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Thursday, April 25, 2013

The "BUZZ WORDS" for 2013

In this global "LOW-GROWTH" macro-economic environment, I would use the following "BUZZ WORDS" to define World Central Bank and global market activity for 2013, as I see it at present.

*(I may update this list as the year progresses, as various scenarios become clearer, and as new events unfold.)

  • the Fed's "QUANTITATIVE EASING" program ("QE") of buying bonds and mortgage-backed securities
  • the Fed (and other Central Bankers around the world) provides low interest-rate loans to Banks
  • Banks are supposed to make this money available to companies and individuals at low rates that they deem appropriate (however, as demand for loans picks up, no doubt the Banks will raise interest rates, even though the Fed may not...a risk that will have to be factored into a company's costs)
  • the Fed's "DUAL MANDATE" monetary policy -- to reduce the unemployment rate while maintaining an inflation target of 2%
  • the Fed's goal is to produce a "WEALTH EFFECT" (precisely who will benefit remains to be seen)
  • wholesale and retail prices of goods and services
  • price of stocks, commodities, etc.
  • home prices
  • taxes
  • interest rates (and, thus, the nest eggs of 'savers')
  • market volatility
  • the value of currencies (e.g., the Yen)
  • introduce company share buy-back programs
  • increase dividends
  • offer or enhance preferred-share programs
  • issue or enhance corporate bond programs
  • production and distribution of goods and services
  • costs of goods and services
  • employee/goods/services performance
  • sales
  • the benefits (to the consumer) of the goods and services
  • the housing sector (the Fed's desire)
  • wages
  • staff
  • this phrase does not seem to exist in this current environment where most (U.S.) markets are at/near either 4-year highs or all-time highs
  • is being ignored

Companies will need to effectively balance their "SHAREHOLDER PERKS" with their cost-cutting measures against demand for their products/services to ensure that, in offering these perks (while protecting against domestic and global risks), they don't go from cash-rich to debt-ridden in short order. As always, it's up to each investor to determine just how "TRANSPARENT" these "RISKS vs. REWARDS" are, as presented by companies, so they can make informed decisions before buying (or continuing to hold) shares.

The risks of a "VALUE" company in this kind of environment may very well be much greater because of its low-growth nature; whereas, a "GROWTH" company's risks may be lower. However, if demand is not there, they will all become "value" plays (or worse) in the end, as their risks increase. In the long run, all of this will only work if consumer demand for goods and services keeps pace with, and outpaces the ultimate costs of the company's "ADDED RISKS" and "INFLATION."

We'll see how 2013 ends and how well global Central Bank policy has worked. Stay tuned...