Wednesday, January 4, 2017

Forecast 2017

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

Before I make a fool of myself and digitalize my opinions, I always like to look back on my previous prognostications. In my Forecast 2016 I said that the Fed would only add a quarter-point rate hike and a whole lot of BS! Perfect. Do I have a crystal ball? No. Because I called for the dollar to be range bound from 93 to 100. Well, I was right for ten months. Close, but no cigar.
King dollar has hit 103 four times in the last two months, but it failed to hold price due to the lack of conviction as in volume. However, if the Fed comes true, the dollar will rise further, but that will be revealed in time or a later paragraph.
I was correct in saying that world currencies would continue to devalue to gain market share in exports. The last two reporting months had global imports giving (us) the US a record average of over $61 billion per month. Maybe I am a sage? Can anyone foresee the day when imports cause us $100 billion in deficits in one month? Sadly, this will happen if we stay on the path that we are traveling.
Smaller Points
I thought that the "hover-board" would become a fad. Not my fault that it contained a faulty design. I also said that Virtual Reality would grow and become big. I got that one!
I was wrong on precious metals as I said that they would consolidate their gains. They went up and now, they are in a downturn. They did turn a profit for 2016 and I could argue that the bear market in the metals is over. I will make my yearly call after the 1st of May. Read on!
I was correct in my market forecast in calling that the market would correct by 10% in the first quarter, but I was wrong in saying that a test of the August 2011 was on the way. I was also wrong in saying that S&P earnings would continue to decline into the fourth quarter. I was right for three quarters, but again, no cigar.
I was correct in my worry about mutual fund withdrawals along with pension underfunding becoming a problem. In addition, I was right in my call that health companies would drop out of the ACA.
No one in the media mentioned my call that the EU would continue into debt and the refugees would become a multi-nation problem for them. Go figure.
I was perfect in my South American views except the Brazilian exchange did become the best in the world. I didn't see that.
My call on the Middle East was easy as there is never a solution in that region since the Roman times.
Finally, I still stand behind my call that Denmark should be praised and copied with their approach to alternative energy. All in all, I think that I earned another B-plus grade. Why couldn't I receive those grades in high school?
D-Day Pushed Off
Before I rest on my laurels, my Forecast 2017 will not be in a typical format. Just as the Chinese calendar for the new year starts at the end of January and the Hebrews have a different calendar as well as India and elsewhere, it is getting impossible to use our Western date in this global environment in the 21th century as the starting point. My outlook will only hypostasize until the 1st of May. It will all depend on what happens on the 20th of January and the first 100 days of the new administration.
As we enter 2017, the market is adjusting to the over-bought condition in the belief in Trump. The smart money is taking profits off the table in a wait-and-see approach. I'm beginning to have my doubts too, but for different reasons. The only aspect that I can agree with is Trump's call to renegotiate or end trade deals. He has appointed a billionaire cabinet of Republicans who favor the same old same old approach. They favor less government and by that they mean a free pass to do whatever they want to increase profits. This is greed over responsibility. It is a sin of capitalism. For example, you have the relationship of coal and electricity. The utility needs to put scrubbers to clean out the poison of residue and the coal company needs to put safeguards for the miners. Greed says this is an obstacle to profits. The only way that scrubbers will be installed is if legislation forces them. The only precautions for miners comes from legislation. We have to protect ourselves from the sins of capitalism. However, we do not need agencies that create laws without Congress. I feel that Trump will allow the judgement of his appointed to make that call. I do not trust these people to do the right thing which is make companies take safeguards, to spend money on responsibility to our eco-systems and workers.
Barons of yore...
We already turned that corner in the 1880s and it took fifty years to stop the exploitation of the land and labor. The fight goes on. We need to repeal the Taft-Hartley Act of 1947, but I never hear anyone calling for this crusade. Bottom line: I don't like Republicans and I don't trust Democrats. Libertarians are naïve. Socialists have more bad points than good. We need a new party for the people and nation.
Boiling Pot
To make any calls prior to Trump's actions would be premature. At this time you hear from pundits the same calls either pro or con on the economy. It is rare for anyone to hit it on the head. There is a boiling pot out there which contains the terrible condition of banks in Italy and Germany along with elections in Europe and refugees. There is the oil agreement to which I say won't last. There is the continuing defaults on bonds by Chinese companies. There is the dangerous debt to GDP in Japan. ISIS, terrorism and the Middle East is never far from headlines. There is the reality that a black swan will appear and I feel that derivatives will be it. Whatever happens, it won't happen until Trump has his honeymoon period. This is the reason why I cannot make any valid calls at this time. In addition, I do see the Fed making a rate hike early in the year and one more at the end of the year. I hope the military cannot talk Trump into an aggressive policy with China, especially in the South Seas. China is slow to act, but once they do, it will be hard to change. We do not need the Chinese to view Trump's policy as aggressive because they may meet aggression with aggression. Keep in mind that it is you and I that make America strong not the military complex. It is not a new bomber, but us. We are the ones who will be doing the doing and dying if the military screws up. It is like the Fed has the backs of the banking industry, we are the reluctant insurance policy for the "deep state."
The strong dollar will be good for US consumers, but it will mask inflation. If Donald follows Clinton's thinking and he forces a lower dollar, we will have dangerous inflation. If king dollar continues to rise, it could go to 113. At that point even a corporate tax cut won't help earnings. This will also effect world currencies and volatility in money is never good.
The boiling pot has spices like the business cycle, the migration cycle and sadly, even a war cycle. I do not like the foundation of the world at this moment. The cornerstone will rest on Trump's inaugural address. If he follows JFK, things will be fine. If he follows Reagan, our nation will be bankrupt by the end of his administration. I could go on-and-on, but why? We all need to give Donald a chance. His actions will speak louder than his words and after the first 100 days, then we will know where our destiny will lead.