I lunched with my old Triple M mate Doug Mulray the other day, and his words of advice came back to me after another colleague teased me because the S&P/ASX 200 has not reached my forecasted 5500-level.
My response to my fair-weather friend was on par with the low-standard sledging of our much improved Test team. Does anyone recall the days when sledgers were both cutting and amusing?
Anyway, my comeback was: “Shut up! What are you whinging about? You made money this year, if you took my advice on where stocks were heading!”
Sure, it was accurate and aggressive, if you add in my tone, but it was not clever, biting and amusing, which great sledging should be.
When I worked with Mulray in the late ‘80s, his sidekick was one Andrew Denton and I once asked them what was the secret to their fast, witty and very appropriate comebacks. Doug volunteered: “Always rehearse your ad libs, Switz!”
If I had taken his advice, I would have expected a smart Alec to tease me if 5441.4 – the closing high on October 28 – ends up being the best for the year.
The good news
So a well-rehearsed response would have gone like this:
- First, it is only 58.6 points off 5500 and, given the forecasting of an index high for any one year is a mug’s game, it’s not a bad result.
- Second, for the year we are up around 11%, after about a 5% pullback and, if you add in dividends of say 5%, that’s a 16% gain – not a bad pay-off for something given to you by a ‘mug’!
- Third, if you’d taken our income portfolio, you would have been up 23.11% by November 29. And if you were a risk taker, you’d be 25.57% up. These two portfolios have beaten the index by 3.8% and 6.3% respectively. These are pretty good results, considering we do not stick our necks out with high-risk businesses. (If you want more details on this then check out our December 2 Switzer Super Report [1])
- Fourth, we did a really good job forecasting on the local economy, with yours truly giving the poor old RBA a bagging on being too slow to cut rates. I think they’re just about right now. We also put money on a resurgent China and an economic comeback for Japan. Regulars might recall that I actually bought two Armani ties when I was in Tokyo, which I argued was a classic case of how the lower yen was going to help Japanese economic growth. And I even called an improving Europe, when I was on the Greek island of Patmos in June and now most of the global economic commentators have jumped on the slow-moving, yet improving, Euro-economy bandwagon.
Sure, some of our experts might have made the odd wrong individual call on a stock but we nailed plenty of good ones over the year.
An even better 2014
For next year, I believe we are looking at another solid year for stocks, as the economic pick ups for Europe and Japan get more solidity. The experts I listen to think European-exposed funds should have a good year. I like the fact that private equity companies are now into Spain and Italy, which is a positive sign that the smart value hunters are giving us a leg up.
All the omens on the US economy scream that tapering will start early in 2014 Remember, the $US85 billion bond-buying with QE3 will only be peeled back to around $US75 billion, or maybe $US65 billion, and so there won’t be a massive liquidity dry up effect, which in turn could push rates much higher.
The Fed won’t want to spook this US economic recovery and so if a correction happened, say in February, I would again be calling it a buying opportunity.
Every week we sit down as a group and try to work out how we can help our subscribers navigate the vagaries of the stock market, the bond market and any other area that SMSF trustees should be thinking about. Sure, so far I have missed the index call of 5500, but it has been a pretty good effort by our team and we are determined to do it again next year.
So stop your whinging!
That’s what I should have rehearsed and that’s what I am doing right now.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in this Switzer Super Report
- Paul Rickard: BHP beats RIO by a whisker [2]
- James Dunn: The benefits of unlisted property for your SMSF [3]
- Penny Pryor: Why we don’t buy airlines [4]
- Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [5]
- Barrie Dunstan: Retirement age needs to rise [6]
- Penny Pryor: Hot spring, leads to cooler Christmas [7]