2011 Financial Predictions

Interesting.  From across the pond come this set of prognostications:

This bear is not for turning. It would be joyous indeed if a fresh cycle of global growth were safely underway, but I don’t believe it. Sorry.

Policy levers in the US, Europe, and Japan remain set on uber-stimulus with the fiscal pedal pressed to the floor and rates near zero everywhere, yet OECD industrial output has not regained the peaks of 2007-2008 by a wide margin. Leading indicators are tipping over again. We are one shock away from a liquidity trap.

The East-West trade and capital imbalances that lay behind the Great Recession are as toxic as ever. Surplus states are still exporting excess capacity with rigged currencies -- the yuan-dollar peg for China and, more subtly, the D-Mark-Latin peg within EMU for Germany.

Dangerously high budget deficits of 6pc, 8pc, or 10pc of GDP in countries with dangerously high public debts near 100pc may have prevented an acute depression, but they have not prevented the weakest rebound since World War Two, and they cannot continue, whatever the assurances of New Keynesians and pied pipers of debt.

Cyclical bulls may see the surge in 10-year US Treasuries -- and therefore mortgages rates -- as a sign that growth is about to blast off: structural bears suspect it may be the first convulsive shudder of bond vigilantes dismayed at the easy willingness of Washington to spend $1.4 trillion above revenues next year, with no credible plan to contain the monster thereafter...

And from the man who predicted the collapse of the past few years:

In this, my final column for 2010, I wanted to compare and contrast two important markets that I think give us some indication about what to expect in 2011. As longtime readers may be able to guess, I am talking about gold and bonds...

Recently, I headlined a column at FleckensteinCapital.com (subscription required), "Party Like It's 1999, Part III," and that is how the equity market landscape looks to me.

After living through the stock and real estate bubbles, you'd think it would be impossible to be surprised by how foolishly people can act. But with the amount of machismo, bravado and downright cluelessness that I see on display, I must admit I am dumbfounded.

Sadly, it seems that the vast majority of Wall Street types have learned almost nothing from the near-death experience they had only two years ago. My guess, though, is that 2011 will reacquaint them (again) with the fact that financial assets can cost you a lot of money.