In case you missed my Sunday Washington Post Business column yesterday: Its called 10 trends to watch in finance for 2013, I look at the major trends currently driving the world of finance.

Most people do not think about what just occurred because they are too busy guessing about the future. This is a mistake.

The 10 overall trends are:

1. ETFs are eating everything.
2. Financial sector continues to shrink (advisers leaving large firms)
3. Increased pressure on fees and commissions.
4. Hedge fund troubles (legal + performance)
5. Dispersal of financial news away from MSM.
6. Demographics = huge driver.
7. The death of Buy-&-Hold has been greatly exaggerated.
8. What Hyper-Inflation?
9. Has Bond Bull Market Ended? Are Rates Spiking?
10. The Fed (+ other Central Banks) still hold the system together.

I know I omitted some items — Socially Responsible Investing, HFT, etc. — but I wanted to focus on the 10 I thought were having the biggest impact.


10 trends to watch in finance for 2013
Barry Ritholtz
Washington Post January 12 2012

Category: Apprenticed Investor

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “The 10 Biggest Trends in Finance Today”

  1. mad97123 says:

    9. The bond bull market has ended/interest rates are spiking.
    10. The Fed still holds the system together.

    9 indicates it’s likely 10 will soon not be true.

  2. The Pale Scot says:

    Let me drop in the comment I placed at wapo;

    1/13/2013 3:23 PM EST
    Concerning hyper-inflation; it isn’t happening because the world is awash in the capital created by sixty years of exploiting natural resources uninterrupted by a major war. we’re coming to the end of that phase of industrialization and the opportunities to sink that capital back into a lucrative venture are much fewer. The days of as Hans Gruber said “I’ll be sitting on a beach making twenty percent” are gone unless you have access to leverage.

    The next age of industrialization (solar energy, production from 3D printing, recovering scarce resources from recycling) is going to much more de-centralized and that will reduce the ability of Wall Street to collect big profits on from large individual ventures. Allocation of capital to hundreds of small projects is less profitable than one big one, it requires more labor.

    So trillions in capital is sloshing around the world with no place to go.

    Add: Capital has been very successful at avoiding taxes globally. The owners have been able to avoid taxation but are happy to loan the money instead. This I believe is going to blow-back on us all. OTTOMH government expenditures in the US have been between 20 and 24 percent of GNP since WWII. Today tax revenue is <17% of GNP. The movement of productivity increases to the one percent means that it is been taxed lower (capital gains) than it would of if the income distribution curve of the 1960's was the same as today's. Shielding this income from the tax rates that ordinary income is subjected to is what eventually will collapse the global monetary system. And then all the saved capital might go up in smoke, it's just digits on a computer.

    Tolstoy wrote great story about this. A peasant cut deal that he could purchase as much land as he could walk around in a single day for one price.

  3. Lukey says:


    If you read the whole article you will understand that #9 is facetious.

  4. Lukey says:

    Ah, I see that Barry just fixed it – much better!

  5. Interesting and to the point article

    8, 9 and 10 are closely related. Bond stechnically seem in the process of giving in.

    Maybe gold will help us see when is game over for bonds. For the time being, gold is being supportive by remaining subdued.


  6. CANDollar says:

    The above list paints this big picture for me:

    If its a low return world in both stocks and bonds then minimizing factors that introduce portfolio performance drag.
    A 2.5% real return creates just over half the return over 20 years that a 4% real return portfolio does.

    Take home message: minimize tax drag, use ETFs and rebalancing, hire an advisor by the hour to manage behaviour

  7. Concerned Neighbour says:

    @The_Pale_Scot, +1 for the Hans Gruber reference.

    Good list BR. I would have put #10 at #1, and I’m surprised there isn’t something in there about HFT.

  8. VennData says:

    HFT only hurts if you’re doing trading, lots of trading, with market orders. Anyone who is doing that is a gambler, not an investor. The ultimate question is this: Why don’t HFTers complain about other HFTers? They should right? “Stealing” form them, “Ruining” the market. Forget the HFT war. You never were going to beat the market. Don’t worry them. Don’t stop people from building better mousetraps.

    If you want rationale tax policy, have 15% cap gains, and dividends. Fine. Go to zero even. But not for huge amounts, for $100K and under. that’s it. You’re telling me a hundred millionaire is going to stop “Creating jobs” because he has to pay $25m instead of $15m to cash out of his $100m? Laughable. Go ahead, 1%er, hold onto your $100m position.

    For investors, try a simple asset allocation two or three ETF pootfolio and re balance once a year. 1/3 US stock, 1/3 foreign and 1/3 bonds. You will beat the averages over the long haul. Why take risks that the data show will hurt you?

  9. peachin says:

    If you are going to list the 100 of this and 50 little ones of that,, and then talk about the weather… let’s get serious.

    How about the 10 biggest assholes on Wall Street
    How about the 25 people in congress who should find another venue.
    How about The 13 most honest and likable people you have met… known or unknown
    How about The 38 Biggest Bitches in Business
    how about the 50 most impressive women in Business

    And then you can use your imagination for more.
    finally, how about 5 major business, Political and $$$$ people who should be removed from society without delay
    I’ll start with a twofer – The Koch Brothers… Then another twofer – The Wimp twins : Eric Cantor and Paul Ryan… Lloyd Blankfein… and then finishing the warning: Dick Cheney

    I’m sure congress will move along with the changes we need – and we can place a police person at their doors after the changes are made.

    No sense of Humor? None intended!

    Why do this: A warning to their groups – “Straighten Up!

  10. JohnnyVee says:

    “6. Demographics = huge driver”

    The baby boomers are like a pig in a python. Even though they are entering the colon of the snake, they still have a substantial impact.

  11. Willy2 says:

    About rising interest rates:

    Already in 2008, I thought rates would start to rise, but they kept falling. But I continue to think that rates WILL rise. The US WILL ultimately default on its debts. And that WILL send interest rates higher. Even a rise (of the 30 year yield) to a “mere” 4% or 5% is enough to scare the wits out of politicians in D.C. Such a (comparitively) small rise would make the funding the federal budget impossible.

    - the longer rates stay this low the deeper the US government can slide into debt. In that regard it’s better that rates start to rise AS SOON AS POSSIBLE.
    - the bondmarket is MUCH larger than the stockmarket and therefore has a much larger impact than a fall of stocks.
    - I also watch the size of the US Current Account Deficit (currently falling) vs. the US budget (currently rising). When this trend continues then it will become MUCH harder to fund the budget deficits domestically.

    About QE:
    QE helps as long as one or more asset classes rise in value otherwise that extra money won’t find it’s way into the stock-/bond-/commodity/real estate market(s) and will be useless.

  12. perpetual_neophyte says:

    Willy2 – If you believe “rates WILL rise,” you have to be able to identify the operational mechanism that will cause that.

    BR – When you write about “the hedgies getting stomped — they underperformed markets by 15 percent,” are you considering risk adjusted returns? That seems like a potentially silly comparison, like saying PIMCO Total Return or Doubline Total Return or some sort of balanced fund got “stomped” because they underperformed a 100% equity index in a big up year for US stocks.

  13. Willy2 says:

    @Perpetual Neophyte:
    1. “Mr. Market” determines interest rates, NOT the FED. (As I have said many times on Pragmatic Capitalism). Never heard of “Demand & Supply” ?
    2. Rates WILL rise as a result of:
    - falling US trade deficit/Current Account Deficit in combination with a rising US budget deficit (=falling foreign demand for T-bonds).
    - severe/extreme stress in the banking sector. Banks who are forced to sell assets (e.g. T-bonds) in order to stay liquid.
    - falling interest rates (=less income for investors) while at the same time e.g. the price of taxation, food energy will/could continue to rise. That’s why a lot of investors are “chasing yields” and buy “junk bonds”.
    3. The big question will be “When will rates rise ?”. Currently my best guess is that rates could fall more but in 2nd half of this year we could/will higher rates.

  14. Willy2 says:

    I certainly have clear thoughts why interest rates WILL go higher. But the big question remains: “When will rates rise ?”.

  15. Willy2 says:

    Yes, demographics will have a MAJOR impact on the economy (for that matter ANY economy). From about 1990 up to 2008, that was a positive impact (more growth). But starting in 2008 those demograpic developments are becoming a (negative) drag on the economy.

    See the books Harry S. Dent Jr. wrote in 1993,1999, 2008 (the coming Depression), 2011 (the great crash ahead). He´s very explicit in his predictions and certainly is going to be proven right.