Commodities represent the next bull market says Don Luskin, Chief Investment Officer of Trend Macrolytics, in an exclusive interview with Dan Mangru of Newsmax TV Money.
Some commodities, such as gold and silver, are pure inflations plays, he says. And others, such as oil, are plays on the industrial cycle.
“We could find ourselves in a world with very high inflation and very slow global growth, where the oil price goes nowhere, while the gold price goes to $2,000,” Luskin says.
“So if it’s inflation you’re betting on, why not just bet on the inflation play par excellence, gold?”
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He says gold is definitely headed to $2,000. “It’s just a question of how long will it take to get there.”
Luskin’s price target for the next two to five months: $1,300.
Loose fiscal and monetary policy is driving us toward double-digit inflation, says Luskin.
Concern about inflation is “very real,” he told Mangru.
“No nation has a good history of controlling inflation, for that matter, no nation has a good history of controlling deflation. A fiat currency is impossible for central banks to control.”
So, Luskin asks, “Can we have double-digit inflation again? You bet we can. I think we will. And the fact that so many people think it’s outright impossible makes it all the more possible, because no one’s on their guard against it.”
“Markets don’t just double when you snap your fingers,” he says.
“But we’ve just seen the S&P 500 up 55 percent in 182 days. So amazing things can happen when consciousness changes.”
And at some point, he says, “there’s going to be a pretty serious consciousness change about the price that we’re going to have to pay to have the Fed and all the rest of the world’s central banks print our way out of what could have been a global depression.
“It’s great that it was merely a global recession. These central banks saved us from a depression. Bully for them. But like any heroic feat, there are costs and side effects. That’s inflation.”
Luskin says the economy won’t experience a V-shaped recovery.
“The kind of damage that we took: the entire credit system of the world shut down and now has to reopen without some of its major players.
“With everyone in the world scared stiff about putting money at risk, not knowing which currency to trust, which banking institution to trust, that’s not the stuff that durable expansions are made of.”
Luskin says the BRIC countries (Brazil, Russia, India, China) are right to wean themselves from the dollar.
“They have become so economically mature, that they no longer need to be dollar-colonized. There’s no reason why ... we and we alone ought to produce the world’s reserve currency.”
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