正文
We continue our tradition this year of positing 10 outrageous claims for the
markets in the coming year. These claims are in many cases extreme - but we
believe a valid case can be made for them actually coming true. We usually get
2-3 of the claims right.
As always, we make these calls to stimulate thought and encourage our clients to
think about their portfolios in new ways. This year’s Outrageous Claims are fairly
closely correlated to the overall theme of the outlook:
1. US recession at year’s end 2007
Never before in modern history has there been a sharper deceleration in US home
prices: Home Equity Loans, Mortgage Refinances, Construction... the housing boom
has been a significant driver. International and historical experience with slowdowns
as significant as this suggests that we will see a recession by year’s end 2007.
2. A “Big oil” company to be de-listed
Next year should see yet another record in terms of private equity deals and we see
an expansion in this playing field expand to include the oil-related sector, a group
largely untouched so far. Also, we expect deal size to increase dramatically, leading
to one of the truly big oil companies to be targeted. Home Depot is currently
rumored to be in play, a $80B company, but we think a deal worth twice as much is
possible next year.
3. Patterson (PTEN) to double
We are bullish on oil services next year and believe the underperformance of the past
year for this group was unwarranted. Increased demand for drilling etc. will underpin
the sector and we have pegged several stocks that offer compelling value. Our
favorite among the pack is Patterson, a stock that currently trades at 5.9 forward
earnings and commands a conservative balance sheet. To us, this company could
easily become a buy-out target next year.
4. AUDJPY to 100 then to 85
We expect the carry trade theme to continue through the first half of 2007. We also
call an additional rate hike by the RBA, which will squeeze the pair higher. Then we
predict most rate hike cycles from traditional high yields to peak, along with BoJ
continuing their process of normalizing rates.
markets in the coming year. These claims are in many cases extreme - but we
believe a valid case can be made for them actually coming true. We usually get
2-3 of the claims right.
As always, we make these calls to stimulate thought and encourage our clients to
think about their portfolios in new ways. This year’s Outrageous Claims are fairly
closely correlated to the overall theme of the outlook:
1. US recession at year’s end 2007
Never before in modern history has there been a sharper deceleration in US home
prices: Home Equity Loans, Mortgage Refinances, Construction... the housing boom
has been a significant driver. International and historical experience with slowdowns
as significant as this suggests that we will see a recession by year’s end 2007.
2. A “Big oil” company to be de-listed
Next year should see yet another record in terms of private equity deals and we see
an expansion in this playing field expand to include the oil-related sector, a group
largely untouched so far. Also, we expect deal size to increase dramatically, leading
to one of the truly big oil companies to be targeted. Home Depot is currently
rumored to be in play, a $80B company, but we think a deal worth twice as much is
possible next year.
3. Patterson (PTEN) to double
We are bullish on oil services next year and believe the underperformance of the past
year for this group was unwarranted. Increased demand for drilling etc. will underpin
the sector and we have pegged several stocks that offer compelling value. Our
favorite among the pack is Patterson, a stock that currently trades at 5.9 forward
earnings and commands a conservative balance sheet. To us, this company could
easily become a buy-out target next year.
4. AUDJPY to 100 then to 85
We expect the carry trade theme to continue through the first half of 2007. We also
call an additional rate hike by the RBA, which will squeeze the pair higher. Then we
predict most rate hike cycles from traditional high yields to peak, along with BoJ
continuing their process of normalizing rates.
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