A few people asked me if European Banks' preference shares will still pay dividends if they received bailout funds. I did some searching on the internet and the answer is most likely yes. However, if the capital of the banks fell below a certain mandatory level, dividends may not be paid for that half year or that year.

If a government bails out banks, it will most likely come in the form of preference shares which should rank equal to the existing ones that investors hold. However, the terms given to the government may be sweeter, along the likes of convertibility to shares at a premium to the current spot, callability at a premium to par, etc. similar to Buffett's terms with Bank of America.

So the chances of an outright default of any major European bank is unlikely. However, be prepared for some dividends to be missed and as a result, extreme price volatility. Expect drawdowns of around 40 - 50% in the worse affected banks. This is as bad a drawdown as with the ordinary shares. But for ordinary shareholders of affected banks, expect a total wipeout or the value to be decimated like ordinary shareholders of Bank of America, Citigroup back in 2009.


http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aeIqWGr5Vnkw

Will Royal Bank of Scotland Continue to Pay Dividends on Its Preferreds?

14 comments | by: Global Investing Editor January 23, 2009 | includes: PGF, RBS

inShare0

Several readers asked me whether the newly nationalized Royal Bank of Scotland (RBS) will continue to pay dividends to owners of its non-cumulative preferred shares (and those of NatWest which it acquired).
My answer:
I do not know, but here is my best guess. the preferreds are a relatively minor part of the capital of the banks and are not currently being added to (like the common). So it is a free choice by the British PM Gordon Brown and and the Chancellor of the Exchequeur, Alisdair Darling, both of whom are Scots themselves, what they do about the biggest case, which is Royal Bank of Scotland. (Nat West is also RBS which acquired it before the mess hit.)
My guess is that they will not halt payment of interest on the preferred for a couple of reasons: 1) they were targetted at US retail investors, not speculative Britons like the recent buyers of RBS common; 2) the government wants eventually to sell the bank to the private sector again and does not want to hurt its standing too much; 3) this is a minor amount of money in fact; 4) it is linked to the dollar business RBS does, which is mostly wholesale, and cutting the payout would hurt the bank's global rep 5) the government's own shares are also preferreds which presumably means that preferred get preference which is what they normally get (I am not sure which preferreds are senior but in theory it is the ones we own) and 6) Britain would lose standing as an international bank centre if these payouts were halted.
They really don't want to wind up as Iceland on the Thames.
Another imponderable is news that the Dutch Parliament is looking into the acquisition by RBS of ABN-AmRo which triggered the meltdown at RBS and of course also hurt Dutch investors.
However, I have no deep insights into the souls of these Labourite Scots and I am just guessing. People can make stupid decisions based on a desire to control moral hazard, like the Paulson decision to let Lehman Brothers go bankrupt, which was a dreadful mistake.
That is why I say to buy the non-bailout bank preferred stocks too, which is Barclays (no UK govt. money taken or wanted, and a yield nearly as high).
There is a huge amount of speculative in- and out-flow into RBS and the other government assisted banks. There is risk with the preferreds but not in my view as much. I am buying these using limit orders, but am also keeping my fingers crossed. I will not comment on U.S. bank preferred stocks.
*Here is another view from an independent analyst at Datamonitor, Jonathan MacDonald, Lead Analyst writing on the British govt. bailout today: "damned if they do, damned if they don't". "It is not yet clear whether the move will prove successful as the current climate has no precedent' acknowledges MacDonald.

Sifting Through the Noise

Published September 24, 2011

Wealth insights

Sift through the noise Here are some key medium-term trends worth bearing in mind By SHANE OLIVER AMP CAPITAL INVESTORS THE day-to-day noise surrounding investment markets can be very distracting, making it hard for investors to see the wood for the trees. This is particularly the case with the global financial crisis and its aftershocks continuing to roil markets at a time when investors are getting bombarded by more and more conflicting information flows. As such, it is useful to be mindful of longer-term themes that will impact investment returns over the next five years or so. Here are some key medium-term trends worth bearing in mind. Low growth in advanced countries Numerous studies have shown that for countries in the aftermath of financial crises, economic growth tends to be fragile and constrained as debt levels are reduced and confidence is constrained. This is certainly proving to be the case in the US and Europe and is likely to remain the case for several years as households and the public sector remain focused on reducing debt. Implications - investors will need to look beyond traditional advanced countries if they seek higher levels of capital growth from their investments. Increased volatility The combination of high private and public sector debt levels in developed countries, extreme monetary policy settings, so-called currency wars (as indebted advanced countries intentionally or otherwise seek to lower their currencies), greater government intervention in the economy, and increasingly twitchy investors means we have entered a more volatile macro economic environment. Like Japan has seen with now six recessions in the last 18 years since its bubble economy burst in the late 1980s, this is resulting in more frequent and more volatile economic cycles and a corresponding increase in investment market volatility. Implications - depending on an investor's time horizon and risk tolerance, this suggests a greater focus on dynamic asset allocation strategies that move between assets depending on opportunities as buy and hold may not work so well; a greater focus on protecting capital values; and a focus on quality high-yield investments in order to provide a greater certainty of return. Back to saving in developed countries Economic uncertainty, a desire to reduce leverage, and reduced investment returns making it harder to meet retirement objectives mean 'consumption is out and saving is in' in many advanced countries. This has seen household savings rates rise in countries such as the US and Australia. This is part of the necessary adjustment from consumption to investment in advanced economies and may have further to go. For emerging countries, the opposite is likely to apply as growth rebalances toward consumption. Implications - the shift from consumption to savings will further limit growth in advanced countries. The key opportunities for consumer stocks are in emerging countries. The end of the financial era To the extent that financial deregulation and rising debt ratios ushered in the financial era over the last 30 years which saw huge growth in the finance sector, rising savings rates and financial re-regulation suggest the financial era is long over. Implications - favour real stocks, eg industrials and materials, over financial stocks. Policy dysfunction in advanced countries It seems the quality of economic policy making and political leadership goes in cycles too. The 1980s - with Reagan, Thatcher, and Hawke/Keating in Australia - ushered in a period of rational economic policy making and strong political leadership. This appears to have given way to a period of regulatory interventions in economies hindering growth, political bickering (witness both the US and Europe in response to their debt problems), and weak leadership, which some would suggest is similar to what Japan has suffered from over the last 20 years. Implications - this adds to weaker growth and more volatility. Low inflation - but with greater risk The secular trend in inflation has been a key driver of investment returns historically. Falling inflation through the 1980s and 1990s led to a sharp fall in bond yields and a sharp rise in price-earnings multiples (ie, share prices rose faster than earnings), which generated great capital gains for both bonds and shares. This is long over. The most likely outcome is for inflation to remain low, reflecting significant spare capacity in developed countries offsetting inflationary pressure flowing from high commodity prices and reduced deflationary impetus from China. However, the risk of a break-out either to higher inflation or into deflation is high. Quantitative easing, which amounts to printing money, suggests a high risk of an inflation break-out, but the experience of Japan, which has seen bouts of quantitative easing and yet years of poor growth suggests there is a real risk of deflation. Implications - the boost to asset returns from disinflation is long over. A break-out to high inflation would be bad for all assets (except gold and commodities) whereas deflation would be bad for shares and property but good for bonds. The Asian ascendancy Constrained and fragile growth is largely limited to the major advanced countries. However, combined with rapid industrialisation and urbanisation in the emerging world, it is reinforcing the ascendance of China, India, and the rest of Asia. Trend growth rates in emerging Asia are likely to be two to three times greater than in the developed world. China is now the world's second-largest economy and in the next five years or so, it will be the largest, with India hot on its tail. Strong growth, along with sound macro economic management, low debt levels, undervalued currencies, and attractive valuations suggests non-Japan Asian equity markets will continue to outperform developed country share markets on a five to 10 year view, notwithstanding occasional setbacks as we have seen recently on inflation concerns. Implications - favour non-Japan Asian shares over mainstream equity markets (allowing of course for risk). Strong commodity prices After a 25-year bear market into the end of the last century, commodities are now just over a decade into a secular bull market driven by strong structural demand on the back of industrialisation in China and other emerging countries, all at a time of still constrained supply. Notwithstanding cyclical fluctuations, the longer-term trend in commodity prices is likely to remain strong, possibly accentuated by a continuing long-term downswing in the US dollar and other major advanced country currencies. Implications - positive for resources stocks and the Australian economy and provides support for the Australian dollar. Expect more upwards pressure on gold and oil prices. Globalisation and offshoring There is nothing new in globalisation, but the reality is it is intensifying, as cheap workers in China, India, and elsewhere join the world trading system. Given the wage advantages, this likely has a lot further to go. Trying to fight against it - by raising barriers against 'unfair competition and a so- called tilted playing field', as some are starting to suggest in Australia again - will be futile. Implications - this will benefit multinationals able to shift functions across boundaries but will only keep adding to the pressure on high-cost local producers, such as Australian steelmakers. Ageing and slowing populations It is well-known populations in developed countries are ageing and population growth will slow. This is clearly worse in some countries, eg Japan where the population is falling, than others such as Australia where high immigration and higher fertility rates are providing an offset. Over time, this will lower potential growth rates in many countries. Implications - positive for shares exposed to health care, tourism, and leisure and for those offering a decent income yield; bad news for suburban houses over inner city housing and coastal resorts; retiring baby boomers could become a negative for shares as the focus shifts to wealth preservation and income; more negative for Japanese shares than US & Australian shares; less of an issue in emerging countries. The environmental imperative While the global financial crisis has slowed the momentum for climate change action, putting a price on pollution looks to be inevitable, with carbon pricing a step in that direction in Australia (barring an election before July next year). Implications - environmental pressures will add to business costs and increasing environmental costs will favour those companies that are environmentally responsible. Running environmental screens across companies in setting up investment portfolios is becoming mainstream. Weak house prices Five years ago, house prices in the US, UK, and Australia were all very expensive relative to incomes and rents. They have now corrected sharply in the US and UK, but the adjustment is expected to be more gradual in Australia (hopefully) in the absence of a crisis and given supply shortages. Implications - with poor affordability and still low rental property yields, Australian housing is likely to provide poor medium-term returns. Concluding comments Pulling all this together suggests several key implications for investors: returns are likely to remain low and constrained from traditional investments and volatility is likely to remain high; favour assets that offer decent income yields; and/or those that offer clearly identifiable growth advantages or scope for greater 'alpha', eg Australian shares, non-residential property, and infrastructure and Asian shares as opposed to US shares, traditional government bonds or Australian housing. The writer is head of investment strategy and chief economist, AMP Capital Investors

S&P 500... Where We Are Now

Market Outlook: September Will Make Or Break The Market

 

 

It's truly setting up to be a September to remember.
Investment markets appear set to break one way or another over the next few weeks. While stocks managed to rally off of Jackson Hole and put together a brief rally to close out August, all bets are off looking out into September, as the calendar is loaded with make or break events that will go a long way in defining how the rest of the year plays out. By the end of the month, stocks could either be poised to rally for the remainder of the year, or they could be cascading off a cliff. Critical events over the next few days and weeks will go a long way in determining the fate of stocks and investment markets.
Through the Labor Day weekend holiday, stocks continued to hold their ground despite recently thrashing about. Despite the sharp decline to kick off the new month, stocks remain well above the recent intraday low of 1101 on the S&P 500 from August 9, at least for now.
click on all charts to enlarge

But signals from a variety of markets indicate that trouble continues to brew under the surface. Starting with the stock market itself, the S&P 500’s Relative Strength Index reached 50 but was unable to make a bullish crossover and instead turned back lower. This is a bearish signal for stocks. The breakout by the Treasury market (IEI, IEF, TLT, TIP) to the upside also suggested that stress is building in the system, as investors continued to flock to safety despite already record low yields.

Gold (GLD) has been another safe haven trade that has been back on over the last seven trading days. Despite many commentators and analysts piling on Gold when it quickly lost steam for two days in late August (which not coincidentally were the same two days when margin requirements were sharply increased for the yellow metal on select exchanges), it has since posted a strong rally over the last seven trading days and appears poised to break out to new all time highs. Silver (SLV) has also responded in an almost identical fashion.


So what is at the core of the market stress? Certainly, the increasingly weakening U.S. economy is playing its part. And the “UNCH” jobs report on Friday did not help. But shouldn’t the consistently bad stream of economic data be playing right into the Tepperesque win-win story for stocks of weakening economy means even more aggressive stimulus from the Fed? Although I have my reservations as to whether QE3 would work in boosting stock prices, neither the weakening U.S. economy nor the lousy jobs report is at the heart of the matter.
The critical issue for investment markets is Europe. With each passing day, it appears increasingly likely that the situation is going to completely unravel. Greece remains out in front, as it looks like the latest bailout program may collapse amid concerns from the IMF and European leaders that the country is widely missing targets required to secure a second round of rescue funding.

Italy appears to be following close behind. After passing an austerity program in order to receive emergency support from the European Central Bank, the Italian government has been increasingly backtracking on these commitments in recent days. This has sent Italian 10-Year Government Bond yields soaring higher once again toward the critical 6%. On Friday alone, yields jumped 12 basis points to close at the highs for the day at 5.28%.

The key risk for investment markets is that a sovereign default in Europe could trigger another global financial crisis similar to what we saw begin to unfold in September 2008. Adding to the worry is the fiscal and monetary arsenal that was available to fight the crisis in 2008 has been largely depleted currently. These worries continue to take their toll on the stock market including the financial sector, which remains down sharply for the year.

One reassuring signal remains the Preferred Stock market, which continues to trade well above early August lows. However, the recent trade lower over the last three trading days should be watched closely, particularly following the suit announced on Friday by the FHFA against 17 global banks in an attempt to recover losses for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). If Preferred Stocks begin to tail off to the downside, a severe stock market reaction may soon follow.

Looking out over the month of September, we should soon find answers as to how this is all going to play out. And we may not have to wait for long given the full calendar throughout the month. The following are some of the key events to monitor in the coming weeks:
September 7: The German Federal Constitutional Court is set to rule whether of recent bond purchasing actions by the European Central Bank are in violation of euro zone rules. If the bailouts are determined to be illegal, this has the potential to seal the fate of the monetary union. Thus, this is a most critical news item to watch on Wednesday.
September 8: Two important speeches come on Thursday. The most notable of the two is President Obama’s jobs speech to a Joint Session of Congress. But perhaps just as critical will be Fed Chairman Bernanke’s speech in Minneapolis that day. Not only will this potentially provide a hint at potential policy actions at the upcoming Fed meeting, but it is also his first scheduled appearance following the German vote on September 7. If this vote were to go badly, Bernanke may be much more explicit in his policy language.

September 20-21: The U.S. Federal Reserve is scheduled for a once one day, now two day meeting to discuss its various monetary policy options. Some investors are anticipating some form of stimulus including perhaps a full blown QE3 with more large scale asset purchases. How global events and economic data unfold over the next 16 days will go a long way in determining how the Fed might react if at all. And even if the Fed does react with a full QE3, it may not be the panacea for the stock market this time around that some may be hoping for.

September 23: The German Parliament will vote on the Greek bailout and the expansion of the European Financial Stability Facility. While Germany is the backbone of the euro zone and has been the primary source of funding thus far for at risk economies across the region, the bailouts are becoming increasingly unpopular in the country and political support for any further action is becoming increasingly fragmented. So the vote is far from a sure thing, and this assumes the fiscal situation stays together in Greece long enough to actually get to the vote. In addition, 16 other euro zone nations are scheduled to vote on the bailout program roughly around the same time including Finland, which has demanded collateral from Greece in return for their approval of the rescue plan.
Investment markets have a great deal to monitor and contemplate in the coming weeks. Depending on how events unfold, we could see the final beginning of the end for the euro zone. At the same time, we could see European leaders come together once again to fight on for the monetary union. The stakes are also high in the U.S., as policy makers have the potential to excite markets with new stimulus measures or disappoint with the lack thereof. Interspersed among all of these key events is a steady wave of global economic data that may either show further deterioration toward a double-dip recession or signs of stabilization. And one last wrinkle will be the ongoing travails of selected financial institutions both in the U.S. and in Europe. Several are increasingly wobbling, and any further deterioration may soon lead to a major Lehman like shoe dropping once again in investment markets.
At present, the trend remains toward further deterioration and the risks are biased to the downside. As a result, keeping portfolio hedges such as Gold, Silver and U.S. Treasuries in place is worthwhile to both protect against downside and capture upside opportunity. Stock allocations would also be well served to emphasize the highest quality names in more defensive sectors, as these typically provide dividend income and are likely to experience considerably less volatility relative to the broader market. Lastly, holding an allocation to cash is also worthwhile in seeking to capture opportunities that may present themselves during any potential sharp market sell offs along the way. Stay closely tuned.

Disclosure: I am long GLD, SLV, IEI, IEF, TLT, TIP.
Disclaimer: This post is for information purposes only. There are risks involved with investing including loss of principal. Gerring Wealth Management (GWM) makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made by GWM. There is no guarantee that the goals of the strategies discussed by GWM will be met.

The Macro Trend is a Bear, But Watch for Rebounds

We have to be very careful to get out of more equities as stocks rebound because it could be the last chance before we trend another 15 - 20% lower.

Trending Lower Across The Board

inShare0

Let’s talk about the dollar for a moment. The US dollar has been stuck in a very large trading range during the past 4 months. But when the dollar actually breaks out of this pattern in either direction, we should see some big price movements across the board in stocks and commodities.
From July through mid-August I was bearish on the dollar. But over the past 2 weeks the price action has become more neutral (more bullish), in my opinion. Its clear there is still indecision with the dollar's value, because every surge in price either up or down is quickly followed by a surge in the opposite direction. The key here is that the support level down at the 73.50 area has held more than three times, and now I think the downward momentum is about to shift. The PowerShares DB USD Bull ETF (UUP) is a good option.
Dollar Index Chart

Gold Chart
Looking at the gold chart, I see potential for another sharp drop to the low $1,600s. While I like the look of this chart for lower prices, there is still a wild card, which is the eurozone issues. I’m not willing to bet on lower prices because we could wake up any day to some poor news that instantly sends gold higher. Rather, I am waiting for things to unfold, and then I will look to buy again for another 10%-20% gain on the next rally.

Crude Oil Chart
This chart is straightforward: The trend is down, and at this time all bounces are to be looked at as shorting opportunities.

SP500 Index
The equities market has broken down sharply over the past couple months. Now we are seeing a rebound, and small cap stocks are making big gains. With the dollar looking bullish and stocks trading up at resistance, I have a feeling we may see another downward move within the next week or so to test the lows or make a new low before putting in a real bottom.

Mid-Week Trend Trading Conclusion:
In short, I feel the market overall is leaning towards lower prices in the coming week or two. After that we will have to re-analyze, because it may be a fantastic buying opportunity for stocks and commodities.

Why Gold May Run Until Late 2013

Gold tends to rise when real interest rates are zero. On average, gold rose by around 48% in 2.5 years, which is an impressive 18 - 19% per annum. How long is the US interest rate expected to remain negative in real terms? Right now, core CPI in the US is around 1.8% and Fed overnight rates is 0 - 0.25% and will remain so until 2013. However, if the US enters into a recession, it may experience deflation temporarily, causing gold price to crash by 30 - 50%. However, things have changed. Ben Bernanke is likely to implement Quantitative Easing whenever Core CPI falls below 1%. This means we needn't worry that interest rates will turn positive anytime soon, at least until 2013. Even if the US starts to hike rates it could take around 2 years before it turns positive because I expect inflation to hit above 4% by then.

Let's assume that as long as interest rate remain at zero from now until 2013, in 1.5 years, it could rise by 38% (19% pa), causing the price to rise to USD2,550 oz. Between 2013 to 2015, it could rise by half the rate, at 9% pa or 18% to USD3013 oz. That's about 63% up from current level or around 15.7% per annum. This is a decent return which is likely to be better than equities.

I prefer gold futures to gold equities because I'm not very confident of 2012 / 13's economic outlook. I may consider buying gold equities at the end of next year when stocks could be down a further 30% from now.


Central banks worldwide are starting to buy gold after decades of buying US Treasuries and European bonds to manipulate their currencies. The debasement of UST and European bonds, and the negative real rates have forced Asian central bankers to diversify their reserves into hard assets like gold.

If you look at the debt crisis that the west is facing, whether some peripheral country in Europe leaves the Eurozone, or the US getting out of their fiscal problems, all of the solutions involves printing money.

If the Eurozone breaks up, every country has to bail out their own banks that may be holding on to sovereign bonds that may default. Gold will shoot up.

If US embarks in any form of QE, gold will shoot up.

If the Eurozone stays in tact, and Germany agrees to bail out all the Eurozone countries in trouble, it involves QE and gold will shoot up.

Japan's economic trouble requires QE to keep interest rates low, the Yen weak to export out of trouble.

It is really a golden age. I'm looking at Silver but I don't think it has the same stability as gold. It is influenced more by industrial demand.


http://seekingalpha.com/article/291242-why-gold-is-going-to-2-000-an-ounce-by-the-end-of-september?source=email_macro_view

http://seekingalpha.com/article/291244-don-t-miss-gold-s-mania-stage-we-re-not-there-yet?source=email_macro_view

Don't Miss Gold's Mania Stage - We're Not There Yet

  inShare0

We're not yet in the mania stage for gold. We could be as close as a year, or as far as 5 years, but we're just not there yet. Take a look at the chart below, which shows gold compared to two of the last, biggest asset bubbles.

What kind of performance can we realistically expect for gold companies to see when we do enter the mania phase?
It's tough to find historical data on gold companies during the 1970s. Most of them are gone. The rest have been gobbled up or sliced apart into completely different companies.
We do have a frame of reference for the internet bubble. You might remember that time as a period when everyone had a hot stock tip. Everyone was up hundreds of percent, or more, on companies like Cisco (CSCO) and Intel (INTC).

Investment Outlook from Aug 2011 to 2013

Aug - Dec 2011

QE may not be announced because the core CPI in US is 1.8%. There may be other forms of QE such as the FED buying longer term US Treasuries to ensure mortgage and car loan interest rates go lower. To be frank, monetary policy cannot do much at this stage. What the US needs to do is to have a fiscal stimulus. But given their record budget deficit, it is unlikely to have much simulus.

Stocks: Global equities may rebound by between 8% for developed countries and 10% for emerging markets. After that, they could reach the low in Aug 2011 and break lower. I don't expect a crash of 30% like we saw in 2008 Oct. This is because valuations are much cheaper this time (PE of S&P500 is around 12x vs 15x historical and around 17 - 20x at cycle highs), dividend yields much higher, and record share buybacks, M&As and insider buying. If the supports at 1128 for S&P 500 fails to hold, we could see it fall to 1050 (currently around 1174). That's like 11% down from current levels.

There's no hiding place. We may see a slight correction between 1 - 7 Sep before markets resume uptrend until end Sep / early Oct before falling off the cliff again. Starting from next week is a terrific time to rebalance out of equities into CTAs and more gold. Core inflation in the US may hit 2.5 - 3% if QE3 or further easing occurs.

Commodities: Of all the things I'm most sure about, gold and silver, particularly gold will make new highs. It will hover around 1800 - 1900 for several months before shooting past 1900 to reach 2100 when QE Lite or QE3 is announced at the end of 2011.

I don't think energy will rise much. It remains hovering around 80 - 90/bbl. Any further weakening of economic data will cause WTI to fall to between 70 - 80. Brent will probably reach 100 - 110.

Agriculture is the strongest commodity around due to food shortages and record low inventories. But even food may suffer a decline when stocks come down.

Bonds: Good quality Asian credits may be a safe haven. I like preferential shares like Maybank 6% and DBS 4.7%. Even Cheung Kong perpetual at 5% (callable 5 years). The yields are above inflation.

Property: In the west there will be no recovery due to deleveraging and over supply. In Singapore, residential properties will continue to rise by between 5 - 15%. Commercial properties may skyrocket due to the inflow of hot money. Rental yields for commercial will be at record low levels, setting up for the next big bubble to burst.


2012: A Year of Reckoning and Untold Peril

This is a very distressful year. Interest rates remain at rock bottom. But demand from the west remains weak. QE3, QE4, QE5 may have been rolled out to no effect. The world may hit hyperinflation. Stocks usually go nowhere during this period.

Stocks: I expect stocks to drift to 800 - 900 by middle of 2012. That's a further 25 - 30% down from current levels. There will be increased M&A and insider buying, even more dividend payouts, but these actions won't stem the tide. Insiders were wrong back in 2008 when net buying hit a record high just before Lehman crashed.

By end of 2012, the S&P 500 may rebound back to 1050 - 1150 to hopefully give Obama a lift for his re-election campaign. Stocks usually rebound very quickly from bear especially if supported by loose monetary policy. I see US core inflation hitting 3.5 - 5% due to repeated easing and capacity constraints.

Commodities: Gold will hit 2100 - 2400 as further QE will ensure inflation stays above 0 interest rates. All other commodities may fall as they are linked to the economy. WTI may hit USD45 - 55/bbl. Brent 70 - 80/bbl.

Bonds: We may see Asian credits remain flat as credit upgrades offset credit spread widening. The loosening of interest rates will cause bond prices will also offset whatever spread widening against AAA rated bonds. Net net no change in price is expected. Asian currencies may fall slightly though against USD if there's a full fledged recession.

Properties: I expect residential properties to correct by 10 - 20% due to the loss of confidence by investors. Commercial properties will remain firm due to the low interest rates environment. If unemployment reaches 2 - 3% in Singapore, residential properties may fall 20 - 30%.


Gosh, I'm too tired to write about 2013... It will get even more interesting because I see inflation in the US hitting 6 - 7% and the US government finally forced to hike rates. The weak economic growth will be extinguished prematurely and the world will plunge from a technical recession in early 2012 to a full blown global crisis that is worse than 2008. The interest rate hikes may cause S&P500 to fall below 800. Gold may start to tumble from 2400 by mid to late 2013 as interest rates catches up with hyperinflation. Properties in Singapore may fall a further 20% due to rate hikes and loss of affordability. Commercial properties may collapse by 30% due to the unsustainably low yields.