Market Outlook

Market seem to be struggling here in January and that's not good for the market outlook for the year. I do think we bounce in here but it will be very weak. We will more than likely see the 6000 level soon the DOW very soon, the fact remains that we can not continue to pop up the dead areas of the market such as the financials and the autos. There is no doubt history will prove this was the worst political decision for this economy.
The stock market I think is in a secular bear market and in this rotation new leaders will emerge. I have a very strong feeling technology wont be the leader in the next phase but that of COMMODITIES and based on this I have been telling people with long term investment strategies to position themselves to the commodity market.
Some great ideas on the commodity market is to invest in countries like Brazil and China. Metals and energy should be excellent long term plays while we rotate out of technology and I am already thinking out longer term maybe 5 years from now as how these will play out.
One side of the story for me to invest in commodities beside from the strong economics behind them in the future is that of the weakening of the US dollar and future trouble with interest rates. I believe the next big disaster for this economy will be foreigners selling our debt and/or not buying as much. This will totally tank the treasuries and send interest rates much higher leading to inflation making commodity prices here seem extraordinarily cheap. I truly believe this is the next great play for the markets. Now I dont have a time line on this but I am sure it will happen in the next 3-7 years as I am doing my cycle time research now.
It is not a time to be in denial folks things are changing and we must change with it investment wise or we will get crushed. It is not a time to invest in consumer technology, financials and the other leading sectors of the last 15 years it wont work. Just remember this 20 years ago the DOW was made of the following companies:
Goodyear, Kodak, GM, Sears, Allied Chemical, Minnesota Mining, Union Carbide, AT&T, Owen-Illinois Glass and I can go on. The point here is if you were 35 years old in 1985 and your financial advisor told you to invest in the strong companies in the DOW, 24 years later to today your portfolio would be ZERO. Yes, it is as simple as that folks, dont get into the idea of buying today's strong companies because we live in a dynamic global world where today leader will be tomorrow's loser so you have to be forward thinking and stay away for what is happening now.
The next phase is definitely going to be a commodity cycle trade. Last year the only sector in the investment market that was up was managed futures and I think this will overtake mutual funds and the sort in year to come in term of investing returns. Fridays strong upward move off the opening weakness was 80% commodity related stocks and that also strengthen my thesis here. Time to change the investment mind set out there and move before you get lost in the decline that is coming.