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Reflecting on Our Ten Themes for 2012

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A year has passed since I wrote this note.

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5. American Icons: I'm dusting off this theme as it was predictive in 2007 (Paris Hilton, Lindsay Lohan, Britney Spears) and the tides have turned anew. Jon Corzine, the Kardashian sisters, Penn State, Willie Gault, and the NBA brought this dynamic back in 2011 and it will pick up steam in 2012. This, of course, will pave the way for the emergence of a new wave of heroes, which will represent and reflect the next generations of leaders.

Result: Dust it off indeed. Lance Armstrong. Twinkies. Elmo. We recently rewrote this column, which is worth a read if you've got a free five.


6. Geopolitical Strife: Extending a theme that was first introduced in 2007, the tricky trifecta of societal acrimony, social unrest, and geopolitical conflict is seemingly entering its final phase. (See: Ten Themes for 2010.) Whether it's the Middle East (Iran), Asia (North Korea), or cyber-terrorism, the collective strife could come to a head this year. While the specter of this is indeed daunting, it will move us one step closer to our social recovery.

Result: We're not there yet, although the migration through our tricky trifecta has officially passed the second phase. Let's hope we don't get called out on a third strike.


7. Markets: Financial asset performance will be dependent on policymakers. "Free" markets-those without government stimuli-will aggressively deflate. "Modified" markets-those with bearded socialism and/or nationalized assets-will act better, but arrive with profound costs and unintended consequences.

Through a pure technical lens, the "reverse head & shoulders" pattern in the S&P
(INDEXSP:.INX) that we've monitored in Minyanville for the past month has triggered, which "works" to S&P 1360... From there-if and when-the European debt auctions will set the tone for global assets in the context of a secular bear market that has a few years to go before generational opportunities emerge in the back half of this decade.

Result: See the chart below; we rallied hard to begin 2012-at a time when that seemed outlandish-and the rest of the year was headline driven, be it European concerns, election ramifications, or cliff concerns.


Click to enlarge


8. Rating Agencies; Moody's (NYSE:MCO), Fitch, and S&P (NYSE:MHP) were big news in 2011, particularly after S&P downgraded the United States credit rating. You can agree or disagree with their process-or opine they over-compensated after fumbling the first phase of the financial crisis-but my sense is that their status and usage will diminish considerably as new standards emerge for rating the worthiness of financial assets.

Result: I've got nothing here so I suppose it's a miss although I would venture to guess that (like me), alotta folks have lost faith in this particular complex. I will note, however, that The Oracle of Omaha still owns 28 million shares and he's a lot smarter than I am.


9. The Millennial Revolution: I've long believed that Generation Y-also known as "Eighties babies"-would be the salvation of the American and perhaps even the global ideal. They are technological Zeitgeists who are generally unencumbered by the social and political baggage of our time. While Mark Zuckerberg is the poster child for this dynamic, expect to see a new wave of entrepreneurs and activists emerge to capture our imagination and change the way we communicate, interact, and yes, believe. I also foresee "socially responsible" opportunities as investors attempt to facilitate change by voting with their wallets.

Result: Mark Zuckerberg was indeed the face of a revolution, but not as I intended above. (Note: Minyanville was quite bearish on the IPO and turned bullish on the stock at $19.) There is a very positive shift underfoot-Peter Atwater might say it is a function of the undertow of existing leadership-but this is a process, not a point, and it's slowly headed in the right direction.


10. Values: As financial stress and global pressures permeate, folks and families will again seek simpler pleasures that aren't measured by money or predicated by status. This will be the silver lining on the 2012 horizon-at the end of the day, regardless of our financial performance, we'll come to realize that we have our friends, our families, and yes, ourselves, as we find our way to better days.

Result: This hit home in a huge way into the holiday season in ways entirely more profound than concerns of financial performance. Yes, perspective has shifted surrounding the importance of our friends, the health of our families, and even our own happiness. This perhaps is the upside to all the anger; the difference between loss and loss.


R.P.

Twitter: @todd_harrison

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Position in SPX.
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