January 2012 Investment Review

Predictions are difficult to make and can be a source of embarrassment. Take these for instance:

“It doesn’t matter what he does, he will never amount to anything.”
– Albert Einstein’s teacher to his father, 1895

“I think there is a world market for maybe five computers.”
– Thomas J. Watson, 1943, Chairman of the Board of IBM

“We don’t like their sound, and guitar music is on the way out.”
– Decca Recording Co. rejecting the Beatles, 1962

“It will be years – not in my time – before a woman will become Prime Minister.”
– Margaret Thatcher, 1974

Predicting where the FTSE 100 will end the year is also not without it’s difficulties. Fortunately many predictions are forgotten as the year goes on, however my blog archive is there for all to see.

So what happened in 2011?

2011 was a roller coaster of a year. The FTSE 100 started the year at 6050, dropped to 5800 by February, rose to 6050 in April, flopped to 5000 in August and then rose back beyond 5700 at the end of the year. Get ready for 2012 which should be more of the same.

For those of you without the memory of an elephant, here is what I said in my January 2011 Investment Review:

“2010 was a roller coaster of a year. The FTSE 100 started the year at 5500, dropped to 5100 by February, rose to 5800 in April, flopped to 4800 in July and then rose back beyond 5800 at the end of the year. Get ready for 2011 which should be more of the same.”

It’s like Groundhog Day, except that it isn’t February 2nd yet. So I was right predicting more of the same for 2011, but I also said; “The consensus view this year sees 2011 end around 7000 as the global recovery continues.” I’d rather forget about that prediction.

It was indeed Groundhog Year. In both 2010 and 2011 the huge drop was caused by the same debt uncertainty in Europe, or rather the fact that the politicians did not possess the will to put things right. Without the debt uncertainty in Europe applying the brakes and generally spooking the world and his wife, who knows where the markets would be now as the global recovery does indeed continue. It seems the corporate news from the US is getting better all the time as is the progress in Brazil, India, Russia & China at last.

I guessed there could be a Santa Claus Rally on 22nd December when the market was just below 5400 and it did end the year at 5700. Let’s hope the real rally occurs before the Easter Bunny arrives.

My favourite poor prediction has got to be:

“You can’t win anything with kids.”
Alan Hansen at the start of the 1996 season about United’s young team. Nine months later, these same kids had won the double and had made their mark in football history. Funnily enough one of those kids, Paul Scholes, made his comeback on Sunday against City.

If you have a moment you can send us your FTSE 100 prediction and you can share with us any poor predictions you can remember.