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Dear Subscriber, At this time of year, the investment markets take on a different look. Many investors are on holiday, so trading volumes are down and the minute-to-minute and day-to-day action can be deceiving. In some cases, there might even be investment managers that are "painting the tape." Taking advantage of the light volume of trading, they attempt to influence the price of their existing holdings by aggressively buying additional shares. In doing so, they can push the price up temporarily, allowing their performance for the year to look a bit better than it otherwise would be. Such tricks are short-lived, of course, but they are played every year, and are among the hidden rituals that mark the changing of the calendar. More noticeable are the predictions, prognostications, proclamations, pontifications, and pronouncements from market pundits about what is in store for us in the upcoming twelve months. On this date last year, I wrote a cautionary piece about listening to such fortune tellers. Speculating about the future can be interesting and great fun, and there's certainly some of it that's required to execute an investment plan. But most of the predictions that you will hear in the next few days should be ignored. While hanging up a new calendar does affect certain investment decision making (notably in regard to tax issues), it's good to remember that not much else really changes from December to January. What will matter next week is what always matters: A careful examination of the structure of the opportunities that the market is presenting. That approach lacks the sizzle of the standard predictions, which are trumpeted by those who are eager to sell you something, an investment product of some kind or perhaps a book. (It's interesting that two years ago, Jim Cramer's then-current book focused on how to "Get Rich, Stay Rich," while his newest is titled, "Getting Back to Even.") Rarely do such predictions do more than project current trends into the future. The few forecasters that you should listen to have some similarities. They tend to be analytical rather than promotional, and to carefully dissect an investment idea by examining the range of likely outcomes that could occur rather than to issue a bold estimate of the price of something in the future. The economic world is one of uncertainty rather than certainty, and no amount of bluster can change that. Have a wonderful new year. Sincerely,
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Nothing in this email constitutes investment advice, which is only offered subject to a contractual relationship and based upon your unique financial circumstances and tolerance for risk. Original material and links to other sources are provided as educational information for your financial decisions. |
