Early in 2010, Gerald Celente, a trend forecaster who predicted the crash of 1987 and the panic of 2008, as well as the fall of the Soviet Union, had a prophecy there would be a “Crash of 2010.” I was one of the few people who critiqued his thoughts at the time and wrote about it in Is Gerald Celente Right About the “Crash of 2010?”
In that article I made the following points;
* GDP can’t keep growing fueled by government spending alone, however, Obama has a few more trillion to spend to stimulate the economy in 2010.
* The economy and GDP are recovering here in the U.S., but of course only the government spending aspect of GDP is pushing the consumer spending, business spending and trade numbers higher. This is only temporary.
* If we build an internal manufacturing capability as Celente suggests, at the higher wage rates of the U.S. labor force, how are those U.S. companies going to compete with China’s wage rates? Answer: They can’t. So what has to give in this globalized world where every country is fending for themselves to be competitive is the fact Chinese wages would have to rise and American’s wages would have to fall.
* China and Japan aren’t going to dump their treasuries when the U.S. Dollar is moving higher. They won’t do that until the Dollar Index heads south of the March 2008 lows of just under 72 (or the 2009 low of just above 74).
* To clarify my big picture thinking, I always say, “a holder of physical gold, cares not that it falls to $700 or lower on its way to $2,000 and higher.” You keep your gold or (buy gold if you haven’t already) because of those “external influences.”
*Also remember the Fed is still relevant…for now).
Flash Forward To December 29, 2010 – There Was No Crash of 2010
We have seen an up year in the stock market and for treasuries overall. Gold has moved higher fueled by additional quantitative easing and an increase by the Obama administration adding over $1 trillion to the budget deficit. Japan and China didn’t sell off their U.S. treasuries and U.S. wages have decreased. Developing nations had a great year seeing their quality of life improve from the “slave labor” levels Celente spoke of. Lastly, the Fed is still relevant, but the question to be answered is, for how long?
Gerald Celente Crash of 2011?
Will Gerald Celente call for a crash of 2011 when he comes out with his 2011 predictions? My speculation is he will since his reasoning for the crash of 2010 hasn’t changed. He’ll probably add some predictions like India and Pakistan going to war or dropping a bomb or two on Iran (not a surprise there and of course bad for the stock market). But will he call for a stock market crash when everything is perceived to be going well in the economy?
Reasons To Be Bullish On The Stock Market In 2011 (With No Real Substantiation)
Clearly, the fundamentals aren’t there for a higher stock market and any threat or actual war breaking out would have its negative consequences (higher oil prices and the increased cost of business associated with it). But this doesn’t mean irrational exuberance wouldn’t return.
The Fed, with its new found powers given to them by congress mid 2010, has more tools to work with, including supporting the stock market. They also have holding banks like J.P. Morgan and Goldman Sachs to funnel money through. If they can get the stock market above 12,000, just maybe they’ll get America going again right?
Mass psychology is what we are dealing with here. With the CNBC cheerleaders leading the way, can the Fed actually get the economy going by pushing the DOW higher? Won’t Americans feel richer if they see their 401k statements showing more wealth? Won’t they then start spending their income and get businesses moving again? Won’t this then lead to a rebound in real estate?
The question is, will it work? This is what I believe to be the last rabbit the Fed has in its hat. If it fails, look out below. The U.S. consumer is key.
China and Japan Will Monitor the U.S. Dollar
China and Japan will keep monitoring the U.S. dollar and won’t start dumping treasuries while they still have the U.S. consumer buying their goods.
At some point, China and Japan will start selling their treasuries, but these U.S. treasuries are still viewed as a safe haven today. Remember, 70% of the world still trades in U.S. dollars. In fact, if my prediction of a deflationary credit contraction comes to fruition, money will flow to “perceived” wealth in treasuries, driving the value of the dollar higher, and into real wealth represented by gold and silver.
During this current economic and stock market rebound we may see a pullback in the price of gold and silver. But we know the recovery is not real because unemployment hasn’t improved. So just keep in mind the rug can be pulled from you at anytime and don’t sell your physical gold and silver if there is a pullback in price.
The Real Reason For A Crash
Celente will eventually get his crash, but I don’t think it will occur until people wake up to the problems our biggest banks are having. This is the story I first wrote about on this site (see articles below) and in my book, “Buy Gold and Silver Safely.”
It is the untold story of 2010 and beyond and something that I will keep a close eye on, since you won’t hear the media address it. It’s also one of the main reasons to own gold and silver in your portfolio. Everything is tied to the banking system.
The only thing that can interfere with this, and will, is Fed intervention. Either way, long term, gold and silver will come out on top. The more the Fed intervenes with QE1, QE2 and QE infinity, the higher the price of gold and silver will go.
If the madness of crowds ever turns against the banks, the rush to gold and silver will be like a game of musical chairs with 1,000 people clamoring for one chair.
August 17, 2009
February 26, 2010
July 21, 2010
October 8, 2010
December 23, 2010
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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