In an interview on October 10, 2015, Michael Belkin, founder, financial market strategist and author of The Belkin Report, predicted that gold and gold mining stocks will soon be the new momentum sectors for institutional investors.

Belkin uses a predictive model to produce The Belkin Report, which he sells for $36,000 a year to institutional investors and sovereign wealth funds. He has an impressive track record. Most recently, in May and June of 2015, his report recommended shorting German car companies, including BMW, VW and Porsche. Since then, such stocks have plummeted. BMW is down 64% and VW is going through a scandal that has devastated their stock.

Although the stock market has been up, Belkin said, “If you’re a short seller, it’s really been the best market in the past seven or eight years.”

In forecasting a downturn in stocks, Belkin argued that the business cycle is on the verge of a significant reversal. The current business expansion is 70 months old, but the average business expansion is 40 months. QE can help keep the expansion going, but it can’t keep it going forever.

Belkin said that stocks go down in recessions, and recessions usually last 18 months. He said that the DJIA usually peaks 2 months before a recession starts and bottoms 4 months before it ends, with the Dow on average down 31% during a recession. The Dow is now down 7%, after peaking on May 19.

Belkin said, “I think we are going a lot lower.”

Individual stocks have already been falling. US Steel is down 77%. Computer stocks are down, with Yahoo down 41%. Caterpillar is also down 41%. Belkin said that money has gone into Facebook, Google, Netflix, and Apple, but these have started to roll over.

“There isn’t really anything left after that,” Belkin said. “I think the markets are going down.” He recommended shorting the stock market, holding cash or “Buy gold stocks because they are extremely depressed and I think they’re ready for a huge rebound.”

Belkin said that over his career he has noticed that “People who have the highest rate of return are value investors; people who buy things when they’re down 80 or 90 percent. As long as it’s not going bankrupt,” after a 90% downturn, a stock doesn’t have to go up much to return a huge profit.

In mid-2009, Belkin said, “All my models pointed up,” and there was a huge rally. Some stocks rose 800% off the lows.

Today, gold stocks are down 80% or 90%, with the XAU down 22% on the year. Individual gold stocks are starting to spring back. Belkin called it “A tremendous, once in a generation” opportunity with very depressed gold stocks.

The Fed, Belkin said, has created “a huge money bubble,” with all the money going into the wrong assets, and the dollar is artificially high. He believes the dollar is going to start to turn over, and when the dollar does, “Gold exploration companies are going to have a huge rally.”

The GDX is down 14%, but one of the Australian mining stocks he recommended is already up over 1,000%. Ramelius Resources is up 250% year to date, and Mellenium is up 140% year to date; both Australian names. Belkin mentioned them just these stocks are just “Indicators of what is likely to happen to a lot of these really depressed gold mining stocks.”

Belkin has written that “Everything [Fed Reserve Chair Janet] Yellin has said is wrong.” The US economy is not recovering, short term interest rates will not rise, the US dollar will weaken, and gold should rise. Belkin has called gold “monetary kryptonite to Yellen’s dollar policy.”

Belkin has been long the dollar for about 18 months, but he is increasingly short the dollar. He believes it could roll over versus the Japanese Yen and Euro, and once there is a shakeout in the dollar, it will really help gold.

“I think that global investors are getting squeezed out of their long equities and long junk bonds,” Belkin said, “and a lot of hedge funds are down for the year.” They are going to be looking for a new market that performs well. As gold and gold stocks begin to rise, Belkin said, “Gold stocks will turn into the new momentum stocks. When nothing else is working for institutional investors, they will flock into the thing that is working and that will be gold and gold stocks.”

Belkin is independent and receives no stock options or compensation from the companies he recommends.

 By Patrick MontesDeOca