Good investors try to be grounded in reality and tend to learn more from their mistakes than from "getting it right". I've made some predictions over the past few months and now is as good of a time as any to test their accuracy.
Guess #1:
The investor says to invest in China through a broad based indexed ETF like GXC or FXI (
April 22)
This has been an unequivocal successful gamble. GXC was going for about $50 a share when I made my guess. It's now worth about $70. In my own personal position I've made an approximate 40% return on this wager in the past 4 months.
Guess #2:
For the investors, a good diversified portfolio should contain some bond holdings like TIPS (Treasury Inflation-Protected Securities). (
April 24)
This one is a small loss. TIP went from $101 took a nose dive and fluctuated to about $100. A small loss of less than 1% would hardly be considered a loss by many, but the small loss is a fact. TIPS yields are typically very slow and this did not prove to be any exception.
There are a wide ranging universe of possibilities as to why TIP hasn't made me any money. My best guess is the recessionary deflation pressures are slightly stronger than the inflationary pressures from increased government spending.
Guess #3:
For the gamblers, USD is not very attractive. (
April 25)
This was an unequivocal success. FOREX traders trade on leveraged currencies. I don't trade FOREX and I honestly don't know what leverage ratio I would use, so I can't estimate what my returns would be. Further, my predictions were just a general knock on the US dollar but I did not explicitly mention which currency would be stronger than the USD, so I just picked EURO. Either way, this was a gangbuster correct guess.
Guess #4:
I'm starting to think this current rally might have been a bit too much and too soon. (
June 11)
Out of all my guesses, this one is one that sticks out the most to me. Not just because the S&P zoomed from 944 to a 1000, but because I took the entire month of July off.
This one is tricky and I'll chalk it up as a 6% loss. The S&P pretty much followed as I predicted until July when it turned around and zoomed up. Unfortunately, I was busy preparing for the Bar Exam (which I never took) and so I haven't paid much attention to the market.
The question that bugs me is, would I have pulled the trigger in July to get out this losing position? On about July 15th, it occurred to me that I did not check the July June ISM numbers. The ISM numbers were surprising for me, because it showed an undeniable decline in shrinkage -- meaning the economy was showing real signs of improvement. Would I have pulled the trigger? This question still bugs me, but I'll chalk it up as a loss. The lesson to be learned is that if I want to trade professionally, I will have to devote full time to the markets. I can't compete against the market on a hobbyist basis when I'm competing against people who live and breathe the market 24/7.
Overall: Not bad guesses. Maybe studying economics wasn't such a bad idea after all.