“This is the season of the year when a host of high-priced economists unlimber their high-speed computers and uncork their precise predictions for the economy for the year ahead: the exact level of GNP [now GDP], the inflation rate, unemployment and so on. In this lucrative forecasting business, all the forecasts are more or less the same, and they will be usually proven way off the mark.” — Murray Rothbard, “The Economy: The Year Ahead,” from The Libertarian Forum, January 1983“Investment… is the craft of the specific. It’s extraordinary how much time the public spends on the unknowable.” — John Train, “The Craft of Investing”The power of knowing the future is profound. Just imagine, for a moment, if you were given the privilege of seeing stock market results one year from today. A resourceful individual could easily parlay that knowledge into profound wealth. It is no wonder that economists, stock traders, fund managers, and financial advisers alike are desperately trying to find a way to peak around the corner of time to anticipate what the markets will do.Forecasting, however, is pretty much junk. I’ve said this in all prior surprise columns and I’ll say it again. Situations in financial markets are fluid and change over time, thus all prognostications are almost instantly stale. No one can truly claim with certainty that they know what tomorrow will bring and if you meet someone who does you should put your hands in your pockets to check for your wallet and slowly back away. It was not only the financial leaders and economists that failed to see the financial crisis (housing bust/recession) coming, but leading investors as well. Voltaire sums it up best: “Doubt is not a pleasant condition, but certainty is absurd.”The term surprise means an unexpected event that is currently an out of consensus view. I have tried to list a few I think actually do have a chance of happening but are not really expected because they are under-recognised probabilities. I have written these in the spirit of nudging one to look “outside the box” and consider a disparate view of things that may cause some cognitive dissonance.I also have included investment vehicles or strategies where appropriate to track aspects of these calls (see important disclaimer at the end). To be clear, what follows is NOT an investment strategy but a list of potential surprises for 2013:1. Despite a floundering economy, the BSX Index climbs again. The economy does not equal the stock market. Say that to yourself three times. The European stock market just proved that last year. Look for the BSX to tack on another high single digit total return. At least one major company, who suspended their dividend, reinstates a new one in 2013.Strategy: Go long the BSX Index.2. Bermuda’s economy continues to stagnate. Look for GDP to officially come in slightly negative (barely single digits) as the “statistical bottom” comes in to play. With over-capitalisation, depressed valuations and a very difficult investment income environment the property and casualty insurance industry on the Island continues its consolidation, so companies can garner more scale. Two smaller reinsurers merge or another one is acquired in 2013. After four years of subpar and negative growth and finally with the acceptance of the need to compete aggressively against other offshore jurisdictions, the Government begins the enactment of a radically new immigration policy involving a new road to permanent residency and potentially full citizenship.Strategy: None3. Global equity markets underwhelm. Consensus estimates for year-end S&P 500 target prices range, generally, from 1550 to 1615 or a gain of roughly ten percent. The surprise would be a rather tepid outcome say low single digits for the S&P 500. Within the US look for weakness in discretionary companies as rising taxes crimp spending. The big trouble, however, could start again in Europe (which the market seems to have forgotten). Spain eventually asks for a bailout and triggers some form of the Outright Monetary Transaction measure with the European Central Bank. Europe GDP actually contracts about two percent as austerity measures bite. France’s socialist agenda reveals the fallacy of “big government” causing the GDP to contract one percent, unemployment to continue rising and a sovereign credit rating cut. Italy, however, with its underwhelming stock valuations and underperformance in 2012, offers investors a decent gain in 2013 on the back of a pro-growth new government.Strategy: Go long S&P 500 Index (Ticker: SPY) and Italy (Ticker: EWI) but partially fund it with short position in France (Ticker: EWQ).4. Enough is enough; Japan gets serious about tackling deflation. Japan’s current account has deteriorated over the past few years, and the seasonally adjusted monthly current account was in deficit for the first time in 30 years. Essentially, they are importing more than they are exporting, as a stronger yen in recent years has hurt their competitiveness abroad. The solution trash the yen. For about ten years the negative correlation between the Nikkei and the yen is almost perfect. Look for the yen to tank at some point to around 100/$ and the Nikkei 225 index to soar more than ten percent for the year.Strategy: Go long the WisdomTree Japan Hedged Equity Fund (Ticker: DXJ)5. Commodities rise then fall. Early in the year commodity prices get bid on renewed optimism of Chinese growth. However, as the year progresses, they begin to look increasing vulnerable as the longer-run prospective of escalating supply and technological advancement undermines the “scarcity thesis” (note: the capacity of the potash industry since 2002 has expanded some 30 percent, yet demand in 2012 was less than 2007!). Analysts come to realise that China will no longer be the dominate force in the commodities market because its primary growth aspect of capital spending and investments, very commodity intensive, begins to transition to more balanced growth of services and household consumption. Look for commodities to end flat to down.Strategy: Avoid (sell) commodities as measured by the S&P GSCI Commodity Index.6. The US energy renaissance continues. US oil production booms with shale oil production. The Keystone Pipeline gets the green light. Nuclear power is given a second chance and either Japan or Germany begin to reverse their negative stance. Look for West Texas Intermediary to fall to around $80 by year-end as imports slow and the US becomes increasingly more energy independent.Strategy: Short WTI Crude.7. Bond yields DO NOT rise. Over 90 percent of economists expect bond yields to rise in 2013. A recent ISI survey indicates the majority of fixed income managers are invested shorter in duration than their benchmarks. I don’t personally know of any fixed income manager that is long duration. Inflation is likely to remain benign. Expect treasuries to trade in a range between 1.5 percent and two percent for the year and end the year near where they began.Strategy: Sell iShares Barclays 20+ Year Treasury Bond Fund (Ticker: TLT) near 130, buy TLT near 115.8. The search for income continues but the “special situations” rule the day. Everyone wants dividends these days. This is evident from the overwhelming skewed flows into dividend strategy funds and ETFs. The search for high quality dividends stocks is a powerful story and likely a lasting investment theme. The problem is, this is already very popular. Two other sources of special income are Master Limited Investment Trusts (“MLPs”) and Business Development Corporations (“BDC”). MLPs are an investment in the long-term build-out of domestic energy infrastructure. MLPs that offer six percent yield, plus a conservative four to five percent distribution growth, could result in a double-digit annual total return over the long term. BDCs yields of over seven percent and a chance for further hikes as economic conditions improve also offer a compelling alternative. Look for MLPs and BDCs to offer more income and outperform the S&P Dividend Aristocrats.Strategy: Go long the Alerian MLP ETF (Ticker: AMLP) and the ETRACS Wells Fargo BDCI ETN (Ticker: BDCS).9. Buy and sell the housing recovery. The idea that real estate is now at the forefront of US growth is prevalent and nearly universally accepted. What may be disappointing is that the rise in home prices is actually likely to slowly level out in the year as refinancing and purchase activity cools. Housing price stability is positive for home builders but also regional banks. Home builders now look expensive, regional banks do not. It’s also very likely that the difficult lending environment and lower net income margins force consolidation in the banking sector as growth is acquired. Look for regional banks to perform well as home builder’s recent gains cool.Strategy: Go long the SPDR S&P Regional Banking ETF (Ticker: KRE) and short (or avoid) the iShares Dow Jones US Home Construction Index Fund (Ticker: ITB).10. Triple “A” ain’t OK. Johnson & Johnson, Exxon Mobil or Microsoft undertakes “aggressive” shareholder friendly actions (very large share buyback or dividend boost) by leveraging up at lower rates and distributing proceeds to shareholders. As a result one looses its triple “A” rating at S&P.Strategy: Go long triple “A” companies like Exxon (Ticker :XOM), Johnson & Johnson (Ticker: JNJ) and Microsoft (Ticker: MSFT) and avoid their debt.11. One more try…. Gold miners outperform the gold commodity. This was a surprise for 2012. Maybe I got the timing wrong? The valuation of gold embedded in gold miner’s shares is at a significant discount. This gap closes in 2013.Strategy: Buy Market Vectors Gold Miners ETF (GDX) and sell SPDR Gold Trust (GLD).12. Ackman is wrong, Loeb and Chapman are right: buy Herbalife. First, for the record, I have nothing against short sellers. In fact I think they are a crucial and beneficial part of the market. Sometimes, however, “celebrity short sellers” are wrong. Ackman has a very good track record of shorting troubled companies and scams so most people never question his logic or short target thesis. But he puts his pants on one leg at a time and sometimes he does get it wrong. The SEC may, at some point, really question the practice of a hedge fund manager taking a short position and then going on a public road show bashing a company so that they almost immediately make money on the position they have. Sounds rather sketchy to me and I’ve never understood the practice.Strategy: Go long Herbalife (Ticker: HLF)13. The hedge fund collapse continues. Underperformance, excessive fees and increased regulatory burden continues to grind on the industry. The fact that another major hedge fund shop succumbs to an insider trading scandal only further erodes confidence in the sector. Fees slowly migrate to one percent and ten percent from two percent and 20 percent. The industry’s assets under administration slide ten percent or more.Strategy: Avoid hedge funds.Nathan Kowalski is the chief financial officer of Anchor Investment Management Ltd.Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Anchor Investment Management Ltd. to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Readers should consult their financial advisors prior to any investment decision. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.