In the spirit of my earlier post about 2008’s surprises, etc., what surprises lie ahead in 2009? Here is Merrill Lynch’s David Rosenberg on the subject:
We continue to believe that trade protectionism, competitive devaluations and military conflicts are the major risks for investors for 2009 – this is, after all, the most broadly based global recession (according to the IMF, not just us) in the post-WWII era: Ecuador defaulted on its foreign debt. Since the G20 meeting in Washington in October, five of those countries – Russia, India, Indonesia, Brazil and Argentina – have announced their intentions to raise import tariffs or otherwise restrict trade. Russia has announced plans to raise tariffs on autos; India has already lifted duties on iron, steel and soy; Brazil and Argentina are putting together a case within Mercosur for boosting external tariffs. Vietnam just raised taxes on steel imports to 12% from 8%. The EU said it may reimpose duties of 79% on a paper-binder component in retaliation against China. French President Sarkozy has established a $7.5 bln fund to invest in domestic companies so as to avoid foreign takeovers. China has reinstated export rebates and now we see that US steel, textile and paper markets intend to file complaints against Chinese imports, and did anyone notice that this auto-bailout excludes foreign companies?
I’d add to David’s risks sovereign defaults, especially in emerging markets; a potential banking crisis in smaller regional banks and thrifts in U.S.; a bursting of the Treasury bubble (admittedly not much of a surprise, and one that may not happen until 2010), etc.