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The Dow Will Hit 10,000 in 2009
by Dr. Mark Skousen, Advisory Panelist
Highlights in this issue:
- Three reasons why the Dow is going up.
- Insights from Jeremy Siegel.
- Why the Dow 10,000 in 2009 isn't crazy.
Dear Investment U Reader, Wall Street has been debating the huge run-up in the Dow Jones Industrial Average. Was March the beginning of a huge rally that will take the market to new highs? Have we witnessed the proverbial "dead-cat bounce?" The prognosticators have been unsure, uncertain and uncommittal about what they see coming next... So let me make it clear where I stand: We are in the beginning of a new bull market that will carry us to 10,000 on the Dow by year's-end - and new highs within a couple of years. Yes, the recovery will be volatile. But now is the time to buy, despite the big run up. No doubt there's plenty of bad news out there - rising unemployment with no end in sight, threatened tax increases on capital gains and dividends, anemic corporate profits, commercial real-estate insolvency, federal deficits, continued threats from the Middle East and Afghanistan, the specter of inflation and high interest rates among others... This list goes on and on. But as the old saying goes, "Wall Street climbs a wall of worry." It's all for naught - and I encourage you to look past these sideshows and distractions. I'm convinced the stock market is headed higher - a lot higher. I'll share my reasoning and tell you why Jeremy Siegel feels the same way. Three Reasons the Dow is Going Up Over the past few months, three things have been sticking out to me like huge blinking aircraft landing signals. Here's why we're going to keep moving up..
The Fed. Bernanke and the Federal Reserve are pulling out all the stops to stimulate the economy. Since September 2008, the money supply (M2) has been growing at an incredible 13% rate, one of the highest in the post-World War II period.
As Milton Friedman has demonstrated time and time again, after a lag of between six and nine months an easy money policy will cause a sharp recovery in the economy and stocks. Economists call it the "Friedman Effect."
Mortgage support. The Obama administration has been working hard at bailing out all the unstable banks, bad mortgages and bad assets in the economy through massive deficit spending. Essentially, the government policy is putting a floor under the residential real estate market, which will keep it from collapsing any further.
History sides with the bulls. Last month, I had dinner with Jeremy Siegel, professor of economics at the Wharton School and author of the bestseller "Stocks for the Long Run." He is a firm believer in looking at historical trends, something that many investors and Wall Street analysts have forgotten. And right now, the trend favors the bulls.
Well, guess what? The lag is over, and the "Friedman Effect" is taking full effect. We can expect higher stock prices and a recovery in the economy by year-end. And as a result of the administration's efforts, housing sales are on the rise and real estate prices are stabilizing. It's why I'm so interested in real estate lately. Take a look at my last column, "Real Estate: The Buy of the Century." Adding more fuel to my position, when I sat down with Wharton's Wizard he showed me an interesting long-term chart of the S&P 500 Index. 
The Wizard of Wharton's Long-Term Outlook You'll note that every time the market hit the bottom of his long-term chart, it rallied - sharply. And that's exactly where it was in late February when I met with Professor Siegel - at the bottom. Sure enough, in early March Wall Street rallied - and it hasn't looked back. It's now up 30% from its lows. Between you and me, he called the exact bottom of the stock market within weeks. (Of course, so did a few of our analysts as well.) How far up can it go? I asked this precise question to Professor Siegel last month. He told me that he has just completed a study of how well stocks do after a major crash like the one we just experienced (falling 50% from its highs). His conclusion was pretty striking: After a major bear market, stocks on average rebound 24% the first year of recovery. And just as nice, the average annual return over the next five years is 18%. Since the Dow was around 8,300 at the first of the year, it could climb back to 10,000 by year-end. (And 18,000 by 2013.) We could comfortably hit these numbers with an additional 19% gain. Although many believe the "easy money" has been made - and they may be right - the market will still offer plenty of profitable opportunities in the coming months. It'll be volatile, but it's certainly not too late to get aboard.
Good investing, Mark ozone2002 ( Date: 08-Sep-2009 22:22) Posted:
Sell Stocks, Buy Gold, The Trade of a Decade!
What was the SEC doing...?
But first, what the stock market and the economy are doing...
In the past two days, the price of gold has shot up more than $40. It's now near $1,000 an ounce.
Why? We don't know. Rumors, talk, noise...there's plenty of that. But as for why investors are suddenly putting so much money into gold, we'll have to wait to find out.
But should you buy gold now? The answer is simple: yes and no.
The Trade of the Decade is still buy gold/sell stocks. And the decade isn't over. If you have US stocks, this is a good time to sell. The Dow went up 63 points yesterday a weak bounce after several days of losses.
This is no time to hold stocks for the reasons we outlined yesterday.
But gold? Should you buy gold and hope to get rich when gold shoots up to $3,000 an ounce? A bad idea, in our opinion. You should buy gold to protect your assets. The risk is in the paper money...because they can create as much of it as they please. And they're under pressure now to create a lot. You buy gold as insurance against inflation, a dollar bust, a bear market in stocks and bonds, or a financial crisis. Gold is nature's money. It is better than manmade money. Because, with gold, what you have is what you've got. They can't artificially depreciate it or easily increase the quantity of it. That's why the feds don't like it. It won't support their cause du jour whether it is a war, a bailout, stimulus, health care, or whatever. Gold doesn't cooperate with the financial engineers. That's why it's a good thing to hold when you think the financial engineers are making a mistake.
But our view is that while the engineers are making a mistake, they're not very good at it even when they're making a mistake they're good at. Typically, they're pretty good at causing inflation. But now the credit bubble is deflating, not inflating. It will take them a few years before they become reckless enough to move prices up again. And then, they'll probably overshoot their objectives considerably.
In the meantime, there's no inflation to speak of...no dollar crisis...no bond bust. So we wouldn't expect the price of gold to soar...not just yet. That's the big surprise that this period of deflation will last longer than expected. Then, when it begins to seem permanent, inflation will suddenly come roaring back.
By then, most investors will have given up on gold...especially those who were speculating on it going to $3,000. It will go to $3,000, but only after speculators have dropped their positions.
So far, everything is happening just as we expected. After more than half a century of boom, we are now in a bust. People need to downsize...cut back...and live a little less large than they had in the boom years. That means...well...just what you'd expect.
Wasn't it just yesterday that we reported that Florida was losing population? People just aren't retiring like used to. Here's comes the evidence:
From The New York Times comes this headline: "Older US Workers Put Retirement on Hold."
The Times tells us that older people are continuing to work because they don't have a choice. They can't afford to retire. So they hold onto jobs, which is another reason it's so hard for the unemployed to find a job. Those who have them aren't giving them up. A Bloomberg report today, for example, tells us that more people are applying for job benefits than expected. Another tells us that millions of people are running out of benefits before they find a job.
Just what you'd expect, in other words. Here are some of the other things we expected:
1. Unemployment is still rising.
"Investors discouraged by US jobs report," says a headline at the International Herald Tribune. To make a long story short, August was a disappointment. More jobs were lost than expected.
We don't know how many jobs we should expect to lose. But we're in the downhill part of the credit cycle; we're bound to lose a lot of them.
2. Sales are falling.
That's another thing we would expect. People have to cut back. So...they do cut back. Sales go down. That means fewer sales and fewer jobs. No point in making things, shipping them and retailing them if no one is buying them, right?
3. What else would you expect? Lower house prices? Check. Higher savings rates? Check. More bankruptcies? Check. Falling prices? Check.
Isn't it nice when things work out "as they should"? Check. |
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Sell Stocks, Buy Gold, The Trade of a Decade!
What was the SEC doing...?
But first, what the stock market and the economy are doing...
In the past two days, the price of gold has shot up more than $40. It's now near $1,000 an ounce.
Why? We don't know. Rumors, talk, noise...there's plenty of that. But as for why investors are suddenly putting so much money into gold, we'll have to wait to find out.
But should you buy gold now? The answer is simple: yes and no.
The Trade of the Decade is still buy gold/sell stocks. And the decade isn't over. If you have US stocks, this is a good time to sell. The Dow went up 63 points yesterday a weak bounce after several days of losses.
This is no time to hold stocks for the reasons we outlined yesterday.
But gold? Should you buy gold and hope to get rich when gold shoots up to $3,000 an ounce? A bad idea, in our opinion. You should buy gold to protect your assets. The risk is in the paper money...because they can create as much of it as they please. And they're under pressure now to create a lot. You buy gold as insurance against inflation, a dollar bust, a bear market in stocks and bonds, or a financial crisis. Gold is nature's money. It is better than manmade money. Because, with gold, what you have is what you've got. They can't artificially depreciate it or easily increase the quantity of it. That's why the feds don't like it. It won't support their cause du jour whether it is a war, a bailout, stimulus, health care, or whatever. Gold doesn't cooperate with the financial engineers. That's why it's a good thing to hold when you think the financial engineers are making a mistake.
But our view is that while the engineers are making a mistake, they're not very good at it even when they're making a mistake they're good at. Typically, they're pretty good at causing inflation. But now the credit bubble is deflating, not inflating. It will take them a few years before they become reckless enough to move prices up again. And then, they'll probably overshoot their objectives considerably.
In the meantime, there's no inflation to speak of...no dollar crisis...no bond bust. So we wouldn't expect the price of gold to soar...not just yet. That's the big surprise that this period of deflation will last longer than expected. Then, when it begins to seem permanent, inflation will suddenly come roaring back.
By then, most investors will have given up on gold...especially those who were speculating on it going to $3,000. It will go to $3,000, but only after speculators have dropped their positions.
So far, everything is happening just as we expected. After more than half a century of boom, we are now in a bust. People need to downsize...cut back...and live a little less large than they had in the boom years. That means...well...just what you'd expect.
Wasn't it just yesterday that we reported that Florida was losing population? People just aren't retiring like used to. Here's comes the evidence:
From The New York Times comes this headline: "Older US Workers Put Retirement on Hold."
The Times tells us that older people are continuing to work because they don't have a choice. They can't afford to retire. So they hold onto jobs, which is another reason it's so hard for the unemployed to find a job. Those who have them aren't giving them up. A Bloomberg report today, for example, tells us that more people are applying for job benefits than expected. Another tells us that millions of people are running out of benefits before they find a job.
Just what you'd expect, in other words. Here are some of the other things we expected:
1. Unemployment is still rising.
"Investors discouraged by US jobs report," says a headline at the International Herald Tribune. To make a long story short, August was a disappointment. More jobs were lost than expected.
We don't know how many jobs we should expect to lose. But we're in the downhill part of the credit cycle; we're bound to lose a lot of them.
2. Sales are falling.
That's another thing we would expect. People have to cut back. So...they do cut back. Sales go down. That means fewer sales and fewer jobs. No point in making things, shipping them and retailing them if no one is buying them, right?
3. What else would you expect? Lower house prices? Check. Higher savings rates? Check. More bankruptcies? Check. Falling prices? Check.
Isn't it nice when things work out "as they should"? Check.
pls read..with an open mind
Written by Brian Heyliger
The Dollar's Doozy Days Are Over
Since March, perhaps the most obvious trade has been to take the short side of the U.S. Dollar.
However, the easy money's been shorting the dollar, and the next round of easy money will be made where nobody else is looking: buying the U.S. Dollar. Thats because quite frankly, the dollar is oversold and everybody hates it.
In an almost lockstep countertrend with stocks, the dollar has been plummeting since March. When you couple the
Oversold nature the greenback with the
Extreme pessimism toward the currency
You have a recipe for a sharp rally. A rally so strong that it should send the shorts running with their tails between their legs.
Just ask Aunt Wilma - everyone's proverbial aunt whose outlook on the market is consistently and without parallel when it comes to being wrong. Shes the aunt who wouldn't dare miss an episode of "Squawk Box," but hasn't a clue that IBM's ticker symbol really is "IBM." Everybody knows someone like this, and she's always on the wrong side of the market.
So... with Dollar Sentiment Index showing only 3% of traders bullish on the ole' greenback, rest assured Aunt Wilma thinks the dollar is still going down.
Now bear in mind that I think gold is in a secular bull market, which by correlation puts the U.S. Dollar in the "doomed" category. But understand this
The Dollar's status as the world's reserve currency didn't appear overnight, and it won't vanish overnight, either.
Even in a roaring bear market in the Greenback, there will be times when the bears have their hind-parts handed to them.
Just like they did last December, as you can see here
Now... to trade the dollar on the long side there are several things you can do.
You can simply buy a fund like the Rydex Strengthening Dollar Fund (RYSBX) - which will perform twice as well as the Dollar, or
You can simply buy the Dollar in the spot market if you're a Forex trader, or
You could short Gold if you're feeling really brave (which I don't recommend, as that trade could go very wrong very quickly).
However
Perhaps The Best Way To
Profit From A Rising Dollar
Is To Sell Stocks
It's no coincidence the peak in the Greenback back in March corresponded with the bottom in the S&P 500. There's a very real relationship - as with Gold - between stocks and the U.S. Dollar.
And with the S&P 500 as overbought as it was in October 2007 (we've had 6 consecutive up months), selling stocks stacks the odds in your favor by a landslide. That is what I told Market Trigger Alert readers to do last week, when we sold the S&P 500 E-mini.
I expect the see the S&P 500 well below 950, perhaps as soon as December. We're well positioned to profit off that fall... Are you?
Good Trading,
Brian Heyliger
EVEN the chinese government is promoting GOLD!..
The recent development of the Chinese government no longer restricting Gold and silver ownership and now actively promoting it is a very, very big deal (
see article reporting this here and see
this clip from Chinese television promoting silver - please remember that this item would not appear on Chinese television without explicit central government approval). To quote from the linked article:
"The Chinese are being converted from being the lowest per capita [G]old consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of [G]old is likely to exceed that of India, which has been for years the world's biggest [G]old market."
This will generate huge physical demand for Gold and silver. I am currently intermediate-term bearish on silver and neutral on Gold because I still believe we need another deflationary price wave of asset liquidation. However, this story is a longer term development that is wildly bullish for precious metals investors and owners.
The physical markets for Gold and silver are severely constrained. Those who say otherwise are dishonest or ignorant. Paper Gold and silver, which is not the same as Gold and silver at all, is plentiful. It is easy to buy the GLD ETF, a futures contract or some other paper proxy for actual physical Gold. I think these instruments defeat the purpose of Gold and silver investing and actually help to keep the price much lower than it should be. I do not advise paper Gold. Those who want paper investments should invest in Gold mining companies, but I think it is prudent to first secure some physical Gold as a portfolio anchor and insurance against paper defaults.
The development of the Chinese government actively encouraging physical precious metal investment is not just important because of the sheer physical demand this move will generate. It is also philosophically and politically important and is yet another sign post pointing to the end of U.S. Dollar hegemony for those who care to pay attention.
A government with a fiat currency that is backed by nothing but paper promises should be trying to get its citizens to despise Gold! Gold is the enemy of fiat currency regimes and always has been. America has been taught that Gold investing is kooky or weird and for "end of the world" types. This mantra has been repeated by the mainstream financial community over and over and Americans, in aggregate, have been brainwashed to believe it.
Why wouldn't the Chinese, who have an unbacked paper currency pegged to America's unbacked paper currency, promote saving money in Yuan to their people? Why wouldn't they tell their people how strong their banks are and how they can earn 5% or 10% on a long-term certificate of deposit? In short, why aren't they lying to their people about money as our government lies to us?
There aren't many reasonable options for this conundrum. They all center around one theme: the Chinese government wants more Gold and silver within its borders. Why would it want that? What is the point of the central government promoting an investment class that creates very few jobs and has little prospect for immediately growing the Chinese economy?
I believe China is preparing for a post-U.S. Dollar world and I believe they are planning to promote a precious metals backed currency in some form (whether their own or an international currency for trading purposes). I believe this is being done methodically and gradually by China and I believe it has grave long-term implications for the U.S. Dollar.
Though not good for the U.S. Dollar, a return to sound currency on any scale is a welcome development in my mind. Gold is money. Gold is a check on spendthrift governments that insist on Keynesian insanity. Gold stands in the way of those who believe increasing the indebtedness of a country is a way to grow or stimulate anything besides debt and increased central bank power.
While China has begun promoting real savings to their people, the United States continues to deny reality and promote toxic waste to its citizens, pretending that our Dollar is strong and our banking system is solvent. When demand for Gold and silver increases in the United States, our government conveniently stops making the retail coins they are legally bound to produce. The more popular these U.S. Mint coins become, the less our government wants to make them.
Here's a previous rant on this topic.
When stepping back from the day to day price swings, this is a big picture of an emerging economy and a declining one. It is not pretty. And please don't think I'm excited by the prospect of China gaining global power - I'm not. I wish it weren't so. American citizens need to buy physical metal in much bigger quantities than they have so far. Our government should be promoting physical precious metal investment and should be falling all over themselves to provide an unlimited supply of U.S. minted Gold and other precious metal coins. But alas, up is down and right is left in a fiat world, so all I can do is scream and yell in cyberspace to let off a little steam and hopefully let a few people know what's coming so they can prepare.
As an aside, many people have asked me about how to buy and store precious metals. I am going to summarize how easy it is in one long-winded paragraph!
You can buy $10,000 worth of Gold by buying ten 1 ounce coins and it is roughly the same physical size as a $10 roll of quarters. Why are people concerned about storage? If you can't find a safe place to put an object the size of a $10 roll of quarters, then you may have to consider paying for a safety deposit box or other storage facility. If you have hundreds of thousands of dollars to invest, well that's a different story (email me - let's do lunch!). I recommend government 1 ounce coins for novice investors (e.g., American Eagles, Canadian Maple Leafs, South African Krugerrands, Austrian Philharmonics) and they can be mail ordered with minimal shipping costs (may be cheaper than using a local coin shop but there's nothing wrong with comparison shopping for such a big purchase). I would buy whichever of these 1 ounce coins has the lowest price on the day you are ready to make a purchase and avoid "rare" or "special" coins and just go for the plain Jane cheapest 1 oz. government Gold coins you can find. I have used several dealers in the past and never had a problem with any of them but I like
apmex.com and
gainesvillecoins.com (no financial relationship with these firms other than as a customer).
Let's get physical along with China and restore some of the wealth destroyed over the past few years by replacing it with actual debt-free savings.
...just invest smartly...nobody has resources to earn all the money in this world.. investment instruments and opportunities aplenty all the times...eg. property, commodities, precious metals, wine, stocks, futures etc... Too bad.. I only know how to buy stocks...cheers !!!!
Move ur money out from stocks.. the stock market will fall
Park them into GOLD.. follow the trend..
u heard it first here.
DYODD
ozone2002 ( Date: 04-Sep-2009 11:21) Posted:
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my prediction is coming true :)
don't let ur money erode!!
ozone2002 ( Date: 05-Jun-2009 09:34) Posted:
Gold will reach US$1,000 very very soon..
print more money US! that's the way to make gold inflate! |
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normally,it cheong into the last 2 to 3 hour of trading day...in the NYMEX,,,always push the hardest at this NYMEX...we see later..but i be asleep....
and tonite dow ok,,,next wk will be another profitable week...
but how long more???anyoe guess???who drop wat bomb???
yes..u r right, but that is rare....but i stll bet it wont stay at 1000 or cross 1050 convincingly....we see.pls dyodd.
but i got this feeling of uneasiness that come Oct, something big going to burst...
It is not cast in stones.
Stocks n gold do not necessary have to go inverse way, there r instances in the past whereby both moved in tandem.
cheongwee ( Date: 05-Sep-2009 00:21) Posted:
| i am sorry, i was wrong, the dollar sink...wish gold luck...stock will have to come down...sooner or later... |
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i am sorry, i was wrong, the dollar sink...wish gold luck...stock will have to come down...sooner or later...
According to expert in kitco...in order for gold to cross 1050..and stay there to be convincing, the dollar must be 77...
and dollar at 77...that means the economy is in the back yard...very bad.....if economy in the backyard...all your stock will be in the toilet...
those gold bug are idiot..they dreamt of the worse case for the economy, just so they can profit from gold....we shd wish everyone well...
i have take prt in kitcoforum for gold...this is what i found out...gold bud as they are call are truly idiot, who wish the worse for their own selfish gain...
i dont thk ppl here are in gold doing trading, hope not.. with good data on the economy...the $ got no where to go , but up...and that is bad for gold...see just now what happen...gold was trying to push thrro..990..but good jod data out only dollar strengthen...gold now in retreat...
the GDP is solid, so all dat will most likely be ok....and if Oct and Nov come and go...no major incident...the $ will be 85...gold 700 to 800(est)
and this is good for stock, we will soar...those bought..if Oct and Nov smooth...aiyoyo....
mermaid will be 1.8...guocoleisure 1.5...and all your counter double...i pray tp god for all....
if going forward the data got to get better...the index head for 80 and abv...gold will collapse big time..we see...pls dyodd...
why gold is crises metal? look at the chart i copy fr CNN...
since 2003 gold goes up in an escalator but come down in an elevator..
hope this time it is different...gold is crises metal, only srock got hit then gold soar...see chart and compare or read the the link below fr CNN...
u want gold to soar, u pray your stock collapse big time, but now we are in a bull rally...
so u read and conclude yourself...let mrket do the talk...
if dollar index is head up to 80...gold will down big time..
it got to stay abv 1050 to convine me...
http://money.cnn.com/2009/09/03/markets/thebuzz/index.htm?postversion=2009090315
my prediction is coming true :)
don't let ur money erode!!
ozone2002 ( Date: 05-Jun-2009 09:34) Posted:
Gold will reach US$1,000 very very soon..
print more money US! that's the way to make gold inflate! |
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God or no god,
Holding so much gold, Fort Knox is already god, because they can keep holding tightly till it's very high, then sell some.
And when the price plunges enoughly, they buy it up again, then sell, then buy.
They can control and benefit from this cycle over and over.
Thus those who have no gold will suffer, god or no god. This had nothing to do with religion. This is common sense.
keepnosecrets ( Date: 04-Sep-2009 00:11) Posted:
It is just quite a common saying in Chinese. Crude way of interpretation is "the calculation of man cannot be better than the calculation of God". REN=Man, SHUAN=Calculate, predict, forecast. TIAN= Sky, heavens, Superior beings, Gods, and BU RU =Not better than.
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Just as u r saying "that is why they smart they are not selling like the Europe.. :, likewise, gold can up go above 1000.
Anyway, let the mkt talk by itself, as we are mere mortals with no divine powers, many things r not within our human perception. There is always 2 sides to a coin.
Also anyway, up also good (enjoy the profit or buy-up) , down also good (can buy more)
cheongwee ( Date: 03-Sep-2009 23:57) Posted:
US CB still holding 8000 tons of gold in Fort Knox...that is why they smart they are not selling like the Europe..
how can BB stand up to Fort Knox...it just sell 100 ton today ..gold go back to 700.. |
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Goodnight. But I am staying till I complete my positions in NYSE. Actually by this hour sleepy already, but this forum really keeps me awake.
cheongwee ( Date: 04-Sep-2009 00:11) Posted:
thanks keepnosecret for your translation....good nite richtan and keepnosecret...thanks richtan for your chart...hope you and your chart are right...
i got more to gain...
tomolo another penny day...hope everyone huat ahhhhhh |
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thanks keepnosecret for your translation....good nite richtan and keepnosecret...thanks richtan for your chart...hope you and your chart are right...
i got more to gain...
tomolo another penny day...hope everyone huat ahhhhhh
