Byron Wien Announces “The Ten Surprises” for 2013

 EmailPrint This Post Print This Post

Byron Wien, Vice Chairman of Blackstone Advisory Partners, yesterday issued his list of “The Ten Surprises for 2013″. This is the 28th year Byron has given his predictions of a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as an event which the average investor would only assign a one out of three chance of taking place but which he believes is “probable”, having a better than 50% likelihood of happening.

Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. He joined the Blackstone Group in September 2009.

Firstly, how did he fare last year? In short, he hit bulls-eye with three items, was partly correct with five and got it wrong twice Here is a short summary, courtesy of Business Insider:

Right:
  • Oil price declines to $85.
  • S&P 500 Index heads above 1,400.
  • Europe finally develops a long-lasting plan.
Wrong:
  • The computer becomes the new weapon of choice.
  • Congress finds a way to cut $1.2 trillion over 10 years.
Partly right:
  • Real GDP growth exceeds 3%; unemployment drops below 8%.
  • Obama beats Romney, Dems win House, GOP wins Senate.
  • Investors shift currency buys to Australia, Scandinavia, Singapore and Korea
  • The Arab Spring matures: Al-Assad is deposed, and Hamas, Hezbollah and Iran are weakened.
  • Indexes in Brazil, China and India gain more than 15%.

Surprises for 2013

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.

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.

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.

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.

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.

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.

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.

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.

“Also Rans”

11. Having traded below 20 for most of 2012 the VIX 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. Frustrated by an inability to increase revenues through raising income taxes, Congress begins to consider different approaches. There is more talk of a value-added tax as well as a wealth tax, and these ideas appear to be slowly gathering momentum.

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.

Sources: Blackstone, January 2, 2013.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Prieur’s Readings (January 3, 2013)

 EmailPrint This Post Print This Post

As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Bob Farrell’s 10 rules for investing

 EmailPrint This Post Print This Post

Wall Street “gurus” come and go, but in the case of Bob Farrell legendary status was achieved. He spent several decades as chief stock market analyst at Merrill Lynch & Co. and had a front-row seat at the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987 crash.

Farrell retired in 1992, but his famous “10 Market Rules to Remember” have lived on and are summarized below, courtesy of The Big Picture and MarketWatch (June 2008). The words of wisdom are timeless and are especially appropriate at the start of a new year as investors grapple with the difficult juncture at which stock markets find themselves at this stage.

1. Markets tend to return to the mean over time
When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an excess in the opposite direction
Think of the market baseline as attached to a rubber string. Any action too far in one direction not only brings you back to the baseline, but leads to an overshoot in the opposite direction.

3. There are no new eras – excesses are never permanent
Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots.

As the fever builds, a chorus of “this time it’s different” will be heard, even if those exact words are never used. And of course, it – human nature – is never different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction eventually.

5. The public buys the most at the top and the least at the bottom
That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing. Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors Survey.

6. Fear and greed are stronger than long-term resolve
Investors can be their own worst enemy, particularly when emotions take hold. Gains “make us exuberant; they enhance well-being and promote optimism”, says Santa Clara University finance professor Meir Statman. His studies of investor behavior show that “losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
This is why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks.

8. Bear markets have three stages – sharp down, reflexive rebound and a drawn-out fundamental downtrend

9. When all the experts and forecasts agree – something else is going to happen
As Sam Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

Going against the herd as Farrell repeatedly suggests can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets
Especially if you are long only or mandated to be fully invested. Those with more flexible charters might squeak out a smile or two here and there.

Sources: The Big Picture, 17 August, 2008 and MarketWatch, June 11, 2008.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Running 2012 NYC Marathon – a means to a better life for impoverished children

 EmailPrint This Post Print This Post

I will be participating in the 2012 New York City Marathon on 4 November as a fundraiser for A Running Start Foundation and I need your support.

Formed in 2004, the Foundation is a non-profit corporation dedicated to using the power of sport to improve the lives of African children. Large parts of the continent are impoverished yet are home to the world’s greatest store of running talent. The Foundation’s mission is to harness this talent in order to allow more of the children to earn a U.S. university education from their athletic gift, to leverage sport to inspire local children to stay in school and enable more talented young athletes to earn a living from sport.

I am raising money for this very important cause by participating in the NYC Marathon and am asking you to help by making a contribution. Please use the link below to donate online – quickly and securely. You will receive e-mail confirmation of your donation and I will also be notified.

http://www.active.com/donate/NYCMarathon2012/prieurduplessis

I thank you in advance for your support and really appreciate your generosity!

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Prieur’s Readings (August 29, 2012): No “death of equities”

 EmailPrint This Post Print This Post

As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Prieur’s Readings (August 20, 2012): Chinese stocks hit new post-crisis low

 EmailPrint This Post Print This Post

As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. I publish the paper even when traveling for extended periods when blogging takes a backseat. This is therefore a sure way of staying in touch.

The paper is published additionally to the normal blog posts. Click here to read the latest edition of the paper.

The newspaper’s subscription is separate from that of the “Investment Postcards from Cape Town” blog. To ensure you receive daily alerts of the updated paper, click here and then subscribe for free by clicking on “Subscribe” (top right of newspaper, just below my photo) or by following me on twitter (click here).

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones


One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

April 2014
MTWTFSS
« Jan  
 123456
78910111213
14151617181920
21222324252627
282930 

Feed the Bull