It’s that time of year again where I make some kind of off the wall predictions for the coming year. I admit I stole this idea from Doug Kass but I find it a fun exercise to do. The goal is to think of the outliers that could affect the markets.
There will be tons of people predicting a recession, a bull market, or a war between Israel and Iran. These aren’t the type of predictions I’m making. Mine are most likely not going to happen but aren’t all that far-fetched that there is a small possibility it or something similar could happen.
With that being said here we go.
John Boehner Resigns from Congress
After reaching a very last minute deal with President Obama to avert the fiscal cliff and then strong-arming it through Congress, tea party conservatives revolt in the new year.
The removal of four conservative Republicans from key committees because they didn’t tow the party line in the past budget votes has left a sour taste in conservatives mouths.
A group of tea party associated conservatives band together and reveal that they will abstain from voting for Speaker. Enough of them make this pledge that Nancy Pelosi will win the speakership.
Seeing no other choice, Boehner resigns his seat from Congress and Eric Cantor is elected Speaker of the House.
Apple Buys Netflix
There are many out there that think Apple would make a splash buy buying Twitter or that if Netflix is taken out it will be by Amazon.
However, Apple looking to make a splash shocks the investment community with a bid for Netflix. Apple looks to incorporate the Netflix library into the iTunes ecosystem and for the September 2013 launch of Apple TV.
Investors are cold to the deal thinking Apple spend too much of their cash hoard instead of paying out a larger dividend and the stock falls to $400.
Of course right after I write this and before I post it I hear Brian Kelly mention this idea on Fast Money so I guess it isn’t too original of an idea.
Sadly Queen Elizabeth passes away unexpectedly. After an extended mourning period, Prince Charles makes the decision that it is in the best interest of the country to abdicate the throne to Prince William. He feels that the country has not forgiven him for the split with Princess Diana.
So say hello to Queen Kate and a paparazzi feeding frenzy.
German Bond Yields Top 7%
Germany, once considered the bastion of strength in the Eurozone starts to feel the effects of bailing out the rest of Europe.
As the German economy unexpectedly falls into a recession, the debt markets get nervous that the rest of Europe must be in worse shape and is fearful that Germany will be on the hook for even further and larger bailouts.
Bond buyers push yields on German bonds to over 7% and thus putting the Euro on the brink of collapse.
Goldman Sachs Files for Bankruptcy
In a convoluted scheme that shocks the financial industry, several high level traders at Goldman Sachs are charged with insider trading ahead of a massive high frequency trading scheme that involved jamming systems with quotes creating artificial moves in stock prices.
The high level traders made millions upon millions doing this. After the negative publicity Goldman got for creating derivatives for John Paulson to short and subsequently selling to its own customers, the SEC has had enough and charges the company criminally.
In a move to prevent a total collapse of the company, Goldman files for bankruptcy which will ultimately lead to pieces of the business being sold off to other financial firms and the official end of Goldman Sachs.
United States Interest Rates Unexpectedly Rise
The recent Fed decision to tie interest rate policy to a specific unemployment rate of 6.5% gives traders certainty that the interest rates will stay low for an extended period of time.
However, midway through the year the country faces yet another one trillion dollar deficit and the Chinese government makes the decision to increase their gold holdings even more and this comes at the expense of holding treasuries.
The realization that the U.S. has financed its massive debt with short term notes scares the market and sends the 10 year to 3% and the long bond to over 6%.
A Major Employee Pension Fund Implodes
One of the states with a large employee pension fund implodes due to one of its alternative investment vehicles that was betting on the markets through the derivatives market.
The public employee pension fund which was already in a precarious funding status needs major funding which its state cannot provide and forces a bailout from the federal government.
My bet would be on the state of Illinois pension fund.
Twitter Gets Acquired
Not surprisingly, Twitter is acquired during 2013. However the big shocker is that it is acquired by Microsoft.
Steve Ballmer looking to make a big splash to finally get the stock price moving makes a transformational acquisition paying $40 billion for Twitter.
Following Microsoft’s acquisition of Twitter, Facebook stock plunges to the single digits as many thought Facebook should acquire Twitter and now see no real avenue for monetization growth for Facebook.
National lawmakers in their infinite wisdom come together in a bipartisan fashion and create a national lottery with the goal of using the profits to pay down the deficit.
The federal government sells this deficit lottery to the public and asks everyone to do their part. Warren Buffett who has criticized the purchase of lottery tickets in the past goes all in on this proposal and promises to purchase tickets every week and urges other wealthy individuals to do the same.
You can’t win if you don’t play and even if you don’t win the country wins….or something like that.
The #FreeTebow Twitter campaign succeeds and the Jets agree to trade Tim Tebow away from the dysfunctional organization.
While most assume he will be traded to his hometown team of Jacksonville, the sporting world is shocked when the San Francisco 49ers jump into the fray and trade for Tebow. The writing is on the wall for Alex Smith and he signs with Dallas as a free agent.
Under the tutelage of Jim Harbaugh, Tebow takes over the starting QB job in week 4 after Colin Kaepernick struggles and the team gets off to a 1-2 start. Tebow leads the team to an 11-5 record and into the playoffs.
In a Super Bowl showdown versus Andrew Luck and the Indianapolis Colts, Tebow leads the 49ers to the Super Bowl Championship with a 40 yard touchdown scamper with 18 seconds to go.
Tebow finally proves all his critics wrong and is named Super Bowl MVP.
As a bonus prediction this year you get pretty much a repeat of a prediction from last year.
The Angels continue to perform at a dismal level with such a high payroll that they trade Albert Pujols to the St. Louis Cardinals in a shocking trading deadline deal. The Cardinals, stocked with a plethora of young arms, trade pitching to the Angels for Pujols and cash considerations.
The Angels will be eating 35% of Pujols salary for another nine years while Big Daddy comes back home to St. Louis where he always belonged. (A guy can dream can’t he?)
Well, there you have it, my ten, including a bonus prediction, “Improbable Probables” for 2013. Ten things that while are highly unlikely, give you pause to think about different outlier scenarios that could affect the markets with the exception of Tebow and Pujols.