by John Patterson
Okay, here are MY predictions for the early part of 2012 on certain assets and asset classes. This is the kiss of death therefore for some, however here we go.
The Euro:
Sell the Euro. It is a dead duck that surely can’t be stronger in the next few months than it is today as the people of Europe won’t let it be and the politicians are quite simply not up to the job – so the problems that it faces will not go away, hence increased weakness.
The US$:
Buy the US$. For those investors who are holding Euro’s, when they sell, they will buy the $. Hence the $ will rise.
US Treasury Bills:
Despite the fact that the US is moving closer and closer to bankruptcy, in the very near term, US government bonds will be the place to be right now. If you have lump sums to invest, this is the place for right now. Buy now, as the Euro weakens, this is where people will go as everyone knows that the banks are in trouble, could still go bust, so here is the place to be safe and as everyone rushes in, so the price will rise.
US Corporate Debt:
Give it a few months and this will be the place also. The value of treasury bills (US Govt debt) will rise and so become a place that is too expensive. Moreover, the stockmarkets will be very volatile, so more funds will flood to treasuries and then subsequently to Corporate Bonds.
Western Stockmarkets:
Get out of these now. Sell, buy T Bills, wait for the prices of shares to drop (substantially) and buy back in. If you are investing on a monthly basis, then buy stocks and keep buying as their price drops. When the price comes back up you will do well without having the indexes making any positive moves – dollar/pound cost averaging.
Emerging Market Stocks:
In general for teh first few months, sell. Wait for a big sell off, then get back in – again, regular premium investors, should just keep going. The growth is here over the next 5- 10 years, however there is not much value in these markets now, so wait.
Emerging Market Bonds:
In general, avoid these for now. Wait for T Bills to peak, then buy. There are exceptions, maybe Abu Dhabi and Qatar, but you need to buy debt from countries with little to no debt.
Property:
Avoid all property like the plague for a good few years. It is still so expensive it is untrue. The banks are broke. They have no money to lend and their positions are not being helped by the Euro Crisis – any bank.
Obviously there are exceptions, (Central London maybe due to a lack of supply), however property will make you no money for years to come.
Commodities:
Useful commodities like copper will likely drop price, however the long term view on all commodities is that due to lack of supply, they will do well. So buy on a regular basis, sell all current holdings and then buy back in – you will know when……………………..
Gold and Precious Metals:
It will be volatile, but the reason why it has done so well recently hasn’t gone away (US fiscal policy). Maybe hold on to this for the long term, however each time the $ rises, Gold will drop and then come slowly back up again.
Let’s see what happens to all of this – it isn’t going to be a pretty year whatever happens, better to be safe in the short term so that you can buy the bargains in the longer term, because there will be plenty of them everywhere
