In this morning’s letter David Rosenberg reminds us of the danger of herding, citing Bob Farrell’s rule #9 – “When all the experts and forecasts agree — something else is going to happen” (see here for the 10 rules):
“Exactly a year ago, the USA Today ran with a big bold article titled: “In 2011, It’s All About Stocks: 5 Top Experts Agree: New Year’s Looking Great For Stocks, Not So Great For Bonds” (nice call!). Indeed, it sure was “all about stocks”, but not the way the consensus was forecasting.
While the U.S. was a relative outperformer, even with the very recent Santa rally, the S&P 500 is still down 1.3% so far this year (if it holds it will be the first time since 1939 that the market was down in the third year of the presidential election cycle), and with tremendous volatility. Strip out utilities, Healthcare and Staples – the stuff you want to own when the economy is in trouble – the S&P 500 is down 5% so far this year (by the way some people talk, down 5% today is considered a good year). And what do we see today? The same paper runs with “Strategists Predict a Glowing 2012: Stocks Forecast to Finish the Year Up By More than 10%. Oy vey.”
Oy vey indeed….
Source: Gluskin Sheff
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.