Stock and Bond Markets are headed lower but commodities and real estate could begin to recover soon.

Market forces June 24

The Obama Administration and Bernacke have no idea what they are doing. They have forgotten about the economic money multiplier effect that decreases as you increase reserve requirements. The multiplier is inversely related to the reserve requirement while the velocity factor is proportional to the rate that money exchanges hands. They are completely different factors that I will explain at a future date. Be it sufficient to say that if Obama continues the current policy then gold and commodity prices will be a good investment this year and the dollar may come under attack.

Market Outlook

The lighter market volume on market advances indicates the market has not stopped going south. Corporate insider selling is high indicating that corporate insiders themselves find their stocks are still overpriced and that they have more bad news to report.

Bonds will be a very bad choice when inflation kicks in this year.

The world is becoming politically and economically unstable under President Obama similar to the world in the 1930s. Real estate & commodities are probably the best investment at this time. Nationwide real estate pieces are down on average about 33% from the peak.

We continue to have zero confidence in all socialist markets. The risk of enormous investment/currency losses in emerging economies is now very high.

The dollar is strong now because the money is absorbed by the America’s bank deleveraging process. But when that ends and American wealth falls under heavy democrat-socialist Obama taxation the dollar will likely collapse just as all socialist currencies have collapsed on multiple occasions. Socialists have no pride or integrity and if they remain in power they will no doubt embarrass America by defaulting on American debt.

American socialists are not just interested in redistributing American wealth to other Americans. No, they are international socialists and plan to distribute America’s wealth around the world. The Al Gore environmental farce is part of the socialist world wealth redistribution plan. Internationalist socialism is another name for failed communism.

Last night most Asian markets were up with China up 1%, Japan up 0.4%, and India up 0.7%.

Most European markets are up today in a range of 0.3% to 1.2% half way through their session.

US futures are up about 0.2% today. We are on the sidelines now. It would be better to buy real estate now than to buy stocks at current prices based on their imaginary potential future earnings ten years from now. Based on real earnings the S&P PE ratio is at an historic high and even a 50% decline is still possible.

Over the next two months we expect to see a stock market sell-off of about 27% as investors realize this Obama crisis of socialism will get deeper and will last at least another one or two years. But soon we expect to se a divergence in commodities vs. the stock market as the adverse effects of the FED inflationary policy kicks in.