Back in November 2011 I predicted 14000 for the Dow.
The first thing to say about predicting indices is that it’s a very dicey thing to do. It’s tough to call indices like the Dow in the short term and even tougher in the long term. The best prediction to make is that the level will remain unchanged, statistically the most likely outcome.
That prediction looked pretty farfetched just a few weeks ago, but now its looking pretty good. Such is the way of the market.
Today’s genius can quickly become tomorrow’s fool and visa versa.
For instance now that Europe’s leaders are back from holiday we are set for a bout of squarking which could easily crush confidence and set the markets back on down.
Looking at my portfolios recent vertical rise, it seems likely that something will crop up from the bowels of fragile Europe to correct such a fine period of returns.
Yet Obamas re-election chances should assure a good performance up to November.
I’m British so I’m not really meant to be able to predict the US election, but it seems to me Mitt Romney is doomed to fail. Romney and Ryan look like a couple of slick consultants about to downsize a factory. While that wouldn’t necessarily be a bad thing for America, are the electorate going to sign up for that?
I have two acid tests in residential races.
The first is, would you have this person around on a Saturday for a barbeque, if they we just normal people.
Romney fails the barbeque test, so the second doesn’t need to be invoked.
The second is, which candidate would you most prefer to leave your kids with for an evening. In a tight race, the one that gets the babysitting job is the one that’s going to win.
Yet I don’t need to use my acid test, the polls say Obama is going to win and that he will have to implode it to lose.
This is going to be the most important factor if my wild prediction of last November that the dow will hit 11,000 by the end of 2012.
Then what happens of Obama is re-elected.
Firstly it will be Obamas last term, so there will be no squeezing the economy in the first two years to fill the cookie jar for the next two years and the run to the next election. Obama is going to be thinking of his legacy and working hard to keep his final term positive to claim credit for the global economic recovery that should arrived by then in any event.
So we are set to have investment tail winds.
So what could go wrong?
Europe. Need I add anymore?
Iran. The classic “war in the middle east” investment meme is always there to hole the global boat under the water line.
Romney. If Romney gets in then he will and should take an axe to the current deficit splurging. That of course would be the surgery that would help prevent the economic wreck ahead. Well at least it’s meant to if you are a Republican. This of course would also fill the recovery cookie jar for his re-election campaign in the trailing two years of his term. That would not be nice for the Dow in 2012/13/14.
So I need Europe to hold its ship together, Israel/Iran to keep a lid on its issues and Obama to get re-elected in November to see my 11,000 Dow prediction seem a work of guru-ship.
Clearly that’s not therefore likely to pan out.
So with that in mind and sure of my barbeque test, I just need to short the Euro more and buy Gold and hence profit from the trouble that fools in Europe and the Middle East will likely bring down on us.