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I share my experiences (good and bad) in trading stocks and results of thousands of trading simulations in my books. My primary book is The Art of Investing. ebtonypow.blogspot.com Retired early from IT and work full-time in investing. Develop strategies to trade. It is my passion to check out... More
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  • My Market Prediction For 2013

    In the article "My prediction for 2013 - all other predictions will be wrong", Larry Smith, a respected contributor at Seeking Alpha, proved that most yearly predictions by known organizations and famed individuals are often wrong. I agree with him whole-heartedly, but there are exceptions and I hope to be one of them. We can profit a lot from an accurate prediction.

    My past prediction

    Why should you want to follow a prediction from a nobody like me? My predictions have been on track many times, particularly for the year 2000, 2003 and 2009. In 2012, SPY (similar to S&P500 index) has a return of 13%. My prediction is 10%, off by 3%. Actually I could be very close to 100% correct if the bill on Fiscal Cliff was not passed, which would have the opposite effect on the market.

    Click here for the blog for my 2012 prediction, which has been posted as comments in Seeking Alpha many times.

    My prediction for 2013

    First, I do not do any research. I try to digest the experts' views (especially those with good arguments), add my own opinions and make a conclusion. We should review the prediction at three-month intervals and make adjustments. Market conditions constantly change -- it is not beneficial to maintain the original prediction that was created in the beginning of the year.

    Being said, I predicted that the SPY would rise by 12% for 2013 disregarding dividends. I regard the S&P500 (SPY is an ETF based on this index) over the Dow as a more accurate overall market representation.

    I predicted that the market would decline by about 3% in the first quarter and then climb back up to 12%. The bill on the fiscal cliff has been passed but the root problem has not been fixed. The problem is our high debt. We will face several hurdles such as cutting further expenses and raising more revenues. Raising the debt ceiling is not a long-term solution. The market will fluctuate when the next hurdle surfaces. With this, I predict a volatile market until mid year.

    Corporate profits on Q1 will not be better than expected but will in later quarters. Apple and its partners could be the exceptions with new profits from selling iPhone5 in China and newer markets in Q1.

    After mid year, there are many reasons that the market will improve.

    1. The EU should have solutions to their crisis. The market will react favorably even though the solutions are not good for some citizens and some countries.

    2. China's economy should have improved and its internal market is growing fast. It has fixed a lot of serious problems in the past, so I do not bet against that. When China recovers, its import partners of raw materials from Australia, Brazil… will also recover.

    3. Japan and India will not recover in the same pace as the rest of the world. Japan needs more citizens while India needs less. Japan's trade is suffering from the islet dispute with China.

    4. QE3 and low-interest rate would lead the recovery this time. We will see how the debt ceiling and the fiscal cliff affect the flow of money. Will China be the sucker again in lending us the 'monopoly' money? China wants our trade for creating jobs at a high price. However, the Chinese must be calculating whether it is worth it or not.

    5. Corporate profits will be increased, especially the global companies after Q1 if China recovers. We are all globally connected. A richer China means more iPhone and iPads sold to Chinese for example.

    6. The USA may be on the road to energy independence with the shale oil and shale gas. We have to see how the extraction damages our environment. The pipe line sector will be an important but neglected so far. Without them, the extracted fuels go nowhere.

    7. The two wars are ending. Hopefully they do not drag any longer.

    Predictions #6 and #7 would lead us to start a secular bull market starting as early as 2016. A secular bull market usually lasts about 20 years. The last one (about 1980 to 2000) is most likely caused by the lack of war.

    If there is any war with USA, then all bets are off! President Obama, take notes.

    Good and bad sectors for 2013

    Good sectors: Technology, Large Cap, Housing and Health Care (depending on the impact from ObamaCare).

    Bad sectors: Utilities, Consumer Staples , Defense and Dividend Stocks (whose value has been above its historical average).

    Risky but profitable sectors: Depending on China: Energy, Coal, Copper, and most other industrial minerals. Financial.

    The benefits of a yearly prediction

    It is used to plan how to invest for the coming year. If the outlook is rosy, commit more money on equities and invest aggressively, and vice versa. Upon a prediction of a recession recovery, an over-weighted equity portfolio is suggested. As my best investing years were 2003 and 2009-- years of recession recovery.

    Mid-year action

    Portfolios need constant manipulations as my mid-year action adjustments for 2011 and 2012 were prudent. I did not adjust both times, but they might provide valuable lessons. The rear mirror is always clearer.

    I predicted 10% for 2012. SPY is about 13%, so it is quite good.
    I predicted 6% for 2011. It is about 2%. It is a little off, but it is still on track.

    The mid-year (July 1) audit for 2012. The SPY's annualized return was 14% (7% YTD) and it was 4% (= 14 - 10) above the predicted 10%. However, we should still have another 3% return (= 10 -7) for the rest of the year according to my prediction. Hence, we should not be too concerned. In reality, it gained about 6% from July to the end of 2012.

    The mid-year (July 1) audit for 2011. The SPY's annualized return was 8% (4% YTD) and it was 2% (= 8 - 6) above the predicted 6%. The SPY should lose 2% (= 6 - 8) for the rest of the year according to my prediction. In such cases, the portfolio needed to rest in cash, be conservative and/or buy contraETFs. If that were done, we would avoid the 5% loss from July to the end of 2011.

    Conclusion

    My last recent market predictions were good for 2011 and 2012. The market was not rational for some years. I do not predict that my future predictions including the one for 2013 would work every time. Market prediction is not a precise science and the constantly changing dynamic factors alter the landscape. However, it is better to stick with a good prediction than not, and in the long term, it works.

    Act on current events being surfaced and adjust our portfolio prediction accordingly.

    Disclaimer. I am no responsible for your actions in your investment. Treat this article as educational information and past performance does not guarantee future performance.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Jan 08 2:16 PM | Link | 2 Comments
  • Rising and falling sectors
    As of 5/29/2011,

    * Rising.
    - eBook.
    - video games.

    * Long-term rising.
    - energy
    - commodities
    - health care.
    - agriculture
    - water


    * Falling.
    - traditional publisher
    - newspaper
    - commercial REIT (could be good value)


    However, if a correction of 5-20% is coming, the best investments are contraETFs, shorting stocks and cash. Market timing is an art more than a science. We bet the above with our best educated guess which should work most of the time, but NOT all of the time.

    (c) TonyP4 2011

    #####
    Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
    May 27 10:59 AM | Link | Comment!
  • Ten Baggers
    Many posts and at least one from other:

    Summary. It is hard to find one unless you buy penny stocks (most of them fail) and then hold them for 5 or more years.

    #
    I have my share of making over 100% in a stock. Most are not by design. I just wait to the next yearly peak (about 3 every year), being acquired by another company, waiting to satisfy time requirement for long-term capital gain in taxable accounts...

    #
    I have spent a lot of time in looking for Mr. TenBagger. It is not for me. I avoid stocks less than $2 and low volume. I may have many TenBaggers, but I sell them before they reach over 100% and it is easier to make money using the gain to buy stocks for the next 100% gain.

    In addition, it is very hard to track performance. To illustrate,

    A penny stock goes to two pennies. 100% gain.
    A penny stock goes to 0. 100% loss.

    Your test portfolio of these two stocks have no gain and no loss. However, for your testing you have 100% gain. Why? The penny stock that goes to 0 is not in your portfolio as your database takes it away as it is not a valid company.

    ----
    The search to get TenBagger.
    - must be less than $2 and low volume.
    - increasing growth, value for last 3 years.



    # Poortorich writes:

    Finding 10 baggers is hard. If someone says they can find one with regularity they are not being truthful. More likely, they were lucky. Did i mention i missed out on a 30 bagger? It still makes me sigh. Finding 2-3 baggers in 5 years is quite common.

    #
    poortorich, It is pure luck to find a 10 baggers. As in my previous posts, they belong to a set of stocks with common parameters and high risk.

    Buffett has many of them like KO and American Express which he holds for ever. However, they're about 20% annualized gain only. So is Peter Lynch. They're great return, but not if we include the losers for a typical retail investor.

    I missed many TenBaggers, but I never feel sorry.

    # graham and Dodd Investor writes:

    Getting a ten bagger is basically a matter of holding period.

    "Ten times in ten years" requires an average annual gain of 26%, achievable, but with difficulty.

    Ten times in TWENTY years requires an average annual gain of 12%-13%, just above the market return.

    Ten times in THIRTY years requires an average annual gain of about 8%.

    Warren Buffett was hoping for a ten-bagger in Coke in 20 years. He got it in ten. But look what happened to his Coke in the "second" ten years.





    #
    #####
    Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.


    May 21 10:04 AM | Link | Comment!
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