The bull run/bear market rally has had three major phases. This from our favorite underground analyst, David Rosenberg:

1. March 9 to May 6 when financials led the way

2. May 6 to July 10 when it was all about defensive growth and strong balance sheets (tech and health care leading the way)

3. Since July 10 it’s all been about basic materials and consumer discretionary stocks.

Whatever way you look at it, however, it’s clear that we underestimated the level of euphoria backing this rally.

The recent run-up in stocks has been closely linked with the “green shoots” hypothesis, as we pointed out in yesterday’s Notes. We’re deeply suspicious of this hypothesis, however.

First, the data points don’t support a V-shaped recovery, something the green shoots hypothesis implies. Tyler Durden and David Rosenberg made this point loud and clear in their joint recent white paper on the recession. (You can read it here).

Second, we believe that the scrutinizing over numbers is a red herring. We know that the economy is getting worse. Whether or not the pace of the plunge is slowing or not is unimportant. Those who focus on this “second derivative” recovery miss the big picture analysis: the US economy in the most perilous position it’s been in since the Civil War.

Yesterday, Strategic Investment editor James Dale Davidson made this point loud and clear to the underground. Despite the $23.7 trillion TARP overseer Neil Barofsky reckons the feds have promised to backstop the economy, James is convinced that we remain in a secular bear market. And he reckons the S&P500 will retrace its March 9 lows before the recession/depression ends.

This is a Depression, a credit cycle gone bad that still has many chapters to    unfold.

If I am right, you can expect the stock market to work its way, after many adventures, to valuations lower than the March lows. Secular bear markets seldom, if ever, bottom at 13 times earnings, where the S&P 500 stood on March 9. That is approximately twice as rich as the multiples you can expect to see at the ultimate bottom if history is any guide.

Two further points.

Over the past century, the stock market has yielded an average dividend yield of 4.4%. Today, the S&P 500 yields just 2%. This implies well below average returns from here on in.

Another fact you should consider in plumbing the bottom is that financial sector profits, illusory though they may have been, accounted for as much as 75% of all corporate profits in the US in the early years of this decade. These financial sector profits were exaggerated by the explosion of leverage in the corporate sector at that time.

As deleveraging is now the rule of the day, a return to highly leveraged earnings in the financial sector is unlikely. It is far more likely that stock valuations will “revert to the mean.”

And this means a much longer bear market than anyone on CNBC imagines.

3. Since July 10 it’s all been about basic materials and consumer discretionary stocks.

3. Since July 10 it’s all been about basic materials and consumer discretionary stocks.

1. March 9 to May 6 when financials led the way

2. May 6 to July 10 when it was all about defensive growth and strong balance sheets (tech and health care leading the way)

• Verizon Communications (NYSE: VZ) will lay off 8,000 full-time and contract workers following a 21% profit drop in its second quarter, The Wall Street Journal reported. All of the job cuts will come from Verizon’s wireline business, which was hit by 630,000 residential phone subscribers canceling their service. This was offset by a rise in its fledgling fiber-optic television and Internet service called FiOS, which saw subscriber gains of 300,000 and 303,000, respectively. For the quarter ended June 30, Verizon posted a net income of $1.48 billion, or 52 cents a share on revenue of $26.86 billion. That compares to a net income of $1.88 billion, or 66 cents a share on revenue of $24.12 billion in the same quarter last year. The company’s wireless division, which is the No. 1 carrier in the United States, saw its revenue increase 28% thanks to its acquisition of Alltel Corp.

• The bulls were out in force on Wall Street yesterday (Monday) after all three markets posted gains. The Dow Jones Industrial Average rose 15.27 points, or 0.2% to close at 9108.51, theStandard & Poor’s 500 climbed 2.92 points, or 0.3% to close at 982.18 and the tech-laden Nasdaq Composite Index increased 1.93, or 0.1% to 1967.89. “The bottom line is that there are signs of life, and the market doesn’t want to go down. Buying late in the day and closing near the high of the day is more proof that the bulls are in control,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research told TheStreet.com.

• The Securities and Exchange Commission made permanent a temporary rule that seeks to limit “naked shorting” by requiring broker dealers to promptly purchase or borrow securities that they would use to deliver on a short sale, MarketWatch.com reported. “Until the SEC actually toughens its rules so that abusive short selling can be stopped effectively with enforceable standards, I am concerned that the abuses that took place last year that hastened the demise of Lehman Brothers and Bear Stearns could happen again,” said Sen. Ted Kaufman, D-Del. “Instead of proposing action today to deal with the problem, the SEC apparently is content to let potential solutions sit on the shelf for another two months,” he added.

• New single-family home sales rose 11% in June over the previous month to a seasonally adjusted rate of 384,000, the Commerce Department said yesterday (Monday). Still, year-over-year sales were down 21.3%. The Midwest saw 43% growth in the category, the sharpest increase in the category. Sales in the west were also strong, up 23%.

• Crude oil for September delivery rose 94 cents yesterday (Monday) to $68.99 a barrel in after-hours trading on the New York Mercantile Exchange (NYMEX), thanks to expectations thatgains in Asian equity markets will spur fuel demand, Bloomberg News reported. The rise was also spurred by investors seeking commodities as a hedge against inflation, as the dollar traded near a seven-week low against the euro. “Investors see the equity markets as a good lead for what you can expect oil demand to be going forward,” Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. told Bloomberg. “At times when you’ve got high inflation expectations, investors tend to move toward real assets such as commodities.”

• Thirty-four percent of corporate chief information officers plan on upgrading their companies to Microsoft Corp.’s (NYSE: MSFT) Windows 7, and 75% also plan on refreshing their hardware investments according to MarketWatch.com, citing a Deutsche Bank AG (NYSE: DB) survey. The investment bank says the Oct. 22 release of its new operating system “could trigger significant new investment across the technology value chain.”

• A strong value proposition can’t stop the video game industry from suffering the wrath of the worst recession in more than 60 years.Software sales fell 29% from a year earlier, while console sales dropped 38%, The Wall Street Journal reported, citing data from market research firm The NPD Group Inc. The decline of the industry, which until the market’s March lows was thought of as recession-proof, has ripped to retailers such as Amazon.com Inc. (Nasdaq: AMZN), which blamed its weak quarterly results from its media business on falling game sales.

Source: Investment News Briefs Tuesday, July 28, 2009

After all, this could easily just be a bear market rally. And bull markets rarely begin with a bear market rally and head straight higher.

Beware The Bear Market Trap

It makes sense to hedge against a renewed decline. Here’s why smart investors are doing so using inverse ETFs. Read on to find out what they are, how they work, and why you should consider adding one or two to your portfolio in order to protect it…

ETFs: A Safer, More Effective Way To Short The Market

Just a few years ago, investors who wanted to profit from a market/stock downturn had to borrow shares from their broker to short the asset in question. But today, betting against banks, small-cap stocks, or even entire market averages, is just one convenient ticker symbol away.

You can short the market by using an inverse exchange-traded fund (ETF).

And while I’m generally an investor who subscribes to the fact that stocks ultimately rise and produce solid, long-term gains, there are certain times when using inverse ETFs can be very appealing – particularly in the current market environment.

Exchange Traded Funds: A Brief Overview

Before we talk about the hedging advantages of inverse ETFs, let’s quickly review what ETFs are, and how they work…

• Exchange-traded funds are securities that closely resemble index funds, but are more flexible because you can buy and sell them during the day, just like common stocks.
• ETFs give investors a convenient way to purchase a broad basket of securities in a single transaction, offering the convenience of a stock along with the diversification of a mutual fund.
• From a humble start in the early 1990s, the ETF industry has exploded, particularly over the past several years. There are now over 700 ETFs, with $450 billion in assets.

And the advantages? ETFs boast several major ones over mutual funds and common stocks…

• Better diversification
• More flexibility
• Lower costs
• More liquidity
• Tax efficiency

Going Short The Smart Way With Inverse ETFs

Inverse ETFs (or short ETFs) are designed to move in the opposite direction of an underlying index. That means you profit when the benchmark tanks. The lower the underlying asset goes, the higher these funds advance.

Perfect for a bear market like this one.

Think of inverse ETFs as a type of insurance policy for your portfolio. Investing a modest amount in one of them can be a useful way to hedge against market declines, or protect your profits in certain asset classes.

And when an index or stock heads south (as we’ve seen many do with a vengeance recently), an inverse fund can help soften the blow – and in some cases, even generate enormous profits.

For example, on September 30, 2008, four days before the Dow went below 10,000, I sent a special newsflash to my ETF Authority readers identifying 14 securities that could skyrocket as the market heads south.

*Source: Bloomberg. Total returns from 9/30/08 – 3/5/09

As you can see, most of the inverse ETF have done exactly what they were designed to do in this rough market. And it doesn’t stop there…

Double Your Money with Inverse ETFs

Some ETFs can even return double the inverse of the underlying security. For example, if you buy shares of the ProShares UltraShort S&P 500 (NYSE: SDS) and the S&P 500 declines by 5%, SDS gains 10%. (Keep in mind that these funds compound daily, so if you invest for longer, the returns won’t line up exactly).

So how are these ultra-short funds able to double the inverse performance of indexes? Simple… by using leverage. The math doesn’t always work out exactly, but you can usually expect it to return double the inverse within a reasonable range.

The trade-off, however, is that these funds can be incredibly volatile – and if you’re wrong, you lose twice as much. So only consider going ultra-short if you have the stomach for it.

Why You Haven’t Missed Out on Short ETFs…

You may think you’ve missed the boat on short ETFs… but think again.

With the market coming off depressing lows, the current rally may simply be a “dead cat bounce” (which have been known to soar), as the market attempts to form a new bottom.

With this in mind, you may want to consider adding an inverse fund or two to help smooth out some of this unprecedented market volatility.

Good Investing!

Nathan Slaughter

Source: Inverse ETFs: How To Profit From The Bear Market Trap

The closest fellow they’ve got is Wen Jiabao – China’s prime minister and a man intent on spending his way out of the country’s economic problems. He might just succeed, too. More on him in a minute.

While millions of Irish revelers (and wannabe Irish) were no doubt nursing ugly hangovers this morning, China has one of its own: A record 25.7% plunge in exports during February.

With the Chinese New Year holiday having occurred in late January this year, economists expected February’s numbers to look better than January’s 17.5% drop from a year earlier – or to at least stabilize. But instead, it highlighted a country with a split personality.

Let’s look at China’s Jeckyll and Hyde economy…

February Flop

On the one hand, it’s evident that China having a very hard time selling its goods to the rest of the world, which (like China) is in the midst of a sharp economic slowdown. For example, deep recessions have hit major export consumers like the U.S. and U.K., plus widespread weakness across Europe.

For a country whose massive export growth has formed the foundation of its economic explosion, it’s no surprise that with this pivotal sector having steadily declined since November, so too has China’s economic growth.

A government forecast puts China’s first quarter GDP growth at 6.5%, compared with the 6.8% fourth quarter figure. And as exports tumble, the World Bank now estimates 6.5% growth for 2009 overall, the weakest since 1990 and a sharp cut from its earlier 7.5% projection.

But on the other hand, there are signs that China’s stimulus program is working, with internal investment rising.

China Hopes For Some Bang For Its Yuan

While its export market is flagging, China’s government is trying to boost its prospects in a way that it can directly control: Spending.

And with a $585 billion stimulus package rolling through its economy, China is adhering to the notion that if you want the best results, you have to spend a bit to get them. China’s banks have lent more money over the past three months than in the past year, according to the New York Times. The number of loans in February alone quadrupled to just over one trillion yuan ($157 billion).

A large portion of the money is going towards repairing and rebuilding China’s aging infrastructure. The National Bureau of Statistics said fixed-asset investment spending shot up by 26.5% to 1.03 trillion yuan over the first two months of 2009, compared with the January-February period in 2008. That thrashed estimates by 5%.

In turn, the improvements could give China a crucial competitive advantage. While others bail out their economies and slide into debt, China is using its strong cash position (ironically borne largely from its export growth) to now help offset export declines and its reliance on that area by improving prosperity from within.

Already, railroad spending tripled over the first two months of the year – much-needed investment for an industry that has struggled to cope with industrial production and demand. That’s in addition to increased spending on the country’s roadways. Construction equipment sales are projected to climb by 20% over the second half of 2009. Education, research and development, and social programs are also enjoying increased spending.

In some ways, the global downturn has forced China to stop relying on its exports and real estate market for growth and instead adopt a wider, more strategic focus.

And there could be more on the way…

Back Up The Stimulus Truck

China’s Prime Minister Wen Jiabao is certainly bullish when it comes to spending money.

Four months after announcing the $585 billion stimulus package, Jiabao pledged to “significantly increase” spending in a speech two weeks ago. He reiterated that more recently in saying that the government has “reserved adequate ammunition” to “introduce new stimulus at any time.”

He may need to, in order to meet his government’s 8% GDP growth target and stem the tide of rising unemployment. With 20 million migrant Chinese workers now jobless and blue-collar job wages falling, it puts additional pressure on China’s fragile pension and healthcare systems – and heightens the prospect of social unrest.

But with all the new money washing through its economy, China is still a viable investment…

In The Year Of The Ox, Should You Be A China Bull?

“As long as the government’s stimulus measures to boost domestic consumption are properly implemented, investment growth will continue to accelerate, making up for the loss of exports.”

So says Ma Jiantang, head of China’s National Statistics Bureau. And given the surprising speed with which many investors have jumped off the China bandwagon, that bodes well for those who still retain some perspective.

Despite cutting its forecast for China, the World Bank says China will fare better than most other economies, driven by its stimulus efforts. In addition to huge infrastructure spending and bank lending, retail sales were up 15.2% over the first two months of the year, with auto sales rocketing 25% higher. And the Shanghai stock market is up 22% this year, too.

Plus, firms like Intel (Nasdaq: INTC) and manufacturers Hon Tai (Taiwan) and IMI Plc. (Britain) are boosting their operations and employment in China.

What’s more, in the wake of the government loosening regulations on Chinese companies wishing to make foreign acquisitions, the commerce ministry is sending a delegation to Europe, specifically on the hunt for buyout targets in a range of industries.

It’s not all rosy in China, of course. The country is suffering at the hands of the global economic downturn like many others. But China is using the wealth and prosperity it’s built up over the past several years to deal from a position of strength.

So while some headlines may play up the doom and gloom, it’s also clear that the China bull is still alive and kicking in some areas.

Source: China’s New Bull Run

Time to “Go Underground” for Great Returns

Of course, you might think one of the last places for toe dipping would be the oil and gas industry. A recent OPEC announcement that no additional production cuts were planned for March should serve to keep oil prices low… for now.

That’s not good news for drillers, producers and anyone else in the oil industry supply chain. Many deep-water projects need oil prices of $60-70 a barrel to be considered economically viable.

But there’s one exception: pipeline operators. You see, they get paid to move or store oil and natural gas products.

One operator that sits apart from the rest is TransCanada Corporation (NYSE:TRP). TransCanada is actually two businesses: a pipeline operator and a power producer.

Its revenues are split nearly equally between the two businesses. And with shares down nearly 40% in the last year and trading at just 11 times projected 2009 earnings, the stock is sitting at historical lows.

In its pipeline operation, TransCanada owns and operates pipelines in both Canada and the U.S. It moves oil and gas from drilling sites to tank farms, refineries, processors and electrical power utilities.

Right now, the company is building its Keystone pipeline that will carry crude oil from Alberta’s oil sands operations to refineries in the south-central U.S. This line was one of four proposals that eventually won out over the competition.

It’s also applied to build a second 1,703 mile-long line that will carry crude oil, and it would supply mid-western pipelines and refinery operations in the states.

These projects aren’t cheap: this one has a projected cost of nearly $3 million dollars… per mile. But that’s fine as TransCanada has plenty of free cash flow to pay for it.

Unlike most other pipeline operators, TransCanada’s business model affords it some measure of protection from wild swings in volume and oil and gas prices, as it typically signs long-term contracts with its customers.

That’s a big plus, and one of the reasons TransCanada typically trades at slightly higher P/E multiples than its competitors.

And in a market where it seems every day another company announces it’s slashing its dividend to preserve capital, TransCanada announced just the opposite: effective at the end of March, it’s increasing its dividend. The stock now sports a yield of nearly 5%.

In summary, TransCanada is a great conservative way to play the oil & gas sector, and represents the best of the pipeline bunch.

Source: TransCanada Corporation (NYSE:TRP): Stock of the Day

There is certainly more stimulus than in any previous recession. The benchmark Federal Funds rate is essentially at zero, which has never previously been attempted, while inflation is still positive. The money supply has been increased by almost 20% in the last three months, which one would normally expect to lead to higher inflation.

On the fiscal side, the $1.19 trillion deficit forecast by the CBO is 8.3% of gross domestic product (GDP), considerably higher than the previous record of 6% of GDP in the recession-ridden year of 1983. And that deficit calculation doesn’t include President-elect Obama’s stimulus plan, which at $800 billion over two years could add $400 billion to the deficit and push it to more than 10% of GDP.

With both monetary and fiscal stimulus stronger than ever before in peacetime, the government is running the economy absolutely flat-out. Only if you thought the government had no effect at all on economic activity could you believe that recession and deflation would continue.

The initial rationale for all of this stimulus was the unprecedented nature of the housing finance disaster, with drops in market prices and loan-loss levels not seen since the Great Depression. Had the U.S. banking system imploded – as it seemed destined to back in September – the resulting recession could indeed have rivaled the Great Depression.

However the $350 billion from the first tranche of the Troubled Assets Relief Program (TARP), mostly invested directly into bank capital (although a number of banks admittedly used the taxpayer-provided infusion to play “let’s make a deal“), appears to have stabilized matters.

JP Morgan Chase & Co. (JPM), for example, is expected to make losses of around $2 billion in the fourth quarter of 2008 – a nasty result to be sure but by no means unexpected in a quarter when stock markets dropped 20% and illiquidity was at its height. With $25 billion of new capital from Uncle Sam, JP Morgan now has plenty of wiggle-room to survive – even in an extended downturn.

In 2009, further trouble may lurk for the weaker U.S. banks, but strong banks like JPM should gain market share and do quite well.

With liquidity now largely restored by both the TARP and by federal asset purchases, there would seem no reason why the banks’ corporate lending should be any more restricted than in previous moderate recessions. In those circumstances, the unprecedented fiscal and monetary stimulus should, in the short-term, produce a stock market bounce, an economic recovery, a dramatic run-up in the price of gold, and soaring inflation, in that order.

The conventional wisdom is that the U.S. economy will have a very difficult first half, but that recovery may appear in the second half of 2009.

These things are very difficult to predict, but my money would be on precisely the reverse scenario: The stock market will be strong in the short-term, and economic numbers will turn around quite rapidly, perhaps even producing modest first-quarter GDP growth, and quite robust economic growth in the second quarter.

By late summer, however, the resurgence in inflation and financing difficulties in the U.S. Treasury bond market will cause an increase in long-term interest rates, accompanied by a reassessment of the U.S. Federal Reserve’s 0% short-term interest rate policy.

That will cause the stock market to reverse direction and head downward.

Serious consumer price inflation will take longer to appear. But by the end of the year and in the first half of 2010, prices will be rapidly rising. Accordingly, both the Fed and the Obama administration will have to begin reversing their stimulative policies, raising interest rates and cutting public spending – or even raising taxes. The policy reversal will cause a second economic downturn, but one that’s of a very different nature from the first.

The current downturn has been caused by a collapse in asset prices, and has been reversed by exceptionally strong monetary and fiscal stimulus policies. However, the second downturn will be sparked by a crisis in the long-term bond markets, will be more concentrated on the real economy than on just the financial sector, and is likely to be much more prolonged since fiscal and monetary policies will be forced to be restrictive.

Monetary policy will have to be tightened to fight surging inflation, while fiscal policy will foster a lengthy battle in the administration and in Congress between the economic necessity of austerity and its hugely unattractive political effects.

Reversing such extreme fiscal and monetary policies will be exceptionally painful, and the second leg of the recession will thus be exceptionally damaging to U.S. corporate profits and to U.S. stock prices. The stock market is likely to take out its November lows by a considerable margin, although at its nadir it will offer patient investors an exceptional long-term bargain – just as it did in 1932, 1949 and 1982, with high real long-term returns for those bold enough to invest.

Currently, the balance of probabilities favors a rising market in the short term – perhaps even rising quite sharply because of the exceptional strength of the current monetary and fiscal stimulus. Gold and gold-mining shares should do particularly well.

Let’s enjoy this projected short-term bull run while it lasts!

Source: Obama’s Stimulus Plan: When is There “Too Much” Stimulus?

But have no fear.

It’s not too late to grab a piece of the pie.

The trick is that you’ll have to look beyond the obvious choices like major oil companies, drillers and other sectors that are hopelessly bid up right now. And you can play various types of funds, as well as stocks, as we’ll demonstrate.

The Four Factors Giving Life to the Commodity Bull

But before we tackle the how, let’s tackle the why:

• First, it’s important to understand that high oil prices are simply going to go higher, still. There will be inevitable pullbacks, but as we’ve written so many times in the past, the math is very simple – people are simply using more oil than at any time in history and worldwide demand is accelerating.

• Second, it’s also important to note that we haven’t had a major new discovery of any substantial size in the last 30 years. And by substantial, we mean big enough to change the balance of supply and demand and, by implication, to reverse the runaway increase in prices. The lack of any new discoveries, then, also points to higher prices.

• Third, absent an immediate, cost-effective and widely available substitute, oil is increasingly nationalistic in nature. This means that oil producers – and particularly the tyrants with spigots – will begin holding back production for their own use. That will reduce the supply available on world markets, further enhancing the upward pricing pressure.

• And fourth, while higher prices are finally inducing some drivers in modern industrialized countries to drive less, developing nations don’t give damn about conservation and are guzzling gasoline like there’s no tomorrow – which, for them, is entirely true. For these nations, access to energy and to petroleum is the literal equivalent to survival and they’ll do everything they can to ensure it. So any drop in demand we’re experiencing is almost immediately offset by higher consumption in such markets as China, India and many parts of South America. And that offsetting consumption may well persist for years.

That’s a very painful reality to face. But it does bring us to the fun part of this commentary: The profits.

New Markets = New Profit Opportunities

Any time you have sustained supply-and-demand imbalances, you also the potential for huge profits. And what’s happening now is no different.

Viewed in that light, higher oil prices can actually be a good thing for the stock markets, just as the rising price of such “commodities” as gold, copper, cotton, silk and spices have been for various nations since the dawn of time.

The reason is that excess profits that would ordinarily flow to Caracas, Moscow and Riyadh, are being recycled into the best global stocks on the best first-tier global stock exchanges, including the New York Stock Exchange, the Tokyo and Hong Kong stock exchanges, and the Frankfurt, Euronext and London exchanges.

But that may be coming to a head as trillions of dollars are chasing a diminishing number of high-quality stocks, which over time will propel those shares to excessively high valuation levels.

So what’s an investor to do? Savvy investors will once again have to go with the (global money) flow, ferreting out markets that haven’t yet hit “mainstream” radar screens, but that still are likely to benefit from rising oil prices.

We refer to them as “frontier” markets and they include such mineral- and resource-rich places as Nigeria, Sudan, Egypt and Bangladesh among others. They’re obviously beyond the same old BRIC choices that have become so popular in recent years.

Most of these markets are so small that many investors overlook them altogether – but they’ll soon become very popular because of the tremendous upside they offer.

Even with political upheaval, hyperinflation, open warfare and catastrophic human and natural disasters, frontier markets are piling on stunning returns. Most are benefiting significantly from rising commodity prices that, in turn, produce higher corporate profits.

As a case in point, consider the Standard & Poor’s/IFCG Frontier Markets Composite Index posted a mouth watering 43.3% return last year. And individual markets did even better. Bangladesh turned in 128.3% while Cote d’Ivoire nailed down a 122.7% gain. The index’s worst performer, Estonia, plunged -14.2%.

Clearly with a range like that, so-called frontier markets aren’t for everybody especially since they’ve gotten so expensive as more money has flowed into them. Data shows that many are trading at Price/Earnings (P/E) ratios that range from a high of nearly 100 for Vietnam to a “mere” 35.9 in Slovenia.

Still, even at these valuations, we can make the case that higher commodity prices will allow these markets to grow for years to come – especially given that they are starting from such a small base.

Which makes them a logical choice for adventurous investors who want to get in before they become hot on the country club cocktail circuit.

During that same time frame, the price of gold went from $400 an ounce to a peak of $730 an ounce by May 2006. By the time the Fed stopped hiking rates, an ounce of gold was sitting at nearly $660 an ounce – an increase of 65%.

As you can see, when there’s a long bull run pushing the price of gold, it doesn’t matter if interest rates are increasing or decreasing, the price of gold should shoot higher.

With inflation and government spending out of control, we should see much higher gold prices in the next 12 months.

That makes today a perfect time to begin acquiring gold at a significant discount.

Bloomberg reports that the S&P 500 has climbed 9.8% since reaching a 19-month low on March 10. And some Wall Street analysts, like Lehman Brothers Ian Scott, are predicting that better-than-expected earnings will pave the way for a bigger rally.

Eric Roseman thinks Ian and his Wall Street pals have it dead wrong.

“This is the biggest sucker’s rally since 2001,” says Eric in the Offshore A-Letter.

“This economic cycle marks the first time in the post-WW II period that inflation and deflation are running side by side. It is unprecedented. Consumers are spending less, losing their jobs and banks are denying credit. Also, soaring food and energy costs are killing consumers’ discretionary funds.

“Housing, however, is my primary concern. New home sales tanked 8.5% in March to their lowest levels since 1991. Housing shows absolutely no signs of bottoming. In my opinion, that’s the biggest deflationary tug on the economy.

“What we are seeing now is a long overdue bear market rally for stocks, including the homebuilders and REITs.”

“The problem with the recent shiny-happy talk,” says Justice Litle in Taipan Daily, “is that bear market rallies often last long enough to pull in the foolish or the over-eager… and then promptly fail when the max number of buyers have been roped in.

“That’s why, in an environment like this, it makes more sense to look at the big indexes with a skeptical trading eye, as opposed to a hopeful investing eye. I forget who said it first — maybe Jesse Livermore? — but it’s quite true that ‘hope is not a strategy.’”

As a member of a Puerto Rican household, rice was a staple food (as were beans and meat). And according to Bloomberg, rice is a staple for 50% of the world. But the world’s love for rice is introducing yet another bullish scenario for the agriculture bull-run.

Thanks to soaring demand from Asia, the price of rice has rocketed five times higher over the past five years. And things are now set to get worse.

You see, nations are starting to cease exporting rice as stock piles shrink. And to them, they have to do this to try and stop prices from going any higher and causing domestic upheaval. The thing is, it hasn’t been working.

In just the past year, the price of rice has doubled. And as nations continue to hold back exports, other nations will continue to flood the markets with buy orders in an attempt to secure rice at any price.

You can expect to see this for the next few years. And it definitely helps the case for a bull run in agriculture. The perfect way to play such a run would be to buy the DBA Proshares Agriculture ETF (DBA), which lets you make money as the agriculture bull-run charges ahead.