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Clem Chambers, CEO of stocks and shares information website ADVFN.com, has forecast that markets may continue this year’s rocky ride in 2012.
For illustration purpose only
Here are his seven best guesses for market events in 2012:
Gold prices are slumped right now, partly due to the general Christmas slowdown in levels of general trading; as well as concerns about EFT, a type of fund which may or may not hold gold.
Nothing goes up in a straight line – hence the current correction in the yellow metal.
Meanwhile, with the printing presses of the world’s biggest economies churning out ‘quantitative easing’, Europe and the US are on a path to inflation.
Whether this will result in hyperinflation or a more manageable 5-10 percent rate is yet to be seen, but gold will appreciate in 2012.
New highs will be reached, and gold will go over $2000, with a chance to make a run at $2500.
The euro is saved – but it’s also doomed to devaluation.
With Germany remaining off the inflation bandwagon the euro was strong, since weaker members were set to fall out of the zone, leaving behind Germany and other stronger economies.
Now that the latest ‘Euro-fix’ is in, Europe will print and print and print, though not in the normal sense. This activity will take the form of lending money to the International Monetary Fund (IMF), who will then lend it back to the EU; and ‘buddy deals’ with the US - anything to avoid appearing as if the organization is merely printing euro notes.
In any event, money supply will be expanded to bail out the Eurozone and inflate away the vast, accumulated debts of the spendthrift governments.
Germany, France and Italy crashed in 2011, but the US and UK didn’t. The FTSE and Dow teetered and tottered but didn’t fold.
In 2012 they will. Perhaps it will be in April or May, when giant developing countries bloated with western currency put on their hedges and readjust their vast stashes of cash, or it may kick off randomly.
To avoid a crash, the whole pathetic credit crunch saga will need to end. However, that possibility seems like a dream, and we are likely to wake up in 2012 with a nasty jolt.
There are 3-5 more years of economic lumps and bumps to get through, and a US/ UK stock market crash is likely to be one of those bumps.
Inflation will boom in Europe, hitting levels now seen in the UK, and the US is following close behind.
Inflation is standard treatment for state debt, and it’s the only way out of the fiscal dead end Europe and the US are facing.
Even though it’s enshrined in the mandates of central banks, 5-10 percent inflation is the only solution to clearing up the mess left behind by binge-spending governments.
Expect plenty of denials and half-hearted explanations, and price rises on the shop shelves.
The age of price stability is rapidly coming to an end.
Don’t confuse your brains with a bull market, the old market saying goes. Meaning: ‘Even an idiot will do well in a bull market, so if you have made a packet in a big rally, don’t think it was because you were smart’.
Emerging markets have been the recipients of huge US largesse.
Like an attached sea cucumber, America has exported its economic stomach to buy off trouble. The EU has not been any less saintly, maintaining huge trade deficits with BRIC countries.
That river of money is about to be choked off.
As the first tightening starts in the developed world, so the BRICs are already folding.
The emerging market bubble will begin to collapse in 2012.
Nonsensical valuations in emerging markets will vanish, just as they did in the Dotcom crash.
Overleveraged businesses will fold, as austerity in the developed world will be a hammer blow for the developing markets: ‘Game Over’.
Banks are getting direct access to the printing presses of the US and Europe. This should keep most of them in business.
However, some will fail stress tests and be nationalized in the same way banks were swallowed up in the UK in 2008.
It’s a poisoned chalice for the politicians, but they love to meddle.
Having banks to tinker with will be just the temptation they need to sweep up a large chunk of Europe’s financial infrastructure.
Nicolas Sarkozy, the president of France, and Angela Merkel, Germany’s Prime Minister, should, of course, carry the weight for Europe’s problems. Where were they when Europe was doing all of its spending?
Like any American CEO hauled into court, they were elsewhere, with no idea of the terrible crimes going on below.
Out with them?! No chance - the respective electorates will be impressed by their leaders’ crisis management skills - even though said leaders helped create the crisis.
President Obama, on the other hand seems set to be a tragic Jimmy Carter, a one- term President ground down with nothing to boost his popularity. Yet he, too, will be re-elected.
The Republicans simply do not have a candidate to beat him. 2012 will see the US economy magically blossom.
Deep in the underbelly of America, things have been picking up. 2012 will see this comeback break the surface and give Obama the tailwind he needs to earn another four years.
|Clem Chambers is a markets expert and author of books including ‘101 Ways to Pick Stock Market Winners’. For free, real-time, stock prices visit www.advfn.com. Follow Clem on Twitter: @ClemChambers|
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