If You Think Real Estate Has Fueled a Wealth Explosion,
Just Wait Until Phase II of the Current Historic Commodity Inflation Hits in 2006

The following quote is from January 2002:
“We are starting what will be one of the three greatest
commodity inflations in 140 years,
which will take place in 2 phases.”
James Flanagan
(January 2002)

Dear %%firstname%% %%lastname%%:

If you were reading Past Present Futures in January of 2002 at the low in the CRB Commodity Index, then you could not have missed the above quote (see sub-headline above).

Phase I of the commodity inflation began after 19 agonizing years of lower prices, three years of basing and the completion of our 60- and 30-year cycle lows. The time had come for the start of a historic bull market in overall commodity prices (see Figure 1 below).

Now, four years later, our forecast has been validated, and we’re ready to begin Phase II of this historic commodity inflation.

The Continuous Commodity Index, or CCI (formerly the Reuters CRB Index), has traded to within nearly one-tenth of a percent of its all-time high established in November 1980. If you did not live through this previous inflation, the top in 1980 coincided with blow-off advances in gold, to $850 an ounce, and silver, to $50 an ounce. Two key questions arise:

• Is the current historic bull market in commodities complete after less than four short years of advance?

• Are we going to fall short of the November 1980 high?

Not on your life!

At the time of the final low in October 2001, financial markets still reeled from the September 11, 2001 terrorist attack. The initial shock resulted in a final sell-off to a higher bottom (just above the CRB’s July 1999 bear-market trough) that turned out to be THE buying low in overall commodity prices.

But as stocks remained in a bear market for another full year, until October 2002, a vital transformation took place, setting into motion the start of the next great wealth redistribution into tangible commodities.

The strength in commodity prices in the face of an imploding U.S. economy and a continued bear market in stocks supplied the dramatic confirmation we awaited to issue our all-out buy signal in commodities in January 2002.

A Quiet Revolution

Looking back, don’t you wish you could have bought the right technology stocks in 1990 – before the Internet became a household word and the information revolution dramatically transformed lives, portfolios and entire industries?

Until recently, a similar quiet revolution has been under way. (The explosion in energy prices changed that).

• The Continuous Commodity Index (the old CRB) has advanced 85% into its September 2, 2005 high.

• The Goldman Sachs Commodity Index, which is heavily weighted by the energy markets, long since staged a breakout above its 1980 all-time high and advanced as much 276%.

As a result, our bull market continues to track the two most explosive commodity advances in history, which occurred during the 1940s and 1970s (60- and 30-year cycles). These advances were not completed in less than four short years!

After 2 decades of ruthlessly cutting capacity in order to merely survive, even as raw materials demand exploded in China and other fast-growing economies, producers simply lack the wherewithal to rectify the worldwide supply-demand imbalance overnight. For example, there hasn’t been a new oil refinery built in the U.S. since the 1970s, and it would take years to construct one and bring it on line.

Disillusionment in the investment community escalated to such proportions that Merrill Lynch shuttered its commodity trading business in 1998, as did a number of other brokers around that time (Merrill Lynch tiptoed back into energy trading only in September 2004).

Once commodities establish a major long-term bear market low, it inevitably requires close to a decade at minimum for the ensuing long-term bull market to run its course, as demonstrated in 1792-1815, 1843-64,
1897-1920, 1933-51 and 1971-80.

All of the latest crucial developments continue to reinforce our vision for the markets based on the 60-year cycle (see figure 2 below). This points to a likely day of reckoning in 2006. Long-term interest rates remain near generational lows, propelling a red-hot real estate market and supporting stocks.

Its strong correlation with its World War II era predecessor helped us call the April 20, 2005 low in the stock market. Later, in last July’s newsletter, we observed, “ We need to see a run-up in price to a new bull market high with follow-through. Ideally this would be followed by another correction into the fall at which time our cycles will turn aggressively bullish for the balance of the year.”

That’s exactly what happened. The S&P 500 peaked on August 3 at a new high of 1245.86, then slid more than 6% before touching bottom at 1168.20 on October 13.

In early October we declared, “In the stock market it has been our expectation price would move aggressively higher during the final quarter of the year based upon our master time factor cycles. Based upon our cycle projections in the S&P 500, we have run out of time for more downside. It is time for the market to show us what it’s made of.”

After a few days, stock prices turned up. Having now nailed both of the 2 most important Wall Street lows of 2005, we said, “ We have an expectation for the October 13th low to support an aggressive leg to the upside. We have experienced a 71% retracement of the leg up into the August 3rd high. The average retracement in history of every leg to the upside is 71%. We have a perfect pattern for the continuation of the bull market with the likelihood a much more aggressive leg up will occur.”

The rally that came next swept the stock market to its loftiest level in 4-1/2 years, setting a new bull market high before Thanksgiving. In 2006, will the same cycles that propelled Wall Street higher since October 2002 cause the stock market to join the list of last century’s “6th-year” tops (1906, 1916, 1946, 1956, 1966 and 1976) that led to full-fledged bear markets?

Steamrolling the Shorts in the Energy Markets

During this 1st Phase in commodity inflation, crude oil experienced the 8th greatest back-to-back bull market in the history of any commodity since 1900, placing it in elite company with some memorable bull markets of World Wars I and II.

We took note of the extreme nature of the move and on August 12, 2005 reiterated our stance that “an objective to 70.00 is reasonable during this final leg up.”

When the devastating Hurricane Katrina struck at the end of the month, it drove the price of crude to record price of $69.82 a barrel in the cash market and 70.85 basis the nearest futures. We stated, “I believe the energy markets are now at ‘artificially’ high levels. In crude oil, we are virtually out of time for a continuation of the uptrend based upon our time period analysis. We could be witnessing a classic ‘Buy on rumor, sell on fact’ in response to hurricane Katrina. In order for crude oil to continue higher, it would basically have to re-write history.”

Prices headed lower while the city of New Orleans still remained underwater. In early September we asserted, “ Probabilities are now in favor of a final top being in place at the August 30, 2005 high.”

Crude oil proceeded to fall up to 21% in its longest decline since the start of its bull market.

As in “Phase I” of the 1971-1974 inflation, energy markets advanced to new all-time highs and a bankrupting of the shorts took place.

The characteristics of the advance strongly resembled patterns seen in agricultural markets between 1973 and 1974 and precious metals between 1979 and 1980.

The velocity and momentum of these powerful moves in energy carry far-reaching implications over the long run.

How soon before the rest of the commodity board plays catch-up with the staggering 580% surge witnessed in crude oil?

Make no mistake about it, when Phase II of this intensifying commodity inflation gets under way, tangible commodities will be THE only investment arena for accumulating wealth.

We have said from the beginning, the current inflationary cycles would not reach completion until the year 2010 at the earliest. Now is the time for investors and traders to orient themselves to this new reality.

Phase II of the Historic Commodity Bull Market

What currently captivates the investing public’s fancy more than anything else?

Real estate prices, of course.

The monumental wealth creation in real estate towers over a sprawling investment landscape.

Low interest rates have set in motion an incredible windfall and wealth creation unlike anything the world has ever seen. This follows the massive 18-year wealth creation in the stock market into the March 2000 high.

Coincident with this blow-off advance in real estate prices, the first move up in the long-term commodity bull market unfolded, but has yet to attract much attention. The investing public is too busy counting its real estate profits.

During Phase II, Tangible Commodity Investments Will Be
the “Only Game in Town”

This is when the public will wake up and start pouring money into tangible assets. Without a doubt, you will want to be fully positioned before this occurs. And all indications strongly point to a launch date in 2006.

Agricultural Bear Markets

As in 1974, the current bull market in commodities has moved from a phase where “a rising tide lifts all boats” to a two-tiered phase. Some individual commodities and complexes already formed major tops followed by dramatic bear markets, while others continue to forge to new highs. This is especially relevant in agricultural markets.

Despite the skyrocketing of energy prices to new all-time highs last summer and the surge in metals like copper and gold to all-time highs or levels not seen in over 24 years, the grain and soybean complexes and cotton persist in trading at levels dramatically beneath their bull-market highs in 2003 and 2004.

Based upon our cycle projections, the historic record speaks very clearly. These will be short-lived agricultural bear markets. In several of these commodities, our analysis already confirms the start of long-term bull markets.

The bottom line is that we are about to capitalize on the practical market philosophy taught over 50 years ago by W.D. Gann. The serious money in speculation is made on the big moves, which occur no more than once every generation. In Gann’s own words:

“When you are able to catch the extreme at the end of any Great Time Cycle you can make a large amount of money in one year’s time trading in fast active markets, and some very large profits in one month’s time.”

W.D. Gann

Renew Your Subscription Today and You'll Save $132
Plus, I'll Throw in a One Year Subscription to our Position Traders Hotline

Accept my offer to subscribe to Past Present Futures today, and you’ll receive a 12-month subscription for just $197 – Plus, I'll give you a one year subscription to our Position Traders Hotline by email or fax (a$99 value). That's a total savings of $130!

I believe that a subscription to our services is the absolute best way for you to prepare yourself to profit, as the coming market moves become reality. You will see current conditions through the lens of history and the techniques of W.D. Gann. Plus, you’ll be informed of the optimal strategies to profit from these advances.

Here's Another Reason to Renew Your Subscription Today …

Respond within the next 5 days and I’ll make sure you’re equipped for the coming opportunities by immediately sending you these 3 Exclusive Reports FREE:

FREE Bonus Report #1: A Generational Shift in Interest Rates

The interest rate market is unlike any other on the board. When trends are established they persist not for years, but for decades. The decline in interest rates over the past 23 years explains why we are in the greatest wealth-building environment the world has ever known. But what happens when long-term rates hit final bottoms as they did in 1901 and 1946? As experts in historical market analysis, we've taken a close look at this situation, and presented the details to you in this three-part report.

FREE Bonus Report #2: Precious Metals

Gold recently jumped to a 24-year high and platinum traded to within just $36 of its March 1980 all-time high. Its proximity to new high ground makes platinum perhaps the most intriguing commodity on the board, but both platinum and gold have been rising for a long time.

Gold has already topped a couple of key highs dating back to the 1980s and platinum has the potential to break out decisively if it can clear overhead resistance. Given the advanced age of the bullish trends in these suddenly much-more-precious metals, can you still rake in big profits without sticking your neck out too far and taking on excessive risk? This report tells you how.

Are the stock market and energy prices really flip sides of the same coin? The correction in the S&P 500 off the August 3rd high coincided with the final surge higher in the crude oil into a final top on August 29 th. As crude oil was turning lower, the S&P 500 continued to correct into the final low on October 13th. The million-dollar question was this: “What would the stock market do if the energy complex established a final top?” This was the simple question we were asking ourselves. The major turning points in all of the markets often boil down to questions such as these. -- This special report answers the question and tells you what to expect from both stocks and crude going forward.

Your Subscription is Guaranteed

I am so confident you’ll profit from Past Present Futures Newsletter and our Position Traders Hotline, I am offering this ironclad guarantee:

“If, for any reason, you are not completely satisfied with your subscription, we will refund the unused portion of your subscription price at any time. No questions asked.”

In either case, the FREE Exclusive Reports are yours to keep.

So please call our offices at 1(800) 545-9331, or (310) 915-7500, and ask for the “Email Renewal Special”. As soon as we hear from you, we’ll rush the 3 FREE Exclusive Reports to you immediately, and we'll start sending your Hotline updates by email or fax.

Don't delay. These opportunities will not wait for anyone.

Your partner for financial success,

James Flanagan, Publisher

P.S. Accept my offer to subscribe to Past Present Futures today, and you’ll receive a 12-month subscription for just $197, Plus, I'll throw in a one year subscription to our Position Traders Hotline ($99 value) – that's a $130 total savings. Plus, if you respond within the next 5 days, I’ll be sure you’re equipped for the coming opportunities by immediately sending you 3 Exclusive Reports FREE (valued at $149 – see detailed descriptions above).

To place your order by phone
call our Customer Service Dept. at (800)-545-9331
--OR-- If you're calling from outside the U.S. : 310-915-7500

Copyright © 2006 by Gann Global Financial. All rights reserved. This document may not be copied in part or full without express written permission from the publisher. All violations will be prosecuted to the fullest extent of the law.

Disclaimer: All content is published from information believed to be reliable, but it is not necessarily complete nor can it be guaranteed for accuracy.No solicitation is made here for individuals to buy or sell futures contracts. Futures and options trading is inherently risky and should only be undertaken by individuals with adequate risk capital.