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This year has shaped up to be fairly typical of mid-decades dating back to the early 1900's. Known as the Decennial Cycle, years ending in 5 have generally been profitable for investors, with the greatest gains occurring during the last quarter of those years, setting the stage for much stronger moves thru the remainder of the decade.

Why? As we've written before, there has been a tendency for the Federal Reserve to fight recessions in the first two years of a new decade with easy money and low interest rates. Easy money is very much like spiked punch. At first you don't feel anything but eventually the effects do kick in, and the markets move sharply higher...especially in popular sectors that ultimately become so hot they're considered "manias."

Consider 1995, 1985, 1975, 1965, 1955, etc. During the first two quarters of those years, it was common to hear dour market forecasts due to pending economic difficulties, and that was the conventional thinking once again this time around.

Unconventional thinkers use times of uncertainty to accumulate under-valued high quality investments. Witness the huge amount of merger and acquisitions activity where the informed investors have been buying the bargains.

MID-DECADE MANIA UPDATE

Our candidates for this next potential mid-decade manic episode are stocks involved in China and India (outsourcing plays) and energy. It appears that before this decade ends, everyone will want to be part of this new trend regardless of the prices paid.

Use market weakness to accumulate the best of breed or you'll run the risk of paying substanially more when the crowd wants in. Another very strong sign came (again) from Bank of America. They've gone to China with a $3 billion dollar investment in state-owned China Construction Bank. Here's what I like now...

Consider The Golden Dragon exchange traded fund or ETF (symbol PGJ). Many of the companies in this fund have been taken down. It looks like a nice time to be a buyer.

Consider The Gap Stores (symbol GPS). They own Old Navy and Banana Republic, too, benefitting from the outsourcing boom and they have a nice clean profitable operation. Many value hunters believe it's worth a lot more than today's price. The shares traded above $50 six years ago.

Consider adding to your favorite oil stocks now that prices have corrected. This appears to be a pause and pivot point for anyone wanting to energise their portfolio.

Good Trading & Good Luck,
Gabriel Wisdom
ph: 888-999-1395
gwisdom@amminvest.com


The opinions expressed are those of Mr. Wisdom and do not necessisarily reflect those of American Money Management LLC (AMM) an SEC Registered Investment Advisor (www.amminvest.com). Clients, employees and Wisdom may buy or sell securities mentioned without prior notice. The opinions expressed do not constitute a recommendation to buy or sell securities and should not be considered investment advise. Investing involves risk, and you should consult your own investment advisor, attorney, or accountant before investing in anything.

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