This page has been archived and commenting is disabled.

Freedom's 2011 Forecast & Update

Michael Victory's picture




 

 

As we near the halfway point, an update on my 2011 forecast.

First, how we’ve done so far.

Forecast: “It could be US municipal defaults, policy shifts from the Chinese, EU crisis, or an expanded war inthe Middle East.”

Check: Although not officially declared a war, the ‘kinetic military action’ in Libya is an expansion of the ongoing wars in the Middle-East. Continued shifts in Chinese policy – evident by the April agreement between the BRICS to establish mutual lines of credit in local currencies, an important step towards the initiative to reduce/end the reign of the dollar as the world’s single reserve currency. Earlier this week it was reported that The Peoples Bank of China plans to shed $2 trillion of U$D assets. While this should not be a surprise and it will likely be a multi-year plan, it is still significant.

Forecast: “As food and energy prices rise, nations will feel the sting of money printing(already happening). This will only increase the number of civil protests (RIOTS). Developing nations will feel the brunt of higher inflation, which will lead to various measures to control price increases (e.g., Russia’s recent announcement of food controls or COMEX margin hikes).”

Check: Egyptian protests began just as I finished this piece and two weeks later, on 11 February, Mubarak resigned from office. Protests have since spread to Bahrain, Syria, Tunisia, Yemen, Jordan, Saudi Arabia and even Wisconsin. There have been three COMEX margin requirement increases for silver futures since this article (four in 2011 – 1/21, 3/24, 4/24, 4/29).

Forecast: From a follow-up post (1/30) “QE2 appears to be an exercise in replacing the toxic assets purchased from the banks for Treasuries. Instead of returning any money back to the Treasury, they are exchanging the toxins for Treasuries. Thus, the Fed’s balance sheet will remain in the $2T…”

Check: Federal Reserve Chairman Ben S. Bernanke may keep reinvesting maturing debt into Treasuries to maintain record stimulus even after making good on a pledge to complete $600 billion in bond purchases by the end of June.

 

OK enough, let’s look at the rest of 2011.

2011: The rest of the story.

I am reaffirming my expectation for significant volatility starting in the 2nd half of2011. From my January article: “As a result, I expect significant volatility throughout 2011. The global slowdown will lead to a drop in US markets by the middle of the year, giving the Fedimpetus for more money printing. For anyone still expecting a return to ‘normal’, 2011 will be a wake-up call.”

During the April FOMC meeting, The Bernanke confirmed the end of QE2 after June. This was telegraphed to the markets and came as no surprise. The question now is whether reinvestment alone from the existing Fed balance sheet will be enough to keep the ponzi-economy growing. If the Fed cannot fill the funding gap, interest rates will rise to attractbuyers, leading to another drop in the stock market. To help find the answer to our question of whether the existing balance sheet will be enough, let’s look at funding requirements. The projected US deficit for 2011 is approximately $1.6 trillion. Reinvestment of principal payments from mortgage-backed securities plus maturing treasury holdings may account for $750B-$1T annually – so far so good. But this isn’t accounting for all the funding needs. We also have maturing debt that needs to be refinanced along with interest payments on existing debt. Even more threatening is the potential sale of Treasury Bonds by China, Japan & the Middle East. The simple fact is that while the rollover of the Fed’s balance sheet may provide funding for annual US deficits, it cannot provide the funding for existing debt or sales by foreign holders.

It is imperative that interest rates remain below the rate of inflation (i.e., negative real rates) to encourage currency velocity to feed the insolvency; otherwise, they are truly pushing on a string. My best guess is a 3-month experiment ending with a spike in long-dated Treasury rates and a contraction in GDP and the stock market sometime in the fall or winter of this year. To help fill the gap, global central banks will be the buyers of last resort. What they call it, or how it’s communicated is still to be determined, but rest assured, there will be more currency printing. Global QE continued – some real fireworks to follow, along with some bombs.


Precious Metals and Commodities

By the time rates spike and the market begins a decline, I expect oil to have hit$150/barrel, with gold nearing $1700. The increased costs of energy and food willcontribute to the US slow down. Going forward there will be repatriation of U$Ds by foreign holders, which will support higher commodity and metal prices. Baring natural disasters and geopolitical events, the precious metals bull will slow while the stock market declines. Gold will be less affected than silver, but should also take a temporary breather as the printing presses refuel. If I am correct and there is a delay between QE2.5 and Q3 (or whatever it’s called or not called), this will be an opportunity to acquire more gold & silver.

 

Ways to play it.

Within your investment portfolio, I have suggested 30% be stored in physical gold and silver, 30% in cash and 30% in growth. If you have followed this weighting, you have afforded yourself the most protection against a variety of financial outcomes. If in fact we have significant volatility in the 2nd half of 2011, you will have the opportunity to put some cash to work. If you are more cautious or have need for higher reserves, you could look to raise your cash position over the next couple months. Although the outcome of the USD is abundantly clear, there will be periods where it is advantageous to hold cash.

If you understand why you are holding physical monetary metal, I won’t need to tell you to hold through this period. Again, if you follow the 30% rule, you will not be forced to sell into weakness. If you have a trading position in paper gold and/or silver and miners play catch-up for the remainder of the 2nd quarter, you could take some profits. You may look at stocks/funds impacted by rising rates. As an example, in a period of rising rates, demand for mortgages and other loan products diminishes.

If I could offer one more bit of advice, it would be to reduce debt to a manageable amount. The common thought is to leverage up and inflate it away. Again, my philosophy is not about getting rich, it’s about protection. I would consider this gambling and those that gamble must be prepared to lose.

 

~David Freedom

david@thevictoryreport.org

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 08/17/2011 - 08:30 | 1568368 pama
pama's picture

I’m guessing that the good folks at UGG Australia caught wind of these people because look at what they have to offer: sandals with fleece.
payday loans

Tue, 07/26/2011 - 07:19 | 1493796 pama
pama's picture

You're missing the point, he was upset about foreign coutnries financing our debt, he did fix that.... Now we finance our own debt.
personal loans for people with bad credit

Sun, 07/24/2011 - 09:14 | 1486898 pama
pama's picture

So now we have to ask the question you pose, why have regulators failed, and can we staff them with better men?
rattan patio furniture

Sat, 07/23/2011 - 16:03 | 1485395 pama
pama's picture

If we die grasping for gold we feel life was exciting while it lasted. If we die retching from cold we feel cheated before and after...to the same extent, double whammied.
Locate a dentist in your area

Sat, 07/16/2011 - 18:33 | 1462678 hama
hama's picture

The Yen, and Japan, raising cash to pay for the reconstruction of the country, is already on the path of Yen appreciation and will be assisted in their efforts by the other central banks. By acting in a co-ordinated fashion they will begin to reverse the worldwide race to the bottom.
florida home insurance

Sat, 07/16/2011 - 04:19 | 1461808 hama
hama's picture

If we die grasping for gold we feel life was exciting while it lasted. If we die retching from cold we feel cheated before and after...to the same extent, double whammied.
travel to spain

Fri, 07/15/2011 - 16:52 | 1460906 hama
hama's picture

The normal guy/gal is scorned here but for what?? Not understanding the effect of Fukishima on the Llama prices in Zimbabwe?? If no one here can agree on anything how does a non-math or non-economic person have a hope of understanding.
Spider Mite Spray

Fri, 07/15/2011 - 07:35 | 1458743 hama
hama's picture

same position experienced with a dour sailor's chord as living thread feels like insult being added to injury... there lies man's illusion of freedom. If we die grasping for gold we feel life was exciting while it lasted. If we die retching from cold we feel cheated before and after...to the same extent, double whammied.
cheapest car insurance

Fri, 07/15/2011 - 05:46 | 1458629 hama
hama's picture

we feel privileged as the fragile link to life is so precious in more ways than one. But the same position experienced with a dour sailor's chord as living thread feels like insult being added to injury... there lies man's illusion of freedom. If we die grasping for gold we feel life was exciting while it lasted. If we die retching from cold we feel cheated before and after...to the same extent, double whammied.
car loans

Sun, 05/01/2011 - 14:31 | 1225741 ebworthen
ebworthen's picture

The house of cards drawing is well done, artist?

People are more likely to put up with oppression and tyrranny in crisis.

Do the banksters and the gub'mint want to solve anything or help anyone?  No.

They want more money and more power; therefore, they will bring on the uncertainty, volatility, and centralization of their capital markets.

Sun, 05/01/2011 - 14:21 | 1225724 Sudden Debt
Sudden Debt's picture

POPQUIZ BITCHEZ!

Everybody expects the silver trade to dip.

It always went against the stream in the past when predicted.

WHAT DO YOU DO!?!

WHAT DO YOU DO!?!

Sun, 05/01/2011 - 11:20 | 1225433 falak pema
falak pema's picture

well this victory report is a recipe which summarises 'why' but not 'when' the western banking system tanks into defeat bringing down the whole system. Freedom being the illusion that avoids us impending serfdom. We do live in an age of complete paradox... on this blog called victory road...

Sun, 05/01/2011 - 11:09 | 1225422 apberusdisvet
apberusdisvet's picture

Several things missing from the Zombie house; barbed wire to prevent access to the roof and gun slits that allow panoramic firing positions.

And, most importantly, some combination of solar/wind/propane to generate power.

Sun, 05/01/2011 - 12:32 | 1225571 disabledvet
disabledvet's picture

actually "you miss the point of the house."  it's "designed to confuse" through a fascinating mix of "spatial reasoning" and "simple air."  it appears "open" but in fact "it's very closed."  there are walls, squares and "various other who-done-its?"  by the time "the zomibie(s)" appear they will be simply AWE struck and "move...

Sun, 05/01/2011 - 08:38 | 1225236 MarketFox
MarketFox's picture

Here are the real basics.....

2006 represents 1X

2011 represents .5X.....and falling

This is with printing..

..................................

So the precedent via Japan is one whereby even though printing is added..

The previous time frame total is not exceeded..and the current total still drops...

...............................

To some extent...constants tend to...maybe should be dropped from the equation.....

 

And thus reflexivity of investment rules the day.....

 

Sun, 05/01/2011 - 02:33 | 1225048 captcorona
captcorona's picture

+10.... I have been working on a similiar design for about 3 years.. This helps a lot!

Sun, 05/01/2011 - 12:18 | 1225554 falak pema
falak pema's picture

Only problem is being inside it when the electricity fails and all movable concrete cannot be moved! Pretty grim being your own zombie!

Sun, 05/01/2011 - 00:59 | 1224989 Creed
Creed's picture

 

for those that have almost everything,

 

I give you...

 

the first zombie proof house

 

 

http://all-that-is-interesting.com/post/4956385434/the-first-zombie-proof-house

Sun, 05/01/2011 - 12:32 | 1225568 disabledvet
disabledvet's picture

i saw no price.  "we gotta move dis shit" and "we gotta move it NOW!"

Sun, 05/01/2011 - 02:38 | 1225054 Manthong
Manthong's picture

Cool!

Does It have a basement?

 

Sun, 05/01/2011 - 00:30 | 1224967 Mike Hunt III
Mike Hunt III's picture

@peelove. What city and what third world country is that?

Sun, 05/01/2011 - 00:12 | 1224946 PLove
Sun, 05/01/2011 - 13:21 | 1225653 Reese Bobby
Reese Bobby's picture

Maybe Demi Moore or Bruce Willis will buy Cairo.

Sun, 05/01/2011 - 16:34 | 1225923 rocker
rocker's picture

Mel Gibson is opening a church group next week. They can all be partners.  Freaking Scary, it is in the middle of America.

I rest my case:  We are Japan now.

Sun, 05/01/2011 - 09:41 | 1225294 Kickaha
Kickaha's picture

When I clicked on the link, Google eventually provided me with an ad encouraging me to vacation in Cairo.

Google, adding real value to the GDP.

Sun, 05/01/2011 - 15:54 | 1225861 TheMerryPrankster
TheMerryPrankster's picture

You need firefox with Adblock plus.

Sun, 05/01/2011 - 03:49 | 1225090 BigDuke6
BigDuke6's picture

Scary.

Never really understood the guns and ammo guys on ZH... always felt the US gun-makers stir the fear up to promote sales.

But that clip gets you thinking.

Sat, 04/30/2011 - 23:58 | 1224933 akak
akak's picture
Freedom's 2011 Forecast:

Partly apocalyptic, with occasional moderate chaos, and a 50% chance of shitstorm.

Sun, 05/01/2011 - 15:20 | 1225797 hardcleareye
hardcleareye's picture

++++

Do NOT follow this link or you will be banned from the site!