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2013

Bruce Krasting's picture




 

 

13

 

The following are my thoughts about things that might happen in 2013. This (Link) takes you to a discussion of my forecasts for 2012. I got a number of things right, and some important things wrong.

 

2013

 

- The bulk of the fiscal cliff issues will be pushed into 2013. This sets up a showdown in March when the debt limit can no longer be extended.

Americans will be exhausted by this process. The poll ratings for the Senate, House and Obama will fall to record lows. The commentary from every segment of society will be against the ineffective government the country has. The ratings agencies will chime in with more warnings that the US credit ratings are at risk. Foreign leaders will speak openly that the USA is losing its position of leadership. The foreign and domestic press will have a field day.

The threat of a government shutdown, and a chance for a “Hoover Legacy”, will force the President to fold in March. The resulting “Deal” will bring modest increases in taxes ($800b over ten-years) and introduces real cuts in both Medicare and Social Security (age eligibility, means testing benefits and changes in inflation adjustments). The debt limit will be extended until January of 2015 (after mid-term elections).

Liberals will hate this result, so will conservatives. The reality will be that the steps taken will have very little consequence to the economy, budget or debt profile in the first few years. A set of future promises will have been made to right the ship, but the “Grand Deal” will be well short of what is needed. What will come will be just another kick of the can down the road.

 

- Frustrated by the lack of results on the economy, Japan's Abe will push for the ultimate financial measure; he will call for the Central Bank of Japan to "extinguish" 20% of Japan's public sector debt. This will be the first official step toward the "Platinum Coin" solution to debt. This will be very controversial on a global scale. Liberal economists will love the idea, while conservative thinkers on money will hate it. This defining moment in modern finance will not happen in 2013, but the year will end will the prospect that it will.

 

- Tim Geithner will leave Treasury and join Wilbur Ross. Tim will become a distressed investor in his new private sector life.

 

- The Yen will trade cheap against all crosses and hit a high of USDYEN 98. It will end the year back below 90.

 

- There will be a total of four super-storms that make landfall in 2013. One will hit the USA, the other three will hit Asia.

 

-The European economy will struggle for yet another year. The weak Yen and the overvalued Euro will act as a drag on growth.

 

- The Euro will remain above 1.30 for the first portion of the year, and then weaken, ending the year at 1.20. The high for the year will be 1.37.

 

- Unemployment in Spain will push 30%. Youth unemployment will rise to over 50%. By the end of 2013 serious questions will be raised as to why Spain is tearing itself apart, and would the country be better off out of the Euro. The conclusion, by many Spaniards, will be that it would be better off leaving versus staying. This would represent a big change in thinking, and set up 2014 as the year of the Euro breakup.

 

-Several states will ban the sale of high energy drinks after more evidence the drinks can cause health problems.

 

- The Chevy Volt and the Tesla will not sell well.

 

- The Swiss National Bank will maintain the 1.2000 peg for another year, but 2013 will be the last year of the dirty float for Switzerland.

 

- There will be more lawsuits and premature deaths of professional football players. The NFL will introduce a series of steps to reduce the incidence of concussions. The new rules will change both the equipment players wear, and establish new, severe penalties for late hits (3 point penalty). Fans will not like the results; critics will say that the new measures do not go far enough.

 

- Around mid-year, the Fed will reduce its monthly POMO buys to $60B per month. Later in the year the purchases will be further reduced to $50B a month. The Fed’s balance sheet will increase by $700B (25%) during the year.

 

- The 10-year bond will trade above 2% by June, and stay above this level for the balance of the year. The 30 year will reach 3.75% at one point in the fall.

 

- Gold will trade in a range, below 1800 and above 1400. Boring.

 

- The US housing market will continue to improve, but at a pace that will be slower than that witnessed in 2012.

 

- Obama will force out Ed DeMarco as the head of the FHFA. The President's new appointee will attempt to put together a new debt forgiveness ReFi program for America's underwater home owners. The effort will produce negligible results.

 

- Barge traffic on the Northern Mississippi will be restricted due to low water in February. The drop in traffic will result in higher prices, and spot shortages of raw materials/energy in the upper mid-west. Later in the year agricultural commodity prices will be impacted by higher cost of transportation. The "trains" will be the beneficiary of this.

 

- Inflation will rise modestly in the US. Full year Core CPI will be greater than 2%. When food and energy are included, inflation will push north of 2.5%. At one point during the year Bernanke will refer to the higher rates of inflation, and suggest that this is a sign of "success". He will be widely criticized for this, as there well be evidence that higher inflation is having a negative affect on the bottom 20% in the country.

 

- Tiger Woods will win a major.Rory McIlroy will not have a good season due to new equipment. Jason Dufner will win the FedEx Cup.

 

- Denver will beat Green Bay in the Super Bowl. In the NBA, the Miami will lose to Oklahoma.

 

- The Mars explorer will find carbon.

 

- The US unemployment rate will fall from 7.9% to 7.1% during the year. The widespread conclusion will be that the Fed's effort to reduce unemployment was only marginally successful, and that structural problems in the economy are the real reason for high unemployment. Taken together, these results will undermine the Fed.

 

- Jack Lew will replace Geithner as Treasury Secretary. This choice will be driven by Lew's knowledge and experience with budget matters. But Lew knows nothing of the capital markets and this will be a problem when a non-budget crisis emerges. Lew will say something about the currency markets that causes a big flap. There will be calls for his resignation as a result.

 

- There will be no meaningful gun legislation in the US during 2013. But the threat of new restrictions will keep gun store shelves empty. Gun violence in America will, of course, continue.

 

- The S&P will hit a low of 1,250 and a high of 1,500. It will be an "okay" year for stocks, but nothing special.

 

- China’s GDP will grow by 7%, a rate that is near stall speed. China will continue to create growth through infrastructure spending; more empty cities and trains to nowhere.

 

- China’s new government will crackdown on corruption. The immediate consequences will be a drop in luxury goods consumption and continued capital outflow. There will be arrests and trials of government officials caught with their hands in the jar.

 

- There will be large losses for Chinese citizens who have invested in “Wealth Management” investments that promised returns of 10% a year. The widespread losses will result in social protests.

 

- Merkel will be re-elected as the German Chancellor. But the election results will raise the question of Germany’s political willingness to stay in the EU. The election will be a turning point for the Euro FX rate. The EURUSD will weaken after the election.

 

- Greece will not leave the Euro in 2013. The economy will continue to suffer. In the fall of 2013 the pressure for Grexit will rebuild. The final exit will not come until 1st Q 2014.

 

- Spain will resist a bailout from the ECB for as long as possible. By the end of the summer the pressure in the Spanish bond market will rebuild. The actual bailout will occur at about the same time as the German election. This will hurt Merkel.

 

- When Spain is forced to accept an ECB bailout, the conditionality that is attached to the request will be cosmetic and of no significance to Spain in 2013/14. The "conditionality" will be on future years, not the present. The ECB's Mario Draghi, will deliver "Unlimited bond buying", as promised. The IMF will be a reluctant participant. The markets will end up wondering, “Who’s next?” The surprise answer is that it will be France, not Italy, that will next come under the market’s gaze. (Mario Monti will stay in the political picture in Italy)

 

- French and German politics will worsen further. Socialist France, and Capitalist Germany will move father away from each other. The squabbles between the counties will go public.

 

-Switzerland will fail to get tax treaties with France and Germany on the issue of illegal accounts. Switzerland's refusal to give up the "names" will result in economic penalties imposed by the EU.

 

- Brazil’s inflation rate will push 10%. The country will blame the USA and the Fed’s cheap money policies.

 

- Argentina will default on some of its external debt.

 

- On average, 2013 will be a colder year than 2012 for the globe. Arctic ice melt will be less than that experienced in either 2007 or 2012. La Nina conditions will reoccur in September.

 

- The Mid-West drought will abate somewhat, but annual rainfall will still be below normal. US crop yields will be higher than in 2012. Weather related problems in China, Russia and Argentina will limit crop production. As a result, the global cost of basic food stocks will rise another 10% for the year.

 

- In a complete blow off to his political base, Obama will green-light the Keystone Pipeline and approve “safe” fracking on Federal land.

 

- Faced with new production sources and a generally weak global economy, crude oil prices will drift lower in the early part of the year. But Saudi Arabia will cut production to adjust supply. The low for WTI will be 78. The high will be next fall, at $95. The WTI/Brent spread will widen from $20, to $25.

 

- The cargo shipping industry will continue to struggle with excess capacity and slow growth in global trade. Several public companies will be forced into a restructuring by lenders.

 

- North Korea will fire more rockets over Japan. Iran will have military exercises around the Straits of Hormuz. The US will spend tens of billions on naval costs in the Straits. Israel will talk tough about Iran. But there will be no major hostilities in 2013.

 

- Although there will be no new wars, there will be several periods during the year where the prospect of something happening will look very real. When this happens, there will be spikes in crude. One spike will occur in early summer; Obama will open up the Strategic Petroleum Reserve to stabilize prices.

 

- There will not be another major "Flash Crash" in 2013. However, during the year there will be thousands of examples of individual stock names that suffer from Algo Attacks that last for only a few seconds. The Wall Street Journal will publish numerous articles that describes the Attacks. The SEC will promise a review of market practices on the topic of HFT, nothing will come from that. There will be numerous "fat finger" trades. One of which will cost the firm behind the finger more than $1B.

 

- The Exacta for the Kentucky Derby: Balance the Books & Power Broker.

 

- In the baseball playoffs, the California Angels will beat Tampa Bay, the LA Dodgers will beat Cincinnati. This will set up the first ever "All LA" World Series. The Angles go on to win, but no one outside of SoCal cares, the TV audience is the lowest in years.

 

- The 2012/2013 Hockey season will be completely lost. Pregnancy rates will increase as a result.

 

- Apple will spend a fair bit of next year below $500, but will end the year close to $600.

 

- There will be no financial crisis in 2013 that undermines bank stocks. However, the question will be, “Where’s the upside”. The big move in bank stocks will not be repeated in 2013.

 

- FB will not trade above $31. This busted IPO will continue to be a drag on other tech IPOs.

 

- Daniel Day-Lewis will win Best Actor for Lincoln. A nine year old, Quvenzhane Wallis will get Best Actress. Lincoln will get the award for Best Picture.

 

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Sat, 12/29/2012 - 14:33 | 3104818 willwork4food
willwork4food's picture

I can live with all of it only if Timmy G gets run over by a bus his first day leaving.

Oh, and San Francisco over Green Bay in 2013.

Sat, 12/29/2012 - 15:18 | 3104894 Orly
Orly's picture

Not going to happen (for what should be quite obvious reasons...).

Houston Texans 24

Atlanta Falcons 18

:D

Sat, 12/29/2012 - 19:17 | 3105471 willwork4food
willwork4food's picture

Houston..yes, yes. I'm good with that.... As long as Timothy Geithner still gets hit by a bus.

Sat, 12/29/2012 - 14:33 | 3104816 rsnoble
rsnoble's picture

I will say I have no doubts it will be another year of complete bullshit, with all the politicians self-interests top priority while the country slides even further into the abyss.  

Might just want to make all that you can make, try not to rely on the gov't for anything, and try to have a good time if possible.  If something shitty comes our way, which I have no doubt, then so be it.  No sense sitting here bitching about a bunch of gazillionaire clowns that do anything they want rather or not you have anything to say about it.

The circus is just getting started i'm afraid.

Sat, 12/29/2012 - 14:30 | 3104813 roadhazard
roadhazard's picture

That was so boring I will not have to log on to the internets this year.

Sat, 12/29/2012 - 14:30 | 3104812 Peter Pan
Peter Pan's picture

How I miss those gypsies with the crystal balls and tarot cards. At least they looked and sounded the part.

The reality is that our predictions make fools of us more than anyone else can.

Sat, 12/29/2012 - 14:30 | 3104811 LoneStarHog
LoneStarHog's picture

I stopped at the italicized word "boring", as I realized it summed up the missive and my state-of-mind reading it.

Sat, 12/29/2012 - 14:27 | 3104806 Tinky
Tinky's picture

I predict that in 2013 Bruce will continue to have too much time on his hands...

Sat, 12/29/2012 - 22:50 | 3105863 Dr. Sandi
Dr. Sandi's picture

It's my sincere hope that in 2013, ALL OF US will continue to have too much time on our hands.

Subsistence livng is a great cure to boredom, but probably somewhat less fun than boredom itself.

Sat, 12/29/2012 - 14:27 | 3104803 Clever Name
Clever Name's picture

This all seems overly optimistic to me.

 

Bullish?

Sat, 12/29/2012 - 16:01 | 3105031 Mr Pink
Mr Pink's picture

I for one hope 2013 won't be as boring as Bruce predicts. ZZZZZZZZZZZZZZZZ

Sat, 12/29/2012 - 14:26 | 3104801 hedgehog9999
hedgehog9999's picture

"The "trains" will be the beneficiary of this."

 

Should read : "the old buffon will be the beneficiary of all this"

Sat, 12/29/2012 - 22:49 | 3105859 Dr. Sandi
Dr. Sandi's picture

I'm not clear. Does the looming container strike apply only to Longshoremen, or do the railroad containers get bitch slapped too?

Sat, 12/29/2012 - 14:24 | 3104795 fonzannoon
fonzannoon's picture

Bernak to slow down the monthly printing? Never. More likely after the cliff he goes to 100 bil/mo and we end the year over a trillion in balance sheet expansion.

Sat, 12/29/2012 - 15:55 | 3105009 DosZap
DosZap's picture

Bernak to slow down the monthly printing? Never. More likely after the cliff he goes to 100 bil/mo and we end the year over a trillion in balance sheet expansion.

Exactly, it is QE 4 Eva, new chart up as JSMINESET.COM,several good takes from the OLD guy,and his CIGA's.

Bennie cannot ever stop buying T's, and Bonds, or the dollar fails asap.

Sat, 12/29/2012 - 22:48 | 3105857 Dr. Sandi
Dr. Sandi's picture

Sooner or later, the money printing will gap into the vortex of J curve inflation.

More bogusbux will need to be printed to pay the interest and inflation penalty on the previous bogusbux. I don't think that can slow down anymore.

Thelma Louise Bernanke and his owners have already driven the big American Cash Car into free fall, in the crisp, clean air above the Snake Canyon.

Sat, 12/29/2012 - 14:18 | 3104780 Lionhead
Lionhead's picture

Happy New Year BK! Always enjoy reading your articles and these predictions. We shall see what the future brings us, good or bad.

Sat, 12/29/2012 - 14:14 | 3104764 lakecity55
lakecity55's picture

Hey, is "13" one of those "important" "illuminati" numbers?

Sat, 12/29/2012 - 14:14 | 3104763 shovelhead
shovelhead's picture

What!

No Zombie Woodstock?

Bummer.

Sat, 12/29/2012 - 14:19 | 3104752 Ghordius
Ghordius's picture

"French and German politics will worsen further. Socialist France, and Capitalist Germany will move father away from each other. The squabbles between the counties will go public"

imho a crass misrepresentation of the two nations that while differing in many details are comparably equally socialist, captitalistic and dirigistic on the whole

all in all a persistent AngloAmerican blind spot

Bruce, I'm not trying to pick on you, all in all you did a very good 2012 prediction run. and you acknowledge your failures like a true champion

but it's the same blind spot that gave you this 2012 issue (from your blog):

"Greece will continue pretending it wants to be in the EU and tied to the Euro, until July. Its deteriorating economy and inability to service its restructured debt will force Greece to leave the EU and re-establish the Drachma.

A year ago I thought that it was not remotely possible for the ECB to come to the rescue of the EU with an unlimited offer to buy up the sovereign debts of Spain and Italy, much less an endless bailout of Greece. I was dead wrong with those expectations. That stance cost me."

Are you still sure you understand today's Europeans? Are you still sure we are pretending something?

Sat, 12/29/2012 - 14:08 | 3104750 Stuck on Zero
Stuck on Zero's picture

I predict that a major volcano will blow in Indonesia. Earth will be plunged into a global winter and millions will starve. 

 

Sun, 12/30/2012 - 04:38 | 3106124 John_Coltrane
John_Coltrane's picture

Ah, but think of the skiing possibilites!  Powder, powder everywhere.

Sat, 12/29/2012 - 14:15 | 3104774 knukles
knukles's picture

Now that's good news

Sun, 12/30/2012 - 00:43 | 3106020 TonyCoitus
TonyCoitus's picture

Indeed. Very bullish.

Sat, 12/29/2012 - 14:05 | 3104743 rsnoble
rsnoble's picture

Oh cool, another conspiracy theorist that puts off anything 'exciting' until 2014.  That way they can have another year of getting rich off playing everyone's emotions.

Sat, 12/29/2012 - 14:04 | 3104738 Kastorsky
Kastorsky's picture

waste of time, yes

Sat, 12/29/2012 - 22:43 | 3105843 Dr. Sandi
Dr. Sandi's picture

Stop wasting your time here and finish the next chapter of the Bible you've been writing instead.

Sat, 12/29/2012 - 13:57 | 3104723 tnquake
tnquake's picture

No hockey season... you had me until then!

Happy New Year ZH'ers!

Sat, 12/29/2012 - 13:56 | 3104722 Salt
Salt's picture

My prediction -

2013 will suck and the best stock to own will be Sturm Ruger.

 

Sat, 12/29/2012 - 13:45 | 3104701 Brit_Abroad
Brit_Abroad's picture

He is joking right ?

Right ?

Somebody help me please.......

Funny, I actually took the time to read it, and you know the only thing I thought of was......muppet.

Sat, 12/29/2012 - 22:42 | 3105841 Dr. Sandi
Dr. Sandi's picture

It's most likely meant to make you think, rather than offering a lifestyle roadmap for the next 12 months.

Sat, 12/29/2012 - 13:36 | 3104685 eddiebe
eddiebe's picture

Bruce will give up writing columns, move back to Switzerland where he will buy a small farm complete with goats and chickens and take up yodeling.

Sat, 12/29/2012 - 13:45 | 3104702 etresoi
etresoi's picture

There are no large farms in Switzerland and there are very few small farms for sale.  Bruce can not afford to live in Switzerland; he is trapped in US, as most ZH readers are.

Sat, 12/29/2012 - 14:36 | 3104824 willwork4food
willwork4food's picture

I prefer to call it comfortably imprisoned.

Sat, 12/29/2012 - 13:35 | 3104682 doomandbloom
doomandbloom's picture

Can you give us an update on your 2012 predictions pls?

Sat, 12/29/2012 - 14:01 | 3104730 Bruce Krasting
Bruce Krasting's picture

I did. In the intro, but I'll do it again:

http://brucekrasting.com/a-re-look-at-my-calls-for-2012/

Sat, 12/29/2012 - 15:48 | 3104982 doomandbloom
doomandbloom's picture

ah yes...thanks Bruce...

Sat, 12/29/2012 - 13:32 | 3104677 brown_hornet
brown_hornet's picture

I predict that the Cubs will not win the World Series.  Bet I'm right.

Sat, 12/29/2012 - 13:28 | 3104671 SunRise
SunRise's picture

Bruce maybe . . .

Sat, 12/29/2012 - 13:27 | 3104669 andrewp111
andrewp111's picture

Obama will not negotiate with the GOP over the debt ceiling. He has already said so. He will do the trillion dollar platinum coin thingy, which makes the debt ceiling irrelevant. He has had sufficient time for Geithner to design the coin, make blanks and dies, and for all we know, may already have a dozen minted and locked away in a very secure vault.

Sat, 12/29/2012 - 14:14 | 3104768 knukles
knukles's picture

Like the only things of value to be found in Ft Knox

Sat, 12/29/2012 - 22:41 | 3105837 Dr. Sandi
Dr. Sandi's picture

I'd enjoy hearing that they audited Fort Knox and found no gold. But they did find 17 one ounce $1 trillion platinum coins.

Sat, 12/29/2012 - 13:20 | 3104655 nmewn
nmewn's picture

I predict Bruce will meet "Red Dress" again, on more favorable terms ;-)

Sat, 12/29/2012 - 16:34 | 3105115 Kayman
Kayman's picture

nmewn

Bruce ought to be able to charm the pants off a willing participant.

Happy New Year, nmewn.

Read your stuff whenever I can.

Sat, 12/29/2012 - 18:17 | 3105359 nmewn
nmewn's picture

And Happy New Year to you as well Kayman.

Don't know why BK is getting crushed here, at least he had the balls to put his predictions out there and gave his track record for last years.

I don't agree with all of them either...but the ratings agents went a little too far on the down grades, I may have to pick some up on the cheap ;-)

Sat, 12/29/2012 - 14:26 | 3104802 lakecity55
lakecity55's picture

I predict O-Phone will use a TelePromTer or read from crib notes.

Sat, 12/29/2012 - 14:21 | 3104792 Getting Old Sucks
Getting Old Sucks's picture

I really enjoyed that read.  One of the best I've read from him.

Sat, 12/29/2012 - 13:15 | 3104644 Water Is Wet
Water Is Wet's picture

Ok, who actually read all of that?  Anybody?

Sat, 12/29/2012 - 19:53 | 3105522 nofluer
nofluer's picture

who actually read all of that?

I did. I didn't agree with all of it, and some of it seemed frivolous... but I read it.

Sat, 12/29/2012 - 15:48 | 3104984 DosZap
DosZap's picture

 Inflation will rise modestly in the US. Full year Core CPI will be greater than 2%. When food and energy are included, inflation will push north of 2.5%.

You must be kidding, it now well over 10%.(if they included food and fuel,which we all know they do not)

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