Bruce Krasting 氏の今年の予測を掲げておこう。
– The bulk of the fiscal cliff issues will be pushed into 2013. This sets up a showdown in March when the debt limit can no longer be extended.
Americans will be exhausted by this process. The poll ratings for the Senate, House and Obama will fall to record lows. The commentary from every segment of society will be against the ineffective government the country has. The ratings agencies will chime in with more warnings that the US credit ratings are at risk. Foreign leaders will speak openly that the USA is losing its position of leadership. The foreign and domestic press will have a field day.
The threat of a government shutdown, and a chance for a “Hoover Legacy”, will force the President to fold in March. The resulting “Deal” will bring modest increases in taxes ($800b over ten-years) and introduces real cuts in both Medicare and Social Security (age eligibility, means testing benefits and changes in inflation adjustments). The debt limit will be extended until January of 2015 (after mid-term elections).
Liberals will hate this result, so will conservatives. The reality will be that the steps taken will have very little consequence to the economy, budget or debt profile in the first few years. A set of future promises will have been made to right the ship, but the “Grand Deal” will be well short of what is needed. What will come will be just another kick of the can down the road.
– Frustrated by the lack of results on the economy, Japan’s Abe will push for the ultimate financial measure; he will call for the Central Bank of Japan to “extinguish” 20% of Japan’s public sector debt. This will be the first official step toward the “Platinum Coin” solution to debt. This will be very controversial on a global scale. Liberal economists will love the idea, while conservative thinkers on money will hate it. This defining moment in modern finance will not happen in 2013, but the year will end will the prospect that it will.
– Tim Geithner will leave Treasury and join Wilbur Ross. Tim will become a distressed investor in his new private sector life.
– The Yen will trade cheap against all crosses and hit a high of USDYEN 98. It will end the year back below 90.
– There will be a total of four super-storms that make landfall in 2013. One will hit the USA, the other three will hit Asia.
-The European economy will struggle for yet another year. The weak Yen and the overvalued Euro will act as a drag on growth.
– The US will not experience a technical recession in 2013. The 2nd Q will have flat growth. YoY GDP will be +2%.
– The Euro will remain above 1.30 for the first portion of the year, and then weaken, ending the year at 1.20. The high for the year will be 1.37.
– Unemployment in Spain will push 30%. Youth unemployment will rise to over 50%. By the end of 2013 serious questions will be raised as to why Spain is tearing itself apart, and would the country be better off out of the Euro. The conclusion, by many Spaniards, will be that it would be better off leaving versus staying. This would represent a big change in thinking, and set up 2014 as the year of the Euro breakup.
-Several states will ban the sale of high energy drinks after more evidence the drinks can cause health problems.
– The Chevy Volt and the Tesla will not sell well.
– The Swiss National Bank will maintain the 1.2000 peg for another year, but 2013 will be the last year of the dirty float for Switzerland.
– There will be more lawsuits and premature deaths of professional football players. The NFL will introduce a series of steps to reduce the incidence of concussions. The new rules will change both the equipment players wear, and establish new, severe penalties for late hits (3 point penalty). Fans will not like the results; critics will say that the new measures do not go far enough.
– Around mid-year, the Fed will reduce its monthly POMO buys to $60B per month. Later in the year the purchases will be further reduced to $50B a month. The Fed’s balance sheet will increase by $700B (25%) during the year.
– The 10-year bond will trade above 2% by June, and stay above this level for the balance of the year. The 30 year will reach 3.75% at one point in the fall.
– Gold will trade in a range, below 1800 and above 1400. Boring.
– The US housing market will continue to improve, but at a pace that will be slower than that witnessed in 2012.
– Obama will force out Ed DeMarco as the head of the FHFA. The President’s new appointee will attempt to put together a new debt forgiveness ReFi program for America’s underwater home owners. The effort will produce negligible results.
– Barge traffic on the Northern Mississippi will be restricted due to low water in February. The drop in traffic will result in higher prices, and spot shortages of raw materials/energy in the upper mid-west. Later in the year agricultural commodity prices will be impacted by higher cost of transportation. The “trains” will be the beneficiary of this.
– Inflation will rise modestly in the US. Full year Core CPI will be greater than 2%. When food and energy are included, inflation will push north of 2.5%. At one point during the year Bernanke will refer to the higher rates of inflation, and suggest that this is a sign of “success”. He will be widely criticized for this, as there well be evidence that higher inflation is having a negative affect on the bottom 20% in the country.
– Tiger Woods will win a major.Rory McIlroy will not have a good season due to new equipment. Jason Dufner will win the FedEx Cup.
– Denver will beat Green Bay in the Super Bowl. In the NBA, the Miami will lose to Oklahoma.
– The Mars explorer will find carbon.
– The US unemployment rate will fall from 7.9% to 7.1% during the year. The widespread conclusion will be that the Fed’s effort to reduce unemployment was only marginally successful, and that structural problems in the economy are the real reason for high unemployment. Taken together, these results will undermine the Fed.
– Jack Lew will replace Geithner as Treasury Secretary. This choice will be driven by Lew’s knowledge and experience with budget matters. But Lew knows nothing of the capital markets and this will be a problem when a non-budget crisis emerges. Lew will say something about the currency markets that causes a big flap. There will be calls for his resignation as a result.
– There will be no meaningful gun legislation in the US during 2013. But the threat of new restrictions will keep gun store shelves empty. Gun violence in America will, of course, continue.
– The S&P will hit a low of 1,250 and a high of 1,500. It will be an “okay” year for stocks, but nothing special.
– China’s GDP will grow by 7%, a rate that is near stall speed. China will continue to create growth through infrastructure spending; more empty cities and trains to nowhere.
– China’s new government will crackdown on corruption. The immediate consequences will be a drop in luxury goods consumption and continued capital outflow. There will be arrests and trials of government officials caught with their hands in the jar.
– There will be large losses for Chinese citizens who have invested in “Wealth Management” investments that promised returns of 10% a year. The widespread losses will result in social protests.
– Merkel will be re-elected as the German Chancellor. But the election results will raise the question of Germany’s political willingness to stay in the EU. The election will be a turning point for the Euro FX rate. The EURUSD will weaken after the election.
– Greece will not leave the Euro in 2013. The economy will continue to suffer. In the fall of 2013 the pressure for Grexit will rebuild. The final exit will not come until 1st Q 2014.
– Spain will resist a bailout from the ECB for as long as possible. By the end of the summer the pressure in the Spanish bond market will rebuild. The actual bailout will occur at about the same time as the German election. This will hurt Merkel.
– When Spain is forced to accept an ECB bailout, the conditionality that is attached to the request will be cosmetic and of no significance to Spain in 2013/14. The “conditionality” will be on future years, not the present. The ECB’s Mario Draghi, will deliver “Unlimited bond buying”, as promised. The IMF will be a reluctant participant. The markets will end up wondering, “Who’s next?” The surprise answer is that it will be France, not Italy, that will next come under the market’s gaze. (Mario Monti will stay in the political picture in Italy)
– French and German politics will worsen further. Socialist France, and Capitalist Germany will move father away from each other. The squabbles between the counties will go public.
-Switzerland will fail to get tax treaties with France and Germany on the issue of illegal accounts. Switzerland’s refusal to give up the “names” will result in economic penalties imposed by the EU.
– Brazil’s inflation rate will push 10%. The country will blame the USA and the Fed’s cheap money policies.
– Argentina will default on some of its external debt.
– On average, 2013 will be a colder year than 2012 for the globe. Arctic ice melt will be less than that experienced in either 2007 or 2012. La Nina conditions will reoccur in September.
– The Mid-West drought will abate somewhat, but annual rainfall will still be below normal. US crop yields will be higher than in 2012. Weather related problems in China, Russia and Argentina will limit crop production. As a result, the global cost of basic food stocks will rise another 10% for the year.
– In a complete blow off to his political base, Obama will green-light the Keystone Pipeline and approve “safe” fracking on Federal land.
– Faced with new production sources and a generally weak global economy, crude oil prices will drift lower in the early part of the year. But Saudi Arabia will cut production to adjust supply. The low for WTI will be 78. The high will be next fall, at $95. The WTI/Brent spread will widen from $20, to $25.
– The cargo shipping industry will continue to struggle with excess capacity and slow growth in global trade. Several public companies will be forced into a restructuring by lenders.
– North Korea will fire more rockets over Japan. Iran will have military exercises around the Straits of Hormuz. The US will spend tens of billions on naval costs in the Straits. Israel will talk tough about Iran. But there will be no major hostilities in 2013.
– Although there will be no new wars, there will be several periods during the year where the prospect of something happening will look very real. When this happens, there will be spikes in crude. One spike will occur in early summer; Obama will open up the Strategic Petroleum Reserve to stabilize prices.
– There will not be another major “Flash Crash” in 2013. However, during the year there will be thousands of examples of individual stock names that suffer from Algo Attacks that last for only a few seconds. The Wall Street Journal will publish numerous articles that describes the Attacks. The SEC will promise a review of market practices on the topic of HFT, nothing will come from that. There will be numerous “fat finger” trades. One of which will cost the firm behind the finger more than $1B.
– The Exacta for the Kentucky Derby: Balance the Books & Power Broker.
– In the baseball playoffs, the California Angels will beat Tampa Bay, the LA Dodgers will beat Cincinnati. This will set up the first ever “All LA” World Series. The Angles go on to win, but no one outside of SoCal cares, the TV audience is the lowest in years.
– The 2012/2013 Hockey season will be completely lost. Pregnancy rates will increase as a result.
– Apple will spend a fair bit of next year below $500, but will end the year close to $600.
– There will be no financial crisis in 2013 that undermines bank stocks. However, the question will be, “Where’s the upside”. The big move in bank stocks will not be repeated in 2013.
– FB will not trade above $31. This busted IPO will continue to be a drag on other tech IPOs.
– Daniel Day-Lewis will win Best Actor for Lincoln. A nine year old, Quvenzhane Wallis will get Best Actress. Lincoln will get the award for Best Picture.