So what’s next? What’s the trade of the coming decade? Well, your editor has decided not to double-down on the identical trade. Gold will remain in our core holdings, but not in our Trade of the Decade for the next 10 years……..
Our NEW Trade of the Decade!
01/04/10 Bethesda, Maryland – Well, that was it for 2009. Whew!
Another great year for gold. But it wasn’t a bad year for stocks either. The NASDAQ rose 45%. The Dow went up about 20%.
As we guessed back at the beginning of the year, stocks bounced. What we didn’t guess was that they would bounce so much for so long. All over the world, stocks went up…and continued to go up. A bounce is inevitable, following a stock market drop. And it’s impossible to say how big a bounce it will be…or how long it will go on.
But a kiss is still a kiss…and a bounce is still a bounce. No kiss lasts forever. Neither does a bounce. Looking ahead, we have to anticipate that it will come to an end…probably in 2010.
If you’ve profited from the 2009 run up in stocks…bravo! Now, sell them… Yes, the bounce could continue. But it’s not worth the risk.
And how ’bout the gold market! Gold has risen every year of the decade. It was the surest, safest place for you money – by far.
Does that mean gold will go up in 2009? Does that mean we will stick with our ‘Trade of the Decade’ for another ten years? Not to brag, but our trade was a big success. Even we were surprised by how well it did.
As long-suffering Daily Reckoning readers will recall, we announced our ‘Trade of the Decade’ in 2000: Sell Stocks; buy gold.
“It turned out to be a good plan,” observes colleague, Merryn Sommerset, in a recent Financial Times story. “In 2000, you could buy an ounce of gold for $280 (the average price over the year). Now, it will cost you about $1,100. At the time, Bonner saw what most others did not. He saw the US not as an economy carefully and cleverly managed by then Federal Reserve chairman Alan Greenspan and his passion for low interest rates, but as a massive credit bubble waiting to burst.
“He also saw the massive and growing national debt, the trade and budget deficits, and fast growth in the money supply as factors that would naturally debase the dollar over the long term. He also saw the credit bubble as global rather than peculiar to America. So it made sense to him to hold the only non-paper currency there is – gold.”
So what’s next? What’s the trade of the coming decade? Well, your editor has decided not to double-down on the identical trade. Gold will remain in our core holdings, but not in our Trade of the Decade for the next 10 years. Why? Because we think the US economy is going the way of Japan.
Japan went into a slump in 1990. It has come out…and gone back in…and come out again…and gone back in again. In terms of the amount of wealth destroyed – at least, on paper – it was the worst disaster in human history. The value of real estate went down 87% in some cities. Stocks fell from a high of 39,000 on the Nikkei Dow down to the 7,000 range in 2009…their lowest point in 27 years.
Why such a bad performance? As we keep saying, if you really want to make a mess of things you need taxpayer support. The Japanese put more taxpayer money into the effort to prevent the correction than any nation theretofore ever had. The result: the correction was stalled, delayed, and stretched out over more than two decades.
And now, US economists are looking at Japan…not with alarm, but with admiration. They are beginning to believe that the Japanese model is the way to go…because it prevented widespread unemployment and a deeper slump.
Here’s our best guess:
….scroll down to the headline above and continue reading HERE (more than 1/2 of the article to go which reveals the New Trade of the Decade and the reasons why)