Bearish about market prospects for 2012

Welcome to my last post of 2011.  Unhealthy global government balance sheets and structural economic problems as a result of years of excess and financial engineering have created a dangerous negative feedback loop in 2011 which I expect to cause recessions around the globe in 2012. This December post outlines this negative feedback loop and explains why I expect a difficult market environment in 2012.

In summary global governments are carrying more debt than ever and raising question as to whether or not a second — and perhaps even more dangerous credit crisis — is inevitable. The clock is ticking and every second, the world takes on more debt. In 2001, global government debt totaled $18.2 trillion. Fast-forward a decade, and the figure now totals nearly $44 trillion, an increase of 140 percent (more than 9.0% a year).
According to The Economist, global sovereign debt is forecasted to grow an additional 7% in 2012 reaching a historical high of $47 trillion

One of the problems with economic crises is that mainstream economists and financial experts
don’t see them coming. That’s exactly what happened in the fall of 2008, when the financial crisis kicked off in the United States. Since that time, governments have continued to spend, all while production has slowed and unemployment has skyrocketed. As we enter the fourth year of the post-crisis environment, there is no sign of growth that is impressive enough to get us out of the negative feedback loop in which governments have continued to operate. A negative feedback loop takes hold when massive government debt loads, a weakening financial system and a slowing economy feed off each other, interrupted by Federal Reserve and other central bank reflationary attempts. The result of this rising debt means more government interference, a further slowdown in the already debilitated economic environment and the possibility of further citizen uprisings in some countries.

As noted, I am very bearish about market prospects for 2012 and I will be adding more non correlated alternative investments to my portfolio.  See my next post The Future of Investing: Alternative Hedging Investing!