Sat Dec 31, 2011
I have posted Doug Kass 15 predictions and read a few others Here is mine for 2012.
1. The stock market will complete its rebound to the upper levels that have marked the upper reaches since 2000. Then, of course, it will go down.
We are in an 18 year period (2000-2018) of sideways movement. As the market gets closer ad closer to prior peaks the probability of reversal grows higher. Or as the and fills one end of the hour glass the inevitable return to the other end begins. There are so many investors so completely in defensive positions of bonds and money market funds, they will have to be forced back into risk assets. The move up in gold shares the last couple of days suggests that is underway.
2. Stocks will probably top by no later than the second quarter of 2012. That will spoil the President's chances for re election. The fall in price should take out this year's 1075 low. But prices rebound into the election.
3. Bond prices have peaked and should return to their mean a value of say 100 for TLT. THat should provide a buying opportunity and an exit from our stock positions. Timing on moving from stocks to bonds will be a process not an event.
4. Copper, gold and silver will soar with a falling dollar. Energy service stocks will also perform well.
5. Our two contrarian picks are Transocean RIG now 38 and General Motors at 20. GM sports $20 cash per share the same as its stock price. GDXJ is at a 17 month low, CEF is trading at par or a discount to NAV, a rare event.
RIG should have a shot at 55-60. GM from 20 should have a shot at 28.
6. Beaten down emerging markets will also gain the first half of the year. They have ben in decline since Nov 2010. Again the story is the dollar.
7. The Euro should be bottoming now and the Dollar topping. I have been saying that and it has not happened yet. Patience, I was months early on a bottom in the Dollar.
8 The President's popularity will rise with the market. Romney wins the nomination. The race is too close to call at this point. I suspect it all depends on whether the govt can make the markets rebound into the election. Jimmy Carter got interest rates down but they bottomed that August and then rose again. Carter lost. Taming the markets is a lot harder than politicians think.
9. The Administration will fail to lead the effort at true energy independence via our newly discovered natural gas discoveries. Fantasies regarding wind, solar, and electric cars will continue in the face of massive failure for all three.
Overall strategy just to be clear.
Long stocks now particularly gold shares.
Expect stocks to top in the first or second quarter as bonds TLT bottoms. Switch from stocks to bonds. The dollar should be strengthening by then.
Stay long bonds after that. I suspect it will be tougher to spot the bottom this fall than it was in 2011. No matter who wins the election I suspect that the top in spring 2012 wil be very important. That should lead to a final low in the markets during 2013. That will be a scary prospect.
I'll make one prediction. We'll see the high for the year in stocks in January, probably the first two weeks.
Posted by: John Burke | January 02, 2012 at 10:43 PM
John
We are off to a fast start. The market rocketed from the Oct 4 low to a high that month in a about three weeks. The rally only lasts while the money holds out.
We are off to a good start on the correct side of the market.
Posted by: Dennis Elam | January 03, 2012 at 08:00 AM