By MoneyMorning.com.au

Not so long ago people would have called you a mental case for saying that central banks will keep printing money forever.

What did the central banks promise? Oh that’s right; they would withdraw from the market when the recovery took hold.

Now they’ve moved the goalposts.

The money printing is no longer about helping the economy recover, it’s now about making sure the economy doesn’t collapse.

It’s a big difference, and it will have a big impact on markets for decades to come…

And when we say ‘decades to come’ we mean it.

Controversial economist and trends forecaster Phillip J Anderson says the impact could result in interest rates staying low for another 70 years.

That’s right, 70 years.

It’s an amazing, and dare we say it, controversial view. But Anderson doesn’t say it without having done the analysis. We’ll show you some of that analysis within the next few days.

But forecasting ongoing money printing and permanently low interest rates is one thing. That will only get you so far. You also need to consider the consequences of it and how you can use it to your benefit.

‘Crush’ the recovery

First of all, let’s make this clear. It’s not just those of us on the fringe who now say that interest rates are staying low for a long, long time.

As Bloomberg reports:

‘Federal Reserve officials, concerned that selling bonds from their $4.3 trillion portfolio could crush the U.S. recovery, are preparing to keep their balance sheet close to record levels for years.

‘Central bankers are stepping back from a three-year-old strategy for an exit from the unprecedented easing they deployed to battle the worst recession since the Great Depression. Minutes of their last meeting in April made no mention of asset sales.’

If the US Federal Reserve cuts the size of its balance sheet, it would mean other market players would have to buy the US government’s bonds.

Those buyers may want a higher interest rate than that accepted by the Fed. That could push up all interest rates and ‘crush’ the US recovery.

So, the short story is that interest rates will stay low, just as we’ve said they would. And now the mainstream has caught on to the story too…finally.

Still value in stocks

The longer interest rates stay low, the better it will likely be for stock investors.

No one wants to earn next to nothing on their money in a bank account.

But on the flip side, who wouldn’t grab the opportunity to borrow money cheaply at rock bottom interest rates? Many businesses have refinanced loans to secure lower interest costs.

And even homebuyers are making the most of the low rates by refinancing home loans or upgrading to a bigger and more expensive home. Does that sound familiar?

But that’s not where the real money is. The real moneymaking opportunity is still in stocks. There’s no doubt this is where the money will flow as investors look to supplement their income in dividend paying stocks.

This will drive up stock prices on yielding stocks. It should also have a knock-on effect for growth stocks.

If companies can borrow at lower interest rates to finance the growth of their business, it should lead to higher revenues and hopefully higher profits as well. That means more good news for stocks.

Of course, nothing is straightforward. You’ll always get bumps along the way. You’ve seen examples of that with Aussie retail stocks over the past few weeks.

Just this week The Reject Shop [ASX:TRS] shares plunged 12% on news of a profit downgrade. Shares of Flight Centre Travel Group [ASX:FLT] have had a terrible three months, falling 15% after gaining 19% earlier this year.

That doesn’t mean you should rush out and buy these stocks.

But it goes to show that despite what you may read in the mainstream, not every Aussie stock is expensive. That’s part of the reason we don’t see a general stock market crash. If you look hard enough, you’ll soon find more than a handful of stocks worth buying.

This resource never falls out of favour

And the best place to find value is in the resource sector.

We sat down for a chat with resource analyst Jason Stevenson yesterday afternoon. We chewed the fat over which sectors look most interesting right now.

We agree that the sector with the most promising fundamentals is probably energy — specifically oil.

But it’s not the only one. Other sectors look interesting too. One of those Jason likes is the iron ore sector.

However, we would be fibbing if we said it was all good news for resource stocks. There are some resources that Jason doesn’t like at current prices. That includes precious metals such as gold and platinum, and uranium.

Things won’t stay that way. Every resource will have its day, especially as interest rates and borrowing costs stay low for decades to come.

The important thing to note is that just because we may be bullish on resources, it doesn’t mean that all resource stocks will go up at the same time. This industry tends to move in waves. Investors hone in on a ‘hot’ resource, chase the price up and then look for the next ‘hot’ resource.

If you can get in on the ground floor of one of those ‘hot’ resource waves, you should do well. But don’t forget the stayers, those that never really fall out of favour, such as oil.

The demand for most other resources can ebb and flow. But the demand for oil remains in a consistent uptrend.

The energy sector continues to throw up some exciting stocks. It’s one of Jason’s favourite resources. Investing in energy is sure to be a winning strategy as Western economies recover, emerging markets continue to grow, and the demand for oil shows no sign of slowing.

It’s a bright future for energy and it should make a lot of investors very rich indeed.

Cheers,
Kris+

PS: It’s not just Jason who has his eye on resource plays. Small-cap analyst Tim Dohrmann likes one specific part of the resource sector. You can read more here.

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By MoneyMorning.com.au