01/04/11 Baltimore, Maryland – New Year’s Resolutions & Predictions-Plus!
We’re at the beginning of the 2nd decade of the 3rd millennium.
What will happen this year? We don’t know. Most likely 2011 will be a lot like 2010. That’s the way it usually works. Big trends are hard to see. One year seems to wander around much like the one before it and the one after. Only much later can you see where they were going.
If 2011 is like 2010 you can stop worrying. Almost everything went up in 2010 – except for real estate.
Stocks went up. Even US bonds went up.
What went up most was our favorite investment – gold. It closed the year at a record high, giving us a gain of nearly 30%.
So far this year, the trends continue. On the first trading day the Dow rose 93 points. Gold went up $15.
But wait. Should you bet on stocks and gold? Will gold do as well in 2011? Will stocks go up another year?
Do you seriously think we have answers to those questions?
You can’t know what will happen. Predictions are worthless. So what we give you are Predictions-Plus. What’s a prediction-plus? It’s better than a prediction; it’s the thing that probably won’t happen but that you should expect anyway. It’s the thing you should believe even if it isn’t true.
Hey, look, that’s the way all the important things in life work. No kidding. You meet a pretty woman. Maybe you could get to be friends. Maybe you could take her on a weekend tryst…like a state governor would. It could be a lot of fun. Most likely, your wife would never know. But you’re better off believing she would find out tomorrow!
Or, suppose you sent in a fraudulent IRS return in order to get a big refund. You’d probably get away with it; that’s a prediction. But here’s a prediction-plus: you’ll get audited before the end of the week!
Likewise, there are predictions-plus in the financial area. What’s most likely in 2011? A repeat of 2010. That’s what you usually get.
But that’s not the best thing to believe or the best way to bet. Everyone is betting on higher stock prices, higher gold prices…and higher just about everything.
The money is to be made in the Predictions-Plus – betting on the contrary.
Here’s our old friend Marc Faber with one of them. Bloomberg:
Marc Faber, who advised investors to buy US stocks in March 2009 as the Standard & Poor’s 500 Index began a rally of as much as 86 percent, said US Treasuries are a “suicidal” investment.
Government bonds are likely to decline, said Faber, who publishes the Gloom, Boom and Doom Report. After bottoming in December 2008, the 10-year Treasury yield rose as high as 3.9859 percent in April on government measures to stimulate the economy. Concern about a second recession in three years sent yields lower through October.
“This is a suicidal investment,” Faber said in a telephone interview from St. Moritz, Switzerland. “Over time, interest rates on US Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates. The worst investment is in US long-term bonds.”
Treasury 10-year note yields will rise to 5 percent from yesterday’s level of 3.349 percent, Faber said, without specifying a time frame. As bonds fall over the next decade, he said investors should buy precious metals, real estate or equities. US debt has returned 5.7 percent in 2010, more than erasing last year’s 3.7 percent loss, according to a Bank of America Merrill Lynch index.
“If you print money, the currency goes down and the S&P 500 goes up,” he said. “By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.”
The Great Correction could make bonds a good buy again in 2011. But it’s a bad bet. So here’s a prediction-plus: the bond market will crack in 2011.
How about stocks? Well, we’ll have to talk about them tomorrow.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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http://arxiv.org/ftp/arxiv/papers/1012/1012.4118.pdf
critical bubble research on gold – follows Didier Sornette approach to predicting bubbles = in essence, gold is in a bubble defined as price increasing at or faster than exponential rate – should pop in mid 2011
if gold is a bubble, then silver is its twin brother
http://arxiv.org/ftp/arxiv/papers/1012/1012.4118.pdf
Hahahaha!
What’s the natural logarithm times the cosine of $1 quadrillion of mostly worthless OTC derivatives divided by an insolvent banking system to the QE2 power?
= 42
I think but I may have put in too few zeros into my calculator as not sure what is a trillion
anyway – the methodology picked the oil bubble in 2007, the chinese share market reversals [crash is such an emotional word] in 2007 and 2009, the NASDAQ correction in 2000, the Nikkie in 1989/ 90 same for the 1987 and 1929 corrections – so we will see in Q1-Q2 2011 if there is a correction = or maybe uit has happened last night?
so just google sornette and johansen and bubble
and, if gold is not in a bubble, it may continue to go up and down in price, as opposed to straight down.
people who trade paper gold and silver may want to sell here. and, some krugers and eagles will change hands, just like any other day.
here’s my prediction-plus: stop trying to predict the future.
want to own gold and silver? if yes, do so!
if no, do not do so.
too complex? lol
Yeah, maybe gold “pops” this summer. Whatever pops means. Could you be more specific? It has had some poor summers this decade. What’s your point? I bought most my gold seven years ago because the government had interest rates too low and we were running deficits. Are those problems worse or better?
Does Didier-Sornette answer those questions?
I am not going to look it up because I think all that stuff is voodoo. Do you know how brilliant the boys at LongTerm Capital Management were? If not read Financial Reckoning Day.
I will admit this: I am not buying metals at these prices and am looking for something of value that is on sale. Does Didier-Sornette have anything to say?
“If 2011 is like 2010 you can stop worrying. Almost everything went up in 2010 – except for real estate”
Well there you have it then, clear as the nose on any contrarian’s face…
richardgoers
If gold is a bubble, what’s the correct naming to describe the modern welfare/warfare/crony state and its paper currency
? Do enlighten us please.