Investment legend says strong rally will continue

Steve Leuthold, 71-year old market veteran and head of Leuthold Weeden Capital Management, sees stocks continuing their rally into next year. Leuthold turned bullish late last year after his Grizzly Short Fund returned 74% during 2008's decline.

Leuthold thinks the S&P 500 will reach 1,350 early next year as the economy recovers. He says that things aren't great but they're getting better, and the rally has momentum and positive psychology on its side.

He currently likes technology, biotechs, and foreign banks, but says he won't touch American banks, because he's concerned about exposure to commercial real estate.

The 2 biggest oil producing countries you've never heard of...

When it comes to crude oil, Nigeria and Angola aren't exactly household names like, say, Saudi Arabia. Yet these two West African countries are currently the fifth and sixth top exporters of crude oil to the U.S., exporting 668,000 bpd and 504,000 bpd, respectively.

But Americans aren't the only ones buying up African crude. Guess who else wants to poach our sources?

China, of course.

China's thirst for oil is on the rise; the International Energy Agency forecasts Chinese crude oil demand to grow to 8.3 million bpd for this year, only to increase to 8.6 million bpd in 2010. With domestic production basically flat, China must import almost two-thirds of the oil it needs, even as demand just keeps going up. Thus, the emerging giant has turned its eye toward Africa.

THIS TRADE WILL DRIVE YOU CRAZY

Today's chart is a reminder that one of the world's most popular bets is one that will drive you nuts: It's the past seven years in U.S. interest rates.

Folks love to predict interest rates. Real estate agents always predict higher rates and remind you to "lock in a low rate now." Speculators study all kinds of government reports to guess where interest rates are going. And many folks believe Uncle Sam's creditors will demand higher rates in order to compensate them for loaning to a risky borrower.

We track interest rates with the benchmark 10-year Treasury note. Back in May, the market blessed the "rates are headed higher" camp when this note's yield reached a six-month high around 3.3%. Rates then surged toward yearly highs around 4%. But in the last two months, rates have plunged below 3.3% to reach their lowest point since May.

If you held a gun to our heads, we'd say, "Yes... eventually all this freshly created credit and money will cause inflation... and thus, higher interest rates." But we'd also point to today's chart of the past seven years in the 10-year yield and say, "Baby, it's tough to make money trading interest rates." We'll stick with greener pastures in the stock and commodity

COULD GOLD SUFFER A BIG CORRECTION? SURE.

The latest on the battle for $1,000 gold: The sellers are in charge... and they could easily get "more in charge."

We don't need to overthink gold's uptrend. Gold is rising due to its centuries-old appeal as a store of wealth. With governments around the world engaged in crazed "tax and spend" policies, it's only rational to expect their Monopoly money currencies to decline in value. And for you trend followers, gold's long-term chart is a picture of the strongest uptrend in the world.

But here's a short-term consideration: As you know, we're expecting a strong rally in the dollar soon. Gold typically trades in a mirror image of the dollar. When the dollar is weak, gold rises. When the dollar is strong, gold falls.

Let's all keep this in mind: The dollar has enjoyed two solid rallies in the past six months. Both helped send gold down more than $60 per ounce. Both presented great gold buying opportunities. The third dollar rally will be no different.

This quarterly result can really have an impact

Are you aware of the GDP release impact?; an event that normally has a major impact on the Forex market?

GDP (Gross Domestic Product) is normally used to gauge the health of a country, as well as to measure a country’s standard of living. Increasing GDP figures normal indicates towards a healthy economy, which is countered by rising interest rates. Negative GDP results show that the economy is contracting and is normally followed by rate reductions.

Why is this important for Forex Traders?

If good GDP figures indicate that an economy is healthy, then that economy will often attract investments, having an effect on the country’s currency.

For example a better than expected GDP figure in Europe will often show that the European economy is improving – This situation is often countered by rising interest rates and can cause the Euro to gain in value.

As shown on the following chart the GDP figure normally has a tremendous impact on the daily movement, often sending the currency pairs into a huge intraday trend.

THE DOLLAR HAS BOTTOMED

After months and months of steady declines... and after the whole world hates the thing... it's time for a dollar rally.

Remember, you can view currencies like the "stock" of a country. When times are good and its finances are in order, a country's currency tends to rise. When times are bad and its finances are a mess, a country's currency tends to fall.

Today's chart displays a "mess." It's the 13% decline in the dollar from its March peak – a giant fall for a major currency. The market doesn't think much of Washington D.C.'s new "tax and spend our way to prosperity" idea.

But as our colleague Jeff Clark has covered in Growth Stock Wire, the negative sentiment toward the dollar is at extraordinary levels... so a solid rally lies ahead. And last week, we saw a bit of price confirmation for this trade...

The dollar index struck a low at 76.25 early this month... then started moving higher. It looked like the bottom was in until sellers pushed the dollar down even farther. This last selling surge had no power, however, and the dollar climbed back to its highest point in three weeks. Everyone hates the dollar, but it's rising... which is a great bullish sign.

This Asset Is Like Gold, Only Better

In the past few years, there's been an explosion of investor interest in "hedges."

Investors want to own foreign real estate for a hedge against a big depression in the United States. They want to own gold for a hedge against a dollar crisis. They want to own oil for a hedge against inflation.

But consider this "hedge factor"...

Between 1941 and 2002, average farmland values outpaced the growth of inflation by 2%.

In fact, some call farmland as good as gold with yield – because you clock in steady income from rents while you wait for the value to grow. I can think of no better asset to own during any kind of financial crisis.

In some ways, farmland is even better than gold or silver. At least farmland is an intrinsically useful thing. It provides a tangible yield in the form of good things from the earth. We all have to eat. As consumers trim their sails, they'll give up a lot before they give up their calorie intake.

Governments, particularly in times of crisis – like now – have a tendency to flood the system with money in an attempt to "goose" the economy. Mostly, such efforts have succeeded in destroying the value of the currency in question.

Anyway, if you believe that we will continue to feel the bane of inflation, then farmland's performance in the 1970s will give you some comfort... While you lost half of your money in the S&P 500, your farmland kept its value nicely. Again, I think that's rooted in the fact that farmland is intrinsically useful. It produces useful and needed things.

Now imagine what farmland might do in today's climate, in which you have not only the likely prospect of inflation, but also a tightening supply of farmland and rising demand for crops. You have biofuels eating up more of our grain supply. I imagine you'll do quite a bit better than in the 1970s.

Farmland treated British investors great just last year. As British housing prices collapsed in 2008, British farmland value rose by 21%. Over the last five years, Brit farmland rose a total 135%. Forget commercial property. That's not a bad ROI in my book.

And there's one more way to look at it: This hedge can outperform gold. In Britain, the farmer outpaced the gold owner. Expanding land values rode up 115% since 1983, versus gold at 81%. You can be sure institutional investors are already placing their long-term bets. Almost half the farmland bought there last year was snapped up by banks and funds.

The obvious investment conclusion: If you're worried about the dollar, the economy, or any other problem, buy farmland today. This is hard to do directly through the stock market... so I encourage you to consider a private deal. You can play agriculture through companies that manufacture irrigation equipment, produce fertilizer, or operate grain-handling facilities.

Check these investments out soon. I think we're in for broad farmland/agriculture rally that should be good for hundreds of percent returns. As you can see from farmland's past results, it's a great hedge in all kinds of environments.