The Brazen Dozen – 2012February 16, 2012 Posted by: Joe Morgan, CFA
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
The Brazen Dozen is a list of events that I believe have a 40 percent probability of occurring during the year. These events skirt the outposts of probability. The objective is to think outside the box with regard to economic, market, and political activity so that we may better prepare for the 100-year floods that seem to occur so frequently.
In this month’s article, I share my outlook for 2012. Yes, it is already mid-February, but sometimes publishing schedules can actually offer an advantage!
For a review of 2011’s Brazen Dozen, click here.
Europe moves steadily toward resolution of the current fiscal crisis, but does not make it out of the woods by the end of the year. Greece and Portugal solidify plans to exit the union. Spain is set to make a final decision in 2013. Looking at the world today, this may not seem such an odd prediction, although I think Germany, France, and others will try very hard to hold the union together only to find failure in the third quarter when it becomes obvious a split must be made. The exact structure of the split, however, remains anyone’s guess.
The Fed leaves interest rates unchanged throughout the year and initiates QE3 late in the year. Though there is some talk of QE today, the stock, bond and credit markets are behaving quite well, eliminating much of the possible upside of any potential QE. In other words, with markets already elevated, why initiate QE which is obviously designed to provide further elevation? Instead, watch for FOMC members to step up rhetoric on fiscal policy at the risk of the Fed’s own independence.
The IPO market for technology companies continues to heat up with many near-zero revenue companies going out successfully. This was on last year’s list. Though the economy remains quite challenged, simple laws of supply and demand continue to force investors into searching for the “next best thing.” Tech is always considered the best “next best...Read More