Every year I put out a list of predictions for the next year. The goal here is to find solid and profitable trends that you can make money on, rather than predict fantastical black swan events that may or may not happen.
For your comedic pleasure, here are last year’s predictions with comments. Let’s see if I was a champ or a chump.
Last year I wrote:
1. Rates: range bound between 1.60% and 3%.
The 10-year Treasury yield should stay between 1.60% and 3%, as the Fed has little room to move much higher. Furthermore, a rush to safety due to a failing European banking sector, or a Chinese meltdown, will keep a lid on higher rates.
Turns out I was a genius on this one. Rates have been flat all year and stayed between 2.06% and 2.60%, which is pretty unusual, as you can see from this long-term chart:
2. Housing: slow and steady.
Housing prices will continue to grow around 4% for 2017. Inventory is low, yet new buyers are hard to find, as the next wave of homebuyers range between 21 and 26 years old.
Existing home sales for 2016 came in at 5.61 million. A 4% move higher would simply be following the trend.
This prediction was pretty close. Housing prices grew 5.4% last year.
3. Gold is going higher, but not why you think.
China has overtaken the U.S. as the number-one importer of oil. Russia now sells China oil and takes the yuan/gold in return. Both Russia and China are selling U.S. Treasuries and buying gold. Russia added 168.5 metric tons in 2016, and China added 80.03 metric tons. Gold is increasing as a backer of currency, while oil is decreasing. At some point the market will realize this and buy gold.
Gold is up about 10% on the year but has sold off significantly over the last quarter.
I was correct, but we didn’t have the big breakout move higher. That said, you should buy gold here.
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4. Oil: $61.55 WTI
The price of oil is difficult to predict in the best of years. That said, when it broke down in 2014, the chart made it clear that it was going a lot lower, as I wrote repeatedly at the time.
Here is the WTI chart:
As you can see, we are trading well below the 10-year average. Reversion to the mean would suggest a price of around $75. However, the oil price doesn’t move in a straight line. There are many factors that influence the price of oil, including supply and demand, the U.S. dollar, global GDP, OPEC cheating, speculation, and the growing market share of electric/solar power.
At this point it is difficult to determine the oil price next year, which is why all the Wall Street seers are saying between $50 and $60 a barrel. The answer is that if we break into the higher channel based perhaps on sustained GDP growth/repatriation of money/Trump optimism, we will see oil trade between $60 and $80. Poor manufacturing numbers and a strong dollar will see the trend between $55 and $35. If you are a short-term trader, you could buy the breakout and sell the breakdown, depending on events.
Long-term investors should wait to buy when it shows a bottom signal. I’d be a strong buyer if it bounced off $33 again.
This was another good call.
Here’s your WTI three-year chart:
We got that move into the upper channel. WTI crude is now at $57.77. One more leg higher and we can hit $61.55 before the end of the year.
5. Pre-war spending
One of the big winners of 2017 will be the defense sector. Every time Trump tweets a bad word about Boeing (NYSE: BA) or Lockheed Martin (NYSE: LMT), you should buy it.
It’s been a banner year for Boeing. The aerospace company is up 90%! That’s huge for a Dow stock. The company has 6,000 planes on backorder and will produce 52 of its 737s a month. Amazing.
Lockheed Martin boosted delivery of the F-35 by 40% this year and delivered 66 of the fighter planes, and it will hit full production of 160 a year by 2023.
So, that’s a pretty good run of predictions. Next week I will tell you how to profit from 2018.
All the best,
Christian DeHaemer
Energy and Capital
My original article can be found here.
P.S. My best calls from last year were Ethereum and Bitcoin in Bubble and Bust Report. I recommended ETH at $96. It is now at $804, a 737% gain.
Here is what one reader had to say:
Christian: Signed up for your goldminers thoughts. What a dude you are!
Recommending Ethereum at $ 92.00. I followed you at exactly that – $92.00. Currently, DEC 18th, $825.00. joined too late for your BTC poke at $450.00 then, but you got me into crypto. You rock. I recommend you.
— Colin
Thanks, Colin. That makes my day.
For the record, Bitcoin is at $17,798 at the time of writing, which is a gain of 3,863%.
If you’d like to get in on 2018’s big gainers, click here and join us today.
