NetNet Quarterly Report: Predictions 2012

Forked Road
Photo: Jacobs Stock Photography | Getty Images
Forked Road

Now that earnings season has officially begun, I think it’s time for me to take a look at how my predictions for this year are panning out.

The annual CNBC predictions have become something of a tradition. I’m not exactly enthusiastic about my own forecasting ability. I tend to get some very narrow things right—for some reason, I’m good at predicting when Tiffany & Co is going to miss its marks—but I don’t think I’m particularly good at vatic pronouncements. I’m more of a “call ‘em like I see ‘em” guy than a fortune-teller.

Still, I made my forecasts on December 1st of last year and I should stand by them.

So, as Ed Koch used to say, “How’m I doing?”

I predicted that 2012 would see 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.

Actually, the rally really took off a couple of weeks earlier than the new year. It had more staying power than a lot of people expected. The Nasdaq, S&P and Dow Jones Industrial Average all rose double digits since my prediction.

I also predicted that both JP Morgan Chase CEO Jamie Dimon and Goldman Sachs CEO Lloyd Blankfein would step down this year. One quarter into the year, both men are still holding on to their corner offices.

I still believe it's likely that Dimon will at least begin making arrangements for his exit.

Recently, Katie Benner at Fortune Magazine penned a piece arguing that Blankfein may be out by this summer. So my prediction seems to be gaining support.

Ironically, some insiders say Blankfein now seems increasingly likely to stay around.That New York Times resignation letter from Greg Smith may keep Blankfein in place for another year. No one wants that kind of thing as the last sentence in his corporate bio.

I predicted political trouble 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.

The political situation in China is increasingly fraught. "China is facing a once-in-a-decade handoff of power to a new generation of leaders this autumn," the New York Times recently reported. This handoff has been complicated by recent turmoil in the ruling party. Bo Xilai, once the top-ranking party official in the metropolitan region of Chongqing, has been stripped of his authority in connection with "disciplinary infractions." His wife and a member of his household staff are strongly suspected in having something to do with the death of a British businessman. One of his top aides recently defected into the America consulate.

At the very least, things are getting weird in China.

Europe, I predicted, would continue to be under pressure:

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.

That prediction looks spot on. I’m scoring that as a tentative win for my crystal ball.

I also had a dire prediction for the Middle East:

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 could well lead to higher oil prices and put renewed downward pressure on the global economy.

This hasn’t happened yet. But something close civil war has broken out in Syria. And Iran is still a source of international tension. So this looks not too far off.

So far, by my count, I’ve had two correct predictions and three that remain open questions. That’s much better than my record for the previous year, when I scored just one out of five.

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