2018 Wealth Predictions: 1st Quarter Update

“Battalions of Orcs are crossing the river.  lt is as the Lord Denethor predicted.” – Lord of the Rings

Two million dollars?  Some people don’t make that much money in a whole year!

I promised a quarterly update on my Wealth predictions for 2018.  So, here it is.  So far, I’m doing okay.  We’ll check back in June to laugh at the how things have gone off the rails.

Bitcoin

Bitcoin is the ugly stepbrother of currencies.  Or it’s Cinderella®.  I categorized the risks previously:

• It (may) be vulnerable to hacking since it’s based on an NSA product – there may be hidden back doors.
• Wal-Mart® doesn’t take it.
• It’s as volatile as a bi-polar ex-wife on meth.

New Risks since December Prediction:

The IRS has categorized each Bitcoin transaction as a taxable event.  Yeouch.  Nobody keeps those kinds of records, and that is an absolute block for people wanting to use it like you’d use a dollar bill.  That moves it from a currency to an investment vehicle.  Use as a currency inherently raises the value of Bitcoin, but this moves it away from that.

My prediction in December:

“I think it might have more to fall before it becomes stabilized, maybe to $10,000.  But I predict it would be higher than $20,000 next December.”

First Quarter Scorecard:

How’s that working so far?  Bitcoin dropped to my $10,000 number and kept right on going until it hit $7,000.  Recently, it’s been bouncing around my $10,000 prediction for the stabilization number.  Is $20,000 still possible?  Sure, but less likely if it’s harder to use as a currency.  I would change this one if I could (note:  The Boy has partial Bitcoins I won’t let him use, due to the taxable thing.  Irony:  He paid a bitcoin for some hosting about 5 years ago.  Yeah.  $10,000 for internet hosting.)

The Stock Market

In December I said:  “The biggest risks are North Korea, Iran, and Saudi Arabia, with anything that created higher oil prices being the biggest risk.  Chances of impeachment this year?  Nearly zero.”

New Risks Since December Prediction

• Democrats taking the House of Representatives in November – this is a risk because it greatly increases political uncertainty. Again, impeachment this year is nearly zero probability.  In 2019 with a Democratic House?  Low, but non-zero.  That’s a huge risk the market has not priced in.  October will be the most volatile month this year, if the Republicans keep the House.  If they lose the house – November will be a very difficult month in the Market.  But if Pelosi keeps talking – the Republicans have nothing to fear.
• How much will the Fed increase interest rates (see below)?
• Is Facebook® in trouble for data? Facebookâ„¢ might be the spark that melts the market down . . . or not.

2018 Prediction on the S&P 500:

“Up.  Not 24%.  But up, say, 10%.  2019?  We’ll see.”

First Quarter Scorecard:

So far, year to date, it’s up 1.01%.  Seems in line with my prediction (so far).

Interest Rates:

We’re recovering from the longest period of low interest rates in history.  All of history.  It really won’t make a difference, but the Federal Reserve simply must increase rates so that we can pretend that the money isn’t all made up.  Eventually if there’s a credible alternative (Bitcoin? Swiss Francs?) the Federal Reserve will have to raise interest rates . . . a lot.

If it’s too much this year, we’ll enter a recession – maybe right away.  I don’t think that’s likely in 2018.  Trump’s Fed chair will want to raise the rates – after this election.  Maybe right after, so the economic pain is over and done with by the 2020 election.

2018 Prediction on the Federal Reserve Rate:

“Up slightly.  Eventually (2019, 2020?) up a lot.”

First Quarter Scorecard:

Zero change in the Fed funds rate.  Mortgage rates have gone up from 3.95% to 4.46%.  Not a lot, and not even a record number for the last decade.  Seems in line with my prediction (so far).

Gold/Silver:

2018 Prediction on the Gold/Silver:

“Meh.  Wanders back and forth.  Probably ends the year +/-10% of where it started.  2019 or 2020 might be different stories, and longer term it will still experience huge upward swings during times of uncertainty.  It appears we’re currently at the “no crisis” pricing, which would probably be a good time to stock up.”

First Quarter Scorecard:

Gold is up 1.8% in the quarter.  Silver is down 3%.  It’s wandering (for now), so it’s in line with predictions.

Please note that when a stock market crisis hits (not if, but when) ALL asset classes will drop in price (except for food and ammo).  That’s generally a great time to buy gold.  If it’s an inflationary spike?  Yeah, you’ll be too late for the party – people will dump dollars to buy commodities like gold.

Disclaimer:  I haven’t started any positions in anything above the last three days and don’t expect to start any in the next three.  So there.  Also, I’m not a financial advisor, and this set of “predictions” is probably as good as a blank Ouija® Board and probably worse than flipping a coin.