“Odds are the consensus forecast for 2012 is wrong. It almost always is.An economic columnist’s heart wants to believe the economy will do better;his head tells him it’s likelier to be worse.”
-David Wessel
The quotation “Prediction is very difficult, especially about the future,” and its several variations, have been ascribed to Niels Bohr, Robert Storm Petersen, Mark Twain, Yogi Berra, Samuel Goldwyn and others. The idea is understandable and yet all sorts of folks go ahead and continue to pronounce what the future holds for us especially at this time of the year. Burton Malkiel has pointed out that at the start of 2011 several pundits warned that the low yields of U.S. Treasuries constituted a “bond market bubble.” In fact, if you had bought 30-year Treasuries then when they were yielding 4.42% and held them until the end of 2011 when their yields had fallen to 2.89%, you would have earned an investment return of 34%. Not bad.
In a recent Wall Street Journal article David Wessel did a good job of laying out all the key factors that could work to help get the American economy back on its feet and also of highlighting the things that could go against that recovery. The daily news in any form is loaded with the details and the interconnections between what goes on in Europe and reverberates on America’s Main Street. David Brooks said last night that President Obama’s reelection chances are essentially dependent on what German Chancellor Angela Merkel does. It sounds odd, but he could be right.
You can continue to watch the improving unemployment numbers, the Case-Shiller Index of housing prices, the profits of American businesses in various sectors, commodity prices, and any other leading and lagging economic indicators that you like. On top of that sea of data rides the election year rhetoric and wrangling that seems so odd given the fact that the American public is so disenchanted with U.S. politics and the seemingly permanent dysfunction of Washington. So what’s the ordinary American to do? The best policy is that you stick to your knitting.
Since the fall of 2008 everything that used to work in the American economy and in your financial life has been negatively affected. It would be really easy to give up and forget about saving and investing or staying in school for that college degree. All those things that you used to pursue in the hopes of a reward now go unrewarded. It’s almost like anything that you do makes no difference. Actually, nothing could be farther from the truth. Just because all your good financial and professional habits haven’t yet been met with positive financial results, you shouldn’t abandon them. Of all the great things that 2012 holds for you, the greatest might very well be a wonderful opportunity to grow and improve knowing full well that your rewards will come in time. They always do.
Happy New Year!
