Larry Edelson: Equity markets are now entering a new bull market, the likes of which has not been seen since the 1932 to 1937 period, when the Dow Jones Industrials soared nearly 382 percent — rallying from a low of 40.56 in July 1932 to a high of 195.59 in March 1937 — even though the global economy continued to sink deeper into a depression.
And the thing is, only the savviest of investors will understand why this new bull market is forming, and how to profit from it.
They are investors who have open minds … who truly understand the lessons of the past … and they aren’t afraid to think dynamically. If you’ve been following my work in my Money and Markets columns and in my Real Wealth Report, then you’re one of those savvy investors.
You see, back in 1932, three years after the Crash of ’29, 17 countries in Europe started to default on their sovereign debt. Investors yanked their money out of Europe and sent it, guess where?
To the U.S. equity markets. They didn’t buy U.S. bonds because they were afraid that Washington would also have debt problems, even though the U.S. was a creditor nation at the time.
So investors bought up stocks like crazy, sending the Dow into a rocket ride higher.
The same thing is about to happen, again. Only this time, I think the flood of capital that could go into equities could be much bigger than it was in the 1932 – 1937 period.
That’s because, this time around, it’s not just Europe’s sovereign debt that’s about to go under, it’s also the government debt markets in Japan and the United States.
Mind you, a 382 percent gain in the Dow, taken from its March 2009 low of 6,495 — the equivalent of the 1932 crash low — would put the Dow a tad north of 31,000 in the next few years …
And just like the mid-1930s …
It Could Happen Again Regardless of What the Economy Does!
It’s a history lesson you need to heed, for two very important reasons:
1. Because it’s one of the major ways you can make money over the next few years.
2. Because it’s a lesson about the Great Depression that almost no one tells you about: That stocks can soar even when the economy stinks to high heaven. Even when governments are crumbling.
This is key to your future. Almost everyone will be refraining from buying stocks because the economy is not so hot, or because they’re waiting for the economy to drag down stocks, even precipitate a crash.
So they will miss the boat, entirely. Or worse, they will sell short stocks on the first pullback, thinking the markets are going to crash, and they will lose their shirts.
Not me, or my subscribers. As I said before, they’re in the camp of the open-minded … who heed the lessons of the past … and think dynamically. So they’re going to be ready to profit from it.
Right now, in the very short-term, stocks are indeed overbought and ripe for a pullback.
But based on January’s closing action and signals, all of my systems now confirm it: U.S. equity markets are in a new bull market, one that will be largely driven by capital flows out of sovereign bond markets.
Support in the Dow Industrials has risen to 13,860, followed by 13,450 to 13,622. Worst case pullback support lies at 12,497.
In other words …
It’s Time to Start Buying Stocks Aggressively on Pullbacks
What will be the best performing sectors going forward? They will be …
- Natural resource stocks
- Multi-national companies and conglomerates
- Materials and energy companies
|Miners are one sector likely to benefit from the next influx of investors.|
Basically, companies that will outlast governments!
My Real Wealth Report subscribers will get the inside skinny and new recommendations with the coming February issue, which publishes on Friday.
What about gold now?
It’s still stuck in the mud, with a bias to the downside. Ditto for most other commodities. Natural resource stocks, which have been hit hard, may be very close to bottoming, and soon turning into buys. But the underlying commodities need more time before I can truly say they’ve bottomed and are preparing for their next leg up.
Real Wealth Report will keep you up to date, with many flash alerts expected over the next several weeks and months, in addition to the regularly scheduled main issues. If you’re not a member, consider joining now by clicking here.
For now, I would consider staking out a nice, general long position in the Dow Industrials by purchasing the SPDR DJ Industrial Average ETF (NYSEARCA:DIA) when it pulls back to the $134 level.
If and when filled, place a stop to reduce risk at $105, on a good till cancelled basis.
One last thing, entirely separate from the above. Something that irks me to no end …
The U.S. vs. S&P
The Feds have filed their first-ever civil suit against a ratings agency, Standard & Poor’s, for the company’s role in the financial crisis and meltdown in 2008/2009. They are seeking a $5 billion fine from the company.
Sounds great, right? Heck no! Standard & Poor’s should be facing criminal charges, not civil charges. So should the other big ratings agencies. They almost destroyed the entire financial system and cost innocent investors all over the world hundreds-of-billions of dollars.
Their business model is corrupt: The big ratings agencies were, and still are, bought and paid for by underwriters. Their ratings were — and still largely are — biased and even fraudulent. The CMOs and CDOs they rated AAA just before the financial crisis were junk. They gave them AAA ratings because they were paid to.
Civil suit? No. The Feds should file a criminal suit and put those companies out of business, or at least force them to change their business model. Period.
That’s probably not going to happen. All the more reason for you to be an investor who has an open mind … who truly understands the lessons of the past … and can think dynamically, instead of listening — or worse, buying — all the garbage that’s out there.
Related: Dow Jones Industrial Average (INDEXDJX:.DJI), Dow Jones Industrial Average ETF (NYSEARCA:DIA), ProShares Ultra Short Dow 30 (NYSEARCA:DXD), ProShares Ultra Dow 30 (NYSEARCA:DDM), ProShares Short Dow30 (NYSEARCA:DOG).
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.