2012 - Predicting the Future

[kevsta]

So a while back Stillicho took exception to my ridiculing of the Bernank's Fed for their terrible predictive record of the economy (that they made) and challenged me to prove that the Asset managers I follow are more accurate with their predictions and world views, and I accepted with conditions..

stilicho
Pick your favourite and we can watch wide-eyed as his or hers forecasts unfold before us. I supplied four really simple criteria but perhaps you have some others in mind. Let's hurry, though, because we can start this proposal of yours around New Years and follow your experts as they overshadow everyone in the business.

"my favourite" hmm, difficult to choose, there are a few. within this group there are alternate views and opinions on micro issues, but within the context of broadly similar macroviews

• Jim Rickards
• Eric Sprott
• Hugh Hendry
• Kyle Bass
• Reggie Middleton
• Steve Keen
• Gordon T Long
• Robin Griffiths
• Ben Davies
• Michael Pento
• Peter Schiff
• Jim Rogers
• Marc Faber

and so if I have until New Years I will accept your challenge, let me collate opinion across the guys who do have a clue, cross reference it with my Contra indicators

• Goldman sellside (Stolper, Jim O Neill etc)
• Whitney Tilson (see the anti Tilson ETF )
• Dennis Gartman
• Jim Cramer
• Bernanke
• Krugman
• Roubini

the problem we have with this though, is it is hugely dependent on what the FED actually do, ie Rickards thinks the Euro will survive and get stronger, and if the FED (IMF whatever) bail Europe out, he will likely be correct.

do you see how they (FED) might have a little inside knowledge with regards to these things and hence *should* be in a position to predict slightly better than outside observers?

So I think the predictions will be along the lines of:

"if they do this, then this.. but if they do this, then this.." is that acceptable?

So lets start with a macro overview to set context. These are my beliefs along with the guys with whom I agree with their analysis.

We are following the timetable for what must come, so clearly laid out by Gordon T Long's extend & Pretend Roadmap back in Jan 2010 just after Dubai World defaulted (remember that far back?) as shown here, people were talking vaguely about Greece and Ireland as potential problems in the distant future at this point. (Gold dropped $70 in a day, nearly back to what I had recently paid for mine at that point)



as you can see things have moved along pretty much exactly to the roadmap since then, we are now well into the European sub-prime area in the diagram, with problems in eastern Europe - Hungary in crisis - with approx 60% of their mortgage debt denominated in Swiss CHF, the Euro peg and problems look set to seriously test the SNB's resolve and reserves, not to mention the Swiss and Austrian banks because Hungary have just passed a law that could definitely be classed as an attack in the currency wars to bail out their borrowers at the cost of foreign banks.

The European banking system is suffering institutional electronic-style bank runs out of Greece, Italy and Spain currently, with old style queuing-outside-the-door Bank runs in Latvia (pics)

Meridith's (and Gordon Long's more accurately timed) Muni / state calls will start coming in this year, Meridith is like Schiff in his US dollar predictions, early, but ultimately will be correct.

So in essence, I think 2012 will be the year that the wheels properly come off the central planners carts and everybody can finally see and accept:

That we (the global economy) are not recovering, and are not likely to before taking some real hardship.

That we are in fact now in year 4 of what will eventually be known as "The Greater Depression" - Schiff has been saying this for at least 18 months now, and even Krugman finally caught on a few weeks ago, this year the pretence will end for everyone else too.

That we are in a massive and unavoidable debt bubble collapse and de-leveraging, and an ongoing implosion of the western world shadow banking system, and trillions in debt writedowns of one form or another are the only real way out of it.

That housing is still overvalued in many places - http://www.economist.com/node/21540231

Based on the average of the two measures, home prices are overvalued by about 25% or more in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden

Europe will not hold together "as-is" - that which is not sustainable, will not be sustained. Greece & Portugal cannot remain in the current system as-is. There will be real defaults, as there is a €4-6 Trillion hole in the European balance sheet.

This will cross the Atlantic and infect the US banking system again via the Trillions of exposure in derivatives, making it absolutely clear to the US that they cannot and will not be "decoupling" from Europe's problems and growing their way out of anything just yet.

In a nutshell, it all has to get much worse, before it can even think about starting to recover.

China - the bubble bursting is now well underway - as predicted by Hugh Hendry back in 2009

From the FT - Hugh Hendry, the outspoken UK hedge fund manager known for his bearish, often contrarian views on the global economy, has seen his ‘China short’ fund rack up gains of more than 52 per cent so far this year, investors have told the Financial Times.

Mr Hendry began raising concerns about a Chinese slowdown in 2009 – even uploading a homemade video on to the video sharing site YouTube based on a visit to deserted Chinese real estate developments.

Hendry is also poised right on the threshold of massive profits from bets taken two years ago that Europe was going back into recession, and will start seeing payment as soon as the ECB's interest rates go sub 1%, I think that is coming this year.

Here he is schooling Nobel Laureate Joseph Stiglitz on the real world economics and (as it turns out) some prophetic advice for the Spanish Finance minister.



Japan - this will be the year it all comes unraveled for Japan, as predicted by Kyle Bass, who this year has been paid handsomely from bets he was making on Greece defaulting in 2008/9, whilst the Bernank was trumpeting his "green shoots of recovery" nonsense.

Here's Kyle on BBC Hard Talk - this one is unmissable.



highlights include:

"debt has grown globally in the last 9 years from $80 trillion dollars to $210 trillion, so global credit market debt has grown at 13% per year for the last 9 years, where global GDP has grown at 4%"

"think about what you just asked me, basically what you're saying is if Germany goes joint and seperately liable with the profligate idiots in Southern europe, will that "solve" the scenario?

..how many of your family members and friends would you go joint and separately liable with?"

Australia - this is the year Australian housing finally catches up with gravity.

Steve Keen was also correct in his analysis of the AU property bubble, but was once again wrong footed on timing by central planners and stimulus interfering with market forces, but this cannot last forever, and with the China slowdown, whether (soft, or hard landing) so goes Aus in 2012.

Canada - same thing which will be the catalyst that exposes the much denied weaknesses in the Canadian banking system

UK - being from the UK originally I can comment in more depth on this one than most countries. In 2012 I think things will start to get really nasty in the UK, with approaching 1000% debt to GDP now

Consumer confidence at record lows as austerity finally starts to hit there (remember, for most homeowners, if you didn't lose your job in 08/09 things actually got much cheaper for you as mortgage interest rates plunged, most of "working home-owning UK" haven't felt much from the crisis yet) but now, with no doubt (in my mind anyway) about Britain plunging back into recession, and housing continuing it's inevitable downward trajectory, I would not be at all surprised to see the rioters back out properly, only this time they will know why they are rioting.

And for the wildcard, I'm going to go with a major energy shock this year, whether triggered by problems in the Middle East - Iran (which I have bet on via Intrade btw) or by Chris Martenson's analysis of exponential population and credit growth bumping up against finite EROEI with liquid fuels - IMO this lecture is the most important information I saw in 2011. (ignore the fact its at a Gold & silver conference, he doesn't mention either one once)



And so with all this debt collapse going on around the world, the one thing I think we can definitely rely on is the Central Planners kicking the printing into overdrive and doing everything in their power to try to prevent the tide coming in.

Whether they will succeed in preventing the inevitable once again, or whether they have finally run out of road this time I am not going to guess at, but I am pretty sure they'll try as hard as they can.

Jim Rickards thinks the US will start QE3 (although it wont be called that) in the form of "targeting NGDP" and they will give no figures and no dates or durations (no accountability) and that it will be triggered by the EURUSD reaching the mid 1.20s.

So it looks like we are going to get flooded with dollars. One other thing I would add to that, which I think is extremely bullish for the price of gold, I’ve been talking about QE3, but there is something even more insidious than that which we may see. It’s called NGDP targeting.

NGDP stands for Notional Gross Domestic Product. Targeting just means that the Fed is going to pick a target for growth in NGDP and then print as much as it takes to hit that target.

Now notional GDP is not the same as real GDP. In other words, notional GDP is real GDP plus inflation. If the Fed targets NGDP, what they are really saying is they don’t care about inflation anymore, they’ve given up. I’ve said all along the Fed wants inflation and this is a way of getting it. It’s also a way of destroying the debt by cheapening the dollar.

...Targeting notional GDP, it’s just a fancy way of saying printing or QE forever. I’m using the phrase QE3 to mean more printing, but I actually think what the Fed is going to do is target NGDP....

Zerohedge's (Bloomberg) ECB / Fed balance sheet seems like a reasonable guide to the EURUSD direction to me and also implies we should be nearer 1.20 than 1.30 currently.

so it does look likely to be heading downwards first, then up again when the Fed rev the printers up.

Given commodities (and virtually everything else - equities etc) strong correlation to EURUSD most of 2011, this would imply we are probably heading still lower in the first part of the year before the capitulation and printing begins in earnest.

Rickards also predicts a surprise in that not only will China not be letting its currency appreciate, they will be re-pegging and looking to devalue again in the next round of the ongoing Currency War. With the slowdown there and lowering of rates again, this also seems likely to me, to attempt to get back to some good old imported US inflation once more.

So given global printing like never before, some specific price predictions..

Gold - on the low side, if we go with the support/resistance levels of $1705 where it was before the negative lease rate shenanigins and end of year liquidations set in, and add just the average yearly gains this decade of 17% that gives us $1994.

On the high side if we go peak to peak from 2011's peak - $1910 and assume the same peak to peak rise as this year (34%) = $2550

so I predict we will see gold trade between $2000-$2500 in 2012.

Silver Silver's long term fundamentals are extremely strong, but it is such a tiny market, and so easily manipulated and held down by interests that hold more in shorts than many years mining could produce, it is more or less impossible to get accurate price discovery, but I will stand by a previous prediction here that we will see $75 in 2012.

Oil currently trading at $100 per barrel as a baseline, with potential energy shocks and massive printing, we have got to take out the previous $147 high, possibly as high as $200.

A few things from my contra indicators that I think wont be happening.

• Goldman's Jim O Neill's perennial "Equities up 20%" call
• Gartman / Roubini's Gold bubble bursting

so there we go, gold, silver, oil, EURUSD and a whole lot more predictions besides. hopefully that's specific enough for you - lets face it I only have to get a single solitary one right to outperform Bernanke lets see...

Disclaimer - I'm sure you can tell and that I don't need to say this, but I will anyway, I am not an investment advisor. Do not base any decisions on anything I have said here. You have not paid me for my advice therefore you do not have my permission to trade from it

I personally am heavily long physical gold and silver since 2009 and will be staying that way for the foreseeable future.

I will also be taking leveraged positions either short or long in gold, silver, oil, EURUSD and eMini Dow / S&P as opportunities present themselves, and so may have "money where mouth is" on some of these predictions from time to time.

Happy New Year to all.

 

[UndercoverElephant]

I already made a prediction for 2012 on this board, over ten years ago. I predicted that 2012 would mark the falling apart of the world as we know it, and that we'd see the cracks appearing about 2007.

My prediction now is that 2012 is going to defy all expectations and predictions. I think we have just embarked on what will turn out to be the most historically important year of any of our lives. It will be the year when all sorts of people will end up asking questions they never expected to ask, and doubting things they never expected to doubt, in response to things happening in the world which they never expected to happen. It's not just the currency crisis - there's all sorts of other important things happening, to do with the distribution of power and the control of information. An entire generation of people have stopped trusting the mainstream media as being reliable to tell them what is actually going on - we get some things reported to us accurately, but on others there is almost total silence. So they have turned to the internet (social media, blogs, forums like this one) for information. And they are finding out all sorts of things which threaten the existing powers.

As Kev's chart shows, the changes will not happen everywhere at the same either. I suspect that most of 2012 may turn out to be relatively not-so-bad for the US specifically, partly because I think a lot of effort will be made to delay the really bad stuff until after the Presidential election, and partly because it is the US dollar which sits at the base of our fiat money system. That means that as the eurozone implodes, it is likely that the FED will step in and prop up Europe with US dollars in order to avoid contagion reaching the US before the election. All of which just delays the inevitable monetary catastrophe, of course. 2013 is going to be when the worst nightmares of the American people actually start to come true.

 

[kevsta]

I already made a prediction for 2012 on this board, over ten years ago. I predicted that 2012 would mark the falling apart of the world as we know it, and that we'd see the cracks appearing about 2007.

My prediction now is that 2012 is going to defy all expectations and predictions. I think we have just embarked on what will turn out to be the most historically important year of any of our lives. It will be the year when all sorts of people will end up asking questions they never expected to ask, and doubting things they never expected to doubt, in response to things happening in the world which they never expected to happen. It's not just the currency crisis - there's all sorts of other important things happening, to do with the distribution of power and the control of information. An entire generation of people have stopped trusting the mainstream media as being reliable to tell them what is actually going on - we get some things reported to us accurately, but on others there is almost total silence. So they have turned to the internet (social media, blogs, forums like this one) for information. And they are finding out all sorts of things which threaten the existing powers.

As Kev's chart shows, the changes will not happen everywhere at the same either. I suspect that most of 2012 may turn out to be relatively not-so-bad for the US specifically, partly because I think a lot of effort will be made to delay the really bad stuff until after the Presidential election, and partly because it is the US dollar which sits at the base of our fiat money system. That means that as the eurozone implodes, it is likely that the FED will step in and prop up Europe with US dollars in order to avoid contagion reaching the US before the election. All of which just delays the inevitable monetary catastrophe, of course. 2013 is going to be when the worst nightmares of the American people actually start to come true.

I would agree with pretty much all of this, and the bolded bit, specifically Martenson actually said 12 -18 months in his presentation (end Nov) which is 2012-2013, but I don't think he was factoring in the Middle East geo-politics, just straight fundamentals so I think that could well come early.

edit. btw good call on 2012/2007 - was that based on Mayan predictions or Strauss & Howe?

 

[kevsta]

Lets have a few others so I don't feel so lonely out here.

Ambrose Pritchard Evans is even more of a Euro bear than me.

Could 2012 be the year Germany let the Euro die?

The shrinking AAA core will leave Germany propping up the EFSF bail-out fund, until the weight of contingent liabilities endangers Germany itself. That will concentrate minds.

Germany will not be able to fudge EMU any longer. It must either immolate itself, accepting a debt union and internal inflation to save a currency it never wanted and doesn't love; or opt instead to uphold fiscal sovereignty and the essence of its own democracy, and let the Project die.

I agree with Rickards analysis on this, neither the US or China want that, they want the Euro here and strong, so they can devalue against it.

it could be good Euro / bad Euro scenario instead I suppose, (DeutchMark and Euro)

 

[UndercoverElephant]

edit. btw good call on 2012/2007 - was that based on Mayan predictions or Strauss & Howe?

Neither, but much closer to the Mayans than S&H.

 

[daenku32]

No hyperinflation prediction?

 

[kevsta]

No hyperinflation prediction?

why would you think I would predict that in 2012? if that's coming its a few years out yet I would think.

look at the roadmap, that's very last on the list.

 

[UndercoverElephant]

No hyperinflation prediction?

No effective upward pressure on wages = no hyperinflation. High inflation without wage increases leads directly to mass civil disorder long before hyperinflation sets in. In a hyperinflationary scenario, even the poor can still afford to buy stuff, just so long as they can spend their wages quickly. With high price inflation but no wage inflation they rapidly find themselves unable to survive at all.

 

[ThunderChunky]

I predict that the economic recovery (USA) will slowly continue, euro will weaken vs dollar, stocks will remain flat or maybe rise 5%, gold growth will slow and only rise about 10%, oil will peak at about 125 but may end the year around 115.

These predictions are straight from my ass, lets see how I do vs the experts.

 

[psionl0]

These predictions are straight from my ass ...

Let's wait until the end of the year before saying that these predictions stink.

 

[ref]

In 2012 nobody wants to invest in Europe. Bond yields in the area continue to rise. Greece and Portugal will continue to miss the targets that were the conditions for the money they received, but will receive more money anyway. Many countries (Italy, UK, Greece, Portugal, Spain) will suffer from the tightening policies, see higher unemployment, and a deep downturn. Budget deficits will continue to grow bigger than expected, as once again evidenced by what is happening in Spain. Germany will also see a recession, may already be in one. Growth estimates for the entire continent will be revised down more than once, and downgrades of many countries will follow.

US will be stalled by the upcoming presidential elections, as the main parties will only focus to make the other party look bad, and want to win no matter what. The parties can't agree on anything this year, as already evidenced by what happened last year. The fighting will hurt the US economy and there is a threat for more US downgrades.

China's slowdown will continue.

Blaah.

 

[kevsta]

In 2012 nobody wants to invest in Europe. Bond yields in the area continue to rise. Greece and Portugal will continue to miss the targets that were the conditions for the money they received, but will receive more money anyway. Many countries (Italy, UK, Greece, Portugal, Spain) will suffer from the tightening policies, see higher unemployment, and a deep downturn. Budget deficits will continue to grow bigger than expected, as once again evidenced by what is happening in Spain. Germany will also see a recession, may already be in one. Growth estimates for the entire continent will be revised down more than once, and downgrades of many countries will follow.

US will be stalled by the upcoming presidential elections, as the main parties will only focus to make the other party look bad, and want to win no matter what. The parties can't agree on anything this year, as already evidenced by what happened last year. The fighting will hurt the US economy and there is a threat for more US downgrades.

China's slowdown will continue.

Blaah.

nothing I disagree with here, I think this will mesh with my predictions.

 

[kevsta]

Ok so at just about the halfway mark its probably worth a quick sitrep on how this is all shaping up.

So a while back Stillicho took exception to my ridiculing of the Bernank's Fed for their terrible predictive record of the economy (that they made) and challenged me to prove that the Asset managers I follow are more accurate with their predictions and world views, and I accepted with conditions..

So lets start with a macro overview to set context. These are my beliefs along with the guys with whom I agree with their analysis.

We are following the timetable for what must come, so clearly laid out by Gordon T Long's extend & Pretend Roadmap back in Jan 2010 just after Dubai World defaulted (remember that far back?)



as you can see things have moved along pretty much exactly to the roadmap since then, we are now well into the European sub-prime area in the diagram..

The European banking system is suffering institutional electronic-style bank runs out of Greece, Italy and Spain currently, with old style queuing-outside-the-door Bank runs in Latvia (pics)

So..

• European periphery meltdown well underway, with Greece, Ireland, Portugal, Spain, Cyprus & Slovenia all in the bailout club thus far, Italy next, after which the markets will focus on France and then Germany as the ultimate bagholder for trillions in unpayable debt.
  
  
• Electronic (the type that matters these days) bank runs reaching crescendo in Spain & Greece, Spanish problems infecting Italy in both sovereign bond yields and banks there starting to fail (and being bailed out)

all totally predictable thus far.

Meridith's (and Gordon Long's more accurately timed) Muni / state calls will start coming in this year..

http://articles.latimes.com/2012/jun/26/local/la-me-stockton-bankruptcy-20120627

So in essence, I think 2012 will be the year that the wheels properly come off the central planners carts and everybody can finally see and accept:

That we (the global economy) are not recovering, and are not likely to before taking some real hardship.

That we are in fact now in year 4 of what will eventually be known as "The Greater Depression" - Schiff has been saying this for at least 18 months now, and even Krugman finally caught on a few weeks ago, this year the pretence will end for everyone else too.

That we are in a massive and unavoidable debt bubble collapse and de-leveraging, and an ongoing implosion of the western world shadow banking system, and trillions in debt writedowns of one form or another are the only real way out of it.

the Bernank talking about the dangers of the Shadow banking system in April 2012.

Roubini on Bloomberg a couple of days ago http://bloom.bg/KDeUlD

despite his fundamental misunderstandings about spam, he's making sense here.

“All of it matters in the sense that we're kicking the can down the road. The Europeans do not want to make the decisions and there will be political elections in Germany, Italy and other parts of Europe.

We have the U.S. presidential election and until then, we’re not going to do anything about our fiscal problem. In China, there is a stall right now because of the leadership transition that happens once in a decade and important decisions about their growth model has to be done. The problem is that every part of the world is kicking down the road to 2013.

At this time we’re reaching a point in which by next year, you could be in a scenario in which we hit a brick wall, and then euro zone breaks up, in the U.S. you have a fiscal cliff, in China the landing could be hard and in the Middle East you could have a war. That is a perfect storm.”


"Everybody's gonna do more monetary easing.. BoE, BoJ, Fed, ECB, the Chinese, the Brazilian, the Indians.. ..but we live in a world in which the problems in advanced economies are not problems of liquidity, they are problems of fundamental solvency, of governments, households, of financial institutions, of a fat-tail of the corporate sector..

yup. because, yes, it is all dependent on Central Banks.

Mark Faber on CNBC - "100" % probability of global recession by Q4

Faber indicated that while investors remain focused on Greece and Europe – other issues, bigger issues are looming. And they’re more threatening.

“As an observer of markets – whenever everyone focuses on one thing – like Greece and Europe – maybe they miss issues that are far more important – such as a meaningful slowdown in India and China.”

The latest reports from Beijing would support Faber's assertion. The HSBC Flash Purchasing Managers Index, slipped to 48.7 in May from 49.3 in April. That marks the seventh straight month that the index has been below 50, a level which indicates economic activity is contracting.

Faber also cited weakness in the high-end as another key catalyst that’s very negative.

“There are more and more stocks that are breaking down – economic sensitive stocks and companies that cater to the high-end,” he said. "That suggests to me the economy is likely to weaken and the huge asset run is likely to come to an end with significant asset deflation.”

Earlier in the week Tiffany [TIF 50.29 -1.36 (-2.63%) ] lowered forecasts citing slower sales. At that time, Fast Money trader Dan Nathan warned that results such as these were foreboding and suggested the high-end was starting to crack.

When taken in concert, Faber says all the economies of the world could take a hit from these negative developments.

“I think we could have a global recession either in Q4 or early 2013." When asked what were the odds, Faber replied, "100%."

However, in the near term Faber also sees potential for a market rally.

Faber said the bullish catalyst would be Greece exiting the EU.

Yup.

That housing is still overvalued in many places - http://www.economist.com/node/21540231

separate thread - the global housing bubbles but lets just say I'm not having to rethink my views on this very much yet.

Europe will not hold together "as-is" - that which is not sustainable, will not be sustained. Greece & Portugal cannot remain in the current system as-is. There will be real defaults, as there is a €4-6 Trillion hole in the European balance sheet.

so Greece hasn't left yet, but back at Xmas this was still "unthinkable" in politician-speak at least, it seems reality has caught up with the spin. there have however been real defaults, and will be many more, even from Greece, who having been bailed out a 3rd time with debt destruction included, are still insolvent, and now owe more than prior to the last bailout with a still deteriorating economy. this cannot go on forever.

This will cross the Atlantic and infect the US banking system again via the Trillions of exposure in derivatives, making it absolutely clear to the US that they cannot and will not be "decoupling" from Europe's problems and growing their way out of anything just yet.

In a nutshell, it all has to get much worse, before it can even think about starting to recover.

the latest swoon in US equities now has even the CNBC stock-pumping schills openly questioning their "decoupling" theory for the money-printing-induced first half year rally on air, I'd say that was the financial definition of "becoming obvious to all".

Derivatives contagion.. tick-tock-tick-tock ..mentioning no names (MS, JPM)

China - the bubble bursting is now well underway - as predicted by Hugh Hendry back in 2009

Hendry is also poised right on the threshold of massive profits from bets taken two years ago that Europe was going back into recession, and will start seeing payment as soon as the ECB's interest rates go sub 1%, I think that is coming this year.

looking good for Hugh, China clearly slowing dramatically, some reports seem really ugly, and Europe heading into deep recession (or depression depending on where you live) and coming under heavy pressure to reduce interest rates below 1%.

Japan - this will be the year it all comes unraveled for Japan..

not yet.

Australia - this is the year Australian housing finally catches up with gravity.

Steve Keen was also correct in his analysis of the AU property bubble, but was once again wrong footed on timing by central planners and stimulus interfering with market forces, but this cannot last forever, and with the China slowdown, whether (soft, or hard landing) so goes Aus in 2012.

I'd say this type of article in the mainstream media says it all really.

How to defeat the deflating property bubble

AS REPORTS roll in about the Australian property bubble deflating and the struggle for sales in the current climate, it's an uncomfortable time for those in the market to sell.

While the number of first-home buyers is again on the rise, SQM Research shows house prices are falling right across the country as the market digests a glut of more than 360,000 properties up for sale.

On top of that, Australians are unwilling to increase their debt while the banks are reluctant to expand their lending.
It all paints a pretty bleak picture for sellers who need to adjust their thinking and tactics to optimise their chances of a sale.

Selling in tough times needs a different mindset.

Read more: http://www.news.com.au/money/david-...le/story-fn7kicty-1226348121027#ixzz1z4tCDDZ6

......

Canada - same thing which will be the catalyst that exposes the much denied weaknesses in the Canadian banking system

the new mortgage regulations effectively pulling the rug from many first time buyers and limiting insurance on the $million+ homes have set this in motion, combined with peaking speculative behavior and the China effect, I think this will be clearly visible to everybody in another 6 months

I'll be looking into shorting your recommended list of banks stillicho, thanks theres some overlap with some interesting figures over at greatponzi.com note, despite previous derision of the website name, these figures have been shown to be accurate)

now, with no doubt (in my mind anyway) about Britain plunging back into recession, and housing continuing it's inevitable downward trajectory, I would not be at all surprised to see the rioters back out properly, only this time they will know why they are rioting.

recession, check. continued housing slide, check. returning social problems? - we shall see how long jubilee euphoria persists, be good if it all kicked off while the Olympics were on, wouldn't it?

And for the wildcard, I'm going to go with a major energy shock this year, whether triggered by problems in the Middle East - Iran (which I have bet on via Intrade btw) or by Chris Martenson's analysis of exponential population and credit growth bumping up against finite EROEI with liquid fuels

with the swoon in the cost of oil per barrel to sub $80 making much of the new "miracle discoveries" non-viable at that price, and the Iranian embargo starting shortly, and no signs of the nuclear dispute resolution in sight, the 2nd half of the year could well still bring this, we shall see.

**Disclosure, long oil futures from $78.50 and short Dow at 12631. up 200+ points thus far and should have a long way to run.

And so with all this debt collapse going on around the world, the one thing I think we can definitely rely on is the Central Planners kicking the printing into overdrive and doing everything in their power to try to prevent the tide coming in.

Whether they will succeed in preventing the inevitable once again, or whether they have finally run out of road this time I am not going to guess at, but I am pretty sure they'll try as hard as they can.

1 Trillion Euros in LTRO 1 and 2 - which has largely backfired, producing a profitable "LTRO stigma" spread trade (hat-tip ZH, who else) and has further laden up already insolvent banks with the devaluing bonds of insolvent sovereigns.

lol genius.

Zerohedge's (Bloomberg) ECB / Fed balance sheet seems like a reasonable guide to the EURUSD direction to me and also implies we should be nearer 1.20 than 1.30 currently.

[qimg]http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2011/12/20111229_fedecb2.png[/qimg]

so it does look likely to be heading downwards first, then up again when the Fed rev the printers up.

at EURUSD 1.243 as of writing this, from 1.30 at 01-Jan, we've got the first half down.. will the Fed ease further? I think they have to, they cant stand by and risk a major markets rout in O's election year, but I suspect it will be covert rather than overt support.

they also cant have the USD index too high for very long, as it will hurt big business, so this has to come in response to the fear trade driving it higher via risk-off safety treasury purchases.

Given commodities (and virtually everything else - equities etc) strong correlation to EURUSD most of 2011, this would imply we are probably heading still lower in the first part of the year before the capitulation and printing begins in earnest.

check.

so the $million question, which comes first, the printing or the collapse? because as stated here, global markets are now entirely dependent on continued CB activity.


with regards to the specific price predictions, apart from expecting a first half swoon correctly, EOY still remains to be seen, if the Fed dont print, I will of course be wrong on everything. in this particular regard the Bernank should really have more clue than some dude in Ibiza

however for those who doubt the overall macro viewpoint I highly recommend spending some time on Gordon T Long's video channel, and in particular "Peak everything" - below, as I think the 2 and 1/2 year old chart at the very top of this thread validates the accuracy of his work and outlook.

 

[Sceptic-PK]

Instead of quoting a fluff piece from David Koch why not just use the real values?

http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0/

Average 4.5% decline across cities from March year to year. Now, pretty sure I said previously that I was expecting a correction in the housing market, but is 4.5% a crash and the beginning of the end times? (Yes I understand this isn't Jan-June info but it's the best I could find on lazy short notice.)

What's more important (in my opinion) is foreclosure rates:

“Possession rates have generally either stabilised or improved in most other states. Bankruptcy rates have [also] broadly fallen across states since 2009, although less so in Queensland and Western Australia. Overall, though, the number of households whose financial difficulties have deteriorated to the extremes of bankruptcy or lender property possession is very low in absolute terms.”

http://www.propertyobserver.com.au/...s-are-falling-not-increasing-christopher-joye

Yeah this is from some stupid property site, but I'm only quoting the RBA here, as I don't feel like searching one of their PDFs I can't copy from, sorry.

 

[ThunderChunky]

IMO, most of your predictions were to vague to be of any value. You did say things would be much worse. Are they?

Your specific price predictions for gold, silver and oil so far look to be way off (mine are too, but less so) at the moment. Comments? Do you want to revise your predictions?

 

[kevsta]

Instead of quoting a fluff piece from David Koch why not just use the real values?

because we already know prices are falling, everybody has their own opinions on by how far they will get to, I'm always more interested in the sentiment an article like that in the MSM indicates, clear acceptance, and "how to get out quickly" HERD==> thataway

IMO, most of your predictions were to vague to be of any value. You did say things would be much worse. Are they?

are they in Greece? Spain? Italy? soon to be France? yes it's all progressing quite nicely (badly)

the plain facts in the EU are that there is a several trillion Euro black hole in the finances, and there will be bagholders and/or printing parties, this is not just going to go nicely away so people can get back to like before just yet

Your specific price predictions for gold, silver and oil so far look to be way off (mine are too, but less so) at the moment. Comments? Do you want to revise your predictions?

we are only halfway through, I correctly anticipated Euro (and correlated commodity) weakness for the first half year, whether I have correctly anticipated a blitz of printing that would resurrect these predictions easily within 6 weeks remains to be seen.

obviously the whole financial world just revises their estimates when the previous ones fail all the time, but I think we should see what happens and how far out they are at year end really.

Silver in particular does look exceptionally hopeful at this point. Gold can put $300 in in 2 weeks easily, given reason. Oil.. market's seemingly forgotten about the Iran thing again at the moment, that could pop $100+ again in a day if it flared up, at any point.

I saw a Saudi royal type being interviewed this morning, who when asked if Iran did start causing mayhem, how high he would expect a barrel might go.. $150? ..he kind of grimaced, and say "I would expect it to go significantly higher than that"

these things are not out of the bounds of possibility, even having *some* probability IMO

 

[Sceptic-PK]

That's a terrible response that didn't address a single thing I wrote. I won't bother again.

 

[kevsta]

That's a terrible response that didn't address a single thing I wrote. I won't bother again.

?? er-hem.. you misunderstand what I mean when I refer to an article, reply on a tangent of your choosing, (foreclosures, far from the only headwind at this point) and then dont like the clarification?

are you denying that public sentiment has anything to do with price?

 

[kevsta]

Quote:

From the FT - Hugh Hendry, the outspoken UK hedge fund manager known for his bearish, often contrarian views on the global economy, has seen his ‘China short’ fund rack up gains of more than 52 per cent so far this year, investors have told the Financial Times.

Mr Hendry began raising concerns about a Chinese slowdown in 2009 – even uploading a homemade video on to the video sharing site YouTube based on a visit to deserted Chinese real estate developments.

Hendry is also poised right on the threshold of massive profits from bets taken two years ago that Europe was going back into recession, and will start seeing payment as soon as the ECB's interest rates go sub 1%, I think that is coming this year.

Ker-ching! Hendry's credibility remains intact.

http://www.ft.com/cms/s/0/077c9f4a-c67a-11e1-963a-00144feabdc0.html#axzz1zkSoAe6w

The European Central Bank has cut its main interest rate to an historic low, responding to increasing gloom over the prospects for the eurozone economy with a move that also offers relief to the region’s struggling banks.

In a decision widely anticipated by financial markets, the ECB on Thursday reduced its main policy rate by a quarter of a percentage point to 0.75 per cent, the first time it has pushed the rate under 1 per cent.

widely anticipated lol, not 2+ years ago when he put his money where his mouth is, it wasn't.

 

[kevsta]

shorter term predictions playing out ok so far...

**Disclosure, long oil futures from $78.50 and short Dow at 12631. up 200+ points thus far and should have a long way to run.

no it was primarily an EURUSD short squeeze I think, ie Risk on again because CBs are printing (or agreeing to work on a plan, for a plan, to print or something (**details to follow)

I was fairly confident crude was going to bounce there somewhere, but I don't think anyone was expecting 10% in a day.

I took half of this off near close on Friday at $85.00

trail stops now, work on my patience, and see how far it will run. will be looking to re-initiate further Dow shorts from as high as we can get before it rolls over again.

remember what happened last time they saved the world at one of their meetings back in Oct 2011, that one managed a 400bps rally, and couple of day or so before it was faded, this one 260bps so far, and we shall see shortly.

rallies will be faded soon enough as first Italy properly, then France and Germany are next in the crosshairs.

Boo, risk off again..

Sstopped out at $88.05 for 955 points per contract on the remaining crude crude runners, although it does look now to have mostly played out on the oil side at this point

I have been adding to the Dow shorts again at 12950 and above with stops at 13005 and am currently at the time of writing an aggregate of -168 points per contract on the short half.

being stopped out now on the short side will result in a total per contract profit of 905-288=617 points per contract, or a big long 1500 point equities swoon (as per last July) from here will make this little trading account quite a bit bigger

..roll on Dow < 11k again. .."come on you Reds!"

NB: please note *some* of the utter Woo that is Technical analysis was used in the making of this highly leveraged digital fiat 1's and 0's.