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 Why I’m Bullish in 2009, Especially for Our Income Funds; Plus, A New Commodity Recommendation
(Posted Jan 05)
Wall Street is down slightly on this Monday morning, but I am cautiously bullish about 2009 for several reasons: 1. The Fed's easy money policy; 2. Stocks tend to do better during the first year of a presidential election cycle, especially when a Democrat takes office; 3. Obama is not expected to raise tax rates on investors and wealthy entrepreneurs.
 A new president, a new bull market? Expect a recovery in our portfolio of quality stocks, funds and precious metals this year. Stop the presses: Keynes has dethroned Adam Smith from the top of the Totem Pole of Economics. That seems to be the message from Ben Bernanke and the Fed in last month’s announcement that it was cutting the Fed Fund Target Rate to practically zero (0.25%) and the Discount Rate to 0.50%. Even more reckless, the Fed announced it would start buying mortgaged securities, long-term Treasury bonds (to keep long-term rates down), and lend credit to households and small businesses!
Is there no end to scandal… fraud… and collapse in 2008?
There are two lessons to be learned from the $50 billion collapse of Wall Street veteran Bernie Madoff’s managed accounts. Historically, Wall Street has done better under Democrats in power. Certainly when Obama is sworn in as president, the Dow Jones Industrial Average will be at a low level, under 10,000. Sadly the S&P 500 has been in a 10-year slump. Is it time for a breakout? The Fed panicked last month by cutting the Federal Funds target rate to 0.25% and lowering the Discount Rate to 0.50%. Such an extreme action is unsustainable, and once the economy stabilizes, the Fed once again will raise rates back to their "natural" rate of interest. New recommendations as well as other changes to the portfolio, in addition to updates on most of our funds. Two factors have led to a strong recovery in basic commodities and commodity stocks. First, the Fed’s easy-money policies cut short-term rates to practically zero and flooded the monetary system with money. Second, President-elect Obama announced plans to spend up to $1 trillion on infrastructure investments.
As we enter a new year and a regime change, I see new opportunities in the stock market, income investments, and commodities — especially gold, the ultimate hedge. Expect more government spending and "easy" credit by the Fed. Still, there are dangers in the global marketplace, and it pays to have a conservative, well-diversified strategy. Here’s what I recommend that you do this month: |
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