Is The Economy Really Ok?

The GDP quarterly number came out better than estimated this morning showing a reading of 0.6% (annualized).  The estimates were for 0.5%.  Since it’s not negative, many pundits are saying “see, we’re not in a recession because the number is positive.”  Not to get to economist on you but most of that growth was based on our trade and export activity.  So, if you strip that out, the actual American economy probably isn’t growing.  But, regardless if we’re growing at -1%, +1%, 0% or any other number you can dream of, I think it doesn’t matter.  When you’re growing at 5% and then it slows to +1% or -1%, it feels like a recession.  That’s why consumer confidence is at its lowest level since 1982.  So, it’s not the absolute number, it’s the growth rate (or lack thereof). 

What you and I have to concentrate on is how do we profit from it?  What we need to figure out is what to buy and what to sell.  I think we clearly have an American economy with no growth and a global economy (primarily in developing countries) that is growing extremely fast.  China said last week that they are growing at over 10% per year.  Whether they’re lying or not, we know they are growing fast.  So, I’m really feeling as if there is tremendous opportunity in the emerging market stocks because their economies haven’t slowed but their stocks have sold off 40-50%.

ETFs such as FXI & FNI are some of my favorites.  FXI is just China but FNI is China & India.  I’m watching these carefully and haven’t pulled the trigger just yet but watching closely.  I think a lot of money can still be made owning these and shorting U.S. companies, probably U.S. industrials.

Also, watch the material stocks.  They’ve sold off recently.  Companies like XTO Energy, Transocean Offshore (RIG), and the ETF MOO may be at a perfect buy point now.  But, let’s let this Fed decision pass and see if the rotation out of these and into technology will continue.

Gold Update

Gold is still falling and it seems destined for at least $825/ounce.  But, $800 is not out of the question.  I will be looking to short gold into strength over the next few days assuming we get any strength.  Don’t fight the trend in gold right now.  It’s falling and you just can’t own this from the long side.



2 Responses to “Is The Economy Really Ok?”

  1. 1 James May 1, 2008 at 12:25 pm

    Is it happening again? Are the foreigners coming in now since the dollar is bottoming?

  2. 2 Jarret May 2, 2008 at 8:35 am

    Getting a little nervous about a short position on the Dow…it just keeps creeping up on news that is not as bad as expected…
    Volume is still under average, so is this a sucker’s rally or the real thing? Let me know your thoughts…

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