Saturday, January 23, 2010

Predictions, Hazardous and Profitable

Readers recall two speculative entries from early 2009.

Predictions are inherently hazardous, because they're usually wrong.Publishing forecasts is an excellent way to not only imply one is an idiot, but prove the case conclusively.

Ah yes, but it's awfully good fun, so fools rush in....

Weirdly, I called the 2009 stock market rally within days of the lows.

Ian W. refreshed my memory:

Charles, you have an excellent blog. In your blog post (link & excerpt below) from March 10, 2009, you suggested the Dow could reach 10,800 and turn back down. This week, the Dow reached 10,767 and has turned sharply lower. You called the bottom and the top! Incredible!

Trendlines in the Dow Jones Industrial Average (March 10, 2009)

"Were the DJIA to form such a right shoulder, we might expect it to reach all the way back up to about the 10,800 level--roughly the top reached by the left shoulder in January 2000."

Thank you, Ian. Now why didn't I follow my own forecast? Well, I did, but then I lost all my gains by going short too early, before the target was achieved.

Impatience is a terribly destructive trait in trading/investing. The market is not "the enemy:" the "enemy" resides within us.

You're probably thinking, "OK, Mr. Smarty-Pants, you got lucky last year. What's your forecast for 2010?"

Well, for starters: I seem to have called the top on Monday: Is The Stock Market Top In? (January 18, 2010) so that's a pretty good start.

So here is my forecast--which this year I am actually going to follow myself.As always, please read the HUGE GIANT BIG FAT DISCLAIMER below to refresh your awareness that these are the freely offered ramblings of an amateur observer, and are not investment advice.

The stock market has rolled over and will either get close to retesting its March 2009 lows (around 6,500 in the DJIA, 666 on the S&P 500) or perhaps punch through those lows to new lows (5,800 on the DJIA).

At a minimum, the DJIA will retrace to around 7,200. Since declines tend occur in shorter time-spans than rallies, I am guesing the correction will exhaust itself in March/early April.

Then a rally will begin which will run until September 2010. This prediction is based on two simple premises:

1. The party in power wants to keep that power, and will manipulate Heaven and Earth to create the illusion of prosperity because "Americans always vote their pocketbooks."

2. The majority of the stimulus money funded last year has yet to be spent. As those hundreds of billions flood the land, the illusion of prosperity will be created.

After the election in November 2010, then the wheels will fall off the games, tricks, frauds, propaganda, etc. and the U.S. economy and stock market will fall to depths few foresee.

Jeff V. recalled my speculative piece from last April, Obama's Secret Plan (April 22, 2009) and noted: Obama's Secret Plan--NOT DEAD YET!

Paul Volcker Prevails (Jan. 21, 2010) by Simon Johnson

President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return -- at least in spirit -- to some of the curbs on finance put in place during the Great Depression.

This is an important change of course that, while still far from complete, represents a major victory for Volcker - who has been pushing firmly for exactly this.

Steve R. also recalled the entry:

RE: Obama's Secret Plan (April 22, 2009):

"Is there even a shred of evidence that Obama might have thought this out one layer deeper than 99.999% of the bankers, critics, pundits and opponents? perhaps one: Paul Volcker."

In light of today's news, I am humbled by your prescience. Hopefully, this is a sign that, in your words, "there may be more intelligence afoot in our leadership than has yet been revealed".

Great insight, thanks for the heads up!

Here's the key excerpt from the April 22, 2009 entry:

I see two possibilities: either Obama really is just another standard-issue tool of the Financial Plutocracy, and Volcker resigns in disgust within a year to protect what's left of his once-sterling reputation, or Obama is giving the Banking Plutocracy all the rope it needs to hang itself. In that case Volcker is the "Trojan Horse" in the system, the one who will emerge after the extremes have finally goaded the public to an anger which cannot be diverted by propaganda and "entertainments."

So watch Volcker. If he resigns, then Obama truly believed the absurdity that bailing out the bankers and enabling their continued looting of the nation is "the fix we need." If Volcker stays, even in the shadows, there may be more intelligence afoot in our leadership than has yet been revealed.

What's for Dinner at Your House update: New recipe: 20-Minute Marinara Sauce

Important new article on cholesterol you really need to read:

The most important thing you probably don’t know about cholesterol

Reader C.K., who writes as "The Healthy Skeptic," penned the article, which is well-sourced and thought-provoking. It reminds us not to accept the standard "wisdom" without submitting it to a healthy skepticism.

Where else can you get all this eclectica in one site, and for free? Such a deal!

DailyJava.net is now open for aggregating our collective intelligence.


Order Survival+: Structuring Prosperity for Yourself and the Nation from your local bookseller or from amazon.com or in ebook and Kindle formats. A 20% discount is available from the publisher.

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