*****Happy New Year
At last, 2008 is over. And this will be the last issue of Daily Profit for the year. I have to say that starting a daily e-letter has been one of the best things I’ve done. And I have you, dear reader, to thank for it. Your questions, comments, suggestions and critiques have helped make Daily Profit a great success. You’re also keeping me on my toes!
So thank you all very much.
*****Economically-speaking, we’re closing out 2008 on a down note. December consumer confidence dropped to the lowest level in 41 years. Of course, they started this survey 41 years ago, so it’s really at all-time lows.
Home prices are still falling. 4th quarter GDP is expected to fall 4.3%.
And unemployment concerns overshadowed lower gas prices, which makes sense. Respondents to the survey anticipate an 8.7% jobless rate by the end of 2009.
*****Another stark measure of how far the economy has fallen is the 55% drop in issued loans. In 2007, banks made $1.69 trillion in loans. In 2008, it’s $764 billion. That’s just a staggering drop, all the more amazing because most of the drop occurred in just the last few months.
*****Holiday sales are looking dismal, down 1.8% year over year. That may not sound like a huge decline, but when you consider how much discounting was going on, it means profit margins were slim to none.
Analysts are expecting that to lead to a rash of bankruptcies in the retail space. 160,000 businesses closed their doors in 2008 and another 200,000 may vanish in 2009. 2,000 – 3,000 malls may close.
*****The big question remains – how much of all this is priced into stocks? I ask because I don’t want us to enter 2009 on a negative note, because there actually are things to look forward to.
An unemployment rate around 9% has been thrown enough that it should be accounted for in stock prices by now. It also appears to me that bad news is not pulling stock prices lower anymore. In fact, it’s been that way for a month now.
The stock market will turn higher before the employment rate does. And I’m seeing a few strategists who have been very bearish in the past say that the stock market may well have already put in its lows for this recession.
Of course, time will tell if stocks have bottomed. But there is some cause for optimism as we head into 2009.
*****On Friday, January 2, I’ll start looking forward to see what 2009 might bring. Fortunately, we have an advantage. My stock selection software, TRIGR, measures money-flows. It shows what sectors and stocks are being bought and which are being sold. That’s the best way to gauge what the big money thinks are the top investment ideas at the time.