With a significant correction in stock prices comes opportunity for those with the resources and time horizon to invest. There are many market sectors that have really been beat up lately and they are worth following from now on.
I continue to believe in the commodity price cycle and that all the weakness in precious metals and other commodities will reverse over the next several years. It isn’t going to happen quickly, because the major global economies are in too much turmoil to make for an easy turnaround.
With this in mind, capital spending programs for a lot of companies are being reduced because the availability of financing is more difficult to secure. Add in the prospect of a declining dollar and an inflationary environment down the road, and the bull market in precious metals should resume.
I’d definitely be following gold and silver over the coming quarters and I’m with Jim Rogers on his view that agricultural commodities will be the final bull market leg of the commodity price cycle.
He is arguing that the government and Federal Reserve are in fact laying the groundwork for significant inflation in the future. Rogers’ view is that sustained reduced interest rates, a significant increase in the money supply, not allowing financial companies to go bankrupt, and enormous government spending financed with debt will create runaway price inflation in the next decade.
I believe his argument to be very plausible and former Fed chief Greenspan recently said that the extremely reduced interest rates earlier this decade have helped create a platform for runaway price inflation in the housing market.
So, the inflation contagion isn’t going to happen tomorrow or the next day, but the fundamentals are coming into place for this situation to become real. Accordingly, you’ve got to keep precious metal investments in the back of your mind from now on.