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Wednesday, June 8, 2011

Mid Year 2011 Prediction Review

Mid Year Prediction Review for 2011
The first of June brings the time to do a mid point check for my 2011 predictions made back in December. This can be a humbling experience but a necessary one. Let’s get to it. Below is a list of my prognostications and a brief comment or two:
  1. The financials, with Bank of America leading the way, will be the best preforming sector on the NYSE in 2011. This turned out to be a wrong headed prediction. The financials have under performed the market and Bank of America has been the worst of the lot. I thought the financials would be a safe haven since they are “too-big-to-fail”. I missed this prediction because I thought the “robo signing” issue was not that serious. Wrong. The under performance of the financials does underscore my main contention that the “strength” in the economy is a result of Fed action not economic fundamentals. This was a big miss, my biggest.
  2. Unemployment will rise to 11%. This has not happened yet but I’m not yielding quite yet. Back in December the talking heads were saying 400,000 per month job creation was right around the corner. They were definitely wrong about that as the jobs number for May was a measly 54,000. Whether or not I’m wrong is yet to be determined. I’ll stand pat on this one.
  3. Jim Demint will emerge as a front runner for the Republican presidential nomination. It may not happen but it is still a good idea. Is this field the best the Republicans, and by extension America, can offer?
  4. The Mexican government suspends the writ of amparo (Mexican hebeas corpus) in a last ditch effort to hunt down and destroy the drug cartels and avert complete anarchy. I may have missed this one but you never know.
  5. The state of California will end the year in dire need of a bail out. The state of California is in need of a bail out now, just not dire. By the end of the year this fruit will ripen and it’ll be dire.
  6. The Real Estate market will take its final leg down. Nailed this one.
  7. Merger and deal activity on Wall Street will have a record year. I was on the money here. The Linkedin, Facebook and ATT’s merger with T Mobile lead a very active deal sheet that only appears to be gaining momentum. 
  8. House Republicans play politics and refuse to make any hard decisions preparing to take on Obama in 2012. Admittedly Paul Ryan took a step on the wild side and made a suggestion. I was wrong here.
  9. The European sovereign debt crisis continues to boil under the surface. Nailed this one too.
  10. Civil unrest in Europe will escalate dramatically. It hasn’t happened yet but just wait. By the end of the year this prognostication will come true in spades.
  11. The China story will take a different turn as its economy begins to overheat. This prediction is on the money. The Chinese central bank has raised rates several times in 2011 in an effort to cool this overheating economic juggernaut.
  12. The Korean peninsula will be reunited as the North Korean government collapses under the strain of China’s pressure and dissension within the military. Not yet, stay tuned. When the US economy turns down all sorts of things start happening.
  13. The Iranian’s will explode a nuclear devise or demonstrate a “dirty bomb” ballistic missile capability. Only time will tell.
  14. The war in Afghanistan fails. Since I have a step daughter deploying to Afghanistan this August this is no happy prediction to standby but I will. Obama will use “his” execution of Bin Laden as proof our mission is complete. The President has no stomach for the fight.
  15. The Obama administration will descend into chaos. Still percolating.
  16. The levels I predicted on the major indices were as follows:
 S&P 500    950 - I’ll stand by this. It may be a little low, but maybe not. 50/50.
 Dow Jones    10,000 This was a crazy prediction in December of 2009. Today the Dow will probably slip under 12,000 on its way to 10,000.  
10 year US Treasury Yield  2.45% This was my most outrageous prediction. Everyone thought interest rate hikes were a forgone conclusion. The 10 year slipped under 3% yesterday to 2.96%. That leaves a long way to go and it may not fall to 2.45% but directionally I got this one right so far.
 Spot Gold Price   $2,300 Again directionally accurate. Gold was under $1,000 per ounce when this was published. The fear trade may take it to $2,300 but inflation will not.
 GDP     2.5% The recent 1.8% growth rate was even worst than I had anticipated. That saying something considering the roar of this bear.
The America economy is in a serious, serious decline. The Obama administration's policies are akin to the medieval medical practice of bleeding the patient. When I hear the Fed Chairman and other administration officials predict increased growth for the remainder of the year it is the unmistakable sound of whistling in the dark. And it sure is dark.

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