6 Provocative Predictions for 2013… and Beyond

Someday, someone will fund an academic study identifying the crevice in the human brain that craves year-end predictions for the coming 12 months. Wherever it resides, it is undeniably strong and far more prevalent among the populace than the craving for news about, say, the “fiscal cliff” or the New York Jets’ quarterback saga.
Within the finance sector, such predictions abound. “Macro surprises” from Morgan Stanley, “13 outliers for ’13” from Deutsche Bank, and the ever popular “outrageous predictions” from Denmark’s Saxo Bank. And you know what? These institutions are, umn, lily-white, every last one of them.
Saxo, for instance, describes its predictions as an “annual exercise in rooting out relatively extreme market and political events for which the probability is perhaps low, if still vastly underappreciated.” In other words, they’re “thought experiments.” They do a nice job of covering their backsides, however.
Then again, they have depositors and clients and shareholders to please. Actually predicting the German stock market will plunge 33% next year — the lead item on Saxo’s list — might discomfort one or more of those constituencies. So they’re obligated to couch their predictions in the abstract.
We, on the other hand, suffer no such conflicts of interest. We rise and fall, live and die on the trust you place in our research… a liberating state, especially given the amount of rope you’ve shown you’re willing to give us.
With that rope firmly in mind, we bring you the following six provocative predictions for 2013… and beyond.
These are not thought experiments to be touted in a late-December press release and posted on Zero Hedge, then quickly forgotten. These are themes that we fully expect to develop during the next 12 months. Let’s begin!
1. The “mother of all financial bubbles” will burst… but not before blowing up even bigger! Money manager and Vancouver Symposium favorite Barry Ritholtz recently bored himself silly with a spreadsheet: It showed a monthly survey of economists by Bloomberg going back to 2002, revealing their “expert” guesses about the 10-year Treasury yield over the following six months.
“In the history of finance,” Barry quips, “we cannot find a more one-sided opinion about a freely traded double-auction market.” Ninety-seven percent of the time a majority of economists predicted higher yields. On three occasions, including last May, the consensus was unanimous: The average forecast was for a yield of 2.4%. Oops… It turned out to be 1.7%. Just a little bit off.
The most recent survey? Ninety-four percent of economists surveyed expect higher rates by next May… and their average guess is 1.93%.
We’ll take the other side of that trade. Indeed, as we told the subscribers of Apogee Advisory last October, “We think the 30-year bull market has one more blowoff phase before the end. You need to act accordingly.”
Back then, the factor we cited was the pending demise of money market funds. We figured on a time horizon of three years. But now that we see such an overwhelming consensus for higher yields and lower prices, we’ll double down: We’ll see a Black Swan emerging early next year — another debt-ceiling crisis (even if the “fiscal cliff” issue is resolved) or more likely another euro-scare. Hot money will flood back into the “safety” of Treasuries. The 10-year yield will plunge below its 1.4% record set last July. It might even go all the way down to 1%.
But that would be the final blowoff that would signal the beginning of a major bear market in bonds. In other words, we think interest rates will rise substantially over the next few years…but not quite yet.
“At some point,” Barry says, “the bond bears are going to be right.” We’re confident that point will arrive before the end of the decade.
2. Boomers’ retirements are about to be crushed (again) in junk bonds and the wrong dividend stocks. First, they lost their shirts in the tech bust. Then they lost their pants in the housing bust. And in 2013, the baby boomer cohort is about to be stripped of its skivvies…thanks to the Fed’s zero-interest rate policy. Because intermediate-term Treasurys and CDs yield close to nothing, savers have been trying to get some yield on their savings wherever they can find it. In this context, junk bonds seem appealing. They offer yields that are at least greater than zero, which is why many investors have been flooding into the junk bond market.
Bad call.
Understand the Fed’s priorities: Saving and investing is their mortal enemy. “They want spending and speculating,” says our macro strategist Dan Amoss, “and are willing to risk the entire monetary system in the process.” Result: “Investors are taking foolish risks; they’ve bid up junk bonds and dividend stocks, pushing yields down in the process.”
If only investing were as simple as buying risky assets when interest rates are stuck at zero. Ask the average Japanese investor how that’s worked for them the last 20 years.
“The 2012 rallies in almost every stock and bond will not last,” declares Dan. “When investors bid up junk bonds and stocks in a zero interest rate environment, they are simply pulling future returns into the present.”
When interest rates start rising again, junk bond prices could plummet.
3. The World’s Fastest-Growing Economies in 2013: Forget the BRICs. If it’s emerging markets with explosive potential you’re looking for, the globe-trotting Chris Mayer has identified three. He’s visited all of them — the first two in 2012.

• Mongolia. “The story is very simple,” says Chris. “You have a tiny economy of just under 3 million people. And they are sitting on enormous reserves of natural resources. The top 10 deposits alone are worth an estimated $3 trillion. It’s a decade-long story. I think a good analogy is Kazakhstan, which is culturally similar — an old Soviet-style economy that opened up and created an enormous boom, thanks to resources. The stock exchange went up 2,400% in six years from 2002; apartment prices rose 800%-plus and land prices in Almaty rose 8,000%.”

• Myanmar, or if you prefer, Burma. “If I could put all of my money in Myanmar, I would,” says globe-trotter and Asia bull Jim Rogers. “Another great story,” says Chris. “Fifty years of isolation and dictatorial rule and it is finally starting to thaw. There is no reason why Myanmar can’t approach the development of its neighbors such as Thailand, given time, investment and a commitment to freer markets. I think it will be one of the fastest-growing economies in Asia…” Hard to invest there, but a great story to watch.

• United Arab Emirates. Chris concedes this one might come as a surprise. “The economy went through a giant bust, but its place as the money center for the Middle East is secure, thanks to low taxes, privacy protection and location. It has the region’s biggest marine port and airport and is home to the highest number of foreign businesses… Best of all, the market is cheap after an epic bubble, but the underlying economy is still growing rapidly.”

Check in tomorrow to see my final three provocative predictions!
Regards,

Addison Wiggin

Attaining Breakthrough through Caring for Customers

There are many reasons Organizations strive to accomplish significant and meaningful improvements. Without a doubt, actions of the leadership team set the pace and guide the direction of change. The moment Art Byrne became the C.E.O of Wiremold in 1991, the very first thing he instilled into the mindset of his management and staff was; 

Productivity=Wealth

As simple as this statement seem, it is very powerful because it brought about a certain mindset. Productivity is a key economic factor in terms of fighting inflation, staying above the competition on the global basis, and promoting business growth. This is what the Toyota Motor Company has done so well over the years. In other to be competitive, all organizations need to work with an ongoing sense of renewal.

One of the most meaningful ways to distinguish an organization is to have the people inside gain a better understanding of the voice of customers.

The fact that every Organization wants to deliver business excellence, higher customer satisfaction and superior profit might not be enough to move any organization above the competition level.

With the everyday change in product, services and taste of customers, any organization will have to move above what they are presently giving. Sometimes we might think we are actually meeting customers’ need until a new product or service is introduced with a new near zero defects. Only then do we realize our services or products actually have more than 5 percent defect. For every product produced there is always improvement.

Organizations however, do not have to wait until another product or service set the pace or dictates which direction we should move or push us out of the market.

The Nigerian Telecommunication industry is a perfect example; when MTN (one of the major players in that industry) came, calls were very expensive because their charges were expensive. They realized an outstanding profit in a short while though, it never lasted when Globacom arrived, they introduced per-seconds billing and MTN lost some of their customers to Globacom who forced them (MTN) to introduce per-seconds billing too. Per-seconds billing was already obtainable, the technology was already available, but they didn’t offer their subscribers that option until Globacom said it was possible to pay for exactly the number of minutes calling.

Globacom dictated the pace of the market for a while too until per-second billing era made no more sense but better services and cheaper calls era came. Etisalat came with this offer. Sure they must have done their research and weighed what is obtainable.

 I just got an Etisalat line, not just for their subscriber’s friendly packages but for their adverts, promo and creativity; I enjoy listening to all their adverts that I feel so proud carrying an Etisalat line. Let me be blunt, I’ve  thought about throwing my MTN line away several times and I can’t imagine how many more Nigerians are thinking just this way.

I believe company’s services or products reflect what motivates the investors, either for solution or just profit maximization. Those with the profit maximization mindset will only carry out campaign influenced by this mindset. 

My Point

Microsoft came into the IT world with solution in mind and the reward cannot be over emphasized. Investors that want to make money should only focus on solutions. Profit is inevitable with customer’s satisfaction and loyalty.

People (Customers) + Satisfaction = Profit (Wealth)

I believe Breakthrough can be attained and maintained if Management in any organization can adopt Caring for Customers from planning to sales or service delivery. Even if your organization is the first in the industry:

1.      Are Ford products better and cheaper than Toyota or Honda products?

2.      Are ford products customer caring oriented?

3.      If I stand in any Nigerian neighborhood, how many Ford do I see and how many Toyota do I see within five minute?

In my compound, there are four Toyotas and a Honda Civic but can’t even think of the last time I set my eyes on a Ford.

Care driven organizations will forever drive in loyal customers. Loyal customers imply profit and market leadership.

Uduak Akpan

How Savers Become Losers

" if wall street is the only place that people ride in a Rolls Royce to get advice from those who take the subway, then who are we taking investment advice from?"

If you are at a point in life where you can begin to put some money away, investment can be an extremely rewarding experience, fiscally and psychologically, or a disappointing and frrustating experinece. This is where you have reasonable expectation and a reasonable investment strategy.

Even though putting money aside might be the begining of your breakthrough, money left in the bank all in the name of savings is actually the begining of poverty.

In 1996, Gold was selling for approximately $250 on Ounce. By 2006, just 10 years later, Gold was selling for over $600 an Ounce; today, it is over $1000 an Ounce. For intance, if in 1996, you had put $1000 in the bank, today (2011) it would be worth less than $10 in Gold (do the calculation yourself). If instead, you had purchased four Ounce of Gold for $100, today that Gold would be worth over $4000. Peolpe who believe their money is save in the bank are actually losing. This is just to tell you that if you think you have money in the bank today, you might not tomorow without even spending a dime because your money might only be able to buy a loaf of bread or a birthday card for your wife.

So, how long have you been working?

How much do you have in your account as personal saving?