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The Case for Gold and Oil Stocks



-- Posted Tuesday, 8 January 2008 | Digg This ArticleDigg It! | Source: GoldSeek.com

Gold Stocks are up 1,000% since 2000 and Oil Stocks 300% since 2003. Yet the public remains conspicuously absent. Not for long if the Fed has anything to say about it…

 

Around the end of 2005 a funny thing started to happen!

 


Chart 1 - Homebuilders have CRASHED

 

The once HOT homebuilding stocks failed to better their highs from earlier in the year and ever so quietly began to roll over and sink lower.

 

But the vast public did not notice!

 

Nope, housing prices were still rising and markets such as California and Florida were hotter than ever.

 

By the beginning of 2007 the housing stocks had received a fair clip but still nobody seemed worried. Then another funny thing started to happen:

 


Chart 2 - Banking Index down +30%

 

A major beneficiary of the mortgage boom – the banking establishment – also started rolling over. 2007 was the year we learnt about CDOs and SIVs.

 

Fast forward to the present and Retail Stocks have been on the chopping block, commercial property is slowing and Friday’s weak ISM manufacturing data provides final confirmation that the business cycle has turned decisively lower.

 

Now if this were a normal economic cycle and the economy did not contain the debt excesses it does, we would get a natural economic recession to cleanse the system and pave the way for the next boom.

 

However this is not your grandmothers economy!

 

Excess monetary stimulus has caused speculative bubbles such as the above to emerge and brought about a situation where a cleansing recession would topple the debt mountain and sweep us swiftly into a Depression!

 

So what’s the Feds answer to preventing a recession? Stimulate more, print more and blow up a bubble somewhere else. But for heavens sake, don’t let anything go down (unless it’s the Dollar).

 

So where will the next object of mania be?

 

Well we know it won’t be any previous object of mania since the public has been sufficiently burnt so as to stay away i.e. tech and real estate.

 

It probably won’t be an item which has already been levitated by credit e.g. Fixed Income instruments such as bonds packaged into leveraged derivatives.

 

And lastly it’s probably something that is not currently well distributed or well known so as to create a potential marketplace.

 

In our opinion, the next mania will occur in Commodities. Commodities of all types agricultural, industrial metals, precious metals & energy.

 

Our favorites:

 


Chart 3 - Amex Gold Bugs Index up 1,000% since 2000 but still not widely recognized

 


Chart 4 - Amex Oil Index +300% since 2003

 

But ofcourse you already know that!

 

 

More commentary and stock picks follow for subscribers…

 

 

 

---

Greg Silberman CA(SA), CFA

greg@goldandoilstocks.com
 

 
I am an investor and newsletter writer specializing in Junior Mining and Energy Stocks and small caps listed in the US, Canada and Australia.

Please visit my website for a free trial to my newsletter.

http://blog.goldandoilstocks.com

 

 

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. 


-- Posted Tuesday, 8 January 2008 | Digg This Article | Source: GoldSeek.com




 



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