what? near 95% participating rate?

Doug Kass: My 15 Surprises for 2012

This new, brighter and more positive narrative is the essence and the common thread contained in my surprise list for 2012. (And this year, following each surprise, I am introducing a specific strategy that might be employed in order for an investor to profit from the occurrence of these possible improbables).

Surprise No. 1: The U.S. stock market approaches its all-time high in 2012. The beginning of the New Year brings a stable and range-bound market. A confluence of events, however (discussed further in the body of the 15 Surprises for 2012), allows for the S&P 500 to eclipse the 2000 high of 1527.46 during the second half of the year. The rally occurs as a powerful reallocation trade out of bonds and into stocks provides the fuel for the upside breakout. The market rip occurs in a relatively narrow time frame as the S&P 500 records two consecutive months of double-digit returns in summer/early-fall 2012.

Strategy: Buy out-of-the-money SPDR S&P 500 ETF Trust (SPY_) calls.

Surprise No. 2: The growth in the U.S. economy accelerates as the year progresses. The U.S. economy muddles through in early 2012, but, with business, investor and consumer confidence surging in the fall, real GDP accelerates to over 3% in the second half. Unemployment falls slightly more than consensus, but the slack in the labor market continues to constrain wage growth. Domestic automobile industry sales soar well above expectations, benefiting from pent-up demand and an aging U.S. fleet. Inflation is contained but begins to be worrisome (and serves as a market headwind) in late 2012. Corporations' top-line growth is better than expected, and wage increases are contained. Operating margins rise modestly as sales growth lifts productivity and capacity utilization rates. Operating leverage surprises to the upside as 2012 S&P profits exceed $105 a share.

A noteworthy surprise is that the residential real estate market shows surprising strength. The U.S. housing market becomes much bifurcated (in a market of regional haves and have-nots), as areas of the country not impacted adversely by the large shadow inventory of unsold homes enjoy a strong recovery in activity and in pricing. The Washington, D.C., to Boston, Mass., corridor experiences the most vibrant regional growth, while Phoenix, Las Vegas and areas of California remain weak. The New York City market begins to develop a bubbly speculative tone. Florida is the only area of the country that has had large supply imbalances since 2007 that experiences a meaningful recovery, which is led by an unusually strong Miami market.

Strategy: Buy Home Depot (HD_), Lowe's (LOW_), building materials and homebuilders, and buy auto stocks such as Ford (F_) and General Motors (GM_).

Surprise No. 3: Former Presidents Bill Clinton and George Bush form a bipartisan coalition that persuades both parties to unite in addressing our fiscal imbalances. The Clinton-Bush initiative, also known as "Simpson-Bowles on steroids," gains overwhelming popular support, and despite strenuous initial opposition, it forces the Democrats and Republicans (months before the November elections) to move toward a grand compromise on fiscal discipline and pro-growth fiscal policy. Interest rates remain subdued, growth prospects become elevated and a feel-good atmosphere begins to permeate our economy in a return of confidence and in our capital markets engendered by the Clinton-Bush initiative.

Strategy: See No. 1 surprise strategy. Sell volatility.

Surprise No. 4: Despite the grand compromise, the Republican presidential ticket gains steam as year progresses, and Romney is elected as the forty-fifth President of the United States. The U.S. moved to the left politically in the Democratic tsunami in 2008 and to the right politically as the Republican Party gained control of Congress in 2010; the 2012 election is the tiebreaker. The result of the tiebreaker is that Mitt Romney and Marco Rubio squeak by Barack Obama and Joseph Biden in the November 2012 election. All the five swing battleground states (Florida, Indiana, Missouri, North Carolina and Ohio) go Republican. The Romney-Rubio ticket also wins the states of New Hampshire and Virginia, previously won by Obama in 2008, and the Republicans prevail (270 electoral votes to 268 votes) in one of the closest elections of all time. (Here is a great interactive electoral college map that allows you to make your own predictions.)

Strategy: See No. 3 surprise strategy.

Surprise No. 5: A sloppy start in arresting the European debt crisis leads to far more forceful and successful policy. The EU remains intact after a brief scare in early 2012 caused by Greece's dissatisfaction (and countrywide riots) with imposed austerity measures. The eurozone experiences only a mild recession, as the ECB introduces large-scale quantitative-easing measures that exceed those introduced by the Fed during our financial crisis in 2008-2009.

Strategy: Buy European shares. Buy iShares MSCI Germany Index Fund (EWG_) and iShares MSCI France Index Fund (EWQ_).

Surprise No. 6: The Fed ties monetary policy to the labor market. In order to encourage corporations to invest and to build up consumer and business confidence, the Fed changes its mandate and promises not to tighten monetary policy until the unemployment rate moves below 6.5%, slightly above the level at which wage pressures might emerge (the Non- Accelerating Inflation Rate of Unemployment).

Strategy: Buy high-quality municipal bonds or the iShares S&P National AMT - Free Municipal Bond Fund (MUB_).

Surprise No. 7: Sears Holdings declares bankruptcy. In a spectacular fall, Sears Holdings (SHLD_) shares are halted at $18 a share during the early spring, as vendors turn away from the retailer, owing to a continued and more pronounced deterioration in cash flow (already down $800 million 2011 over 2010), earnings and sales. With funding and vendor support evaporating, as paper-thin earnings before interest and taxes margins turn negative and cash flow is insufficient to fund inventory growth. The shares reopen at $0.70 after the company declares bankruptcy and its intention to restructure, as we learn, once again, that being No. 3 in an industry has little value -- especially after store improvements were deferred over the past several years. A major hedge fund and a large REIT join forces in taking over the company. Ten to fifteen percent of Sears' 4,000 Kmart and specialty stores are closed. More than 35,000 of the company's 317,000 full-time workers are laid off. As a major anchor tenant in many of the nation's shopping centers and with no logical store replacement, the REIT industry's shares suffer through the balance of the year, and the major market indices suffer their only meaningful correction of the year. Target (TGT_) and Wal-Mart's (WMT_) shares eventually soar in the second half of 2012.

Strategy: Buy out-of-the-money Sears Holdings puts, go long Target and Wal-Mart, and short the iShares Dow Jones U.S. Real Estate Index Fund (IYR_).

Surprise No. 8: Cyberwarfare intensifies. Our country's State Department's defenses are hacked into and compromised by unknown assailants based outside of the U.S. Our armed forces are place on Defcon Three alert.

Strategy: None.

Surprise No. 9: Financial stocks are a leading market sector. After five years of underperformance, the financial stocks rebound dramatically and outperform the markets, as loan demand recovers, multiple takeovers permeate the financial intermediary scene and domestic institutions enjoy market share gains at the expense of flailing European institutions. With profit expectations low, three years of cost-cutting and some revenue upside surprises (from an improving capital markets, a pronounced rise in M&A activity and better loan demand) contribute to better-than-expected industry profits. P/>

Another tough year
To cover this group
Down 40 to 50
And they're still in the soup
Regulation, litigation
And potential mitigation
Time to put it all aside
And enjoy your vacation....

But if Republicans win the White House
It's them I'd like to thank
Cause they'll not only change the top seat
But also the bill of Mr. Dodd and Mr. Frank

So Happy New Year
Hope you found this rap a little clever
And buy some big banks and brokers next year
Don't hide in the regionals forever!

-- "Nomura Securities' Year-End Rap"

Strategy: Buy JPMorgan Chase (JPM_), Citigroup and the Financial Select Sector SPDR (XLF_).

Surprise No. 10: Despite the advance in the U.S. stock market, high-beta stocks underperform. Though counterintuitive within the framework of a new bull-market leg, the market's lowfliers (low multiple, slower growth) become market highfliers, as their P/E ratios expand.

With the exception of Apple (AAPL_), the highfliers -- Priceline (PCLN_), Baidu (BIDU_), Google (GOOG_), Amazon (AMZN_) and the like -- disappoint. Apple's share price rises above $550, however, based on continued above-consensus volume growth in the iPhone and iPad. Profit forecasts for 2012 rise to $45 a share (up 60%). In the second quarter, Apple pays a $20-a-share special cash dividend, introduces a regular $1.25-a-share quarterly dividend and splits its shares 10-1. Apple becomes the AT&T (T_) of a previous investing generation, a stock now owned by this generation's widows and orphans.

Strategy: Long Apple (common and calls).

Surprise No. 11: Mutual fund inflows return in force. With confidence renewed, domestic equity inflows begin to pour into equity mutual funds by midyear and approach a $100 billion seasonally adjusted annual rate by fourth quarter 2012. The share prices of T. Rowe Price (TROW_) and Franklin Resources (BEN_) double.

Strategy: Long Legg Mason (LM_), T. Rowe Price and Franklin Resources.

Surprise No. 12: We'll see merger mania. Cheap money, low valuations and rising confidence are the troika of factors that contribute to 2012 becoming one of the biggest years ever for mergers and takeovers. Canadian companies are particularly active in acquiring U.S. assets. Canada's Manulife (MFC_) acquires life insurer Lincoln National (LNC_), two large banks join a bidding war for E*Trade (ETFC_), and International Flavors & Fragrances (IFF_) and Kellogg (K_) are both acquired by non-U.S. entities. Finally, a Canadian bank acquires SunTrust (STI_).

Strategy: Long E*Trade, Lincoln National, International Flavors & Fragrances, Kellogg and SunTrust.

Surprise No. 13: The ETF bubble explodes. There are currently about 1,400 ETFs. During 2012, numerous ETFs fail to track and one-third of the current ETFs are forced to close. There are several flash crashes of ETFs listed on the exchanges. The ETF landscape is littered by investor litigation as investor losses mount. New stringent maintenance rules and new offering restrictions are imposed upon the ETF business. The formation of leveraged ETFs is materially restricted by the SEC. (Hat tip to Barry Ritholtz's Big Picture.)

Strategy: Avoid all but the largest ETFs.

Surprise No. 14: China has a soft landing (despite indigestion in the property market), and India has a hard landing. India becomes the emerging-market concern. With India's trade not a driver to GDP growth, its currency in free-fall, pressure to keep interest rates high by its central bank and signs of a contraction in October Industrial Output, India's GDP falls to mid-single-digit levels.

Strategy: Long iShares FTSE/Xinhua China 25 Index Fund (FXI_); short WisdomTree India Earnings Fund ETF (EPI_) and iPath MSCI India Index ETN (INP_).

Surprise No. 15: Israel Attacks Iran. The greatest headwind to the world's equity markets is geopolitical, not economic. Israel attacks Iran in the spring, but, at the outset, the U.S. stays out of the conflict. Iran closes the Strait of Hormuz, and oil prices spike to $125 a barrel.

Strategy: Buy Schlumberger (SLB_), ExxonMobil (XOM_) and other oil production and exploration stocks.

回头看，只要是预测就不靠谱。现在是不是底，我觉得不是，等七八月的ISM出来搞死你。

尼玛，不好，我居然也预测一把。

中国地产还没死，政府就要死了，不是死了，开明了。


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China’s officials forced to sell luxury cars
By Simon Rabinovitch in Beijing
©Getty
Cash-strapped local governments in China have begun auctioning off fleets of officials’ luxury cars as part of efforts to bolster revenues hit by the country’s slowdown.
Wenzhou, a south-eastern coastal city hit hard by the cooling economy, sold 215 cars at the weekend, fetching Rmb10.6m ($1.7m). It plans to sell 1,300 vehicles – 80 per cent of the municipal fleet – by the end of the year.
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Government revenues from tax and land sales in Wenzhou have been declining after years of heady growth. With the city’s risk-taking businesses struggling to pay back debts, the burden has fallen on the local government to turn things around. State media noted the auctions would directly boost the city’s coffers.
Wenzhou is not alone. Across the country, from Kunming in the south to Datong in the north, officials have been tightening their belts, paring back on banquets, curtailing travel and trimming the fleets of tinted-window luxury cars that have long been standard issue – even in the middle ranks of government.
“It is a sign of the difficulties facing city finances,” said Tao Ran, a local government expert at People’s University in Beijing.
While government car auctions have been held before in China, such sales have increased in recent months and state media have urged more officials to follow suit. Cities have been told to keep police cars and ambulances, but to sell the chauffeured sedans that do not comply with government policy.
About one in every five Audis in China – the German car’s biggest market – is owned by the government, according to industry estimates. More egregious examples – of police driving Porsches, and even a Maserati with military plates – have also prompted Chinese citizens angry about official corruption to post pictures of the cars online.
In publicising the auctions, the government is aiming to head off that anger – all the more important in a year when China embarks on a once-in-a-decade leadership transition.

Local officials, who have shown little sign of responding to past criticism of their car-buying habits, appear to be motivated mainly by the downturn.
The cooling property market has deprived them of land sales, which is traditionally a key source of cash, and fiscal revenue growth is nearly 20 percentage points lower than last year.
Official cars cost China about Rmb100bn annually, and auctioning off the luxury fleets is one easy, if temporary, way to try to plug the gap in local finances.
Yulin, a city in Shaanxi province that until recently boomed from its coal mines, raised Rmb5.6m on one day in June by selling 19 cars – an average of Rmb292,600 per vehicle, according to the Communist party newspaper People’s Daily. Up for grabs were black Audis, the car of choice for Chinese officialdom, though the hottest item was a Toyota Land Cruiser, much coveted on mining roads.
Other cities, including Changzhou and Nanchang, said they started auctioning cars last year. The trend is also spreading to poorer villages, with Yuan’an, a farming county in central China, boasting on its official website about a June 18 auction that netted Rmb220,000.
The municipalities say the auctions are their way of implementing a central government policy to root out misuse and illegal purchases of official cars. But despite policy being in place since 1994, the number of government cars has mushroomed.
“It’s not only about reform,” said Prof Tao. “Many are short of money.”

尼玛，almost every risk is low by IMF standard