Are your finances feeling tossed like the crew of the SS Minnow? You know the tiny ship that just went out for a three hour tour. If not for the courage of the mighty crew, the Minnow would be lost.
Ok, I am reliving a bit of my childhood! Yes, your finances are not just like the SS Minnow on Gilligan's Island. However, it has certainly been a bumpy ride so far!
However, not to be the bearer of bad news, but we would suggest there are Three Reasons Markets Will Likely Decline in 2013. Here is why:
1) 2013 is not an election year
This market, however unsettling with the events in Europe, is being propped up. Yes, that is right! Our government has been doing everything possible to keep this show going and I have no doubt they will come to the rescue again very soon, if necessary. Why? Because it's a presidential election year that's why.
My Bernanke and the boys at the Fed know that if they don't get the current incumbent back in office, it is highly unlikely they will be back either.
So it behooves them the keep creating liquidity in the market and the illusion of economic growth. Yes, I said the illusion because the only growth we see has been fabricated by massive government borrowing.
Now this is nothing new so don't send me hate mail about my dislike for President Obama or his administration. According the Traders Almanac, this election year phenomena has been going on since 1833 which returns over the ensuing election years dwarfing returns in not election years.
However to take this full circle, 2013 is not an election year. In fact, according to the Traders Almanac, had the lowest returns of any of the four presidential years. These are the years most likely to produce wars, recessions and bear markets. Yes, bear markets!
2) The Bush tax cuts expire at the end of 2012
According to the government's own study by the Congressional Budget Office, the economy will shrink by 1.3% in the first half of next year if the government allows these cuts to expire. Here is what the CBO says "Such a contraction in output in the first half of 2013 would probably be judged to be a recession" according to a Fox News Story.
It is amazing that just the expiration of these tax cuts would have such an impact. Sen. Orrin Hatch, R-Utah was quoted as saying "You can call this a fiscal cliff. You can call it Taxmageddon as others have done. Whatever you call it, it will be a disaster for the middle class. And it will be a disaster for the small businesses that will be the engine of our economic recovery."
So what is the solution? Congress must agree on extensions while not significantly increasing our debt levels. Congress agree….good luck with that!
It won't happen or if it does happen it will be so last minute and so full of pork that it will do little good! So this is reason number 2 for our call for a bear market in 2013.
3) The Euro will break apart in 2013.
Yes, you heard it here. The damage to the Euro will be irreversible and we will end up with a split of Europe between the haves of the North and the have nots of the South. Look for just ten countries to form the newly shrunken European Union with Germany firmly in the lead.
The result of this turmoil will surely put a end to whatever "can kicking" they do for the balance of 2012. With Europe already in recession this will surely pull the rest of the world with it.
So what is the solution to this you ask? Certainly you don't just mean to scare us all with negative fear mongering and you would be right.
The point of this is to once again warn you to have your investment assets in the hands of not just passive management strategies, but active investment strategies such as trend following.
A trend following manager will help you make money from the coming bear market, while offsetting losses in your passive management strategies. This will allow you to cushion the blow that will likely come from the next great financial meltdown in 2013.
Looking for a trend following manager. Why not talk to us today!