…and it says that 2009 predictions are completely useless and a huge waste of time. It’s hard enough to try and figure out which way a particular stock, index or commodity is going to go on a daily or weekly basis, let alone where it’s going to end up at next year’s close. Besides, almost every time you go back and revisit those predictions a year later, they’e almost always wrong.

Zen

So why do people enjoy reading them so much? The simple answer is that they are purely entertaining and I’m not here to entertain but to provide some sound (non-professional) advice by guiding you through what’s going on in the markets today, not a year from now. I’ve glossed over a few of them and to be honest, I’m not feeling too good about the direction of the markets as most of the predictions are a tad too bullish. When almost everybody is thinking the same thing it almost never happens.

I would have thought the events that took place this year would have made more people realize that focusing on what is going on in the now moment is far more important than trying to look ahead. For the longest time I’ve thought long term investing is dead, long term being anything over 6 months and that short term trading is far more profitable. The massive collapse of our financial system causing the destruction of 10 years of returns on the Dow combined with the dire prospects facing the U.S. economy only reinforces my belief. Buy and hold strategies should be called buy and forget you invested your money because that is more like gambling.

The whole point of this is to focus on what your portfolio is doing right now, make any adjustments you need for the short term and let the markets do whatever they are going to do. If you read a prediction for example that oil is going to 100+, well that belief could become part of you and it will cause you to have a bullish bias on oil in the upcoming months, possibly to your detriment. I have no idea what oil is going to do because every time I think it’s at a bottom it goes lower. It could still go lower because it seems like all the talking heads are saying we’re at floor here.

I just try to look for signals that oil may be turning a corner and while some things do look promising, they’re not quite there yet and oil could just as easily roll over and drop another 10 points before putting in a bottom. But if you believe that oil is going higher no matter what, it’s easy to open a position now and as it drops continually adding to it on each dip because you’re so convinced it’s going to go up. Well, after throwing enough good money after bad you might not be able to stand it anymore and once it drops below your breaking point you sell out. Then oil stages a 40 point rally and you’re so frustrated because all along you were right but your beliefs got in your way.

So after all this rambling, my prediction for 2009. Some traders will make money, but more will lose. The ones that are profitable next year will be the ones that have safeguards in place to make sure their beliefs have their best interest in mind.

2 Responses to “Looking Into My Crystal Ball…”

  1. chuck Says:

    Hello !
    I'm new to your site which I read about in the Globe and Mail. I would concur with what you say above and add that "gut feelings" (not the same as emotion) are as reliable as anything I have used to make plays. Buy and hold hasn't worked for me (RSPs) and I'm in the process of transitioning to fully managing my money. The meltdown has taught me that the big banks are not trustworthy: they made bad investments, and they didn't look after their clients accounts. Right now I am buying into gold a bit for short/mid term and I'm looking a oil as a long term play. Even if oil goes yet lower it will inevitably head back up as it is grossly undervalued in my opinion. On another note, I believe that this market crisis is really about global warming and the environment, and only completely reshifting our economies towards sustainablity will lead to a lasting recovery ! -chuck

  2. Jeff Pierce Says:

    Chuck,

    Greetings! Your comment has made me want to clarify one thing in my post and I want to thank you for that.

    A short term position can turn into a longer term play based on the action after you have entered the position. But buying a position with the pure intention of holding it no matter what it does can lead to significant portfolio damage. I'm not against holding a position longer if it's acting right, I just don't want to buy and assume it's going to go up in the long term.

    I tend to think oil will come back, howerver this decline has been particularly nasty and maybe it's pricing in some type of alternative energy discovery. Who really knows. Just keep your initial position small and add to it as it goes up and you'll be fine.

    I actually think the enviornment will be the major driving force of all economies moving into the next decade and beyond.

    Happy New Year and I'm glad you found my site.

Leave a Reply

You must be logged in to post a comment.