Sunday, 12 October 2008

5 Predictions for the week ahead.

Last Sunday I wrote that the week ahead would be the most decisive of the decade for the world economy. Sadly I proved to be spot on. Stocks markets melted down in a way unknown for 20 years and more like 30 years.

We have been left in a mess and it seems there is little that can be done now that the patient is in severe cardiac arrest (that patient being the credit markets).

However, for the week ahead its seems to me as though some things will happen, others in the comments please and then we can see who was right next Sunday assuming we have power for our computers....:

1- RBS. Barclays & Lloyds/BOS will announce taking of the Governments' shilling before the markets open tomorrow. Despite the huge knock to dividends, this will temporarily support their share prices. The CEO of RBS will resign.

2- The markets will continue their downward trend as more bad news seeps out into reality. Perhaps not with the vigour of this past week and with a bear rally for a day or two, but downwards nonetheless. Lehmans fall-out will be main bad news to financials sector.

3- After the failure of the Sarkozy talks today (prediction), the Euro will weaken further against the dollar and pound. Serious questions will begin to be asked about its viability.

4- Commodity sell off will continue, as will gold and silver to some extent as margin calls for big traders continue to force liquidation of assets. Maybe some respite by Friday, Oil will end the week under $70 unless OPEC cut production.

5- Questions will being to be asked of the strength of some UK Insurers as they are battered by huge markdowns to their assets; similar with large pension fund companies like BA and BT.

So all in all, looks like a great week ahead. Hope I am wrong. My hunch is sentiment will turn around the end of October

22 comments:

Guido Fawkes said...

Brave predictions. I'm thinking about a small short in oil.

Old BE said...

We have been living on tick for too long. It is not surprising that there is now a reckoning. Nothing can stop us sliding into a deep long-lasting recession.

The worst thing the government can do now is to re-inflate.

CityUnslicker said...

brave one Guido - still likely 10% drop, timing is everything in the event of a bounce...

Richard Elliot said...

I'll be in the office until midnight every night trying to fight through the mayhem.

I hope it isn't true, but I don't see it changing from this week.

Anonymous said...

It's a shame more people don't have enough money to sit things out for the longer term or take advantage of what could be good times http://www.cnbc.com/id/27116449

Re. things looking up after the end of October - that's what Jim Jubek has been predicting on CNBC - what he says usually makes a lot of sense.
http://video.msn.com/video.aspx?mkt=en-US&brand=money&vid=2dd904a6-cb34-44a6-9324-707fe93449d7

...sorry I don't know html to turn these into clickable links instead of cut-and-pastes

Anonymous said...

The important thing, chaps, is to remain civilised - we must spare the wives and children. The front row of gibbets, I suggest, should be for Blair, Brown, Bush, Clinton and Greenspan. The next row might contain Mandelson and Campbell, and every Congressman who has served since, say, LBJ took office. Thereafter there should be all the titans of Wall Street and the City (and Iceland) who contributed so greatly and paid themselves so much. Have I missed anyone? Oh yes, the academic magnates of the Economics profession, whose incompetence and deceit must have made a dictinctive contribution. Plus every mortgage fraudster who can be caught.

Anonymous said...

"we must spare the wives and children"; well, not, perhaps, Mrs Clinton and Mrs Blair.

Anonymous said...

I have no idea what's coming. This move has been too fast and it's hard to believe that there won't be some kind of rally that people can sell into. I actually like quite a few stocks here, but I hate to buy as earnings begin to come out.

My dollars have been doing well. Everything else I have has been getting killed (except gold and silver).

Simon Fawthrop said...

One issue I haven't seen mentioned so maybe it isn't a problem, but isn't the drop in share price a threat to companies that have share price covenents on their loans?

I know this used to be a covenenat on some loansbut is it now? Or is just that this is so minor that nobody can be bothered with it?

Anonymous said...

Agree on oil... seems logical to suggest drop if OPEC do not restrict production.

It will be interesting to see what conditions are attached to Banks by government.

Will Russians assist Iceland?

Anonymous said...

The Euros have reached agreement. That's one down?

CityUnslicker said...

RE - Ditto

Sammy - thanks for the links

Dearime - Is incompetence illegal? That will be the defence of those you cite in any trials to come.

Matt - Sadly, I don't think the rally will be enough to sail into.

great Simpleton - Not sure how much of a problem that will be, but it is similar to my point 5. let's see what happens this week.

CharonQC - Nice to see you comment here. Let's see with Oil. The Bear will help Iceland, they need to look strong given their recent calamities.

Anon- Not entirely sure. the 'announcement' is still that countries will do their won thing and not act together. let's see what effect this has on the Europe this week.

Anonymous said...

"Trials", CU?

CityUnslicker said...

being optimistic Dearime

Steven_L said...

Hmmm, in other word short everything.

I can't bring myself to do it, I just sit there mesmirised watching it all fall further and further.

I had a small punt on Swiss Francs last week, at about the only time I could have got it wrong and lost 195 of the buggers. But I made £41 back on the FTSE the other night when I was a bit pissed and needed something to do.

I still think Vodafone and BP look good value, but I thought that when they were both 20% higher too.

However, seen as Guido is backing you up on the oil one, I might have a small wager.

One thing I can't help thinking, is that if everything is going down bar dollars and Swiss Francs, sooner or later money might move from one to the other. What will be the last refuge?

I did find a website the other day that was offering me 'leveraged lean hogs' as the world gone crazy enough for a big spike in leveraged lean hogs yet?

Anonymous said...

one concern I have is that, while the left and right in the US have the axes to grind in blaming one another (with left blaming deregulation and bonuses, and right blaming government interference and Clintonian mortgage targets for the less affluent leading to the subprime bubble... that stuff about banks being forced to consider welfare and unemployment payments a valid substitute for salary in mortgage applications etc.)... if there is any juice to the claims that government targets for mortgage lending to the poor causing the subprime bubble... isn't it the case that for our government now to insist that their part-owned banks resume lending to business at 2007 levels... as we enter a recession... when business lending may not be of the same quality as in 2007... well, am I the only one seeing this? In order to hit their targets to qualify for government support, the banks are being incentivised to lend at levels which may be unjustifiable even outside of a credit crunch scenario (because of the prospects of their small business customers in a recession)... and so we could be encouraging, right now, a 'sub prime business lending' bubble?

Anonymous said...

...and yes, I am aware that these things are circular, in that less lending could lead to the recession... and that a spiral might be prevented, fingers crossed!, by forced lending... but... if the problem is not nipped in the bud... we may be putting fertiliser on weeds instead of flowers... and what a pretty garden that will give us...

CityUnslicker said...

Sammy, your points are well made. The solution to this problem is not necessarily the same answer as the one that got us into this mess...

Anonymous said...

Interesting predictions.

The Dow and the other markets soared yesterday. Moscow finished nearly 9% up today after many losses and the FTSE had a good rise yesterday, but that may just be the rally in the bear market that you referred to.

Also,and I may have missed it, could you make a post explaining exactloy what impact the Derivatives Market now worth an estimated $1.14 Quadrillion may have on the rest of us?

Anonymous said...

Your prediction about the bear market having a rally for the first 2 days looks spot on!

Don't know enough about the rest, but I imagine most of them are also accurate.

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