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2017 Predictions: Dollar Down, Gold Up, S&P 500 Flat (article)

Discussion in 'Gold Silver (All things Metal)' started by platinumdude, Dec 31, 2016.

  1. platinumdude

    platinumdude Gold Chaser Platinum Bling

    Mar 31, 2010
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    By Mike Norman

    I came into 2016 bullish on stocks. I even said we'd see 20,000 on the Dow by year's end and we're close. I was also bullish on gold and oil. I said to buy steel stocks early in the year and about mid-year I said to buy the Russian ruble. I also maintained that the the big news of the year would be that the Fed was going to hike interest rates and that bonds would sell off. I advised buying ProShares UltraShort Lehman 20+ Yr ETF (TBT) , many times. I said the dollar would decline.

    I pretty much got everything right, but gold did sell off after the election and the dollar rallied after the election. Rates went higher than all the pundits thought.

    So now, here are my thoughts for 2017.

    As many of you know I have turned cautious on the market since after the election. We have seen a welling up of enthusiasm and optimism, and from where I sit it's coming from all the same people who were telling us that a Trump victory would be terrible for the economy. It's people who are now believing in some fictitious Confidence Fairy.

    It's not only the enthusiasm that bothers me, it's Trump's cabinet full of fiscal hawks and the fact that federal government spending growth has gone flat year-over-year and next year, according to the CBO, spending will be even slower.

    Trump may very well do the fiscal stimulus he proposed, but right now all I hear is that we'll get a corporate tax cut that will basically institutionalize the 15% that corporations already pay. We'll probably get some deregulation and I don't know what kind of broad effect that's going to have because let's face it, it's not like putting money into people's hands.

    On the flip side of these measures I see spending cuts as advocated by a number of his advisers such as Larry Kudlow and his budget director, Mick Mulvaney. Tax cuts plus spending cuts equals nothing: they cancel each other out.

    The trillion-dollar infrastructure investment has now turned into public-private partnerships where government tax incentives (taxpayer money) will be given to billionaire hedge fund operators and asset manages to build the infrastructure that they deem fit and charge a fee (hefty ones, most likely) for its use. That's a double tax on regular people, so I don't see anything "stimulative" from that. Maybe a little. We'll see.

    Then there's the repeal of Obamacare, which as bad as that law is, requires the government to contribute about $100 billion annually in subsidies, which is an economic stimulus. Take that away and it's a problem. If Obamacare is repealed then that will almost certainly go away.

    Bottom line is, on the fiscal side I see not much of anything, really.

    On the monetary side I see the Fed continuing to raise rates because rate hikes are inflationary as I have explained a million times. They will be creating the very inflation they think they are pre-empting. Bonds, after this brief counter-trend rally, will start heading lower once again. In the midst of all this we may actually see a term from the 70s being hauled out and that's "stagflation." I think the economy may go into a mild recession if things stay the way they are with spending and loan growth decelerating.

    The dollar will go down in 2017 and provide a lesson in Modern Monetary Theory for anyone who wants to learn one and that is, rate hikes are bearish for a currency, not bullish. Gold will rise as inflation increases and the U.S. economic performance is hindered by spending cuts and no real economic stimulus from the Trump team. Exports might be a bright spot but only if the dollar falls enough. To hasten that Trump may enact tariffs on China, a move that I think will hurt the dollar in the medium term.

    By Dec. 31 of next year I see the S&P 500 being virtually unchanged from where it is now. I also see a big, first-quarter to first-half swoon, which will bring the S&P 500 to the low that we saw on the night of the election. This will provide you with the one and only really big buying opportunity of the year.

    Oil prices will range from $47 on the downside to $57 on the upside with the average price for 2017 being around $52 per barrel.

    And that's it. Those are my forecasts for now, but I reserve the right to amend these if I see the fiscal picture change or if I see a big resumption and acceleration in bank lending.
    Scorpio and Ebie like this.
  2. Ebie

    Ebie Midas Member Midas Member

    Apr 9, 2010
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    This makes sense...nice to read it...
  3. goldielox1

    goldielox1 Silver Miner Seeker

    Jun 20, 2013
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    This guy is clueless. He thinks the government creates prosperity through inefficient and wasteful tax and spending. No, tax cuts put the money back into the pockets of productive Americans that can actually grow the economy.

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