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Smart traders and investors flee to hard assets.
Each year around this time, we review our forecasts and projections for economics, politics, the markets, and other kinds of relevant information that can affect our trading and investing. For those who have not followed us in the early years of Trader Tracks Newsletter or on the radio, we take this opportunity to express where we have been and where we are going.
We waited until after the presidential elections had wrapped-up and the next president had been named before posting these additional ideas. Had Romney been elected, some things would have been slightly different, but not markedly so.
We did predict Barrack Obama would be elected and that is exactly what’s happened. The important question is: what can we learn from this past decade and what might occur in the following years from 2013-2016?
We predicted Barrack Obama would be re-elected and would not finish his second term due to a nervous breakdown from pressures of this high office and/or be driven to resign regarding a scandal involving a woman.
Based upon new information, we can add a third prediction. Obama will not be able to contain the debt crisis. With his stubborn agenda of “tax and spend”, he will make the messes increase even sooner. This speeds up the debt crisis, cracking the USA and global bond markets and setting off a series of other nasty problems. Most of these negatives were baked into the economic cake anyway, but his agenda will just speed them up and create a smash earlier than otherwise.
While it’s too early to tell, we think the Petraeus resignation scandal is tied to the potential of a Petraeus’ obligation to testify regarding the growing Libyan attacks misinformation scandal and alleged lying. Keep in mind the Nixon impeachment resignation was based on lying and a cover-up. We can see the same thing developing with the current administration in forthcoming congressional hearings. If this happens, our 2012 forecast for the president might be coming true.
With the president’s agenda being one of “tax and spend”, the Fiscal Cliff will get a Band-Aid repair and it will not hold up. The debt crisis is spreading all over Asia with China sinking faster than before. On Bloomberg Asia, it was just announced tonight that Japan’s GDP has gone negative at the rate of -3.5%. This is really scary as deflation news and falling stocks of major Japanese companies is now spreading quickly and is, in our view, now going out of control.
As bad as this is, Europe is failing even faster. The big boys (France, the U.K. and Germany) are joining Greece, Portugal, Italy, and Spain’s failures in 2013. These big boys are entering even deeper depressions. Germany is now in recession (not depression) but how long can they hold on?
In 1999 we predicted a stock market crash and we were correct when the Nasdaq had a major selling event. Greenspan propped up the other markets, but they should have otherwise been wrecked like the Nasdaq. This just delayed the markets’ crash until 2008 when it was artificially repaired with taxpayer cash despite banker insolvency.
In 2003, we predicted that the Euro Currency and Euro-Land experiment attempting to produce a United States of Europe, would fail. It took longer than we expected but we were correct. The Euro currency is economically swirling the drain. So far, Greece, Ireland and Iceland have caved. Lots more will fail very soon.
In 2004 we predicted our best trade ever in this decade when the Swiss Franc rallied from 55 on the Index to 89 providing a gain of $39,000 on one contract for the price of putting up modest margin money and paying regular broker commissions. That was the best single trade we’ve been able to find in ten years. More fantastic trades will present themselves as markets cave to places not expected.
In June of 2005 we predicted a massive housing crash as lumber futures took a dive in tandem with the messes we saw building in financial derivatives. We were correct as builders, brokers, title companies, banks and other lenders went broke. Only the big boy banks were saved, as they own the Federal Reserve. They replenished themselves with taxpayer cash and will do it again.
Before the 2008 markets’ smash, leading up to it for several months, we predicted a severe markets’ dislocation. That wreckage was so bad it nearly took down the world economies and perhaps some governments. The re-capitalization with taxpayer money was a temporary repair. The worst is yet to come and this time there is no way out.
We predicted the tops, bottoms and some intermediate support and resistance prices in the silver market from $26.50 to $49.00 and back again. We are working on similar trades in grain, precious metals and energy.
From November 12 Through December 31, 2012 We Predict:
President Obama will sign a flurry of executive orders enhancing new, onerous and bureaucratic controls enabling the EPA to further his green agenda and curtail the so-called carbon energy products. This wastes billions of taxpayer funds and further destroys carbon energy, driving carbon energy prices ever higher. The USA is headed for $5 per gallon of gas and Europe already has nearly $10 per gallon in some places. It’s going to get a lot worse but this won’t last more then 2-3 years as we will get a hyperinflationary blow-off.
A trio of very negative executive orders might be signed giving the UN more and very expansive powers over American citizens. Those could be (1) new global taxes on the Internet, (2) global gun control including the United States and (3) new taxes on all financial transactions worldwide to steal money to further the United Nations One World Order agenda. Eventually, after the World War, the UN will be permanently destroyed and with it the nightmare of the One World Order.
The Fiscal Cliff situation will go to a scary stand off and then be addressed with an executive order to extend the Bush Tax cuts temporarily for one year or less. Option two would be the Speaker of the House caving in to presidential pressures offering new taxes on incomes of $250,000+ and none on those with lesser incomes. The lesser incomes would get more taxes anyway, but they will be stealth taxes buried in other unrelated legislation.
The global stock markets will suffer a 10-12% correction in Q-1 2013 but not a crash. The harder crash is more likely to come in May 2013 or September-October 2013. The so-called Big One could take down stocks 50-90%. A -90% wipeout would not be unheard of… it has happened before.
The US Dollar will rise to at least Index 84.50 and perhaps to 88.50 in 2013 as the Euro skids first down to 120.00 major support and then falls further to 115.50 after a few weeks at the 120.00 level. The Euro Currency will collapse when Germany starts trading their old Deutsche Mark in parallel alongside the Euro. Lower Euro supports are 112.50, 110.00, 108.00 and then 80.00. If it gets below 108.00, we think the Euro is toast.
Inflation will gradually build in early 2013 and then race ever faster. Food prices will rise +50% in 2013 on agricultural shortages by farmers, but mostly on a sinking US Dollar and war.
A conflict will breakout in the Middle East between Israel and several of her neighboring nations. Oil prices will skyrocket. We do not see nuclear war in the Middle East but rather widespread violence using heavy weapons, drones, missiles and bunker-busting mammoth bombs.
This conflict, if unchecked, could go right to the front door of Saudi Arabia. Should this occur, there would be a wider war involving the USA to protect Saudi oil fields. The Straits of Hormuz will be mined by Iran, which will slow oil tanker shipments. The US Navy will clear the waters by using minesweepers. We can see 5-10 Middle Eastern nations all fighting in unison in this conflict with a great loss of life.
President Obama is not skilled in the art of running a war and the USA generals will take over some decision-making authority into their own hands creating an outrage in the Congress and the Senate. These actions will be hidden at first but later come into the news based upon the military who have taken precautions protecting America and her citizens. This could further add to Obama’s resignation from the Presidency.
On the streets in America next year, expect a long hot summer of joblessness, urban rioting, violence and a major crime wave from the unemployed. The larger worry for authorities is the amount of guns in the streets including stolen heavy weapons from National Guard armories. Some years ago a rail freight car of 10,000 .22 automatic rifles was hijacked near the Mexican border. These were destined for sale to a major department store chain. Who has them? Who knows? The stocks and company sales of two major handgun manufacturers were reported up nearly 10% last week on stronger demand/sales. Consumers are getting worried about security.
The current depression could last until 2017 or even 2024 depending upon wars and political cycles. There was a nasty depression in the USA in 1842-1843. This was the beginning of several decades of markets mayhem including the American Civil War and a series of rolling recessions/depressions lasting until 1896. The worst of the market dislocations ran from 1873 to 1896, a nearly 20-year depression. Some say there were intermittent recoveries but we say they did not amount to much. Those were very bad years in the United States. We see the same stuff repeating all over again in this cycle.
The worst of the worst, in our opinion, will hit us in 2013 to 2016 with depression and world war. This is not end of the world stuff but a really ugly historical re-run. The so-called Mayan event next month on December 21, 2012 is not a world-ender, but a new and better beginning…however, the following three years will be a severe adjustment period.
The Obama administration and other world leaders are at the end of their fiscal rope. They are simply out of tools and ideas to extend and pretend any longer. The early gasps and rasping breathes from the bigger bond markets are coming down right now in Japan. The bond markets are skidding ever faster and 2013 will usher in higher interest rates breaking the central bankers. Even a one or two percent bond yield increase will crush these nations as the debt burden skyrockets on the outstanding paper.
Watch for the rating agencies like Moody’s and Fitch to begin a series of rolling downgrades further smashing these bankers. The USA will get a new debt downgrade in 2013. Their own little print and spend games will turn on them, wrecking hundreds of banks over the next three years.
Oh, what to do?
Smart investors and traders are moving toward almost all hard assets. We have been against buying and owning any real estate since 2005. Now is the time to buy a house or a farm if you need a place to live and prefer not to rent. In our view, the price bottom has been reached to obtain a cheap interest rate for a mortgage. In some places throughout the USA house prices have supported.
If you are a home buyer you had better take extra careful precautions on anything you purchase. Numerous banks, insurance companies and title companies are at severe risk. We would not encourage government insured mortgages, second mortgages, or any dealings with small fry companies that might be unable to continue in business.
Ideally a home could be bought with the seller carrying the mortgage for on-going income and your exposure to outsider lenders and others would then be greatly reduced.
We are also expecting that in more government grasping for tax dollars, homeowners will lose the mortgage interest deduction on tax returns.
Even worse, we expect corporate pensions, 401k’s, Roth pension plans and other saving devices to be converted to USA government paper. This not only diminishes their value, but could render them valueless in the future.
Move to a smaller town off the beaten track. Live a modest lifestyle. Pay off all debts. Have a paid-for vehicle, preferably a truck. Grow a garden. Provision-up your daily needs months in advance. Hunker down and become invisibly wealthy. Take care of family and friends. Be an owner of gold and silver coins. Take serious precautions for security. Become as independent as possible. This is a repeat of the later 1800s all over again. The less dependent you are on anybody else or any outsider, the easier your life will become.
We cannot see buying into new stock positions unless they are shorts during the first two weeks of November 2012. If you own stocks, use risk stops on bigger companies and take profits or hold on with juniors, knowing they should sell and then bounce back.
Somebody please tell us when the global bond markets crash for good and we’ll tell you when this can get better and we can start all over again, maybe with a partially backed fiat gold currency.
Roger Wiegand is the writer of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and long term traditional stock shares, futures and commodities trading with specifics for individual trades. Stay tuned for more of Trader Rog’s insights and predictions via his exciting new daily audio subscription. Coming soon! Details at www.wavelengthpublishing.com
Roger also is a regular contributor to The Korelin Economics Report (www.kereport.com), the highest rated daily internet radio program listened to throughout the world dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report, which airs on radio stations across the USA on Saturdays and Sundays.
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