Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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