It is time once again to put my ramblings, rants and ruminations for the previous 12 months under the spotlight. Did I correctly spot any stock market or economic trends or should I be standing in the corner with the dunce cap on for most of 2010?
Firstly let me just say that you will not find too many finance commentators or self appointed market experts writing an article where they hold themselves accountable for past predictions or forecasts. Often many of the people writing stock market related articles for the mass media and big commercial websites don’t like to dwell on where they went wrong, instead they would rather draw our attention to any of their predictions (no matter how vague they were) if these turn out to be even marginally accurate.
Of course I am happy to take credit if I made some good calls in 2009, but more importantly I find that the start of the year is a good time to look back and see where I made a goose of myself over the previous 12 months. I am not a market expert, financial journalist or stock market guru but I do plod along and call things how I see them as an investor and businessman.
So without further delay let’s look at what this humble blog got right and wrong in 2009 and just in case you think of am making things up with the benefit of hindsight, then here some of the forecasting related posts I wrote in late 2008/early 2009.
Emissions Trading Scheme
Back in December 2008 I suggested that if the global economy remained weak in 2009 then the proposed ETS legislation in Australia would be watered down and in fact that is what happened. Actually I would say the Government’s ETS approach is in tatters.
This is good for the stock market and investors because the idea that we will significantly reduce of CO2 emissions via a new tax is rubbish. All the ETS would have done is made the Australian economy less competitive and been a big win for countries like China & India.
In late 2008 I wrote; “An oil price between $50-$80 USD a barrel would seem a reasonable trading range in 2009 and I would guess OPEC will keep cutting production until they can get somewhere near that price ” and guess what, I was right on the money.
Oil prices followed the world markets down during the early part of 2009 but eventually production cuts did the job and prices move above $50 USD but stayed below $80 USD a barrel. Oil prices always bounce back, developed and developing economies still love oil.
ASX All Ords & S&P/ASX 200
If you read back through my blogs for the year you will see that I clearly believed the Australian share market would bottom out and that 2009 would be the time to start easing back into stocks. As it turns out 2009 was the time to be buying, not selling stocks.
Australian stocks in $AUD terms outperformed real estate and gold in 2009. True I got burnt in 2008, but thankfully some of the moves I made in 2009 have helped to ease the pain.
Spotting the stock market bottom
During the period between February – April 2009 I became convinced that the stock market was in a bottoming out process and that the multi-year market low had been seen in March.
This was during a time when the doom crowd were calling the rise across global stock markets a “sucker’s rally” and they were still ranting on about an imminent global depression. Well they were wrong and the Shareswatch Blog was right, it is as simple as that.
By the way, my QBE versus the ASX All Ords Index theory turned out to be a good way to spot the market bottom, so I reckon it is worth watching the relationship between these two in 2010 as well.
Australian economic outlook
I expected Australia to slip into recession in 2009 and although we did see one quarter of GDP contraction, the economy in fact did not fall into a technical recession thanks largely to our commodities exports and robust residential housing market.
This means my forecast for the Australian economy in 2009 was wrong, mainly because I did not anticipate that the Government would prop up the housing market via the first home buyers grant. Personally I think this was the wrong move and one day I suspect we will see this extra boost taken out of the housing market via a correction. (not a crash)
Australian home prices
Residential property prices were the subject of some heated debates in the media and across a number of websites and blogs in 2009. My view was that I saw no reason why Australian home prices would suffer a U.S. style crash and thus I did not believe we would see a widespread crash in home prices in Australia during 2009.
As we know now, house prices did not crash in 2009 and so called experts like Steven Keen got it wrong. I might not be anywhere near as well known as Steven Keen but at least my forecasts are more accurate!
Overall the message I tried to convey to stock market investors in 2009 was to focus on the facts and avoid being swayed by those trying to get attention by making outlandish predictions.
The facts as I saw them in late 2008 and early 2009 led me to believe that the global economy was not heading into oblivion, the free market system was not about to collapse and that the effects of the global financial crisis would eventually be worked out of the system. In short, there was light at the end of the tunnel and there was no need to head for the fallout shelter.
So I reckon this blog did better at making the right calls than a lot of mainstream financial commentators, self titled market exports and fund managers etc. All it all I would say it was good year for the Shareswatch Australia Blog.
But that is my view and I am of course biased…so what do readers think? Did the Shareswatch Blog provide useful insights or analysis of the stock market and economy during 2009? Do you think I made some good calls or just got lucky?
Over to you…