A statistic that may be somewhat predictive is that well over half of USA residents say that their personal life is good; however only about a quarter of those polled say that the USA is headed in the right direction. I feel the same way; regardless of the recent market highs. All things come to an end and if market price action during this previous week is any indication, equity market increases may be at the end point. Certainly, there have been and will continue to be valid opportunities as I have suggested. But these have been few and far between.

As I observed previously, recent market highs have been supported more by enthusiasm than by substance. The general market drops this last week have emphasized that. If you've been watching, you saw the Dow Jones Industrial Average (DJIA) drop a historically large amount: down 4.06 percent (552 points). Similarly, the S&P 500 Stock Index lost 3.71 percent and the Nasdaq Composite declined 6.49 percent. Also, the US dollar continued to slump, down 1.23% this week as measured by a trade-weighted geometric average of six other currencies.

What's Up?

So, what's up? Precious metals are up. For the previous week, spot gold closed at $832.00, up $25.00 or 3.10 percent. Silver was also sharply higher, pushing to $15.75, then backing off to $15.47/oz. Because precious metals prices have risen so fast, we are seeing a correction and a weakening of prices for awhile because the consensus is that gold, in particular, is "overbought". However I expect precious metals prices to continue to rise after this correction. And, of course, news reports followed the price of oil; reports suggest that oil is heading for the $100/barrel price. Like the precious metals, oil may weaken in the short term, and we could see oil prices down to $90/barrel. In the short term any political or military surprise could cause oil to jump up to well over $100 per barrel. The long term "surprise" is that the supply of oil is decreasing while demand is increasing - a receipe for much higher prices - - and probably sooner than we may think.

Investments Worthy of Consideration

USA companies which have major foreign sales may not be up significantly, but large caps that have foreign sales (and hence incomes in foreign currencies) have become attractive to value investors.

• Coca Cola (KO)
• Proctor and Gamble (PG)
• Colgate-Palmolive (CL)
• Marriott International Inc (MAR)- hotels throughout the world
• 3M (MMM) - Consumer products

There are companies which deal in commodities:

Potash Corp of Saskatchewan (POT) - fertilizer

Rayonier (RYN) - timber real estate, and high performance-fibers

Newmount Mining (NEM) - Major gold miner getting its act together

And, of course,foreign equities are interesting, because foreign markets are pretty much on a "roll" and the currencies in which they deal are typiclly stronger than our US$

BHP-Billiton (BHP) - Largest international mining company

Tenaris (TS) - Argentine producer of high quality oil well pipe

PetroBras SA - Brazil's state-controlled oil company with a lot of oil

A number of selected funds and Indexes can be good.

Central Fund (CEF) - Just holds gold and silver bullion

Power Shares Water (PHO)

Prudent Bear (BEARX) - Fund for a bear market

Silver ETF (SLV) - Holds silver

Global Investors Global Resources (PSPTX) - Fund of commodity companies

As can be noted, my outlook is generally financially conservative. I believe that the US$ is being depreciated simply because the USA government has a lot of debts (and committments) which are better paid off with "cheap money". This is a somewhat questionable way to pay debts, but it seems work for those who run the money printing presses. Just remember that the law of supply and demand works - even for money. When there's more supply, the value goes down, so if and when more US dollars are produced, the values (purchasing power) will decrease. So count on assets increasing when measured in US$.

Now, what's down?

Market drops of the size as happened this last week are pretty startling. Off hand, I would say that we'll see a continuance of the losses and this week does indicate that such will be happening. But I'm not so sure because, historically, market valuations in the US have held up well during election years. I think that we'll see a strong rally in stock prices as the year ends.

That, of course, does not mean that I am expecting "a rising tide to lift all boats". But I am expecting a modest continuation of rises in the general stock markets for awhile. How long? I don't really have a crystal ball, but we should be good for a few months. I do see a continuance of the rise in commodity valuations, perhaps after this present correction, so again will be emphasizing precious metals, agricultural commodities, and hard assets. I continue to hold such investments as CEF, POT, and NEM, among others commodity investments. Also, equities associated with the market in China seem to have accelerated upward too fast for comfort, so will exit investments directly related to China for the time being.

So, what's to do?

As noted above, I will continue emphasizing precious metals, commodities, and hard assets. Also, I like the prudent bear fund (BEARX) which is different from betting against the markets - the prudent bear fund bets against the stocks of weak companies and there are a few of them around.

Although I believe the general markets are not poised for any down trend, I will stay out of most stocks. The exceptions are noted in several paragraphs above. I will probably stay away from bonds in general because of the weak US$, but may take another look at inflation adjusted bonds because those bonds will provide an inflation "cushion". Because of the tricky rules about inflation protected bonds, I will be considering an inflation protected bond fund rather than buying the bonds directly.

And I emphasize that I certainly plan on holding my precious metal investments. We will probably see a very good return over the next twelve months.

Conclusion

With the problems in the sub-prime mortgages, a war in Iraq plus the possibility of that expanding into Iran, and with the US dollar continually slipping as compared with other currencies, a rally in the equity markets may prove to be overly optimistic. Needless to say, the financial environment is not low-risk.

At this point, there may be a lull in financial activities which can provide a good point to consider the big picture. And that big picture appears to be a weakening dollar overlaid on a slowing US economy. So, I'm just going to take things as they develop. As is said, there's always a market tomorrow.