Financial predictions to track in 2014 (CBS News)

Financial predictions to track in 2014

By Larry Swedroe

Every year, I like to keep track of predictions people make for the upcoming year, the “sure things” for the year. It seems like no one in the financial media holds others accountable, which is a shame since the evidence shows that there are no good forecasters. So I will. Today, we’ll look at the common predictions I’ve been hearing for 2014.

Our first sure thing is that with the Fed announcing its plan to end quantitative easing, interest rates will rise. Thus, investors should limit bond holdings to the shortest maturities.

Our second sure thing follows from the first. With the Fed tightening, emerging markets equities will perform poorly.

The third sure thing is that with the CAPE at 26.17 as we entered the year, about 60 percent above its long term average, stocks should be avoided.

The fourth sure thing is that with all the fiscal and monetary stimulus that continues to be injected into the economy, we’ll see a sharp rise in inflation (Note: This is guru Peter Schiff’s favorite subject).

The fifth sure thing follows from the fourth. The rising inflation will lead to a falling dollar. The dollar index closed 2013 at 80.29

And the sixth sure thing follows from the fourth and fifth: Gold will reverse the sharp fall it experienced in 2014. Gold closed 2013 at $1204.50.

The seventh sure thing is that the municipal bond market will be hit by both interest rate increases and default problems, keeping investors away.

The eighth sure thing is that the economic recovery will continue its tepid path, with the Philadelphia Federal Reserve’s Survey of Professional Forecasters predicting GDP growth of 2.6 percent.

The ninth sure thing is that after defying the gurus in 2013, the volatility of the market will rise. The VIX ended 2013 at 13.43.

Our tenth and final sure thing is that active management will beat passive in net returns. Seventy-five percent of advisors believed that, as stated in InvestmentNews, January 6-10, 2014.

That’s our list. We’ll report back to you at the end of each quarter. We’ll check in quarterly to see how things actually turn out. 

© 2014 CBS Interactive Inc.. All Rights Reserved.

Saving Detroit: The Privatized Solution (Part 3: Shareholders)

By David Docekal, Editor, The Hypercapitalist

@DavidDocekal

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I briefly mentioned this in a comment on my last Detroit post but I still wanted to go more in-depth on the subject of shareholders for the City of Detroit.

Residents, I believe, would take more pride and feel more accountable if they had direct ownership in their city. One could argue that this is true with government as it is now but people don’t see government as an investment. They see it as an expense. Holding stock in a corporation, however, is like owning property. It goes up and down in value (hopefully you make a profit) and if you need to sell it, you can sell it. By holding a piece of paper that says you own equity in Detroit would be something that empowers you to be involved.

Residents would automatically get a set amount of shares for free when the city becomes private. These shares would not be allowed to be sold for a minimum of two years. This is to help maintain the stability of the investment pool. The free shares are given out in order to gain buy-in for the program and to release the burden of buying shares for residents who may not be able to afford them. This enables them to vote in city elections. Only shareholding residents may vote for the board of directors.

The return on investment would come in the form of shares of stock to investors in the city corporation. The shares would be valued by a marketplace set up specifically for the buying and selling of stock in the city. The value of course is worth the demand. Citizens of the city would automatically get a certain number of shares without having to purchase upon their first tax return (to prove residency) living in the city. That gives them the ability to be vested in their hometown without having to suffer a possible burden of purchasing shares. It would otherwise be like owning any other stock in a company. It would have the chance to increase in value and be sold as needed.

Additional shares can be purchased anytime. However, they would be designated “non-voting” until proof of residency is provided. Then they would be converted to voting stock.

The investment account could be managed online, on the phone, through your regular broker or at an office for the Department of Shareholder Affairs. This would accommodate low income stockholders who may not have access to the internet or even a phone.
Residents would be able to buy voting shares in the company. The annual voting would elect a board of directors that would in turn hire a CEO and vice presidents to manage the city day-to-day. Executives would receive sizable but not outlandish bonuses based on the city’s performance for that fiscal year.

Outside investors (or non-residents) can buy shares in the Detroit Corporation but they would be non-voting. This would minimize the risk of outsiders deciding city management but would afford the opportunity for the rest of the world to put their faith and support into Detroit. Non-voting shares are also given to any corporation regardless of residency. Voting shares are designated for resident individuals only.

This would all be backed up by the “I Own Detroit” ad campaign featuring everyday residents along with celebrity residents, like Eminem, sharing their pride in ownership and pride in their hometown.
The point is to promote pride, faith and commitment in the city. And above all: accountability.

Taxes would still be a factor. Property and Income Taxes would be used strictly for infrastructure, payroll and other day-to-day city services. Investment capital would be used for capital projects such as beautification, stadiums, parks, etc.
Other revenue would be from sales tax that could be partly allocated to a special fund for low-interest loans for qualified locally-owned small businesses provided by the company’s banking subsidiary. Other money would be donated to registered, accredited food pantries within city limits.

The corporation would take possession of all current city services including emergency services, schools, libraries, infrastructure, etc. Each department with a dedicated vice president appointed by the CEO.

My Reasons Why I Wish Jack Donaghy Was a Real Person

-He can help your company’s profits with the positive synergy of revenue stream dynamics.

-He can teach you to love your mother unconditionally through the powers of Stockholm Syndrome

-Jack knows the only way to truly change the world is a room full of rich people.

-He can set aside how idiotic a plan was and teach you to imagine a world where it worked!

-He could build GE into the greatest company on Earth. And bring Earth into the top three planets in the universe!

– He can reduce your company’s healthcare costs by putting his patented formula in the coffee to keep the women from getting pregnant.

-He could give seminars on how the path to success is through focused, high-level paranoid thinking. Like Hitler…. or Willy Wonka.

-He’s a white male with hair…..The sky is the limit!

-He created the tri-fection oven. Need I say more? Come on Quadrafection…..

-If you’re lucky enough he will invite you to a weekend filled with gazing out windows while holding a glass of scotch.

-(on GE) He could bring “good things to life”. And bad things to Chinese Rivers.

-He’s been a GE man for 30 years….. and a GE woman for one week of corporate espionage on Revlon.

and my #1 reason….

-Need to exactly replicate your office in another location? He knows a guy…..