The consensus for 2011

In Uncategorized on 31/12/2010 at 6:06 am

2011 will be another good year for stocks. Recovery continues in the West, higher inflation in the world, and more Eurozone problems.

Sounds alright then.

But a more gloomy view

Remember at the end of last yr, everyone was expecting a troubled  yr for equities. And it was, until 4Q when the decision of the Fed to print money, led to a recovery of equity mkts. Here’s a view from NYT on why optimism among investors may not be a gd thing.

Consider how stocks performed in other recent periods of optimism. In October 2007, a survey by the American Association of Individual Investors found that 55 percent of investors were bullish; in the 12 months that followed, the S.& P. 500 fell 37 percent. Similarly, in March 2000, investor bullishness reached 66 percent. And a year after the fact, stocks were down 25 percent.

It just goes to show that by the time the market thoroughly convinces investors to be optimistic, most of the good news is already behind us.

Me: Investing is like playing backgammon. You can calculate only so much, the dice dictates what you can play.


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