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Zak Mir: Crystal Balls 2013
In my eBook Lessons From The Financial Markets For 2013 I looked back at 2012 to discover what 2013 may hold.
It could very well be that 2013 will reveal a number of issues as yet unresolved in the financial markets, over and above the likely fudge on the Fiscal Cliff. Unfortunately the cliff could be just what it takes for the ratings agencies to downgrade the U.S . another notch meaning that the U.S. Dollar starts to slide sharply versus the Euro and Sterling. I would expect 2013 to see the UK currency touch $1.75 and the Euro $1.40, much more if the U.S. budget negotiations extend beyond early Spring. In fact, the U.S. ‘s woes could prove to end the intense negative focus on the PIIGS, and even mean that for the time being the UK’s miraculous triple A rating is kept on hold.
But ironically the fate of the post financial crisis could be revealed by how well or otherwise the Japanese bid to end a 22 year post financial crisis period ends as it sets out to launch what could be the biggest fiscal bazooka in history, at least in terms of trying to get inflation and / or growth back into its economy. It can be said that if by this time next year all its efforts at mega QE have not succeed, Western economies might have to regard the first five years of the Credit Crunch as merely an instalment on a 20 year plus sentence.
Stocks: Buy Banks, Any Banks, Even All The Banks
At the start of the financial crisis banks proved that they were too big to fail, too big to be moral, and now having been outed on the scandals, too big to be liable for any wrongdoing. But the slap on the wrist fines will continue, if only to fund the Treasury, and this Teflon coated sector will continue to benefit from being on the right side of zero interest rates and effectively 5% mortgages rates. The time to buy the banks, and you can take your pick, is just after a scandal, the worse the dip, the better value as they can never be closed down.
Gold: Buy Gold – But Dump If Not Up By The End of January. Buy Crude Oil – Middle East Meltdown + Dollar Debt Collapse
Gold: this market is technically back at the last chance saloon given the fall from over $1,900 to $1,660 and its key 200 day moving average. The Japanese QE initiative and rumours of Paulson hedge fund forced liquidation of Gold should coincide with a floor for the metal. However, it may be wise to give up the ghost here if there is no traction for the bulls by the end of January.
Crude Oil : The situation in the Middle East certainly does not look pretty and it would appear that after the Arab Spring we are looking at an Arab Autumn two years on when it is revealed that whatever regimes were in place before 2011 were at best no worse than what we have now. While Crude Oil might not see the kind of “Peak Oil” spike seen in 2007 – the 2012 bear trap below $93 appears to be a robust enough signal to take Brent Crude through $120 by the end of Q1.
Indices: Immune To Almost Everything – Stocks An Inflation Hedge, Rip Off Britain Hedge, And Far Better Than Effective Deposit Interest Rates
FTSE 100: November saw the FTSE 100 have one final test of its 200 day moving average at 5,720 followed by a sharp rebound and OK Santa Rally despite the cliff. A 2012 resistance line suggests a target as high as 6,300, and therefore a likely range for the UK index no worse than 5,700 – 6300 for 2013. In fact, with negative watch AAA rating, triple dip recession, a Canadian Bank of England Governor and even the unravelling of the Coalition apparently factored in, sideways here appears to be the worst case scenario.
Dow: Having bounced so swiftly from November 12,500 support it may be that the Dow needs to regroup in the low 13,000 zone. However, with the Fed having arguably over compensated for the Cliff taking $600bn by probably delivering another $1.7tln of money printing over the next 2 years plus, it seems difficult to belief there is much downside for leading U.S. stocks, especially if a weaker Dollar starts to rev up inflation.
Read Zak’s Lessons From The Financial Markets For 2013 by clicking here
