What are the headwinds today for the commodity bull market – and how can you best invest your money?
I’ve been accused of answering these two questions in entirely too broad and much too narrow terms.
For me, the questions are basically one in and the same. My thesis as a commodity investor is not borne out of idolatry or love for gold or oil.
I look at the entire global market for everything, and in doing so it becomes perfectly clear that no other market looks as promising or potentially profitable as the commodity market.
And I try to say so objectively. Every other market out there seems inextricably and detrimentally tied to the whims of a politician or central banker somewhere.
No central banker alive desires to see the stock market decline. No politician in the west wants to see the collapse of the dollar or the euro.
But that’s simply not how markets work. No market goes up forever – and the fact that every major politician and banker believes that they can simultaneously spur the stock market AND maintain a viable currency leads me to only one conclusion:
Commodities will continue to reign.
I’m not saying that commodities aren’t linked to the actions of the Federal Reserve or the European Central Bank (ECB). I’m saying they’re positively correlated.
So when the Federal Reserve announces that they will loan practically any amount of money to European banks (as they did last Thursday) it will eventually be bullish for commodity prices.
It might prop up European bank stocks and stem the tide for European stocks in general, but the real beneficiary will be commodities.
Today’s issue is kind of in response to a comment I received from a reader. Last week Steve S. wrote in to say, "I subscribe to a number of advisory services, including yours. All of them seem to feel that they are providing advice to their subscribers which I feel is a basic misconception.
Those of us who spend a lot of time researching stocks and other investment opportunities are not looking for advice, what we want is information, objective, accurate information. It can be from other sources, or the results of your analysis, but not advice to buy this or sell that. Only we can make that judgment given our particular situations.
I wonder if others feel this way. It could improve the style of commentary that you provide."
I wrote back to Steve already – but today’s issue should further illuminate my position as a daily newsletter editor. My best research and advice is to take a look at what’s happening with the most basic unit of finance these days: the U.S. dollar.
Money normally functions as a medium of exchange AND a store of value.
Today, the U.S. dollar isn’t just a medium of exchange. It’s also a bailout tool in the Federal Reserve’s arsenal, to be used to assist nearly any large bank on the planet.
Because of this usage of the dollar, its faculty of being a store of value is being undermined dramatically.
That forces people (like you and me) in ever greater numbers to FLEE the dollar in exchange for the only safe harbor left: real world commodities.
So when I seem to be railing against the Fed, it’s because they’re destroying large swaths of wealth – which is ultimately bad for the economy. That should urge you to buy gold and silver.
And when I tell you to buy companies like Exxon-Mobil (NYSE: XOM) it’s because I believe that such a company will weather the Fed’s wealth destruction.
I hope you come to the same conclusions. If not, I’d love to hear why. Email me at [email protected]