This is it.
2014 is the year I expect the government’s missteps to finally catch up with us. Why? Because all four of my longer term cycles are pointing down at the same time for the first time since between 1930 and 1934!
Not only the U.S. government, but those around the world as well, have continued to escalate their stimulus efforts, with more required and less cumulative effect. And now it’s time for the much-needed, overdue, and possibly unavoidable reckoning… or what I like to call “The Great Reset.”
What will that look like?
Well, we can look back to history to the two greatest resets after major debt and asset bubbles between 1835 and 1843 and again between 1930 and 1939. Deflation, debt deleveraging, major bubbles bursting and high unemployment… that’s what it looks like.
So here’s what I forecast for 2014:
Forecast #1: 10-Year Treasury Bonds Rise to 3.7% (if not more)
I see this happening by mid-2014 and when it does, it will help trigger the next economic slowdown and stock crash (which I detail below).
Forecast #2: Gold’s Surprise Move
Gold will likely fall a bit further as stocks peak in early 2014. Then it will have one final counter-trend rally, heading back up toward $1,400 to $1,430 or so into mid-2014. After that, it’ll continue on its painful journey south. Gold could see $250 an ounce by 2020 to 2023.
Forecast #3: No Reprieve for Commodities
Commodity prices and oil will head further down this year, especially in the second half, and China will start to see its mammoth real-estate bubble burst. Watch out for oil once it breaks $80 barrel, copper once it breaks $300, and the Shanghai Composite (Chinese stocks) once it breaks 1,900. Chinese real estate could collapse 80% or more over the coming years!
Forecast #4: The U.S. Dollar Hedge
The U.S. dollar index could rise 30% to 40% by 2016, with much of that by late 2014, likely more so in the second half of the year. This will be the lowest risk means to hedge against the next great crash.
Forecast #5: The Next Big Stock Market Collapse
I see the Dow peaking near 17,000 in very early 2014 before turning over and beginning the next big crash down to as low as 10,000 by late 2014. Eventually we could see the Dow as low as 5,000 between 2015 and 2016. And I still believe the Dow could slam into 3,800 or 3,300 when all of our major cycles bottom together, around late 2019 into early 2020.
The most likely catalyst for the next crash will be global triggers in major fault-lines like southern Europe and China.
Japan triggered the first crisis in the early 1990s when it went over the demographic cliff. The U.S. triggered the second crisis in 2008 as it went over the cliff and its subprime crisis roared.
China is the next major domino to fall, but trouble in southern Europe and a fall-off in U.S. real estate could add their own fists to this fight first.
My only caveat is this: Given such a strong confluence of cycles that point downward between 2014 and 2019, if we don’t see a major stock crash or economic downturn by November — I’m talking greater than a 20% crash here — I will re-evaluate the success of government stimulus measures to counter and look for a greater crash more toward 2018 and 2019… but my cycles tell me the time is now.
My view is that central banks have stretched economies and debt about as far as they can and it will simply take a trigger to blow this bubble back to its B.S. origins… and there are many more triggers than I have discussed here!
So what should you do with your investments this year?
My advice is to tread very carefully and get as defensive as you can get by late January, especially as the Dow gets near 17,000.
Take advantage of the move up early in the year, but be prepared to protect yourself when the time comes… and I think that is coming sooner rather than later.
Adam, our investment guru, is constantly combing the markets for opportunities in the boom just ahead… and when the collapse arrives, he’ll be looking for opportunities on the other side of the fence.
A happy New Year to you! May you find it profitable in our company, when most people get blindsided by the next bubble burst.
|Follow me on Twitter @HarryDentjr|
Ahead of the Curve with Adam O’Dell
Passive index investing is not the way to go in today’s markets. The long-term risks associated with buy-and-hold investments are too great. And short-term trend changes only work to benefit investors willing to stay nimble, jumping in and out of the market’s strongest sectors.