2022 Will Bring Stagflation And Wild Stock Fluctuations

Summary

• Stocks will Yo-Yo wildly next year.
• Precious Miners will Finally Soar.
• Long Term AI & Biotech Investors will Prosper.
• The market will reward traders with large cash piles.

My previous blog title ("Stocks will Soar in 2021") was spot on, as the SPX rose 31.7 % from the blog date till today despite the recent correction. Unfortunately, my precious metals didn't fare so well, with flagship gold down 8 %. (I was personally lucky, because the decline was mostly offset by the Fed-induced 6 % rise in the USD:EUR rate).

NONETHELESS (and I capitalise this word for a reason), I believe the weak PM (precious metals) miners will soar in 2022 triggered by 1970s-style StagFlation. The CPI data in the West are patently false, and inflation is probably double the official figures. The fact that bond yields actually SANK in the face of this week's tapering (and Powell's threat of 3 more tapers in 2022) suggests the market is terrified of the negative effects of tapering in a weak economy, and is assuming the worst: a) A weakening economy, b) rapidly rising inflation and c) hugely negative real interest rates. These 3 ingredients are the 'perfect storm' for metals, and especially for miners whose balance sheets are pristine compared with the gung-ho days of 2011. Virtually all gold miners have AISCs (All Inclusive Sustaining Costs) of around $1000/oz, with some as low as $750/oz. So gold prices are at least 80 % above mining costs. If gold hits $2300 in 2022 miners should rise at double or even triple the pace of the metal's rise, as they will enjoy 200 % mark-ups. So I have liquidated the metals and reinvested exclusively in miners for their net cash, positive LCFs, rising dividend yields and probable buybacks.

I also believe biotech performances have suffered mere delays and will play catch-up in 2022 in a show of massive sector rotation. AI stocks are a relatively new addition to my portfolio, with a 5 - 10 year horizon, but am accumulating them incrementally (GOOGL, AMZN, NVDA, AMD, INTC, META,  Samsung, IBM, etc.,.).

Summary: PMs, AI and Biotech will fare better than the indices. I went to 40 % cash at SPX 4500 (see prior blog) and am steadfastly planning to go to 70 % cash (which includes PMs) at SPX 5000, to take advantage of hair raising corrections as I did in March 2020 -- for which I had prepared with a 50 % cash pile. My Top 10 portfolio components at this stage consist of (in order of value):

KL/AEM (merger recently approved)

$GOLD

AFMD

ARWR

FATE

AGEN

Ethereum, Solana, Cardano

MSFT

MYOV

NOK

Wishing everyone a healthy, happy and prosperous 2022.