Time to Look Ahead by Looking at the Past

If there is a picture that says a thousand words, this has to be it. It is also a very true representation of where the markets have been since 2000. We've been going sideways to lower and if you are a "buy and hold" investor you haven't made much unless you got out when the market reached it's peak during the trading year. 2011 was a great example of why you need to look at the markets in a different light going forward. You need to find a means of seeing through the volatility of the short term market swings and the smoke and mirrors from the "Talking Heads" whose only vested interest is their own pocket books.

Business Insider article - Richard Koo chart

The important thing to take away from this graph is the targets (box upper right hand corner) for the market that the guru's and economists forecast going into the year. Pathetic misses and these are the same people who didn't have a clue as to the 2008 top and the downdraft that ensued.

With 2011 just about in the books, let's look at the potential problems facing the markets in 2012:

1. Europe will remain a continuous problem for next year.
2. Iran is becoming a potential Iraq.
3. North Korea is back on the radar.
4. Lack of growth in terms of GDP - estimates as low as 1.5%  for all of 2012 
5. Oil prices persistently high and likely to go higher.
6. Little to no wage growth and high unemployment continues.
7. Consumers will continue to pay down their debt and save more (little spending).
8. Can't count on any Leadership out of Washington.
9. Businesses will likely not start hiring until tax situation and effects of Obamacare are known.
10. Still possibility of a double dip recession which we may be in already.

A couple of charts (from James Pethokoukis, Business Insider article) to reinforce the comments above:

Next week we will try and put together a few hints on where the markets could end up in 2012. We now have the tools to help us to take advantage of the big moves and hopefully keep us safe when things begin to go the wrong way. 

Merry Christmas