Year-End 2012 Target: 2.6% U.S. 10-Year Treasury Yield; 1,300 S&P 500 Index; 720 Russell 1000 Index.
—Dueker, Gordon, Kshatriya, Pease, Velis, Wood, In a Low-Return Environment, Every Basis Point Counts, Russell Investments, December 2011.
As proposed by Edward Lorenz in 1963, long range weather forecasts, those made at a range of two weeks or more, are impossible to definitively predict the state of the atmosphere, owing to the chaotic nature of the fluid dynamics equations involved.
Dr. John Dee (1527–1608 or 1609) was a noted British mathematician, astronomer, astrologer, geographer, and consultant to Queen Elizabeth I. He also devoted much of his life to alchemy, divination, and Hermetic philosophy. He was known for his use of crystal balls in his work.
—”Crystal Ball,” Wikipedia
Little has changed.
The 10-year is at 1.65%; the SPX at 1,427; the RIY at 790.
The fluid dynamics equations of 2012 have left the cautious in the dust. I do not mean to single out the good people of Russell Investments. These are smart people practicing a difficult art and science (and it was alchemy, divination and Hermetic philosophy before science).
In 2012, estimating, forecasting and strategy are important and good work.
Whether weather or the stock market, we yearn for perspective to help us frame our belief.
This 2012 has seen an extraordinary underperformance by those cautious, and in spades the 2-and-20 crowd, and an extraordinary performance by those willing to play oblivious to the Winds of Economics, Politics and Crisis.
Let me be clear. Given free rein, I likely would have underperformed Dueker, Gordon et al. As it is, I am forced by Journalism into buy-and-hold.
Thank you, Journalism.
At the edge of our many cliffs, we enjoy another December. It is crystal ball season. Discuss.