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The fourth quarter of 2010 brings some interesting perspectives on the market. There is a significant amount of speculation afoot that the recovery has stalled. These ideas aren’t based on GDP growth or the lack of jobs but the economic cloud cast by lower consumer spending. I think this judgment is premature because the consumer spending decrease is based on lower consumer credit. This doesn’t mean you should panic in terms of your retirement account, however. There are still good opportunities available if you know where to look.
The hard reality is that consumer spending is vulnerable to the credit crunch. As long as credit is restricted, consumer spending can never reach previous levels. The end result is that money experts looking for a miracle in the tea leaves are wasting their time. The truth is that our economic environment has changed permanently. Savvy traders call investing today one of the most challenging environments of a lifetime. This assessment is true, but there are low-hanging fruit in this economy. In the past few weeks, we’ve had even more confusing occurrences. Third quarter earnings vary widely by sector. Financials, telecommunications and home prices all fell. But demand for homes grew. People want homes but at a bargain. Some smart people are still shopping in this economy, but only if they can get exactly what they want. Reading the tea leaves of the fourth quarter requires a firm grip on reality. The first review of Black Friday’s results revealed a yearly increase in total sales, but not as high as expected. So where should investors look in the fourth quarter?
The fourth quarter has the international problems of Korea and the strained relationships between China and the United States as they back two different parts of the peninsula. On Thanksgiving week, we watched the markets drop worldwide as this face off started. This military standoff will dominate international relations in the fourth quarter and may negatively affect the market well into 2011.
On the brighter side, the US dollar is weak, making American goods cheap. Oddly enough, it makes small companies like Brown & Halley, exporters of Almond Roca (a hot Chinese import), a wonderful investment. Some small shops and boutique manufacturers have highly profitable futures importing to emerging markets. The Washington State candy market is worth 6 billion dollars and companies that manufacture candy in the state have a high potential. Smaller companies that produce products with a very high demand are where you should put your money in the fourth quarter. These companies will continue to moving against the overall economic trend well into 2011. With the proper research, you can identify public organizations like Brown & Halley. These companies will produce jobs, have higher wages than normal and exceed most sales growth estimates. If you want to know where to put your money at the end of 2010, ask which companies are creating jobs. Companies that are creating jobs now will have strong earnings well into the future. These are the organizations that deserve your investment in the fourth quarter of 2010. They can rebuild investment accounts devastated in the past few years by a weak market.
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