Wednesday, January 2, 2013

A New Year, A New Worry

"As investors, we always have to be aware of our innate and very human tendency to be fighting the last war.  We forget that Mr. Market is an ingenious sadist, and that he delights in torturing us in different ways."
                                                               -Barton Biggs

http://www.ft.com/intl/cms/s/0/7bb765ea-50de-11e2-b287-00144feab49a.html#axzz2GpefFLBu

Happy New Year!

First, courtesy of the blog Bespoke (by way of Barry Ritholtz of the Big Picture), here is an excellent summary of the market action in 2012:


courtesy: Bespoke; Big Picture

As you can see, most of the market gains last year were achieved during the first quarter.  For the rest of 2012, stocks largely gyrated on news from Washington and Europe. 

Still, the S&P 500 return of +16% for the last twelve months wasn't too shabby, particularly given the bearish sentiment that prevailed for most of the time.

I remain positive on the outlook for stocks this year, but I would feel a little better if my bullish views haven't turned into the consensus.

I started today's piece with a quote from investment legend Barton Biggs.  Biggs died last year, but not before compiling an impressive track record as an investment strategist first at Morgan Stanley, then later as a edge fund manager.

Biggs's quote reminds us that markets never act as logic or intellect would suggest.  The current bullish Wall Street sentiment (12 of 13 Street analysts have stocks moving higher in 2013) should be cause for concern, since many of the same factors that are generally cited for stock market gains (e.g. low bond yields) were also prevalent a year ago.