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    Stock Rally Says Economic Boom, Fed Shows Concerns

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    The Fed says that a zero percent funds rate is needed for an “extended period.” The Fed shares my concerns on housing and job creation, with housing starts at depressed levels. Treasury Secretary Geithner has overly optimistic growth and job creation, which does not jive with the FOMC or me. The weekly chart for the Dow shows the upside potential in an overvalued market.

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    Stock Rally Says Economic Boom, Fed Shows Concerns

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    The Fed says that a zero percent funds rate is needed for an “extended period.” The Fed shares my concerns on housing and job creation, with housing starts at depressed levels. Treasury Secretary Geithner has overly optimistic growth and job creation, which does not jive with the FOMC or me. The weekly chart for the Dow shows the upside potential in an overvalued market.

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    The Fed says that a zero percent funds rate is needed for an “extended period.” The Fed shares my concerns on housing and job creation, with housing starts at depressed levels. Treasury Secretary Geithner has overly optimistic growth and job creation, which does not jive with the FOMC or me. The weekly chart for the Dow shows the upside potential in an overvalued market.

    Copyright:

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    Download as PDF, TXT or read online from Scribd
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    23 views3 pages

    Stock Rally Says Economic Boom, Fed Shows Concerns

    Uploaded by

    ValuEngine.com
    The Fed says that a zero percent funds rate is needed for an “extended period.” The Fed shares my concerns on housing and job creation, with housing starts at depressed levels. Treasury Secretary Geithner has overly optimistic growth and job creation, which does not jive with the FOMC or me. The weekly chart for the Dow shows the upside potential in an overvalued market.

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    of 3

    Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

    ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine


    covers over 5,000 stocks every day.

    A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,
    and commentary can be found HERE.

    Suttmeier's ForexTV Main Street vs Wall Street can be watched on the web HERE.

    March 17, 2010 – Stock Rally Says Economic Boom, Fed Shows Concerns

    The Fed says that a zero percent funds rate is needed for an “extended period.” The Fed shares
    my concerns on housing and job creation, with housing starts at depressed levels. Treasury
    Secretary Geithner has overly optimistic growth and job creation, which does not jive with the
    FOMC or me. The weekly chart for the Dow shows the upside potential in an overvalued market.
    Continued Mixed Message from the FOMC Meeting
    While the FOMC says that economic activity continued to strengthen with a stabilizing labor market, the
    important fuel for growth is uncertain.
    • Household spending is expanding at a moderate rate but remains constrained by high
    unemployment, modest income growth, lower housing wealth, and tight credit.
    • Business spending on equipment and software has risen significantly. However, investment in
    nonresidential structures is declining, housing starts have been flat at a depressed level, and
    employers remain reluctant to add to payrolls.
    • While bank lending continues to contract, financial market conditions remain supportive of
    economic growth.
    • Although the pace of economic recovery is likely to be moderate for a time, the Committee
    anticipates a gradual return to higher levels of resource utilization in a context of price stability.
    The Fed says, “With substantial resource slack continuing to restrain cost pressures and longer-term
    inflation expectations stable, inflation is likely to be subdued for some time.” I say that inflationary
    pressures are building. You see it at the super market, in the drug store, healthcare premiums, and at
    the gas pump. With lower incomes, Americans see a higher cost of living on Main Street USA, while
    Wall Street gets record bonuses. Recent ISM reports show rising Prices Paid.
    The Fed stated that the zero to .25% federal funds rate will be needed for an “extended period” as I
    expected. The quantitative easing whereby the Fed purchases $1.25 trillion of agency mortgage-
    backed securities and $175 billion in GSE debt will end as planned at the end of this month.
    A Key Statement for me is “housing starts have been flat at a depressed level, and employers
    remain reluctant to add to payrolls.” Without improvements on these two important fronts the US
    economy is positioned for a double-dip.
    Single-Family Housing Starts have stabilized at about 500,000 units annualized. This does not
    move the needle in the NAHB Housing Market Index, which remains depressed below a reading of
    20, when 50 is neutral. Some are putting a positive spin on “flat at a depressed level” but in my
    judgment with the tax credits set to expire at the end of April, the risk is for a double-dip in housing and
    banking, which is how “The Great Credit Crunch” began at the end of 2006 and through 2007.
    Some say there is pent up demand for new homes. I disagree with that as three million homes are
    likely to go through the foreclosure process in 2010. With the price of building materials on the rise
    home builders will not be able to compete with the pending glut of homes in resale. Also keep in mind
    that more homes are being occupied by extended families.
    Is Treasury Secretary Geithner more upbeat than the FOMC?
    The theme from the Obama Administration can be summed up as the worst of “The Great Credit
    Crunch” is behind us, but the country still faces significant and ongoing challenges that begins will high
    unemployment. The Administration expects 3% growth in 2010 and 4.3% in 2011 and 2012. That would
    be a boom as the FDIC closes 500 to 800 community banks. The Administration projects 100,000 jobs
    created per month in 2010, 200,000 in 2011 and 250,000 in 2012. If the Fed agreed, they would have
    removed the “extended period” from their statement, and Main Street unemployment rates would stop
    rising. Unemployment here in Tampa Bay is 14.3% in Pasco County and 12.7% in Hillsborough.
    It seems to me that most economists inside and outside of the White House are considering this
    economic recovery as typical and out of the text book. This is where I disagree, as the text book
    describing the end of “The Great Credit Crunch” has yet to be written and several more chapters
    remain to be discovered.
    The weekly chart for the Dow favors higher prices, but beware of the downside risk. My annual
    pivot is 10,379 with today’s resistance at 10,778, and annual and semiannual resistances are 11,235
    and 11,442. With ten of eleven sectors overvalued according to ValuEngine my prediction
    remains – Dow 8,500 before 11,500! Healthcare is undervalued by only 3.2%.

    Chart Courtesy of Thomson / Reuters


    That’s today’s Four in Four. Have a great day.

    Check out the latest Main Street versus Wall Street on Forex TV Live each day at
    1:30 PM. The next broadcast is Monday, March 8, 2010.
    http://www.forextv.com/Forex/custom/LiveVideo/Player.jsp
    Richard Suttmeier
    Chief Market Strategist
    www.ValuEngine.com
    (800) 381-5576
    As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I
    have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as
    well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the
    ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample
    issues of my research.

    “I Hold No Positions in the Stocks I Cover.”

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