1 of 10 Apple Inc. Reuters Apple Inc. Reuters The December EU Treaty changes prove insufficient to solve EU funding needs – particularly those in Italy – and the EU debt crisis returns with a vengeance by mid-year. In response, the stock market finally caves in and drops 25 percent in short order, prompting EU politicians to call an extended bank holiday – closing all European exchanges and banks for a week or more. Reuters In 1992, Texas billionaire Ross Perot managed to take advantage of a recessionary economy and popular disgust with U.S. politics and reap 18.9 percent of the popular vote. Three years of Obama has brought too little change and only additional widespread disillusionment with the entire U.S. political system, and conditions for a third party candidate have never been riper. Someone with a strong programme for real change throws his or her hat in the ring early in 2012 and snatches the presidency in November in one of the most pivotal elections in U.S. history, taking 38 percent of the popular vote. Reuters The effects of the slowing up-and-coming Asian giant ripple through the Asia Pacific and push other countries into recession. If there ever was a country dependent on the well-being of China, it is Australia with its heavy dependence on mining and natural resources. And as China’s demand for these goods weakens, Australia is pushed into a recession, which is then exacerbated as the housing sector finally experiences its long overdue crash – a half decade after the rest of the developed world. Reuters As 2012 begins, pressure will mount on the European banking system as new capital requirements and regulatory pressure force banks to deleverage in a great hurry. This creates a fire sale on financial assets, as there are few takers in the market. A total freeze of the European interbank market forces nervous savers to make bank-runs, as depositors distrust deposit guarantees from insolvent sovereigns. More than 50 banks end up on government balance sheets and several known commercial bank brands cease to exist. Reuters As we saw with Switzerland, becoming a safe haven in a world of devaluing central banks presents a number of risks to a country’s economy. The capital markets of both countries are far smaller than Switzerland, but the Swiss are aggressively devaluing their currency and money managers are looking for new safe havens for capital. Flows into the two countries’ government bonds on safe haven appeal becomes popular enough to drive ten-year rates there to more than 100 basis points below the classic safe haven German Bunds. Reuters Switzerland’s persistency in fighting the appreciation of its currency will continue to pay off in 2012. With Swiss fundamentals – particularly export related – continuing to suffer mightily in 2012 from past CHF strength, the SNB and government bear down further to prevent more collateral damage and introduce extensions to existing programmes, and even negative interest rates, to trigger sufficient capital flight from the traditional safe haven of Switzerland to engineer a move in EUR/CHF as high as 1.50 during the year. Reuters As marginal returns from building million-inhabitant ghost towns diminish and exporters struggle with razor-thin margins due to the advancing CNY, China gets to the brink of a “recession”, meaning 5-6 percent GDP growth. Chinese policymakers come to the rescue of exporters by allowing the CNY to decline against the U.S. dollar - buoyed by its safe-haven status amid slowing global growth and an ongoing Eurozone sovereign debt crisis - and send the pair up to 7.00 for a 10 percent increase. Reuters Lower oil prices in 2012 could lead to an increase in the Baltic Dry Index, as operating expenses go down. Brazil and Australia are expected to expand iron ore supply, further leading to lower prices and therefore higher import demand from China to satisfy its insatiable industrial production. In combination with monetary easing, this leads to a massive spike in iron ore demand. Reuters The price of CBOT wheat will double during 2012 after having been the worst performing crop in 2011. With 7 billion people on the earth and money printing machines at full throttle, bad weather across the world will unfortunately return and make it a tricky year for agricultural products. Wheat especially will rally strongly as speculative investors, who had built up one of the biggest short positions on record, will help drive the price back toward the record high last seen in 2008. Reuters
The Danish bank Saxo has released it's ten most outrageous business and financial predictions for the new year.
In its annual Outrageous Predictions, Saxo Bank focuses on events that are unlikely to happen, but, at the same time, still have far more probability of occurring than the market appreciates.
While the predictions are not meant as forecasts, the bank finds it is important for investors to consider events with under-recognised probabilities. If any of them actually come to pass, they would have a significant impact on the markets.
Steen Jakobsen, chief economist at Saxo Bank, said: "Our Outrageous Predictions have been prepared in the spirit of encouraging investors to think outside the box and prepare for world-altering events. Thinking outside the box is rarely a comfortable exercise, but neither is dealing with an unpleasant surprise for which one has failed to prepare in any meaningful way.
"Should some of the predictions come to pass, it would make 2012 a year of tremendous change. We would like nothing more than to be proven wrong on negative views, but only if they are replaced with something better than the current central bank and government-manipulated paradigm."