Today’s commentary
I am going to my annual review a bit earlier this go around, hoping that I can do a new top ten surprises list earlier and more comprehensively next year. In 2012, I started the subscriber newsletter out with Ten Surprises for 2012. The goal was to give Credit Writedowns Pro subscribers a list of things that investors only assigned one in three odds of occurring that I believed had a fifty percent or better chance of occurring. So if I was right, then I should get 5 out of ten predictions correct, while 3 to 4 out of ten should have been expected by investors. Last year, I graded myself at 7-3. Let’s see how I did this year.
2013 was a good year
Before I dive into the grading, I want to make a few general comments though.
First, the three market predictions I assigned myself – Greek sovereign bonds and Japanese equities outperforming and Apple falling – all turned out to be wildly right. In fact, Greece and Japan were the two big monster macro calls in global markets for the past year. So I am very happy that I got those calls right. By contrast, in 2012, in terms of market calls, I said the gold bull would end and that European equities would outperform. Those predictions were OK. Gold did eventually enter a huge bear market – but in 2013, one year too late for me to be right last year. And Europe did outperform… marginally. So I am happy out the big outperformance this year.
My second thought goes to the impossibility of the task. To get these outlier calls right a full year in advance is a tough task. I am trying to make calls that are not mainstream that will actual happen, one year in advance. The very nature of the task tells you that many of these calls are going to be wrong. So, last year’s 7-3 was miraculous. Having eyeballed, this year’s calls I know that I was too pessimistic about both the US and the eurozone at the start of the year. I was saying policy makers would induce recession because of the fiscal cliff in the US and that Ireland and Spain would need an OMT backstop to exit their bailout plans. By March, I had already backtracked on the US prediction. And by June, I had fully backtracked on my downbeat European view. That leads me to my final thought.
My final thing to note is that I am more optimistic at the end of this year than I was at the beginning of the year. Having done a quick scan of the predictions, I can tell that is going to affect my scores negatively. What it says is that 2013 was a better year than the tone of my surprises said it would be. When I did my quick scan of predictions, that’s what stood out for me. And I think from an economic forecasting perspective this is an important point. The global economy is more resilient than we often think it is. Things look bleak sometimes and ask yourself how they could possibly turn around. Miraculously things do turn around – to our collective surprise. That’s how it worked in 2013, and frankly that’s how it always seems to work. The Great Depression is an anomaly. Usually, policy makers step back from the brink and make the right political decisions that give the economy just enough breathing space.
I hope my optimism at the end of 2013 remains when we look back at the end of 2014 at the predictions I will make next month.
[Content protected for Gold members only]
More About: Apple, bailout, Canada, France, Germany, government bonds, Greece, Housing, investing, Ireland, Japan, Members, OMT, prediction, Spain, WeeklyThe most in-depth research and analysis is on Credit Writedowns Pro.
Review: How My Ten Surprises for 2013 Fared originally appeared on Credit Writedowns
Links: RSS - Daily - Weekly - Twitter - Facebook - Contact
Credit Writedowns Feed # abf0d081857b85fe6be494728740a4f1