David Letterman, the Chicago Olympics, and Your Predictions

by JDH on October 3, 2009

Unless your name is David Letterman, or you were a member of the Chicago Olympic bid, or the President of the United States who staked his reputation not on fixing our problems but instead getting the Olympics for his home town, or Jim Balsillie, or an ape, this was a relatively uneventful week.

David LettermanI guess David Letterman had an interesting week, being forced to admit that he did some things with staff members he shouldn’t have done. Dave will survive, because he “got out in front of the news story”, admitted what he did, and so everyone will move on.  I think the whole things kind of creepy, since this guy is 60 years old and just got married in the spring to his long time girlfriend and mother of his six year old son, but that’s just me.

Jim Balsillie learned that a big hammer is not always the best tool if you are trying to open a glass jar.  Had he played nice he would own an NHL team somewhere, and if he bit his tongue a year or two from now he could move the team to a city of his choice.  Instead, he helped engineer a bankruptcy, and it backfired.

But these two stories, in the grand scheme of things, are mere diversions.

About the only interesting news for us Canadians, other than the start of the NHL hockey season, was the announcement that Scotiabank will now deliver gold right to your home. Cool. Of course Sprott Money has been doing that for a year or two, but still, it’s pretty cool.

Other than that, nothing much happened this week, so, let’s review the past.

Last December I asked readers to predict where the market would be at the end of each quarter of 2009. On our 2009 Predictions Page I summarized the consensus estimates for where the market would be at September 30, 2009: On average, readers of this blog believed the Dow would close at 7,949, and the price of gold would close at $1,085.

The actual closing values, on September 30, 2009 were 9,712 for the Dow, and $1,006 for gold, so on average we were too pessimistic on the overall market, and pretty close on the price of gold.

Congratulations are due to Davidslane, winner of the “closest to the pin” contest for the second quarter in a row, who predicted gold at $1,050, which was a bit optimistic, but pretty close. He did predict the Dow at 8,200, which was too pessimistic, but still pretty good, considering that those prediction were made over nine months ago.

The winner on the Dow prediction was Richmanch, who predicted Dow 10,000, which was the highest prediction of any of our predicters. Well done. I’m reminded of the strategy employed on The Price is Right television show to bid high. If the first three contestants bid 850, 900, and 925, the logical next bid is 926, because you then get any price higher than all other bids. I’m not saying that was Richmanch’s strategy, but it worked, and he wins.

Who needs to watch professional forecasters when we have readers who do a better job than the experts?

How did I do? Not well. I predicted gold at $2,200 and the Dow at 7,000, so I was much more pessimistic on the economy than warranted. I assumed that there would be a follow through on the carnage from 2008, with the markets bottoming out around June, with a recovery happening later in the year. Instead, government stimulus efforts have created hope in the minds of investors, which has lead the markets higher all year.

As I have repeated in my weekly commentaries all year, I believe it’s all an illusion. I don’t believe government’s can spend our way out of a recession. Unemployment is high. Deficits are higher. October is often a “turn around” month for the markets, and this October is not off to a great start, so who knows what will happen for the remainder of this month.

But let’s be clear here: my predictions have been completely wrong. I assumed a market crash, and it hasn’t happened. I assumed that the result of massive government spending would be an explosion in the price of gold. Gold has gone up, but it hasn’t been an explosion.

I have been wrong.

I feel like I should make a David Letterman-type apology, but I’m not that funny.

I feel like I should give all of my readers a refund for the subscription price of my newsletter.

And I will.

Whatever you have paid me, I will refund.

Fortunately for me, this service is free. No charge. (And I guess you get what you pay for).

Have I been wrong? Based on the numbers, yes, I’ve been wrong.

But I prefer to believe that my timing has been wrong, but my thoughts have been accurate. I continue to believe that the price of gold will increase, and the markets will suffer yet another correction.

I’ve been wrong for the last year, but I believe that I will ultimately be proven correct. So, I continue to hold gold and silver stocks, and a lot of cash. If gold continues strong, I will make money. If the market crashes, I will use my cash to average down, and profit from the bounce.

Time, as always, will tell.

Feel free to provide your thoughts on predictions on our 2009 Predictions board, send your notes of congratulations to the winners, and see you next week.

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