Last year was fantastic for markets. Almost everything we suggested you buy (bar gold, which we rather assume you all hold already for insurance purposes) went up in many cases by a lot.
The Japanese market was our standout, rising by more than 50%. But the European markets we have been nagging you into did brilliantly too. The US was up 25% and UK small-caps (which I favoured over large caps) rose 28%. But it wasn't just markets that worked out in 2013. Many other things seemed to go right too.
China's new leaders held an encouraging plenum and made markets happy with their super-sounding reforms; nothing nasty happened in Europe; growth returned to the US and the UK; house prices bottomed in much of Britain; and the Federal Reserve's tiny taper didn't seem to bother anyone much.
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But while this is all nice, perhaps it was just too easy? As Peter Warburton of Halkin Services puts it: "if you were holding a King and a Queen, would you stick or twist?" After all we know that our economies and markets are still full of contradictions.
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China might be doing well, but much of its economy is still a credit-bubble mess. Can its leaders really contain it? Profit margins are at record highs in America. What if they mean-revert? The UK housing market is very dependent on the continuation of the lowest interest rates for 300 years. What happens when they rise?
The main driver behind the boom in markets has been quantitative easing (QE) shovel money into markets and they pretty much always rise regardless of anything else. What happens as it ends (see James Ferguson on this)? And what of inflation? Or deflation? Or the fact that Europe just isn't fixed?
That's a lot to worry about. But perhaps, as investors at least, we don't have to worry about it quite yet. With inflation falling across the West, the QE scam, as Bill Bonner notes, "may have years to run".
Central banks hate deflation and the tiniest hint of it may always be enough to keep them printing. And if the scam keeps running, who wants to sell the assets it forces up in price equities, houses, proper art and the like? Probably not you. We'd suggest selling the obviously over-priced assets you have (ie, everything in the US bar the dollar).
But we're keeping Japan, Europe, Russia and some exposure to Britain (probably still small caps, given that this will be a good year for UK growth). We are looking again at oil and gas firms (good yields) and seriously considering some Chinese equities.
Matthew Lynn reckons we can take rising house prices everywhere and more crazy taxes in France for granted in 2014, but he chucks in a couple of wild cards too. He even thinks this might be the year in which Greece finally gives in and leaves the euro.
A very Happy New Year to all our readers.
