“During the next three weeks, we’re going to have a series that will be designed to give us a better understanding of the past, I should say a better knowledge of the past, in order that we may understand the present and be better prepared for the future. I don’t think any of you will deny the fact that it is impossible to understand the present or prepare for the future unless we have some knowledge of the past.” — Malcolm X, History is a Weapon

AT this juncture of the year 2013, and in what is scheduled to be the final contribution of this writer to SSL’s ‘In the money’ for this year, it is necessary that we review the year that was, and the likely implications these events may have in the 12 months of 2014. Starting stateside, the first question was: ‘Will they or won’t they?’ and this concerned whether The Federal Reserve (chaired by Ben Bernanke) would pull the plug on, or at the very least taper the third round of Quantitative Easing (QE3). The belief was that this would occur by September 2013, but with unemployment of 7.2 per cent being above the targeted rate of six per cent, this was never going to transpire. Speaking of big Ben (Bernanke), he will be stepping down as chairman of the Fed, and will be replaced by Janet Yellen, the Fed’s first female chairman.

With QE3 continuing in earnest, The Standard & Poor’s 500 Index (S&P 500) rose to unforeseen levels and closed on October 28th, 2013 at a record 1,762.11. This, (QE3), according to analysts was behind the bond bubble which resulted in bonds below investment grade yielding five per cent in May, 2013. Consequently, the US 10-year Treasury rose from a 2013-low of 1.66 per cent on May 2, 2013 to 2.98 per cent on September 5th, 2013, when speculation concerning the tapering of QE3 was at its crescendo. So much so that stakeholders anticipated the September meeting of the Federal Open Market Committee (FOMC) to be the means through which it would be agreed and subsequently announced. This wasn’t to be, as history has since proven.

Further in 2013, there was extreme action in Corporate America, as DELL was the subject of a back-and-forth buyout which involved the founder and CEO, Michael Dell, Silver Lake partners, Carl Icahn and a host of others. After what seemed like ages, the deal finally closed and DELL was privatised. Speaking of failed buyouts, Research in Motion (RIMM), changed its name to BlackBerry (BBRY) during the Z10 launch of January 30th, 2013. In Quarter 3 (Q3) and Quarter 4 (Q4) of 2013, the company announced the signing of a letter of intent for its sale to Fairfax Financial Holdings (owned by BBRY Director Prem Watsa) for a $9 per share deal, which valued BBRY in the range of US$4.7 billion; a far cry from its 2007 valuation of US$70 billion. This deal eventually imploded and the struggle continues.

While the Olympus scandal came to a grinding halt, Apple and Samsung continued to wage wars in the courtrooms around the world, and JP Morgan’s dalliances with attorneys and judges was just getting started. In the largest corporate settlement to date, JP Morgan agreed to pay US$13 billion to settle investigations into its business practices pertaining to mortgage-backed securities. Additionally, on October 19th 2013, they logged additional hours with their legal counsel in light of the hearing of the ‘London Whale’ matter in which they incurred a US$6.2 billion trading loss.

In a matter which assures us that casual flyers became much more acquainted with aeroplane dynamics, Boeing’s 787 Dreamliner experienced in its first year of service, at least four instances of electrical system problems resulting from its lithium-ion batteries.

The USA Government had issues, with a partial Government shutdown and speculation as to whether both sides of the Congress would come to an agreement concerning the raising of the debt ceiling. To be clear, had that agreement not been struck on October 16, 2013, they may have defaulted on debt repayments. This would have been catastrophic. Jamaica also had her fair share of Governmental challenges with its second debt swap in three years via the passing of the National Debt Exchange on February 28, 2013. The International Monetary Fund (IMF) continued to oversee the Government of Jamaica to ensure its adhering to the stipulations within the Extended Fund Facility extended to the land we love.

Other noteworthy news on local shores included a swathe of layoffs in some noteworthy companies, and the reopening of the Jamaica Stock Exchange’s Corporate Bond Market. This year, 2013, ushered in the listing of several companies on the Junior Stock Exchange and the Jamaica Stock Exchange and speculation as to whether or not the tax incentives which in part contributed to the success of the former would be discontinued under the Omnibus Tax Incentive Act.

What will the future hold for the Junior Stock Exchange and the Jamaica Stock Exchange? This a fair question in light of dollar devaluation, economic contraction and rising inflation. One can only assume, however, that good companies will continue to be good companies and as such, are worth the investment. Advantage should be taken of the opportunities as they present themselves. In ‘Surviving the Times’ of August 21, 2013, survival strategies for ‘the times’ were outlined and it could be taken a step further if it was said that closer looks/more discerning eyes will be given to every investment as things continue to contract before they expand. Value is paramount and there remains value in equities markets, both locally and overseas. The wish of this writer is that 2014 will be favourable, and that you will pursue value in every investment endeavour. Life appreciates.

Ryan Strachan, Manager, Corporate Solutions & Wealth Management, at Stocks & Securities Ltd.

rstrachan@sslinvest.com