https://oncoursefp.com/images/Vectors%2 ... 0final.pdf
some of my favorites:
2021 was a banner year for domestic stocks. There were 70 new all-time highs in the S&P 500 - nearly one-third of all
trading days. Thus, 69 times someone could have said “Not today. I don’t want to invest at an all-time high” and been
wrong. Avoiding stocks after a new all-time high is a silly idea that should be put to rest once and for all.
Including dividends, the S&P 500 rose 28.7% in 2021, the seventh best gain in the past 50 years. On the heels of total
returns of 18.4% in 2020 and 31.5% in 2019, the index has doubled in the past three calendar years. Since the financial
crisis bear market ended in March 2009, the S&P 500 has risen over 800% - an annualized rate of nearly 19%. Six times
last year, the index experienced a drawdown of between 3% and 5%. All were reported in the financial media as the
forerunner of something unusual and worrisome, but the largest peak-to-trough drop was a mere 5.2%. That puts 2021
in the bottom 10% of maximum annual drawdowns since 1927 and the fourth smallest in the past 35 years. The worst
down day was a loss of just 2.6%. There was plenty of volatility in individual stocks inside the index, but none of it
made it to the index level - just another reason to love diversification.
Had anyone received advanced knowledge of the inflation spike in 2021, they likely would have fled the stock market,
sold bonds and bought gold. Yet gold lost 3.6% in 2021 while the Vanguard Total Bond Market Index ETF (BND) lost just
1.8%. As history reveals, when the unexpected happens the capital markets often do the opposite of what's
anticipated. Even if we could know what lies ahead, we have no idea how the capital markets will react.
We are attracted to voices that confidently claim to know what the future holds because we seek certainty in an
uncertain world. Every January, "experts" pronounce their forecasts for the economy and the global markets in the New
Year. They do this despite the dismal track record of their past forecasts. The 2021 winner of my "Most Embarrassingly
Bad Forecast from A Wall Street Big Shot Award" is Morgan Stanley's chief U.S. equity strategist, Mike Wilson, who
predicted that the S&P 500 would gain 4% in 2021. Peter Lynch, the legendary manager of the Fidelity Magellan Fund
during its glory days, said that if he spent 13 minutes studying economic forecasts, he had wasted 10 minutes. Be
skeptical of all predictions of extreme events which, by definition, are outliers and unlikely to occur – regardless of the
number of their YouTube views.
He next gives his fearless predictions for 2022 (all the stuff that normally happens). My favorite:The annual forecast issue of Kiplinger's Personal Finance magazine has arrived in my mailbox. First came this warning –
"Investors will have to pick their spots carefully in 2022 and may not be able to rely on a rising tide lifting all boats -
either in broad index terms or even within a particular investment style or sector. It will be a decent year for stocks
if you're a stock picker, a more modest year if you're an S&P 500 investor." Nothing new here. Every January, there are
assertions by active managers that the upcoming year is going to be a "stock picker’s market,” because (insert
reasoning here). But by year-end 2022, most stock funds will have once again underperformed their benchmark index.
Active managers will blame it on (insert excuse here). They will never admit that after subtracting management fees
and trading expenses, the average actively managed stock fund does not add value. I have no interest in Kiplinger’s top
stock picks for 2022 and either should you. But let's look back to the 2021 forecast issue and calculate the performance
of last year's stock recommendations.
• A portfolio equally divided among the eight stocks Kiplinger’s recommended for 2021 would have returned 8.2%
last year, trailing the 25.6% gain in the Vanguard Total Stock Market Index ETF (VTI) by an embarrassing amount.
• A portfolio equally divided among the five stocks that Kiplinger’s advised readers to avoid or sell last January
would have returned 22.6% last year
In summation:• Social media will continue to give every nut-job with an internet connection and a keyboard a global audience of
gullible followers. Too much financial advice on social media is self-serving opinion offered by someone who
doesn't know you and who might not know what they are talking about. There is no truth filter and each year, it
seems that the financial lunacy promoted on social media can't get any worse. But it does.
Timeless advice. Enjoy reading!These aren’t really predictions. They’re just my way of saying that 2022 will be just like all previous years -- because
there’s nothing new under the sun. I have no idea where markets, inflation, oil prices, interest rates or the economy
are headed in 2022. And neither does anyone else. Avoid anyone who pretends otherwise. I've read many economic
forecasts for 2022. They bore me. Why does anyone believe that economists can predict the future? Because they look
at numbers all day long? So do high school math teachers. Yet we don't expect them to be able to predict the future.
We're silly to ask economists to peer into the future for us and it's idiotic that so many of them are happy to do so.