Eleven Predictions for 2012 and How To Profit From Them!

Here are eleven predictions for the coming year. You can take them to the bank!

Well, actually, I don’t pay a lot of attention to my predictions. I’m always afraid that they will distort my interpretation of market action. I always want to focus on the market and what it is telling me to do rather than try to predict the market. So I try to not get to wrapped up in my predictions.

On the other hand, I like the intellectual exercise that leads me to a greater understanding of the markets.

Here is how I use my predictions. I will only follow the market based on my Rules that I teach in my courses. However, I will weight the size of the position greater if the Rules and my analysis agree with each other. For example, I may double the size of my position if my analysis and the Rules are both bullish.

* The stock market will move 20% higher. PEs are too low. Earnings are moving higher. Global money supply is back to an easing mode. Buy the US stock market.
* The US economy will stumble along at about 1-2% through the year. My leading indicators say there will not be a recession but they also say that there will not be a strong economy. This is a good time to start a business as financing rates are low, rents are cheap, and labor is cheap. The company won’t skyrocket right away but you will be positioned for the stinger economy down the road.
* Unemployment will stay very high. Yes, the rate may come down but that will only be due to the fact that fewer people will look for a job. The US economy will not boom because of tax increases and regulatory uncertainty plus the coming recession in Europe.
* Europe will move into recession with weakness mainly on the periphery but with even Germany struggling to stay afloat. Austerity programs, higher taxes, and higher interest rates will weigh on the various economies. Buy European stocks in the middle of the year.
* Global interest rates will stay below 1% in major countries. Weak global growth, little private borrowing, and massive monetary easing will keep rates low for another year.
* The housing market in the US will rebound but will still be historically weak. Houses are very very very cheap. Rents are rising. The population is growing. Buy housing stocks.
* The US dollar will rise. The US is the best house in a crappy neighborhood and has a relatively tight monetary policy. Other central banks are easing while the Fed is relatively stable.
* Inflation will stay muted but there may be a surprise to the upside. The raw material for hyper-inflation is in place but the match has yet to be struck. However, I believe that match will be struck by the end of 2012
* Gold will struggle early in the year but move to new highs by the end of the year. Low inflation and a strong dollar will dampen enthusiasm for the yellow metal but the threat of higher inflation driven by global monetary easing will keep a floor on the price. If it looks like inflation is coming back, look for the price to skyrocket. Buy gold but only when it moves into bull markets. Keep some insurance gold under your mattress.
* Commodities will also generally struggle with a similar situation as gold. However, global demand for better living conditions, particularly in huge but poor countries like China, India, and Indonesia will increase the demand for nearly all commodities so commodity prices will be higher at the end of the year. I will generally play commodities from the downside early in the year but from the long side later.
* Emerging market stocks will outperform developed nations. Global monetary easing, generally growing global economies, and tight float on the stocks will boost performance over the year. Buy emerging market stocks when they move into bull markets.

What do you think? Give me your predictions in a comment below!

This entry was posted in Economics, Forex, Futures, Investing General, Stocks. Bookmark the permalink.

4 Responses to Eleven Predictions for 2012 and How To Profit From Them!

  1. Steve Barnard says:

    Down the tubes.
    Global warming is freezing everyone out, volcanoes are blowing all over the place, large earthquakes (over 7) have jumped, sovereign debt is a time bomb – whose is going down first? Big Bro is getting bigger and more intrusive, governments are basically paralyzed, “they” are pushing for war (which I don’t think will happen). The general populace is very unhappy and nervous – the market agrees – gun sales are going through the roof. Other than that, I basically agree with your predictions, except for one thing – what is the “Black Swan” Courtney? You know there will be at least one. Could it be the Trillion Dollar lawsuit filed in the Southern District of New York: http://divinecosmos.com/media/Keenan_complaint_11-23-2011_SDNY.pdf

  2. Melvyn says:

    Courtney, I appreciate you analyses from this post and your FMT Insights.

    As you might know, I am a psychiatrist and author of PsychePolitics. Though I was always a data driven math lover, I now know more about the interactions between reason and emotion. Most people end their discussions with something like, “Well, that’s emotional.” They really don’t get into it.

    I have come to believe something 90 degrees different. Logic is driven by emotion–to a large degree. This might beg the question, though, which is, “How exactly will emotions play out?”

    While predicting the consequences of emotion is gobs harder than explaining it in retrospect, here goes:

    1. If Romney wins the GOP nomination, the market will start to rise.

    2. If Romney wins the general election, the markets rise more quickly.

    3. Europe must curtail the easy life of its southern members. While austerity may hurt in the short run, it will stabilize Europe in the long run. So, not to adhere to your admonition of avoiding timing predictions, I’d say Europe will stabilize and its markets will start to rise much sooner than otherwise predicted, perhaps by the end of 2012. This is because markets rise based on emotions. Is hope an emotion? Well, optimism is, and hope releases it. That is, once people see the Southern European countries accept and start the austerity processes, hope will come and optimism will be released.

    Again, emotion generally leads logic. So, once hope and optimism emerge, people will see the glass of economic data as half full. They’ll say, “Well, unemployment is only 8%, but the trend is good, hopeful. . . et cetera, et cetera, et cetera.”

    In fact, that’s why Romney’s ascendency will help. Hope and optimism.

    BTW, if you are interested, I know of a way to decrease the unemployment rate substantially with the stroke of a pen. If Romney wins, I’ll try to get the message across, to help him . But I’ll tell you, if you’re interested. Or, you could check out my blog for an upcoming post on the subject!

    Keep your posts coming. I love ’em.

  3. John B. says:

    Your predictions are generally very clever and I can imagine them happen!
    I think we haven´t surpass the crisis yet. US economy will decrease for 1-2%, because the unemployment and debt will work against it. The foreign debt is steadily rising and we can´t expect any decrease any time soon. For me, the biggest problem is with housing. While US rents are on the rise, the value of housing is decreasing and more and more people are choosing to live more secure life without any mortgages.
    Anyway, I wish you happy New Year!

  4. Pete says:

    I think the market trends will be strong but short lived with the volatility of 2011 continuing well into 2012.
    MUTS will outperform the carry trade. Fill in the direction of the trend, take a cut from the middle and get out! Wait for the next trend to develop and repeat.
    Instruments that provide leverage are preferred to make the most of the short moves.
    Timing the sale of premium will be very difficult in the choppy market.
    Headline risk will continue to generate large daily swings.
    The DXY will continue to be bullish, Fueled by a US economy showing continuing weak improvement thus chasing away a QE3 from helicopter Ben, and the high degree of inverse correlation between the USD index and the major stock indices will be broken.

Leave a Reply

Your email address will not be published. Required fields are marked *