The Sky is Falling!

By Sinclere Lee

Washington (BNW) —
While the nation's oil companies post record profits for the fourth-quarter because of higher gas prices, the American people are being screwed by their government. Screwed with a dry dick! Yeah, the smart money got out of the stock market long ago, now it’s just a sucker’s market!

The economic news this week is the Federal Reserve's decision to cut interest rates 0.75 percentage point to 3.5 percent to help ease some of the fears that have plagued Wall Street in recent months. Some investors are expecting the Fed to cut rates further when the central bank meets Jan. 29-30, suggesting that the economy is still in danger of recession.

You can cut the interest rate all you want, and it won’t work because for the last twenty years Americans have been living beyond their means. Consider this, the trade deficit in this country is one trillion dollars this year… that means that we buy more than a trillion dollars worth of goods than we sell. And, to keep up a false standard of living we can’t afford, we borrow money from countries around the world just to stay alive.

How long can we keep this up? In other words: the sky is falling, it hit me on the head… looked at your 401-K, and you will see what I mean!

While bad economic news abound everywhere in this country, there is one bright spot as it relates to Black Americans… that is, we ain’t effected by the economic mess because we ain’t no money in the first place. It’s white people who are being screwed!

These raggedy houses Blacks are losing because of the subprime scheme is no big deal. Why? Because the houses they’re losing, were not worth the money the niggers got in the first place.

The Congressional Budget Office expects the U.S. budget deficit to grow to $250 billion this year, though the number may need to be revised once an economic stimulus package being debated in Washington is released.

Stupid Bush proposed a $145 billion plan to boost the nation's economic activity but details have not been finalized. Oil prices fell further on fears that weakness in the U.S. economy will crimp demand. In currency trading, the dollar fell against the euro and the yen.

Now, the Asian markets are being dragged down with US.

The dollar extended its losses against the euro in early Asian trade after the Fed's emergency 75 basis-point interest rate cut wiped out the U.S. currency's yield advantage over its the European one.

Industrial metals, such as copper, recovered some lost ground after hefty falls this week on fears a U.S. recession could derail demand.

The global stock market rout began early this week, triggered by concerns global economic growth was hitting a wall and financial institutions had more subprime-related write downs to reveal.

In an effort to shore up markets, the U.S. central bank slashed rates to 3.5 percent on Tuesday. Mirroring the move, the Hong Kong Monetary Authority cut its base rate by 75 basis points to 5.00 percent.

Some said the Fed's decision — a week before a scheduled rate meeting — smelled of panic.

Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking in Tokyo said, "A lot of people see that the Fed's move yesterday was too little,".

"But given that they cut just a week before this month's meeting, it does show that the Fed realizes things are bad," he said.

Some investors were in the mood to seek out bargains, encouraged by the recovery on Wall Street, where benchmarks managed to recover from their lows after a feverish trading session on Tuesday.

Australia staged a dramatic comeback, where shares rose almost 7 percent — on course for their biggest daily gain in a decade. The S&P/ASX 200 index had fallen 12 sessions in a row.

"This market traditionally has been more defensive than the overseas markets, and it's been pretty badly hit over the last few days," said Leigh Gardner, ABN AMRO's head of sales trading.

Miner BHP Billiton Ltd led the way, soaring 9.5 percent after a strong second-quarter production report.

In Tokyo the Nikkei surged 3.6 percent, recovering from it biggest one-day loss since the September 11 attacks on the United States. The index is still down 15 percent just this month alone.

In the money markets, the euro climbed as much as 0.4 percent to the day's high of $1.4685 in early Tokyo trade, extending its rally after surging 1.3 percent on Tuesday, its biggest one-day percentage gain since early 2006.

Japanese government bonds gained, pushing the two-year yield closer to the Bank of Japan's overnight rate target on mounting expectations for a rate cut later in the year.

Most analysts said the JGBs were posting gains on doubts over whether Japanese stock markets would be able to sustain a 3 percent jump after the Federal Reserve's emergency slash.

There are certain times in the market - like during a major sell off - when it's hard for investors to tell if something's a deal or no deal.

It has been reported that Wall Street analysts are notoriously bad at forecasting profit trends anyway. At the beginning of last year, they said corporate earnings would grow 8 percent in the third quarter, when in fact they fell nearly 5 percent. And after predicting last fall that fourth quarter earnings would soar nearly 12 percent, analysts now believe S&P profits will plummet a staggering 19 percent, thanks largely to plunging financial sector earnings.

Errors like this are only magnified during a severe slowdown in economic growth or a recession. Earnings don't soar by double digits during these downturns, says Jack Ablin, chief investment officer for Harris Private Bank: "They go negative."

Merrill Lynch started to sound the alarm late last year. After warning investors to expect a drop in earnings this year in December, experts now think profits could fall as much as 8 percent this year.

Just for the sake of argument, let's say Merrill is right. If 2008 profits were to fall 8 percent - a significant downturn - the S&P 500's slowdown-adjusted P/E would rise to 16.7, based on Monday's close of 1325.19. This is higher than the market's average 16.2 P/E since 1945, according to S&P. And instead of a majority of sectors looking cheap, most start to look pricey.

To find the real bargains in this type of market, you have to play it safe. Stick with the most conservative earnings expectations. For instance, we measured the P/E ratios for various sectors based on a hypothetical 8 percent drop in earnings this year.

Remember, 55 percent of tech sales are generated overseas. So even if the U.S. economy stalls, as many predict it will, the stronger global economy should protect tech earnings - at least on a relative basis.

Though there's value in tech, it's still volatile. The safest way to invest in the sector is through a diversified fund that owns a mix of large-cap tech. The average large-cap growth fund invests 29 percent of its assets in this sector.

Contrary to popular belief, Americans facing a looming recession should expect little relief in the form of lower gas prices, experts say.

Despite recently falling oil and gasoline prices, strong worldwide demand, refinery shortages, and OPEC production cuts should keep gasoline well above $2 a gallon in 2008.

Slower consumer spending and rising unemployment - traditional harbingers of an economic downturn - are unlikely to drastically reduce energy prices. Oil isn't expected to fall below $60 a barrel from its current level of $90 and gasoline should bottom out around $2.30-2.50 a gallon from around $3 currently, experts say.

"That's the floor, even in a global recession," said Simon Wardell, an oil analyst at consulting group Global Insight. "The overall balance is going to remain pretty tight."

In the short run, gasoline prices might slip a bit but long-term both gas and oil prices are expected to remain near record highs.

Recession or no recession, expect gasoline prices to surge again to set a new record of over $3.22 a gallon sometime between March and May, when refiners leave stocks low and switch over to summer blends and traders anticipate the high-demand summer driving season.

"The same things that make the rally every spring are still there," he said.
But from May onward, he said prices could fall quickly, especially if there is a recession. Still, most people do not think they'll go much below $2.50 a gallon.

"I wouldn't go out and buy that Hummer," he said. "It's still prudent to behave as if record gas prices are just one event or one economic recovery away."

Another reason why gas prices will stay high is that there isn't enough oil being refined into gasoline to significantly bring down prices -even in the face of a recession.

Although capacity at existing refineries has been expanded, a new refinery in the U.S. hasn't been built in roughly 30 years - which the industry blames on strict environmental rules and community opposition.

"There's a limit to how far gasoline can fall," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At the end of the day, there is still a dearth in refining capacity," Schork said.

Plus, slack demand for gasoline has kept gas prices from rising as fast as oil prices did at the end of 2007, a downturn in oil prices would not necessarily be followed by a downturn in gasoline prices.

But oil prices should stay above the $60 a barrel mark, according to experts.

Strong growth in Asia, where a recession is seen as less likely, combined with runaway demand in oil-rich Middle East economies, is likely to keep demand, and prices high no matter what happens in the U.S., said Wardell.

Even in a recession, there have only been a couple of years where demand in this country has actually fallen, said Wardell.

"It just doesn't happen," he said.

Schork sees oil prices pulling back to the $60s or $70s if there is a recession and retail gasoline prices in the $2.50 to $2.70 range, but he thinks any pullback will be relatively brief.

"By no means am I predicting the end of the bull run," he said.

And then there is OPEC.

For its part, experts say the cartel would step in with a production cut if oil prices fell too much, which it did at the end of 2006 when oil prices fell to the $60 range.

"OPEC is very much eager to defend prices," said Wardell

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