Thoughts from the Frontline

2003 Forecast

January 11, 2003

Transition and Surprise
A World of Hurt
King Dollar and the Guillotine
Gold Has a Lot More Glitter to Come
The Muddle Through Economy, Part 2003
Deflation Hiding Behind the Trees and Bond Prices
Rallies in a Secular Bear Market
Summary: On the Gripping Hand
My Biggest Forecasting Mistake

We cover the globe, currencies, the US economy, bonds, stocks, deflation, inflation, gold, oil and more!

For the last three years, making annual predictions has been relatively easy, at least as compared to this year. You try to discern the dominant theme for the year and then everything else usually flows from there. In 2000, it was an over-valued stock market. In August of 2000, the interest rate yield curve went negative, and as I wrote at length at the time, Federal Reserve studies (among others) showed that a recession always followed a negative curve by about 12 months. I saw no reason for that not to be the case this time. I suggested strongly to readers that the safe move was to get out of the stock market entirely at that time.

Thus, coming to January of 2001, a second half recession was the dominant theme of 2001, and the general slowdown throughout the world provided a back-drop for a very bearish picture. I began to write that year that we were beginning a probable decade long (at least) secular bear market. Last year, the theme was the arrival of deflation, a less than robust recovery and the development of my view that we are in…