Byron Wien Announces Predictions for Ten Surprises for 2013

  Byron Wien Announces Predictions for Ten Surprises for 2013

Business Wire

NEW YORK -- January 2, 2013

Byron R. Wien, Vice Chairman, Blackstone Advisory Partners, today issued his
list of Surprises for 2013. This is the 28th year Byron has given his views on
a number of economic, financial market and political surprises for the coming
year. Byron defines a “surprise” as an event which the average investor would
only assign a one out of three chance of taking place but which Byron believes
is “probable”, having a better than 50% likelihood of happening.

Byron started the tradition in 1986 when he was the Chief U.S. Investment
Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a
Senior Advisor to both the firm and its clients in analyzing economic,
political, market and social trends.

Byron’s Ten Surprises for 2013 are as follows:

      Iran announces it has adequate enriched uranium to produce a
      nuclear-armed missile and the International Atomic Energy Agency
      confirms the claim. Sanctions, the devaluation of the currency, weak
1.   economic conditions and diplomacy did not stop the weapons program. The
      world must deal with Iran as a nuclear threat rather than talk endlessly
      about how to prevent the nuclear capability from happening. Both the
      United States and Israel shift to a policy of containment rather than
      prevention.
      
      A profit margin squeeze and limited revenue growth cause 2013 earnings
2.    for the Standard & Poor’s 500 to decline below $100, disappointing
      investors. The S&P 500 trades below 1300. Companies complain of limited
      pricing power in a slow, highly competitive world economic environment.
      
      Financial stocks have a rough time, reversing the gains of 2012. Intense
      competition in commercial and investment banking, together with low
3.    trading volumes, puts pressure on profits. Layoffs continue and
      compensation erodes further. Regulation increases and lawsuits persist
      as an industry burden.
      
      In a surprise reversal the Democrats sponsor a vigorous program to make
      the United States independent of Middle East oil imports before 2020.
      The price of West Texas Intermediate crude falls to $70 a barrel. The
4.    Administration proposes easing restrictions on hydraulic fracking for
      oil and gas in less populated areas and allowing more drilling on
      Federal land. They see energy production, infrastructure and housing as
      the key job creators in the 2013 economy.
      
      In a surprise reversal the Republicans make a major effort to become
      leaders in immigration policy. They sponsor a bill that paves the way
      for illegal immigrants to apply for citizenship if they have lived in
5.    the United States for a decade, have no criminal record, have a high
      school education or have served in the military, and can pass an English
      proficiency test. Their goal for 2016 is to win the Hispanic vote, which
      they believe has a naturally conservative orientation and which put the
      Democrats over the top in 2012.
      
      The new leaders in China seem determined to implement reforms to root
      out corruption, to keep the economy growing at 7% or better and to begin
6.    to develop improved health care and retirement programs. The Shanghai
      Composite finally comes alive and the “A” shares are up more than 20% in
      2013, in contrast with the previous year when Chinese stocks were down
      and some developing markets, notably India, rose.
      
      Climate change contributes to another year of crop failures, resulting
      in grain and livestock prices rising significantly. Demand for grains in
7.    developing economies continues to increase as the standard of living
      rises. More investors focus on commodities as an investment opportunity
      and increase their allocation to this asset class. Corn rises to $8.00 a
      bushel, wheat to $9.00 a bushel and cattle to $1.50 a pound.
      
      Although inflation remains tame, the price of gold reaches $1,900 an
8.    ounce as central bankers everywhere continue to debase their currencies
      and the financial markets prove treacherous.
      
      The Japanese economy remains lackluster and the yen declines to 100
9.    against the dollar. The Nikkei 225 continues the strong advance that
      began in November and trades above 12,000 as exports improve and
      investors return to the stocks of the world’s third largest economy.
      
      The structural problems of Europe remain largely unresolved and the mild
      recession that began there in 2012 continues. Civil unrest subsides as
10.   the weaker countries adjust to austerity. Greece proves successful in
      implementing policies that reduce wasteful government expenditures and
      raise revenues from citizens who had been evading taxes. European
      equities, however, decline 10% in sympathy with the U.S. market.
      

Every year there are always a few Surprises that do not make the Ten because
either I do not believe they are as relevant as those on the basic list or I
am not comfortable with the idea that they are “probable.” Below are several
“also rans” which did not make the Ten Surprises.

“Also Rans”

      Having traded below 20 for most of 2012 the VIX Volatility Index surges
11.  33% to 30, providing a bonanza for traders. The decline in the S&P 500
      increases market volatility.

      The Newtown, Connecticut, massacre finally convinces Congress to do
      something about gun control. As a first step they ban future civilian
12.   purchases of automatic weapons, including handguns, with clips of more
      than ten rounds and require more extensive background checks on all gun
      purchases. “It should not be easier to buy a gun than rent a car”
      becomes a slogan.

      Frustrated by an inability to increase revenues through raising income
13.   taxes, Congress begins to consider different approaches. There is more
      talk of a value-added tax as well as a wealth tax, and these ideas
      appear to be slowly gathering momentum.

      Congress decides that high-frequency and other computerized
      algorithmic-based trading practices are putting the individual investor
14.   at a disadvantage. A transaction fee designed to slow down frenetic
      activity and protect against “flash crashes” and glitches is imposed on
      intra-day trades.

      The planet finds itself saturated with technology. Semiconductor
      companies, software providers, social media favorites and personal
      computer manufacturers all report disappointing earnings and provide
15.   discouraging guidance. They lead the overall market lower. Users finally
      agree the present state of the art is fast enough and connected enough,
      and that they have more “apps” than they know what to do with. Apple
      bucks the trend and trades above $700 as its products continue to enjoy
      enormous success abroad.
      

About Blackstone:

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The views expressed in this commentary are the personal views of Byron Wien of
Blackstone Advisory Partners L.P. (together with its affiliates, “Blackstone”)
and do not necessarily reflect the views of Blackstone itself. The views
expressed reflect the current views of Mr. Wien as of the date hereof and
neither Mr. Wien nor Blackstone undertakes to advise you of any changes in the
views expressed herein.

Contact:

Blackstone (New York)
Public Affairs, 212-583-5263
 
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