{"id":2424,"date":"2010-12-13T05:07:36","date_gmt":"2010-12-13T12:07:36","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2424"},"modified":"2018-08-17T08:47:25","modified_gmt":"2018-08-17T12:47:25","slug":"2011-predictions","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/12\/13\/2011-predictions\/","title":{"rendered":"2011 predictions"},"content":{"rendered":"<p><span style=\"font-size: 16px;\">This is the first of what will become a regular feature of the blog.\u00a0 My intention is to\u00a0put in\u00a0electronic stone my\u00a0sense of things as they are and will be.\u00a0 Hopefully this provides actionable information for each of you.\u00a0 It also neatly provides criteria by which you can assess my\u00a0continued skill as an investor.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">As the title would imply, the focus here is on intuition, since facts, by definition are things that occurred in the past, yet investing unfolds in the future.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">Let&#8217;s get to it, with a focus on what my\u00a0intuition tells me now about 2011&#8230;<\/span><\/p>\n<p><span style=\"font-size: 16px;\"><strong>OVERALL THEMES<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">Cohesion &#8211; The economies of the world will finally start to move more in lock step than they have since the Great Recession ensued.\u00a0 Until now some economies have emerged from the recession growing more quickly than others.\u00a0 While others have been laggards.\u00a0 2011 will witness a return to more even, more cohesive economic growth.\u00a0\u00a0 That is, the &#8220;system&#8221; will be operating in a more unified, healthier and more robust fashion.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Stabilization &#8211; Nervousness has been present in the economic body for the preceding three years.\u00a0 Anxiety will begin to depart the emotional make up of business owners, workers, consumers and politicians.\u00a0 In other words, the system will stabilize as trust replaces hope.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Back to the Future &#8211;\u00a0Greater cohesion and stabilization\u00a0will result in a rhetoric and an imagining on the part of individuals with\u00a0an emphasis on the future.\u00a0 Folks have been focused on the immediate present in an unhealthy way.\u00a0 That has led to short-term decisions whose consequences are not fully understood.\u00a0 An analogy would be when you first get a severe cut on your body.\u00a0 Your attention is focused entirely on how to stop the bleeding.\u00a0 Then your attention shifts to how to stop the pain.\u00a0 Then your attention shifts to what the long-term ramifications are to your body &#8211; this is the stage we are entering in my opinion.\u00a0 Ultimately, the injury creates a scar that serves as a reminder of what went wrong, but the focus returns to the future.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\"><strong>Economy<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">U.S.<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Stock\u00a0markets &#8211; I feel that they are going to be up\u00a0between 10-14%.\u00a0 This is because my feeling is that businesses will start to be able to grow their revenues in a meaningful way for the first time in almost three years.\u00a0 In turn, that will lead to an improvement in the unemployment situation.\u00a0 In general, investors will begin to focus on business issues and much less on economic issues as the economy is trusted again.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Federal Reserve (monetary policy) &#8211; The Fed will continue to be impotent quantitatively having pulled all of their policy levers already.\u00a0\u00a0Instead, the power of the Federal Reserve\u00a0will be qualitative.\u00a0\u00a0In other words, what\u00a0they feel is happening in (i.e. their commentary and opinions about)\u00a0the world economy will be more important than any specific action that they\u00a0will make.\u00a0 They are also likely to leave interest rates flat for all of 2011.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Congress (fiscal policy) &#8211; Will be gridlocked\u00a0and unable to make\u00a0any substantive changes.\u00a0 There will be movement on taxation and pro-business type issues.\u00a0 In particular, look for an extension of the Bush-era taxation environment.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">U.S. dollar &#8211; Despite the desire of the Federal Reserve to weaken the U.S. dollar, it will likely strengthen as the economy strengthens.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Economy, in general<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Gross Domestic Product &#8211; There will be\u00a0no double-dip recession.\u00a0 Instead GDP will likely grow around\u00a04%.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Consumers &#8211; The improvement in hiring (see below) will see a much improved consumer mood.\u00a0 So the consumer will start to increase\u00a0her\/his spending relative to income.\u00a0 This will lower the savings rate.\u00a0 I would expect by the end of 2011 that spending levels and personal income levels will be roughly equal.\u00a0 Meaning that consumers are spending what they earn.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Businesses &#8211; Will finally start to see modest revenue growth.\u00a0 In the aggregate this will be 5-9%.\u00a0 Because of the bare bones expense structure of businesses, this will result in a POP! in earnings.\u00a0 In turn, businesses will begin to hire again.\u00a0 I would expect that the unemployment rate exits 2011\u00a0in the 7.8-8.7% range.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-size: 16px;\">outside of\u00a0the U.S<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Europe &#8211; The debt storm that is passing through Europe right now (Portugal, Ireland, Italy, Greece and\u00a0Spain)\u00a0will subside with not much consequence in terms of the economy.\u00a0 Instead, the predominant result will be political (see comments on Germany below).<\/span><\/li>\n<li><span style=\"font-size: 16px;\">China &#8211; The Chinese are on the brink of two ugly things: massive asset inflation and the bursting of that bubble, and social unrest.\u00a0 Expect to see social protests in China as the haves and have nots gap widens.\u00a0 In typical authoritarian fashion though, the protests will be convincingly squelched.\u00a0 Expect to hear, if not see the true, dark underbelly of China.\u00a0 I would also expect a conflict with the U.S. over its currency, the Yuan.\u00a0 The U.S. (see below), in the form of Barack Obama, will pressure China on its currency.\u00a0\u00a0The Chinese will fight back to increase the fervor of nationalism there\u00a0to distract from their own internal economic problems.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Japan &#8211; Will continue to be an economic\u00a0zombie.\u00a0 Expect very little change out of Japan as its inexperienced new government struggles to deal with a set of problems that are a generation old.\u00a0 For example, an economy that has gone sideways since the early 1990s!<\/span><\/li>\n<li><span style=\"font-size: 16px;\">India &#8211; Will begin courting the United States to increase business and trade ties.\u00a0 The underlying goal is to begin to isolate its nemesis, Pakistan.\u00a0 Look for grand, friendly\u00a0gestures, that are ultimately hollow, as the flirtation is explored.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Brazil &#8211; Will continue to try and coordinate their economy\u00a0with their\u00a0geopolitics awkwardly.\u00a0 Ultimately, for Brazil to attain &#8220;world power&#8221; status, the government and business world must work together to establish Brazil on the world stage.\u00a0 So far, Brazil has done this without consistency.\u00a0 This leads to suspicion and reluctance on the part of other nations to deal with Brazil.\u00a0 Expect more of the same improvement in its economy, with uncertain messages from its politicians.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\"><strong>Geopolitics<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">U.S.<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Barack Obama (Executive branch) &#8211; In order to re-establish the Democratic party and to help his re-election chances, Barack Obama will focus on foreign policy as he cannot move a gridlocked Congress.\u00a0 There will be a pull-out from Afghanistan where there will be some tenuous political, rather than military,\u00a0settlement.\u00a0 He will talk about his kept promise to pull troops out of Iraq.\u00a0 Obama may also focus on trade issues. But most of all, he will begin battering China on a whole host of economic and trade issues.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Congress (Legislative branch) &#8211; Will largely be gridlocked.\u00a0 Watch a fascinating fencing match as the Republicans and Democrats fight to paint the other as the source of the obstruction preventing &#8220;real&#8221; change from happening.\u00a0 The only movement will be on freebies for the American public and business community, such as a continuance of the Bush-era tax cuts\/debt increases and press-friendly economic incentives for businesses.\u00a0 In other words, the same as it always has been.\u00a0 Result: an increase, rather than a decrease in the debt levels of the U.S.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-size: 16px;\">Europe<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Germany is feeling out its mojo for the first time since World War II.\u00a0 They will continue to use the economic crises in europe as the\u00a0justification for their meddling in other european nation&#8217;s affairs.\u00a0 Expect Germany to warm\u00a0to Russia and to talk about the need for NATO to evolve to fit a more modern world.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">France will experience an existential crisis as its nearly 50-year vision for Europe starts to unravel because of an emboldened Germany.\u00a0 The French are likely to warm to the United States and look for meaningful ways to strengthen its relationship with the U.S.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-size: 16px;\">China &#8211; See above.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Japan &#8211; The new and partially naive government will be unable to change the economic reality.\u00a0 So look for them to follow Obama&#8217;s strategy of emphasizing foreign policy.\u00a0\u00a0It is\u00a0very likely that they will\u00a0join the U.S. in China-bashing.\u00a0 They will also begin talking about a military that is not just for defense, but offense as well.\u00a0 This will be for the first time since the end of World War II.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Middle East<\/span>\n<ul>\n<li><span style=\"font-size: 16px;\">Iran &#8211;\u00a0I\u00a0feel that they will begin to assert their dominance in Iraq&#8217;s politics.\u00a0 They will have internal divisions between the Ayatollahs and the Presidency, but the net effect will just be noise and stress.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Iraq &#8211; Will see an increase in violence.\u00a0\u00a0Iranian backed Shiites and Saudi backed Sunnis will vie for power to fill the vacuum left by a\u00a0reduced U.S. military presence.\u00a0 The Iranians are likely to win this one.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Saudi Arabia &#8211; Is currently going through a succession crisis.\u00a0 The question is will it become a less archaic state under new leadership?\u00a0 Because of the Iranian power surge, this will be a challenging year for the Kingdom.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"font-size: 16px;\">Afghanistan &#8211; The U.S. and\u00a0NATO will try and broker a peace accord with the Taliban.\u00a0 Just how they will relate this story back to their publicks will be fascinating.\u00a0 But no\u00a0foregin power wants to be there any longer and strategically the nation is irrelevant.\u00a0 Look for the U.S. and Europe to ask Russia\u00a0for support\u00a0for any new Afghan coalition government.\u00a0 Unlike\u00a0Europe and the U.S., Russia actually has an interest in a more stable Afghanistan.\u00a0 Additionally, India and Pakistan are likely to jockey for influence in Afghanistan.\u00a0 So expect a courting by both sides to win\u00a0U.S. favor.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\"><strong>Miscellaneous Issues<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">Gold &#8211; Is very overvalued in my opinion.\u00a0\u00a0As the U.S. economy and U.S. consumer sentiment both improve markedly, expect a big sell off of gold.\u00a0 Gold&#8217;s initial run was due to an increase in demand from the growing wealthy populations of China and India who wanted luxury.\u00a0 Then\u00a0gold\u00a0became a safe-haven for investors who\u00a0retreated there in the event of\u00a0the onset of a Depression.\u00a0 Then speculators, seeing the big momentum in gold prices added their own capital.\u00a0 This will come to an end in 2011.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">Oil &#8211; Prices are likely to remain at their current\u00a0inflated, unjustifiable levels, due to continued speculation.\u00a0 Expect real price spikes\u00a0when the noise in the Middle East gets too loud\u00a0(i.e. Iraq&#8217;s sectarian battles and Saudi Arabia&#8217;s succession issues)\u00a0for markets to bear.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\"><strong>WILD CARDS<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">Russia &#8211; Because of the U.S. obsession with the Middle East over the past decade, Russia has become resurgent.\u00a0 The government of Medvedev and Putin is calculating, cunning, courageous, and motivated to return Russia to the global stage before the U.S. frees its Middle Eastern resources.\u00a0 Russia is active in Germany, its periphery, Afghanistan, and Iran.\u00a0 In other words, in all of the hot spots.\u00a0 Russian choices will be a wild card for the world system.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">China &#8211; The timing of the bursting of its economic bubble is difficult to assess.\u00a0 This is because the government there has demonstrated a willingness to use lying, manipulation, and authoritarianism to gloss over its problems.\u00a0 Yet, inevitably a day of economic reckoning will come in China.\u00a0 Just how severe its economic bubble bursting is, and its timing, is crucial.<\/span><\/li>\n<li><span style=\"font-size: 16px;\">U.S. Congress &#8211; If the Democrats and Republicans find a way to work together then the net effect of the entire globe will be positive.\u00a0 But don&#8217;t count on this.\u00a0 Instead, look for partisan politics to get even more absurd.\u00a0 What the effects will be from this are very, very difficult to gauge.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 16px;\">I am not a person who hides from responsibility and accountability so I will be returning to these predictions at the end of each quarter in 2011 to assess how I did.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is the first of what will become a regular feature of the blog.\u00a0 My intention is to\u00a0put in\u00a0electronic stone my\u00a0sense of things as they are and will be.\u00a0 Hopefully this provides actionable information for each of you.\u00a0 It also neatly provides criteria by which you can assess my\u00a0continued skill as an investor. As the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3,15],"tags":[],"class_list":["post-2424","post","type-post","status-publish","format-standard","hentry","category-the-blog","category-predictions"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2424","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2424"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2424\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2424"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2424"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2424"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}