I made a ton of good calls for 2022, which I will highlight below quickly before getting into my 2023 view. I wanted to do this to get my thoughts down on paper so I’m on record. Unlike some out there, I don’t delete posts or tweets, so anyone could go back three years and find my treasures as well as my goofs. I don’t do this for a living, but someday may want to, as I find this stuff terribly fascinating to write and research. No, this doesn’t mean I want to be a junior analyst somewhere for a firm working 14 hour days. What this means is that maybe someday I get enough stuff right where I decide I want to look into another type of career. I’m nowhere near that, as I’m a hobbyist now.
With 2022, I made some pretty interesting calls which went against what the mainstream and many were saying. Let’s review a couple.
- In June 2021, I wrote the article “The pin that pops the everything bubble“. At this point, inflation had just started to move up and the Fed was saying transitory. I felt that no one in their right mind was buying bond/treasuries at 1-2-3% if inflation was 8-9%. I had relied on Hanke’s view of inflation that would come after the money bombers 12-18 months later. It did. Hanke and his team nailed the 9% inflation. I had called for higher rates (bonds would drop) as well as stocks. Essentially, I called “the pin that pops the everything bubble” as rising rates. We then had the worst 60/40 portfolio on record.
- In January 2022, everyone was talking about a Fed pivot happening because “they can’t raise rates”. My intuition was telling me that if they pivot too early before inflation peaked, that we could be building a structure of hyperinflation. If we appeased the stock markets by pivoting, we would sacrifice the currency. I didn’t CALL for this, but asked, “could they let it burn” and let FFR rates and treasuries to continue to rise? EVERYONE around me was saying they would have to pivot. Still getting my sea legs around all of you, I raised my hand to ask this question, and no one responded. This time, I’m making calls.
- I called for terrible crypto performance in early 2021 which eventually came to be, and theorized before ANYONE else I could find on Twitter, in early 2021 that BTC was to the S&P as NUGT was to gold. I stated that any downturn in the markets could be leveraged the other way for crypto. BTC was down 70% on markets being down about 30%.
How did my performance go – By Asset class??
- At the end of 2023, my trading account was in 60% cash.
- My silver holdings were flat, up a hair
- I accumulated more food for storage
- I was in no equities other than PM miners with some small trades with U and NG. I was down 36% for the year in the trading account, which was created to hedge my real estate holdings.
- My rental units went way up in value and a 2 year long rehab on one finished and as of 1/1/2023 is generating strong cash flows.
- My home value went up substantially. I bought at the housing value valley in 2013, as I also added solar and batteries on a 20 year loan which eliminated my electric bill and added equity value to the property. With the inflation with energy costs this year, I avoided all inflation-related higher energy costs with electricity to the home
- I looked at land, but prices were WAYYYYY high. Putting a pin in that for 2024-2026.
- I do not, nor have I ever, held non-asset backed digital currencies. Had I known how to short this industry, I would have made a fortune.
Summary performance: I had calculated that my gains in real estate were 6x my losses in miners to give me the best year I’ve ever had, given how much the value of the properties went up.
I do not list dollar amounts anywhere, as it’s no one’s business. Additionally, I did not sell PM equities to realize losses, nor did I sell rental units to bank profits.
2022 intangibles that affect 2023 intangibles
- Russia invaded Ukraine and negatively impacted global supply chains
- BRICS disruption with talks of currency and some gold backing
- Nord Stream 1 and 2 blown up, presumably by the good guys in order to cut off any possibility of Russia getting funds for this nat gas.
- China getting less western-friendly by the minute – I would now consider a lot of their equities as untouchable.
2023 macro forecast
Obviously, it goes without saying that no one has a crystal ball, so I think trying to paint dollars on things might be a fool’s errand. I think it is reasonable to try and ballpark things, but I’m also not licensed by any body, and with this, I’m providing amateur analysis and any and all things here you should talk to your financial advisor about. Maybe someday I go into that field, but I don’t like the 60/40, I like resource investing. Good luck finding a career advising anyone with that. That being said, my performance would have destroyed any 60/40 last year, on paper, but markets are wild and volatile and my lack of investing in traditional equities has opportunity costs that I have experienced, that FAs may be able to maximize you with.
Summary – rates slightly lower for debt, FFR maxes out around 5% and holds steady most of the rest of the year
I started with a lot of these items below, but everything seemed to hinge on this, so let’s start here. With a DRASTICALLY sharp incline in the Fed Funds rate, we are seeing inflation coming down. The real question is, what is the lag time on this? Could the first decline in the inflation rate have been a move up from 6 months before? 10 months before? Could natural market forces of increased price have created oversupply to which lower prices needed to happen? I believe 2023 is going to experience a lot of damage to the markets based on decisions damn near 10 months ago.
I believe they will get to their 5% and sustain until something absolutely major breaks. I don’t think, at this point, they care if your 401k goes down 50%. All of them cashed out already and basically warned you all that pain was coming.
With the Fed selling treasuries every month to unwind their balance sheet, you can see upward pressure on rates. Additionally, you have China continuing to sell – and use those dollars to buy gold. If the US government continues to spend like drunken pirates, they will continue to need to issue more and more debt. We saw the bank of Japan defend the Yen, and with this, they are sellers too. I’m at a point now, where it’s hard for me to figure out where the buyers are – as long as inflation is 7-8%. But if they can show they are taming inflation, and it’s soon in the 6s, to perhaps be anticipated to be in the 4s this year, some may take a flyer on 4.5% to front run a risk off event many see coming.
I believe they HAVE to create a risk off event to get a lot more rotation from equities into debt. Let that one sink in. If you know you have $100b per month of debt to sell, and the govt is selling, and china is selling – create a risk off event which can then move trillions from equities to debt.
That might be their strategy here. It’s the ONLY way I can see them unwinding $4T of debt AND funding more US deficit spending.
I believe you have lots of selling pressure BUT if you are successful in navigating an arm wrestling event where equities go down over another 1-2 years and not a cliff drop, you can also sustain buying pressure from banks and other nations at 4-5%.
That being said, you can see the value of bond losses holding serve, with inflation perhaps coming down to 4-5%. This also doesn’t grow your wealth, but perhaps preserves it. With little upside to bonds, could gold do better here? I’ll look at that as well.
Summary – pockets of residential markets hit hard, most see reasonable correction. Commercial real estate terrible.
I wanted to start here because it’s my primary holding, and why I got into PM investing. Now, I’m a wannabe resource barron that happens to own rentals lol. Every few years I might want to add a rental, but at this point, I’m not a buyer of rentals. Why?
We have seen real estate values go up, a lot, and retreat some lately. Many want to talk about lack of supply of houses, but I just felt that was sort of bullshit. Home prices went vertical in some markets. LA, Austin, Denver are a few. What I had anticipated at the onset of COVID was a mass move to telework, and with this, many would flee the cities and buy houses in the suburbs. It would crush city real estate values. There is a lot of evidence some of that happened, as many moved out of NYC and fled to Florida, where other suburbs around cities saw values increase as people fled cities.
But there was something missing, and I think the real estate conversation of the year filled in a LOT of blanks for me with Amy Nixon at Wealthion talking about the AirBnBust. I had followed Amy for months before this, as she had talked about a lot of insights with the real estate markets. A lot of YouTube people I had followed had moved to Austin and DFW and I was curious about the markets there. Anyway, in this conversation, it’s revealed that during/after COVID, 2-2.5m homes were converted to short term rentals. This was to help travel on the other end of COVID.
What this tended to do in some of those cities were to remove supply from the market for both sales AND long term rentals. Whoa. Then, with the “bust” part of this, as the economy has slowed, bookings “disappeared” from these services. Since half of these properties were bought/sold in the last 2 years, it stands to reason that many may hit the market, soon, as a home to buy, or some may convert to long term rentals.
Meaning – in some touristy markets, expect a glut of homes to hit the markets as well as a lot more apartments to rent long term. This should significantly bring down sale prices and rents in the most overstretched markets
However, I feel that my rentals in York/Reading PA do not have any form of tourism going on, and this really isn’t going to affect those markets, at all. My home was purchased at the LOW of the housing market in 2013, and I have a 2.6 or so 30 year on it. I have a “book value” over 50% higher than what I paid for it, but the truth is, you can see that real estate, relatively speaking, is about relative to the M2 money inflation. Depending on how you draw lines.
I believe that a correction will take place with unemployment rising. However, anyone in the last 3 years that refinanced sub 3% would be out of their goddamn minds to buy a house with inflated valued at 7% right now. More likely, higher unemployment and decreased market sentiment may lead to people forcibly selling their homes. However, I see for right now, higher rates have frozen the markets. You have high equity people not wanting to give their home away, but only try and capitalize on high equity – but you also have sellers reluctant to buy at over 5%.
This paralysis in the markets will have a 2 year or so slide in home prices as forced selling will bring down neighborhood comps….everywhere. How much? It depends how deep and how long the recession goes for, but for 2023, you can expect to see frozen markets until unemployment gets higher. Then, perhaps a 10-15% draw down after monster gains the last 2 years. For people like myself who aren’t selling, it’s paper losses. But, how I want to preserve that wealth will be the PM section.
Overall – some markets are going down, badly, with lots of inventory hitting soon. Think about how the tech layoffs are affecting Silicon Valley. With many companies able to work from home now, why would you buy a small house there or in Seattle for $1m when you can live somewhere like I live for twice the house size at one third the price?
Commercial real estate
This is what I’m most bearish about over anything else. With COVID, I wrote extensively over summer 2020 how working from home was going to decimate commercial real estate. Think about an office building in a city with 1,000 workers on perhaps 10 floors. All of these people drive in, pay parking, buy food there over lunch, and might eat or shop before they go out of the city for the evening. Now, imagine 970 of those 1000 working from home and the company has tremendous profits. This is the model which happened for a lot of companies in 2020. Sure, the markets were juked, but this showed a LOT of companies that they can have a remote work force and give up a lot of expensive commercial real estate. Many of these office buildings would go empty.
As a trickle down effect, think about the restaurants and shops all around these buildings, and how they would be affected. Slowing sales, layoffs. Closures.
I don’t like REITS, and I was in on WPG as it was circling the drain and made some good tactical moves around their bankruptcy. Many of these companies may look great on paper due to how they value their assets, but one has to consider how their debt to equity ratios look like with a 30-50% haircut on values. Likewise, how does their free cash flow look like with less leases, and leases that are being signed are for less. To me, this sector is due for a PC loadletter beat down.
So – I feel my overall paper risk on my home price might be 10%, maybe 15% down. I have two rental properties (3 units) and feel these values may also suffer, but these are more city based and feel they got more overstretched than my primary residence. I can see 20-30% draw down with these. I’m not selling any of the above, so it’s not really a big deal.
But what if I lose my job? How am I positioned for bad times? What if I have to sell? For THAT reason, I want to hedge this with PMs and miners, for leverage on that. More on that later.
Summary – overall certain sectors going to get crushed and zombies going to get their heads splattered by Lucille. M&A activity should be high. P/E ratios should start coming back down to orbit and value stocks with solid dividend could be best play.
There are so many sectors, it’s hard to just say “market bad”. It’s possible that’s where this goes, but I think you have to look at where excesses are. IF we think there is contraction in economic activity to happen, where does it happen first?
Tech – there are perhaps 400 different health apps and watches. Before 2009 QE, we used to have rational markets and recessions, where the best products thrived and the worst of them got smashed. I feel 2023 is the year of tech collapse. Many people may continue to feel the pinch at the grocery store and cut off buying apps they don’t need or use a lot.
Entertainment – I don’t like how we have 213 different media services with 400 shows and 30,000 on each. Just about anything gets greenlit these days. While COVID crushed some big time movies in the theatres, the new Avatar movie might slow down big budget films for awhile. I no longer watch Hulu, as I only had it for that dystopian show with a weird America where the women wore the nun hats. $11 a month, and the show seemed to get worse this season, to the point I stopped caring. I need to cancel. Think about all of the people with the bloated cable bills which might head to streaming services. I believe mergers and acquisitions are going to happen here, as a lot of companies are about to go bust.
Media – we have seen the rise of alternative media which seems to not tow the company line, so to speak. I feel when news is heavily sponsored by entities, it prevents the media from objectively reporting on those sponsors. I’ll leave that here, as I don’t want to be sued, but you can continue to see a lot of MSM dying and companies like Daily Wire with a subscription model and no real corporate sponsors to pick up steam. Regardless of if you are left or right, people are thirsty for the objective truth, and not corporate or government sponsored “truths” that cannot be questioned.
I don’t want to go into every other sector here, but I think the headwinds of everything is the high rates. I believe they have signaled they might be near the FFR peak they want. However, they are also signaling they might keep it high for some time. I had heard many companies are zombie companies, and with this, I believe many companies are about to become insolvent. I believe this is also part of the sledgehammer of demand destruction the fed wants to do. IF you crush demand, companies don’t need to make things or employ people.
The difference I believe is that with many recessions, the first thing they do is cut high priced talent. I think in this case, the first thing cut is commercial real estate as companies that modernize want to cut costs, but retain the best talent during tough times. While there will be trimming of the fat, high energy costs can lead to companies letting leases expire in favor of mostly remote work forces. If you are based out of NYC, you can potentially take your 20,000 seat building and move 10 miles away and get a 200-400 seat office space where people come into the office a few times a month. High priced NYC wages can be replaced with cheaper personnel in the region, who would visit the office once a month perhaps by train and get a hotel. This is how my mom worked out of Citi/Morgan Stanley in NYC the last 10 years of her life. I believe to avoid wage inflation, companies want to find talent further away from the office that are just as talented, but don’t live right by the office. They can still do 8-10 hour days, but not in the office.
So unlike other recessions where we have massive unemployment numbers – we will see unemployment, but targeted at high priced city personnel as well as draw downs in corporate office footprints.
When looking at equities in log, over the last 100 years and using the Dow, they are still historically overvalued to RE and gold.
While in QT, I see no reason why 2023-2024 cannot take us to 20,000
Summary – going to be volatile, but over the course of the year should rise substantially.
While we have inflation of the money supply driving a lot of the inflation – I feel like the demand destruction of QT will be deflationary in a lot of things. Less office space, less factory production means less energy consumption. But, you have China apparently re-opening for the 43rd time. Russian oil is still a thing, where they attempted $60 price caps – as if they actually understood that price caps create shortages.
The daily draw down of the SPR has to stop sometime soon. But, they never talked about filling it back up. They like to sell off what someone else bought, but have not really announced how they would refill the damn thing. Well, IF they were going to do it, 2023 might be a good time to do that before a recession completes and things get hopping again.
Green energy policies are decimating Europe, and why they have a lot of NG stocks, I have read that a lot of industry stopped there, and may never come back. We are highly allied with Europe, and this nonsense with green energy will fracture them and send many of them running back to the Russians for cheap gas and oil prices. The US has offered LNG, but apparently that’s really expensive by the time it hits their terminals due to transportation costs.
I love the uranium story, but everything I read in 2020 said 2023 or so was the year for long term contracts. Many front ran all of this, and rode it up and back down.
Looking at US oil prices in log shows we are still at the high end of oil prices.
It doesn’t seem this admin has any interest in continuing us on a path of energy independence and at the same time, it seems we pushed the Saudis into the arms of the Chinese. We continue to be frenemies with some OPEC nations, with sanctioning others.
It seems we could see lower prices in the ST of 2023, but China is the wildcard here. Coal is actually catching a look at by some.
The tricky part here with inflation is we may see deflation in a lot of things with the demand destruction, but pockets of things like energy may have sustained higher costs. Also, since home prices and rents may not come down THAT much in 2023, we can potentially see 4-5% inflation by end of year.
“The energy is the economy, stupid”. With this, if your business has a lot less sales AND higher energy prices – this also supports the model above with reducing commercial real estate footprint.
It is possible that even with demand destruction, that the fragmentation of globalized markets could have sides chosen, different pricing models, etc. I can’t see why in Q1 we might not see oild in the $50s-$60 range but as China demand snaps up and Russia/OPEC/China gets talking, we could see $100 oil at time point mid to late year.
I think that it is going through a very, very, very healthy reckoning. On the other side of this, instead of 20,000 coins and 400 exchanges in shady areas, there are 50 coins and 10 highly regulated exchanges. While this sector is not for me, I would expect a lot more downside as the markets go lower. While BTC has a massive fan club, at some point there can be a full capitulation/liquidation event. Think about how if we see really bad things all year, that BTC could go sub $10k, and many may have margin calls that further push the prices down. Think about what assets some of these exchanges have, and how it’s possible that bankruptcy also forces liquidation of all assets in order to pay out claims.
I have told people I’m a buyer of bitcoin at $3,000 for years. While it pissed everyone off, I just saw how stupid high the gains were. At $3,000, it’s healthy to have speculative bets on a small portion of your holdings. I might buy half a bitcoin at that price. If it does go to $1m in 10 years, GREAT! If it goes to $1,500 I sell half of my holdings and I’m out $750, not my life savings.
Be careful of the hucksters.
Summary: Continued geopolitical issues and de-globalization along with other countries tightening signal it weaker.
See, there’s two things here you need to consider. The “dxy” and “the dollar”. Many use these interchangeably, but they should not. I often tell people about the concept of having a $20 bill and an ounce of gold vaulted 100 years ago. Then, they were equal value. Take them out now, and gold appreciated 90x? Or, did the dollar depreciate against that asset by 95%? You can see over the last 100 years, that the dollar depreciated against all asset classes by 95-99%, and will do another 95-99% in another 10, 20, 0r 100 years.
I believe the talk of hyper inflation with the dollar is, mostly, hyperbole, but is rooted in the fact that we are the major world reserve currency and everyone wants to hold dollars. But we are seeing seismic shifts in this. More treasuries are being sold off by other nations. The dollar went from 65% to 60%, and we took a major power out of SWIFT and told them to pound sand. Sanctions might work against Nicaragua, but not Russia. Russia had already been out of the dollar and in gold, from what I recall. The US seized their foreign reserves – which may have been USD, I don’t recall. My point here is Russia was moving away from the dollar, we then told them they aren’t allowed in our club, then used the world’s reserve currency we control as a beat stick to force compliance.
That didn’t sit well with others.
To the best of my knowledge, BRICS is growing daily. While there is no BRICS basket of currencies, yet, it’s just a matter of time until there is a BRICS basket that trades against the dollar.
What I can tell you is that the dollar, against assets, is going to plunge. Rumors of gold backing and commodity backing seem to bolster a value for these currencies, but they also are over half of the world’s population and 60% of the resources. Most of what we cannot get permitted to mine or drill in this country is resourced in BRICS+ countries.
What I believe is the major hindrance to BRICS+ currently is the pricing mechanism is owned by…the people who don’t actually produce. Now, we came out and said “don’t buy Russian oil”. Then it was, “Russian oil needs to be capped at 60%”. In response, Russia said, “we won’t sell to those who price cap”.
Let’s let that play out a little. Think about all of the stuff that BRICS+ produce, and what if there was some sort of sustained efforts to deprive the western markets of goods while selling it to Shanghai? Or dubai? Or New Delhi? Or Moscow?
What you might see, is prices going up, relatively quickly, on the COMEX because supplies will be exhausted if they cannot bid higher for goods.
All of this de-globalization leads to less demand for the USD. Whether it is 1% less demand or 10% less demand, I cannot tell you. But this leads anyone to believe that it would then need more USD currency units to entice supply to the west away from the east. I believe the East bringing gold more back into the picture as a possible method of settlement is a form of backing to currencies – whether it is implied or not.
With Ghana buying gold with their cedi, it shows a blueprint how countries can stabilize their currency with gold, without nationalizing miners or resource companies. Nationalizing companies is about the worst thing you can do, but even forcing 20% in cedi can then have miners pay their workers in local currencies rather than getting dollars. This can further reduce dollar demand.
I believe this defines sort of the end of the petro dollar. With this, you can expect the value of the USD relative to things to go down, as demand is not needed as much.
We have seen China take dollars and buy gold. How many of the $17T that is out in the wild overseas comes back to us to buy gold and other resources from us? How long until we are flooded with dollars competing for limited resources?
It seems to me that 2023 is a time where USD is sold. However, that pesky DXY is compared mostly to the EUR and JPY and GBP. All of these countries have their own crisis and look to finally be tightening now. DXY can fall against these, but the EUR is shit, and that’s the wildcard in this.
Meaning – you can have the USD losing value to gold while the dollar appreciates against the EUR at the same time.
Summary – it seems the demand destruction is working with high rates at such a steep incline. However, there is a lag on this of perhaps 6-12 months so we have a lot of fun 6-12 months after the last rate hike. Should get to 4-5% this year, but weakening dollar and de-globalization have upward pressure on this.
I covered a lot of this above, but this is where it seems Schiff talks about a high inflation depression. I can see that, but over years, and not acute to 2023. He talks about that scenario above with the dollar losing value. And, while demand destruction is hitting us, it still might cost more to buy things from other countries due to our falling dollar. So you can have crushing demand – which would normally force prices down, competing with the falling dollar, which requires more dollar units to buy something internationally.
I covered most of inflation above. The dollar issue and energy is what keeps inflation at 4-5%, but the demand destruction and deflation in cars, housing, rents lead to inflation coming down from 8%.
The question then, is IF they can see 4% by end of year, do they stop at 5% FFR? My guess is they need to see a 5.x in inflation monthly before stopping, understanding that they may overshoot. That could be May before that really officially stops. Meanwhile, every month $100b in treasuries and MBS are being sold.
If they pivot too early, dollar accelerates lower and with this, inflation snaps up. If they wait to pivot too long, they know they can wipe out American production. I believe, as stated above, their intention is to force rotation from the stock markets to debt markets to stabilize rates that could explode.
Because inflation may rest around 4.5-5%, and many will sell stocks to get into dollars, then rotate into bonds, you can see rates coming down a little.
Summary – many prognosticators were smashed to bits when QE brought $6T into the economy. Well, with the Fed intent on smashing the stock market and bonds to go sideways in value, this asset class can really play catch up this year to maybe $2400 with silver maybe approaching $35-40.
I am reminded constantly of how Rick Rule and Michael Burry were years in front of their respective market moves. I got in this space in 2019 to hedge my real estate investments. I have made a killing on some trades, and taken a bath on others. Had I just bought and held the shiny, I’d be up 16% from the time I started in 2019. I am not a gold holder, but buy gold miners. My vaulted silver was all bought around $16-$17. So I’m still up 50% on that.
But in 2023, I’m seeing a catch up in the asset price of gold.
Remember how I talked about the vault and the $20 bill? How gold appreciated 90x? Well, any reader of this knows that gold was forced at $20, then $35, and then hit the free markets in the 1970s. The free market then allowed gold to “catch up” to inflation, quickly. It overshot, by a lot. This “inflation hedge” is seen in equities and real estate, but t ebbs and flows over the years with this financial energy flowing back and forth. As more money is introduced to the system, the markets tend to find where the value is.
On the log chart over the last 50 years, you can see this weaving above and below a trendline. How you draw this is up to you. This has a potential then to play catch up and take us to $4000-$8000 or so. But it’s not going to do that in 2023. Look at this chart, closely. When you had the move in the 1970s, this was over many years. Same with 2000-2011. In this case, you can visualize, that relatively to the money in the system, that gold is undervalued to other things.
With the above, IF we can guess the Fed WANTS to create conditions where the market deflates to push money into debt, you can also guess these conditions of defensive assets would go into gold, as well.
IF we are seeing inflation at 4.5% and perhaps the 10y at 3-3.5%, we are still in a sense dealing with negative real rates. Additionally, with the USD going down relative to “things”, and other exchanges being stood up, WITH the back drop of countries buying massive amounts of gold – with LESS buying treasuries, it would thus stand to reason that a portion of the $17T in cash outside of this country would make its way to gold.
But gold has no yield.
True, but go back to the vault. Gold, over 100 years, jumped 90x. That wasn’t yield. It was ebbs and flows of currency depreciation against that asset class. At times, the currency flows into gold when people want to preserve financial energy, sometimes out of it when people want to lever up for the good times and bet on companies making a fortune.
So the bet here is that, logically speaking, it’s going to require more currency units to buy the same amounts of things next year. Things that are overvalued will flow into things undervalued. With the VALUE of bonds perhaps holding serve in 2023 with competing market forces, gold has the chance to play catch up here to the long term trend.
With silver, you have to look at the ratio which is about 75:1 and figure by the end of the move we are looking at perhaps 30:1 if not more. But silver moves later, and faster. If the end of this gold move is 2030 and gold then is $4,000, you might be looking at $133 silver. By just buying physical silver with things like Kinesis, you can hold that purchasing power and get a possible 5x on it in 7 years. Who knows.
The story gets more crazy if gold backing of sorts happens. What if Shanghai unseats the COMEX as THE price maker? Not in 2023. We can throw out crazy numbers, but if you look at the steep run up in 78-80, 2008-2011, and 2018 to 2020, we can see that gold plays catch up, and quickly.
Could we have a 23-24 up, a consolidation for 25-26, then a strong move from 27-30? That’s probably more likely than a vertical move to $4,000 in 2023.
I’m of the mindset now that if you see $3,000 gold by a bank forecast for 2023, they are advertising for bag holders to then short the shit out of them and take their money. It is very reasonable to see $2200-$2400 gold this year, followed by $2300-$2700 gold in 2024 before a consolidation. That might be when equities start to come back to life at the end of a recession and people rotate out of gold and debt. The 1930s had several recessions as I recall, so it is possible that equities start back up, but sustained high commodities prices have inflationary effects which stunts sales.
For 2023, if we can be conservative with $2000 gold and 75:1 GSR it’s a $26 silver price. But the macros on silver are starting to catch up with the paper prices. It is logical here to see $35-$40 silver sometime this year as it is apparent to even novice silver investors that inventory isn’t great. The Silver Institute finally came out and recognized the global silver deficit for last year.
High end gold you are looking at maybe $2500. I hope to be very wrong on this one.
Summary – most of these point to higher gold and/or worse stock market. Bond market could overperform my forecast if gold not favored.
With any type of forecast, you have to think about variables at play. These variables then shift the whole weather forecast. Let’s look at a few
- Job numbers. There has been a brewing battle between the BLS and Philly Fed about jobs numbers. Philly Fed is insisting BLS over-inflated by 1m jobs. If true, bad policy was created. BLS contends Philly Fed using outdated models. Feels like “juking” the data to show rosy economy for elections, then after elections and new people in, make adjustments down. This is a seismic shift for everything below.
- Fed actually freezes rate hikes, immediately, as they realize jobs are worse than they thought. This is thought to be bullish for stocks, you get another bear rally, and then Q4 numbers come in and suck.
- Fed discusses reducing rates earlier than expected. My forecast is thinking a lot of pain with holding 5% as long as possible. Remember, they WANT to cause rotation from markets to debt to stabilize rates.
- Russia/Ukraine peace. I don’t see this, anytime soon. Russia was fighting to keep NATO out of Ukraine. US put in a friendly president after they sort of caused a coup in 2014. Some areas of Ukraine did not like this, and these regions are now under Russian control. I see a stalemate with current occupation lines drawn on a map. Russia could have leveled Ukraine. They did what they needed to do to stop NATO from coming in. IF there’s a peace, this might damage the BRICS narrative and boost the dollar. Overall, it stands to reason the only real way out of this is for foreign influence to get Putin out and someone friendly to Washington in. Militarily, it looks like Russia already has the territory they want and are dug in. Correct me if I’m wrong on this.
- Cliff drops in markets. I think Michael Oliver nailed this in 2021. He talked of an arm wrestling down, and we are indeed seeing that. IF markets drop off of a cliff, all bets are off and everything goes to cash. I don’t see that. These bear rallies and sell offs keep market participants happy with bidirectional plays to make money, but really in the end only really hurts 401k and pension holders.
- Further political instability in the US. Social media is nuts on the large scale. Q1 crazies are out there. Wokists are trying to get billions in reparations to be paid in CA. Everyone has gone crazy. Instability can cause a lot more worry – gold can actually very much overshoot with the right conditions.
- Silver might be far worse off than we know. I’m being conservative here with a $26-$35 or so silver price for 2023, but we saw COMEX deliveries of 3m oz fulfilled like the last day. VERY low registered. Deficits now being reported. Solar panels, EVs being relentless. Possible this goes nickel at any time. I’m very, very surprised they have kept the charade as long as possible.
- Banking failures. I think there’s a lot of weak European banks, and the US banks are much better – but I’m thinking here things like bank runs, commercial real estate failures, pension fund failures and bailouts, cratering of RE in certain markets – all of this leads to a form of contagion where a big FED backstop needs to be put in place. While bank bail ins are in legislation, I cannot see them reasonably used. My concern is my trading account – could the bank that holds my stuff go under? What happens to my mining stocks? I don’t think this is a DEEP concern of 2023, but it has to be on the radar and why I’m VERY much bullish my mining stocks, I have an eye out for banking issues. With this, I may use rental monies to stack more shiny in Kinesis as my hard hedge and keep my existing items in my trading account but not add much.
- Nationalizations. I think this is low risk, as the Ghana model to me seems far superior to mine nationalization. The industry I invest in has bad jurisdictional risk, and with this, you always have to be defensive about this stuff.
- Political upheaval – This Nord Stream 1 and 2 isn’t covered, anywhere, by MSM. I did see reports that it was “the good guys” who did this. IF this becomes a major story to those in Germany who are freezing, this seriously puts in danger a lot of long-standing alliances. This could change how BRICS looks, how NATO looks, and how the EU looks – all within 2023. This also has tailwinds for gold. IF NATO is fractured, does Russia then begin to press for peace by creating a separate border state nation between Ukraine and Russia? This allows for both to save face – Russia can claim victory by creating a DMZ state, with assurances a weakened EU and NATO will not step foot in Ukraine while holding gas rights to the land for development. Ukraine can claim victory by expelling Russian forces from eastern Ukraine. EU and NATO big losers in this.
- China and Taiwan. This is getting sketchier every year. I’m surprised no one lifted a finger to help Hong Kong. That may have pushed up the timeline on Taiwan. I think they want to see the US a LOT weaker before this. For example, waiting until after there is a fractured NATO, EU, terrible stock market, and $1.5T deficit on top of a $35T debt AFTER the chinese are out of treasuries and exchanged all of their dollars for gold. The Russian move with Ukraine tipped them off to the US playbook. I think a steady selling of $700b in treasuries and steady buying of gold with USD is on the menu for 2023. This puts upward pressure on treasury yields and the price of gold.
- OPEC and Saudis. I think the US policy on energy right now is sort of silly, at best. We can’t get a permit here. We can’t drill. But we can sternly tell the Saudis to increase production to lower our oil prices. Well, if China IS opening up, and the Saudis and others are having real issues increasing production, it stands to reason that supply available to the US is going to be limited, as the Chinese may pay higher prices for oil, perhaps settling in gold. All over the middle east gold exchanges have been stood up. Oil prices could really, really increase in a hurry. IF we do not replenish our SPR and continue to drain it down to dangerously low levels – AND we have supply issues from the Saudis, would this not affect our posture of defending certain areas of the planet? This might also be a factor in 11 above. Battle of the Bulge shit.
- Change in leadership – for a variety of reasons, we could have a change in leadership this year at the top. How does that fare overall? I believe Harris dropped out of the primaries with 1% of the dem vote. It’s fair to say no one in the GOP has confidence in her. Yet you could have someone leading our nation where only 1 in 200 people would support her? Stock market go boom. This could be a cliff drop event. With Biden, you may disagree with him, but you at least understand the brand and the scope there. With Harris, there’s a lot of wildcards.