What worries me
by Peter Switzer
Regular readers know that I’m cautiously optimistic on stocks for 2011 but, being a former academic, I have to test out my views and so the question has to be asked — what keeps me awake at night?
The simple answer is — no economic or business threat is disturbing my snoozing each night but, I have to say, in my waking hours Europe bothers me a bit. Next would be China, but this one is a lower order concern.
There are plenty of doomsday merchants on Europe and when these guys put their arguments together they can be very convincing.
Still slumming it in New York — not! — I picked up on a guy called Scott Minerd, the CIO of Guggenheim Partners and he really thinks Europe will let the bulls down this year.
He virtually called the German Finance Minister a stumblebum with little credibility and tipped Spain would be the "Lehman Brothers of Europe".
Like a lot of bears out there trying to make the market work in the direction of their trades and their positions, they see the sub-prime mess as the first act to at least a three-act tragedy. It goes sub-prime to Europe’s debt disaster to Great Depression. You won’t have Act 2 without causing Act 3, let me assure you.
As Billy Joel might have sung: “He could be right, he could be wrong or he could be crazy!”
Minerd recommends shorting the euro and going long gold as you would expect.
Positive for 2011
Right now the research muscle of the likes of Goldman Sachs, Blackrock and Morgan Stanley Smith Barney have positive calls on 2011 and I doubt whether the pointy head economists at these institutions wouldn’t have had a hard look at the risks of European debt, as well as the shakiness of the likes of Spain.
After all, there have to be some lessons from the GFC and working out what can create a financial meltdown looks like the most important threat to be analysed before the likes of Goldman Sachs comes out with a 20 per cent rise tip for the stock market in 2011.
Sell off ahead?
My biggest concern for shares next year is the rise we have seen over the past couple of years. The S&P 500 is up around 11 per cent for this year and about 82 per cent since the lows of March 2009.
That means there could be a sell off around April and it’s the time that market clichés such as “Sell in May and go away” are often trotted out. This could also coincide with more Euro-debt concerns.
However, as I have been arguing, and it was a view matched by many US experts I have interviewed while I have been in New York — I think we will muddle through and gradually solve these global debt challenges.
That said, if I get this wrong, I sure will be losing plenty of sleep!
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Published on: Tuesday, December 14, 2010blog comments powered by Disqus