Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Oil and Food Prices Falling, Real Estate Stabilizing, Stocks Soaring, Crisis Over?

Stock-Markets / Credit Crisis 2008 Jul 24, 2008 - 08:52 AM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleImagine the following: The price of oil falls back to $107 ... gas prices drop to say, $3.50 a gallon or lower ... and food prices decline 10% or even 20%.

Simultaneously, the real estate market stabilizes. Foreclosures peak ... new and existing home sales pick up ... and consumers start spending again, opening up their wallets and purses.


What do you think the social mood and economic environment will look like if all that were to happen?

Naturally, the pundits on Wall Street will jump for joy, forecasting Dow 15,000 or higher and an end to the bull markets in gold and other natural resources.

In Washington, politicians will be talking about how our economy is the strongest in the world. Ditto for the Presidential contenders on the campaign trail.

And naturally, the Federal Reserve will claim victory over the worst financial crisis to ever hit the U.S.

Would Wall Street or Washington be right to make such claims?

Well, they can say whatever they want.

But that doesn't mean you should listen to them or that they're right. Let me tell you right now — under the scenario I laid out above, any signs or claims that our economy is recovering or that the boom in natural resources is over will be dead wrong.

Don't misunderstand me, I am not a pessimist.

To the contrary, I consider myself an optimist. I believe in mankind's ability to overcome any obstacle. That's especially true here in the great U.S. of A., where we have one of the world's most resilient, innovative, and hardest-working cultures on the planet.

So why am I warning you?

Because I think a pause in all the recent market trends is about to happen — right here and now — and I don't want you to be fooled by it, or the talk that will surround it.

If you are, you will likely make some of the worst investment decisions of your life.

Up first, since this market is already taking a reprieve ...

Oil: Has It Peaked For Good?

Not on your life. While I do expect a major correction that could bring oil down to the $107 level, no way, no how, have we seen the end to the bull market in energy.

First , from a purely technical point of view, a sharp but short-term pullback in the price of oil is warranted. Indeed, I warned you about it a few weeks ago.

Let's not forget that oil has rocketed ...

688% higher from its low of $18.65 at the end of 2002

152% since the beginning of 2007

So the correction you are witnessing now is perfectly normal and healthy for the oil bull. And it will merely be a setup for the next leg higher.

Oil Now In Pullback Mode - Will Find Massive Support At the $105 to $115 Level

After all, what is the most basic definition of a bull market? One where prices make "higher highs" AND "higher lows."

The "higher low" component is exactly what oil is doing now — making a higher low, albeit over $100 a barrel!

Second , while official stats show a 3% decline in U.S. oil demand in the last six months, there is no sign of demand destruction in India or China.

Hard to believe, right?

But here are the facts ...

China imported 11% more crude oil in the first half of 2008 than a year earlier. In May alone, China's crude oil imports leapt by 25% to their second-highest ever.

Moreover, its oil consumption is estimated to jump 63% in 2020 as compared to 2006.

Demand for oil in India grew by 4.7% in the first half of this year. Demand for diesel climbed by as much as 25%.

And that's just those two countries!

Meanwhile, on the supply-side of oil ...

  • Canada's oil production peaked in 1974, Egypt's in 1993, Syria's in 1995, Ecuador's in 1999, Yemen's in 2001 and Mexico's in 2004.
  • Oil production is past its peak in 33 of the world's 48 largest oil-producing countries.
  • Even in Saudi Arabia, oil reserves are past their peak. The world's largest oil producer is finding it has to increasingly pump large amounts of water into its biggest oil field, Ghawar, to extract the remaining fuel out of it. A fuel which is of far lesser quality, no less.

Third , any uptick in the economy, even if it's temporary, will just be more bullish for oil.

Let's say the price of oil pulls back and finds a new base at around $107.

How high do you think oil will soar when there's an uptick in the U.S. and global economies (even if temporary)? Remember, its base will be almost 10 times higher than it was when the bull market began!

See, $150 oil doesn't seem so incredible when we're talking about support at $100 or $107. Even $200 doesn't seem so ridiculous, does it? It's amazing how used to higher prices we all get!

So, is the long-term bull market in oil and energy over? As I said previously, not a chance! I think the above facts and thoughts put it all into perspective.

Bottom line for oil: Keep your eyes peeled for my updates, especially in Real Wealth Report . I intend on using this pullback to position my subscribers for some mind-boggling profits on the next leg up.

Next ...

Has the Boom Ended for Other Natural Resources?

My answer: Also, no way! Like oil, many commodities were overdue for a sharp price pullback. They've soared for months on end without a decent retracement and shakeout. So, any pullback is unequivocally normal.

That applies to gold ... silver ... copper ... platinum ... and base metals like zinc, nickel, and aluminum. Plus, coal ... agricultural commodities ... and more.

But I repeat: It's nothing but a normal correction in a very strong long-term bull market. A process whereby "higher lows" are made, in a stair-stepping climb to much higher prices in the months and years ahead.

Commodity Pullback Normal, Healthy Expect A 10% Decline ... Then Buy Like Crazy!

Indeed, you can see it in the chart of the CRB index, a basket of 19 of the most widely traded and used commodities on the planet.

Notice that awesome uptrend. Notice how even a 20% correction wouldn't change the long-term picture of the CRB index one iota.

What's more, the fundamentals continue to support the long-term bull market. I won't go into details here because you already know from my writings how three billion souls in India and China are driving this bull market in natural resources. Their demand, pitted against limited supplies in many natural resources, is the primary driver behind the bull market.

I will merely add that no matter how bearish any pullbacks may appear on the surface, always look below the surface and keep in mind the long term, which includes ...

The Worst Behind-the-Scenes Inflationary Spiral Ever To Be Seen In this Country

I estimate we're only about halfway through the inflation process that the U.S. is being put through by the powers-that-be in Washington, namely the Federal Reserve.

Already, in just the last two years, $4.3 trillion in fiat money has been created. But by the time the mortgage and credit crisis passes, hundreds of banks will have failed and I calculate the Fed will have to pump at least another $2 trillion into the economy.

Under our fractional reserve banking system, where every $1 of new money created by the Fed creates as many as $10 through relending, that means more than $60 trillion in fiat money could ultimately flood the economy.

Even if it gets back to a factor of half that, or 5 to 1, we're talking as much $30 trillion in fiat money working its way through the economy.

Inflationary? You bet it is.

A systemic devaluation of the dollar? Absolutely. It effectively slices the purchasing power of your current dollars in half, or worse, by increasing the existing supply of money by almost 200%.

In plain English, that means if it takes you $50,000 to break even today, a few years from now it could take you double that, or $100,000 — perhaps even more.

That's why — without question — you need inflation hedges ...

... and why, no matter what, I don't want you to be fooled by any short-term price declines in those hedges.

Now ...

What about the Dow?

As I pointed out in my January 17 and March 18 issues of Money and Markets , and again recently, the Dow is headed much lower.

Look at the updated version of my previous charts, and you'll see what I mean.

Dow Industrials at Critical Support And Likely to Plunge Much Lower

Important note: Once the Dow closes below the 11,000 critical support level on the charts, I expect to see it plunge to at least 9,200.

But if you're thinking of riding that out, think again: The ongoing devaluation of the dollar will make the decline much worse, and you stand to lose as much as another 50% of the purchasing power of your money.

That's another critical reason for you to keep your inflation hedges and buy even more on dips.

Best wishes,

Larry

P.S. To find out more about how the Dow is going to lose another 50% of its value ... how you can avoid being caught off guard ... and profit as well, please see the latest issue of my Real Wealth Report .

For just $99, you can get an annual subscription that includes 12 monthly issues, all my special reports, and loads of profit opportunities.

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules