Thursday, January 28, 2010

The Kirk Report

The Kirk Report


The End Of Prediction Season

Posted: 28 Jan 2010 01:22 PM PST

Bull View
It will come of no surprise to many of you that I spend an hour or two each and every day reading about the market. As once clear benefit from doing that every single day, I often notice subtle trends that others don't because they don't read as much as I do.

Let me provide you one interesting and timely example.

For over the past month, I've been collecting links offering both bullish and bearish views about the year ahead. In essence, if I found something that provided a strong bullish bias, I copied the link down and put it in a file. I also did the same thing bearish links as well. Now that the month has passed and we've officially exited "prediction season," what did I discover from this process? Bottom line - bearish predictions outnumbered bullish predictions five to one.

What is noteworthy and unusual about this observation is that following strong performance years, that doesn't typically occur. In fact, the more the market is up in the prior year, the more bullish the predictions tend to be for the next. Recency bias at its finest. But, that was not the case for 2010.

While I'll leave it to you to draw your own conclusions about that finding, it is obvious that the wounds and pain from the market's crash have not been healed or forgotten. Even amid the most bullish forecasts I could find, it was a challenge to uncover anything so bullish that seemed out of this world bullish. I mean something like "the market is going to be up +50% this year and this is why" kind of stuff we've seen in the past. In fact, you would think that coming off the great rally from the March lows in 2009 we would see at least a few predictions for an even stronger market this year. But, if that exists, I was not able to find it.

Moreover, it does suggest that we all need to be gatekeepers of our minds and opinions in order to not let the mood of the masses cloud our ability to make good investment and trading decisions. After all, opinions don't pay the bills but making good trades do and many times the best decisions will be made that go directly against the vast majority. The key is to know when to simply follow the herd and overall trends and when it is best to bolt from it as fast as possible. And, even if you get really good at doing that, there will be times you'll be caught leaning the wrong way. That's what makes this game so much fun and also why God created stops!

With that said and especially given the recent gloomy mood of the market, you may find this brief collection of "bullish views" of interest especially since most of them probably have been forgotten by now that the first month of the year and prediction season is now behind us:

  • America's economic recovery will be twice as big as experts predict (Slate)

  • Might the recovery be more robust than widely expected? Wall Street's most respected pessimist thinks so (NY Mag)

  • Most newsletters on Honor Roll are bullish for new year (MarketWatch)

  • Some reasons to be bullish about 2010 (Barrons)

  • Good underpinning for continued recovery (Morningstar)

  • Recovery will be stronger than forecast (Investment Postcards)

  • The interest rate myth - A bullish argument (Trader's Narrative)

  • The great recession is over! (Barry Ritholtz)

  • Why I'm buying stocks this year (TheTradingReport)

  • The US will grow like gangbusters and surprise everyone (Dennis Gartman)

  • Evidence is building that the world economy is headed for a substantial recovery from the worst financial crisis since the Great Depression (Bloomberg)

  • A bullish long-term technical outlook (The Technical Take)

  • The economy is growing faster than you think (Real Clear Markets)

  • The non-consensus view of things to come (Rising Dividend Investing)

  • Mr. Sunshine's happy economic outlook (CNN Money)

  • Up again in 2010? (Standard & Poor's)

  • Fleeing bonds for equities again (Jim Oberweis)

  • Improved fundamentals coupled with flat stock prices could provide a good tailwind for S&P 500 companies (Morningstar)

  • "There are two types of forecasters, those who don't know and those who don't know they don't know." - JK Galbraith

* If I missed any outlandish bullish forecasts, please be sure to send them my way so I can pass them on.

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