration” in Washington DC has served to remind the saner among us that the US government is on a path that can only be termed “madness”. The projected deficit for this fiscal year is over $ONE TRILLION. In a deficit of this magnitude, talk of even slowing the rate of spending increases (Washington DC speak for a cut) has brought out all manner of apocalyptic doom scenarios. What idiocy is it that grips the mind of these people? They are intent on bankrupting the nation. Historians paint a picture of the Roman emperor Nero supposedly fiddling while ROME BURNED. The current crop of leaders has certainly nothing on him. Matter of fact, they make Nero look downright statesman-like by comparison.

Here is the VIX CHART. Notice the sharp spike higher. Keep in mind that the only reason it had spiked higher in late December of last year was over fears involving the now infamous “fiscal cliff”.

Gold finally had some upside movement off its worst levels as it is seeing a bit of a reprieve from the nearly nonstop selling that has hit it since it took out support at $1640 last week. My buddy John Brimelow’s excellent “Gold Jottings” reports very good premiums being paid for Gold by Indian buyers overnight. Demand was strong in Asia for the physical metal.

While the bounce is welcome, it does not look particularly impressive at this point. I suspect that there are more guys looking to sell rallies right now as they were caught long in gold and did not get out during the initial break towards psychological support near $1550. As I stated in yesterday’s missive, gold needs to get back above $1640 to spook any of the shorts except for the most weak of hands. A move through $1620 will get some of them nervous enough to be ready to exit but the sentiment seems to be to wait around to see if the rallies have any staying power before exiting.

Something worth noting here, the Yen had a sharp rally, lots of short covering, as it and the US Dollar still remain safe haven currencies for some unfathomable reason. That implies a sharply weaker Euro and that is exactly what we saw today so far. The Euro got kicked in the groin by risk aversion trade tied to losses in the stock markets. Heck, the long bond finally showed some signs of buying although considering the extent of the jump in the VIX, for it to have trouble holding onto gains above a full point, tells me that there are still an awful lot of guys who want no part of bonds. Perhaps the thinking is if the Fed is going to throttle back on the bond buying program, there is no particularly compelling reason to lock in yields at such ridiculously low levels.

Let’s just close today’s thoughts with this… for the better part of nearly two months we have seen a near consensus among traders/investors that the Fed policy, in combination with the ECB, the BOE and the BOJ, had guaranteed smooth sailing in stocks. That led to one way trading in equities and in some of the currencies with the return of TRENDING MARKETS. That is the environment that traders, especially hedge funds LOVE. They find it extremely difficult to trade herky, jerky markets that whipsaw them up and down. The hedge funds were happy; the Central Banks were even happier as they had successfully herded the speculators into the markets they wishes them to ply their leveraged one way bets. All was well with the world, until….

Yesterday’s FOMC minutes have now injected uncertainty back into the minds of enough traders to return us to the wild up and down, nearly unpredictable movements of yesteryear. We’ll have to watch these things very closely to see if this is the start of another new norm of more wild price swings or if we can return to the one way trades that marked the beginning of this year. Keep an eye on the Euro as it will give us some clues…. other than that, we are all trying to watch to discern what comes next. No one ever said this business was easy.- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

“First and foremost, I want to thank the “Silent Majority” of readers who wrote some very nice emails in the last 24 hours. It has help ease the pain considerably.

Speaking of pain, gold and mining shares have been badly beaten up and there’s no immediate relief in sight. The only positive is the bearishness has become overwhelming and if support can hold in the coming weeks, we should get a compelling contrarian situation not seen in years.

The line in the sand is $1,520 area. It should be heavily targeted by the overwhelming number of bears now. The sidelines remains the best place for gold buyers until the line in the sand is tested. The ultimate conservative approach remains not to be a buyer until gold can close above $1,700.

Mining and exploration stocks have been brutalized and it shall take weeks, if not months for them to repair the damage. I just can’t fathom how they do so without first seeing gold reverse its current bearish trend. I do think Rick Rule makes some very good points in this video about this sector. I do think those fortunate enough to have risk capital can begin a scale-down buying approach (you place bids from current price to lower levels).”- Peter Grandich, Grandich Letter