2012 Dynamics

Bold predictions for 2012.

Political

The election will be more about policy than economics, and it will be between Romney and Obama, and Obama will win.  I think the economy will improve, therefore Romney’s perceived economic management skills won’t be as meaningful to working class independents and democrats.  He would need their help to take the White House.

I think the economy will improve.

The United States will have above-expected to solid growth.  There are waves rippling out around the US hitting continents in two or so year intervals.  The good thing for the US is that it has survived the two roughest waves already.  In late 2007-08 consumer spending sucked in the US, it started to turn worse in 2009 for the consumer in Europe, and now in late 2011-12 China looks to be weakening.  The governments were hit after the consumer.  In 2009 the Federal Funds rate dropped to it’s lowest, in 2011 Europe almost collapsed – I don’t think it will in this year either.  German leadership is too strong, and France is on board, and the ECB has to follow.  China is about to get hit on the consumer side.  They still may have a couple of  years until government is in the spotlight.  That’ll certainly be interesting to watch, and could create conflict in Asia, particularly if the public protests.  There are investment ideas that flow from this overall view.

Actionables

  • US Equities are underpriced.  Risk will be in higher demand driving prices higher.
  • European Bonds could provide a great vehicle.  Yields are beginning to top out, the currency is a wildcard to me.  I think it could strengthen, but not much mor than I think it could weaken
  • Some European Equities should be on the table.  As they move through the process of saving their asses they risk may move back into favor.
  • I wouldn’t play in China anyways, but it is important to gauge the currency.  It’s essentially a fight between the natural position of the Yen and the politicians for upward movement vs the attempted softlanding.

 


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