by Addison Wiggin & Ian Mathias
- Multiple measures reveal 2000-2010 was a bust... which industry will likely rise from the ashes
- The 5 wraps up “The year of commodities”… plus, which hard assets are set to soar in 2010
- One precious metal likely to outperform gold
- Plus, more superlatives from Dubai… our reaction to the mighty Burj
For our first 5 Min. of 2010, let’s close the books on the last 10 years -- that decade of reckoning. We noted before Christmas that, as we forecast long ago, the major stock indexes were a bust for the decade. But check this out… were the last 10 years a wash for the whole economy?
So what’s the term for 10 years of no growth in jobs, the slowest GDP growth in 70 years and a 4% fall in inflation-adjusted net worth? Dormancy? Depression? Whatever it is… ouch.
“Historically, downturns have been enormously creative times technologically,” notes Patrick Cox, our tech analyst. “Our current economic mess will be no exception. Economic pressures are forcing reassessments and hard, creative choices. The result will be an explosion of breakthrough technologies. Nobel laureate economist Gary Becker is just one of those who studying business cycles who predicts that the recovery from our current mess will be unparalleled and spectacular…
“In the early 1400s, German goldsmith Johannes Gutenberg invented the movable-type printing press. This invention did far more than facilitate book production and increase the availability of knowledge. It started an information technology (IT) revolution that continues to accelerate even today.
“In Gutenberg’s era, his advances in lithography not only increased access to the world’s greatest thinkers. They also put practical business and technical knowledge in the hands of commoners. This seemingly insignificant invention smashed monopolies of thought and political power. The result was exponential growth in science, technology and democratic ideals. The Renaissance and the Enlightenment followed, on up to our present era.
“We’ve already seen a series of printed circuit lithography technologies revolutionize the electronics industry. Every electronic device you own — from your television to your mobile phone — contains a lithographically printed circuit board of one form or another. Like many of the transformational technologies of the last century, it was invented during the Great Depression. The timing was not a fluke.”
So which breakthrough technologies will rise from the ashes? Check out Patrick’s latest free investment report: 6 Events in 2010 Could Reshape Your Future
Stocks finished an odd year Thursday with a 1% sell-off. We’re told traders are spooked that the Fed will initiate its “exit strategy” sooner than expected… but with volume so thin, who knows exactly why stocks fell on the last day of the year. What is certain is that the Dow ended up almost 19% for the year. The S&P fared a little better, with a 23% gain. And the Nasdaq, the tech bellwether beaten down for most of the decade, ended up a startling 44%. That’s the best year for stocks since 2003, though very few are anywhere near 2007 highs.
“Yes, dear reader, 2009 was a strange year,” Bill Bonner mused in his last Daily Reckoning of 2009. “It began strangely... and ended the same way. After many years of going the other way, finally, the rich were NOT getting richer. At the beginning of the year, they were getting poorer, big-time, as the value of their stocks fell in half... and the value of the real estate dropped 30%.
“But then the government stepped in and made sure that at least the richest of the rich didn't suffer too much. And then, thanks to a natural bounce and a very unnatural amount of money from the feds, the rest of the rich didn't end the year too badly either. The FTSE world index closed yesterday within a few points of its high for 2009, and the U.S. market ended very near the level it was when Lehman Bros. went broke.
“Of course, that still left investors a little short, if they looked back at their 2008 high. The Dow is still down about as much as houses -- about 30% from the peak.”
One notable boom of the last decade: The proliferation of options trading. Options took a lot of the blame for “Black Monday” in 1987, and nearly a decade passed before investors got the nerve to give ’em another try. But since 1997, options trading volume has risen at least 7.5% annually every year but two -- a 0.1% fall in 2002 and a mere 1% rise last year. Over 3.6 billion options contracts exchanged hands last year, beating the 2008 record by roughly 20 million. That’s about 14 million contracts for every trading day of 2009… pretty crazy.
2009 was “the year of commodities,” if you ask Reuters. Tradable “stuff” enjoyed its best year since 1973… the Reuters/Jefferies CRB Index rose about 24%. Here’s the nitty-gritty:
Looking ahead, we wouldn’t be surprised if the extremes of this chart reverse course. Copper especially has benefited from the booming belief in the faux recovery, while wheat, nat gas and cattle all seem set up for a renaissance. Our very own Chris Mayer has been bullish on agriculture and nat gas lately, and you might remember a few months back when we shared Doug Casey’s strong convictions (heh, are they ever weak?) on the cattle market.
For proof, check out French oil company Total. This morning, they announced an $800 million cash investment into Chesapeake Energy’s stake in Barnett Shale. That’ll add up to a 25% share of one of Chesapeake’s (and America’s) biggest natural gas deposits.
Gold, in spite of all the hype, has had a lackluster performance compared to its hard asset siblings. If you simply seek a stable alternative to fiat money, gold’s been great. But for true profiteering, don’t miss the rest of the bunch… check out Resource Trader Alert for details. For the very latest from RTA’s editor, Alan Knuckman – including his picks for the first few weeks of 2010 -- watch his CNBC interview from this morning.
“While 2009 was a good year for gold, it was a great year for silver,” notes James Turk of goldmoney.com. “It rose against all nine of the major world currencies, including a 53.0% gain against the Japanese yen and more spectacular gains ranging from 42.6% to 49.4% against five other currencies
“Like gold, silver fits well within a long-term accumulation plan, but only if you are prepared to accept the volatility that comes with it. The reward for doing so will be that silver outperforms gold over the long run, as is already becoming evident. By comparing the average annual rates of return (over the last 10 years), silver has done better than gold in five of nine currencies, and is not too far behind in the other four.
“Given that that it presently takes 65 ounces of silver to purchase one ounce of gold, and that their historical ratio is about 16-to-1, a weighting of 67% gold and 33% silver for your bullion holdings continues to make sense. If the ratio falls to 20-to-1, for example, those percentage weightings will almost reverse, solely because of silver's outperformance compared with gold.”
If you’re interested in silver, there’s no better advice for your buck than Byron King’s latest report on the matter, Better Than Gold.
Gold is roaring into the new year today. The spot price is up about $25 on the first day of 2010 trading, to $1,125.
Bullish indicator and contrarian warning: 63% of investors plan on increasing their exposure to commodities in the next three years, says a Barclays Capital study released today. Of the remainder, 23% plan on maintaining current level of exposure.
If commodities have done so well, you know the dollar must have had a lousy year. Indeed, the dollar index ended 2009 at just under 78, 4 points lower than 12 months ago.
Two items of note in the data bin today: First, the American manufacturing sector expended again in December, according to the Institute for Supply Management. The monthly ISM manufacturing index came in at 55.9, up 2 points from November and above Wall Street expectations. December marks the fifth straight month of expansion.
Not to be outdone, the Chinese purchasing managers’ index (their version of the ISM) rose to 56.1 in December. The Chinese government claims that’s the highest level for them since 2004. It’s so high, in fact, that we’re hearing more than one inflation siren sound for China this morning. There’s such a thing as a V-shaped recovery, and then there is China -- now expected to have grown at an annual rate of 10.4% last quarter. Wow.
The rest of the week will be rich with economic data… factory orders, auto and pending home sales tomorrow. ADP jobs and ISM service reports come Wednesday, and then initial claims on Thursday. And on Friday, the Labor department will unveil their infamous jobs report. We’ll let you know how it all goes.
Last today, a new high-water mark for the world… literally.
The Dubai government officially opened the top floor of the Burj Dubai for business today. At 168 stories, 2,684 feet, it is the world’s tallest building by a long shot. It’s also the world’s tallest free-standing structure, highest occupied floor, highest observation deck and longest traveling elevator. We can think of some other records… like, “world’s most hyped construction project” or “world’s greatest testament to hot money and cheap labor.”
But still, this thing is as big as two Empire State Buildings staked on top of one another. It’s 15 degrees colder at the top than at the bottom. Peacocking, chest beating… whatever you want to call it, this is pretty wild.
And if the size of your marquee skyscraper has any relevance to your global swagger, here’s an interesting list. The updated biggest buildings in the world, in order: The Burj Dubai, Taipei 101, Shanghai World Financial Center, the Petronas Towers in Malaysia and then the Willis (Sears) Tower in Chicago.
“There is nothing new about building tall,” writes Peter Cooper of arabianmoney.net, one of our favorite contacts in Dubai. “The Great Pyramid of Giza was the tallest building for nearly 4,000 years, until surpassed by the English medieval cathedral at Lincoln, which was the tallest building in the world from 1300 until the spire collapsed in 1549. By then other super tall cathedrals had been built.
“My own home town Salisbury now has the tallest cathedral in Britain, admittedly a modest 404 feet, but a triumph of engineering when it opened in 1320. You can still see the giant wheel used to raise the stone during construction…
“It took nearly 4,000 years for my ancestors to come close to matching the pharaohs of Egypt. And it took 42 years for the Empire State Building to be topped by the World Trade Center, on whose roof I have also stood. Alas, post-Sept. 11, it is no more.
“The 168-story Burj Dubai will likely also hold its title for some time… The economics of building tall are ruinously expensive, which will deter rivals. My city in England peaked in prosperity around the time the spire was completed and spent the next 775 years in a bear market.
“In my time in Dubai, almost nothing has been built in Salisbury, while Dubai has quadrupled its GDP and completed the world’s tallest building. What can be done for an encore?”
Cheers,
Ian Mathias
The 5 Min. Forecast
P.S. Here’s our first screamin’ deal of 2010: $300 off one of our most popular (and profitable) publications in 2009.
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