The Three Secret Indicators That Will Pave the Way to Global Profits

By Keith Fitz-Gerald
Contributing Editor

The National Association of Business Economists, or NABE, says its newest study shows that credit risk has taken over for terrorism as the No. 1 business concern. Not surprisingly, trading tanked.

What a stunner.

How this stuff continually makes headline news is beyond me. It’s hardly insightful.

What is enlightening, on the other hand, is knowing just where to look so that you can keep clear of such messes as this subprime fiasco – and so you can also position your capital for the highest-possible profit.

Let me explain…

What the NABE Reveals

In case you missed it, here’s what the NABE said yesterday (Monday) morning. According to a survey of more than 258 association members, credit risks have now supplanted terrorism as the primary risk to the economy. I’ll bet Osama Bin Laden and his bunch of fanatics just loves this. In a dramatic twist of irony, economists have trumped them! Go figure…

Anyway, 32% of NABE members now believe that loan defaults – and excessive debt – are their biggest concerns. A mere 20% still believe that national security is the top worry. Mind you, that is down from 35% only a year ago. Money matters also supplanted gas prices, inflation, and government spending. Also topped as concerns: Longer-term healthcare costs, and even medical care for an aging population.

Three Indicators To Watch Like a Hawk Right Now

Once you’ve read Money Morning for awhile (and its sister publication, the highly regarded monthly investment newsletter, The Money Map Report), you’ll discover that we’re very good at identifying investment strategies that give you a huge competitive advantage over the “investing masses.” I mean, just consider the economists. They missed this subprime meltdown – just like they missed the stock market crash of 1987, the dot-com bust and subsequent recession in 2000, and the strong 2003 economic rebound.

There’s a reason for that: All the market prognosticators are watching the same indicators. So they’re bound to come to pretty much the same conclusions.

So how do you identify signs that some financial contagion is poised to pick your pocket?

Fortunately, there are three powerhouse indicators that don’t require a PhD in mathematics, a “black-box” computer program or some fancy-pants graphs presented by one of the cable-network stuffed shirts.

Let’s take a look:
 

  • First – Wal Mart Same Store Sales. Every month, the Bentonville Behemoth (NYSE: WMT) releases same-store sales to the public. This is an effective indicator of the market’s future prospects because how the public spends its money is going to affect your wallet. An estimated 60%-70% of Americans shop at Wal-Mart at least once each month, so this statistic can provide some immediate insight into how Joe Six-pack is dealing with interest rate stress. [For a related story, see today’s story on the new global competition Wal-Mart is facing].
  • Second – Credit card defaults. Americans have achieved the dubious honor of being the world’s most prolific spenders. In fact, I’ve heard it estimated that we now collectively owe more than the actual Gross Domestic Product (GDP) of the U.S. economy. That’s a sad state of affairs considering that our marginal savings rate is at or below zero. This figure will signal an important slowdown in personal spending habits and should mirror Wal-Mart’s data fairly closely, because it will show just how far in the hole people really are when it comes to their cash as opposed to their credit.
  • Third – Auto Sales. U.S. consumers love to get behind the wheel of cars that they can’t afford, using money they don’t have, and on payment schedules that they can’t make. Watch the next round or two of automobile sales figures, and that will give you some important insights on the last of our three “Money Morning Consumer Finance Indicators.” If this indicator falls as much as I’m expecting on the heels of the declining Wal-Mart-sales and rising credit-default-rate indicators, you’d best “hold onto your bippies,” as my grandmother used to say.

Defensive Investing Is More Important Than Ever

I’ve been on the warpath about the topic of defensive investing for a few years now. In fact, it’s become my mantra, the keystone of my carefully crafted overarching investment strategy. Indeed, defensive investing usually headlines the comments that I’ve made again and again to standing-room-only crowds of thousands of individual investors at Money Shows and other financial conferences that I appear at all around the world.

But at the risk of repeating myself yet again, I’m going to emphasize the importance of defensive investing – especially during such an uncertain stretch.

The subprime mess is just that – a big mess. It is not only illogical – but completely irrational – to think that it’s over.

In fact, the real pain has just begun, despite the fact that the central banks have pumped nearly $500 billion into the badly shaken global markets. The subprime slime has not yet reached the consumer, although it is arguably headed that way, fast. The investing masses will finally understand the troubles they are facing when the three news indicators I’ve outlined for you turn these relatively minor news items into front-page headlines.

But thanks to those indicators, we’ll have had advance warning of the now-real events, and will have positioned our money accordingly. That way, your money won’t need to be surprised, as is seemingly true of so many investors in this subprime credit crisis.

In fact, when it comes to your money, some sectors will appreciate even in the face of all of this nonsense. And that’s where you need to be.

Right now, some of my favorite choices include international investments deriving a substantial portion of their revenue from the Asian Rim, which is growing at 8%-12% a year. I particularly like those companies focused on Asian consumers and mundane consumer products. Global tech, in general, appears to have been beaten down to attractive levels. The same is true of materials suppliers.

In thinking about each of these investment opportunities, what’s really important to remember is that each of these sectors is riding a tide of wealth that is likely to continue expanding regardless of our consumer woes, irrespective of our subprime mess, and without regard of our interest rates.

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About the Author

Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.

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