Last year was a volatile year, with the unthinkable near-default by the world’s largest economy almost happening because of politics. I believe 2012 will be much more volatile than almost any year in recent history, so here is my list of predictions for 2012 and the odds of those predictions actually happening:
Euro collapsing -- 50%. Greece should have never been part of the euro to begin with, having manufactured a fake debt-to-GDP ratio, and now there is virtually no solution for the problems the country has that are deep within its culture. Greeks don’t want to be ruled by Germans and Germans don’t want their taxes going to bail out the Greeks. My bet is that this does not end well this year and the United States economy suffers because of it.
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Eurozone is in recession in 2012 -- 70%. Best case for countries like Spain and Italy is severe austerity measures, rather than defaults, coupled with tax increases -- and this spells economic slowdown. Worst-case scenario is a domino effect of defaults, but defaults will take a while to play out, if they happen, until all options are tried, and that could be into 2013.
Israel attacks Iran in some fashion -- 20%. The US pulling out of Iraq frees up air space for Israel to take out Iran’s nuclear capability. Stuxnet and a recent explosion (Iran’s missile silos that killed high-profile General Moghaddam) have been attributed to Israel. Israel has already taken out, by bombing, Syria’s nuclear capability in September 2007, and is not afraid to act unilaterally. If the new sanctions are enforced by President Obama they will probably force Iran’s hand, but if President Obama backs down it will probably force Israel’s.
The rest of the Middle East gets further destabilized --55%. Iraq looks to be headed toward unresolvable internal conflict which will further destabilize an already unstable region, and Syria is a problem that will come to a head this year and will be hard to be resolved peacefully.
Romney gets the GOP nod --75%. Gov. Romney is the very uninspiring front-runner for the GOP. Every other GOP candidate has self-destructed, and the guy who has spent the last six years running for president is winning a war of attrition.
Romney beats Obama -- 60%. The presidential race is Obama versus Obama; whoever the GOP nominee is he, or she, will not be an inspiring figure and only an alternative to the current president. If the economy is better by November then Obama is unbeatable -- if it turns worse than anyone beats Obama. Once again, we will have two choices for president that most of Americans don’t want, but it is what we are faced with. I don't think the economy has a jobs creation event on the horizon and so the economy suffers from high unemployment, turmoil in Europe and high oil prices coming out of the Middle East trouble. Because of my bearish view on the economy and on continued political gridlock I believe the economy is most likely going to suffer, and if it does, President Obama will be a one-term president.
Packers win Super Bowl -- 40%. New Orleans is the toughest test for the defending champions. The one thing I am 100% sure of is that my Dallas Cowboy will not be involved.