Salient to Investors:
Shane Brett at AllAboutAlpha writes:
- The long-term outlook for the US economy is broadly positive with housing stabilized, consumer confidence slowly returning, political instability solved by Obama’s decisive win, and as health spending increases under Obamacare.
- Cheap domestic energy will continue and the US will seriously expand exploration of shale oil using fracking technology. 2013 will see a relocation of energy intensive industries back to the US, causing trade disputes.
- The big unknown for the US is the effect of massive Quantitative Easing, and currency volatility is virtually guaranteed.
- The US has the benefits of being food and potentially energy independent, having a young growing population, and of being the center for economic creativity and new business start-ups.
- China will ramp up infrastructural spending in 2013 providing a boost to the world economy, boosting copper prices and commodity dependent economies like Canada and South Africa.
- Chinese companies are starting to bid more aggressively for both US companies and domestic American contracts, which will cause friction over the next few years.
- The German election in September will completely dominate 2013 in Europe, with little substantive progress being made in ending the Euro Zone Crisis until then. Merkel has disguised both the true size of the Euro crisis and the price to hold the Euro Zone together from the German electorate.
- The main economies of Europe will teeter between zero growth and recession in 2013.
- Global money creation will increase currency volatility, with the US Dollar and Euro weakening significantly in 2013. The Australian Dollar is the most overvalued currency now that country’s commodity export boom is subsiding, domestic economy slowing, and interest rates falling. The Euro will remain volatile.
- The amount of money creation is unprecedented and its outcome largely unknown – massive currency debasement has always preceded high inflation and economic decline. Inflation will rise in the years ahead – always the intention of the US to devalue in real terms its gigantic national debt.
- Commodity prices will stop declining in 2013 and the super cycle will resume – excluding oil, commodity prices declined progressively throughout the whole of the twentieth century, but reversed the whole decline during the past decade.
- The world faces a zinc and phosphorous shortage. The world population will increase by 140 million people in 2013. Many important countries depend on importing food.
- The melting of the North Pole ice caps will add new regular shipping routes across the Arctic in 2013, a major economic advantage to Russia, Canada, the US and Scandinavia.
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