TOP TREND: MID-YEAR UPDATE
2016 FORECAST: Once upon a time, the principles of free-market capitalism could answer the country’s most pressing economic questions: Where are equity markets headed? Will wages rise? Will retail sales rebound? Those days are gone. Capitalism is dead. It was killed in 2008 by four little words: “Too big to fail.” Bankism prevails. Central banks have lowered interest rates to unheard-of zero/negative levels and kept them there for the benefit of their bankster buddies.
We’re in the midst of the greatest financial scam in world history. Don’t believe the Trends Research Institute; listen to European Central Bank President Mario Draghi pledge to “do what we must” to keep afloat Europe’s sagging economies: More stimulus, more cheap money, more economic trickery to further feed the massive global-debt bubble. But despite banksters’ maneuverings, the $225 trillion debt bubble will burst — and a global recession/depression will prevail.
TREND UPDATE
The Panic of 2016 and Great Recession we forecast as our Top Trends for 2016 are on. Global equity markets are in turmoil. And while we did not predict the United Kingdom would vote to leave the European Union nor anticipate the resulting financial implications, we did detail in the Winter and Spring Trends Journals, Trend Alerts, Trends Monthly and Trends in the News broadcasts that the fundamentals of the global economy have long been hovering at crash mode — far greater than Brexit.
In early December 2015, when we released our Top Trends for 2016, gold was $1,062 an ounce. We had forecast a strong rebound in the coming year and provided breakout points that would ignite gold’s next bull run. We wrote, “Considering the pending market volatility, combined with increased geopolitical unrest, we had long forecast gold, despite hitting six-year lows, would re-emerge as the primary safe-haven asset.”
In addition, we detailed those critical breakout points that would signal gold’s ascent: We forecast that gold must remain steadily above $1,200 to reach its next breakout point, $1,400. Once stabilized above $1,400, we projected a $2,000 range.
As we go to press, gold, in the mid-$1,300 range, has breached and stabilized well above our $1,200 breakout point and is testing $1,400 an ounce. As trend forecasters and not financial advisers, we do not recommend investment strategies. Thus, while there may be a significant pullback on gold, we forecast it will be short-lived and the last one in this price range before gold tops $1,400 per ounce and spikes higher. As a result, as markets have their ups and downs, we forecast the next big pullback will position gold on a long-term upside.
GOLDEN GLOW
Despite central banks’ money-pumping schemes since the Panic of ’08 that injected countless trillions of dollars, yuan, euros, yen, pounds etc., into financial sectors with quantitative easing and zero/low-interest-rate policies, the data show the money-pumping schemes pumped up Wall Street, not Main Street. And now, with the giant equity bubble deflating and central banks doubling down on their failed attempts to prop up the markets, they have further debased fiat currencies around the world, thus setting the stage for soaring gold prices.
For example, never in recorded history has the world witnessed negative interest rates. At press time, there were nearly $13 trillion worth of bonds with negative yields. Therefore, as central banks around the world continue to take desperate measures to keep the cheap money stream flowing with negative/zero/low-interest-rate policies, holding cash yields nothing… and could cost something. Thus, in this current climate of ongoing market volatility and tepid economic growth, for many, holding gold is considered the ultimate safe-haven commodity.
FOLLOW THE MONEY
With interest rates in negative/zero territory, not only has it penalized the general public, which once upon a time used to put the little extra cash it had in saving accounts or buy certificates of deposit and get a decent interest rate… central-bank policy is also crushing and crashing the banking system.
With rates moving at or near negative territory, it is less profitable for banks to lend, thus reducing their earning power and adding more downward financial pressure during a time of increased distress.
For example, the International Monetary Fund crowned Deutsche Bank AG, whose net income fell 98 percent last quarter, the riskiest financial institution in the world, warning that its failure could trigger a shock to the entire banking system. They also rated HSBC and Credit Suisse as possible contributors to systemic risk.
In Italy, desperate maneuvers by Eurozone officials and the Italian government are being considered to rescue its failing banking system, weighed down by high debt levels, bad loans and plummeting share values.
The Stoxx Europe 600 Bank Index has collapsed 35 percent this year, and 20 of the largest global banks have lost a staggering half-trillion dollars of value in just the first six months of this year. TJ