Monday, January 4, 2016

Predictions for 2016

This article is long and will require you to put your thinking cap on. It’s real important information though. Especially if you’re using economics to make yourself rich. Or using it to prevent your future demise. Read it when you have a few minutes for some pretty intense mind twisting data that I’m going to lay out for you in the most simple way I can. 

We’re finally here. This is the year I have been waiting for. Or very close to it. It’s time to start making some good money again. Those who prepare themselves for big economic events walk away wealthy. Those who get surprised by them will walk away broke.

The perfect storm is brewing guys and gals and I’m ready for it. I’ve paid for several forecasts over the last couple of years from various economists that all claim to be the best. The one consistent thing that they say is we are on our way to a complete meltdown. Wether it happens at this upcoming recession or the next I’m not sure. Many of them believe it’s right around the corner.

So lets say that it holds of until the next recession. This one or the next one, there are several things that will likely happen during this recession that you can make a lot of money from. Which include another likely housing crisis. I made my first million as a result of our last 2008 housing crisis. And I plan to make several more on the next one. I was just dipping my toes in the water on the last go around. I now know exactly what to do during a housing crisis and I plan to repeat it to a much larger scale.

You may ask why do I say that the perfect storm is coming. Well, let me tell you what I’ve learned from the experts. We are currently converging on several different economic issues that are going to have a dramatic impact on the stock market. The upcoming stock market crash will in turn have an impact on the housing market as there will be many people who will lose all of their wealth in this next crash.

Cyclical patterns happen historically that can be used to predict the future. Roughly every 7 years a recession happens. In 2016 we will be in year 8 since our last recession so we are due for another any time now. An additional factor is 2016 will be a presidential election year. Presidential election years are always hard on the stock market.

To make matters worse, the year 2016 is the year where the first of the baby boomers turn 70. There will be 700,000 baby boomers turning 70 in 2016 and they will be required by law to start spending down their retirement and sell off a portion of their stock. This will continue to compound every year where an additional 700,000 baby boomers turn 70 and have to start selling some of their stock every year. This is expected to have a dramatic negative impact on the stock market.

The millennials were previously expected to hold up the housing market but as it turns out they aren’t buying houses like previous generations. As of now they prefer to rent. Millennials grew up during our housing crisis. Previous generations felt like owning your own house was one of the largest and best investments you would typically make in your lifetime. Millennials don’t think of owning your own house as being such a great investment since they saw their family or friends families lose property from the 2008 crash. It is expected that they will begin purchasing property about 10 years behind the norm.

This very minute you can see signs of a crisis coming. The stock market is having regular massive fluctuations up and down. 

The United States National Debt is now at almost 19 Trillion dollars. That equals over 157,000 worth of debt per taxpayer. It has very quickly reached a point where it is impossible to pay back. The rest of the world still has confidence in the United States. Once they lose confidence in our ability to repay our debt, the dollar will crash. And it will happen very quickly. 

Or currant president has created more debt than all of the previous presidents combined. Mark my words the United States will never pay back the National Debt. We are quickly coming to a point where we won’t even be able to pay the interest on the debt. We will start WWIII the day we tell China that they have been artificially propping up their currency and we don’t owe them that money. We will tell them that we wouldn’t even have that debt if it wasn’t for their currency manipulation. Which technically is true considering the fact that their currency manipulation helped strip the manufacturing jobs out of this country. And it has helped the remaining manufacturing companies who managed to hang on have extreme difficulties worldwide competing with China in the export of their products. Their social tariffs which put fees on our exports entering their country also made it difficult for us to compete since we weren’t playing on a level playing field.

The largest budget items that the US has are Medicare/Medicaid, Social Security, Income Security, Federal Pensions, Defense, and Net Interest on Debt. Expect to see major cuts in these areas at the first attempts of balancing the budget. These cuts are going to have to come from everywhere if they make an honest attempt to eliminate the national “debt". Just balancing the budget (balancing the “deficit”) will take some very serious cuts. These cuts if done correctly will lead to rioting in the streets as what happened in Greece when people got their entitlements taken away. We’re going to need cuts to that degree if we seriously are going to pull out of this mess that the politicians created.

Out of those major budget items, one of the first to be whittled away will be Medicare / Medicaid and Social Security. This Obamacare stuff ended up doing the exact opposite as to what was needed when it adds trillions to the national debt in this area. The government is expected to continue to grow the massive federal pension plans. They won’t personally want to get off the gravy train. If anyone is going to be hurt it’s not going to be them. Pension plans that’s crazy anyway. They need to be stopped. And switch to a 401K or something. What business in the country still has pension plans? Not many.

The government is also not expected to do much with national defense as far as more cuts go.  Defense represents roughly 6% of our national debt. Back in the days of Abe Lincoln it represented roughly 5%. And as you know, there really isn’t anything that they can do about the interest on the debt.

So when they start tinkering around with Medicare and Medicaid, do you think they are going to take away elderly health care or will they take it away from the handicapped? Hard choice? They could make one big very well needed cut in this area by simply making every person on disability, reprove their disability every year or two. It is possible for a person to get better. All landlords know the massive scale of disability fraud out there. Reproving disabilities would weed out many of the scammers while those who really need it will be able to keep it.

Social security is a real tough one to take away. Especially since that is your money that you invested. In doing so they will have to admit that the United States government ran the biggest Ponzi scheme in World history. They will have to admit that they spent all of the money and the elderly now will have to stick it out on the street because they won’t be sending their money they use for rent anymore. I don’t see that happening. But it is very possible that they admit what they did and give a cutoff point where they tell everyone if you are under this or that age you will get nothing. They will also develop another plan for those who got robbed from the government and they will make it seem to them that they have some great opportunities to get every penny back with this new method. Do you think any of the congressmen will go to prison for their Ponzi Scheme which essentially robbed every working man and woman in this country? Will any of them get prosecuted for the crime of Treason they committed which is punishable by death?

We are in a Government Bubble right now. A government bubble AND a Credit Bubble. All bubbles eventually pop. The question is NOT “will it happen” but rather, “when will it happen”.  And when it does happen will you need to be able to protect yourself with weapons and ammunition? Will you need to feed yourself with food you stored to get through a bad time and a run on the grocery store shelves? Will you need to power your house with a generator because the electrical grid gets shut down or no one can afford to pay for it due to a limited supply of cash? Does that generator need to be a solar generator due to a run on oil and or gasoline? Do you actually think that that can’t happen in the United States even though it happens all over the World? Did you know there is almost always several countries at any given point in time that are in a major crisis such as this?

Have a look at this link to visually comprehend the magnitude of this issue.

Currently the dollar is doing very well against other currencies. It is being propped up since it’s the worlds reserve currency. For those of you who don’t know what that means, let me give you an example. If Poland was going to do business with Australia they would exchange US Dollars, not their own currencies. There have been major efforts at ending it’s world reserve currency status by both China and Russia. They have made deals with each other and other countries that they will trade in a note currency. Not ours.

The rest of the world is in a recession right now. China and Russia are having financial issues as well as Europe. As other countries currency loses value, the US remains the one 1st world safe haven for the wealthy in those countries to put their money and hedge it against the losses that are happening where they live.

The next country predicted to fall after Europe will be Japan. It’s ratio of gross government debt to their entire Gross Domestic Product (GDP) is 240%. After Japan it will be our turn in the United States. When we crash we will cause a global depression.  Our ratio of government debt to GDP is roughly 104%.

This isn’t just an issue of government debt. Our entire economy revolves around people using credit to purchase products both for their personal lives and business lives. As I said before, the things that are propping up the United States are the dollar being the worlds reserve currency and the fact that other countries are currently doing much worse than we are that have to have somewhere safe to shelter their money.

Lets go over some of the projections from the leading cyclical economists.

The Kondratieff Wave is one of the most prominent of all economic theories. So much so that the Russian economist, Nikolai Kondratiev who saw this pattern was eventually executed because of it. Those Russians don’t like someone accurately predicting the future I guess. Especially when it’s bad.

The Kondratieff Wave essentially says that there is roughly a 60 year cycle of economics that happens over and over with ALL countries. It is thought of as having 4 distinct “seasons". Each season lasts several years. The United States is right now in the start of the “winter season” which lasts 20 years. Here is what happens with a countries economy during these seasons.

Winter: excess capacity worked off by massive debt repudiation, commodity deflation & economic depression. A “trough” war breaks psychology of doom. (we’re here right now. And will likely be moving into a depression phase at our next crash. We have been experiencing deflation recently. And our trough war I suspect will be WWIII or a major event with the global terrorists. The last time we were here was the 10 or so year phase of the Great Depression which ended in 1939 and the 10 years following it through WWII the trough war of those days.)
Spring phase: a new factor of production, good economic times after getting through the hard winter phase, rising inflation. (this is what we get to look forward to they suspect after 2020. We were here last in the booming economy of the 1950’s. The US was just officially becoming the Worlds strongest military power. A magnificent post war economy and the beginning of the Baby Boom. The GDP more than DOUBLED in the 50’s.)
Summer: hubristic “peak” war followed by societal doubts and double digit inflation. (Remember the Jimmy Carter days? And Vietnam in the 1970’s)
Autumn: the financial fix of (Carter) inflation leads to a credit boom which crates a false plateau of prosperity (Regan - Clinton) that ends in a speculative bubble (Bush & Obama) (we just got out of the Autumn phase a couple years ago and into the Winter phase. They say roughly 2013 was the end of Autumn.)

This is not the only economic cycle that suggests that we are headed towards an “economic depression".

Cyclical economist Harry Dent primarily focuses his theories on demographics. The fact that our population is aging rapidly. He expects the worst economic trends due to demographics to initially hit between 2014 and 2019.  And it will last until the year 2023. He feels it will be exceptionally hard because “the every day consumer never came out of the last recession”. Dent says that Japan is still in their “coma” from their recession 20 years ago because they never let their debt bubble deleverage (Pop). And the only way we will not follow in Japan’s footsteps is if we stop printing money. The Federal Reserve is artificially propping up our economy and creating the same issue with the 4.5 trillion dollars they have printed to add to the system. If they keep printing money we will go into a stagflation type scenario where the economy will stay extremely lackluster for many years to come. The only way to really fix the problem is for us to bottom out hard and heavy by deleveraging. We then will pick back up relatively quickly and get back into a good growth economy.

Regarding Dent’s theory pertaining to economic issues surrounding an aging population, how does that make you feel about the whole amnesty issue now? These are mostly young illegals coming into our country.

These cycles have been studied for years. There is even an English economist named William Stanley Jevons who found that the sunspots are on the same cycle as the Words economic cycles. Yes, that’s right. When the sun’s spots die down the World’s economy dies down. When they ramp up the economy ramps up. I’m sure this is coincidence and they are simply on the same cyclical pattern but who knows; a full moon is known to effect peoples personalities. And female friends or co workers menstrual cycles often end up coinciding with each other in roughly the same dates each month. Strange things happen that we can’t explain.

Here are several other leading cyclical economists and their predictions. Some of which we are already a little past due.

Charles Nenner Research (source)
Stocks should peak in mid-2013 and fall until about 2020. Similarly, bonds should peak in the summer of 2013 and fall thereafter for 20 years. He bases his conclusions entirely on cycle research. He expects the Dow to fall to around 5,000 by 2018 – 2020.

Kress Cycles (Clif Droke) (source)
The major 120 year cycle plus all minor cycles trend down into late 2014. The stock market should decline hard into late 2014.

Elliott Wave (Robert Prechter) (source)
He believes that the stock market has peaked and has entered a generational bear-market. He anticipates a crash low in the market around 2016 – 2017.

Market Energy Waves (source)
He sees a 36 year cycle in stock markets that is peaking in mid-2013 and will cycle down for 2013 – 2016. “… the controlling energy wave is scheduled to flip back to negative on July 19 of this year.” Equity markets should drop 25 – 50%.

Armstrong Economics (source)
His economic confidence model projects a peak in confidence in August 2013, a bottom in September 2014, and another peak in October 2015. The decline into January 2020 should be severe. He expects a world-wide crash and contraction in economies from 2015 – 2020. Watch the movie The Forecaster. Amazing guy this Martin Armstrong is. He got locked up by Goldman Sachs for many years for refusing to give a judge his economic forecast which they found to be unbelievably accurate.

Cycles per Charles Hugh Smith (source)
He discusses four long-term cycles that bottom in the 2010 – 2020 period. They are: Credit expansion/contraction cycle, Price inflation/wage cycle, Generational cycle, and Peak oil extraction cycle.

So my question to you is. Does history repeat itself? After reading this information, do you feel like we very well could be close to the perfect storm? Are we in a situation where we could have a potential major crisis? A crisis that is of the magnitude of a complete government and credit bubble meltdown? And what are you going to do about it? Are you prepared for what will happen? Do you even know what will happen? It is expected to be at minimum as worse as if not much worse than The Great Depression.

In future emails I will write a little bit about how things could look. What types of things are expected to happen. In my research I’m trying to determine what exactly will happen specifically to landlords and with tenants. Based on what happened in other countries who have crashed as a result of debt related issues.


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