Beginning in 2001, the Fed began lowering interest rates to levels never before seen since the late 1950s. The U.S. economy moved into the re-liquefaction phase of the business cycle, the initial recovery phase of a new bull market, after the Fed lowered interest rates the sixth time. The economy has moved into the second recovery phase, the increase in profits phase, since October 2002. Corporate profits have improved this year a bit over 11%. The economy is currently in the third phase of the business cycle, the easy money phase.

The economy should surpass 3% GDP by the end of this year. With the exception of China, the U.S. economy will be ahead of all its trading partners by this time next year. Then, our economy will have reached the initial bullish phase of the business cycle, dominated by weak bond prices, rising prices, strong gold and silver sales, and a weak dollar. It will be difficult for the Dow to move anywhere above 10,000 points due to extreme competition for the investment dollar. The stock market will be forced to share dollars with stocks abroad, gold and silver, real estate, commodities, and foreign currency investments, such as, annuities, bonds and notes. This will most likely take place over the next 18 months.