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Four Reasons to Be Optimistic in 2013: Kamen

Kenneth A. Kamen, Mercadien Asset Management
Tuesday, 22 Jan 2013 | 10:24 AM ET
Chris Ryan | Riser | Getty Images

It was easy, at first glance, to say good riddance to 2012. After all, in addition to the never-ending countdown to Dec. 31, we had an acrimonious election holding our attention and the prairie dog situation in Europe, where one country after another would pop up with news of an imminent economic crisis.

So it's understandable that, distracted by all this negativity, most of us managed to miss the fact that hidden in plain view, there was quite a bit of good news taking place.

In fact, we are starting 2013 on a bit of a high note, particularly since the positive developments of last year seem a lot more likely to shape our financial future than the stuff that gave us heartburn, like the battle over the "fiscal cliff."

No doubt this year will usher in more headline-driven angst, but I suggest that investors look past the posturing to see what's really happening in order to take the right steps to preserve, protect and enhance their financial futures.

We can't take our eye off the political stewpot, always capable of boiling over, and there's much known and unknown that can rock the equity markets in 2013. However, some macro themes make me very optimistic:

Capital Expenditure

The most over-reported item of the past two years, other than Kardashian shenanigans, was the record stockpile of cash on corporate balance sheets as companies waited for a clearer picture of tax law. (Read More: Companies Are Sitting on More Cash Than Ever Before.)

Certainty can be the best economic stimulus of all, and, finally, the tax deal gave us some. Some money may soon be put into play as companies begin the implementation of long delayed projects and initiatives, and that should have a powerful positive effect on economic activity in 2013 and beyond.

Housing

Home ownership has been one of the dominant economic drivers in the U.S. for a century. The sub-prime-induced real estate meltdown of 2008 has been a central cause of our recent economic woes. (Read More: Housing Could Lead Stocks Higher: Stephanie Link.)

2013's Hidden Economic Recovery
David Roche, Global Strategist, Independent Strategy explains why he thinks manufacturing will help drive a hidden recovery in the real economy.

There can be no robust economic recovery in this country without a housing rebound, and it seems to have started. The homebuilders' sentiment index, which tends to be a leading indicator of new home construction (and related employment), has been increasing and inventories of existing and new homes for sale have been declining steadily.

October 2012 figures reveal that nationally there was only a 5.4-month inventory of existing and new homes on the market, the lowest level since February 2006. This is a huge decline from the 12.1-month supply available as recently as mid-2010 and well below the 6.6-month average available supply since 2000.

What's more, according to the Census Bureau, new household formation soared from 700,000 in 2008 to 1.1 million in 2012, well above the number of new home completions. If this trend continues or increases due to an improving economy and related job growth, we could be returning to the kind of favorable supply/demand ratios not seen consistently since the early 1980s. (Read More: Existing Home Sales Unexpectedly Fall 1%.)

Energy

New technologies for energy development, especially fracking, have been a huge game-changer for the United States. (Read More: Fracking: How It Works, Where It's Done.)

Fracking means drilling horizontally rather than vertically and then pumping pressurized water and other solvents into shale rocks, creating cracks that release and thus enable the collection of the natural gas and oil trapped within. Its success has lead to a massive recalculation of domestic U.S. energy reserves, making the United States the world's new natural gas superpower.

This has dramatically reduced natural gas prices. According to the U.S. Department of Energy, the U.S. Natural Gas Wellhead Price went from a July 2008 high of $10.79 per thousand cubic feet to a low in April 2012 of $1.89 and is now hovering just over the $3 mark.

What Do US Markets Want in 2013?
David Dietze, President & Chief Investment Strategist, Point View Wealth Management thinks U.S. markets would like to have more stimulus and certainty over fiscal cliff legislation.

And while, to date, fracking has primarily dislocated the natural gas market, it can also be used to unearth similarly huge domestic crude oil deposits locked inside vast shale formations rather than rely on vertical drilling to find huge pools of pressurized oil that shoot into the air when tapped.

True, the long-term environmental impact of fracking has become very controversial (I offer no opinion here), but the economic juggernaut it is unleashing will be nearly impossible to stop.

As a result of new technologies, the U.S. is expected to surpass Saudi Arabia in crude production by 2020. I don't need to spell out the enormous implications here to national security and the economy, along with the benefits equity markets, manufacturers, consumers, investors and our children would enjoy should the United States actually reach energy independence by the end of the decade. (Read More: US Pumps Up Oil Output to Highest Level in 20 Years.)

Europe

With the European Central Bank's announcement of steps to backstop many of the region's bond markets, the threat of a European sovereign debt and banking crisis has greatly diminished over the past six months. (Read More: As Euro Crisis Fades, Fears of Complacency Emerge.)

Though significant economic and political issues mean Europe is likely to remain volatile for years to come, a slowly stabilizing euro zone will serve to keep global investors' nerves in check and perhaps even get some positive media play in 2013.

I chose to point out these developments that might have escaped your radar because I think they all have long-term consequences, but they alone are no cause for irrational exuberance.

The biggest current risk we face is that our friends in Washington D.C. can't get their collective act together. If they do, the headlines that grab our attention going forward should be catalysts for a new bull market.

Kenneth A. Kamen is a managing director of The Mercadien Group and president of Mercadien Asset Management and Mercadien Securities, as well as the author of the highly acclaimed book from Bloomberg Press,"Reclaim Your Nest Egg: Take Control of your Financial Future."

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