11 Surprises for 2011

 |  Includes: DIA, QQQ, SPY
by: BlindReason

So I took a quick crack a 2011 surprsie list. Technically there are 11 in here, but it's a good sampling of the things that are "top of mind".
  1. Several Large Tech Titan CEOs step down. Steve Ballmer and John Chambers both move on. However, despite many expecting Carol Bartz to leave, she does not, and instead Yahoo (NASDAQ:YHOO) pursues M&A and develops a strategy. Cisco (NASDAQ:CSCO) continues sluggish growth that is too tied to GDP rather than growth in broadband. Cisco sheds some girth post Chambers.
  2. Higher margin retailers take a big hit from the smartphone trend as more people shop and transact with their mobile phones. Shopping begins to change as retailers and consumers adapt with new ways to promote, discount and coupon goods and services. Retailers like Best Buy (NYSE:BBY) and others in electronics suffer the most and first. Price leaders like Walmart (NYSE:WMT) suffer the least. But it’s only the start of several large ebbs and flows in retail coming over the next 10 years as higher margin retailers fight back with next generation mobile promotions to bring in price sensitive shoppers.
  3. Google’s (NASDAQ:GOOG) Android platform and Chrome make huge market gains in 2011 as the software starts to catch up to Apple (NASDAQ:AAPL) in public mindshare. Despite the launch of the IPhone on LTE and CDMA and multiple US carriers, improvements in Android share continue. Both companies are strong during 2011 with new innovation in devices and software signaling overall continued strength in tech. However, Apple's IPhone and IPad launches in 2011offer devices that have much better battery life/performance than competitors due to integrated systems/chips that conserve power (competitors have to buy from multiple vendors-Apple will shift to in-house). The shift towards low power reduced instruction chips continues, and Intel (NASDAQ:INTC) continues to stumble in 2011.
  4. The “Long Goodbye” in cable companies starts to hit its stride as increased use of broadband turns Cable into “just another pipe” . Pressure is put on the FCC to free up more wireless spectrum as wireless companies try various antics to preserve revenue. Dormant spectrum is reallocated and auctioned and plans are put in place for 1-2 more national wireless broadband players to enter the market. Bottlenecks in wireless and in metro networks cause many carriers to introduce use fees on bandwidth intensive applications such as video. Technologies that allow for broadband growth here become valuable again just like it’s 1999. The battle over net neutrality is just beginning.
  5. Momentum in the 2011 Congress slows compared to the ending lame duck session, however the first target of the president and Congress is Natural Gas. Pressure on a plan to transition to natural gas increases as the price of oil moves towards $150. Great for natural gas equities and the commodity. Westport, Clean Energy (NASDAQ:CLNE) and exploration do well also. Congress makes attempts to simplify Finreg and remove uncertainty.
  6. In currency markets, Germany continues its game of complaining about its deadbeat Euro partners (Italy, Portugal, Spain, Italy, Ireland) in the euro all while enjoying a huge export boom in German goods that drive profits (AKA the biggest currency misconception of the decade). If you examine a chart of export growth post euro, Germany is practically the sole beneficiary. Australian and Canadian dollars start the year off strong, but take hits later in the year as turmoil hits US bond markets. Turmoil is defined as an interest point rise in the 10 year and 30 year of 1 point or more as budget deficits rise unrestrained.
  7. On the political front, President Obama’s approval ratings being to rebound as he moves back to the center. Hiring in the job market ramps but not enough to make a difference quickly enough. Sarah Palin decides to stay on the sidelines and sell more books and look great on TV However, President Obama will not win a second term (about a 10% chance). No real confrontation of serious fiscal issues facing the county cause potential 3rd party presidential contenders like Mike Bloomberg into the field. Republicans are not able to overturn last year’s health deal BUT they do succeed in peeling off some elements in pieces over several bills. It does set up a battle for a much larger battle post 2012 that will totally revamp US healthcare, cutting US expenditures and totally restructuring the industry.
  8. In the Summer of 2011, people make new discoveries of extrasolar planets more similar to Earth than those discovered before. New telescope launches/activations allow for new discoveries. ET doesn’t visit though.
  9. Geopolitics. Last year we talked about using computer hacks to stall the Iranian nuclear program and we got Stuxnet. This year we may have more substantial conflict. The strong Chinese military faction within the communist party will continue to border conflicts with its neighbors as a younger generation of more reckless leaders take over. Potential border conflicts include North Korea, South Korea, Japan, Vietnam and India. These countries will all look the United States for a stronger relationship and greater US troop presence, making fears of a US retrenchment there overblown. However, in Europe a plan will be put in place to finally remove or severely limit US troops. North Korea makes moves towards unification with South Korea by the end of year. Hard evidence of transfers of nuclear technology from Korea to Iran are revealed and used as a basis for a strike in 2012. The president declares victory in Afghanistan and shifts to a Biden plan which means far fewer troops but a lot more drones. Confrontation with Pakistan and the United States reaches a fever pitch and the relationship is changed drastically affecting geopolitics with India and the region. The Israeli cabinet goes through a major transformation.
  10. Commodities moderate somewhat as China continues to ramp reserve requirements and interest rates. However, China’s reversion to its historical mean continues unabated with GDP at 8-10%. Continuing with last year's prediction that oil climbs toward $100 a barrel, oil moves to $150, causing severe pressure on US economy and job growth. We finally get an energy plan because of this pressure. Financial equities are the strongest performers of 2011 led by the laggards of 2010—Bank of America (NYSE:BAC), Citigroup (NYSE:C), JP Morgan (NYSE:JPM) all do fine as most assets generally reflate. Real estate on the low end continues to reflate, very high end real estate prices steadily fall.
  11. In Venture Capital--Several very high profile angel investors suffer high profile losses and LPs begin to reevaluate the limitations of using Super angels as a vehicle. Early stage venture starts to show some severe strains and people start to move into later stages. Funds beginning to focus again on broadband and service providers from 10 years ago, while strength in SaaS, and mobile exits continue. Higher oil prices facilitate some exists and strength in clean tech but only in very select spots. Clean tech continues to be exceptionally asymmetrical compared to software and IT.