It’s fun reading everyone else’s predictions.
You would think, coming into what the Mayan’s may have predicted to be the final year for this planet, that people would want to make sure they get things right but no – most people just predict for next year a variation of what they thought would happen this year – no matter how wrong they were in 2011.
Last January, the Dow was under 12,000 and we had Russell leadership as they tested the 800 line, now the Dow is the leader at 12,287 and the Russell is struggling at 745 but both in such a tight range that we could have pretty much skipped the whole year and we wouldn’t have missed anything.
Although constantly asked, I do not like to make arbitrary predictions just because the year is winding down on the calendar. The dirty little secret to my accurate prognostications is I WAIT until I actually see something that’s very likely to happen before I mention it. This annoys many people who interview me, who are used to getting a prediction on pretty much anything they ask a guest, no matter how clueless that person is.
That being said, last year, on December 19th, I wrote "It’s Never too Early to Predict the Future" and among other brilliant observations I noted: "I’d be gung-ho bullish now if I wasn’t worried the Euro will collapse as that is the fly in the ointment." Here we are a year later and we survived that, as well as a nuclear catastrophe in Japan and revolutions in the Middle East and none of that caused the World to end, nor did it push oil over $100 for more than a short while, nor did it ever get gold to that magic $2,000 level.
So what’s it going to take? What would it finally take to topple the now $60Tn global economy where EVERY Nation on Earth has proved that they are ready, willing and able to create Trillions of new Dollars/Euros/Francs/Yen/Yuan and drop them into the mix – until they find the recipe to make the Global Economy start to rise again. Will too many cooks spoil the broth or is it just that a watched pot never boils and we are all a bit too impatient as we have to wait for the economic yeast to rise?
Read what I wrote last December 19th of last year – nothing has really changed but also, as I said at the time: "Obviously, I am fairly convinced that Global "leaders" are making all sorts of policy mistakes handling the economy and I do believe it will all end in disaster but that does NOT mean I am market bearish. "
Think if it this way: If you come across a fire that is consuming a house from the inside and the firemen show up and spray water on the outside, then I will stand there and tell you that the house will still burn to the ground. However – I will also tell you that the house is going to be soaked in water. The two things are not mutually exclusive – just as a slow-moving economic collapse and a booming stock market are not mutually exclusive – especially if that collapse is the result of a transfer of wealth from the working class to the investing class (see the 1920s).
One prediction I was comfortable making this morning in Member Chat was that the move up in the Futures overnight was BS and our plan is to short the Dow at the open with something like the DIA $123 puts at about .50 but we’ll have to see where it actually opens.
Oil already dove from $100 back to $99 and we caught the action both ways yesterday as oil fell from $100 to $98.50 and we decided to go long at $98.50 and caught the ride back to $100 but today we have lost interest as it’s a crazy day and anything can happen so we’ll concentrate on the Dow, which has the potential to drop 100 points and give us a nice double or better on the DIA puts – which would be enough to buy those goggles where the eyes shaped like 2012 and that’s all we need to close out 2011, right?
My concern into next week (and we have 3 disaster hedges from Wednesday’s Alert to Members that are still playable this morning) is that we’re still testing our 2,603 line on the Nasdaq (see Wednesday’s post) and we’re only here in the first place on what looks like a very low volume, very manipulated rally so the bullish space we have outlined over the past two weeks on the chart, contains a gigantic air pocket – precisely the kind that gives us a very sharp drop to complete what will look like an M on the charts.
But those are all things we can worry about next year. For now, let’s just enjoy the end of 2011 and look forward to 2012.
A very Happy New Year to you and your family,
– Phil
