- The S&P 500 exceeds 1600 thanks to strong earnings, and market volatility jumps. Not sure if this means there is a correction in between. I would like to hear from some of these bulls their thoughts about why they don't entertain the idea of a normal correction coming at some point.
- China revalues the yuan by 10%. I don't know about 10% in a year but 30% by maybe 2011 seems like it could be on the outer fringe of plausible.
- Crude remains in short supply because of Asian demand, pushing oil to $80 a barrel. Oil up on Asian demand is an idea I latched onto several years ago so I buy into it but I don't know that it goes back to $80 so soon.
- Agricultural prices rise corn at $5 a bushel, wheat to $7, soybeans to $9 and cotton to 80 cents a pound. A lot of smart people have called for the commodity boom to favor softer commodities plus the drought in Australia impacts what I believe is 15% of the world wheat supply.
- S&P 500 earnings grow by 10% in 2007. This one would surprise me but earnings have done better than a lot of people would have suspected. Here again double digit earnings growth does not usually last as long as this last run has.
- The Fed doesn't lower rates in the spring, and the 10-year yield rises to 5.5%, with the yield curve resuming a positively sloped shape. This is what I said in my 2007 prediction video post. Inversions don't last very long, usually, so that it would correct itself one way or another in 2007 makes sense. 5.5% or even 6% on the ten year would not be a catastrophe. I have thought for months that the spring was the earliest possible the Fed could cut but I don't think they will cut until later than that.
- Gold hits $800 an ounce and silver rises to near $18. Well these two have a much better shot of happening if the yuan does what he thinks it will against the dollar. $80 oil can also come into play here as a sort of domino type of thing not necessarily a correlation type of thing. Here the thought is that if the dollar drops things priced in dollars often go up there by staying the same in terms of euros or yen or whatever.
- Japan's Nikkei 225 rises 15% as the Japanese economy improves. I seem to always take the under on Japan. This was wrong in 2005 and right in almost every other year except maybe 1999.
- Latin America does well, particularly Brazil, where the Bovespa index rises to 55,000 (currently 44,780). I am a big fan of Brazil and while it benefits from China's ongoing success it will have a correction at some point so don't go too crazy.
- Rudy Guiliani pulls ahead as the leading candidate for Republicans and Barack Obama gains momentum for the Democrats. Ehhhh, why not?
Thursday, January 04, 2007
In case you missed this on the WSJ Market Beat Page, they listed Byron Wien's surprises for 2007. My thoughts are in maroon.