2016 Topics to Discuss with Your Financial Adviser(s)?

Knowing as you are reading this you real question is “what sectors and financial interments do I invest in?”  In 2015, nearly every single sector was down. It was my first losing year in my investing life. It did hurt a little less when I heard it was Warren Buffet’s first bad year as well.  It was that ugly.  In 2015, only friends in the markets making money did it on risky short sales.

Review of the Investment 2016 Sector topic to discuss with your adviser.

US Stocks Sector and US/Canadian focused Mutual Funds

The prices are high and corrections are looming. There will always be high flyers from out of the blue and the black swan risk of political or military actions. The oil prices and petro unemployment consequences are worrisome as well the near zero interest rate all but eliminating the FED’s most used tool to fine tune the US and world economy.  Lame Duck administrative regulation bureaucratic Hail-Mary’s are a concern that may hurt small business.

See the top 95 Mutual Fund Companies ranked at Assets Under Management as of  January 2016

Bonds

There will always be exceptions; however, with interest rates near a zero yield, in theory, prices can only go down. However, some bond trading wizards always seem to have a financial play. In 2015, bonds lost less,  which was a tactical win. Relying on the “queen of the pigs” can sometimes be a good.

Far East Sector without China

It seems this sector always seems to figure it out first. The price of oil manufacturing and the cost of shipping the goods they make will help these non-oil producing countries. As long at the terrorism does not shut down production in Indonesia, the Far East will come through once again.

China

China will be back. Per my article in 2014, the Chi-Coms would have made Adam Smith proud with their capitalism practices. It appears the mid level commissars were not brave enough to tell their politburo commissars that 15% growth may not last forever. Business cycles and inflation happen. It is highly risky to investing in “individual” companies in China due to the lack of good microeconomic information. I do not see how you or even your brokerage company could get reliable information out of the communist controlled China. Mutual Funds should spread your micro economic risk here. They are so tied into the world economy with equity ownership and ownership of foreign government bonds. Does the Chinese Government risk a military action on Taiwan?

Russia

Oil Prices are key.  Low oil prices are hurting Russia. The cause is China’s slowdown, Russia’s and OPEC’s continued production and even the “greenies” helping reduce demand in the US and Europe with lifestyle changes in recycling and electric cars. What is left for Russia to sell for cash? Like in the Tom Clancy book,  “Red Storm Rising” (1886), will Putin make black swan military move in Iran like he did in Ukraine to get another warm water port for export? Hope not.

South America

Like the Far East, South America still looks promising from a manufacturing perspective. They seem to have less political uncertainly than Indonesia and Mexico.

Europe

The PIGS have been out of the news lately but have any of the issues really been addressed? There are still many excellent European based companies. Plus, there has been an exodus of many US companies to Europe to avoid new US Tax regulations. I have several friends who have had their corporate offices move to Europe in the past two years who are now considered to be European companies. Now my buddies have been transferred to Europe. How can this be good for the United States? Note to tax-happy politicians and overreaching bureaucrats: the Laffer Curve is real. Just ask the Economic Development staff in the State of New York, now offering free taxes for 10 years to entice companies back to the state.

India and Africa

India and Africa have millions of people and vast potential. Both have natural resources and a growing educated workforce. However, India has an ongoing feud with nuclear power Pakistan. In Africa, you have economies with high potential and some corruption next to lawless countries.

In Conclusion

In 2016, beware of macroeconomic changes by sector and geo-political changes. Like last year, you and your advisers will have to do your homework to make any money this year. Consult a trusted professional before making any financial moves or transactions.