What’s going to happen next?
That’s the main question I get from people. I find it interesting that so many people want to believe that I can see the future but I suppose that’s been the same for thousands of years – people want to know what’s going to happen and they are willing to put their faith in someone who’s just a little more insightful than they are. This isn’t unique to stocks, my old consulting company was called Delphi Consulting – also taking advantage of my reputation as a business prognosticator.
While I do pride myself on my ability to spot trends early AND to figure out how to make a buck playing them (you can see how I did last year in our 2009 Review) – I don’t like it when that part of my reputation distracts from my general message, which is that NO ONE, not me, not Cramer, not anyone, can tell you what is going to happen next and the best strategy you can follow is one of maintaining a balanced, sensibly hedged portfolio that can make money in any market direction.
This weekend, in member chat, we were discussing an excellent presentation by James Montier, now of GMO, who listed “Ten Lessons (Not?) Learnt,” which is a must read for all my Members as it lists and expands on 10 themes that echo what we discuss every day at PSW – things every investor needs to hear and understand before they go chasing off after the next guru who promises to give them a peek at the future (emphasis on my 5 favorites):
Markets Aren’t Efficient- Relative Performance is a Dangerous Game
- This Time is Never Different
- Valuation Matters (in the Long Run)
- Wait for the “Fat” Pitch
- Sentiment Matters
- Leverage Can’t Turn a Bad Investment Good
- Beware of Over Quantification
- There is No Substitute for Skepticism
- The Benefits of Cheap Insurance
In short (since this is not supposed to be a philosophical article) neither James Montier or I can predict the future. I can’t speak for the thousand other bozos who tell you they can but we’re telling you, for a fact, that we cannot. So, bearing that in mind, let’s look at a few trends that we’ll be watching in 2010 and examining the possibilities of their outcome…
Let’s begin with something relatively easy to predict – the short-term. This morning we have a huge bump in the futures, with the Nasdaq (at 7am) back to it’s Friday futures high and…
