10
Surprises for 2013
Marluv (Marluv@gmail.com):
10 surprises for 2012
December 31, 2012
BROAD MARKET
The world market has 2 models that I believe will be the
catalyst for higher prices in 2013.
Model 1:
The fiscal cliff is not resolved and a standoff ensues and
you have profit taking in this market as investors square up position in early
March. Generally too much is at stake for the Republicans to drop the ball on
making a deal. If they do not compromise it will directly affect asset
valuations across the board in all sectors. I read somewhere that over 50% of wealthy
individuals do want a tax increase but many are still fearful because the politicians
run the government like a penny stock business.
The situation in Eurozone returns with France next on the
chopping block and we have a spike in the USD/EUR which causes a massive
selloff in Mar-May 2013. Europe recently adopted a new tax law that many
businesses pay taxes in France more than they generally earn annually. France
has introduced a tax on turnover on the stock exchange and on any transaction
which means you are taxes twice if you were to buy and sell the same car.
Higher taxes in Eurozone will force money away from Europe and it may end up
either in South America, China or the United States. Higher taxes generally
hurt profit margins and venture funding as money becomes tight and less liquid.
The unemployment rate continues to rise because companies
don’t want to take on the risk and we continue in this negative feedback loop
of muddling along or kicking the can down the road.
Cramer recently claimed that Eurozone has absorbed allot of
the bad paper and resold it as good value to investors. If this is such the
case the situation in Europe may stabilize and this would predicate the next scenario.
Model 2:
The fiscal imbalance is resolved and current valuations stay
in tack which creates an under belly that supports higher stock valuations and
introduce speculation towards the end of the year. If the fiscal balance is
resolved companies can now grow as well as investors can feel safe that the turbulent
waters have calmed down. This fosters
the opportunity for new investors to enter the market and begin the speculative
bubble for the next few years. The worst
has been behind us in 2008 and since then we have been slowly growing our way
out of this mess. There have been so many pitfalls during the recovery due to
so many variables that could not be quantified. Sometimes the recovery was halted by mere
ignorance to compromise from both parties.
If profit margins gradually rise and the government stays out of the pot
we may be setting up for a major breakout in the S&P, Dow Jones and Russell
2000 towards the end of this year. We
will get higher P/Es on many great companies.
The housing market will be the catalysts as bank stocks
rally. Financing returns and people begin to buy houses at a reasonably good
rate. During this period of a housing bust many people have been accumulating
in Manhattan as well as commercial investors. Real estate in New York has held
up extremely well which means that it will take off when the housing market
recovers around the rest of the country. This is good for current owners as we
may see an incline in the property prices across the board. People may break
even on their underwater homes in soft areas. Interest rates may begin to rise
and the stock market will continue its ramp higher.
If we can contain our debt to GDP to around 10% America will
be fine for another 10-15 years because our growth and innovation will curb the
negatives of our economy. I continue to be an optimist on the United States as
we always bounce back from major melt downs.
Oil prices may fall with the new supplies of oil found in
the Bakken. The United States soon will produce more oil than is needed to
import from Saudi Arabia. I sense with so many new oil wells becoming
discovered all over the world the long term prospects for high oil prices may
not occur. It’s a possibility oil may collapse (like natural gas) if too much
supply comes into the market from Horizontal drilling operations. This may help
equities if oil prices drop because oil is a tax on the consumer.
Finally, Bond coupons become attractive after a full year of
stocks rallying and it’s probably the time to start to move into bonds in early
2014. Everything may begin to grow and the bullish talking heads return on CNBC
on pumping stocks.
10 Surprises
Surprise No 1: Apple’s
next product
Apple (AAPL) computer unveils apple TV and it tremendously
adds to the stock’s valuation. I think this year selloff in apple was a good
chance to buy apple for cheap. I still think apple will continue its ramp to the
$700+ target. If model two occurs apple will easily hit $750->$800 per
share. They are some concerns on apple’s future earnings stability but I still
think we have one more year of Mobile growth in Smart phones, Tablets and Smart
TVs. If America bounces back, the technology sector will continue to outperform
the broad market. Apple is directly connected to the consumer and retail so it’s
tied directly to the recovery.
Surprise No 2: Google’s
new game changer
Google (GOOG) unveils its Project Glass and it
revolutionizes the mobile world. Soon Samsung, Apple and Microsoft will unveil
a similar product. This will be a game changer for mobile connectivity and the
next generation for mobile platforms. This will tremendously give Google the
edge and its stock will head to new highs. I still think Google will hit $800->$900
soon as these new technologies will continue to make the company a strong
beast. Now many argue that the profit margins on Add impressions are dwindling
and the company may have some head winds ahead. I feel this may be somewhat
true but the industry and the market is so big they should continue to do fine
for another year even thou I think the online advertising business model is a
speculative bubble.
Project Glass
Surprise No 3: FB
will recover
Facebook (FB) may actually feel the wind of more mobile
growth and the stock actually heads higher. The investors who got killed during
the IPO are able to recoup losses as the stock heads back to $40 per share.
Ultimately, I think Facebook will get there advertising revenue up because they
are still the 2nd most popular website in the world. They should
increase earnings revenue and the stock should begin to rally and head to
possibly a $100+ per share over the next 2 years. I think the massive sell off
in Facebook was a great sale for long term holders. Although I was bearish during
the IPO of Facebook I have changed my views because I feel the sector is so hot
that even mediocre companies will still do okay for another year. The idea is a
rising tide lifts all boats!!
Surprise No 4: Microsoft makes a bid for RIMM or AMAZON makes a bid for
RIMM (Taken from 2011 Surprises)
Microsoft has experienced the lost
decade just as the Japanese did because after Bill Gates left the company it was
left with a poor creative leader Steve Ballmer. Bill Gates was the creative
force behind Microsoft’s major leap in being a market pioneer in the technology
sector. In the past 10 years apple came from way behind and took space from
Microsoft by dominating the Mobile space. In early 2000 I remember Microsoft
was the first in the Mobile space by unleashing Windows CE 1.0 and Pocket PC
1.0. For some odd reason the company did not put much quality in developing the
new space properly and Apple came and gobbled it up like a turkey. Microsoft
has had major problems transforming there business model to the CLOUD and is
desperately trying to find new ways to innovate there business by launching
Microsoft Synch, Bing and Windows Phone. The windows phone is way behind and
needs population to grow. The only way to catch up with Android and IOS is by
acquiring RIMM and there usage space. If Microsoft does not acquire RIMM some other company will do
so in the near future.
Amazon has also made an attempt to buy
RIMM because they recently launched 3 versions of their E-book Reader. They
need internet connectivity via 3G and 4G LTE and may look to acquire RIMM to
help grow there space. RIMM made many mistakes and allow Apple and Android to
eat up all there market space in the past decade. Amazon is trying to move into
mobile information. The software business is a very turbulent business model.
Surprise No 5: AMAZON and online retailers must pay up in Taxes (Taken from 2011 Surprises)
Amazon continues to be the market
leader for online shopping and is imposed with an online tax for out of state
sales by many other states. The loop hole in online sales tax may begin to
become a theme in congress to rebalance the economy local businesses by taxing
online business with an internet federal flat tax. This is something online
business dread but the internet is not some geek driven specialty product
anymore. It is main stream and out of control. Many states will begin to impose
taxes on internet commerce to help balance state wide budgets.
Amazon should continue to do
well with the creation of their new Amazon Phone that will directly compete
with Apple. Amazon is the number one market place for online retail. This gives
it a great position in the industry.
Surprise No 6: Heavy 3D Gaming goes Mobile (Taken
from 2011 Surprises)
I see major advances in hardware that
online social gaming will become heavy in graphics and power. This may be the
beginning of the Mobile 3D gaming world. Sony will possibly release a device
for 4G LTE with heavy 3D capabilities as well as Microsoft and Nintendo. Apple
and Android will also be the early leaders of this new space. N-Vidia will
supply the technology for the graphics processors. The world will now transform
from 3D heavy consoles to 3D heavy mobile devices.
I still think that this
industry it’s about to blow up and become big in the next 2 years.
Surprise No 7: Electric cars take charge (Taken
from 2011 Surprises)
I see a major bull market setting up
for the electric car space. There will be a huge opportunity in the electric
car space because we have so many new products coming to the table. The
vehicles will be so valuable that auto makers and dealers will do very well in
the years to come. These cars will be gobbled up by people who live in the
cities. The automakers will struggle to keep up with demand for the electric
cars they produce. This will be one of the legs that will help revitalize
America in the next 10 years. This space is a huge goldmine. The Nissan Leaf,
Chevy Volt and Toyota Prius will be the leaders.
Result: I
was correct but due to more supply of oil found recently in America the change-over
to other energy forms has slowed. This means that it will take longer for these
new products to become main stream. In 2012 Tesla motors had a pretty good year
with the release of its Model-S car.
Surprise No 8: Person to person mobile credit transactions.
With the invention of the new ways to
transfer money via Square and Pay Anywhere for mobile to mobile money transfers
I think this will continue to be a big thing for 2013. The user base may double
in the next 12 months as more people will rely on credit to pay people and do
business. By allowing people to become merchants and consumers at the same time
it has allowed more borrowing and credit related charges for products and
services. This is created a new market similar to Paypal in 1995 but for mobile
computing and with the growth of mobile it should feel the wind of growth from
the sector.
Surprise No 9: Ford does well
As ford borrowed special loans from the
fed helped the company to grow its way out of bankruptcy. By having an all star
CEO who has certainly showed he can lead a dying company back to life has given
Ford great prospects for 2013. This stock may continue its way back up to $20 per
share over the next 12 months. The auto industry is growing and US automakers
have finally gotten their act together by actually competing using technology in
their products against the Japanese and German automakers.
Surprise No 10: The airlines may rally as a long shot
I think the airlines have been beaten
down so bad over the years we may get a nice rally in this sour sector for over
2 decades. The reason this sector has lagged and never resulted in a profit is
because of high fuel costs curbed profit margins. I think that with the recent discover of oil
in the US we may actually see lower oil prices in the near future. We may also get
some more consolidation in this industry. I think that if energy prices drop it
will be good for this high risk sector.
Happy new year and may 2013 be fruitful.
RECAP 2012
BROAD
MARKET
Surprise
No 1: The World stock market has 3 models that I believe will be the catalyst
for higher prices in 2012.
The model is as such:
Model 1: The
situation in Europe creates a massive panic and many countries are booted out.
The Eurozone re-allocates itself to only the strong nations not before causing
a massive crash in equities across the globe. The S&P will sell to 1000,
Nasdaq 100 will sell below 2038 early next year and then a capitulated move
will create a massive rally into the end of year. This situation can then
transform into anyone of the next two models.
Model 2: The Job
numbers stay in line with consensus and the market slowly grinds higher gaining
a high of Nasdaq 100 – 2450 target. This will be the high for the year and we
trade between that ranges during the course of the year.
Model 3: The Eurozone
situation is contained and massive money printing creates another floor in
equities and the market begins to rally due to inflation of the currency. The
US economy begins to grow steadily and inflation stays low. The rally in
equities move money out of bonds and the whole world goes into a massive rally.
Emerging markets will be the biggest gainers. The target for this scenario is S&P
500 – 1520-1600 area.
Result:
Model one came true as the markets sold off due to Europe’s problems in May 2012.
We then recovered but the massive rally
I was expecting did not happen because the fiscal cliff became a concern
towards the second half of 2012. This caused the market to consolidate towards
the end of 2012 on pending new tax hikes on the wealthy.
TECHNOLOGY
Surprise
No 2: Microsoft makes a bid for RIMM
Microsoft has experienced the lost
decade just as the Japanese did because after Bill Gates left the company it
was left with a poor creative leader Steve Ballmer. Bill Gates was the creative
force behind Microsoft’s major leap in being a market pioneer in the technology
sector. In the past 10 years apple came from way behind and took space from
Microsoft by dominating the Mobile space. In early 2000 I remember Microsoft
was the first in the Mobile space by unleashing Windows CE 1.0 and Pocket PC
1.0. For some odd reason the company did not put much quality in developing the
new space properly and Apple came and gobbled it up like a turkey. Microsoft
has had major problems transforming there business model to the CLOUD and is
desperately trying to find new ways to innovate there business by launching
Microsoft Synch, Bing and Windows Phone. The windows phone is way behind and
needs population to grow. The only way to catch up with Android and IOS is by
acquiring RIMM and there usage space.
Result: Microsoft
did not make a bid for RIMM because they were busy pushing the windows Phone
and the deal with Nokia has currently kept them at bay for another acquisition.
Microsoft focused most of its energy on Windows 8 with Surface. Yet it did not help the stock because the PC
business is dying as more people move to the Tablet.
Surprise
No 3: AMAZON makes a bid for RIMM
Amazon has made an attempt to buy RIMM
because they recently launched 3 versions of their E-book Reader. They need
internet connectivity via 3G and 4G LTE and may look to acquire RIMM to help
grow there space. RIMM made many mistakes and allow Apple and Android to eat up
all there market space in the past decade. Amazon is trying to move into mobile
information. The software business is a very turbulent business model.
Result: This
did not happen because Amazon is developing its own phone to compete with apple
in 2013
.
Surprise
No 4: AMAZON and online retailers must pay up in Taxes
Amazon continues to be the market
leader for online shopping and is imposed with an online tax for out of state
sales by many other states. The loop hole in online sales tax may begin to
become a theme in congress to rebalance the economy local businesses by taxing
online business with an internet federal flat tax. This is something online
business dread but the internet is not some geek driven specialty product
anymore. It is main stream and out of control. Many states will begin to impose
taxes on internet commerce to help balance state wide budgets.
Result: Amazon
charges local taxes to the closest state the distribution center was shipped
from so some taxes are invoked due to distribution channels. This has curbed
the internet flat tax for now but that doesn’t mean it will go away.
Surprise
No 5: APPLE has a good year but this is the end
Apple continues its rise as people
continue to support the product line but I seriously doubt apple will hit $1000
a share in the next 5 years. This is due to the fact that the technology world
is a turbulent space and nothing is written in stone. Competition will
ultimately curb apple’s product line and due to the fact that Steve Jobs has
died the company will lose its way. The company will then slowly burn out and
with no superstar CEO to capture people’s attention it becomes like another
Microsoft. Big and bloated! The stock may slowly move and volatility dry up.
Apple will not be able to keep up the pace of creativity in the years to come
due to massive competition by Google, Microsoft, Samsung and everybody else.
People tend to forget Steve Jobs was a gem!
Result: I
was correct AAPL took a beating towards the end of 2012 because of future
stability in earnings. I felt AAPL became a runaway stock and reality has set
in a bit to create a great buying opportunity currently available at the 500
area!!
Surprise
No 6: Google Looses to Facebook
The Google+ product will ultimately
fail as compared to Facebook. The world doesn’t need another social networking
site. We already have another twenty that have died. The growth will eventually
flat line and the product will just be another tool from Google. If Google
cannot clearly make it stand out against Facebook with unique features it will
die a slow death. Google is starting to worry that Facebook will take market
share so is beginning to compete in order to preserve their position as the
search leader. Google will ultimately win in the Mobile space because it’s
clearly more abundant and device friendly. Google likes to share profits and
Apple does not! The exclusivity of apple model is what will work against it in
the long term. Google will have major problems with the multiple versions of
the Android platform. This will create a problem for developers.
Result: I
was correct GOOG did not take over any market share from Facebook and its
social networking was dead on arrival as expected. But I was partly wrong on
the death of mobile growth I now think Google has gained strength in the mobile
market. Mobile is still growing.
Surprise
No 7: Twitter takes over
Twitter will continue to grow and will
be an integral part of all types of message exchanging mechanisms for social
media and reporting. The company will probably propose an IPO and will be a
very successful IPO once launched. Twitter is a very valuable tool and will
continue to dominate the internet space. It is allot more valuable than most
people realize. The endless possibilities to its uniqueness will make it the
next major IPO since GOOGLE. I prefer Twitter over Facebook.
Result: I
was correct Twitter has continued to do well and will go IPO in 2013.
Surprise
No 8: Groupon, Linked IN, Zynga
All these babies will ultimately loose
30-50% of valuation. The business models for Groupon, Linked IN, and Zynga are
terribly flawed. These companies hardly make a real profit and if I had to pick
one out of these three to bet on I would possibly pick Zynga. The space for
online gaming is young but I doubt Zynga will be the market leader of this
space. The problem with groupon is it has major competition from
Livingsocial.com and many others. Link-In is a great site for information about
people but doesn’t really return any real cash.
Result: I
was correct Zynga and Groupon turned out to be trash but Linked In actually
turned into a pretty good stock. It’s the Facebook for resumes and business.
Surprise
No 9: Heavy 3D Gaming goes Mobile
I see major advances in hardware that
online social gaming will become heavy in graphics and power. This may be the
beginning of the Mobile 3D gaming world. Sony will possibly release a device
for 4G LTE with heavy 3D capabilities as well as Microsoft and Nintendo. Apple
and Android will also be the early leaders of this new space. N-Vidia will
supply the technology for the graphics processors. The world will now transform
from 3D heavy consoles to 3D heavy mobile devices.
Result: I
was correct that more people are moving towards mobile gaming on hardware 3D.
Sony unveiled a mobile platform a device and the I-Phone supports new 3D hardware.
This industry is still about to expand big time.
AUTO
MOBILES
Surprise
No 10: Electric cars take charge
I see a major bull market setting up
for the electric car space. There will be a huge opportunity in the electric
car space because we have so many new products coming to the table. The
vehicles will be so valuable that auto makers and dealers will do very well in
the years to come. These cars will be gobbled up by people who live in the
cities. The automakers will struggle to keep up with demand for the electric
cars they produce. This will be one of the legs that will help revitalize
America in the next 10 years. This space is a huge goldmine. The Nissan Leaf,
Chevy Volt and Toyota Prius will be the leaders. If USA allows BYG to import
their vehicles here it will be a market leader as well. Finally Warren Buffett
will make 800-1000% return on his BYG investment if that scenario occurs.
Result: I
was correct but due to more supply of oil found recently in America the change-over
to other energy forms has slowed. This means that it will take longer for these
new products to become main stream.
