Trends and forecasts for 2012

Trends and forecast for 2012

My own personal view on what may happen over the next 12 months. It looks bad but there are opportunities in the midst of the chaos ahead.

War, terror, chaos, Bank Holidays and energy shortages
As I contemplate the outlook for 2012 things look really rather grim. The background is tension over Syria and Iran where sabres are being rattled by the west in the belief, by some, that Iran is seeking to produce a nuclear weapon (although no hard evidence has so far been shown for this). Syria, a country with close links to Iran is near a civil war state.

These factors will unsettle the Middle East and with it the oil market.

In the USA new laws have been passed that permit the indefinite detention (without trial) of any person who is deemed to be an enemy of the state. This law appears to ride roughshod over the rights outlined in the USA Constitution. This is a troubling development from the nation that we used to view as the home of free.

In Europe the Euro is in deep trouble with any resolution to the problem seemingly being 'kicked down the road' as many times as possible. However unless there is a major restructuring of the Bank debts that have become Sovereign debts in the Euro zone there will be major problems in the first months of 2012.

Oil Shocks Unrest in oil producing regions is nothing new and the pressure from Israel and the USA on Iran seems likely to continue. There appears to be a stealth war already going on with US drones over flying Iran and mysterious explosions happening in or around Iranian research bases.

The recent rumour/threat that Iran was going to/had closed the Straits of Hormuz added 3% to the oil price in minutes. Can you imagine what would happen if this oil gateway was closed for a week? This story will run and run with the oil price climbing gradually higher in spite of the recession/depression in the USA and Europe.

Euro Zone breakup or breakdown?

The Euro currency in its current form can not continue indefinitely. Capital is leaving the Euro zone and only being replaced by 'funny money' from the European Central Bank. The can has been kicked down the road about as far as it can go although perhaps some new ingenious rescue mechanism will be devised.

I expect the Euro to collapse; either into two blocks (basically North and South) or more likely into the Euro zone (Germany, France, Belgium, Netherlands and Luxembourg; maybe some others) and all the rest.

Spain, Greece, Portugal and Italy could create an new regional "South Euro" but more likely they will simply bring back their own currencies. What will happen to Euro based contracts will exercise corporate lawyers for the next few months.

The tricky thing is the timing. When will it happen? My guess is between 6 and 9 months into 2012. It will be chaos. On the upside; if this happens, holidays in Southern Europe will become cheaper!

What will happen to Ireland? 

It may run counter to every political bone in an Irish Republican's body, but perhaps they could look at joining Sterling again. There are so many constitutional issues with this that plotting the path seems difficult, but it would make a huge amount on sense given the trade between the UK and the Republic.

Will the EU survive

Probably. Perhaps in some more useful and much attenuated role.

In the UK

I expect major retailers to go to the wall in the first three months of 2012. Upward only rent demands, terrible trading conditions and the on-line market will see a number of big names either disappear or become amalgamated into larger trading groups.

Mental health issues of anxiety and depression will grow and become even more common. Sadly it's likely the suicide rate will increase too.

Good news stories: Insolvency practitioners will do well, on-line business will grow and new home delivery companies will come to market.

Crime

Will only go up with an increase in food theft rather than manufactured goods. This is simply a reflection of the impact that the austerity program is having. There is no simple way out of this. The Labour party believe that fewer shallower cuts are needed but in truth this will simply prolong the agony.

Good news stories: Private security firms will grow, new forms of manned and unmanned guarding will start to look effective and affordable on a neighbourhood by neighbourhood basis.

Government

To reduce costs the Government must get smaller. The Tory/Liberal alliance will tell you that it is getting smaller. But it's not small enough and likely never will be because they just can't resist meddling and imposing new rules. However job will move from local Government to private service companies and from central Government quangos to HMRC. Taxes MUST be collected!

Good news stories: It's the Government, there are no good news stories.

Employment/Unemployment

Sadly I can only see UK unemployment rising along with self-employment forced by circumstances. Where there are no jobs sometimes the only option left is to become self employed. Long term unemployment is still the nettle that central Government is frightened to grasp. In the 1930s depression unemployment rates hit 25%. If/when the Euro goes bang it's possible we might see rates near this again. It seems obvious to me that the black economy will thrive in this type of setting.

Bank Holidays

The meaning of Bank Holiday is that the bank is closed. If things get very tight in the Euro zone and possibly even in the UK, the Governments may be tempted to impose a Bank Holiday where a levy is taken directly from every bank account in the name of  "The Greater Good". During this Bank Holiday access to cash would be severely restricted. This has happened before (in Italy I believe) and could be as high as 1% of the amount in an account. What would that do to your savings plan?

Of course they will not announce this in advance or you may be tempted to put your cash under the mattress and that would never do. The beast (Government and Banks) must be fed!

Energy

In the UK our energy supply is hanging on by a thread. Ageing Nuclear reactors are being kept going passed their design life to cover an energy gap that will only get bigger as the UK population grows. The Greens fascination with wind turbines will continue in-spite of the experiences in the USA where many multi-turbine installations have been left to rot as the feed-in tariffs change and make maintenance and updating unaffordable. 

In the short term Gas Turbine power stations can deal with the issues but only for as long as we have a ready supply of natural gas. With many supplies coming from long and vulnerable pipelines it would be dangerous to rely on these alone. Solar power can only really be a bit part player in the UK, especially since most installations do not include battery back-up storage.

The reality is that only more nuclear infrastructure will deliver the power we crave but it takes a decade or more to bring a new nuclear station on-stream. A personal generator in the garage may be the most effective way to beat rolling black-outs that seems certain in the years ahead.

Gas Exploration

Shale gas may be the way ahead but the environmental costs seen in the USA (poisoned drinking water etc.) may stop or slow its progress in the UK. However perhaps our deep water exploration teams will find more oil and gas opportunities in the western approaches or off the North West coast of Scotland. Let's hope so.

Peoples

Immigration is nothing new for Europe and nor is emigration. I expect to see more of both in 2012. There signs already that many of Europe's talented youth are going to seek new opportunities abroad. For the Portuguese, Angola and Brazil are beacons of hope. Likewise for the Spanish, Latin America offers jobs and a future. For the Irish and the Brits, Canada, Australia and New Zealand look enticing when seen from the UK.

But Europe will also see more immigration from the Arab countries as turmoil continues in North Africa and now Syria. Add in people from Afghanistan and Somalia and one can begin to see a real change in how Europe will look in coming decades.

The Rise of Turkey

A member of NATO and once a strong candidate to join the EU, now Turkey looks set to become a regional powerhouse of influence and control. They will have lots to say about Syria, Iran and Israel. Muscles will be flexed.

It seems that 2012 will be a year of being defensive, looking after one's own, protecting what you have before worrying about what you want next. The TV will continue to produce more escapist shows (Strictly Come Dancing, X-Factor, Britain's Got Talent etc.) to provide relief from the gloom of real life.

People will still be seduced by technological toys like the iPhone/iPad. They will simply add the payment to their monthly bills. Subscription TV will become more popular as discretionary spending moves from going out to the pub/restaurant to staying at home with a bottle of wine/beer.

Most things done by the Government will have little or no impact, the best that one can hope for is that they get out of the way so that Micro and small business can grow into medium sized ventures and so create new jobs.

Batten down the hatches, it's a choppy sea we are set to navigate in 2012.