Seeing that events move so fast these days…what with High Frequency Trading and trillion dollar bail-outs being produced like rabbits out of a hat, and more discoveries about more creative ways to “fix” an audit or a credit rating being revealed by the second, I’ve decided to put out forecasts every six months. So I’m updating my 1st Jan 2010 forecasts (in italics): [1]
1: S&P 500
Won’t go above 1,300 in 2010 but it won’t go down much until hits at least 1,200 at which point it risks a 15% to 20% reversal which will be relatively short-lived.
It hit 1,200 for a few days then it went down 13% (closing prices) and 15% intraday, interesting that 1,200 was about (one of many) Fibonacci numbers. I was expecting it to carry on at least until 1,300 before a reversal; but the question I’m asking myself is whether 13% down is a blip, a reversal or a correction? My view (a real minority) is the S&P 500 is 20% or so below its “fundamental” (that’s based on working out what International Valuation Standards calls “other-than-market-value”, which I do using historical correlations between price and nominal GDP and long-term interest rates).
But, and this is the kicker; it’s in the slump that happens after a bubble-pop which is when mal-investments made in the bubble get washed out. Typically (in the past) you don’t get big corrections (like over 20%) at that stage of the cycle, and although the drama-queens were all over the place with the recent “crash”, well 13% isn’t exactly Armageddon.
No reason to change the forecast of January – now, as then, it’s a “value-picker’s market”.
2: Oil
Will drift sideways between $65 and $85 unless there is an “event” of which the most likely is a war of some sort…won’t go down below $60.
That pretty-much what happened so far, I don’t think it will go down below $65 unless more skeletons are found in the financial closet, and I still think that within a year it could be playing with $90.
3: Gold
The market is struggling to understand value and the path ahead is therefore likely to be choppy, great for traders to show off their surfing prowess perhaps a bit risky for “buy and hold”.
My view then and now is that gold is a bubble and that its price…
