Global investors have plenty of reasons to look forward to an exciting 2008. I have a few predictions up my sleeve that will shake up the global markets this year. Exciting mergers, historic IPOs, and record profit moments are just a few of opportunities ahead of us. Let’s dive right in.
#1: Facebook.com Launches an IPO
Facebook.com is raking in the big bucks: estimates of $100 million in revenue to be exact. Ever since Microsoft invested $240 million in the startup, Facebook has hired a team of equity and stock specialists, hinting towards a potential IPO in the near future.
Facebook is valued at $15 billion, but who knows what obstacles or competitors Facebook will see in the future? Remember when Myspace and Yahoo! Were king? Social media is a lot of fun, but not if you’re an investor. The rear window is clear, but the windshield is too foggy to see through.
Nonetheless, expect Facebook to launch an initial public offering during the 2nd half of 2008. If you missed out on Google, here’s your 2nd chance!
#2: Tata Motors Buys Land Rover and Jaguar from Ford
Looking to expand their brand and enter the luxury car market, Indian car maker Tata Motors bid $2 billion to purchase Land Rover and Jaguar from Ford Motor company. Ford is in big financial trouble, and will likely sell their luxury brands to focus on reinvigorating the core business.
As a shareholder in Tata Motors, I dislike the decision in the short term because Tata should focus on providing India’s growing middle class with affordable transportation, referring to Tata’s new $2,500 car. But in the long term, Tata is seeking to extend their brand in the Western Hemisphere.
Buying an already established brand is the quickest and easiest way to create a viable footprint in a highly competitive marketplace. Just ask Google why they bought Youtube and neglected Google Video, or why Coca Cola purchased Vitamin Water instead of launching another competitor.
In the long run, Tata Motors is on to something special.
#3: Sirius/XM Merger Gets Approved by the FCC
The Sirius/XM merger debate is one of the most popular topics on this website, so let’s explain why the merger is vital from a financial point of view. While the mainstream media and FCC worries about Sirius-XM creating a living, breathing monopoly, XM-Sirius investors worry about the instability of both companies’ cash flows. Both companies are losing money, and piling on the debt.
Operating expenses and cost of revenues eat up all the profits that XMSR and SIRI generate. It makes no sense for XM and Sirius to compete with each other when satellite radio is in its infancy. It’s just too damn expensive.
The FCC and the public should realize that both companies are losing tons of money because of the unnecessary competition. A synergy would benefit everyone, including satellite radio advocates, current and future customers, and Sirius shareholders.
To prevent a price hike, Sirius executives should sign an agreement to keep their services affordable.
Well, how much would you spend for satellite radio? I bought XM radio for World Cup 2006 in Germany and loved it! $12.99 a month or less is reasonable.
#4: International Real Estate Continues to Boom
Nightly Business Report featured an interesting story on the impact of the US real estate market on the economy. But one speaker noted that “International Real Estate is still booming.”
That’s an understatement.
The opportunities in International real estate are endless because residential and commercial overseas development is a long term investment. While US real estate investors wait for the bottom of the US real estate market, we will see more money flock overseas in the meantime. International REITs are a simple way to invest in foreign real estate trusts, a trend that will continue to boom in 2008.
More mutual fund companies will release REITs and index funds to match the consumer demand. I recommend sticking with the older, more established mutual funds or choosing a simple index fund to invest in real estate trusts.
The Nightly Business Report recommended allocating 2% to 4% of your portfolio in these international REITs.
#5: 2008 Beijing Olympics Inflates Value of Chinese Based ADRs
If you thought 2007 was a good year for Chinese ADRs, just wait until the onset of the 2008 Beijing Olympics. 2008 Beijing Olympics commences on August 08, 2008, and brings tons of business and exposure to China based companies. Travel agencies, air and train transportation, and hotel accommodation companies should reach near record profits due to the heavy traffic within China.
The short term boost in earnings adds momentum to these Chinese ADRs, but most of the gains are only temporary. If you’re looking to invest in China, stay away from these stocks during Summer 2008. You don’t want to buy these securities at the top; They will be very expensive.
Now It’s Your Turn…What’s Your Biggest Prediction in 2008?
Ever been called the Nostradamus of Investing? Well, here’s your chance. Leave your predictions in the comments to muse us.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.