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Monday, January 20, 2014

Our Outlook for 2014

Happy New Year!
Our Outlook for 2014

We would like to thank all our clients and friends of the firm for a terrific year. For now, the economic and political climate looks favorable. We have developed a piece detailing our 2014 Outlook, which is available on the web at ljpr.com/outlook. In it, you'll find an overview of our perspective on the economic, investment, tax and estate planning issues of the New Year. In general, we are cautiously optimistic, and as the Outlook covers, we are revising our models to reflect what we see as a new phase of the cycle. We have new funds and new ideas to consider.

2013 had a variety of events that we would not have expected, and some we did:

  • Washington operated in the most dysfunctional fashion since 1900 and as a result, the deficit was reduced by over $500 billion.
  • The Sequester did not cause planes to plunge, or cows to give green milk.
  • The budget showdown caused the government to shut down, which caused a variety of problems for folks who didn't need it.
  • The Health Care rollout went poorly, surprising everyone that the government jumping into high technology might have snafus. It is interesting that the contractor, CGI Federal is a Canadian company (French Canadian, zut alors). So we had the US government trying to build a website using a Canadian company to implement an exceedingly complex health care decision to allow people who can't get health insurance to go on a computer and sign up. Now why didn't that work?
  • On the other hand, Kentucky had a tremendously successful health exchange that worked swimmingly. Maybe working on it and testing it for over two years helped.
  • We had a terrorist attack on US soil, not from Al Qaeda, but from two young disgruntled men from Chechnya. Scary, but interesting that the amount of technology that surrounds us is amazing. There were pictures of the perpetrators within hours.
  • Speaking of technology, Target had 40 million customers "targeted", whose credit/debit accounts were compromised from in-store transactions. Stores were then overwhelmed with cash, which baffled clerks who couldn't make change.
  • Detroit filed for bankruptcy, now bringing a huge question of whether a Federal Bankruptcy judge can trump the Michigan Constitution (which I think will go to the Supremes). It also presents a strange argument that the biggest creditor of Detroit is the retirees, and the biggest asset (by the Judge's position) is the retiree's pension.
  • Vladimir Putin demonstrated his vast leadership qualities (?) by helping broker peace accords with Iran and Syria.
  • The North Korean leader, Kim Jong-un, provided a new meaning to the phrase 'termination with extreme prejudice' as it applied to his uncle and all his aides.
  • The Fed began its long-awaited "taper". In July, when the Fed Chair gave an example of tapering, stocks and bonds took a dive. When the taper actually started, the market soared. Go figure.
So, we couldn't make this stuff up, but after all of this, US equities had a banner year. Perhaps we should predict doom and gloom for 2014, but our outlook is actually simple: we expect the economy to continue to grow, the taper will continue, interest rates will likely rise, emerging markets will grow, and the media will be inundated with political campaign ads. 

What about 2014? Here's a foreshadowing of what we expect:
  
  • As a result of our client survey, we are providing a variety of client enhancements.
  • We have revised our investment models to include some new low-cost funds and to reflect our view on a rising rate environment (more in the Outlook). Expect this early in 2014.
  • Financial planning will have to take into account changes in the health care situation.
  • We will be providing a series of educational programs for clients and friends throughout the year.
  • We will be leveraging technology to do out-of-office meetings (such as Skype).
  • We are engaged in a very exciting project called the Michigan Alpha Project (MAP). The MAP is a collaboration of Walsh College and LJPR to provide a real-time, real money portfolio in one of North America's best markets: Michigan. We will be posting more on this later.

All in all, we see some challenges for 2014, but proper positioning and diligence in planning will provide the opportunity for a solid year. As always, we'll be on the lookout for potential problems as well as opportunities.

We wish you all a very Happy New Year. In closing, we'd like to offer a New Year's wish: Go Green, Go White! For the rest of 2014: may you have a year of good health, happiness and prosperity.

Leon

PS: If you get mad at my jab on Canadian software companies, recognize that 'LaBrecque' is French Canadian. I was just trying to name some great French Canadian software companies that I can think of, or any big French Canadian companies, for that matter...