According to a recent Bloomberg article, financial analysts believe that the year end of 2008 has more trouble in store for the US economy.

The world’s largest economy will slow to a 0.5 percent annualized growth rate from October to December, down from a 1 percent estimate last month, according to the median forecast of 63 economists surveyed from June 30 to July 9. Analysts anticipate consumer spending will rise 0.2 percent next quarter, the smallest gain since 1991.

Federal Reserve policy makers will forgo raising interest rates until next year as the expansion stalls, the survey shows. That contrasts with traders, who estimate 68 percent odds of at least a quarter point rate increase by year-end.

“Consumers are poised to pull back” as the “perfect storm returns,” said Richard Berner, co-head of global economics at Morgan Stanley in New York. He cited the credit crunch, record energy costs and declines in payrolls and house prices.

The article goes on to say that the US market may be propped up at the moment by tax rebate checks. Once those checks are spent and consumers feel the pinch of rising prices things will stagnate further by the year end.

Here at ContrarianProfits we think things will probably get much worse before they get better. Bill Bonner says that the real trouble will start when US consumer spending actually goes down… He recommends staying clear of stocks:

Stock markets all over the world are getting whacked. They’re at a 5-month low, even beneath where they were when Bear Stearns went bust. Japanese, European and American stocks (as measured by the S&P) are all in bear market territory – all down at least 20% from their peaks.

Naturally, “some investors are beginning to scent a possible end to the slide.”

It was dumb money that was buying stocks at their all-time peaks. Not only in the United States, but everywhere. It is imbecilic money that buys now, in our opinion.

We are a long way from “capitulation territory.” When it comes, you will not see stocks selling at 15 times earnings. You’ll see them selling at 5 times earnings. And you won’t see the Dow at 14 times the price of gold. You’ll see it at 2, 3 or maybe 5 times the gold price.

Most importantly, when investors finally give up on stocks, you won’t find articles in the major press telling you that investors are “on alert” for the bottom. They will have lost interest – and their money – long before.

Despite all their woes, Americans have still barely begun to cut back on spending and begun to save in a major way. Sooner or later they will. And if the savings rate goes back to where it was in the early ’90s – at nearly 8% of personal income – it will take about $800 billion out of consumer spending. You can imagine what that will do to retailers…to the auto and aviation industries…and to Wall Street.

Stay clear of stocks, dear reader. Stick with cash and gold.