2014 Predictions

Each year, the Miles Franklin Blog publishes its forecast of key trends for the coming 12 months.  Note the word trends; as we long ago gave up on predicting specific market levels.  To wit, paper financial markets have become so hopelessly, relentlessly rigged, that the factors we’ve spent a lifetime analyzing – i.e., fundamental and technical – have become useless over short-term periods such as a year; let alone, a month.  In fact, technical analysis may have been permanently disabled by government intervention; which frankly, utilizes’ traders “chart reading” as a weapon against them.  Conversely, we feel more confident than ever about discussing the PHYSICAL markets that underlie them; specifically, gold and silver.
Again, such predictions will not involve specific numbers or timeframes.  Instead, they will simply focus on the projected “top economic stories” of 2014, particularly as they relate to Precious Metals.  And thus, away we go!
1. Worldwide interest rates will continue to rise, led by the United States.  This trend commenced when “taper talk” commenced in mid-2013; in effect, validating the worst bond market fundamentals of our lifetimes.  And if rates do indeed rise, NOTHING will be spared from the ensuing financial nuclear destruction.  Nothing, that is, but real money.  As we wrote in September, the entire world is irreversibly addicted to ultra-low interest rates; and thus, even the tiniest rate increase will be catastrophic.
In the U.S. alone, a miniscule increase in the benchmark 10-year Treasury yield – from 1.6% to 3.0% – has already caused new mortgage applications to plunge to a 13-year low; and given the government itself admits “housing” accounts for roughly half of all GDP growth these days, no amount of BLS, BEA, or other statistical lies will be able to mask the fact that the economy is in the verge of freefall.  To illustrate just how distortive the Fed’s “QE” program has been, today’s 10-year Treasury of yield, amidst a $17.3 trillion, rapidly expanding national debt, is still more than 50% below the 60+ year average of 6.57%.

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