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Neither you nor I can know with certainty what the future will bring. But at this particular juncture, we don’t have to poke around in hidden crevices of the economy. Nor must we stretch our imagination to conjure this or that scenario. To get a pretty good idea of what’s likely to happen next year, all we have to do i... |
I have assembled our Weiss Research team of analysts to lay out for you, step-by-step, what those consequences are likely to be in the coming year — 11 startling forecasts for 2010. |
Mike Larson is one of the only analysts in the country who accurately predicted both the real estate bust in 2005 and the recent real estate bottom in 2009. Today, he is not only our resident expert on real estate, but also our chief Fed watcher, interest rate specialist and analyst of the entire financial sector. |
Larry Edelson, joining us from Bangkok, Thailand, was among the very first to predict that gold would one day exceed $1,000 per ounce, and now that day has come. But Larry’s gold forecast is just one of many that illustrate a special skill he brings to as a Director of the Foundation for the Study of Cycles: Timing the... |
Claus Vogt, joining us today from Berlin, is the man I’ve personally selected to make the picks — and give the signals — for one million dollars of my own money, based not only on his own years of trading experience but also on the input from our entire Weiss Research team. |
I can think of no better person to help us forecast the direction of the global economy and global stock markets. |
I hasten to add that forecasting what we believe is likely to happen in 2010 is strictly the first part of our program today. During the second, equally important, part we will give you actionable guidance — investment ideas you can USE to take advantage of the profit and income opportunities that flow directly from ou... |
Ron Rowland, our specialist on ETFs … Nilus Mattive, our specialist on dividend stocks … and Bryan Rich, our foreign currency expert. |
From Southeast Asia, we have our Asia stock specialist Tony Sagami, who just completed a reconnaissance tour of Indonesia and … from Southern South America; we have Sean Brodrick, reporting on his visits to resource companies in Chile and Argentina. |
Plus I have invited a special guest, Monty Agarwal, one of the nation’s leading experts on hedge funds, sovereign wealth funds, and global money flows. |
Thanks to their participation in this special summit, you benefit from some of the most timely, in-depth and fascinating research in the world today. |
Two of the nation’s largest brokers, Bear Sterns and Lehman Brothers … the nation’s largest mortgage lenders, Countrywide Financial and Fannie Mae … the nation’s largest savings and loan, Washington Mutual … and the nation’s second largest commercial banks, Citigroup. |
And next, look at the utterly massive government reaction to those failures that we have uncovered: Fed Chairman Bernanke has responded with the most rapid acceleration of monetary expansion in U.S. history. |
Before the Lehman Brothers collapse last year — it took nearly 14 years for the Federal Reserve to double the cash and reserves at the nation’s banks. |
But after the Lehman Brothers collapse, it took Mr. Bernanke’s Fed only 112 days — barely four months — to double the monetary base. In other words, he accelerated the pace of bank reserve expansion by a factor of forty-five to one. |
Meanwhile, Treasury Secretary Geithner and his predecessor responded with the largest bailouts of all time, helping to triple the size of an already-bulging federal deficit. |
Claus Vogt: Combined, the monetary and fiscal stimulus engineered by the Fed and the Treasury Department represents an estimated 30 percent of the nation’s gross domestic product. That’s three times more than during the Great Depression. And that’s ten times more than that in the average postwar recession. |
Martin: It sounds like science fiction. |
Mike: I wish it were. But it’s real. |
Martin: Give use your first forecast for 2010. |
Forecast #1 The Federal Reserve will not relent in its money printing madness until it’s absolutely forced to do so. |
Mike: Because it’s in black and white — right in the Fed’s own statements, month after month. It’s what they told us they’d do. It’s what they’re doing. And it’s what they’re telling us they’re going to continue doing. We also know Bernanke will pursue this policy because of the persistence of those forces. We’ve had 1... |
Martin: An obvious excuse for the Fed to continue printing money! So the pivotal question for 2010 is this: When and how will Mr. Bernanke shift gears? But first, let’s focus on the immediate consequences of the Fed’s money printing. |
Forecast #2 A continuing, virtually unstoppable long-term decline in the dollar. |
Yes, we will have dollar rallies. And yes, the dollar rallies will be sharp. But they will be traps. After each rally, the dollar will consistently resume its long-term decline. Mr. Bernanke is creating massive new supplies of U.S. dollars, ad infinitum. So he’s naturally diluting their value. |
Martin: But so far, the U.S. dollar’s decline has been orderly. |
Larry: I wouldn’t use the word orderly. Instead, I’d use the words “messy” and “volatile,” and that’s only going to get worse in 2010. 2010 will also bring louder voices demanding that the dollar be replaced as the world’s dominant reserve currency. Most important, at some point, the pressures on the dollar could reach... |
Martin: … and those lows are already very close. |
Larry: Yes. Against the euro, the dollar is just 4 euro cents from its lowest level in the euro’s history. When that low is broken decisively, it could set off a dramatic wave of panicky dollar selling here and in the Euro zone. Against the Japanese yen, the dollar is now just 2.5 yen from its lowest level of all time.... |
Claus: Of course. Investors hold dollars all over the world — not only in the Euro zone and Japan, but also in Southeast Asia, South Asia, the Middle East, and the Americas. Those investors are not only central banks that may still have some political motives to refrain from selling … but also private corporations and ... |
Martin: Right. But won’t that kill European export industries? |
Claus: Yes, and periodically here in Europe, we will gripe and make noise about how unfair that is. But we cannot complain too loudly. Remember, we also benefit from all this free money. We also have very shaky financial systems. We also have been rescuing our banks and letting our budgets go to hell in a handbasket. M... |
Martin: Because they have been doing pretty much the same thing as the Fed is doing now … and they’ve been at it for over TWENTY years. |
Monty Agarwal: Gentlemen, I know I’m new here and you wanted to save me for later, but there’s another factor — a factor so pertinent to this discussion … do you mind if I interject it here? |
Martin: I don’t mind at all. |
Monty: It’s the sovereign wealth funds, the giant national pension funds, which I track avidly. Not only have they grown dramatically in size — to as much as 3 trillion dollars — but with the dollar decline, they are now becoming far more aggressive in shifting out of the dollar and moving into alternatives — other cur... |
Martin: What happens next, gentlemen? |
Larry: Let me answer that. Let me tell you what I already see happening among many investors here in Asia … and what could soon become a sweeping, worldwide phenomenon all over the world in 2010. |
Forecast #3 The entire concept of “RISK” will be REDEFINED by global investors. The new definition will be: HOLDING U.S. dollars and dollar-denominated assets. |
First of all, more and more investors perceive U.S. dollars — and anything denominated in dollars — as high-risk investments. They don’t really care how conservative the instrument is or how strong the company may be. All they see is that it’s wrapped in greenbacks, and they paint everything associated with those green... |
Martin: Which makes them anxious to dump dollars. |
Larry: Not just gold, but also silver, copper and other commodities. Not just commodities but also other tangible assets like real estate. Not just tangible assets, but also paper assets that provide a stake in those tangibles … including common stocks! |
I call this “the monetization of assets” — the phenomenon whereby other assets of many shades and colors become substitutes for the traditional role money plays as a store of value. That’s the inevitable result of the Fed’s efforts to flood the economy with devalued money. |
Claus: And that’s why they’re buying gold. |
Martin: Which leads me to this question we often get from our readers: Won’t central banks prevent — or at least moderate — the rise in gold by simply unloading some of their gold hoards on the marketplace? |
Forecast #4 Gold will reach $1,500 if not higher as central banks help drive up its price with massive new buying of their own. |
Martin: When do you see this beginning in a big way? |
Larry: It already is! China is actively buying gold, boosting its gold reserves from 600 metric tons to 1,054 metric tons — a 76 percent increase since 2002. India has just spent a whopping $6.7 billion to scoop up 200 tons of gold from the International Monetary Fund. |
Martin: But how big is this in the context of the broader global market for gold? |
Larry: Are you kidding? It’s equal to roughly 8 percent of all the gold mined in the entire world each year. Meanwhile, in addition to central banks, you’ve got a rush of private investors buying gold. Demand for gold investment products like ETFs soared to a record 1,732 metric tons of gold in the third quarter, $55 b... |
Martin: Now, 27 percent of our readers said gold could rocket to somewhere between $1,500 and $2,000. And nearly 8 percent said $2,000 or higher. |
Larry: Well, they’re right on, in my opinion! But it won’t be a one-way street. Before going that high, an ounce of gold could dip below $1,000. If it does, it will be a huge buying opportunity, a true gift for gold investors. I’ve said this many times before and I’ll say it again: Every ounce of gold bullion you can b... |
Martin: Claus, what about oil? |
Forecast #5 The overwhelming majority of oil producing nations will demand that the U.S. dollar be replaced as the pricing standard for crude oil. |
Martin: In past OPEC meetings, the debate was always about how to lower or raise the price of oil. |
Claus: That will not be the big issue in 2010. More than ever before, oil will be driven by free market forces, and more than ever, the rise in oil prices will be tied to the fall in the U.S. dollar. As the dollar falls, the demands to replace the dollar will get louder and more unanimous. And as those demands grow in ... |
Martin: Gentlemen, please be more specific about what that will do to the price. |
Larry: Here’s my forecast, based on my work with the Foundation for the Study of Cycles: In 2010, the price of oil will move into a new, higher, and broader trading range — $110 on the high end, $70 on the low end. |
Martin: So you don’t see oil making new highs in 2010. Why not? |
Forecast #6 The U.S. economic recovery of 2010 will go down in history as one of the weakest and shortest in 100 years. |
Mike: Never forget: There are currently 27.4 million unemployed or underemployed workers in the United States. |
Never forget: Banks are clamping down on credit cards, tightening standards for the last nine quarters in a row, according to the Fed’s own surveys. Also never forget that more than one in five U.S. homeowners has lost all their equity in their home and is upside down on their mortgage. |
Plus, now you throw rising gasoline prices and surging heating oil prices into the mix and you’re left with a perfect storm for a very large proportion of American consumers: No job security. No credit. No home equity to tap. And to add insult to injury, rising energy bills. |
Forecast #7 The economies of Brazil, China and India will grow up to four times faster than the U.S. |
For the most part, their consumers are not threatened by record unemployment, are not overly reliant on credit cards or home equity as a source of spending power … and are not directly impacted by rising energy. |
In the U.S., even if the recovery holds until the latter part of 2010, I don’t think you’ll see growth of more than a couple of percentage points. Meanwhile, Brazil will grow by nearly 5 percent, India by 7 percent and China by almost 9 percent. |
Claus: Based on official government sources, which, in at least two of those countries, have often understated the actual growth. |
Martin: Tony, can you help us there? By the way, I understand you’ve now moved back to Asia permanently? |
Forecast #8 Stocks in countries like China, India and Brazil will rise up to three, four, even FIVE times faster than the S&P 500. |
The immediate reason is quite simple — China’s $586 stimulus plan is working like a charm. China didn’t have to borrow a dime to finance that stimulus. And unlike the U.S., which used trillions to buy out worthless sub-prime debt, China spent its stimulus money on highways, airports, dams, utilities, bridges, shipping ... |
Larry: Look. This is not just about one year or even one decade. We are in the first years of one of the most powerful mega-cycles in the history of civilization. |
Martin: I know exactly what you’re talking about — the work you’ve done over the years with the Foundation for the Study of Cycles, which you presented to us in an earlier event this year. |
Larry: For those who may have missed it or who need to refresh their memory, could you run some key highlights of our session with the Foundation’s Director of Research, Richard Mogey? |
Highlights of Our Event with Richard Mogey, Director of Research for the Foundation for the Study of Cycles. |
The time is the 1930s, and we’re back in the Great Depression. President Herbert Hoover could not have dreamed of a more adverse environment to begin planning his re-election campaign — not even in his worst nightmares. |
The public and the press demand to know who or what was to blame for this catastrophe. To survive, the Hoover Administration would have to give them answers. |
But the president knows that just any answer will not suffice. Only a credible, exhaustively documented, scientific answer could have a chance of restoring the public’s faith in his administration and in the U.S. economy. |
And so, Hoover turns to a scientist he trusts — a Chief Economic Analyst in the Hoover Administration … named Edward R. Dewey. |
Later Dewey will create a nonprofit foundation. And with this foundation he and his successors will continue a 78-year quest for the mysterious forces that drive the economy and investment markets, joined by many of the best minds from Harvard, Yale, Princeton, Oxford, Temple University, Western Reserve and other globa... |
A former Vice President of the United States — General Charles G. Dawes — joins Dewey’s Foundation. So does Senator Everett M. Dirksen. |
Richard Mogey: Dewey discovered a very simple reality — that in modern, industrialized nations, economic expansions and contractions occurred in regular, PREDICTABLE patterns. |
Larry: In regular waves — CYCLES! |
Larry: I’ve put together a short list of some of the most outstanding calls in major markets. |
Richard: Forecasts of key turning points. |
the great Crash of 1987 in the stock market. |
Richard: These were all very major turns in the history of markets. |
Congratulations, Richard. This is why Weiss Research has entered into an exclusive, strategic alliance with the Foundation to help give our readers direct access to this valuable timing information. |
Richard: Thank you! We also have a much longer, 500-year geopolitical cycle — a major power shift from East to West or from West to East, which is the case now. |
Martin: That was fascinating, Larry. Congratulations again on introducing us to the Foundation. What I find most remarkable about all of this is not just how accurate the Foundation has been in timing the market, but also how broad their vision is of the future — particularly the 500-year cycle of the massive power shi... |
Larry: We are just in the very early stages of that shift. And clearly, it’s not just about a shift of power. It’s also a shift of capital, wealth and investment opportunities. It’s a wealth shift from economies that are bogged down in debts, deficits — and denial of the dire disasters all around them — to economies th... |
Martin: What does that mean for global stock markets in 2010? |
The S&P 500 could rise 20 percent further in the first half of 2010. But as investors begin to realize how weak the U.S. recovery truly is, it’s likely to give up AT LEAST half of those gains in the second half. |
So by December, if the S&P is still up 10 percent for the year, it will be a minor miracle. In contrast, don’t be surprised if major foreign markets are up by 30 percent, 40 percent or even 50 percent for the year … three, four or even five times more than the S&P 500. |
Martin: Mike, you told me before this conference that you had some strong numbers that illustrate how this has happened in the recent past. |
Mike: It’s actually quite consistent. When stock markets are rising, most foreign markets outperform by HUGE margins. So far this year, for example, the S&P 500 has risen by 21 percent. China’s Shanghai Stock Exchange Composite Index is up 75 percent, beating the S&P by factor of 3.6 to one. India’s BSE Sensex index is... |
In 2007 overall, the foreign markets did equally well — India up 65 percent, Brazil up 72 percent, and China up 110 percent. But since the S&P rose only 3.5 percent, the relative outperformance is far greater: India, almost 19 times better. Brazil almost 21 times better. China thirty-one times better! |
So clearly, a forecast of three, four or five times outperformance in 2010 is not at all unreasonable, given the historic precedents. |
Martin: Just remember that this is a double-edged sword. Volatility to the upside comes with volatility to the downside. Would anyone venture a guess as to which will do the best of all? |
Forecast #9 The best performing stock markets in 2010 will include Indonesia, Thailand and Vietnam. |
I just completed a five-day fieldtrip to Indonesia, and I was blown away by what I found. Indonesia has the fourth largest population in the world and is growing like a weed. It just reported that its economy grew by 4.2 percent in the third quarter and that’s on top of 4 percent in Q2. That makes it the THIRD fastest ... |
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