Every year, our Investment Committee comes up with a list of wishes on how we hope things with go with the U.S. and global economy that affects investing opportunities. Last December, our list included wishes for an orderly resolution in Europe, political certainty in the U.S., lower correlations around the world, EPS growth with a focus on dividends and the Fed’s continued focus on reflation. Some of these were met to an extent, while others not so much.
So, for 2013 some of the wishes remain very similar, but the year that has been has provided new areas for wishful thinking. We’ve limited the list to five (in no specific order) but we could have gone on for awhile. Here’s the list, developed by Matt Reiner on our CIA Investment Committee.
Wish #1: Energy Independence
2012 could be coined the year the media brought the idea of energy independence to Main Street investors. Many insiders have believed this was a possibility for awhile, but this subject became more of a topic of conversation as the year proceeded. Of course, it is foolish to believe that in 2013 we would become energy independent, thus this wish is more geared towards continuing to build the foundation to allow for this to happen in the future. The Baken and Marcellus shales provide massive amounts of natural gas for our country. Thus, let 2013 be a year where initiatives promote growth in this area, rather than inhibit it. And allow these initiatives to give the private sector the necessary tools to build the necessary framework to allow energy independence to become a reality.
Wish #2: Technological Innovations
Over the past 15 years, this country has seen technology advance in ways unimaginable. Many investors continue to worry about what the driver would be for us to get into another period of economic expansion; technological innovation could be this driver. In 2013, the wish is for there to be a greater sense of innovation utilizing the great technology we have today. An ability to utilize the great advancements we have seen to provide for even greater innovations. Let 2013 bring us the technology that we thought was unattainable a year or two ago. And let the innovations re-invigorate our country from a sense of pessimism to one of
of pent up demand and there is a strong desire to take risk and grow businesses. But without knowing the rules of the game, this growth will not occur. Business owners and CEOs of public companies will not proceed with future growth initiatives until they understand the environment, but once they do they will propel this economy. Looking at 2012, it was a year that provided market run-ups and corrections. It was a year that provided us with joy and sadness, but despite all the worries we had, it was another year of progress, not in all facets of the game but in some. We will always be presented with headwinds, but it’s up to us how we deal with them.
Thanks for perusing and we wish all a Happy Holiday and a healthy and prosperous New Year.
Wish #3: Political Competence
I know, this one is a bit of a laugher. The idea behind putting this on the wish list (as was done last year) is the idea that eventually it will come true… right? In 2013, politicians have the ability rid them of the negative stigma they have built for themselves. These politicians have the ability to create clarity and more certainty that could propel this country into another economic expansion. They have the ability to show the word that the U.S. is able to compromise and thus provide an example for other nations to follow. Politicians need to stop politicking in 2013 and do as they were voted into office to do… represent their citizens and do what’s best for this country, not necessarily for them or their parties.
Wish #4: Tax and Entitlement Reform
This wish relates to the before-mentioned wish and provides a more direct desire of ours. The current policymakers have the ability to revamp a somewhat antiquated (and very complicated) tax code. The resolution is not a simple “raise the taxes on the rich,” rather it’s an overall reform of the code. The code was last changed in 1986, when the mortgage deduction was a huge benefit given that rates were in the 9-10% range. Times have changed (not that the mortgage deduction isn’t beneficial) and the makeup of our country and where revenues are derived differ from the 80s. So, politicians need to take that into account and make history by effectively adjusting the tax code, while also revamping the entitlement programs. This doesn’t mean changing anything for those currently participating in entitlement programs; rather, alter the future of the programs to allow for nothing to HAVE to change for those currently participating.
Wish #5: Two Quarters of GDP Growth (YoY) Over 3%
This is more of a direct wish, but one that really encompasses everything that has been mentioned thus far. If we see a couple of the beforementioned wishes come true, we will likely see this one come true as well. This country has a lot
Let’s let 2013 be a year that catapults our economy, provides us with certainties we never believed to be possible and provides all of us a renewed sense of optimism for our country’s future.