For the 28th year running I have given my views on a number of
economic, financial market and political surprises for the coming year….defined as events which the average investor would only assign a 30% chance of taking place but which I believe are “probable”, having a better than 50% likelihood of happening. [Below is my list of 10 surprises for 2013, complete with my rationale for each.] Words: 1037
So says Byron R. Wien, Vice Chairman, Blackstone Advisory Partners(www.blackstone.com) in excerpts from his original press release* entitled Byron Wien Announces Predictions for Ten Surprises for 2013.
This article is presented by www.munKNEE.com (Your Key to Making Money!) for information purposes only. The article may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Wien’s Ten Surprises for 2013 are as follows:
1. Iran announces it has adequate enriched uranium to produce a nuclear-armed missile and the International Atomic Energy Agency confirms the claim. Sanctions, the devaluation of the currency, weak economic conditions and diplomacy did not stop the weapons program. The world must deal with Iran as a nuclear threat rather than talk endlessly about how to prevent the nuclear capability from happening. Both the United States and Israel shift to a policy of containment rather than prevention. [Read: What Happens to Oil Prices if Israel Bombs Iranian Nuclear Facilities?]
2. A profit margin squeeze and limited revenue growth cause 2013 earnings for the Standard & Poor’s 500 to decline below $100, disappointing investors. The S&P 500 trades below 1300. Companies complain of limited pricing power in a slow, highly competitive world economic environment. [Read: S&P 500 Prospects Not Good Given Economic Situations in Europe & Asia – Here’s Why and Dr. Faber and I Concur: There Are Major Reasons to be Very Cautious in 2013 – Here’s What To Do]
3. Financial stocks have a rough time, reversing the gains of 2012. Intense competition in commercial and investment banking, together with low trading volumes, puts pressure on profits. Layoffs continue and compensation erodes further. Regulation increases and lawsuits persist as an industry burden.
4. In a surprise reversal, the Democrats sponsor a vigorous program to make the United States independent of Middle East oil imports before 2020. The price of West Texas Intermediate crude falls to $70 a barrel. The Administration proposes easing restrictions on hydraulic fracking for oil and gas in less populated areas and allowing more drilling on Federal land. They see energy production, infrastructure and housing as the key job creators in the 2013 economy. [Read: Interested In What Oil Prices Will Be In 2013 – and Why? Then This Article Is For You and Fracking: Everything You’ve Always Wanted to Know but Were Embarrassed to Ask]
5. In a surprise reversal the Republicans make a major effort to become leaders in immigration policy. They sponsor a bill that paves the way for illegal immigrants to apply for citizenship if they have lived in the United States for a decade, have no criminal record, have a high school education or have served in the military, and can pass an English proficiency test. Their goal for 2016 is to win the Hispanic vote, which they believe has a naturally conservative orientation and which put the Democrats over the top in 2012. [Read: America’s Economic Advantage is Immigrants! Here’s Why]
6. The new leaders in China seem determined to implement reforms to root out corruption, to keep the economy growing at 7% or better and to begin to develop improved health care and retirement programs. The Shanghai Composite finally comes alive and the “A” shares are up more than 20% in 2013, in contrast with the previous year when Chinese stocks were down and some developing markets, notably India, rose. [Read: Richard Duncan: China Headed Into a Serious Crisis]
7. Climate change contributes to another year of crop failures, resulting in grain and livestock prices rising significantly. Demand for grains in developing economies continues to increase as the standard of living rises. More investors focus on commodities as an investment opportunity and increase their allocation to this asset class. Corn rises to $8.00 a bushel, wheat to $9.00 a bushel and cattle to $1.50 a pound. [Read: Grantham’s Advice: Allocate 30% to Resources (15% in Forestry, 5% in Efficiency Investments, 10% in “Stuff in the Ground” – Here’s Why]
8. Although inflation remains tame, the price of gold reaches $1,900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous. [Read: Alf Field: Once $1,800 Is Taken Out Gold Will See a Vigorous Climb to $4,500 Area]
9. The Japanese economy remains lackluster and the yen declines to 100 against the dollar. The Nikkei 225 continues the strong advance that began in November and trades above 12,000 as exports improve and investors return to the stocks of the world’s third largest economy.
10. The structural problems of Europe remain largely unresolved and the mild recession that began there in 2012 continues. Civil unrest subsides as the weaker countries adjust to austerity. Greece proves successful in implementing policies that reduce wasteful government expenditures and raise revenues from citizens who had been evading taxes. European equities, however, decline 10% in sympathy with the U.S. market.
Every year there are always a few Surprises that do not make the Ten because either I do not believe they are as relevant as those on the basic list or I am not comfortable with the idea that they are “probable.” Below are several “also rans” which did not make the Ten Surprises.
11. Having traded below 20 for most of 2012 the Volatility Index – surges 33% to 30, providing a bonanza for traders. The decline in the S&P 500 increases market volatility.
12. The Newtown, Connecticut, massacre finally convinces Congress to do something about gun control. As a first step they ban future civilian purchases of automatic weapons, including handguns, with clips of more than ten rounds and require more extensive background checks on all gun purchases. “It should not be easier to buy a gun than rent a car” becomes a slogan.
13. Congress begins to…talk of a value-added tax as well as a wealth tax, and these ideas appear to be slowly gathering momentum. [Read: Stealth Taxation in the Form of Financial Repression is Coming! Here’s Why – and How]
14. Congress decides that high-frequency and other computerized algorithmic-based trading practices are putting the individual investor at a disadvantage. A transaction fee designed to slow down frenetic activity and protect against “flash crashes” and glitches is imposed on intra-day trades.
15. The planet finds itself saturated with technology. Semiconductor companies, software providers, social media favorites and personal computer manufacturers all report disappointing earnings and provide discouraging guidance. They lead the overall market lower. Users finally agree the present state of the art is fast enough and connected enough, and that they have more “apps” than they know what to do with. Apple bucks the trend and trades above $700 as its products continue to enjoy enormous success abroad.
- The “best of the best” financial, economic and investment articles to be found on the internet
- An “edited excerpts” format to provide brevity & clarity to ensure a fast & easy read
- Don’t waste time searching for articles worth reading. We do it for you!
- Sign up HERE and begin receiving your newsletter starting tomorrow
- You can also “follow the munKNEE” on twitter & Facebook
*http://www.blackstone.com/news-views/details/byron-wien-announces-predictions-for-ten-surprises-for-2013 (The views expressed in this commentary are the personal views of Byron Wien of Blackstone Advisory Partners L.P. (together with its affiliates, “Blackstone”) and do not necessarily reflect the views of Blackstone itself. The views expressed reflect the current views of Mr. Wien as of the date hereof and neither Mr. Wien nor Blackstone undertakes to advise you of any changes in the views expressed herein.)
Dr. Marc Faber, the author and publisher of the “Gloom Boom And Doom” report is one of the most well-read economists out there. I am of the opinion that his suggestions and investment advice are more realistic than any other economist or analyst we hear and read regularly. The summary of Dr. Faber’s latest monthly report suggests that he views 2013 as a year of capital preservation. In other words, Dr. Faber is not very bullish on risky asset classes for 2013. This article discusses Dr. Faber’s views and the reasons to remain cautious in 2013. Words: 1494; Charts: 3; Tables: 1
Since 2012 is rapidly coming to a close, I’m fielding questions about what the future holds for 2013. My hope? That my answers will be both informative and instructive, and ultimately profitable, of course. Words: 1588; Charts: 2
Barron’s have just come out with the forecasts of 10 top analysts and ALL their forecasts are positive. There is not a single forecaster who expects the S&P 500 to fall in 2013 and there is only one forecaster who expects the 10 year bond yield to fall from its current level of 1.7% and he only sees a 10 bps decline to 1.6%. [Look at the average forecasts for each item at the end of the post.]
Goldman Sachs has been out with a number of reports in recent weeks highlighting their positioning for 2013. While it’s important to keep in mind that these kinds of reports are no holy grail… it is always good for brain storming and, after all, it’s not like Goldman Sachs is a bunch of dummies.
While Treasuries are said to have no default risk as the Federal Reserve can always print money to pay off the debt, hidden risks might be lurking. As oxymoronic as it may sound, the biggest risk to the economy and the U.S. dollar might be, well, economic growth! Let us explain. Words: 2065; Charts: 1
Saving rates continue to fall. As full-time employment remains elusive, the average American continues to resort to debt, and governmental support, to fill the gap between waning real incomes and their expected standard of living….[This] will continue to impede economic growth until such time as either debt returns to levels that are conducive for higher levels of personal savings or incomes rise. [Words: 1322; Charts: 7]
[As the New Year approaches it is becoming more and more imperative that we] find our internal inner joy…[and] maintain our positive perspective…while the external world around us deteriorates thanks (actually that should read “no thanks”) to all those…who caused or enabled the current financial and economic trauma. We must face up to the fact that the current financial path of the United States is unsustainable and will probably not result in a “Happy New Year” for most Americans in 2013. As such, we must do something utterly different. Words: 620
Until policymakers see the light, it’s very slow and steady as she goes, with a chance of higher inflation on the horizon. This is not necessarily bad for the stock market, however, since I continue to believe that both stocks and bonds are priced to the expectation that growth will be very weak or even negative in the years to come. Words: 696
…Fiscal policy, both in the U.S. and in Europe, has already been a drag on economic growth, and it’s extremely likely to continue to be one as politicians begin addressing concerns about long-term debt burdens. The debate about the fiscal cliff deal might revolve around the preferred paths to reducing the nation’s long-term debt, but it also will determine just how much fiscal policy will limit growth over the coming months and years. What’s really at stake, in the near term at least, is the answer to two important and interrelated questions: How dysfunctional is our political leadership and how bad is our economy going to be next year? Words: 610
There is a high probability that the correction in the gold price that started in early October at $1797 has been completed. Once $1800 is taken out on the upside the gold chart will look tremendous. A beautiful “cup and handle” base would then provide strong support for a vigorous upward climb in the precious metal. At this stage there is no reason to abandon the rough target of $4500 for this coming upward wave. [Below is my analysis and some charts on the situation.] Words: 434; Charts: 2
There are countless articles available for free suggesting what to expect short- and long-term in the markets but what are those analysts who charge a fee for their insights and recommendations saying these days? Same old, same old or unique and actionable? One such subscription market timing service has pulled back the veil to give us a peek at what could well be unfolding. Words: 906; Charts: 8 links
A look at the trend in prices of the Big Mac clearly shows that investors are being penalized with higher inflation, lower income from bonds and certificates of deposit and being led to believe that the economy is growing better than it really is. [Let me explain.] Words: 1012; Charts: 2
A new financial policy initiative known by the label “Financial Repression” may soon become our worst nightmare. ‘Repression’ rhymes with ‘depression’ which could be what we have to look forward to as rampant price inflation and permanently lower living standards take hold. Get ready to be conscripted into a citizen army assembled for the greater cause of saving the nation from being swamped by a tsunami of debt. Let me explain. Words: 1585
“Regardless of whether or not you feel taxes need to be raised, a big set of tax hikes is scheduled to happen. To be sure, some of those hikes will be undone in compromises, but many if not most will sneak through.” [Let me explain.]
One of the things that’s being lost in the welter of rhetoric around the debt crises of sovereign nations is that these are not normal debtors, and government debt is not the same as personal debt. If you or I are in debt we are obliged to fulfil the terms of our repayment obligations or to go bankrupt or to pretend to die and go off and live on the life insurance. A country in the same situation has a range of other measures available to it…[Let’s explore their options and what their implications would be for the country and its citizens.] Words: 1145
Financial Repression is a form of wealth confiscation and redistribution that is in some ways as effective as taxation – but the government never directly calls it that. It never appears in the budget (directly), and while it is dependent on a comprehensive network of laws and regulations – none of those go through the legislature with a stated intention of creating Financial Repression. So while the economic net effects are similar to a huge and comprehensive set of investor taxes being used to pay down the national debt, the “taxes” are never a campaign issue because voters and investors don’t understand what is happening – they only feel the results. [In this article I lay out for you what is slowly developing and expected to escalate dramatically in the next few years.] Words: 5800
China’s miracle is driven by one thing and one thing only: its trade surplus with the U.S., which went from zero in 1990 up to now more than $300 billion a year [but] since the darkest hours of the 2008 global economic meltdown, China has made little progress in shifting its reliance away from exports, and, as a result, the Chinese economy is dangerously exposed to a renewed downturn in global trade. Words: 500
The biggest danger to our society will be food prices and food costs….Productivity of grains has fallen to 1.2% per year which matches population growth exactly leaving society with no safety margin. [In addition,] there is a coming shortage of two fertilizers which occur exclusively in nature…so once the supply is gone, it’s gone forever – and this can only mean that commodity prices are going higher – much higher. Words: 585
Economics will dictate that you can only build so much storage to avert a price drop from continual over-supply and, right now, the world produces more Oil than it consumes each day, and it has for the past 16 months. This trend will only get worse so expect prices to finally start to address this over-supply issue in the Oil markets in 2013. [Let me explain further.] Words: 1640
Marathon Oil has a great animation on the basics of hydraulic fracturing or “fracking.” It explains how horizontal drilling works and explains the roles of water and sand. Take a look.
We now believe that there is at least a 50% probability of Israeli airstrikes against Iranian nuclear sites… Iran has multiple retaliatory options at its disposal…[and it begs the question:] Which options would most adversely affect the price of oil? [Let’s take a look at what those options would be.] Words: 544
The American age demographic profile is substantially better than its major trading partners, driven by the combination of a rising working age population as the children of the post-war Baby Boomers grow up and enter the work force and substantial immigration [legal or otherwise. This profile has major economic dividends as outlined in this article.] Words: 530
…[V]iewed objectively, the world currently stands at the precipice of an even greater crisis than the one in 2008-2009 but you wouldn’t know it by looking at US stock prices. The S&P 500 is down only about 10% from its peak levels in October 2007 compared to the leading indicator stock markets in Spain, Italy and China which…are all down by 60% or more since their peaks. It is folly to think that the S&P 500 index can long withstand simultaneous conflagrations in those countries because, as their economies go, so too will the entire global economy and [that is bound to adversely affect the U.S. as] close to 50% of all S&P 500 earnings are derived from outside the U.S.. Words: 840