http://seekingalpha.com/article/321072-europe-staring-into-the-abyss
It is inevitable that Greece will eventually default and leave the Eurozone. The Euro currency is too expensive for Greece. The debt is too huge and its economy contracting. There is no way to avoid a default. The question is whether it will be disorderly.
France and Italy may increasingly reach the Abyss as their labour cost is increasing without a corresponding increase in productivity.
Mauldin believes that the can will not be kicked down to 2013. I presume it will reach the end of the road by the later half of 2012.
Looking at the charts. I think the rally has legs for a few more months, maybe up to April / May 2012. After that, stocks could drift slowly downwards, with occasional spikes that never reach a new high. Nov 2012 is the US Presidential election and Mr Obama has a fighting chance of getting re-elected. Unemployment rate is dipping to 8.3% and at the rate the US economy is recovering, it could be 7.5% by Nov 2012. After the election, the President will address US$1 trillion fiscal deficit that the world's biggest economy is wallowing in. It will be almost game over for the US economy if they do. The economy could stall in 2013.
Then there's the problem of inflation due to rampant money printing. Can inflation stay below 4% in the face of QE 3, 4, 5 and so on? What will rate hikes in 2014 do to the economy?
I am not very optimistic for the world economy until 2014.
WTI crude looks like it is going through several months on dips, from a technical perspective. I will be very wary. Inventory of oil in the US is rising and oil tends to dip after the winter month. 1Q and 2Q could see WTI falling to USD90 bbl before picking up.
Conclusion
Make use of March, April and May to de-risk your portfolio. Go for safety. Go for alternatives like Amundi Volatility World, DB Systematic Alpha. Bond funds like Templeton Total Return.
