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Themes and Thoughts for 2011


A new year arrives as investors reset the clocks.


"The best thing about the future is that it comes only one day at a time." --Abraham Lincoln

It's 2011 and with it, our information-overloaded environment has more than its fair share of predictions, prognostications, and projections vying for the mainstream mindshare.

I've actively participated in this ritual in the past, and dutifully detailed what I foresaw in 2007, 2008, 2009, and 2010. Some vibes were early, others spot on and still others missed the mark entirely, but the beauty of the Minyanville community has been our ability to talk with -- rather than at -- each other, and quite hopefully there was value in the process itself.

In the interest of full disclosure, my set-list this year has been somewhat ad-hoc as I spent my entire vacation finishing my book; and yes, that included New Years Eve, for which I must thank Jamie for her unbelievable support and understanding. And while I might have holed-up yesterday to bang it out, two terrific twins, Gavin and Mug, turn seven today and that was time well spent. Balance is a wonderful thing, but it sometimes arrives on its own schedule

Still, my mind is a raging torrent, flooded with rivulets of thought cascading into a waterfall of creative alternatives. With that in mind and in no particular order, I would like to communicate the following thoughts as I cast my gaze towards the horizon ahead:

  • Professor Peter Atwater recently published one of the most cogent articles ever written in the 'Ville, and aptly captures our Years of Magical Thinking and the potential ramifications thereof.

  • Many of the previous themes that were considered early wouldn't have been without the heavy hand of government intervention. Case in point, "Pension Panic and Puny Munis" in 2009 and "The State of the States" in 2010. Expect those issues to manifest in size and scope in the year ahead -- and expect the government to affix its crosshairs upon them.

  • That's not a shocker -- what could be surprising is that somebody, stateside or abroad, will scream "Uncle Sam" and put a stop to it. It's been a long time since the markets traded free -- above board or below board -- and the resulting price action, most likely in the back half of the year, will be a sobering wake-up call when Mother Nature finally arrives.

  • We've long offered that we would see "inflation in things we need and deflation in things we want" and 2010 demonstrated that in spades. I would remind ye faithful that commodities have never been a longstanding safe haven and that could prove true anew in 2011. If the government reins are pulled and the dollar rallies in kind, the last thing gold bugs will likely see is the car window before they get squashed.

  • There are two realistic solutions for our eye-popping deficits and untenable debt: upward taxation and austerity measures, neither of which is pro-growth. 2011 should be when those become in vogue stateside, much like we've already seen in the Euro Zone, which continues to believe that the USA is to blame for the global financial crisis.
  • While societal acrimony will persist and people will continue to point fingers, we'll likely see an "inside-out" spiritual recovery on a much broader basis, and those who 'see the light' will be much better for it. A return to basic truths, including the joy of family, friends, pets, and the simple pleasures in life will serve as the "other side" of the "Civil War" mentality that is making its way through the mainstream.

  • Higher rates should manifest in 2011. At first, they'll be embraced by the "it's a natural by-product of an economic recovery" camp, but then it'll prove problematic for the people who are actually supposed to comprise a recovery. That could vie for our collection attention as 2012 approaches and the Mayan Prophecy suddenly becomes a mainstream discussion.

  • In the unlikely event that the Financial Accounting Standards Board (FASB) finds religion and requires banks to accurately reflect what is actually on their balance sheets (imagine that!), we could see the outright nationalization of financial institutions. Citigroup (C), Bank America (BAC), JP Morgan (JPM), and Wells Fargo (WFC) would be names to watch in that regard, while Goldman Sachs (GS) would probably take itself private before that ever came to pass.

  • "The European Disunion" was one of our primary themes last year and that continent should continue to migrate through the grieving process of denial, anger, bargaining, sadness, and acceptance. And please don't shoot the messenger, bloke!

  • Layered between the debt sandwich of sticky sovereign situations and over-extended consumers is corporate credit, which continues to act well after obligations were rolled a few years into the future on the back of TARP. We spoke last year about M&A and stock buybacks as a natural extension of that, and we should see the third manifestation -- leveraged buyouts -- emerge this year.

  • The leaders coming out of a crisis are rarely the same as those who enter it and 2011 will see that dynamic resonate. Inherent in that process is widespread recognition of the wayward actions from the past -- on every level, in a manner made possible by the Internet -- and renewed faith in those who demonstrate creative solutions for the future.

With that last point in mind -- and with the Things I've Learned in tow -- I would like to wish each and every one of you the healthiest and happiest of new year, and continued success as we navigate this most interesting journey.

May peace be with you.


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