Martin D. Weiss takes a closer look at the U.S. stock market and how it has been consistently slumping. Dr. Weiss examines the four megaforces backing the global economy and helping it create momentum.
The Fed has pumped in hundreds of billions in fresh cash, slashed its discount rate three times and cut the Fed funds rate twice. But despite this, the U.S. stock market has consistently and persistently fallen woefully behind other markets and commodities month after month, year after year.
Between the first day of trading of 2002 and the close of business last Friday, November 16:
- Gold has risen 181%
- Silver is up 242%
- And crude oil has surged 393%
Investors who put their money into foreign markets and natural resources have made out like bandits, while those in the Dow have been left behind in the dust. But even the spectacular gains made in country ETFs and natural resources pale in comparison to the profits made by investors who bought shares in many of the companies that develop and produce those resources.
Even for latecomers, this megatrend can start creating new riches almost immediately. And unlike previous cycles that came and went quickly, this one is driven by four mega-forces that show no sign of ebbing. Instead, they show every sign of gaining momentum.
The first two mega-forces are so fundamental and so long term, it could take decades to reverse them, even in the best case scenario. The next two are more immediate and more fluid. And right now, all four are converging to create an even greater gap between the U.S. stock market and other investments.
Mega-force #1
The global population explosion is fueling a parallel explosion in the demand for resources. The currencies of emerging markets are among the strongest in the world. Just last week, China's industrial production surged 17.9% from last year. That's over nine times more quickly than the U.S., which was up just 1.9% in a similar period.
Mega-force #2
Global warming now threatens to destroy a larger portion of the world's crops with floods, droughts and other disasters.
Mega-force #3
While emerging markets and natural resources are being propelled forward by rapid growth, the U.S. economy is being held back or even dragged down by the housing bust, mortgage meltdown and credit crunch.
The main problem: Most consumers and corporations in America are addicted to debt. And now, a larger and larger percentage is getting cut off, with serious withdrawal pains.
The best evidence: The Fed's just-released bank survey, which demonstrates just how severely lenders are now tightening their credit standards.
Mega-force #4:
In previous cycles, when the dollar plunged, the Federal Reserve would almost automatically intervene to help slow the trend. The Fed is doing precisely the opposite now. It's running the money printing presses at full speed, flooding the economy with cold cash, and making it plainly clear that it virtually guarantees a growing economy.
"But for an economy already slammed by the worst credit crunch in a generation, it's not enough to prevent a recession. And for world commodities already surging in cost, it's too much, too soon driving them even higher. Bottom line: The massive wealth shift from traditional investments like Dow stocks to alternatives such as emerging markets, commodities and commodity stocks is just beginning," says Dr. Weiss.
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About MARTIN WEISS & MONEY AND MARKETS
Martin D. Weiss, Ph.D., founder and president of Weiss Research, Inc. and a leading advocate for investor safety, is a nationally recognized expert on domestic and international financial markets. With more than 35 years of experience, including many years in Latin America and Asia, Dr. Weiss has helped empower millions of investors to make better financial decisions through his monthly Safe Money Report and daily Money and Markets.
Dr. Weiss' keen understanding of foreign markets and the global economy has earned him a reputation for thoughtful, in-depth analysis that investors can rely upon to make informed financial decisions. Regularly called upon by the media for his independent investing guidance, he has been featured in publications nationwide, including The Wall Street Journal, The New York Times, Chicago Tribune, Investor's Business Daily, and Forbes and has also appeared on CNN and CNBC.
Dr. Weiss holds a bachelor's degree from New York University, a Ph.D. from Columbia University and is fluent in eight European and Asian languages.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin 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. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.