Investing

I posted Turnaround on December 28, 2008. I’m going to review the predictions: 

• This will not be as bad or even nearly as bad as the great depression
  • Well this looks obvious now but really wasn’t obvious 12 months ago.
• Prices have overshot to the downside, in part due to deleveraging
  • This turned out to be very true but there were 3 more months of pain to endure
• The recent situation is unprecedented and the response from government and monetary authorities has been unprecedented this will bring forward the recovery in commodity prices (at least relative to dollars).
  • Commodities have been on a tare
• The US Dollar is going to go down substantially once the deleveraging ends, this will be more like quarters than years
  • The USD had already peaked against the AUD in October 2008. The recent rally in AUD began in March 2009 and has seen the USD drop by half.
• US Treasury bond prices are unsustainable but may remain that way for some time. They are the short of the decade but you may not see any reversal in the next 12 months (don't fight the fed, the fed wants rates very low right now).
• You would have made money on this
• Many stock are an excellent buy at current prices based on the underlying value of their businesses.
  • S&P 500 is up 72% from the low and 32% since the original predictions post. This is less than other worldwide markets!
• The worldwide fiscal response is targeted at infrastructure projects this will add incremental demand to commodity prices while low prices in the later quarters of '08 have reduced supply.
  • The Goldman Sachs Commodity Index is up about 80% since December 2008.
• The major drop in asset prices was caused by credit markets seizing up, this problem is coming to an end (based on indicators such as the TED spread) though the economic slowdown persists. Half of the reason for the decline is resolved and asset prices will start to reflect this even while economies are in recession
  • This took a few more months but the stock market certainly did turn while the economy was still in recession
• The stock market will turn in advance of the economy. There will be no economic news to indicate that stock prices are going to turn.
  • As above
• Broad markets will probably retest their recent lows in the first half of 2009. It could be profitable to buy some insurance at today's and increasingly higher prices.
  • Spot on. There was 25% downside from December 28th.
• Commodity stocks survived 7 months into the US recession and 10 months into the bear market. They are fundamentally unimpaired and will likely lead us out of the bear market.
  • The GSCI is up nearly 3 times more than the S&P 500 since December 2008.
• Bank stocks will likely do well over 2009 because they were likely priced for the end of banking. Unfortunately they are too complicated to analyse so I won't be touching them.
  • BKX was at 42 in December 08, It’s now at 47 which is 12%. Not exactly an outperformance. The learning here is when something is “too complicated to analyse” then I should stay far, far, away rather than make predictions about it!

posted by Neil  # 3:15 AM