There is an old story about a fellow who discovers the power of compounding. He puts $100,000 in the bank at 7% interest and has his body frozen for 50 years. When he awakens, he runs to the phone to call the bank to see how much his account is worth, and the operator asks that he deposit $1,000 for the call. Well, we don't see many pay phones these days, but the threat of inflation suddenly presenting you with some surprises due to the current "stimulus" program is very real.
The devastation wrought by an implosion of debt during the latter part of 2008, along with the Obama victory, has produced what may be the greatest investment opportunity in the last 100 years. Don't be fooled by the media hype and deceit dished out by Wall Street and the Feds. You can learn to identify the best opportunities on your own with a very simple technique called "comparative strength and weakness." I will reveal how to apply this tool. But first, here is what comparative strength & weakness analysis is telling us to expect from today's markets.
First - Buy Gold!
Gold is a currency. Gold is real money, but it's unique from all the other currencies. All currencies, with the exception of gold, are fiat currencies. They are synthetic. Over time, they all fall, but at different rates. This can give you an illusion of strength when one currency is not falling as fast as the rest. Gold has held its value and has proven its merit during the panic liquidation we saw in 2008. Yes, gold sold off. As the debt markets imploded, investors and money managers were forced to sell anything and everything, regardless of value, to raise cash in order to pay off loans. Gold was not exempt and that presents you with a major buying opportunity.
Even accounting for the recent rebound in the popular averages, as of the end of April 2009, the Dow Industrial Average is still off over 44% from its October 2007 high at 14,279. The S&P 500 has lost 46% during the same period. On the other hand, gold has managed to appreciate by nearly 20% during the same time frame.
How you can use comparative strength and weakness analysis to learn what to buy and what to sell. When one asset class holds up better than the rest, it is considered comparatively strong, and it is the best place for you to go with your money.
The recent bounce in the U.S. dollar - which is due to foreign investors and institutions liquidating foreign investments priced in foreign currencies, selling those currencies, and then buying dollars in order to pay off U.S. dollar denominated loans - has had surprisingly little negative effect on the price of gold. As mentioned above, while the stock markets have been devastated and many commodities have been depressed, gold is still selling for more than it was at the stock market's all-time high. Gold's "comparative strength" is sounding loud and clear that you should be holding and buying gold.
Which gold and silver miners give you the best chance at doubling or tripling your money in the next year? Recommended buys in Professional Timing Service.
Gold - Is there a down side?
One argument against buying gold is that due to the debt crisis and a failing economy, we are going to experience a long period of deflation. There are several problems with this rationale.
Most simply, if we were going to see a drawn-out period of price deflation, gold would be selling for less than $500 rather than $900. Although the prices of all asset classes, including commodities, were driven to extreme lows due to recent forced liquidation as the world deleveraged, gold has more than held its ground.
With the exception of gold, many commodity prices are now below their cost of production. Oil under $55 creates supply destruction. Production will not continue at a loss, and current low prices along with the unavailability of credit for future exploration and development ensures future commodity and raw material shortages.
Shortages equate to higher prices. The media has not filled you in on the fact that recessions see economic activity decrease, but not stop entirely. There will still be demand. Energy demand, for example, will not cease. Everyone will not walk to the grocery store. Even with the most severe estimates for unemployment during 2009, there will still be 144 million paying jobs. Nevertheless, supplies of raw materials will fall much faster than abatement in demand. This situation ensures higher commodity prices, and gold will be the leader.
The Federal Reserve and Treasury are pulling out everything in their kit bag to stimulate the economy. This may, indeed, work for a time. The economy may temporarily improve, or at least stop deteriorating. The problem is that they are trying to save an alcoholic by feeding him whiskey. The government is determined to increase debt and flood the economy with cash, regardless of the consequences. If a $1.7 trillion deficit doesn't do the trick, they will borrow and spend again and yet again if need be. The Keynesians are running the show, and their behavior is 100% predictable. They are in panic mode, and the ultimate cost will be a depreciation of the U.S. dollar.
In the face of declining commodity supplies, this will force commodity prices higher. This is readily apparent in the case of gold, which is leading the pack higher on a comparative strength basis. There is still a narrow window here to accumulate gold. You must not wait too long. Soon, shortages will hit home, inflation will accelerate, and the next leg in the commodity bull will fire up on all engines. There will not be a new bull market in top stock for 2010 (see below), but there will be a resumption in the bull market for gold.
Subscribe now, and I will send you our most recent study "Gold Expectations." This report discusses why you need to consider gold in your portfolios. We will show you how you can apply the principle of comparative strength and weakness in your investment strategy to find those gold stocks for 2010 with the greatest potential.
There are three ways to take advantage of the next leg in the gold bull market - buy physical gold, buy gold ETF's (paper gold), or buy mining shares.
It has become difficult to buy physical gold. I prefer to buy bullion coins like Krugerrands, American Eagles, Canadian Maple Leafs, or Austrian Philharmonics. However, the allure of physical gold and the dire future in store for the dollar and the economy has not been lost on large investors. Merrill Lynch recently announced that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on purchasing gold bars in their accounts. The demand for physical gold has driven premiums up and delivery times out. I believe everyone should have some physical gold, and all three approaches (including buying paper gold) are discussed in our "Gold Expectations" report. This booklet is included with all subscriptions.
The second way to invest in gold - and discussed in the "Gold Expectations" report - is to buy gold mining companies. They are not immune to the problem of obtaining credit when there is little to be found. Rob McEwen of Goldcorp fame recently said that finding financing was more difficult than finding gold. Nevertheless, the more promising companies are attracting investors. Your subscription to and "Gold Expectations" will reveal what specific mining stocks 2010 you should avoid, which you should consider buying now and at what price, and which mining shares should be put on your radar for future purchase.
"Gold Expectations" will also reveal a wonderful little indicator that will tell you when the gold mining sector is overpriced and when it is underpriced. As gold shares were hitting their extreme lows in October and November of 2008, this simple model was giving us its most bullish readings EVER! Since then, the XAU has doubled and many of the gold issues on our list have tripled and more. One flew from a low of $0.41 to $3.80 in less than eight weeks.
We update all of our indicators and present our current analysis in each issue of the Professional Timing Service newsletters. I can't forecast what our models will be saying in the future; but as we go to press with this flyer, our work is pointing to new highs in gold during 2009. Depending on how economic forces and world events unfold, we could see those highs sooner rather than later in the year. New highs in gold this year is a given.
My models are forecasting that the Philadelphia Gold and Silver Index (XAU), which reflects the activity in precious metal mining stocks, will reach 300 when gold hits new highs. That is an increase of 360% from the October lows when we were seeing our most bullish readings and an increase of over 150% from current levels. The outlook for select gold and silver stocks has rarely looked better.
Why don't you take this opportunity to find out more about Gold and Energy
by giving yourself Professional Timing?
Everyone needs to own some gold, and you need to consider gold in your portfolio now. Our report "Gold Expectations" will give you the tools to assist you in finding the best gold buys. The report further details just why the Obama victory and debt deleveraging has created a rare entry point into the gold market and just how you can exploit it.
With the fundamentals and technical aspects as bullishly aligned as they are presently, buying gold at $900/oz. is as close to a slam dunk as you will ever find in the markets. Buying gold while egregious monetary and fiscal programs are being instituted is almost like buying fire insurance after your house burns down. There is still some time, but no one knows how much. The bargains will not last forever. Once gold breaks to new highs and you begin seeing $50 to $100 daily up moves, it will be too late. If you do nothing more than pick up a few shares of Goldcorp (GG-NYSE) under $28.00, you should fare well by this time next year.
Second - Buy Some Crude Oil!
The second major opportunity we are facing is investing in other commodities - including crude oil - while they are still selling below their cost of production. Gold is showing the way, and crude oil will follow. It always does. My technical work is not yet as bullish on crude oil and the overall commodity complex as it is on gold, but the green flags are starting to appear. You will read about all the technical and fundamental developments as they emerge in our monthly and mid-monthly newsletter publications, as well as in our Tuesday and Thursday online updates.
New Buys in Energy Trusts and Stocks!
Third - Don't Buy Bonds!The third opportunity we are facing is not so much an opportunity as a strong warning. Don't buy bonds. Bonds at today's prices are the absolute worst investment on the Street. Yes, I know that the Fed has been driving interest rates lower, and the bond market has benefited. For several years, my advice has been for you to only approach the bond market on a trading basis. Do not invest long term, fixed income money in bonds. This approach has worked out quite well for our readers. We offer all subscribers access to the signals from our bond model as well as what specific bond fund trades you should take with each signal.
"Your information is what I was looking for. After one week, and after I have read a part of the handbook as well as the actual information, I admire your advice and the clarity of the recommendations." P.V. 1/10/09
A further caveat - you must be wary of chasing yield. This is a difficult environment for income. By forcing rates this low, the Fed and the Treasury are encouraging the public to take enormous risks in the search for paltry yields. DO NOT FALL INTO THIS TRAP! You will learn how best to approach the yield problem and how to buy Treasuries, including Treasury Inflation Protected Securities (TIPS), in the safest investment account on the planet. Also, you will pay no commissions or transaction costs. All subscriptions will receive a copy of "Buying Treasuries in the World's Most Secure Investment Account" absolutely free.
Incidentally the technical behavior in the TIPS this month is pointing strongly to an imminent resurgence of inflation. This dovetails nicely with our expectation for much higher gold prices this year.
Last - Get The Heck Out of the Stock Market!
This final opportunity, like the last one, is negative. For the last two years, our brochures and newsletters have been warning folks to get out of the top stocks market for 2010. If you did nothing more than that, you would have not wasted your time in reading them. The forced liquidations and selling panics are not over. There is a lot of bad debt yet to be settled.
Corporate earnings will fall. Optimistic estimates put 2009 earnings for the S&P 500 at just over $28.00. Even after a smashing 46% decline, the S&P is still a bearish 30 times earnings. The average PE is 15 times, which would put the S&P at 420 based on 2009 earnings. If that isn't bad enough, the average never happens. There is always overshoot; and at 12 times 2009 projected earnings, the S&P would be close to 330.
Bear market rallies aside, there is a lot more potential on the down side for the averages than on the up side. The bear market will not be over until everyone has sold their stock. Unless you are a trader, you are not going to make any money in financial/paper assets for some years to come. We offer several trading models tuned to the stock market's popular averages that are available to all subscribers. Our Nasdaq Slow Tracker, which is included with all subscriptions, has given our readers invaluable guidance with the twists and turns in this market.
Our cyclical work began indicating that an "Obama rally" would spring from lows in early March. This work was followed by solid buy signals from my timing models. The rally is on, and I believe it will last through the summer. However, the market does not care much what I believe. This will not be easy money. The rally will struggle on until my timing models generate sell signals, at which point subscribers will be immediately alerted via our online updates and in the market letter.
Nevertheless, you can learn to navigate the stock market in 2010 if you have the proper technical tools. One year subscriptions will include "A Handbook for the Perplexed." It will not reveal how to calculate our proprietary models, but it will teach you how to formulate and apply other important tools so you can learn to manage the markets better on your own. Learn to be your own advisor.
"Dear Mr. Hesler, Happy holidays and a happy New Year. I really appreciate your insights and wisdom. Thank you again. H.C." 12/31/08
What you will receive with your subscription to Professional Timing Service:* Ongoing analysis of the gold market, including bullion, paper gold ETF's and mining shares.
* Monthly newsletter and mid-monthly updates.
* E-mailed mid-weekly updates on Tuesday and Thursday.
* Exclusive access to our "Special Reports" folder that includes all of our current studies.
* Signals telling you when to be in and out of gold funds, including the Rydex Precious Metal Fund.
* Objective signals on trading the U.S. Dollar Index, bonds, and the Nasdaq.
* Income-producing energy investments that put the dollar to work for you rather than against you
* Sane and sensible information that will assist you in managing your financial future.
Also, I will include "Buying Treasuries in the World's Most Secure Investment Account." Subscribers have told us that this report alone is worth the price of the subscription.
Plus, if you subscribe for a year, you will receive a copy of "A Handbook for the Perplexed." This booklet reveals my favorite technical tools and techniques. They are all quite simple to keep, but they are very effective.
Perhaps most important, each monthly letter includes an updated list of what top stocks for 2010 to buy now and exactly what price you should pay for them.
Why not take a minute to join us now, and yourself Professional Timing.
The second major leg of the millennium's great gold bull market is getting under way, and gold should far outperform other asset classes this year and next.
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