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A Slight Detour on the Road to RichesBy
Tuesday, June 5, 2012
I believe we're still in the Bernanke Asset Bubble...
When it's all over, this could turn out to be the greatest bubble in U.S. history. Investors in stocks, commodities, and real estate could all make triple-digit gains. And just about all "risky" assets will benefit.
But since early April, commodity plays have been clobbered, down 13% so far. So have foreign markets – Spanish and Italian stocks are down 28% and 24%, respectively.
U.S. stocks have been the "least bad" performers – but that sure doesn't mean they've been good. They are still down a quick 10%.
With everything falling, how can we still be in a bubble?
I fully explained the Bernanke Asset Bubble in the April 16 DailyWealth...
In short, Ben Bernanke, Chairman of the U.S. Federal Reserve, will keep interest rates artificially low for longer than anyone can imagine. And that, in turn, will create an asset bubble... in just about everything.
As of January, Bernanke plans to keep interest rates near-zero until at least late 2014. This policy WILL ignite a bubble in nearly all assets. It's already started...
Bernanke began his policy at the end of 2008, when he cut short-term rates to near-zero. The stock market began to rally almost immediately... Stocks have doubled since bottoming in March 2009. And commodities were up as much as 80% after Bernanke's policy went into effect.
I believe this is only the beginning. Assets prices could still rise more than anyone can imagine. But recently, the Bernanke Asset Bubble has taken a breather. Stocks and commodities are dropping.
Even though I believe in the Bernanke Asset Bubble, the trends are clearly DOWN... for now.
In my True Wealth newsletter, we recognized this shift and got defensive with our investments. We sold several of our commodity plays. And we're keeping a close eye on our trailing stops.
Now is not the time to try to "call the bottom" in stocks or commodities. It's MUCH safer to mind your trailing stops... And sell any position that hits a stop.
While I believe commodities and stocks will come roaring back, we have to be patient. We can't fight the downtrends.
We're on the "road to riches" through the Bernanke Asset Bubble – where stock prices, real estate prices, and commodity prices will soar. But the markets took a detour over the past few months. And we are not back on track yet.
The trends are down. So there's no urgency to pile into anything at this moment. We must be patient and wait.
I'll let you know when the Bernanke Asset Bubble gets back on track.
Good investing,
Steve Sjuggerud
Further Reading:
Catch up on three of Steve's favorite Bernanke Asset Bubble plays here:
It's not "sexy"... But it can make you rich...
"It pays no taxes on its real estate income... as long as it distributes that income to you in dividends."
"If I hadn't done this a few times already, I wouldn't think it's possible..."
Market NotesTHE IDEAS IN BRIAN HUNT'S MARKET NOTES ARE MOVING... If you've caught some of our e-mails recently, you know we've made a major addition to the DailyWealth family.
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