Best of the Week
Most Popular
1.How U.S. Dollar Destruction Threatens the Global Economy - Steve Forbes
2.Why UK House Prices Will Continue Rising - 'It's Immigration Stupid' - Nadeem_Walayat
3. Bitcoin Price at Beginning of a Move up? - Mike_McAra
4.Gold Price to Plunge, Visiting Fort Knox - David_Hague
5.Silver Price Forecast - Metal to Gain Ground in August on These Factors - Jim Bach
6.Gold And Silver Will Rise With US Dollar Demise, Just Not Soon - Michael_Noonan
7.Bitcoin Price Strong Move Possible - Mike_McAra
8.Israel Gaza War Crimes - Soldier's Ordered to Shoot Civilians Including Children - C4News - C4News
9.UK House Prices Crash Warning - Daily Mail Cognitive Dissonance - Nadeem_Walayat
10.UK House Prices Boom - Top Quick Cheap Tips to Help Sell Your Home - Nadeem_Walayat
Last 5 days
Why Emotional Discipline is Key to Trading Success - 21st Aug 14
Getting the Most Value from Your “Geriatric Cruiser” - 21st Aug 14
Mafia Boss Claims Stocks A Bubble, Buy Physical Gold and Silver - 21st Aug 14
Outrage! On The Beheading of Our Media Brother James Foley - 21st Aug 14
Stock Market Crash a Historical Pattern? - 21st Aug 14
The Black Box Economy - 21st Aug 14
The Bond Market is taking Advantage of Janet Yellen`s Dovishness - 21st Aug 14
Meet Your Investment Manager - 21st Aug 14
Gold and Silver Trading Alert as U.S. Dollar Soars to New Highs - 21st Aug 14
President Obama Strongest Statement Yet on Israel Gaza War - 20th Aug 14
Peak Gold? Russia To Surpass Australia As World No 2 Gold Producer - 20th Aug 14
AI, Robotics, and the Future of Jobs - 20th Aug 14
Stock Market Investors What's Your Exit? - 20th Aug 14
The Gold War - Thinker, Trader, Holder, Why? - 20th Aug 14
Ukraine Interest Rates Soars to 17.5% As External Debt Cannot be Repaid - 20th Aug 14
Rising Interest Rates and The End of Stimuland - 20th Aug 14
Inflation Watch: $245,000 to Raise a Child in United States - 20th Aug 14
Inside the Stunning Deal That Put Apple and IBM on the Same Side - 20th Aug 14
The US Gold in Fort Knox is Secure, Gone, or Irrelevant? - 19th Aug 14
Bitcoin Price On The Brink of a Possible Reversal - 19th Aug 14
Why Tesla Stock Price Will Double in the Next 12 Months - 19th Aug 14
Europe's Economic Malaise: The New Normal? - 19th Aug 14
The Coming U.S. Economic Collapse Will Trigger a Revolution - 19th Aug 14
Market Bubbles, Bubbles Everywhere - 19th Aug 14
This is Your Economic Recovery With and Without Drugs - 19th Aug 14
Stock Market Strong Start to Jackson Hole Week - 19th Aug 14
Iraq, Ukraine - Oh, What A Tangled Mess We Weave - 19th Aug 14
How to Apply Moving Averages as a Trading Tool - Video - 18th Aug 14
Why Short Stock Traders Are Losing Money This Week - 18th Aug 14
Stock Market Rally May be Complete - 18th Aug 14
Why Chinese Citizens Invest In Gold - 18th Aug 14
Palladium Reaches 13-Year High Over $900 oz as Gold Trading Volumes Surge 66% - 18th Aug 14
Understand and Profit from Surging European Volatility - 18th Aug 14
No Escape from The Dollar as The Currency Standard - 18th Aug 14
Stock Market New Highs Less Certain - 18th Aug 14
German Stock Market DAX About To Drop - 18th Aug 14
Stay on Board - Stock Market Big Picture - 18th Aug 14
Europe Economy Is Tanking, QE Is Coming - 18th Aug 14
Are You Ready for The Greatest Technology Revolution Yet? - 17th Aug 14
Why King Coal is Bigger than Oil or Gas - 17th Aug 14
U.S. Empire of Death and Lies - 17th Aug 14
Ukraine - Whose Spin Are We Caught Up In Here? - 17th Aug 14
Time Decay And No Escape For Abenomics - 17th Aug 14
India BSE SENSEX The Party Is Over In Bombay - 17th Aug 14
Stock Market Uptrend Looks Underway - 17th Aug 14
The Key Role Of Conspiracy Theory In Dumbing Down Society - 17th Aug 14
The Federal Reserve in Denial Mode - Bond Market Explained - 17th Aug 14
Stock Market Ukraine-Triggered Volatility, But a Flat Finish - 16th Aug 14
Stock Market Investors Conditioned To Catch The Falling Knife - 16th Aug 14
Decline And Fall Of The CO2 Crisis - 16th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

Look at Financial Crisis Year 2013

Stock-Markets / Financial Markets 2013 Jan 02, 2013 - 02:34 AM GMT

By: Clif_Droke

Stock-Markets

In the course of history, some of the great crises of the past were beyond the pale of human control. Other crises, however, were created by the very people who suffered the effects of them. The coming year could well afford a testament in how a “crisis of our own making” leads to economic destruction.


We have an excellent example of a created crisis in the ongoing fiscal cliff debate in the U.S. Congress. The debate centers on whether or not Congress intends to extend the Bush-era tax cuts or allow taxes on the middle class to rise in 2013. This is no small consideration, for if taxes are allowed to increase in the coming year it would mean almost certain death to the 4-year economic recovery. Investors would also likely suffer.

Even if a compromise is soon reached which prevents middle class taxes from rising, the very fact that Congress is struggling with an issue as simple as this – namely, the truism that rising taxes in a recessionary environment are contractionary in nature – displays an appalling lack of understanding among our elected leaders. Is it any wonder that many Americans are fed up with the dearth of political and economic wisdom to be found in the nation’s capital?

Moreover, the ongoing fiscal cliff debate is another piece of evidence that the next major economic crisis is likely to be political in origin instead of financial. The previous crisis of 2008 was of course a financial event which began in the housing sector and extending to the credit market. Linear extrapolation leaves much to be desired as a market forecasting tool. This is one reason why scientists and economists (who are the chief exponents of linear forecasting) often miss their predictions. But when applied to the realm of politics, linear extrapolation is one of the most accurate forms of prediction there is. This is because government and bureaucracy, by very nature, are imminently predictable. The men and women who fill the roles of elected officials aren’t forward thinking and are more apt to be reactionary rather than proactive. That is, politicians invariably respond to crises with after-the-fact remedies which rarely address the underlying causes of the crises and often do more harm than good. Because politics and bureaucracy move with all the speed of a glacier, you can see the trends emerging within this sector from miles away and easily predict what’s coming next.

The next major crisis will undoubtedly originate within government itself. Short-sighted politicians in European and Middle East countries have already shown the blueprint for engineering economic calamity in the face of a worldwide deflationary undercurrent. Even if the U.S. Congress manages to dodge the fiscal precipice in early 2013, there are myriad opportunities for them to wreak economic havoc in the coming year. Indeed, the temptation to embrace counterproductive policies in the hopes of stimulating the economy a’ la Europe is ever present. It would be surprising indeed if Washington manages to dodge a self-inflicted economic crisis in 2013, especially as the major yearly Kress cycles are all in the “hard down” phase until late 2014.

Let’s now take a look at what some of the leading minds on Wall Street have to say about the 2013 outlook. Echoing our sentiment for a “crisis of their own making” in 2013, veteran market forecaster Bert Dohmen of The Wellington Letter (www.dohmencapital.com) observed in a recent newsletter:

“There are two things that Congress will not do anything about, because they are either clueless, or personal ideology prevents them from doing so. The economic cliff is a recession. The economy has been slowing for over 15 months. That trend will continue, especially if major tax hikes are a price for averting the cliff. A recession will cause an acceleration of debt.”

Dohmen also made reference to a “corporate earnings cliff,” which he believes will occur if economic growth goes into contraction. “The stronger, recent earnings have been the result of big cost-cutting,” he wrote. “As they say, you can’t cut your way to prosperity.”

On an intermediate-term basis, one bright spot on the horizon is the U.S. housing market. Many respected real estate analysts have gone on record as predicting a continuation of the real estate recovery for 2013. Diane Swonk, chief economist at Mesirow Financial, believes that housing will continue to be on the mend this year. She writes, “Remodeling is up, and spending on [hurricane] Sandy recovery will enhance the trend, which is a plus for building materials and housing-related durables – appliances, carpeting, and furniture.”

Robert Campbell, editor of The Campbell Real Estate Timing Letter (www.RealEstateTiming.com) correctly predicted the 2007-2008 housing market collapse. He now sees a recovery well underway for California real estate, and subsequently U.S. real estate. In a recent issue of his newsletter he concludes, “While there are many contributing factors to the current housing recovery, I am of the belief that the recent gains in housing prices are in large part due to Fed policy. Not only have their actions pushed mortgage rates to record lows – which have increased demand – but the Fed is also allowing the banks to keep millions of foreclosed properties on their books until they want to bring it to market – which has decreased supply. Whether future price increases turn out to be small or large for the U.S. housing market, the current trend is pointing toward higher valuations ahead.”

The potentially bullish intermediate-term continuation chart pattern in the Housing Index (HGX) suggests that Campbell’s and Swonk’s forecast could be correct, at least for the first half of the year.



There is reason to believe that as we head further into the second half of 2013, however, that even real estate will begin to feel the pinch of a slowing economy as the Kress cycles descend ever closer to the 2014 bottom. One person who doesn’t share the rosy view for real estate in 2013 is Robert Shiller, the famous economics professor at Yale University and co-creator of the S&P Case-Shiller home price indexes. Shiller believes the inventory of potential foreclosures remains a threat across the U.S., especially if the economy slows.

At least one respectable analyst, who has a strong long-term track record for accuracy, believes the metals and mining sector could do well in 2013. Michael Cintolo, editor of Cabot Market Letter (www.cabot.net) recently observed, “Materials stocks (coal, steel, iron ore, etc.) had a horrible 52% drop from early 2011 through the middle of [2012], but have been etching a bottom for months; they’re now working on breaking above their 200-day moving average for the first time since September 2010.” See the SPDR S&P Metals & Mining ETF (XME) chart shown below.



While there are some special situation and profitable sector possibilities for 2013, investors would do well to remember that, as the year progresses, the longer-term Kress cycles will create increasing economic headwinds. The year could come to resemble 2007 in its volatility. More importantly, 2013 will serve be the gateway for the revolutionary 120-year cycle bottom scheduled for late 2014. It promises to be an eventful, fast-paced year and undoubtedly the most economically significant one since 2008.

2014: America's Date With Destiny

Take a journey into the future with me as we discover what the future may unfold in the fateful period leading up to - and following - the 120-year cycle bottom in late 2014.

Picking up where I left off in my previous work, The Stock Market Cycles, I expand on the Kress cycle narrative and explain how the 120-year Mega cycle influences the market, the economy and other aspects of American life and culture. My latest book, 2014: America's Date With Destiny, examines the most vital issues facing America and the global economy in the 2-3 years ahead.

The new book explains that the credit crisis of 2008 was merely the prelude in an intensifying global credit storm. If the basis for my prediction continue true to form - namely the long-term Kress cycles - the worst part of the crisis lies ahead in the years 2013-2014. The book is now available for sale at:

http://www.clifdroke.com/books/destiny.html

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Momentum Strategies Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014