Thursday, January 6, 2011
NIA's Top 10 Predictions for 2011
NIA's Top 10 Predictions for 2011The National Inflation Association is pleased to announce its top 10 predictions for 2011.
1) The Dow/Gold and Gold/Silver ratios will continue to decline.
In NIA's top 10 predictions for 2010, we predicted major declines in the Dow/Gold and Gold/Silver ratios. The Dow/Gold ratio was 9.3 at the time and finished 2010 down 15% to 8.1. The Gold/Silver ratio was 64 at the time and finished 2010 down 28% to 46. We expect to see the Dow/Gold ratio decline to 6.5 and the Gold/Silver ratio decline to 38 in 2011. Later this decade, we expect to see the Dow/Gold ratio bottom at 1 and the Gold/Silver ratio decline to below 16 and possibly as low as 10.
2) Colleges will begin to go bankrupt and close their doors.
We have a college education bubble in America that was made possible by the U.S. government's willingness to give out cheap and easy student loans. With all of the technological advances that have been taking place worldwide, the cost for a college education in America should be getting cheaper. Instead, private four-year colleges have averaged 5.6% tuition inflation over the past six years.
College tuitions are the one thing in America that never declined in price during the panic of 2008. Despite collapsing stock market and Real Estate prices, college tuition costs surged to new highs as Americans instinctively sought to become better educated in order to better ride out and survive the economic crisis. Unfortunately, American students who overpaid for college educations are graduating and finding out that their degrees are worthless and no jobs are available for them. They would have been better off going straight into the work force and investing their money into gold and silver. That way, they would have real wealth today instead of debt and would already have valuable work place experience, which is much more important than any piece of paper.
Colleges and universities took on ambitious construction projects and built new libraries, gyms, and sporting venues, that added no value to the education of students. These projects were intended for the sole purpose of impressing students and their families. The administrators of these colleges knew that no matter how high tuitions rose, students would be able to simply borrow more from the government in order to pay them.
Americans today can purchase just about any type of good on Amazon.com, cheaper than they can find it in retail stores. This is because Amazon.com is a lot more efficient and doesn't have the overhead costs of brick and mortar retailers. NIA expects to see a new trend of Americans seeking to become educated cheaply over the Internet. There will be a huge drop off in demand for traditional college degrees. NIA expects to see many colleges default on their debts in 2011. These colleges will be forced to either downsize and educate students more cost effectively or close their doors for good.
3) U.S. retailers will report declines in profit margins and their stocks will decline.
Although most analysts on Wall Street believe retailers will report a major increase in holiday season sales over a year ago, NIA believes any top line growth retailers report will come at the expense of dismal bottom line profits. NIA expects many retailers to report large declines in their profit margins for the 4Q of 2010 and first half of 2011. Retailers have been selling goods at bargain basement prices in order to generate demand. Americans, being flush with newly printed dollars from the Federal Reserve, have been eager to buy up supplies of goods at artificially low prices. However, shareholders will likely sell off their retail stocks on this news. As share prices of retail stocks decline, retailers will begin to rapidly increase their prices by mid-2011.
4) The mainstream public will begin to buy gold.
Although the mainstream media continues to proclaim we have a gold bubble, it is impossible to have a gold bubble when mainstream America isn't buying gold. The average American is more likely to be a seller of gold through companies like Cash4Gold, in order to raise enough dollars to put food on their table. Most Americans today don't even know the price of gold. During the next 12 months, we expect to see a huge ramping up in the public's knowledge about gold. More Americans than ever will know the current price of gold and understand that it is real money. By the end of 2011, we expect the general public to begin looking at gold as an investment, just like they began looking at Real Estate as an investment in 2003. Sometime during the next six months, we believe you will overhear a stranger at a restaurant talking about investing into gold. We believe the price of gold could surge to as high as $2,000 per ounce in 2011......read on
2001 - 2010 Gold % Annual Change
James Turk writes --
Gold rose 29.8% in 2010 against the US dollar. It is gold's second best annual gain this past decade and the tenth year in a row it climbed against the world's reserve currency.
Gold also rose last year against eight other major world currencies, but its greatest appreciation was against the US dollar. The following table presents the annual change in gold's rate of exchange this decade against nine major currencies.
| Gold % Annual Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|
|
| USD | AUD | CAD | CNY | EUR | INR | JPY | CHF | GBP |
| 2001 | 2.5% | 11.3% | 8.8% | 2.5% | 8.1% | 5.8% | 17.4% | 5.0% | 5.4% |
| 2002 | 24.7% | 13.5% | 23.7% | 24.8% | 5.9% | 24.0% | 13.0% | 3.9% | 12.7% |
| 2003 | 19.6% | -10.5% | -2.2% | 19.5% | -0.5% | 13.5% | 7.9% | 7.0% | 7.9% |
| 2004 | 5.2% | 1.4% | -2.0% | 5.2% | -2.1% | 0.0% | 0.9% | -3.0% | -2.0% |
| 2005 | 18.2% | 25.6% | 14.5% | 15.2% | 35.1% | 22.8% | 35.7% | 36.2% | 31.8% |
| 2006 | 22.8% | 14.4% | 22.8% | 18.8% | 10.2% | 20.5% | 24.0% | 13.9% | 7.8% |
| 2007 | 31.4% | 18.1% | 11.5% | 22.9% | 18.8% | 17.4% | 23.4% | 22.1% | 29.7% |
| 2008 | 5.8% | 33.0% | 31.1% | -1.0% | 11.0% | 30.5% | -14.0% | -0.3% | 43.7% |
| 2009 | 23.9% | -3.6% | 5.9% | 24.0% | 20.4% | 18.4% | 27.1% | 20.3% | 12.1% |
| 2010 | 29.8% | 14.0% | 24.3% | 25.3% | 39.1% | 25.0% | 13.2% | 17.0% | 34.5% |
| Average | 18.4% | 11.7% | 13.8% | 15.7% | 14.6% | 17.8% | 14.9% | 12.2% | 18.3% |
2011: Year of the bank run?
From CNN finance:Is a bank run about to bring Europe to its knees?
Some market watchers say yes, pointing ominously to the torrents of money pouring out of Ireland.
Not such a good bet
Irish bank deposits declined in November for the fourth straight month, the central bank said last week. Overseas deposits fled the country at their fastest pace in more than a year.
The deposit flight compounds the stress on a financial system whose massive property-lending losses already have driven the government to accept an unpopular bailout from the European Union and the International Monetary Fund.
Worse yet, it shows that the solutions policymakers slapped together in the fall of 2008 helped in some cases to create even bigger problems -- ones that are now coming due.
Unconditionally guaranteeing bank deposits is just such a policy, in a country where loan losses made the banks insolvent, job loss left many taxpayers peniless and deposits now at least double annual economic output.
And this time, given the unpopularity of bailouts and dysfunctional European politics, there is ample reason to fear the banking mess won't so easily be swept aside.....read on
End of Empire: World Bank taps offshore yuan bond market for first time
From Reuters:SHANGHAI, Jan 5 - The World Bank issued its first yuan-denominated bond, raising $76 million and trying to promote the use of the Chinese currency in international markets at a time when China's stake in the institution is about to increase.
The World Bank said in a statement on Wednesday the International Bank for Reconstruction and Development, its low-interest lending arm, had priced the two-year paper at 0.95 percent, representing the lowest yield so far on same-maturity dim sum bonds -- the nickname for yuan-denominated bonds issued in Hong Kong.
The offshore yuan market in Hong Kong has seen explosive growth in less than a year, with renminbi deposits in the former British colony surging more than 150 percent in the six months to October 2010. Global companies and institutions such as the Asian Development Bank, McDonald's Corp and Caterpillar have all issued yuan bonds.....read on
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