Larry Edelson discusses the bull market conditions and the resources that are contributing to it. Mr. Edelson takes a closer look at the declining U.S. stock market.
Gold appears to want to test support at the $800 level, perhaps even a tad lower. Oil may push down to the $88 area. When looking at the CRB Index, there could be a decline to about the 790 to 801 level. And China is going to let off some steam, possibly declining as much as 25 percent. The rest of Asia could follow suit.
In just the past three months:
- Oil has surged from $70.74 to as high as $98.62, a 39.4 percent gain.
- Gold has jumped from $679.70 to its recent high of $848, a 24.7 percent gain.
- The Commodities Research Bureau (CRB Index), which covers 16 commodities, has leapt from 735.68 to as high as 863.92, a 17.4 percent move higher.
- China's Shanghai A index has rocketed higher, up over 92 percent so far this year.
Important note: The U.S. stock markets could fall more, because of the subprime mortgage crisis, and for the very real reason that the U.S. economy is weak. It's impossible to say for sure how long these fall backs could last. But it would be no surprise if it were to end sooner than later.
Very sharp corrections can be sudden, swift, and severe, but often can serve as the foundation for the next leg up. That's how bull markets tend to act. Riding bull markets to glory isn't that much different than riding a real bull in a rodeo. In both cases, the bull wants to throw the rider off its back as quickly as possible. If bucked and thrown off, not only will the rider get hurt, he's also not likely to get back on anytime soon.
In the longer term, natural resources and Asian shares could have more upside.
- For gold to equal its 1980 high in today's dollars, it would have to soar to more than $2,200 an ounce.
- Platinum would have to spike to almost $3,000 an ounce.
- Sugar would have to multiply twenty times over and rocket to over $2.30 a pound.
China's market could correct in the short term, but it's very possible it will shift upward.
Consider the following:
In China, the market value of freely traded shares is $643 billion, just 20 percent of China's gross domestic product (GDP). Compare that to the U.S. where the market cap of all stocks in the U.S. is 152 percent of GDP.
China, and much of the rest of Asia, could very likely go much further on the upside. And there are three billion new consumers in Asia, nearly half the world's population, modernizing and being ushered into free markets.
"Three steps to consider right now:
- 1. Stay out of the U.S. stock markets, except for select natural resource stocks. The U.S. markets can be vulnerable to the downside.
- Avoid Treasury and corporate bonds. Bonds are sitting ducks, and the declining dollar only compounds the problem.
- Hang on to gold (and other natural resource positions)," Mr. Edelson suggests.
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LARRY EDELSON & MONEY AND MARKETS
With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research's customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.
Mr. Edelson is also a regular contributor to the daily e-letter, Money and Markets. Recognized as an expert in precious metals and natural resources, he is often called upon by the media for his investing views. Mr. Edelson has been featured on Bloomberg, Reuters, and CNBC as well as The New York Times, New York Sun, and Marketwatch.com.
Mr. Edelson holds a B.A. degree from Columbia University.
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.
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