Financial Samurai Predictions for 2012

Santorini Church and CrossHappy New Year Everyone!

The Dow closed up 5.5% in 2011 vs. a prediction of up only 5%.  A 50 basis points differential is a critical error that needs to be rectified if I want to get beyond a “B” grade given to me by a reader.  Apologies for my negligence!  At least the direction was correct.

Several people have asked whether I’m involved with the CIA given the prediction of Kim Jung Il’s passing came true.  I can neither confirm, nor deny.  You don’t want to know because it’s for your own safety.  Meanwhile, others asked how I knew some of the bigger blogs in the PF space where all owned by larger companies almost a year before the news broke.  It’s obvious folks.  The writing is different, the original founders no longer interact with their readers, or comment on other sites, and the allure of money is too great to deny.

Making predictions is fun.  More bloggers should make them as it gives readers an idea of whether you are crazy or not!  Who cares if you’re wrong?  What matters is the reasoning, as nobody gets it right all the time.  With clear thoughts come clear decisions.  I encourage everyone to sit down in front of the computer and write down how they think the world will pan out in the next 12 months and plan accordingly.

This year’s predictions are somewhat tame compared to 2011’s predictions.  The reason is because after so many shocks, nothing really surprises anymore.  Furthermore, the more you get right, the less there are to make.  Please enjoy!

PREDICTIONS FOR 2012

1) President Obama wins a second term.  Political pundits and online betting sites are completely clueless and gutless in their 50/50 predictions.  They talk about how the stock market and unemployment needs to do well for Obama to get re-elected.  Nothing matter folks!  Republicans have nobody worthy of beating President.  Barring an Obama illness, nothing really matters.  The economy is improving, unemployment is going lower, and personal balance sheets are strong.  If you know anybody who is delusional enough to think a Republican will win in 2012, bet them as much money as you can afford to lose.  When Obama wins, you’ll get a nice little year-end extra bonus.  If anybody would like to bet me that Obama does not win, I’m open for business!

2) The unemployment rate drops below 8%.  Just like that, the unemployment level breached 9% to 8.6% in the latest reading.  And just like that, at some point in the 2nd half of 2012, unemployment flirts with 8% and then busts on through.  Have you seen the holiday spending figures yet?  En fuego!  Nobody spends money on stuff they don’t need if they don’t have money and aren’t confident about their job prospects.  Simple logic folks.

3) There is no inflation.  Despite tuition, food, and energy costs all going up, the government says we have no inflation, therefore the 10 year yield stays handsomely below 3%.  We have become a nation of blindly following our leaders and letting them get away with whatever they want.  One blogger friend in a previous post highlighted an Obama scandal he’s pissed about, and when I asked him to write about it on his site, he said “he doesn’t talk politics on his blog”!  If that’s not government omnipotence, I don’t know what is!  Our leaders would not be here if we did not believe in them.  Hence, there is no inflation because they say so.

4) The US markets have a banner year.  Everything is relative.  Given the 10-year yields no more than 3%, any return more than triple the 10-year yield is an amazing return.  As of now, we’re talking about a 6% return, however, may I be so bold to forecast a greater than 10% return on the S&P500 in 2012.  That’s right, we’re talking S&P 1,400.  Because the consumer is fine and spending again, corporate earnings continue to grow at a healthy clip.  The S&P 500 dividend yield is equal to the 10-year yield at 2%, and investors start asset allocating back into equities.  Buy underlying shares of gold and oil as I believe they have an even better chance of being up 10% in 2012.  International equities catch a bid as well and outperform the US, especially Brazil and the larger Asian markets.  If I am up 10% in my overall portfolio at any point this year again, I will sell almost all my holdings just like in 2011.

5) Online advertisement spending surges, therefore blogging becomes that much more lucrative.  Some people worry blogging is a unsustainable stream of income.  Clearly, they see the world through dark lenses.  With the continued improvement of the economy, the Olympics in the summer, and the Presidential elections, advertisement spending and industries that rise and fall with who gets elected are a boon to anybody with media property.  There’s no better time than right now to own a blog as more and more advertisement dollars get spent online.  If you have a chance to buy a blog for less than 2X yearly revenue, do so with abandon.  In the same token, there will be richer valuation acquisitions of personal blogs by big corporations due to the increased value of media properties.

6) Five more Members of the Yakezie Network give it a go as full-time bloggers leading to a flood of followers.  The longer you have your blog, the more valuable it becomes.  With one more year under each Member’s belt, coupled with the increase in advertisement spending all year, each Member sees their income rise by another 30-50% on average.  Earning $50,000+ a year through their sites becomes common place, as Members know how to leverage the Yakezie Network and brand to their own advantage.  We’ve launched our Yakezie Blogger Services for those interested in starting a blog as well.  All are great people who provide competitive pricing and do solid work.  The problem with these financial success stories is that many more will fail because they think it’s so easy, enriching the “how to make money online” marketers even more.

7) The Yakezie Network closes its doors to new Members.  This isn’t exactly a fair prediction, since I technically have full control over the outcome.  However, the whole reason why I started the Yakezie Network was because I wanted to build great friendships online who all enjoy helping each other out.  It’s more rewarding to have a tighter group of quality relationships who believe in the greater good.  Some Challengers have never left a comment here or connected over e-mail, Twitter, or Google+, leaving me no choice but to deny admission.  There’s also been some unnecessary drama which is counterproductive.  If I go the other route, I will go big and figure out a way to also keep the small community feel.

8) Social Media is one of the worst performing sectors. You’ve already made a triple in Twitter in 2011, now it’s time to cash out. The amount of competition in every single space is obliterating returns quicker than a Congressman’s mistweet. Social Media fatigue sets in, and there’s no more desire to “check-in” at your favorite bar due to stalkers. You resist tweeting your delicious meal due to an unknown follower compiling a compendium of what you eat. And you no longer update your Facebook page due to story after story about someone not getting a job thanks to what they posted. Privacy becomes King.  The company who maximizes privacy insurance, or enables privacy insurance wins big.

9) US housing is one of the best performing investment classes. After five years of softness and pent up demand, US housing finds a strong footing. The US homebuyer shakes free from paralysis, and the international homebuyer takes the plunge given how incredibly more expensive housing is in Moscow, London, Hong Kong, Singapore, Beijing, Shanghai, Singapore, and even Canada now. A $25,000 rental income stream used to be valued at $500,000 on a cap rate of 5%. Now it’s worth $833,000 based on 3%, but prices have barely moved, yet.  People do the math and wisen up.

10) Mobile technology becomes the place to invest and work.  The market for mobile software surges to some $20 billion dollars in 2012 from just $4 billion in 2011.  Companies can’t find mobile designers and software engineers fast enough as there is no doubt mobile computing is here to dominate.  Starting salaries for 24 year old graduates with 2 years of experience easily surpasses $100,000 a year, which begs the question: If you want a job, and want to get paid, why wouldn’t you just get good grades and learn some programming skills?  Venture capital pours into the mobile space like it did in the social media space and new mega fortunes are made.  Google, Facebook, and Twitter is so 2011!

BONUS: You will find love, fortune, and a flatter stomach.  2012 is a year to stop making excuses as to why you can’t find a suitable companion, why you still don’t have a road-map to financial freedom, and why you still aren’t as fit as you like.  If you’ve seen the show The Biggest Loser, you know losing weight can be done if you want it.  If you observe carefully, even the least attractive and poorest of people find great love.  Meanwhile, people are getting rich every single day.  I strongly believe that if you continue to read Financial Samurai and Yakezie all year, you will read informative articles that will help you get there.  Writing about relationships, career, and fitness are favorite topics here.

TO A BETTER TOMORROW

I hope you enjoyed reading my predictions for 2012.  Of course you should always do your own due diligence before making any investment decisions.  I’m an optimist by nature, but I am one of the most focused realists you will find.  Please share some of your thoughts and predictions as well!

PS There are several other very controversial and seemingly improbably predictions that will come true.  But, I’ve decided to keep them under wraps after some deep discussions with The Committee.  Warning: do not attempt to find The Committee.

Best,

Sam

Photo: Church in Santorini, 2011. Sam.

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Read this year’s predictions withinterest given that last year you were either spot on or very close with most of them. It is difficult to say anything about the specific predictions; only the future will tell (quite a few sound likely and other sound very desirable). I do hope, however, that you will change your mind about the Yakezie membership prediction. May concider enforcing stricter rules, may be?

    Anyway, have a very good year, Sam. We had a great New Year present (I am telling everybody btw). This morning we are below 200k – thanks to the help and guidance of the Yakezie network. And we met some great people as well.

  2. says

    I like your predictions. I do agree that the Republicans do not have a viable candidate at this point. It is too bad that we have such poor choices. I could use a flatter stomach, that’s for sure and will be working on it.

    Thanks for all you do for Yakezie and its members. I am a much better blogger because of it.

    • says

      That $20 is in the bag! I’ve literally got about 350X that amount on Obama winning. Finding the other side via Twitter and this site is so easy and so much fun! About $5,000 of the bet is going to charity, so either way, charity wins!

  3. says

    I can totally vouch for number 10 as I am working in the field right now, demand is on fire and our company is doubling in size in 2012. The thing is, our company is not the only one seeing demand rise parabollicaly for Android/WP/iOS apps…

  4. says

    I hope I still can become a member before you close the door. :-) I agree with Obama winning the second term. But I don’t think that the real estate market will get any better. Inflation… I think we will have some no matter what. It will be very interesting to re-read this post 12 months from now.

  5. says

    Happy New Year Sam! I love the opening of your predictions. I sure hope the markets have a strong year in 2012. There are lots of people talking about the gloom and doom, end of the world stuff coming in 2012, but I’m not buying it. No inflation sure would be nice too. Food prices rose a lot in 2011 so I hope they will stabilize because we all have to eat! I’m hoping my 2012 goals on stretching, taking Bollywood classes, and eating more raw vegan foods will help me with a flatter stomach. ;) -Sydney

  6. Robert @ The College Investor says

    Nice predictions. I agree that the mobile tech sector will continue to grow exponentially.

  7. says

    Great predictions! The scary thing is I agree with almost all your predictions and I am without a crystal ball or prediction ability. Have a Happy and healthy New Year.

  8. Darwin's Money says

    Love the predictions! What are your thoughts on gold this year? I predict roughly flat; gone are the 25% annual runups. thoughts?

  9. says

    Copy. Paste. And now I too can know future since I have the Sam the all-seeing (B graded) Samurai on my side. A 10% raise hey? I thought I was being bold. I could definitely see it. Lets hope the Yakezie continues to be a launchpad for deserving people out there!

  10. says

    I hope you find a way to keep Yakezie open, but also keep the small community feel (the “teams” are fabulous, and a similar idea could work). I know it took me a long time to leave a comment here, and even longer to join twitter- part of that is intimidating. Believe it or not, it IS intimidating to talk to the founder of the network you want to join, especially one so successful as Yakezie.

  11. Simple Rich Living says

    I like your Bonus prediction the best :) and I certainly hope it comes true for myself :). Best wishes in the new year!!!

  12. says

    “The Committee” – is that the CIA’s name for the CIA?

    You could turn Yakezie into a fraternity (and yes, the original ‘fraternities’ also allowed females to join. Some of the older sororities are actually fraternities!)… have 10 ‘pledge blogs’ per half a year, and if they make it through they can be a member? The only thing that doesn’t shake out is the whole ‘graduating college’ thing.

    Wacky idea? Maybe; just tossing it out there…

  13. says

    Happy New Year! Great predictions. I agree with most of them, but I doubt the housing market will come roaring back anytime soon. There are too much foreclosure properties.
    I’m pretty sure Obama will win too and I hope unemployment really drops below 8% soon.
    I also think at least 5 more people will quit their day job. ;)

  14. says

    Sam, I think those are some really good predictions. I tend to agree with most of them. On the fence about unemployment and housing right now, we’ll see about those two. Both seem quite weak around here. But I think you’re making some strong calls on the other ones, I like the list. And yes, I too think Obama will win based on how things look now, despite much discord and polarized views.

    Best wishes for a happy, healthy 2012.

    • says

      Thanks Ray. I’m optimistic both unemployment and housing will surprise on the upside. I see it all around the big cities in my travels.

      Hell, who knew folks could earn a living online so easily after several years.

  15. HMI says

    The only thing I disagree with is #8 – I think Social Media is still in it’s infancy and will continue to explode. It’s no longer “nice to have” for companies it’s a must have. I hope the US continues to bounce back. As a Canadian here are my predictions.

    Housing in Canada finally catches up to the debt, housing slumps 5-8% in most markets.

    The Keystone Project goes through post election regardless if Republicans or Democrats win.

    The US bounces back, oil climbs above a buck twenty resulting in a continued frenzy of exploration and production.

    First time poster, short time reader.

    Happy New Years.

    • says

      Love the WTI OIl $120+ prediction! That’s a good one. I hope it happens, b/c that means demand is strong and the world is ROCKING AND ROLLING!

      I’m talking about Social Media investing not giving good returns. Valuations are crazy, and there is fatigue. However, the individual media properties i.e. blogs really RAMP higher in value.

      Thanks for sharing your thoughts and HNY!

  16. says

    I think #3 is off – the government statements of “no inflation” thus far are based on sound economics. Over the last couple of year housing, autos and energy have been falling, as has the cost of tech gadgets of various types. Food has gone up. That’s not a recipe for a big positive CPI.

    #4, I’d be long too.

    #7 is unfortunate as I was thinking of joining. Y’all seem like good folks.

    #9 I don’t buy based on data – the Case Shiller index usually moves very smoothly (ie. small second derivative) and it’s been going down from July through the October (last) reading. As slowly as it turns, I don’t see 2012 being more than fractionally positive, and if pressed I’d bet “negative” for even money.

      • David M says

        Everyone is disagreeing with you on housing Sam – THUS – since human beings are usually wrong – I think you are DEFINATELY correct.

        Now, what do I do with this information (retorical question).

      • says

        Pick a metro area that’s part of Case-Shiller so we can resolve the bet in a sensible way and I suppose we could talk.

        But overall it’s really not a topic I’m eager to bet on (even ignoring the obvious issues of betting with random people on the internet). I think the short side has a small edge, but there’s numerous other places where I know I can get a much bigger edge on a much shorter time frame.

        Oh, and Dave, if we’re all wrong you can go long Case-Shiller futures on GLOBEX and make money by being right.

  17. says

    I hope you’re right about a lot of these things (just like you were in 2011). I’m going to go with your predictions on Obama and the stock market. I’m not sure if I can disagree with any of your predictions wholeheartedly, but if I had to pick one, I think you’ll be wrong about US housing.

    • says

      Yep, US housing is definitely dicey as a whole, however, the big cities which attract international demand eg San Francisco, New York City are going to face an increasingly steep international demand curve. US property is so cheap compared to the ROTW.

  18. says

    I love your predictions on the US Market. I’m always a believer that the markets can continue to shake off bad years in order to return to their historical average of 8%. So, your 10% is definitely manageable.

    • says

      Ah, historical average of 8% let’s see! Going to be tough to get to 10%+, but I believe baby! Just like I believed 10% was possible in 2011, which is exactly why I sold when I was up 11% at the end of April. Let’s go!

      • says

        I also don’t think President Obama will win reelection. Maybe it is a case of wishful thinking. Or, maybe it has more to do with the lack of new jobs. If unemployment is still high and stock market is only spinning its wheels with a 5% annual rate of return or less, then I don’t think that the America public will reelect the President.

  19. says

    I agree with social media fatigue. I don’t log in my facebook account these days and Klout and Fourquare seem rather pointless to me.

    I also think we are about to see 10-15 bloggers make the jump to fulltime around this time next year.

    I don’t know much about the US housing market, (I am canadian), but the interest that Canadians have in the US markets is really interesting to watch. Everyone and their uncle wants to buy property in the States now.

  20. says

    Are you one of those 5 Sam? :)

    Still holding on to my bet against Obama. (Don’t have a choice I guess, you can’t go back on a bet!) I keep thinking about how John Kerry ended up being the nominee somewhat out of the blue, so I can’t fiercely defend my prediction until I know who he is up against. My thought though is that Trump will run independent, which will ultimately help Obama.

    Regarding inflation, I sure am seeing it at the grocery store, that is for sure!

    • says

      Ha, definitely not! I make way too little to go full-time.

      Don’t let me conviction and strong words about Obama sway your conviction! In fact, you should DOUBLE DOWN and bet more! Larry from Investor Junkie has $500 against Obama with me, and I’m pinging him to see if he wants to go $1,000. Have faith!

      Government says no inflation, so don’t believe the prices in the grocery!

      Welcome back!

  21. says

    I sincerely hope you are wrong about #1… but fear you are right.

    I hope you will be right about #4! It sure would make me a very happy person.

    Count me in as one who hopes to see the Yakezie network continue to grow, albeit at a slow and metered pace. I love reading the new perspectives Challengers have, and as there are so many sub-niches within the PF world it seems that people are able to find small groups to work with within the network they can identify with.

  22. says

    These are good predictions, but I am most interested in your real estate prediction. I’ve been doing a lot of research into real estate investing. I don’t even own my own place yet but instead of buying the most house I can afford, I’m planning on getting a very modest condo that will work as an investment property. My life may not be glamorous for a while, but I am confident I am following the right path! 2012 IS MY YEAR! And everybody else who wants it to be :)

  23. says

    Hmmmm, i’m going to predict this as a C…. j/k. Actually think these are all fair predictions and I can’t see why any of them will not come to fruition, or at least close. The flat stomach depends on how awesome the food is in NZ but I hear the mountains are pretty awesome too so I should be able to do plenty of food burning!

    I don’t make predictions much because I am indecisive and change my mind a lot when it comes to that kind of stuff, I have fun reading others though! On the politics front I have been considering a political blog but I do use my personal facebook to share and push activism / politics related content around my network.

  24. says

    I like the logic behind the predictions although I hope some don’t come true (Obama being one).

    How do we have a huge year for US Housing but no inflation?

  25. says

    Great list Sam!

    As for “Social Media fatigue sets in”, I stopped checking out my personal facebook page at the start of 2011. I noticed that female friends locally still works with it a lot though, but traditionally females have always been more social overall.

    I’m hoping 2012 will be a pivotal year for us all!

    • says

      Oh, and even though I voted for Obama, I think if Romney gets the republic nomination he will win the election by the narrowest of margins.

      Well, unless Obama and Romney have a televised debate and Obama destroys Romney like he did with McCain.

      I think Romney brings a lot to the table from a running the country better in the financial sense and add value in that way. Plus, he’s more of a moderate than a far right conservative. But even if he doesn’t get elected, Obama hasn’t been a horrible president either though.

      I’m actually more worried about congress, the members seem to be either too far right or too far left. They can all be replace (or mostly of them can) as far as I’m concerned. At times they looked like children. Unfortunately for the Republicans, the media is more liberal in nature, so they take the biggest hit…

    • says

      I hear ya man. Klout is kinda ridiculous. Seriously, WHO HAS TIME? Google+ is OK, but again, who has time?

      Romney just got crushed in the Iowa Caucus. Guess people really do love Ron Paul!

      No way Romney will win. Too stiff, too rich, too out of touch with the voters.

  26. Kathryn C says

    Love these. Agreed on the social media. I am getting more and more “over” facebook everyday. IF anything, I find it slow and boring now.

    On the unemployment rate, here’s my favorite comment:

    “Nobody spends money on stuff they don’t need if they don’t have money and aren’t confident about their job prospects.”

    Spoken like a true finance blogger. Unfortunately the rest of the country doesn’t subscribe to your discipline. I don’t see the unemployment rate coming down that much, but, I saw that you were pretty spot on with your 2011 predictions!

    • says

      I don’t believe people are irrational Kathryn. I don’t know ANYBODY who continuously pounds a sledge hammer on their pinky for pleasure. Hence, I don’t know anybody who buys stuff they can’t afford. To do so would be silly!

  27. says

    Hey Sam,

    I’m in mobile and I agree that it’s the place to be! But, salaries are not starting $100k everywhere! What is the overall cost of living like where the salaries are like that?

    You have some inside info on the members going full-time too eh, but I won’t be surprised. ;)

  28. says

    New Challenger as of three days ago, and already have seen the power of Yakezie and have been greatly encouraged by the people I have met so far. I hope that I will have a chance to earn a membership before you close the door.

    I am glad to see your prediction that online media property will become more valuable, and think 2012 will be a good year in that arena. I think you are right about Obama.

  29. says

    I sure hope you’re right about online advertising. Or else it’s not unlikely I may not have a job in a year…

    Mobile sure is expanding in leaps and bounds – will be interesting to see if the social media bubble bursts this year.

  30. says

    I have to agree with you with most of your predictions. I don’t know what to say about the inflation. The experts are saying that will be around 3,62-0,36 (if I remember well). I guess that will see this year.

  31. says

    I find your predictions unusual, intriguing, and hopefully wrong on most counts. Cannot see how Obama could possibly be re-elected if any individual would possibly think about what he has done to this country (and, I am not even a Conservative). Real Estate has a ways to go. REAL unemployment figures don’t have the proverbial “snowball’s chance” to get under 10% (see shadwostats.com). One has to understand and accept that our government lies to us on way too many fronts than to accept their numbers/statistics without constant scrutiny. Metals will do very well by the end of 2012.

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