THEY JUST DON’T GET IT: “Fewer workers are needed nowadays.” Too many people just cannot understand this fact or refuse to! I have written for six years that less people are required for the production of goods and services. Fewer people are needed in most industries today. More is done by less! The term “replaced by a computer” is so true today. High technology and robotics have replaced people. No matter what industry we examine, less people are required for it to function-from underground mining operations to the floor of the stock exchanges. This will continue and it will have an enormous impact on employment in the world. Understand this, most people are not indispensable and in a sense, they are not needed! How do you address the unemployment problem with that?

TECHNICAL ANALYSIS, 6% DOWNSIDE OR SO FROM THE RECENT HIGHS FOR NOW: Technical analysis and cyclical analysis still suggest that we still could face an overall decline in the stock market of between 20% to 26% over the next year or so. Ups and downs of 5% or so followed by rallies of less until we finish the entire 20% to 26% down move. We expected this to occur by now-for the last eighteen months. It did not occur in our opinion because of near zero interest rates which have provides a key support for the stock market. Keep in mind that is what our analysis suggests, things could or should happen, they do not have to happen.

LONG TERM CHARTS SUGGEST: Using historical charts, the stock market should have suffered a harsh decline but it was delayed since we still have the backdrop that can prevent or at least delay a bear market which is: 1-No real rise in interest rates-still near zero rates at present! 2-money supply growth is still adequate. 3-The economy, though not strong, is still not becoming weaker, not yet anyway! Those ingredients can support a respectable stock market performance and limit a bear market; but those ingredients may change.

DESPITE POTENTIAL BEAR MARKETS AND MURDEROUS PRICE DECLINES: Our models have always shown that by far the greatest opportunities are created when stocks are in their bear market cycles. No, it is not for trading stocks but for undervalued accumulation for exceptional capital gains. They must be studied with in-depth fundamental analysis and concurrent insider buying or large insider ownership must be there! The amounts of common stocks that are incredibly cheap are as high as ever. The problem is that the major brokerage houses still follow and recommend their same limited universe of stocks and often drive them up well above proper valuation; that story will never change.

THE FED CANNOT AFFORD TO SEE A HARSH BEAR MARKET: The US Federal Reserve Bank considers the stock market performance as a key factor of the economy. It cannot tolerate a harsh decline and has taken any and all means to prevent a bear market. As well, many US and Canadian pensions are underfunded could be challenged to deliver the required payments to their pensioners.

THE FED MODEL: If we use the “Fed Model” for the 10 year T-note vis a vis the S&P 500, it still allows a move up of another 15%. But can the T-Note rate remain at such low levels? We doubt it in view of the recent comments of Bernanke. We also do not believe the reported inflation numbers-never did.

LARGE CAP STOCKS, INSIDER SELLING IS VERY HEAVY: Insiders, the officers and directors of the publicly traded corporations, they have been heavily selling their own personal shares while buying very limited amounts of their own companies’ shares. Not a short term timing tool but a longer term warning of later declines.

CANADIAN JUNIOR MINING SHARES, AU CONTRAIRE, THEY HAVE THE HEAVIEST AMOUNT OF INSIDER (OFFICERS AND DIRECTORS) BUYING OF ANY SECTOR: Their managements obviously believe that they are very undervalued. By any gauge that we use and have used in the past, they are exceptionally undervalued. They are now carrying their lowest valuation levels in over twenty years. Large cap mining shares and mid-cap mining shares are carrying very low valuation levels too.

COMMODITIES CYCLE: Our analysis based upon population trends and economies suggests that the current weakness in many commodities’ prices is merely a “pit stop” that will change again. Historically speaking, it has more years to run. It generally limits the upside for the major industrial stocks and has truly limited their price performance for over a decade. Watch copper for clues.

GOLD’S PRICE DECLINE: The price of gold in the $1200 range? Consider that the cost of production for many mines is approximately $1200 per ounce. At today’s prices, production at many mines could cease and if you examine supply growth over the last ten years you will see that the supply available for purchase is rather limited. The “cost of production” is the key element here so watch it. It can provide a valid bottom.

CANADIAN AND U.S. ECONOMIES: The economies still are grinding along and our business owners and workers still tell us that they do not see much economic strength or much improvement ahead. They need it, but do not see it happening. And yes, there are strong parts in the economies but unfortunately still too many weak parts. Same old story (actually it’s a new story), less workers are required today to operate most businesses and governments; however, many governments have not recognized that yet.