Jan 13, 2007

Big Trends Outlook

Here's how David Galland, Managing Director at Casey Research sees the Big Picture in US and global economy (excerpt from The Room - a subscription only ezine):

"..Trading patterns are likewise accelerated, with money whipping around the globe at the speed of light, with traders claiming to be chasing this trend or that, but in actual fact what they are chasing are shadows.

Here we take a deep breath and step aside, refusing to be dragged into the mad scramble of the herd.

The bigger trends, the ones that will count most in helping us place our speculative bets and build our fortunes, are not hard to see, once you poke your head out of the dust thrown off by the thundering herd.

As the International Speculator has so carefully laid out, the trends to keep a steady eye on at this time break down as follows…

A. War.

War is inflationary. It is a drain on national resources and a major contributor to already unimaginable deficits.

B. The dollar is doomed.

It is a currency without backing, “managed” by individuals who are on record as saying that the quantity of the stuff in circulation is of no serious import. Monetary inflation leads to price inflation and a weaker dollar, the most positive environment for precious metals and other tangibles.

C. Resource stocks are owned by almost no one.

When the broader field of investors realize that precious metals are going to go up as the dollar goes down, the influx of buying will send these stocks to the moon.

Embedded in these trends there are other important nuances, probably the most important being the sheer quantity of dollars now in the hands of foreigners, foreigners who we seem to have no qualms about poking in the chest.

The abuse of the U.S. government of its currency, and it’s hubris in foreign policy, will, inevitably, push the foreign holders to diversify out of the dollar. But it won’t happen in the blink of an eye, at least not at first.

Success in playing these trends will take patience, and you have to be willing to hold through the inevitable downs. But a year from now, your portfolio of the stocks we favor around here should be far healthier than it is today.

David Galland
Managing Director
Casey Research, LLC



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