Some light-hearted predictions on some deadly serious issues.
After a decade of running rings around the rest of Wall Street, Goldman Sachs spins off its investment banking business into a boutique firm, in a self-financed management buyout led by its partners. The new partnership, which resembles Goldman Sachs circa 1982, merges with Perella Weinberg to create Goldman Weinberg LLP and dominates the advisory league tables in 2011. The remaining business looks like Blackstone on steroids, with a huge sales and trading, hedge fund and private equity business, as well as a rapidly growing asset management and private banking business. It buys Schroders in the UK to take assets under management to $1 trillion.
With financial markets activity and margins under pressure for the first half of the year, UBS and Nomura both throw in the towel in investment banking. In his last strategic move before stepping down early as chief executive of Deutsche Bank, Josef Ackermann buys the asset and wealth management arms of UBS, after he loses the auction to buy Singaporean bank DBS Holdings. Citigroup buys the equities and advisory parts of UBS Investment Bank. Encouraged by the reduction in capacity, Crédit Agricole and RBC announce a big strategic push into investment banking.
Buoyed by surging capital inflows, emerging markets banks start flexing their muscles. Itaú Unibanco, the Brazilian bank, pays a rich price for Standard Chartered in April, creating the world's first global emerging markets bank. Not to be outdone, Industrial and Commercial Bank of China buys Barclays, to create the first bank with a top tier domestic footprint in the three main timezones.
As pressure continues to build on the eurozone economies, Greece and Ireland drop out of the euro in the second quarter of the year. The European Central Bank creates the EERM - the euro exchange rate mechanism - effectively a two-tier euro system, and encourages Portugal, Spain and Italy to join. Belgium breaks up as a nation state after its debt is downgraded in May, having failed to form a government for 13 months. The euro closes the year at 1.06 to the dollar.
US and European markets surge ahead in the first half of the year, fuelled by continued low interest rates and a bounceback in M&A activity as corporates ignore shareholders and spend a large part of their $2.3 trillion cash balances on a flurry of "transformational" acquisitions. The S&P 500 hits 1,500 and the FTSE 100 6,900 by the end of May. Chinese, Indian and Brazilian equities continue to levitate until September 2011, with the Shanghai Composite surging 45% to 4,200, when a forced devaluation of the yuan sends markets and investors reeling and triggers the worst emerging markets crisis since 1997. Developed markets close the year 3% lower than where they started.
Dismayed by spiralling asset prices, Blackstone takes itself private in July using some of the money raised in its latest $15bn fund in a buyout financed by Goldman Sachs. A handful of big players struggle to hit their ambitious fundraising targets, forcing Apax and Permira to merge. Citigroup takes control of music group EMI, and Guy Hands liquidates Terra Firma.
Consolidation continues in asset management, with BlackRock leading the way as it takes over the management of the European Union's €440bn European Financial Stability Facility, the rescue fund that acquired most of Belgium's assets when it broke up in May. The sector is shaken by the emerging markets crisis in September, and then, in the final quarter of the year, by the global exchange-traded funds scandal. This is triggered by the collapse of an "ETF-cubed" - an ETF of ETFs of gold ETFs - which Canadian regulators discover is leveraged 37 times and holds no underlying gold.
US-based trading platform Bats buys Chi-X, creating the first 24-hour global equities market, with realtime settlement and a choice of clearing venues. Exchanges soar in value as banks start pushing more OTC derivatives trading volumes on exchange. Nasdaq loses out for the third time in its attempt to buy the London Stock Exchange, in an auction won by CME Group. European regulators start work on Mifid III after they uncover unintended consequences in Mifid II too late in the day to stop its implementation in 2012. The ECB gives up on Target2 Securities and, at the end of the year, Euroclear and Deutsche Börse are locked in a battle to win the lucrative contract.
The coalition government in the UK collapses after in-fighting over the legislation on the alternative vote. In a snap general election, David Cameron's Conservatives win a slim absolute majority ahead of a Labour party revitalised under the leadership of David Miliband. In the US, President Obama rebounds in the polls as Sarah Palin formally announces her intention to run for the White House in 2012. In November, Palin mangles the words to the Star-Spangled Banner on The Tonight Show with Jay Leno, opening the door to the Republican dream ticket of Mitt Romney and Marco Rubio.
The All Blacks fail to choke in the semi-final of the World Cup rugby against France, and narrowly beat Argentina in the final. The London 2012 Olympics are rebranded London 2013 after the UK admits it won't be ready in time. Russia is stripped of the 2018 World Cup after Fifa admits to rampant vote rigging, gives the competition to Spain, and adopts the same model as the Eurovision song contest whereby the competition is hosted by the previous winner.
