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This is The Carnegie Management Group Hotline for Wednesday March 10, 2010

U.S. stocks traded quietly yesterday rising in the morning and drifting lower in the afternoon, then finishing with modest gains. The S&P 500 gained 0.17 percent to 1,140, the Dow edged higher by 0.11 percent to 10,564, and Nasdaq rose 0.36 percent to 2,340.

Yesterday's positive market sentiment was fueled AIG asset sales of over $50 billion. The vultures have been out deal seeking in early 2010 and merger and acquisition activity continue to increase investor confidence.

The S&P Futures are trading near unchanged this morning before the opening bell.

European leaders are announcing the end to Greece's financial troubles.

The worst of Greece’s financial crisis is over and other European nations won’t follow in its path, said former European Commission President Romano Prodi.

“For Greece, the problem is completely over,” said Prodi, who was also Italian prime minister, in an interview in Shanghai today. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”

We disagree with Mr. Prodi.

Yesterday was the one-year anniversary of the 2009 U.S. stock market lows. Stocks have gained 68 percent since and all the recent news streams are yielding more positive stories than negative. A sense of complacency is setting in and worries are subsiding. At least on the surface.

Jobs, jobs, jobs. The next three monthly job reports will be the most critical for President Obama, the U.S. economy, and the stock market. The job-loss trend has leveled and now it's time for NEW jobs to become available for American workers.

Analysts that predict job growth are following simple trend lines and expect the resumption is natural and a forgone conclusion. We think they are delusional. Job growth is NOT the next path for the employment reports.

We expect states will begin massive layoffs in the second half of 2010 due to budget deficits. Additionally, education jobs will also be trimmed. Los Angeles announced last week over 5,000 job cuts in their school system. These jobs were slated to be cut one-year ago, but were saved by stimulus money. This year the stimulus dollars are not there.

Stimulus programs, which fueled the bear-market rally, including the government's program to purchase over $1.25 trillion of residential mortgages, are expiring. Now we must see if the underlying effects on the economy are solid or will crumble without support.

If the removal of stimulus programs causes a down draft in the stock market, expect President Obama and his administration to push for more stimulus. IE: MORE DEBT, which will lead to MORE TAXES in the future for American citizens. Our government's vicious spending and massive debt pile up will continue and inhibit sustainable growth.

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February 2010 News

Date		Article
Feb. 17, 2010	NEW	The Coming Foreclosure Flood
Feb. 17, 2010	NEW	What the Nation's Budget Woes Mean for You
Feb. 17, 2010	NEW	Goldman, Greece Didn't Disclose Swap, Investors Fooled
Feb. 16, 2010	NEW	Lone Voice Warns of Debt Threat to Fed
Feb. 13, 2010	NEW	High Speed Spending
Feb. 13, 2010	NEW	White House Expects High Unemployment Until 2015
Feb. 13, 2010	NEW	China Raises Reserve Requirement to Cool Growth
Feb. 12, 2010		Beijing Seen Vacant for 50%, Chanos Predicts Crash
Feb. 10, 2010		The Global Debt Bomb
Feb. 4, 2010		House Raises U.S. Debt Limit to $14.3 Trillion
Feb. 2, 2010	MUST READ	20 REASONS GLOBAL DEBT TIME BOMB EXPLODES SOON. Which trigger will ignite the Great Depression II

		CLICK HERE TO SEE NEWS ARCHIVES

Forecast 1
Forecast 2
Forecast 3
Forecast 4
Forecast 5
Forecast 6

Carnegie Management Forecast 1

The Federal Reserve will temporarily win the deflationary battle by creating trillions in new money to re-inflate the economy. The most immediate result will be the reflation of the stock market, commodities prices and crude oil between now and late-2009. The Dow Industrial Average could rebound to around 12,000 by mid-2009.

Carnegie Management Forecast 2

A tsunami of new money from the Fed will produce higher rates of inflation and, hence, higher interest rates and higher mortgage rates during 2009. During this period of rising interest rates, 30-year bond prices will decline dramatically as yields rise to at least 7 percent. Mortgage rates could reach 9 percent. Stocks and commodities will return the best profits during 2008 to mid-2009.

Carnegie Management Forecast 3

Spending on housing has peaked for many years to come. Do not purchase real estate. I do not see a bottom in housing before the Great Recession and Bear Market of 2010, 2011 and 2012 unfolds. Homes-for-sale inventories continue to rise. Forty percent of home sales in many regions of the country are sales of foreclosed properties.

Carnegie Management Forecast 4

Deflation in the housing and automobile sectors will increase the economic pain during the Recession and Bear Market of 2010-2011-2012. Home foreclosures will rise during this period. The Great Depression of 2010-2012 could mirror the 1930’s Great Depression that lasted from 1930 to 1942—a period of 12 years!

Carnegie Management Forecast 5

The assets of foreign sovereign wealth funds will exceed the net capital of the U.S. banking system in less than five years. The assets of sovereign wealth funds are soaring because of exported U.S. dollars. At current rates of growth, Charles R. Morris, author of “The Trillion Dollar Meltdown,” says the assets of foreign sovereign wealth funds will exceed the net capital of the U.S. banking system in less than five years.

Carnegie Management Forecast 6

Under-funded pension plans will contribute to the economic crash during 2009-2012. THE DARK CLOUDS OF DEFLATION ARE ON THE HORIZON. The retirement of 78 million baby boomers (26 percent of our population) born after World War II, will result in a dramatic reduction of economic growth. When people retire, they instantly spend less money because their biggest fear is outliving their retirement income or nest egg.