Remember When The Euro Was Going To Collapse?

This will be my last publishing on Random Gleanings in 2012. Thanks for reading, and best wishes for a peaceful and happy season. Still a week away from the end of the entire year Although we are, year for stocks and bonds it would appear that 2012 will go down as a banner. Yet few, if any, saw 2012 as anything but trouble at the start of the year. Remember when the euro was going to collapse? Or how our overall economy was on the brink of the “double-dip” recession? Or the way the election of Obama/Romney (take your find) was certain to fish tank the marketplace?

Or the way the fiscal Cliff would drive stocks sharply lower? None of these happened. Too many investors, in my opinion, paid attention to commentators and parked their hard-earned savings into cost savings accounts earning nothing. The motto of “It has never been more costly to be defensive” rang true over summer and winter, yet far too many disregarded it.

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  • 24$1,087,496 $71,049 $24,000 $65,250 $112,299 6%
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Fearful investors not only missed out on the good looking returns from stocks and bonds in 2012, but also lost surface to inflation, which is stillrunning around 1.5% per annum. Because someone has had success in the past doesn’t imply they have much better insight into the future. If 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 like, but don’t make investments on your feelings. 3. Daily Price Movements in Stocks is Random – News programs like CNBC are constantly looking to explain why stocks and shares might be relocating any particular direction on any given day. In truth, no one knows. 4. Economic Forecasts Are Basically Educated Guesses – Famed Fidelity mutual manager Peter Lynch used to state that if you may spend ten minutes a season on economic forecasts that is ten minutes too much. The record of economists in forecasting the time forward is dismal at best.

Making investment decisions based on only predictions is a certain way to poor returns. 5. Beware the Consensus – Warren Buffett wrote a piece for Forbes mag in 1979 titled “You Pay A Very High Price in the Stock Market FOR ANY Cheery Consensus”. Buffett observed that when “everyone” agreed a stock was attractive it probably was overvalued and not worthy of investment.

Stocks now sell at levels that should produce long-term comes back far superior to bonds. Yet, pension managers, usually encouraged by corporate and business sponsors they need to always please (“whose bread I eat, his Melody I sing”) are pouring money in record proportions into bonds. While Buffett was early in his bullish forecast for stocks, the 20 12 months 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 within the last three years helped by the amazing amount of Federal Reserve liquidity put into the banking system. As the Fed’s activities were carried out to help the economy and financial system, they helped global markets as well also.