Ah the New Year, it’s a time dedicated to fun, friends, and celebrations of all kinds. Some parties are to remember and commemorate, while others are to forget and wipe the slate clean. But perhaps the best part of New Year’s is that it brings about an opportunity for new goals, new attitudes, and new dreams. Resolutions.
TAKING CONTROL OVER YOUR FINANCIAL WELL-BEING AND MAKING MORE MONEY ON YOUR INVESTMENTS SHOULD TOP YOUR PRIORITY LIST IN 2012.
Year end is a great time to view a year-over-year comparison of your investments. Total performance (the amount you ended with less the amount you started) tells only part of the story (the trend line tells the other part.) But before that, remember that you cannot build long-term wealth unless your total investment performance is greater than the Dow Jones Industrial Average.
“The market” will close 2011 one of the most volatile years in recent history. Even so, the year ended with little blood or treasure. The DJIA gained just 5.5% for the year – only slightly ahead of inflation (averaged 3.6% in second half of ’11).
The 15-51 strength Indicator, built with superior 15-51 construction and above-average stock components, finished strongly at 13.9% for the year, bettering the Dow by 253%. The chart is below.
Now if you think that’s volatile wait ‘til 2012!
The Dow starts the New Year at the exact point in which it can’t hold. In 2011, Dow 12,200 was as much of a sell point as any other in memorable history. It was a Trader’s Delight. So that’s where the Dow starts in ’12 – exactly on the RedZone – which is about 1,000 points higher than the Action Zone Midpoint (updates to these topics will appear in future blogs).
Stocks begin 2012 over-valued by at least 10%. That said, you should expect the same kind of volatility – if not more – in 2012. The Market is anything but stable and the stock market reflects that.
For instance, it’s hard to believe there is still speculation about recession and/or inflation while both are quite evident and present in the marketplace – and soon to appear in national retail numbers. They’ve been in producers prices for some time. But you know, Wall Street, always the last to know and to react “unexpected” news. As such, these two items can’t be factored into a Dow 12,200 valuation.
Also in America, unemployment remains stubbornly high and banks still aren’t lending. Remember, money is their product of trade and inflation is on the way. In other words, banks cost of goods are set to rise and right now they don’t want to engage in lending long-term rates without an inflaiton premium attached. That’s why Banks don’t want to lend now. There’s not enough incentive and opportunity in for them. This is not good for the housing market, enterprise, or consumers.
This, of course, is also not to mention that the world currency markets remain in a state of flux, Europe is fragile, and the below two Wall Street Journal headlines make China’s entrance to the world debacle official:
- China’s Growth Continues to Slow (By Aaron Back)
- China Pins Hopes on Public Housing (By James T. Areddy and Bob Davis)
Public hosing projects never work in the US, and if you want to be fair, the “subprime mortgage crisis” via Fannie Mae and Freddie Mac turned into exactly that. It didn’t work either. Benefits, if any, are only temporary. Good luck to China.
Add to this a Presidential Election campaign in America and what you have is a year full of speculation and stock market volatility. Prepare for it. Plan for it. And capitalize on it if you wish.
IT’S TIME TO TRAVEL THE ROAD OF FINANCIAL INDEPENDENCE.
Let me know if I could help.