- A major government will go broke in Europe. Ireland came close. Portugal avoided it (so far). But for Spain or Italy, 2011 could be a fatal year. Expect higher bond yields, a falling Euro, and trouble in the streets. In my newsletter I've been exploring what this means for the Aussie dollar and your investments.
- A U.S. Debt Reckoning. The U.S. government is rapidly nearing its statutory "debt ceiling." The Tea-Party Congress may compromise with the President to cut taxes and some spending. But the real crisis may come as U.S. cities and States (Illinois, California, and New York) approach bankruptcy and need their own bailout. Will your portfolio be positioned to profit when that day comes?
- China will tighten up. One of the main recipients of the inflation being exported by the Fed is China. It's desperately trying to contain that inflation (in food, housing, and stock prices) before it leads to social and political instability. But if it "tightens" monetary policy too fast, it could produce a crash - leading to much lower commodity demand. If you don't know what that means for your Australian investments, you're not prepared.
In truth, most of these things should have happened last year. But the central banks won 2010. There's a much smaller chance they will stave off a huge market crash in 2011.
Even if they do... it's coming eventually. And you need create a portfolio of investments that withstands this crash when it happens.
