The Keystone Speculator’s 2017 Predictions
It’s time for another year of predictions and forecasts that will provide comic relief in December 2017. Making predictions one year in advance may seem like a fool’s errand but it is a very important exercise for all traders and analysts 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 redeemed themselves in 2016 after the entire lot was dead wrong at forecasting the stock market in 2015. Even in 2016, the stock market was lackluster until the central bankers stepped up the pace in the second half of the year which rewarded everyone that remained blindly long the stock market. Several Wall Street analysts were far too bullish with their estimates last year. Keystone was far too bearish last year which looked genius until March began. The BOE pumped stocks higher after the Brexit vote in late June 2016 which started the second half stock market orgy. Then the ECB is pumping stocks higher with quantitative easing that was extended. The central bankers are the market.
Wall Street
Prognostications for the S&P 500 (SPX) in 2017;
RBC (Golub) 2500
Oppenheimer
(Stoltzfus) 2450
BCS (Glionna) 2400
JPM(Lakos-Bujas)
2400
BMO Capital
(Belski) 2350-2500
Wharton (Siegel) 2340-2470
(18 or 19x130)
Omega (Cooperman)
2380 (17x140)
DB (Bianco) 2350
S&P CFRA
(Stovall) 2335
C (Levkovich)
2325-2425
CS (Garthwaite)
2300
MS (Parker) 2300
BAC (Subramanian)
2300
GS (Kostin) 2300
Fundstrat (Lee)
2275
Keystone Speculator 1900
[Credit has to be given to the Wall Street analysts. They are permabulls to begin with and the calls for ever-higher stocks is the correct call. Keystone was way off but as always mentioned, and highlighted below, the prognostications are only a guesstimate and the trading through the year is not based on the forecasts.]Golub is the “SPX 2500” man; he will either live by the sword or die by the sword as the months play out. Every estimate is above 2300 except Tom Lee and Keystone. Lee overestimated the SPX last year although generally his continuous bullish call for stocks was correct. Interestingly, Lee placed himself purposely at the low end of the range; if markets tank he may want to say he was at least the guy with the lowest estimate. Seven Wall Street estimates are above SPX 2400 for 2017. Keystone is targeting an uber low SPX 1900 for one year from now.
Keystone was very bearish for last year which looked genius for the first two months but the central bankers again prove too powerful. The Federal Reserve forecasted four hikes in 2016 and only pulled off one in the final two weeks of the year with Chair Yellen’s credibility against the wall. Will the central bankers finally run out of gas with the stock market rolling over?
For 2017, Keystone is the only Wall Street Analyst looking for a substantially down stock market. The year should finish negative and may even include a flash crash or regular crash event. Stocks are probably from 20% to 80% overvalued due to eight years of central banker intervention. No one truly knows what any asset is worth anymore due to the multi-year central banker involvement in global markets. The ECB begins tapering in March-April, so barring any further central banker shenanigans, the springtime should represent where the global central banker intervention in markets permanently wanes lower. Without the same amount or more of monthly easy money, stocks will go down. There are huge hopes for more stock market upside with Trump providing an enormous stimulus package as well as lowering taxes and reducing regulations but everyone’s hopes may be a bit lofty and the stock market may have it all priced-in.
The basic theme for 2017 is that the taper in the ECB purchases begins from March to April. The forecast is that stocks will top out between late February and mid-March. A low will occur in April, then a rally higher again to a topping out in late April or early May, and, for the sake of drama, that will mark a multi-year top for stocks (the monthly charts currently hint at this outcome). So stocks will likely sell off in January, then recover in February and top out as mentioned. Think of it as a top now, then a peak between late February and mid-March, then a peak in late April early May and stocks will not see the highs from these peaks for many months, perhaps years. The alternate forecast is for the stock market to simply roll over at anytime and begin trending lower on a long term basis.
Another theme is the 18-year secular stock cycle that should likely finish with a couple down years ahead (more on this below).
The year begins at SPX 2239. [The year ends at 2674 a +19.4% gain a blowout year for the bulls.]
Keystone is expecting a multi-year top to occur in 2017 similar to the May 2015 market top. The only reason that May 2015 was not THE multi-year top is the never-ending central banker intervention and accommodation. Investors will probably begin pricing-into the market in late February and March the realization that the ECB is reducing its monthly QE purchases. QE is the mother’s milk of stock prices. Global central bankers including the Fed, BOJ, BOE and ECB are running out of bullets. A wild card is how much juice China’s PBOC can add to the stock market.
Keystone is calling a multi-year top in stocks this year. The SPX monthly chart is in negative divergence over the last two years but there is some near-term juice remaining after the late-2016 ECB QE extension and Trump victory pumps. Thus, a jog move would be expected on the monthly basis to begin the year (down-up-down). Keystone says a multi-year top will be placed in the stock market this year and these prices will not be seen again for several years. [Keystone explained this with the monthly charts during 2017 the charts are not yet fully negatively diverged to create the top.]
When stocks come off one of the tops described above for early 2017, dip-buyers will loyally jump in and buy but stocks will continue to stumble lower. This will create panic and fear that the central bankers have finally run out of gas. Once trust, confidence and credibility in the Fed is lost, all is lost. When buying the dips is viewed as running into a buzzsaw, full-scale large block selling will occur in the stock market. The wealthy, that have raped the system for all its worth over the last eight years gaining huge profits from the Fed’s and other central bankers Keynesian policies, will lock in profits. They did not get wealthy by riding stock markets lower. They will take their chips off the table. Average Americans that got caught up in the stock market hype after the Trump election will be left holding the bag like 2007-2009.
Keystone continues to forecast an ongoing disinflationary and deflationary scenario around the world which is extremely counter to the universal expectation that inflation increases from here forward. The media already labels the future as the ‘great reflation’. 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. In 2017, house prices will retreat as the housing market stumbles. The deflationary and disinflationary funk will likely continue for a year or two longer, much to the consternation of Wall Street analysts, with inflation kicking in perhaps in 2018-2020 then hyperinflation in the early 2020’s (which will be a whole new set of problems). Traders will be frustrated this year at not seeing the inflation and far higher rates occur that everyone else is now forecasting.
It is likely very prudent to exit long stocks that you are not willing to hold for a few years. Do not let media commentators goad you into staying in the stock market. The smart folks this year are likely the ones moving assets into cash and willing to wait things out for a few weeks or months or even a year or so to see what happens. 2017 may be a year where traders are picking up nickels in front of a bulldozer.
NOTE: Do not confuse Keystone’s predictions and prognostications with actual trading positions. Keystone highlights short-term trades in the blog and the status of the Keybot the Quant algorithm, that controls 65% of Keystone’s 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. Keystone adjusts positions in the market very quickly. If you cannot perform adjustments quickly, it may be prudent to reduce long exposure to stocks in 2017. A flash crash is potentially on the table and will provide no warning and, most importantly, may not quickly recover as in prior flash crashes. Without further adieu, Keystone provides the following 180 predictions for 2017.
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The Keystone Speculator’s 2017 Predictions
SPX High for 2017: 2283 (if this is breached 2328) [no, 2695]
SPX Closing Price for 2017 (SPX Begins at 2239): 1900 [no, 2674]
SPX Low for 2017: 1810 [no, 2245]
[The current price at 2239 reflects S&P 500 earnings at say, $120 with a PE of 18.7 or $118 at 19.0. Earnings average about $118 in 2016. For 2017, the Wall Street consensus is expecting earnings at $132 in 2017 which would target the SPX 2468-2508 range. The 2007 stock market top occurred with a 20.3 PE and the 2000 top with a 26.2 PE. The current 19-ish PE is misleading since the RUT small caps are well above a 20 PE for the last few years and the 19 is an artificially lower number due to the obscene and aggressive stock repurchase programs over the last four 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. Bob Shiller’s Cape PE is 28.3 consistent with prior major market tops (its historical average over 130 years is 16.7). Keystone puts on a bear suit for this year (see the comments on the 18-year secular bear cycle below) and forecasts far lower numbers than the consensus. Keystone projects earnings to drop in the second half of the year, perhaps quite dramatically due to recession, to $110 and $100, far lower than anyone expects. For the year, the average earnings are forecasted at $110 so with the 18.7 multiple a 2057 target is calculated. At $100, where the year may end, that would place the SPX at 1870-1900.]
Dow Industrials Range in 2017 (INDU starts at 19764): 15400-20230 [no, 19760-24900]
Dow Industrials Closing Price for 2017 (INDU): 16000 [no, 24719]
Nasdaq Composite Range (COMPQ starts at 5383): 4200-5580 [no, 5400-7000]
Nasdaq Composite Closing Price (COMPQ): 4550 [no, 6903]
Russell 2000 Industrials Range (RUT starts at 1358): 950-1428 {no, 1340-1560]
Russell 2000 Industrials Closing Price (RUT): 1050 [no, 1536]
Dollar Range (USD starts at 102.25): 87-103 [yes, 91-104]
Dollar Closing Price (USD): 90 [yes, 92]
Dollar/Yen Range (USDJPY starts at 117): 100-122 [yes, 107-118]
Dollar/Yen Closing Price (USDJPY): 111 [yes, 112.66]
Euro Range (XEU starts at 1.085): 1.03-1.15 [yes, 1.03-1.20]
Euro Closing Price (XEU): 1.13 [no, 1.20]
2-Year Note Yield Range (UST2Y starts at 1.21%): 0.6%-1.6% [yes, 1.12%-1.92%]
2-Year Note Closing Yield (UST2Y): 1.00% [no, 1.89]
5-Year Note Yield Range (UST5Y starts at 1.76%): 1.15%-2.40% [yes, 1.64%-2.26%}
5-Year Note Closing Yield (UST5Y): 1.75% [no, 2.20%]
10-Year Note Yield Range (TNX starts at 2.46%): 1.6%-3.0% [yes, 2.06%-2.61%]
10-Year Note Closing Yield (TNX): 2.0% [no, 2.40%]
30-Year Note Yield Range (TYX starts at 3.06%): 2.25%-3.30% [yes, 2.65%-3.20%]
30-Year Note Closing Yield (TYX): 2.65% [yes, 2.75%]
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]
2-10 Spread at End of Year (Starts at 125 basis points): 100-ish (2.0% minus 1.00%) [no, 53]
Unemployment Rate % Range (4.8% at start of year): 4.7%-5.6% [yes, 4.1%-4.8%]
Unemployment Rate % December 2016: 5.1% [no, 4.1%]
Will Any Monthly Jobs Report During 2017 Be Under 200K Jobs? How Many if Yes? Yes, nine.[yes, only about 4]
Will Wage Inflation Appear in 2017? No, wages will stay flat at about 3% per year, without wage inflation, the Federal Reserve cannot succeed at creating inflation. [yes]
GDP Average during 2017: 2.0% [yes, 0.7% to 3.3%]
WTIC Oil Range (WTIC starts at 53.87): 28-58 [yes, 42-61]
WTIC Oil Closing Price (WTIC): 42 [no, 60]
Brent Oil Range (BRENT starts at 56.94): 28-62 [yes, 45-67]
Brent Oil Closing Price (BRENT): 43.60 [no, 66.87]
Natty Gas Range (NATGAS starts at 3.73): 2.00-4.00 [yes, 2.6-3.5]
Natty Gas Closing Price (NATGAS): 2.70 [yes, 2.95]
Gold Range (GOLD starts at 1151): 720-1280 [no, 1135-1360]
Gold Closing Price (GOLD): 975 [no, 1309]
Silver Range (SILVER starts at 16): 9.80-21.50 [yes, 13-18.5]
Silver Closing Price (SILVER): 12.20 [no 17.15]
Copper Range (COPPER starts at 2.51): 1.40-3.20 [yes, 2.45-3.30]
Copper Closing Price (COPPER): 1.80 [no, 3.30]
Commodities Range (CRB starts at 192.55): 120-220 [yes, 166-194]
Commodities Closing Price (CRB): 170 [yes, 193]
China Growth Rate % Average for 2017 above or below +6.5%?: Below [no]
BDI (Baltic Dry Index starts at 960) Range: 420-2200 [yes, 690-1700]
BDI at end of 2017: 1400 [yes, 1366]
Technology Sector (XLK starts at 48.37) Higher or Lower in 2017? Lower [no]
Semiconductors Sector (SOX starts at 906) Higher or Lower in 2017? Lower
Semiconductors Sector (XSD starts at 56.10) Higher or Lower in 2017? Lower
Biotech Sector (IBB starts at 265) Higher or Lower in 2017? Lower
Financials Sector (XLF starts at 23.27) Higher or Lower in 2017? Lower
Health Care Sector (XLV starts at 68.92) Higher or Lower in 2017? Lower
Retail Sector (RTH starts at 75.80) Higher or Lower in 2017? Lower
Retail Sector (XRT starts at 44.04) Higher or Lower in 2017? Lower
Consumer Discretionary Sector (XLY starts at 81.46) Higher or Lower in 2017? Lower
Consumer Staples Sector (XLP starts at 51.75) Higher or Lower in 2017? Lower
Energy Sector (XLE starts at 75.30) Higher or Lower in 2017? Lower
Industrials Sector (XLI starts at 62.19) Higher or Lower in 2017? Lower
Materials Sector (XLB starts at 49.70) Higher or Lower in 2017? Lower
Utilities Sector (UTIL starts at 659) Higher or Lower in 2017? Lower
Utilities Sector (XLU starts at 48.58) Higher or Lower in 2017? Lower
Telecom Sector (IYZ starts at 34.48) Higher or Lower in 2017? Lower
Transportation Sector (TRAN starts at 9052) Higher or Lower in 2017? Lower
Transportation Sector (IYT starts at 163) Higher or Lower in 2017? Lower
Homebuilders (XHB starts at 33.86) Higher or Lower in 2017? Lower
Real Estate Sector (XLRE starts at 30.79) Higher or Lower in 2017? Lower
The 18-year cycle is the most reliable stock cycle and is currently in a secular bear from 2000 to 2018. Dramatic cyclical rallies are very common in the secular bears such as 2003-2007 and from March 2009 to present. Since only a couple of years remain in the secular bear cycle and stocks continue to rally, the next couple years, 2017 and 2018, have to have a downward bias. For 2017, let’s go with a down year for the stock market. The secular bear cycle should finish with negativity. Then the secular bull 18-year cycle begins from 2018-2036 with hyperinflation a future problem likely kicking in after 2019.
A long overdue recession is expected to begin in 2017.
The buyback activity fades in 2017.
M&A activity will continue but at a far slower pace this year. [no]
Earnings will remain challenged and noticeably decrease this year especially in the back half contrary to the universal consensus that says earnings will run to the lofty 132-140 area..
Top line revenue numbers for companies will remain challenged (flat or lower). [yes]
There remains a great overcapacity of commodities and goods around the world. The lack of demand for products will stifle economic activity and disappoint those looking for a recovery. [yes]
As described above, the US markets should top out with a significant top in the January-May time frame and this will include the major European indexes (DAX, CAC, FTSE, etc..) and Japan (NIKK). These global indexes will all top out together because the eight-year global central banker joy ride is over.
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. [yes]
Commodities will remain subdued in a lingering global deflationary environment. [yes]
Wage inflation disappoints in the US. Wages will remain flat at the 3% annual rate disappointing the Fed. Inflation, which the Federal Reserve has tried to create for eight years with money printing, cannot exist without wages increasing. At the end of 2016, wages were +2.9% annually and will not make much headway higher. This will disappoint the Fed and market participants. [yes]
Another theme this year is the lack of ‘velocity of money’. This has prevented inflation from occurring despite the central bankers printing money for eight years. The money sits at the banks and companies are only willing to use cash for buybacks and divvy’s which serve to pump stock prices higher and make the wealthy richer. The velocity of money, the multiplier effect, will not kick in which means inflation is not yet here. Inflation is projected to become an issue more in the 2018-2010 time frame. [yes]
The biggest parlor game this year is guessing how many times the Federal Reserve will hike rates. The Fed is at three hikes. In 2016, the Fed projected four hikes only to implement one. The bond market is indicating perhaps two hikes. Keystone is expecting a recession so the rate hike talk will quickly fade. The forecast is for no rate hikes this year. The Fed will hold off in the spring in March and after that it will be obvious that a hike will not occur as the economy stumbles and a recession looms. [no, 3]
The Federal Reserve will return to the ZIRP policy late in the year due to a weakening economy causing a loss in Fed credibility. The consensus will grow into yearend that 2018 will be a lousy year creating more doom and gloom.
A major breakdown may occur for the stock market on 1/18/17 or 3/18/17 give or take a week or two on each side of each date.
A major breakdown may occur for the stock market on 7/14/17 or 9/14/17 give or take a week or two on each side of each date. [yes]
Even though Trump plans on providing
stimulus, tax cuts and deregulation, stocks are already very highly valued. Trump’s
plans will be slow to implement and stocks have already priced in most of the
move higher.
For retail stocks, there will be many
bankruptcies and store closings this year beginning right away in January. The
United States is overstored by a factor of three compared to other developed
nations. In other words, two-thirds of al retail stores could disappear and the
US would then only be equally-stored as other Western nations. [yes]
Cosmetics will continue doing well such as
ULTA but the stock is topping. Department stores will be weak such as M, TGT,
JCP and SHLD. People are more price conscious so discount outlets such as BURL
and TJX may hold up well this year and dollar stores such as DLTR and DG. [yes]
The selfie-beauty trend will continue where
young people spend money on cosmetic products so they look good when they leave
the house in case any selfies are taken. ULTA is a favorite of long traders,
however, the happiness is already priced in and anyone chasing it is going to
regret it. ULTA will trade flat, print a significant top, and roll over lower
during the year frustrating everyone that thought they had a sure bet. For the
adventurous, ULTA is an attractive short for 2017. [yes, great call]
PETS is on a ramp higher so there is a touch
more upside but the stock will print a multi-year top this year between March
and July. Traders are throwing money at the pet sector and will be disappointed
at year end. [yes]
Twitter, TWTR, will be viewed as a successful
company this year and probably taken out by one of the tech bigwigs. As global
turmoil increases, more global citizens will use Twitter as a news feed.
Uber is the IPO of the year this year.
Companies involved with cancer research,
drugs and treatments will do well. [yes]
Banks will not be the great trade of the year
that everyone expects.
Semiconductors, SOX, will come back to earth
this year and lead or coincidentally drop with the expected sell off in broad
indexes.
Tourism, travel, hotel and airline industries
will suffer as terrorism around the world remains at the same pace and worse.
The 3-D stocks such as DDD, SSYS, VJET and XONE
are potential buys but not until mid-year.
High-flying stocks such as AAPL, FB, AMZN,
NFLX and GOOGL are all set up to print a significant market top, likely
multi-year, and roll over. The carnage will create a gloomy mood in markets
this year and add to the negativity as the months play out.
High-yield plays are a short this year such
as JNK and HYG. [yes]
The Puerto Rico debt problem will fester and
send high-yield plays lower. The expected drop in oil prices and move lower in
energy stocks will create a drag on high-yield plays.
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.
Natural gas use will increase. Companies
involved with manufacturing and operating portable gas plants will do well. [yes]
Coffee should do well this year on the long
side. JO is a potential play.
Grains and ag plays are a favorite long this
year such as JJG or WEET (thinly traded), SSG and DBA. They have potential to far
outperform the broad market.
Repatriated funds from overseas, if Congress
approves a plan, will go to buy backs and only serve to pump stock prices
higher and make the wealthy more filthy rich. If Congress places stipulations
on the repatriated fund for it to go to specific uses, the program will
disappoint.
Protectionism will increase this year around
the world including intellectual property protectionism which will slow down
technological and medical advances (less global cooperation and exchange of
information). [yes]
The UK economy has been unaffected by the
Brexit vote, however, PM May will implement Article 50 before March to begin
the two-year Brexit process, and this will create lower UK stocks and a lower
FTSE and softer economy.
The pound (sterling) will surprise traders
since it will not weaken significantly lower. Te pound will stabilize and
travel flat with an upward bias through the year. [yes]
The euro is not going to parity. The euro
will move more sideways through the year like the US dollar index. [yes]
In March 2017, in the Netherlands, another
test of global populism occurs with the elections. The expectation is the trend
towards populism and nationalism continues.
In France, the spring election is a pivotal
event for Europe and the global markets only outdone by the German election in
the early Fall. The polls indicate that LePen has 30% and would not win the
election in the second round; however, the polls were incorrect last year for
both the Brexit vote and the US presidential election. If there is a terrorism
event before the French election, LePen may ride that event to victory. Barring
that, LePen will not win. Even though
LePen does not win, the citizens will still want to call a referendum vote on
leaving the European Union which will cause turmoil in France and across the
continent.
In Germany, with the election set for the
September-October time frame (no firm date as yet), Chancellor Merkel will
receive a run for her money. More heinous incidents will occur by refugees that
she invites in with open arms so her credibility decreases. Merkel will barely
win the election and will have difficulty controlling a Germany that is split. [yes]
Deutsche Bank will be a big story this year
and there will be worries that it is creating contagion and a new banking
crisis. The bank may be tainted by a scandal that involves loans to President
Trump and even if on the up and up will drag the president and Germany through
the mud. [yes]
Greece will rear its ugly head again creating
drama as it needs more bailout money. [yes]
Italian, Spanish and Portuguese bank problems
create global contagion.
Vietnam will be a favorite overseas flavor of
long traders in 2017. [yes]
Vietnam Airlines will have a very successful
year. [yes]
In January, some pent-up tax-loss selling
will occur that did not take place in early December as when it usually
happens. Investors delayed the selling expecting Trump to lower capital gains
taxes this year.
OPEC is a den of thieves. The cartel will lose
its credibility this year (what little it has). The cartel had lost relevance
years ago but cobbled together significance during 2016 to stabilize oil prices
with productions freezes and cuts. The producers will be cheating on the
agreement and stabbing each other in the back. OPEC will be in disarray.
The North American shale producers will ramp
up oil production this year replacing what OPEC has cut. A world glut in oil
will not abate and oil prices will sink lower. [yes, bur recovered]
Turkey is a boiling caldron of trouble in
2017 and will be an epicenter of activity in the Middle East. [yes]
Another assassination attempt will be made on
Turkey PM Erdogan as unrest in Turkey continues.
The United States needs to protect the
electrical grid but the politicians sit on their hands. There may be a close
call with a CME this year (solar flare) but the planet will limp by another
year whistling past the graveyard. The prediction is that Congress will
continue to not act to beef up the grid against either a coronal mass ejection
of an electromagnetic pulse weapon. China or Russia or others may set off a
weapon in the atmosphere above the US that will fry all electronics. The grid
is not protected against either a terrorist act or against a CME. Everyone will
continue to turn a blind eye. Perhaps a close call with a solar flare will
cause Congress to act to protect the grid. [yes]
Terrorists may attack the electrical grid
system potentially trying to damage the towers supporting high tension wires with
explosives. Terrorists may use rifles taking aim at substation electrical
equipment in an effort to cripple power stations employing attacks at multiple
stations at the same time. [yes]
Wild fires will increase in the US and found
to be started by radical Muslims that pledge allegiance to ISIS. [yes]
Malls are under siege this year and al-Shabab
terror group urges attacks on US, UK and Canadian malls. A terrorist attack/s
at a North American mall/s should be expected.
US malls continue turning into eye sores as
people shop on line more and more and visit the mall less and less. Companies will
explore opportunities of turning malls into senior community living facilities. [yes]
Senior center style REIT’s and companies will
do well this year. SNH, BKD, AFAM, companies that cater to senior citizens
should do well.
World governments will begin placing
facilities more and more underground as drones become cluttering the sky.
Underground tunnel-boring machines, drill bits and all industries supporting
excavation and underground infrastructure should do well going forward. Humans
will seek underground shelters at an increased rate. [yes]
Stem cell research will accelerate so
therapeutic stocks should at least hold their own in 2017. Treatments that can
help rebuild myelin or reduce pain from myelin loss will be of interest to
traders. [yes]
Bitcoin will tag 1225 this year. The 1,000
level was hit on the first trading day for the year, 1/2/16, and ran to 1013. However,
bitcoin then collapses to 900. The flight of capital out of China, India and
Turkey will continue and some of that money finds its way into bitcoin.
Bitcoin and virtual currencies become more
widely accepted around the globe this year.
Over 45K businesses now accept bitcoin as payment. [yes]
Trump will become frustrated at how slow
government works. Congress takes time to move legislation through the
bureaucratic system. Trump will complain about things taking too long and
threaten to use executive orders like President Obama (and other presidents)
used. [yes]
Sadly, there will be many violent incidents
and perhaps terrorism at buildings around the world with the “Trump” name on
the facade. Some buildings will remove his name for fear of violence.
Trump will be a thorn in China’s side all
year long. Trump will shut down Chinese banks that provide funding to North
Korea. This action will get the communist’s attention. China needs to stop
dragging its feet with keeping North Korea in line. China is the only nation
that North Korea will listen to. China will be forced, and they do not like to
be forced, to become more involved as a big brother to North Korea.
Just as the British government has thrown
roadblocks in front of the Brexit process after the vote went the opposite way
of the privileged elite, the same will occur in the US. Even though the
republican majority exists in both houses, there will be much opposition to
Trump and roadblocks will appear in his way darkening the rosy path that shined
to begin the year.
Democrats will dog Trump with allegations of conflicts
of interest at companies his kids manage that benefit from his policies. The
democrat-leaning media (about 80% of the media in the US) will be linking
business decisions to Trump’s businesses trying to sway public opinion against
Trump. Accusations of cronyism will increase. [yes]
Trump will not build a long physical wall
across the bottom border with Mexico. Trump will plan a combination of a
physical wall and virtual wall using modern technology to monitor the borders.
Some Trump loyalists will view this as him not honoring his promise to build a
wall which helped get him elected. Trump’s popularity will take a hit after he
reneges on the wall but overall, he will weather the controversy. [yes, ongoing]
Data will be uncovered from the Obama
Administration that will reveal how feckless US policy was in controlling the
southern border with Mexico. [yes]
Trump promised to repeal and replace
Obamacare but instead he will tweak the program and try to call it Trumpcare.
Trump loyalists will be unhappy that he reneges on this campaign promise. Trump
becomes mired in the healthcare quagmire. [yes]
Before the end of the year, Americans become
disenchanted with Trump as his policies take too long to implement and other
problems crop up. A recession is on the come and the economy becomes sicker as
the year moves along.
The Federal debt will move higher under Trump
and create a rift in the republican party since conservatives are the same as
liberals when it comes to piling on more debt.
The universal consensus expects inflation to
ramp up here forward, however, the forecast is that disinflation and deflation
will linger another year or two before the path to inflation appears. [yes]
2017 is a ‘bigger fool’ year for the stock
market. Whoever is buying now is the bigger fool that will turn around during
the year to sell and realize there is no one there. The bigger fool is the one holding
the bag.
Virtual technology will continue to sputter.
The technology has not lived up to the hype. Cost is a problem. The one-half of
America that benefit in the stock market due to the endless central banker
pumping may be a customer but the general public is not interested. The
augmented and virtual reality fields will move forward very slowly and with
subdued enthusiasm. [yes]
Computer wearables will continue to struggle.
Apple Watch will not be the success that CEO Cook expects. Common people do not
have the money to spend on this stuff. The watches and other devices are purchased
and hyped by tech enthusiasts, programmers and app developers since their
livelihoods depend on people buying the products. [yes]
The Apple ear buds will also be slow to catch
on since it looks like you have a cigarette butt in your ear and people will
not like being laughed at. Like the Google Glass flop. [yes]
The ‘internet of things’ loses steam. More
and more people realize all this interconnectivity and technology in every
little gadget is a bunch of rubbish. Consumers will strive for and seek more simple
technology that takes the least amount of time to learn and use. [yes, abstract]
Driverless cars are further away from
mainstream use than thought. The daily news stories make it sound like the cars
are already in standard use. There are reliability, weather and many other
issues not yet handled by the autonomous vehicles. In addition, a slow-moving
driverless vehicle in itself may be a road hazard. Driverless vehicles will
find accelerated applications in mining, trucking and transportation systems this
year but the fully autonomous car for the public is likely many years away
rather than months. [yes]
A suitcase nuke or biological weapon will go
off in a major western City around the globe (US, Europe, Japan or Australia).
The nuclear contamination would be minor as well as the biological threat.
Perhaps a few blocks of a city are cordoned off for clean-up. The nuke angle is
unlikely. It is much easier for a terrorist to get hold of a biological agent
so this is more likely and there may be an event where it is distributed via
aerosol spraying something nasty on a crowd of people that are assembled. The
event will likely have more of an impact psychologically to the populace than
the death and injury it causes which should be minimal.
The further demise of American journalism
occurs and the corresponding rise of the “Citizen Journalist” takes hold. They brought
it on themselves. 80% of the media and news flow in the United States is from
democrat-leaning writers and journalists such as CNN, ABC, NBC, CBS, NPR, PBS,
MSNBC, Salon, Rolling Stone, New York Times, Washington Post, Facebook and
Twitter. 20% of the US media provides
news touting the republican perspective such as Fox News, American Spectator,
Rush Limbaugh, and Mark Levin. 80% and 20% adds up to 100%. Unbiased news does
not exist in America which is sad. [yes]
Everyone has an agenda to pursue except, of course, Keystone the Scribe and the Daily Chronology of Global Markets and World Economics that equally bashes both sides of the corrupt establishment. Main stream journalists and reporters become less relevant as consumers seek out alternative news services free of the sickening spin.
Everyone has an agenda to pursue except, of course, Keystone the Scribe and the Daily Chronology of Global Markets and World Economics that equally bashes both sides of the corrupt establishment. Main stream journalists and reporters become less relevant as consumers seek out alternative news services free of the sickening spin.
A new ‘frugality’ will take hold in America
which reinforces the theme of lack of demand in the economy. Young people do
not chase the materialistic goods to the extent of older people. [yes]
A drone hits an airplane.
The key housing
and auto sectors will weaken this year. [yes, mixed data, hurricanes]Social internet reaches a peaking phase as many people realize they are wasting their lives trying to impress a bunch of strangers. [yes]
The currency wars will increase. Capital outflows will continue from China as the yuan weakens. China’s economy is in serious trouble and will perform a faceplant this year.
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. [yes, but nothing drastic yet]
The US will expand ties and business with India but the BSE and Nifty indexes will trend sideways to sideways lower and end the year negative. [no, big winners]
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. The deflation and disinflationary environment continues despite everyone guaranteeing inflation at the start of the year. [yes, mixed]
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]
Student loan debt problems will surface and a realization hits that the US has a new and serious problem.
Ditto car loans that are the new subprime fiasco.
Social unrest will increase in America. 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.
Attacks on the wealthy population will increase both physically and property-wise. [no]
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. [no]
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.
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, mixed]
Congress will begin discussions 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]
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 but not much]
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.
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. This may occur in the January-May time frame. 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.
Here are some of Keystone’s individual stock picks for 2017 with the prices at the start of the year. 11 long ideas and 10 short plays. If the markets are as weak as Keystone expects, almost any stock on the long side would not be attractive while short plays should be in vogue all year long. It will be an interesting list to watch this year; 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.
MGPHF 0.94 (penny stock; graphene) [yes, 1.96]
DBA 19.97 (ag)
JJG 28.16 (grains)
JO 19.55 (coffee)
SSG 21.46 (sugar)
TWTR 16.27 (social internet; real-time news feed) [yes]
ILMN 127.65 (genetics; Grail cancer detection) [yes]
MBLY 38.23 (chips and tech for autos) [yes]
CMG 376.82 (burrito restaurant)
NVGS 9.33 (propane; portable gas units; Wilbur Ross)
HDGE 9.25 (bear ETF)
AAPL short from 119 and higher (tech) [no]
FB short from 128 and higher (social internet)
TSLA short from 250 and higher (electric cars) [yes]
AMZN short from 820 and higher (online retailer)
NFLX short from 129 and higher (media)
GOOGL short from 826 and higher (tech)
JNK short from 36 and higher (high-yield) [yes]
HYG short from 87 and higher (high-yeld) [yes]
SDY short from 85.6 and higher (divvy ETF)
DVY short from 88 and higher (divvy ETF)
Keystone's Past Year's Predictions (about two-thirds of the above predictions
for 2017 would be expected to come true):
2017 Predictions were 44% Correct
2016 Predictions were 57% Correct
2016 Predictions were 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 the Top in UTIL (Utilities) November 2017
Predicted the Top in ULTA in May-June 2017
Predicted the Top in US Dollar Index at 104 at start of 2017
Predicted the October 2016 Top in High Yield HYG and JNK
Predicted the Top in Utilities in July 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 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
© 2011. 2012. 2013. 2014. 2015. 2016. 2017. 2018. The Keystone Speculator™. All Rights Reserved. No part of this blog or its contents may be reproduced in any fashion without expressed written consent from The Keystone Speculator™.
© 2011. 2012. 2013. 2014. 2015. 2016. 2017. 2018. The Keystone Speculator™. All Rights Reserved. No part of this blog or its contents may be reproduced in any fashion without expressed written consent from The Keystone Speculator™.
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