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2012 Predictions

by Byron on December 31, 2011

Markets Year End 2012:  Dow 10,327.65; S&P 1056.06

The stock market will finish the year around 10,200 after spending a chunk of the year below it.  Structural problems will continue in Europe – the market knows the Euro is broken and shall demand a real fix.  BRIC’s have their individuals problems as well.  The US economy has no real catalysts for robust growth.  After holiday 2011, the American balance sheet recession problem reemerges.  Combine that with profit margins ebbing after quite a flow and you have a down market.

The 10-Year Treasury Yield finishes 2012 notably lower

The 10-year treasury yield will finish the year on the increase – at about 1.75%.  This will come after briefly dipping below 1.5%.  The Fed, despite their indication to the contrary, has their hands tied by political pressure and a short plank of monetary tools.  This will make deflation difficult to fight.  Virtually every market pundit believes the 10 year finishes the year higher than where it started (see Barron’s 2012 predictions).  If everyone believes something will happen, something else is going to happen.

Commodity Prices Continue to Slump

Commodity Prices will continue moving lower.  Deflationary pressures and slowing economies worldwide keep the price of most commodities depressed.  The path to prosperity is not a straight line.  As economies around the world remember this truism, commodity prices remain problematic.  Middle 2012 attempts by the US to fight deflation may bring about the commodity price bottom, either short or long term.

The Dollar Index Closes 2012 10% higher

Deflation and worldwide save-haven seeking cause the dollar index to finish 2012 about 10% higher than it began.

Gold Continues the March Down

Gold will finish the year under 1250 an ounce.  As The Economist recently put it, “either the bullion market or the Treasury bond market is mistaken.”  I agree.  And if I’ve got to back one of these horses, it’s the bond market every time.   It’s deflation, not inflation.

MMT Gets Its Day in the Sun

Modern monetary theory will get a great deal of traction in the middle of the year.  Obama will – correctly – fall on his sword in the early summer and say something like, “We simply will not be held hostage by unnecessary austerity.”  Money will be spent into the economy and the economy will be saved its “aftershock” day of reckoning.  Mitt will use this to get elected, despite the fact that flooding the markets with money was the correct thing to do from an economic standpoint.

It’s Mitt

Mitt Romney gets elected as the 45th president of the United States.  With the economy continuing to flop about on the deck, Americans will deem it time for change again.  Official unemployment might stay below nine, but real employment is a hell of a lot higher.  And people know it.  The people want hope and change once again.  By definition, Obama doesn’t bring change.


Google becomes the new Nasdaq darling, outstripping Apple.  (This is already happening.)  Google will see some of its other revenue streams – android related and Google Apps hit tipping points.  This will make everyone realize that not only is the advertising franchise going to continue to grow double digits, but mobile and Apps are on their way to being eleven and ten figure businesses, respectively.  Google will also buy Evernote and Dropbox – Justice Dept be damned.  Evernote and Dropbox are going to consume an ever-increasing share of our digital lives, consistent with Google’s long-standing goals.  Moreover, both services dovetail nicely with that which Google currently provides.

And You Thought 2011 was the Year of the Smartphone

Smartphones start to look like geniuses in 2012 as they eliminate the need for wallets first, then keys.  Mobile payments are fast a coming from companies large and small like Paypal, Vodaphone, Square, Google, mFoundry.  The winners are likely to win HUGE.  In addition, various apps are beginning to surface allowing for the extinction of the house key.  Within half a decade, you will only ever need your mobile device.  2012 will be the year that really starts to become apparent.

The Recorded Life

The Recorded Life will become something that everyone will start to talk about.  Some will rebel, some will embrace, but it will be here.  Big data was a big term in 2011.  Personal data – even big personal data – will be a big part of 2012.  Collecting and analyzing personal data are huge businesses over the next 25 years.

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