Investing for stable, steady growth – Part 5

English: Filling station at Childerley Gate. T...

English: Filling station at Childerley Gate. This one will be a historical record of fuel prices in mid-2005! (Photo credit: Wikipedia)

This is a brief update to part 4 from June 7th, (2013) in which I wrote (in regard to the US stock market): “if the small rebound that started today can hang on for another few days…  the US stock market might squeak out one more new high.” Today, in conformity to the projected rally, two major US stock indices exceeded their highs of a few months ago to make new all-time highs (in “nominal” price).

I show a chart of that below. Recall also (if you read previous installments of this series) that I expect a collapse in US stock prices soon, perhaps starting today (though, in the following days, if stocks do rise further, I may publish a more detailed analysis of possible price peaks in the near future).

Note also that stock prices in the UK and Japan and other parts of the world have already begun to topple. We can look at a few of those charts later.

First is a chart showing 4 things from January 2007 until today. The line in red is an index of the stock prices of the 500 biggest companies in the US.

SPX v gasoline, oil, & CRB index

On March 2nd, 2009, I published a forecast of an imminent rally in US stocks. Since then, US stocks have performed relatively well  (for instance, better than most commodities).

You may recall that prior to March of 2009, US stocks did very poorly. I published forecasts of that as well.

English: Fuel prices today What will this sign...

English: Fuel prices today What will this sign show in one year? (Photo credit: Wikipedia)

One primary idea that I have focused on since 2004 is that the rise in inflation-adjusted fuel prices that started in 1999 was likely to accelerate and destabilize the global economy. You may recall that a few years later than that, many other people started to talk about rising fuel prices and the effects on their budget and the broader economy.

Oil prices went from $11 to $148 in under 9 years, raising gasoline prices in the UK to over $11 per gallon. The rise in gasoline prices diverted resources from other markets, such as the mortgage market for huge homes in sprawling desert suburbs (in the US, that would be in Arizona and Nevada). Housing prices in parts of the US (and elsewhere on the planet fell by more than 50% in a few years), starting with Arizona and Nevada in 2005 and joined by other regions of the US across the next few years. Note, for further reference, that I published my first reference to a pending decline in real estate prices in 2003 (March 3rd).

Now, with all of that in mind, let’s note the pink and green lines above. Those are prices of unleaded gasoline (in the US) and of oil. Scroll back up and see what you notice about them.

The most obvious thing to me about those two lines is that they move very closely with one another. We can also see that the blue line (which is an index of broader commodity prices) never rose as much as oil or gasoline, plus has been declining for over 2 years.

I forecast (in 2004) that rising fuel prices would ultimately “break” the global financial bubble (including the credit bubble, real estate bubble, stock bubble, and other speculative bubbles). I forecast in early 2009 (before the stock rally started) that fuel prices would rise enough again (eventually) to break the stock market rally a second time, but this time much more sharply. That is what I forecast that we are about to see.

We can also note that in March 2009, one of the clues that buying would return to US stocks was that fuel prices did not make a new low along with the timing of US stocks. After high fuel prices pinched demand in 2008, fuel prices collapsed. Then, once prices got low enough that people started buying SUVs again and increasing their consumption of fuel, that means economy activity hastened. That was evidenced in the behavior pattern of increased buying of stocks which is measurable by the increasing prices of stocks (starting in March 2009).

Just to put the scale of the rise in fuel prices next to the fluctuation in stock prices, I include the chart below. Oil is in blue. The other three lines (at the very bottom) are US stocks, British stocks, and an index of global stocks.

perfchart2

Now that we are clear that stock market price movements have been tiny compared to oil, let’s look closer at the last few years. Notice that from 2009 through most of 2012, stock markets worldwide have closely correlated with oil prices (in blue).

perfchart3

Is this a surprise to me? No.

Since 2004, I have consistently repeated that fuel prices would dominate global markets and rise enough to pop the financial bubbles with a harsh economic reality. Oil is that economic reality. Financial bubbles (of future promises called contracts) can avoid economic realities for a while, but eventually the issue becomes clear: demand for fuel is rocketing (especially in Asia) while global supplies of fossils fuels are flat or dropping.

global oil extraction

So, here are a few quick comments on the chart above. Asian stock markets (in light blue) topped in late 2012. British stocks (pink) and global stock in general (green) have not made a new high along with US markets. They might, but I highly doubt it. Considering the momentum data for the US stock market, the bubble is ending (maybe as of a few hours ago).

English: Fuel prices creeping up again This sm...

English: Fuel prices creeping up again This small area of Lea houses the filing station, shop, post office, garage and car sales. The Murco sign stands out against the white snow and crisp blue sky. (Photo credit: Wikipedia)

Oil prices however may continue to rise. If you scroll up to charts above showing 2008, you will see that as gasoline and oil prices continued up, stocks plunged.

The “ideal” fulfillment of my 2004 forecast would be that oil and gasoline prices exceed the 2011 rally. That should be enough to “pop” the now-tender global economic bubble of credit (debt, mortgages, credit cards, derivatives, etc).

However, stocks should tumble considerably before a new multi-year high in fuel prices. I do not think gasoline prices will need to approach $11 again in Europe to create a major panic. In 2008, there was an utter naive and blindness about the importance of fuel prices, plus a crazy idea that politicians could solve a global economic problems with some “Keynesian” financial rescue programs.

Gasoline prices were more than a dollar higher in Hawaii and California than in South Carolina by 2008. That was not a national political issue. That was simple  supply and demand. The “liberal” (socialist) ideal of political salvation to solve economic challenges is pure fantasy (though rather effective for deceiving the masses and focusing their attention on political figureheads rather than on simple realities of fossil fuel geology and tangible economics).

English: Chart of inflation-adjusted UK house ...

English: Chart of inflation-adjusted UK house prices, 1975-2009. Data sourced from Nationwide building society (Photo credit: Wikipedia)

So, I am forecasting a repeat of the 2007-2008 sequence. This is simply an extension of my 2004 forecast. The events of the last decade have simply reinforced all of my prior analysis.

We are already in the process now that we saw in 2007. Stock prices will begin to fall, nation by nation, then fuel prices will reach a point where prices get so high that demand declines and prices plunge- prices of stocks and everything else.

(The final link below my article is titled If Gas Prices Go Any Higher, They’re Going To Start Eating Away At Growth. Again, note that I was warning that inevitability back in 2004!)

In early 2007, Japan (lime green below) topped first among the 4 shown. Germany ($DAX) in pink topped a few months later and then twice rallied without making a new high. Next, the US peaked (red line). Within weeks, a popular index of worldwide stock markets peaked (blue) and then began the plunge that I forecast years prior to that (among many other competent forecasters- and I use the word competent simply to distinguish forecasters whose forecasts actually fit with what actually happened).

perfchart4

As usual, I will repeat that the emerging shift presents an opportunity far in excess of the 2007-2009 shift. In that transition, ownership of immense amounts of wealth changed hands very quickly. Those who acted in accord with competent forecasts received a massive flow of the vast abundance that had previously been amassed by the mainstream herds of sheeple (like those who turned on CNN for the most convenient financial advice, rather than focusing on the most competent and profitable and trustworthy financial analysis available).

Let the most rapid transfer of wealth in human history begin. The purpose of stock exchanges and investment markets is for the redistribution of prosperity.

Nature rewards the wise and diligent. Nature punishes the foolish and presumptive.

Those who are motivated will contact me for a brief exploration of the emerging opportunity. Thank you for your interest and I look forward to hearing from those of you who are open to benefiting from reality, including the realities of changing trends.

globalstocks

Here is a chart showing how an oil-rich nation like the US has done relatively well in the last few years (in terms of stock prices). I update the chart below. Above, I was noting the likelihood of a peak in Asia and Europe that might NOT hold in the US (which became my explicit forecast around June 7). Then, US markets did finally make a new high (today), while so many others did not and may have already started what may be a very sharp long-term decline, slowing the US economy along with the rest of the world once again.

comp

Unleaded gasoline

Unleaded gasoline (Photo credit: Wikipedia)

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7 Responses to “Investing for stable, steady growth – Part 5”

  1. Savannah-Lin Dofa Says:

    Wow that is crazy… good to learn about what is going on..

  2. Dov Shapira Says:

    You ended your article on a pessimistic note.
    Now annalist can truly predict the future of the economy or the stock market

    • jrfibonacci Says:

      Thanks for your comments, including Loretta and Savannah. Dov, first of all, your words may have been slightly garbled by auto-correct.

      As for how I ended the article, I do not consider it pessimistic to say that the emerging shift will be one of the largest and fastest redistributions of wealth in human history. As for the investing methods that have not been all that great since the 1990s, I am quite pessimistic. As for the methods referenced in the various prior 4 segments, I think you would find some of the results that I reported to be far from pessimistic!

      Anyone who is not at least doubling their money annually (through all types of the market conditions) is not much of a trader in my opinion. I do not mean just trading stocks on a cash basis, but anything within the whole array of modern trading instruments and methods.

      If you do not think an analyst can make true predictions, so be it. Why read any analysts then? Why listen to them on TV? If some President or Governor or military intelligence officer cannot report any useful analysis, then what evidence do you have to support that dismissive “analysis?”

      In addition to the last 11 years of my forecasting which you could review for accuracy and value (if you were motivated to do so), there are numerous legends in the field of forecasting. The most obvious case is Mr. Dow and Mr. Jones, who partnered to create an index of large US stocks called the Dow Jones Industrial Average (which they analyzed against the Utilities and Railroad/Transport sectors). They were… analysts. Their analysis is rather famous, but dismiss it all if you wish.

      If you really want to toss out all analysts out just for being analysts, then I toss out your dismissive analysis like I toss out the huge amount of incompetent analysis that is all over the mainstream. It’s like watching someone who does not know Hebrew fluently pretending to know how to translate Hebrew in to English. Anyone who is competent in Hebrew would know that the “translation” is crap. Or, it’s like someone who does not know Hebrew looks at the little squiggly letters of the Hebrew alphabet and says “those do not look familiar to me so they must be nonsense!”

      Good analysts- and I have published lists of them- are not discouraged when the masses of sheeple dismiss good analysis. If you are terrified of economic reality, as most people are, then I am pessimistic for the results you will produce through dismissing economic reality. 😉

  3. Mary Sacco Says:

    Very good article, it gives a clear idea about how things are going on. Thanks for sharing!

  4. Rob Says:

    Great Article! Those charts are ridiculous!

  5. Karen Langston (@KarenLangston) Says:

    A very long article would love to have seen it broken up into a couple of parts so I could really absorb all that you have to say

  6. Tyler Kull Says:

    this is awesome!

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