Predictions 2012

John Carney: Wall Street

1. Lloyd Blankfein will retire as CEO of Goldman Sachs.

The Goldman Sachs booth on the floor of the New York Stock Exchange
Getty Images

Blankfein is exhausted after serving as chairman and chief executive of Goldman Sachs since June 2006. He has weathered the credit bubble of 2007, the financial crisis, the transformation of the firm away from proprietary trading, financial reform, and a life-or-death lawsuit with the SEC.  Many people feel Goldman needs post-crisis leadership — and I wouldn’t be surprised if Blankfein comes to agree with them next year.

(By the way, last year, I predicted that JPMorgan Chase's

Jamie Dimonwould retire. So maybe Blankfein is safe. In any case, I’m doubling down and predicting Dimon retires in 2012.)

2. Europe’s sovereign debt crisis will continue but the euro will survive.

European leaders still think that if they stop the contagion by bailing out one country, they won't have to bail out the others. They talk about deepening their fiscal and political ties but have no agreement about what this would mean. There’s simply no end in sight for the crisis in Europe.

That said, the commitment of the Europeans to the euro is too deep for them to allow it to break up. Eventually, perhaps next year, the European Central Bank will become much more active in preventing the bond market from breaking the unified currency.

3. A political crisis will emerge in China.

China has trapped itself between an unstoppable force and an immoveable object. The unstoppable force is the need to constantly create new jobs for its increasingly urbanized population. The immoveable object is the lack of domestic demand. As its biggest trading partner — Europe — enters a deeper slump, its local financing becomes ever more precarious, and attempts to cool down its housing bubble lead to a crash. Result: there’s a strong chance for a political crisis to emerge.

4. The “Arab Spring” will become an Islamist spring.

The democratic uprisings we saw around the Meditearean this summer will arise once again but in far darker forms. Advocates of radical Islam will take hold of the anniversary of the uprisings to turn against the nascent governments that have arisen. This and put renewed downward pressure on the global economy.

5. The US stock market has a rip-your-face-off rally.

Sometime next year, the stock market will experience a huge rally that will make suckers of all the pessimists like me. Shorts will get clobbered; those sitting on the sidelines will look foolish.

Click ahead for John's 2010 predictions

Now to my 2010 Predictions scoring.

Overall, I give myself a gentleman’s C, having managed to get one out of five right.

1.Put-backs are going to be a very big deal

Wrong. They actually haven’t become much more of a big deal than they were in 2010. I still think this is dangerous complacency.

2. Jamie Dimon will retire as CEO of JP Morgan Chase.

Once again, he didn’t.

3. Europe's sovereign debt crisis will continue.

That certainly turned out to be right.

4.The bubble in emerging markets will become obvious

Nope. The fate of China, Brazil, India and so on is still in dispute.

5. The municipal debt situation will become a crisis.  

The mass defaults I thought were coming still haven’t arrived.