December 30, 2010

Top 10 Wackiest Market Predictions for 2011

Will the Fed really be abolished in the wake of a monetary union with Canada and Mexico?

Okay, we can all look back and snicker at demographer Harry Dent’s prediction that the Dow would reach 40,000 by 2009. He was only off by 34,000 points, but he made a bundle on his book of the same name. Other reputable sources that got it wrong include Art Laffer’s bet with Peter Schiff in 2006 that the nation’s economy was not, in fact, in trouble. Even though Schiff won that round, he can hardly claim a perfect track record. Getting it wrong is just something that comes with the “predictin’ business” (few care to revisit Nostradamus and his Detroit Lions Super Bowl claim).

With this in mind, we take a look at some of the zanier market takes for the upcoming year. We’d say we’ll revisit them at the end of 2011 to see who was right—but why bother?

1). Germany Leaves the EU, the EU Splits

Reports of Saxo Bank's annual "10 Outrageous Predictions” are everywhere. We happened to view them at Minyanville.com. If you haven’t gotten your market news from a cartoon bull and bear, you haven’t lived. According to Steen Jakobsen, who produces the annual list:

“Germany leaves the EU−or rather Germany is forced to leave the EU with its strict rules on emergency funds. From a game-theory point of view, several countries would be better off outside the EU rather than inside. The EU splits into two tiers: one with Germany and restrictive fiscal policy rules, and the other comprised of countries on the outside−namely, the PIIGS.”

2). Emerging Markets Plunge 50% By June

Jakobsen has some truly wacky predictions, but given all that’s happened, this one unfortunately falls in the realm of possibility.

“Emerging markets, specifically the BRICs, are down 50% by the half-year mark. Emerging markets are going into 2011 15% overvalued. Brazil is about to see a U.S.-like banking scandal that becomes the catalyst.”

3). Canadian Dollar Will Rocket to $2 U.S.

The Canucks get in on the act, courtesy of the Vancouver Sun. According to the paper:

“We’ll say ‘the Canadian dollar is rising fast,’ but it'll actually be more a case of the U.S. dollar dropping through the floor. Chinese government officials will use greenbacks as toilet paper and nuclear reactor radiation shielding while Irish government officials launch an international marketing campaign with the slogan ‘Ireland: Yes we're broke, but we're not America broke.’

4). Crazy SEC Predictions For 2011

Despite the headline, it’s not what you think. Tennessee will be in the top 25 when they face Florida next year, and Auburn will be 6-6.

5). U.S. Congress Blocks Bernanke's QE3

"Congress blocks the Fed's authority to expand its balance sheet, and sets up an eventual challenge of the Fed's dual employment/inflation mandate."

This one is also attributed to Jakobsen. Our friends at Motley Fool say this one’s possible, but if the sell-off in U.S. Treasuries in recent weeks does imply that growth will finally kick in during 2011, rather than being challenged by Republicans, Bernanke might be recognized as a hero. We’ll see.

6). Apple Will Build 65 Million iPads in 2011

As PCWorld notes, analysts and researchers are coming out with some crazy predictions about iPad shipments in 2011. Today's outrageous number comes from market analysts at DigiTimes Research predicting Apple will order 65 million iPad screens from its suppliers by the end of 2011. DigiTimes Research's projections are based on its report that iPad screen shipments for November reached 2.7 million -- 1.5 million from LG, 1.2 million from Samsung.

7). Banks Burn Cash (Literally), Ask For More

Maybe they know something we don’t. Again from our sarcastic colleagues in the Great White North, the Vancouver Sun predicts “investigative journalists will uncover video footage of American bank chairmen enjoying a bonfire on the beach fueled entirely by piles of burning cash, mortgage payments and property leases. The footage will raise the ire of consumers when the same bank chairmen ask the government for $13 billion in 'bonfire money,' claiming ‘We're too big to freeze.’ Republicans demand tax breaks for the banks and, when they get them, pillory Democrats for the ‘bonfire bailout.’”

8). A Complete Economic Collapse

We’ll give him another chance, even though his pendulum is swinging far in the other direction, from “nothing to see here” to “the world is ending.” Art Laffer wrote a piece for the Wall Street Journal last June focusing on a complete economic collapse in 2011. Let’s hope Schiff again thinks differently.

9). Because Glenn Beck Says So

In November, Glenn Beck mocked the National Inflation Association (NIA) for its “fear-mongering over a coming food crisis," and the group's conclusion that massive inflation in food prices is imminent.

Beck cited NIA's forecast of huge increases in the cost of food staples, which Beck has said is a result of both the Federal Reserve's efforts at quantitative easing, and George Soros' supposed sinister plot to devalue the dollar for his own personal gain.

One problem; according to Media Matters (we know, we know …) few economists have heard of NIA, although it does exist. Dean Baker, the co-director of the Center for Economic and Policy Research, said he's "never heard" of NIA, but told Media Matters their conclusions are ridiculous on their face:"Inflation is falling, not rising, this is crazy."

10). Ashton Kutcher Prepares for the Coming Apocalypse

Call him the new Chuck Heston, not for his acting chops, but for his stockpile of Soylent Green. Not a whole lot to add on this one, so we’ll leave it to Salon.com:

“In an undeniably kooky interview for the new issue of Men's Fitness, the ‘Dude, Where's My Car?’ star explains his motivation for keeping in shape. It's not to keep himself bankable as a movie star. It's not because Demi likes a man with a little definition. It's so that when our fragile civilization turns into a Michael Bay movie, he will not be the nerdy scientist/rookie cop/loveable old timer with two days till retirement.

‘All of my physical fitness regimen is completely tailored around the end of day,’ he explains. ‘I stay fit for no other reason than to save the people I care about.’

‘End of day?’ When did Kelso become Kirk Cameron?”

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