Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Obama Markets Show Boom for China and Commodities as U.S. Stocks Slump

Stock-Markets / Investing 2009 Mar 09, 2009 - 05:23 PM GMT

By: Ned_W_Schmidt

Stock-Markets Best Financial Markets Analysis ArticleYou have already chosen a life apart from the mainstream. The site you are visiting is not part of the real world. Most of what you read on sites like this one are economic heresies. However, most of us realize that $2 of government spending plus $2 of government spending do not equal $5 of GDP. Rather, the sum of that calculation actually equals $3 of GDP. If we channel spending through governments, we get a negative return.


In the U.S., many voters thought they were encouraging change. Instead, what they got was the same old wasteful and failed policies of the previous Congress. That change which is occurring in the U.S. government is not producing economic recovery, so needed by much of the world. What we are getting is the Obama Depression, an economic slide made longer by changing so much of the government for the worse.

This week's first graph documents the failed policies of the current U.S. government. These investment results are for the S&P 500, Shanghai Stock Exchange Index, and $Gold since the November U.S. election. As always, reality trumps ideology. The difference between the return on $Gold and U.S. stocks continues to be about 50 percentage points. This is about as we observed last we visited this data.

Per the equity markets, the collective wisdom of all investors in the world, the Obama Depression is not likely to end soon. The Obama economic plan is wealth destroying, not job creating. Gold, not imaginary and faulty constructed dollar indices, is the ultimate valuation of a nation's money. In less than three months, the true value of the dollar, as measured by Gold money, has fallen by roughly 25%. That is a harsh and real evaluation of the prospects for current U.S. economic policy. Apparently, failed policies are again something on which we can rely.

However, that chart poses another question. Why in the same period of time that U.S. equities are collapsing is the Shanghai Stock Exchange Index rising? The world is filled with many stock markets and thousands of stocks. Not all are to fall victim to the failed Obama economic policies.

Investors are appraising the economic prospects for China to be far superior to those of the U.S. How can that be? Well, the answer is really simple. The government of China is pro-prosperity while the Obama administration is ideologically opposed to prosperity and wealth. The stock markets and Gold have voted, and to argue with that vote is foolhardy.

Gold is largely a defensive investment. Gold is wealth insurance, protecting investors from government policies. With the years of pain remaining under Obama economic policies, investors should be adding Gold on any and all price dips. However, that is not sufficient. We need to also have an offensive element to our wealth portfolio.

Having lived through the first oil shock, this author can assure you than few, in anybody, forecast it to be likely. Few foresaw the technology bubble till well after it had started. Only Hyman Minsky expected the financial mania, and consequences, of the past few years. China is another of those decade long investment themes not being widely recognized by investors. And part of the economic miracle in China is Agri-Food consumption. How many industries have comparable economic growth? Per the USDA, "China's estimated 300 million middle class consumers and rapid increase in demand for protein and feed ingredients helped drive its total agricultural imports to $43 billion in 2007 with the United States' share accounting for a quarter of the total, or $10.7 billion. China's imports of agricultural products have quintupled since its accession to the World Trade Organization (WTO) in 2001. (fas.usda.gov/country/China, 2009)" [Emphasis added.]

Our second chart this week portrays the movement of Agri-Food commodity prices with green triangles. All prices were buffeted by the hedge fund mania in the past year. However, Agri-Food prices seem to have bottomed. That support comes from the long-term trend of rising Agri-Food demand in China. In the years ahead, Chinese demand for Agri-Food will come to dominate global Agri-Food markets in ways few expect. And then in a few more years the world will face rising Agri-Food demand from India.

In that same chart are indicated the likely status of Agri-Food prices in an Elliot Wave framework. Wave II seems to be in the process of being completed. As this chart only covers the most recent years, Wave II's final C-Wave may yet come, if not completed, without any inconsistencies developing. In any event, Waves III, IV, and V remain to unfold in the years ahead.

Riding a structural economic cycle is perhaps both the most rewarding and easiest for investors. Gold is just one example of such a structural cycle, and Wave V still remains ahead for it. Agri-Foods are another, and it has likely only completed Wave II. Bear markets, like those still alive in many markets, are opportunities for investors to buy future wealth on the cheap. Is your portfolio positioned for the coming waves of the Agri-Food structural economic cycle? Or is your portfolio still mired in the banks and tech stocks of the last decade?

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View , a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To receive the most recent issue of this publication, use this link: http://home.att.net/~nwschmidt/Order_AgriValueRECENT.html

Copyright © 2009 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in