It doesn’t matter what economic data is being thrown at us. The markets have continued to soar despite poor economic numbers, growth, and scandals.
But eventually, these numbers will catch up with the markets.
It’s no secret that the Obama administration is doing whatever it can to help fuel the growth in the stock market ahead of the midterm elections in November. He has to.
The stock market has become a leading indicator for confidence in our economy and judging by Obama’s approval rating, the Democrats could easily lose their power in the Senate.
That’s why they have continuously pumped money into the
markets. (see It’s Bigger Than Ever)
The Democrats know they will be taking some losses, but will try to do whatever they can to hold on to the majority in both the Senate and House – including pumping piles of printed money into the markets.
Did we really think that this market rally was able to sustain itself without help? (see It’s Bigger Than Ever)
The last monthly unemployment numbers before the midterm elections have just been released and it shows that employers have lost yet another 95,000 jobs in September resulting in a 9.6 % unemployment rate.
Let’s not forget that these numbers do not factor in the true unemployment rate in the US but is derived from a monthly survey of 60,000 households in the United States known as the Current Population Survey.
When you consider that the US has more than 310,000,000 citizens, a survey of 60,000 households doesn`t make a lot of sense.
But unemployment numbers is not the only thing we should be worried about.
There’s yet another scandal that is rearing its ugly head.
The Foreclosure Scandal
Just when the U.S. housing crisis couldn’t get any worse, the largest bank in the United States, Bank of America, is halting all sales of foreclosed houses on growing allegations that lenders have improperly seized hundreds of thousands of American homes.
They aren’t the first bank to halt foreclosures.
The banks may now be getting into trouble for what appears to be yet another economic-breaking scandal that’s about to unfold.
Employees at both GMAC and JP Morgan have already and openly admitted that they signed off on foreclosures without checking to see if they were justified.
At JP Morgan, Beth Cottrell admitted that she and her team signed off on about 18,000 foreclosures a month without proof!
But they’re not the only ones playing tricks.
Bank of America has already been caught committing acts of dirty bank tricks. They have:
- foreclosed on a property that doesn’t even have a mortgage
- locked out home owners who own their houses outright with no mortgage
- …and even locked out homeowners who were current on paying their mortgages!
But why would the banks be so anxious to behave this way? Why would politicians and the treasury departments allow them to do it? Take a look at this video to find out:
The US economy is nowhere as rosy as the stock market is making it out to be.
Real economic growth should happen when the Fed lowers rates. This should fuel home purchases, home development, and more business investments which lead to real economic growth through growh in the real estate sector and business.
But even with the current 30-year fixed mortgages at less than 4.5%, and the Fed rate at all-time lows, we have yet to see any hints of real growth.
This clearly tells us that we have a long way to go before our economies return to any state of normalcy.
If the Republicans manage to regain some control in the midterm elections, they will undoubtedly cut reckless spending and attempt to fix the markets the right way – which just so happens to be the long way. Republics are known to be pro-business, but will avoid uneccessary spending for short-term fixes.
That means the markets may actually suffer in the short-term if, or perhaps when, the Republicans gain control.
As investors, the last thing we want to hear, or say, is that the markets are still on the brink of falling. But we need to understand the complexities at work. This scenario could easily happen based on real economic numbers, forecasted growth, deflation, stagflation, and/or inflation.
But that doesn’t mean we’re not going to make any money in the markets. In fact, it means that it will only make it easier for us to choose what to invest in.
From all of the economic twists and turns, we can be confident that certain things will happen:
- We know the Fed will print more money – even with the Republicans in place.
- We know that citizens around the world are no longer confident in their countries and their fiat currencies.
- We know that the second largest economy in the world, China, is spending billions of dollars on gold and commodities – with more than enough money to back it up
- We know that when the US economy turns around, maybe 2,3, or 5 years from now, inflation will come to play.
When you combine all of these factors alone, the resource sector will boom.
It’s no secret that the Fed wants nothing to do with deflation. Remember the speech from the Fed on September 21 which sparked the recent rally?
“The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”
This means that eventually, inflation will kick in. With the amount of money being printed, inflation will eventually kick into high gear to “keep consistent with its mandate.” It may take many years, but it will happen.
That means increasing our emerging market exposure while we concentrate in areas that benefit from a weak dollar. That means increasing our position in commodities and precious metals.
Let’s also not forget Bernanke’s speech at the end of August where he stated:
“The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools. Should further action prove necessary, policy options are available to provide additional stimulus.” – Ben Bernanke, Federal Reserve Chairman (see The Economic Outlook and Monetary Policy)
Clearly, we cannot stop the Fed from printing more money. Judging by the recent jobs report and the progression of the foreclosure market, including the ARMS debacle (see The Story Without a Happy Ending,) precious metals and commodities should continue their climb.
Over the last year, we have been waiting on signs of a new junior resource sector bull market. The first signs are already appearing (see The Breakout) and over the next few months and early next year, we should have clear indication of a new junior resource bull market.
If we continue to see strength in precious metals and commodities once the dust settles with the midterm elections, the junior resource sector should begin its boom.
We shouldn’t jump into deep waters yet, but getting our feet wet now certainly wouldn’t hurt.
Until next time,
Managing Director, Equedia Weekly
Equedia Network Corporation
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