Tuesday, 3 January 2012

What Will 2012 Bring?

So, now the hangovers have abated, what will 2012 bring?

Marcus Padley
I'll start with a broker I thoroughly respect, Marcus Padley (writes for Fairfax etc), who appears who made some predictions whilst having a few beers pre-Christmas.

Headlines you may see in 2012 
  • ANZ raises interest rates 100bp at monthly monetary policy meeting. Declares interest rate settings “appropriate for our shareholders” and “profit margins within target band”
  • RBA closed. Glenn Stevens joins Macquarie
  • Westfield charges Retailers $10,000 per square megabyte on New Westfield Virtualand website
  • Gerry Harvey declares the internet a ‘fad’
  • Mercedes Benz prices jump 218% on euro break up. German exports fall 98% Greek Drachma jumps 14% to 0.0002374 Deutschmarks as faceless EU plant retires from post as Greek Prime Minister aged 45 on seven eighths of his final two years salary plus benefits
  • German taxi driver earns 10 times as much as new Greek PM
  • Rogue Trader at Goldman Sachs makes $US100bn profit shorting euro. Joins Cramer’s White House Administration as US Treasury Secretary
  • Berlusconi releases second Love Song CD “Don’t cry for me Angela Merkel, you know the truth is, I never loved you. All through my wild days, my mad existence, I knew the euro, wouldn’t go the distance”

...etc. Read the rest in the link, its quite amusing.

His 2011 predictive history sans beer (I assume) is worth a read, he is rather good... Let's share the financial obvious with hindsight. If you like what you read you can sign up for a free weeky newsletter at the bottom of this page: Marcus Today. Also a free end of day report here.

Art Cashin
Art is a 40 year trading veteran on the floor of the NYSE working for UBS.

Art Cashin of UBS

Europe Rumbles Continue Beneath More Upbeat Headlines - Ever since last week’s liquidity operation, most headlines out of Europe have leaned toward the reassuring side. Beneath those headlines, however, there are signs the strains remain and may, in fact, be growing.

European banks are making great use of the ECB’s overnight deposit facility. Last night they parked $590 billion at the ECB breaking the record they had set the night before. They are clearly unwilling to lend to other European banks, highlighting the distrust and fear in the interbank marketplace. While the ECB’s lending initiative calmed the markets somewhat, it apparently has done nothing to free up the logjam blocking interbank lending.

The distrust on the streets is said to be growing also. Barroom gossip says that safe-deposit boxes are in a demand that borders on frenzy. They allow you to take your Euros and covert them into something of value (gold, Swiss Francs, etc.) and sock it away in a safe place. Others are said to be buying property in London and elsewhere lest you awake one day and discover that your Euros have reverted to drachmas or lira.

Savvy bankers are said to be setting up personal and communal trusts domiciled in places like the Bahamas, the Caymans or the Isle of Jersey. Some banks are offering depository accounts denominated (and repayable) in alternate currencies like the dollar or the yen.

We think a Lehman-like event would most likely be triggered by a run on a bank or a series of banks. The scramble for currency (value) protection among the public could turn into that bank run in the same way that a crowd can instantly turn into a mob. Watch the money flows out of Greece and Italy very carefully. The pot continues to bubble.

Outflows From Italy and Greece

Max Keiser (the irrepressible!)

My Predictions
  • At least one Eurobank will fail as capital flight from the PIIGS increases in intensity. (Capital flight occurring now, banks insolvent and on ECB life support)
  • Credit contagion and freeze. (TED Spread, Euribor etc rising now)
  • Crash of various debt fuelled asset classes. (Stocks, property easing as credit freezes, economies stall and UE climbs are occurring now)
  • China's manufacturing sector continues to contract (now 2 months running), their housing and debt sector collapses. (happening now at a rapid rate)
  • Japanese economy on the verge of collapse as Yen reaches all time high.(happening now, this year they borrowed more than tax revenue for the first time)
  • ASX will see 2xxx (Eurobank failure - replay of 2008)
  • Unemployment in Oz 9% and rising (rising now as property prices fall)
  • Australian bank profits turn to losses ala USA, Ireland, Britain etc with abysmal outlook for 2013 as another 8-10% wiped off house prices.(outcome of Property Prices falling another 8-10% plus credit freeze)
  • 40% of Americans and 8% of Australians have 'underwater mortgages' or negative equity.(outcome of Property Prices falling another 8-10%)
  • US Debt over $17 trilion (thats a gimme)(based on last 3 years debt growth and Obama's debt addiction and election year)
  • Gold over $2500 USD as QE3 is triggered following a late 2008 NYSE -30% replay, which puts a boost under stockmarkets, but little else as US unemployment U3 nudges 12% . (based on late 2008, early 2009)
  • Australia's Deficit increases as tax revenues dwindle (outcome of Property Prices falling another 8-10% and UE rising, CGT and PAYG revenues falling)
  • Australian states get credit downgrades as the stamp duty money flow slows to trickle and their in massive deficits leading to massive cuts in state public servants. (outcome of Property Prices falling another 8-10%, Stamp Duty revenues dwindle)
  • If Ron Paul doesn't get GOP nomination, No Hope Obama hits the front. (coin flip)
  • AUD breaches 75c.(based on late 2008, early 2009 carry unwind, Risk OFF)
  • Coin toss on Iran invasion as China declares alliance. (historical friendship established a long time ago, google it)
  • Russia continues to take a more aggressive and militaristic stance towards the west with a possible China alliance (enemy of my enemy is my friend). (occurring now)
  • Civil unrest climbs in the PIIGS and UK - soldiers used to keep it under control as civil war draws closer as unemplyment climbs, credit is frozen and austerity creates a depression.(starting to occur now as austerity bites)
  • Le Pen and the far right take more dominant positions in France if not president Le Pen (starting to occur now)

On China/Iran and Russia/West (videos in links):
China to Protect Iran Even if Result Starts World War III

Russia Retaliates Against US: Puts Radar Station On Combat Alert, Prepares To Take Out European Missile Defense Systems


1 comment:

  1. (belated) Happy New Year to you too!

    This is a great composition of some predictions, I really like it.

    I can only mildly disagree with three of your predictions:
    - 75c AUD
    I don't think this is something that can be predicted. If the AUD was priced correctly, we would have been smashed down long ago. But the question I ask is, how do you price something in USD, if the USD is mispriced? Currency wars and exchange rates are so complex at the moment.

    - 9% Unemployment
    I'm not sure that it will occur that quickly, and I am a sceptic regarding the actual collection of the statistics. We're probably at 9% now, but the Govt changed the way the stats are reported when Rudd came in.

    - ASX at 2xxx
    I'm on the fence with this. Someone told me a few months ago that the top 8 companies in the ASX represent about 90+% of the ASX capitalisation. Given that four of those are banks, and another two are miners, I think perhaps you might be on the money.

    But... I don't trust the stock market. One murmur of QE3 and stock markets around the world will jump I think. Plus we tend to follow the US market still, particularly as foreign investment constitutes a significant portion of ASX investment.

    However... (I do go on and on) we are also in the midst of a boomer retirement wave. Super will be cashed in. And those funds have big holdings. So that could depress the ASX significantly. I'm not sure that it would take it down to 2xxx though.

    You could sum up my entire argument against all three points to be: I don't trust the way markets function, and the way statistics are reported.