The Phoenix Great Depression, and my financial predictions for 2020 and 2021

Hey, maybe I'm just a pessimist, don't pay any attention to me.  

On the morning of January 26th, 2020, when Covid-19 was just "some disease in China" and conventional wisdom was that the Dow Jones Industrial Average would surge up to 35,000 soon, I made these predictions (linked below).  Every single prediction seemed completely nuts at the time I wrote them.  My numbers for the Dow, S&P 500, and Russell 2,000 all came true within a couple of months.  

My biggest mistake in my thinking in 2020 was that I dramatically underestimated The Fed's willingness to create so much new money, to prop up the economy, that it will (and has) dramatically devalue the U.S. dollar.  What we call inflation is the process of prices catching up with the devalued dollar (or other currency), due to dramatically increased money supply (up nearly 25% in 2020 alone).  This process takes a couple of years to work through.  Inflation will continue to rise for another year or two, it's just beginning.  Full blown hyperinflation is a distinct possibility. 

Predictions 2020

On January 4th, 2021, two days before the treasonous attack on the U.S. capitol by Donald Trump supporters, while trying out a new blog, I made financial predictions for this year (2021).  Bitcoin was 31,431 then.  In a side note, I said Bitcoin at $50,000 wouldn't surprise me in 2021.  That's the only prediction that has actually happened so far, eventually followed by a huge drop.  It's now below 30,000 at the moment.  The prediction for silver is a typo, I expect silver to rise above $43 a troy ounce in 2021, not rise by $43 in price. 

 Again, The Fed has created far more money than I expected, and the inflation we are now seeing is the beginning of the effect from that.  This has delayed the drops I see happening in stocks and real estate this year, but not prevented them.  We'll see how close, if at all, these predictions come to reality by the end of 2021.  When I wrote this blog post below, about 400,000 Americans had died of Covid-19 complications, the number is now over 624,000, and cases are surging again. I predicted 750,000 Covid deaths in the U.S. by the end of 2021.  Unfortunately, we're headed that direction far to fast.

Predictions 2021

 In October 6th, 2019, before the Covid-19 pandemic was even on the horizon, I wrote this blog post about why I thought the next recession would be a time a massive and incredible change.  The "Repo Market crisis" had just begun, and was expected to be handled  by The Fed in a week or two.  Conventional wisdom was that we MIGHT have a minor recession in 2021.  Maybe.  Obviously, I disagreed.  Here's that October 6, 2019 blog post, The Phoenix Recession.  I saw a full blown depression coming, but no one wanted to hear the "D" word in 2019, so I called it a recession.  Obviously, we went into a serious recession, technically a depression (10% or greater drop in GDP in Q2 2020), in 2020. 

I believe we are now 22 months into what I call The Phoenix Great Depression.  This will be a 5 to 8 year economic crisis that will come in waves, and appear to rebound at times.  But for the majority of Americans, by the time we hit 2027, it will feel like we have been through a full blown Great Depression.  Those in the official capacity to decide that we are in a depression will do anything to avoid that determination these days.  If the Great Depression of the 1930's happened right now, it would be called a "triple dip recession" with  "great rebounds" in between the dips.  We are that far detached from reality now.  The second big wave of The Phoenix Great Depression is getting ready to hit us as I write this, in July 20, 2021.  

Here's my most in depth post about The Phoenix Great Depression, and why I think the 2020's will be a period of change like any other in hundreds of years.  

 Check out my new blogs:

 The Big Freakin' Transition- about the future and economics

Crazy California 43- Weird and cool locations in California

Full Circle- about writing and the writer's life

And my fiction blog...

Stench: Homeless Super hero- I'm writing fiction now about the world's first homeless super hero, Stench.

Crazy California 43- Weird, cool, and historic locations in California.

 

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