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【在 g**c 的大作中提到】![](/moin_static193/solenoid/img/up.png) : 现在公司盈利都在增长,个人收入也在涨,房价在涨,利息超低,人人都疯狂投资,跌 : 的动力在哪里?熊熊不要和自己过不去了
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2013 Outlook: Lex Parsimoniae
There are known knowns; there are things that we know
There are known unknowns; that is to say there are things that we now know
we don't know"
But there are also unknown unknowns - there are things we do not know we don
't know"
-Donald Rumsfeld, U.S. Secretary of Defense, 2002
The economic and market environment remains as uncertain as ever as we move
into 2013. One does not have to look far to find extreme risks that could
propel us sharply in either direction at any given moment in time. Given
these vast complexities, examining investment markets as a whole can lead to
many conflicting signals. Thus, it is worthwhile to break the market down
into isolated component parts to determine what is known as fact and what
must be predicted. And by working to simplify the markets, it should
ultimately lead to a greater understanding of what we can expect from
investment markets in the coming year.
The Known Knowns
The following forces are known as fact for investment markets in the coming
year. And none is more significant than the first.
Extremely Aggressive Monetary Policy - One fact we know heading into the New
Year is that the U.S. Federal Reserve is ready to print money with wild,
perhaps reckless, abandon. Overall, the Fed will inject more than $1
trillion into financial markets in 2013 as part of its QE3 program at a rate
of $85 billion per month. And the Fed money printing is likely to be joined
along the way by major programs from the European Central Bank, the People'
s Bank of China and other major global central banks. In recent years, such
aggressive monetary stimulus programs have driven investment markets higher
regardless of economic fundamentals or persistent threats of crisis. And
given the scale of monetary stimulus in the coming year, it is likely that
we may see more of the same in 2013. While some have questioned the efficacy
of QE3 in this regard since its launch in September 2012, it is important
to note that relatively little liquidity has been injected into the
financial system to date under this program. This is set to change in a big
way starting in January 2013, however, as U.S. Treasury purchases are added
just as mortgage backed securities purchases under the existing program
begin to pick up speed. In terms of investment impact, this should benefit
stocks, high yield bonds and precious metals including gold and silver most.
These gains are likely to come at the expense of U.S. Treasuries,
particularly Long-Term U.S. Treasuries, as capital flows out of the safety
of U.S. government bonds and into risk assets.
Taxes Are Going Up - Regardless of what direction fiscal policy makers chose
in Washington DC over the coming year, one thing we know for certain is
that taxes are going up. While the impact of these higher taxes may impact
certain income earners more than others, everyone in the U.S. will be paying
more in taxes than they have in previous years, even if it's 2% more out of
their paycheck once the payroll tax cut expires. And if consumers and
businesses are sending more of their money to the government to pay taxes,
they have less money left over to spend on consumer and capital goods. This
is likely to place a drag on economic growth in the coming year, which
should presumably weigh on stocks and high yield bonds in favor of precious
metals and U.S. Treasuries. But the heavy flow of liquidity from the Fed may
help investors to ignore such fundamental truths for yet another year.
Fiscal Policy Paralysis - A fact that is repeatedly reinforced by the
Federal government in Washington is that absolutely nothing of substance is
going to be accomplished in addressing the critical issues facing the U.S.
economy until politicians are up to their knees in the fire of the problem.
And even then they are likely to find a way to dither. The recent fiscal
cliff debacle highlights this point, as the media has been captivated by a
debate over policy solutions that do not even begin to scratch the surface
of the underlying problem. For example, the Federal debt has increased by $6
trillion over the last five years, yet we have been tortured for over
nearly two months on a debate that struggles to implement even $100 billion
in spending cuts. In short, nothing is going to come out of Washington to
try and tackle the problems facing the U.S. economy in 2013. Instead,
solutions will finally come under consideration down the road when it's
potentially too late.
The European Crisis Remains Unresolved - The seeds of the European crisis
were sown years ago and began manifesting themselves during the outbreak of
the financial crisis back in 2008. And the problem has continued to get
worse with each passing year. In 2010 the problem was Greece. By 2011 it had
spread to Ireland and Portugal. And in 2012 it had fully infected Spain and
Italy. As debt problems continue to mount, economic growth remains
insufficient to begin to reverse the trend, particularly as the global
economy continues to slow. While coordinated global monetary stimulus may
help markets ignore the festering problem across Europe for another year,
the problems facing the region and subsequently the world continue to mount.
But just like the Fed in the U.S., the ECB appears to stand ready to throw
more and more money at the problem. While one cannot solve a debt problem
with more debt, the Europeans appear determined to continue trying.
Known Unknowns
The following are forces that are known uncertainties that require careful
monitoring and evaluation as the year progresses.
The Global Economy - All signs point to further slowing and the potential
for recession in many parts of the world in the coming year. But it remains
possible that growth could surprise to the upside, particularly depending on
the magnitude of monetary stimulus injected into the global economy in 2013
. Any such growth may prove fleeting, but it has the potential to influence
investment markets and not necessarily for the better, for it may raise
inflation concerns and the thought that monetary policy makers may withdraw
stimulus sooner rather than later, which of course they will almost
certainly not in the end.
Corporate Profits - Corporate profits have begun slowing with margins
already at post WWII highs. And with the global economy set to decelerate in
the coming year, many signs suggest that we are likely to begin seeing
meaningful profit margin compression as companies have little scope for
further cost cuts. Corporations have defied this trend thus far, but it
remains to be seen how much longer they can continue to maintain
profitability and margins at current levels during the quarterly earnings
seasons throughout 2013. Of course, the potential always exists for upside
surprise as well, although the odds are becoming increasingly low for such
outcomes.
Inflation - When central banks inject as much money as they have over the
last several years into the global economy, inflation is an issue that
should remain of paramount concern. While policy makers cite that inflation
pressures remain largely contained to this point, one could quibble with
whether current inflation measures are truly capturing actual pricing
pressures. And once inflationary pressures take hold, they can be difficult
to contain without a hard press on the monetary brakes. Such a response, of
course, has the potential to sharply rattle investment markets.
And the last known unknown is arguably the most important.
When Reality Finally Sets In - Investment markets have floated higher for
years under the influence of monetary stimulus. For the freely flowing money
from global central banks including the Fed has enabled investors to
completely ignore the fact that little has fundamentally improved since the
outbreak of the financial crisis several years ago. In fact, much has gotten
worse and precious time and resources have been squandered along the way.
At some point, investment markets will finally awaken to the reality of the
situation. Exactly when that will occur and what the final catalyst will be
remains to be seen, but we will eventually arrive at this inflection point
someday. Perhaps this moment will come when stocks arrive at a triple top
around 1576 on the S&P 500 Index. But more likely, it will come quietly one
day when the market least expects it. Whether this occurs in 2013 or beyond
remains to be seen.
(click to enlarge)
Unknown Unknowns
It is the unknown unknowns, or the potential problems that we are not even
aware that we should be monitoring, that have the greatest potential to
result in a sudden and dramatic shift in investment markets. Potential
candidates include the following.
Another Flash Crash - Investment markets have been infested in recent years
by high frequency trading programs, which are computer driven models that
result in quotes and trades being executed down to the millisecond. We have
seen a number of instances in recent years where a breakdown or defect in
these models has resulted in highly unusual and disruptive trading activity.
While most of these incidents to date have occurred on a small scale, the
potential exists for a large-scale market disruption on any given day.
Institutional Meltdown - A good deal of trading activity today occurs in the
darker corners of the market, and the potential continues to exist for
another Long-Term Capital Management or London Whale type unraveling where a
select group of traders or a hedge fund takes on a disproportionately large
position that threatens to destabilize a major financial institution or the
entire global marketplace. One would have hoped in the aftermath of the
financial crisis that measures would have been undertaken to diffuse these
risks. But unfortunately, such activities continue to go unabated if not
encouraged in the current environment.
Geopolitical Event - Numerous challenges exist across the global political
landscape. The situation in the Middle East remains highly unstable with new
leadership assuming power in a number of countries across the region. And
the recent events in Benghazi have reinforced the idea that the threat of
terrorism remains pronounced. Such events have meaningfully disruptive
effects on investment markets at any given point in time.
Such is the economic and investment landscape as we enter 2013. It is an
environment that is fraught with risk and must be managed carefully. But
when considering all of these factors both in isolation and then
collectively, we can draw the following conclusions.
Bottom Line
The Fed is set to stimulate aggressively in the coming year by printing over
$1 trillion. And other global central banks are likely to join in along the
way with major stimulus programs of their own. History has shown that
during periods when monetary stimulus is being applied so aggressively and
at such a massive scale, risk assets including stocks, high yield bonds and
commodities will steadily rise regardless of how fundamentally weak the
economy and corporate profits may be. Thus, until this trend is definitively
broken, it should be expected to continue.
This notion, of course, raises and important question. What exactly could
definitively break the trend of aggressive monetary stimulus supporting
higher risk asset prices? The answer is a number of forces may cause reality
to finally set in on investment markets, and they all require close
monitoring throughout the coming year. These forces include the ongoing
crisis in Europe, the potential magnitude of an economic slowdown or
corporate profit contraction, the outbreak of inflationary pressures, or
some other event that cannot be reasonably anticipated at the present time.
Thus, a hedged investment strategy remains prudent as we enter the New Year.
An allocation to risk assets such as stocks, high yield bonds and
commodities including copper, oil, agriculture, gold (GTU) and silver (PSLV)
are all warranted given the degree of money set to be printed in the coming
year. A position in TIPS (TIP) also makes sense along with precious metals
and senior loans (BKLN) to protect against the threat of inflation and
rising interest rates. But in recognition that downside forces may
eventually overwhelm the investment market euphoria over monetary stimulus
or that the stark reality that underlying fundamentals remain woefully
insufficient to support stocks and other risk assets at current levels, it
also remains worthwhile to complement these exposures with allocations to
areas of the market that should perform well under these circumstances. This
includes high quality nominal bonds (AGG), long-term U.S. Treasuries and
other longer duration assets such as Build America Bonds (BAB). Holding
allocations in cash or short-term bonds at selected points in time may also
be warranted depending on the swiftness or seriousness of a change in market
conditions at any point in time.
The coming year promises to provide more interesting times for investment
markets and its participants. But a broadly diversified strategy with
components that are designed to participate in any further Fed induced
upside but can also withstand any unexpectedly sharp and dramatic turns
along the way remains a prudent approach in the current environment.
This post is for information purposes only. There are risks involved with
investing including loss of principal. Gerring Wealth Management (GWM) makes
no explicit or implicit guarantee with respect to performance or the
outcome of any investment or projections made by GWM. There is no guarantee
that the goals of the strategies discussed by GWM will be met.
【在 g**c 的大作中提到】![](/moin_static193/solenoid/img/up.png) : 现在公司盈利都在增长,个人收入也在涨,房价在涨,利息超低,人人都疯狂投资,跌 : 的动力在哪里?熊熊不要和自己过不去了
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