We forecast it before, and we continue to do so. There will be a BIG economic bounce that will be heard across the world as lockdown restrictions ease, vaccination rates increase, and continued streams of cheap government and central bank money continue to flow into the economy.
Ready to break loose and feel free, there will be sharp increases in consumer spending across the retail, entertainment, and hospitality sectors.
Tech shares sharply zoomed when, last February, the Geek Squads – the Silicon con-artists – were the first to tell their workers to work-at-home. Schools and colleges quickly followed, emptying classrooms and college dorms, and sending students online.
Following the Hi-Tech deciders, politicians declared “shelter-in-place” orders forcing people to stay home, while closing down politically-declared “non-essential business,” i.e., anyone but the big box stores and other multi-nationals.
Unable to shop until they dropped, consumers went online to buy what they needed and wanted, adding yet another level of strong growth to the 21st century online Hi-Tech world of working, learning, eating, and living.
In response, the NASDAQ rose 43.6 percent in 2020, its best year since 2009. The S&P 500 had spiked 68 percent from its March 2020 lows, and the Dow closed the year at 30,606, hitting a record high.
But now, with signs signaling a return to some sense of a New ABnormal where people will live lives outside their homes and rely less on the tech world, the NASDAQ fell below its 50-day moving average, down nearly 4 percent earlier in the day before rebounding to close down 0.5 percent at 13,465.20.
The overvalued price/earnings ratio Dow Jones Industrial Average fell 360 points in early trading, but it, too, snapped back, closing up 15.66 points.
Money Junkie
But the Dow bounced back a bit after Fed Chair Jerome Powell told Congress that inflation was “soft.” With inflation muted and the economic outlook “highly uncertain,” the word on The Street is that interest rates will remain low, thus cheap money will continue to flood the markets.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell told the Senate Banking Committee today.
And contrary to what the Fed and The Street had forecast, we have been forecasting Dragflation: declining economic growth and rising inflation.
Now, amid a sharp rise in bond yields in recent weeks as Washington makes plans for more money-pumping schemes to prop up the failing economy, inflation fears are on the rise. Thus, the higher inflation rises, the higher the likelihood of the Fed raising interest rates, which will, in turn, crash the cheap-money, artificially-propped-up equity markets.
Liars
And as we have continually detailed, the inflation numbers are rigged by Washington to limit the amount of social security and other benefits that are tied to inflation numbers.
For example, today Case-Shiller reported that December home prices had their sharpest gains in seven years, rising 10.4 percent.
However, the fact that it cost 10.4 percent more to buy a home, according to the rulers of Slavelandia, is not inflation, and the government does not count it.
Why?
Because the “experts” decided that a home is an asset and buyers will benefit when they sell it. In their world, regardless of where you live or how much you paid and put into home improvements… you’ll make money when you sell it.
That is just one example of how the real inflation numbers are cooked to appear to remain low as living costs continue to climb. For more accurate statistics, we suggest John Williams’ www.shadowstats.com.
The U.S. is not alone in rigging the inflation numbers. Yesterday, Bloomberg reported the Canadians are fixing the numbers as well:
Inflation Jumps in Canada After Statistics Agency Backtracks
“Statistics Canada backtracked on its decision to revise down estimates of underlying inflation, raising questions whether the agency has a full grasp of the real state of price pressures in the economy.
In a rare move, the agency said Monday it’s reversing a methodological change—unveiled only five days ago—that lowered some readings of core prices. After receiving negative feedback from economists over the change, Statistics Canada said it reverted to its old methodology and will study the matter further.
The result is an inflation picture that is more elevated than reported last week.
Bloomberg quoted Derek Holt, an economist at Bank of Nova Scotia, who noted, “We’re now left largely in the dark on what core inflation is and reliant upon if and when StatsCan publishes a revision to its revised methodology that they just retracted.”
Thus, real inflation will continue. Indeed, we have been reporting sharply rising commodity prices, shipping costs, etc. in the Trends Journal, and we forecast that as inflation sharply increases interest rates will rise, the equity markets will plummet and precious metals such as gold and silver will shine brighter.
TREND FORECAST: While we have forecast a strong economic bounce-back this spring through autumn, it will be an artificial high, pumped up by high demand that was repressed during lockdowns.
As we noted, while many lost jobs will begin to return, new ones won’t be created. Businesses that have gone out of business will not suddenly bloom. Moreover, there will be a slow recovery in many sectors including entertainment, events, hospitality, tourism, trade shows, conventions, cruises, and brick and mortar retail among them.
Moreover, private debt levels will continue to rise, putting more downward pressure on spending.
When will the artificial boom bust? While it is impossible to read the minds of Banksters who will do all it takes to keep the equity Ponzi scheme going and the Wall Street money junkies on their high, we maintain our forecast for a deep bear market this year.
And, most importantly, when Wall Street crashes, so, too, will Main Street, bringing the world to the reality that the “Greatest Depression” has begun.
When will the equity crash happen? Read Gregory Mannarino’s new article, “MARKETS’ DAY OF RECKONING: COMING SOON.”
GOLD/SILVER. After hitting a seven-month low at $1,767 per ounce during trading on Friday, gold bounced back yesterday closing up more than $30 per ounce. Today it was down $7.45 closing at $1,805 per once while silver moved up 84 cents to close at $27.68 per ounce.
With gold off to its worst start in 30 years, as we have continued to note, as more money flows into cryptocurrencies, there will be less to gamble on precious metals.
However, we maintain our forecast that while bullion is down some 6 percent this year, the dollar will continue to weaken, inflation will increase, gold prices will top $2,100 per ounce, and silver will push above $50 per ounce.
And, the lower cryptocurrencies slide, the higher gold prices will go. While both markets, precious metals and cryptocurrencies, are speculative, precious metals are hard assets that are purchased by central banks to boost their monetary reserves and are used in heavy and high tech industries, respectively… while digital currencies are intangibles.
BITCOIN. Bitcoin and other cryptocurrencies began their dive on Monday following statements by Elon Musk – whose Tesla company had recently bought $1.5 billion worth of bitcoin – that its price “seems high.”
As the words flowed out of his mouth, bitcoin, after hitting a high of $58,341 sank over 10 percent.
Then, yesterday, the prices tanked again following U.S. Treasury Secretary Janet Yellen’s fear message of “crypto-control ahead” when she issued a warning on CNBC that investing in bitcoin poses dangers for society and is risky for investors. Yellen said,
“To the extent it is used, I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”
To help push the price down further, Ms. Yellen warned that bitcoin, “It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer.”
And suffer they did! As we go to press, bitcoin is down over 10 percent, trading at $48 percent at $48,326.
TREND FORECAST: How low can bitcoin go? How far can it fall? We maintain our 5 January forecast: “The downward breakout point will be hit should prices fall below $25,000 per coin.”
OIL. Discounting Federal Reserve Chairman Jerome Powell’s warning that U.S. economic recovery remained “uneven and far from complete,” oil prices stayed on their year-long highs with Brent Crude closing up 18 cents at $65.42 a barrel, while West Texas Intermediate fell 3 cents to close at $61.67 per barrel.
The big push up, as we had reported, came when OPEC+ made the deal to keep cutting back on supply. And now, with hopes of a vaccinated world and life returning to a New ABnormal, the vax news is good news that will have people feeling free to go out, travel, go to work… and pump petrol into their autos.
Upside – Downside
As oil prices move higher and real wages stagnate and/or fall, the increasing petrol costs will put downward pressure on consumer retail/restaurant/travel spending while pushing inflation higher.
