Thursday, January 1, 2015


- Today came from yesterday and together forms the path to tomorrow
-  JFL

Before I can look forward it is important to understand how yesterday led to today. In my forecast 2014 I had some misses and hits.
On the hit side I stated that the copycat world would continue to devalue currencies, seeking the export market niche. In addition, central banks have lowered interest rates to help achieve their currency targets. They realized that the US Fed QE and lower interest rates allowed the US government to function with its high debt load and allow its banks to recapitalize after the financial mess of 2008.
I swung and missed when the US Fed did not raise interest rates as they indicated that they would. This is a smoke screen that the new Fed chairperson, Yellin hopes to play again in 2015. Hitters will soon hit this curve ball to right for a hit. When enough of them get on base, the Fed will change their language to maintain control. The Fed will not raise interest rates in 2015 and if they do, it will be a joke at a quarter of a percent. They are trapped in a box. They do not know how to raise rates without damage to the stock market and then, the media of public opinion.
I missed on the call to see regional monikers emerge to be front and center as opposed to individual nations. Keep in mind, this is a slow transformation and the process takes time.
I had Russia right with opening an oil market to China and the East.
I missed on Obamacare. I said costs would explode the national debt, however prices have risen. The call could be correct down the road.
I correctly stated that gold would be under pressure, but I was vague about when the turn-around would occur.
I was wrong about the demographics call and no one foresaw the oil crash. Retail has received a stimulus due to the extra bucks from lower gas prices. On the flip side the global community is slowing, especially commodity driven economies. Taken together, all my hits, misses and overlooked will lead us into 2015. This is what I see:
For those among you, dear readers, that are only interested in investing ideas, I will provide a near-term market outlook. Keep in mind, many aspects affect corporate returns with the number one force on the list being currencies.
King Dollar
will sink corporate profits. You may or may not dismiss my blog posts, but compared to the "talking heads" on TV, at least, I'm honest.
Foreign profits account for the largest portion of corporate returns and the rising dollar will crush that side of the ledger. Domestic consumption may increase due to lower energy prices, but the product themselves are still outsourced. As the bottom line shrinks, so too will the stock market. I see a drop of 1800 points in the Dow. This will occur after the first quarter. The size and scope of this trend will also be effected by the incomes in emerging markets. Lower commodity prices will have a negative trickle down effect in those nations. In addition, currencies will be under duress.
Wish For
governments wanted a lower currency value to spur exports. Now, they will get it except the demand will also shrink and new problems will surface like reserves to buy dollars and support their currency. Deficits will destroy budgets and plans for the future.
All this negative pressure will hit gold and silver, however other dangers like default will soon give strength to precious metals. I see gold at $1350 by April, but at that point the powers-to-be will attempt to regain control. We will have to wait and see what they do at that time. I would hope that citizens realize that a strong dollar improves their living standard and lowers the cost to food and energy, while the Fed seeks inflation which is contrary to our pursuit of happiness. With that said, I will offer my big picture with issues that will be in the news in 2015.
The first big issue will be the collapse of commodity prices. If they persist past the first quarter and there is no reason to stop this continuation of this trend, then the prospect of default will surface. The only rescue will be government protection in state economies and mergers or acquisitions in capital economies. Power hungry CEOs will oppose M & As to the point of default. These issues are slow to react and slow to resolve.
I stated this in my 2013 call, but I didn't repeat it last year. The ill effects by government agencies, thieves and fools will continue and possibly cause a major event like a blackout or explosion in 2015.
by the Republicans on gas will be debated and passed because infrastructure needs it and of course, the old stand-by that jobs will be created and our deficits lowered. At the same time they will argue for more money for the military. We are led by crooks and fools.
will attempt to revive his Pacific trade deal. This is a same old, same old approach that caused our economy and standard of living to decline due to the lower priced imports which destroys our industries and jobs.
will suffer a recession, but I can't say how long and deep it will last. The EU will offer the answer of QE. Yep, this will add debt just like Japan and the US. Germany is key and because it relies so much on exports, it will be open to try anything. This will keep the trend of lower values for the euro which will put pressure on all members. Members will debate the pros and cons of staying with the euro. Greece will need money again and demographics will come forefront, especially with retirement and pensions.
Argentina will have debt problems and Brazil social unrest. There will be sporadic news from Venezuela, Peru and Ecuador, but none of it good.
will have one bad moment after another. Thailand will have unrest. Japan a recession. China won't have an answer for global slowing and faces a real estate bubble.
Middle East
will have another up-rising and the continuation of displaced citizens will cause hardship for economies.
History and "15"
it has a funny way of repeating. Maybe because people have the same needs and wants and are led with decisions that reflect those issues. I could recount a historical litany of events in years with the fifteen ending, but I will give the first and skip to closer times. One theme is common: war.
In 115, The Jews revolted from Rome for the second time and it did not end well.
In 1715 the Ottoman Empire retook the Peloponnese peninsula. Spain lost its treasure fleet in the Caribbean. The Swedes occupy Norway.
In 1815 there were a lot of treaties signed, but no one kept their word. The Scots revolted from England. Didn't work out or the re-vote in 2014. Napoleon escaped from Elba which led to Waterloo which led to more treaties which led to more wars. One bright note, Andrew Jackson, a general without credentials, kicked the British out of New Orleans.
In 1915 Congress refused to give women the right to vote. US technology had the first coast-to-coast long distance phone call and Europe engaged in WWI. On a lighter note, the President of China, Yuan Shikai declared himself emperor.
Bottom line: if history repeats there will be unrest and conflicts which to me does not bode well for the stock market. I guess there will be trade deals, but no one will obide by the rules and possibly a new tech advance, however it could be in medicine, possibly Ebola? Sorry, for the dismal outlook, but history has a way like people of doing the same mistakes over and over again.

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