Month: January 2013

Gargantuan and Growing: The U.S. Debt Figure You’ve Probably Never Heard Of

The widely reported $16.1 trillion federal debt is a drop in the bucket

By Elliott Wave International

Financial transparency is a must for U.S. publicly traded companies. But if the federal government had to abide by those same regulations, more Americans would know that the often-reported $16.1 trillion federal debt doesn’t come close to the truth about the nation’s liabilities.

In a Nov. 26 Wall Street Journal opinion piece, a former chairman of the Securities and Exchange Commission and a former chairman of the House Ways & Means Committee write:

The actual liabilities of the federal government — including Social Security, Medicare, and federal employees’ future retirement benefits — already exceed $86.8 trillion, or 550% of GDP.

The authors say that few people know about the $86.8 trillion figure because that figure is not in print on any federal government balance sheet.

Federal debt is staggering enough. Municipal liabilities also pose a danger to the nation’s financial health.

Illinois has an unfunded pension liability of at least $83 billion. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states.

Bloomberg, Aug. 29

The article also noted, “California, with an A-ranking, one level below Illinois, remains S&P’s lowest-rated state.”

Budget shortfalls in California and Illinois are just the tip of the municipal financial iceberg. Many other state governments are financially swamped.

How did municipal spending get so out of control? Well, a stupefying story out of Bell, Calif., provides a hint. On Nov. 26, CNN reports that the Bell police chief earned $457,000 a year, and “He is now asking for more money.” In 2010, the Bell city manager resigned after controversy over his $787,000 yearly salary.

States Are Broke and Approaching Insolvency

… States’ legislatures continue to blow money. For years,
state governments have been spending every dime they could
squeeze out of taxpayers plus all they could borrow. (The
lone exception is Nebraska, which prohibits state indebtedness
over $100k. Whatever Nebraska’s official position on any
other issue, by this action alone it is the most enlightened
state government in the union.) But now even states’ borrowing
ability has run into a brick wall, because the basis of
their ability to pay interest — namely, tax receipts —
is evaporating. … The goose — the poor, overdriven taxpayer
— is dying, and the production of golden eggs, which allowed
state governments to binge for the past 40 years, is falling.
The only reason that states did not either default on their
loans or drastically cut their spending over the past year
is that the federal government sucked a trillion dollars
out of the loan market and handed it to countless undeserving
entities, including state governments.

The Elliott Wave Theorist, November 2009

If there’s another leg of the economic downturn, expect a further dwindling of tax receipts.

Finally, consider the wobbly financial dominoes in Europe and what may happen in the U.S. after the first one falls.

8 Chapters of Conquer the Crash — FREECan the Fed Stop Deflation? Should you rely on the government to protect you? What should you do if you run a business? You can get answers to these and many more questions in Robert Prechter’s Conquer the Crash. And you can get 8 chapters of this landmark book — free.This 42-page report can help you prepare for your financial future. You’ll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more. Get Your FREE 8-Lesson “Conquer the Crash Collection” Now >>

By OilPrice.com

Have our wishes been answered? Scientists have found an oil field which contains 200 times more hydrocarbons than there is water on the whole of the Earth.

Time to wave peak oil goodbye forever … but before you do I should probably inform you of the tiny hiccup in any plan to develop this oil field.

It is around 1,300 light years away.

The scientists work at the Max Planck Institute in Germany, and using the 30m-telescope of the Institute for Radio Astronomy they discovered a vast cloud of hydrocarbons within the Horse Head Nebula galaxy in the Orion constellation.

Upon discovery of the cloud IRAM astronomer Viviana Guzman declared that, “the nebula contains 200 times more hydrocarbons than the total amount of water on Earth!”

Just for those of you curious as to exactly how many barrels of oil that roughly equates to, here you go: one hundred and fifty-five quintillion, two hundred and thirty-eight quadrillion, ninety-five trillion, two hundred and thirty-eight billion, ninety-five million, two hundred and fifty thousand, or 155,238,095,238,095,250,000 barrels.

Now like me you might be wondering how oil, which is supposedly produced from organic matter buried millions of years ago, could possibly exist in space. Well it turns out that these hydrocarbons were likely created by the fragmentation of giant carbonaceous molecules called polycyclic aromatic hydrocarbons, which are produced during the death of a star.

There is even a theory that molecules such as these could have served as the first organic compounds for creating life.

Source: http://oilprice.com/Latest-Energy-News/World-News/Scientists-Find-Mega-Oil-Fiel-…-1300-Light-Years-Away.html

By. James Burgess of Oilprice.com – The No.1 source for oil prices

By www.CentralBankNews.info

By www.CentralBankNews.info     The central bank of Peru held its monetary policy reference steady at 4.25 percent, as expected, saying inflation continues to ease and economic growth is close to the country’s potential growth rate.
    The Central Reserve Bank of Peru (BCRP), which has held interest rates unchanged since April 2011, said inflation in 2013 should gradually converge to the bank’s 2.0 percent target due to “the improvement of food supply conditions and due to a pace of growth of economic activity close to the economy’s level of potential output, in a context in which global economic activity continues to show weak indicators.”
    Peru’s headline inflation rate eased to 2.65 percent in December from 2.7 percent in November and core inflation rose by 3.27 percent in the last 12 months, the bank said. Excluding food and energy, inflation was an annual 1.91 percent in December.
    Last month the BCRP also said it expected inflation to decline to around 2 percent in 2013.

    The bank also said Peru’s economy has stabilized around its long-term sustainable level of growth although the export sector is still registering a weak performance, also the same observation that the central bank made in December.
    In the third quarter, Peru’s Gross Domestic Product rose by an annual rate of 6.5 percent, up from 6.3 percent in the second quarter.

    www.CentralBankNews.info
‘
   
   
   

Peru’s central bank held its monetary policy reference interest rate unchanged at 4.25 percent, as widely expected, as inflation has continued to decline and is now within the bank’s target range.
    The Central Reserve Bank of Peru (BCRP), which has held its rates steady since April last year, said it expects “this trend to be maintained in 2013, with inflation gradually converging to 2 percent.”
    The central bank targets inflation of 1-3 percent and its president, Julio Velarde, recently said inflation should remain mild in December, with the rate ending this year around 2.8 percent and the declining further to around 2 percent in 2013.
    Velarde also forecast that the economy is expected to grow around 6 percent in 2013, similar to 2012. In 2011 Peru’s Gross Domestic Product rose 6.9 percent.

    Peru’s inflation rate slowed to 2.66 percent in November from 3.25 percent in October due to a decline in the cost of perishable foods, reversing earlier price rises.
    Peru’s GDP expanded by 2.2 percent in the second quarter from the first for an annual growth rate of 6.1 percent, the same as in the first quarter and one of the highest growth worldwide on the back of investments in infrastructure and mining projects.
     The central bank said economic growth had stabilized around its long-run sustainable level but activity linked to export markets were weak.

By MoneyMorning.com.au

It’s been a whirlwind start for the markets in 2013.

In the first week of trading major indexes notched up their biggest weekly gains in more than a year.

Greg Canavan predicted this bullish start to the New Year in his latest research presentation.

In fact everything from the property market to commodity prices to the terms of trade is tracking the predictions Greg’s made in ‘The Fuse Is Lit‘.

But it’s still very early days in 2013. So I sat down with Greg before he rushed off to celebrate the birth of his new-born daughter to get his take on where the markets are poised right now…and what kind of actions you should be taking to safeguard your capital this year…

Simon Munton: Greg, how should our readers feel about this rally in stocks? This week we’ve seen a bit of a cool-down. Is that a chance to jump in and join the bulls? Or are we just being sucked into a major sell-off in the coming months?

Greg Canavan: I believe the latter. The Fed, the Bank of Japan and other major central banks are trying to push you into risky assets. This is a game for nimble traders. It’s not a game for people wanting to make sound investments. Just like the rallies that happened after QE1 and QE2, this one will end. And probably quicker.

SM: Why do you say that?

GC: This sort of action always ends badly. By that I mean forced speculation during times of economic weakness. It ends when there is no one else left willing to risk their capital for a few extra percentage points of yield. The bottom line is we’re being pushed out on the risk spectrum, right when the risk is greatest. Resist this urge. I just don’t think you’re being compensated for putting capital into the market at this point.

SM: You mention in your predictions video for 2013 several ‘false signs’ that will trick investors into thinking things are getting better in the markets and the Australian economy. Is this rally a false sign?

GC: Yes. Another false sign is renewed optimism about China. That’s also firing up our market, especially the iron ore majors BHP and Rio. Probably the biggest mistake you can make with your money in 2013 is believing the hype about China’s ‘comeback’.

SM: That’s a big call. There’s been a 70% rebound in the iron ore price. Companies like Fortescue Metals are now reviving projects that have lain dormant for months. Surely that constitutes a genuine comeback.

GC: Nothing has fundamentally changed in China in six months. China has simply found new ways to keep its credit boom going. As I explained in last year’s ‘China’s Bust’ report, China may be on the other side of its historic credit boom (which expanded most famously from 2009 to 2011) but due to the state-controlled nature of the banking system, credit growth is still running at dangerous levels. China has a banking system that is ready to blow. The same thing happened in the US in 2007, and it’s going to happen to China in 2013.

SM: What do you mean?

GC: I read a Bloomberg article recently that explains it well. An analyst for TCW Group Inc., which oversees about $135 billion wrote, ‘The U.S. got into trouble because institutions like Fannie Mae (FNMA) and Freddie Mac were too big to fail and had a toxic mix of private shareholders and implicit government guarantees. China’s financial system is full of Freddies and Fannies.’ What you’re seeing now is not a brave new recovery in China. You’re seeing a bust being delayed by piling on more debt. As I’ve said for the last six weeks, the fuse is lit for a catastrophic bust in 2013.

SM: What timescale are we talking about here? And what practical steps can Aussie investors take to prepare?

GC: I lay out the three phased impact of a China bust on Australia’s economy here. That’s not to say the Chinese ‘recovery’ won’t have legs from here. But if history is any guide China is going to face some very hard choices later this year (harder than it already faces). Australian investors face a hard choice now too. Do you go with the crowd and hope for the best? Or do you swim against the stream and prepare for the worst?

SM: Clearly you’re taking option two. You’ve called your investing strategy for 2013 ‘The Survival Circle‘.

GC: Yes. These are portfolio adjustments I believe you need to make now if you believe, as I do, that a fuse has been lit from China’s bust to the heart of the Aussie economy – specifically, the Aussie banking sector. What you need to know about this strategy is it’s designed to take into account rallies that might occur BEFORE the fuse reaches ground zero. We just sold out of Treasury Group for a 36.5% gain. And the latest investment added just before Christmas is already up 4%. So this is a bearish portfolio set-up that can yield results even when markets rally hard. Predicting and capitalising on what I call ‘false signs’ is a big part of the ‘Survival Circle‘ strategy.

SM: Final thought for readers?

GC: Look, it can be annoying watching markets rally if you’re bearishly invested. But if you look back through recent history, credit expansion, stimulus measures and falling interest rates have ALWAYS pushed up share prices even as the risks of investing increased.

This is what’s happening now. But I don’t think this situation will last long. In fact, I think the market is on the brink of another down leg. If you agree with me, and you’d like a strategy for protecting yourself – and even profiting – from this down leg, you’ll find it in my report.

SM: Thanks Greg.

From the Archives…

What Lower Interest Rates Mean for Australian Stocks in 2013
10-1-2013 – Kris Sayce

My Investing Resolution for 2013: Profit With the Rulers of the Universe
10-1-2013 – Bengt Saelensminde

Downside in the Yen: Shinzo Abe and the Three Bears
9-1-2013 – Murray Dawes

China’s Economy is Still Heading for a Hard Landing – Here’s a Better Bet
9-1-2013 – John Stepek

By MoneyMorning.com.au

The European commission president, José Manuel Barroso, really asked for it when he said in Lisbon, ‘I think we can say that the existential threat against the euro has essentially been overcome. In 2013 the question won’t be if the euro will, or will not, implode.’

The question is, will the Eurozone implode in 2013? There’s definitely an existentialist threat.

If things go badly on ‘the continent’, there may well be a crash in the Aussie stock market. Your retirement savings could be torn to shreds. Your life will be ruined. You might as well…wait…what’s this?

Did it work? Did you immediately stop thinking about your coming financial woes and believe Manuel’s claim that all will be well? Who’s Manuel anyway? Who cares? Just look at that grumpy-sniffle’s face. It’s so cuddly.

OK, so what’s going on here? Well, the prestigious newspaper the Financial Times decided to combat the worsening euro crisis with a clever new strategy: Superimpose puppies onto European sovereign debt charts. Hopefully nobody will notice everything in Europe getting worse. They’ll just see wet noses and floppy ears.

Don’t believe it? Check it out for yourself here. You’ll need a log in, so here are two of their charts, as proof:

Never mind what the chart says, just look at those puppy-dog-eyes.

Clearly, the Financial Times needs to rethink their strategy. You can still spot the disastrous levels of debt. Making the dogs bigger, a whole lot bigger, might help. In fact, the little puppies are going to have to become huge, because Europe is getting steadily worse, despite what Manuel Barroso might say.

We’re sick of being criticised for our regular pessimism, so here’s our attempt at the puppy dog strategy. (For an example of how not to use the puppy dog strategy, click here.)

As you can see from the chart above, unemployment in the Eurozone reached an all time high of 11.8% recently. Unemployment for workers under the age of 25 is now higher than 50% in Greece and Spain. 22% of the Irish population live in jobless households. In fact, many European countries are experiencing problems worse than during America’s Great Depression. All this has many analysts worried about the potential for social unrest in Europe in the worst hit areas.

Even the wealthier countries like Germany are starting to struggle. French and German manufacturing activity has fallen for 10 months in a row. Even Germany’s record 2012 exports took a hit as the year ended.

We’re not sure how Europe’s finance ministers could possibly ignore all these facts during their last summit.

They won’t be able to continue ignoring them for long though. Things are expected to get even worse in coming years. Goldman Sach’s Economics Research team calculated their forecast for real GDP growth. A long recession is in the cards and it may take three years for Europe to recover to its previous level.

Greece remains worst off and a new bailout may be needed soon. Greece’s banks alone are expected to require a 30 billion euro recapitalisation all up. Their non-performing loans are at a remarkable 24% high. The worst thing is that the debt write down of Greek government bonds has left the same banks without the revenue stream from those bonds. And there ain’t much they can make money off at the moment.

Citigroup analysts believe there is a 60% chance Greece will leave the euro in the next 12-18 months.

The thing is, if one country leaves the currency, others will likely follow.

Elga Bartsch from Morgan Stanley reckons there are ‘fundamental flaws in the euro’s institutional set-up’. Sharing one monetary policy amongst different countries simply creates too many problems. Regulation, economic fundamentals, moral hazard and much more.

Plus there are also far too many issues left over from the 2008 financial crisis which need to be mopped up. Spanish houses are rumoured to be selling 70% below their crisis peaks and Irish property prices may be in for another fall.

The most recent developments out of Europe involve Cyprus. The banking system there is in deep trouble. The German parliament’s key opposition parties are kicking up a fuss over the bailout terms. You see, Cyprus has a reputation as being a banking centre for Russian oligarchs and their dirty money. The Germans want assurances that their taxpayer dollars aren’t going to end up in Russian billionaire’s wallets.

In the end though, the German taxpayers are expected to cough up the money. Their bark is worse than their bite.

Meanwhile, in France, even the bankers are going on strike over cost cutting plans. But French companies have little choice and a socialist government on their back. Shawn Tully explains the state of France at Forbes:

‘Corporate profits have plunged to 6.5% of GDP, about 60% of the euro zone average. That’s because French exporters are losing market share, and the ones that survive must lower margins to charge competitive prices. As a result, they lack the funds to invest in new plants and technologies. France now has half as many exporting companies as Germany and, amazingly, Italy. German industry benefits from 19,000 robots, five times the number in France. As for R&D spending, it’s dropped 50% in the past four years.’

Tully reckons the problem behind all this is that countries stuck in the euro can’t devalue their currency to make their exports competitive. Without competitive exports, it’s tough to grow an economy. The thing is, devaluing your currency is cheating. It’s like making your house bigger by changing how many centimetres are in a meter. You still have the same house.

The only way to truly make an economy competitive is to enhance productivity, lower wage costs, reduce the regulatory and tax burden and stop bailing out the people who run a business into the ground.

In other words, Europe has gone to the dogs.

If bad financial news gets you down, but you enjoyed this uncharacteristically enthusiastic edition of Money Morning, you can probably guess what ‘investment’ you should buy in 2013…

But the puppy strategy is just a bit of fun. In short, it’s just like any other diversion tactic. You could look at the bad news coming out of Europe and just ignore it. Plenty of people will do and have done that.

And unfortunately, there are more investors who don’t even know what’s happening. They watch the mainstream news. They see and read the stories about all the measures the central bankers are taking to fix things.

They see the proposal about the USD$1 trillion platinum coin and think, ‘Why not? Just do it, if it helps.’

Now, you can use that approach if you want. Cover your eyes and try to ignore it. But as even any six-grader knows, covering your eyes doesn’t make something go away. Go on, try it. Stand on a rail track as a train approaches and cover your eyes. Second thoughts, don’t try it. We both know what will happen.

The same goes for investing. And that’s why it pays to take notice of what’s really happening to the economy and markets.

So, aside from a four legged friend, what investments might do well while Europe implodes? Well, there are two strategies that fit the bill. The first is a crisis strategy. Could your wealth withstand a complete collapse of the banking system without the governments of the world being able to fund bailouts?

You could ensure part of your wealth is that robust by owning precious metals and other physical assets. A house is still a house, even if it falls in price. What matters here is that your ownership is direct. When you own a home or some gold, there is nobody standing between you and your asset. There is no Banksia Securities, MF Global or investment bank you rely on.

Another interesting strategy takes advantage of the fact that the train wreck of Europe, and the rest of the world, is a slow motion one. You should invest in assets that pay you to wait. Dividend stocks, bonds, options and many other investments can keep your bank account ticking over. That way you’ll be collecting cash while everyone else frets about the price of their investments.

These two strategies are what Money for Life Letter readers read about in their first two issues. But in December, we revealed that Australia’s banking system might actually be in trouble, just like Europe’s. And how that could mean cancelling your mortgage in 2013. You can find out about all three opportunities here.

Have a great weekend,

Nick Hubble
Editor, Money for Life Letter

From the Port Phillip Publishing Library

Special Report: The Fuse is Lit

Daily Reckoning: Let the Iron Ore Wars Begin!

Money Morning: What Lower Interest Rates Mean for Australian Stocks in 2013

Pursuit of Happiness: Is it Really Possible to Make Money from Your Home?

By www.CentralBankNews.info     Mozambique’s central bank held its benchmark standing facility rate steady at 9.50 percent but said it would reduce the monetary base to 38.50 billion meticais by the end of January to help meet its 2013 goals of 6.5 percent inflation and 8.4 percent real economic growth.
    The Bank of Mozambique (CPMO), which cut its key rate by 550 basis points in 2012, said inflation in southern Africa had been relatively stable due to good harvests, the decline in international commodity prices and a stable currency.
    Mozambique’s inflation rate eased to an annual rate of 2.02 percent in December from 2.33 percent in November.
    In December the central bank said it would intervene in the interbank market to ensure that the monetary base expands to a maximum 40.5 billion meticais by the end of December.
   The central bank said business confidence had continued the upward trend that it began in July 2012 and the average interest rate on commercial loans fell by 50 basis points to 21.49 percent in November.    The bank said Mozambique’s Gross Domestic Product fell by 1.3 percent in the third quarter from the second quarter for annual growth of 6.8 percent. In the second quarter, Mozambique’s economy expanded by an annual rate of 8.0 percent.

    www.CentralBankNews.info

By www.CentralBankNews.info     The Bank of Korea (BOK) cut its forecast for economic growth and inflation in 2013 and said the pace of recovery in the first half of this year would be below South Korea’s long-term trend.
    BOK, which held its base rate steady at 2.75 percent on Thursday, said in its Economic Outlook for 2013 that the contribution of exports to overall growth this year would continue to outstrip that of domestic demand, as in 2012.
    “Exports are expected to show faster growth than last year, as the world economy gradually recovers and the volume of trade increases,” the BOK said, forecasting export growth of 5.5 percent in 2013 and 8.2 percent in 2014. In 2012 exports are forecast to have risen by 3.6 percent.
    For 2012 the BOK forecasts Gross Domestic Product growth of 2.0 percent, down from its previous forecast in October of 2.4 percent, and for 2013 it forecasts growth of 2.8 percent, down from a previous 3.2 percent forecast. Year-on-year growth in the first half of 2013 is forecast at 1.9 percent, rising to 3.5 percent in the second half.

    For 2014 the BOK forecasts GDP growth of 3.8 percent. South Korea’s average quarterly growth rate from Q1 2001 to Q2 2008 was 1.2 percent.
    South Korea’s headline inflation rate is forecast to rise to an average of 2.5 percent in 2013, down from its previous forecast of 2.7 percent, and then rise further to 2.8 percent in 2014. In 2012 the inflation rate was 2.2 percent.
    The BOK targets inflation of 2.5-3.5 percent for the 2013-2015 period.

    www.CentralBankNews.info

How Statisticians Won the Battle And Mood Won the War

By Robert Folsom

In the late stages of the 2012 presidential campaign, one of the loudest sideshows was the debate over whether polls accurately predict election outcomes.

The debate pitted data crunchers like 538’s Nate Silver and neuroscientist Sam Wang of the Princeton Election Consortium against critiques like “nobody knows anything” from Peggy Noonan and “you can only measure what matters least” from Michael Gerson.

Now that the numbers have been counted, it’s fair to say that the results landed firmly on the side of the statisticians. For example, Silver’s election-eve analysis proved stunningly accurate.

Yet in January 2012, four researchers published an even more stunning statistical forecast. Their research identified the collective influence that “regulates voting with respect to the re-election or rejection of incumbents.”

What’s more, this forecast has nothing to do with asking voters what they were going to do, or had just done. The research debuted in the paper titled,

Social Mood, Stock Market Performance and US Presidential Elections:

A Socionomic Perspective on Voting Results

This was no sideshow about statistical models; the paper identified the main performer in the center ring.

The elections paper did of course meet all the standards of quality scholarship. It posted in January on the Social Science Research Network (SSRN) website, home to some 350,000 research papers. Yet in just 10 months the elections paper became one of its most-downloaded papers ever.

And as I mentioned recently on this page, the elections paper has now been published in Sage Open, a peer-reviewed journal of the social and behavioral sciences.

But most importantly: While observers express surprise at the “landslide” electoral college result, NO ONE who read this paper was surprised by the outcome of the 2012 presidential election. That’s because it explained when incumbent presidents are — and are not — reelected to a second term.

And yes, the election paper also explains why.

If you haven’t read it, please know that it’s still available as a free download from SSRN. Follow this link – you owe it to yourself.

If you would like to receive the best of Social Mood Watch and other free socionomics content each week, sign up here.

This article is syndicated by The Socionomist, a publication of the Socionomics Institute, and was originally published under the headline How Statisticians Won the Battle And Mood Won the War. The Socionomist is designed to help readers understand and anticipate waves of social mood. Copyright © 2012 Socionomics Institute.

By The Sizemore Letter

The market, like the Greek gods on Olympus, has a cruel streak.  It seems to enjoy toying with us mere mortals, and it seems to enjoy teaching us a little humility as well.

This time last year I threw my hat into the ring of InvestorPlace’s “10 Stocks for 2012” contest with my recommendation of Turkish telecom giant Turkcell (NYSE:$TKC). 

A monster run in the third quarter pushed me into first place, where I kept a tenuous lead up until New Year’s Eve.

As the final day of 2012 progressed, I had a comfortable 2% lead over the TheStreet.com’s Philip VanDoorn and his recommendation of Capital One Financial (NYSE:$COF)—a lead that I maintained throughout the day.  Up by more than a percent with less than an hour until close, I felt victory at hand.  I pulled a cigar out of the humidor, one I had been saving for a special occasion, and cut it.

So there I sat, cigar in mouth and torch in hand…waiting…when a funny thing happened.  In the closing minutes of the trading year, Capital One had a massive surge while my precious Turkcell flat lined.

I lost the contest by less than 1% in the final three minutes of the trading day. 

Needless to say, the cigar didn’t get smoked.  It got hurled at my computer screen in a volley of expletives I’m not particularly proud of.

Congratulations to Philip, by the way, on an excellent choice that would have earned his readers a handsome 38% return.

What lessons can we learn from my humbling tale?

To start, never get cocky when investing.  This is an endeavor that rewards a cool, composed disposition.  Your ego can be your worst enemy—particularly for male investors.

Yes, it’s fine to engage in frat-boy-like banter with fellow traders on StockTwits or Twitter (or better yet, over a beer after you leave the office).  I do it all the time, and it’s all in good fun.  Just make sure you keep a sense of humor about it, and accept that you will look like a fool now and then when you make your investment moves public.  It happens to us all.

Second, investing is a lot like horse shoes or hand grenades.  In the real world, being close is generally good enough.  Few investors who bought Turkcell at my recommended price would complain that it “only” returned 37% or that the Banco Santander (NYSE:$SAN), which came in third, “only” returned 26%.

And along those lines, it’s important to not get fixated on arbitrary timelines.  In the real world of investing, you don’t buy a stock and hold it for exactly one year, buying on January 2 and selling on December 31.  If an investment is working, you let it run.  And if it’s not, you reevaluate.  You either give the investment theme more time to work out, or you cut your losses and move on.

For example, Arcos Dorados (NYSE:$ARCO) had a terrible year, down 42%.  But Josh Brown, who recommended, did not stand by idly while it sank.   After the stock gapped lower on a bad earnings release, he sold the stock in the accounts he manages and lived to trade another day.  That’s what a good investor does.

And now, it starts again.  InvestorPlace just launched the “10 Stocks for 2013” iteration, and it should be a fantastic contest this year.  I cast my lot with German luxury automaker Daimler AG (OTC: $DDAIF), maker of the iconic Mercedes Benz.  But I also hold Jeff Reeves’ Intel (Nasdaq: $INTC) and Steve Freehill’s Two Harbors (NYSE:$TWO) both personally and in my Dividend Growth Portfolio at Covestor.  (Listen to Jeff and me discuss our picks in this podcast).

I encourage you to follow the contest.  And you buy Daimler—and it wins this year—we can light up victory cigars together on New Years Eve 2013.  The slightly-damaged stick that I cut on New Years Eve 2012 has been placed back in the humidor…for now.

Disclosures: Sizemore Capital is long DDAIF, INTC, SAN, TKC, and TWO.

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