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Optimism Returns – Economic Doom & Gloom is Lessening

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The Negative Daily News
Daily we are bombarded with news of European Debt Crises, of China Slowdowns, of USA housing and job numbers. Everything seems so negative. Yet when one takes a larger view of what is happening around us, it is obvious that the next cycle is starting, and we are pulling out of the economic mess.

Unmistakable Economic Signs of Coming prosperity
It is said that the stock market foretells the economic future. The Dow Jones Industrial Average is now at 13,500 and rising. It has been 5 years since this average has been reached which was last in October 2007.

The Dow Jones Composite Average has broken above its recent high and matched its high of 2008 before the great fall.

Even junior resource stocks, which are normally the last stocks to join an upward parade, are showing some signs of life.

“Those who don’t know history are destined to repeat it.” Edmund Burke (British Statesman and Philosopher 1729-1797
In every time, there are economic cycles. An economic cycle starts, gradually more jobs appear, demand for workers increases resulting in higher wages, more and more people jump on the bandwagon, caution is thrown to the wind, everyone is convinced the future is bright, excesses appear and irrationality grows, and then the fall in economic prosperity which is always far quicker and more dramatic than the rise, and the cycle ends with economic pain and hurt.

Then the economy starts a new cycle, whether because of a new technology, or a new economic power rising in the world, or a new generation of young people, or a new need of some sort. The only surety is that we have always had economic cycles and we will always have economic cycles.

Some indicators of the coming boom follow:

August 23 2012 Raymond James Weekly Trends
We would use any material weakness that develops over the next few weeks as an opportunity to add to equities over bonds and growth-oriented cyclicals over defensives. While both equities and cyclicals have rallied over the past month, from a relative perspective, they have yet to become over bought as compared to bonds and defensive equities.

September 2012 Auto Sales Set Records
Based on the first 16 selling days of August, U.S. new car sales reached a four and-a-half year high last month. Slightly more than 14.5 million units were sold in August (at an annual rate, seasonally adjusted), which was an increase of 20% from a year earlier, and the highest sales month since March 2008.

European Debt Watch
Marketwatch September 2012 In Europe, leaders will still have to act against the region’s crisis, but they’ve also continued to express a strong resolve “to do whatever it takes” to keep the Eurozone intact. Perhaps more importantly, U.S. economic data reports have generally improved. While not signaling especially strong growth in the near term, recent data releases suggest that we remain on the gradual recovery track.

Aug 17/12 Financial Post TSX rises amid German commitment to euro, rising copper, low inflation On Friday, traders reacted favorably to remarks by German Chancellor Angela Merkel during her visit to Ottawa. She said Thursday that her country — which is Europe’s biggest economy — is committed to doing everything it can to maintain the euro currency union.

Payrolls
Private-sector payrolls have risen by 4.3 million since bottoming in early 2010. The pace has been a little slower than that of the recovery from the 2001 recession, except that the pickup in jobs began a lot sooner in this recovery. However, the current recovery has also coincided with an atypical decline in public-sector employment (mostly in state and local government).

Aug 17/12 Marketwatch The market could be poised to move higher soon, says Scott O’Neil, president of MarketSmith. O’Neil tells MarketWatch Radio’s Larry Kofsky “we kept trying to get through 1,400″ on the S&P “and on the Nasdaq, 3,000 being a ceiling and now both of those levels kind of feel like a floor.”

Aug 17/12 The TSX has risen above its 200 MA for the first time.

Sep 6/12 Daily Markets CNBC’s reports that after losing 70 percent of their business in the housing crash, the nation’s home builders are breaking ground again. New orders for homes are rebounding strongly, and housing starts have shown sustained growth over the past year. The demand is there; unfortunately, in some areas, the workers to build these homes are not. Many former construction workers moved on to facilities maintenance work or remodeling, or whatever jobs they could find. Replacing them is difficult because today’s market demands highly skilled workers, and there is simply no available base. In the past, builders would hire workers and train them on the job.

The Evidence is all Around Us

As can be seen from so many quarters, there are strong signs of life popping up in the economy.

It is time to stop sitting on the sidelines and to join investing in the stock market. Failing to do so now, means missing the train, and then buying at the top when stocks prices are too high.

The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds. Larry Cyna and/or the CymorFund may have positions in the shares of companies mentioned

 

Summary: The current economic cycle is painfully drawing to a close, and the next is slowly emerging. Economic signs of growth and recovery are being seen in many sectors. The USA will again lead the recovery. Buying investments now is buying at the bottom of the cycle and is an opportune time to invest.

Tags: Economic Cycles, Investing, Diversity in Investing, Jobs in the USA, Stock market, DJIA, home builders, junior resource stocks, prosperity, Those who don’t know history are destined to repeat it 



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