By Mary Anne & Pamela Aden
The Aden Forecast
What a year 2009 has been, filled with twists and turns, some surprises, thrills, excitement, history and some disappointments too, all topped off with gold skyrocketing in its biggest monthly rise in a decade.
 But regardless of the emotional ups and downs, this year has been much better than last year, which was one for the record books. This year has been very good for us since we've been invested in the metals markets and the strongest currencies throughout the year, along with energy and resource stocks. Since mid-year, we've also been invested in the emerging stock markets and other strong stock sectors, and all of these areas have done very well (see Chart 1). So we're happy to report that it's been another year of double digit gains. We'll work hard to repeat this performance for you in the year ahead, which is shaping up to be even more interesting than the year that's now ending.
In fact, it's actually been an incredible decade. As we've often discussed, the year 2000 marked the beginning of a new era that does not happen often. But when it does, it warrants a total strategy shift, which is what's been taking place over the past 10 years.
Starting in 2000, for instance, stocks fell sharply as the tech boom came to an abrupt end. Gold started to rise. This shift was most important as it marked the beginning of a lost decade for stocks. The stock market has lost 10% since then while gold has quintupled. Hands down, gold has been the far better investment.
It's also been the decade and era of commodities as they've moved higher as well. At the same time, the U.S. dollar has steadily declined, and for the most part, so have interest rates.
These have been the primary mega trends this decade and as 2009 comes to an end, you can see that these trends were in full swing this year.
As Chart 1 shows, gold, the other metals and commodities (represented by silver and oil), U.S. stocks, the global emerging stock markets and the major currencies were the outstanding winners this year.
To date, these markets have gained 29% for gold, while silver and oil are up 50% and 52%, respectively. The Dow Industrials gained 15%, but the emerging markets have been even stronger with Brazil and Hong Kong, for instance, up 69% and 44% for the year. The Australian dollar gained 29% and the other major currencies also moved up impressively. The U.S. dollar was the loser.
All of this year's big winners were generally markets that fell last year, some more than others, as a result of the horrendous financial crisis, which hit just about everything. When the dust finally settled, most of these markets reached major or intermediate bottoms. This year they made up for lost time by rebounding strongly, with some of the markets wiping away last year's losses.
Will these upmoves continue as we move into 2010? As you'll see in this month's issue, we believe that they will. But since these markets have all had significant gains, we'll likely see downward corrections first before they resume their rises. These corrections could essentially get started at any time, so don't be surprised if they do.
Remember, no market goes straight up or straight down. Corrections along the way are normal and they're healthy.
The major trends are always the most important. That's where your focus should be because that's where the greatest profits are made. If you're in for the long haul, which is what we advise for most investors, then stay with the major trends and use corrections as an opportunity to buy more of an investment you feel you don't have enough of, but at a good price.
All of our recommended markets on Chart 1, for example, are in major uptrends. So any upcoming weakness will provide good buying opportunities. Should that change, you'll be the first to know and we'll of course keep you posted, but we don't think it will. Why?
Very simply, the global financial system has gotten itself into a cornered situation where there's no way out. This is not our opinion, it's essentially the facts.
Wealth is shifting from West to East. Asia is booming, along with some of the other emerging markets, while the West is struggling and barely pulling itself out of recession. China has trillions in its reserves, the U.S. is broke and it's borrowing like there's no tomorrow. So what does this mean?
The bottom line is that the U.S. has few options. Its debt is soaring to levels that were unthinkable just a couple of years ago. It is truly shocking, but it keeps on spending. And it's spending money that it does not have, so it has to keep borrowing more and more, and it won't be able to pay these massive amounts back.
How The Piper Will Be Paid
Just the interest on the debt is going to amount to over $500 billion within the next five years. That's more than the total deficit last year and it'll amount to one third of all taxes collected. In other words, there won't be much money left for everything else, which just means even more borrowing and greater deficits for as far as the eye can see.
Since default is out of the question, the only way out of this situation will be ongoing weakness in the dollar and the inflation option, which is historically the old tried and true, least painful method of keeping it all together for as long as possible.
So we can assume that the dollar will head lower in the years ahead. And at the same time, gold and commodities will move sharply higher.
These are the mega trends that've been in force for a decade and there's no reason to believe this is going to change. As for stocks, they'll likely continue rising as long as interest rates remain low. But the big moves are going to be in gold, the other precious metals, commodities and to a lesser degree, the currency markets.
Editor's Note: Mary Anne and Pamela Aden are two of the most influential and well known investment analysts, writers and lecturers in the world. They are the co-editors and publishers of The Aden Forecast, P.O. Box 790260, St. Louis, MO 63179, 1 year, 12 issues, $250, weekly updates included. The Aden Forecast specializes in the U.S. stock market, mutual funds, U.S. interest rates and bonds, the international stock and bond markets, as well as the foreign exchange and precious metals markets.
The Adens are also the Directors of Aden Research, based in San Jose, Costa Rica, and they are professional money managers. For more information visit www.adenforecast.com.
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