Daily Investment Interpretations

July 12, 2010

2010-7-11:  As investors, we need to "get it right"
    I need to guard against letting any biases I might have interfere with arriving at correct answers concerning what's going on economically. In that vein, it may help to review the predictions that Warren Buffett, Todd Harrison, and Paul Krugman made last year regarding what would happen to the economy later last year and this year.
    Offhand tonight, I don't remember what forecasts Warren Buffett made last year except that I don't believe he sidestepped the meltdown that occurred between October, 2007, and September, 2009. (I'll try to check on this tomorrow.)
    Todd Harrison warned of the "widow's peak" that was going to occur any day now back in the summer of 2009. It didn't happen, and if it happens now, it doesn't count, at least in my book.
    In early 2009, Paul Krugman warned that the recovery wasn't going to get off the ground, while stock market gurus were claiming that proclaiming that it was underway, and that was the time to be buying stocks. They were right and Dr. Krugman was wrong. In May, he quietly agreed that a recovery was in progress.
Bottom Line:  None of the three got it right last year, although the Fed was correct in supporting the ongoing-recovery thesis.
    My investment advisory service is getting more pessimistic. The intermediate-term trend is down. It would take a close above 1,080 (only 2 points above Friday's close) to break above the current resistance level, and open the door to further advances. But my investment advisory service is driven by its models and their indicators, and will depend upon their numbers to buy if the models say "buy" and sell if the models say "sell". Although it would be valuable to know whether the economy is going to rise or fall from here, it isn't necessary to second-guess what the economy's going to do in order to know when to buy and when to sell.
    Stock market futures are down a few points tonight.