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We live in an era of particular asset appreciation. In spite of the much ballyhooed report of the real estate bubble bursting, I just saw recently on a financial news show that an 80 million dollar home/estate for sale had attracted more than one bidder, and that the bidders were, of course, in the financial field. Stock prices are hitting records. The price of oil is still high, and even the agricultural commodities are moving now. So where is all this commodity inflation now, what will it do to our stock market, and how does this relate to our past economic experience?

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In view of the late February/March 2007 sudden market decline, there are some investors who are questioning the value of long term investment in the stock market as a way to build wealth. These and other readers can read my article, Hedge Funds - Derivatives - Debt - China and the Risk of Systemic Market Panic, to gain insight into what types of systemic events I believe could cause stocks to surrender their investment value.

There is no doubt that a rapid market decline can engender fear and cause investors to sell into the decline. I myself had been selling some stock prior to the recent market fall in order to diversify my assets, as I was fully invested in stocks for some time before the price decline. I even bought a small amount of puts before and into the drop, though not enough to offset the fall of the paper value of my portfolio.

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The time at which most people believe a significant stock market correction will occur – whether because of interest rates, war, budget or trade deficits, excessive public and/or private debt, or events in China (or some other reason) –may actually be a time when it is less likely to happen. I have discussed this aspect of market psychology in my article, Stock Market Investing and the Power of Contrary Opinion.

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In the last three and a half decades we have encountered both periods of relative stability in the price of gold, but also periods of extreme volatility. When President Nixon took the United States off the gold standard in 1971, the result was a 9 year bull market in the price of the golden metal. There were two inflationary waves in the 1970’s, the first peaking in 1974-5, and the second more severe wave peaking in the late 1970’s and early 1980’s. This period was also marked by escalating oil prices, driven by the actions of an Arabian cartel. Eventually, the gold price rose from its fixed price of $35 to its peak of almost $700 per ounce (London pm fix) in 1980.

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In my eBook, A Way to Wealth – The Art of Investing in Common Stocks, I share my philosophy and practice of selecting mutual funds managed by value managers in order to build wealth over time. Most of the funds in which I have personally chosen to invest fit that category. So far, my original investments in most of the funds in which I have invested have multiplied over the years and I have by and large been satisfied with their performance in both up and down markets. My funds have included the Templeton Growth Fund, First Eagle Global Fund, and the Royce Opportunity Fund (sold).

I think the investor before purchasing a fund should look at the track record of his prospective choices, preferably over at least one full market cycle (bull and bear market performance). Look for funds which perform well in down markets as well as bull markets. You will be grateful you did if these funds are again able to sustain comparable performance when there is a bear market. I discuss this in my ebook as well as in the FAQs of my website.

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In my eBook, A Way to Wealth – The Art of Investing in Common Stocks, I outline my investing journey through both good and awful stock markets, and tell how I am to the current date winning the battle for long term profits in equities and mutual funds. The eBook profiles my unique technique for profitably investing in stocks and mutual funds. Much of my results have been achieved and profits retained by choosing stocks and funds more conservatively.

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It would be all to easy for me to espouse various stock market investment theories – when to be successful in investing, I argue that one should stay the course of longer term investment as described in my book, A Way to Wealth – The Art of Investing in Common Stocks. Sure, we have had many sharp and fearful declines in the market, which I have pointed out in some of my other articles – and there will be more in the future.

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This article might be titled, How You Can Make a Fortune by Investing in Strong Banks During a Credit Crunch. In my article Monday March 5, 2007: Are Stocks Still Worthwhile Investments? I stated in reference to at that time lesser possibility of contagion in the subprime mortgage problem, "The only thing that I believe could affect the economy and equities would be for the authorities to starve the system of providing mortgage money to potential borrowers – in other words, a credit crunch."

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There is unsaid in our daily life a social contract between all the players. Individuals are able to live their daily lives in a manner without much fear because of this contract, unless one lives in an area where this contract has broken down. You might call this unseen force in ordinary life the confidence that people have that their persons, social, economic, spiritual lives will be protected from the actions of others in that society, or from their government. We have enacted laws, and have institutional structures to protect us, such as the judicial system and religion, however imperfect they are. We have laws on the books to protect the citizenry. The Ten Commandments states that it is not right, for example, for men or women to kill each other, or to steal, and so on.

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In my article, When Gold Speaks a Thousand Words, published on this website on April 23, 2007, I posited my very positive view on gold. I wrote how that view, held by me for some time, had led me to make several gold coin and bullion purchases in the $300’s and $400’s per ounce in recent years.

Since that time, and especially quite recently, gold has rallied strongly, and has risen past its 2006 high to a present price of approximately $753.99. Oil has also risen in a spectacular fashion into the high $80’s per barrel. These support my conclusion in another article I penned for this website, published on February 26, 2007, Inflation and the Stock Market: Does Anyone Remember the Seventies?, that the gold price, oil and oil service companies stock price booms we have witnessed for the last few years are quite similar to the booms in like instruments last seen during the late 70’s. However, that boom in the late seventies and early eighties represented a long term peak in oil prices around $40 - per barrel and the gold price around $850.

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Just when a new bull market in a category of investments (stocks or commodities, etc.) is percolating to the top, investors may still be immersed in the psychology of investing in the previous bull market's most favored investment. As the maturing trend dies out, investors may still try to find reasons to invest in that trend, even though it may be actually reversing, with some investors playing yesterday's game. This may happen just when the long-term trend for the mature trend may have turned down.

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Sometimes it takes a full generation to pass before the memories of important historical events are purged from the collective mindset of a society. For example, soon the living memories of World War II will fade into history, and will be available only through our media.

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We are entering, in my opinion, a period of economic and stock market turbulence that will affect the pocketbooks of our citizenry going forward. Commentators on financial television have been reluctant until recent days to make the analogy of the present period to the awful economic period of the 1970's, which has been my thesis for some time.

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The disinflation we have experienced in our economy from 1982-2007 (until what I call the silent inflation of the last couple years turned into a more evident broader inflation in recent months) has been in my opinion one of the major underpinnings of the long term bull market in equities during much of the former period. This time was punctuated by the 1987 crash and the 2000-2003 post bubble era bear market. In addition, the lower regulation and non interference with the economy ushered in by the Reagan administration over two decades ago created an atmosphere conducive to investing in stocks and bonds – not to mention Paul Volker of the Federal Reserve Board being determined to successfully break the back of the 1970’s embedded inflation.

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Sir John Templeton’s sentiment that never before in U.S. history has our government and its citizens accumulated the level of financial debt as we have recently was referenced in my February 28th, 2007 article. And it is the citizenry who usually suffers from the eventual debt reckoning, forcing a decline in their living standards, Templeton believes.

The last great debt liquidation in the United States happened as the 1930’s Depression unfolded. After the stock market Crash of October 1929, the fledgling Federal Reserve shrank the money supply by a third, presumably to fight inflation, only exasperating the severe economic downturn of the 1930’s.

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I would like to draw your attention to the following web page graph denoting the Presidential futures market vote shares between Democratic and Republican candidates in the upcoming 2008 Presidential Election (as expressed in the Iowa Electronic Markets – a respected election futures market):
http://iemweb.biz.uiowa.edu/graphs/graph_Pres08_VS.cfm.

This shows a potential Obama victory in the Presidential election, as the Iowa Electronics Markets has a good record at predicting election outcomes.

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Americans are known for voting according to the health of their pocketbooks, and this year’s election may be no exception. While Ronald Reagan’s election in 1980 emerged out of the very noticeable dissatisfaction with the economic policies of the Carter years, Senator Obama may capitalize on similar sentiment among voters today in the race for the Presidency.