Predictions: As we head blindly into 2020

What do I see coming in the financial world in 2020?  I see a bunch of dominoes all lined up, the big dominoes are the biggest levels of debt in human history.  Government debt, corporate debt, student debt, mortgage debt, credit card debt, auto loan debt.  The seizing up in the Repo market back in September was the beginning of the dominoes falling, and now many forces are trying to hold back the inevitable.  I don't bet on sailing ships, I bet on the tide, it's always there, and when it turns, everything else begins to change.  You can swim against the tide for a while, but it always wins in the long run.  Shit's gonna get crazy(ier) this year.  Some people say I'm a doomsayer, but really I'm just sharing the news that a storm is coming, a big one, like I did in this blog post on January 2, 2018, when I said this:

"Something, maybe Trump's looming impeachment and leaving office, (and Pence might get the boot, too), will trigger a collapse like 2008." 

-Me (Steve Emig), January 2, 2018

I have a history of being a bit early on predictions.  But I wrote that one a few days after President Trump signed the huge tax cut bill into law.  If you listen to the news clip embedded, former CNBC show host, and current presidential advisor, Larry Kudlow, says, "I believe we're on the front end of an investment boom."  He also went on to say that the GOP (Republicans) had nothing to worry about in the 2018 mid-term elections.  We know how that turned out. In this same blog post, I predicted that  the stock market would go a bit higher, then we'd head into a recession.  Everybody in the financial world, at that time, seemed to think Dow 30,000 was just around the corner, and all assets would surge higher for 3 or 4 more years.  My opinion was ridiculous to anyone involved in the financial world.

In reality, Larry and I were both wrong.  The stock market, as you can see in this Dow Jones Industrial Average chart (click to "5 year" chart), the Dow peaked less than a month after this clip, January 26th, 2018, at 26, 616.71.  By Christmas 2018, all the main stock averages were down 10% to 20%.  They climbed back, spurred by The Fed's lowering of interest rates.  The Dow did not get back above 26, 616, and stay above it, for another 19 months, until last September, when the Liquidity Now Known as QE4, began.  Larry Kudlow was getting high on his own supply, so to speak, in in January 2018.  On my side, we didn't go into a recession in 2018.  The Dow, S&P 500, and Russell 2000 went a bit higher for about three weeks, then started heading down, as I predicted.  The Nasdaq surged until September, then headed down hard.  I completely underestimated The Fed's drive to prop up the economy through November 2020, to get Trump into another 4 year term.

That said, here are my much more specific predictions for the financial world in 2020:

I predict Donald Trump will be forced out of office before the 2020 election in November.  This may not be from the impeachment "trial," it may come from some other reason later on.  I also predict that Vice President Mike Pence will not be able to step into the role of president, for some reason.

In the financial markets, I see us hitting or passing these numbers before December 31st, 2020:

Dow Jones Industrial Average:  It will go below 19,000
Nasdaq: It will go below 5,600
S&P 500: It will go below 2,250
Russell 2000: It will go below 1,125

Gold:  It will surpass $2,750 per troy ounce
Silver:  It will surpass $60 per troy ounce

Bitcoin:  I have no fucking idea, that's shit's crazy.  But it will likely be higher than it is now.  Young people will throw money in Bitcoin and other cryptos as things head downhill, most likely.

I predict Deutsche Bank will go into some form of bankruptcy this year.

I predict GE (General Electric) will also go into some form of bankruptcy this year.

I predict that Warren Buffet, despite losing several billion in net worth, will be one happy camper.  He and Charlie Munger finally be able to start putting Berkshire Hathaway's $120 cash pile to work into really good investments.

OK there are my predictions for 2020.  As of this writing on January 26, 2020, all but the two bankruptcies seem very unlikely, to just plain ridiculous, to pretty much every intelligent person.  Those two seem pretty unlikely, at this point, but possible to a few people.  In 11 months and a few days, you can call me out for being wrong, trolls.  If I am wrong.  Time will tell.

Remember... a recession is when the whole world goes on sale, and almost no one wants to buy.

I think we are entering one of the greatest times for financial opportunity in human history.  The trick is to weather this storm, and not end human history in some stupid way.  I'm calling this coming decade "The Phoenix Great Depession."  A big crash, with some really cool things rising from the ashes... eventually.

Blogger's note- About 12:00 noon, PDT, Monday, March 9, 2020- I have not edited a word of this post since originally writing it on January 26th, 2020.  But today, after a couple of tumultuous weeks, the Dow is down 1,813 points at the moment, after being down over 2,000 earlier today.  This 6-7% one day drop is due to a collapse in oil prices, brought on by a price war between Russia and Saudi Arabia.  To be honest, the stock market started dropping sooner than I expected this spring, but this is largely what I saw coming this year, at some point. 

But looking back at this post, I didn't write the levels the stock markets, and gold and silver, were at, at the time I wrote this post.  So I'm adding that information now, using internet price charts.  When I wrote this post on Sunday, January 26th, the Dow was at 28,989 the previous Friday, and expected to soon reach 30,000 by nearly everyone.  My predictions seemed ludicrous to most, and went completely against prevailing wisdom.  So here are the approximate stock index levels when I wrote this post on January 26th, 2020:

Dow Jones Industrial Average- 28, 989.
Nasdaq 100-  9,314.91
S & P 500- 3,296.47
Russell 2000- 1,662.23

Gold- $1,571.10 per troy ounce
Silver- $18.06 per troy ounce

The gold and silver prices I predicted seem crazy to me, but we have over 9 1/2 months left in 2020, and things are already crazy this year.  I'm sticking by all of my predictions above. We'll see how close I am on each of these at the end of the year.  Then you can wonder how a broke, homeless man in L.A. made these predictions when nearly everyone else saw a much different future in the markets, back in January.

Blogger's note- 3/18/2023- Just for the record, I have not changed anything in the original text of this post, or the first Blogger's note, above.  I have a new blog now called Adaptive Reuse SoCal, about finding new uses for old, abandoned, and unused buildings, as well as the economy, and commerical real estate in general.  Check it out!

Adaptive Reuse SoCal

Recessions are rehab for Wall Street

Amy Winehouse on Letterman singing "Rehab."  Just like Amy, at some point in the next year or so, the economy will be dead.

So... back in April, I called the beginning of the Next Great Recession.  I was wrong.  Truth is, we should have had a recession start back in about 2017.  It had been 9 years since the Great Recession of 2008 (which actually started in 2007).  The amount of student debt in the U.S. ($1.4-$1.5 trillion) is higher than the amount of subprime loans that triggered the 2008 collapse ($1.3 trillion).  The Dow Jones Industrial Average stock index peaked in late January, though it's trying to get back up there again lately.  The Federal Reserve said they were going to start raising interest rates back towards a more normal rate, which would slow down the sluggish economy.  Trump started prattling on about a trade war with China, then actually started signing off on tariffs. 

All of those things were signs that we're on the brink of a stock market slide and then the collapse into another "Great" recession, likely to be worse than 2008.  It was just a matter of what the trigger would be to set things off down the slope.

The stock market, as a whole, has been heading up since March 2009.  When Trump "won" the presidency, it immediately dropped 800 points the next morning, as the world freaked out.  But then it started heading up, and it went up at a steeper rate than it did during the Obama years.  Why?  Because the Republican establishment and the corporate world were sure that they could get the massive "tax cuts" package passed with Trump in the White House.  It took a year, while nearly all of Trump's other promises collapsed, but the tax cut bill got passed in January.  That tax cut package was basically welfare for major corporations and the super wealthy.  It didn't do much of anything for average Americans.  That's what "tax cut" plans are for.  And that bill passing, with nothing else big to look forward to, is another reason the Next Great Recession should have started. 

One possible trigger after another came and went, the Dow Jones index dropped, but there was no big collapse.  In fact, the Nasdaq, the tech centered stock index, kept going up.  It finally seems to have peaked about a month ago, when people ganged up on Facebook and their stock dropped about 20%.  But still, no recession.

It was obvious that there was an incredible upward pressure keeping the stock market, and our whole economy, afloat.  But I couldn't figure out exactly what it was.  Then I ran into a talk by former quant (Wall Street numbers super brainiac) Nomi Prins.  I think it was this speech.  She's a former Wall Street insider at Bear Stearns, Lehman Brothers, and Goldman Sachs.  Her new book, Collusion, (no relation to Trump/White House) explains why the inevitable recession hasn't started.  The Fed has basically been creating money out of nothing (they can actually do that, that's pretty much their whole schtick), and they've been pumping it back into the economy.  But instead of going into building new businesses, roads and bridges, or things that help average folk, it's been mostly just going into the hands of the wealthy and  into the stock market. 

Think of it this way.  A hardcore gambling addict goes to Las Vegas, and every time he runs out of money, somebody gives him a credit card with $100,000 cash advance on it... that he doesn't have to pay back.  He should be dragged out of the casinos and sent to rehab for his addiction, but new money keeps coming, and life seems good to him. 

Or a crack addict finds herself waking up one morning on the side of the 5 freeway, naked, and surrounded by mule hoof prints and chocolate sprinkles.*  It must have been quite an evening.  When shit gets that crazy, it's definitely time to head to rehab and get straightened out.  But a pimped out Escalade rolls up, gives her clothes to put on, a ride back to her house, and a bunch more crack.  No need for rehab when the crack just keeps flowing. 

That's a simple, but pretty realistic, way of looking at our economy right now.  Wall Street is on a neverending binder because they just keep getting more drugs (cheap money from The Fed.)  So the very necessary trip to rehab (the next recession), hasn't started yet. 

So that's where we are.  But the the game can't go on forever.  And the longer we are artificially kept from the recession that should have already happened, the worse the next recession will actually be.

At this point, I'm basically sure that this next recession, which could happen any time, but may be delayed for a year or so, will be worse than 2008.  It's gonna hurt, and it's gonna leave some marks.  If it doesn't end up happening until 2020, it probably won't be a recession at all, but will likely be a full blown Great Depression like in the 1930's.  Depressions aren't necessarily deeper economic pits than recessions, but they last longer. 

The reality is, we're in for a very serious, and very long economic downturn.  It could happen at any point, like tomorrow, or in a year.  All kinds of means, mostly The Fed pulling money out of its ass, is keeping it from happening at the moment.  But it will come, probably late this year or spring of next year, possibly later. 

At this point, taking into account Nomi Prins' research, and the Mueller investigation, I think President Donald Trump being taken into federal custody for a whole series of treasonous crimes will most likely be the trigger.  And yes, I think he actually will be the first president actually indicted, and even taken into custody, because the charges against him will be so serious.  The crazy part will be that the Republican/Religious Right Establishment will want Mike Pence, and their people, to take over.  But it seems very likely at this point that there will be legitimate proof that Trump's actions and the Russian interference in the 2016 election, was enough to sway the election away from Hillary Clinton. 

If that is how things turn out, then both Trump AND Pence were illegitimately in office, and Pence would not be the next in line as president.  Technically, Hillary would.  Maybe.  We'd be in brand new territory at that point.  Just for the record, I'm no Hillary fan at all.  She'd be better than Pence, but I don't want either of them in charge, personally. 

Personal thoughts aside, if things do turn out this way, or in some similar way, when Mueller's investigation is complete, it would create so much turmoil, that there's no way the stock market, and the economy as a whole, could be buoyed up much longer. 

In any case, the recession that doesn't want to be will eventually come.  The political turbulence from the Mueller investigation, and any similar investigations that start after November, will make things even crazier.  Like Amy Winehouse, Wall Street is doing everything they can to avoid going to rehab.  We know how that worked out for Amy.

Nutty time ahead people.  Not sure exactly when, but they're coming.  Plan accordingly. 

By the way, my interest in these things, and my thoughts and writings along these lines, are why some people within the political arm of the Religious Right and evangelical world have gone to great lengths to keep me from expressing my ideas, and from making a living for the last 17 years or so.  You didn't think I was homeless so much because I like sleeping under the stars, did you?