- 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?
Wikinvest Wire
Thursday, January 04, 2007
Byron Wien's Surprises
In case you missed this on the WSJ Market Beat Page, they listed Byron Wien's surprises for 2007. My thoughts are in maroon.
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Australian drought:
Australia warming faster than world
By Virginia Marsh in Sydney
Published: January 3 2007 10:14 | The seriousness of Australia’s environmental problems was underlined Wednesday with the release of data showing that the country appears to be experiencing the effects of global warming more deeply than other parts of the world.
In its annual climate report, the Australian Bureau of Meteorology said 2006 had seen the warmest spring on record, with average temperatures up 1.42 degrees centigrade. The mean temperature for the year was 0.47 degrees above the 1961 to 1990 average. Average global temperatures in 2006 were 0.42 degrees above their 1961-1990 average.
2006 was consistent with longer term data, showing mean temperatures in Australia had increased faster than the global average since 1910, the bureau added.
“Most scientists agree this is part of an enhanced greenhouse gas effect,” said Neil Plummer, the bureau’s senior climatologist. “Of Australia’s 20 hottest years [on record], 15 have occurred since 1980.”
The bureau also warned that rainfall patterns were becoming more extreme. While overall rainfall in 2006 was in line with historical averages, this was because unusually wet weather in the north and west cancelled out drought in the southeast, parts of which suffered their driest year on record. This trend has also been experienced in previous years.
Many of Australia’s most important resources projects are located in its north and west, from the world’s biggest iron ore producing region in the Pilbara through to all the country’s liquefied natural gas projects and several alumina, bauxite and gold mining operations.
The trend to more marked droughts, meanwhile, is afflicting the country’s most important agriculture regions. Australia is usually one of the world’s top three grain exporters and the sharp reduction in its expected wheat crop this year has already pushed up global prices.
This summer’s dry weather in the southeast, the latest in a series of droughts, had been exacerbated by an El Nino weather system in the Pacific Ocean, the bureau added.
“Aspects of this multi-year drought are highly unusual and unprecedented in many years,” it said.
Publication of the bureau’s report coincided with the first tropical cyclone of the season. The approach of Cyclone Isobel, off the country’s north-west, forced the suspension of production at at least two significant oil fields as well as the closing of BHP Billiton’s Port Hedland iron ore export operations. Last year, Cyclone Larry caused more than A$1bn in damage to north Queensland, including the destruction of almost all of the country’s banana crop.
The government has responded to growing public concern over climate change by, among other things, establishing a taskforce to investigate carbon trading systems, something it previously opposed, and through a number of water initiatives.
In his New Year message earlier this week, John Howard, prime minister, singled out tackling the country’s chronic water problem as one of four key priorities for 2007, alongside educational standards, security and maintaining low unemployment.
“This will require us more than ever to look at [the water] issue from a national perspective,” he said, urging the states to put aside regional rivalries.
But both Labor, the main opposition party, and environmental lobby groups say the government, which has maintained its opposition to the Kyoto protocol, is still not doing nearly enough on the environment.
“Without meaningful and urgent action on climate change, category-five cyclones are projected to become more frequent,” the Australian Conservation Foundation said yesterday. “In 2007, we need the Australian government to respond to science by adopting a plan that dramatically cuts our greenhouse pollution.”
If the under has been correct on Japan for most years, isn't it about time for it to be over for several years??? Either I believe in trend reversals or I am a wishful thinker or I am just an idiot :)
I tend to buy into the contraian idea as well. But I just have a hard time making a fundamental case for Japan. Years of wildly stimulative policy with not much stimulation to show for it is my biggest problem.
Great post, I am a day late reading but really enjoyed. The Brazil trade is very crowded (this has been the trend for a couple of years), but I agree looking back in 12 month's the currency should be stronger and interest rates definitly lower. I enjoy reading your blog.
Hi Nice Blog .This labor time management is used to track the time and attendance of employees, and at the same time track labor activity against specific parts, jobs, and operations.
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