Tuesday, October 28, 2008
In this report I will review the advice and predictions I made on May 27, 2008 (exactly five months ago) in a report entitled Charting a Course Through the Recession.
In striving to be accurate, fair, and complete, and in the spirit of constant improvement, it’s important to review where we went right and where we went wrong. I’m pleased to say that many of my predictions were right on target. I didn’t anticipate such an aggressive dollar advance, but now I see this trend continuing for awhile. I am continuing to recommend some of the same prudent actions as always. Stay out of debt, keep cash close by, get some money out of the dollar (gold), and know your neighbors. And stay tuned for more from me in future reports.
Here’s the executive summary from that report (in italics), with my comments on each point.
Point #1
My assessment is that the economic and financial risks are exceptionally high and possibly historically unique. This is no time for complacency. A defensive stance is both warranted and prudent. A 50% – 70% (real) decline in the main stock market indexes is a distinct possibility, and portfolios should be ‘crash-proofed.’
This advice was spot on. When I wrote this, the Dow was at 12,700, and since then it has declined by -34% to 8370 at present (10-28-08). Reflecting the unequal nature of losses vs. gains, the Dow would have to gain 51% just to get back to the 12,700 level.
The S&P 500? That will need to gain 58% to get back to its level of May 27, 2008.
Current Outlook: At this particular juncture, I am looking for the stock market to rebound, possibly as much as 20% by the end of the year, and somewhere in the vicinity of 10,000 for the Dow.
I say this not because I think that any particular economic news will warrant such a gain, but because stock market bounces are just part of the game, and because the Fed and the Treasury Department are busy dumping lots and lots of newly created and borrowed cash into the financial companies. That money has to go somewhere, and it probably isn’t going to go into legitimate loans for expanding businesses or to consumers. So it will go into the market.
Further, the amount of cash “rocket fuel” that is being
by cmartenson 
