The Three Themes of 2018

46
Thu, Jan 4, 2018 - 10:44am

Beginning in late 2016, we began to question what we termed The Generally Accepted Narrative of 2017. This allowed us to accurately forecast rising precious metal prices last year. For 2018, we will generally rely upon three, overriding themes and we discuss them in detail today.

As a recap, what was GAN2017? We first spelled it out in a formal post on January 17, 2017. You can read it here: https://www.tfmetalsreport.com/blog/8103/questioning-generally-accepted-...

From that post, the five primary tenets of GAN2017 were:

  1. Major US deficit spending will promote economic growth
  2. This economic growth will allow The Fed to hike the Fed Funds rate 3-4 times
  3. Rates on the long end will rise, too, as "the bond bubble bursts"
  4. All of this growth and higher rates will prompt a huge rally in the dollar
  5. And the US stock market will charge toward 25,000 on the Dow.

So, how did this turn out?

  1. Economic growth as measured by GDP looks to come in at around 2%. Trump's only political win came with the tax cuts of late December. Nothing done on infrastructure or healthcare.
  2. The Fed did, in fact hike the FF rate 3 times.
  3. Long rates fell and the bond bubble definitely did NOT burst.
  4. "King Dollar" did NOT return and the POSX fell by over 10%.
  5. The Dow topped 25,000 for the first time in history just this morning.

For the purposes of this site and precious metal investing, points number 3 and 4 were the most important and, by having rates and the dollar fall, Comex gold rose over 13% on the year...its best annual gain since 2010.

So, what's next for 2018?

As you've already heard me mention, 2018 will be defined by three general risks. How these play out will dramatically impact the dollar, the bond market and the precious metals. The three risks are:

  1. Political Risk -- By late summer of this year, attention will turn to the coming mid-term elections in the US. If the Democrats are poised to regain control of Congress, speculation regarding a move to impeach President Trump will rapidly intensify.
  2. Geo-Political Risk -- If you're paying any attention at all to global events, then this needs no further explanation. Whether it's the possibility of renewed war on the Korean Peninsula, conflagration in the Middle East or actual Hot War between NATO and Russia, geo-politics have the potential to greatly unsettle global markets in 2018.
  3. De-Dollarization Risk -- The global pace of de-dollarization is clearly quickening. Later this month, a yuan-denominated crude oil contract will begin trading in Shanghai. Later this year, a ruble-denominated gold contract will begin trading in Moscow. These and other events will provide a clear challenge to US dollar hegemony in 2018.

In 2017, the mainstream financial press blindly pumped GAN2017 without any regard to other possible outcomes. We here at TFMR were first to proclaim GAN2017 a sham and we were all rewarded with gains in gold and silver. Now in 2018, where in the media do you see ANYONE discussing the three risks laid out above? Instead, it's all about the cryptos and Dow 25,000. Well, I can assure you that just as we were generally correct about GAN2017, we're going to be correct about the Three Themes of 2018, too. Just give it a while to play out.

To that end, the Comex metals have charged back overnight as the POSX has resumed its fall. Though the FOMC was able to talk up the USDJPY and thus pump the Dow to 25,000, the broad-based POSX has given back all of its gains and now resides again under 92. As it breaks down further next week and falls to and through the 2017 lows near 91, maybe some folks on CNBS and BBG will start to notice?

This dollar weakness has pushed the CRB commodity index to the 195 breakout point. Commodity prices are going to be a BIG story in 2018 and these rising prices will add spillover support to gold, silver and the mining shares throughout the year.

For CDG and CDS today, the good news is the overnight rebound after the thrashing they took post FOMC yesterday. CDG fell all the way to 07 last evening while CDS hit .02. The fact that I currently have 18 and .24 should not be written off as a simple bounce. The underlying trend, technical and CoT structure certainly argues for higher prices in this initial phase of 2018. I was hoping to do some buying on a pullback to .80 but, unless there's some sort of BLSBS-related bloodbath tomorrow, I'm not sure I'm going to get it.

As I close, I see that we have further extended to $1319 and $17.26. This is great news so go have a great day!

TF

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  46 Comments

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AGXIIKrenozep
Jan 4, 2018 - 5:42pm

Dennis If they can't find workers

Lone Skum will automate with AI droids doing the heavy lifting

renozepMickey
Jan 4, 2018 - 5:35pm

@Micky re: Cal to NV Corporate Migration

I haven't been to Stateline in years but have lived in Reno for 35. In answer to your question-

Yes, the Calif. to Nevada migration of businesses and people continues and is gaining momentum. Reno (N0. Nevada) and Las Vegas, Stateline, Pahrump and vicinity (So. Nevada) are the growth centers; the rural boondocks- not so much. Reno is truly going nuts: traffic, housing; jobs, schools, homeless ... We have the largest, in acreage, industrial park/warehousing complex in the world out on the desert east of Reno. Tesla's huge battery factory is out there and many million sq.ft. warehouses doing fulfillment shipping. They can't find workers. It's a perfect storm for growth. It's sad to see "the Biggest Little City in the World" get Californicated.

Jan 4, 2018 - 4:42pm

Missed it by that much...

I sold my JNUG too quickly today, figuring that gold was capped for the day and it would just decay in value slowly. Had work to do and couldn't watch charts. But I love the look of the close--decisively through 1320. Only took two days. And this was while the $/Y was up on the day.

On the way home from work, we saw 9 helicopters over the city--flying in formation, all black and the last one was a Vietnam era style Huey.

Wife's sister in on speakerphone currently complaining about sexual harrassment and discrimination at her large corporate employer. But she will not seek out a lawyer and do anything about it.

And after reading AGXIIK's fine post, all I can sey is that all is (the new) normal today. 2018 will be unlike the norm of prior years. It will be interesting to watch its trend.

silver10sguy
Jan 4, 2018 - 4:16pm

Maya Gold Is Another Example of INFLATION

I am starting to think that anything slightly connected to gold, silver, and commodities may explode higher as INFLATION ROARS. We may see miners go up for no reason at all to levels not seen since the 1970's and early 1980's. Some penny miners went over $200 a share. At least this is my HOPE!!!

Jihk2431
Jan 4, 2018 - 3:33pm

Mentioned this stock a few times last year, but Maya Gold &

Silver is on fire today - up 38%. I can't make sense of why that is based on their news release, but this was one of my strongest performers last year. Symbol in US is MYAGF. Be careful not to google Maya Gold - that is the name of a former adult film star.

As a plug, I discovered the stock on Jay Taylor's show. His friend Chen Lien promotes it in his newsletter.

OOOBuck
Jan 4, 2018 - 3:31pm

Farm Payrolls should be BS Positive

since they love to count trash-wage part timers in their calculations. The ghost of Christmas past so to speak.

Hope I'm wrong this time.

If so, I expect PMs will respond in the usual way and open a little lower. ditto for the miners.

And then it's up up and away into the weekend. .... hey, wishin, hopin and guessin, I guess.

silver10sguy
Jan 4, 2018 - 3:25pm

HUI Turning Green

It sure looks like commodities are ready to blast off this year!

LiberoJoseph Warren
Jan 4, 2018 - 3:14pm

Joseph warren:

Should have just payed a million bucks bounty for each terrorist since day one of 9/11. Would have saved a ton of money (could have gone to universal prescription drugs for all) and NO loss of US soldiers lives, and no billions/trillions of middle east infrastructure, -that should go to our own US soil.

AGII: Great post. Four cops guarding 2 cons picking up trash. About $30 bucks an hour (at least) X 4= $120 bucks an hour that could have payed some 7 high schoolers or college kids $17 bucks an hour. But too much math for TPTB to bother with.

When the swamp is drained, Sessions soul (and every cabinet member of trump reign) will be found on the bottom.

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bently
Jan 4, 2018 - 3:08pm

Metals very strong

Another impressive close in the making. If this keeps up, the miners will surely follow...

Joseph Warren
Jan 4, 2018 - 2:59pm

Re: ‘Giving away’ foreign aid

The credits are used to bribe foreign leaders and make their countries dependent (to grab natural resources & for military basing rights). They are also a means for US contractors to get fat off the hog trough.

If bribes don’t work, they send in the CIA. If that doesn’t work, they send in the military. Economic Hitman John Perkins has spoken/written extensively on this.

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