2012: The Predictable

It’s a new year; so various and sundry pundits, analysts and soothsayers feel compelled to make predictions. Anyone that makes specific price level predictions is not prudent to say the least.

All that can be predicted accurately is repeated behavior and trends will continue until some force is impaired on them. Then they will either accelerate or change. That’s the fact, Jack!

What is predictable for 2012?

• The usual suspects will goose stocks and commodities near month end to game performance.
• The usual suspects will manipulate stocks, gold, oil and silver near derivative expirations.
• The usual suspects will try to manipulate S&P futures and stocks during the last hour of trading.
• The usual suspects will manipulate S&P futures after Asian trading closes.
• The usual suspects will buy S&P futures on Sunday night to front-run the expected Monday rally.
• Big hedge funds will congregate in mostly the same stocks.
• Big banks will craft earnings, mostly by mark-to-mark fantasy and depleting loss reserves.
• Some auto makers will stuff dealers with cars in order to register higher sales.
• Industry associations will continue to report unrealistically stronger economic metrics.
• The financial media will continue to display pundits that have been horribly wrong for years.
• European sovereign debt crises will fester and worsen.
• The US budget deficit will continue to mushroom.
• US politicians will do little during the coming election year except to attribute blame.
• Globally politicians will kick the can down the road until the market forces real change.
• If a crisis arises, politicians will offer ‘band-aid’ solutions but not the necessary reforms.
• Fed officials will use the media to advance their views, no matter how wrong.
• When stocks rally most fin media outlets will attribute the gain to optimism on Europe.
• When stocks decline most fin media outlets will attribute the drop to pessimism over Europe.
• Individual investors will continue to liquidate stocks and pension assets.
• Bombastic prognosticators will show no humility or shame when they are horribly wrong.
• Late afternoon bullish rumors and stories to boost the NYSE close will appear.
• US government economic statistics will understate inflation and overstate economic strength.
• Most investors and traders will seek affirmation of their core biases and not insight or wisdom.
• Many investors and traders will ‘talk their books’ in the belief that patsies will help them.
• China’s plight will gain more attention and significance.
• Merkel and Sarkozy will meet – repeatedly.
• The usual suspects will bray that central banks aren’t doing enough asset monetization.
• Some German official will appear to squash market hopes of German or ECB asset monetization.
• European nations will not meet fiscal and budget goals.
• The world will not end on December 21, 2012.
• The Chicago Cubs will not win the World Series.
• The Yankees will need pitching.
• NHL refereeing will be exasperating.

The trends

On a weekly basis (long term): stocks are flat; bonds are up but deteriorating; silver, gold, copper and most food commodities are down. The dollar is strong. Oil is modestly bullish but could easily reverse. Gasoline is neutral but is more vulnerable to the downside.

On a daily basis (intermediate term): the dollar is strong.

For 2011, the DJIA gained 5.5%; the S&P 500 was unchanged (-0.04), and the Nasdaq fell 1.8%. The MSCI world stock index declined 9%.
Please recall that for most of the second half of 2011 we pleaded to ‘wait & watch; only play if you must.’