Finding Order in Chaos
Did you know you can get the Sprott Money Monthly Wrap Ups, Ask The Expert,
special promotions and insightful blog posts sent right to your inbox?
It's that time of year when analysts and prognosticators begin issuing their forecasts for the year to come. This is always challenging business, and predicting 2023 promises to be even more difficult than usual.
My initial thoughts on 2023 are that it will be much like 2010 and 2019, years where an early or unexpected Fed pivot to loosening and QE drove strong gains in the COMEX precious metals. That part of the next twelve months seems a certainty. The only question is timing—and that's the hard part.
Take, for example, this year. I missed on my year-end price targets because the Fed has taken longer to pause/pivot than I expected. Part of the reason for the slower than forecast monetary policy shift was the fact that the initial stage of the rate hiking policy was itself delayed by the Russian invasion of Ukraine. So this forecasting stuff is tricky in its own right. And then, when you have to deal with timing and unexpected geopolitical events, it gets downright challenging and nearly impossible.
I bring this up today because early predictions for 2023 are beginning to roll out. The first I've seen is from Saxo Bank, and it’s entitled "The Ten Most Outrageous Predictions For 2023". As you look through this list, you'll realize that these guesses are not really that "outrageous" and all of them have a reasonably high degree of likelihood. However, as an analyst, you can be correct about the general idea but dead wrong on the timing. In any event, you might look these over:
And then there's the latest from Credit Suisse analyst, Zoltan Pozsar. Since it's proprietary research, I haven't yet seen the full report. However, you'll recall that Pozsar has been writing all year about a "new Bretton Woods" where the global monetary system shifts to a more commodity-backed system.
I found the following two snippets on Twitter. You should read them both. Are the scenarios improbable? No. Are they likely? That answer may be "no" too. But who can say for certain? And how would an unforeseen, further escalation in the Ukraine War impact these scenarios? Do you see how this prediction stuff is challenging? Maybe Pozsar is correct about the changes, but the timing could be next month, next year, or five years from now. Who can say?
And it's not just war escalations that could derail or escalate the timing of events. How about some of these other items that have suddenly appeared over the last few days?
Here's more on that $80T in off-balance sheet derivative exposure story: BIS warns of $80 trillion of hidden FX swap debt
What about the future viability of Tether and crypto: FTX on Steroids: Is “Tether” the Biden World’s Crypto BCCI?
You already know about physical metal tightness around the globe. HSBC began the process of exiting the industrial metal business in 2020, and as of this week, they're completely out. What's that they say about rats and sinking ships? HSBC resigns as LME member after exiting industrial metals
And the stonk market appears to be right on the edge of the abyss again. On the chart below, note that the last two taps of the trendline resulted in 20% drops in the weeks that followed. A drop of 20% from here would take the S&P down to 3200. How would that muddy the macro waters in early 2023?
From Twitter, here are two more charts that suggest a renewed plunge in the stonk market could be imminent:
So, anyway and in conclusion, it's that time of year when we all look ahead and strategize for the months to come. However, the year 2023 will be defined by Chaos Theory as much as anything else, so take everything you read over the next few weeks with one of those proverbial grains of salt. As with 2022, the only thing predictable about 2023 will be its unpredictable nature.
The more you know, the more wisely you invest.
Feeling inspired to invest in silver? Browse our selection of silver bars, coins, or our exclusive Sprott Silver.
About Sprott Money
Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.
Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.Learn More