Predictions For 2013

[Gumby]

Anyway, all I'm saying is that the "death of the dollar" predictions you've kept trying to warn us about for the past few years are getting really old and have no basis in reality — which keeps proving you wrong year after year after year (decades, actually). You can change the topic to gold/stocks vs. bonds/cash if you want to. But, my overall point is that you've been dead wrong (along with Peter Schiff) about the dollar imploding for a few years now and I think it's time for you to re-evaluate that aspect of your analysis. And if you don't care to re-evaluate what is clearly a flawed model, then stop the fear-mongering in the future. We all own plenty of gold here anyway as an insurance policy.

[Kshartle]

Is there an ignore function?

[Gumby]

Is there an ignore function?

We've often wondered the same. Of course, we don't mind you being here. I'm just saying that you've gotta lay off the death of the dollar narrative a bit, going forward, because a lot of us wish we could ignore that never-ending fear-mongering. At some point, your dollar prediction has to have an end date. You can't just kick your prediction into the future indefinitely like Schiff does.

Most of the arguments you and I get into are over your fear-based dollar/fiat death predictions — which never seem to come true. If you want to stop having these arguments, then just lay off the Schiff/fear narrative that isn't matching up with reality. Or I'll just keep on pointing out that the predictions are baseless.

Merry Christmas!

[Reub]

Isn't it grand that we are all in the Christmas spirit?

[Kshartle]

Isn't it grand that we are all in the Christmas spirit?

Tis the season.

Gumby you are getting a lump of coal. You'll want to hang onto it for heat once the dollar completely implodes and the heating bill skyrockets. 

[Gumby]

You'll want to hang onto it for heat once the dollar completely implodes and the heating bill skyrockets. 

Thanks. I'll keep waiting for that to happen.

[portart]

There is one senario that could threaten the dollar. A new currency with a gold backing. Any other fiat currency will only float along with the dollar and it will go on and on since you need something for exchange. A currency with solid gold backing it could cause a real issue in a currency crisis as you would have somewhere else to turn.

[Gumby]

There is one senario that could threaten the dollar. A new currency with a gold backing. Any other fiat currency will only float along with the dollar and it will go on and on since you need something for exchange. A currency with solid gold backing it could cause a real issue in a currency crisis as you would have somewhere else to turn.

Doesn't gold already fulfill that demand? Doesn't Bitcoin? And why would any country want to make their currency stronger unless they were a major importer? And if they were a major importer, why would they want to give away their finite gold/currency to foreigners?

[Kshartle]

The above is a long-winded way of saying my expected return on the PP assets is about 2.5% real on a 50/50 mix of stocks and gold, and about 1.0% real on a mix of LT and cash.

Yeeeeeesh.....for the next 5-10 years? So you expect general price appreciation or the CPI as well as gold to average around 2%......the bond portion to return around 3% and stocks around 7%?

I guess that wouldn't be the worst thing that ever happened. This would imply about 4.5% returns or so on average with very little price inflation so to speak. Well.....I've gotta ask you then do you think are better non-PP investments out there you have confidence in? EM, REITs, corp bonds?

[portart]

I would say gold does not satisfy an alternative to the dollar because you can't go down the gas station and fill up on it. The average person wouldn't buy any gold as a currency alternative because it is a store of value, not a dollar replacement. Bitcoin doesn't have any backing and thus could have any number of issues as we have already seen happening. I was referring to another currency by a soverign government backed by gold, and redeemable in gold. This would be something you could use everyday for purchase in different denominations. Thus, if there were a fiat currency crises, this particular currency wouldn't go to zero as each dollar would have a stable floor under it. Massive inflation could affect what each dollar could purchase but it wouldn't destroy it.

[Gumby]

I would say gold does not satisfy an alternative to the dollar because you can't go down the gas station and fill up on it. The average person wouldn't buy any gold as a currency alternative because it is a store of value, not a dollar replacement. Bitcoin doesn't have any backing and thus could have any number of issues as we have already seen happening. I was referring to another currency by a soverign government backed by gold, and redeemable in gold. This would be something you could use everyday for purchase in different denominations. Thus, if there were a fiat currency crises, this particular currency wouldn't go to zero as each dollar would have a stable floor under it. Massive inflation could affect what each dollar could purchase but it wouldn't destroy it.

You can't even go down to the gas station and fill up with Canadian dollars — let alone this fantasy alternative currency, that doesn't even exist.

Again, I doubt any country would choose to lock themselves into such a situation where they were making their exports unaffordable — by pegging/backing with gold and simultaneously allowing foreigners to deplete their gold reserves for their own pieces of paper.

[portart]

Yes, and that is why you haven't seen one yet. 

[Libertarian666]

Money printing, which both suppressed bond yields and flooded the world with cash that had to go somewhere.

But, in August you said "money printing" was supposed to increase bond yields, and push up the price of gold as people piled out of stocks...

http://gyroscopicinvesting.com/forum/st ... /#msg75272

What he's saying is the money printing suppresses yields immediately, but ensures they will go up in the long-run. And the longer the money-printing pedal is to the metal, the higher they will eventually go as more buyers leave the market to protect against inflation.

The point is the FED can keep the game going only for so long. Now there is another possibility and what I think is happening. The declining economy and Americans getting poorer has decreased inflationary pressure so instead of getting poorer by losing the value of their money they are mainly getting poorer by losing employment, keeping inflation down and the pressure for higher rates.

Of course Tech is free to disagree if I've missunderstood.  I expected higher rates and higher gold prices by now though because I expected the declining labor participation rate to stabalize at some point. It isn't.

Yes, that is my position, thanks.

[Gumby]

But, in August you said "money printing" was supposed to increase bond yields, and push up the price of gold as people piled out of stocks...

http://gyroscopicinvesting.com/forum/st ... /#msg75272

What he's saying is the money printing suppresses yields immediately, but ensures they will go up in the long-run. And the longer the money-printing pedal is to the metal, the higher they will eventually go as more buyers leave the market to protect against inflation.

The point is the FED can keep the game going only for so long. Now there is another possibility and what I think is happening. The declining economy and Americans getting poorer has decreased inflationary pressure so instead of getting poorer by losing the value of their money they are mainly getting poorer by losing employment, keeping inflation down and the pressure for higher rates.

Of course Tech is free to disagree if I've missunderstood.  I expected higher rates and higher gold prices by now though because I expected the declining labor participation rate to stabalize at some point. It isn't.

Yes, that is my position, thanks.

Really? Your position is that people are going to "leave" the market? Where are those dollars going to go? If they buy gold, or other assets, the dollars still never the leave the US banking system. As long as those dollars stay in the US banking system (and they will) the banks will just buy the Treasuries as the Fed mandates they do to support the Fed's interest rate targets. Nobody is "leaving" the Treasury market. That whole line of thinking is just a myth. As long as excess reserves exist (and they do) they will need to be drained by banks into Treasuries.

Secondly, the overwhelming majority of the "money printing" that happens in a credit-based society — such as ours — comes from banks. The Fed is really a tiny player when it comes to "money printing" and their "money printing" is really just a swap of longer termed debt (Treasuries) for shorter-termed debt (cash with IOR/FFR payments). It's mostly a non-event in the grand scheme of things. Congressional spending is certainly more inflationary than Fed swaps, but even Congressional spending pales in comparison to private credit issuance.

Yes, rates may go up, or may go down depending on inflation expectations, but again, the Fed's "money printing" does not cause inflation in the way that you suggest. The Fed's "money printing" is too small, and confined, compared to the private credit market's printing. And the Fed really just conducts debt swaps that don't do much beyond inflate a few financial assets.

I realize you still don't want to believe me, but my guess is we'll have this exact conversation again next year and you'll keep telling us to 'wait and see'.

But, come on now, it's been half of a decade of Fed "money printing" and there's still barely any sign of inflation. How many years have to go by before it becomes painfully obvious that the Fed isn't able to create much inflation with their swaps?

[Stunt]

I don't see a major difference between KShartle's views or Gumby's views other than one willing to accept the policies the fed and government officials roll out in hopes of perpetuating the status quo and the other changing investment strategies to counter potential missteps by these same groups.

I agree that long term low rate environment will have unthinkable consequences that we can't comprehend at the moment. Something nobody will be able to predict or easily prepare for. I do feel that gold is the best hedge for a system that is fundamentally not sustainable long term, what long term is, is anyone's guess...2years, 10years, 50...300... All just as likely in my eyes. It all depends on so many issues both domestic and international.

If someone doesn't want to prepare, that's their choice and it might work well for them if the fed is successesful and executes each crisis well. Just as not saving for retirement is perfectly fine if ultimately someone doesn't live to retirement age or has intentions of retiring. Likewise hedging for the 10% chance of a total currency reset or financial meltdown within the next 30years. The cost is selling short better returns for the sake of a insurance and low return portion of ones portfolio.

All personal choices in my opinion. At least people here are aware of the issues and are able to make these choices and love with them rather than some that are oblivious.

[clacy]

First, I have no clue how to forecast a year out for asset classes, but my guess is.....

Gold will break big, one way or another.  It's been flat more or less for 18 months now.  I suspect it goes much higher after some big consolidation.

Stocks are due for a huge correction, IMO.  I think it goes up through May and then becomes very volatile but stays flat until the fall (possibly into spring of next year), before having a 30%+ DD.

Bonds, I think head lower, until the stock market breaks and then bond funds will break to new highs.

Cash seems like a no-brainer.  Stays flat (down in real terms).  I see no signs of imminent inflation that would necessitate monetary tightening.

FAIL

[AdamA]

First, I have no clue how to forecast a year out for asset classes, but my guess is.....

Gold will break big, one way or another.  It's been flat more or less for 18 months now.  I suspect it goes much higher after some big consolidation.

Stocks are due for a huge correction, IMO.  I think it goes up through May and then becomes very volatile but stays flat until the fall (possibly into spring of next year), before having a 30%+ DD.

Bonds, I think head lower, until the stock market breaks and then bond funds will break to new highs.

Cash seems like a no-brainer.  Stays flat (down in real terms).  I see no signs of imminent inflation that would necessitate monetary tightening.

FAIL

Hilarious. 

Thanks for for reminding us.  It's fun to review these prediction threads. 

[Thomas Hoog]

I have proven in the past to be the worst prophet of all, so be aware
VTI: +32 %
TLT: - 8 %
GLD  -12 %
SHY  + 4 %
makes + 4 % portfolio

not to bad, but I have a crystal ball

[Kshartle]

I have proven in the past to be the worst prophet of all, so be aware
VTI: +32 %
TLT: - 8 %
GLD  -12 %
SHY  + 4 %
makes + 4 % portfolio

not to bad, but I have a crystal ball

Spectacular getting direction right 4/4 and degree so spot on with VTI and close with TLT.

I do have a question though.....what was the rationale for SHY at 4%?

[Peak2Trough]

I'll go with:

VTI: -9%
LTT: +12%
Gold: +8% 
Tbills:  +3%

HBPP:  4%-ish

The third time I revised this post I realized I was just pulling numbers out of my... ahem.

About as wrong as I could have been.  Even missed the direction on 3 out of 4, which is actually kind of hard to do

[Thomas Hoog]

I have proven in the past to be the worst prophet of all, so be aware
VTI: +32 %
TLT: - 8 %
GLD  -12 %
SHY  + 4 %
makes + 4 % portfolio

not to bad, but I have a crystal ball

Spectacular getting direction right 4/4 and degree so spot on with VTI and close with TLT.

I do have a question though.....what was the rationale for SHY at 4%?

None, a mistake. I just did take figures which could be divided by 4 ( 25%). I'm so lazy.