We normally post our annual predictions
forecast each year in late December and again in the first quarter of the New
Year. Considering current newsworthy events, our Part Two is being
posted today in December 2012. We wrote our Part One, which was
previously listed on Kitco last month. Our
reasoning for three prediction reporting events has to do with the
out-of-control malaise in Europe, recent economic news from Asia and most of
all, politically driven economics within the United States.
In America, the major
market moving events are the so-called Fiscal Cliff, the debt crisis,
and the unresolved, unaddressed violent attack in Benghazi surrounded by
alleged lying and intrigue.
In Europe, the
crashing credit experience (now into its sixth year in Greece) has not been
resolved despite news to the contrary last week. The unanswered predicament
here is the future of the Euro Currency and Euro-land consortium of member
nations. (We like to refer to this consortium as the United States of
In China, they have
been through a period of hard capitalistic growth over the past two-three
decades. This was brought about by radical change within the central Communist
Party working to implement a hybrid of capitalism and communism. It worked
for years but now they have lost their customers and must change their
business plan. Reversion back to communism will derail that nation for
decades. War drums are heard in China as their new navy is expanding in the
South China Sea. They say they own it and will stop and detain anyone within
it. This is not going to work well at all. Challenges to this idea are just
ahead in 2013 by neighbors and the USA.
In Japan, the debt to
GDP ratio exceeds 200% and the national economy sits on a fulcrum of razor
edge balance. Buyers of JGB bonds are vanishing and there is not enough
credit to go around.
In South America, their
economies have been primarily driven by agriculture, mining, and energy. All
of those markets have performed greatly for several nations in the Southern
Hemisphere. Now, as these growth patterns mature, new and serious problems
In the Middle East, the Arab
Spring has Sprung and is spreading rapidly. Iran is the primary culprit
selling and donating weapons to be used against Israel and USA interests.
This is fostering more violence in the Middle East and that fact has not been
addressed by the current USA administration.
Prediction: The Fiscal Cliff may
happen with a Kick The Can Extension in early January 2013 when things
go ugly. If the President, Senate and House leadership (our so-called
leaders) continue on their current path, both Democrats and Republicans will
resolve nothing by January 1, 2013.
Option Two could be a tax increase on those earning $250,000 or more
annually followed by a hidden group of stealth taxes to come later in 2013.
Initially, those wage earners with incomes under $250,000 will be
“saved” and told no new taxes. Later they get hit with a tax
landslide. Option One or Two won’t happen in 2012. The
“Leadership” will be on Christmas vacation.
Prediction: The Benghazi events could
conspire to take down the Obama Presidency through impeachment. An
Impeachment Proceedings cannot win in our view, but the combination of
Benghazi alleged untruths and the national/international debt crisis will
ruin the administrations current power. We think the President resigns in
disgrace, similar to the Nixon event on the threat of impeachment and other
unaddressed major American problems like the debts that have now reached the
Prediction: American energy independence
conceived partially from the regional Bakken wells,
in Southern Canada, Eastern Montana and Northwestern North Dakota will be
short lived. There is an abundance of gas and oil being pumped from those
new wells right now. However, the depletion rate (the rate of usage) is
faster than normal. As fast as this idea rises to its zenith, it will flare
out, diminish and fall back to poor production delivery levels. This will be
a major disappointment.
This problem will be made worse as the
Keystone Pipeline is not approved nor built. The current USA energy policy of
favoring green ideas will fail badly as they already have in wind, solar and
related others in that greenie energy sector.
Coal has been suppressed and smashed in
price by EPA rules and cheap natural gas. It will take some time for this
industry to regain its financial and productive footing. But since it shall
be the last and mandatory choice when natural gas supplies dwindle, coal
comes back again.
While some new auction bidding for Gulf
of Mexico oil and gas leases has been approved and held, those sources will
be too small to have a serious effect for American energy independence. There
is plenty of energy available in Alaska but politics has smothered leasing
and drilling progress for years as the old Alaskan pipeline slows down to a
dribble compared to its former production.
Over the past 20 years or so, USA
refineries have been shutting down on EPA questions and were collectively
very old, creaky and in bad condition. Note all the fires, explosions and
deaths over the past few years. No new ones are being built as it costs $6
billion for one substantial refinery. Worse yet, refinery operators
can’t make any money…why build a new one in this profitless
environment? One cannot justify the cost or time investment.
America is now importing about 35% of
its refined gasoline for motor vehicles delivered from foreign tankers to our
shores. Considering the amount of refined gasoline we cannot produce and must
import; this is a dangerous position for the United States: a new and scary
Prediction: Permanent climate change
is nonsense. A typical climate cycle is ten years. With a decade of
disruptive weather and storms in the USA the climate change proponents have
been crawling out of the woodwork. This current year’s long bad weather
event has been recorded numerous times in America. It is one cycle, pure and
simple. We have proven data that early indicators of the next ice age began
in 1998 and will gradually build to a climax over years. Historically, the
kind of weather we see today is a prelude to the next ice age and all the
signals are in place. Climate change extremists push their agenda to obtain
government handouts and make money on those types of stocks. Look at the
related failure lists over the past 3-4 years if you think we’re
Prediction: The USA bond markets are
moving to an implosive failure. It has started first with municipal bonds and
next it spreads to junk bonds where reckless cowboy investors parked cash for
high returns on high risks. Mr. Bernanke must buy back roughly 60% of his new
paper at current auctions; parking it on the bond purgatory shelf in the
Federal Reserve. Those bonds are marked as “sold” and they are
Bernanke is at the end of the road.
Foreign investors are still buying his fiat paper but are doing so in
lessening amounts. Recent buying has been a fleeing position from European
paper. This cannot last too much longer.
We have been through several bubbles
since the year 2000. (1) The super low Greenspan rates that
encouraged unqualified homebuyers to jump into the market. (2) Derivative
abuse by the billions, instigated by global banks to earn fees on smoke and
mirrors. (3) Federal debt existing beyond any reasonable level, with no
national budget approval for the last three years. (4) Bond and currency
printing at outrageous rates of increase with no asset backing. (5) Stock
trading and manipulation at grandiose levels despite economic conditions.
(This event is purely trader-driven and is destined to implode in late 2013.)
(6) A destructive real estate industry crash caused by credit buyer and
With a smashed national budget, a new
and forthcoming world war that the American military cannot afford could be
the final straw in credit land.
Prediction: The next big seizure of
assets will be the mandatory conversion of pension assets to USA government
paper. The estimate is $8 trillion, which is about half of the current
reported USA national debt. This happened in Argentina in the year 2000 and
the victims lost everything they had including savings, pensions, liquid
wealth, and real estate. That nation is broke and going there again courtesy
of Mrs. Kirchner’s public policy.
The USA will follow on the same path
courtesy of House Minority Speaker, Nancy Pelosi.
Lack of responsible leadership in
Washington D.C. has driven the United States to bankruptcy. We are insolvent.
We reside in the land of the walking-credit-dead and exist on plastic and the
no-other-choice-will of foreigners buying our paper. The paper game is about
done as the smart ones are moving to hard assets of numerous varieties.
Do not expect any leadership from
Washington but rather, plan for the worst and hope for the best. Most
Americans know something is wrong but with the news offering a different
Pollyannaish story they march forward like lemmings over a cliff to their ultimate
Prediction: USA inflation now at +11.3%
will be rising to reach +15% by May and a lot higher in fall 2013. The severe
pressures on Obama will contribute to his resignation.
Prediction: There will be a Santa Claus
rally beginning December 3 and completing on December 15th, or so. Stocks in
the first half of 2013 can rally with the normal corrections, presuming the
president can continue to hold his office. However, by May 2013 we should see
a markets’ haircut of 11-12% or slightly higher.
In the fall of 2013, we forecast a stock
market crash of -38 to -50% from the 2013 highs. The incidence of a World War
or impeachment proceedings could make the selling much worse.
Europe is in much worse shape than
Prediction: The new credit pact fought
over on Greece for the past two years is ready to collapse despite it being
only one week old. Germany passed approval of the agreement last week but
Finland and the Netherlands must also vote and approve. Worse yet, the
various factions within the agreement, after studying what was signed, are
infuriated and are already talking repudiation. Nobody got what was wanted
and everyone felt they were treated unfairly. If this agreement lasts until
fall as expected as of last week, we would be surprised.
Prediction: If Greece exits the
Euro-land consortium and the Euro currency, we say the whole
Euro-land-idea-event collapses in onto itself. We did predict this in 2003
early on in the formation of this Euro-land effort. Our thoughts were: How
can so many nations with widely varying cultural differences, economic status
and languages become one and equal? Answer: They can’t.
We were right and the handwriting is on
the wall. The collapse will be lead by Germany when
they start trading D-Marks in parallel with the Euro currency. Euro-land will
dissolve. The bigger question is what will the
old/now new currencies be worth post Euro currency demise? We say not much at
all. The Greek Drachma would be worth nothing. Portugal, Spain and Italy are
all heading for major pain as well as the UK and a few more. The wounded
German economy will hang on to survive as will Finland, the Netherlands and
Iceland. The other members will be unmercifully hammered.
Asia has a
mixed bag of problems and opportunities.
China temporarily lost its economic footing but new elections and powerful
political operators from the old Mao regime are now in charge. The grand
China experiment is over and is now on the decline. The Chinese export
machine must now turn inward and pursue organic growth. The exporting has
fallen down drastically as sales to Europe and the USA hit the dumpster.
Expect Chinese seizure of foreign assets of all kinds within China. This will
include hard assets, factories, stocks, cash, trading, infrastructure,
businesses, and worst of all intellectual property. China is now busy trying
to buy Greek assets on major discounts.
We said this
would happen about 3-4 years ago when foreign investors who were All-IN (thinking they found investor nirvana) began to
get cut off at the credit knees. Holders of major installations and property
will lose most of it in the forthcoming seizure credit-smashing implosion. We
think this was the 20-30 year plan all along. The suckers will lose a pile.
Nations Abuse of the USA and the West
The United Nations is a communist third world front. It’s been the
staging platform for the One-Worlders. After the
next big war, the UN is defunct…gone…zero. “The Times of
India reported last week that the USA and Israel were isolated and humiliated
on the world stage on Thursday after the international community
overwhelmingly voted to upgrade Palestine to a non-member observer state in
the United Nations.” Prediction: Donald Trump will be converting the
newly vacant UN New York headquarters building into condominiums within 2-4
One-Worlder proponent Brzezinski complained about the rise of
resistance to the UN and its affiliates. “Brzezinski: "Populist
Resistance" is Derailing the New World Order ... Rise in "populist
activism" a threat to "external control" ... During a recent
speech in Poland, former US National Security Advisor Zbigniew
Brzezinski warned fellow elitists that a worldwide "resistance"
movement to "external control" driven by "populist
activism" is threatening to derail the move towards a new world
order.” −InfoWars The Daily Bell
12-2-12 Our view says he is correct.
agree with Mr. Brzezinski as the Sheeple, after
being battered and destroyed by bankers and politicians, are going on the
offense. We would not want to be in the One-Worlder
camp with the bankers as the list is public and we know what history says
will happen next. It might take a few years but the ending is always the same.
The U.K and
France are both in very serious credit and economic trouble. One new report
from London referred to the nation’s credit situation as a 60 Billion
Pound Black Hole.
is on fire from one end to the other.
Egypt, Syria, Lebanon, Yemen and other surrounding neighbors along with some
North African nations rise-up in a major war against the west. Iran and Egypt
will be the leaders and they might even overrun Saudi Arabia, stealing all of
their oil and gas assets. The United States will defend the Saudi’s to
protect energy supplies but Turkey may side with the others against the USA
despite being a member of NATO.
has been on growth roll but is stalled on politics.
After the passing of Hugo Chavez next year, the next leader will be another
dictator following in the footsteps of Chavez. Castro could be gone next year
too but his brother, despite being a softer communist than Fido, will
continue to operate Cuba as his personal dictator fiefdom. There are hopes a
new leader would emerge in Cuba freeing the people and opening the doors to
prosperity. It will come but not for at least another five years.
headed for collapse again along with less severe but serious problems in
Chile, Peru, Bolivia and others. Uruguay and Panama are probably the freest
with the others in various lesser situations of comfort and freedom for their
citizens. Mexico has been doing much better within their economy, but the
escalation of crime in four large states and certain tourist mecca’s
has created new and serious concerns.
Gold and silver markets will improve in 2013. Gold should touch $1,923 and
then $2,000 in the first half of the year. In the second half, we could see
prices at $2,150 to $2,250 for highs.
beaten down but has been rising faster than gold of late. We are near $33 now
with $35 resistance. In the first half of 2013 silver could touch $44.48 and
perhaps $48.50. In the second part of the year if things go well and we
expect they will, silver could finally break $50, rising to $56 and then $59
dollars. Purchases of gold coins and bars have slowed but are still rising.
On the other hand, silver buying has been off the charts during the last few
months. Since silver is more affordable we expect the ratio of silver buying
to gold will continue to drastically increase. This will put hard pressure on
silver prices as most of the new buying is for investment not for commercial
It is obvious
to us that hard assets are the answer. It all starts with physical gold and
please tell us when the global bond markets crash for good and we’ll
tell you when this can all get better and we can start over again, maybe with
a partially backed fiat gold currency.
Contact Claudio Bassi, at Trader Track’s New York City publishing
offices for a trial subscription. Call
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