Peak pessimism

I’m adding a new category, divination, for predictions. Macro predictions are a mug game, of course, but I sometimes feel I make fair calls, so it’d be good to keep a public record, in order to prove scientifically that I’m actually as crap at it as everybody else.

Image of street performer looking at a crystal ball

Not your blogger (credit: Hadouken@Wikimedia)

Claim 1: new stock market peak before year end

So the prediction of the day is that the current market correction is not far from its bottom as the short term pessimism bubble reaches a peak. It wasn’t that big a correction anyway — stocks going back where they were 2 months ago, real yields crossing zero!, big deal all that — and the fundamental situation seems to be fairly OK. Monetary policy may not be optimal but it’s not too much in the way either, and the perceived dangers seem to be mostly storms in a teacups. Apart from that cyclical forces seem to be pushing up. To quantify the prediction, let’s say that the stock markets will touch May record highs again at least once before December.

Claim 2: Greek bottom in 2013 or 2014

I looked up my past predictions and have really only made one post with one previously, about Greece, in Febuary 2012 which was overall approximately correct. They even improved point #2 as the EU is now funding Greece through debt relief via accounting tricks (the buy backs last year, maturity rollovers, rate discounts, etc) which are actually an improved way to do what I was suggesting.

To make a new prediction for Greece I would say that nominal GDP will bottom this year or next (to be checked a couple of year afterwards, say end 2016), for similar reasons as the world markets bouncing back. At some point every body who has survived that long will probably keep going, the primary budget balance puts the Greek government in a better negotiating place, and with sentiment, at some point you can’t get much more desperate, and then the only way is up (however slowly).

Disclosure: long 17500/18000 December Nikkei call options spread, which is in part a play on the first claim; no position on Greece.

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