I am glad to present the outlook 2007 today that is characterized by the motto "Inflate or Die". In the year 2006 I studied the inflation cycles almost 2,000 years back to the Roman Empire and the insights I have gained are both exciting and disturbing to say the least, and it seems that almost every human on the planet will be heavily influenced the next years and not just financial market participants...

This report offers some extreme projections for the future that can hardly be "topped", and the main forecast is without doubt the most important call I have ever made... A healthy dose of skepticism is always good and since paper doesn't blush I want to start with a review of the "radical calls" since 1999 in order to make the extreme scenario suggested more plausible. Most of these bold statements were "lonely calls" hardly believed by anyone and usually even smiled at:

(1)   In the summer of 1999 I warned of the approaching crash in the stock markets, especially in technology shares, the press release was taken up by several newspapers (see media page). As you probably remember, the Nasdaq 100 did lose a daunting 84%, the New Markets around the globe partly even more than 90%. The crash came slightly later than expected but is still considered a precise call for a once-in-a century event like the 2000-2 bear market. interpretation: While some "broken clocks" had warned of a crash for many years (like Bob Prechter since 1987...) hardly anyone was able to pinpoint the top with a reasonable accuracy.

 

(2)   In the year 2000 the onset of a huge bull market in gold was forecast for either early April or early May 2001, and as a matter of fact the gold bull market did start on April 2, 2001. An article in April 2001 specified that the bull market would last until 2006-7 at least - as you know gold rallied into 2006 so far. interpretation: In 2000-2001 even dyed-in-the-wool gold bugs threw the towel, anyone who bought gold in 2001 was warned or even scoffed.

 

(3)   In January 2001 I foresaw (article) that the US would enter a recession in the 2nd quarter of 2001. Officially the recession started in the 2nd half of 2001 but this was a distortion caused by massaging the economic data. Honest statistics do confirm that the US economy was already shrinking earlier, e.g. the ISM Manufacturing Index fell below 50% in the 2nd quarter 2001 which indicated a contraction. interpretation: at the beginning of the millennium an incredible mania was present, it was widely assumed that the New Economy would prevent any cyclical downturns in the future.

 

(4)   In late 2001 I called the end of the ongoing bear market for late October 2002(article) - and yes, the S&P 500 and the other major US indices did end the bear market in October 2002, 2 weeks earlier than expected which has to be regarded as a very precise call for a once-in-a-century event. interpretation: at the time the article was first published (late 2001) most analysts assumed that the bear market had already ended in September 2001 after the 9/11 crash.

 

(5)   Now in 2006 I am again suggesting that something unbelievable will happen, which will have a major impact on the global economy, the financial markets and even YOUR daily life...

Review of the Outlook for 2006

I'd like to analyze the forecast charts sent out 1 year ago (red line) and compare it to the actual price development (black line; editorial deadline 11/27/06) in the 6 main markets covered. Please keep in mind that the key for the Amanita forecasts is timing, prices are considered less reliable and precise and are of secondary importance only.

Motto 2006 "Meeting the shadow":

It was warned that the risk of losses would be much larger than in the previous years. result: in the stock markets we saw the sharpest correction in 3 years, in gold, silver, oil, and the commodities (CRB index) even the deepest correction since 2001 took place.

  1. oil: Oil has been covered for 3 years, hardly anyone else was bullish all the way up from the $30ies to almost $80 per barrel, and the forecast for 2006 was bullish, too, nevertheless the correction that took place was also foreseen. The fit between the red lines (2 scenarios) and the black line is quite good, the overall tendency in 2006 was accurately projected.

2.  precious metals: Gold is now almost exactly where the late 2005 prognosis suggested it would be one year later (even if the huge rally     of the 2nd quarter came as a surprise).

 

3.      bonds: This prognosis has worked like a charm with a fit between projection and reality that is almost impossible to beat. The TNX (yield of the 10-year T-notes) topped in mid2006 at 5.25% and thus almost exactly at the level shown in the chart, moreover the interest rate decline (= bond rally) of the 2nd half of the year was nailed precisely.

 

4.   stocks: In December 2005 I wrote that the yearly top would ideally come with the Bradley turn in mid-May; the indices did set the high of the first 9 months in the week of May 5-10 and thus within days of the time target mentioned almost 6 months in advance. While in the first 9 of the past 12 months equities did stick to the outlined schedule, the past 3 months were a surprise. I have to add that in the equity markets the forecast has changed dramatically compared to last year (and that I have a very weak cosmic connection to the Taurus ruled stocks that's why the performance in stocks is considerably weaker compared to the other 5 markets tracked). individual stocks: the performance (difference between the stock picks long & short as published 1 year ago) is 17.4% over the past 12 months, we are working on a new model for individual stocks but that will still take some time so this year there no stock picks included.

 

 

  1. Currencies: The consolidation in the currency markets (benchmark EUR/USD) was recognized well in advance, apart from a minor time shift the prognosis hit the bull's eye.

 

6.  grains: The basic tendency (wheat rising into fall 2006, then down) was recognized well although the magnitude of the sudden spike in September-October was more than expected (note that timing is the key, not price levels).

 

 

 

 

Comments: forecasts are necessary and important but:

  1. they are, of course, continuously adjusted in the subscriber area
  2. decisions can only be made real time and not in advance - if that were possible we could enter everything into the system and go on vacation the next 10 years. You can plan whether to go long or short on 7/15/2033

then the final decision can only be made in July 2033 and not months or years in advance.

This time the previous Amanita Investor's Guides are not available in the free area but only in the subscriber area because of the crucial changes that year, publishing the outlook from December 2005 now would be grossly misleading. General remark: all previous yearly reports are no longer valid when a new one is published.