Simon Hunt Strategic Services — the eponymous market analysis vehicle of copper market veteran Simon Hunt – has just published its 2012 outlook.
Be warned, though, it carries the following disclaimer:
The views set out in this report will be deemed heretical by many but they are based not just on understanding the industry’s history of the last 50-odd years or its cyclical nature (good times never go on forever much as we would like them to!), but on an analysis of material which has actually gone into furnaces and that held within the financial sector and others…Naturally, FT Alphaville always likes a contrarian view, especially when it’s one based market fundamentals like stuff that’s “actually gone into furnances”.
So here, for the benefit of all, is a summary of Simon Hunt’s top heretical views (our emphasis).
* The world is in a balance sheet depression which will make a second and perhaps more dangerous credit crisis almost inevitable. It should break out next year or in 2013.
*The three pillars of the world economy, the USA, Europe and China, each have their own problems, but their impact is global because of the feedback loops from the financial sector to the economy.
*The USA has a debt and deficit profile which is unsustainable. The Euro Zone has yet to fully decide whether it can forge a full fiscal union or whether the costs are too high in which event membership will have to be restructured. And China is trying to put its economy onto a more sustainable growth path at a time of leadership change.
*Debt and demographics will shape future global growth. Governments have made promises to their citizens which they now cannot afford and even less in the future as retirees in so many countries are mounting. Markets have become frustrated by political indecision. They want answers.
*Since the power of markets is infinitely greater than the resources of central banks, they will get their way.
*The world will suffer from rolling recessions starting in 2013, continuing until about 2018 and characterised by deflation. Most asset prices will fall during this period....MORE