A Look Back at Your 2011 Predictions, and Happy New Year

by JDH on December 31, 2011

Happy New Year. Fasten your seatbelts for what promises to be a very exciting, and perhaps world altering 2012. But before we look forward to 2012, let’s take a walk down memory lane, to see how readers of Buy-High-Sell-Higher.com did in predicting 2011 year end numbers. One year ago I asked you for your predictions on where the Dow and Gold would end 2011. The results are in:

The average prediction for the closing level of the Dow on December 21, 2011 was 10,892. Apparently we were somewhat too pessimistic, since the Dow actually closed at 12,217.56, or 12% higher than we expected. Congratulations go to ChrisC, who predicted a closing level of the Dow at 12,650. Well done. A year in advance, that’s about as close to “bang on” as you can get.

How did I do? Not well. I predicted that the Dow would lose 1,000 points each quarter, so my prediction of 12,000 on March 31, 2011 was within 300 points of perfection. My 10,000 prediction on September 30, 2011 was only off by 900 points from the actual level of 10,913. However my December 31, 2011 prediction of 9,000 was not even close to the actual 12,217 level.

Why was I so far off? Why were we all too pessimistic?

You could make the argument that we weren’t that far off. On October 3, 2011 the Dow closed at 10,655, the low point for the year, which was 854 points lower than the 11,509 level the Dow reached on September 16, 2011, a mere two weeks earlier. Had the Dow fallen a further 854 points in the remaining three months of the year, I would have been very close. If swings of 854 points in 11 trading days were not an unusual occurrence in 2011, a few more weeks either way makes a big difference.

I’m not trying to justify my lousy prediction. I was wrong. I admit it.

But I can’t help but wonder if there wasn’t some manipulation going on here.

The Dow peaked at 12,810 on April 29, 2011. On October 3, 2011 the Dow closed at 10,655, the low point for the year, a drop from peak to trough of 2,155 points, or almost 17%. That’s a big swing. That’s volatility.

And yet, on from December 31, 2010 to December 31, 2011 the Dow traveled from 11,577 to 12,217, a gain of 640 points, or 5.5%

When was the Dow last at 11,577? November 29, 2011.

That means that the entire gain for the year on the Dow occurred in the month of December. That’s not exactly a nice steady bull market rise. And let’s not forget that that the broader averages, like the S&P 500, ended the year flat, and the Nasdaq was actually down 1.8% on the year. I guess that means it’s easier to “paint the tape” in a 30 stock universe, than in a 500 stock index. Or perhaps in a “flight to safety” the lemmings all go for the big stocks.


The other area where I tested your predictive powers was the closing price of gold. Gold closed the year at $1,564.80; your average prediction was $1,621, so we were, on average, over-optimistic on the price of gold by 3.5%.

But again, timing is everything. When did gold last trade at $1,621? December 21. So, if 2011 had ended 7 trading days earlier, your average prediction would have been perfect.

Congratulations to JohnB, who predicted a closing price for gold of $1,650. That’s very good, only a deviation of 1.7% from the actual closing price.

As for me? I predicted that gold would hit $2,000 by year end. I was obviously over-optimistic. Or was I?

On August 23, 2011, and again on September 6, gold spiked well over $1,900 per ounce. On September 6 the intra-day high for the year hit $1,923.70. At that time I didn’t think a further gain of $76 over the final four months of the year was that big a stretch. But alas, it’s been down-hill ever since.

However, let’s not forget that gold was still up about 10% in 2011, and that’s the eleventh straight year that gold has risen.

Let me repeat: that’s 11 years in a row that gold has gone up in price. You can’t say the same for the Dow, or any other stock market index. That’s impressive.

So what will we see in 2012? I’ll provide my thoughts next week, but for now, it’s prediction time again.

Your Predictions for 2012

To participate in the 2012 prediction contest, please cut and paste the following section into an e-mail (replacing the XXXs with your predictions):

My name (no-one uses real names here; your Buy High Sell Higher Username is fine, or make up whatever handle you want): XXXX

I predict the Dow will close at the following levels, on the following days:

March 31, 2012 XXX

June 30, 2012 XXX

September 30, 2012 XXX

December 31, 2012 XXX

I predict the price of gold, in US dollars (assuming US dollars still exist) will close at the following levels, on the following days:

March 31, 2012 XXX

June 30, 2012 XXX

September 30, 2012 XXX

December 31, 2012 XXX

Here are my other totally random predictions (optional; such as your stock picks, the Super Bowl winner, whether or not the Mayans will be right, or whatever): XXX

That’s it. The deadline for submissions is January 2, 2012, before the markets open. You can post your predictions on the Buy High Sell Higher Forum, or simply e-mail them to me at predictions2012@buy-high-sell-higher.com. May the best predictor win.

Thanks for reading. Happy New Year. See you next year (and next week).

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