‘Dr. Doom’ Roubini gets bullish on global economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Economist Nouriel Roubini, renowned for his foretelling of doom and gloom in financial markets, has turned bullish in his 2014 outlook, expecting economic performance to “pick up modestly” in both advanced economies and emerging markets.

“The advanced economies, benefiting from a half-decade of painful private-sector deleveraging, a smaller fiscal drag, and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9 percent,” he said in an opinion piece on the Project Syndicate website on Tuesday.

“Moreover, so-called tail risks will be less salient in 2014.”

(Read More: ‘Dr. Doom’ Roubini makes case FOR the US economy)

Threats of a euro zone implosion, another US government partial shutdown, a debt-ceiling fight, a hard landing in China, or a war between Israel and Iran will be far more subdued, he said. Most advanced economies will still fail to reach true growth potential in 2014, he said, but explained that the positives for the US economy included the shale-energy revolution, improvement in the labor and housing markets, and the flow of manufacturing back to the country.

He also expects emerging markets (EMs) to perform well next year. A fall in commodity prices in 2013 and fears over the “tapering” of US Federal Reserve stimulus hit these economies hard, but Roubini expects them to grow faster this year – closer to 5 percent.

“Brisker recovery in advanced economies will boost imports from emerging markets. The Fed’s exit from QE (quantitative easing) will be slow, keeping interest rates low. Policy reforms in China will attenuate the risk of a hard landing. And, with many emerging markets still urbanizing and industrializing, their rising middle classes will consume more goods and services,” he said.

(Read More: Roubini: No Stock Bubble, but ‘Huge’ Crash Could Come Later)

Whilst some emerging markets will remain fragile he sees a better performance by those with fewer macroeconomic, policy, and financial weaknesses. South Korea, the Philippines, Malaysia, Poland, Chile, Colombia, Peru, Mexico, Kenya, Rwanda and the Gulf oil-exporting countries are included in this prediction.

The International Monetary Fund’s latest outlook for global growth states that emerging markets would grow 5.1 percent next year, and developed economies to grow at 2 percent (year-on-year) after expanding by 1.2 percent last year.

Roubini, the co-founder and chairman of Roubini Global Economics, has seen his predictions come into the spotlight since successfully arguing in 2005 that home price speculation would sink the economy.

(Read More: ‘Dr. Boom’? Roubini Sees Two Years of Stock Gains)

In the last five years his persistently bearish views have added to his moniker of “Dr. Doom”. In March last year he told CNBC that investors should brace for a market correction in the latter half of the year as revenues would begin to disappoint. In June, he warned in a report published in Institutional Investor magazine that the Fed’s monetary easing exit strategy would be “treacherous” and would lead to financial instability.

But despite the pessimism there have been signs that the “permabear” could be turning bullish. In particular, in September he made the case for the US economy at a speech at IndexUniverse’s Inside Commodities conference.

 He maintained that the US would in a better position than most of its global competitors, leading to an appreciation in its currency, no bond market crash and only a gradual increase in interest rates.

(Read More: Roubini: Fed Exit Strategy Will Be ‘Treacherous’)

Despite the upbeat feel to his 2014 predictions there are the usual caveats to his opinion piece for Project Syndicate. Years of underinvestment in human and physical capital in advanced economies mean there could be longer-term constraints and a risk of “secular stagnation”.

In China, he sees resistance to the economic reforms set out in the recent Third Plenum of the Communist Party’s Central Committee. A reluctance from local governments and state-owned enterprises to change means China’s medium-term prospects remain worrisome, he said.

“In sum, the global economy will grow faster in 2014, while tail risks will be lower. But, with the possible exception of the US, growth will remain anemic in most advanced economies, and emerging-market fragility – including China’s uncertain efforts at economic rebalancing – could become a drag on global growth in subsequent years,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This is the ECB’s biggest task for 2014: Soc Gen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The single biggest task for the European Central Bank (ECB) in 2014 will be the implementation of the banking union in the currency bloc, said Frédéric Oudéa, CEO of Société Générale.

“The first major objective is to implement the banking union. [The ECB] should not underestimate the operational challenge, which is to create a new regulator [and] recruit close to 1,000 people,” Oudéa told CNBC late Wednesday.

“I`m very confident in Daniele Nouy, she`s a very seasoned, experienced, talented regulator, so I think she will put in place something robust, but it`s a big task,” he said. Daniele Nouy, who has been the head of France`s banking regulator, was appointed to head the euro zone`s new banking supervisor last month.

In December, the European Union reached a long-awaited agreement on a mechanism to manage the closure of the region`s failing banks.

The so-called single resolution mechanism, together with a bolstering of the ECB`s supervisory powers and region-wide deposit insurance, makes up the European “banking union” – a deal that is expected to significantly reduce the need for tax-payer funded rescues of lenders. 

As for the Federal Reserve, Oudéa said he expects the US central bank will act towards winding down its quantitative easing (QE) program by the end of 2014.

Oudéa says the end of QE will likely be accompanied by a slight increase in long-term interest rates, which he deems positive as it marks a normalization of market parameters.

“It`s good to see the Fed starting to reduce the liquidity it`s providing. The very positive thing is that market did not over react, but took it more positively,” he said. This month, the Fed will take its first step toward winding down its huge monetary stimulus program by reducing the pace of monthly asset purchases by USD 10 billion to USD 75 billion.

Discussing his outlook for the global economy, Oudéa sees a steady improvement in both Europe and the US.

“For the world as a whole, [I see] slightly better figures. I think what`s important is we had effectively the beginning of tapering at the end of 2013, it means for [a] good environment for 2014,” he said.

-By CNBC`s Ansuya Harjani; Follow her on Twitter @Ansuya_H

 Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Five tech trends for investors to watch in 2014

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The new year is just around the corner and with that investors are looking ahead to where they should place their bets in 2014.

While it’s impossible to predict the future, there are some technology trends that saw momentum this year and are poised to take off in the coming year, experts say.

Read more: Top 3 tech stock picks for 2014: Pro

Here are five tech trends that investors should be keeping an eye on.
Wearables

Wearable devices gained some ground in 2013, but they will become more mainstream in 2014 and may even be adopted in the enterprise space.

Read more: Venture capitalists’ best ideas for 2014

“The enterprise will leverage wearable technology in ways not being done in the consumer space,” said Himanshu Sareen, CEO of Icreon Tech. “It is our prediction that the enterprise will embrace wearables for their employees specifically in industrial, high-tech and health-care settings.”

 One way these devices might be used is in a manufacturing setting where there are a large number of employees on a factory floor. Wearable biometric monitors could be used to track employees’ vitals while they are on the job to help protect against accidents.

Investors can also expect to see more of these devices used to track patients health, Sareen said.

On the consumer side, it’s likely investors will also see Google’s Glass become available to the mass market.

Read more: Here’s what the 2014 tech IPO pipeline looks like

Crowdfunding

Crowdfunding sites like Kickstarter have already had a big impact on how entrepreneurs raise funds for their small businesses, but a provision in the JOBS Act may take crowdfunding to new heights.

“Crowdfunding is going to be the new lottery,” said Patrick Chung, a partner at the venture capital firm New Enterprise Associates. “Regardless of whether people actually make money, the first megahit to be crowdfunded will keep this lottery going for a decade or more.”

The JOBS Act’s Title III, whose rules haven’t been finalized, basically would enable small companies to sell securities via online open platforms to both accredited and nonaccredited investors.

Read more: Here’s what the 2014 tech IPO pipeline looks like

“On the one hand, crowdfunding is going to to be very positive, allowing entrepreneurs to raise capital easier and faster,” Chung said. “On the other hand, in a world where money is becoming easy to come by, it also places a premium on investors who can actually help with the business.”

In other words, while small companies will have more access to capital from a wider range of investors, experienced investors will have an edge because they can offer funds, experience and connections, he said.
Local

Expect to see a lot more real-time information on the people and places around you as tech gets more local and more personal next year.

“The combination of location tracking, big data and wearables means that when those points of data are cross-referenced you can get updated live information on all of the places, items and people around you,” said Michael Chasen, founder and CEO of SocialRadar.

There’s already a lot of companies in this space, and that number will continue to grow, Chasen said. Foursquare is a big player in the local space and Twitter has recently been testing a “Nearby” feature that shows users who is tweeting nearby.

Apple is also trying to connect people with information around them in a real-time manner via use of iBeacon, which is basically a transmitter that tracks shoppers’ locations while in stores in order to send push notifications about products within range.

Read more: Apple rolls out iBeacon, a GPS for inside retail stores

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Ten trends that will shape Asia in 2014: Carnegie

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Global think tank Carnegie Endowment for International Peace expects 2014 to be a volatile year for Asian investors due to rising political risk, security tensions and skepticism over the commitment to economic reform in China, Japan, India and Indonesia. Thus, it expects these ten trends to shape the landscape for investors this year.

1. Asia drives demand

For decades G7 countries have been buying Asian exports and investing heavily in Asian economies, but Asia`s role has transformed; the region has become a major factor in advanced economies` own growth stories, with Asia now investing in and consuming more from overseas. A key example is Asia`s relationship with the US; American demand for Asian goods has powered Asia`s export-led economies since the 1960s, but now Asia has become an important export destination for various US goods including corn, soybeans, pork and natural gas.

2. Security fragmentation threatens economic integration

The primary challenge for Asia will be the conflict between economics and security, said Carnegie. The major powers in Asia are mistrustful and prone to nationalism, as has been evident with the territorial disputes between China and Japan in recent years. The think tank expects this conflict to sharpen in 2014, and is particularly concerned about China.

“Bluntly put, Beijing`s long-term strategic intentions inspire deep anxieties,” read the report.

3. The contested commons

Regional tensions will not be limited to territorial disputes but will translate to the global commons as well. China announced its air defense identification zone in November and similar declarations are likely in 2014, said Carnegie, leading to disputes over rights of passage, freedom of navigation and diverging interpretations of customary international law.

4. Japan`s pivot to Asia

As strategic wariness between Tokyo and Beijing intensifies, Japanese Prime Minister Shinzo Abe is expected to continue to strengthen Japan`s pan-Asia diplomacy, through leveraging project finance, trade, aid, people to people exchanges and security cooperation. Investments may begin to flow out of China to other Asian destinations if tensions escalate in 2014. According to Carnegie, one challenge will be for Tokyo and Washington to stay coordinated

5. North Korea`s great unraveling

The execution of Jang Song-thaek, the uncle of North Korean leader Kim Jong-un, highlighted internal divisions and questions over the stability of the regime. Carnegie expects instability risk to rise in 2014. If Pyongyang continues to use provocative measures, especially in the form of conventional attacks around or beyond its disputed maritime border with South Korea, these could be destabilizing as they would question the conventional deterrence that has kept the peace for the past six decades.

6. The future of the U.S. rebalance

Washington will face choices in 2014 that will test traditional U.S. roles in Asia in new ways. While the U.S. has long been the provider of security related and economic-related public goods in Asia, Washington`s allies will be watching how it manages the impact of sequestration on its defense posture and whether it makes long-range investments in new capabilities.

7. A convergence of models

This year will see continued competition between regional trade agreements, such as the U.S.-backed Trans-Pacific Partnership (TPP) and the pan-Asian Regional Comprehensive Economic Partnership (RCEP). Previously, China looked at the TPP warily, viewing it as part of a U.S. containment strategy, but it could start to take more interest this year, said Carnegie. However, the think tank reiterated that many conflicts between the TPP requirements and China`s domestic arrangements still exist.

“But if the TPP is concluded in 2014, it will set a new competitive standard in Asia,” said Carnegie.

8. China`s economy: to market?

China ended 2013 having adopted a sweeping economic reform agenda at the Third Plenum in November but Carnegie pointed out that these reforms will not succeed unless the state sheds some of the functions that make it a pervasive force in the economy. However, despite the challenges, Carnegie expects the biggest change to come in this area of reform, with significant moves toward market-based prices and steps to liberalize deposit interest rates.

“The biggest struggles, meanwhile, will be over restrictions on internal migration and the subsidies provided to state-owned firms.”

9. The push and pull over reforms

Carnegie expects antsy global investors and angry domestic voters to pull and push a number of Asian governments in competing directions. The body expects there to be little progress on Indian reforms as the pending election is unlikely to lead to bolder initiatives. However there will be increased pressure on India`s states to enhance their role as local laborites for growth-conducive reforms. Among other examples, Carnegie said Japan will have to confront skepticism on the prime minister`s economic agenda, while ongoing political conflict will test investor confidence in Thailand.

10. Central Asia in flux

Finally, Carnegie sees fresh economic and strategic pressures emerging in continental Asia in 2014. Landlocked Central Asian economies will be tested amid the U.S. withdrawal from Afghanistan, new Chinese investment and infrastructure initiatives, Russia`s efforts to extend its preferential customs union, and Iran`s uncertain trajectory.

– By CNBC`s Katie Holliday: Follow her on Twitter @hollidaykatie

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s what should bolster bitcoin in 2014

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Last year was nothing short of exciting for bitcoin and with 2014 set to be another interesting year for digital currencies, the Bitcoin Foundation expects wider adoption and the recognition of its potential to support bitcoin going forward.

Over the course of 2013 the digital currency increased nearly 6,000 percent in value on the Mt. Gox exchange, closing the year out at USD 806.

In late November, bitcoin peaked at USD 1,242 before concerns about Chinese regulation and a global speculative bubble led to a rapid depreciation. Bitcoin has since stabilized around current levels. Bitcoin was trading at USD 816 on the Mt Gox exchange on Tuesday afternoon in Asia.

Read more: Do you really know bitcoin? Here are 11 myths

As mainstream awareness continues to increase the question remains: given volatility and speculation can bitcoin become a viable currency?

“There’s certainly a lot of work that needs to happen… between now and bitcoin being a unit of account unto itself,” Patrick Murck, principal and founder of the Bitcoin Foundation, which aims to standardize, protect and promote the use of bitcoin worldwide, told CNBC on Thursday.

Read more: Big US online retailer to accept Bitcoin

“But people are working on it and I think that’s what you’re going to see happen this year. Having reliable exchanges… more merchants coming on board, more consumers using it as a payment platform. All of those things will support bitcoin going forward as a currency,” he added.

Among the key events for bitcoin in 2013 were a surprisingly positive US senate hearing on digital currencies in November and regulatory action from Chinese authorities in December.

Despite the positive developments in the US, concerns about greater global regulation continue to linger after the People’s Bank of China ordered third-party payment providers to stop using bitcoin in December, sparking a sharp fall in the value of bitcoin.

However, Murck expects such concerns to fade.

Read more: Meet ‘Bitcoin Jesus’, a virtual currency millionaire

“It’s the same story that you saw play out in the US At first people don’t recognize bitcoin at all, they don’t know what it is. They first take a look at it [and] it’s very disruptive so it looks scary. So they want to tap the breaks a little bit and see what this thing is,” he said.

Read more: Behind China’s love affair with bitcoin

“As they start to get their heads around it and understand the real potential for economic growth, for job growth, for connecting people to a globally connected digital economy, they start seeing why as a policy objective they should be supporting innovation in this space. So I think you’ll see the same thing in China,” he added.

As for what 2014 holds for the underlying value of bitcoin, Murck said it all comes down how useful bitcoin is.

“I think the underlying value is going to be determined by how useful it is to people in commerce. So the more merchants that adopt it, the more consumers use it, the more businesses use it for supply chain management and for business-to-business transactions and cross-border transactions, the more valuable bitcoin will be to everybody and that will be reflected in the price.”

— By CNBC’s John Phillips. Follow him on Twitter@J_Phillips_CNBC

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why gold bugs should brace for an ‘awful’ 2014

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Gold had a tumultuous run in 2013 but don’t expect any respite in the new year, said UBS, which anticipates double-digit percentage losses over the next 12 months.

“For investors who have gold, it’s just going to be an awful year again,” said Dominic Schnider, head of non-traditional asset classes at UBS Wealth Management, who sees the precious metal falling to USD 1,050 an ounce this year, 13 percent below current levels.

Read more: Gold sees biggest annual loss in 3 decades

“People have been talking about [the Federal Reserve’s] taper, but I would really think about rate hikes. If you make a 12-month forecast you need to look into 2015 and rate hikes are on the cards,” he said. A rising interest rate environment typically makes owning gold more expensive as it is not an income-producing asset.

With the global economic growth and inflation mix looking promising in 2014, the risk-reward balance is now skewed toward risky assets, Schnider added.

 Gold suffered its biggest annual loss in 32 years in 2013, plunging 28 percent over the course of the year, with the Fed’s decision to scale back its massive stimulus program and a benign global inflation outlook sapping demand for the metal.

Central bank liquidity has been a major pillar of support that has driven gold to record high near USD 1,920 in September 2011. Spot gold was last quoted at USD 1,213.

UBS is not alone it its bearish outlook for the precious metal. US  investment bank Goldman Sachs, for instance, predicts bullion is set to fall at least 15 percent this year.

Read more: Goldman predicts steep losses for gold in 2014

Making a case for buying gold, Joe Magyer, senior analyst at the Motley Fool says investors should not downplay the risk of inflation raising its head this year.

“I think the time to be worried about inflation is the time when nobody else is worried, so that would probably be now. If you bought gold at USD 1,900 an ounce, I don’t know why you wouldn’t be very interested at USD 1,200 an ounce,” Magyer said.

For investors keen on gaining exposure to the metal, strategists recommend buying physical bullion while avoiding miners.

Read more: Forget stocks & buy gold in 2014: Strategist

“Stay away from the miners – margins are going to come under pressure, things don’t look pretty. If you really want to have gold as an asset of last resort, hold it physically,” Schnider of UBS said.

—By CNBC’s Ansuya Harjani; Follow her on Twitter@Ansuya_H 

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Buffett beats S&P for second straight year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

For the second straight year, shares of Warren Buffett’s Berkshire Hathaway have outperformed the benchmark S&P 500 stock index.

Berkshire’s Class A shares finished 2013 at USD177,900, just below their 52-week high of USD178,900 set in late July. That’s up 32.70 percent from their USD134,060 close in 2012. It’s the biggest annual gain since 1998 when the shares soared 52.2 percent.

Berkshire’s Class B shares gained 32.17 percent, closing at USD118.56, up from USD89.70 at the end of last year.

The S&P had its best year since 1997 with a spectacular gain of 29.60 percent, excluding dividends, but that’s just below Berkshire’s surge.

n 2012, the stock also came out ahead with a gain of 16.82 percent versus the S&P’s 13.41 percent.

By Buffett’s favored measurement, however, 2012 was “subpar.”

Read More: Berkshire Hathaway’s 15 biggest stock holdings

In his annual letter to shareholders released in March, Buffett compared Berkshire’s per-share book value to the S&P 500 with dividends included. Berkshire’s gain of 14.4 percent lagged the S&P’s of 16.0 percent.

Buffett was disappointed, writing, “When the partnership I ran took control of Berkshire in 1965, I could never have dreamed that a year in which we had a gain of USD24.1 billion would be subpar … but subpar it was.”

We won’t know how Berkshire did by the book value metric until the company releases the next letter to shareholders in a few months.

Over the past ten years, Berkshire’s stock has gained 111.16 percent, easily outpacing the S&P’s 66.23 percent increase.

—By CNBC’s Alex Crippen. Follow him on Twitter:@alexcrippen

More CNBC stories:

Buffett’s 2014 action plan
Even Warren Buffett doesn’t want old Berkshire HQ

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Five things that could go wrong in 2014

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The outgoing year certainly earns its place in history as one of the best of times for stocks.

It was pretty much smooth sailing to a new high on the S&P 500 of 1,848—a 30 percent gain with no correction greater than 7 percent. Stocks in the coming year are also expected to make good strides, but no forecasts come close to the performance of 2013.

But 2013’s advantage over the coming year was that the market was able to climb a wall of worry—starting with the fiscal cliff last New Year’s Eve, through the government shutdown in October, and up to the Fed’s announcement in December that it would pull back on stimulus.

Strategists are optimistic for 2014. Unlike in 2013, however, they say there is no one big catalyst to fear—one major event that’s sure to trip up the stock market’s advance.

“Risk is always at its greatest when you don’t think there’s risk,” said Citigroup chief equities strategist Tobias Levkovich. “If you think it’s perfect sailing, you don’t wear a seat belt.”

Read more: 2013: A record-breaking year

There are, however, several potential trouble spots to watch, and most of them expect to see a pullback sometime in 2014.

Rising rates. The first worry is the possibility of a sharp, rapid move higher in interest rates. While an improving economy should be able to withstand a higher rate environment, the concern is that rates could rise too much, too fast.

Since the Fed announced it would taper its $85 billion monthly bond-buying program, interest rates have been rising, helped also by improving economic data. The 10-year yield Tuesday touched 3.03 percent, closing the year at its the highest level since July 2011.

“Trouble usually comes from the bond market, and the bond market is in the process of normalization,” said John Stoltzfus, chief market strategist at Oppenheimer Asset Management.

Stoltzfus said a selloff in bonds could feed on itself as investors seek redemptions from bond funds. Analysts worry that the housing recovery could be a casualty of interest rates that run too fast, if mortgage rates abruptly move higher.

But most strategists do not see the 10-year yield leaping wildly ahead.

“We have fair value of 3.5 in the 10 year,” said Jack Ablin, chief investment officer at BMO Private Bank. “I don’t think that’s enough to roil the markets, roil the economy. The banks will certainly benefit, encouraging them to come back to traditional borrowing and lending.”

Even as the Fed steps back from its QE program, it has stressed that it will keep short-term rates low for a long time.

Slowing profit growth. Earnings season gets underway in mid-January, and that may be the first test for stocks.

“Probably the biggest risk on the radar screen are the markets themselves,” Ablin said. “Come the second or third week in January we start looking at earnings results, and we could see managements with downbeat forecasts. In that environment, where we’re at an all-time high in just about everything, I think that’s really going to be our first test.”

Margins are at a cyclical peak of about 10 percent, and he expects earnings to grow just about 3.5 percent next year.

“The question is are we going to be able to maintain margins?” Ablin said. “Are we going to accelerate profit growth?” The low interest rate environment has helped companies with margin expansion, he added.

_PAGEBREAK_

Citigroup’s Levkovich said weaker earnings growth is certainly a risk, but there’s also a risk that earnings could surprise to the upside.

“Earnings could come in stronger. There’s more operational leverage in business than people perceive,” he said. “Margins are really high because companies have been efficient.”

Levkovich points out that only two of 10 sectors have higher margins than they had in the last earnings peak in 2007.

“Eight are meaningful below—there’s operating leverage to the upside,” he said, adding that lower tax rates and interest rates have helped margins.

Levkovich has a target of 1975 on the S&P 500 for 2014, recently raised from 1,900 based on expectations that profits will help drive it higher.

Inflation. As the Fed begins to step away from quantitative easing, the expectations for inflation have fallen along with commodities prices. But a number of analysts worry that the economy could strengthen enough to stir up inflation, even as the Fed tries to keep rates low.

Read more: The case for ditching stocks & buying gold in 2014

“Just a perception within the market that the economy is doing well enough and there could be a reason to justify higher interest rates with a projection of higher inflation—that could give us a spike [in rates],” Stoltzfus said. “We’ve had two generations of investors right now that have never felt a bad bond market.”

Washington. The debt ceiling debate could pick up steam in the coming weeks, but even though it is on the short list of worries, most strategists do not see Congress going to the brink again.

“It could be political dynamics that people start worrying about again as we move toward the middle of the year,” Levkovich said. “There are a variety of factors, but I think Washington’s always an interesting place to watch.”

Both parties were blamed for the government shutdown, and he said it is unlikely the Republicans would risk the mid-term congressional elections with a big debt ceiling battle.

Geopolitical risks. Overseas threats are always a concern, and Levkovich points out that there could be currency disruptions in emerging markets.

China’s credit crunch also casts a cloud, but Stoltzfus said he expects the country to manage and add positively to global growth.

“It’s exasperated by regulators, needing to curb bank lending,” he said. “We think China is more a contributor than a risk factor.”

“My key wild card is obviously Europe,” said Ablin, adding that it needs to create some kind of stimulus to assure a synchronized global recovery.

The positive US energy story is bullish for America, he said, but if it drives oil prices too low, it could cause disruptions in economies that rely on oil production, including Russia and the Middle East.

—By CNBC’s Patti Domm. Follow here on Twitter@pattidomm.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This Asian market laggard could shine in 2014

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

After underperforming their regional peers this year, South Korean stocks should rally 18 percent in 2014, according to a recent report from Nomura.

The brokerage sees the benchmark Kospi at 2,350 by the end of 2014, a far cry from its current level of 2,011. For 2013, the index is up a meager 0.7 percent, compared with the Hang Seng Index`s  3 percent gain and the Taiex`s 12 percent rise.

Also read: Investors to eye riskier markets in 2013: Control Risks

While Nomura`s targets may seem ambitious, it says that improving exports and solid earnings growth underlie the index`s upside potential.

Recent data has painted a tepid picture for the world`s seventh-largest exporter. In November, overseas shipments inched up just 0.2 percent from a year earlier, a drastic drop from October`s record high. But Nomura`s economists say a faster global growth rate next year should see exports rebound.

“Improved demand from the US and the euro zone should support Korea`s exports; not only to these two regions but also to emerging markets that import Korean goods for re-export. We continue to believe that Korea is the most leveraged play to a global macro recovery given its high dependency to international trade,” the report said.

Improved margins for Korea Inc. make up the second component of Nomura`s bullish outlook. While the brokerage warns that the first half of 2014 could remain volatile as the Federal Reserve begins reducing its monthly asset purchases, they expect 2014 to bring 19 percent annual earnings growth.

“We believe that equities will need earnings growth to support further gains from here – much of the macro risk-compression / “deep value” mean-reversion upside arguments have now played out. Our Kospi 2014 fiscal year-end target of 2,350 implies 18 percent upside. Earnings growth of 19 percent year-on-year will be led by cyclical sectors that have experienced significant earnings drops over the past two years.”

“We believe Korea should outperform its regional peers given its high-beta characteristics and valuation discount (though not as highly under-valued as in previous years) relative to its long-term average,” they added.

No more yen headwinds?

A declining yen has weighed on profit margins of manufacturers with the Japanese currency down about 18 percent against the won this past year. A lower yen makes Korean goods more expensive by comparison in global markets but Nomura isn`t too worried about the future.

“In our view, the significant depreciation of [the yen] due to Abenomics has largely come to an end. Thus, we are becoming more optimistic on the Korean auto sector, which has been hit the most among Korean sectors by the [yen`s] depreciation.”

However, not all analysts are quite as bullish on South Korea. The latest note from Barclays  indicates the economy could be hit by politics in the near-term.

“The two parties in the National Assembly failed to conclude the passage of the proposed 2014 spending budget by its deadline on Dec. 2, 2013. As a result, there is a possibility the government could face an automatic reduction of its fiscal spending (the so called fiscal cliff) early next year. Concerns about government spending and political headwinds will dampen consumer sentiment and corporate investment as well, in our view,” said Chanik Park, head of Korea research, Asia Ex-Japan equity research at Barclays.

– By CNBC.com`s Nyshka Chandran. Follow her on Twitter @NyshkaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Facebook still a firm adult favorite, Twitter falls behind

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Ruby Karp may have written,”I’m 13 and None of My Friends Use Facebook,” but according to a new study, Mark Zuckerberg’s social network remains the platform of choice for adults, with 71 percent using the website in the US.

A new study by the Pew Research Center found that 73 percent of online adults are now a member of a social network, and Facebook remains the dominant platform. Its survey of 6,010 US adults over the age of 18 found a slight increase in Facebook users in 2013, up from 67 percent in 2012.

However, the Pew research also found that more adults used professional networking site LinkedIn and photo pin-up site Pinterest than Twitter. Some 22 percent of those surveyed said they were on LinkedIn, and 21 percent had Pinterest accounts – but only 18 percent were on Twitter. This marks a change from 2012, when more adults used Twitter (16 percent) than Pinterest (15 percent).

“While Facebook is popular across a diverse mix of demographic groups, other sites have developed their own unique demographic user profiles,” senior researcher Aaron Smith and research assistant Maeve Duggan wrote in the report.

(Read more: Facebook monthly active users)

“For example, Pinterest holds particular appeal to female users (women are four times as likely as men to be Pinterest users), and LinkedIn is especially popular among college graduates and internet users in higher income households.”

Looking at the metric of monthly active users, Facebook leads the pack, with 1.19 billion. LinkedIn and Twitter have 259 million and 232 million, respectively.

But there are concerns of a growing disillusionment among teenagers with Facebook, as Twitter and Instagram (which is owned by Facebook) grow in popularity. When it reported earnings in October, Facebook CFO David Ebersman admitted that the daily activity among younger teens has declined.

The Pew Survey noted that Twitter and Instagram were more appealing to younger adults, urban dwellers, and non-whites, and that there was a “substantial overlap” between Twitter and Instagram users.

(Read more: Who’s viewing your Instagram, and profiting from it?)

This mirrors other recent findings, such as those by U.S.investment bank Piper Jaffray, which conducted its semi-annual “Taking Stock With Teens” project back in October.
It found that Twitter was fast becoming the most important social media network among younger users, and was “eclipsing Facebook, followed closely by Instagram.” Thepopularity of Facebook was waning among teens, the bank said, with 23 percent citing it as the most important, down from 33 percent six months ago and 42 percent a year ago.

Indeed, in her August op-ed on news site Mashable, Karp wrote: “Part of the reason Facebook is losing my generation’s attention is the fact that there are other networks now. When I was 10, I wasn’t old enough to have a Facebook. But a magical thing called Instagram had just come out.”

Professor Daniel Miller, who is working on University College London’s Social Networking Sites and Social Science Research Project, found a similar trend.

He wrote that among a small survey of 16 to 18 year olds,”Facebook is not just falling, it is basically dead, finished, kaput, over,” and that many users will only stay on the website as a “mode of family interaction because their parents and even grandparents are starting to see it as almost an obligation to keep in touch through Facebook.”

Still, Gregory Galant, the CEO of Muck Rack told CNBC in October: “I think Facebook’s going to be around for a very long time, not because their current product can last the test of time but because they’re unusually adept at evolving.”

Indeed, the Pew Survey stressed that Facebook is still the platform that engages its users the best.

“In addition to being the most commonly used social networking platform of the five we measured, Facebook also has high levels of engagement among its users,” the report noted. “63 percent of Facebook users visit the site at least once a day, with 40 percent doing so multiple times throughout the day.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow