At the beginning of each year, we publish a forecast issue in The Sentinel Financial Report. The forecast issue gives us an opportunity to review our previous year’s predictions and comment on what we see ahead. The forecasts made for 2011 were quite accurate in the areas of banking, real estate, precious metals, the U.S. Dollar, and the stock market. For 2012, we see some very definitive patterns based on factors you might not ordinarily expect. The following is an excerpt from our 2012 forecast issue:
Our social cycle model has conservatism and discord as its current centerpieces. Since the inception of this publication we have called for a new conservatism on the part of the public particularly in matters involving money. A year ago, in the 2011 forecast issue, our centerpiece of conservatism was affirmed when “austerity” was named Word of the Year by Merriam-Webster. It became the 2010 Word of the Year when Merriam-Webster reported 250,000 online searches for the term. Austerity is a 14th century noun meaning “the quality or state of being austere” and “enforced or extreme economy”. The world is just beginning to see the first wave of austerity resulting from the predictable end of the credit bubble. Look no further than Europe to see what austerity looks like when governments run out of money. Austerity will also come when banks run out of money (failure).
In keeping with our theme of conservatism, the 2011 Word of the Year was “pragmatic”. Pragmatic is a word which means practical or logical. According to John Morse, president and publisher of Merriam-Webster, the word, “captures the current American mood of encouraging practicality over frivolity”. The days of frivolous consumer spending are over. The same, however, cannot be said of the Federal Government. There is a very discernable trend to the most recent Word of the Year:
(2006) truthiness – “preferring to believe what you wish to believe”
(2007) w00t – “expressing joy”
Readers will observe a definite pattern. The words democracy, integrity, truthiness, and w00t all emanate from a sense of optimism and harmony. The word blog does not have any negative connotations. But notice what happens after 2007 (the stock market top). Starting in 2008, we have the words bailout, admonish, austerity, and pragmatic. See the change? The first word has a negative connotation (bailout). The next word, admonish, does not convey harmony, and the latter two, austerity and pragmatic, reveal a more conservative and pessimistic trend.
The other part of our centerpiece, discord, often results from austerity. Sometimes discord results from political oppression. In 2009, the U.S. saw an organized wave of discord when the Tea Party emerged as a group in discord with a government who appeared to be spending money like it grew on trees. This group emerged near the bottom of the stock market in the spring of 2009. The Middle East had (is having) their Arab spring which led to the ouster of the Mubarak government in Egypt and the Khadafy regime (with NATO help) in Libya. Back in the U.S. the Occupy movement sprang to life at the stock market low of late summer. The Occupy movement was interesting in that there was not one single issue that galvanized them but rather a whole host of ills committed against the 99% — they are mad. The common action in all of this discord were protest movements. Our social cycle model received validation now that Time has chosen the “Protestor” as its Person of the Year. When you think about the number of potential candidates for this award, the fact that nobody in particular was chosen is important. What it tells us is that there will be future waves of people rallying around particular causes in opposition to larger entities like governments. The protest movements just witnessed in the U.S. will become more commonplace as the public begins to feel the pinch of the economy and government withdrawal.
Jim is the author of Escaping Oz: Protecting your wealth during the financial crisis.