Wednesday, January 6, 2016

Forecast 2016

- Today comes from yesterday and together forms a path toward tomorrow.

Before I can go forward, I'd like to reflect on my 2015 calls.
Perfect Call
I said that Yellen would not raise rates and if she did, it would only be a quarter point and late in the year. And yet, not one pundit ever mentioned my blog. Go figure!
King Dollar
I said it would sink Dow profits. I'm a sage!
Market Correction
Wrong! I called for a 10% correction by the end of the first quarter and although January was down, the market rebounded to new highs. My only mistake was in timing because the market did fall 10% in August. However, truth be told, I was looking for a deeper correction. The composite was down 5% for the year, while NASDAQ was up 5%, however a few tech stocks like Netflix skew the index. Verification comes through the small caps which were down for the year. The uptrend has been broken both yearly and multi-yearly.
I said that all fiat money would continue their race to the bottom. Bingo! My exact words.
"governments wanted a lower currency value to spur exports. Now, they will get it except the demand will also shrink(because their citizens pay higher costs) and new problems will surface like reserves to buy dollars and support their currency(bonds were issued in dollars and have to be repaid in dollars which cost them more.) Deficits will destroy budgets and plans for the future."
Wrong. Called for a $1350. price
Commodities in General
Wrong with warning of defaults, however this could be a timing issue again as hedging saved many oil companies. Nevertheless, in 2016 those contracts will expire and there will be defaults in oil. Any oil price below $32. will cause serious repercussions in the market.
Correct and it will continue and get worse.
Taxes on Gas
Wrong, but again a timing issue. This will happen after the 2016 election.
Obama will keep backing it. My only hope is Sanders and Trump oppose it and win the public.
Mixed. I called for a recession, however my prediction for QE was correct.
Mixed bag. The dangers still exist especially for Argentina, Brazil and Venezuela.
Wrong as Thailand didn't suffer unrest. Japan weathered through another year with the Yen lower which helped their big exporting companies. Bank of Japan bought stocks to help their market and I missed that one.
Middle East
Wrong about another coup, but correct with displaced citizens. Findings on Ebola cure are still a work in progress, but the crisis has passed.
What do you think, dear reader? I think that I did B plus work and now, this is how I see it.
The Fed will only add another quarter point, but really desire to get to 1%. At 1% the Fed can talk up ammunition if another crisis appears. Basically, another wait and see approach with a whole lot of BS!
The dollar will be range bound from 100 down to 93. Many other factors will determine its ultimate direction, especially with defaults in oil bonds and how the Fed responds to its reckless zero interest rates. If the dollar breaks above its high at 101, then new highs will come. Conversely, if it breaks below 93, then 85 is the next support level. Derivative triggers could cause a global recession, however that terrible danger could be put off until 2017. It is the ultimate weapon of financial destruction. Nevertheless, the debt market is, as it always was, a ticking time bomb caused by the Fed with low rates that provide cheap money, and the prospect of negative rates will only make everything that much more dangerous.
Currencies will continue to devalue which is a way to dump their exports on the US economy... I see the "hover-board" as a big fad, but since it is made by outsourced companies, little help for US manufacturing. It will continue to shrink, but toy companies will benefit with the fad. On the other Virtual Reality is expected to grow and surpass $150B in just four years. I'm not a gamer, but that is serious toy money.
Gold will also be range bound, but will respond to silver's action. I hope silver rises due to mining cutbacks in production and the demand by the solar industry. The price should be around $30. per ounce, so there is plenty of upside, although I don't see it rising that high. "Paper" gold trading could become a scandal. Paper trades exceed world supply many times over which is the manipulation of gold and silver. If there was actual delivery of these contacts - trouble in paradise with gold off the charts.
The market should drop 10% in the first quarter and I feel that it will eventually test the 2011 August lows. The real test will be in the action of the bond market. If defaults trigger problems, then derivatives could crumble everything with liquidity being a central point...I see S & P earnings falling into negative territory in the fourth quarter. This will be consecutive down earnings reports which in itself is a sign of a recession... Global markets, especially in Shanghai will pressure markets with declines. The Chinese ban on selling ends on 6 January. However, the ban has been extended for owners of 5%, which is hedge funds and institutions. Bottom line: you can buy, but you can't sell even if you want too. Yeah, that will spark new buyers into their market which happens to be dominated by individuals. The Chinese could do like Japan and buy their markets. This should be outlawed by law. Does the myth of the US Plunge Protection Team come into mind?
Mutual funds in the US had serious withdrawals in 2015 and this will increase in 2016 to which will add to the market drop. Just wait and find out that you cannot redeem your money. A serious, serious crisis is brewing.
Since 2016 is an election year and with the market catering, candidates will throw out all kinds of crap. I think that the idea of Mark Skousen's, Gross Output(GO) will catch hold by the media as it makes the US economy look better than it is in reality. Michael Burry, the man behind the movie, The Big Short, says he worries because big banks got bigger and the Fed is leveraged at 77 to 1 which makes it insolvent. Got gold anyone?
Like I stated above, I see hacking becoming worse and all the ways that physical money is being by-passed will only make things get worse if a crisis develops due to liquidity. I have warned you in the past, dear reader that there isn't enough money in circulation to cover the amount of debt in society. You should start paying bills with cash to understand its value. Money is not cheap!
Affordable Care Act will show its weakness and badly constructed as more and more health companies drop out of the exchanges. In addition, health prices are still rising. ACA is a terrible idea! There will also be a new buzz word in health care: Synthetic biology.
The EU will go deeper into debt due to the burden of the refugees. There will be backlashes, but I wonder do the refugees really appreciate the good will of so many or just how it effects me? It is no longer what my country can do for me, but what the global community can do for me. This will be a continuing saga, but no nation in SA offers a home to these people. I wonder about that too?
As for SA, Brazil will get the Olympics and social unrest about wages and living conditions as well as Argentina and Venezuela. The big Brazilian oil company should go bankrupt, but it will probably get a bailout. I see mucho unrest in SA.
The leap year won't have an answer for Chinese imperialism in the South Seas as military spending like in the US will be the Communist Party answer to help their economy. Not the answer!
Climate change will receive lip service of reforms. Promises will never be kept. Laws should be passed to demand solar energy on any new structure four floors or higher. Car companies should be pushed into NGC or electric models. The idea of tax credits will only burden society with another taxing bureaucracy. Instead, the government should impose tariffs on solar imports and provide tax credits to help US industries get their footing. Money should be given to states that pass solar building requirements. This is how I would answer the question. Denmark should be praised and copied as a great model of alternative energy.
The Middle East has been a sore spot in the world since the beginning of time. Palestine should be recognized and helped along with Israel. The deal with Iran holds some hope, but these people have a different culture than the West. Their religion, Islam has a serious flaw. Take 10 Muslims. You will get 5 Sunni and 5 Shite, however you will get 10 different interpretations of their teaching and beliefs. The Jewish religion has the same situation, except if you differ with a Jew, at most, he will shun you. These Muslims will kill you and destroy your church if you aren't one of their followers. These people are like the Catholic Church back in the Middle Ages when money and power blinded leaders. These people are worse. They're fanatics and I personally don't want anything to do with them until they can understand this principle: live and let live. Nothing there lasts, especially peace. This is a sore spot in the world and nothing has changed through time. No one can change culture only peace and love can show the way, but all we'll get is guns and war. Sorry, I cannot offer a better view, but keep on with self-improving and believing in peace and love. Amen.