OK, 2014 as a calendar year for stocks was disappointing but it’s only a time thing. The reality is that we pay our taxes on super or investments per financial years and the last one was a 17% total return year. And while there’s a bit of negativity about on 2015, the overall consensus is that the US stock market will be up over 10%, emerging economies look like good value and the surprise star specked on, even by US market experts, is, wait for it – Europe!

Yep, the region that has brought us some of the most laid back, Club Med and sometimes called PIGS economies (with Greece being the prize economic boar or bore), now is seen as the great white hope for stock players.

I must admit I’m eyeing off the VEU ETF for this year, along with the IVV ETF for some US exposure, which should even give an exchange rate benefit, if our dollar makes it to 75 US cents as predicted by most economic number crunchers.

And while these are some side plays I’m considering for this year, my major play has come out of Warren Buffett’s playbook, with P. Switzer forthrightly and jingoistically admitting that he’s betting on Australia!

The case for Australia

1. Wall Street will help, with the likes of hotshot hedge fund manager, Appaloosa’s David Tepper seeing 8-10% upside in 2015 for US stocks. He thinks the S&P 500 is “fairly valued”, its P/E is only 16 and the central bank won’t raise rates until mid-year (at the earliest). A guy who was more cautious early in 2014 now says “It’s not the time to be careful now. Enjoy the ride.”
2. The market research team at Allianz in the US expects returns in the mid-to-high single digits in 2015.
3. Markets are now agreeing with my arguments that lower oil prices are more good than bad for the global economy. “Trends are all of a sudden reversed, and investors believe now that low oil prices are good and that could push stocks even higher,” said Jack Ablin, CIO at BMO Private Bank on CNBC.
4. Central banks will still be underwriting stocks, despite the Fed easing back but it’s not rushing to raise interest rates.
5. The European Central Bank is tipped to start QE3 on January 22, though these guys have disappointed us before and are partly responsible for our stock market losing momentum in 2014.
6. Japan’s government approved stimulus spending worth $US29 billion to raise GDP by an extra 0.7% and it’s still our second biggest customer and the third biggest contributor to world demand.
7. The Bundesbank’s President, Jens Weidmann, recently said Germany (Europe’s biggest economy) could be better than expected next year and the situation in Europe is not as bad as many people think! He linked lower oil prices to higher growth.
8. US economic growth is tipped to be around 3.5% and a higher greenback will help the global economy.
9. After a bad year, the contrarians are saying materials, energy and Europe (along with emerging economies) are the plays for 2015, which is all good news for Oz.
10. It was a perfect storm for the poor old Aussie stock market that was not helped by a tough Budget stance, which spooked a lot of consumers and then business, which then hit the country’s economic growth.Of course, the market had to contend with idiot commentators constantly referring to a housing market bubble, over-exposed banks and a scary Murray Financial Inquiry. And they wondered why there was bit of negativity around the Australian economy!But many of these sad developments of 2014 will either be changing in 2015 or their very movements in 2014 will start working their magic to help stocks in the year ahead.A case in point? The Aussie dollar is a classic.Since the GFC, our dollar has largely headed up, and at one stage was over $US1.10 in 2011. In only 2013, it was over $US1.05, which has hurt our exporters and our import-competing businesses. I expect many of these to do better, profit-wise, in 2015.Companies such as CSL, Resmed, Westfield and Macquarie, which earn a lot of their income overseas, should report well this year because a lower dollar magnifies their Aussie dollar bottom lines. I talked about this months ago and these companies’ share prices have already responded but I expect to see more of this next year.
11. Aussie petrol buyers are now on average $30 a month better off and each sustainable $10 drop in the cost of crude oil adds two-to three-tenths of a percentage point to GDP in the US and similar equations will work for other countries.
12. All the above reads well for many Australian companies and I expect smaller cap companies to have a good year over 2015, even if they start slowly.

What I liked the most

• This from the ECB’s Mario Draghi: “We don’t need unanimity for QE (quantitative easing).” This means he can tell the Germans to eat his shorts, though I doubt this dignified Italian would be so gross.
• Ray Dalio, founder ofthe world’s biggest hedge fund firm, Bridgewater Associates, with $157 billion under management said this: “For now, though, the economy is fine”, he told CNBC. “We’re in the mid part of a cycle. This is the easy part, the good part of the cycle.”
• This from Warren Buffett a few years back about how misleading the media can be: “The media harps on unrest in the Middle East, the spike in oil prices, the real estate slump, high unemployment and unwieldy federal deficits. But they spend much less time on rock-bottom interest rates, low inflation, an improving economy and record corporate profits.” And then he added:“I’m 100% enormously optimistic about the future for this country. There’s no way you can bet against America and win… We’ve unleashed human potential and will continue to do so. Twenty years from now, your kids and grandchildren will live far better than you live.”
• And that’s why I’m betting on Australia – for the exacts same reasons. I know Ken Henry, arguably our best Treasury official ever, is really bullish about Australia medium-term and that’s my time horizon for investing.
• Loved this from a guy who was dismissing the importance of the Greek economy to bigger global economic and market debate: “Oh forget them. Greece peaked in 453 BC!”

Take out message?

Bet on Australia!

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.