Blog : Peter's Market Outlook

by Peter Leeds on May 1st, 2015

Peter's Market Outlook:
 
The opportunities getting set up by a potential "market reset" are massive.  If things play out as we're expecting, there will be fortunes to be made.
 
peter leeds economy outlook
Yes, my outlook for shares is leaning more towards caution than profit right now.  More millionaires were made in the Great Depression than at any other time in history.  We are possibly about to see a similar situation playing out again.
 
We'll explain the huge opportunities, but first we must address what will set them up.  (The importance of a candle is much greater when the power goes out).
 
  • The economy's failure to respond to numerous "stimulative heart shocks" - in a healthy economy, record-low interest rates and unprecedented money-printing should be driving every economic metric strongly higher, but instead the numbers have been crawling in ugly for months.
  • Nations all over the world have been "creating" new currency.  Remember, money is simply an idea that we all agree upon.  Even so, the U.S. dollar has lost 95% of it's purchasing power over the last hundred years, and that trend will continue (and should actually accelerate).
  • Interest rates will either be raised, or they won't.  If the economy is strong enough, the Federal Reserve will increase rates by a small amount, which will have negative effects.  If the economy is not strong enough, then that is even worse.
  • The true inflation and employment data are misrepresented to the masses.  For example, if you can't afford a steak dinner, so you eat at McDonald's, the government does not treat this as inflation.  After all, you still ate.
  • There is major potential for a self-fulfilling deflationary period in the coming months, whereby our consumer-based economy can not afford as much.  If the purchasing slows, it may set off difficulties for businesses, which then cut back costs (i.e.- salaries), further increasing spending reductions.
  • Our nation has been ignoring the elephant in the room for decades.  America's debt load is mathematically un-payable.  If interest rates rise, it gets worse.  If unfunded liabilities are included it becomes almost hysterical.  The question is which ways will America use to default?  It will not be a good decade for seniors who are relying on Social Security.
  • Bubbles have formed in student loan debts (especially since the government took over from the banks), housing, the dollar, and the stock market.  Weeeeeee - This could get ugly tomorrow, or maybe next year, but when it does, it will deflate in days, not months.
  • The global economy is desperate.  Many nations either have negative interest rates, or are considering them.  The idea is that you invest and then get less money back later.  Imagine buying a bond for $1,000 which only pays back $900 in 10 years...  Some theories are that, with such punitive rates, businesses will be more likely to put their cash to better use in the economy.
  • Greece, Venezuela, Portugal, and numerous other nations are "default" wildcards.
Long story short, this is NOT a healthy economy, and the downside is much greater than any further potential upside.  AAPL, for example, may rise another 20%, but it does have the risk of dropping much more than 20%.  (And not because of our recent comments about the iWatch).
 
Meanwhile, professional money managers are nearly fully invested in the stock market, setting up a potential stampede if it becomes time to get out.  At the same time, there is very little fresh money to be put into shares.
 
So, let's get to the good stuff:  
 
As the value of money sinks, the prices of things typically traded in dollars rises.  Think oil, gold, silver, platinum, base metals, and basic commodities.  (This is also why a $40,000 house in 1950 now costs $675,000).
 
As well, any serious market correction (or global conflict) typically instigates a 'flight to safety,' which means solid assets (yes, like gold) spike.
 
However, it might be a mistake to think you should invest in gold.  Physical metals are great insurance for what may come, but they aren't a great method to easily trade to enrich yourself.  (I own a significant amount of physical gold and silver, but don't anticipate ever selling it in my lifetime, even as it rises).
 
However, there are many companies trading on the stock market which have their operational basis in base metals, and precious metals mining, oil extraction, and certain commodity plays which would do extremely well EVEN in (and due to) a market meltdown.

By the way, we are running out of oil.  Check out the Oil Clock.
 
The Winning Investments will NOT be:
  • Exploration penny stocks (looking for a resource is worth zero)
  • Those with probable or inferred resources
  • Those with a single digit reserve-life-index (RLI) - for example, at current production rates, their resource will run dry in 8 years.
  • International high-risk producers (such as those based in Iraq, Ukraine, Libya, etc...)
  • Shale oil producers (due to their production drop-off rate)

The Massive Winners WILL be:
  • Production penny stocks (actually taking a resource out of the ground and selling it)
  • Proven reserves (rather than inferred or probable)
  • A double-digit RLI (at current production rates, their resource runs dry in 33 years)
  • Domestic (safe) producers, such as those based in America, Canada, Mexico...
  • Strong balance sheets
  • Improving income statements
 
Subscribers to Peter Leeds Stock Picks are going to be seeing all our best penny stock plays to enrich yourself in the coming days.  

These are small companies, with strong financials and positioned in the perfect place at the perfect time.  They are trading for pennies, and will multiply significantly in price if things play out as we expect.
 
 

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