Speaking of "wrong," let's move on to the bond market, shall we? "Wrong" doesn't even come close to describing where the prices of sovereign debt instruments are currently trading, and in 2013 that, I believe, will be the biggest story to unfold. If, as I foresee, a sweeping wave of reality begins to wash over the investment world, then sovereign bond holders (and the institutions that produce them) are in for a world of hurt. Where this cascade begins is anybody's guess, though. It could be in Japan now that the era of "Abenomics" seems to be upon us. To recap, Japan has the world's most outrageous debt-to-GDP ratio at roughly 240%, and as that super-smart guy Kyle Bass has so eloquently pointed out recently, their debt will shortly reach 1 quadrillion yen—a hard-to-fathom number which he simplifies thus: "If you were to try and count to a quadrillion and every number took you one second to get there, how long do you think it would take you to count to a quadrillion? Thirty-one million years." Kyle's assessment of the ramifications of that? "There is no chance the Japanese can ever repay their debts. Plain and simple." 18188.png Source: Bloomberg Kyle is right. In fact, Kyle has been right for a couple of years. But Kyle has been a victim of his own peerless ability for clear thought—he has been early. No matter. 2013 will be the year Kyle is proven oh-so-right. 18011.png Source: Bloomberg Adding to Japan's woes is their demographic situation, which will now lurch from problematic to perilous almost overnight: 18025.png Source: The Housing Time Bomb Now, charts are great to outline the problems facing Japan, but what about "Abenomics" as the possible solution to Japan's woes? Well, according to one of the smartest Japan-watchers I know, BAML's Pawan Kalia, far from being Japan's saviour, Abenomics could, in fact, be the final straw that pushes the Land of the Rising Sun towards sunset in a hurry. Pawan's logic? Simple. Abe won election on a platform of aggressive fiscal expansion, and although ¥3-4 trillion is priced into the market, the final number may well be closer to ¥10 trillion or 2% of GDP (in fact, if you listen very carefully, you can even hear numbers like ¥200 trillion over 10 years being waved around with abandon in certain circles). If that is even close to what eventually transpires, it will require massive new bond issuance. Ironically, just as fixing the confidence problem will sound the Fed's death knell, in Japan, generating the much-hyped "2-3% inflation" will also bring the bond market crashing down around the government and the BoJ's ears. Be careful what you wish for. In Europe, that cute little blonde girl couldn't be more hopelessly wrong about everything being fine and the EU putting all its problems behind it in 2013. Let's begin with Greece. Beware Alex Tsipras. The charismatic and combative leader of the left-wing, anti-austerity Syriza party came from nowhere last year to almost sweep into power on a wave of anti-European sentiment, and, though Antonis Samaras' New Democracy Party (the original architects of Greece's cooked books) narrowly won the election, Tsipras is not lying down quietly: (UK Guardian): Public opinion surveys have repeatedly put his party in the lead since the summer. He has his sights on power. Demands for fresh elections are likely to be heard frequently over the course of 2013. "This government does not have a long lifeline," he says, waving his arms for emphasis as he lists the measures adopted by his "dogmatic neo-liberal" political enemies that, he continues, have been tried and failed miserably.