Financial Samurai Predictions for 2012

Happy 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.