Heavy Economic Issues

Jeff Manera, June 15, 2008

The past few weeks have been tumultuous in the domestic and global markets. Most recently, the markets have been recovering from a 400-point sell-off in the Dow -- a drop that not only pulled down domestic markets, but also drug along with it stock markets all over the world.

Causing such volatility in the U.S. stock markets are several issues weighing heavily on the U.S. economy, such as consumer spending, the credit crisis and rising inflation. I know that these issues are on every investor's mind, so let's take a closer look at each and talk about what to expect in the months ahead.

Consumer spending is a dominant factor in economic health. In fact, it accounts for more than two-thirds of the economy. So the fact that consumer spending was reported last Thursday to be slightly up compared to recent months hints that U.S. consumers aren't as tapped out as many had feared. But we must keep in mind that the CPI increase was a modest 0.6% and only beat expectations by 0.1%.

And, there's a lot more contributing to the CPI rate than how much money consumers dish out -- also playing a huge part in the state of the U.S. economy is inflation. Rising inflation is pushing up the price of just about everything you need to buy, most noticeably in food and gasoline. And the inflation rate and CPI is set to grow even more in the months ahead, until the Fed decides to take action and increase the interest rate to bump up the value of the dollar.

Do you want to know how I expect the Fed to respond to rising interest rates? Visit the G³ Global Options website today!

And to add more bleak news from the economic front, there's the ongoing credit crisis. Analysts have been going back and forth, throwing around ideas of when the credit crisis will end for months. And now many are saying that the credit crisis is much worse than expected -- something I have been saying all along.

For some evidence, just look at the Lehman Brother's report that there has already been a $2.8-billion quarterly loss by banks and securities firms, and there is more sub-prime trouble to come. And I think that this is completely possible, and that U.S. housing prices could correct well into 2009, especially in regions that saw the most dramatic rises, including California, Las Vegas, and parts of Arizona and Southern Florida.

So how do we get around this economic mess and still make a profit? By focusing on certain global markets while adjusting our investment strategies to whatever economic problems come our way. All of this is reflected in our portfolio positions, and to find out what investments I recommend to buck the dire economic trends happenings now, visit the G³ Global Options website today.

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