The Three Financial Trends That Will Define 2011 By Michael Lombardi
It’s that time of the year when analysts and economics make financial predictions for the year ahead. And it is time for me to throw in my two cents’ worth as well. I believe that
four financial trends will shape and define 2011. Here they are:
Gold will rise in price again in 2011. Gold stocks will be amongst the best stock sectors for investors in 2011.
As I sit down to write PROFIT CONFIDENTIAL this morning, the price of gold bullion is up 27% for 2010. Many of the gold stocks recommended in our various financial newsletters were up over 100% this year. I believe that trend will continue in 2011, because of the two other financial trends below that will establish themselves.
The U.S. dollar’s long-term downward trend will recommence in 2011.
After getting near a record low against other world currencies in early November, the U.S. dollar has been rallying. In my opinion, the greenback has been going up for the simple fact that the euro has been going down in value, as country after country in Europe gets its bond ratings downgraded.
The hard fact is that euro countries own very little in U.S. Treasuries when compared to other countries. In October of 2010, the five biggest owners of U.S. Treasuries were: China, Japan, the United Kingdom, Brazil, and Hong Kong. No euro country even made the top-10 list!
Because of bond trader focus on European countries (I think the bond traders are making a fortune shorting the bonds of troubled euro countries), the trend for a stronger U.S. dollar may continue in the first or even second quarter of 2011. But medium- to long-term, the greenback will go down, as it simply succumbs to too much debt backing the currency.
Interest rates will rise in 2011. Utility stocks and U.S. Treasuries will not be good investment for investors next year.
Long-term interest rates in the U.S. started to rise in October. Specifically, the yield on the bellwether 10-year U.S. Treasury has risen 38% since the first week of October 2010 to today. I believe this trend will continue as:
(1) foreign investors demand greater returns for buying bonds of a country that is drowning in debt; and
(2) all this monetary liquidity that has been pumped into the system to save us from the Great Depression II will result in inflation.
We all know that the prices of bonds and utility stocks decline as interest rates rise. I won’t own any of either in 2011.
http://www.dailymarkets.com/stock/2010/ ... fine-2011/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"