The fact is, we’re always making predictions and forecasts of one sort or another.  Some predictions are easier to make than others – you can predict your next paycheck on the basis of the last one, perhaps – or you can predict where you might be in a year if everything else remains equal and you have a fairly good sense of your productivity.

The hardest predictions to make are those that go farther and farther out into the future. The further ahead it is, the more uncertainties get in the way and cloud up any probabilities we think we can see. Black swan events, disequilibrium on the edge of chaos, and critical mass from gains in public awareness make many specific events impossible to calculate.

But you don’t have to arrive at exact calculations in order to see trends that are clearly already in place. You just have to know how to connect the dots in any given area of development.

With that in mind, I’ll present trends in place in ten key global sectors and mention the economic impact they seem likely to have or what economic influences are facing them – all based upon my own observations.  Why?  Because it will help you get clearer on the big picture and to position your own investments accordingly.  In other words, if you consider yourself a serious or major investor, but you’re not already on top of these trends, you’re already behind.

Top Economic Global Trends for 2012-2016

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1. Commercialization of education. As much as many are working to stop it, the force of the trend is behind the privatization, outsourcing, decentralization, specialization, instrumentalization and move towards contract-based work in education. I won’t argue against it here, as others have done better elsewhere, but suffice to say this is not a model for education, but training. That said, if you want to align your allocations accordingly, choose investments that benefit from these trends.  Like I said, I do not condone them from a social perspective, but you need to make your own choices.

2. Food engineering. Around the world, companies like Cargill, Monsanto and Tyson are building food engineering conglomerates and corporate networks for the delivery and privatization of daily nutrition. The rationale, the image of “modernization,” is always in the name of helping the underdeveloped, but even your neighbor and his dog should know by now how that line really works.  If you haven’t yet, read Confessions of an Economic Hit Man by John Perkins.  There’s nothing hyperbolic going on here. Just a lot of well documented genetic modification and corporate colonization of the underprivileged.  If you don’t know what that means or don’t think it is worth your time to read up on, you stand to lose out in more ways than one.

3. Energy politics.  Even though solar, wind, fuel cell and other innovative technologies won’t be enough to fulfill all of our energy needs, look out for even more attempts and companies innovating in this area.  We will see a heightened politics of energy (oil lines especially) and social unrest particularly tied into food and water needs.  I’ll remind you of the close relationships between water, natural gas and oil refining – or the use of corn in ethanol production.  Or the amount of water and land used in the overproduction of livestock.

4. Rising healthcare costs. With the increase in specialization and privatization in another arena that does not essentially stand to benefit from the efficiency model, witness increased costs (an inevitable development) and profits with a rising number of private health care providers.  Along with this goes the rise in pharmaceuticals for newly DSM’d pathologies (over 57% of entries in which have some direct connection to pharma companies).  Does this mean every pharmaceutical company is going to be a winner?  No. There are always individual company risks. What I am saying is that this trend is connected to the others.

5. Diversification of Financial Networks.  We’re on the cusp of many financial transitions globally. The major one, and the one changing perhaps the slowest, is the move away from the USD as the world’s major reserve currency.  I’ve written about this many times on this site and you can find the posts in the menu above.  Other transitions: the rise in microlending, alternate/local currencies and purely digital currencies.  In the very long term, paper/metal-based money is probably on its way out for sure, to be replaced with digital capital.  We see the beginnings of this now with mobile-enable payment processes and services that allow you to use your iPhone like a wallet. Other predictions: my colleague @EverydayFinance is one who agrees with forecasts predicting the collapse of the Euro. I’m not ready to get behind that one yet, however. I think the political need and motivation to keep a monetary union is just too strong.

6. Emerging and frontier markets. The African continent is the fastest-growing economy in the world. Yes, faster in absolute terms than even China.  Precisely because their newly emerging markets have been so underdeveloped, there is more room for quicker growth.  This does not come without resistance either, however.  African nations seek their own independence, not handouts from foreign aid, which always come with a catch.  I would not be surprised to see much of the major innovation in years ahead come from this continent – along all of the above lines – food, energy, water, health care and education. Africa has no other choice.

7. Global governance and sovereignty. With potential bank runs in Spain, Portugal, Greece (as @EverydayFinance also predicts) and – according to one report, even Sweden – the financial systems of independent nation states can be knocked to the core. Even without a Euro collapse, the growing imbalance between sovereign wealth funds and creditor to debtor nations is becoming a potential threat.  Couple this with the fragility in the reserve currency system, China’s policy as a wild card, and it is safe to bet on some type of global sovereignty restructuring. Part of this will no doubt be the increasing growth of corporatization and multinational corporate networks of governance (under the name of the free market, of course).

8. First World As Third World. The Business Insider recently ran a great article detailing how in many (most?) respects, the United States can qualify as a third world country.  Especially next to certain official or former Third World countries themselves, who now have infrastructure ten times better than anything available in the U.S. Internet speeds? Try South Korea and Canada over the U.S.  Airports? Try New Delhi over JFK.  Maternity leave? Venezuela and Mexico women fare better than U.S. moms.  The matter of the fact is that the U.S. has put all of its resources into militarism abroad and has left its own citizens to stagnate domestically in terms of health care, education and infrastructure.  Jobs are shipped to cheaper labor in other countries and the American middle class has become hollowed out, riddled with student loans that can’t be paid back on the lack of living wages, which haven’t kept pace with corporate revenues.  Time to learn your Mandarin, folks.

9. Disruptive Technologies. In addition to the new energy tech mentioned above, you need to leave room for the next Apple, Groupon, or other new economy innovation to come along.  This is everyone’s favorite trend to predict for some reason.  New consumable gadgets that satisfy the need for something “new.”  But many of these technologies can be disruptive economically as well as socially.  Apple, we now know, has a greater market cap and cash on hand than the GDP of most countries’ sovereign wealth funds.  Where is this leading us?

10. Extraterrestrial Colonization.  Calling it what it is, it is space exploration for the ends of colonization. Check the definition of colonization if you need a reminder. Simply put, powerful organizations in control of the growth of capital in extremis are in search of more resources, off-planet.  It’s not about pure scientific research, that’s just a convenient palatable pretext.  I’m not trying to be cynical here. I’m just repeating the facts that I’ve been told.

So what does all of this add up to? You tell me. Connect the dots. These are all interrelated trends.  Each becomes significant in relation to the others. Each is both a cause and an effect of the others.  So you need to seek out the companies at the centre of these.  Draw a Venn diagram.

I’ll point out one more time that I’m not condoning any of these trends or the companies that have set themselves up to benefit from them. In fact, if you’re a creative thinker, you can probably figure out how you’d still position your portfolio in a more socially responsible fashion that would still benefit from these trends.  Either way you need to know the big picture.  For every action there is a reaction. Don’t think about globalization without thinking about resistance, countertrends and the rise in public awareness.

Have I left anything out?  Do you disagree?  Reach me on Twitter (the link is at the top of the page) and let me know.  Let’s discuss it.

The question now that Facebook has broke through a new floor is how low Facebook shares can sink from here?  What will the next level of support be at? How much new money will have to pour in to support shares at these levels?

Facebook’s IPO seems to have been glitched from the get-go, its opening of trading delayed by 30 minutes on the NASDAQ as a result of a technical glitch.  How long is this curse going to last?  With the new rumors unveiled regarding Facebook’s plans for a Facebook phone, one wonders how much of the IPO price was intended to support the production of the proposed phone, and whether this will now continue.  Other investors have complained that Facebook was not transparent enough about the slowing in its earnings growth just prior to the IPO.

The Facebook Faceplant

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At this point, the shares are down 20% from the IPO.  This is why it is a good idea to wait a week, even a month, before investing in an IPO.  The stock might not even settle down for another 6 months.

It could also be useful to compare today’s results with where Facebook stood just over 16 months ago.  I wrote about how much each Facebook user is worth one year ago.  Back then it was valued at $50 billion.  Today it’s valued around $61 billion, post-IPO.  Was it worth it?  It seems likely that the stock can still drop further.  Maybe even down to the same market cap that it was worth one year ago.

After all, has its revenue model changed much?  I remain a Facebook sceptic, even from a shareholder’s point of view. I know people who are waiting to jump in and buy it closer to $20, but even there I am not sure I would be ready. There was one report valuing FB stock around $13.  That seems reasonable, and would certainly put them into proper perspective vis a vis Google’s actual worth.

Nevertheless, the “Eurobond” is what Italian Prime Minister Mario Monti has proposed as a way out of the European debt situation.  Perhaps a Eurobond offering would calm global markets over European uncertainty. Eurobonds are just what they sound like – a counterpart to the Euro; a bond that represents the collective debt of the European Union member countries.

Watch the German Bund Yield

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There certainly seems to be room for it.  Right now the German bund yield is falling fast as more investors move their money in from surrounding countries, to the perceived safety and strength of Germany, which is able to get deeper into debt itself as a result.

If the German Bund yield starts to rise, however, it would indicate a change in sentiment, perhaps a sign that investors have stopped thinking that Germany will be able to carry all of the EU’s problems on its shoulders.  If so, it could be an indication of Eurobonds coming – or at least the perception that they might come as a stop-gap measure to come in and help Germany.  In reality, they will certainly help the weaker economies, which is why Monti is a Eurobond advocate.

Apparently, most European leaders have shown signs that they would be open to the idea of a Eurobond that would be representative of the collection of all Euro members’ debt.  These would trade in addition to individual nations’ bonds.  The Eurobond proposal in general, then, is obviously also a vote on the integrity of the European monetary and political union.

Do you buy it? Would you buy it? Would it still be a success in the wake of a possible “Grexit”?

Scotiabank’s Q2 Report

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Bank of Nova Scotia (TSX: BNS) reports on Tuesday and is expected to give an estimate of $1.15 in earnings per share (up from $1.10 a year ago).  Scotiabank will be interesting to watch given its attraction for investors as a result of its international portfolio, which is larger than the other Canadian banks.  But given some of the international risk of late, it might feel some indirect side effects.  Scotia is not expected to report on a dividend increase this quarter, however.

CIBC’s Q2 Report

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Canadian Imperial Bank of Commerce (CIBC) (TSX: CM) reports on Thursday and is expected to show earnings of $1.88 per share (7% profit growth; up from $1.75).  CIBC’s earnings have stabilized over the past year as a result of further strength in its retail banking division.  CIBC is not thought to be implementing a dividend increase this quarter, either.

National Bank’s Q2 Report

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National (TSX: NA), however, is expected to report a dividend hike this Thursday with its earnings reports. Since the financial crisis of 2008-2009, National has raised its dividend three times, well ahead of the Big Five Banks and was also the first out of the dividend gate.  Earnings growth per share is expected at 10%, the highest of this round of reports, with earnings of $1.86/share.  Much of this is taken to come from its capital markets division.

Although there are no dividend increases this time around, it is thought likely that Royal Bank (TSX: RY) and TD (TSX: TD) will post dividend increases next quarter.

So here’s a list of some other great companies that are leading us into the next decade.  Perhaps, like the early Microsoft (MSFT) and Apple (AAPL), some of these, too, will win big over the long term – regardless of what happens with the global slowdown or the collapse of the Euro (if that happens).

10 New Economy Stocks

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In no particular order:

Zillow (NASDAQ: Z) – Zillow is an online real estate database that makes its money largely from selling advertising on its site, and leasing its data out to search engines. Zillow has continued to grow and now has launched mobile applications on all major mobile platforms.  Its shares trade around $40, about 9 months after their 2011 IPO.

Zipcar (NASDAQ: ZIP) – Zipcar is the famous car-sharing network, a leader in the field, and has just expanded into Austin,  Texas, making Austin the 18th major metropolitan area the company has expanded to, and offering a fleet of 40 vehicles.  The shares trade just above $10 currently after an IPO in late 2011.

Groupon (NASDAQ: GRPN) – Remember Google tried to buy these guys out, but Groupon rejected the offer.  Going public back in November 2011, Groupon is still leading in the social media stock category right up there along with Facebook.

Angie’s List (NASDAQ: ANGI) – ANGI is showing excellent growth, but its expenses are keeping up with it, as well.  Some have argued that it, along with Pandora and Yelp, haven’t done enough to move away from traditional business models for gaining revenue from advertising.  But ANGI is one of the few new social media companies to collect money from paid memberships.

Facebook (NASDAQ: FB) – See my recent post on the Facebook IPO flop and potential problems with Facebook’s profit model. That being said, Facebook is clearly a huge player and not going anywhere, so it would probably pay to have at least a small position here for sure. The question is when to jump in.

Zynga (NASDAQ: ZNGA) -  Zynga’s share price saw a nice boost following the Facebook IPO. Zynga, of course, is the maker behind all those Facebook games that everyone else plays but which you despise. Zynga is still growing and represents the largest browser-based gaming platform for Facebook.

Pandora Media (NYSE: P) – The online, free music service that has grown in popularity over the past three years made its IPO debut less than a year ago in June 2011. It relies on those ads you keep skipping over, and on monies taken in from memberships from those who wish to skip the ads.

Baidu (NASDAQ: BIDU) - While this ADR is not a new offering, there is no mistaking that it can only grow in an environment where Google, Facebook and other social media are blocked.  Even in sheer numbers alone, the Chinese Google-equivalent can boast more potential searches, and definitely more Chinese-language searches, than Google.  Owners of BIDU prior to the nice stock split in May 2010 have already been rewarded quite well.

Millenial Media (NYSE: MM) – You might not yet have heard of this provider of mobile advertising solutions, but they went public earlier on in 2012 and have so far done fairly solidly, although also experiencing a drop following their IPO just like Facebook.

Yelp (NYSE: YELP) – That’s right, the famous online review service (of everything goods and services) went public earlier in 2012 as well.  It now trades around $18.

Netflix (NASDAQ: NFLX) – OK, this makes #11, but it was worth keeping Baidu in the list. Netflix has had some bumps in the road but is clearly a key player going forward in the online and streaming media delivery business.

What distinguishes these companies from the prior dot-com generation of flops is that these have all gone public, for the most part, after having developed a solid track record and deep customer bases (even if the revenue isn’t fully there yet).  In other words, if any money is to be made in social media, or in Web 2.0, it is this basket of companies that will be collecting first.

Of course, this list is just the tip of the iceberg of what we can expect from the truly “new” economy, but these are the ones that are taking us there and coming along for the ride.

The aim here is to encourage bilateral trade and investment between China and Japan (the world’s second and third-largest economies, remember), and, some speculate, the risks involved with the USD and costs associated with extra exchange transactions.  Scholars of history will take special note for several reasons, one of which is that it is the first time China has allowed the Yuan to trade directly with any currency besides the US dollar.

Zero Hedge posted an excellent chart as a reminder that over the centuries, major reserve currencies have come and gone several times, just as empires never last – neither does the predominant currency of global trade.  Portugal, Spain, the Netherlands and France have all been world-dominant economies at earlier points in time.  Does the average American even know what this means?

It’s a very good time to begin learning Mandarin, if you have not already.

Some commentators think it is a good sign that Facebook didn’t “pop” like so many past tech IPOs did (as much as 50% on the first day of the IPO, last year – LinkedIn (NYSE: LNKD) doubled.  You can compare this with the 72% average “pop” back in the 1999 dot-com days).  But the other factor to look at is still the fact that the underwriters and early investors still had to pour more money into it to put up a floor price.

The question now is what’s going on with Facebook? Has all the money been made already? Will it drop even further?  When will the large investors stop pouring money in? Who’s making money shorting Facebook already?

What Facebook Did Wrong?

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First, some have concluded that the opening price was just set too high.  Others interpret the lack of a pop merely as an indication that the price was set correctly, at fair value.  Another perspective is the fact that the company still achieved its own aims in the IPO, since the point was to raise money – $38 a share – and this it did, pocketing exactly that amount from the underwriters (large investment banks who then turn around and sell them to retail and other institutional investors).

Underpricing an IPO, on the other hand, would be a good idea to ensure at least some “pop” profit so as to reassure mutual funds and other investors, who might feel they are taking a chance on a young, small, or somewhat riskier company.  Underpricing might also mean the investment banks have tried to purposely lowball the price in order to make more money off of the higher demand that they know is in the market.

Another nice side effect of having an IPO is all the positive publicity that can ensue in the headlines following a first-day jump. Apparently Facebook shared in none of that this time.

IPO Trends

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The Washington Post reports that between 2007 and 2010, the average IPO pop was just 6.6.% – this changed just this past year or so, however, with a small cycle of internet stocks (Zillow (NASDAQ: Z), Zipcar (NASDAQ: ZIP), and Angie’s List (NASDAQ: ANGI) that climbed between 25 and 79%).  Obviously these numbers recall the early dot-com days, so Facebook’s breaking this trend might be seen with relief.

Still, there are potential problems with Facebook’s profit model.  Barring further drops in the stock price (and issues such as the NYSE attempting to court Facebook to list with them instead), it is going to be the issue of revenues that investors should pay attention to most.  The best advice, it appears, is still to wait this out at least a month before investing in Facebook.

The possible upside to Facebook’s IPO is so obvious that everyone’s neighbor and dog are also lining up to get some of the shares.  That alone – the fact that this is the most anticipated IPO in history (likely) – should be enough of a tip-off to warn you about trying to jump in at the beginning.

Here are some of the key areas of caution you should pay heed to with regard to Facebook (FB). It might ultimately not even be a stock you’ll want to own in just 2 years (short-term traders can read elsewhere, as I know you’ll be trying to take advantage of it anyway).

Typical IPO Risks

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Alright – there are the problems that relate to most IPOs potentially, but even more so in Facebook’s case.  I already went over some of the potential pricing problems with Facebook in yesterday’s post.  But let’s cover some additional ones, too.

It’s possible that the easy money has already been made with the pre-IPO owners and that we’re going to witness something of a “pump and dump/slump” – all the more so because it is expected that about 50% of shares are going to be sold by insiders.  This might also indicate the company is already fully valued.  Thus some watchers are predicting share prices of as low as $18 out six months from now.

A related issue is that the total amount of shares that will be issued for the free-float post-IPO will only amount to a small portion of the total number of shares.  There is an effective “lock-down” on shares going out at least six months, and when that period is up, the larger institutional investors might act to unload quite a bit more into the market, diluting the pool and lowering the price yet again.  This is another good reason to wait 6 months.

Leadership Issues

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Another issue with IPOs in general is that the innovators responsible for the creative set up and initial growth might decide to leave after it goes public in order to continue with start ups somewhere else.  This wouldn’t be Facebook’s fault, but it is something to consider in light of the projected 50% insider sales figure.

There is also the potential danger of manipulation or transfer of control to some of the largest shareholders, like Microsoft.  And there is the much talked-about issue of Zuckerberg’s acquisition of Instagram, which purportedly went against objections from the Board of Directors.

Potential Profit Problems

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Finally, the real elephant in the room.  Although Facebook is set to open at about half of Google’s (GOOG) current market value, it is currently bringing in revenue of only one seventh (1/7) what GOOG does.  Right now about 20% of Facebook’s profit is said to come from Zynga (game-maker), but this cozy relationship might suffer if Zynga makes any changes.  And Facebook can’t depend on mobile ad earnings, since the mobile ad revenue market has shown itself to be quite disappointing, counter to the hype and expectations.

So where is growth going to come from? A recent CNBC poll has shown that 57% of users never click on Facebook ads, and another 26% hardly ever do.  Worse, Facebook just saw its first quarter of sequential negative revenue growth – an issue that shouldn’t be happening this early in the game if the potential for growth is supposedly still so high.

All in all, there are a lot of question marks around this stock.  Don’t be fooled by your familiarity with Facebook. The original dot-com bubble was just as seductive back in its day.  My suggestion is either to be a trader (if you must) and pay hourly/daily attention, or wait at least a month before jumping in – and after you’ve done more of your own research.

But hold your horses.

Use Caution With Facebook (FB) IPO

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Come Friday, share prices could be wildly different from the projected $34-$38 IPO price (a company valuation of $93-$104 billion). This is because heavy demand on the first day will push up the price and, as often happens, it could come crashing back down again (we just don’t know how soon that will take place).  It’s also entirely possible the stock will sink below the initial IPO price, too.

In other words, IPOs are a wild card and unless you have an institutional investor to work closely with, I would probably wait a good week to see where the stock starts trending at.  Couple that with your own research and you’ll be off to a much better start.

Who Gets To Buy into the Facebook IPO

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The first investors out of the gate will be the underwriters (Morgan Stanley) and other heavy hitters, JP Morgan and Goldman Sachs.  The next chunk go to other large institutions and company insiders.  Only about 10-20% of the initial 337 million shares will be available for sale through firms like E*Trade and TD Ameritrade to individual investors.  And of these, you can be sure small investors will still be excluded (you’ll need a minimum trading account balance of anywhere from 100k to 500k to be eligible to participate).

Is Facebook Risky? Can FB Make Money?

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The important question at the end of the day is whether or not Facebook (NASDAQ: FB) will make any profits and how long these will last.  Will Facebook even be around in 10 years? Perhaps another social media platform will find a way to disrupt.  Perhaps social media itself will evolve into something different.  Even before ten years’ time, though, will all those Facebook ads really pay off?

Some would-be investors and newbie investors think Facebook is guaranteed to make money – just because they use it everyday and are emboldened by their love and apparent familiarity with it (Keep It Simple Like Buffet, right?).  But does Facebook have any other profit-making strategy besides advertising?

This raises the perennial problem with Facebook – issues about the privacy of users’ data. It seems evident that some plan must be underway which profits from the demographic information “freely” given by its 600 million+ users (extrapolate from that to see how soon Facebook could boast an account for every person on the planet).  But this spectre raises the potential downfalls.

5-8 years out, the face of public protest around the world will surely have changed and matured as a result of movements such as Occupy and the Arab Spring.  Facebook is not going to be able to easily get away (or for very long) with objectionable exploitations of personal data (even if they fit “legally” within terms and agreements so obscure that no one can reasonably be expected to understand them).

All this means tread carefully.  Facebook will be a growth stock for some period of time, to be sure, but first and foremost, in the short term, Facebook will be a speculative play.  Make no mistake.

Despite the bailouts and austerity plans which began two years ago, Greece’s debt situation continues to worsen – even as they have shrunk the size of government and public pensions.  Many critics see the country’s political system breaking down, with new elections surely on the horizon, and it is reported that Angela Merkel has likened it to Weimar Germany.

Yet even if Greece leaves the Euro, the changes that ensue (which will mostly affect Greece) wouldn’t mean that Greece is any less a part of the European continent.  The benefits of having their own currency would be the key fact that Greece would be able to devalue it, thus making exports cheaper and theoretically bringing in more money and making Greece competitive again.

#Grexit: So Will Greece Leave the Euro?

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It seems likely, because if they do not, Greece will clearly go bankrupt and European political sentiment is strongly opposed to such an option.  But Euro members cannot force any other member to withdraw from the monetary union.  Yet the alternative – if Greece clings to the Euro – will ultimately keep the country dependent on foreign aid for decades.

What would a #grexit look like?  Germany’s “Greece Task Force” has concluded that Greece’s largest debtholder is the ECB (European Central Bank).  This presents problems if Greece can’t service these tranches of debt.  So rather than canceling these debts, crisis experts are suggesting that Europe cut back on the funds that flow into the Greece government and public sector, but not cutting back on the funds used to service the debt (these bailout funds would go into a special account).  This is so simple you have to wonder why a special task force was needed to come up with it.

But if Greece adopts a new currency, even in that situation, it is still not expected to be able to service its debts.  If the Greek exit will make for a bumpy ride with the Euro, it is speculated to create a life or death situation for Greece itself – officials won’t speculate on the record for fear of troubling financial markets further.

But importantly, no matter what happens with Greece, one should be reminded that Greece can remain an EU member (as is Great Britain) and still receive assistance (as have Latvia and Hungary in the past).

Meanwhile, the Euro has sunk to a purchasing power of just 1.28 USD and European markets are down another 1.94-2.94% on the day.  Speculation will continue tomorrow and for as long as a decision is made, or the financial costs of preventing a #grexit are perceived as too high for the Euro to bear.