Entries Tagged as 'Predictions for 2011'

Will Interest Rates Still Soar?


Just five days ago I posted Interest Rates To Soar Soon! In that post I said:

With the dollar falling, commodities moving higher, and the U.S. monetizing its debt, someone soon will demand a higher return for buying our bonds. I think that time may come within the next several weeks.

At the bottom of the post I wrote:

Barring a collapse in precious metals, expect higher interest rates soon.

In just a few days Gold has dropped from $1,575 to $1,461, Silver from almost $50 to $34.19 and Crude Oil from $115 to $98. Interest rates have fallen again to 4.26%. Why didn’t I see the collapse of PMs and Oil coming? I realized that Silver was going vertical, but thought maybe the USD is going to fail. I recommended that my sister buy Silver in August last year at $17 or so. She finally came in on Easter at about $48!

Porter Stansberry had this to say:

When central banks sold gold in the late 1990s, the metal bottomed. Now they’re buying. We think it’s proof we’re right. Since when? What else can it be but a top, even if it’s only an interim top on the way to much higher gold and silver prices (and much more central bank and pension-fund buying)?

Mexico’s central bank just bought 100 tons of Gold!

Now I think a lot of this selling was done by them, the powers that be (TPTB) who don’t want to see Gold go up and who have a huge short position in Silver. There’s also the idea that is gaining credibility that the economy is rolling over, maybe due to the end of QE, is it 2 or 3? That would explain oil dropping.

But what really has changed in a week? Silver is still in backwardation. The eligible Silver at Comex just dropped another 92,000 ounces. New jobv claims came out today and the number shows no improvement, even blew away analyst estimates by its pessimism. Housing starts were the lowest, 500,000, since records were kept and the NYT reported:

“The economy lost steam in the first quarter. Growth in personal consumption — the single largest component of the economy — slowed markedly. Business-related construction cratered and residential construction fell. Exports stumbled. The only unambiguous plus was continued business investment in equipment and software, which is necessary but not sufficient for overall growth.

In all, economic growth slowed from an annual rate of 3.1 percent in the fourth quarter of 2010 to 1.8 percent in the first quarter of 2011….”

What it all means to me is that the FED can “inflate or die.” I expect even more money to be printed and thrown into the economy to fuel more malinvestments, not just in this country, but around the world.

I quoted David Banister at Market Trend Forecast this week with his outlook for Silver. He wrote:

I expect Silver to correct to the 40 to $42.75 areas based on my Fibonacci work and Elliott Wave views, and after this 4th wave consolidation we will see a surge to as high as $60 per ounce.

Full disclosure: I own Silver, Gold and precious metal stocks and have since 2001. I hate weeks like this, but I don’t plan to reduce my holdings at all.

Understanding where we are in the Silver Bull Market

Last August David Banister recommended buying Silver (www.MarketTrendForecast.com). He’s back this week with his forecast for Silver. Silver has pulled back from almost $50 to $39.47 at this hour. Is it time to panic and sell or time to load up the wagons with fresh physical?

For my part, nothing has changed except the price. Backwardation is at its largest gap so far, $1.23! I agree with Banister.

If you like Banister’s article, why not check out JW Jones article: The S&P 500 May Hold Clues to the Peak in Gold & Silver

Interest Rates To Soar Soon!

Interest rates on 30-year U.S. Treasuries have flatlined for the last two years between 4.75% and 3.51%.  In the same time period Gold has gone from on an up-escalator ride from $859 to $1,565.  Silver has gone from $11.82 to almost $50.  The CRB has gone from 209 to 370 and Crude oil has gone up from $46.72 to above $114.

Interest rates might have stayed flat if the USD had moved higher, but the USD Index has dropped from 87 to 74 back to 88 and now 73!

With the dollar falling, commodities moving higher, and the U.S. monetizing its debt, someone soon will demand a higher return for buying our bonds.  I think that time may come within the next several weeks.  Already the 200 day moving average is moving higher, we are at the recent lows of 4.38 and a daily buy signal would come at 4.5% and next week a weekly buy signal would come at 4.5%.

Some say that we are another Greece in the making.  Why in the world would you accept this low of an interest rate to take on the risk of inflation or default?  Barring a collapse in precious metals, expect higher interest rates soon.

BTW, if you are like me and crunching numbers and balancing budgets are your strengths? Check out online degree accounting

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Book Review: The Return of the Great Depression By Vox Day

I saw “The Return of the Great Depression” advertised on Kindle for $1.59 and I couldn’t pass it up.  I’m glad I didn’t.  The book was published October 29, 2009 and is just slightly out of date, because we have a lot more money spent on QEs and the national debt has ballooned $4 trillion.

Vox Day graduated in 1990 from Bucknell University with degrees in Economics and Asian Studies. He is a blogger at  Vox Popoli blog.In Chapter 10 he outlines six scenarios for the near, economic future of the U.S. and lists their probability.

Scenario 1 is St. Bernanke and the Green Shoots.  This is the one favored by the Blue Chip Consensus, economists from the IMF, Donald Luskin and the Wall Street economists.  This is the “V” shaped recovery.  Probability nil.

Scenario 2 is The Jobless Recovery (or the “U” shaped recovery).  They include the likes of Paul Krugman and Joseph Stigletz who don’t believe the U.S. has stimulated enough. Considered to be too optimistic by the author.

Scenario 3 is the Whiskey Zulu India or the hyper-inflation.  Proponents of this scenario include Jim Rogers, Marc Faber, Jim Sinclair, Peter Schiff, Bill Fleckenstein to name a few; classical economists of the Austrian School.  The author believes this scenario is the most likely except that commodities collapsed along with oil and precious metals at the time the book was published.

Scenario 4 is The Great Recession. Proponents here include Stephen Roach, Bill Gross and Robert Reich.

Scenario 5 is Great Depression 2.0. This scenario is the one the author favors, including Mish Shedlock. One in which debt is deflationary and leaves us with a depression that is 35% worse than the 1930s variety.

Scenario 6 is Fallout 4 Live.  The second least-likely scenario is Armageddon

I favor the Whiskey Zulu India scenario. Commodities have made a recovery from 2009 and are setting new highs in corn, wheat, soybeans, oil and the CRB index. Silver has closed over $46 today and the author says in order for this scenario to be correct, we would need to see Gold over $1,500 by the end of 2010. Well, we missed it by four months. That’s close enough for me. I don’t believe the government’s figures and think inflation is much worse that announced and that consequently shows us that GDP is not increasing. Expect more QE ad infinitum!

Welcome Dollar Collapse!

Outlook For the U.S. Dollar in 2011

I think the U.S Dollar looks like one sick puppy! Sure it’s not as bad as the Euro, but it’s likely that our debt will hit 100% of GDP this year and I see no end to QEs. The FED now owns more Treasuries than any country in the world (isn’t that monetization?) Sheldon Filgerat the Hiuffington Post thinks so. He wrote in August, 2010:

In a step that will be one of the markers on the road to economic and financial catastrophe, the Federal Open Market Committee (otherwise known as the FOMC) of the Federal Reserve, made a bombshell policy decision on August 10, 2010, one fraught with dangerous long-term consequences for the American and global economy.

Why is 100% of GDP so important? That seems to be the level of no return. Once a government hits that level interest payments eat you alive.

Technically, the USD appears to be rolling over after running into resistance at its 40 week moving average. I expect a challenge, that will fail, of the 79 level on the index and then a test of the lows of november of 2009 and 2010 or the 75 area. (see chart)

Tags: Predictions for 2011

Market Outlook for 2011

I was struck by this Chart of the Day:

The S&P 500 has tracked in direction and time what occurred since the crash in 1929. That points to a bottom in the market near 2012.

I’m concerned about debt in this country and around the world, the trouble in Euro-land, the slowdown in China brought on by their inflation and mis-allocation of resources (whole cities are sitting empty). I think the banks here are choked with commercial real estate that needs to be written down, housing may suffer another 20% pullback and cities and states have a long way to go before they are on sound fiscal footing. Unemployment is likely to stay high and even given a push higher by laying off of government employees. In addition, the likelihood for violence when unions are confronted by cuts in pay and pensions could rival what we’ve seen in Europe.

The government has spent $2 Trillion fighting this recession in 2010 and still we can look forward to more spending even though our debt is likely to hit 100% of GDP in 2011. And what has it bought us? Commodity prices are reflecting uncertainty, fear of shortages and fear of a declining dollar. How can the stock market continue higher? In my opinion it can’t!

My opinion on the markets in 2011?

I think we are looking for the DJIA to test the lows of 9600 to 9800! (see chart)

Tags: Predictions for 2011

Gold Outlook For 2011

2010 marks the 10th straight year that the closing high for the year is higher than the previous year. I remember like it was yesterday withdrawing $1,200 from my bank and driving down to the coin shop and purchasing three gold Ameriican Eagles. Today, I couldn’t purchase one for that amount of money. Here’s the closing price each year since 2000:

2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00
2009 — $1118.40
2010 — approximately $1419

What’s my outlook for 2011?

The low in July of 2010 was about $1.156 and the recent high was about $1,430. That’s $274. If we think of the trading the last two months as a flat or flag, a breakout could give us a target of $274 on top of $1430 or $1,704! Interestingly, Jim Sinclair at JS MineSet has looked for $1,650 for a long time and recently $1,764. (see chart)

Tags: Predictions for 2011

Silver: New Paradigm

Silver was up in price 80% in 2010 and is near $31 an ounce. I am fascinated by the talk that Silver could trade higher than Gold as in this video from Future Money Trends:

My take on the 2011 target for Silver: The metal is extended and a considerable distance above the exponential 40 week moving average at $22.60. That means despite the video, we could always have a correction. I would get half my position in Silver at this price and if there’s a pullback into the mid- to low-twenties, buy the other half. (see chart)

Tags: Predictions for 2011

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