Happy Boxing Day to everyone out there. I'm typing this on a pitch-black Saturday morning with a freshly-fallen crest of snow outside the door. The "what on Earth am I going to write about today?" ghost was haunting me, but I landed on one thought I'd like to share.
The year 2010 – – notably, almost every day since the Jackson Hole speech in late August – – is one I would not ever want to repeat. Through all the pain, however, I've learned some things. I've learned to be a lot more "blended" on the bull/bear side (which is definitely helping me this month); I've learned that the target interest rate is far from being the only tool the Fed has at its disposal (and, boy, is that an understatement); and I've learned to regard prognostications about cycles with little more than a grain of salt.
This was on my mind, since I read that Peter Eliades went on MarketWatch last week to share his target of 1500 on the S&P in the first half of the new year. My experiences in 2010 have taught me to regard projections based on cycles as pretty much meaningless, even though they still get plenty of media coverage (I suppose because the public has a really, really short memory).
I was reminded of this today when I read the Terrible Ten article on MarketWatch by Peter Brimelow, who noted the ten worst newsletters of the year based on performance:
Martin Weiss’ Safe Money Report, Martin D. Weiss: -6.0%
Peter Eliades’ Stockmarket Cycles, Peter G. Eliades: -8.1%
TimingCube, F. Minssieux: -9.0%
Bernie Schaeffer’s Option Advisor, Bernie Schaeffer: -11.0%
Crawford Perspectives, Arch Crawford: -12.4%
Brown’s Investment Signals Mid-Term Model, Stephen Brown: -12.7%
Sy Harding’s Street Smart Report, Sy Harding: -13.8%
China Stock Digest, James Trippon: -15.9%
Cabot China & Emerging Markets Report, Paul Goodwin: -17.1%
Doug Fabian’s ETF Trader, Doug Fabian: -21.5%
One may wonder where a newsletter from – oh, say – Gainesville might be on this list. I suppose it's impossible to "track" performance when a newsletter pretty much says any of x-quantity possibilities may or may not happen immediately, in the near future, or never.
The fact is that the market tends to move in broad trends, and reliably predicting those trends is impossible on a consistent basis. Those who tilt bullish look brilliant during years like 2010, and those who tilt bearish look brilliant during years like 2008 (the converse holds true as well, of course).
I'm a stock-by-stock kind of guy. I look at a huge number of charts every day, and I try to make the best decisions I can on an individual basis. When the market sweeps broadly higher, it doesn't matter how good my short picks are – – they're going to get clobbered. But by keeping my eyes open for both bullish and bearish opportunities, I try to open myself up to upside potential irrespective of the market's direction. The hope, of course, is that the positions on the wrong side of the market will lose less than the gains enjoyed by those on the right side of the market.
If nothing else, I would close by saying take the sweeping predictions – – which are manifold every time the old years gives way to the new – – with very little regard. The predictions of the experts are, at best, no better than yours.