Outlook for Investing in 2013
Overview for 2013
With every economic situation there are Pros and Cons. In general, I see geo-political situations and domestic fiscal politics as a major drivers surpassing micro economic realities. Pardon this obvious comment but I recommend you leverage them to maximize your long term returns and minimize your risk as much as possible. If your liquid, you will see investment bargains in traditional and non-traditional opportunities like never before to set yourself up for years to come. If your liquid, you should be guardedly excited…. unfortunately at the expense of others.
The PROs for 2013 Investing
There are some reasons to be optimistic in 2013. Going into 2013 liquidity is king. Here’s a list of opportunities I see:
- Gold and other defensive investments – gold has increased during the last political administration for rational and non-rational reasons. Until the fiscal cliff and current middle eastern pending conflict is averted, I see no reason to move away from defensive investments.
- The world in general survived 12/21/12.
- Will the congress and the Obama Administration be able to agree on some real and meaningful austerity measures to give the market and CEOs real confidence that we will not be another Greek economy? Why is this in the Pro section? I’m ready for hope and change.
- Interest rates will be low. If you can get approved for a loan, you will be able to purchase assets with cheap money.
- Corporations are sitting on cash. Hopefully fiscal policy will free up this cash to fuel the economy with investments.
- The pool of college grads will offer cheap labor. Companies can pick the most outstanding candidate and hire them at a bargain.
- The unemployment cash drain will be reduced since many long term unemployed from the 2010/2011 job loss bubble will have extinguished the unemployment benefits. This will fictitiously keep the reported unemployment number much lower than the true measure of the situation. Based on the way these numbers are calculated, the delta between unemployment reported number and the actual unemployment rate will be increasing.
- If you have cash, you will be able to invest in distressed businesses and many, many business opportunities. Distressed real estate purchases, purchase of businesses, venture capital opportunities, …. All for pennies on the dollar.
- People have to live somewhere. With hundreds of foreclosures in each county in each state in the USA each month, rental housing will be in high demand for the foreseeable future.
- Mutual Funds reduce the risk of individual stock. This is even more important in a volatile economy.
The Cons for Investing in 2013
Reasons to be defensive in 2013. There are many reasons to be worried or concerned about 2013. Here a few:
- The Israeli/Iran situation could be deal killer for investors in 2013. This could be a investing game changer. Invest accordingly.
- Will Fiscal Cliff will it be resolved and how?
- Will the Obama Care 3.8% capital gains tax kill the high end real estate market forever?
- Disposable Income – Do you remember that term? Neither to US and European consumers. This is a huge issue and I don’t see a resolution.
- China’s increased ownership of US debt. Since they own us why are they building aircraft carries? But the are.
- Job growth. Hopefully US fiscal policy will help the US entrepreneurs save the US and world economy. This is the ONLY way our macro economic growth comes back. So far the rhetoric on “positive actions” in not encouraging.
- No one knows exactly how the health care issue will shake out. This is why many corporations are sitting on cash. Speaker of the House Nancy Pelosi (D-CA) was correct when she said, “we will have to pass it to find out what is in it.” Brilliant.
- Foreclosures will continue to be an issue.
- Bonds, in general, will be risky play since the interest rates are nearing a theoretical zero percent. Remember, the price of bonds have an inverse relationship to interest rates.
Let me know your thoughts below in the blog?
Mike Dunn | Author | Meet the Author