Making Money Alert
A Bullish Consensus on 2013?
12/26/2012
The year is nearly in the books, and now is the time when all of the professional pundits, amateur speculators, and major brokerage houses give out their forecasts for the year ahead.
According to a recent Barron's cover story, "Outlook 2013," there is a bullish consensus among the financial elite that the equity market will see about a 10% gain in 2013. The 10 strategists surveyed for the article see gains ahead for the S&P 500 Index, and their mean S&P prediction for 2013 is 1562. That implies about a 10% price gain from the levels on the Dec. 17 publication date.
Hey, I will be the first one to be pleased if this prediction turns out to be correct. But the way I see it, the market still has way too many unknowns here to be prognosticating a double-digit percentage gain.
Among the highlights in the consensus opinion is a likely deal on the "fiscal cliff" that will remove the major source of uncertainty that's plagued the markets since the election. Then there's a continuation of the Fed's easy money policies, which I think is a "no brainer" prediction. The pundits also predicted increased corporate spending and hiring in 2013, which could lead to better economic growth.
Unfortunately, the rosy consensus here is devoid of any outlier, "black swan" events that could rock the markets.
One company highlighting potential outlier events is Saxo Bank. Some of the bank's predictions for 2013 are definitely outside of the normal realm, but they definitely are plausible.
Events such as a doubling in Treasury bond yields is one of the more likely events, as I see it, but the bank also has potential events such as a plunge in crude oil prices to $50 per barrel, and a correction in gold prices to below $1,200 per ounce.
Those two latter events are unlikely, but what the Saxo predictions show is that when it comes to markets, it's not just about the mainstream consensus. In fact, the more consensus opinion there is out there, the more I worry about what actually will take place.
Whatever happens, 2013 is likely to be another eventful year, and we'll be here to watch it all unfold, and to make sense of it, every week in the Alert.
Happy New Year!
ETF Talk: Asia Offers Intriguing Investment Opportunity
With the U.S. government's fiscal cliff still grabbing headlines and causing uncertainty that hurts domestic stocks, it may be time to shift our gaze to foreign markets. Asia is a region of the world that is showing stronger growth generally than anywhere else; it also can grow without much drag from the fiscal cliff in the United States. In addition, Asia does not have the sovereign debt problems and recessionary conditions currently afflicting Europe. An exchange-traded fund (ETF) that focuses on Asian markets is iShares S&P Asia 50 Index Fund (AIA).
This fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Asia 50. That index is designed to measure the performance of the 50 leading companies listed in four Asian countries or regions: Hong Kong, Singapore, South Korea and Taiwan.
AIA is up 19.22% year-to-date. Asia is drawing attention from investors due to its recent growth, as well as its potential for future growth, so this ETF's rise should continue. Unlike the West, with the U.S. fiscal cliff and Europe's aforementioned problems, Asia currently has nothing big looming and threatening to impede its continued growth.
As a comprehensive fund seeking to emulate Asia's diversity, AIA has investments in many sectors. The two biggest, financial services (28.95%) and technology (25.73%), are followed by smaller weightings in communication services (10.37%), consumer cyclical (9.01%), energy (8.06%) and industrials (5.67%), among others with smaller percentages.
While no singular sector contains a majority of AIA's assets, the fund is heavily invested in its top 10 holdings, which make up 50.25% of its total investments. Far and away the biggest investment is in Samsung Electronics Co. Ltd., which holds 14.16% of the fund's assets. The next four holdings, in order, are: China Construction Bank Corp H Shares (5.65%), Taiwan Semicon Man TWD10 (5.61%), China Mobile Ltd. (5.34%) and Industrial and Commercial Bank of China Ltd. (4.99%).
Recent trends demonstrate that Asia is likely to continue its ascent. With the United States and Europe dealing with their respective issues, consider investing in Asia and Asian funds, such as AIA.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please check out my Successful Investing newsletter. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.
Depardieu Defies Despotism
By Jim Woods
This week, my friend, colleague and frequent Eagle Daily Investor contributor weighs in on, of all things, a French movie star's high-profile, anti-tax protest. I suspect that if taxes become this onerous here at home, we are liable to see this type of action by U.S. citizens in the future.
Movie stars aren't usually known for their courageous political stands. Although there are many politically active actors and filmmakers, e.g., George Clooney, Alec Baldwin, Michael Moore, etc., most simply walk down the safe, left-wing path alongside their peers. Yet one big-time movie star isn't afraid to take a controversial political stand on an issue, a stand that actually forced him to relinquish his native country's citizenship.
I am here referring to my new favorite actor, Frenchman Gerard Depardieu.
The Oscar-nominated actor, and star of numerous films, is one of the most recognizable figures in all of France. But what did Depardieu do that was so politically courageous and, in my view, so heroic?
Simple, he defied despotism.
Recently, Depardieu chose to give up his French citizenship and move to Belgium to become a permanent resident of the nearby country. Depardieu made the move chiefly to avoid the onerous 75% income tax on the wealthy, a policy recently introduced by the socialist President of France, Francois Hollande.
Depardieu's decision to give up his French passport and social security card in exchange for paying much lower taxes as a Belgian citizen would certainly have been big news, and that decision would still, in my opinion, have been a heroic act by someone who felt persecuted by a socialist state. However, the verbal sparring between the actor and the French politicians angry with his decision is the real reason why Depardieu should be admired.
After announcing his decision, Depardieu took fire from French Prime Minister Jean-Marc Ayrault, who called his leaving an "unpatriotic" act. That criticism set Depardieu off, and he responded with an Atlas Shrugged-like verbiage challenging the Ayrault comments.
In an open letter to Mr. Ayrault in Sunday's edition of French weekly Le Journal du Dimanche, Mr. Depardieu wrote: "I'm leaving because you think success, creation, talent and anything different should be punished."
That sounds like John Galt to me, the main character of the great Ayn Rand novel that tells the tale of what happens when the most productive members of society refuse to be treated like slaves. In Atlas Shrugged, the men of the mind, the great industrialists, scientists, composers, etc., choose to stop living for the sake of the state, and instead go "on strike" in protest.
Depardieu didn't exactly go on strike, but he did make it clear that he was tired of what he considered persecution by an unjust French tax system. According to the actor, he paid 85% taxes on his revenues in 2012. He also estimated that he has paid €145 million in taxes to the French governmental leviathan, or $189 million, since he started working at the age of 14.
Given that kind of mass-scale socialist asset grab, can you blame Depardieu for seeking out a reprieve?
It's not often that celebrities actually make a courageous political stand, but Depardieu certainly has done so here, and he needs to be recognized, respected, and applauded for it by all of us who are tired of relinquishing the fruits of their labor to state-sanctioned looters.
Follow Jim on Twitter: @Woodsish.
I Need Your Input on the Radio
From time to time, I like to make sure I am doing what my readers and listeners want. This is true of the content of my newsletters, the content here in the Alert, and it's especially true of my Monday Morning Market Outlook podcast.
As a new year approaches, now is a great time for me to ask you, the listeners, what you want to hear when I do my podcast each Monday. Would you like more macro-economic news, or would you prefer I get a bit more political? Or, would you like me to concentrate on specific stocks and ETFs? Or, maybe you want me to do more personal finance segments?
Whatever suggestions you have, I would love to hear them. Just drop me a note here and let me know what's on your mind. And if you aren't already a listener, then please check out my Monday Morning Market Outlook podcast today!
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
As a new year approaches, now is a great time for me to ask you, the listeners, what you want to hear when I do my podcast each Monday. Would you like more macro-economic news, or would you prefer I get a bit more political? Or, would you like me to concentrate on specific stocks and ETFs? Or, maybe you want me to do more personal finance segments?
Whatever suggestions you have, I would love to hear them. Just drop me a note here and let me know what's on your mind. And if you aren't already a listener, then please check out my Monday Morning Market Outlook podcast today!
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
Wisdom from "The Big Man"
"I wanted an electric train for Christmas but I got the saxophone instead."
--Clarence Clemons
The fantastic sax player and long-time member of Bruce Springsteen's E Street Band is, sadly, no longer with us, but his music will live on for decades to come. In this Christmas-related quote, "the Big Man" as Bruce called him, shows us that one gift, or one seeming disappointment, can sometimes translate into a tool of genius that has given millions pleasure. So, whatever you got for Christmas this season, make use of it to its full capacity. Who knows, you might end up transforming that gift into beauty for us all, just the way Clarence did.
To keep up on the latest investment activities, check out Eagle Daily Investor, where my e-letter appears each week. To read my e-letter from last week, please click here. I also invite you to comment about my columns, as well as the articles and columns of the other Eagle Daily Investor writers.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug
To the best within us,
Doug Fabian