September 28,2009

The world economy continues on track to recovery.  For the moment we are staying with our prediction of last month that the U.S. experiences GNP growth in the 3.5% area during the 4th quarter.  Obviously a world terrorism event or an action by or against Iran could affect this outlook.  We continue to be positive on stocks and negative on bonds.  Stocks around the world could be 7-10% higher by year end.  Part of this gain will be from earnings and part of it will be inflation hedge.  Markets are correctly beginning to focus on the potential for world-wide inflation/currency depreciation.  Gold and other commodities are the primary beneficiary of this outlook but stocks are a secondary hedge against inflation.  We prefer to own the means of production versus paper assets, i.e. bonds.  We are also bullish on gold and commodities.  We expect gold prices in the $ 1,500 range in the next 18 months.    

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