Good evening everyone,
As we are converging towards the end of 2011, I would like to come back on the major events of this year and share with you my views on the upcoming one.
Let’s first start by a global overview of the financial world. As a matter of fact, 2011’s second semester was marked by the debt crisis and we saw again that the idiom “too big to fail” was an enormous fallacy not only for companies, but also for countries. It is very important to keep that in mind for diversifying portfolios correctly. We have seen a lot of volatility in exchange rates and it is hence important to consider all available currencies to have an optimal money market allocation.
But what went wrong exactly?
I believe that states were relying on economical models based on facts such as life expectancy which are now completely outdated. Back in the days, people were expected to die on average around their 70’s, whereas people in developed countries are now expected to leave beyond 80. If the retirement plans were expected to last for 8 years on average, it would now be 18 years. People have to understand that the world has changed, and hence that retirement age has to go beyond their current levels. Politically, this is very difficult to put in place, as we have seen for example in France, but congratulations to the French government for keeping their heads up and standing firm. I believe that people are now taking shortcuts by only blaming the financial world for the current economical issues. In a sense, everybody is responsible: the financial institutions, the politicians and the people themselves. We have to stop delaying problems and increasing the debt, we are now paying for the mistakes our parents and grandparents made. Let’s try to look forward a bit more and to create new models which will avoid such catastrophes in the future.
What’s to come in 2012?
I believe the equity markets will go back up during the 2012 year if the European states managed to find suitable solutions by taking drastic social decisions which are necessary to avoid a global recession. I believe the commodity markets are a good investment option as demand will stay firm if the global recession is avoided. Gold remains a question to me, as I personally believe it is overpriced at the moment. However, if investors want to fly to safety, we could see the gold market breaking all time highs again. Do you want to buy Euros at 1.20? I’m not really sure. If the European governments keep refusing to face reality and the crisis gets worse, the SNB’s floor might very well break and see Euros go back to parity with the Swiss franc, even beyond.
I would like to come back to the Arab spring (or Arab awakening) which saw some of the worse dictators loose the power and people. Let’s try not to make the same mistake again. Let’s try not to put radical governments in place and have to do it all over again in 10 years. A lot of blood was spread to get to where we are now, we do not want this to have been done in vain.
Apart from that, I would like to wish you all and your beloved ones all the success in the world, health and prosperity for 2012. I will try to add more content on a regular basis to the blog in order to provide you with more insight on Quantitative Finance and Computer Science.
Thanks for following this blog and leaving your comments, and see you next year!