Friday, February 4, 2011

Top 15 Shockers For 2011

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

Each year, I usually release a small list of somewhat off the wall things that I think have some chance of occurring. Some shockers are repeats. Obviously, I hope that all of the less than positive ones don't happen. This is not my forecast for 2011, which I hope has a better chance of coming true!

Before I get to this year’s list, let’s do a quick review of what I offered last year. You’ll see my comments on how each did in italics.

Last Year’s 2010 Shockers:

1 - At least one major European country defaults on its debt
With so many crises that the ECB had to fight, I’ll put this in the correct column.

2 - The Euro sees a country leave, causing further strains in the union
Very close with Greece!

3 - A municipal bond crisis unfolds in the US
No crisis, but that sector was certainly pounded during the final four months of the year.

4 - Heading into its third decade of deflation and economic ruin, the graying and flat population of Japan begins to open its borders to immigration and remilitarizes, hoping to shock and stimulate their economy
Not yet.

5 - Aided by a resurgent economy, the Democrats retain both houses and Congress and super majority in the Senate
Not even close!

6 - Tim Geithner resigns from the Treasury citing personal reasons to spend more time with his family and embark on a career in the private sector, payback to him for having helped Wall Street "swindle" hundreds of billions from taxpayers
Too bad it didn’t happen.

7 - Treasury bonds end the year as one of the top performing assets
They were sailing ahead up more than 25% during the summer before giving back more than half the gains.

8 - Citibank is broken up and sold off in pieces and loses its name
Not until Uncle Sam goes totally away.

9 - Goldman Sachs goes private since the benefit of being public, added capital and huge leverage is no longer there

10 - Citizens of Iran rise up against their government and begin a revolution. Iran responds by attacking Israel in an ill-conceived attempt at rallying public support behind a collapsing government.
Thankfully no.

11 - The stock market peaks during the third quarter and a new bear market begins.
The stock market saw a significant peak in April, followed by a 15%+ correction, but it was just in the context of an ongoing bull market.

12 – The Jets win the Super Bowl. Hey, I can dream! (actually, it’s San Diego)
Will my Jets ever get back to the party?

So now, let’s roll out the Shockers for 2011!

1 – After toiling in obscurity for more than two years while its energy cousins doubled and tripled, natural gas finally has its day in the sun as one the surprise investments of 2011, almost doubling!

2 – The Euro currency’s quiet bear market reinvigorates itself and heads to new five year lows and towards the ultimate shocker of parity (100).

3 – Under tremendous pressure from both within and the financial markets, Bernanke & Co. do not launch QE3 when it ends in June. Initially cheered by all, this leads to major asset peaks in stocks, commodities and high yield bonds.

4 – Joe Biden suddenly resigns the vice presidency and is replaced by Hillary Clinton, virtually assuring Barack Obama of reelection in 2012.

5 – Riding a renewed wave of cooperation with John Boehner and Congress, Barack Obama’s popularity soars to heights forcing quality republican candidates to withdraw.

6 – Powerhouse countries China and India lead the emerging sector to strongly choke off inflation by raising interest rates and draining liquidity. In turn, the bull market in emerging markets comes to a grinding halt.

7 – Generation bubbles in cotton, sugar and coffee burst, sending these highflying commodities in a tailspin.

8 – Driven by the wildest global weather on record, wheat, corn and soybeans soar to record highs, eclipsing the bubble prices of 2008.

9 – Contrary to widespread, depression like prognostications from Meredith Whitney, the municipal bond market does not collapse in crisis.

10 – The public’s love affair with investment grade and high yield corporate bonds ends.

11 – After two years and almost 100% rally, the public finally plows back into stocks, just like they did with tech in 1999, housing in 2006 and energy in 2008, precisely at the wrong time, leading to yet another case of getting caught holding the bag.

12 – While the economy chugs along during the first half of the year and the unemployment rate slowly declines, the trend sharply reverses during the second half as GDP slows and the ranks of the unemployed rises.

13 – The security no one wants to own, long-term U.S. treasury bonds, sees a dramatic resurgence during the second half of 2011.

14 – Investors infatuation with Apple and Netflix turns to sobs, tears and saturation as the outperformance grinds to a halt and turns rotten to the core as it’s streamed through our living room.

15 – The once storied New York Mets are the doormat of the National League East, unable to win even 70 games as the Red Sox and Phillies dominate Major League baseball.

A little longer than planned, but I hope you enjoy it anyway!

FYI, I will be on CNBC's The Call on February 8 at 9:35am.

Feel free to email me with any questions or comments at

Until next time…

Paul Schatz
Heritage Capital LLC

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