Our Predictions for 2013 Were Not Even Close

by JDH on January 4, 2014

I first posted my predictions here at the start of 2008, and at the end of 2008 I asked for your predictions as we started the tradition with our 2009 predictions contest.  As I mentioned last week, our best year, as a group, was 2010.  At the start of 2010 we made our predictions, and the group, on average, was near perfect. The group predicted that the Dow would close at 11,667. As it turned out, the Dow close for the year at 11,577.51, so your prediction was freakishly close to the actual number.

Even better, that year the group also predicted that the price of gold would close at $1,418, and where did gold close?

$1,420.70

Yes, on average the group was within $3 of the actual closing price.  Wow.

Unfortunately for 2013 we were not even close.

The group predicted that the Dow would close at 11,800, and the actual closing level on December 31, 2013 was 16,577.  We were off by 40%.  Our best predictor was Uboat with a prediction of 14,500, but even that was an under-estimation by 2,000 points. My guess was 11,500, similar to the group average, and obviously not anywhere close.

As for gold, we predicted $1,850.  Actual number: $1,205.  Oh well, at least we only missed by 35% on that one.  MetalMeister won the competition with a prediction of $1,700 an ounce.  I predicted $1,850, the same as the group average, so I wasn’t close either.

What happened?

How did we go from being great predictors in 2010 to complete losers in 2013? To letters: QE.

None of us fully realized the impact of massive money printing, that drove the stock market higher.  If I was a banker and could get money for free, I’d put it in the market too, and the more buyers, the higher it goes.

But with all of this money printing, why isn’t the price of gold also higher?  We all know that money printing is inflationary, so why are we not rushing to the save haven of gold, an asset that can’t be printed, and has no counter party risk?

My guess: there’s a time lag between the money printing and the inevitable inflation.  We are not yet observing large inflation, because the printed money is not fully in the economy.  The bankers get the money, and invest it in the stock market.  If the printed money went instead to real people, we would spend it, which would inevitably drive prices up.  But, if the money is invested in the stock market, the stock market is inflated, but there is minimal impact on the actual economy.

Yet.

So what will happen in 2014?  I’ll provide my full thoughts next week, but the question to ponder is “what will the Fed do?”  If they keep printing money, it’s likely that 2014 will look like 2013.  Until it doesn’t.

What do you think?

I’ll give everyone until January 8 to send me:

Prediction #1: The closing level for the Dow on March 31, 2014, June 30, 2014, September 30, 2014, and December 31, 2014.

Prediction #2: The closing level for one ounce of gold, in U.S. dollars, on March 31, 2014, June 30, 2014, September 30, 2014, and December 31, 2014.

Prediction #3: Anything else you want. The price of silver or oil, your top stock picks, who will win the Super Bowl, whatever. It doesn’t count in our contest, but it will be recorded for all time, just for fun.

As in past years, the prize in the contest is nothing other than bragging rights.

You can e-mail your predictions to 2014predictions@buy-high-sell-higher.com or you can post them on the 2014 Predictions board on the Buy High Sell Higher Forum.

To give you a taste, here’s a poll on gold.

What will the price of gold be on December 31, 2014

  • $1,101 to $1,500 (38%, 37 Votes)
  • $1,501 to $1,800 (25%, 24 Votes)
  • $900 to $1,100 (12%, 12 Votes)
  • $1,801 to $2,000 (9%, 9 Votes)
  • Over $2,500 (8%, 8 Votes)
  • $2,001 to $2,500 (5%, 5 Votes)
  • Under $900 (2%, 2 Votes)

Total Voters: 97

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Thanks for reading, and better luck in 2014.