John Wasik

By John Wasik

(Reuters) – If you want to be optimistic about investing this year – and there are plenty of reasons to be – you need to understand the tale of two economies.

One narrative is the recovering U.S. economy: Robust corporate profits, increased manufacturing, slightly more hiring and continued global demand. The other story tells of a hobbled euro zone, a possible slowdown in China and the prolonged misery of the U.S. housing market.

Which tale do you choose to believe? I’m loath to forecast which scenario will dominate because both will play out in varying degrees. The euro zone downgrades last week(link.reuters.com/pyw95s) are certainly going to reverberate in the markets, so if you’re over-exposed to European debt and stocks, pare back. In any case, you should be upgrading your portfolio to grab growth and income while reducing risk.

Keep in mind that my observations are not predictions and based on my Totally Oscillating Algorithmic Sentiment Trends (TOAST) strategy. That is, things change quickly and you need to figure out how much money you can afford to lose in an ever-volatile market. Here are some trends worth noting:

1. HOUSING

Housing will still be hurting, but could be jump-started. While Ingo Winzer’s National Economic Outlook (www.localmarketmonitor.com/) is generally optimistic, he doesn’t see a U.S. housing rebound. “The evidence is now pretty clear that a sustained economic recovery is underway, although housing markets won’t feel much benefit until next year,” Winzer writes.

By John Wasik

(Reuters) – Can those celebrity-linked prepaid cards really help the unbanked?

Lately there have been a spate of them, from Kim Kardashian’s to Lil Wayne’s. When it comes to that newest one, the Approved Prepaid MasterCard issued by the Bancorp Bank and endorsed by personal finance personality Suze Orman, who is also an investor in the product, less is not necessarily more. There are better alternatives.

First, a disclosure. I knew Orman well before she became brand-name famous (we’re both from Chicago) and she even wrote a blurb for my book, “Late-Start Investor,” in 1998. She’s generally done some good things for financial consumers.

By John F. Wasik

(Reuters) – For years, one of the more bankable phenomena in finance has been the January effect.

The premise is simple: Institutions and traders sell off stocks the end of the year for tax reasons and portfolio dressing. Then they start buying again in January, often favoring small companies, also known as “small caps.”

With myriad signs that the U.S. economy is in recovery, this may be another good year for the January effect. Even if it isn’t – and I refuse to make predictions for short-term traders – it would be a good idea to add bargain-priced small caps to your core portfolio through index mutual funds or exchange-traded funds (ETFs).

Jan 6 (Reuters) – No matter what theme you adopt in a
market forecast, predictability has always been a bugaboo. Just
ask Bill Gross, the legendary manager of the PIMCO Total Return
bond fund.

Gross’s $244 billion baby saw at least $5 billion in assets
flee in 2011, more than $1.4 billion in the fourth quarter
alone. Relative to the size of his fund, this is a notable vote
of no confidence ().

Investors voted with their money because of Gross’s bet
against U.S. Treasuries last year. Like many of us, he digested
the headlines and became dyspeptic over the Congress defaulting
on its debt, sluggish economy, the S&P credit downgrade and
euro zone debt woes. Yet what actually happened didn’t follow
Gross’s “new normal” script. Instead we got the “old abnormal”
of unpredictability.

Jan 3 (Reuters) – Despite gloomy headlines from Europe over
the past year, a new technology mash-up is emerging that could
spark some exciting ideas for investors.

There is long-term growth in convergent technologies that
integrate the Internet, green transportation, building-based
micro-power plants and power distribution into a collaborative
worldwide grid, according to author and consultant Jeremy
Rifkin, founder of the Foundation on Economic Trends.

It is a development trend that stretches into the next
decade and is worth investing in right now, said Rifkin.

29 (Reuters) – You won’t get too many arguments at
holiday parties if you say that 2011 has been one of the most
challenging years for investors.

With the European crisis unresolved and major bi-polar
dysfunction in Washington, it’s never been more difficult to
plan ahead. Yet there are always core wealth management
concerns that you need to address.

Here are some that I think are key.

DO YOU TRUST YOUR ADVISER?

Under pressure from the brokerage and insurance industry,
the Securities and Exchange Commission is reconsidering a
proposal to make all advisers fiduciaries.

Dec 27 (Reuters) – For 2012, think volatility — again.

Yet that doesn’t mean that economic recovery won’t be part
of the story. A focus on the industries likely to benefit from
a rebound and long-term demographic trends bodes well for these
sectors:

* Health Care. If you don’t have health-care stocks as part
of core holdings in broad-based index or sector funds, you’re
going to missing almost guaranteed growth.

The leading edge of the 77-million-plus Baby Boomer
generation has hit 65, a wave that will last more than 20
years. That will increase the demand for medical services,
devices and pharmaceuticals.

By John Wasik

(Reuters) – In every year, there are a host of surprises that come along like earthquakes: They are nearly impossible to predict.

Who would have thought that Congress would be at loggerheads over raising its debt ceiling or that Standard & Poor’s would cut the credit rating on U.S. Treasuries? On top of that, who would have then foreseen that U.S. paper would still be regarded as a global safe haven, gold would tumble and interest rates would continue to fall?

We can be thankful that more didn’t go wrong with the global economy, although things could certainly go haywire next year. Here are some things that surprised me personally and professionally this year and may flummox us in the next 12 months.

Dec 19 (Reuters) – In just the last year alone, we’ve seen
epic snow, wind, fire and rain. There were a record 12 extreme
weather events in 2011 according to the National Oceanic and
Atmospheric Administration, each causing at least $1 billion in
damages. With climate change rearing its ugly head, Mother
Nature may even become surlier. Depending upon where you live,
that means it may be more difficult to find affordable
insurance coverage.

I routinely shop this time of year for the best homeowner’s
policy, and I’ve found that it’s gotten more complicated than
ever. Several insurers have put in exemptions for certain kinds
of storm damage while others insure less by low-balling the
replacement cost of my house.

Since my policy is hovering around $1,000 a year – it’s
climbed in recent years by $200 – I was hoping to find a better
deal. So I asked Robert Hunter, director of insurance for the
Consumer Federation of America, how I should vet homeowner’s
policies.

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