Remember When The Euro WOULD Collapse?

This will be my last publishing on Random Glenings in 2012. Thanks for reading, and best wishes for a happy and peaceful season. Still a week away from the finish of the year Although we are, it would appear that 2012 will decrease as a banner year for stocks and bonds. Few Yet, if any, saw 2012 as not to trouble in the beginning of the year. Remember when the euro was going to collapse? Or how our overall economy was on the brink of the “double-dip” downturn? Or the way the election of Obama/Romney (take your pick and choose) was certain to fish tank the market?

Or how the fiscal Cliff would drive stocks and shares sharply lower? None of these occurred. Too many investors, in my opinion, taken notice of commentators, and parked their hard-earned savings into savings accounts earning nothing at all. The motto of “It has never been more expensive to be defensive” rang true over summer and winter, yet too many overlooked it.

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• Wealth Effect: an increase in the purchase price level decreases purchasing power (and vice versa)

Fearful traders not only skipped out on the handsome returns from stocks and shares and bonds in 2012 but also lost floor to inflation, which is still running around 1.5% per annum. Because someone has had success before doesn’t mean they have any better insight into the future. In the event that you had the chance to see Steven Spielberg’s excellent movie Lincoln, you realize that political discordance has been a feature of our democracy always.

Dislike politicians, if you want, but don’t make investments on your emotions. 3. Daily Price Movements in Stocks is Random – News programs like CNBC are constantly looking to explain why stocks might be moving in any particular path on any given day. In reality, no one really knows. 4. Economic Forecasts Are Basically Educated Guesses – Famed Fidelity mutual supervisor Peter Lynch used to state that if you spend 10 minutes a calendar year on economic forecasts that is ten minutes too much. The record of economists in forecasting the period is dismal at best forward.

Making investment decisions predicated on only predictions is a certain way to poor results. 5. Beware the Consensus – Warren Buffett published a piece for Forbes newspaper in 1979 titled “You Pay AN EXTREMELY High Price in the CURRENCY MARKETS For A Cheery Consensus”. Buffett observed that whenever “everyone” agreed a stock was attractive it probably was overvalued, rather than worthy of investment.

Stocks now sell at levels that should produce long-term profits far more advanced than bonds. Yet, pension managers, usually inspired by corporate and business sponsors they need to always please (“whose bread I eat, his tune I sing”) are pouring funds in record proportions into bonds. While Buffett is at his bullish forecast for stocks early, the 20-year period that followed his article was the best in U.S.

6. Don’t Fight the Fed – This long-time Wall Street axiom is still relevant today. Stocks have more than doubled in the last three years helped by the incredible amount of Federal Reserve liquidity added to the bank operating system. While the Fed’s activities were performed to help the economy and financial system, they helped global markets as well also.