2016 Predictions and Results

(Final results for 2016 are shown in parentheses to the right of the forecasts. Keystone did not do well for 2016 with only 57% of the predictions and price forecasts correct (99 out of 173). The forecasts for ranges of indexes, Treasuries and rates are very good. The stock picking is respectable. Forecasting is difficult with the central bankers always stepping in to save the day.)
The Keystone Speculator’s Predictions for 2016
It’s time for another year of predictions that will provide numerous laughs in December 2016. Making predictions one year in advance may seem like a fool’s errand but it is a very important exercise for all traders’s to hone their intermediate and long term strategic forecasting abilities. Use the table below as a template to write your own predictions and better yet have a friendly wager with an associate to see who can emerge as the wisest forecaster one year from now.
The Wall Street analysts were dead wrong at forecasting the stock market in 2015 since all were calling for an up year but instead the stock market finished down. Keystone was the only analyst correctly calling the down stock market in 2015. Here are this year’s prognostications from Wall Street analysts followed by Keystone’s 187 Predictions for 2016. Once again, Keystone is the only Wall Street Analyst looking for a down stock market in 2016.
Permabull Tom Lee at Fundstrat predicts SPX 2350. John Stoltzfus at Oppenheimer forecasts SPX 2300. Raymond James strategist Jeff Saut calls for a +10.4% gain in equities which targets SPX 2300. David Bianco of DB and Sam Stovall at S&P Capital IQ both forecast SPX 2250. Savita Subramanian at BAC, Dubravko Lakos-Bujas at JPM and Jonathan Glionna at BCS each forecast SPX 2200. Adam Parker at MS forecasts SPX 2175. C strategist Levkovich expects a +7% gain in the stock market next year which targets SPX 2182. Andrew Garthwaite at CS predicts SPX 2150. David Kostin at GS and Brian Belski at BMO Capital both predict SPX 2100. The Keystone Speculator 1687. (Keystone was not close as central bankers prove too powerful for another year. Note the prognosticators that got it wrong on the high end including Lee, Stoltzfus, Saut, Bianco and Stovall. 2016 was an odd year with lots of drama)
The year begins at SPX 2044.
Keystone was looking for a multi-year top to occur in 2015 and the May 2015 stock market top at SPX 2135 is holding so far to begin the New Year.
Keystone continues to forecast an ongoing disinflationary and deflationary scenario around the world. The US has been in a disinflationary and deflationary funk since 2012. The commodities and goods deflation is rampant; however, the services sector (college tuition, utility bills, insurance bills, house prices) is not yet rolling over into deflation. The services deflation will begin and increase the overall deflationary funk which will persist the next couple years, perhaps longer. The inflation and hyper runaway inflation will likely not occur until 2018-2020 and beyond. Inflation will be rampant after 2019 but before then, deflation needs to bite off a few more chunks of economic and market flesh.
Note: Do not confuse Keystone’s prognostications with actual trading positions. Keystone typically describes any ongoing and new trades on the blog as they occur and the status of the Keybot the Quant algorithm, that controls 65% of the portfolio, is constantly displayed in the left margin. Reference Keybot the Quant’s status if you ever want to know whether the stock market is currently in a bull or bear market pattern. The portfolio weighting numbers in the left margin provides insight into Keystone’s overall status on the market (bull, bear, neutral) based on the actual dollar amounts invested. Without further adieu, Keystone provides the following 178 predictions for 2016;
The Keystone Speculator’s Predictions for 2016 (Final results for 2016 are shown in parentheses to the right of the forecasts)
SPX High for 2016: 2063 (nope, too bearish, central bankers remain too powerful 2278 is the high)
SPX Closing Price for 2016 (SPX Begins at 2044): 1687 (no, the year ends at 2239)
SPX Low for 2016: 1403 (nope but low came down to 1810)
[The current price at 2044 reflects S&P 500 earnings at $108 to $113 with a PE of 18 to 19. The 2007 market top occurred with a 20.3 PE and the 2000 top with a 26.2 PE. The current 18.5-ish PE is misleading since the RUT small caps are well above 20 PE for three years and the 18.5 is an artificially lower number due to the obscene and aggressive stock repurchase programs over the last three years. Using a 30% or more correlation for the buybacks, the current PE would be more in the 21-26 range if the ongoing buyback orgy never occurred. For 2016, the Wall Street consensus is expecting earnings of $112 to $130 with an ongoing PE multiple at 18.5 which yields SPX targets in the 2100-2400 range. Keystone puts on a bear suit for the year (see the comments on the 18-year secular bear cycle below) and forecasts far lower numbers than consensus. Keystone projects earnings to drop, not rise, in 2016, to $100, and lower than anyone expects.]
Dow Industrials Range in 2016 (INDU starts at 17425): 12320-17610 (no, 15.5K-20.0K)
Dow Industrials Closing Price for 2015 (INDU): 14180 (no, 19764)
Nasdaq Composite Range (COMPQ starts at 5007): 2900-5063 (no, 4200-5500)
Nasdaq Composite Closing Price (COMPQ): 3180 (no, 5383)
Russell 2000 Industrials Range (RUT starts at 1136): 780-1215 (yes, 940-1380)
Russell 2000 Industrials Closing Price (RUT): 860 (nope, not even close, 1358)
Dollar Range (USD starts at 98.75):  92-102 (yes, 92-102 dead-on)
Dollar Closing Price (USD): 92.50 (no, 102.22)
Dollar/Yen Range (USD/JPY starts at 120.30): 110-125 (yes, 99-122)
Dollar/Yen Closing Price (USD/JPY): 112 (yes, in the neighborhood, 117)
Euro Range (XEU starts at 1.085): 1.04-1.16 (yes, 1.03-1.15, dead-on)
Euro Closing Price (XEU): 1.13 (no, 1.04)
2-Year Note Yield Range (UST2Y starts at 1.06%): 0.57%-1.28% (yes, 0.56%-1.30%, dead-on)
2-Year Note Closing Yield (UST2Y):  0.89% (no, 1.20%)
5-Year Note Yield Range (UST5Y starts at 1.76%):  1.15%-1.90% (yes, 0.95%-2.11%)
5-Year Note Closing Yield (UST5Y):  1.43% (no, 1.94%)
10-Year Note Yield Range (TNX starts at 2.27%): 1.6%-2.5% (yes, 1.34%-2.62%)
10-Year Note Closing Yield (TNX): 1.88% (no, 2.45%)
30-Year Note Yield Range (TYX starts at 3.02%): 2.25%-3.30% (yes, 2.10%-3.20%)
30-Year Note Closing Yield (TYX): 2.65% (no, 3.07%)
Will the Yield Curve Invert? No, but the flattening behavior continues. Stocks can fall into a bear market without an inverted yield curve as they did in five notable periods; early 1962, 1976-1978, 1987 into the crash, 1998 and 2011. (yes on the yield curve)
2-10 Spread at End of Year (Starts at 121 basis points):  100-ish (no, 125)
Unemployment Rate % Range (5.0% at start of year):  4.7%-5.9% (yes, 4.6%-5.0%, my high end was off)
Unemployment Rate % December 2016: 5.8% (people will be desperately seeking work which will drive this number higher) (bad call, ends year at lows at 4.6%)
Will Any Monthly Jobs Report During 2015 Be Under 200K Jobs? How Many if Yes? Yes, six. (yes)
Will Wage Inflation Appear in 2016? No, and without wage inflation, the Federal Reserve cannot succeed at creating inflation. (yes, although some glimmers of a slight bump higher at end of year)
GDP Average during 2016 (GDP begins at 2.1%-ish stagnant and slow growth):  2.0% (yes, est. 2.1%)
WTIC Oil Range (WTIC starts at 37.07): 27-48 (yes, 25-55)
WTIC Oil Closing Price (WTIC): 42 (no, 53.87)
Brent Oil Range (BRENT starts at 37.28): 32-52 (yes, 26-59)
Brent Oil Closing Price (BRENT): 43 (no, 56.80)
Natty Gas Range (NATGAS starts at 2.35): 2.10-3.80 (yes, 1.63-3.90)
Natty Gas Closing Price (NATGAS): 2.60 (no, 3.73)
Gold Range (GOLD starts at 1061): 970-1250 (yes, was a little low on the call, 1060-1380)
Gold Closing Price (GOLD): 1075 (yes, close enough, 1150)
Silver Range (SILVER starts at 13.81): 13.70-17.70 (yes, 13.70-21.00)
Silver Closing Price (SILVER): 14.00 (no, 16.00)
Copper Range (COPPER starts at 2.13): 1.40-2.30 (no, 1.93-2.76)
Copper Closing Price (COPPER):  1.80 (no, 2.50)
Commodities Range (CRB starts at 176.27): 120-220 (yes, 154-194)
Commodities Closing Price (CRB): 170 (yes, 192.50)
China Growth Rate % Average for 2014 (starts the year at +7.0%-ish): +6.5% (the government numbers are bogus the actual growth rate is in the +3% to +5% range) (yes)
BDI (Baltic Dry Index starts at 478.00) Range: 400-2200 (yes, 300-1300)
BDI at end of 2016: 1186 (yes, 963)
Technology Sector (XLK starts at 42.83) Higher or Lower in 2016? Lower (no, 48.36)
Semiconductors Sector (SOX starts at 663.48) Higher or Lower in 2016? Lower (no, 905)
Semiconductors Sector (XSD starts at 43.68) Higher or Lower in 2016? Lower (no, 56.11)
Biotech Sector (IBB starts at 338.33) Higher or Lower in 2016? Lower (yes, 265)
Financial Sector (XLF starts at 19.07) Higher or Lower in 2015? Lower (no, 23.31)
Health Care Sector (XLV starts at 72.03) Higher or Lower in 2015? Lower (yes, 69)
Retail Sector (RTH starts at 77.72) Higher or Lower in 2016? Lower (yes, 75.80)
Retail Sector (XRT starts at 43.24) Higher or Lower in 2016? Lower (44, call it a yes)
Consumer Discretionary Sector (XLY starts at 78.16) Higher or Lower in 2015? Lower (no, 81.5, but close)
Consumer Staples Sector (XLP starts at 50.49) Higher or Lower in 2015? Lower (no, 51.76 but close)
Energy Sector (XLE starts at 60.32) Higher or Lower in 2015? Higher (yes, 75.40)
Industrials Sector (XLI starts at 53.01) Higher or Lower in 2015? Lower (no, 62.20)
Materials Sector (XLB starts at 43.42) Higher or Lower in 2015? Lower (no, 49.70)
Utilities Sector (UTIL starts at 577.82) Higher or Lower in 2015? Lower (no, 660)
Utilities Sector (XLU starts at 43.28) Higher or Lower in 2015? Lower (no, 48.50)
Telecom Sector (IYZ starts at 28.79) Higher or Lower in 2015? Lower (no, 34.53)
Transportation Sector (TRAN starts at 7509) Higher or Lower in 2015? Lower (no, 9038)
Transportation Sector (IYT starts at 134.73) Higher or Lower in 2015? Lower (no, 163)
Homebuilders (XHB starts at 34.18) Higher or Lower in 2015? Lower (yes, 33.84)
The 18-year cycle is the most reliable cycle and currently the secular bear from 2000 to 2018 is in play. Dramatic rallies are common in the secular bears such as 2003-2007 and from March 2009 to May 2015. Since only three years remain in the secular bear and a tiny down year occurred in 2015, two of the next three years, 2016, 2017 and 2018, would be expected to be down even three of four from 2016 to 2019. For 2016, let’s go with a down year for the stock market. Perhaps a new president and new blood will provide buoyancy in stocks in 2017 then the secular bear can finish with a down year or two in 2018-2019. Then the secular bull 18-year cycle begins from 2018-2036 with hyperinflation a future problem kicking in after 2019. (yes, in play, 2016 is up and 2017 and 2018 may be down)
The buyback activity fades in 2016. (yes, somewhat, there is plenty but it is lessening)
The M&A activity will continue but at a far slower pace. (yes, although the pace is moderate)
Earnings will remain challenged and noticeably decrease this year. (no)
Global bond yields, Treasury yields, currencies including the euro, dollar/yen and US dollar index, and commodities including gold, silver, copper and oil are going to move much more sideways than anyone expects frustrating bulls and bears alike in these asset class. Commodities will remain weak in the deflationary environment but not drop much further. In a global slowdown the need for raw materials diminishes. (yes, generally correct, the late-year rally skewed all numbers for the year)
A deflationary environment grows in the US importing the malaise from Europe and China. The idea that the US will go merrily along with a robust economy while the rest of the world is in an economic slump is not realistic. The global contagion and deflation will be exported to the US. (yes, although to end the year inflation expectations increase dramatically expecting Trump to spend lots of money)
Wage inflation does not occur in the US. Wages will remain flat and fade disappointing the Fed. Inflation, which the Federal Reserve has tried to create for six years with money printing, cannot exist without wages increasing. (yes, there is a slight bump higher as the year ends)
The biggest parlor game this year is guessing how many times the Federal Reserve will hike rates. The FOMC hiked rates on 12/16/15 for the first time in a decade off of the ZIRP level at 0.0%-0.25% to 0.25%-0.50%. The Fed dot plots show that members predict four hikes in 2016 and Vice Chairman Fischer is touting this line. The bond market says two or perhaps three hikes are on tap in 2016 so there is a serious disconnect that needs rectified. Keystone says at most one hike will occur and it will not be surprising to see zero hikes in 2016. The economy is weaker than anyone realizes and deflation will remain in play. (yes, very good call on rate hikes one it was)
The Federal Reserve will return to the ZIRP policy due to a weakening economy causing a loss in credibility. (no, two rate hikes so far ending 2016)
A major breakdown may occur for the stock market on 2/12/16 or 4/12/16 give or take a week or two on each side of each date. (yes, April top occurs but pull back is mild so not a major breakdown)
A major breakdown may occur for the stock market on 8/8/16 or 10/8/16 give or take a week or two on each side of each date. (yes, called the Aug-Sept top)
A bigger down move would have been expected by the major indexes from the long term rising wedge chart pattern from 2009 to the top in 2015. Thus, a strong move down will occur in 2016 worthy of the drastic move lower that would be expected from a rising wedge pattern. Keystone would have predicted much less of a point loss for 2016 if it was not for the long term rising wedge. The rising wedge failure is what causes Keystone to lean towards the 1400-1700 as the low point for the SPX during 2016. (no, central bankers keep pumping stocks higher)
As the year begins, traders are fully loaded on one side of the boat with three trades; short oil, long dollar and expecting yields to climb (bonds sell off). Typically, the opposite happens. Keystone predicts the US dollar index to float along sideways with a downward bias in 2016 the opposite of the consensus. (yes)
Treasury yields will bumble and stumble and stagger sideways all year long. Those looking for big ups in yields will be disappointed and those looking for huge down moves in yield will be disappointed. (yes)
WTIC crude oil has a chance to base right now, early in the year at 32-ish, but the call is for oil to bottom at 27-30 and this will occur early in the year Jan-Apr. Oil will then move sideways to sideways higher all year long. (yes, very accurate call on oil, dead-on)
Brent oil will base at 32-ish this year and then move sideways to sideways higher the rest of the year. (yes, good call)
Gasoline prices will move sideways to sideways higher and as they slowly rise will hurt the economy. (yes, they did rise but the economy  is stagnant)
The oil and gas shale industry in the US will remains sluggish but stabilize in the back half of the year as oil prices stabilize. (yes)
Ag commodities will recover this year. DBA should do well. (yes, for the first half of year but then rolled over again)
Grains will do well and is a favorite commodity this year. JJG should do well. Also GRU and WEET but these two trade too thin. You can look into other wheat and grain plays.(yes for first half then rolled over)
Coffee is another favorite commodity. JO rallied big in 2014 then collapsed with the other commodities in 2015. JO should make big gains this year. (yes)
The high-yield trouble will continue especially with companies exposed to the oil and energy paper. Watch HYG and JNK. Conditions will improve into the end of the year as oil prices stabilize all year long and trend higher late in the year. (yes, high yield dips in October but recovers into year end.)
In May and June 2016, the Puerto Rico debt drama will hit the fan as they are headed for default on July 1. The Puerto Rico drama will be reminiscent of the Greek drama. Both are bankrupt island nations. The turmoil will cause more trouble in the high-yield space with HYG and JNK. (yes, this drama continues to play out)
The US Congress will provide a bailout package to Puerto Rico but try to structure it in a limited fashion so the States do not try to jump on the band wagon. The tactic does not work and since bailout funds are provided to Puerto Rico states such as California and Illinois will line up at the window asking for bailouts. Puerto Rico will set a precedent in June 2016 that will greatly affect the financial health of states such as California and Illinois. Americans are sick of bailouts that make the wealthy filthy rich while they suffer through life unable to find adequate employment. (yes, the Congress continues avoiding the problem)
Companies in the energy and oil and gas space will go belly-up but there will be far more restructurings rather than all-out bankruptcies. The companies that handle these types of restructurings will benefit, maybe a GHL or EVR and other M&A style companies that have attorneys and business people that can help these companies navigate out of the morass. EVR stock does not look good but GHL is a far more attractive long play in 2016. GHL should at least go down less than the broad market if 2016 is a weak year for stocks. (yes)
The Dividend Stock Bubble will burst sending SDY and DVY lower during 2016. Investors will be disappointed that a dividend stock strategy does not look too good when the capital disappears with price depreciation. (no, the dividend bubble continues higher pumped by easy money)
PCLN will end the year under 1000. (no, but it did drop under 1000)
FB will rollover this year and end the year under 85. (no, it rolled over but to 114)
AMZN will have a dramatic fall from grace this year peaking out with a multi-year top during February-April. (no, AMZN rallies this year since it is dubbed the king of retail)
Keystone continues to like graphene plays such as MGPHF or ENZR (penny stocks) and commercial uses of the graphene material will expand. IBM and SNDK have a small finger in this pie. (yes, MGPHF a huge winner in 2016, ENZR, a penny stock, is flat)
Body cameras will be required on more and more police officers so companies such as TASR will benefit. (yes)
Drones are a growth industry. AVAV and AMBA  benefit. (yes, but AVAV and AMBA flat on year)
3-D printing stocks will be back in vogue in 2016 and gain popularity as a favorite flavor during the year so potential long plays are DDD, SSYS, VJET and XONE. (yes, split decision, DDD and XONE up, SSYS and VJET down)
Autonomous cars are not as far along as people think. It was easy to bring autonomous cars the first 80%of the way to fruition, however, the last 20% will take the same amount of time or longer. The problems are more complex as the self-driving vehicles are refined. Progress on autonomous cars will be about where it is now this time next year. Folks will realize that driverless cars are not coming as fast as thought. (yes, although the strides made in 2016 are very impressive, more accidents are occurring as the technology proceeds)
Infrastructure plays will receive love as governments announce stimulus measures to improve roads, bridges, cable lines, towers, pipes, etc… VMC and EXP may benefit but neither should be played long. The materials providers may be the main benefactors like cement providers. CX would be a play but after it bottoms in the spring/summer time period. Other potential plays are CCI, CRH and IGF but CRH is the only one that should be considered as a possible long play. (yes, a great call)
The key housing and auto sectors will weaken. (yes, but a split decision, housing is softening, autos were softening but finished the year in a strong sales pattern)
A housing slump will appear around spring time, usually a busy time of year, but work will be slow in 2016 revealing the weak housing sector. Stocks and indexes such as XHB, LEN, PHM and TOL will move sideways to sideways lower during the year. Chinese and Russian investors and hedge funds have been buying real estate bloating prices into a bubble but they are done buying and the market has no other support. The average family was screwed by the Fed and cannot afford homes at the now lofty prices. (yes)
Housing starts will average below one million per month during the year. (nope, above)
A major restructuring and renaissance will occur in the retail sector in 2016. Stores will merge, go bankrupt and/or combine; all kinds of restructurings will take place. The pop-up stores such as Halloween stores, toy stores, faddish fast fashion stores and other niches will increase noticeably. Other functions for pop-up stores will develop such as selling plants in the spring time which will cut into the sales of stores such as HD and LOW. Anything seasonal in nature will be offered in a pop-up store. (yes)
The US dollar will move flat, ditto euro, ditto Treasury yields although Treasuries should move sideways with a downward bias in yields. (yes, but year finishes with yields rising on Trump victory)
AAPL stock is obviously maturing and rolling over no longer a growth stock but instead a long-term value like MSFT for many years moving into a stagnant phase. AAPL will be at 60-90 at the end of the year. (no, correct in it moving into the value range but its price remains strong above 100)
The Apple Watch is a flop. (give this a yes for now, the only people buying the watch are tech enthusiasts, Silicon Valley techies, programmers and app developers that want to keep their jobs)
Global smartphone sales will level off and the devices become more of a commodity item. Competitions increases in the space and cost of phones will decrease (disinflation and deflation). (yes)
Social internet reaches a peaking phase as many people realize they are wasting their lives trying to impress a bunch of strangers. (give this a yes but the jury remains out; young adults moving towards 30 are moving away from FB)
FB trends lower all year long. (no, was actually up then lower in last four months)
LNKD trends lower all year long. (LinkedIn is bot out)
Instant video and messaging applications remain popular with young people. (yes)
TWTR recovers in 2016 and is relied on for real-time news as world events become more intense. (yes, but the falls onto shaky footing again)
Japan is the big surprise this year with their markets and financial systems exploding into disarray. While everyone was concerned about China, Japan is the one that creates global market contagion and negativity. (no, Japan creates drama but not mayhem)
Japan will seek ways to increase immigration but they are picky who they allow to gain residency. Japan will actively encourage young educated Americans to come to Tokyo and other locales to spend a few years and perhaps decide to stay. Japan has a serious demographics problem and they will begin to address it in 2016. (yes, Japan is trying to address the problem by opening career doors to women)
Japan’s JGB’s (bonds) explode higher in yield signaling the BOJ losing control. Japan may be the catalyst that brings the entire global economy down. JGBS is a potential play. JGBS is an inverse bond ETN which moves higher as JGB prices move lower (yields explode higher). (The JGBS ETN implodes, Japan hangs in there and yields do pop higher)
The NIKK is expected to move sideways to sideways lower in 2016. (no, was a great call until end of year rally)
The currency wars will increase. China continues to devalue the yuan which will cause other Asian nations to devalue and the race to debase continues. Capital outflows will increase from China as the yuan weakens. China’s economy is in serious trouble and will perform a faceplant this year.(yes, generally)
China will finally receive the long-awaited financial crisis due to a decade of overbuilding. The shadow banking system in China will unravel in a similar pattern as the 2008-2009 US financial crisis. (no, but it is on shaky ground)
The US will expand ties and business with India but the BSE and Nifty indexes will trend sideways to sideways lower. In the back half of the year the indexes will stabilize more sideways. (no, ends higher)
Protectionism will increase as the slowing global economy causes countries to continue slitting each other’s throats. Tariffs are increasing in solar, steel and wine sectors and will spill over into many other sectors and industries as each nation attempts to protect their own industries. The result is like the Great Depression in the 1930’s where everyone drags each other down the rabbit hole. (yes to trade wars and protectionism)
Saudi Arabia that desires to break the back of the North American oil industry (Canadian tar sands and US shale) ends up causing serious damage to their own economy. The Middle East is a powder keg. The oil war of attrition breaks down between the Saudi and North America oil producers with losers all around. (yes, but OPEC and non-OPEC producers rally the troops to fix prices and oil recovers late year)
A terrorist attack will occur at Temple Mount and this serves as the catalyst to begin a major Middle East War between Sunni and Shiite. The ongoing proxy wars between the two superpower Arab sects in Syria and Yemen will bleed across all of the Middle East and northern Africa. (yes, minor terrorist events occur in the area of Temple Mont, wars worsen, Middle East deteriorates)
The cold war and strained relations continues between Russia and the West through the end of President Obama’s presidency. (yes in spades, now Trump wants to go the other way and rebuild ties with Russia)
European nations are going to split on ideological lines over the refugee crisis, Brexit and other problems. Europe will sink deeper into a complicated quagmire. (yes)
The ECB’s QE program will not prove effective. The global central bankers can no longer create the huge stock market gains with money printing. Each central banker stimulus measure has less of an effect on raising stock prices. (no, the power and majesty of the central bankers keeps pumping stocks higher)
Europe will remain mired in deflation for 2016 and confusion over ECB policies will develop. European stocks and the DAX are expected to move sideways to sideways lower in 2016. (nope, stocks float higher on ECB QE)
A cyber attack will occur on a financial institution or major retailer that is not rectified quickly in a day or three. Instead, the cyber attack will create a mess that disrupts the company from conducting business for many days or weeks. The incident will create fear and panic about the safety of the internet and cloud. (yes, several large scale attacks occur)
The cyber security stocks such as IMPV, VDSI, PANW, QLYS and HACK will move sideways to sideways lower and not receive a further boost higher despite global cyber attacks increasing around the globe. (yes)
Student loan debt problems will surface and a realization hits that the US has a new and serious problem. (yes, but there remains very little attention paid to the problem)
As the student debt problem increases, the subprime auto lending problem also surfaces. Auto and financial sectors weaken as two major problems come home to roost; student loan debt and automobile debt. (nope, not yet)
Global auto sales will be weaker than expected. Luxury car sales will disappoint in 2016. (no, yes through part if year but the year finishes strong.)
Young folks will become disillusioned and discouraged with America. The student debt issue will intensify and many young folks will give up as they are now expected to support the older folks by paying for Obamacare insurance they never use and many cannot find jobs. Young folks will drop-out and tune-in, so to speak, like the 1960’s and 1970’s since they are overwhelmed by life ahead. (yes, they do have a different way)
Social unrest and violence will increase all around the world including in Brazil, Nigeria, Russia (to less of an extent since most are employed by Stare-owned enterprises), West Africa, Venezuela, Iran, Saudi Arabia and the Middle East in general due to the ongoing soft oil prices. Governments such as Saudi Arabia will have difficulty placating the masses as budgets are stretched due to the loss in oil revenue. (yes, Venezuela is in chaos)
Social unrest will increase in America. Protests will morph into a collective effort where the same demonstration may contain folks protesting different problems such as police militarization and brutality, racism, Occupy Wall Street and income equality—all part of a larger protest. Even though their causes are different, all protestors will combine under a unified front under the income inequality banner. The middle class and poor, since they do not own stocks, have not benefited from the Federal Reserve easy money policies and instead the rich are now filthy rich. The common folks will rise up in revolt realizing they were sold down the river by the Fed. The distrust in US authority will increase dramatically and the split between the social classes (rich versus poor) will widen even farther. The spread between rich and poor in America is at the widest in 50 years. The Federal Reserve has made the wealthy filthy rich and created the huge wealth gap that will breed social unrest. The social unrest, animosity and violence will be exacerbated by the economy weakening. (yes, and Trump becomes elected as the huddled masses begin to fight back)
Attacks on the wealthy population will increase both physically and property-wise. Expensive cars will be keyed with more frequency and tires slashed. Spray painting graffiti on mansions will become more common. The rich will begin seeking gated communities for safety as the separation between rich and poor increases in America and social protests become more violent. (nope, not yet)
As the stock market is weak and company layoffs increase in 2016, CEO’s will become targets of mob mentality with protestors showing up at their residential houses reminiscent of the days of pitchforks and torches. The wealthy will have to seek neighborhood communities with security guards and gated communities. CEO’s and other corporate executives will become very worried about their safety. (nope, not yet)
Shopping malls will reinvent themselves since consumer traffic continues to trail off. People are buying more goods on line and visiting the malls less. Malls will begin seducing restaurants to fill the empty spaces available and others will install kiddie parks or other attractions to use the vast real estate space. The social unrest in America will target the malls as key areas for demonstrations much to the chagrin of retail managers trying to keep the malls alive. A few violent events will occur at malls this year. This prediction was true in 2015 and will continue in 2016. (yes)
A cash society will increase in the US. The one-half of America that were abandoned by the Federal Reserve in favor of making the other one-half of America that own stocks wealthy will stretch their family budgets by avoiding paying taxes in every way possible. More people will work “under the table” for cash which will cut the Federal, state and local governments out of tax revenue. Products and services will be exchanged for cash so taxes will not have to be paid. When the economy turns south and folks lose their jobs, the government tax bases will be hit had with a double whammy; less revenue from folks out of work and less revenue due to a cash society increasing. Many communities that continue to spend obscene amounts of money on technology and other gadgets and militarization equipment for their local communities will quickly fall into financial trouble. When an economy falters, things can go downhill very fast. (yes, ongoing)
Congress will pursue legislation to implement a cashless-society in the United States. Lawmakers know that people will be working under the table more and dealing in cash to avoid paying taxes so the politicians will try to get legislation in place before the use of cash becomes prevalent again. The general public will be disagreeable to a cash-less society approach for America. (yes, it is beginning, other countries are removing large bills from society, governments want their tax money and want to track everything)
More and more heinous acts including murder will be recorded on smartphones as they occur and immediately posted on social internet platforms such as FB. The sick behavior of showing these acts in real-time only serves to encourage other sicko’s to do the same thing. Society becomes sicker each day. (yes, the other day a mentally disabled young man was tortured in realtime posting it on Facebook; this is sick stuff)
A citizen journalist movement continues. Less folks pay attention to the talking head pundits on cable news stations and instead follow blogs, videos and broadcasts on the internet that provide insight faster in real-time. Who needs the news services anymore? There is no integrity since they do not even check their news stories so everyone figures they may as well take their news from TWTR and other news feeds. The news from regular common folks provides greater insight and the large news outlets are prejudiced by their political agendas. On the down side, the quality of news on the internet decreases. (yes)
The quality of original content provided on the internet will diminish as ad-blocking software gains more and more popularity. The loss of ad revenue that original content providers had enjoyed will discourage folks from spending the time to provide free content. The internet will take one step towards the more seedy side as a result. (yes, but workarounds develop such as blocking software to block the ad-blocking software)
Politics and the stock market are in for a wild and dramatic ride in 2016 with many surprising events occurring in the political and economic arenas; more than in any other time in recent history. This prediction was true in 2015 and should carry though into 2016. (yes, Trump wins)
For the democratic nominee for president, lots of drama is predicted. Hillary Clinton is receiving the coronation as the year begins but will bow out of the race. Obama’s and Clinton’s do not get along so the president will allow a potential indictment to go ahead for Clinton but she will settle the situation without legal problems if she quits the POTUS race, which she does. Obama will also blame Clinton for the Middle East mess. Obama rewards Biden for his eight years of loyalty as Biden jumps into the top spot on the democratic ticket but only if Clinton would hand over her delegates. It may be impossible for Biden to step into the race this late, but if Biden cannot run, a different candidate will be chosen for the nominee, and Clinton will give her delegates to that person. The democratic ticket will have at least one female. The democrats will win the POTUS election in November 2016. (nope, Trump wins. Clinton wins the popular vote by 3 million people but Trump takes the Electoral College)
For the republican nominee for president, lots of drama is predicted. The republican establishment will not allow Trump to win the nomination. Either Cruz or Rubio will be chosen and a female running mate will be selected. The party will likely realize that Cruz is about the best to pull the different factions together but the establishment does not like him and will only agree since they can get rid of Trump. Cruz, or the republican nominee, will lose the election. Common folks have watched the rich become filthy rich with bailouts and other goodies from the Federal Reserve so they will vote democrat to maintain and enlarge government programs to help themselves to some of the pie. Average folks figure they may as well get their fair share as much as possible since the greedy wealthy already raped the system for all its worth during and after the financial crisis. Obviously, none of this behavior is healthy for the country but this is the America that the Federal Reserve and the Washington politicians have created. Democrats win the presidential election since they will provide more government aid to the middle class and poor. People have given up hope that they can work to make a living; instead they now need the government to provide aid to help them make ends meet. (no, the republican establishment hated Cruz more than they hated Trump)
Trump will go quietly in the night and not decide to run as an independent but he will hold a lot of clout providing colorful comments into the election. (no)
A geologic event involving plate movements or winds will occur which creates a huge tsunami wave event that lands ashore of a coastal nation. The vertical height of the wall of water will shock people on how such a large wave could even be possible. Concern grows for coastal cities on how to protect against rogue waves. (some tsunami’s but no real big one, no)
One or two major geopolitical event/s such as war, terrorism, and/or a pandemic will occur this year. The timing would align with a stock market selloff. The event will be blamed and cited as the reason for the stock market selloff just like in 2001 when 9-11 was blamed for the stock market drop when in fact the economy and underpinnings of the stock market were far weaker than touted at the time. The war or other event will be blamed for the selloff as a means to protect the Federal Reserve. The Fed will not be blamed for a sick economy and falling markets even though they are at fault. This is why Greenspan, Bernanke and Yellen are never concerned and remain relaxed and calm at all times; they know how the inside baseball game is played and they will always be protected and never be blamed. Instead, the major negative events will be blamed for the downfall of the economy and markets. (no, stocks hung in there, the events occur but the central bankers keep saving the day)
Here are some of Keystone’s individual stock picks for 2016 with the prices at the start of the year 21 long plays and 2 shorts. Keystone is in a few of these but not all of them but any of them can be bought at anytime as the year begins. It will be an interesting list to watch this year and see how they work out; the prices can be assessed at the end of the year. As always, do not invest in any of these picks unless you want to lose your money; always ask your financial advisor for guidance before placing any trade.
IBM 137.63 (tech) (yes, 166)
DISCA 26.67 (media) (yes, 27.43)
GHL 28.58 (company restructurings) (no, 27.8)
TASR 17.28 (body cameras) (yes, 24.26)
JGBS 17.497 (Japanese JGB inverse ETN; thin) (no)
MGPHF 0.244 (penny stock; graphene) (yes, 0.96)
ENZR 0.06 (penny stock; graphene) (no, 0.04)
ATRS 1.207 (penny stock biopharma) (yes, 2.30)
DCTH 0.50 (penny stock; biotech) (no, 0.89)
DDD 8.64 (3-D printing) (yes, 13.30)
SSYS 23.46 (3-D printing) (no, 16.58)
VJET 4.45 (3-D printing) (no, 2.90)
XOP 30.21 (oil and gas) (yes, 41.71)
USO 10.99 (oil) (yes, 11.68)
GNK 1.49 (shipper) (no, reverse split to 7.35)
OSTK 12.27 (online discount retailer) (yes, 17.52)
DBA 20.61 (ag) (no, 20.00)
JJG 30.346 (grains) (no, 28.18)
JO 19.70 (coffee) (no, 19.50)
KN 13.32 (micro-electronics) (yes, 17)
OPTT 2.10 (renewable wave energy) (yes, 2.91)
AMZN short 675.20 (but would not consider short until Feb-Apr) (online retailer) (no)
NFLX short 114.26 (but would not consider short until Feb-Apr) (media) (no)
Keystone's Past Year's Predictions (about two-thirds of the above predictions for 2016 would be expected to come true): (but only 57% were correct)
(2016 Predictions above are calculated at 57% Correct)
2015 Predictions were 64% Correct
2014 Predictions were 66% Correct
2013 Predictions were 60% Correct
2012 Predictions were 64% Correct
2011 Predictions were 60% Correct

An Abbreviated List of Keystone's Notable Predictions and Market Calls:
Predicted October 2016 Top in High Yield HYG and JNK
Predicted Top in Utilities in 2016
Predicted the Bottom in TWTR in 2016
Predicted Stock Market Bottom February 2016
Predicted the Commodities Deflation in 2014-2015
Predicted the Sugar Rally in 2015
Predicted the Stock Market Top and Selloff in July-August 2015
Predicted the Potentially Multi-Year Stock Market Top in Spring 2015
Predicted the AAPL Top in June-July 2015
Predicted the Stock Market Tops July 2014, September 2014 and December 2014
Predicted the Top in High-Yield Instruments in 2014 and 2015 (HYG and JNK)
Predicted the US Dollar Rally beginning Summer 2014
Predicted the Stock Market Top in Late December 2013 Early 2014
Predicted the Coffee Rally in Late 2013 Early 2014 via JO
Predicted the AA Bottom in 2013
Predicted the Stock Market Tops in May 2013 and July 2013
Predicted the Dollar/Yen Appreciation (Yen Weakness) Starting in 2012
Predicted the President Obama Re-Election Win One Year in Advance
Predicted the Natty Gas Bottom in 2012
Predicted the AAPL Tops in April 2012 and September 2012
Predicted the Stock Market Tops in February 2011, May 2011 and July 2011
Predicted the Stock Market Top in April 2010
Predicted the Stock Market Top in October 2007
Warned of the Impending Real Estate Bubble 2002-2005
Warned of the Impending Dot-Com Bubble 1998-1999

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