Nov 11 2010 3:20PM

Part One Of Trader Tracks 2011 Predictions

Between November 1 and December 15 we like to post our next years’ predictions for those markets and social situations affecting our trading and investing ideas.

We previously forecast that both the stock and bond markets would sell-off for numerous fundamental reasons. Of course the timing and the amount of selling is front and center on everyone’s mind.

Before we continue with our predictions it is important to review this email from our top advisor. He has been consistently correct in his forecasts and has brought me a great deal of insight regarding things I would have never considered. Consider this a fundamental back-drop covering the next several years. After this note, I will elaborate further on my forecasts and suggest some prospective dates for our trading and investing.

Our Best Advisor Says It’s All Over.

I’m not a pessimist but our top and best advisor who seems to be always correct offers the following.  If he is correct, and I suspect he is, we have a long slow Japan-style slog in the economic mud with a major system breakdown, like Russia’s bust-up some years ago. I suspect somewhere along the trail in this movie, the USA Sheeple go to pitchforks and torches. I sure hope not but it almost seems inevitable. What a shame that a few Marxists can do so much permanent damage to my beloved America. All political parties are guilty.

“The midterm elections are anticlimactic and change nothing. In the short term, it makes no difference how many Congressional seats the GOP captures.  The Dumb-O-Crats have already won.  Since taking control of Congress in 2006, Hussein and his wrecking crew have jammed through more socialist legislation than all the past liberal agendas combined (had) ever hoped to accomplish.  It's a done deed.”

“If anyone thinks that changing the mix of Congress with more elected conservatives will fix things; (they are) dreaming. The new Congress will be just as clueless, incompetent, corrupt, and swayed by the lobbyists. The only priority will be to get re-elected, as usual. Any hopes and promises will be dashed by reality. The reality is any legislation that the new Congress passes to try to undo Hussein's Marxist programs will be simply vetoed.  The GOP will not have the votes to over-ride a Presidential veto. This is a Dead-End.”

“The Constitution gives the responsibility of appropriating funds to the House. They may be able to shut-off any additional funds for existing programs, such as Obamacare, etc., but the basic funding of those programs is already the law of land. Control of the Federal purse strings is of no help to undo the damage already done.”

“So, there will be two years of legislative gridlock.  In the mean time, Hussein will expand (entrench) his new socialist programs with a blizzard of Presidential executive orders and appointees by-passing Congress. These Dumb-O-Crat political appointees in charge of hundreds of Federal agencies, set policy that interprets, and bends the intent of new and existing programs to the socialist ideology...encasing them in concrete.  It will require literally decades of political dedication and action to undo the damage…and that is not likely to happen.”

“On top of all the political shenanigans, is the meddling of the FED with the money supply. The greatest theft of public money, ever, will continue on an even grander scale to transfer even more to the bankers, the Wall Street Boyz, and the politically connected.  That is the one, and only, sure outcome of these elections. The citizens  (Sheeple) aren't even a consideration, other than to ratify the rip-off with their votes.”  -Northern Advisor

As we write this forecast on Election Day, we feel certain Bernanke will smooth talk the public after the FOMC meeting tomorrow. These efforts are designed to ease the minds of Wall Street, central bankers, and foreign nations while preparing to jam another $500B in QE2 printing of new bonds, bills and currency. The outcome is a dollar dilution-devaluation with a large move toward inflationary destruction of international credit. They hope for and talk of the opposite. Expect $500B more in each quarter in the first three quarters of 2011; $2 Trillion total.

We think something breaks in the credit markets in 2011. It can come early in the year based upon bond failures outside of the USA or, be potentially created by some Black Swan effort we cannot yet see. One of the very large near term bubbles is in Hong Kong Real Estate. Many say Hong Kong is isolated within China, We say that when this one cracks, it rolls over all of China, takes down their stock market and spreads over the world. This could be in Q1 of 2011 or as late as the fall of 2011.

Europe is in big trouble, just like America. That situation is different in that the European Central Bank does not have all the powers of the Federal Reserve and U.S. Treasury. By charter, the ECB is not permitted to make loans to member countries. However, in light of all their failing nations and emergencies, the ECB is buying those nations’ crummy bonds to help them. This is an accident waiting to happen. Irish bonds are going scary and those of Greece are basically, in my view, worthless. Even Portugal, which is tiny and holding about $6B in gold has serious problems. In 2011, either Spain or Italy takes a bad economic hit and they all go down like dominoes.

Germany is the single European powerhouse. They have been trying to grudgingly help their broken neighbors but cannot save the world. No one has that kind of credit or cash. As pressures mount in Germany for the PIIGS to borrow more from them and German export sales taper-off on weakening overseas customer’s, new changes arrive. Mrs. Merkle is a tough cookie and is trying to protect German credit and their economy. Germany’s Mr. Alex Weber who holds the financial reins is on her side. Germany is going to and must cut the strings attaching them to the ECU, the Euro and avoid being trapped by being too generous with broken neighbors. Germany will start trading the old German Marks currency along with the Euro and soon after cut all ties and gradually go it alone. Adios for the Grand Euroland Experiment. Hello Deutchland!

China has been the growth powerhouse of the world. This was enabled for several reasons. Among those are millions of people working hard as cheap labor; grateful to have a job. Next, the USA companies moved factories and millions of dollars to China to take advantage of a much lower cost of goods. Further, the money Boyz in NYC saw an opportunity to raise billions to invest in China for the fees, commissions and the vigorish. Now China, which has been paid in US Dollars and bonds is seeing the end of American Credit. We estimate they hold nearly $1 Trillion in toxic U.S. paper and another $1 Trillion in other financial markets; all at risk of cratering.

Trees do not grow to the sky. As Hong Kong saw a +90% increase in real estate prices just this year as their US exports were going down the drain; reality comes to the fore. For those who say this goes on forever we say bunk. This economy is command and control more than most as the government can move faster not asking permission of any legislature or the public. They decide and they just move quickly.

Chinese are excellent traders and very smart. Those controlling the USA economy as in our congress, Federal Reserve and Treasury can howl and complain all day. China will do what is best for China. The irony is Geithner and Bernanke do the same but are forcing the wrong decisions on a path to destruction. The collective scream does nothing. All will lose.

Navigation through volatility for most kinds of investing and trading is going faster with wider trading ranges. This is going to scare many Sheeple into making wrong decisions. The more volatility we see the deeper the fear as good trading ideas go against the investors; TEMPORARILY. One of the top trading exchanges will fail.  We do not know which one but have some ideas. This happens over 1-3 years.

Any exit strategy from the Middle Eastern wars will be sloppy and uncomfortable. In 2011 it shall become obvious most of our troops will have to pack-up and leave. This guerilla war should be left to highly paid mercenaries who manage methinks better under the cover of darkness with no identities. The USA simply cannot afford to spend so much money on the Defense Department and will discover better ways to manage the problems.

The troops begin to come home gradually over several months. This was the Nixon VietNam strategy-declare victory and leave.

As Americans on food stamps approach 50,000,000 next year, the American government and most particularly the bankrupt states cannot afford to keep paying unemployment checks and related benefits. We noticed last week that one state is posting armed guards at unemployment offices as those folks prepare to cut-off the checks. They are expecting violence and I think they are correct. U.S. jobless is 24% going to 35%.

Immigration problems are spreading and violence is increasing. Watch Arizona and southern California for stand-offs between USA citizens and both legal and illegal immigrants. The American southwest has millions of guns and the Sheeple are getting super angry faster. We think the federal government should immediately order two full divisions of troops to guard the border and cool the hot tempers. They won’t do it as it would admit policy defeat and interfere with new immigrants’ votes for the administration. This dust-up is now in the 9th Circuit Court in San Francisco. The outcome will be against the State of Arizona. Arizona State and local police are unfairly caught in the middle. This turns ugly as citizens take charge and do what they think they must.

Mexico is going dangerous at a furious pace. When a nation calls out the troops in large numbers to do daily battle, it can only end badly. Marxism is spreading quickly throughout South America. Brazil has just elected a former Marxist and guerilla fighter. Hugo Chavez continues to nationalize and steal from his people. Iran is helping Chavez and between them both they are providing arms and criminal support to Mexico bad boyz and perhaps Nicaragua.  

I can foresee, that if this is permitted to continue and spread while the current US administration does nothing, the entire USA Southwest goes under siege. It could turn very violent.

One of the larger wet blankets on America and other economies will be massive, hard-core inflation. Most still think we are in a deflation with no inflation. Food and energy are always the first to inflate and they are running at +9% and moving-up faster. Soon many other parts of the U.S. economy inflate on a sinking U.S. Dollar. We already have a tightening noose on capital controls. Expect this to get worse. Next we’ll see price controls, which are most familiar in war time.

Since we are fighting two undeclared wars in Iraq and Afghanistan, those are merely designated “police actions” like the 1950’s skirmish in Korea. The declared war is the “War on Terror.” This one is easy to designate and discuss as the enemies are largely unidentified-fighting shadows. We have rogue nations, and enemy nations but this war is illusory at best. This keeps the defense industry busy and rich.

In light of the November QE2 announcement by the FOMC, we now forecast a new technical US Dollar intermediate low to be 64.00 on the index. The normal number is 80.00, which has been the standard for years. The dollar formerly and briefly blipped under 70.00 but recovered quickly. Not now.

We will first see growing inflation that turns in a vicious hyperinflation within 24 months or less. We think the first real scare of this arrives in the fall of 2011. In 2012, it shall hit the world with a vengeance as the U.S. Dollar is both the standard of the world and represents 85% of the world’s currency reserves. This is a game changer. Eventually, the dollar sinks to 46.00-40.00 on the index; effectively cutting its value in half from earlier in 2010. (Read “When Money Dies” by Adam Fergusson) This book is the best we’ve seen on Hyperinflation in Germany, Austria, and Hungary after WW I.

Expect the despot rulers of Nigeria to be taken down in a citizen’s revolt in 2011. The citizens are tired of theft and corruption. Look for the new lady leader of Brazil to go far left following in the footsteps of Hugo Chavez and Fidel Castro. She is a former communist guerilla fighter. The largest new oil field in the world is at stake in the ocean near that nation. Iran will be making a move with other communists to seize it.

Stock and bond markets are terribly over-valued. The shares will fall under their own non-supportive weight. Insiders have been selling out for months as fast as they can and see the forthcoming crash. With new QE2 announcements we see the FOMC on the path to certain systemic destruction.

We have been saying for years… this is all they have left-printing bonds, bills, notes and dollars with no asset backing whatsoever. Foreign holders of this paper are exiting these trades as fast as humanly possibly. China has a five year plan to be out but will not make it in time. They are converting this US originated paper to hard assets world-wide.

Copper has been pushing the limits of the recent $4.00 futures high. With China pressuring to buy more and needing so much more for development projects, electronics, power equipment and others, watch for the March, 2011, copper futures high to be broken moving the price to above $6.00 next year. Copper is inflation sensitive.

Pensioners and those older Americans on fixed incomes will be largely, economically destroyed in the forthcoming inflation. New GOP House members will be in open warfare with Obama and his democratically controlled senate. Obama is a one term president going out in disgrace as one of the worst ever to hold the job.  His is an event worse than Jimmy Carter and Woodrow Wilson. May we live in interesting times so be prepared.

The next fall rally in gold and silver should commence after Thanksgiving. From the signals we see, this rally could be absolutely outstanding. Try your best to own physical gold and silver and trade the shares of the related companies. The next larger-faster phase of commodities trading can continue for another 7 years based upon previous historical cycles.

Now, more than ever, it is important to take the immediate necessary precautions to protect yourself and your families and friends. Traders and investors should be buying precious metals and select shares right now. In our Trader Tracks Newsletter we have a great list of trading and investing ideas for you. Meanwhile, you can never go wrong buying physical precious metals and holding them for security. We’ve had a constant run of nearly ten years with gold rising 15% per year so this remains a good trade. In the last twelve months, gold has rallied over 34% and is going ever faster.

It’s not going to stop any time soon. In fact, we predict those annual percentages will rise even more and this offers a chance, arriving only once in 25 years on the historical cycles.

Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at


Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades.  See for more information. Listen to our Traderrog Daily Market Close on the Korelin Economics Report website

Contact Claudio Bassi, at Trader Tracks New York City publishing offices for an introductory 30-day trial subscription for only US$49.00.  This is half the monthly rate our subscribers pay.  Call us at 718-457-1426
Monday through Friday, 9:00 am to 4:30 pm (EST) for details.  You can also e-mail our office manager, Claudio Bassi at for more information.


Kitco Contributed Commentaries 2006
Latest Commentaries by
James Turk
Brien Lundin
Eric & David Coffin
Lawrence Roulston
Howard Ruff Howard Ruff
The Aden Sisters
Frank Holmes
Roger Wiegand