Why a amateur rocket launch in a blog post about this year's economy? It's a good visual representation of the way inflation took off, and raised prices on almost everything in the past several months. Many people are looking at gas, home, and other prices, thinking, "Whoa, what just happened?
In my opinion, we are now 31 months into what I call The Phoenix Great Depression, a 5 to 7 year + economic mess that will ultimately feel like a great depression to most Americans, and may meet the traditional definition of one. It started with the Repo Market Crisis in late September of 2019, and got everyone's attention when Covid-19 hit U.S. shores in February and March of 2020, leading to mass business shutdowns.
We are now heading into the second recessionary wave of this long crisis. What does that mean? This year, that means three main things.
1) Prices will keep going up, in general. Gas prices will go down some after a while, and real estate prices should be falling most places nationwide, by late 2022. The official inflation rate, currently 7.9% is a joke, real inflation for most things people buy is probably closer to 12% to 20%. Gasoline prices are up around 50% here in the L.A. area, over $6 in many places, and that's a lot more than 7.9% per year. I think the official interest rate may go a bit higher, but then will come down this year. But inflation will remain high, 5%-7% most likely.
2) Interest rates will keep going up for most, or all, of 2022. I wrote an economic outlook report for my business owning friends, and sent it out on September 10th, 2021. In it, I predicted interest rates would rise 1% to 2% by late 2022. The 10 year T-bill rate, a good benchmark for interest rates, was 1.35% then. The 10 year T-bill rate just hit 2.38% yesterday, meeting the 1% minimum rise I predicted six months ago. It's reasonable to expect interest rates to rise another 1% to 1.5% by the end of 2022. This will dramatically slow down the real estate market in 2022, and should lead to falling prices in most areas by late this year.
3) The stock market indices will continue a bumpy downward trajectory for the next few months. Think of a ski slope with moguls, they will bounce up at times, but the overall trend will continue down. Look at a DIJA chart for 2008, that's the kind of trajectory I see as most likely for stocks this year4-7 months of bouncy downtrend, and maybe a big drop afterwards. Up and down, but a slow downward trend from now (late March) to maybe July-October 2022. The four main stock indices should drop below these levels this year, 2022: Down Jones Industrial Average- below 27,000, Nasdaq- below 10,000, S&P 500- below 3,500. Once stocks bottom out, below these numbers, they should bounce back 10% - 20%.
Where do I get these numbers? In stocks and commodities, there's an old rule that every long term bull market makes a retracement of about 50% of the rise, after reaching the peak. So if a bull market rises about 1,000 points, it will drop back about 500 points, get unstable for a while, and then begin a new trend. I read about this rule in a commodities course by Ken Roberts in 1998. The markets are so manipulated and warped at this point, I think the retracement will be more like 35% to 45% of the total rise from the 2009 low, to the peaks early this year.
These are my personal opinions, and, as always please do your own research, due diligence, and consult appropriate professionals before making business and investment decisions.
Oh, by the way... When I was writing this post last night at a McDonald's, the type pad for my laptop was turned off remotely, by someone. This has happened 2 or 3 times now, rendering my laptop useless. As of right now, I can't get into the software to re-enable the type pad. That's how intense the censorship of alternative thoughts about the economy is these days.
In addition, I just noticed the page view counters on my blog have been turned off, AGAIN. So, there's this thing in the U.S. called a Constitution, and the First Amendment is all about Free Speech. This is how intense the attacks on free speech our in the U.S. A. in 2022.
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ReplyDeleteBlogger's note: When I wrote this post, the Dow Jones Industrial Average was at about 34,807, and the Nasdaq was at about 14,108.
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