Keystone's 2013 Predictions Summary
It’s time for another year of predictions that will provide comic
relief in December 2014, but first a look back at 2013 is in order. The analysts are out in force now forecasting the SPX to move above 2000 in 2014. Perhaps they will all be
correct. Last year, there was a consensus from 1390 to 1615 and the SPX blew up
through even the highest estimate. The power of the central bankers, especially
the Fed and BOJ, can never be underestimated. Like the old Wall Street adage
says, “don’t fight the Fed.” In addition, the low rates fuel share buy backs
that pump asset bubbles higher. The weakness in copper and commodities from
February 2013 forward had no negative effect on markets. This is remarkable and
verifies the power of the Fed. The ‘shock and awe’ move by the BOJ in April
2013 was the single greatest market upside driver in 2013.
Keystone was looking for lower equities
in 2013 and had the direction and magnitude wrong. Fortunately, Keybot the
Quant, Keystone’s trading algorithm, is smarter and navigates successfully
through the year. Keystone continues to hold short positions against the
markets that are currently all under water as equities continue higher. Market
bears should get a turn at bat in 2014.
Keystone looked for dollar buoyancy in 2013 and euro weakness.
Both were on the flat to bullish side. Also, a
continued disinflation with a
move towards deflation scenario was expected, which remains in place, but bond
yields were expected to be flat. Instead the 10-year yield went from 1.9% to
3.0%. In fairness, the 10-year dropped to 1.6% before the rise. Keystone
thought the effects of QE would diminish since there is no velocity of money
and the whole globe is now debasing anyways, however, global traders continue
to believe in the central bankers and as long as this trust remains, all is
fine for market bulls. Keystone
expected lower equities which obviously did not occur, in fact, equities logged
one of the best years in a long time.
(12/30/13 end of year
assessment shown in color)
Keystone’s Predictions for 2013
1. SPX High for 2013: 1520 (over 1800)
2. SPX Close for 2013 (SPX Begins at
1426): 1205 ($93x13) (over 1800)
3. SPX Low for 2013: 1105 (1426)
4. Dollar Range ($USD): 77-93
(79-85)
5. Dollar Closing Price ($USD): 88
(80-81)
6. Euro Range ($XEU): 100-137
(128-138)
7. Euro Closing Price ($XEU): 113
(138)
8. 10-Year Note Yield Range ($TNX): 1.10%
- 2.00% (1.60%-3.00%)
9. 10-Year Note Closing Yield ($TNX): 1.55% (3%)
10. 30-Year Note Yield Range ($TYX):
2.00% - 3.20% (2.80%-4.00%)
11. 30-Year Note Closing Yield
($TYX): 2.65% (4%)
12. Unemployment Rate % Range: 7.3 – 9.5% (7.0%-7.9%)
13. Unemployment Rate % December
2013: 8.2% (7.0%)
14. GDP Average During 2013: 1.1% (about 1.5%-ish)
15. WTIC Oil Range ($WTIC): 50 – 110
(85-113)
16. WTIC Oil Closing Price ($WTIC):
73 (99)
17. Brent Oil Range (BNO): 80 – 130
(96-112)
18. Brent Oil Closing Price (BNO): 93
(111)
19. Natty Gas Closing Price
($NATGAS): 5.25 (4.43)
20. Gold Range ($GOLD): 1000 – 1800 (1180-1700)
21. Gold Closing Price ($GOLD): 1375 (1200)
22. Copper Range ($COPPER): 2.0 – 3.8
(3.0-3.8)
23. Copper Closing Price
($COPPER): 2.60
(3.38)
24. Commodities Range ($CRB): 220-310 (270-306)
25. Commodities Closing Price
($CRB): 265 (282)
26. China Growth Rate % Average for 2013:
6.5% (but data not reliable) (it stays above 7% even 7.5% if you trust the data)
27. The QE3 and QE4 quantitative easing
measures are not creating the strength that QE1 and QE2 had. There is a race to
the bottom now by all countries, a race to debase, a competitive devaluation.
As the year moves along traders will realize that QE simply does not have the
super oomph like prior years and this will further weaken markets.
(Nope, central
bankers continue to rule)
28. Disinflation will continue with
a move into deflation during 2013 as measured by Keystone’s Inflation-Deflation
Indicator. Wage deflation will continue to be a major concern. People do not spend
money if they do not see their salaries increasing. The massive deleveraging
for people, business and government continues. (correct, stocks move
higher but we remain in a disinflationary environment; wages are not
increasing)
29. The U.S. will fall into
recession this year. Higher taxes and regulations, and Obamacare costs and
taxes, will hurt business and hiring. The weak consumer sentiment and
confidence numbers, as well as retail sales, in late 2012, pave the way to a
sick economy in 2013. (nope, Obamacare is problematic but the weakness has not appeared)
30. The four-year Presidential cycle
points to lackluster first and second years, 2013 and 2014, and this is expected
for 2013. The 18-year
cycle, currently in a secular bear from 2000-2018, has a few more years to go
before flipping back to an 18-year bull market in 2019-2037. In fact, two more
recessions may occur before the 18-year cycle bottoms, perhaps a recession in
2013 and another in 2017, and, if each recession is a couple years in duration,
potentially four out of the next six years may be weak for markets.
(this statement
holds true but 2013 was up)
31. Structural unemployment will
continue in the U.S., and the social fabric will show signs of stress, with
increased crime, especially burglaries. Families grouping together to live,
such as young adults living at home with parents, or elderly parents living
with children, will continue since folks will be hurt by the deflationary funk
and low employment. So this boost of family formation will be missing in action.
(correct)
32. The housing sector will continue to
struggle and the recovery will prove premature. The poll of people building new homes
are shrinking, a shadow inventory remains, the cash buyers are running out, and
many of these investors are flippers waiting for a big push in housing that
will not yet occur. Many of these flippers will seek to unload the properties
which will weaken the housing sector. Other foreclosures, now freed by the
banking paperwork, will increase the housing inventory. The banks and financial
companies have been buying real estate they will be caught in the housing lull
as well, which will create a housing funk for a couple or few more years, a
flat lifeless market. (housing peaked in April and down ever since however the jury is
out)
33. House prices will move flat and start
to fall as the year moves along, surprising everyone believing in the housing
recovery. (they continue sideways some elevation; hedge funds chasing real
estate)
34. Housing Starts will not exceed one
million surprising all that are expecting a strong housing recovery. A strong
recovery will be shown by 1,000K starts and higher, not seen since June 2008.
(Starts
squeezed out 1 million)
35. January should be weak considering
that consumer sentiment and confidence is dropping, retail sales are weak and
the quantitative easing measures are having less of an effect. The highs for
the year may occur early in the year. (nope)
36. Keystone’s Cash Society™ will grow
during 2013. People will
realize that taxes can be avoided if you pay cash for goods and services. This
behavior will grow the underground cash society. This is the path Greece went
down, and other countries that do not properly address debt. Raising taxes does
not increase the amount of money that comes into the coffers; it may reduce the
amount as the cash society flourishes. (cash society is
growing)
37. A Flash Crash will occur this
year on par with the 5/6/10 Flash Crash. (not one quite on par
but many notable flash crashes that Keystone catalogs on an ongoing basis)
38. The ECB will start to cut rates (there
is not much room from 0.75%) in early 2013 to spur growth in Europe and help
the struggling nations. Perhaps at the 2/7/13 meeting. The euro will trend
lower all year long. (euro flat to higher although Draghi did cut rates)
39. Greece will remain part of the
euro up thru Merkel’s re-election. (yes)
40. Merkel will be re-elected in September
2013. (yes, easy one)
41. At the end of 2013, after
Merkel’s re-election, talk will heat up greatly over Greece leaving the euro
and also the possibility of Germany leaving the euro. (interestingly, gunmen today
shoot at the German ambassador’s residence as Greece and Germany are at odds
over austerity; no talk on Greece leaving euro, however)
42. The German DAX, the big success
story of 2013, will roll over and lag in 2013, but some money-pumping will help
it recover into the Merkel election. (a lull then Merkel
pumped it up through the election to the current new all time highs)
43. The European markets, after phenomenal
gains in 2013, will roll over as the European recession deepens and experience
a weak 2013. (nope, euro markets remain at multi-year highs fueled by weaker yen)
44. China hard landing occurs.
China’s shady banking and insurance scams (wealth-type products) will unravel
and throw the country into turmoil as many citizens are wiped out of their
savings. This will slow the move to an urban, domestic-led economy. A mistrust
of the city life will continue especially on news of company failures and
scams. The move from rural to uban will take longer than many think. The
one-child policy will have serious ramifications from a demographics standpoint
fueling potential unrest. The growth will probably stay at a 6.5% number, but
this will be in concert with a hard landing. (no hard landing yet, one-child
policy was changed)
45. Japan will accelerate their
quantitative easing from spring on once the member positions are in place at
the BOJ. The dollar/yen and Nikkei may languish as the year begins and not run
higher on the yen weakness until the late spring and summer forward. (the BOJ
yells Banzai! Destroying the yen and pumping dollar/yen and stock markets higher)
46. Japan will face a massive debt crisis
in 2013 which may be a catalyst for a global monetary crisis across the globe.
(nope, the
party continues)
47. Japan and the U.S. will forge
strong ties with natty gas and LNG which will lead to building a liquefier or
two in the States and a terminal or two in Japan which will be a bright spot
for the overall economy. America’s natty gas is Japan’s future. (yes)
48. In general, the natty gas industry
renaissance will continue in the States despite the government placing road
blocks. The negativity concerning fracking should have little effect on the
industry. The natty gas auto industry will grow and talk and action will
increase on natty infrastructure. Folks will begin to realize that natty gas is
one of the tickets out of the country’s monetary mess. (yes, although natty gas
infrastructure lags)
49. More and more U.S. manufacturing will
move to Mexico and gains will be made with the drug war on the border. The
violence will lessen now that States have legalized pot since much of the pot
that came across the border is no longer desired. (things are calming a
bit)
50. Protectionism around the globe
will increase, with country against country, nation against nation, in little
spats, with countries performing tit for tat measures against each other to
provide advantages for their own economies. The race to the bottom. The global economic
environment will be poisoned by this behavior causing global markets to
languish. (there are protectionism measures increasing like China solar
panels and French wine)
51. The Fed will not raise rates in
2013. (easy one, now there is ZIRP Forever)
52. Unemployment will remain
elevated and wage deflation and average hours worked will remain flat showing a
continual situation where businesses simply have no plans to hire or expand.
(one of the
better predictions)
53. The Dividend Stock Bubble will
continue to burst. ETF’s such as SDY and DVY will top in early 2013 and these
highs may not be seen for a long time. (they continued to run
although this prediction will be used moving forward)
54. Financials will underperform in
2013. (nope)
55. The Great American Consumer will
finally peter out after decades of reckless spending. The retail sector will be
weak in 2013. A couple or
few notable retailers will seek bankruptcy protection in the spring and summer
sending shock waves thru the retail sector. (Remember, predicting the demise of
the Great American Consumer is a fool’s errand since they have spent non-stop
since the 1970’s. Perhaps
Keystone should mark this prediction ‘Incorrect’ right now?) (yes, incorrect; the
consumer lives on)
56. Bankruptcy will return as an
oft-used word in 2013 as many businesses across many different sectors will
seek protection due to sluggish sales and a weak, low and slow-growth economy.
(nope)
57. The muni-bond top will continue
and roll over with MUB trending lower. MUB to likely make its high in early
2013 and then move sideways with a sideways down bias for years to come.
(yes)
58. California will face a monetary
crisis and look to the Fed for support. The country will be up in arms over
having to bail out States. A couple other States will jump on the band wagon
right away, perhaps Illinois. The local and state government difficulties will
continue with both looking to raise taxes as a means to raise revenue.
(governments
are all raising taxes but Cali did not face a monetary crisis)
59. The automobile industry will be
far weaker than anyone expects. The late 2012 surge in Ford pick-ups should
abate and sales will be weak across the board moving forward. Weak auto sales
will add to copper weakness and continue platinum and palladium weakness.
(auto’s surprisingly
held in there, the rich made richer by the Fed all bot new cars)
60. Despite the government wanting
to exit GM in 2013, at a loss, the stock will languish all year long due to a
weak global economy and auto sector. This will cause the government to delay
their exit and open up new concerns over saving GM since they will be headed
into trouble again. (nope, it is painted as a happy ending and the stock moves higher)
61. Internet will start to fracture
into those respecting their own privacy and those that do not care. Sites that
respect privacy and have and explain strong guidelines will win over many
subscribers. Computer privacy issues will be very important to some folks but
others will not care. FB and other social sites will continue to make mistakes
exposing personal information. The privacy issue will be key in 2013.
(great
prediction considering the NSA scandal and Snowden occurred and is ongoing)
62. Twitter IPO will be wildly
successful. (yes)
63. There will be some consolidation
of companies in the tech sector in 2013, which will lead to stronger companies,
but layoffs. Mobile chip companies such as ARMH and QCOM will continue with
favorite son status. (yes)
64. Sadly, the rich vesus poor class
warfare talk will continue and this is simply another negative background force
that will hurt the economy in 2013. The business bashing environment will
continue thru 2013 and business will continue to struggle in a very difficult
environment. (yes)
65. The U.S. standard of living will
continue to slowly decrease over time. (yes)
66. Young people will become disillusioned
with college debt that results in the same job that would be obtained without
the degree, only now the young person is an indentured servant with 50K
government debt. Young folks will gravitate towards skills and seek high-paying
jobs in shale gas, welding, natty gas technicians, and other similar
industries. The stigma of trade jobs will vanish as the young folks seek these
technician-type and other physical-type jobs rather than office jobs.
(yes but
structural unemployment is a problem)
67. On-line education sites will start to
catch up with the needs of young people and will expand in a multitude of ways
to educate all people of all ages. The
use of GOOG and AAPL tablets in classrooms will increase. People will be
retrained with different skills so they can seek available positions and the
Internet and on-line education will play a more important role to fill these
needs. (give it a yes)
68. The country will accept the new
marijuana laws and become less concerned as time moves along, especially since
many States and localities will want to fund government by taxing the lucrative
pot industry. (yes)
69. Banks, financial institutions,
airlines, and many other companies will incorporate more and more add-on fees
to boost the bottom line in a weak low-growth economy. The nit-picking fees
will further hurt the consumer. (yes, hurt the consumer but create big
profits for companies)
70. The cyber threat will increase
and one or two major banks will experience a significant hack attack and
problem in 2013. Cyber security companies will do well in 2013. (yes, look at the TGT
breach, things are a mess in cyber security land)
71. For tech in general, there will always
be great new products but much of the tech revolution from the 1970’s thru the
2000’s is waning. Nowadays, sites perform upgrades that add very little new
items and instead create difficulty of use and a poorer experience. This is a
sign of an industry trying to extract more with less, providing programmers
work to do but the benefit is becoming less attractive. Look at apps, 500K apps
and the typical person likely only uses a couple dozen. Plain and simple, the
number of new ideas in technology will continue, but at a slower pace.
(yes)
72. Data is the most important thing in
technology, companies can sell and lease data to multiple outlets and create
revenue streams. The data becomes more important than the actual money a site
brings in. Privacy limits are pushed again. (yes, ‘data mining’ is a
new buzz word, and ‘metadata’)
73. AAPL will struggle in 2013, the
luster is off the rose. The gun-ho Apple enthusiasts have filled their needs.
New customers are more open to other manufacturers and more focused on the
price point. The
realization will occur that Apple is simply another commodity producer of
Smartphone’s, tablets and notebooks like any other manufacturer. AAPL
television will either not appear in 2013, or, if it does, only receive a
lukewarm reception. (yes, although AAPL may finally make some inroads to China;
Samsung rules, folks like the larger screens)
74. AMZN will sell a mobile phone
and it will be successful. (not quite there)
75. Computers and technology in
general will continue to create deflationary affects on the global
economy. Computers are huge
deflationary machines. Robots will continue to replace human’s in more and more
jobs, especially dangerous jobs. The gains in technology only serve to increase
the structural unemployment. (yes)
76. The PC market demise is greatly
exaggerated. Content creators will continue to need desktop and laptop machines
moving forward. The desktop
manufacturers should experience one more business cycle push where offices
upgrade computers, but the slow slide south for PC’s should continue after
that, and then develop into a steady base line business. (HPQ runs higher)
77. Mobile monetization will
continue to be a tough nut to crack. People
want things to be free or low cost on the Internet, and do not want to have a
small screen littered with ads. There are profits to be made but the
realization will hit that mobile ad revenue may not be as great as thought.
(jury’s
out)
78. The Wallet Wars will be in full
display this year and a pivotal year to identify winners and losers in the
mobile payment battle. Square is trying to gain the early edge. The best tech ideas are those out of
left field with one company leading. The wallet wars are already a jam-packed
battle zone with companies fighting each other to be one of the main
darlings. This behavior
will result in a low margin difficult business moving forward. (jury’s out)
79. The trend in localized healthcare
clinics treating straight forward healthcare issues will increase, also
in-store health models such as WAG. (yes)
80. The self-publishing of books
will increase in popularity with folks attempting to write the great American
novel. The self-publishing
machines will increase in popularity and maintain interest in the printed word.
Magazines and newspapers will continue to go the way of the buggy whip.
(eBooks
continue gaining huge popularity)
81. 3-D printing will continue to gain in
popularity and use, little boxes that can print nearly anything you need. This
has a huge future and is revolutionary. (yes, big year for those
stocks)
82. The automobile industry is
placing black boxes in all cars moving forward similar to the flight recording
boxes in airplanes. There will be arguments against this new practice but
people will forego more of their rights and all future automobiles will be
manufactured with the black box recorders with Americans wanting to gladly give
up their liberty for a little bit of perceived safety. Folks are already using
Progressive’s gizmo that tracks vehicle behavior. (yes, that is where
technology leads)
83. Large X or M class solar flares
will hit the Earth at some point in 2013 and folks will be shocked at the
amount of electronic damage that occurs due to the electromagnetic pulse. Folks
will take solar flare events much more serious moving forward. (nope, for the solar maximum
cycle, it was oddly quiet, 2013 should have been a banner year for flares and plasma
events)
84. As the difficult economic times
continue in 2013, folks will seek out music and other outlets to reduce stress
and seek more simple, perhaps frugal lives. More and more products will move
towards less use of labeling; understated goods will be in more demand.
(yes about
the move to avoiding the gawdy labels, but folks are still partying like its
1999, well, at least the wealthy that the Fed makes wealthier)
85. Defensive sectors such as consumer staples
like PG will hang in there better than other stocks during 2013. People always
need toothpaste, toilet paper, and soap no matter what the economy is doing.
(markets
did not correct properly all year long but PG ran higher like all the rest)
Correct 48
Incorrect 37
Total 85
Percentage
Correct 56%
(Many of the above predictions will be used for 2014)
