Ad Hoc Commentary – 2013 outlook
We did quite well for 2012. We called for Jan 18, 2012 to be bullish as we heralded in the Dragon year. We said spooky will only come Jun – and it did. And we were bearish in Q4 2012 but held that view for a little too long – the markets recovered in the final half of December.
What is in store in 2013?
2013 is Japan year:
The sovereign debt crisis will migrate there. Though Roubini ran a series dispelling the fear of Japan sovereign debt last year, yours truly beg to differ. Capital will not sit idle after tasting blood in Greece. They will ask who is next and the next weakest link will likely be Japan:
http://www.spiegel.de/international/world/massive-japanese-sovereign-debt-could-become-global-problem-a-875641.html
Specifically, yours truly expects in 2013:
1. Capital to fright Japan’s sovereign bond market.
2. Franco-German core to be shaken.
France should shudder this later this year as she digests the venom she got from Greece.
3. Asia will enjoy massive FDI inflows
Capital will find solace in emerging Asia’s FDI windows. India and Indonesia to do especially well.
The winning themes in 2013 should be capital flows that escapes the taxing hands of cash strapped governements:
1. Buy equities
The only market liquid enough to take the massive capital flows from sovereign bonds.
2. Sell bonds of stressed nations
Japan is where the action is. Some people prefer selling call options. America could very well be next, but be mindful that everyone cannot run for the door at the same time. There aren’t enough liquid assets to receive the capital flows out of bonds.
3. Buy commodities
Commodities will be a buy, but likely would only take off in the second half of the year.
This is the year when it becomes clear for all to see that politicians will continue spending and then expect the masses to pay taxes for their profligacy. Keynesian economics is in vogue because it preached to the masses that economic panacea can be found in free spending politicians. Those who stand in the way of the political elites will not have it easy. Just try helping those ‘poor’ rich not pay their ‘fair share’:
http://www.guardian.co.uk/world/2013/jan/04/swiss-bank-wegelin-close-tax-evasion
Good luck in the markets.