One weakness with Zeal is they are bullish on commodities. I am not. During the 2000-2001 US very small recession, commodities got hammered, and I posted the data a few weeks ago, on which commodity lost how much.
US economy drives world demand, so our next recession, which I expect to be deeper and longer, will cause a commodity downturn. Just look at the IMF and Federal Flow of Funds data for 2000-2001, to see my point.
I wrote Zeal about this, and they did not respond. Zeal’s commodity bullishness will turn around and bite them if they don’t wake up to this fact. China’s boom cannot sustain when American slows down, because they have not stimulated internal demand. They are export dependent. That is China’s weakness (others are high bank loan losses, corruption, and lack of accounting standards).
If you use Zeal, keep the caveat in mind, that the commodities will start weakening as the recession gets going. As far as precious metals, I have no idea what the future holds. Chris J showed in his newsletter that gold prices are affected by changes in inflation, not by the value of the dollar. Get his newsletter to read the whole story. The charts show both the dollar and gold weakening since the late 1980’s, but in 2005 both the dollar and gold rallied together.
If gold is inversely related to dollar weakness, why was there a gold rally while the dollar was rallying? Wouldn’t the gold rally be delayed while the dollar was strong? So, the relationship is not something you could trade on.
Back to Zeal – they’ll probably continue being right while the commodities bull continues.
I got my July Yamamoto Forecast. Irwin T. Yamamoto is currently ranked as a top stock market timer and one of the top bond timers in the nation by Timer Digest. He sees an economic slowdown, and is bearish on gold, stocks, and bonds. He recommends 0% stocks, 100% cash. His cash picks are bank money-market accounts and to check bankrate.com for highest yields.
Yamamoto’s reasoning: stocks are pricey at 18x trailing earnings. Projects for 2007 are for slower economic growth, and even Bush expects GDP to drop to 3.3%. Buased on 2007’s outlook, stocks are too expensive. It’s not ideal to pay a premium for stocks when business activities are descending.
His take on gold and oil: We anticipated a correction in the gold makret, and got a $100 price drop. The bullion should feel moer downward pressue in this rising interest-rate environment. Yet as the economy slows, the loss of value in the dollar means higher metal prices later in the year. Oil prices will be supported by higher demand for the commodity during the summer driving season. Still, sooner or later, a short-term dip in prices is probably due to the negative effects of a softer economy. END QUOTE
Yamamoto Forecast, PO Box 573, Kahului, HI 96733 $350/year
