Avoiding the Market Danger Zones in the Year Ahead


(Ed Note: Bill penned this note as 2011 was drawing to a close. Don’t despair…he’ll be back with his daily reckoning in no time for 2012!)

And here we are at the end of the week…and the end of the year.

And we’re no surer of what is going on than we were at the beginning of it.

But gold kept going down. It is looking more and more like gold intends to make its big correction now… It’s been down for 6 days in a row.

We’ve been waiting for it. We’ve been hoping for it. We’ve been counting on it.

Is it here yet?

We don’t know. Gold is edging down towards $1,500. But it is still solidly ahead for the year! What kind of bull market correction is that?

Who knows? Maybe 2012 will give us a better opportunity to buy more gold… We hope so…

In the meantime, the markets are fairly quiet. The politicians are keeping their mouths closed too.

Here at The Daily Reckoning Christmas headquarters we’re drinking eggnog, eating fruitcake and wondering what 2012 will bring. We’ve given up trying to actually look into the future. We don’t seem to have the knack for it.

Instead, we’re just trying to figure out what we OUGHT to believe in order to end the coming year in the best possible situation. That is, what belief is least likely to be fatal? Which is most likely to pay off?

Generally, you ought to believe that things will turn out worse than they actually will. Why? Because the danger is on the downside. And this is a dangerous market.

Europe could blow up at any time. Despite what you read in the papers, Europe’s debtor nations – and the banks that hold the debt – are just a few basis points from disaster. Traders and speculators are taking it easy over the holidays. We’ll see what happens when they get back to work in January.

China, too, is a danger zone. Trouble is, we don’t know exactly what the danger is. China’s economy is still growing at more than 5% per year. If the growth rate goes up…China will put a big strain on the world’s demand for oil and other commodities…which will make it harder for US and European families to make ends meet.

On the other hand, China is also showing signs of a slowdown…or even a blow-up. Shanghai property prices are said to be falling…fast. And the size of China’s bad debts may be greater than America’s subprime or European ‘olive country’ bonds.

Meanwhile, the US is sitting pretty. For now. Money is fleeing China and Europe for the perceived safety of the USA. Whatever else may happen, there’s one thing investors can count on. Ben Bernanke and his merry band of price fixers will print the money necessary to pay off bondholders.

But America is dangerous too. It has a doomed currency…an out-of-control military…and a dysfunctional Congress. Sooner or later, it will blow up too.

We don’t know which bomb will go off first. But at least we know to keep our heads down in 2012.

Best wishes for the New Year…


Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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4 years 9 months ago

Gold is currently $1,600, Honey! One hundred dollars more than when you wrote the article!

4 years 9 months ago

Oil will be $127 to $132 on New Year’s Day 2013. The production of crude oil for the whole planet will fall to around 82 million barrels per day.
America will have to have another issue with the debt about June but it will survive 2012 without the Big D starting. China’s birthrate will decline to 1.4 children per woman, down from 1.6 in 2011, the median age will rise also.

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