How the FTSE 100 index will perform in 2013

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Indonesia stock info - How the FTSE 100 index will perform in 2013 ; New analysis of New Year stock market predictions for 2013 contains bad news for pessimists and good news for people who might like to see the value of their savings and investments rise.
Perennial pessimism is an easy way to simulate wisdom about stock markets but it may tell us more about the people making those sage warnings of doom and gloom than it does about share prices in future.
More than 8,000 people were questioned by pollsters Populus before a clear trend emerged: the more pessimistic you are about how the FTSE 100 index will perform in 2013, the more likely you are to be poor, inexperienced and living in an economically depressed area. On a brighter note, you’re probably also female.

By contrast, richer, older, men living in the south east were far more likely to be optimistic about the outlook for share prices in 2013.  Saga, the over-50s specialist which commissioned the survey, reports that men are much more positive about the future, with a net 22pc believing in a 2013 bullish stock market, whereas women are the bears – with a net 2pc predicting a fall in the FTSE 100.

Pensioners, who have lived long enough to see a few economic cycles come and go, are more optimistic about share prices than younger respondents. People aged between 65 and 74 are twice as likely as those still at work to think the FTSE 100 will be trading higher in 12 months time. Those of all ages living in the South East were 15pc net positive or three times more optimistic than those in the North East, with Wales nearly as pessimistic at 6pc.

Differences are sharpest between socio-economic groups – with wealthier people in socio-economic groups A and B showing a net positive score of 18pc, while those in socio-economic groups D and E saying they believe the stock market will crash – with a net 6pc predicting share prices will fall next year. Could there be an element of wishful thinking here?

Of course, as the investment guru Warren Buffett has pointed out, there are only two types of expert when it comes to stock market predictions; those who don’t know and those who don’t know they don’t know. But, with American fiscal cliff worries making the economic outlook for 2013 more uncertain than ever, the Saga survey has a comforting message for savers and investors.

It also contains an implied rebuke for the cynics of cyberspace who, as the comments below will surely demonstrate, are relentlessly gloomy. Whisper it but behind the anonymous online tags, the sad truth seems to be that the more bearish someone is about the stock market, the less likely they are to have any skin in the game or to know what they are talking about. Happy New Year!

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 Tags: America, experience, fiscal cliff, FTSE 100, investments, north east, optimists, pessimists, Populus, poverty, predictions, Saga, savings, South East, stock market, stock market predictions, warren buffett, wealth, youth

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IMF said asian economic growth forecast 2013

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Indonesia stock info - asian economic growth forecast 2013 ;  The International Monetary Fund said that Asia will continue to power the world economy, but it warned there was an increasing risk that growth in the region could drop to levels last seen during the global financial crisis.

In an update to its regional economic outlook, the IMF said it saw a one in seven chance of Asian growth falling below 4% in 2013, compared to its main forecast for the region's economy to expand 5.9% next year.

The fund said that risks to its core view--which assumes that euro zone-related tensions gradually diminish and U.S. lawmakers prevent severe fiscal tightening measures automatically kicking in around the turn of the year--remained substantial and were on the downside. However, it noted that growth could be stronger than expected if officials in Europe and the U.S. were to fully deliver on their commitments.

"Growth is projected to pick up very gradually, and Asia should remain the global growth leader, expanding over two percentage points faster than the world average next year," the IMF said. But it noted that the euro-zone debt crisis in particular posed a considerable risk.

If a shock from Europe or the U.S. were to spark a severe global slowdown, that would exert a "powerful" drag on Asia's most open economies via trade, the IMF said. And while Asian countries have been resilient to financial market spillovers, an aggressive pullback by European banks and capital flight could cause severe disruption, particularly to Southeast and East Asian economies with the exception of China, it said.

The IMF now forecasts Asia's economy to grow 5.4% this year, 0.6 of a percentage point weaker than the view it published in April. Its new 2013 forecast is also 0.7 of a point below its April estimate.

The fund added that a hard landing in China's economy remained a low-probability risk, but warned that such a scenario would have a significant impact on Asian economies, if it did occur

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Deficit Economics

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Thirty years ago, I published an article in The Freeman entitled, "Deficits are Not the Only Problem," and in it I challenged the notion that federal budget deficits in and of themselves are the major economic problem in our society. The deficits, I argued were symptoms of the larger problem of out-of-control government expansion and the spending that accompanies that expansion.

On the surface, it seems that Paul Krugman agrees with me that the federal deficit by itself is not THE economic problem. Furthermore, I will go further and agree with him that much of the current deficit is due to the depressed state of the U.S. economy, and that a stronger economy would, in fact, provide more tax revenues from current tax rates than is now the situation.

Like always, however, I disagree vehemently with Krugman on (1) the role of federal deficits in "providing" or at least enabling economic recovery, and (2) the efficacy of government spending itself. Krugman believes that we need large deficits so that the government spending generated by them can help jump-start the economy; I believe that the very spending he believes provides overall economic benefits actually hampers economic recovery.

Krugman says that out of the current trillion-dollar deficit, about $600 billion of it is due to the depressed economy, and that the remaining $400 billion is "sustainable." (Funny, he wasn't making that claim when George W. Bush was running large deficits. Then Krugman claimed that the cut in the top income tax rate from 39.6 percent to 35 percent was causing huge economic problems and was dragging us into economic hell. Yes, a relatively small cut in tax rates was destroying the economy, which would have been a first in economic history.)

He writes:

First of all, the weakness of the economy has led directly to lower revenues; when G.D.P. falls, the federal tax take falls too, and in fact always falls substantially more in percentage terms. On top of that, revenue is temporarily depressed by tax breaks, notably the payroll tax cut, that have been put in place to support the economy but will be withdrawn as soon as the economy is stronger (or, unfortunately, even before then). If you do the math, it seems likely that full economic recovery would raise revenue by at least $450 billion.

Meanwhile, the depressed economy has also temporarily raised spending, because more people qualify for unemployment insurance and means-tested programs like food stamps and Medicaid. A reasonable estimate is that economic recovery would reduce federal spending on such programs by at least $150 billion.

Putting all this together, it turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. Some of the deficit is in fact sustainable; just about all of the rest would go away if we had an economic recovery.

He continues:

And the prospects for economic recovery are looking pretty good right now — or would be looking good if it weren’t for the political risks posed by Republican hostage-taking. Housing is reviving, consumer debt is down, employment has improved steadily among prime-age workers. Unfortunately, this recovery may well be derailed by the fiscal cliff and/or a confrontation over the debt ceiling; but this has nothing to do with the alleged unsustainability of the deficit.

Yes, we are supposed to believe that things are just fine, and if President Obama is permitted to stick it to some taxpayers (with the middle class to be stuck at a future date) and spend a few billion here and there, that the economy will recover because of it. Furthermore, if the so-called Fiscal Cliff (yet another idiotic slogan from Washington that the media recites in its usual Pavlovian style) kicks into action, then the economy will tumble down the hill like Sisyphus's boulder.

Notice that this contradicts what Krugman claimed a couple of years ago when the tax cuts were supposed to expire and the government extended them. Back then, Krugman said that if it were up to him, he would allow all of the rates to go back to their pre-2003 levels and use the newfound revenues for more current spending projects. For that matter, he claimed in 2010 that even if all rates were raised, the negative effect would be minimal to the economy.

Today, he sings a different tune. If the Republicans don't give Obama everything he wants, then the Republicans will solely be responsible for plunging the economy into something akin to the Dark Ages. Why he claims that Obama's prescription for recovery -- tax, borrow, print, and spend -- will be effective it beyond my comprehension.

When George W. Bush was president, Krugman claimed over and over that the economy was moribund because Bush got Congress to cut the top rate from 39.6 percent to 35 percent, and that the marginal tax rates for everyone else were cut as well. A while back, he was claiming that these tax cuts were "unaffordable" to the tune of four trillion dollars. With Obama in the White Hosue, he has claimed that it doesn't matter how much the government borrows, since interest rates are at "historic lows" and we "owe it all to ourselves," anyway.

In other words, Krugman gives us mixed signals that on the surface seem to be confusing. There is an easy translation, however: Democrats (and especially Obama) always good, Republicans always bad. If Republican administrations borrow and spend, they are dragging us into Hades; if Democrat administrations borrow and spend, they are bringing economic recovery.

So, in his attempt to be the world's most politically-partisan economist, Paul Krugman calls for the very things that in the long run are economically destructive, but claims that if a Democrat implements those things, then the result will be prosperity. I'm not sure how all of this will take place, but I must say that following Krugman does prove to be an interesting ride.

On Second Thought...

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I do have a brief commentary about Krugman's latest political column masquerading as Serious Economic Analysis. Like all Progressives, Paul Krugman believes that the State can create an economy by coercion. If it is ordered into being, then it is so.

Furthermore, political victories by the Democratic Party always make the economy better. That is why the economy has done so well in the past four years. (Don't forget that Democrats had absolute majorities in both houses for two years with Obama being permitted to do anything he wanted, but unemployment went up, not down.)

Of course, this notion that government can order anything into being via coercion has tragic results. In writing about the Sandy Hook massacre, Jeff Tucker writes:

In the days that followed the killing, my browser kept taking me back to a Wikipedia link about the Gun-Free School Zones Act of 1990. The law, still intact after many challenges and rewrites, reads: “It shall be unlawful for any individual knowingly to possess a firearm that has moved in or that otherwise affects interstate or foreign commerce at a place that the individual knows, or has reasonable cause to believe, is a school zone.”

Guns of all sorts are banned anywhere near schools. If the government’s laws had worked, this killer would have realized that his plan was unachievable. After all, the world’s most powerful government had banned the whole idea of guns at school.

To put this in an economic context, Krugman actually seems to believe that if Democrats have enough political power and Barack Obama orders the economy to improve, then it will improve. Raising taxes will have no effect except to allow for more spending, and everyone knows that government spending is the key to economic recovery, as there can be no downside to expanding the government checkbook.

Should prices be "sticky," then government can inflate, which cuts the real prices and creates prosperity, since everyone knows that printing money is the key to making us richer.

The problem is that politics generally is the enemy of prosperity. Politicians see no problem in destroying businesses and throwing sand in the gears of entrepreneurship, since the media then will be the megaphone for trumpeting the message of the politicians: See? Businesses always fail! That is why you need us to help you!

Well, Krugman, Obama definitely has won the political PR battle (given the love affair the media has with him), and he has the numbers. We shall see how this turns out. Although I do not believe that the "fiscal cliff" can throw us into recession, nonetheless it will impede the recovery, but that is OK, since in the end, the politicians will win.

The Prophecy Game

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If Americans today did what Israelites were commanded to do back in Bible times -- stone false prophets to death -- there would be a lot of dead economists, and that would include Paul Krugman. Krugman has been wrong in the past (claiming that if Japan borrowed and spent enough money during the 1990s, that it would come out of its economic funk, with Japan doing the former but the latter not occuring), but he also knows that a good defense is a good offense.

Thus, he centers on an editorial that is more than three years old to claim that EVERYONE who might disagree with his wisdom is a false prophet. No, he doesn't want them stoned to death, just removed from any meaningful social contact with anyone. His theme is simple: anyone who predicted that the massive expansion of the Fed's balance sheets and attempts to monetize U.S. debt and deficits would lead to an increase in interest rates is an idiot:

...we cannot and will not persuade these people to reconsider their views in the light of the evidence. All we can do is stop paying attention. It’s going to be difficult, because many members of the deficit cult seem highly respectable. But they’ve been hugely, absurdly wrong for years on end, and it’s time to stop taking them seriously.

 Krugman points out that as long "as the economy is depressed," interest rates will remain low. Unfortunately, he wants to claim that this is a market phenomenon instead of something that is being done by Ben Bernanke, an effect of the bad economy. Yet, what should help revive the economy? You guessed it: low interest rates.

So, what is it? Are interest rates an effect of a bad economy, or do they ward off a bad economy? There is a problem of causality, as Krugman wants it both ways. We shall see in the coming year what actually happens. If Krugman is correct, the government's vast intervention into the economy is finally going to bear real fruit, as most sectors will rebound nicely and President Obama will have that real recovery that he deserves.

On the other hand, Krugman has been wrong before, not that he ever admits it. The Krugman paradigm is this: when the economy is depressed, government should suppress interest rates, create lots of new money, try to initiate inflation, and then borrow and spend lots of money. This will bring about a real recovery.

Since the financial crisis became painfully obvious in 2008 (and, really, more than a year before that), government has done all of these things, including bailing out banks, financial houses, and much of the domestic auto industry. The Fed's balance sheet has grown exponentially, and it seems that if nothing else, Bernanke is hellbent on making sure that no big bank goes out of business.

On the other hand, the real economy is not doing so well. If we see the kind of recovery Krugman predicts in the next four years, then Krugman will be able to claim victory, although he has a habit of claiming victory even when he is wrong. The problem is that, like most Progressives, he believes that leftist government is so magical that it can do away with the Law of Opportunity Cost by printing money.

I don't believe that economics is an "empirical" science. Instead, economic theory must submit to the laws of nature, not the laws made up by a British sexual pervert. That means a priori, and anything else is metaphysics, as far as I am concerned. So, we shall see in the end who is the false prophet.

Krugman: Capital Stalls Economic Growth and Creates Inequality

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One of the differences between mainstream Keynesian (and neoclassical) economists and the Austrians is the view that both sides have of capital. On the Keynesian-socialist side, capital is useful mostly in the spending that is done in capital creation, and future capital improvements and repairs are useful only if these things require more spending.

Before going further, I need to emphasize that Austrians do not endorse all capital expansion, as we do see expansion based upon aggressive efforts by the government via the Fed pushing down interest rates or the government offering all sorts of subsidies and tax benefits (see "green energy") as promoting malinvestment. Since Keynesians such as Krugman do not recognize malinvestment as an economic issue (except for rare times when they think it might aid their arguments, and even then they will not use malinvestment as an economic term), they can endorse things like the massive subsidies for "green energy," since those sectors allegedly "create jobs."

If one ignores the Law of Opportunity Cost, then "green energy" is a great investment. Except, as the Wall Street Journal recently pointed out in an editorial, the Algore Sector of the economy is a disaster, an investor's version of the black hole. If Paul Krugman is interested in the relationship between capital formation and inequality, he need look no further that what has happened to the economic sector that President Barack Obama promised would lead us out of the economic downturn. Time and again we see the government transferring wealth to those who already are wealthy via this unjustified program of capital malinvestment.

(Al Gore, by the way, has managed to become fabulously wealthy living off these taxpayer subsidies while the investors who have helped provide the up-front money that he pockets have taken a financial bath. That is a story for another time and another posting, but I do find it instructive that Krugman never has gone after Gore the way that he has gone after people who actually might be productive.)

So it is today that Krugman takes on the capital bogey, first repeating (with some skepticism) yet another version of David Ricardo's pessimistic "steady state" plateau to be reached at an unnamed time. Ricardo's insistence of decreasing marginal returns to capital is there, as well as the view that at some point, capital formation will run into the proverbial brick wall. To his credit, Krugman disagrees, although not for the right reasons.

For Krugman, growth occurs only if government spending increases. One should not forget his preposterous claim that the recovery was faltering because state government spending was not rising at rates comparable to previous economic recoveries. (It never occurs to Krugman that because states must balance their budgets, they are heavily dependent upon real economic growth from private firms, so if anything, the financial problems in states and municipalities should be the "canary in the coal mine" warning that maybe Obama's policies are not promoting growth.)

Krugman then lets loose with this gem:

So machines may soon be ready to perform many tasks that currently require large amounts of human labor. This will mean rapid productivity growth and, therefore, high overall economic growth.

But — and this is the crucial question — who will benefit from that growth? Unfortunately, it’s all too easy to make the case that most Americans will be left behind, because smart machines will end up devaluing the contribution of workers, including highly skilled workers whose skills suddenly become redundant. The point is that there’s good reason to believe that the conventional wisdom embodied in long-run budget projections — projections that shape almost every aspect of current policy discussion — is all wrong.

Yeah, it is capital creating mass unemployment across the economy just as capital is responsible for the high cost of medical care. True, if it is malinvested capital, then in the long term, the malinvestments direct investment away from truly productive uses, and after the inevitable bust occurs, we see unemployment rising.

On the subject of "inequality," Krugman is insinuating that unless government steps in to limit investment returns to capital, then those returns will enrich some, but at the expense of others. Thus, Krugman reasons, capital that actually might be profitable in a market setting actually helps to create poverty. This is an amazing conclusion, but then we live in amazing time.

Krugman does not address the fact that maybe, just maybe, people purchase goods because they believe use of those goods will make themselves better off. In other words, he recognizes only the returns to investors as having anything to do with economics, while the actual uses of these goods and their economic effects either are ignored or are devalued.

During the 1930s, the New Dealers that Krugman so often praises claimed that the economy was in depression in part because ours was a "mature economy." I remember reading a 1980 Daniel Patrick Moynihan newsletter in which he made essentially the same claim. If that really were true, then I would challenge readers to go back to those eras and see who has a higher standard of living, Americans then or Americans now.

One one last point, Krugman continually claims that our present policies are starving Washington of wealth and that Washington really is on an "austerity" plan. If that is true, then why is the economy of the D.C. area booming at a time when the economy elsewhere is stagnant? Seven of the top 10 wealthiest counties either are contiguous to D.C. or are contiguous to counties that touch the D.C. borders, and the pattern continues. But if D.C. is booming, then why is the rest of the country doing poorly?

Krugman's Keynesian "Trickle-Down" Economics: Washington, D.C., as an Experiment

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According to Paul Krugman and other Keynesians (not to mention almost all so-called political Progressives), endorsing a relatively free economy in which governments do not set or regulate prices and permit owners of factors of production to bargain in free markets is also to endorse what they call "Trickle-Down Economics." This "theory," according to the Progressives, operates like this: If we "help" the "rich," (that is, do not confiscate all or nearly all of their wealth), then by so doing, the spending of the rich will "trickle down" benefits to everyone beneath.

Obviously, this is presented with the belief that the "theory" is false on its face, or at least the results of the "theory." The rich, as Krugman and others will tell you, don't spend all of their income, which means that not everyone beneath them will receive enough income to survive. The better way to do things, according to the Krugmanites, is for the government to confiscate most of the earnings and wealth of the rich and distribute them to everyone else. This will result in equal incomes, which then assure enough spending to keep the Big Circle of the Economy moving and result in economic Nirvana.

For the past four years, we have had a major Keynesian experiment in Washington, D.C., as huge amounts of money have been transferred from elsewhere in the USA to the D.C. area, and especially the nation's capital itself. The outlying counties have become considerably wealthier, and especially wealthier relative to the rest of the USA. But what about Washington, itself? If the Keynesian theory is correct, then the wealth absorbed by government should have "trickled down" to the other residents of D.C. who are not directly connected to high-paying government jobs, political office, or lobbying firms or companies that have major government contracts.

Certainly the economy of D.C. has received enough new money to have gained "traction" (as Krugman likes to call it) to be engaged in a boom. Well, it turns out that unless one is well-connected politically, the Keynesian "stimulus" just might not have as much staying power as Krugman claims.

It turns out that income and living inequality in the District are worse than ever, according to recent reports:

Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. The federal government funneled $83.5 billion their way in defense and other work in 2010 - an increase of more than 300 percent since 1989, even after adjusting for inflation. Private industry poured more than $3 billion into lobbying toinfluence the government, nearly double what it spent a decade ago.

Like spokes on a wheel, the high-rise offices of this elite radiate out from Capitol Hill along major arteries deep into suburban Maryland and Virginia. The latest Census figures placed 10 of the capital's surrounding counties in the top 20 nationwide for median household income - up from six in 1990.

The article lays out the rise of Lani Hay from military officer to out-and-out Washington tycoon whose wealth has come about solely from the income transfers from private individuals and businesses to the government. And her $120 million in government-awarded income pales next to the income that others gain at the government troughs.

Yet, at the same time, the regular people in Washington are not taking part in this orgy of new governmental wealth. This article lays out what the "other" people experience, as the blogger Glenn Reynolds received this from a D.C. council member:

"I really think you should reconsider your article about how Washington, DC was not affected by the recession and is doing so much better than the rest of the country. . . . I am not sure if you have ever been to the DC area, but I live here and there is a lot of poverty. The capital area might be doing great and the 2 wards where congresspeople live might be doing well, but the rest of the city is affected by poverty. Wards 7 and 8 have an average income of less than $30,000 and there are boarded up stores all over the city, just not in the 2 mile radius that tourists and outsiders see. . . . Maybe your next article could be about how DC has the largest income margin in the nation? About how the congresspeople and lobbyists make over $100,000 a year and the rest of city is living in poverty?"

 That is not all. The Reuters article lays out a few gems that would contradict the Keynesian Gospel:

Inequality has increased in 49 of 50 states since 1989. (See accompanying box on how inequality was measured.)

The poverty rate increased in 43 states, most sharply in Nevada, ravaged by the housing bust, and in Indiana, which saw a rise in low-paying jobs.

Twenty-eight states saw all three metrics of socioeconomic well-being worsen. There, inequality and poverty rose and median income fell.

In all 50 states, the richest 20 percent of households made far greater income gains than any other quintile - up 12 percent nationally.

The five largest increases in inequality all were in New England: Connecticut first, followed by Massachusetts, New Hampshire, Rhode Island and Vermont. The decline in manufacturing jobs hit New England's poor and middle hard, while the highly educated benefited from expansionin the biotech and finance industries.

And then there is this: 

Massachusetts boasts the country's finest public education system, but that has failed to slow a sharp increase in the income divide. Indiana has revamped the state's welfare system, but the number of people in poverty has soared. And in the District of Columbia, the federal government's hand in rising inequality is visible locally and nationwide.

This is not possible under Krugman's Keynesian Trickle-Down Theory. More money for public education means inequality disappears. The New England states vote heavily Democratic, and very liberal Democrats at that (no Republican holds statewide office in New England), so there can be no question that the policies that govern these states are correct, according to Krugman's views. Furthermore, there is no more Democratic political entity in the country than Washington, D.C., so there can be no doubt that the city is following "proper" political and economic policies.

So, if all of the claims that Krugman has been making the past several years are true, then there is little or no economic inequality in Massachusetts and in Washington, D.C., and they are the two most "liberal" political entities in the country. Inequality cannot be happening there because Paul Krugman always is correct.