Stocks closed last week with their worst trading performance so far this year. The Dow Jones Industrial Average lost 1.6 % and the 15-51 Indicator dropped 3.3%. “The market” continues to rattle around the top of its action zone range amid the same old story.
Spain saw its cost of debt increase swiftly – a sign of weakness and high-risk – because her unemployment rate continues to skyrocket inside a shrinking economy. China’s economic growth continued to slow last quarter, and while 8.1% growth sounds good to most, it represents China’s slowest growth rate in more than three years. And then, of course, there are continued escalations of hostilities in oil’s fertile ground in the Middle East.
The overseas picture is an ugly one.
Here at home further weakness was revealed by the employment numbers posted by the U.S. Department of Labor. Only 120,000 jobs were added to non-farm payrolls in March – half the pace economists had projected, and half the pace of February. That’s not good – especially when you take into consideration that early profit reporters Google, Wells Fargo, and JP Morgan Chase all beat expectations.
When you hear media pundits and Wall Street analysts claim that the stock market will continue its rise and “not correct” because corporations are generating more profits remember that they’re not hiring people with that money. Unemployed workers are unemployed consumers – the drivers of economic growth and vitality. Their weakness is Market weakness.
While long-term investors shouldn’t get caught up in one number, one moment, or one month, every piece should be factored into a long term perspective. If done so, investment trends make perfect sense.
Since 2007 when the last boom began to bust the Dow Jones Industrial Average has failed to keep pace with the market economy (GDP), indicating a continued and prolonged recession. To many of us, this person included, it has felt exactly like that (recession.) Yet the DJIA is up 5.2% despite the most recent sell-off (that’s inflationary).
During times like these, with fragile world markets and massive currency vulnerabilities, gold often, if not always, rises. It does so swiftly during crisis conditions, which can be seen quite clearly in the aftermath of the 2008 crash (see chart below.)
The questions media pundits and “market experts” are throwing around the airwaves right now are: Is the gold run over, is the economy recovered, and is the Dow headed to 14,000 – or even 17,000?
Let me first say quickly, the Dow will fall below 9,000 long before it reaches 17,000. In other words, don’t worry about missing the run to 17,000 before you enjoy the opportunity of buying below 9,000.
The only way a prudent investor could answer yes to all three of the above questions is if the Dow Jones Industrial Average’s trend-line was that of the 15-51 Indicator’s in the chart shown above. Instead, the Dow Average is far below, representing a stable and accurate portrayal of downward market activity (that’s recessionary), proven by its close tracking to GDP.
In times of economic recovery and expansion, backed by strong currencies and U.S. dollars, the DJIA will greatly outperform gold and GDP. The 15-51 Indicator will, of course, outperform them all. But that’s not the picture above.
Stocks, here, are greatly over-valued in real terms (that is, adjusted for inflation.) That’s a condition ripe for a correction – not Dow 17,000.
It’s time to send the clown advising you back to the Big-Top and take matters into your own hands and begin outperforming the 15-51 Indicator (which is up 33% so far this year.) It’s the best way to make money on money.
And let me know if you need help.
