Last year at this time I wrote up my predictions for 2011. It turns out I missed a few but got a lot right.
Here is the short recap:
1. China real estate bubble pops
This was spot on.
The fall of Chinese housing has been a slow motion train wreck for about six months now. Newly-built Chinese ghost cities are a common topic on the web. Real estate prices are down in most major cities.
2. Spain defaults
I was early on this one. But the game’s not over yet.
According to Reggie Middleton via Zerohedge:
“As it stands now, the government expects to increase its debt from 55.2% of GDP in 2009 to 74.3% in 2012. In absolute terms, the government debt is expected to grow from €580.4 billion in 2009 to €848.3 billion in 2012. However, we expect the debt to increase much more owing to a shortfall in government’s targeted fiscal consolidation, primarily on
account of lower-than-expected economic recovery. Spain is expected to reach a debt/GDP ratio of over 100%, and that is using its highly optimistic numbers…”
Spain’s unemployment is officially at 21.5%, coupled with the worst real estate hangover in the world.
3. Decade of natural gas
We are getting there. The U.S. is awash in cheap natural gas. So much so that we have become an exporter of the energy. Chicago Bridge and Iron (NYSE: CBI) – a company that builds NG infrastructure – is up about 21% since I told you about them in this space last year. Natural gas prices in the U.S. remain below $4 – in defiance of the usual winter pop.
4. Uranium companies surge
This forecast was undone by the Tsunami that hit Japan and caused an atomic crisis at the Fukushima plant. This disaster has taken the glow out of nuclear power. The spot price for uranium has bounced back from its low and has flat-lined at $52 a pound. There are bargain hunters out there, but it looks too soon to me.
5. China clings to dollar, riots ensue
This prediction was spot on. The dollar is still pegged to the RMB and Google trends shows a huge spike “China riots” news references. It is not unthinkable that a hard economic landing could create a “China Spring,” or a Glasnost type political situation.
6. Farmland jumps in price
Again, this call was correct.
Farmland across the world has surged. In the Midwest many are saying we are in a bubble as prices are hitting new records monthly – in some cases going for more than $10,000 an acre.
As my cohort Andrew Mickey says: “This is done. When an Iowa farm sells for $20,000 an acre when the same farm sold for $1,900 an acre in 2001, something is wrong. Trends that can’t continue, don’t.”
7. Dow has four 10% correction in 2011 — ends the year up 9.7%
Looks like I got close with this one – and could still pull it off.
I was basing my prediction on 2004, which was a year of consolidation after a big market-rally year. The Dow closed last Friday up 6.19% for the year.
And if you look at this chart it looks like we’ve broken out of a wedge formation to the upside, so another 3% gain by the end of the week isn’t out of the question – especially given the massive daily moves we’ve seen all year.
Dow 2011, good riddance:
8. The Year of the Electric Car
Last year I wrote: “Look for EVs to sell out this year. The Nissan LEAF, the Chevy Volt, and the Fisker Karma will hit the ground rolling, giving early adopters all sorts of smug happiness.”
Early adopters did jump on-board the coal-powered car with élan. The problem was that there weren’t any late adopters. Only 6,142 Volts have been sold through November – much less than the 120,000 that President Obama talked about.
9. Dead tech revival
Last year I wrote: “Old companies like Intel (NASDAQ: INTC) (which had its best year ever), Cisco (NASDAQ: CSCO), IBM (NYSE: IBM) and Corning (NYSE: GLW) will break out of their ten-year sideways range based on the revival of business spending.”
Two for four. IBM went from $145 to $195, Intel climbed about 30%, Cisco had an off year, and Corning got crushed.
I am still putting my money in blue chip tech stocks. They are cheap, have lots of cash, pay healthy dividends and are growing nicely.
10. Fidel Castro dies
This was a dumb prediction. Clearly, Castro will never die.
Look for my next brilliant, prescient, shocking, forward-thinking 2012 predictions coming soon to an inbox near you.
Have a great New Years,
P.S. And while we are going through past predictions I came across what I wrote in 2000:
“America is beautiful. Inflation is at a historic low of 2.7 percent for 1999. Unemployment is running below 4 percent, unprecedented since the fifties. Interest rates are running around 6 percent – low enough so everyone and his mother can buy that dream house in the country. The Federal government, as well as most state and local governments, is in surplus. Even the endless bipartisan haggling means that this surplus will go to reducing the deficit.”
Times have changed. The only economic indicator on that list that can be called better is that you can still buy your dream house for about the same price and thirty-year mortgages are running below 4%. Cheap debt and the probability of double-digit inflation in the next five years makes buying a house seem like a good idea.