Could 2018 be a breakout year? Well, it depends on where you're looking.
2017 was certainly a great year for the stock market. A record year in fact with the Dow busting through several milestones. The Dow Jones was up every month in 2017. Naturally, analysts and mainstream media pundits were giddy as they looked back on the year last week.
Meanwhile, gold was up over 12% and closed above $1,300 for the first time in five years. What did the pundits have to say about that? Well, according to CNBC, gold has "lost its luster."
In his last podcast of 2017, Peter Schiff said that is pretty absurd.
Even though it was up 12%, that means you've lost your luster. But the conclusion of CNBC was the Fed is going to keep raising rates, so gold's not going up. But wait a minute. The Fed raised rates three times this year and gold went up 12%. So obviously, rate hikes are not an impediment to the gold price going up."
In fact, as we've reported, rising interested may well be good for gold.
Peter did note that a lot of people haven't paid much attention to gold this year because of the focus has been on the skyrocketing stock market and cryptocurrencies.
Yes, I think gold was not in the limelight, but I think that is going to change a lot in 2018."
So, what about the stock market? Well, Peter doesn't share the unbridled optimism of the mainstream.
To me, this type of unprecedented rise does not happen at the beginning of something. It happens at the end of something. So, anybody who believes 2018 is going to be more of the same really is going to be in for a rude awakening."
The Dow tanked in the final few minutes of trading in 2017, falling 118 points on the final day of the year. Peter said this could be a foreshadowing of what's to come. Nevertheless, there seems to be almost universal optimism that the stock market is going to keep going up.
Peter said it reminds him of last year when everybody was bullish on the dollar. Despite the optimism in January, the greenback fell almost 10% in 2017. It was the first annual decline in the dollar since 2012 and the biggest drop since 2003. That marked the beginning of a multi-year bear market in the dollar that was saved only by the 2008 financial crisis.
It's not going to be that lucky next time. There isn't going to be a crisis to save the dollar. The dollar is going to be the crisis. So I think again, this is the beginning of a multi-year bear market (for the dollar) that nobody saw coming at the end of last year or the beginning of this year. And it's the same way nobody sees the problems in the stock market."
Peter looked back over the last several years and noted that there has been a bigger lag than he expected between all of the Federal Reserve money printing and the advent of inflation as reflected in consumer prices. But he said we are on the cusp of a major bubble pop that will unleash a tidal wave and make 2018 a breakout year.
They didn't just try to reflate the bubble, the succeeded. They made them even bigger. And now, when they pop this time, that's it. We're finally going to be dealing with the inflation that was unleashed when they tried to reflate these bubbles. They're not going to be able to create more inflation to try to blow up an even bigger bubble than this one. So, this is the end of it. Their bubble-blowing days are over and this is the beginning. This is the breakout year. This is the breakout year in foreign currencies - or the breakdown in the dollar - the breakout in gold, the breakout in commodities and the euphoric top in the stock market."