Sunday, December 30, 2012
2012 / 2013
How will 2013 be for investors? On balance, I have to say it will be very good for global equities. Thanks to Bernanke's pronouncement, liquidity will continue to be ample, depressing interest rates. The certainty in maintaining low rates will now push a lot more funds on the sidelines to search for better returns. There is the one thing which is holding them back, the fiscal cliff. Even if no resolution is seen in the first week of January, it is not all bad. The ball will swing back to Obama and they will eventually come to some conclusion before January is over.
There is a lot of pent-up demand for investment spending in the USA that will get unleashed next year. Businesses have delayed capital projects in anticipation of the fiscal cliff. Capital spending has been notably weak in the last six months, much weaker than during the rest of the recovery. So a political deal, or even just some clarity about the future, could result in a nice bounce back in capital spending after the beginning of the year.
Inflation will not be raising its head anytime soon because Iran and Iraq are ramping up production to make up for lost time, so much so that Saudi Arabia, the swing producer has been downsizing its monthly production to accommodate the rise in supply. If that is the case, it will prolong and help recovery.
Naturally, the case is a bit different with Malaysia and Singapore with the upcoming elections in Malaysia. We will have to wait out the outcome.
2012 The Year That Was
Best Commodity (+24%): Wheat prices rose in 2012 as drought cut into supply from the grain belts of Russia, Australia, and the U.S. Wheat is a $14.4 billion crop in the U.S., where it ranks fourth behind corn, soybeans, and hay.
Best Exchange-Traded Fund (+77%): Signs of a housing recovery sent shares of homebuilders soaring this year, boosting the IShares Dow Jones U.S. Home Construction Index Fund (ITB).
Worst Commodity (-35%): Abundant supply is depressing coffee prices. Brazil, the world’s largest grower, has almost doubled its output in the past decade, producing another record crop this year.
Worst U.S. Large-Cap Stock (-43%): Hewlett-Packard’s (HPQ)annus horribilis was marked by a third-quarter loss that was its worst ever, including an $8 billion writedown related to the dwindling value of its enterprise services business. HP later took an $8.8 billion writedown related to accounting problems at Autonomy, a software maker it acquired last year. In September, HP announced plans for 29,000 job cuts.
Worst Initial Public Offering (-30%): Facebook (FB) plunged as much as 53 percent after its $16 billion debut in May. The stock rallied on news that third-quarter sales rose 32 percent, beating analysts’ estimates.