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My July Real Wealth Report is one of the most important issues I’ve ever written. So important that even if you’re not a subscriber, I want you to have it.
You can download it for free by clicking here.
Why is the issue so important? Because in it, I give you what I consider the most important concept to grasp when looking at asset values — whether it’s stocks, bonds, commodities, real estate, cars, you name it.
It’s about paper money, and how to translate paper money values into real terms. Into values that you can compare across time periods. Into values where you can really see what different assets prices are doing when compared to each other. And into values that will show you clearly whether they’re going up, down or sideways.
The lessons you’ll learn will stay with you for the rest of your life, and affect almost every investment you’ll make. You will never look at the world the same way again.
And that’s especially important because today, more than ever before, you need a solid, enduring basis upon which you can make your investment decisions.
Look, Washington does not want you to grasp the concept I tell you about in my July Real Wealth Report issue.
Nor does Washington want you to have an anchor upon which you can evaluate whether or not your investments are truly making any money.
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Why? Because if you were to have a way of truly understanding what Washington is doing to your money, you’d throw nearly every bum in Washington out of office, for good.
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| Once you understand what’s happening to your paper money, you’ll have a leg up on the markets. |
In late July of last year, I told you the dollar’s demise was going to dramatically affect you in myriad ways, not the least of which would be soaring commodity prices — especially gold and oil — and falling stock prices.
I also told you that the U.S. economy faced a nightmare of untold proportions, and that all heck was about to break loose.
Here’s what’s happened since those warnings …
First, the U.S. dollar has shed another 9.2% — on top of a multi-year 32% decline … hammering the greenback down more than 40% since 2001.
Second, U.S. stocks have had their worst June since the Great Depression, and have now plunged more than 17% since last July, and nearly 21% since their October highs.
More than $3 trillion in stock market wealth has evaporated. Globally, more than $14 trillion.
Third, the bond market has experienced one of its worst swoons ever, falling as much as 8 full points since last October, even as the Fed slashed rates and pumped liquidity into the markets.
The reason for the bond swoon: Traders and investors are waking up to what I’ve been telling you all along — that no central bank in any corner of the globe would opt for restrictive monetary policies in the kind of environment we have today. Instead, they will inflate away the problems. Depreciate paper currencies, and even sacrifice the value of their bonds.
Fourth, U.S. real estate markets have shed an estimated $4 trillion. And that’s just residential property. Commercial real estate prices have fallen 8.8% since their peak in October 2007. More property losses are to come, especially in commercial. In fact, Moody’s estimates that commercial property prices could fall another 20% before hitting bottom.
Fifth, gold has soared to 28-year highs, jumping $379 an ounce since last July to as high as $1,033. That’s a one-year gain of 57%.
Sixth, oil has rocketed to as high as $147 per barrel. Fully $74.19 higher than a year ago. An astounding one-year increase of 102.7%.
And despite their recent pullback, oil and energy prices remain in a long-term bull market, with higher prices to come.
Seventh, other commodities have also exploded higher, from grains and agricultural commodities to palm oil to exotic metals such as cobalt and uranium.
All of this begs the following three questions …
— Is the Bear Market in the Dollar Over?
— What’s Next for the Markets?
— Where Is the Biggest Money Going to Be Made?
I’ll answer the first question very directly: If you think the decline in the dollar has been something to behold, you ain’t seen nothin’ yet!
Right now, the dollar is overdue for a bounce. Looking at the Dollar Index, I figure it can rally about another 5%, to just over 76.
But after that, lookout below. By my measures, I figure the U.S. dollar can fall as much as another 50% in value. The two reasons are simple, and the same ones I’ve been telling you all along.
Reason #1. For the U.S. economy to survive the debt levels it is drowning in, both public and private, the dollar must keep falling.
U.S. assets must be put on sale via the dollar’s decline. They must be pounded down to values that no one could refuse to buy. That way, all excess can be wringed out, capital will eventually come rushing back in to the economy and market, and real asset values will begin to rise again.
But beware, the mechanism through which this process will occur will be the long-term decline in the dollar.
Reason #2. Inflation must jump to much higher levels.
We’re already experiencing the highest inflation rates in 27 years. But inflation is still relatively tame compared to where I expect it to head.
Ultimately, I expect we will see inflation levels in this country that no one dares mention today. I’m talking about inflation of 20% … 25% … even 30%.
So what about the markets right now? What about the corrections you’re seeing now in natural resources and commodities? Are those bull markets over?
No way! Once this pullback ends and the dollar resumes its decline, commodities, inflation, and natural resources will all continue much higher — until at least the year 2011, and quite possibly even longer.
That’s what my historical models indicate, and they have yet to prove themselves wrong in the nearly twenty-eight years since I first developed them.
So, on to the third question, where is the biggest money to be made?
Not in most stocks. I think they will continue to get pounded lower as our economy passed through its worst inflationary recession, ever.
Not in bonds, where investors around the world are likely to sell with vigor as the authorities in Washington continue to devalue the buck and stoke inflation higher.
No. The best place to make money over the next several years will continue to be hard assets, natural resources, assets that have intrinsic value, are in limited supply, and ever increasing demand. That’s especially true of …
Gold: By Far, the Single Best
Way to Protect Yourself and
Profit from a Falling Greenback
Once the pullbacks you’re now seeing in the commodities markets run their course, I expect the yellow metal to soar to new record highs — above $1,033 an ounce … then $1,500 an ounce … and eventually above $2,200 an ounce before this cycle is over.
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| Gold is the best protection against inflation! |
My suggestion: Buy every pullback you see in the gold market. Buy the best gold shares, including emerging gold stocks. But be careful. The higher gold goes, the more selective you have to be.
What About Oil? Its
Bull Market Has a Ways to Go!
In my view, oil will hit $150 a barrel … then $175 … then as high as $200. Gas prices will also soar to more than $6 a gallon.
My suggestion: Look into select oil and gas shares.
But beware: Not all oil and gas companies are going to participate in the further price surges of oil and gas. You will need to be very selective, scrutinizing companies’ balance sheets and hedging policies, as well as their upstream (drilling and exploration) and downstream (refining) revenues and profit margins.
The best-positioned firms stand to reap a major windfall. Do a little digging, it will be worth your while.
Other commodities: There are going to be great opportunities opening up in grains, in sugar, coffee, cattle, cocoa — and in base metals like aluminum, iron, copper, and more — when the next phase of the Greatest Natural Resource Boom kicks off.
Miss it, or get shaken out by the current pullback, and you’ll be kicking yourself for years!
Best,
Larry
About Money and Markets
For more information and archived issues, visit http://legacy.weissinc.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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