Monday, January 14, 2013
What experts expect for stocks, bonds and real estate this year.
Bill Miller, Legg Mason Capital Management – The great bond bear market has begun, starting with Treasuries, which should see years of losses as interest rates begin to normalize. Equities, which outperformed bonds in 2012, will continue to do well, driven by rising earnings, strong free cash flow, solid profit margins, low inflation and attractive valuation relative to bonds.
Bryon Wien, vice chairman Blackstone – Prospects in Washington are gloomy, we cannot solve our problems simply by getting the rich to pay more. We have to broaden the tax base, revise the tax code and deal with entitlements. S & P 500 will decline 10 percent before ending the year about where it is now.
Bill Gross, founder of investment firm Pimco – little risk in bonds because the Federal Reserve is buying and there is no real risk until the war is over at 6.5% unemployment which he believes is two-three years away. Mr. Gross likes bonds from Italy and Spain, also Brazil. Brazil has much better growth prospects with bonds yielding 8.5 percent.
Karl Case, an emeritus professor at Wellesley College, who helped create the widely cited S & P Case-Shiller Index of housing prices. He says a year ago was a terrific time to buy a house. A 20-city composite index showed a 4.5 percent gain. Prices in hard-hit Phoenix have now gained 13 consecutive months. And even in Chicago and New York City where average prices dropped in 2012, prices should be improving in 2013. California is gaining strength but a long way from pre-recession process. California makes up one-fourth of the housing value in the United States. Real Estate tends to move in longer cycles, and Mr. Case is still saying now is a good time to buy.
REMEMBERING HUELL HOWSER - "Folksy television host: Known for his gee-whiz enthusiasm, he highlighted the familiar and the obscure all around the state,: Huell Howser seemed an unlikely candidate to become a television star - a big, grinning ex-Marine with a ... Tennessee drawl and an eye for stories that others would pass by, such as the Bunny Museum in Pasadena and the rendering of artwork out of dryer lint. ... Howser, 67, [was] an iconic figure in public television ... A former local television news reporter, Howser struck out on his own in the 1980s - producing 'Videolog,' a series of human interest stories, for public television station KCET-TV. In 1990, he launched his 'California's Gold' series that aired on public TV stations throughout the state."
DISNEY EYES LAYOFFS - "Walt Disney Co. started an internal cost-cutting review several weeks ago that may include layoffs at its studio and other units, three people with knowledge of the effort told Reuters, in an early sign that big companies may not be finished tightening their belts. Disney ... is exploring cutbacks in jobs it no longer needs because of improvements in technology, one of the people said. It is also looking at redundant operations that could be eliminated following a string of major acquisitions. ...
"After years of repeated and sometimes severe cost cutting in the wake of the financial crisis, by last summer it looked as though Corporate America had trimmed all the fat and was back on the path of profits through operating growth. But news Disney is weighing cuts - on the heels of Eli Lilly and Co.'s warning last week that cost controls would drive earnings this year - could herald yet another wave of retrenchment."
CLIMATE BLINK: HOTTEST YEAR EVER - "Temperatures in the contiguous United States last year were the hottest in more than a century of record-keeping, shattering the mark set in 1998 by a wide margin. ... The average temperature in 2012 was 55.3 degrees, one degree above the previous record and 3.2 degrees higher than the 20th-century average, scientists at the National Oceanic and Atmospheric Administration said. They described the data as part of a longer-term trend of hotter, drier and potentially more extreme weather. ... [T]he data provided further compelling evidence that human activity - especially the burning of fossil fuels, which produces greenhouse gases - is contributing to changes in the U.S. climate."
ECONOMIC TREND: AMERICANS AGAIN ON THE MOVE - "Americans began striking out for greener pastures at a pace not seen since before the recession crippled job prospects, hobbled home sales and kept many stuck in place. About 3.9 percent of the population, or 11.8 million people, moved to a different county in 2011, new Census figures show. That was the highest level since before the recession, and up from 3.5 percent in 2010 and 2009 - the lowest level since the government began the tally in 1948. Movement between counties largely reflects people moving because of jobs. ... Overall, the increase signals both a healthier economy and future growth because it means more workers are being matched with jobs that suit their skills. However, the 3.9 percent rate remains low historically, fueling debate about the implications for the economy. The census data don't indicate whether it rose again in 2012."
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Edwin “Buzz” Aldrin (83), Robert F. Kennedy Jr. (59), Steven Soderbergh (50), Mick Taylor (65).
RICHARD MILHOUS NIXON was born 100 years ago this past week in Yorba Linda, Calif. -- "Bob Woodward believes now that the Watergate scandal was much worse than he realized as a young Washington Post reporter ... 'Those tapes are a tire iron wrapped around the Nixon legacy that no one's going to ever get off,' he said in an interview. 'You listen to those tapes, and he literally is using the presidency as an instrument of personal revenge and reward.' ... Many of Nixon's marquee accomplishments would make today's Republican rank and file apoplectic. He signed a bill creating the Environmental Protection Agency, proposed universal health care and supported an Equal Rights Amendment to the Constitution. He even imposed wage and price controls. ...
"Nixon died nearly two decades ago , at 81, but those tapes he secretly recorded of his Oval Office conversations continue to trickle out. Fresh batches have revealed disparaging comments about blacks, gays, Jews and ethnic groups ... More are being processed. 'You've got a self-portrait by him - he installed the tape system, he knew it was functioning,' said Woodward. 'It's the perfect irony that he thought he was so powerful that no one would ever find out about the tapes or ever get them.' ... Gerald Ford would have turned 100 this July, and he seems likely to get even less fanfare than Nixon for his centenary. But the 50th anniversary of John Kennedy's assassination, Nov. 22, will most likely spark a spike in Kennedy nostalgia."
HARD TO BELIEVE FILE: CALIFORNIA BALANCES ITS BOOKS! - "After five years of crippling deficits, Gov. Jerry Brown announced ... that the state is in the black as he proposed a $97.7-billion budget that would increase funds for education and health care while still leaving money on the table. The governor's optimism followed an unanticipated leap in revenue that helped cancel the $1.9-billion deficit estimated only months ago. ...
"And the state this year will begin to reap the benefits of tax increases he championed last year. Brown would increase overall spending by 5 percent, buoyed by forecasts of an improving economy and higher tax receipts. His plan includes few of the spending cuts that have characterized recent state budgets."
L.A.'S RACE FOR MAYOR ... Greuel and Garcetti hope for support from [Bill] Clinton or Obama,": "The two leading contenders for mayor - City Controller Wendy Greuel and City Councilman Eric Garcetti - have each told confidants they hope one of those marquee names will be in their corner. ... Garcetti's connections to Obama could be trumped by the clout of some of Greuel's most prominent, moneyed backers. Two of the founders of the DreamWorks studio -- Steven Spielberg and Jeffrey Katzenberg -- ... have made clear that Greuel, their onetime employee, is their choice for mayor. ... Bill Clinton might be among those to remind analysts that presidential endorsements don't necessarily carry the day. Just a few months into his first term in 1993, he endorsed City Councilman Michael Woo for mayor of L.A. and even traveled to Van Nuys to pitch for the candidate. Businessman Richard Riordan, a moderate Republican, beat Woo soundly."
SIGN OF THE TIMES: The number of NYSE market makers and traders working on the floor has fallen from 3,000 in 2007 to 300 today, per today's N.Y. Post.
COLLEGE FOOTBALL BOWL PICK OF THE WEEK – RR ended the season 13 – 7, not a bad season. Congrats to the National Champions in all four NCAA football divisions: Alabama Crimson Tide, North Dakota State Bisons, Valdosta State Blazers, and Mount Union Purple Raiders.
COLLEGE HOCKEY PICK OF THE WEEK – Friday January 18, 7:00 PM ET, TWCS; #15 ranked Cornell University Big Red (7-6-2) vs. #16 ranked Union College Dutchmen (10-7-4). A big capital district game, we like Cornell to pull the upset over The Dutchmen, Cornell 4 Union 1. (Season to date (3-0)
NFL FOOTBALL PICK OF THE WEEK – Sunday January 19, 3:00 PM ET, Fox; San Francisco 49ers (12-4-1) vs. Atlanta Falcons (14-3), the NFC Championship game; the 49ers in a breeze over Atlanta, San Francisco 32 Atlanta 21. Season to date (12-7)
THE SWAMI’S TOP PICKS – 49ers 32 Falcons 21, New England Patriots 28 Baltimore Ravens 17, Cornell 4 Union 1. Season to date (48-24)
DRIVING THE WEEK - With the $1 trillion coin idea (fun while it lasted but never plausible) now formally off the table, we get back to regularly scheduled programming of trying to figure out if and when the debt ceiling will be raised. Still too soon for much serious movement off initial hard line positions. Presumably the picture will become clearer after the House GOP retreat late in the week, when members receive presentations on just how devastating a default would be to a fragile U.S. economy. Such a default would, in fact, make a prime GOP goal, reducing the debt, a great deal harder by crushing economic growth and possibly sending borrowing rates higher should the US lose some of its safe haven status. ... But GOP frustration at a lack of cuts in the fiscal cliff deal is very understandable. Trick will be to slake partisan thirst for big confrontation and dramatic results without tanking the global economy.
Fed Chairman Ben Bernanke speaks today at 4 p.m. at the University of Michigan on monetary policy and the U.S. economy ... Huge week for bank earnings with Goldman Sachs, JPMorgan Chase and U.S. Bancorp on Wednesday; Bank of America, BlackRock and Citigroup on Thursday; and Morgan Stanley on Friday.
Next week; Office politics how to stop it.
Until Next Monday, Adios!
January 14, 2013