- The year in one chart (heh)
- A look back at Paradigm editors’ big 2022 predictions
- When the Fed abandoned its unofficial mandate
- MSM latches on to a very non-mainstream story
- A prepper on the “hyper-complexity of home solar-electric”… A Deep State warning… And more!
With the winter solstice upon us (and a polar vortex)… the year 2022 is now stumbling to a close…
What else can you say about a year in which one of Paradigm Press’ major themes — a central bank digital currency or “Biden Bucks” — becomes the stuff of memes?
Today and tomorrow we’ll look back on some of the Paradigm editors’ big predictions for 2022 — both the ones they got right and the ones where they missed the mark.
Starting Friday, Paradigm and The 5 will go into holiday mode. You’ll still get any flash sell alerts as needed from your paid publication(s)… while here at The 5 we’ll republish some “greatest hits” single-topic issues you might have missed the first time.
Then on the first trading day of 2023 — Tuesday, Jan. 3 — we’ll get right down to the Paradigm team’s 2023 predictions.
But for the moment… let’s rewind.
“If you want to beat inflation and protect the purchasing power of your retirement account, there are a few key areas you need to be invested in,” said our income-investing specialist Zach Scheidt on Jan. 4.
One area he said was tangible goods. That means “equipment companies, stocks of companies that mine raw materials and infrastructure plays,” Zach said. One way to play that would have been the SPDR S&P Metals & Mining ETF (XME) — up 9% year to date, in a year the S&P 500 is down 17.8%. Not bad.
Zach also liked regional banks. “Traditional banks do well when interest rates rise,” Zach reminded us. “And since Fed chair Jerome Powell has made it clear that the Fed’s target interest rate is set to rise this year, we can expect banks to grow profits in 2022.” The SPDR S&P Regional Banking ETF is down 17.4% year to date — about the same as the broad market. But here we suspect Zach wasn’t wrong — just early.
Finally, he identified blue chip tech stocks. Not the go-go growth stocks with no profits, the ones that dominated the market from roughly 2012–2021. Instead he pinpointed one of his longtime favorites: Apple, he said, provides “the safety and reliability that investors want.” Alas, AAPL hasn’t been immune to the tech sector’s woes, taking a 25% hit during 2022.
Still, with a market cap topping $2 trillion, AAPL is a stalwart — up 400% since Zach first talked it up in these virtual pages seven years ago, while the S&P is up 100%.
Gold is winding down the year near where it began — around $1,800. Which is a heckuva lot better than how stocks and bonds fared.
That said, the Midas metal did not fulfill Jim Rickards’ forecast of a return to the 2020 highs near $2,070.
In part, that’s because interest rates didn’t fulfill Jim’s forecast. Rising interest rates draw deep-pocketed investors toward bonds; when interest rates are low and stagnant, gold becomes more attractive.
Jim figured the yield on a 10-year Treasury note would stay moribund, under 2%. Instead, it blew past that level in March and sits this morning at 3.65%.
Seen in that light, it’s remarkable the gold price held up as well as it did this year.
Looking ahead, gold stands to do extremely well if stocks are headed for another “lost decade” like the 1970s and the 2000s — for reasons we laid out elsewhere early this year.
The stock market is staging an oversold bounce on this hump day.
At last check, all the major U.S. indexes are up about 1.5% — the Dow up about 500 points, easily vaulting past 33,000 again.
The mainstream is attributing the jump to an upside surprise from the Conference Board’s monthly consumer confidence numbers.
Which seems like a mighty strange reaction by 2022 standards: A resilient consumer is one more green light for the Federal Reserve to keep jacking up interest rates — the last thing Wall Street wants.
Which brings us back to a call we made on Jan. 6 of this year: We surmised that the Fed no longer looked upon “rising stock prices” as part of its unofficial mandate, along with the official mandate of “stable prices” and “maximum sustainable employment.”
As it turned out, that was the story of the year — Mr. Market trying to wrap his mind around the fact that the Fed places a greater priority on controlling inflation than on shoveling EZ money toward Wall Street. For the first time since 1987, the Fed no longer had the stock market’s back.
Even now at year-end, Mr. Market clings to the “pivot” narrative — that the Jerome Powell Fed will flip back to money-printing just in time before the markets and/or the economy tank.
That’s why the consumer-confidence explanation for today’s rally doesn’t quite add up.
There is a more glum economic number today, however: Existing home sales fell 7.7% from October to November, worse than expected. Sales volume is now down 35.4% year-over-year. The median price of an existing home edged down to $370,700 — which doesn’t begin to ease the sting of higher mortgage rates.
In the commodity complex, gold is nearly unchanged at $1,818. Silver clings to the $24 level.
Crude is up nearly two bucks after the Energy Department’s weekly inventory numbers, a barrel of West Texas intermediate now $78.18. The dip to $70 only 11 days ago didn’t last long…
A follow-up to our item a month ago about central banks buying gold at a record pace: The mainstream is starting to take on a very interesting interpretation.
From the U.K. Telegraph this week: “A record central bank gold rush has been triggered by fears of Western sanctions after Russia was made a pariah state in the wake of its invasion of Ukraine, according to the World Gold Council.
“Officials in many countries outside the West are rethinking their foreign currency reserves after the sanctions meant Russia’s central bank lost the use of its war chest, hampering its ability to protect the ruble and its banking system.”
We agree with that interpretation. Indeed, this is the reaction we were anticipating in January — six weeks before the Russian invasion.
No, it’s not a wholesale flight out of the U.S. dollar. But the trend is unmistakable — a lingering unease over “What if Washington targets my country next?”
Result: Not only did central banks around the world load up on 400 metric tons of gold during the third quarter… the year-to-date accumulation in 2022 has already set an annual record. (And the records go back to 1967.) Impressive…
➢ China, by the way, has confirmed that it was among the buyers. The People’s Bank of China claims it added 32 metric tons worth about $1.8 billion to its reserves. That’s the first addition announced since 2019, bringing the official total to 1,980 metric tons. But as we’ve said for years, the real size of China’s gold stash is likely at least twice that. (America’s official total remains the world’s largest at 8,133 metric tons.)
Before Christmas arrives, Congress might dial back on one of the most awful changes to the tax code in recent years.
We’re talking about the requirement that third-party payment networks like PayPal and Venmo send you a Form 1099-K for transactions totaling as little as $600 a year.
Up until this year, you’d get the form if you racked up more than 200 transactions worth at least $20,000 total. But the threshold fell to just $600 under the American Rescue Plan stimulus bill signed by Joe Biden in March 2021. Now a single transaction of $600 or more can trigger the form.
The requirement has been the subject of much hand-wringing online this year — and some pretty good memes…
Now comes word that the threshold might rise to $10,000.
Per CNBC, Sens. Joe Manchin (D-West Virginia) and Bill Hagerty (R-Tennessee) hope to slip the change into a massive $1.7 trillion spending package that congressional leaders are aiming to rush through by Friday to avoid a “partial government shutdown.”
If they don’t succeed, tax pros are “more or less expecting the worst,” New Jersey CPA Albert Campo tells CNBC. “We’re expecting most of our clients to get these things.”
We’re starting to wonder if self-sufficiency isn’t all it’s cracked up to be.
Please indulge your editor a bit of reflection as the end of the year draws near. If you’re a really longtime reader, you know of our acquaintance with Cam Mather — the expert on self-sufficiency who calls himself “the sensible prepper.”
Cam and his wife, Michelle, have walked the prepper walk at their off-grid home in eastern Ontario since 1998. That was where my wife and I attended a workshop of his in 2015.
One of the things he said that stuck with me was, “For too many people, ‘off grid’ means ‘on propane.’”
He had a point: How resilient are you, really, if you’re dependent on a big truck to show up and refill your propane tank every few months? Cam was much more partial to solar panels and a wind turbine for electricity, and a wood stove for heat fueled by logs from his 150 acres.
But there’s no such thing as perfect resilience: The supply chain snags of 2022 made that clear.
We’re thinking here about the author, social critic and longtime friend of The 5 James Howard Kunstler. He has a grid-tied solar installation at his home in upstate New York. It cost about $35,000 when he put it in nearly a decade ago. Given his anticipation of societal upheaval, it seemed like a good idea at the time.
Long story short, the system started going wonky this summer. He was told the charge controller was shot and, oh by the way, the lead-acid batteries he had as backup for critical loads like the well pump were nearing the end of their useful life.
Problem: New building codes required that professional installers use only lithium batteries — about four times as costly as lead-acid. Mr. Kunstler faced a steep learning curve of self-installation if he wanted to save substantial coin.
“The hyper-complexity of a home solar-electric system is extreme,” Kunstler wrote in July.
“There are hundreds of little integrated components that can blow, all of it adding up to a case of guaranteed fragility. There are no easy fixes or duct-tape work-arounds for any of it. I can’t make any replacement parts in my garage. They come from faraway factories via supply lines that get sketchier every day on trucks that don’t operate profitably at $6.50-a-gallon diesel fuel. [Emphasis ours.]
“In a low-grade epiphany while going through this ordeal… I realized that back in 2013, instead of getting the solar electric system, I could have bought the Rolls-Royce of home generators and buried a 500-gallon fuel tank outside the garage, and had a manual water pump piggy-backed onto the well, and maybe even purchased a fine, wood-fired cookstove — and had enough money left over for a two-week vacation in the South of France. Silly me.
“Of course, these travails with my home solar electric system are a metaphor for the complexity and fragility that is, all of a sudden this year, causing the operations of Western Civ to fly to pieces.”
To the mailbag, briefly: After my reflections on JFK and the Deep State Monday… and Emily’s remark at the end of yesterday’s edition that “it’s about time an unaccountable quasi state gets dragged out of the shadows”… a reader writes…
“Oh, Emily, your parting shot this afternoon was spot-on perfect. Please drive carefully, and don’t go anywhere alone.”
The 5: Emily says she still has much running around to do ahead of Christmas. “Fingers crossed!”
Best regards,
Dave Gonigam
The 5 Min. Forecast
